Wasatch Pharmaceutical Inc – ‘10QSB’ for 9/30/97 – EX-6.4

As of:  Wednesday, 11/19/97   ·   For:  9/30/97   ·   Accession #:  1038838-97-113   ·   File #:  0-22899

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Quarterly Report — Small Business   —   Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Quarterly Report -- Small Business                    15     66K 
 2: EX-6.4      Opinion re: Discount on Capital Shares                 5     25K 
 3: EX-27       Financial Data Schedule                                1      6K 

EX-6.4   —   Opinion re: Discount on Capital Shares

EX-6.4
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THIS  CONVERTIBLE  DEBENTURE AND THE UNDERLYING  SHARES OF COMMON STOCK HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES  SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT").  ANY RESALE  THEREAFTER MUST BE PURSUANT TO REGISTRATION  UNDER THE
ACT OR AN AVAILABLE EXEMPTION.                                                  

WASATCH PHARMACEUTICAL, INC.
A UTAH Corporation

Dated:   September 24, 1997                                                     

NO.       1                                                                     

          WASATCH  PHARMACEUTICAL, INC., a UTAH corporation (the "Corporation"),
is indebted  and, for value  received,  promises to pay to the order of ORIENTAL
NEW  INVESTMENTS,  LTD.,  (the  "Holder")  on March 24,  1998 (the "Due  Date"),
(unless this Debenture shall have been sooner called for redemption, extended by
the Holder or converted as provided herein) upon presentation of this Debenture,
Fifty thousand  dollars,  ($50,000)(the  "Principal") and to pay interest on the
Principal as provided herein.                                                   

The Corporation convenants, promises and agrees as follows: 

1.        Interest.  Interest on  this convertible  Debenture shall accrue  form
September 24, 1997, (the date of payment of the Principal to the Corporation) at
the rate of ten percent (10%) per annum until paid or converted.  Interest shall
be due and  payable  to the  Holder  quarterly,  beginning  November  30,  1997.
However,  in the event of default,  interest  shall accrue at the rate of twenty
percent (20%) per annum from the date of default.                               

         All accrued and unpaid  interest  shall be payable on the Due Date. All
payments of principal  and  interest or principal or interest  shall be made the
Holder at offices of the Holder,  c\o SAGEM,  Rue Des Baines 35,  1205  Genevea,
Switzerland,  or at such  other  place and may be  designated  in writing by the
Holder.                                                                         

2.       Redemption.                                                            

                2.1  This  Debenture  may  be  redeemed  at  the  option  of the
Corporation  in whole  or in part to the Due  Date at any time and from  time to
time  without  penalty or premium.  The  Corporation  may  exercise its right to
redeem  prior  to  maturity  by  giving  notice  (the  "Redemption  Date").  The
Redemption  Date  shall be at least 30 days and not more than 60 days  after the
date of the Redemption Notice.                                                  

                2.2 On the  Redemption  Date,  the  Corporation  shall  pay  all
accrued and unpaid  interest on the Debenture up to and including the Redemption
Date and shall pay to the holder hereof a dollar amount equal to the  Redemption
Amount.                                                                         

                2.3 The  forgoing  Notice  of  Redemption  notwithstanding,  the
Holder may convert this Debenture and accrued  interest into common stock of the
Corporation pursuant to the Holder's Rights of Conversion as set forth below.   

3.       Conversion.  At any time after the date the Principal of the  Debenture
was paid to the  Corporation,  the Holder may elect to convert the Principal and
accrued interest (to the date prior to the date Notice of Conversion is given to
the  Corporation),  in whole or in part, or solely the accrued interest in whole

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or in part into as many shares of the common stock of the  Corporation as equals
the dollar amount to be converted  divided by fifty percent (50%) of the average
closing bid price for common  stock of the  Corporation  as reported by the NASD
Electronic  Bulletin  Board for the ten (10) days prior to the date the Holder's
Notice of Conversion is received by the Corporation.                            

                3.1  Conversion  Notice.  The  Holder  may  exercise  the  above
conversion  rights by giving  written  notice  (the  Conversion  Notice)  to the
Corporation  of the  exercise  of such  right.  The  Conversion  Notice  must be
received by the  Corporation  at least one business day prior to the  Conversion
Date and will  state  the ten day  average  closing  bid  price,  the  amount of
principal  and/or  interest being  converted and the delivery  instructions  for
certificates registered in the name of the Holder.                              

