EXHIBIT 99.2
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
Date of Issuance: _______________ __, 2002
$____,000
5% SECURED CONVERTIBLE DEBENTURE
DUE _______________ __, 2004
THIS DEBENTURE is one of a series of duly authorized and issued debentures of
Viragen, Inc., a Delaware corporation, having a principal place of business at
000 X.X. 00xx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000 (the "Company"),
designated as its 5% Secured Convertible Debentures, due _______________ ___,
2004 in the aggregate principal amount of up to $975,000 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to
_____________________________ or its registered assigns (the "Holder"), the
principal sum of $_____________ on _______________ __, 2004 or such earlier
date as the Debentures are required or permitted to be repaid as provided
hereunder (the "Maturity Date") and to pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Debenture
at the rate of 5% per annum, payable semi-annually on June 1 and December 1,
beginning on June 1, 2003 and on each Conversion Date (as defined herein) and
on the Maturity Date (each such date, an "Interest Payment Date"), in cash or
shares of Common Stock (as defined in Section 5) at the Interest Conversion
Rate; provided, however, payment in shares of Common Stock may only occur if:
(i) there is an effective Underlying Shares Registration Statement pursuant to
which the Holder is permitted to utilize the prospectus thereunder to resell
all of the shares of Common Stock to be
issued in lieu of cash (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (ii) the
Common Stock is listed for trading on a Principal Market (and the Company
believes, in good faith, that trading of the Common Stock on a Principal Market
will continue uninterrupted for the foreseeable future), and (iii) there is a
sufficient number of authorized but unissued and otherwise unreserved shares of
Common Stock for the issuance of all of the share issuable pursuant to the
Transaction Documents, including the shares to be issued for interest in lieu
of cash. The Company may not prepay any portion of the principal amount or
interest on this Debenture without the prior written consent of the Holder,
other than as provided herein. Subject to the terms and conditions herein, the
decision whether to pay interest hereunder in shares of Common Stock or cash
shall be at the discretion of the Company. Not less than twenty Trading Days
(as defined in Section 5) prior to each Interest Payment Date, the Company
shall provide the Holder with written notice of its election to pay interest
hereunder either in cash or shares of Common Stock pursuant to the terms of
Section 4 (the Company may indicate in such notice that the election contained
in such notice shall continue for later periods until revised). Subject to the
aforementioned conditions, failure to timely provide such written notice shall
be deemed an election by the Company to pay the interest on such Conversion
Date in shares of Common Stock. Interest shall be calculated on the basis of a
360-day year and shall accrue daily commencing on the Original Issue Date (as
defined in Section 5) until payment in full of the principal sum, together with
all accrued and unpaid interest and other amounts which may become due
hereunder, has been made. Interest hereunder will be paid to the Person (as
defined in Section 5) in whose name this Debenture is registered on the records
of the Company regarding registration and transfers of Debentures (the
"Debenture Register"). All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at the rate of 18% per annum (or such lower
maximum amount of interest permitted to be charged under applicable law) ("Late
Fee") which will accrue daily, from the date such interest is due hereunder
through and including the date of payment.
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the same. No service charge will be
made for such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 5) and may be transferred or exchanged only in
compliance with the Purchase Agreement. Prior to due presentment to the Company
for transfer of this Debenture, the Company and any agent of the Company may
treat the Person (as defined in Section 5) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
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Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative
or governmental body):
(i) upon 1 Trading Day's notice from the Holder, any
default in the payment of the principal of, interest (including any
Late Fees) on or liquidated damages, including but not limited to, the
Standard Liquidated Damages Amount due under the Purchase Agreement,
in respect of, any Debentures, free of any claim of subordination, as
and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise);
(ii) upon 1 Trading Day's notice from the Holder, the
Company shall fail to observe or perform any other covenant, agreement
or warranty contained in, or otherwise commit any breach of any of the
Transaction Documents (as defined in Section 5);
(iii) the Company or any of its subsidiaries shall
commence, or there shall be commenced against the Company or any such
subsidiary a case under any applicable bankruptcy or insolvency laws
as now or hereafter in effect or any successor thereto, or the Company
commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or any subsidiary thereof
or there is commenced against the Company or any subsidiary thereof
any such bankruptcy, insolvency or other proceeding which remains
undismissed for a period of 60 days; or the Company or any subsidiary
thereof is adjudicated insolvent or bankrupt; or any order of relief
