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EXHIBIT 10
ADVANCED BIOTHERAPY CONCEPTS, INC.
10% CONVERTIBLE SUBORDINATED DEBT INSTRUMENT
DUE SEPTEMBER 30, 2004
$ June 29, 2000
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Los Angeles, California
"NEITHER THIS DEBT INSTRUMENT NOR ANY SECURITIES INTO WHICH IT IS CONVERTIBLE
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR ANY APPLICABLE
SECURITIES LAW OF ANY JURISDICTION AND IS A "RESTRICTED SECURITY" AS THAT TERM
IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT AND HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. THIS DEBT INSTRUMENT AND THE SECURITIES INTO WHICH IT IS
CONVERTIBLE MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER SUCH
SECURITIES ACT OR SUCH APPLICABLE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE
WITH REGARD THERETO, OR (ii) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
REGISTRATION UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER."
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to pay to
____________________________________________________ ("Holder"), where
designated by the Holder, the principal sum of
__________________________________________________ Thousand Dollars ($
________________ ), paid by Maker to Holder concurrently herewith, together with
interest at the rate of ten percent (10%) per annum accrued from the Funding
Date on the unpaid principal balance. "Funding Date" means the date Maker shall
have received from the Holder immediately available funds in the original
principal amount of this debt instrument. Principal and interest shall be
payable in lawful money of the United States, except as otherwise provided
herein.
This debt instrument is one of an issue of debt instruments of Maker,
issued pursuant to that certain Convertible Subordinated Debt Purchase Agreement
of even date herewith (the "Purchase Agreement"), among Maker and the holders of
such debt instruments, designated as its 10% Convertible Subordinated Debt
Instruments (the "Convertible Debt Instruments"), limited in aggregate principal
amount to US $2,000,000, all of like date, terms and maturity, except variations
necessary to express the principal amount and holder of each Convertible Debt
Instrument. Maker and the holders are also parties to that certain Investor
Rights Agreement of even date herewith ("Investor Rights Agreement").
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Interest is payable semi-annually on June 30 and December 31 of each year
commencing December 31, 2000, at Maker's option in cash or in a Convertible Debt
Instrument identical to this instrument in the principal amount of such accrued
interest or any combination of cash and such instrument. The outstanding
principal balance together with accrued and unpaid interest (in cash) is due and
payable on September 30, 2004. This debt instrument may be prepaid, in whole or
in part, at any time, and from time to time, without premium or penalty. Any
payment (in cash or in kind) received on this debt instrument shall be applied
first to all accrued and unpaid interest and then to the outstanding principal
balance.
Subject to the terms hereof, the entire principal amount owing under this
debt instrument, or any portion thereof, is convertible at the option of Holder
("Conversion Right") at any time after the date hereof prior to (and including)
its maturity so long as Maker has not made a Call (defined below) by issuing a
Call Notice). This debt instrument is convertible into fully paid and
non-assessable shares of Maker's common stock, $.001 par value ("Common Stock"),
at the rate of one (1) share of Common Stock for each Twenty-Five Cents ($0.25)
("Initial Conversion Price") of principal amount so converted. Upon conversion,
unpaid interest accrued on such principal so converted shall be paid in cash or,
at the option of Holder, paid in additional shares of stock at the rate of one
(1) share of Common Stock for each Twenty-Five Cents ($0.25) of interest amount
so converted. Shares issued upon the conversion of this debt instrument shall
not be entitled to any dividend declared prior to the date of such conversion.
