EXHIBIT 10.72
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: April 16, 2003
$____,000
SECURED CONVERTIBLE DEBENTURE
DUE JULY 1, 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 July 1, 2005 in the
aggregate principal amount of up to $______________ (the "DEBENTURES").
FOR VALUE RECEIVED, the Company promises to pay to
_____________________________ or its registered assigns (the "HOLDER"), the
principal sum of $_____________ on July 1, 2005 or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"MATURITY DATE"). The Company may not prepay any portion of the principal amount
of this Debenture without the prior written consent of the Holder, other than as
provided herein.
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 6) 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 6) 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.
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, 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 6) 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 June 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
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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;
(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
or the Company shall have failed to file, within 20 days of
the Original Issue Date, a registration statement registering
for resale the shares of Common Stock issuable pursuant that
Common Stock Purchase Agreement entered into between the
Company and Talisman Management Limited or shall have failed
to use reasonable best efforts to cause such registration
statement to be declared effective within 120 days of the
Original Issue Date;
(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 6), 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
6)); 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
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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 6) shall not have been declared effective
by the Commission (as defined in Section 6) 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 6)), 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;
(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) 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 6) 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 6) on the date
prepayment is due or the date the full prepayment price is paid, whichever is
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greater. 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.
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 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 to the
extent such conversion 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
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shares issuable upon conversion of 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 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. As promptly as reasonably
possible, the Company shall obtain the vote of shareholders
(the "SHAREHOLDER APPROVAL") as may be required by the
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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, 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 (as set forth in the Purchase Agreement) of
the Issuable Maximum and, with respect to the remainder of the
aggregate principal amount of the Debentures 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 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 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.
(A) The number of shares of Common Stock
issuable upon a conversion hereunder shall be the
quotient obtained by dividing (x) the outstanding
principal amount of this Debenture to be converted by
(y) the Set Price.
(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;
(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 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.
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
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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 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 $0.20 (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 shall be the
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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,
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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 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 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 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 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.
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(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
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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 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. The Company
covenants that all shares of Common Stock that shall be so issuable
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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 (954)
233-1416, ATTN: XXXXXX X. 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 date and earlier than
11:59 p.m. (New York City time) on such date, (iii) four days after
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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. REDEMPTION.
(a) OPTIONAL REDEMPTION. Subject to the provisions of this
Section 5, the Company may, at any time, deliver a notice to the
Holders (an "OPTIONAL REDEMPTION NOTICE" and the date such notice is
deemed delivered hereunder, the "OPTIONAL REDEMPTION NOTICE DATE") of
its irrevocable election to redeem all, but not less than all, of the
then outstanding Debentures, for an amount, in cash, equal to the
Optional Redemption Amount on the 30th Trading Day following the
Optional Redemption Notice Date (such date, the "OPTIONAL REDEMPTION
DATE" and such redemption, the "OPTIONAL REDEMPTION"). The Optional
Redemption Amount is due in full on the Optional Redemption Date. The
Company may only effect an Optional Redemption if from the Optional
Redemption Notice Date through to the Optional Redemption Date, each of
the following shall be true: (i) the Company shall have duly honored
all conversions and redemptions scheduled to occur or occurring by
virtue of one or more Conversion Notices prior to the Optional
Redemption Date, (ii) there is an effective Underlying Shares
Registration Statement pursuant to which the Holders are permitted to
utilize the prospectus thereunder to resell all of the Underlying
Shares issued to the Holders and all of the Underlying Shares as are
issuable to the Holders upon conversion in full of the Debentures
subject to the Optional Redemption (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
the Principal Market (and the Company believes, in good faith, that
trading of the Common Stock on the Principal Market will continue
uninterrupted for the foreseeable future), (iv) all liquidated damages
and other amounts owing in respect of the Debentures 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; (vi) no Event of Default has occurred and is continuing;
(vii) an issuance of all of the Underlying Share upon conversion
hereunder would be permitted in full without violating the limitations
set forth in Section 4(a)(ii)(A) or (B); and (viii) no public
announcement of a pending or proposed Fundamental Transaction or
acquisition transaction has occurred that has not been consummated. If
any of the foregoing conditions shall cease to be satisfied at any time
during the required period, then the Holder may elect to nullify the
Optional Redemption Notice in which case the Option Redemption Notice
shall be null and void, ab initio. The Holders may convert, pursuant to
Section 4(a)(i) hereof, any shares of Debentures subject to an Optional
Redemption at any time prior to the date that the Optional Redemption
Amount and all amounts owing thereon are due and paid in full. The
Company covenants and agrees that it will honor all Conversion Notices
tendered from the time of delivery of the Optional Redemption Notice
through the date all amounts owing thereon are due and paid in full.
