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EXHIBIT 3.5
THIS DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY,
THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE
SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION S AND/OR REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN
REGULATION D PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED
UNDER THE ACT, PURSUANT TO REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED WITH
OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS
INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.
DEBENTURE
EMPYREAN BIOSCIENCE, INC.
4% CONVERTIBLE DEBENTURE
DUE MAY 2, 2006
No. ___ $__________
This Debenture is issued by EMPYREAN BIOSCIENCE, INC., a Delaware
corporation (the "COMPANY"), to ____________________________ (together with its
permitted successors and assigns, the "HOLDER") pursuant to exemptions from
registration under the Securities Act of 1933, as amended.
ARTICLE I.
SECTION 1.01 PRINCIPAL AND INTEREST. For value received, on May 3,
2001, the Company hereby promises to pay to the order of the Holder in lawful
money of the United States of America and in immediately available funds the
principal sum of __________________(US $________), together with interest on the
unpaid principal of this Debenture at the rate of four percent (4%) per year
(computed on the basis of a 365-day year and the actual days elapsed) from the
date of this Debenture until paid. At the Company's option, the entire
unconverted principal amount and all accrued interest shall be either (a) paid
to the Holder on the five (5) year anniversary from the date hereof or (b)
converted in accordance with Section 4.02 herein. The amount of such unconverted
principal and such accrued interest shall be paid in (i) cash and/or (ii) shares
of "Common Stock" (as defined below), at the Company's option.
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SECTION 1.02 OPTIONAL CONVERSION. The Holder is entitled, at its
option, to convert at any time and from time to time, ninety (90) days following
an effective registration statement covering the shares of Common Stock issuable
upon conversion of the Debenture until payment in full of this Debenture, all or
any part of the principal amount of the Debenture, plus accrued interest, into
shares (the "CONVERSION SHARES") of the Company's common stock, $0.0001 par
value ("COMMON STOCK"), at the price per share (the "CONVERSION PRICE") equal to
either (a) an amount equal to one hundred and forty percent (140%) of the
Closing Bid Price of the Common Stock as listed on a Principal Market (as
defined herein), as quoted by Bloomberg L.P. (the "CLOSING BID PRICE") as of the
date hereof, or (b) an amount equal to eighty percent (80%) of the average five
(5) lowest Closing Bid Prices of the Common Stock for the twenty (20) trading
days immediately preceding the Conversion Date (as defined herein).
Subparagraphs (a) and (b) above are individually referred to as a "CONVERSION
PRICE". As used herein, "PRINCIPAL MARKET" shall mean the Nasdaq Bulletin Board
System, Nasdaq SmallCap Market, or American Stock Exchange. If the Common Stock
is not traded on a Principal Market, the Closing Bid Price shall mean, the
reported Closing Bid Price for the Common Stock, as furnished by the National
Association of Securities Dealers, Inc., for the applicable periods. No fraction
of shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share. To convert this Debenture, the Holder hereof shall deliver written
notice thereof, substantially in the form of EXHIBIT "A" to this Debenture, with
appropriate insertions (the "CONVERSION NOTICE"), to the Company at its address
as set forth herein. The date upon which the conversion shall be effective (the
"CONVERSION DATE") shall be deemed to be the date set forth in the Conversion
Notice, provided that the Company or the transfer agent delivers the Conversion
Shares within ten (10) business days after receipt of a Conversion Notice. If
such Conversion Shares are not delivered within such ten (10) business day
period, the Conversion Date shall be the date such shares are actually delivered
to the Holder.
SECTION 1.03 RESERVATION OF COMMON STOCK. The Company shall reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Debenture, such number of
shares of Common Stock as shall from time to time be sufficient to effect such
conversion, based upon the Conversion Price. If at any time the Company does not
have a sufficient number of Conversion Shares authorized and available, then the
Company shall call and hold a special meeting of its stockholders within sixty
(60) days of that time for the sole purpose of increasing the number of
authorized shares of Common Stock.