Subject to the terms hereof, and subject to the Excluded Sales (defined
below), if prior to the later of (i) thirty-six (36) months after the Initial
Closing (defined in the Purchase Agreement) or (ii) "registration" (as that term
is defined in the Investor Rights Agreement) of the shares of Common Stock into
which the Convertible Debt Instruments are convertible, Maker sells Common Stock
at a price less than the Initial Conversion Price or sells rights to acquire
Common Stock at a price less than the Initial Conversion Price and such rights
are then currently exercisable at such lower price, then Holder shall be
entitled to exercise the Conversion Right at such lower price ("Price
Adjustment") rather than the Initial Conversion Price. The foregoing reduction
of the Conversion Price shall not apply to any shares of Common Stock issued or
issuable upon the occurrence of one (1) or more of the following events
(collectively, " Excluded Sales"): (i) upon conversion of Convertible Debt
Instruments whether issued pursuant to the Purchase Agreement or in payment of
interest as contemplated herein, (ii) pursuant to options, warrants, and other
rights to acquire Common Stock outstanding as of the date hereof, (iii) options,
warrants and other rights to acquire Common Stock granted to directors,
officers, employees of, or consultants to, the Company from and after the date
hereof, in a manner determined by the Board of Directors, or (iv) in connection
with acquisition transactions, to financial institutions or lessors in
connection with commercial credit arrangements or other financings, and
strategic partnering arrangements and the like, which issuances are approved by
the Maker's Board of Directors, PROVIDED that the shares of Common Stock issued
or issuable pursuant to the Excluded Sales described in clauses (iii) and (iv)
above shall be cumulatively not more than 4,700,000 shares (as appropriately
adjusted for anti-dilution and any subsequent stock
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splits, stock dividends, recapitalizations and the like); or (v) with the
consent of the holders of greater than fifty percent (50%) of the aggregate
principal amount then outstanding under all Convertible Note Instruments.
If at any time, and from time to time, while this debt instrument is
outstanding, the Market Price (defined below) of the Common Stock is at least
three hundred percent (300%) of the Initial Conversion Price for at least a
twenty (20) consecutive trading day period, Maker, upon ten (10) days' prior
written notice ("Call Notice") to Holder, may cause all or a portion of the
outstanding principal balance of this debt instrument to automatically convert
to Common Stock ("Call") at the conversion price in effect on the date of the
Call Notice given by Maker, PROVIDED that the shares of underlying Common Stock
shall have been "registered" (as that term is defined in the Investor Rights
Agreement) on or prior to the date of the Call Notice. The Maker shall then
cancel this debt instrument, and, in the event that less than the entire
principal amount owing is so converted, the Maker shall promptly issue a new
Convertible Debt Instrument for the principal balance not so converted, and
convertible at the option of the Holder, on the same terms and conditions as
this debt instrument. The term "Market Price" shall mean, with respect to a
given date, (i) if the Common Stock is traded on the over-the-counter market and
not in the NASDAQ National Market System or on any national securities exchange,
the average mean between the per share closing bid and asked prices of the
Common Stock on the trading date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ National Market System or on a national securities
exchange, the per share closing price of the Common Stock in the NASDAQ National
Market System or on the principal stock exchange on which it is listed, as the
case may be; provided, however, if such Common Stock is traded both on a
national stock exchange and the NASDAQ National Market System, the closing
prices on the principal stock exchange shall be used. The closing price referred
to in clause (ii) above shall be the last reported sale price or, in case no
such reported sale takes place on such day, the average of the reported closing
bid and asked prices, in either case in the NASDAQ National Market system or on
the national securities exchange on which the Common Stock is then listed.
In order to exercise the Conversion Right granted herein, the Holder shall
surrender this debt instrument to the Maker, with the form for conversion
hereinafter provided fully executed, whereupon the Maker shall promptly issue to
the Holder one or more share certificates of the Maker representing the shares
of Common Stock into which this debt instrument is to be convertible. The Maker
shall then cancel this debt instrument, and, in the event that less than the
entire principal amount owing is so converted, the Maker shall promptly issue a
new Convertible Debt Instrument for the principal balance not so converted, and
convertible at the option of the Holder, on the same terms and conditions as
this debt instrument.
In the event of any stock split, stock dividend, or similar distribution or
in respect of the Common Stock occurring after the date hereof (collectively
"Splits"), the number of Common Stock shares issuable upon conversion hereof
shall be appropriately increased and the conversion
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price stated above shall be appropriately adjusted. In the event of any reverse
stock split or similar subdivision occurring with respect to the Common Stock
after the date hereof (collectively "Reverse Splits"), the number of shares of
Common Stock issuable upon conversion hereof shall be approximately decreased
and the conversion price stated above shall be appropriated adjusted. In the
event of any Split or Reverse Split, the Common Stock price referred to in the
provisions relating to Price Adjustment and Excluded Sales shall be
appropriately adjusted consistent with the provisions immediately preceding this
sentence in this paragraph. In the event of any merger, consolidation,
reorganization, reclassification or similar event involving the Maker or the
Common Stock (other than a merger in which the Maker is the surviving entity),
then the type and amount of securities or other property that Holder shall be
entitled to receive upon conversion hereof shall be appropriately adjusted based
on the type and amount of securities or other property received by the holders
of the Common Stock in such transaction.
