NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE
HARBOR THEREFROM.
No. 00- US $2,000,000
-------------
BIOGAN INTERNATIONAL, INC.
8% SECURED CONVERTIBLE DEBENTURE DUE FEBRUARY 28, 2002
FOR VALUE RECEIVED, between BIOGAN INTERNATIONAL, INC., a Delaware
corporation (the "the Company") promises to pay to CALP II, a Bermuda limited
liability company, the registered holder hereof (the "Holder"), the principal
sum of Two Million Dollars and 00/100 Dollars (US $2,000,000) on February 28,
2002 (the "Maturity Date") and to pay interest on the principal sum outstanding
from time to time in arrears (i) prior to the Maturity Date, quarterly, on the
last day of March, June, September and December of each year, (ii) upon
conversion as provided herein or (iii) on the Maturity Date, at the rate of 8%
per annum accruing from March 8, 2000, the date of the issuance of this
Debenture. Accrual of interest shall commence on the first such business day to
occur after the date hereof and shall continue to accrue on a daily basis until
payment in full of the principal sum has been made or duly provided for.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
1
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Debenture, the Company may require, prior to issuance of a new
Debenture in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Debenture in
such other name does not and will not cause a violation of the Act or any
applicable state or foreign securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
4. A. The Holder of this Debenture is entitled, at its option, subject
to the following provisions of this Section 4, to convert all or a portion of
this Debenture into shares of Common Stock of the Company, $0.001 par value per
share ("Common Stock") of the Company at any time until the Maturity Date, at a
conversion price for each share of Common Stock (the "Conversion Rate") equal to
the lower of (x) $0.4166 or (y) the Current Market Price (as defined below)
multiplied by eighty percent (80%); provided that the principal amount being
converted is the lower of (x) at least $10,000 (unless if at the time of such
election to convert the aggregate principal amount of all Debentures registered
to the Holder is less than Ten Thousand Dollars $10,000, then the whole amount
thereof) or (y) the maximum amount which the Holder can then convert pursuant to
the terms of Section 4.E. hereof .
B. For purposes of this Debenture, the following terms have the
meanings indicated below:
(i) "Market Price of the Common Stock" means (x) the closing bid price
of the Common Stock for the period indicated in the relevant provision, as
reported by Bloomberg, LP or, if not so reported, as reported on the
over-the-counter market or (y) if the Common Stock is listed on a stock
exchange, the closing price on such exchange, as reported in The Wall Street
Journal.
(ii) "Current Market Price" means the average Market Price of the
Common Stock for the five (5) trading days ending on the trading day immediately
before the relevant Conversion Date (as defined below).
C. The Holder of this Debenture is entitled, at its option, to convert
this Debenture at any time which is after the earlier of (x) the thirtieth
(30th) day after the Initial Closing Date or (y) the Effective Date of the
Registrable Securities applicable to the Initial Debentures (as those terms are
defined in the Securities Purchase Agreement); provided, however, that the
Holder may not convert more than thirty three and one-third percent (33 1/3%) of
the original principal amount of the Debentures issued to the Holder (or
Holder's predecessors in interest) during any thirty (30) calendar day period,
nor sell more than that number of shares of Common Stock which equals (i) Two
Hundred Eight Thousand ($208,000), divided by (ii) Conversion Rate.
2
D. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company's transfer agent, American Securities Transfer ,
accompanied by or preceded by facsimile or other delivery to the Company of the
form of conversion notice attached hereto as Exhibit A, executed by the Holder
of the Debenture evidencing such Holder's intention to convert this Debenture or
a specified portion hereof, and accompanied, if required by the Company, by
proper assignment hereof in blank. Subject to the provisions of Section 4.E.