or other order approving any such case or proceeding is entered; or
the Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property
which continues undischarged or unstayed for a period of 60 days; or
the Company or any subsidiary thereof makes a general assignment for
the benefit of creditors; or the Company shall fail to pay, or shall
state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Company or any subsidiary thereof
shall call a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or the Company
or any subsidiary thereof shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company or
any subsidiary thereof for the purpose of effecting any of the
foregoing;
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(iv) the Company shall default in any of its obligations
under any other Debenture or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company in an amount
exceeding $100,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable;
(v) the Common Stock shall not be listed for trading on
the American Stock Exchange, or Nasdaq SmallCap Market, the New York
Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board
(each, a "Principal Market") and shall not again be eligible for and
quoted or listed for trading thereon within five Trading Days;
(vi) the Company shall be a party to any Change of
Control Transaction (as defined in Section 5), shall agree to sell or
dispose all or in excess of 33% of its assets in one or more
transactions (whether or not such sale would constitute a Change of
Control Transaction), or shall redeem or repurchase more than a de
minimis number of shares of Common Stock or other equity securities of
the Company (other than redemptions of Underlying Shares (as defined
in Section 5)); provided, however, where the Company is the surviving
corporation in a Change of Control Transaction, provided the Holder
provides the Company with prior written consent of such transaction,
which consent shall not be unreasonably withheld, such a Transaction
shall entitle the Holder to the same remedies as if an Event of
Default shall have occurred however such an event shall not be deemed
an "Event of Default" under this Debenture;
(vii) an Underlying Shares Registration Statement (as
defined in Section 5) shall not have been declared effective by the
Commission (as defined in Section 5) on or prior to the 150th calendar
day after the Original Issue Date;
(viii) if, during the Effectiveness Period (as defined in
the Registration Rights Agreement (as defined in Section 5)), the
effectiveness of the Underlying Shares Registration Statement lapses
for any reason or the Holder shall not be permitted to resell
Registrable Securities (as defined in the Registration Rights
Agreement) under the Underlying Shares Registration Statement, in
either case, for more than 10 consecutive Trading Days or 20
non-consecutive Trading Days during any 12 month period;
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(ix) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the Holder
prior to the expiration of thirty days from the Event Date (as defined
in the Registration Rights Agreement) relating thereto (other than an
Event resulting from a failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to
the 150th calendar day after the Original Issue Date, which shall be
covered by Section 3(a)(vii));
(x) the Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after a
Conversion Date pursuant to and in accordance with Section 4(b) or the
Company shall provide notice to the Holder, including by way of public
announcement, at any time, of its intention not to comply with
requests for conversions of any Debentures in accordance with the
terms hereof; or
(xi) upon 1 Trading Day's notice, the Company shall fail
for any reason to deliver the payment in cash pursuant to a Buy-In (as
defined herein) within five days after notice thereof is delivered
hereunder.
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become at the
Holder's election, immediately due and payable in cash. The aggregate amount
payable upon an Event of Default shall be equal to the sum of: (i) the
Mandatory Prepayment Amount (as defined in Section 5) plus (ii) the product of
(A) the number of Underlying Shares issued in respect of conversions hereunder
within thirty days of the date of a declaration of an Event of Default and then
held by the Holder and (B) the Closing Bid Price (as defined in Section 5) on
the date prepayment is due or the date the full prepayment price is paid,
whichever is greater. Interest shall accrue on the prepayment amount hereunder
from the 5th day after such amount is due (being the date of an Event of
Default) through the date of prepayment in full thereof in an amount equal to
the Late Fee, to accrue daily from the date such payment is due hereunder
through and including the date of payment. All Debentures and Underlying Shares
for which the full prepayment price hereunder shall have been paid in
accordance herewith shall promptly be surrendered to or as directed by the
Company. The Holder need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law; provided, however, the Holder shall have the right to waive any
Event of Default which has occurred and such waivers shall be retroactive to
the date such Event of Default occurred. Such declaration may be rescinded and
annulled by Xxxxxx at any time prior to payment hereunder and the Holder shall
have all rights as a Debenture holder until such time, if any, as the full
payment under this Section shall have been received by it. No such rescission
or annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
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Section 4. Conversion.