SUBORDINATION. This debt instrument and the indebtedness evidenced hereby,
including principal and interest, shall at all times remain junior and
subordinate to Superior Indebtedness. As used herein, the term "Superior
Indebtedness" shall be and mean any item of indebtedness which shall be
designated as Superior Indebtedness by the Company subject to consent of either
(i) Cappello Capital Corp. as the Placement Agent for the Convertible Debt
Instruments or its designees, or (ii) the holders of greater than fifty percent
(50%) of the aggregate outstanding principal amount of all Convertible Debt
Instruments.
In the event of any liquidation, dissolution or winding up of Maker or of
any execution sale, receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization, or other civil proceeding relative to maker or its
property, all principal and interest owing on all Superior Indebtedness
(including interest accruing after such event) and all costs, fees and expenses
(including attorneys' fees related to the collection of Superior Indebtedness)
shall first be paid in full before any payment is made upon the indebtedness
evidenced by this debt instrument; and in any such any payment or distribution
of any kind or character, whether in cash, property or securities (other than in
securities or other evidences of indebtedness, the payment of which is
subordinated to the payment of all Superior Indebtedness which may at the time
be outstanding including without limitation dividends payable on Common Stock
into which this debt instrument may be converted), which shall be made upon or
in respect of this debt instrument shall be held in trust and paid over to the
holders of such Superior Indebtedness, in accordance with their respective
rights, for the application and payment thereof unless and until such Superior
Indebtedness shall have been paid or satisfied in full. Further, in the event
that any portion of the indebtedness evidenced hereby shall become due and
payable before its express maturity by reason or acceleration pursuant hereto
(under circumstances when the provisions of the immediately preceding sentence
or the immediately succeeding sentence shall not be applicable), all principal
and interest owing on all Superior Indebtedness (including interest accruing
after such event) and all costs, fees and expenses (including attorneys' fees
relating to collection of Superior Indebtedness) shall be paid in full before
any payment is made upon the
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indebtedness evidenced hereby. During the continuance of any default in the
payment of either principal or interest on any Superior Indebtedness, no payment
of principal or interest shall be made hereon if either (i) notice of such
default in writing has been given to the Company by the holder or holders of
such Superior Indebtedness or (ii) judicial proceedings shall be commenced or
pending in respect of such default. Maker forthwith upon receipt of any notice
received by it pursuant to the immediately preceding sentence shall send a copy
thereof to Holder.
Holder, by acceptance hereof, agrees to accept no payment by Maker on
account of the indebtedness of evidenced hereby in violation of the provisions
of the immediately preceding paragraph and further agrees that any such payment
so accepted may be recovered by the holders of Superior Indebtedness and such
payments shall be held in trust and immediately paid over to the holders of the
Superior Indebtedness. Holder undertakes and agrees for the benefit of each
holder of Superior Indebtedness to execute, verify, deliver and file any proofs
of claims, consents, assignments or other instruments which any holder of
Superior Indebtedness may at any time require in order to confirm, prove or
realize upon any rights or claims pertaining to this debt instrument and to
effectuate the full benefit of the subordination contained herein; and upon
failure of the Holder to do so, any holder of Superior Indebtedness shall be
deemed to be irrevocably appointed the agent and attorney-in-fact of Holder to
execute, verify, deliver and file any such proofs of claims, consents,
assignments or other instruments.
The foregoing subordination provisions are for the benefit of the holders
of Superior Indebtedness and are solely for the purpose of defining the relative
rights of the holders of Superior Indebtedness on the one hand and Holder on the
other hand, and nothing herein shall impair, as between Maker and Holder, the
obligation of Maker to pay the principal and interest on this debt instrument in
accordance with the terms hereof, which is unconditional and absolute, nor shall
anything herein prevent Holder from exercising all remedies otherwise permitted
by applicable law or hereunder upon default hereunder, subject to the holders of
Superior Indebtedness as herein provided for.
