Document:

f10k09_x109-genm.htm

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND IS BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.  THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.

 

10% SECURED CONVERTIBLE DEBENTURE

 

Company:  Genmed Holding Corp.

 

Company Address: Rontgenlaan 27, 2719 DX, Zoetermeer, The Netherlands

 

Maturity Date:  December 8, 2013

 

Principal Amount: $132,912.04

 

Genmed Holding Corp., a Nevada corporation, and any successor or resulting entity by way of conversion, merger, consolidation, sale or exchange of all or substantially all of the assets or otherwise (the “Company”), for value received, hereby promises to pay to the Holder (as such term is hereinafter defined), or such other Person (as such term is hereinafter defined) upon order of the Holder, on the Maturity Date (as such term is hereinafter defined), the Principal Amount (as such term is hereinafter defined), as such sum may be adjusted pursuant to Article 3, and to pay interest thereon with such interest commencing to accrue as of the date hereof and payable on a monthly basis, commencing on the 15th day of the month following the month of issuance of this Debenture, and on the Maturity Date (except that, if any such date is not a Business Day, then such payment shall be due on the next succeeding Business Day), at the rate of ten percent (10%) per annum subject to adjustment as set forth in Section 7 hereof (the “Interest Rate”).  All interest payable on the Principal Amount of this Debenture shall be calculated on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable.  Payment of interest on this Debenture shall be in cash.  This Debenture may not be prepaid without the written consent of the Holder.  This Debenture is being issued pursuant to the Securities Purchase Agreement dated as of December 9, 2010 by and between the Company and R.P. Piceni (the “Purchase Agreement”).  Defined terms not defined herein shall have the meaning ascribed to them in the Purchase Agreement

 

ARTICLE 1

 

DEFINITIONS

 

SECTION 1.1 Definitions.  The terms defined in this Article whenever used in this Debenture have the following respective meanings:

 

(i) “Affiliate” has the meaning ascribed to such term in Rule 12b-2 under the Securities Exchange Act of 1934, as amended.

 

(ii) “Bankruptcy Code” means the United States Bankruptcy Code of 1986, as amended (11 U.S.C. §§ 101 et. seq.).

 

  

  

  

(iii) “Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of California are authorized or obligated to close.

 

(iv) “Closing Date” means the closing date set forth in the first paragraph of this Debenture.

 

(v)  “Shares Issued at Conversion”, when used with reference to the securities deliverable upon conversion of this Debenture, means all Shares now or hereafter Outstanding and securities of any other class or series into which this Debenture hereafter shall have been changed or substituted, whether now or hereafter created and however designated.

 

(vi) “Conversion” or “conversion” means the repayment by the Company of the Principal Amount of this Debenture (and, to the extent the Holder elects as permitted by Section 3.1, accrued and unpaid interest thereon) by the delivery of Shares on the terms provided in Section 3.2, and “convert,” “converted,” “convertible” and like words shall have a corresponding meaning.

 

(vii) “Conversion Date” means any day on which all or any portion of the Principal Amount of this Debenture is converted in accordance with the provisions hereof.

 

(viii) “Conversion Notice” means a written notice of conversion substantially in the form annexed hereto as Exhibit A.

 

(ix) “Conversion Price” on any date of determination means the applicable price for the conversion of this Debenture into Shares on such day as set forth in Section 3.1(a).

 

(x) “Current Market Price” on any date of determination means, if applicable, the closing price of a Unit on such day as on the over the counter market on the OTC Bulletin Board (“OTCBB”); provided further, that, if such security is not listed or admitted to trading on the OTCBB, as reported on the principal national security exchange or quotation system on which such security is quoted or listed or admitted to trading, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the closing bid price of such security on the over-the-counter market on the day in question as reported by Bloomberg LP or a similar generally accepted reporting service, as the case may be.

 

(xi) “Debenture” or “Debentures” means this Senior Secured Convertible Debenture of the Company or such other convertible debenture(s) exchanged therefor as provided in Section 2.1.

 

  

  

  

(xii) “Discount Multiplier” has the meaning set forth in Section 3.1(a).

 

(xiii) “Event of Default” has the meaning set forth in Section 6.1.

 

(xiv) “Excluded Securities” means securities issued as compensation for bona fide securities or in connection with acquisitions (exclusive of any financing).

 

(xv) “Holder” means R.P. Piceni any successor thereto, or any Person to whom this Debenture is subsequently transferred in accordance with the provisions hereof.

 

(xvi) “Interest Payment Due Date” means any date upon which interest is due to be paid by the Company to the Holder, as set forth in the opening paragraph of this Debenture.

 

(xvii) “Market Disruption Event” means any event that results in a material suspension or limitation of trading of the Common Shares.

 

(xviii) “Maturity Date” means December 8, 2013.

 

(xix) “Maximum Rate” has the meaning set forth in Section 6.4.

 

(xx) “Outstanding” when used with reference to Shares means, on any date of determination, all issued and outstanding Shares, and includes all such Shares issuable in respect of outstanding scrip or any certificates representing fractional interests in such Shares; provided, however, that any such Shares directly or indirectly owned or held by or for the account of the Company shall not be deemed “Outstanding” for purposes hereof.

 

  

  

  

(xxi) “Person” means an individual, a corporation, a partnership, an association, a limited liability company, an unincorporated business organization, a trust or other entity or organization, and any government or political subdivision or any agency or instrumentality thereof.

 

(xxii) “Principal Amount” means, for any date of calculation, the principal sum of all Advances made by Holder to the Company and the aggregate amount of any Fees payable.

 

(xxiii)  “SEC” means the United States Securities and Exchange Commission.

 

(xxiv) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as in effect at the time.

 

(xxv) “Subsidiary” means any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are owned directly or indirectly by the Company.

 

(xxvi) “Trading Day” means, if applicable, any day on which (i) purchases and sales of securities on the principal national security exchange or quotation system on which the Common Shares are traded are reported thereon, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, as reported by Bloomberg LP or a similar generally accepted reporting service, as the case may be, (ii) at least one bid for the trading of Shares is reported and (iii) no Market Disruption Event occurs.

 

(xxvii) “Trading Market” means, if applicable, the OTC Bulletin Board (“OTCBB”), or, to the extent the Company becomes eligible to list its equity on any other national security exchange or quotation system, upon official notice of listing on any such exchange or system, as the case may be, it shall be the “Trading Market.”

 

(xxviii) “Shares” means Shares of Common Stock and any other class or series of capital stock, whether now or hereafter authorized and however designated, which have the right to participate in the distribution of earnings and assets (upon dissolution, liquidation or winding-up) of the Company.

 

(xxix) “Volume Weighted Average Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Shares are then listed or quoted on a Trading Market, the daily volume weighted average price of the Shares for such date (or the nearest preceding date) on the primary Trading Market on which the Shares are then listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function; (b) if the Shares are not then listed or quoted on the Trading Market and if prices for the Shares are then reported in the “Pink Sheets” published by OTC Markets (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Shares so reported; or (c) in all other cases, the fair market value of a Unit as determined by a nationally recognized-independent appraiser selected in good faith by Holder.

 

All references to “cash” or “$” herein means currency of the United States of America.

 

  

  

  

ARTICLE 2

 

EXCHANGES, TRANSFER AND REPAYMENT

 

SECTION 2.1 Registration of Transfer of Debentures.  This Debenture, when presented for registration of transfer, shall (if so required by the Company) be duly endorsed, or be accompanied by a written instrument of transfer in form reasonably satisfactory to the Company duly executed, by the Holder duly authorized in writing.

 

SECTION 2.2 Loss, Theft, Destruction of Debenture.  Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Debenture, the Company shall make, issue and deliver, in lieu of such lost, stolen, destroyed or mutilated Debenture, a new Debenture of like tenor and unpaid Principal Amount dated as of the date hereof (which shall accrue interest from the most recent Interest Payment Due Date on which an interest payment was made in full).  This Debenture shall be held and owned upon the express condition that the provisions of this Section 2.2 are exclusive with respect to the replacement of a mutilated, destroyed, lost or stolen Debenture and shall preclude any and all other rights and remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement of negotiable instruments or other securities without the surrender thereof.

 

SECTION 2.3 Who Deemed Absolute Owner.  The Company may deem the Person in whose name this Debenture shall be registered upon the registry books of the Company to be, and may treat it as, the absolute owner of this Debenture (whether or not this Debenture shall be overdue) for the purpose of receiving payment of or on account of the Principal Amount of this Debenture, for the conversion of this Debenture and for all other purposes, and the Company shall not be affected by any notice to the contrary.  All such payments and such conversions shall be valid and effectual to satisfy and discharge the liability upon this Debenture to the extent of the sum or sums so paid or the conversion or conversions so made.