(a) (i) At any time after the Closing Date, this Debenture shall
be convertible into shares of Common Stock at the option of the Holder, in
whole or in part at any time and from time to time (subject to the limitations
on conversion set forth in Section 4(a)(ii) hereof). The Holder shall effect
conversions by delivering to the Company the form of conversion notice attached
hereto as Annex A (a "Conversion Notice"), specifying therein the principal
amount of Debentures to be converted and the date on which such conversion is
to be effected (a "Conversion Date"). If no Conversion Date is specified in a
Conversion Notice, the Conversion Date shall be the date that such Conversion
Notice is provided hereunder. To effect conversions hereunder, the Holder shall
not be required to physically surrender Debentures to the Company unless the
entire principal amount of this Debenture has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Debenture plus all accrued and unpaid interest thereon in an amount equal
to the applicable conversion. The Holder and the Company shall maintain records
showing the principal amount converted and the date of such conversions, in a
form substantially similar to Schedule 1 attached hereto. In the event of any
dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee, by
acceptance of this Debenture, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of this
Debenture, the unpaid and unconverted principal amount of this Debenture may be
less than the amount stated on the face hereof.
(ii) A Holder may not convert Debentures or receive
shares of Common Stock as payment of interest hereunder to the extent
such conversion or receipt of such interest payment would result in
the Holder, together with its affiliates, beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder) in excess of 4.999% of the then
issued and outstanding shares of Common Stock, including shares
issuable upon conversion of, and payment of interest on, the
Debentures held by such Holder after application of this Section. To
ensure compliance with this restriction, the 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. If the Holder has delivered a Conversion
Notice for a principal amount of Debentures that, without regard to
any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall
honor the conversion for the maximum principal amount permitted to be
converted on such Conversion Date in accordance with the periods
described in Section 4(b) and, at the option of the
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Holder, either retain any principal amount tendered for conversion in
excess of the permitted amount hereunder for future conversions or
return such excess principal amount to the Holder. In the event of a
merger or consolidation of the Company with or into another Person,
this paragraph shall not apply with respect to a determination of the
number of shares of common stock issuable upon conversion in full of
the Debentures if such determination is necessary to establish the
Securities or other assets which the holder of Common Stock shall be
entitled to receive upon the effectiveness of such merger or
consolidation. The provisions of this Section 4(a)(ii) may be waived
by the Holder upon, at the election of the Holder, not less than 61
days' prior notice to the Company, and the provisions of this Section
4(a)(iii) shall continue to apply until such 61st day (or such later
date, as determined by the Holder, as may be specified in such notice
of waiver).
(iii) If the Company has not obtained Shareholder Approval
(as defined below), then the Company may not issue upon conversion of
the Debentures, in the aggregate, in excess of 19.999% of the number
of shares of Common Stock outstanding on the Trading Day immediately
preceding the Original Issue Date, less any shares of Common Stock
issued upon exercise of the Warrants issued Holders of the Debentures
on the Original Issue Date pursuant to the Purchase Agreement (such
number of shares, the "Issuable Maximum"). Each Holder shall be
entitled to a portion of the Issuable Maximum equal to the quotient
obtained by dividing (x) the aggregate principal amount of the
Debenture(s) issued and sold to such Holder on the Original Issue Date
by (y) the number of the Debenture aggregate principal amount of all
Debentures issued and sold by the Company on the Original Issue Date.
If any Holder shall no longer hold the Debenture(s), then such
Holder's remaining portion of the Issuable Maximum shall be allocated
pro-rata among the remaining Holders. If on any Conversion Date: (A)
the shares of Common Stock are listed for trading on a Principal
Market, (B) the applicable conversion price then in effect is such
that the shares issuable under this Debenture on any Conversion Date
together with the aggregate number of shares of Common Stock that
would then be issuable upon conversion in full of all then outstanding
Debentures, together with any shares of Common Stock previously issued
upon conversion of the Debenture theretofore issuable under the
Debentures and Warrants would exceed the Issuable Maximum, and (C) the
Company shall not have previously obtained the vote of shareholders
(the "Shareholder Approval"), if any, as may be required by the
applicable rules and regulations of the Principal Market (or any
successor entity) applicable to approve the issuance of shares of
Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof, then the Company shall issue to the Holder requesting a
conversion a number of shares of Common Stock equal to such Holder's
pro-rata portion (which shall be calculated pursuant to the terms
hereof) of the Issuable Maximum and, with respect to the remainder of
the aggregate principal amount of the Debentures (including any
interest that shall have been added to the principal amount
