EXHIBIT 10.104
NEITHER THIS SECURITY NOR THE ISSUANCE TO THE HOLDER OF THE SECURITIES INTO
WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE 1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THIS NOTE IN THE EVENT OF A
PARTIAL CONVERSION. AS A RESULT, FOLLOWING ANY CONVERSION OF ANY PORTION OF THIS
NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN
THE PRINCIPAL AMOUNT SET FORTH BELOW.
7% CONVERTIBLE NOTE DUE 2006
OF
VIRAGEN, INC.
NO. $
DATED JUNE 18, 2004 NEW YORK, NEW YORK
FOR VALUE RECEIVED, VIRAGEN, INC., a Delaware corporation (the
"Company") hereby promises to pay to or upon the order of ____________________,
or its registered assigns or successors-in-interest (the "Holder") the principal
sum of ___________________ Dollars ($____________), on the Maturity Date, and to
pay interest thereon at the Applicable Rate from the date hereof on the Interest
Payment Dates until the same becomes due and payable (except as otherwise
provided in Section 2(c)(5)) , whether at maturity or upon acceleration or by
redemption or repurchase in accordance with the terms hereof, or otherwise.
Interest on this Note shall be computed on the basis of a 360-day year of 30-day
months and actual days elapsed and shall be payable in accordance with Section 2
hereof. Notwithstanding anything contained herein, this Note shall bear interest
on the outstanding principal amount from and after the occurrence and during the
continuance of an Event of Default, at the rate (the "Default Rate") equal to
the lower of
sixteen percent (16%) per annum or the highest rate permitted by applicable law.
Unless otherwise determined by the Holder or required by applicable law,
payments will be applied first to any unpaid collection costs, then to unpaid
interest and fees and any remaining amount to unpaid principal.
All payments of principal of and interest on this Note shall be made
in lawful money of the United States of America or, at the option of the Company
and subject to the provisions of this Note, interest payable on the Interest
Payment Dates may be paid in whole or in part in fully paid and nonassessable
shares of Common Stock. All cash payments by the Company shall be made by wire
transfer of immediately available funds to such account as the Holder may from
time to time designate by written notice in accordance with the provisions of
this Note. This Note may not be prepaid in whole or in part except as
specifically provided herein. Whenever any amount expressed to be due by the
terms of this Note is due on any day which is not a Business Day (as defined
below), the same shall instead be due on the next succeeding day which is a
Business Day and, in the case of any Interest Payment Date that is not the date
on which this Note is paid in full, the extension of the due date thereof shall
not be taken into account in determining the amount of interest due on such
date.
The obligations of the Company under this Note shall rank in right
of payment on a parity with all other unsubordinated obligations of the Company
for indebtedness for borrowed money or the purchase price of property. This Note
is issued pursuant to the Purchase Agreement and the Holder of this Note and
this Note are subject to the terms and entitled to the benefits of the Purchase
Agreement.
The following terms and conditions shall apply to this Note:
SECTION 1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement.
(b) All the agreements or instruments herein defined shall mean such
agreements or instruments as the same may from time to time be supplemented or
amended or the terms thereof waived or modified to the extent permitted by, and
in accordance with, the terms thereof and of this Note.
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(c) For purposes hereof the following terms shall have the meanings
ascribed to them below:
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject Person. For purposes
of this definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Aggregation Parties" shall have the meaning provided in Section
6(g)(1).
"AMEX" means the American Stock Exchange, Inc.
"Applicable Rate" means seven percent per annum or, if an Event of
Default shall occur, then so long as any Event of Default shall continue, 16
percent per annum (or in either case such lesser rate as shall be the highest
rate permitted by applicable law) or, in case the Company shall exercise its
rights under Section 2(c)(5), one percent per annum.
"Board of Directors" means the Board of Directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors, or duly authorized committee thereof (to the extent
permitted by applicable law), and to be in full force and effect on the date of
such certification, and delivered to the Holder.
"Business Day" means any day other than a Saturday, Sunday or a day
on which commercial banks in the City of New York, New York are authorized or
required by law or executive order to remain closed.
"Closing Date" shall have the meaning provided in the Purchase
Agreement.
"Common Stock" means the Common Stock, par value $.01 per share, or
any shares of capital stock of the Company into
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which such shares shall be changed or reclassified after the Escrow Funding
Date.
"Common Stock Equivalent" means any warrant, option, subscription or
purchase right with respect to shares of Common Stock, any security convertible
into, exchangeable for, or otherwise entitling the holder thereof to acquire,
shares of Common Stock or any warrant, option, subscription or purchase right
with respect to any such convertible, exchangeable or other security.
"Common Stock Warrant" means the Common Stock Purchase Warrant in
the form attached as EXHIBIT F issuable as part of the Optional Redemption
Consideration.
"Company Certificate" means a certificate of the Company signed by
an Officer.
"Company Notice" means a Company Notice in the form attached as
EXHIBIT D.
"Conversion Date" means the date on which a Conversion Notice is
given in accordance with Section 6(b)(1).
"Conversion Delay Payments" shall have the meaning provided in
Section 6(c)(5)(C).