 

SECTION 2.4 Repayment at Maturity.  At the Maturity Date, the Company shall repay the outstanding Principal Amount of this Debenture in whole in cash, together with all accrued and unpaid interest thereon, in cash, to the Maturity Date.

 

ARTICLE 3

 

CONVERSION OF DEBENTURE

 

SECTION 3.1 Conversion; Conversion Price.  At the option of the Holder, this Debenture may be converted, either in whole or in part, up to the full Principal Amount hereof into Shares (calculated as to each such conversion to the nearest 1/100th of a share), at any time and from time to time on any Business Day, subject to compliance with Section 3.2. The number of Shares into which this Debenture may be converted is equal to the dollar amount of the Debenture being converted divided by the Conversion Price. The “Conversion Price” shall be equal to the lesser of (i) $0.02 (the “Fixed Conversion Price”), or (ii) if the Shares are quoted, listed or admitted to trading on the OTCBB, any national securities exchange or quotation system, 50% of the lowest “Bid” price on the date of conversion..

 

  

  

  

If the Holder elects to convert a portion of the Debenture and, if applicable, on the day that the election is made, the lowest “Bid” price per share of the Shares is below $.001, the Company shall have the right to prepay that portion of the Debenture that Holder elected to convert, plus any accrued and unpaid interest, at 150% of such amount. In the event that the Company elects to prepay that portion of the Debenture, Holder shall have the right to withdraw its Conversion Notice.

 

SECTION 3.2 Exercise of Conversion Privilege.

 

(i) Conversion of this Debenture may be exercised on any Business Day by the Holder by telecopying an executed and completed Conversion Notice to the Company.  Each date on which a Conversion Notice is telecopied to the Company in accordance with the provisions of this Section 3.2 shall constitute a Conversion Date.  The Company shall convert this Debenture and issue the Shares Issued at Conversion in the manner provided below in this Section 3.2, and all voting and other rights associated with the beneficial ownership of the Shares Issued at Conversion shall vest with the Holder, effective as of the Conversion Date at the time specified in the Conversion Notice.  The Conversion Notice also shall state the name or names (with addresses) of the persons who are to become the holders of the Shares Issued at Conversion in connection with such conversion. As promptly as practicable after the receipt of the Conversion Notice as aforesaid, but in any event not more than two (2) Business Days after the Company’s receipt of such Conversion Notice, the Company shall (a) issue the Shares Issued at Conversion in accordance with the provisions of this Article 3 and (b) cause to be mailed for delivery by overnight courier a certificate or certificate(s) representing the number of Shares to which the Holder is entitled by virtue of such conversion.  Such conversion shall be deemed to have been effected at the time at which the Conversion Notice indicates, and at such time the rights of the Holder of this Debenture, as such (except if and to the extent that any Principal Amount thereof remains unconverted), shall cease and the Person and Persons in whose name or names the Shares Issued at Conversion shall be issuable shall be deemed to have become the holder or holders of record of the Shares represented thereby, and all voting and other rights associated with the beneficial ownership of such Shares shall at such time vest with such Person or Persons.  The Conversion Notice shall constitute a contract between the Holder and the Company, whereby the Holder shall be deemed to subscribe for the number of Shares which it will be entitled to receive upon such conversion and, in payment and satisfaction of such subscription (and for any cash adjustment to which it is entitled pursuant to Section 3.4), to surrender this Debenture and to release the Company from all liability thereon (except if and to the extent that any Principal Amount thereof remains unconverted).  No cash payment aggregating less than $1.00 shall be required to be given unless specifically requested by the Holder.

 

(ii) If, at any time after the date of this Debenture, (a) the Company challenges, disputes or denies the right of the Holder hereof to effect the conversion of this Debenture into Shares or otherwise dishonors or rejects any Conversion Notice delivered in accordance with this Section 3.2 or (b) any third party who is not and has never been an Affiliate of the Holder commences any lawsuit or legal proceeding or otherwise asserts any claim before any court or public or governmental authority which seeks to challenge, deny, enjoin, limit, modify, delay or dispute the right of the Holder hereof to effect the conversion of this Debenture into Common Shares, then the Holder shall have the right, but not the obligation, by written notice to the Company, to require the Company to promptly redeem this Debenture for cash at one hundred fifty percent (150%) of the Principal Amount thereof, together with all accrued and unpaid interest thereon to the date of redemption.  Under any of the circumstances set forth above, the Company shall be responsible for the payment of all costs and expenses of the Holder, including reasonable legal fees and expenses, as and when incurred in defending itself in any such action or pursuing its rights hereunder (in addition to any other rights of the Holder).

 

(iii) The Holder shall be entitled to exercise its conversion privilege notwithstanding the commencement of any case under the Bankruptcy Code.  In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives to the fullest extent permitted any rights to relief it may have under 11 U.S.C. § 362 in respect of the Holder’s conversion privilege.  The Company hereby waives to the fullest extent permitted any rights to relief it may have under 11 U.S.C. § 362 in respect of the conversion of this Debenture.  The Company agrees, without cost or expense to the Holder, to take or consent to any and all action necessary to effectuate relief under 11 U.S.C. § 362.

 

  

  

  

SECTION 3.3 Intentionally deleted.

 

SECTION 3.4 Adjustments.  The Conversion Price and the number of Shares deliverable upon conversion of this Debenture are subject to adjustment from time to time as follows:

 

(i) Reclassification, Etc.  In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another Person (where the Company is not the survivor or where there is a change in or distribution with respect to the Common Stock of the Company), sell, convey, transfer or otherwise dispose of all or substantially all its property, assets or business to another Person, or effectuate a transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of (each, a “Fundamental Corporate Change”) and, pursuant to the terms of such Fundamental Corporate Change, securities of the successor or acquiring entity, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of securities of the successor or acquiring corporation (“Other Property”) are to be received by or distributed to the holders of Shares of the Company, then the Holder of this Debenture shall have the right thereafter, at its sole option, to (x) require the Company to prepay this Debenture for cash at one hundred fifty percent (150%) of the Principal Amount thereof, together with all accrued and unpaid interest thereon to the date of prepayment, (y) receive the number of securities of the successor or acquiring entity or of the Company, if it is the surviving entity, and Other Property as is receivable upon or as a result of such Fundamental Corporate Change by a holder of the number of Shares into which the outstanding portion of this Debenture may be converted at the Conversion Price applicable immediately prior to such Fundamental Corporate Change, or (z) require the Company, or such successor, resulting or purchasing entity, as the case may be, to, without benefit of any additional consideration therefor, execute and deliver to the Holder a debenture with substantial identical rights, privileges, powers, restrictions and other terms as this Debenture in an amount equal to the amount outstanding under this Debenture immediately prior to such Fundamental Corporate Change.  For purposes hereof, “securities of the successor or acquiring entity” shall include capital of such entity of any class which is not preferred as to dividends or assets over any other class of stock of such entity and which is not subject to prepayment and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock.  The foregoing provisions shall similarly apply to successive Fundamental Corporate Changes.

 

(ii) Adjustment upon Issuance of Securities.  If the Company issues or sells, or in accordance with this Section 3.4 is deemed to have issued or sold, any securities (including the issuance or sale of securities owned or held by or for the account of the Company, but excluding securities comprising Excluded Securities) for a consideration per share (the “New Issuance Price”) less than a price equal to the Fixed Conversion Price in effect (the “Applicable Price”) immediately prior to such issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Fixed Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price.  For purposes of determining the adjusted Conversion Price under this Section 3.4, the following shall be applicable:

 

(iii) Adjustment for Splits, Subdivisions or Combinations of Shares.  The Fixed Conversion Price shall be proportionally decreased and the number of Shares issuable upon exercise of this Debenture shall be proportionally increased to reflect any split or subdivision of the Company’s Shares.  The Fixed Conversion Price shall be proportionally increased and the number of Shares issuable upon exercise of this shall be proportionally decreased to reflect any combination of the Company’s Shares.

 

3.4.1               Issuance of Options.  If the Company in any manner grants any Options (not including Excluded Securities) and the lowest price per share for which one Share is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such Unit shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Share for such price per share.  For purposes of this Section 3.4.1, the “lowest price per Share for which one Share is issuable upon exercise of such Options or upon conversion, exercise or exchange of such Convertible Securities” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one Unit upon the granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option.  In the event of the reduction of the Conversion price of any such Option (or the conversion, exercise or exchange price of any related Convertible Security), the adjustments set forth in this Section 3.4 shall be recomputed, taking into account such lower price.  No further adjustment of the Fixed Conversion Price shall be made upon the actual issuance of such Share or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Unit upon conversion, exercise or exchange of such Convertible Securities.