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(b) MONTHLY REDEMPTION. On each Monthly Redemption Date, the
Company shall redeem each Holder's Pro Rata Portion of the Monthly
Redemption Amount, the sum of all liquidated damages and any other
amounts then owing to such Holder in respect of the Debenture. For
purposes of this Section 5(b) only, "PRO RATA PORTION" is the ration of
(x) the principal amount of this Debenture on the Original Issue Date
and (y) the sum of the aggregate original principal amounts of the
Debentures issued to all Holders on the Closing Date. If any Holder
shall no longer holds Debentures or if a Holder's outstanding principal
amount is less than their Pro Rata Portion of the Monthly Redemption
Amount, then such Holder's Monthly Redemption Amount shall be such
lesser amount and the Pro Rata Portion shall be recalculated to exclude
such Holder's principal amount (or portion thereof no longer
outstanding) from clause (y) above and the Monthly Redemption Amount
shall be allocated pro-rata among the remaining Holders. The Monthly
Redemption Amount due on each Monthly Redemption Date shall, except as
provided in this Section, be paid in cash. As to any Monthly Redemption
and upon 20 Trading Days' prior written irrevocable notice, in lieu of
a cash redemption payment the Company may elect to pay all or part, as
set forth in the notice, of a Monthly Redemption in Underlying Shares
based on a conversion price equal to the Set Price; PROVIDED, HOWEVER,
that the Company may not pay the Monthly Redemption Amount in
Underlying Shares unless, on the applicable Monthly Redemption Date and
during the 20 Trading Day period immediately prior thereto, (i) there
is an effective 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 the Debenture
subject to such Monthly Redemption (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 the Principal Market will continue uninterrupted
for the foreseeable future), (iii) on or prior to the 20th Trading Day
prior to such Monthly Redemption Date, the Company irrevocably notifies
the Holder that it will issue Underlying Shares in lieu of cash; (iv)
all liquidated damages and other amounts owing in respect of the
Debenture 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 such issuance; (vi) such issuance would be permitted
in full without violating the limitations set forth in Section
4(a)(ii)(A) or (B); (vii) no Event of Default nor any event that with
the passage of time would constitute an Event of Default has occurred
and is continuing; (viii) no public announcement of a pending or
proposed Change of Control Transaction or Fundamental Transaction has
occurred that has not been consummated and (ix) THE AVERAGE OF THE 5
CLOSING BID PRICES IMMEDIATELY PRIOR TO THE 20TH TRADING DAY PRIOR TO
SUCH MONTHLY REDEMPTION DATE AND THE AVERAGE OF THE 5 CLOSING BID
PRICES IMMEDIATELY PRIOR TO SUCH MONTHLY REDEMPTION DATE EXCEEDS $0.25
(SUBJECT TO ADJUSTMENT FOR REVERSE AND FORWARD STOCK SPLITS, STOCK
DIVIDENDS, STOCK COMBINATIONS AND OTHER SIMILAR TRANSACTIONS OF THE
COMMON STOCK THAT OCCUR AFTER THE DATE OF THE PURCHASE AGREEMENT). The
Holders may convert, pursuant to Section 4(a)(i), any principal amount
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of the Debenture subject to a Monthly Redemption at any time prior to
the date that the Monthly Redemption Amount and all amounts owing
thereon are due and paid in full. The Company covenants and agrees that
it will honor all Conversion Notices tendered up until such amounts are
paid in full.