"Conversion Notice" means a duly executed Notice of Conversion of 7%
Convertible Note due 2006 substantially in the form of EXHIBIT A to this Note.
"Conversion Price" means $2.00 (which gives effect to the reverse
stock split approved by the Company's stockholders on June 11, 2004 but not any
adjustment provided in Section 6(c)(8)), subject to adjustment as provided in
Section 6(c).
"Current Market Price" shall mean the arithmetic average of the
daily Market Prices per share of Common Stock for the five consecutive Trading
Days immediately prior to the date in question; provided, however, that (1) if
the "ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 6(c)(1), (2), (3), (4), (5), (6), or (7),
occurs during such ten consecutive Trading Days, the Market Price for each
Trading Day prior to the "ex" date for such other event shall be adjusted by
multiplying such Market Price by the same fraction by which the
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Conversion Price is so required to be adjusted as a result of such other event,
(2) if the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to Section 6(c)(1), (2), (3), (4), (5), (6), or (7), occurs on or after
the "ex" date for the issuance or distribution requiring such computation and
prior to the day in question, the Market Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by multiplying such Market
Price by the reciprocal of the fraction by which the Conversion Price is so
required to be adjusted as a result of such other event, and (3) if the "ex"
date for the issuance or distribution requiring such computation is prior to the
day in question, after taking into account any adjustment required pursuant to
clause (1) or (2) of this proviso, the Market Price for each Trading Day on or
after such "ex" date shall be adjusted by adding thereto the amount of any cash
and the fair market value (as determined by the Board of Directors in a manner
consistent with any determination of such value for purposes of Section 6(c)(4)
or (6), whose determination shall be conclusive and described in a Board
Resolution) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any computation under
Section 6(c)(4), the Current Market Price of the Common Stock on any date shall
be deemed to be the arithmetic average of the daily Market Prices per share of
Common Stock for such day and the next two succeeding Trading Days; provided,
however, that if the "ex" date for any event (other than the Tender Offer
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to Section 6(c)(1), (2), (3), (4), (5), (6), or (7), occurs on or after
the Expiration Time for the Tender Offer requiring such computation and prior to
the day in question, the Market Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying such Market Price by
the reciprocal of the fraction by which the Conversion Price is so required to
be adjusted as a result of such other event. For purposes of this paragraph, the
term "ex" date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades, regular way, on the
relevant exchange or in the relevant market from which the Market Price was
obtained without the right to receive such issuance or distribution, (2) when
used with respect to any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades, regular way, on such
exchange or in such market after the time at which such
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subdivision or combination becomes effective, and (3) when used with respect to
any Tender Offer means the first date on which the Common Stock trades, regular
way, on such exchange or in such market after the Expiration Time of such Tender
Offer. Notwithstanding the foregoing, whenever successive adjustments to the
Conversion Price are called for pursuant to Section 6(c), such adjustments shall
be made to the Current Market Price as may be necessary or appropriate to
effectuate the intent of Section 6(c) and to avoid unjust or inequitable results
as determined in good faith by the Board of Directors.
"DTC" shall have the meaning provided in Section 6(b)(2).
"Effective Date" means the date on which a Registration Statement
covering all the Underlying Shares and other Registrable Securities (as defined
in the Registration Rights Agreement) is declared effective by the SEC.
"Eligible Bank" means a corporation organized or existing under the
laws of the United States or any other state, having combined capital and
surplus of at least $100 million and subject to supervision by federal or state
authority and which has a branch located in New York, New York.
"Escrow Funding Date" shall have the meaning provided in the
Purchase Agreement.
"Event of Default" shall have the meaning provided in Section 5(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Shares" shall have the meaning provided in Section
6(g)(1).
"Extended Market Price Redemption Date" means with respect to any
portion of this Note to which Section 2(c)(4) applies, the date that is 30
Trading Days after the latest date on which the Restricted Ownership Percentage
no longer restricts the Holder's right to convert the remaining Unconverted
Portion, but in no event later than the Maturity Date.
"Expiration Time" shall have the meaning provided in Section
6(c)(6).
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"Fundamental Change" means
(a) Any consolidation or merger of the Company or any Subsidiary
with or into another entity (other than a merger or consolidation of a
Subsidiary into the Company or a wholly-owned Subsidiary) where the
stockholders of the Company immediately prior to such transaction do not
collectively own at least 51% of the outstanding voting securities of the
surviving corporation of such consolidation or merger immediately
following such transaction; or the sale of all or substantially all of the
assets of the Company and the Subsidiaries in a safe transaction or a
series of related transactions; or
(b) The occurrence of any transaction or event in connection with
which all or substantially all the Common Stock shall be exchanged for,
converted into, acquired for or constitute the right to receive
consideration (whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all
common stock which is (or will, upon consummation of or immediately
following such transaction or event, will be) listed on a registered
national securities exchange or approved for quotation on Nasdaq or any
similar United States system of automated dissemination of transaction
reporting of securities prices; or
(c) The acquisition by a Person or entity or group of Persons or
entities acting in concert as a partnership, limited partnership,
syndicate or group, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, of beneficial
ownership of securities of the Company representing 50% or more of the
combined voting power of the outstanding voting securities of the Company
ordinarily (and apart from rights accruing in special circumstances)
having the right to vote in the election of directors.