 

  

  

  

3.4.2               Issuance of Convertible Securities.  If the Company in any manner issues or sells any Convertible Securities (not including Excluded Securities) and the lowest price per share for which one Share is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, then such Share shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per Share.  For the purposes of this Section 3.4.2, the “lowest price per share for which one Share is issuable upon the conversion, exercise or exchange” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one Share upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security.  In the event of the reduction of the conversion, exercise or exchange price of any Convertible Security, the adjustments set forth in this Section 3.4 shall be recomputed, taking into account such lower price.  No further adjustment of the Fixed Conversion Price shall be made upon the actual issuance of such Share upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Debenture has been or is to be made pursuant to other provisions of this Section 3.4, no further adjustment of the Fixed Conversion Price shall be made by reason of such issue or sale.

 

SECTION 3.5 Certain Conversion Limits.  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, as set forth on the applicable Conversion Notice, such Holder (together with such Holder’s Affiliates, and any other person or entity acting as a group together with such Holder or any of such 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 beneficially owned by such Holder and its Affiliates shall include the number of Shares issuable upon conversion of this Debenture with respect to which such determination is being made, but shall exclude the number of Shares which are issuable upon (A) conversion of the remaining, unconverted principal amount of this Debenture beneficially owned by such 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 (including, without limitation, any other Debentures or warrants to purchase Shares) beneficially owned by such Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 3.5, 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 3.5 applies, the determination of whether this Debenture is convertible (in relation to other securities owned by such Holder together with any Affiliates) and of which principal amount of this Debenture is convertible shall be in the sole discretion of such Holder, and the submission of a Conversion Notice shall be deemed to be such Holder’s determination of whether this Debenture may be converted (in relation to other securities owned by such Holder together with any Affiliates) and which principal amount of this Debenture is convertible, in each case subject to such aggregate percentage limitations.  To ensure compliance with this restriction, each Holder will be deemed to represent to the Company each time it delivers a Conversion Notice that such Conversion Notice 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 3.5, in determining the number of outstanding Shares, a Holder may rely on the number of outstanding Shares provided to the Holder in writing by the Company after Holder makes such request or in the event that the Company files, any of the following with the Securities and Exchange Commission, the most recent of the following: (A) the Company's most recent Form 10-Q or Form 10-K, 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 outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to such Holder the number of Shares then outstanding on the records of the Company as of the date of the request.  In any case, the number of outstanding Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by such Holder or its Affiliates since the date as of which such number of outstanding Shares was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of Shares outstanding immediately after giving effect to the issuance of Shares issuable upon conversion of this Debenture held by the Holder.  The Beneficial Ownership Limitation provisions of this Section 3.5 may be waived by such Holder, at the election of such Holder, upon not less than 61 days’ prior notice to the Company, to, at the sole discretion of the Holder, either change the Beneficial Ownership Limitation to (i) 9.99% of the number of Shares outstanding immediately after giving effect to the issuance of Shares upon conversion of the Debenture held by the Holder and the provisions of this Section 3.5 shall continue to apply, or (ii) remove any Beneficial Ownership Limitation under this Debenture.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3.5 to correct this paragraph (or any portion hereof) which 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.  If any court of competent jurisdiction shall determine that the foregoing limitation is ineffective to prevent a Holder from being deemed the beneficial owner of more than 9.99% of the then outstanding Shares, then the Company shall prepay such portion of this Debenture as shall cause such Holder not to be deemed the beneficial owner of more than 9.99% of the then outstanding Shares.  Upon such determination by a court of competent jurisdiction, the Holder shall have no interest in or rights under such portion of the Debenture.  Any and all interest paid on or prior to the date of such determination shall be deemed interest paid on the remaining portion of this Debenture held by the Holder.  Such prepayment shall be for cash at a prepayment price of one hundred fifty percent (150%) of the Principal Amount thereof, together with all accrued and unpaid interest thereon to the date of prepayment.  The limitations contained in this paragraph shall apply to a successor holder of this Debenture.  The limitations contained in this paragraph shall not apply if the Company is not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or does not have any class of securities registered under such Act.

 

  

  

  

SECTION 3.6 Surrender of Debentures.  Upon any redemption of this Debenture pursuant to Sections 3.2, 3.5 or 6.2, or upon maturity pursuant to Section 2.4, the Holder shall either deliver this Debenture by hand to the Company at its principal executive offices or surrender the same to the Company at such address by nationally recognized overnight courier.  Payment of the redemption price or the amount due on maturity specified in Section 2.4, shall be made by the Company to the Holder against receipt of this Debenture (as provided in this Section 3.5) by wire transfer of immediately available funds to such account(s) as the Holder shall specify by written notice to the Company.  If payment of such redemption price is not made in full by the redemption date, or the amount due on maturity is not paid in full by the Maturity Date, the Holder shall again have the right to convert this Debenture as provided in Article 3 hereof or to declare an Event of Default.

 

ARTICLE 4

 

STATUS; RESTRICTIONS ON TRANSFER

 

SECTION 4.1 Status of Debenture.  This Debenture constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms subject, as to enforceability, to general principles of equity and to principles of bankruptcy, insolvency, reorganization and other similar laws of general applicability relating to or affecting creditors’ rights and remedies generally.

 

SECTION 4.2 Restrictions on Transfer.  This Debenture and any Shares deliverable upon the conversion hereof, have not been registered under the Securities Act.  The Holder by accepting this Debenture agrees that this Debenture and the Shares to be acquired as interest on and upon conversion of this Debenture may not be assigned or otherwise transferred unless and until (i) the Company has received the opinion of counsel for the Holder that this Debenture or such Shares may be sold pursuant to an exemption from registration under the Securities Act, provided that the Company will not require opinions of counsel for transactions involving transfers to Affiliates of the Holder or pursuant to Rule 144 promulgated by the SEC under the Securities Act, except in unusual circumstances, or (ii) a registration statement relating to this Debenture or such Shares has been filed by the Company and declared effective by the SEC.

 

Each certificate for Shares deliverable hereunder shall bear a legend as follows unless and until such securities have been sold pursuant to an effective registration statement under the Securities Act:

 

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Securities Act”).  The securities may not be offered for sale, sold or otherwise transferred except (i) pursuant to an effective registration statement under the Securities Act or (ii) pursuant to an exemption from registration under the Securities Act in respect of which the issuer of this certificate has received an opinion of counsel reasonably satisfactory to the issuer of this certificate to such effect unless sold pursuant to Rule 144 under the Securities Act.  Copies of the agreement covering both the purchase of the securities and restrictions on their transfer may be obtained at no cost by written request made by the holder of record of this certificate to the Secretary of the issuer of this certificate at the principal executive offices of the issuer of this certificate.”

 

  

  

  

ARTICLE 5

 

COVENANTS

 

SECTION 5.1 Conversion.  The Company shall issue or, if applicable, cause its transfer agent, not later than two (2) Business Days after the Company’s receipt of a Conversion Notice, to issue and deliver to the Holder the requisite Shares Issued at Conversion.

 

SECTION 5.2 Notice of Default.  If any one or more events occur which constitute or which, with notice, lapse of time, or both, would constitute an Event of Default, the Company shall forthwith give notice to the Holder, specifying the nature and status of the Event of Default or such other event(s), as the case may be.

 

SECTION 5.3 Payment of Obligations.  So long as this Debenture shall be outstanding, the Company shall pay, extend, or discharge at or before maturity, all its respective material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings.

 

SECTION 5.4 Compliance with Laws.  So long as this Debenture shall be outstanding, the Company shall comply with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities, except for such noncompliance which would not have a material adverse effect on the business, properties, prospects, condition (financial or otherwise) or results of operations of the Company and the Subsidiaries.

 

SECTION 5.5 Inspection of Property, Books and Records.  So long as this Debenture shall be outstanding, the Company shall keep proper books of record and account in which full, true and correct entries shall be made of all material dealings and transactions in relation to its business and activities and shall permit representatives of the Holder at the Holder’s expense to visit and inspect any of its respective properties, to examine and make abstracts from any of its respective books and records, not reasonably deemed confidential by the Company, and to discuss its respective affairs, finances and accounts with its respective officers and independent public accountants, all at such reasonable times and as often as may reasonably be desired.

 

SECTION 5.6 Reservation of Shares Issuable Upon Conversion.  The Company shall at all times reserve and keep available out of its authorized but unissued Shares, solely for the purpose of effecting the conversion of this Debenture, such number of Shares as shall from time to time be sufficient to effect the conversion of this Debenture; and if at any time the number of authorized but unissued Shares shall not be sufficient to effect the conversion of this Debenture, in addition to such other remedies as shall be available to the holder of this Debenture, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Shares to such number of Shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval to file an amendment to the charter of the Company.

