Exhibit 4.1
DEBENTURE AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD
IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO
REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FACE AMOUNT $2,500,000
PRICE $2,500,000
DEBENTURE NUMBER July - 2006-101
ISSUANCE DATE July 14, 2006
MATURITY DATE July 14, 2011
FOR VALUE RECEIVED, SIMPLAGENE USA, INC a Nevada corporation (the
"Company"), hereby promises to pay DUTCHESS PRIVATE EQUITIES FUND, LP and
DUTCHESS PRIVATE EQUITIES FUND, II, LP (collectively, the "Holder") by July 14,
2011 (the "Maturity Date"), the principal amount of Two Million Five Hundred
Thousand Dollars ($2,500,000) U.S., and to pay interest on the principal amount
hereof, and any accrued penalties, in such amounts, at such times and on such
terms and conditions as are specified herein.
The Debenture set forth in this Agreement is subject to automatic
conversion at the end of five (5) years from the date of issuance at which time
the Debenture outstanding will be automatically converted based upon the formula
set forth in Article 3.2(c).
Article 1 Interest
The Company shall pay interest ("Interest") at the rate of ten percent
(10%) per annum on the unpaid Face Amount of this Debenture. Such payments will
be made to the Holder (each an "Interest Payment," or collectively, the
"Interest Payments") on a monthly basis on the first business day of each month,
commencing August 1, 2006 and continuing while there is an outstanding balance
on the Debenture, in an amount equal to the Interest on the balance on the
Debenture ("Interest Payment Amount" or collectively, the "Interest Payment
Amounts") then accruing from the past Interest Payment until such time as the
Interest Payment is due and collected. After the Effective Date, the Holder
shall have the right to request Interest Payments in Common Stock priced at the
Conversion Price.
Any monies paid to the Holder in excess of the interest due when paid shall
be credited toward the Redemption of the Face Amount of the Debenture.
Article 2 Method of Principal Payment
Section 2.1 Prior to the Effective Date.
In the event that the Effective Date has not occured on or before
January 1, 2007, then,the Company will make amortizing cash payments to the
Holder (a "Payment," or collectively, the "Payments") on a monthly basis on the
first day of each business day of each month while there is an outstanding
balance on the Debenture, in the following amounts ("Payment Amount" or
collectively, the "Payment Amounts"):
Payment for January 1, 2007 through March 1, 2007 $150,000.00
Payment for April 1, 2007 and each month thereafter $260,416.67
Notwithstanding any provision to the contrary in this Debenture, the Company may
pay in full to the Holder the Face Amount, or any balance remaining thereon, in
readily available funds, at any time and from time to time without penalty.
All Payments made under Article 2, shall be applied toward the total
Redemption Amount as outlined in Article 14, herein.
Section 2.2 Subsequent to the Effective Date
After the U.S. Securities and Exchange Commission ("SEC") has declared the
registration statement for the shares underlying the Debenture ("Registration
Statement") effective ("Effective Date"), Effective, the Holder, at its sole
option, shall be entitled to convert a portion of the Debenture pursuant to
Article 3, below. After the Effective Date, the Company shall not be obligated
to make any Payments to the Holder as outlined in Section 2.1, above.
Nothing contained in this Article 2 shall limit the amount the Holder can
elect to convert during a calendar month except as defined in Section 3.2 (i),
below.
Article 3 Conversion
Section 3.1 Conversion Privilege
(a) The Holder of this Debenture shall have the right to convert any and all
amounts owing under this Debenture into shares of Common Stock at any time
following the Issuance Date and which is on or before the close of business on
the Maturity Date, except as set forth in Section 3.2, below. The number of
shares of Common Stock issuable upon the conversion of this Debenture is
determined pursuant to Section 3.2 and rounding the result up to the nearest
whole share.
(b) This Debenture may not be converted, whether in whole or in part, except
in accordance with this Article 3.
(c) In the event all or any portion of this Debenture remains outstanding on
the Maturity Date, the unconverted portion of such Debenture will
automatically be converted into shares of Common Stock on such date in the
manner set forth in Section 3.2.