"Holder Notice" means a Holder Notice in the form attached as
EXHIBIT E.
"Indebtedness" means, when used with respect to any Person, without
duplication:
(1) all indebtedness, obligations and other liabilities (contingent
or otherwise) of such Person for
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borrowed money (including obligations of such Person in respect of
overdrafts, foreign exchange contracts, currency exchange agreements,
Interest Rate Protection Agreements, and any loans or advances from banks,
whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or other instruments for the payment of money, or
incurred in connection with the acquisition of any property, services or
assets (whether or not the recourse of the lender is to the whole of the
assets of such Person or to only a portion thereof), other than any
account payable or other accrued current liability or obligation to trade
creditors incurred in the ordinary course of business in connection with
the obtaining of materials or services;
(2) all reimbursement obligations and other liabilities (contingent
or otherwise) of such Person with respect to letters of credit, bank
guarantees, bankers' acceptances, surety bonds, performance bonds or other
guaranty of contractual performance;
(3) all obligations and liabilities (contingent or otherwise) in
respect of (a) leases of such Person required, in conformity with
generally accepted accounting principles, to be accounted for as
capitalized lease obligations on the balance sheet of such Person and (b)
any lease or related documents (including a purchase agreement) in
connection with the lease of real property which provides that such Person
is contractually obligated to purchase or cause a third party to purchase
the leased property and thereby guarantee a minimum residual value of the
leased property to the landlord and the obligations of such Person under
such lease or related document to purchase or to cause a third party to
purchase the leased property;
(4) all obligations of such Person (contingent or otherwise) with
respect to an interest rate or other swap, cap or collar agreement or
other similar instrument or agreement or foreign currency hedge, exchange,
purchase or similar instrument or agreement;
(5) all direct or indirect guaranties or similar agreements by such
Person in respect of, and obligations or liabilities (contingent or
otherwise) of such Person to purchase or otherwise acquire or otherwise
assure a creditor against loss in respect of, indebtedness,
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obligations or liabilities of another Person of the kind described in
clauses (1) through (4);
(6) any indebtedness or other obligations described in clauses (1)
through (5) secured by any mortgage, pledge, lien or other encumbrance
existing on property which is owned or held by such Person, regardless of
whether the indebtedness or other obligation secured thereby shall have
been assumed by such Person; and
(7) any and all deferrals, renewals, extensions and refundings of,
or amendments, modifications or supplements to, any indebtedness,
obligation or liability of the kind described in clauses (1) through (6).
"Interest Payment Date" means each January 1, April 1, July 1 and
October 1, commencing on the first such date after the Issuance Date, and the
Maturity Date.
"Interest Payment Shares" means the shares of Common Stock issuable
in payment of interest on this Note in accordance with Section 2(a).
"Interest Rate Protection Agreement" means, with respect to any
Person, any interest rate swap agreement, interest rate cap or collar agreement
or other financial agreement or arrangement designed to protect such Person
against fluctuations in interest rates, as in effect from time to time.
"Interest Share Price" means for any Interest Payment Date the
arithmetic average of the Market Price of the Common Stock for all of the
Trading Days during the period of 20 consecutive Trading Days ending on and
including the Trading Day immediately preceding such Interest Payment Date.
"Issuance Date" means the "Closing Date" as defined in the Purchase
Agreement.
"Majority Holders" means at any time such of the holders of this
Note and the Other Notes which hold Notes and Other Notes which, based on the
outstanding principal amounts thereof, represent a majority of the aggregate
outstanding principal amount of this Note and the Other Notes.
"Market Price" with respect to any security on any day shall mean
the closing bid price of such security on such day on the Nasdaq, the NYSE or
the AMEX, as applicable, or, if such
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security is not listed or admitted to trading on the Nasdaq, the NYSE or the
AMEX, on the principal national securities exchange or quotation system on which
such security is quoted or listed or admitted to trading, in any such case as
reported by Bloomberg, L.P. (or if such source ceases to be available,
comparable source selected by the Majority Holders and acceptable to the Company
in its reasonable judgment) or, if not quoted or listed or admitted to trading
on any national securities exchange or quotation system, the average of the
closing bid and asked prices of such security on the over-the-counter market on
the day in question, as reported by the National Quotation Bureau Incorporated,
or a similar generally accepted reporting service, or if not so available, in
such manner as furnished by any NYSE member firm selected from time to time by
the Board of Directors for that purpose, or a price determined in good faith by
the Board of Directors, whose determination shall be conclusive and described in
a Board Resolution.
"Market Price Optional Redemption Date" means the Business Day on
which this Note is to be redeemed in whole pursuant to Section 2(c).
"Market Price Optional Redemption Notice" means a Market Price
Optional Redemption Notice in the form attached hereto as EXHIBIT C.
"Market Price Optional Redemption Period" means the period which
commences on the date that is one year after the Issuance Date and ends on the
Maturity Date.