 

SECTION 5.7 No Impairment.  Except and to the extent waived or consented to by the Holder or as otherwise permitted under the terms hereof, the Company will not, by amendment of its Certificate of Incorporation or similar corporate charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Debenture and in the taking of all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against impairment.

 

SECTION 5.8 Right of First Refusal on Other Financing.  In the event that the Company obtains a commitment for any other financing (either debt, equity, or a combination thereof) which is to close during the term of this Debenture, Holder shall be entitled to a right of first refusal to enable it to, at Holder’s option, either: (i) match the terms of the other financing, or (ii) add additional principal to this Debenture, in the amount of such other financing, on the same terms and conditions as this Debenture. The Company shall deliver to Holder, at least 10 days prior to the proposed closing date of such transaction, written notice describing the proposed transaction, including the terms and conditions thereof, and providing Holder an option during the 10 day period following delivery of such notice to either provide the financing being offered in such transaction on the same terms as contemplated by such transaction, or to add additional principal to this Debenture, in the amount of such other financing, on the same terms and conditions as this Debenture.  Notwithstanding the foregoing, if the Company seeks to consummate such financing on terms less favorable to the Company than those terms that were provided to Holder, such financing shall be subject to Holder’s right of first refusal set forth in this Section 5.8.

 

  

  

  

ARTICLE 6

 

EVENTS OF DEFAULT; REMEDIES

 

SECTION 6.1 Events of Default.  “Event of Default” wherever used herein means any one of the following events:

 

(i) the Company shall default in the payment of principal of or interest on this Debenture as and when the same shall be due and payable and, in the case of an interest payment default, such default shall continue for five (5) Business Days after the date such interest payment was due, or the Company shall fail to perform or observe any other covenant, agreement, term, provision, undertaking or commitment under this Debenture, the Purchase Agreement or any other Document delivered in connection with the Purchase Agreement, including the Consulting Agreement and such default shall continue for a period of ten (10) Business Days after the delivery to the Company of written notice that the Company is in default hereunder or thereunder;

 

(ii) any of the representations, warranties, or covenants made by the Company herein, in the Purchase Agreement or any other Document delivered in connection with the Purchase Agreement, or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Debenture, the Purchase Agreement or any other Document delivered in connection with the Purchase Agreement shall be false or misleading in a material respect on the Closing Date;

 

(iii) under the laws of any jurisdiction not otherwise covered by clauses (iv) and (v) below, the Company (A) becomes insolvent or generally not able to pay its debts as they become due, (B) admits in writing its inability to pay its debts generally or makes a general assignment for the benefit of creditors, (C) institutes or has instituted against it any proceeding seeking (x) to adjudicate it a bankrupt or insolvent, (y) liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors including any plan of compromise or arrangement or other corporate proceeding involving or affecting its creditors or (z) the entry of an order for relief or the appointment of a receiver, trustee or other similar person for it or for any substantial part of its properties and assets, and in the case of any such official proceeding instituted against it (but not instituted by it), either the proceeding remains undismissed or unstayed for a period of sixty (60) calendar days, or any of the actions sought in such proceeding (including the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its properties and assets) occurs or (D) takes any corporate action to authorize any of the above actions;

 

(iv) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under the Bankruptcy Code or any other applicable Federal or state law, or appointing a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and any such decree or order continues and is unstayed and in effect for a period of sixty (60) calendar days;

 

  

  

  

(v) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the Bankruptcy Code or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as and when they become due, or the taking of corporate action by the Company in furtherance of any such action;

 

(vi) a final judgment or final judgments for the payment of money shall have been entered by any court or courts of competent jurisdiction against the Company and remains undischarged for a period (during which execution shall be effectively stayed) of thirty (30) days, provided that the aggregate amount of all such judgments at any time outstanding (to the extent not paid or to be paid, as evidenced by a written communication to that effect from the applicable insurer, by insurance) exceeds One Hundred Thousand Dollars ($100,000);

 

(vii) it becomes unlawful for the Company to perform or comply with its obligations under this Debenture, the Purchase Agreement or any other Document delivered in connection with the Purchase Agreement in any respect; or

 

(viii) the Company shall default (giving effect to any applicable grace period) (a) in the payment of principal or interest as and when the same shall become due and payable, under any indebtedness, individually or in the aggregate, of more than One Hundred Thousand Dollars ($100,000).

 

SECTION 6.2 Acceleration of Maturity; Rescission and Annulment.  If an Event of Default occurs and is continuing, then and in every such case the Holder may, in Holder’s sole and absolute discretion, by a notice in writing to the Company, rescind any outstanding Conversion Notice and declare that any or all amounts owing or otherwise outstanding under this Debenture are immediately due and payable and upon any such declaration this Debenture or such portion thereof, as applicable, shall become immediately due and payable in cash at a price of one hundred fifty percent (150%) of the Principal Amount thereof, together with all accrued and unpaid interest thereon to the date of payment; provided, however, in the case of any Event of Default described in clauses (iii), (iv), (v) or (vii) of Section 6.1, all amounts owing or otherwise outstanding under this Debenture automatically shall become immediately due and payable without the necessity of any notice or declaration as aforesaid.

 

SECTION 6.3 Late Payment Penalty.  If any portion of the principal of or interest on this Debenture shall not be paid within ten (10) days of when it is due, the Discount Multiplier under this Debenture shall decrease by one percentage point (1%) for each period of ten (10) Business Days that any portion of such amount remains unpaid by the Company for all conversions of this Debenture thereafter.

 

SECTION 6.4 Maximum Interest Rate.  Notwithstanding anything herein to the contrary, if at any time the applicable interest rate as provided for herein shall exceed the maximum lawful rate which may be contracted for, charged, taken or received by the Holder in accordance with any applicable law (the “Maximum Rate”), the rate of interest applicable to this Debenture shall be limited to the Maximum Rate.  To the greatest extent permitted under applicable law, the Company hereby waives and agrees not to allege or claim that any provisions of this Debenture could give rise to or result in any actual or potential violation of any applicable usury laws.

 

  

  

  

SECTION 6.5 Remedies Not Waived.  No course of dealing between the Company and the Holder or any delay in exercising any rights hereunder shall operate as a waiver by the Holder.

 

SECTION 6.6 Remedies.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Debenture will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Debenture, that the Holder shall be entitled to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Debenture and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

 

SECTION 6.7 Payment of Certain Amounts.  Whenever pursuant to this Debenture the Company is required to pay an amount in excess of the Principal Amount plus accrued and unpaid interest, the Company and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Debenture may be difficult to determine and the amount to be so paid by the Company represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Debenture and to earn a return from the sale of Shares acquired upon conversion of this Debenture at a price in excess of that price paid for such shares pursuant to this Debenture. The Company and the Holder hereby agree that such amount of stipulated damages is not disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Debenture into Shares.

 

ARTICLE 7

 

MISCELLANEOUS

 

SECTION 7.1 Notice of Certain Events.  In the case of the occurrence of any event described in Section 3.4 of this Debenture, the Company shall cause to be mailed to the Holder of this Debenture at its last address as it appears in the Company’s security registry, at least twenty (20) days prior to the applicable record, effective or expiration date hereinafter specified (or, if such twenty (20) days’ notice is not possible, at the earliest possible date prior to any such record, effective or expiration date), a notice thereof, including, if applicable, a statement of (y) the date on which a record is to be taken for the purpose of such dividend, distribution, issuance or granting of rights, options or warrants, or if a record is not to be taken, the date as of which the holders of record of Shares to be entitled to such dividend, distribution, issuance or granting of rights, options or warrants are to be determined or (z) the date on which such reclassification, consolidation, equity split, merger, sale, transfer, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of record of Shares will be entitled to exchange their shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale transfer, dissolution, liquidation or winding-up.

 

SECTION 7.2 Register.  The Company shall keep at its principal office a register in which the Company shall provide for the registration of this Debenture.  Upon any transfer of this Debenture in accordance with Articles 2 and 4 hereof, the Company shall register such transfer on the Debenture register.

 

SECTION 7.3 Withholding.  To the extent required by applicable law, the Company may withhold amounts for or on account of any taxes imposed or levied by or on behalf of any taxing authority in the United States having jurisdiction over the Company from any payments made pursuant to this Debenture.

 

SECTION 7.4 Security.  The obligations of the Company hereunder are secured by a grant of a first priority security interest in all of the assets of the Company pursuant to a Security Agreement.