(c) REDEMPTION PROCEDURE. The payment of cash and/or issuance
of Common Stock, as the case may be, pursuant to a Monthly Redemption
shall be made on the Monthly Redemption Date and the payment of cash
pursuant to an Optional Redemption shall be made on the Optional
Redemption Date. If any portion of the cash payment for a Monthly
Redemption or Optional Redemption shall not be paid by the Company by
the respective due date, interest shall accrue thereon at the rate of
18% per annum (or the maximum rate permitted by applicable law,
whichever is less) until the payment of the Monthly Redemption Amount
or Optional Redemption Amount, as applicable, plus all amounts owing
thereon is paid in full. In addition, if any portion of the Monthly
Redemption Amount or Optional Redemption Amount, as applicable, 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. Notwithstanding anything to the
contrary in this Section 5, the Company's determination to redeem in
cash or shares of Common Stock shall be applied ratably among the
Holders based upon the principal amount of Debentures initially
purchased by each Holder, adjusted upward ratably in the event all of
the shares of Debentures of any Holder are no longer outstanding.
SECTION 6. DEFINITIONS. Capitalized terms not defined in this Section 6
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
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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.
"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 other accrued and unpaid amounts due
hereunder, and (B) the principal amount of Debentures to be prepaid,
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.
"MONTHLY REDEMPTION" shall mean the redemption of the
Debenture pursuant to Section 5(a) hereof.
"MONTHLY REDEMPTION AMOUNT" shall mean, as to a Monthly
Redemption, $______________(1) in the aggregate among all Holders, or
such lesser principal amount of the Debentures as is outstanding in the
aggregate on the Monthly Redemption Date.
"MONTHLY REDEMPTION DATE" means the 1st of each month,
commencing on the earlier of the first such date after the Effective
date and August 1, 2003 and ending upon the full redemption of this
Debenture.
"OPTIONAL REDEMPTION AMOUNT" shall mean the sum of (i) 120% of
the principal amount of the Debenture then outstanding and (ii) all
liquidated damages and other amounts due in respect of the Debentures.
--------------
(1) 1/24 of the aggregate principal amount issued pursuant to the
Purchase Agreement.
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"OPTIONAL REDEMPTION DATE" shall have the meaning set forth in
Section 5(a).
"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.
"PRINCIPAL MARKET" shall have the meaning set forth in Section
3(a)(v).
"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 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.
"UNDERLYING SHARES REGISTRATION STATEMENT" means a
registration statement meeting the requirements set forth in the
Registration Rights Agreement, covering among other things the resale
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of the Underlying Shares and naming the Holder as a "selling
stockholder" thereunder.
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, 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 FIRST PRIORITY SECURITY INTEREST IN ALL OF THE ASSETS OF THE COMPANY AND
ITS SUBSIDIARIES AS SET FORTH IN THOSE CERTAIN SECURITY AGREEMENTS, DATED AS OF
THE CLOSING DATE, AMONG THE ORIGINAL HOLDERS OF THE DEBENTURES AND EACH OF THE
COMPANY AND THE SUBSIDIARIES AND, WITH RESPECT TO VIRAGEN (SCOTLAND) LTD., A
FLOATING CHARGE IN ALL OF THE ASSETS OF VIRAGEN (SCOTLAND) LTD. AS SET FORTH IN
THAT CERTAIN XXXX AND FLOATING CHARGE, DATED AS OF JANUARY 31, 2003. 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 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
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address in effect for notices to it under this Xxxxxxxxx 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 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 deemed 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.
*********************
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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:
------------------------------------------------
Xxxxxx X. Xxxxxx, Executive Vice President & CFO
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ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal of the Convertible Debenture
of Viragen, Inc., (the "Company") due on _______________ __, 2005, 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
Number of shares of Common Stock to be Issued:
Applicable Set Price:
Signature:
Name:
Address:
SCHEDULE 1
CONVERSION SCHEDULE
Convertible Secured Debentures due on _______________ __, 2005, 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 Conversion Subsequent to
(or for first entry, Conversion
Original Issue Date) Amount of Conversion (or original Company Attest
Principal Amount)
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