Holder, by acceptance hereof, acknowledges and agrees that the
subordination provisions set forth herein are, and are intended to be, an
inducement and a consideration to each holder of any Superior Indebtedness,
whether such Superior Indebtedness was created or acquired before or after the
issuance of this debt instrument, to acquire and continue to hold, or to
continue to hold, such Superior Indebtedness, and such holder of Superior
Indebtedness shall be deemed conclusively to have relied upon such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Superior Indebtedness. No right of any present or future holder of any Superior
Indebtedness of Maker to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of Maker or by any act or failure to act by any such holder, or by any
noncompliance by Maker with the terms, provisions and covenants of this debt
instrument, regardless of any knowledgeable thereof any such holder may have or
be otherwise charged with.
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The Holders of greater than thirty-three and one-third percent (33_%) of
the aggregate outstanding principal amount of all Convertible Debt Instruments,
may, by written notice to Maker, declare all or any part of the unpaid principal
amount of the Convertible Debt Instruments then outstanding to be forthwith due
and payable upon the occurrence of any one of the following events affecting the
Maker ("Events of Default"), and thereupon such unpaid principal balance or part
thereof (as applicable) together with interest accrued thereon shall become
immediately due and payable without further demand or notice:
(i) Failure to make any payment when due and the failure to cure
such default within twenty (20) days after the receipt of written notice of such
default;
(ii) Failure to honor Conversion Rights properly exercised in
accordance with the Convertible Debt Instruments and failure to cure such
default within thirty (30) days after receipt of written notice of such default;
(iii) Maker's consent to (x) commencement of any proceeding
against Maker under any bankruptcy or insolvency law or (y) a general assignment
for the benefit of Maker's creditors or (z) the appointment of a receiver of any
of Maker's property; or
(iv) Commencement by a third party of any proceeding against
Maker under any bankruptcy or insolvency law or appointment of a receiver for
any part of Maker's property without Maker's consent, if such proceeding has not
been discharged or appointment rescinded within one hundred twenty (120) days.
No waiver by Holder of any payment or other right under this debt
instrument shall operate as a waiver of any other payment or right, and no
waiver shall be valid unless and until in writing and signed either by (i) the
Holder or (ii) the holders of more than fifty percent (50%) of the aggregate
outstanding principal amount of all Convertible Debt Instruments. This debt
instrument may not be modified or terminated orally but only by agreement or
discharge in writing and signed by either Holder or Maker of this debt
instrument, or by the holders of more than fifty percent (50%) of the then
aggregate principal amount of all Convertible Debt Instruments. Except as set
forth herein, the Holder of this debt instrument shall not have the right to
sell, assign or otherwise transfer this debt instrument or, prior to
registration thereof, the underlying Common Stock, without the prior written
consent of Maker in its sole discretion. Nothing contained in this debt
instrument shall be deemed to prohibit or otherwise restrict any voluntary inter
vivos transfer by a Holder who is a natural person of all or a portion (in
aggregate principal amount not less than Ten Thousand Dollars ($10,000)) of this
debt instrument to an individual retirement account or in trust for the primary
benefit of any or all of such Holder, his or her spouse or the respective
parents, siblings, children or grandchildren (whether by blood or adoption)
(collectively "Family Members") or to a family partnership, limited liability
company or corporation, in which only such Holder, his or her spouse or their
Family Members are the partners, members or shareholders, as applicable
(collectively, "Estate Planning Entity"),
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provided that any such interest so transferred to an Estate Planning Entity
shall remain subject to the provisions of this debt instrument and the
transferee shall comply with all terms herein and sign a counterpart hereof
agreeing to be bound hereby and shall sign the Purchase Agreement and the
Investor Rights Agreement. This debt instrument shall inure to the benefit of
the parties and their respective permitted successors, heirs and legal
representatives.
This debt instrument is being delivered and is intended to be performed in
Los Angeles, California and shall be construed and enforced in accordance with
and governed by the internal laws of the State of California without resort to
California's conflict of laws provisions.