Section 3.2 Conversion Procedure
(a) Conversion Procedures. The Holder may elect to convert the unpaid Face
Amount of and accrued interest on this Debenture, in whole or in part, at any
time following the Closing Date. Such conversion shall be effectuated by the
Holder sending to the Company a facsimile or electronic mail version of the
signed Notice of Conversion which evidences the Holder's intention to convert
the Debenture as indicated. The date on which the Notice of Conversion is
delivered ("Conversion Date") shall be deemed to be the date on which the Holder
has delivered to the Company a facsimile or electronic mail of the signed
Notice of Conversion. Notwithstanding the above, any Notice of Conversion sent
by the Holder to the Company by 9:30 A.M. EST, shall be deemed to have been
received the previous business day, with receipt being via a confirmation of
time of facsimile and electronic mail sent by the Holder.
(b) Common Stock to be Issued. Upon the Holder's conversion of any
portion of this Debenture, the Company shall issue the number of shares of
Common Stock equal to the Conversion Notice. If, at the time of conversion, the
Registration Statement has been declared effective, the Company shall
instruct its transfer agent to issue stock certificates without restrictive
legend (other than a legend referring to the registration statement and
prospectus delivery requirements) or stop transfer instructions. If, at the
time of the Holder's conversion, the Registration Statement has not been
declared effective, the Company shall instruct the transfer agent to issue the
certificates with an appropriate legend. The Company shall act as Registrar and
shall maintain an appropriate ledger containing the necessary information with
respect to each Debenture. The Company warrants that no instructions, other than
these instructions, have been given or will be given to the transfer agent and
that the Common Stock shall otherwise be freely resold, except as may be
otherwise set forth herein.
(c) Conversion Price. The Holder is entitled to convert the unpaid Face
Amount of this Debenture, plus accrued interest, any time following the Issuance
Date, at the lesser of the following prices (the "Conversion Price"): (i)
Maximum Conversion Price (as defined in Section 3.2 (c) (i) below; or (ii) at a
"Conversion Price" of eighty percent (80%) of the lowest closing bid price of
the Common Stock during the ten (10) trading days immediately preceding a
Conversion Date (as outlined in Section 3.2 (a), above). No fractional shares
or scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded up, in the event of a partial share,
to the nearest whole share. The Holder shall retain all rights of conversions
during any partial trading days.
(i) Maximum Conversion Price. The Maximum Conversion Price shall
be equal to ninety percent (90%) of the average of the five (5) lowest closing
best bid prices of the Common Stock during the "Maximum Conversion Pricing
Period". The Maximum Conversion Pricing Period shall commence on the
twenty-first (21st) calendar day immediately following the filing of Form 8K
announcing the Agreement and Plan of Reorganization of Simpla Gene Inc and New
Colorado Prime Holdings, Inc ("8K Filing Date") and ending on the date which is
the earlier of 1) the Effective Date (as defined herein) or 2) the one hundred
and twentieth (120th) trading day following the 8K Filing Date.
(d) Maximum Interest. Nothing contained in this Debenture shall be deemed
to establish or require the Company to pay interest to the Holder at a rate in
excess of the maximum rate permitted by governing law. In the event that the
rate of interest required to be paid exceeds the maximum rate permitted by
governing law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the governing law and
such excess, if so ordered, shall be credited on any remaining balances due to
the Holder. In the event this Section 3.2 (d) applies, the Parties agree that
the terms of this Debenture remain in full force and effect except as is
necessary to make the interest rate comply with applicable law.
(e) Opinion Letter. It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the Common Stock as
provided herein, including the responsibility and cost for delivery of an
opinion letter to the transfer agent, if so required. The person or entity in
whose name the certificate of Common Stock is to be registered shall be treated
as a shareholder of record on and after the conversion date. Upon surrender of
any Debentures that are to be converted in part, the Company shall issue to the
Holder a new Debenture equal to the unconverted amount, if so requested in
writing by Holder.
(f) Delivery of Shares. Within three (3) business days after receipt of the
documentation referred to above in Section 3.2(a), the Company shall
deliver a certificate, in accordance with Section 3.2(c) for the number of
shares of Common Stock issuable upon the conversion. In the event the Company
does not make delivery of the Common Stock, as instructed by Holder, within
three (3) business days after the Conversion Date, the Company shall pay to
Holder in cash, as liquidated damages, an additional two percent (2%) per month
of the dollar value of the Debentures being converted, pro rata for partial
periods, until delivered.
