EXHIBIT 10.64
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: February 28, 2003
$125,000
SECURED CONVERTIBLE DEBENTURE
DUE FEBRUARY 28, 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
▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"),
designated as its Secured Convertible Debentures, due February 28, 2005 (the
"Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Alpha Capital AG or
its registered assigns (the "Holder"), the principal sum of $125,000 on February
28, 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 February 28, 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.
2
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;
3
(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;
4
(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 ▇▇▇▇▇▇ 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.
5
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
6
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
7
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.
8
(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 ▇▇▇▇▇▇'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
9
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
10
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 (▇▇▇) ▇▇▇-▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'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: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Exec. VP / CFO
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:
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
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
------------------------ ---------------------- ---------------------- ---------------------- ----------------------
======================== ====================== ====================== ====================== ======================
24