Attached files
Exhibit 10.3
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE"ACT") OR APPLICABLE STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN
OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO
COUNSEL TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT."
Original Issue Date: October 12, 2012
Amount: US $250,000
CONVERTIBLE DEBENTURE
FOR VALUE RECEIVED, Western Standard Energy Corp., a Nevada Company
(hereinafter called the "Company"), hereby promises to pay to the order of BRL
Consulting Inc., as to a 50% interest in this Convertible Debenture, or its
assigns, and Gladys Jenks, as to a 50% interest in this Convertible Debenture,
or her assigns (collectively, the "Holder") the sum of Two Hundred and Fifty
Thousand US Dollars (USD $250,000) (the "Principal Amount"), on the Maturity
Date (as hereinafter defined). This Convertible Debenture (including all
Convertible Debentures issued in exchange, transfer or replacement hereof, this
"Debenture") is duly issued by the Company pursuant to the terms of a Securities
Purchase Agreement entered into between the Company and the Holder on October
12, 2012 ("SPA").
All payments due hereunder (to the extent not converted into Conversion Shares
as defined herein, of the Company) in accordance with the terms hereof shall be
made in lawful money of the United States. All payments shall be made at the
address of the Holder as designated by the Holder or at such address as the
Holder shall hereafter give to the Company by written notice made in accordance
with the provisions of this Debenture. Whenever any amount expressed to be due
by the terms of this Debenture is due on any day which is not a Business Day (as
defined below), the same shall instead be due on the next succeeding day which
is a Business Day.
This Debenture is subject to the following additional provisions:
Section 1. Interest. This Debenture shall bear no interest.
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Section 2. Maturity Date. The "Maturity Date" shall be the date which is the
earlier of (i) April 1, 2013; or (ii) the 90th day following the Company's
receipt of SEC approval of the Registration Statement (as defined in the SPA).
Section 3. Conversion.
(A) CONVERSION RIGHT. The Holder, upon a Default Event (as defined herein) shall
have the right (a "Conversion Right") effective on the 61st day after Holder has
provided notice to the Company of such election, to convert all, but not part,
of this Debenture into an amount of shares ("Conversion Shares") of common stock
of the Company ("Common Stock") which is equal in number to 50% of the total
issued and outstanding Common Stock of the Company at the time of conversion.
Any Conversion Shares issuable pursuant to the exercise of this Debenture shall
be issued as fully paid and non-assessable shares of Common Stock, or any shares
of capital stock or other securities of the Company into which such Common Stock
shall hereafter be changed or reclassified (the "Conversion"). The Conversion
Right set forth in this Section 3 shall remain in full force and effect
immediately from the Original Issue Date until this Debenture is paid in full.
(B) ADJUSTMENT TO DUE TO MERGER, CONSOLIDATION, ETC. If at any time when this
Debenture is issued and outstanding, there shall be any merger, amalgamation,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of another class or
classes of stock or securities of the company or another entity ("Material
Transaction"), then the Holder of this Debenture shall thereafter have the right
to receive upon conversion of this Debenture, upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock and/or securities
which the Holder would have been entitled to receive in such transaction had
this Debenture been converted immediately prior to the Material Transaction.