If the failure of the Company to issue the Common Stock pursuant to
this Article 3.2 (f) is due to the unavailability of authorized shares of Common
Stock, the provisions of this Article 3.2 (f) shall not apply, but instead the
provisions of Article 3.2 (k) shall apply.
The Company shall make any payments required under this Article
3.2(f) in immediately available funds within three (3) business days from the
date the Common Stock is fully delivered. Nothing herein shall limit the
Holder's right, at the Holder's sole discretion, to pursue actual damages or
cancel the conversion for the Company's failure to issue and deliver Common
Stock to the Holder within three (3) business days after the Conversion Date.
The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the full amount of the Debentures
then outstanding and due to the Holder. If, at any time, the Holder submits a
Notice of Conversion and the Company does not have sufficient authorized but
unissued shares of Common Stock (or alternative shares of Common Stock as may be
contributed by Stockholders) available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default being referred to
herein as the "Conversion Default Date"), the Company shall issue to the Holder
all of the shares of Common Stock which are then available. Any Convertible
Debentures or any portion thereof, which cannot be converted due to the
Company's lack of sufficient authorized common stock (the "Unconverted
Debentures"), may be deemed null and void upon written notice sent by the Holder
to the Company. The Company shall provide notice of such Conversion Default
("Notice of Conversion Default") to the Holder, by facsimile, within one (1)
business day of such default.
If, by the third (3rd) business day after the Conversion Date, any portion
of the Shares of the Convertible Debentures have not been delivered to the
Holder and the Holder purchases, in an open market transaction or otherwise,
shares of Common Stock necessary to make delivery of shares which would have
been delivered if the full amount of the shares to be converted and delivered to
the Holder by the Company (the "Covering Shares") , then the Company shall pay
to the Holder, in addition to any other amounts due to the Holder pursuant to
this Convertible Debenture, and not in lieu thereof, the Buy-In Adjustment
Amount (as defined below). The "Buy In Adjustment Amount" is the amount equal
to the excess, if any, of (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Covering Shares minus (y) the net
proceeds (after brokerage commissions, if any) received by the Holder from the
sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to
the Holder in immediately available funds within five (5) business days of
written demand by the Holder. By way of illustration and not in limitation of
the foregoing, if the Holder purchases shares of Common Stock having a total
purchase price (including brokerage commissions) of $11,000 to cover a Buy-In
with respect to shares of Common Stock it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount which the Company will be required to pay to the Holder
will be $1,000.
(g) Prospectus and Other Documents. The Company shall furnish to Holder one
(1) prospectus and any other documents incidental to the registration of the
shares of Common Stock underlying the Debentures, including any amendment of or
supplements thereto. Any filings submitted via EDGAR will constitute
fulfillment of the Company's obligation under this Section.
(h) Limitation on Issuance of Shares. If the Company's Common Stock becomes
listed on the Nasdaq SmallCap Market after the issuance of the Debenture, the
Company may be limited in the number of shares of Common Stock it may issue by
virtue of (A) the number of authorized shares or (B) the applicable rules and
regulations of the principal securities market on which the Common Stock is
listed or traded, including, but not necessarily limited to, NASDAQ Rule
4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable (collectively, the
"Cap Regulations"). Without limiting the other provisions thereof: (i) the
Company will take all steps necessary to issue shares of Common Stock on
conversion of the Debentures without violating the Cap Regulations, and (ii) if,
despite taking such steps, the Company cannot issue such shares of Common
Stock without violating the Cap Regulations or the Holder cannot convert as a
result of the Cap Regulations (each such Debenture, an "Unconverted Debenture")
the Holder shall have the right to elect either of the following options:
(x) if permitted by the Cap Regulations, require the Company to issue
shares of Common Stock in accordance with the Holder's Notice of Conversion at a
conversion purchase price equal to the average of the closing bid price per
share of Common Stock for any five (5) consecutive Trading Days (subject to
certain equitable adjustments for certain events occurring during such period)
during the sixty (60) Trading Days immediately preceding the Conversion Date; or
(y) require the Company to redeem each Unconverted Debenture for an amount
(the "Redemption Amount"), payable in cash, equal to the sum of (i) one hundred
thirty-three percent (133%) of the then outstanding principal of an Unconverted
Debenture, plus (ii) any accrued but unpaid interest thereon through and
including the date on which the Redemption Amount is paid to the holder (the
"Redemption Date").