"Market Price Optional Redemption Price" means an amount in cash (or
in the case of the amount referred to in the succeeding clause (2), in shares of
Common Stock in accordance with Section 2(a)) equal to the sum of (1) an amount
equal to 100% the principal amount of this Note that is outstanding on the
Market Price Optional Redemption Date plus (2) accrued and unpaid interest on
such principal amount to the Market Price Optional Redemption Date plus (3)
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (2) at the rate provided in this Note to the Market
Price Optional Redemption Date.
"Maturity Date" means March 31, 2006.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
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"1933 Act" means the Securities Act of 1933, as amended.
"Nasdaq" means the Nasdaq National Market.
"Newly Issued Shares" shall have the meaning provided in Section
6(c)(7).
"Note" means this instrument as originally executed, or if later
amended or supplemented in accordance with its terms, then as so amended or
supplemented.
"NYSE" means the New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President or the Chief Financial Officer of the Company.
"Optional Redemption Consideration" means (1) an amount in cash
equal to the sum of (A) an amount equal to 110% the principal amount of this
Note that is outstanding on the Optional Redemption Date plus (B) accrued and
unpaid interest on such principal amount to the Optional Redemption Date plus
(C) accrued and unpaid Default Interest, if any, on the amount referred to in
the immediately preceding clause (B) at the rate provided in this Note to the
Optional Redemption Date and (2) a Common Stock Warrant that initially (I)
entitles the holder thereof to purchase a number of shares of Common Stock equal
to the quotient obtained by dividing (x) the principal amount of this Note
outstanding immediately prior to redemption of this Note on the Optional
Redemption Date by (y) the Conversion Price in effect immediately prior to
redemption of this Note on the Optional Redemption Date and (II) has a Purchase
Price (as defined in the Common Stock Warrant) equal to the Conversion Price in
effect immediately prior to redemption of this Note on the Optional Redemption
Date, subject to adjustment as provided in the Common Stock Warrant.
"Optional Redemption Date" means the Business Day on which this Note
is to be redeemed in whole pursuant to Section 2(b).
"Optional Redemption Notice" means an Optional Redemption Notice in
the form attached hereto as EXHIBIT B.
"Optional Redemption Period" means the period which
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commences on the date that is ten Trading Days after the Effective Date and ends
on the Maturity Date.
"Other Common Stock Warrants" means the Common Stock Purchase
Warrants issuable by the Company upon optional redemption of the Other Notes.
"Other Notes" means the several 7% Convertible Notes due 2006 issued
by the Company pursuant to the Other Purchase Agreements.
"Other Purchase Agreements" means the several Purchase Agreements,
dated as of March 31, 2004, by and between the Company and the respective
original holders of the Other Notes.
"Permitted Indebtedness" means:
(1) Indebtedness outstanding on the Issuance Date prior to issuance
of this Note; and
(2) Indebtedness evidenced by the Note and the Other Notes;
(3) Indebtedness incurred after the Issuance Date in an aggregate
amount not to exceed $1 million at any one time outstanding so long as (x)
such Indebtedness is incurred for the purpose of acquiring equipment owned
or used or to be owned or used by the Company or any Subsidiaries (or for
the purpose of acquiring the capital stock or similar equity interests of
a Subsidiary that is formed for the limited purpose of owning same and
does not own or hold any other material assets) and does not exceed the
purchase price of the equipment, capital stock or other equity interest so
acquired plus reasonable transaction expenses and (y) such Indebtedness,
if secured, is secured solely by the interest of the Company or one of its
Subsidiaries in the equipment so acquired and rights related thereto;
(4) Indebtedness incurred after the Issuance Date that is secured
solely by raw materials, works in progress and finished goods inventory
and accounts receivable in a financing by a bank, finance company or other
institutional lender providing receivables or inventory financing;
(5) endorsements for collection or deposit in the ordinary course of
business; and
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(6) in the case of any Subsidiary, Indebtedness owed by such
Subsidiary to the Company.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, incorporated organization, unincorporated association
or similar entity or any government, governmental agency or political
subdivision.
"Principal Market" means the AMEX or such other U.S. market or
exchange which is the principal market on which the Common Stock is then listed
for trading.
"Purchase Agreement" means the Purchase Agreement, dated as of April
1, 2004, by and between the Company and the original holder of this Note or its
predecessor instrument pursuant to which this Note or its predecessor instrument
was originally issued.