 

  

  

  

SECTION 7.5 Transmittal of Notices.  Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii) three (3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) 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 facsimile numbers for such communications shall be:

 

(1) If to the Holder, to:

 

R.P. Piceni

Calle Codorniz 15-13

Jesus, Spain

(2) If to the Company, to:

 

Genmed Holding Corp.

Rontgenlaan 27, 2719 DX

Zoetermeer, The Netherlands

Attn:  Erwin Bouwens

 

Each of the Holder or the Company may change the foregoing address by notice given pursuant to this Section 7.5.

 

SECTION 7.6 Attorneys’ Fees.  Should any party hereto employ an attorney for the purpose of enforcing or construing this Debenture, or any judgment based on this Debenture, in any legal proceeding whatsoever, including insolvency, bankruptcy, arbitration, declaratory relief or other litigation, the prevailing party shall be entitled to receive from the other party or parties thereto reimbursement for all reasonable attorneys' fees and all reasonable costs, including but not limited to service of process, filing fees, court and court reporter costs, investigative costs, expert witness fees, and the cost of any bonds, whether taxable or not, and that such reimbursement shall be included in any judgment or final order issued in that proceeding.  The "prevailing party" means the party determined by the court to most nearly prevail and not necessarily the one in whose favor a judgment is rendered.

 

SECTION 7.7 Governing Law.  This Debenture shall be governed by, and construed in accordance with, the laws of the State of Nevada (without giving effect to conflicts of laws principles).  With respect to any suit, action or proceedings relating to this Debenture, the Company irrevocably submits to the exclusive jurisdiction of the courts of the State of Nevada sitting in Las Vegas and the United States District Court located in the City of Las Vegas and hereby waives, to the fullest extent permitted by applicable law, any claim that any such suit, action or proceeding has been brought in an inconvenient forum.  Subject to applicable law, the Company agrees that final judgment against it in any legal action or proceeding arising out of or relating to this Debenture shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of which judgment shall be conclusive evidence thereof and the amount of its indebtedness, or by such other means provided by law.

 

  

  

  

SECTION 7.8 Waiver of Jury Trial.  To the fullest extent permitted by law, each of the parties hereto hereby knowingly, voluntarily and intentionally waives its respective rights to a jury trial of any claim or cause of action based upon or arising out of this Debenture or any other document or any dealings between them relating to the subject matter of this Debenture and other documents.  Each party hereto (i) certifies that neither of their respective representatives, agents or attorneys has represented, expressly or otherwise, that such party would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that it has been induced to enter into this Debenture by, among other things, the mutual waivers and certifications herein.

 

SECTION 7.9 Headings.  The headings of the Articles and Sections of this Debenture are inserted for convenience only and do not constitute a part of this Debenture.

 

SECTION 7.10 Payment Dates.  Whenever any payment hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

SECTION 7.11 Binding Effect.  Each Holder by accepting this Debenture agrees to be bound by and comply with the terms and provisions of this Debenture.

 

SECTION 7.12 No Stockholder Rights.  Except as otherwise provided herein, this Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including, without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into Shares in accordance with the terms hereof.

 

SECTION 7.13 Facsimile Execution.  Facsimile execution of this Debenture shall be deemed original.

 

IN WITNESS WHEREOF, the Company has caused this Debenture to be signed by its duly authorized officer on the date of this Debenture.

 

	  	
Genmed Holding Corp.

 

	  	
By:                                                                    

 

	  	
Name: Erwin Bouwens

 

	  	
Title: President

 

	
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EXHIBIT A

 

DEBENTURE CONVERSION NOTICE

 

TO:           [________________________]

 

The undersigned owner of the Convertible Debenture due December 8, 2013 (the “Debenture”) issued by Genmed Holding Corp. (the “Company”) hereby irrevocably exercises its option to convert $__________ of the Principal Amount of the Debenture into Shares in accordance with the terms of the Debenture.  The undersigned hereby instructs the Company to convert the portion of the Debenture specified above into Shares of Common Stock Issued at Conversion in accordance with the provisions of Article 3 of the Debenture.  The undersigned directs that the Shares and certificates therefor deliverable upon conversion, the Debenture reissued in the Principal Amount not being surrendered for conversion hereby, [the check or Shares in payment of the accrued and unpaid interest thereon to the date of this Notice,] be registered in the name of and/or delivered to the undersigned unless a different name has been indicated below.  All capitalized terms used and not defined herein have the respective meanings assigned to them in the Debenture.  The conversion pursuant hereto shall be deemed to have been effected at the date and time specified below, and at such time the rights of the undersigned as a Holder of the Principal Amount of the Debenture set forth above shall cease and the Person or Persons in whose name or names the Shares Issued at Conversion shall be registered shall be deemed to have become the holder or holders of record of the Common Shares represented thereby and all voting and other rights associated with the beneficial ownership of such Common Shares shall at such time vest with such Person or Persons.

 

Date and time:                                                           

 

 

By:                                                           

 

Title:                                                           

 

Fill in for registration of Debenture:

 

Please print name and address

 

(including ZIP code number):

 

 

 

 

	
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A-

	
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Initialsf10k09_x110-genm.htm

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement dated as of December 9, 2010 (this “Agreement”) is made by and between Genmed Holding Corp., a Nevada corporation, with principal executive offices located at Rontgenlaan 27, 2719 DX, Zoetermeer, The Netherlands (the “Company”), and Admefo Investments AG, with principal executive offices located at Oberneuhistrasse 6 6340, Baar, Switzerland (“Holder”).

 

WHEREAS, Holder desires to purchase from the Company, and the Company desires to issue and sell to Holder, upon the terms and subject to the conditions of this Agreement, a Secured Convertible Debenture of the Company in the aggregate principal amount of $875,224.72 (the “Debenture”); and

 

WHEREAS, Holder is the owner of two notes payable by the Company. One is between the Company and Total Look BV, dated August 25, 2010 and has a current outstanding balance of $603,364.71 (the “Total Look Note”), the other is between the Company and E.R. Bouwens Beheermaatschappij BV, dated August 25, 2010 and has a current outstanding balance of  $252,595.06 (the “ERB Note” and together with the Total Look Note, the “Notes”); and

 

WHEREAS, upon the terms and subject to the conditions set forth in the Debenture the Debenture is convertible into Common Shares of the Company (the “Shares”).

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.           PURCHASE AND SALE OF DEBENTURE; ADVANCES

 

1.1           Transaction.  Holder hereby agrees to purchase from the Company, and the Company has offered and hereby agrees to issue and sell to Holder in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “Securities Act”), the Debenture.

 

1.2           Advances.  The Debenture shall evidence the obligations of the Company to Holder to repay advances made by Holder to the Company (each an “Advance” and collectively, “Advances”) as provided herein.  On or before the third business day prior to the Closing Date (as defined in Article VII), the Company and Holder shall attempt to agree on the amount of the initial Advance (the “Initial Advance”) based upon a budget proposed by the Company and agreed to by Holder.  Thereafter, if the Company elects to request additional Advances, it may make such request upon at least five-business days written notice to Holder.  Any such request shall set forth the proposed use of proceeds.  The Company shall be entitled to make only one request per month and the amount so requested shall not exceed $50,000 unless approved in advance by Holder.  Holder shall have the right, in its sole and absolute discretion, to accept the request, deny the request or advance a smaller amount.  The Company shall not have a right to request an Advance after December 8, 2013.  The aggregate amount of all Advances shall not exceed $875,224.72.  The amount of each Advance shall be added to the principal amount of the Debenture.

 

1.3           Form of Debenture.  The Debenture shall (a) be in the form of Exhibit A attached hereto, (b) be in the principal amount of $875,224.72, (c) bear interest based on the outstanding principal amount outstanding from time to time at the rate of 10% per annum, payable monthly in cash, (d) be secured by a first priority security interest in the assets of the Company pursuant to a security agreement (“Security Agreement”) in the form of Exhibit B attached hereto, (e) be subordinated to the current Bond holders of the Company, (f) be convertible into the Shares of the Company at a variable conversion rate, and (g) be due on December 8, 2013 (the “Maturity Date”).

 

  

  

  

2.           HOLDER’S REPRESENTATIONS AND WARRANTIES

 

Holder represents and warrants to and covenants and agrees with the Company as follows:

 

2.1           Holder is purchasing the Debenture and additional Shares issuable upon conversion of the Debenture (the “Debenture Shares”) for its own account, for investment purposes only and not with a view towards or in connection with the public sale or distribution thereof in violation of the Securities Act.

 

2.2           Holder is (i) an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act of 1933, as Amended (the “Securities Act”), (ii) experienced in making investments of the kind contemplated by this Agreement, (iii) capable, by reason of its business and financial experience, of evaluating the relative merits and risks of an investment in the Securities, and (iv) able to afford the loss of its investment in the Securities.