Section 4. Default. The entire unpaid balance of the Principal Amount shall, at
the election of Holder, be and become immediately due and payable, and (i) the
Conversion Right; and (ii) the security agreement, dated as of October 12, 2012,
executed by the Company in favour of the Holder pursuant to the SPA and any and
all other security documents held by Holder pursuant to this Debenture
(collectively, the "Transaction Documents") shall become immediately
enforceable, upon the occurrence of any of the following events, subsequent to
the date of this Debenture (a "Default Event"):
(a) the non-payment by the Corporation when due of any other payment as provided
in this Debenture;
(b) default by the Corporation in the performance of, or compliance with, any
term or provision of this Debenture, the SPA or the Transaction Documents, which
is not cured within fifteen (15) days after written notice of default is
delivered to the Company by the Holder; or
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(c) the Corporation (i) applies for or consents to the appointment of, or if
there shall be a taking of possession by, a receiver, receiver and manager or
receiver-manager, custodian, trustee or liquidator for the Corporation or any of
its property; a. becomes generally unable to pay its debts as they become due;
(ii) makes a general assignment for the benefit of creditors or becomes
insolvent; (iii) files or is served with any petition for relief under any
bankruptcy laws or regulations and if served, does not file with the appropriate
courts a dispute of the petition within 10 days; (iv) has any judgment entered
against it the enforcement of which would materially affect the Corporation; (v)
has any attachment, lien or levy made to or against any of its material property
or assets; or (vi) has assessed or imposed against it, or if there shall exist,
any general or specific lien for a material amount for any federal, state,
provincial or municipal taxes or charges against any of its property or assets.
Each right, power or remedy of the Holder, upon the occurrence of any Default
Event as provided for in this Debenture or now or hereafter existing at law or
in equity or by statute shall be cumulative and concurrent and shall be in
addition to every other right, power or remedy provided for in this Debenture or
now or hereafter existing at law or in equity or by statute, and the exercise or
beginning of the exercise by the holder or transferee hereof of any one or more
of such rights, powers or remedies shall not preclude the simultaneous or later
exercise by the Holder, on behalf of the Holder, of any or all such other
rights, powers or remedies.
Section 5. No Voting Rights. The 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.
Section 6. Rule 144 Hold Period. For purposes of Rule 144 under the SECURITIES
ACT OF 1933 (the "Act"), it is intended, understood and acknowledged that the
Common Stock issuable upon Conversion of this Debenture shall be deemed to have
been acquired at the time this Debenture was issued. Moreover, it is intended,
understood and acknowledged that the holding period for the Common Stock
issuable upon Conversion of this Debenture shall be deemed to have commenced on
the date this Debenture was issued.
Section 7. Transfer. This Debenture shall be binding upon the Company and its
successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. This Debenture may be sold, assigned or transferred only
in compliance with applicable securities laws and regulations.
Section 8. Governing Law. This Debenture shall be governed by the laws of the
Province of British Columbia, as applicable, except in respect to a dispute
arising over the title to the Collateral in which event such dispute shall be
governed by the laws of the jurisdiction in which the Collateral resides;
provided, however, that the Parties agree, in respect to all disputes arising
out of this Agreement, to attorn to the courts of the Province of British
Columbia and the procedural laws related thereto.
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Section 9. Business Day Definition. For purposes hereof, the term `business day'
shall mean any day on which banks are generally open for business in the
Province of British Columbia and excluding any Saturday and Sunday.
Section 10. Notices. Any notice or other communication required or permitted to
be given hereunder shall be given as provided herein or delivered against
receipt:
if to the Company at:
980 Skeena Drive
Kelowna, B.C. V1V 2K7
if to the Holder at:
c/o BRL Consulting Inc.
3543 West 5th Avenue
Vancouver, B.C. V6R 1S1
Email: blokash@gmail.com
Any notice or other communication needs to be made by facsimile and delivery
shall be deemed give, except as otherwise required herein, at the time of
transmission of said facsimile. Any notice given on a day that is not a business
day shall be effective upon the next business day.
Section 11. Waiver of any Breach to be in Writing. Any waiver by the Company or
the Holder of a breach of any provision of this Debenture shall not operate as,
or be construed to be a waiver of any other breach of such provision or of any
breach of any other provision of this Debenture. The failure of the Company or
the Holder to insist upon strict adherence to any term of this Debenture on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Debenture. Any waiver must be in writing.
Section 12. Unenforceable Provisions. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
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Section 13. Construction; Headings. The headings of this Debenture are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Debenture.
IN WITNESS WHEREOF, Company has caused this Debenture to be signed in its
name by its duly authorized officer this 29th day of October, 2012.
COMPANY:
Western Standard Energy Corp.
By: /s/ Dallas Gray
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Name:
Authorized Signator