"Record Date" shall mean, with respect to any dividend, distribution
or other transaction or event in which the holders of Common Stock have the
right to receive any cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or converted into any
combination of cash, securities or other property, the date fixed for
determination of stockholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
"Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
"Repurchase Event" means the occurrence of any one or more of the
following events:
(a) For any period of five consecutive Trading Days following the
date hereof there shall be no reported sale price of the Common Stock on
any of Nasdaq, the NYSE or the AMEX;
(b) The Common Stock ceases to be listed for trading on Nasdaq, the
NYSE or the AMEX for a period of five consecutive Trading Days;
(c) Any Fundamental Change; or
(d) The adoption of any amendment to the Company's
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Certificate of Incorporation (other than any certificate designating a
series of preferred stock of the Company and other than the amendment
necessary to effect the Reverse Stock Split) which materially and
adversely affects the rights of the Holder or the taking of any other
action by the Company which materially and adversely affects the rights of
the Holder in respect of the Holder's interest in the Common Stock in a
different and more adverse manner than it affects the rights of holders of
Common Stock generally;
(e) The inability of the Holder or holders of any Other Note for 20
Trading Days (whether or not consecutive) during any period of 365
consecutive days occurring on or after the SEC Effective Date to sell
shares of Common Stock issued or issuable upon conversion of this Note or
the Other Notes or exercise of the Warrants or issued as Interest Payment
Shares pursuant to the Registration Statement (1) by reason of the
requirements of the 1933 Act, the 1934 Act or any of the rules or
regulations under either thereof or (2) due to the Registration Statement
containing any untrue statement of material fact or omitting to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or other failure of the Registration
Statement to comply with the rules and regulations of the SEC;
(f) The Company fails to file the Registration Statement with the
SEC within 25 days after the Closing Date;
(g) The Registration Statement required by Section 2(a)(i) of the
Registration Rights Agreement is not declared effective by the SEC within
85 days following the Closing Date, or the Registration Statement required
by Section 2(a)(ii) of the Registration Rights Agreement is not declared
effective by the SEC within 90 days following demand of the Holder
pursuant to the Registration Rights Agreement.
"Repurchase Price" means with respect to any repurchase pursuant to
Sections 5.1 and 5.2 an amount in cash equal to the sum of (1) 110% of the
outstanding principal amount of this Note plus (2) accrued and unpaid interest
on such principal amount to the date of such repurchase plus (3) accrued and
unpaid Default Interest, if any, thereon at the rate provided in this Note to
the date of such repurchase.
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"Restricted Ownership Percentage" shall have the meaning provided in
Section 6(g)(1).
"Reverse Stock Split" shall have the meaning provided in the
Purchase Agreement.
"SEC" means the U.S. Securities and Exchange Commission.
"Share Interest Payment Limitation" means, with respect to any
Interest Payment Date, a number of Interest Payment Shares equal to 20% of the
aggregate number of shares of Common Stock traded on the AMEX (or other
principal market on which the Common Stock in listed at the time of such
determination) on all of the Trading Days during the period from and including
the date that is 35 Trading Days prior to such Interest Payment Date to and
including the date that is 26 Trading Days prior to such Interest Payment Date
(as reported by Bloomberg, L.P. or if such source ceases to be available, a
comparable source selected by the Majority Holders at the request of the Company
and acceptable to the Company in its reasonable judgment), equitably adjusted
for stock splits, stock dividends and similar events that are reflected in the
trading market for the Common Stock during such period.
"Share Interest Payment Option" shall have the meaning provided in
Section 2(a)(1).
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on which the Principal Market is open for
the general trading of securities.
"Transaction Documents" means this Note, the Other Notes, the
Purchase Agreement, the Other Purchase Agreements, the Warrants, the Common
Stock Warrant and the Other Common Stock Warrants.
"Transfer Agent" shall mean the institution acting as transfer agent
for the Common Stock.
"Unconverted Portion" shall have the meaning provided in Section
2(c)(4)(A).
"Underlying Shares" means the shares of Common Stock issued or
issuable upon conversion of, or in lieu of cash
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payment of interest on, this Note in accordance with the terms hereof and the
Purchase Agreement.
"Warrants" means Common Stock Purchase Warrants of the Company
issued to the original Holder of this Note pursuant to the Purchase Agreement
and issued to the original holders of the Other Notes pursuant to the Other
Purchase Agreements.
SECTION 2. PAYMENT OF CERTAIN INTEREST IN COMMON STOCK; OPTIONAL
REDEMPTION.
(a) ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST.
(1) If the Company exercises its option to make a payment of
interest on this Note wholly or partly in Common Stock (herein sometimes called
the "Share Interest Payment Option"), the issuance of Interest Payment Shares
upon such exercise of the Share Interest Payment Option shall have been
authorized by the Board of Directors of the Company.
(2) The Company shall not be permitted to exercise the Share
Interest Payment Option with respect to any payment of interest on this Note if:
(i) the number of shares of Common Stock authorized, unissued and
unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
(ii) the issuance or delivery of Interest Payment Shares or the
public resale of such Interest Payment Shares by the Holder would require
registration or filing with or approval of any governmental authority
under any law or regulation, and such registration, filing or approval has
not been effected or obtained or is not in effect or on such Interest
Payment Date or the date the Company delivers such Interest Payment Shares
to the Holder the Registration Statement is unavailable for use by the
Holder for the resale of the Interest Payment Shares or is not expected to
be available for such use for at least 15 Trading Days after the date the
Company delivers such Interest Payment Shares to the Holder;
(iii) the outstanding shares of Common Stock are neither (A) listed
or admitted for trading on a national securities exchange nor (B) quoted
on the Nasdaq; or the Interest Payment Shares shall not at the time of
issuance have been authorized for listing, upon official notice of
-16-
issuance, on the principal securities exchange on which the Common Stock
is then listed and traded;
(iv) the Interest Share Price for the Interest Payment Shares is
less than the par value of the Common Stock; or
(v) an Event of Default has occurred and is continuing on the date
the Company makes such election or on the applicable Interest Payment
Date.
