BIONEUTRALGROUP, INC. Debenture

FOR VALUE RECEIVED, the Company, promises to pay to the order of _______________ located at ___________________, and/or its registered assigns (the “Payee” or the “Holder”), the principal sum of $100,000 (the “Principal Amount”) within 90 days from the date hereof (the “Maturity Date”) in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, unless it is converted into the Private Placement (as defined herein) after the Company undertakes the Reverse Merger (as defined herein) and the subsequent Qualified Offering (as defined herein), and to pay interest on the Principal Amount at a rate of 10% per annum to be paid on the Maturity Date.

This Debenture is subject to the following additional provisions:

A. “Reverse Merger” means the share exchange transaction to be entered into between the Company and a publicly traded company currently listed on the Over the Counter Bulletin Board (“Pubco”), pursuant to which the Company will become a wholly-owned subsidiary of Pubco.

B. “Qualified Offering” means a private placement offering, subsequent to the Reverse Merger, of an aggregate amount of five hundred thousand dollars ($500,000) (the “Private Placement”).

C. “Business Days” 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.

Interest at the rate of ten percent (10%) per annum from the date hereof through the Maturity Date shall be paid on the Maturity Date by the Company, in cash.

 

A. Principal shall be due and payable on the date that is 90 days following the date hereof (or if such date shall be a Saturday, Sunday or holiday, then on the immediately preceding Business Day).  The principal amount shall be repaid in cash and in full on the date it is due.

 

B. The Company further agrees that, if any payment made by the Company or any other person is applied to this Debenture and is at any time annulled, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded or repaid, or the proceeds of any property hereafter pledged as security for this Debenture is required to be returned by Holder to the Company, its estate, trustee, receiver or any other party, including, without limitation, under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the Company’s liability hereunder (and any lien, security interest or other collateral securing such liability) shall be and remain in full force and effect, as fully as if such payment had never been made, or, if prior thereto any such lien, security interest or other collateral hereunder securing the Company’s liability hereunder shall have been released or terminated by virtue of such cancellation or surrender, this Debenture (and such lien, security interest or other collateral) shall be reinstated in full force and effect, and such prior cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligations of the Company in respect to the amount of such payment (or any lien, security interest or other collateral securing such obligation).

 

C. All computations of interest shall be made by Holder on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable.  Whenever any payment to be made hereunder shall be stated to be due on a day which is not a business day, such payment shall be made on the next succeeding day and such extension of time shall in such case be included in the computation of payment of interest.

 

D. The Company may prepay all or any part of the outstanding principal amount of this Debenture, together with interest accrued, if any, plus a premium, upon not fewer than ten (10) Business Days’ prior written notice to the Holder.  In the event such prepayment occurs, the amount paid shall be 125% of the prepaid principal plus any accrued interest.

 

A. Mandatory Conversion Mechanism.

i. If the Company undertakes a Qualified Offering prior to the Maturity Date, the Company will deliver to the Holder a notice (the “Offering Notice”), stating the price and other terms and conditions thereof not later than five (5) business days prior to the closing date of the Qualified Offering.

 

and any securities issued in connection with the Private Placement are not being registered under the Securities Act of 1933 or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) the Debenture, any Common Shares or any shares issued in connection with the Private Placement are subsequently registered thereunder, or (B) Holder shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration; and (ii) neither the Company nor any other party is under any obligation to register the Debenture or the Common Shares under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder, provided however that Holders shall have the same registration rights with respect to any holders under the private placement as investors in the Qualified Offering in the event that the Debentures are converted into the Private Placement in the Qualified Offering; (iii) Holder is acquiring the Debenture, the Common Share and any securities issued in connection with the Private Placement for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act, and (iv) Holder does not presently have any agreement or understanding, directly or indirectly, with any party to distribute any of the securities.

 

B.           Accredited Investor Status.  Holder is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D.

 

 

C.           Reliance on Exemptions.  The Holder understands that the Debenture and any securities issued in connection with the Private Placement acquired in the Qualified Offering are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of Holder set forth herein in order to determine the availability of such exemptions and the eligibility of Holder to acquire the securities.

 

 

D.           Information.  Holder and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the securities that have been requested by Holder.  Holder and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  Neither such inquiries nor any other due diligence investigations conducted by Holder or its advisors, if any, or its representatives shall modify, amend or affect Holder's right to rely on the Company's representations and warranties contained herein. Holder understands that its investment in the Debenture and any securities issued in connection with the Private Placement acquired in the Qualified Offering involve a high degree of risk and is able to afford a complete loss of such investment. Holder has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the securities.

F.           Modification and Severability.  If, in any action before any court or agency legally empowered to enforce any provision contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency.  If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this agreement, but this agreement shall be construed as if such unenforceable provision had never been contained herein.