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then held by such Holder for which a conversion in accordance with the
applicable conversion price would result in an issuance of shares of
Common Stock in excess of such Holder's pro-rata portion (which shall
be calculated pursuant to the terms hereof) of the Issuable Maximum
(the "Excess Principal"), the converting Holder may require the
Company to elect to either: (1) use its best efforts to obtain the
Shareholder Approval applicable to such issuance as soon as is
possible, but in any event not later than the 60th day after the date
in which the Company determines (or is notified by the Holder) that
the Issuable Maximum would be exceeded, or (2) by the tenth Trading
Day following such election or failure to timely elect, as the case
may be, pay cash to the converting Holder in an amount equal to the
Mandatory Prepayment Amount. The Company must make its election by
written notice to the Holders by the fifth Trading Day after the date
that the Company determines (or is notified by the Holder) that the
Issuable Maximum would be exceeded. Failure to timely elect to seek
Shareholder Approval under this Section shall be deemed an election by
the Company to pay the Mandatory Prepayment Amount for the Excess
Principal in cash. If the Company shall have elected the first option
pursuant to the immediately preceding sentence and the Company shall
have failed to obtain the Shareholder Approval on or prior to the 60th
day after the date in which the Company determines (or is notified by
a Holder) that the Issuable Maximum would be exceeded, then within
three days of such 60th day, the Company shall pay cash to the
converting Holder an amount equal to the Mandatory Prepayment Amount
for the Excess Principal. If the Company fails to pay the Prepayment
Amount for the Excess Principal in full pursuant to this Section after
the date payable, the Company will pay interest thereon at a rate of
18% per annum or such lesser maximum amount that is permitted to be
paid by applicable law, to the converting Holder, accruing daily from
the date such payment is due until such amount, plus all such interest
thereon, is paid in full. The Company and the Holder understand and
agree that shares of Common Stock issued to and then held by the
Holder as a result of conversions of Debentures shall not be entitled
to cast votes on any resolution to obtain Shareholder Approval
pursuant hereto.
(iv) Underlying Shares Issuable Upon Conversion and
Pursuant to Interest.
(A) The number of shares of Common Stock
issuable upon a conversion hereunder shall be determined by
adding the sum of: (1) the quotient obtained by dividing (x)
the outstanding principal amount of this Debenture to be
converted and (y) the Set Price, and (2) the amount equal to
(x) the product of (I) the outstanding principal amount of
this Debenture to be converted and (II) the product of (aa)
the quotient obtained by dividing 5% by 360 and (bb) the
number of days for which such principal amount was
outstanding, divided by (y) the Set Price on the Conversion
Date, provided, that if the Company shall have elected to pay
the interest due on a
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Conversion Date in cash pursuant to the terms hereof,
subsection (2) shall not be used in the calculation of the
number of shares of Common Stock issuable upon a conversion
hereunder.
(B) Notwithstanding anything to the contrary
contained herein, if on any Conversion Date:
(1) the number of shares of Common
Stock at the time authorized, unissued and
unreserved for all purposes, or held as treasury
stock, is insufficient to pay interest hereunder in
shares of Common Stock;
(3) the Common Stock shall fail to be
listed or quoted for trading on a Principal Market;
or
(4) the conversion would otherwise
violate Section 4(a)(iii).
then, at the option of the Holder, the Company, in
lieu of delivering shares of Common Stock pursuant to this
Section 4, shall deliver, within three Trading Days of each
applicable Conversion Date, an amount in cash equal to the
product of the number of shares of Common Stock otherwise
deliverable to the Holder in connection with such Conversion
Date and the highest Closing Bid Price during the period
commencing on the Conversion Date and ending on the Trading
Day prior to the date such payment is made.
(b) (i) Not later than three Trading Days after any Conversion
Date, the Company will deliver to the Holder (A) the number of shares of Common
Stock being acquired upon conversion of the Debenture (the "Conversion Shares")
in the form of a certificate or certificates which shall be free of restrictive
legends and trading restrictions (other than those required by the Purchase
Agreement) representing the number of shares of Common Stock being acquired
upon the conversion of Debentures and (B) a bank check in the amount of accrued
and unpaid interest (if the Company has timely elected or is required to pay
accrued interest in cash). Provided the Registration Statement is then
effective, the Company shall, upon request of the Holder, if available, deliver
any certificate or certificates required to be delivered by the Company under
this Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in the case
of any Conversion Notice such Conversion Shares are not delivered to or as
directed by the applicable Holder by the third Trading Day after a Conversion
Date, the Holder shall be entitled by written notice to the Company at any time
on or before its receipt of such Conversion Shares, to rescind such
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conversion, in which event the Company shall immediately return the
certificates representing the principal amount of Debentures tendered for
conversion.