 

2.3           Holder understands that the Securities are being offered and sold by the Company in reliance on an exemption from the registration requirements of the Securities Act and equivalent state securities and “blue sky” laws, and that the Company is relying upon the accuracy of, and Holder’s compliance with, Holder’s representations, warranties and covenants set forth in this Agreement to determine the availability of such exemption and the eligibility of Holder to purchase the Securities;

 

2.4           Holder understands that the Securities have not been approved or disapproved by the Securities and Exchange Commission (the “Commission”) or any state securities commission.

 

2.5           This Agreement has been duly and validly authorized, executed and delivered by Holder and is a valid and binding agreement of Holder enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and except as rights to indemnity and contribution may be limited by federal or state securities laws or the public policy underlying such laws.

 

3.           THE COMPANY’S REPRESENTATIONS

 

The Company represents and warrants as of the date hereof to the Holder that, except as set forth on Schedule 3 attached hereto, the statements contained in this Section 3 are complete and accurate as of the date of this Agreement.  As used in this Section 3, the term “Knowledge” shall mean the knowledge of the managers of the Company and/or the officers or employees of the Company after reasonable investigation.

 

  

  

  

3.1           Capitalization.

 

a.           The Debenture Shares have been duly and validly authorized and reserved for issuance by the Company, and, when issued by the Company upon conversion of the Debenture, will be duly and validly issued, fully paid and nonassessable and will not subject the holder thereof to personal liability by reason of being such holder.

 

3.2           Organization; Reporting Company Status.

 

(a)           The Company is a corporation duly organized, validly existing and in good standing under the laws of Nevada and is duly qualified as a foreign company in all jurisdictions in which the failure so to qualify would reasonably be expected to have a material adverse effect on the business, properties, prospects, condition (financial or otherwise) or results of operations of the Company or on the consummation of any of the transactions contemplated by this Agreement (a “Material Adverse Effect”).

 

3.3           Authorization.  The Company (i) has duly and validly authorized and reserved for issuance additional shares of common stock, which is a number sufficient for the issuance of the conversion of the Debenture in full and (ii) at all times from and after the date hereof shall have a sufficient number of shares of common stock duly and validly authorized and reserved for issuance to satisfy the conversion of the Debenture in full.  The Company understands and acknowledges the potentially dilutive effect of the issuance of the Debenture Shares.  The Company further acknowledges that its obligation to issue the Debenture Shares upon conversion of the Debenture in accordance with this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other members of the Company and notwithstanding the commencement of any case under 11 U.S.C. § 101 et seq. (the “Bankruptcy Code”).  In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives to the fullest extent permitted any rights to relief it may have under 11 U.S.C. § 362 in respect of the conversion of the Debenture.  The Company agrees, without cost or expense to Holder, to take or consent to any and all action necessary to effectuate relief under 11 U.S.C. § 362.

 

3.4           Authority; Validity and Enforceability.  The Company has the requisite power and authority to enter into the Documents (as such term is hereinafter defined) and to perform all of its obligations hereunder and thereunder (including the issuance, sale and delivery to Holder of the Securities).  The execution, delivery and performance by the Company of the Documents and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Debenture and the issuance and reservation for issuance of the Debenture Shares) have been duly and validly authorized by all necessary action on the part of the Company and no further filing, consent, or authorization is required by the Company, its officers, or its Board of Director.  Each of the Documents has been duly and validly executed and delivered by the Company and each Document constitutes a valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and except as rights to indemnity and contribution may be limited by federal or state securities laws or the public policy underlying such laws.  The Securities have been duly and validly authorized for issuance by the Company and, when executed and delivered by the Company, will be valid and binding obligations of the Company enforceable against it in accordance with their respective terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally.  For purposes of this Agreement, the term “Documents” means (i) this Agreement; (ii) the Debenture; and (iii) the Security Agreement (as hereinafter defined).

 

3.5           Validity of Issuance of the Securities.  The Debenture and the Debenture Shares upon their issuance will be validly issued and outstanding, fully paid and nonassessable, and not subject to any preemptive rights, rights of first refusal, tag-along rights, drag-along rights or other similar rights.

 

3.6           Non-contravention.  The execution and delivery by the Company of the Documents, the issuance of the Securities, and the consummation by the Company of the other transactions contemplated hereby and thereby do not, and compliance with the provisions of this Agreement and other Documents will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien (as such term is hereinafter defined) upon any of the properties or assets of the Company under, or result in the termination of, or require that any consent be obtained or any notice be given with respect to (i) the charter or organizational documents of the Company, in each case as amended to the date of this Agreement, (ii) any loan or credit agreement, debenture, bond, mortgage, indenture, lease, contract or other agreement, instrument or permit applicable to the Company, including, or (iii) any statute, law, rule or regulation applicable to, or any judgment, decree or order of any court or government body having jurisdiction over, the Company or any of its properties or assets.  A “Lien” means any assignment, transfer, pledge, mortgage, security interest or other encumbrance of any nature, or an agreement to do so, or the ownership or acquisition or agreement to acquire any asset or property of any character subject to any of the foregoing encumbrances (including any conditional sale contract or other title retention agreement).

 

  

  

  

3.7           Approvals.  No authorization, approval or consent of any court or public or governmental authority or any other person is required to be obtained by the Company for the issuance and sale of the Securities to Holder as contemplated by this Agreement, except such authorizations, approvals and consents as have been obtained by the Company prior to the date hereof.

 

3.8           Absence of Events of Default.  No “Event of Default” (as defined in any agreement or instrument to which the Company is a party) and no event which, with notice, lapse of time or both, would constitute an Event of Default (as so defined), has occurred and is continuing.

 

3.9           Securities Law Matters.  Assuming the accuracy of the representations and warranties of Holder set forth in Article 2, the offer and sale by the Company of the Securities is exempt from (i) the registration and prospectus delivery requirements of the Securities Act and the rules and regulations of the Commission thereunder and (ii) the registration and/or qualification provisions of all applicable state and provincial securities and “blue sky” laws.  The Company shall not directly or indirectly take, and shall not permit any of its directors, officers or Affiliates directly or indirectly to take, any action (including, without limitation, any offering or sale to any person or entity of any security similar to the Debenture) which will make unavailable the exemption from Securities Act registration being relied upon by the Company for the offer and sale to Holder of the Securities, as contemplated by this Agreement.  No form of general solicitation or advertising has been used or authorized by the Company or any of its officers, directors or Affiliates in connection with the offer or sale of the Securities, as contemplated by this Agreement or any other agreement to which the Company is a party.  As used in the Documents, “Affiliate” has the meaning ascribed to such term in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

3.10           Registration Rights.  No Person has, and as of the Closing (as such term is hereinafter defined), no Person shall have, any demand, “piggy-back” or other rights to cause the Company to file any registration statement under the Securities Act relating to any of its securities or to participate in any such registration statement.

 

3.11           Interest.  The timely payment of interest on the Debenture is not prohibited by the charter documents of the Company, in each case as amended to the date of this Agreement, or any agreement, contract, document or other undertaking to which the Company is a party.

 

3.12           No Misrepresentation.  No representation or warranty of the Company contained in this Agreement or any of the other Documents, any schedule, annex or exhibit hereto or thereto or any agreement, instrument or certificate furnished by the Company to Holder pursuant to this Agreement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

 

3.13           Finder’s Fee.  There is no finder’s fee, brokerage commission or like payment in connection with the transactions contemplated by this Agreement for which Holder is liable or responsible.

 

3.14           Litigation.  There is no action, suit, proceeding or investigation pending or, to the Company’s knowledge, currently threatened against the Company that questions the validity of this Agreement, the Documents, or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or that might result, either individually or in the aggregate, in any material adverse changes in the business, assets or condition of the Company, taken as a whole, financially or otherwise, or any change in the current equity ownership of the Company.  The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no action, suit, proceeding or investigation by the Company currently pending or that the Company intends to initiate.

 

  

  

  

3.15           Agreements.

 

(a)          There are no agreements, understandings or proposed transactions between the Company and any of its officers, managers, directors, or any affiliate thereof.

 

(b)          Schedule 3.15 lists all agreements, whether written or oral, to which the Company is a party.  All such agreements are in full force and effect and no party thereto is in default of such party’s obligations thereunder.

 

3.16           Tax Returns.  The Company has made and filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

3.17           Acknowledgment Regarding Holder’s Purchase of Securities.  The Company acknowledges and agrees that the Holder is acting solely in the capacity of an arm's length purchaser with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that Holder is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by Holder or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Holder’s purchase of the Securities.  The Company further represents to Holder that the Company's decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

 

3.18           No Integrated Offering.  Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Securities to the Holder.  The issuance of the Securities to the Holder will not be integrated with any other issuance of the Company's securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

 

3.19           Patents and Trademarks.  The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights necessary or material for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  The Company has not received any written notice that the Intellectual Property Rights used by the Company violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights of others.