The Holder may elect, without limitation, one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture. The Debenture shall
contain provisions substantially consistent with the above terms, with such
additional provisions as may be consented to by the Holder. The provisions of
this section are not intended to limit the scope of the provisions otherwise
included in the Debenture.
(i) Limitation on Amount of Conversion and Ownership. Notwithstanding
anything to the contrary in this Debenture, in no event shall the Holder or any
of its affiliates be entitled to convert that amount of Debenture, and in no
event shall the Company permit that amount of conversion, into that number of
shares, which when added to the sum of the number of shares of Common Stock
beneficially owned, (as such term is defined under Section 13(d) and Rule 13d-3
of the Securities Exchange Act of 1934, as may be amended, (the "1934 Act")), by
the Holder, would exceed 4.99% of the number of shares of Common Stock
outstanding on the Conversion Date, as determined in accordance with Rule
13d-1(j) of the 1934 Act. In the event that the number of shares of Common Stock
outstanding as determined in accordance with Section 13(d) of the 1934 Act is
different on any Conversion Date than it was on the Closing Date, then the
number of shares of Common Stock outstanding on such Conversion Date shall
govern for purposes of determining whether the Holder would be acquiring
beneficial ownership of more than 4.99% of the number of shares of Common Stock
outstanding on such Conversion Date. However, nothing in this Article 3.2(i)
shall be read to reduce the amount of principal, interest or penalties, if any,
due to the Holder.
(j) Legend. The Holder acknowledges that each certificate representing the
Debentures, and the Common Stock unless registered pursuant to the Registration
Rights Agreement, shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR
ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(iii) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
(k) Prior to conversion of the Debenture, if at any time the conversion of
all the Debentures and exercise of all the Warrants outstanding would result in
an insufficient number of authorized shares of Common Stock being available to
cover all the conversions, then in such event, the Company will move to call and
hold a shareholder's meeting or have shareholder action with written consent of
the proper number of shareholders within thirty (30) days of such event, or such
greater period of time if statutorily required or reasonably necessary as
regards standard brokerage house and/or SEC requirements and/or procedures, for
the purpose of authorizing additional shares of Common Stock such as necessary
to facilitate the Holder's conversions. In such an event management of the
Company shall recommend to all shareholders to vote their shares in favor of
increasing the authorized number of shares of Common Stock. Management of the
Company shall vote all of its shares of Common Stock in favor of increasing the
number of shares of authorized Common Stock to an amount equal to three hundred
percent (300%) of the remaining balance on the Debenture. The Company
represents and warrants that under no circumstances will it deny or prevent the
Holder's right to convert the Debentures as permitted under the terms of this
Subscription Agreement or the Registration Rights Agreement. Nothing in this
Section shall limit the obligation of the Company to make the payments set forth
in this Article 3. The Holder, at its sole option, may request the Company to
authorize and issue additional shares if the Holder feels it is necessary for
conversions in the future. In the event the Company's shareholder's meeting does
not result in the necessary authorization, the Company shall redeem the
outstanding Debentures for an amount equal to the sum of the principal of the
outstanding Debentures plus accrued interest thereon multiplied by 125%.
Section 3.3 Fractional Shares. The Company shall not issue fractional
shares of Common Stock, or scrip representing fractions of such shares, upon the
conversion of this Debenture. Instead, the Company shall round up, to the
nearest whole share.
Section 3.4 Taxes on Conversion. The Company shall pay any documentary
stamp or similar issue or transfer tax due on the issue of shares of Common
Stock upon the conversion of this Debenture. However, the Holder shall pay any
such tax which is due because the shares are issued in a name other than its
name.