(ii) If the Company fails for any reason to deliver to
the Holder the Conversion Shares pursuant to Section 4(b)(i) by the
third Trading Day after the Conversion Date, the Company shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, for
each $5,000 of principal amount being converted, $50 per Trading Day
(increasing to $100 per Trading Day after 3 Trading Days and
increasing to $200 per Trading Day 6 Trading Days after such damages
begin to accrue) for each Trading Day after such third Trading Day
until such Conversion Shares are delivered. In the event a Holder of
this Debenture shall elect to convert any or all of the outstanding
principal amount hereof, the Company may not refuse conversion based
on any claim that the Holder or any one associated or affiliated with
the Holder of has been engaged in any violation of law, agreement or
for any other reason, unless, an injunction from a court, on notice,
restraining and or enjoining conversion of all or part of this
Debenture shall have been sought and obtained and the Company posts a
surety bond for the benefit of the Holder in the amount of 150% of the
principal amount of this Debenture outstanding, which is subject to
the injunction, which bond shall remain in effect until the completion
of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Holder to the extent it obtains judgment. In
the absence of an injunction precluding the same, the Company shall
issue Conversion Shares or, if applicable, cash, upon a properly
noticed conversion.Nothing herein shall limit a Holder's right to
pursue actual damages or declare an Event of Default pursuant to
Section 3 herein for the Company's failure to deliver Conversion
Shares within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit
the Holders from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.
(iii) In addition to any other rights available to the
Holder, if the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(b)(i) by the
fifth Trading Day after the Conversion Date, and if after such third
Trading Day the Holder purchases (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by such
Holder of the Underlying Shares which the Holder anticipated receiving
upon such conversion (a "Buy-In"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to or
elected by the Holder) the amount by which (x) the Holder's total
purchase price (including brokerage commissions, if any) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that such Holder anticipated
receiving from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to
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such purchase obligation and (B) at the option of the Holder, either
reissue Debentures in principal amount equal to the principal amount
of the attempted conversion or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company
timely complied with its delivery requirements under Section 4(b)(i).
For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of Debentures with respect to which the market
price of the Underlying Shares on the date of conversion was a total
of $10,000 under clause (A) of the immediately preceding sentence, the
Company shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the Company to
make payment in respect of a Buy-In for the failure to timely deliver
Conversion Shares hereunder and the Company timely pays in full such
payment, the Company shall not be required to pay such Holder
liquidated damages under Section 4(b)(ii) in respect of the Conversion
Shares resulting in such Buy-In.
(c) (i) The conversion price in effect on any Conversion Date
shall be equal to (A) $0.175 (subject to adjustment herein)(the "Set Price"),
except that, if after the earlier of the Effective Date or the 90th day after
the First Closing Date, the Closing Bid Price for any 20 consecutive Trading
Day period is less than 137.5% of the Set Price then in effect, the Set Price
shall be adjusted to thereafter equal 70% OF THE AVERAGE OF THE LAST 5 CLOSING
BID PRICES DURING SUCH 20 DAY PERIOD; provided, however, in no event shall the
Set Price be less than $0.125 (the "Floor Price") (subject to adjustment
herein). There shall be no limit on the number of adjustments that may occur to
the Set Price hereunder, subject to the limitation with respect to the Floor
Price.
(ii) If the Company, at any time while the Debentures are
outstanding: (A) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock, (B) subdivide outstanding shares of Common Stock into a
larger number of shares, (C) combine (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number
of shares, or (D) issue by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then the Set Price
and Floor Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend
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or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while Debentures are
outstanding, shall issue rights, options or warrants to all holders of
Common Stock (and not to Holders) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the
Closing Bid Price at the record date mentioned below, then the Set
Price and Floor Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of
which the numerator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of shares which
the aggregate offering price of the total number of shares so offered
would purchase at such Closing Bid Price. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.
(iv) If the Company or any subsidiary thereof, as
applicable, at any time while Debentures are outstanding, shall offer,
sell, grant any option to purchase or offer, sell or grant any right
to reprice its securities, or otherwise dispose of or issue (or
announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or any equity or equity equivalent
securities (including any equity, debt or other instrument that is at
any time over the life thereof convertible into or exchangeable for
Common Stock) (collectively, "Common Stock Equivalents") entitling any
Person to acquire shares of Common Stock, at a price per share less
than the Set Price (if the holder of the Common Stock or Common Stock
Equivalent so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options
or rights per share which is issued in connection with such issuance,
be entitled to receive shares of Common Stock at a price per share
which is less than the Set Price, such issuance shall be deemed to
have occurred for less than the Set Price), then, the Set Price shall
be adjusted for such conversions as Holders shall indicate in its
Conversion Notices to equal the conversion, exchange or purchase price
for such Common Stock or Common Stock Equivalents (including any reset
provisions thereof) at issue and the Floor Price shall be adjusted
downward for such conversions as the Holders shall indicate in its
Conversion Notices to equal the conversion, exchange or purchase price
for such Common Stock or Common Stock Equivalents (including any reset
provisions thereof) at issue less $0.07. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. The
Company shall notify the Holder in writing, no later
12
than the business day following the issuance of any Common Stock or
Common Stock Equivalent subject to this section, indicating therein
the applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms.