SECTION 1.04 REGISTRATION RIGHTS. The Company is obligated to register the
resale of the Conversion Shares under the Securities Act of 1933, as amended,
pursuant to the terms of a Registration Rights Agreement, between the Company
and the Holder of even date herewith (the "REGISTRATION RIGHTS AGREEMENT").
SECTION 1.05 INTEREST PAYMENTS. The interest so payable will be paid at
the time of maturity or conversion to the person in whose name this Debenture is
registered. At the time such interest is payable, the Company, in its sole
discretion, may elect to pay interest in cash (via wire transfer or certified
funds) or in the form of Common Stock. In the event of default, as described in
Article III Section 3.01 hereunder, the Holder may elect that the interest be
paid in cash (via wire transfer or certified funds) or in the form of Common
Stock. If paid in the form of
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Common Stock, the amount of stock to be issued will be calculated as follows:
the value of the stock shall be the Closing Bid Price on: (i) the date the
interest payment is due; or (ii) if the interest payment is not made when due,
the date the interest payment is made. A number of shares of Common Stock with a
value equal to the amount of interest due shall be issued. No fractional shares
will be issued; therefore, in the event that the value of the Common Stock per
share does not equal the total interest due, the Company will pay the balance in
cash.
SECTION 1.06 PAYING AGENT AND REGISTRAR. Initially, the Company will
act as paying agent and registrar. The Company may change any paying agent,
registrar, or Company-registrar by giving the Holder not less than ten (10)
business days' written notice of its election to do so, specifying the name,
address, telephone number and facsimile number of the paying agent or registrar.
The Company may act in any such capacity.
SECTION 1.07 SUBORDINATED NATURE OF DEBENTURE. This Debenture and all
payments hereon, including principal or interest, shall be subordinate and
junior in right of payment to all accounts payable of the Company incurred in
the ordinary course of business and/or bank debt of the Company not to exceed
$2,600,000.
ARTICLE II.
SECTION 2.01 AMENDMENTS AND WAIVER OF DEFAULT. The Debenture may be
amended with the consent of the Holder. Without the consent of the Holder, the
Debenture may be amended to cure any ambiguity, defect or inconsistency, to
provide for assumption of the Company obligations to the Holder or to make any
change that does not adversely affect the rights of the Holder.
ARTICLE III.
SECTION 3.01 EVENTS OF DEFAULT. An Event of Default is defined as
follows: (a) failure by the Company to pay amounts due hereunder within fifteen
(15) business days of the date of maturity of this Debenture; (b) failure by the
Company to advise its transfer agent to issue Common Stock to the Holder within
twenty (20) business days of the Company's receipt of the attached Notice of
Conversion from Holder; (c) failure by the Company for thirty (30) business days
after written notice to it to comply with any of its other agreements in the
Debenture; (d) events of bankruptcy or insolvency; (e) a breach by the Company
of its obligations under the Registration Rights Agreement which is not cured by
the Company within fifteen (15) business days after receipt of written notice
thereof. The Holder may not enforce the Debenture except as provided herein.
SECTION 3.02 FAILURE TO ISSUE UNRESTRICTED COMMON STOCK. As indicated
in Article III Section 3.01, a breach by the Company of its obligations under
the Registration Rights Agreement shall be deemed an Event of Default, which if
not cured within twenty (20) days, shall entitle the Holder to accelerated full
repayment of all debentures outstanding. The Company acknowledges that failure
to honor a Notice of Conversion shall cause hardship to the Holder.
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ARTICLE IV.
SECTION 4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture, in whole
or in part, may be converted at any time following the date of closing, into
shares of Common Stock at a price equal to the Conversion Price as described in
Section 1.02 above.
SECTION 4.02 RIGHT OF REDEMPTION. The Company shall have the right,
upon ten (10) days written notice, to redeem any or all outstanding Convertible
Debenture amounts at one hundred and twenty five percent (125%) of par plus any
accrued unpaid interest and or penalties.
SECTION 4.03 RE-ISSUANCE OF DEBENTURE. When the Holder elects to
convert a part of the Debenture, then the Company shall reissue a new Debenture
in the same form as this Debenture to reflect the new principal amount.