(3) (A) The Company may exercise its right to elect the Share
Interest Payment Option with respect to any Interest Payment Date only by giving
notice of such election to the Holder not less than 25 or more than 29 Trading
Days prior to such Interest Payment Date, which notice shall state the
percentage of the interest payable on such Interest Payment Date which is to be
paid in Interest Payment Shares. The Company shall have the right to elect the
Share Interest Payment Option with respect to this Note only if the Company also
elects the similar option which it has with respect to the Other Notes for the
interest due thereon on the date which is such Interest Payment Date and in each
such case pro rata among this Note and the Other Notes, based on the amounts of
interest due on such date hereon and thereon. If the Company elects the Share
Interest Payment Option with respect to a particular Interest Payment Date, the
Company shall issue to the Holder in respect of such Interest Payment Date the
aggregate number of whole shares of Common Stock determined by dividing the per
share Interest Share Price of the Common Stock on the applicable Interest
Payment Date into an amount equal to the total amount of lawful money of the
United States of America which the Holder would receive if the aggregate amount
of interest on this Note which is being paid in Common Stock were being paid in
such lawful money. Notwithstanding any other provision of this Note, in no event
may the Company issue in respect of the interest payable on this Note and the
Other Notes on any Interest Payment Date a number of Interest Payment Shares in
excess of the Share Interest Payment Limitation.
(B) If the Company elects the Share Interest Payment Option with
respect to an Interest Payment Date, the Interest Payment Shares for such
Interest Payment Date shall become issuable on such Interest Payment Date and
the Company shall deliver, or cause to be delivered, the appropriate number of
shares of Common Stock to the Holder within three Trading Days after the
applicable Interest Payment Date. If in any case the Company shall fail to
deliver or cause to be delivered such
-17-
number of shares of Common Stock to the Holder within such period of three
Trading Days, then in addition to any other liabilities the Company may have
hereunder and under applicable law (1) the Company shall pay or reimburse the
Holder on demand for all out-of-pocket expenses, including, without limitation,
reasonable fees and expenses of legal counsel, incurred by the Holder as a
result of such failure, (2) if as a result of such failure the Holder shall
suffer any direct damages or liabilities from such failure (including, without
limitation, margin interest and the cost of purchasing securities to cover a
sale (whether by the Holder or the Holder's securities broker) or borrowing of
shares of Common Stock by the Holder for purposes of settling any trade
involving a sale of shares of Common Stock made by the Holder during the period
beginning on the date the Company notified the Holder of the Company's election
of the Share Interest Payment Option and ending on the date the Company delivers
or causes to be delivered to the Holder the shares of Common Stock issuable in
respect thereof), then the Company shall upon demand of the Holder pay to the
Holder an amount equal to the actual direct, out-of-pocket damages and
liabilities suffered by the Holder by reason thereof which the Holder documents
to the reasonable satisfaction of the Company, and (3) the Holder may by written
notice (which may be given by mail, courier, personal service or telephone line
facsimile transmission) or oral notice (promptly confirmed in writing), given at
any time prior to delivery to the Holder of the shares of Common Stock issuable
in connection with such exercise of the Share Interest Payment Option, require
payment in cash of the interest in respect of which the Company exercised the
Share Interest Payment Option, in which case the amount of such interest shall
be immediately due and payable, with Default Interest thereon from the
applicable Interest Payment Date until paid in full and the Company shall not be
obligated or entitled to issue such Interest Payment Shares in respect of such
Interest Payment Date. Notwithstanding the foregoing the Company shall not be
liable to the Holder under clause (2) of the immediately preceding sentence to
the extent the failure of the Company to deliver or to cause to be delivered
such shares of Common Stock results from fire, flood, storm, earthquake,
shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, acts of God, or any
-18-
similar event outside the control of the Company (it being understood that the
action or failure to act of the Transfer Agent shall not be deemed an event
outside the control of the Company except to the extent resulting from fire,
flood, storm, earthquake, shipwreck, strike, war, acts of terrorism, crash
involving facilities of a common carrier, acts of God, or any similar event
outside the control of the Transfer Agent or the bankruptcy, liquidation or
reorganization of the Transfer Agent under any bankruptcy, insolvency or other
similar law). The Holder shall notify the Company in writing (or by telephone
conversation, confirmed in writing) as promptly as practicable following the
third Trading Day after such Interest Payment Date if the Holder becomes aware
that shares of Common Stock so issuable have not been received as provided
herein but any failure to give such notice shall not affect the Holder's rights
under this Note or otherwise. If the Company shall have exercised the Share
Interest Payment Option with respect to a particular Interest Payment Date and
either (1) the Company shall notify the Holder on or after such Interest Payment
Date that the Interest Payment Shares might not be delivered within three
Trading Days after such Interest Payment Date or (2) the Holder learns after the
date which is three Trading Days after such Interest Payment Date that the
Holder has not received such Interest Payment Shares, then, without releasing
the Company of its obligations with respect thereto, from and after the Trading
Day next succeeding the earlier of the events described in the preceding clauses
(1) and (2) of this sentence the Holder shall make reasonable efforts not to
sell shares of Common Stock in anticipation of receipt of such Interest Payment
Shares in a manner which is likely to increase materially the liability of the
Company under clause (2) of the second preceding sentence. No fractional shares
of Common Stock shall be issued in payment of interest on this Note. In lieu
thereof, the Company may, at its option, issue a number of shares of Common
Stock which reflects a rounding up to the next whole number or may pay lawful
money of the United States of America in lieu of issuance of such fractional
share.