(v) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock (and not
to Holders) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security, then in each such
case the Set Price and Floor Price shall be determined by multiplying
such price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Closing Bid Price
determined as of the record date mentioned above, and of which the
numerator shall be such Closing Bid Price on such record date less the
then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of
assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned
above.
(vi) In case of any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holders shall
have the right thereafter to, at their option, (A) convert the then
outstanding principal amount, together with all accrued but unpaid
interest and any other amounts then owing hereunder in respect of this
Debenture only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of the Common
Stock following such reclassification or share exchange, and the
Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the
Common Stock of the Company into which the then outstanding principal
amount, together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture could have
been converted immediately prior to such reclassification or share
exchange would have been entitled or (B) require the Company to prepay
the aggregate of its outstanding principal amount of Debentures, plus
all interest and other amounts due and payable thereon, at a price
determined in accordance with Section 3(b). The entire prepayment
price shall be paid in cash. This provision shall similarly apply to
successive reclassifications or share exchanges.
13
(vii) All calculations under this Section 4 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may
be.
(viii) Whenever the Set Price and Floor Price are adjusted
pursuant to any of Section 4(c)(ii) - (v), the Company shall promptly
mail to each Holder a notice setting forth the Set Price and Floor
Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.
(ix) If (A) the Company shall declare a dividend (or any
other distribution) on the Common Stock; (B) the Company shall declare
a special nonrecurring cash dividend on or a redemption of the Common
Stock; (C) the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of
any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then, in each case, the
Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of the Debentures, and shall cause to be
mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the
holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger,
sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of
the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity
of the corporate action required to be specified in such notice.
Holders are entitled to convert Debentures during the 20-day period
commencing the date of such notice to the effective date of the event
triggering such notice.
(x) If, at any time while this Debenture is outstanding,
(A) the Company effects any merger or consolidation of the Company
with or into another Person, (B) the Company effects any sale of all
or substantially all of its assets in one or a series of related
transactions, (C) any tender offer or exchange offer (whether by the
Company
14
or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then upon any subsequent conversion of
this Debenture, the Holder shall have the right to receive, for each
Underlying Share that would have been issuable upon such conversion
absent such Fundamental Transaction, the same kind and amount of
securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of one
share of Common Stock (the "Alternate Consideration"). For purposes of
any such conversion, the determination of the Set Price shall be
appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one
share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Set Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock
are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any
conversion of this Debenture following such Fundamental Transaction.
To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new debenture consistent with
the foregoing provisions and evidencing the Holder's right to convert
such debenture into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity
to comply with the provisions of this paragraph (c) and insuring that
this Debenture (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. If any Fundamental Transaction constitutes or results in
a Change of Control Transaction, then at the request of the Holder
delivered before the 90th day after such Fundamental Transaction, the
Company (or any such successor or surviving entity) will purchase the
Debenture from the Holder for a purchase price, payable in cash within
five Trading Days after such request (or, if later, on the effective
date of the Fundamental Transaction), equal to the Black-Scholes value
of the remaining unconverted portion of this Debenture on the date of
such request, which value shall in no event exceed 150% of the
principal amount outstanding of this Debenture.
(d) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of Common Stock solely
for the purpose of issuance upon conversion of the Debentures and payment of
interest on the Debentures, each as herein
15
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of shares
of the Common Stock as shall (subject to any additional requirements of the
Company as to reservation of such shares set forth in the Purchase Agreement)
be issuable (taking into account the adjustments and restrictions of Section
4(b)) upon the conversion of the outstanding principal amount of the Debentures
and payment of interest hereunder. The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the Underlying Shares
Registration Statement has been declared effective under the Securities Act,
registered for public sale in accordance with such Underlying Shares
Registration Statement.