hereof, interest accrued or accruing from the date of issuance to the date of
conversion shall, at the option of the Company, be paid in cash or Common Stock
upon conversion at the Conversion Rate applicable to such conversion. No
fractional shares of Common Stock or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded to
the nearest whole share. The date on which notice of conversion is given (the
"Conversion Date") shall be deemed to be the date on which the Holder faxes or
otherwise delivers the conversion notice ("Notice of Conversion"), substantially
in the form annexed hereto as Exhibit A, duly executed, to the Company, provided
that the Holder shall deliver to the Company's transfer agent or the Company the
original Debentures being converted within five (5) business days thereafter
(and if not so delivered with such time, the Conversion Date shall be the date
on which the later of the Notice of Conversion and the original Debentures being
converted is received by the Company). Facsimile delivery of the Notice of
Conversion shall be accepted by the Company at facsimile number (000)000-0000;
ATTN: XXXXXX XxXXXXXXXX, CHIEF EXECUTIVE OFFICER. Certificates representing
Common Stock upon conversion will be delivered within three (3) business days
from the date later of the Notice of Conversion is delivered to the Company as
contemplated in the first sentence of this paragraph C or the original Debenture
is delivered to the Company's transfer agent or the Company.
E. Notwithstanding any other provision hereof, of the Warrants or of
any of the other Transaction Agreements (as those terms are defined in the
Securities Purchase Agreement), in no event (except (i) with respect to an
automatic conversion, if any, of a Debenture as provided in the Debentures, (ii)
as specifically provided in this Debenture as an exception to this provision, or
(iii) while there is outstanding a tender offer for any or all of the shares of
the Company's Common Stock) shall the Holder be entitled to convert any
Debenture or shall the Company have the obligation, to convert all or any
portion of this Debenture (and the Company shall not have the right to pay
interest on this Debenture) to the extent that, after such conversion, the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures), and (2) the number of shares of Common Stock issuable upon the
conversion of the Debentures or exercise of the Warrants with respect to which
the determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 9.99% of the outstanding
shares of Common Stock (after taking into account the shares to be issued to the
Holder upon such conversion or exercise). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such sentence.
Any issuance by the Company to the Buyer in excess of the limit contained in
this Section 4.E. shall be null and void, AB INITIO, and upon notice of such
invalid issuance, the Company shall correct its books and cause its transfer
agent's books to be corrected forthwith to reflect that the Buyer's ownership of
3
Common Stock is within the limit set forth herein. Holder shall immediately
deliver any certificates for invalidly issued Common Stock to the Company's
transfer agent. The Company further agrees to (i) immediately reissue
certificates for Common Stock to the extent that a portion of the Common Stock
represented by said certificates have been validly issued and (ii) immediately
reissue all or a portion of those shares which were deemed invalidly issued (at
the Conversion Price set forth in the original conversion notice(s) applicable
to such shares) upon notice from Holder that the reissuance of such shares would
not cause such Holder to have a beneficial ownership interest in excess of
9.99%. Notwithstanding the foregoing, Holder may elect, by providing the Company
written notice at any time prior to the reissuance of shares, to cancel that
portion of a prior conversion applicable to shares of Common Stock surrendered
by it pursuant to this Section 4.E. The Company hereby indemnifies and holds
Holder free and harmless in connection with any and all liabilities, losses,
costs and expenses, including, without limitation, attorneys' fees and costs
arising from or relating to claims made by any third parties with respect to any
and all purported violations by each Buyer under Sections 13(d) and 16 resulting
from a conversion(s) of Debenture, unless such claim arises from such Holder's
default of its obligations hereunder, or representations or warranties contained
herein. The Holder, by its acceptance of this Debenture, further agrees that if
the Holder transfers or assigns any of the Debentures to a party who or which
would not be considered such an affiliate, such assignment shall be made subject
to the transferee's or assignee's specific agreement to be bound by the
provisions of this Section 4(E) as if such transferee or assignee were the
original Holder hereof.
F. Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of Section 4(g) of the Securities Purchase
Agreement, the Conversion Rate shall be amended to be equal to (i) 90% of (ii)
the Conversion Rate determined in accordance with the other provisions of this
Debenture without regard to this Section 4.F., and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with clause (y) of Section 6 hereof.
5. Any Debentures not previously converted as of the Maturity Date,
shall be deemed to be automatically converted, without further action of any
kind by the Company or any of its agents, employees or representatives, as of
the Maturity Date at the Conversion Rate applicable on the Maturity Date
("Mandatory Conversion").