(4) If the Company elects the Share Interest Payment Option with
respect to a payment of interest on this Note with respect to a particular
Interest Payment Date, the Company shall deliver to the Holder, on or prior to
the date on which Interest Payment Shares for such payment of interest on this
Note are to be received by the Holder, a Company Certificate setting forth (i)
the total amount of the cash interest payment to which the Holder is entitled,
(ii) the portion of such interest payment being made in Interest Payment Shares
and the amount which is 100% thereof, (iii) the number of Interest Payment
Shares allocable to such payment, as calculated pursuant to this Section 2(a),
(iv) any rounding adjustment to such number or any payment necessary to be made
pursuant to Section 2(a)(3), (v) a brief statement of the facts requiring such
adjustment, and (vi) a brief statement that none of the conditions set forth in
-19-
Section 2(a)(2) has occurred and is existing and that all of the requirements of
this Section 2(a) have been met. The Interest Payment Shares shall be duly
issued in the name of the Holder or its nominee. Such Company Certificate shall
be conclusive evidence of the correctness of the calculation of the number of
Interest Payment Shares allocable to the payments to which such Company
Certificate relates and of any adjustments to such number made pursuant to this
Section 2(a) in the absence of manifest error. On or before the pertinent
payment date, the Company shall issue, or cause the transfer agent for the
Common Stock to prepare and issue, the Interest Payment Shares in the name of
the Holder or its nominee before being so delivered by the Company on the
payment date.
(5) The Interest Payment Shares, when issued pursuant to and in
compliance with this Section 2(a), shall be, and for all purposes shall be
deemed to be, validly issued, fully paid and nonassessable shares of Common
Stock; the issuance and delivery thereof is in all respects hereby authorized;
and the issuance thereof, together with lawful money of the United States of
America, if any, paid in lieu of fractional shares of Common Stock, will be, and
for all purposes shall be deemed to be, in full discharge and satisfaction of
the Company's obligation to pay the interest on this Note to which such Interest
Payment Shares relate.
(b) OPTIONAL REDEMPTION. (1) At any time during the Optional
Redemption Period, the Company shall have the right, on one occasion only, to
redeem this Note in full by payment of the Optional Redemption Consideration
pursuant to this Section 2(b) on the Optional Redemption Date, so long as the
following conditions are met:
(A) on the date the Optional Redemption Notice is given and at all
times to and including the Optional Redemption Date, no Event of Default
and no event which, with notice or passage of time, or both, would become
an Event of Default has occurred and is continuing (unless the
requirements of this clause (A) will be satisfied immediately after the
redemption of this Note and the Other Notes on the applicable Optional
Redemption Date and the Company shall furnish Company Certificates to the
Holder to such effect on the date the Optional Redemption Notice is given
to the Holder and on the Optional Redemption Date),
(B) on the date the Optional Redemption Notice is given and at all
times to and including the Optional
-20-
Redemption Date, no Repurchase Event has occurred with respect to which
the Holder has the right to exercise repurchase rights pursuant to
Sections 5.1 and 5.2 or with respect to which the Holder has exercised
such repurchase rights and the Repurchase Price has not been paid to the
Holder and no event which, with notice or passage of time, or both, would
become a Repurchase Event has occurred and is continuing,
(C) on the date the Optional Redemption Notice is given and at all
times thereafter to and including the applicable Optional Redemption Date,
the Registration Statement shall be effective and available for use by the
Holder, the holders of the Other Notes and the holders of the Warrants for
the resale of the shares of Common Stock issued and issuable upon
conversion of this Note and the Other Notes and issued or issuable upon
exercise of the Warrants, as the case may be, and is reasonably expected
to remain effective and available for such use for at least 30 days after
the applicable Optional Redemption Date;
(D) on the date the Optional Redemption Notice is given and at all
times thereafter to and including the Optional Redemption Date one or more
registration statements under the 1933 Act covering the resale of the
shares of Common Stock issuable to the Holder upon exercise of the Common
Stock Warrant issuable to the Holder in payment of a portion of the
Optional Redemption Consideration shall be effective under the 1933 Act
and available for use by the Holder for the resale of such shares of
Common Stock and each such registration statement shall be expected to
remain available for such use for 30 Trading Days after the Optional
Redemption Date, and
(E) on the date an Optional Redemption Notice is given, the Company
has funds available to pay the cash portion of Optional Redemption
Consideration.