Section 3.5 Company to Reserve Stock. The Company shall reserve and
maintain the number of shares of Common Stock required pursuant to and upon the
terms set forth in the Subscription Agreement to permit the conversion of this
Debenture. All shares of Common Stock which may be issued upon the conversion
hereof shall upon issuance by the Company be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
Section 3.6 Restrictions on Sale. This Debenture has not been registered
under the Securities Act of 1933, as amended (the "Act") and is being issued
under Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the
Act. This Debenture and the Common Stock issuable upon the conversion
hereof may only be sold pursuant to registration under or an exemption from the
Act.
Section 3.7 Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Conversion Price shall be proportionately reduced in the
case of a subdivision of shares or stock dividend, or proportionately increased
in the case of combination of shares, in each such case, by the ratio that the
total number of shares of Common Stock outstanding immediately after such event
bears to the total number of shares of Common Stock outstanding immediately
prior to such event.
Article 4 Mergers
The Company shall not consolidate or merge into, or transfer any or all of
its assets other than in connection with the contemplated transaction between
SimplaGene USA, Inc and New Colorado Prime Holdings, Inc., to, any person,
unless such person assumes in writing the obligations of the Company under this
Debenture and immediately after such transaction no Event of Default exists.
Any reference herein to the Company shall refer to such surviving or transferee
corporation and the obligations of the Company shall terminate only upon such
written assumption of the Company's obligation. In the event of a merger, or
other consolidation, the Company shall give notice to the Holder simultaneously
with the announcement to the public markets.
Article 5 Security
This Debenture is secured by a Security Agreement (the "Security
Agreement") of this date between the Company and the Holder.
Article 6 Defaults and Remedies
Section 6.1 Events of Default. An "Event of Default" occurs if any one of
the following occur:
(a) the Company does not make timely Payment or does not timely issue and
deliver the Shares for a Conversion, in whole or in part, necessary to cover the
principal, interest or other sum due on the Maturity Date, Conversion Date, upon
redemption, or otherwise described herein, subject to notice being sent by the
Holder, via electronic mail or facsimile, to the Company, subject to cure in one
(1) day; or,
(b) the Company does not make a Payment in cash for a period of two (2)
business days when due as described in this Agreement; or,
(c) any of the Company's representations or warranties contained in the
Transaction Documents or this Debenture were false when made or the Company
fails to comply with any of its other agreements in the Transaction Documents
(as defined in Article 16 below) and such failure continues for a period of five
(5) business days; or,
(d) the Company pursuant to or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case; (ii) consents to the entry of an order for
relief against it in an involuntary case; (iii) consents to the appointment of a
Custodian (as hereinafter defined) of it or for all or substantially all of its
property or (iv) makes a general assignment for the benefit of its creditors or
(v) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company in an involuntary
case; (B) appoints a Custodian of the Company for all or substantially all of
its property or (C) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for sixty (60) calendar days; or,
(e) the Company's Common Stock is suspended or no longer listed on any
recognized exchange including electronic over-the-counter bulletin board and
pink sheets, provided that the Company continues reporting under OTC BB
requirements ("Principal Market") for in excess of five (5) consecutive trading
days. Failure to comply with the requirements for continued listing on a
Principal Market for a period of five (5) trading days; or notification from a
Principal Market that the Company is not in compliance with the conditions for
such continued listing on such Principal Market; or,
(f) the Company breaches any covenant or condition of the Transaction
Documents, and such breach, if subject to cure, continues for a period of five
(5) business days; or,
(g) the Registration Statement is not declared effective by the SEC within
twelve (12) months of the Issuance Date.
(h) the Agreement and Plan of Reorganization of SimplaGene USA, Inc. and
New Colorado Prime Holdings, Inc and all of its subsidiaries is not completed
simultaneously with the Closing.
(i) the Agreement and Plan of Reorganization of SimplaGene USA, Inc. and
New Colorado Prime Holdings, Inc. violates any SEC requirements for timely
filings of all necessary paperwork to facilitate the merger.
Section 6.2 Remedies. In the Event of Default, the Holder may elect to
secure a portion of the Collateral (as defined in the Security Agreement). The
Holder may also elect to garnish revenue from the Company in an amount that will
repay the Holder on the schedules set forth in this Agreement.