 

3.20           Foreign Corrupt Practices.  The Company, nor any manager, officer, agent, director, employee or other person acting on behalf of the Company has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

3.21           Solvency.  The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature.

 

  

  

  

3.22           Compliance.  The Company (i) is not in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company under), nor has the Company received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is not in violation of any order of any court, arbitrator or governmental body, or (iii) is not or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business except in each case as could not have a Material Adverse Effect.

 

3.23           Regulatory Permits.  The Company possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits could not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

3.24           Seniority.  As of the Closing Date, no indebtedness or other equity of the Company, other than those certain interest bearing Bonds is senior to, or pari passu with, the Debenture in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise.

 

4.           CERTAIN COVENANTS AND ACKNOWLEDGMENTS

 

4.1           Outstanding Notes. The Company hereby acknowledges the current outstanding balance of the Total Look Note is $603,364.71, inclusive of interest as of the date of this Agreement, and the current outstanding balance of the ERB Note is $252,595.06, inclusive of interest as of the date of this Agreement, for an aggregate outstanding balance of $855,959.77. As an inducement to enter into this Agreement, the Company hereby agrees and acknowledges the conversion feature outlined in Section 1c. of the Notes is changed from $0.04 per share to the lesser of (i) $0.02 per share (the “Fixed Conversion Price”), or (ii) if the shares are quoted, listed or admitted to trading on the OTCBB, any national securities exchange or quotation system, 50% of the lowest “Bid” price on the date of conversion. Additionally, as to the ERB Note, the Company hereby agrees and acknowledges that the conversion limitation as outlined in Section 1c(ii). of the documentation evidencing the obligation is hereby deemed null and void so that the note may be converted in its entirety and without limitation.

 

4.2           Filings.  The Company shall take all actions and make all necessary “blue sky” filings required to be made by the Company in connection with the sale of the Securities to Holder as required by all applicable laws, including without limitation such action as the Company shall reasonably determine is necessary to qualify the Securities, or obtain an exemption for the Securities for sale to the Holder at the Closing pursuant to this Agreement under all applicable laws, and shall provide a copy thereof to Holder promptly after such filing.

 

4.3           Reserved Shares.  The Company at all times from and after the date hereof shall have such amount of Shares duly and validly authorized and reserved for issuance as shall be sufficient for the conversion in full of the Debenture.  The Company shall take all action reasonably necessary to at all times have authorized, and reserved for the purpose of issuance, such amount of Shares as shall be necessary to effect the full conversion of the Debenture.  If at any time the number of authorized amount of Shares of the Company is insufficient to effect the full conversion of the Debenture amount of Common Shares, the Company shall call and hold a special meeting of the members of the Company as soon as practicable, for the sole purpose of so increasing the number of Shares.  Management shall also vote all of its Shares in favor of increasing the number of authorized Shares.

 

  

  

  

4.4           Accounting and Reserves.  The Company shall maintain a standard and uniform system of accounting and shall keep proper books and records and accounts in which full, true, and correct entries shall be made of its transactions, all in accordance with GAAP applied on consistent basis through all periods, and shall set aside on such books for each fiscal year all such reserves for depreciation, obsolescence, amortization, bad debts and other purposes in connection with its operations as are required by such principles so applied.

 

4.5           Transactions with Affiliates.  So long as the Debenture is outstanding, the Company shall, directly or indirectly, enter into any material transaction or agreement with any member, officer, director or Affiliate of the Company or family member of any manager, officer, director or Affiliate of the Company, unless the transaction or agreement is (i) reviewed and approved by a majority of the Disinterested Managers (as such term is hereinafter defined) and (ii) on terms no less favorable to the Company than those obtainable from a nonaffiliated person.  A “Disinterested Manager” shall mean a manager of the Company who does not have an interest in such transaction or agreement.

 

4.6           Certain Restrictions.  So long as the Debenture is outstanding, no distributions shall be declared or paid or set apart for payment nor shall any other distribution be declared or made upon any Shares, nor shall any Shares be redeemed, purchased or otherwise acquired for any consideration by the Company, directly or indirectly, nor shall any moneys be paid to or made available for a sinking fund for the redemption of any equity interest.  So long as the Debenture remains outstanding, the Company shall not, without the prior written consent of the Holder, (i) issue or sell any Shares or other equity in the Company, (ii) issue any preferred stock, warrant, option, right, contract, call, or other security or instrument granting the holder thereof the right to acquire any equity interest, (iii) incur any secured debt other than the Bonds currently being offered by the Company, (iv) effect a split or subdivision of any equity interest, or (v) increase the compensation to any officer by more than 5% for any annual period.

 

4.7           Use of Proceeds.  The Company shall use the proceeds from any Advance solely to fund working capital in accordance with a budget to be agreed upon from time to time.  Without limiting the generality of the foregoing, no Advances shall be used directly or indirectly to repay any indebtedness of the Company.

 

4.8           Most Favored Nation Provision.  Any time the Company effects a subsequent financing, Holder may elect, in its sole discretion, to exchange all or some of the Debenture then held by it for the securities issued in a subsequent financing based on the then outstanding principal amount of the Debenture plus any other fees then owed by the Company to Holder, at the effective price at which such securities are sold in such subsequent financing.

 

5.           ISSUANCE OF SHARES

 

Holder shall have the right to convert the Debenture by telecopying an executed and completed Conversion Notice (as such term is defined in the Debenture) to the Company.  Each date on which a Conversion Notice is telecopied to and received by the Company in accordance with the provisions hereof shall be deemed a Conversion Date (as such term is defined in the Debenture).  The Company shall transmit, or if applicable, cause its transfer agent to transmit the certificates evidencing the Debenture Shares issuable upon conversion of the Debenture (together with a new debenture, if any, representing the principal amount of the Debenture not being so converted) to Holder via express courier, within two (2) business days after receipt by the Company of the Conversion Notice, as applicable (the “Delivery Date”).

 

6.           CLOSING DATE

 

 

The “Closing” shall occur by the delivery: (i) to the Holder of the documents evidencing the Debenture and all other Documents, and (ii) to the Company of the Initial Advance.  The date on which the Closing occurs shall be referred to herein as the “Closing Date”.

 

  

  

  

7.           CONDITIONS TO THE COMPANY’S OBLIGATIONS

 

Holder understands that the Company’s obligation to sell the Debenture on the Closing Date to Holder pursuant to this Agreement is conditioned upon:

 

7.1           Delivery by Holder to the Company of the Initial Advance;

 

7.2           The accuracy on the Closing Date of the representations and warranties of Holder contained in this Agreement as if made on the Closing Date (except for representations and warranties which, by their express terms, speak as of and relate to a specified date, in which case such accuracy shall be measured as of such specified date) and the performance by Holder in all material respects on or before the Closing Date of all covenants and agreements of Holder required to be performed by it pursuant to this Agreement on or before the Closing Date; and

 

7.3           There shall not be in effect any law or order, ruling, judgment or writ of any court or public or governmental authority restraining, enjoining or otherwise prohibiting any of the transactions contemplated by this Agreement.

 

8.           CONDITIONS TO HOLDER’S OBLIGATIONS

 

The Company understands that Holder’s obligation to purchase the Securities on the Closing Date pursuant to this Agreement is conditioned upon:

 

8.1           Delivery by the Company of the Debenture, (I/N/O Holder or I/N/O Holder’s designee), together with the other Documents to Holder;

 

8.2           The accuracy on the Closing Date of the representations and warranties of the Company contained in this Agreement as if made on the Closing Date (except for representations and warranties which, by their express terms, speak as of and relate to a specified date, in which case such accuracy shall be measured as of such specified date) and the performance by the Company in all respects on or before the Closing Date of all covenants and agreements of the Company required to be performed by it pursuant to this Agreement on or before the Closing Date, all of which shall be confirmed to Holder by delivery of the certificate of the chief executive officer of the Company to that effect;

 

8.3           The Company shall have delivered to the Holder a certificate of the Company executed by an officer of the Company, dated as of the Closing, certifying the resolutions adopted by the Company’s members authorizing the execution of the Documents, the issuance of the Securities, and the transactions contemplated hereby, and copies of any required third party consents, approvals and filings required in connection with the consummation of the transactions contemplated by this Agreement;

 

8.4           There not having occurred (i) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (ii) the commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States or any of its territories, protectorates or possessions or (iii) in the case of the foregoing existing at the date of this Agreement, a material acceleration or worsening thereof;

 