SECTION 4.04 LIMITATION ON RIGHT AND POWER TO EXERCISE. Any provision
in this Debenture or any other document to the contrary not withstanding, the
Holder shall not have the right or power to convert this Debenture into Common
Stock, either in whole or in part, and any attempt to do so shall be void, if,
after having given effect to such conversion, the Holder shall be or shall be
deemed to be the beneficial owner of ten percent (10%) or more of the then
outstanding Common Stock within the meaning or for the purposes of Section 13(d)
or 13(g) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), or as the term "BENEFICIAL OWNER" is defined in Rule 13d-3 of the Act.
SECTION 4.05 TERMINATION OF CONVERSION RIGHTS. The Holder's right to
convert the Debenture into the Common Stock in accordance with paragraph 4.01
shall terminate on the date that is the five (5) year anniversary from the date
hereof and this Debenture shall be automatically converted on that date in
accordance with the formula set forth in Section 4.01 hereof, and the
appropriate shares of Common Stock and amount of interest shall be issued to the
Holder.
ARTICLE V.
SECTION 5.01 ANTI-DILUTION. In the event that the Company shall at any
time subdivide the outstanding shares of Common Stock, or shall issue a stock
dividend on the outstanding Common Stock, the Conversion Price in effect
immediately prior to such subdivision or the issuance of such dividend shall be
proportionately decreased, and in the event that the Company shall at any time
combine the outstanding shares of Common Stock, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision, dividend or
combination as the case may be.
ARTICLE VI.
SECTION 6.01 NOTICE. Notices regarding this Debenture shall be sent to
the parties at the following addresses, unless a party notifies the other
parties, in writing, of a change of address:
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If to the Company, to: Empyrean Bioscience, Inc.
23800 Commerce Park Road
Suite A
Cleveland, OH 44122
Attention: Richard C. Adamany
President and Chief Executive Officer
Telephone: (216) 360-7900
Facsimile: (216) 360-7909
With a copy to: Benesch, Friedlander, Coplan and Aronoff LLP
BP America Building - 200 Public Square
Cleveland, OH 44114
Attention: Joseph G. Tegreene, Esq.
Telephone: (216) 363-4643
Facsimile: (216) 363-4588
If to Holder: -------------------------------------------------
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SECTION 6.02 GOVERNING LAW. This Debenture shall be deemed to be made
under and shall be construed in accordance with the laws of the State of
Delaware without giving effect to the principles of conflict of laws thereof.
Each of the parties consents to the jurisdiction of the U.S. District Court
sitting in the Southern District of the State of New York or the state courts of
the State of New York sitting in Manhattan in connection with any dispute
arising under this Debenture and hereby waives, to the maximum extent permitted
by law, any objection, including any objection based on FORUM NON CONVENIENS to
the bringing of any such proceeding in such jurisdictions.
SECTION 6.03 SEVERABILITY. The invalidity of any of the provisions of
this Debenture shall not invalidate or otherwise affect any of the other
provisions of this Debenture, which shall remain in full force and effect.
SECTION 6.04 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents
the entire agreement between the parties hereto with respect to the subject
matter hereof and there are no representations, warranties or commitments,
except as set forth herein. This Debenture may be amended only by an instrument
in writing executed by the parties hereto.
SECTION 6.05 COUNTERPARTS. This Debenture may be executed in multiple
counterparts, each of which shall be an original, but all of which shall be
deemed to constitute on instrument.
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IN WITNESS WHEREOF, with the intent to be legally bound hereby, the
Company as executed this Debenture as of the date first written above.
EMPYREAN BIOSCIENCE, INC.
By:_______________________________________
Name: Richard C. Adamany
Title: President & Chief Executive Officer
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EXHIBIT "A"
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE NOTE)
TO:
The undersigned hereby irrevocably elects to convert $_________________
of the principal amount of the above Note into Shares of Common Stock of
Empyrean Bioscience, Inc., or cash, at Empyrean Bioscience, Inc.'s option,
according to the conditions stated therein, as of the Conversion Date written
below.
CONVERSION DATE:
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APPLICABLE CONVERSION PRICE:
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SIGNATURE:
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NAME:
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ADDRESS:
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