6. The Holder recognizes that the Company may be limited in the number
of shares of Common Stock it may issue by (i) reason of its authorized shares,
or (ii) the applicable rules and regulations of the principal securities market
on which the Common Stock is listed or traded (collectively, the"Cap
Regulations"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still can not
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall have the
option, exercisable in the Holder's sole and absolute discretion, to elect any
one of the following remedies:
4
(x) require the Company to issue shares of Common Stock in
accordance with such Holder's Notice of Conversion relating to the
Unconverted Debenture at a conversion purchase price equal to the
average of the closing bid price per share of Common Stock for any five
(5) consecutive trading days (subject to the equitable adjustments for
certain events occurring during such period as provided in this
Debenture) during the sixty (60) trading days immediately preceding the
date of the Notice of Conversion; or
(y) require the Company to redeem each Unconverted Debenture
for an amount (the "Cap Redemption Amount"), payable in cash, equal to:
V x M
----------
CP
where:
"V" means the outstanding principal plus accrued interest
through the Cap Redemption Date (as defined below) of an Unconverted
Debenture;
"CP" means the Conversion Rate in effect on the date of
redemption (the "Cap Redemption Date") specified in the notice from the
Holder electing this remedy; and
"M" means the highest closing ask price during the period
beginning on the Cap Redemption Date and ending on the date of payment
of the Cap Redemption Amount.
The holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.
7. Subject to the terms of the Securities Purchase Agreement, dated
March 8, 2000 (the "Securities Purchase Agreement"), between the Company and the
Holder (or the Holder's predecessor in interest), no provision of this Debenture
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, and interest on, this Debenture at the
time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture and all other Debentures now or hereafter issued of similar terms are
direct obligations of the Company.
5
8. If the Company merges or consolidates with another corporation or
sells or transfers all or substantially all of its assets to another person and
the holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section 5(A) hereof, less all amounts required by law to be
deducted, upon which tender of payment following such notice, the right of
conversion shall terminate.
9. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, the Company spins off or otherwise divests itself of a part of its
business or operations or disposes all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive compensation
for such business, operations or assets, but causes securities of another entity
(the "Spin Off Securities") to be issued to security holders of the Company,
then the Company shall cause (i) to be reserved Spin Off Securities equal to the
number thereof which would have been issued to the Holder had all of the
Holder's Debentures outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be issued to
security holders of the Company (the "Outstanding Debentures") been converted as
of the close of business on the trading day immediately before the Record Date
(the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
conversion of all or any of the Outstanding Debentures, such amount of the
Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by
(y) a fraction, of which (I) the numerator is the principal amount of the
Outstanding Debentures then being converted, and (II) the denominator is the
principal amount of the Outstanding Debentures.
10. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Base Price shall be equitably adjusted to reflect such action.
By way of illustration, and not in limitation, of the foregoing (i) if the
Company effectuates a 2:1 split of its Common Stock, thereafter, with respect to
any conversion for which the Company issues the shares after the record date of
such split, the Base Price shall be deemed to be one-half of what it had been
calculated to be immediately prior to such split; (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such reverse split; and (iii) if the Company declares a stock dividend of one
share of Common Stock for every 10 shares outstanding, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such dividend, the Base Price shall be deemed to be the amount of such Base
Price calculated immediately prior to such record date multiplied by a fraction,
of which the numerator is the number of shares (10) for which a dividend share
will be issued and the denominator is such number of shares plus the dividend
share(s) issuable or issued thereon (11).
6
11. All payments contemplated hereby to be made "in cash" shall be made
in immediately available good funds in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts. All payments of cash and each delivery of shares of
Common Stock issuable to the Holder as contemplated hereby shall be made to the
Holder at the address last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time; except that the Holder
can designate, by notice to the Company, a different delivery address for any
one or more specific payments or deliveries.
12. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
13. This Debenture and all agreements entered into in connection
herewith shall be governed by and interpreted in accordance with the laws of the
State of California for contracts to be wholly performed in such state and
without giving effect to the principles thereof regarding the conflict of laws.
Any litigation based thereon, or arising out of, under, or in connection with,
this agreement or any course of conduct, course of dealing, statements (whether
oral or written) or actions of the Company or Holder shall be brought and
maintained exclusively in the state or Federal courts of the State of
California, sitting in the City of Los Angeles. The Company hereby expressly and
irrevocably submits to the jurisdiction of the state and federal Courts of the
State of California for the purpose of any such litigation as set forth above
and irrevocably agrees to be bound by any final judgment rendered thereby in
connection with such litigation. The Company further irrevocably consents to the
service of process by registered mail, postage prepaid, or by personal service
within or without the State of California. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service or notice, attachment prior
to judgment, attachment in aid of execution or otherwise) with respect to itself
or its property, the Company hereby irrevocably waives such immunity in respect
of its obligations under this Agreement and the related agreements entered into
in connection herewith.