3.2 Prohibition on Stop Transfer  Instructions.  The Corporation shall not issue
stop transfer  instruction to its transfer agent with respect to certificates to
the issued upon  conversion.  In  addition,  the  Corporation  shall not place a
restrictive  legend on the  certificates  to be  issued  upon  conversion  after
expiration of the  Regulation S Restricted  Period for any reason other than the
Corporation's   reasonable  good  faith  belief  that  the  representations  and
warranties  made by the Lender or contained in the Holder's Notice of Conversion
are untrue.                                                                     

                3.2 Registration  Rights. If within ten business days of receipt
of a Notice of Conversion,  the Corporation fails to issue  certificates for the
Shares required by such Notice or issues  certificates with a restrictive legend
after the expiration of the Regulation S Restricted Period, for any reason other
than the Corporation's reasonable good faith belief that the representations and
warranties  made by the Lender or contained in the Holder's Notice of Conversion
are  untrue,  then the  Corporation  shall be required at its expense and at the
request of the Holder to effect the registration of the Shares under the Act and
relevant Blue Sky laws as promptly as is practicable  and in no event later than
90 days from the date of the Holder's demand  therefor.  The Corporation and the
Holder  shall  cooperate  in good faith in  connection  with the  furnishing  of
information  required for such registration and the taking of such other actions
as  may  be  legally  or   commercially   necessary  in  order  to  effect  such
registration. The Corporation shall file a registration statement within 30 days
of Holder's  Notice of  Conversion  and shall use its best efforts to cause such
registration  statement to become  effective as soon as practicable  thereafter.
Such best efforts shall include, but not be limited,  promptly responding to all
comments  received  from the staff of the  Securities  and Exchange  Commission,
providing   Holder's  counsel  with  a  contemporaneous   copy  of  all  written
communications  from and to the staff of the Securities and Exchange  Commission
with respect to such  registration  statement and promptly  preparing and filing
amendments to such  registration  statement which are responsive to the comments
received from the staff of the Securities and Exchange Commission. Once declared
effective by the Securities and Exchange commission, the Corporation shall cause
such  registration  statement to remain  effective  until the earlier of (i) the
sale by the Lender of all Shares registered of (ii) 120 days after the effective
date of such registration statement.                                            

                3.3  Registration in the Event of Amendments to Regulation S. In
the event  that  Regulation  S is amended  in such a manner as to  increase  the
Restricted  Period  for more  that  its  present  time  period  or to  otherwise
substantially diminish the liquidity of the Holder's investment as determined in
its sole discretion, the Holder shall have the option to require the Corporation
to register the Shares in the manner as set forth in (m) above.                 

         2

                3.4 Penalty for Failure to Convert or File Periodic Reports.  If
within ten business days of receipt of a Notice of Conversion,  the  Corporation
fails to issue  certificates  for the Shares  required  by such Notice or issues
certificates  with a restrictive  legend after the  expiration of the Restricted
Period, for any reason other than the Corporation's reasonable good faith belief
that the  representations  and warranties made by the Lender or contained in the
Holder's Notice of Conversion are untrue,  or fails to file all periodic reports
with the Securities and Exchange  Commission required of it or fails to file the
Form 8-K required by this sale of this Debenture, then the Corporation shall pay
to the Holder by wire transfer,  as liquidated  damages for such failure and not
as a penalty,  and amount in cash equal to the lesser of $12,500 or  twenty-five
percent (25%) of the outstanding Principal and accrued interest. Such liquidated
damages shall be added to the Principal and accrued  interest of the Convertible
Debenture and subject to the Default  Provisions  thereof.  However,  accrual or
payment of such liquidated  damages shall not relieve the  Corporation  from its
obligations to register the Shares pursuant to paragraph 3.2 above.             

