EXHIBIT 10.59
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: January __, 2003
$____,000
SECURED CONVERTIBLE DEBENTURE
DUE _______________ __, 2005
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 Secured Convertible Debentures, due _______________ ___, 2005
in the aggregate principal amount of up to [$2,138,842] (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to ___________________
or its registered assigns (the "Holder"), the principal sum of $_____________
on January __, 2005 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 0% per annum until January
__, 2004 and 6% per annum thereafter, payable semi-annually on June 1 and
December 1, beginning on June 1, 2004 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), (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 and (iv) the Company shall have obtained
Shareholder Approval to exceed the Issuable Maximum. 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 cash. 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) or the Company shall have
failed to amend the Company's certificate or articles of
incorporation to increase the number of authorized but
unissued shares of Common Stock to at least the Required
Minimum on or prior to April 1, 2003;
(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 Holder, either retain
any principal amount tendered for conversion in excess of the
permitted amount hereunder for future conversions or return
such excess principal
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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, then the Company may not issue, pursuant to the
Transaction Documents, in the aggregate, in excess of 19.999%
of the number of shares of Common Stock outstanding on the
Original Issue Date (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
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. Within 60 days of the
Original Issue Date, the Company shall obtain the vote of
shareholders (the "Shareholder Approval") 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 Transaction Documents. If the Company
shall have not obtained the Shareholder Approval on or before
60 days from the Original Issue Date, then the Company shall
issue to the Holder, upon conversion of this Debenture, 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 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 Company shall, by the
fifth Trading Day following such conversion, pay cash to the
converting Holder in an amount equal to the Mandatory
Prepayment Amount with respect to such Excess Principal. If
the Company fails to pay the Mandatory 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
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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 by (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 the
applicable interest rate on this Debenture by 360
and (bb) the number of days for which such principal
amount was outstanding, divided by (y) the lesser of
the Set Price and the Interest Conversion Rate on
the Conversion Date, provided, that if the Company
shall have elected to pay the interest due on a
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.
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(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 conversion, in which event
the Company shall, if applicable, 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 Xxxxxx'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
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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 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 $0.085 (subject to
adjustment herein)(the "Set 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 shall be
multiplied by a fraction of which the numerator
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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 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 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. Such adjustment shall
be made whenever such Common Stock or Common Stock
Equivalents are issued. The Company shall notify
11
the Holder in writing, no later 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 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.
(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.
12
(viii) Whenever the Set Price is 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 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 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
13
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 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
14
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 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
15
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).
"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.
16
"Issuable Maximum" shall have the meaning set forth in
Section 4(a)(iii).
"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).
"Shareholder Approval" shall have the meaning set forth in
Section 4(a)(iii).
"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 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
17
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 Event of Default nor any event that with the passage of time would
constitute an Event of Default has occurred and is continuing; (vii)
no public announcement of a pending or proposed Change of Control
Transaction or Fundamental Transaction has occurred that has not been
consummated and (viii) the Company shall have obtained Shareholder
Approval to exceed the Issuable Maximum. If any of the foregoing
conditions shall cease to be in effect
18
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. In any case, 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) Conditional Redemption at Election of Holder. On any
Conversion Date after the earlier of the Effective Date or the 90th
day after the Closing Date, if the Closing Bid Price for the 20
consecutive Trading Day period prior to such date is less than 120% of
the Set Price then in effect, the Holder shall have the right to cause
the Company to, at the election of the Company, either (i) redeem the
portion of this Debenture then subject to the Conversion Notice
applicable to such Conversion Date based on a redemption price equal
to 125% of the principal amount of such principal amount (the
"Conditional Redemption Price") or (ii) in lieu of a cash redemption
payment, issue Conversion Shares based on a conversion price equal to
75% of the average of the last 5 Closing Bid Prices during such 20 day
period; provided, however, if, on the applicable Conversion Date,
there is an effective Registration Statement pursuant to which the
prospectus thereunder is available to resell Conversion Shares issued
to the Holder, the Company must first issue shares registered pursuant
to such Registration Statement. Notwithstanding anything to the
contrary herein, the Company acknowledges and agrees that, to the
extent the Company exceeds the Issuable Maximum, it must pay any
Conditional Redemption Price in cash until Shareholder Approval is
obtained. The Company must notify the Holder of its election to pay
the Conditional Redemption Price in cash or shares of Common Stock
within 24 hours after notification from the Holder that the Holder
elects to exercise its right to a redemption hereunder. All
conversions hereunder shall be made as if pursuant to Section 4 and
the other sub-sections relating thereto, including but not limited to,
liquidated damages and fees for late delivery of Conversion Shares.
Nothing herein shall preclude the Holder from converting this
Debenture to the extent this Debenture remains unpaid and unconverted
after the Mandatory Redemption Date.
(c) Redemption Procedure. The Optional Redemption Price
is due on the 10th Trading Day following the Notice Date and the
Conditional Redemption Price is due on the 10th Trading Day following
the Conversion Date unless otherwise paid in shares of Common Stock.
If any portion of the Optional Redemption Price or Conditional
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 such redemption price plus all such interest
is paid in full. In addition, if any portion of the Optional
Redemption Price or Conditional 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
19
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 or Conditional 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 all of the 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 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
20
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.
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.
*********************
21
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 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:
Applicable Interest Conversion Rate:
Signature:
Name:
Address:
SCHEDULE 1
CONVERSION SCHEDULE
Convertible Secured 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:
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Aggregate
Principal
Amount
Remaining
Date of Subsequent to
Conversion Conversion
(or for first (or original
entry, Original Amount of Principal
Issue Date) Conversion Amount) Company Attest
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24