In the Event of Default, as outlined in this Agreement, the Holder can
exercise its right to increase the Face Amount of the Debenture by three percent
(3%) as an initial penalty, and by three percent (3%) for each subsequent Event
of Default. In addition, the Holder may elect to increase the Face Amount by
two and one-half percent (2.5%) per month (pro-rata for partial periods) paid as
liquated damages ("Liquidated Damages"), compounded daily, until cured. It is
the intention and acknowledgement of both parties that the Liquidated Damages
not be deemed as interest or a penalty under the terms of this Agreement.
Section 6.3 Acceleration. If an Event of Default occurs, the Holder by
notice to the Company may declare the remaining principal amount of this
Debenture, together with all accrued interest and any liquidated damages, to be
immediately due and payable in full.
Section 6.4 Seniority. The Company warrants that no indebtedness of the
Company is senior to this Debenture in right of payment, whether with respect to
interest, damages or upon liquidation or dissolution or otherwise. The
Company warrants that it has taken all necessary steps to subordinate its other
obligations to the rights of the Holder hereunder.
Section 6.5 Cost of Collections. If an Event of Default occurs, the
Company shall pay the Holder's reasonable costs of collection, including
reasonable attorney's fees and costs of arbitration.
Article 7 Registered Debentures
Section 7.1 Record Ownership. The Company, or the Company's attorney, shall
maintain a register of the Holder of the Debentures (the "Register")
showing their names and addresses and the serial numbers and principal amounts
of Debentures issued to them. The Register may be maintained in electronic,
magnetic or other computerized form. The Company may treat the person named as
the Holder of this Debenture in the Register as the sole owner of this
Debenture. The Holder of this Debenture is exclusively entitled to receive
payments of interest on this Debenture, receive notifications with respect to
this Debenture, convert it into Common Stock and otherwise exercise all of the
rights and powers as the absolute owner hereof.
Worn or Lost Debentures. If this Debenture becomes worn, defaced or
mutilated but is still substantially intact and recognizable, the Company or its
agent may issue a new Debenture in lieu hereof upon its surrender. Where the
Holder of this Debenture claims that the Debenture has been lost, destroyed or
wrongfully taken, the Company shall issue a new Debenture in place of the
Debenture if the Holder so requests by written notice to the Company and
provides the Company with such documents as may be reasonably requested by the
Company, including a loss stock affidavit.
Article 8 Notice.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Debenture must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Paul Roman
SimplaGene USA, Inc.
500 Bi-County Blvd. Ste. 400
Farmingdale, NY 11735-3940
Telephone: 631-694-1111
Facsimile: 631-694-8493
With copy to:
Gary T. Moomjian
Moomjian & Waite, LLP
100 Jericho Quadrangle - Suite 225
Jericho, New York 11753
Phone: 516-937-5900, Ext. 47
Fax: 516-937-5050
If to the Investor:
Douglas Leighton
Dutchess Capital Management
50 Commonwealth Ave, Suite 2
Boston, MA 02116
Telephone: 617-301-4700
Facsimile: 617-249-0947
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
Article 9 Time
Where this Debenture authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a holiday on
which the United States Stock Markets ("US Markets") are closed ("Holiday"),
such payment shall be made or condition or obligation performed on the last
business day following such Saturday, Sunday or Holiday. A "business day" shall
mean a day on which the US Markets are open for a full day or half day of
trading.
Article 10 No Assignment
This Debenture and the obligation hereunder shall not be assignable by the
Company or the Holder.
Article 11 Rules of Construction.
In this Debenture, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
tense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Debenture are inserted for
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made in accordance with the bylaws and charter of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 12 Governing Law
The validity, terms, performance and enforcement of this Debenture shall be
governed and construed by the provisions hereof and in accordance with the laws
of the Commonwealth of Massachusetts applicable to agreements that are
negotiated, executed, delivered and performed solely in the Commonwealth of
Massachusetts.
Article 13 Disputes Under Agreement
All disputes arising under this Debenture shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts,
without regard to principles of conflict of laws. The parties to this Debenture
will submit all disputes arising under this agreement to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
("AAA"). The arbitrator shall be selected by application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
an attorney admitted to practice law in the Commonwealth of Massachusetts. No
party to this agreement will challenge the jurisdiction or venue provisions as
provided in this section. Nothing in this section shall limit the Holder's
right to obtain an injunction for a breach of this Debenture from a court of
law.