(e) Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of the Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Closing Bid Price at such time. If the
Company elects not, or is unable, to make such a cash payment, the Holder shall
be entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock
on conversion of the Debentures shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to
be provided by the Holders hereunder, including, without limitation, any
Conversion Notice, shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to the Company, at the address
set forth above, facsimile number (000) 000-0000, Attn: Xxxxxx Xxxxxx or such
other address or facsimile number as the Company may specify for such purposes
by notice to the Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries
16
hereunder shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 5:30 p.m.
(New York City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 5:30 p.m. (New York City time) on
any date and earlier than 11:59 p.m. (New York City time) on such date, (iii)
four days after deposit in the United States mail, (iv) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
Section 5. Definitions. Capitalized terms not defined in this
Section 5 or elsewhere in this Debenture shall have the meanings ascribed to
them in the Purchase Agreement. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a
day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence of any
of (i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated under
the Exchange Act) of effective control (whether through legal or
beneficial ownership of capital stock of the Company, by contract or
otherwise) of in excess of 33% of the voting securities of the
Company, (ii) a replacement at one time or over time of more than
one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the
board of directors on the date hereof (or by those individuals who are
serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the
members of the board of directors who are members on the date hereof),
(iii) the merger of the Company with or into another entity that is
not wholly-owned by the Company, consolidation or sale of 50% or more
of the assets of the Company in one or a series of related
transactions, or (iv) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for
any of the events set forth above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $0.01 par value per
share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"Conversion Date" shall have the meaning set forth in section
4(a)(i).
17
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Interest Conversion Rate" means 90% of the lesser of (i) the
average of the 5 Closing Bid Prices immediately prior to the
applicable Interest Payment Date and (ii) the average of the 5 Closing
Bid Prices immediately prior to the date the applicable interest
payment shares are issued and delivered if after the Interest Payment
Date.
"Mandatory Prepayment Amount" for any Debentures shall equal
the sum of (i) the greater of: (A) 135% of the principal amount of
Debentures to be prepaid, plus all accrued and unpaid interest
thereon, plus all other accrued and unpaid amounts due hereunder, and
(B) the principal amount of Debentures to be prepaid, plus all accrued
and unpaid interest thereon, plus all other accrued and unpaid amounts
due hereunder, divided by the Set Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is less,
multiplied by the Closing Bid Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in
respect of such Debentures.
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of
any Debenture and regardless of the number of instruments which may be
issued to evidence such Debenture.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of the Original Issue Date, to which the Company and the
original Holder are parties, as amended, modified or supplemented from
time to time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company
and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Set Price" shall have the meaning set forth in Section
4(c)(i).
"Trading Day" means (a) a day on which the shares of Common
Stock are traded on a Principal Market on which the shares of Common
Stock are then listed or quoted, or (b) if the shares of Common Stock
are not quoted on a Principal Market, a day on which the shares
18
of Common Stock are quoted in the over-the-counter market as reported
by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices);
provided, that in the event that the shares of Common Stock are not
listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean a Business Day.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of Debentures or as payment of interest in accordance
with the terms hereof.
"Underlying Shares Registration Statement" means a
registration statement meeting the requirements set forth in the
Registration Rights Agreement, covering among other things the resale
of the Underlying Shares and naming the Holder as a "selling
stockholder" thereunder.
Section 6. Redemption.
(a) Optional Redemption by the Company. The Company shall have
the right, at any time after the Effective Date, upon 20 Trading Days' prior
written notice to the Holder (an "Optional Redemption Notice" and the date such
notice is received by the Holder, the "Notice Date"), to redeem no less than
the entire principal amount of this Debenture then held by the Holder, at a
cash price equal to the 125% of the principal amount outstanding plus interest
and any fees owing thereon (the "Optional Redemption Price"). The Company may
only effect an Optional Redemption Notice if each of the following shall be
true: (i) the Company shall have duly honored all conversions occurring by
virtue of one or more Conversion Notices prior to the Optional Redemption
Notice, (ii) there is an effective Underlying Shares Registration Statement
pursuant to which the Holder is permitted to utilize the prospectus thereunder
to resell all of the Underlying Shares issued to the Holder and all of the
Underlying Shares as are issuable to the Holder upon conversion in full of this
Debenture subject to the Optional Redemption Notice (and the Company believes,
in good faith, that such effectiveness will continue uninterrupted for the
foreseeable future), (iii) the Common Stock is listed for trading on a
Principal Market (and the Company believes, in good faith, that trading of the
Common Stock on a Principal Market will continue uninterrupted for the
foreseeable future), (iv) all liquidated damages and other amounts owing in
respect of the Debentures and Underlying Shares shall have been paid or will,
concurrently with the issuance of the Underlying Shares, be paid in cash; (v)
there is a sufficient number of authorized but unissued and otherwise
unreserved shares of Common Stock for the issuance of all the Underlying Shares
as are issuable to the Holder upon conversion in full of the Debentures subject
to the Optional Redemption Notice; (vi) no
19
Event of Default nor any event that with the passage of time would constitute
an Event of Default has occurred and is continuing; and (vii) no public
announcement of a pending or proposed Change of Control Transaction or
Fundamental Transaction has occurred that has not been consummated. If any of
the foregoing conditions shall cease to be in effect during the period between
the Notice Date and the date the Optional Redemption Price is paid in full,
then the Holders subject to such redemption may elect, by written notice to the
Company given at any time after any of the foregoing conditions shall cease to
be in effect, to invalidate ab initio such redemption, notwithstanding anything
herein contained to the contrary. The Holders may convert any portion of the
outstanding principal amount of the Debentures subject to an Optional
Redemption Notice prior to the date that the Optional Redemption Price is due
and paid in full.