By acceptance of this debt instrument, Holder represents and warrants to
the Maker, and any permitted subsequent Holder of this debt instrument, or any
portion thereof, represents and warrants to Maker as a condition to the transfer
thereof, as follows:
(i) Holder is an ACCREDITED INVESTOR as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act of 1933, as amended
("Securities Act");
(ii) the debt instrument and the underlying shares of Common
Stock to be acquired by Holder will be acquired for investment for the Holder's
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and Holder has no present intention of
selling, granting any participation in, or otherwise distributing the same;
(iii) Holder has had an opportunity to discuss the Maker's
business, management, financial affairs and the terms and conditions of the
private placement of the debt instrument with the Maker's management, and to
review the Maker's Form Annual Report on 10-KSB/A filed May 4, 2000, for the
year ended December 31, 1999, and the Maker's Quarterly Report on Form 10-QSB
filed May 15, 2000, for the quarter ended March 31, 2000, filed with the
Securities and Exchange Commission, as well as the Maker's Notice and Proxy
Statement (preliminary and/or final) for the Annual Meeting of stockholders
scheduled for August 24, 2000, and Holder is satisfied with its business review
of the Maker;
(iv) Holder understands that this debt instrument and the shares
of Common Stock into which it is convertible have not been, and will not be,
registered under Securities Act except as provided in the Investor Rights
Agreement, by reason of a specific exemption from the registration provisions of
the Securities Act which depends upon, among other things, the bona fide nature
of the investment intent and the accuracy of the Holder's representations as
expressed herein. The Holder understands that the debt instrument and the Common
Stock are "restricted securities" under applicable U.S. federal and state
securities laws and that, pursuant to these laws, the Holder must hold the debt
instrument and the Common Stock indefinitely unless such debt instrument or
Common Stock, as applicable, is registered with the Securities and Exchange
Commission and qualified by state authorities, or an exemption from such
registration and
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qualification requirements is available. The Holder acknowledges that the Maker
has no obligation to register or qualify the debt instrument or the Common Stock
for resale except as provided in the Investor Rights Agreement. The Holder
further acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Common
Stock, and on requirements relating to the Maker which are outside of the
Holder's control, and which the Maker is under no obligation and may not be able
to satisfy; and
(v) Holder understands that until registration of the underlying
Common Stock pursuant to the Investor Rights Agreement, the Common Stock and any
securities issued in respect of or exchange for the Common Stock, may bear one
or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend required by the blue sky laws of any state to
the extent such laws are applicable to the shares represented by the certificate
so legended.
THIS DEBT INSTRUMENT IS NOT NEGOTIABLE.
In the event Holder shall incur costs, including attorneys' fees, in
enforcement and collection of this Convertible Debt Instrument, whether or not
litigation is commenced, the prevailing party shall be entitled to reasonable
attorneys' fees and costs incurred in connection therewith. In the event the
Company elects to exercise its rights to partially prepay or partially Call the
Convertible Debt Instruments, Company shall do so among the holders pro rata in
proportion to the outstanding aggregate principal amounts thereof held by the
holders. All notices shall be given in accordance with the notice provisions of
the Purchase Agreement.
/ / /
/ / /
/ / /
/ / /
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IN WITNESS WHEREOF, the Maker has executed this Convertible Debt Instrument
as of the date and at the place first written above.
MAKER:
Advanced Biotherapy Concepts, Inc.
a Nevada corporation
By:
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Edmond Buccellato,
President and Chief Executive
Officer
ACKNOWLEDGMENT
The undersigned Holder hereby accepts the Convertible Debt Instrument
and makes the representations and warranties by Holder set forth in the
foregoing Convertible Debt Instrument.
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Print or Type Name of Holder
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ELECTION TO CONVERT
The undersigned Holder of the within Convertible Debt Instrument hereby
surrenders $______________ of the aggregate principal amount of such instrument,
and $______________ of the aggregate accrued interest thereon, for conversion
into __________________________ Common Stock shares of Advanced Biotherapy
Concepts, Inc., in accordance with the terms and conditions set forth in the
Convertible Debt Instrument above, and hereby requests that such shares issuable
upon such conversion be issued to the undersigned.
HOLDER
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Print or Type Name
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