Article 14 Redemption
The Holder shall have the right to accept a redemption request from the
Company to be redeemed, in cash, from the Debenture, in whole or in part, at a
price equal to one hundred and twenty-five percent (125%) of the outstanding
principal amount of the Debenture, including accrued interest (and penalties if
applicable) during the two years following the Issuance date. After the two year
anniversary date, the Holder shall have the right to accept a redemption request
from the Company to be redeemed, in cash, from the Debenture, in whole or in
part, at a price equal to one hundred and ten percent (110%) of the outstanding
principal amount of the Debenture, including accrued interest (and penalties, if
applicable). Any Payments, as defined in Article 2 above, shall apply to the
Redemption Amount.
Article 15 Holder Warrants
As an additional inducement to the Holder, the Company shall issue to the
Holder a warrant (a "Warrant") to purchase two million five hundred thousand
dollars ($2,500,000) worth of its shares of its Common Stock exercisable at the
strike prices outlined in the Warrant Agreement, attached hereto and
incorporated by reference.
Article 16 Transaction Documents
The Company agrees that contemporaneously with the execution and delivery of
this Debenture, the parties hereto are executing and delivering a Debenture
Registration Rights Agreement, Subscription Agreement, Warrant Agreement, and
Security Agreement (collectively, the "Transaction Documents") pursuant to which
the Company has agreed to provide certain rights and obligations as defined in
the Transaction Documents.
Article 17 Waiver
The Holder's delay or failure at any time or times hereafter to require strict
performance by the Company of any undertakings, agreements or covenants shall
not waive, affect, or diminish any right of the Holder under this Debenture to
demand strict compliance and performance herewith. Any waiver by the Holder of
any Event of Default shall not waive or affect any other Event of Default,
whether such Event of Default is prior or subsequent thereto and whether of the
same or a different type. None of the undertakings, agreements and covenants of
the Company contained in this Debenture, and no Event of Default, shall be
deemed to have been waived by the Holder, nor may this Debenture be amended,
changed or modified, unless such waiver, amendment, change or modification is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Holder.
Article 18 Integration
This Debenture and the Transaction Documents are the FINAL AGREEMENT between the
Company and the Holder with respect to the terms and conditions set forth
herein, and, the terms of this Debenture may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the Parties. The
execution and delivery of this Debenture is done in conjunction with the
execution of the Transaction Documents, as defined in Article 16.
Article 19 Failure To Meet Obligations by the Company
The Company acknowledges that its failure to timely meet any of its
obligations hereunder, including, but without limitation, its obligations to
make Payments, deliver shares and, as necessary, to register and maintain
sufficient number of Shares, will cause the Holder to suffer irreparable harm
and that the actual damage to the Holder will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this
Debenture a provision for liquidated damages. The parties acknowledge and agree
that the liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and do not constitute
a penalty. The payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms of this
Debenture.
*.*.*
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above and duly authorized to sign on behalf of:
SIMPLAGENEUSA,INC.
------------------
By: /s/Paul Roman
--------------
Name: Paul Roman
Title: President & Chief Executive Officer
By: /s/Thomas McNeill
------------------
Name: Thomas McNeill
Title: Vice President & Chief Financial Officer
DUTCHESS PRIVATE EQUITIES FUND, L.P.
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By: /s/Douglas H. Leighton
------------------------
Name: Douglas H. Leighton
Title: A Managing Member
Exhibit A
NOTICE OF CONVERSION
--------------------
(To be Executed by the Registered Owner in order to Convert Debenture)
SIMPLAGENE USA, INC.
The undersigned hereby irrevocably elects, as of ________________, to
convert $________________ of its convertible debenture (the "Debenture") into
Common Stock of SIMPLAGENE USA, INC.(the "Company") according to the conditions
set forth in the Debenture issued by the Company.
Date of Conversion________________________________________________
Applicable Conversion Price________________________________________
Number of Common Shares Issuable upon this Conversion_______________________
Name(Print)___________Dutchess__________________________________
Address______________50 Commonwealth Ave, Boston, MA 02116_____________
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Phone_____617-301-4700_____________ Fax________617-249-0947___________
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By:_______________________________________
Douglas Leighton