  

  

  

8.5           There not having occurred any event or development, and there being in existence no condition, having or which reasonably and foreseeably could have a Material Adverse Effect;

 

8.6           There shall not be in effect any law, order, ruling, judgment or writ of any court or public or governmental authority restraining, enjoining or otherwise prohibiting any of the transactions contemplated by this Agreement;

 

8.7           The Company shall have obtained all consents, approvals or waivers from governmental authorities and third persons necessary for the execution, delivery and performance of the Documents and the transactions contemplated thereby;

 

8.8           Holder shall have received such additional documents, certificates, payment, assignments, transfers and other deliveries as it or its legal counsel may reasonably request and as are customary to effect a closing of the matters herein contemplated; and

 

9.           SURVIVAL; INDEMNIFICATION

 

9.1           The representations, warranties and covenants made by each of the Company and Holder in this Agreement, the annexes, schedules and exhibits hereto and in each instrument, agreement and certificate entered into and delivered by them pursuant to this Agreement shall survive the Closing and the consummation of the transactions contemplated hereby.  In the event of a breach or violation of any of such representations, warranties or covenants, the party to whom such representations, warranties or covenants have been made shall have all rights and remedies for such breach or violation available to it under the provisions of this Agreement or otherwise, whether at law or in equity, irrespective of any investigation made by or on behalf of such party on or prior to the Closing Date.

 

9.2           The Company hereby agrees to indemnify and hold harmless Holder, its affiliates and their respective officers, directors, employees, consultants, partners, members and attorneys (collectively, the “Holder Indemnitees”) from and against any and all losses, claims, damages, judgments, penalties, liabilities and deficiencies (collectively, “Losses”) and agrees to reimburse Holder Indemnitees for all reasonable out-of-pocket expenses (including the reasonable fees and expenses of legal counsel), in each case promptly as incurred by Holder Indemnitees and to the extent arising out of or in connection with:

 

a.           any misrepresentation, omission of fact or breach of any of the Company’s representations or warranties contained in this Agreement or the other Documents, or the annexes, schedules or exhibits hereto or thereto or any instrument, agreement or certificate entered into or delivered by the Company pursuant to this Agreement or the other Documents;

 

b.           any failure by the Company to perform any of its covenants, agreements, undertakings or obligations set forth in this Agreement or the other Documents or any instrument, certificate or agreement entered into or delivered by the Company pursuant to this Agreement or the other Documents;

 

c.           the purchase of the Debenture, the conversion of the Debenture, the payment of interest on the Debenture, the consummation of the transactions contemplated by this Agreement and the other Documents, the use of any of the proceeds of the Advance by the Company, the purchase or ownership of any or all of the Securities, the performance by the parties hereto of their respective obligations hereunder and under the Documents or any claim, litigation, investigation, proceedings or governmental action relating to any of the foregoing, whether or not Holder is a party thereto; and/or

 

  

  

  

d.           resales of the Securities by Holder in the manner and as contemplated by this Agreement and the Documents.

 

9.3           Promptly after receipt by a party seeking indemnification pursuant to this Article IX (an “Indemnified Party”) of written notice of any investigation, claim, proceeding or other action in respect of which indemnification is being sought (each, a “Claim”), the Indemnified Party promptly shall notify the Company against whom indemnification pursuant to this Article IX is being sought (the “Indemnifying Party”) of the commencement thereof, but the omission so to notify the Indemnifying Party shall not relieve it from any liability that it otherwise may have to the Indemnified Party except to the extent that the Indemnifying Party is materially prejudiced and forfeits substantive rights or defenses by reason of such failure.  In connection with any Claim as to which both the Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party shall be entitled to assume the defense thereof.  Notwithstanding the assumption of the defense of any Claim by the Indemnifying Party, the Indemnified Party shall have the right to employ separate legal counsel and to participate in the defense of such Claim, and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs and expenses of such separate legal counsel to the Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall have concluded that representation of the Indemnified Party and the Indemnifying Party by the same legal counsel would not be appropriate due to actual or, as reasonably determined by legal counsel to the Indemnified Party, potentially differing interests between such parties in the conduct of the defense of such Claim, or if there may be legal defenses available to the Indemnified Party that are in addition to or disparate from those available to the Indemnifying Party or (z) the Indemnifying Party shall have failed to employ legal counsel reasonably satisfactory to the Indemnified Party within a reasonable period of time after notice of the commencement of such Claim.  If the Indemnified Party employs separate legal counsel in circumstances other than as described in clauses (x), (y) or (z) above, the fees, costs and expenses of such legal counsel shall be borne exclusively by the Indemnified Party.  Except as provided above, the Indemnifying Party shall not, in connection with any Claim in the same jurisdiction, be liable for the fees and expenses of more than one firm of legal counsel for the Indemnified Party (together with appropriate local counsel).  The Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which consent shall not unreasonably be withheld), settle or compromise any Claim or consent to the entry of any judgment that does not include an unconditional release of the Indemnified Party from all liabilities with respect to such Claim or judgment.

 

9.4           In the event one party hereunder should have a claim for indemnification that does not involve a claim or demand being asserted by a third party, the Indemnified Party promptly shall deliver notice of such claim to the Indemnifying Party.  If the Indemnifying Party disputes the claim, such dispute shall be resolved by mutual agreement of the Indemnified Party and the Indemnifying Party or by binding arbitration conducted in accordance with the procedures and rules of the American Arbitration Association.  Judgment upon any award rendered by any arbitrators may be entered in any court having competent jurisdiction thereof.

 

10.           GOVERNING LAW

 

This Agreement shall be governed by and interpreted in accordance with the laws of the State of Nevada, without regard to the conflicts of law principles of such state.

 

11.           WAIVER OF JURY TRIAL

 

TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS.  EACH PARTY HERETO (i) CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

 

  

  

  

12.           COUNTERPARTS; EXECUTION

 

This Agreement may be executed in counterparts, each of which when so executed and delivered shall be an original, but both of which counterparts shall together constitute one and the same instrument.  A facsimile transmission of this signed Agreement shall be legal and binding on both parties hereto.

 

13.           HEADINGS

 

The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

 

14.           SEVERABILITY

 

In the event any one or more of the provisions contained in this Agreement or in the other Documents should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby.  The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

15.           ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS

 

This Agreement and the Documents constitute the entire agreement between the parties hereto pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of such parties.  No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by both parties.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

 

  

  

  

16.           NOTICES

 

Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii) three (3) days after being sent by U.S. certified mail, return receipt requested, or (iv) one (1) 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 facsimile numbers for such communications shall be:

 

	
A. If to the Company, to:

 

	  
	
Rontgenlaan 27, 2719 DX

Zoetermeer, The Netherlands

Attn:  Erwin Bouwens

 

	  
	
B. If to Holder, to:

 

	  
	
Admefo Investments AG

Oberneuhistrasse 6 6340

Baar, Switzerland

Attn:  E.B.H.G. Meijers

 

	  

The Company or Holder may change the foregoing address by notice given pursuant to this Article XVI.

 

17.           CONFIDENTIALITY

 

Each of the Company and Holder agrees to keep confidential and not to disclose to or use for the benefit of any third party the terms of this Agreement or any other information which at any time is communicated by the other party as being confidential without the prior written approval of the other party; provided, however, that this provision shall not apply to information which, at the time of disclosure, is already part of the public domain (except by breach of this Agreement) and information which is required to be disclosed by law.

 

  

  

  

18.           MAXIMUM INTEREST RATE

 

Notwithstanding anything herein to the contrary, if at any time the applicable interest rate as provided for herein shall exceed the maximum lawful rate which may be contracted for, charged, taken or received by the Holder in accordance with any applicable law (the “Maximum Rate”), the rate of interest applicable to this Agreement shall be limited to the Maximum Rate.  To the greatest extent permitted under applicable law, the Company hereby waives and agrees not to allege or claim that any provisions of this Agreement could give rise to or result in any actual or potential violation of any applicable usury laws.

 

19.           ASSIGNMENT

 

This Agreement shall not be assignable by the Company without the prior written consent of the Holder.  The Holder may assign this Agreement upon three days prior written notice to the Company.

 

20.           PAYMENT OF COSTS

 

All costs and expenses of Holder in connection with this Agreement and the other Documents and the transactions contemplated herein shall be paid by the Company promptly upon receipt by the Company of the invoice(s) therefor.

 

IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be executed and delivered on the date first above written.

 

	
Genmed Holding Corp.

 

 

By:                                                      

Name:  Erwin R. Bouwens

Title:  President

	
Admefo Investments AG

 

 

By:                                                    

Name:  E.B.H.G. Meijers

Title:  President

 

	
______________

Initials

	  	
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Initials

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