4.       Default.  Upon the  occurrence of  any one or  more of  the  Events  of
Default set forth below and subject solely to the  Corporation's  actual cure of
the default,  the Holder at its option and in its sole  discretion,  may declare
the  unpaid  Principal  and  accrued  interest  immediately  due and  payable as
completely  as if said  aggregate sum was  originally  agreed to be paid at such
time. The declaration of a default shall be without demand for payment, which is
hereby expressly waived by the Corporation.  In addition, upon the occurrence of
any one or more of such  Events of  Default,  the Holder may  proceed to enforce
payment of the Principal and accrued interest, as accelerated as above provided,
and any and all other  duties,  obligations  and  liabilities  contained  in the
Convertible  Debenture  Agreement and the convertible  Debenture.  The Events of
Default are as follows:                                                         

                4.1 The entire  unpaid  balance of the Principal and all unpaid,
accrued interest shall, at the election of the Holder, be and become immediately
due and payable upon the  occurrence of any of the following  events (a "Default
Event"):                                                                        

          (a) Any  default by the  Corporation  in the  punctual  payment of the
          principal  and  accrued   interest  of  the  outstanding   Convertible
Debenture when and as the same shall become due and payable;

          (b) Any default by the Corporation  under or breach by the Corporation
          in   the   performance   of   any   covenant,   agreement,   warranty,
          representation  or  condition   contained  i  this  Agreement  or  the
Convertible Debenture;                                      

(c) If the Corporation shall:                                 

                   (i) apply for, or consent to, the  appointment of a receiver,
                   trustee,   or  liquidator  of  the  Corporation  for  all  or
                   substantially all assets of the  Corporation; (ii) file or be
                   served with any petition for relief under the Bankruptcy Code
                   or any  similar  federal or state law or admit in writing its
                   inability  to pay its debts as they become due;  (iii) make a
general assignment to creditors;          

          (d) If any pleading shall be filed in any court or other forum seeking
          the  adjudication of the  Corporation as a bankrupt or insolvent,  the
          appointment of a receiver,  trustee,  or liquidator of the Corporation
          of all or  substantially  all of their assets which pleading shall not
be dismissed within thirty (30) days; or                    

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EX-6.4
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          (e) The  filing of any tax lien  respecting  any of the  assets of the
Corporation;                                                

          (f) The failure to file all periodic reports of the Borrower  required
          over  the  next 12  months  with  the  U.S.  Securities  and  Exchange
          Commission as and when due, specifically and 8-K report on the sale of
this debenture;                                             

          4.2  Right  to  Cure  Default.  The  forgoing   notwithstanding,   the
Corporation  shall have thirty  (30) days from the date of such  default to cure
said default. Upon such cure the terms of a Convertible Debenture shall continue
in effect.                                                                      

          4.3 Rights and  Remedies.  Each  right,  power or remedy of the Holder
upon the occurrence of any Default Event as provided for in this  Debenture,  or
now or hereafter existing at law or inequity,  or by statute shall be cumulative
and  concurrent  and shall be in addition to every other right,  power or remedy
provided for in this Debenture or now or hereafter  existing at law or equity or
by statue,  and the  exercise  or  beginning  of the  exercise  by the holder or
transferee  hereof of any one or more of such rights,  powers or remedies  shall
not preclude the simultaneous or later exercise by the Holder of any or all such
other rights, powers or remedies.                                               

5.       Failure to Act and Waiver.  No failure or delay by the Holder to insist
upon the strict  performance  of any term of this  Debenture  or to exercise any
such term or of any such breach, or preclude the Holder from exercising any such
right,  power  or  remedy  consequent  upon  a  Default  Event  hereunder  shall
constitute  a waiver of any such term or of any such  breach,  or  preclude  the
Holder  from  exercising  any such  right,  power or remedy at any later time or
times. By accepting  payment after the due date of any amount payable under this
Debenture,  the holder  hereof  shall not be deemed to waive the right either to
require payment when due of all other amounts  payable under this Debenture,  or
to declare a Default  Event for failure to effect such payment of any such other
amount.                                                                         