14. In the event that any action is taken by the Company or Holder in
connection with this Note, or any related document or matter, the losing party
in such legal action, in addition to such other damages as he or it may be
required to pay, shall pay reasonable attorneys' fees to the prevailing party.
7
15. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal
or interest on this Debenture and same shall continue
for a period of three (3) days; or
b. Any of the representations or warranties made by the
Company herein, in the Securities Purchase Agreement,
the Registration Rights Agreement or in any
certificate or financial or other written statements
heretofore or hereafter furnished by the Company in
connection with the execution and delivery of this
Debenture or the Securities Purchase Agreement shall
be false or misleading in any material respect at the
time made; or
c. The Company fails to issue shares of Common Stock to
the Holder or to cause its Transfer Agent to issue
shares of Common Stock upon exercise by the Holder of
the conversion rights of the Holder in accordance
with the terms of this Debenture, fails to transfer
or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the
Holder upon conversion of this Debenture and when
required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or
fails to remove any restrictive legend or to cause
its Transfer Agent to transfer on any certificate or
any shares of Common Stock issued to the Holder upon
conversion of this Debenture as and when required by
this Debenture, the Agreement or the Registration
Rights Agreement and such legend removal is otherwise
lawful, and any such failure shall continue uncured
for five (5) business days; or
d. The Company shall fail to perform or observe, in any
material respect, any other covenant, term,
provision, condition, agreement or obligation of this
Debenture and such failure shall continue uncured for
a period of ten (10) days after written notice from
the Holder of such failure; or
e. The Company shall fail to perform or observe, in any
material respect, any covenant, term, provision,
condition, agreement or obligation of the Company
under the Securities Purchase Agreement, the
Registration Rights Agreement, the Warrant or the
Pledge Agreement (as defined in Section 18 below) and
such failure shall continue uncured for a period of
ten (10) days after written notice from the Holder of
such failure (other than a failure to cause the
Registration Statement to become effective no later
than the Required Effective Date, as defined and
provided in the Registration Rights Agreement, as to
which no such cure period shall apply); or
8
f. The Company shall (1) admit in writing its inability
to pay its debts generally as they mature; (2) make
an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (3)
apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial
part of its property or business; or
g. A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
h. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or
similar process in excess of Two Hundred Thousand
($200,000) Dollars in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days
or in any event later than five (5) days prior to the
date of any proposed sale thereunder; or
j. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceeding; or
k. The Company shall have its Common Stock suspended or
delisted from an exchange or the NASDAQ Bulletin
Board from trading for in excess of five (5) trading
days.
l. An Event of Default has occurred under the terms of
any other Debenture (in this series) issued pursuant
to the Securities Purchase Agreement.
9
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein, in the Pledge Agreement, the Letter of Credit (as
defined in Section 18 below) or any other rights or remedies afforded by law.
16. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
17. In the event for any reason, any payment by or act of the Company
or the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, the IPSO FACTO the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 17
or otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 17 shall control every other
provision of this Debenture.
18. The obligations of the Company contained herein and in the Security
Purchase Agreement are secured by (i) that certain Stock Pledge Agreement (the
"Pledge Agreement"), dated the date hereof, by and among the Company, the Holder
and (the holders of other Debentures delivered pursuant to the Securities
Purchase Agreement, if any), whereby the Company has delivered 28,800,000 shares
of Common Stock to the Escrow Holder (as that term is defined in the Pledge
Agreement), in the form attached to the Securities Purchase Agreement as Annex
VII, and (ii) that certain Standby Letter of Credit issued by the Bank of India
(New York City office), in the form attached to the Securities Purchase
Agreement as Annex VIII.
10
19. Time is of the essence as to the performance of each and every
obligation of the Company and Holder pursuant to this Debenture.