(b) Redemption Procedure. The Optional Redemption Price is due on
the 10th Trading Day following the Notice Date. If any portion of the Optional
Redemption Price shall not be paid by the Company by expiration of such 10th
Trading Day, interest shall accrue thereon at the rate of 18% per annum (or the
maximum rate permitted by applicable law, whichever is less) until the Optional
Redemption Price plus all such interest is paid in full. In addition, if any
portion of the Optional Redemption Price remains unpaid after such date, the
Holders subject to such Redemption may elect, by written notice to the Company
given at any time thereafter, to invalidate ab initio such redemption,
notwithstanding anything herein contained to the contrary. If a Holder elects
to invalidate such redemption the Company shall promptly, and, in any event,
not later than 3 Trading Days from receipt of such Xxxxxx's notice of such
election, return to such Holder all of the Debentures for which the Optional
Redemption Price shall not have been paid in full.
Section 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation of
the Company and is secured by a floating charge in certain assets of Viragen
(Scotland) Ltd. as set forth in that certain Bond and Floating Charge, dated as
of the date of the Purchase Agreement. This Debenture ranks pari passu with all
other Debentures now or hereafter issued under the terms set forth herein. As
long as there are Debentures outstanding, the Company shall not and shall cause
it subsidiaries not to, without the consent of the Holders, (a) amend its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Holders; (b) repay, repurchase or offer to
repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent
permitted or required under the Transaction Documents; or (c) enter into any
agreement with respect to any of the foregoing.
Section 8. If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed debenture, a new Debenture
20
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
Section 9. The Company will not and will not permit any of its
subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom that is senior in any respect to the Company's
obligations under the Debentures.
Section 10. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by any of the Transaction
Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York, Borough of
Manhattan (the "New York Courts"). Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of the New York Courts for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or
such New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Debenture and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Debenture or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Debenture, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
Section 11. 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.
21
Section 12. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances. If it
shall be found that any interest or other amount deemed interest due hereunder
shall violate applicable laws governing usury, the applicable rate of interest
due hereunder shall automatically be lowered to equal the maximum permitted
rate of interest. The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on the Debentures as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by
resort to any such law, hinder, delay or impeded the execution of any power
herein granted to the Holder, but will suffer and permit the execution of every
such as though no such law has been enacted.
Section 13. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.
*********************
22
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture
to be duly executed by a duly authorized officer as of the date first above
indicated.
VIRAGEN, INC.
By:
----------------------------------------
Name:
Title:
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal and, if specified, interest
under the 5% Convertible Debenture of Viragen, Inc., (the "Company") due on
_______________ __, 2004, into shares of common stock, $0.01 par value per
share (the "Common Stock"), of the Company according to the conditions hereof,
as of the date written below. If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Company's Common Stock does
not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be
Converted
Payment of Interest in Kind [ ] Yes [ ] No
If yes, $ _______ of Interest
Accrued on Account of Conversion
at Issue
Number of shares of Common Stock to
be Issued:
Applicable Set Price:
Signature:
Name:
Address:
SCHEDULE 1
CONVERSION SCHEDULE
8% Convertible Debentures due on _______________ __, 2004, in the aggregate
principal amount of $____________ issued by Viragen, Inc. This Conversion
Schedule reflects conversions made under Section 4 of the above referenced
Debenture.
Dated:
Aggregate Principal
Amount Remaining
Date of Conversion Subsequent to
(or for first entry, Conversion
Original Issue Date) Amount of Conversion (or original Company Attest
Principal Amount)
25