6.       Transfer/Negotiability.  This debenture  shall be  transferred  on  the
books of the Corporation  only by the registered  Holder or by his/her  attorney
duly  authorized  in  writing.  Transfer  shall be  effected  by delivery to the
Corporation of a duly executed  Assignment,  substantially  in the form attached
hereto as Exhibit A. The foregoing  notwithstanding  the  Corporation  shall not
transfer  this  Debenture nor any of the shares of common stock to be issue upon
conversion in the United States or to a U.S. Person, (as defined in Regulation S
promulgated under the Act) or for the account and benefit of U.S. Person, except
as provided in said  Regulation S until forty-one days from the date of issuance
of this  Debenture,  The  Corporation  shall be  entitled to treat any Holder of
record of the  Debenture as the Holder in fact thereof and shall not be bound to
recognized  any equitable or other claim to or interest in this Debenture in the
name of any other  person,  whether or not it shall have express or other notice
thereof, save as expressly provided by the Laws of COLORADO.  Subject to receipt
of a duly executed Assignment, the Debenture shall be assigned by the Holder for
value, to a Holder in Due Course as defined by the Uniform  Commercial Code. The
Corporation  hereby makes an  unconditional  promise to repay the  Principal and
accrued  interest of this Debenture on or before the date due to any such Holder
in Due Course and  acknowledges  that repayment to a Holder in due Course is not
subject to any claims or defenses the  Corporation may have against the original
Holder.                                                                         

7.       Notices.  All notices and  communications  under this  Debenture  shall
be in writing and shall be either delivered in person or accompanied by a signed
receipt  therefor or mailed  first-class  United States  certified mail,  return
receipt  requested,  postage  prepaid,  and  addressed  as  follows:  if to  the
Corporation, to:                                                                
Gary V. Heesch, President                   
WASATCH PHARMACEUTICAL, INC.                
714 East 7200 South                         
Midvale, Utah 84047                         

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EX-6.4
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and, if to the Holder,  to the address of such Holder as it appears in the books
of the  Corporation.  Any  notice of  communication  shall be  deemed  given and
received  as of the date of such  delivery or three days after  deposit  with an
overnight courier service or five(5) days after deposit with U.S. Postal Service
as first class air mail.                                                        

8.       Governing  Law. This  Agreement  shall  be  construed  and  enforced in
accordance with the laws of the United States and the State of Colorado  without
regard  to  conflicts  of law.  In the  event  that  any  dispute  should  arise
pertaining to this  Agreement,  the Parties agree that  jurisdiction  shall vest
only in the state or federal  courts  located in  Denver,  Colorado  in order to
resolve such dispute.  Nevertheless, the Lender may elect to file an arbitration
in Denver,  Colorado before the American Arbitration  Association (the "AAA") to
resolve any dispute regarding this Agreement,  and the Borrower hereby agrees to
arbitrate such dispute before the AAA in Denver,  Colorado,  if the Lender makes
such election.                                                                  

9.       Incorporation by Reference.  The terms, Representations  and Warranties
set forth in the  Convertible  Debenture  Agreement  between the Corporation and
ORIENTAL NEW INVESTMENT, LTD., dated September 24, 1997, are incorporated herein
by this reference, and any transferee or subsequent Holder of this Debenture (or
the shares of common stock issued upon conversion  thereof during the Restricted
Period  as  defined  by  Regulation  S) shall  be  subject  to and  bound by the
provision of such agreement.                                                    

         IN WITNESS  WHEREOF,  the  Corporation  has caused this Debenture to be
duly executed.                                                                  

ATTEST:                                           WASATCH PHARMACEUTICAL, INC.  

/s/ David K. Giles                                Gary V. Heesch                
--------------------------                        --------------------------    
Secretary                                         Gary V. Heesch, President     

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EX-6.4
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Exhibit A 

ASSIGNMENT                                                                      

         FOR   VALUE   RECEIVED,    the    undersigned    hereby   assigns   to:
____________________  The 10% Convertible  Debenture of WASATCH  PHARMACEUTICAL,
INC., No. ____ and hereby irrevocably appoints ______________________, Attorney,
to transfer said  debenture on the books of the within named  corporation,  with
full power of substitution in the premised.                                     

        WITNESS my hand and seal this ____ day of _____________________, 199_.

                                                                 _______(SEAL)

                                                                  _____ (SEAL)
WITNESS:                                                                        

--------------------                                                            

6 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10QSB’ Filing		Date		First		Last			Other Filings
		3/24/98		1
		11/30/97		1
Filed on:		11/19/97
For Period End:		9/30/97							NT 10-Q
		9/24/97		1		4			8-K
									List all Filings