20. A. On the condition that the Company is not in default under this
Debenture (or no event has occurred that would ripen into a default with the
passage of time) the Company may, at its option, repay, in whole or in part, the
then outstanding principal and interest balance of this Debenture on the date of
the Redemption Notice (after deducting the principal and interest subject to
outstanding Conversion Notices) at the Redemption Price (as defined below). This
Debenture is redeemable, in whole or in part, by the Company by providing
written notice (the "REDEMPTION NOTICE") to the Holder via facsimile at its
address set froth herein (the Business Day between the hours of 6:30 a.m. and
3:00 p.m. Pacific Time the Redemption Notice is received by the Holder via
facsimile is defined to be the "REDEMPTION NOTICE DATE"). Within ten Trading
Days after the Redemption Notice Date the Company shall make payment of the
Redemption Price (as defined below) in immediately available funds to the Holder
(such date of payment referred to as the "REDEMPTION DATE"). Partial redemptions
shall be in an aggregate principal amount of at least $100,000. The Company
shall redeem, pro-rata amongst the Holder and the holders of other Debentures in
the series (if any) based on then outstanding balance due under the Debenture
and the other Debentures in the series.
B. In the event the Company serves a Redemption Notice, the Redemption
Price shall be equal to 125% of the outstanding principal and interest balance
of the Debenture.
C. The Notice of Redemption shall set forth (i) the Redemption Date and
the place fixed for redemption, (ii) the Redemption Price,(iii) a statement of
or reference to the conversion right set forth herein, and (iv) confirmation
that the Company has the full Redemption Price reserved as set forth in F.
below. The notice shall specify the principal and interest balance hereof to be
redeemed. Within five Trading Days of the Redemption Notice Date, the Company
shall wire transfer the appropriate amount of funds to the Holder. If the
Company fails to comply with the redemption provisions set forth herein by the
sixth Trading Day after the Redemption Notice Date (or in the case of a public
offering as contemplated in F. below, by the sixth Trading Day after the
Redemption Notice Date) relating to the Redemption Notice, the redemption will
be declared null and void and the Company shall not be permitted to serve
another Redemption Notice. For the first five Trading Days after the Redemption
Notice Date, the Holder will retain its conversion rights with respect to a
maximum of fifty percent (50%) of the principal and interest amount subject to
the redemption. If the Holder elects to so convert the said principal and
interest after the receipt of the Redemption Notice, the Company must receive
notice of such election within two (2) business days from the time the
Redemption Notice was received by the Holder. In the event the Company has not
complied with the redemption provisions set forth herein the Company must comply
with the delivery requirements of any then outstanding Conversion Notice as set
forth herein. If the entire balance of interest and principal of this Debenture
is redeemed hereunder, the Holder shall deliver to the Company the original of
this Debenture within three (3) Business Days after it has received good funds
for the Redemption Price.
11
D. Intentionally deleted.
E. The Redemption Price shall be adjusted proportionally upon any
adjustment of the Conversion Price as provided herein and in the event of any
stock dividend, stock split, combination of shares or similar event.
F. The Company shall not be entitled to send any Redemption Notice and
begin the redemption procedure hereunder unless it has:
(a) the full amount of the Redemption Price in cash,
available in a demand or other immediately available
account in a bank or similar financial institution,
specifically allotted for such redemption;
(b) immediately available credit facilities, in the full
amount of the Redemption Price with a bank or similar
financial institution specifically allotted for such
redemption; or
(c) a combination of the items set forth in (i) and (ii)
above, aggregating the full amount of the Redemption
Price.
Notwithstanding the foregoing, in the event the redemption is expected to be
made contemporaneously with the closing of a public offering of the Company's
securities for an amount in excess of the Redemption Price, the Company shall
not be required to have the full amount of the Redemption Price available to it
as set forth above.
12
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: February 28, 2000
BIOGAN INTERNATIONAL, INC.,
a Delaware corporation
By: /S/ XXXXXX XxXXXXXXXX
-----------------------------------------
Xxxxxx XxXxxxxxxx
-----------------------------------------
(Print Name)
President
-----------------------------------------
(Title)
13
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________
of the principal amount of the above Debenture No. ___ into Shares of Common
Stock of BIOGAN INTERNATIONAL, INC. (the "Company") according to the conditions
hereof, as of the date written below.
Conversion Date*
--------------------------------------------------------------------------------
Applicable Conversion Price
--------------------------------------------------------------------------------
Signature
--------------------------------------------------------------------------------
[Name]
Address:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