In order to exercise its right of redemption under this Section 2(b) the Company
shall give the Optional Redemption Notice to the Holder not less than 30 Trading
Days or more than 40 Trading Days prior to the Optional Redemption Date stating
that: (1) the Company is exercising its right to redeem this Note in accordance
with this Section 2(b), (2) the principal amount of this Note to be redeemed,
(3) the amount of the cash portion of the Optional Redemption Consideration, (4)
the number of shares of Common Stock and the purchase price therefor to be
-21-
contained in the Common Stock Warrant included in the Optional Redemption
Consideration, (5) the Optional Redemption Date and (6) that all of the
conditions of this Section 2(b) entitling the Company to call this Note for
redemption have been met. On the Optional Redemption Date (or such later date as
the Holder surrenders this Note to the Company) the Company shall (x) pay to or
upon the order of the Holder, by wire transfer of immediately available funds to
such account as shall be specified for such purpose by the Holder at least one
Business Day prior to the Optional Redemption Date, an amount equal to the cash
portion of the Optional Redemption Consideration and (y) issue and deliver to
the Holder the portion of the Optional Redemption Consideration consisting of
the Common Stock Warrants, which will be deemed for all purposes to have been
issued to the Holder on the Optional Redemption Date, unless the Company shall
have failed to pay the amount specified in the immediately preceding clause (x)
when due.
(2) The Company shall not be entitled to give the Optional
Redemption Notice or to redeem any portion of this Note with respect to which
the Holder has given a Conversion Notice on or prior to the date the Company
gives the Optional Redemption Notice. Notwithstanding the giving of the Optional
Redemption Notice, the Holder shall be entitled to convert this Note in
accordance with the terms of this Note by giving a Conversion Notice at any time
on or prior to the later of (1) the date which is one Trading Day prior to the
Optional Redemption Date and (2) if the Company fails to pay and deliver to the
Holder or deposit in accordance with Section 7(k) the Optional Redemption
Consideration on or before the Optional Redemption Date, the date on which the
Company pays and delivers to the Holder or deposits in accordance with Section
7(k) the Optional Redemption Consideration. The Optional Redemption
Consideration set forth in the Optional Redemption Notice shall be adjusted to
reflect the reduced outstanding principal amount of this Note and related
accrued interest and Default Interest on the Optional Redemption Date resulting
from any permitted conversions of this Note after the Optional Redemption Notice
is given.
(3) In order that the Company shall not discriminate among the
Holder and the holders of the Other Notes, the Company agrees that redemption of
this Note pursuant to this Section 2(b) shall be made at the same time as a
redemption by the Company of the Other Notes. In order that the Company not
discriminate among the Holders and the holders of the Other Notes, the Company
agrees that it shall not redeem any of the
-22-
Other Notes pursuant to the provisions thereof similar to this Section 2(b) or
repurchase or otherwise acquire any of the Other Notes (other than a mandatory
redemption pursuant to provisions of the Other Notes comparable to Section 5)
unless the Company offers simultaneously to redeem, repurchase or otherwise
acquire a pro rata portion (based on outstanding principal amount) of this Note
for cash at the same unit price as the Other Note or Other Notes.
(c) MARKET PRICE OPTIONAL REDEMPTION. (1) At any time during the
Market Price Optional Redemption Period, the Company shall have the right, on
one occasion only, to redeem this Note in full by payment of the Market Price
Optional Redemption Price pursuant to this Section 2(c) on the Market Price
Optional Redemption Date, so long as the following conditions are met:
(A) on the date the Market Price Optional Redemption Notice is given
and at all times to and including the Market Price Optional Redemption
Date, no Event of Default and no event which, with notice or passage of
time, or both, would become an Event of Default has occurred and is
continuing,
(B) on the date the Market Price Optional Redemption Notice is given
and at all times to and including the Market Price Optional Redemption
Date, no Repurchase Event has occurred with respect to which the Holder
has the right to exercise repurchase rights pursuant to Sections 5.1 and
5.2 or with respect to which the Holder has exercised such repurchase
rights and the Repurchase Price has not been paid to the Holder and no
event which, with notice or passage of time, or both, would become a
Repurchase Event has occurred and is continuing,
(C) on the date the Market Price Optional Redemption Notice is given
and at all times thereafter to and including the applicable Market Price
Optional Redemption Date, the Registration Statement shall be effective
and available for use by the Holder, the holders of the Other Notes and
the holders of the Warrants for the resale of the shares of Common Stock
issued and issuable upon conversion of this Note and the Other Notes and
issued or issuable upon exercise of the Warrants, as the case may be, and
is reasonably expected to remain effective and available for such use for
at least 30 days after the applicable Market Price Optional Redemption
Date;
-23-
(D) on each Trading Day in the period of 30 consecutive Trading Days
ending on and including a Trading Day that is not less than five Trading
Days prior to the date the Company gives the Market Price Optional
Redemption Notice the Market Price of the Common Stock shall have been at
least 200 percent of the Conversion Price in effect on such Trading Day.
In order to exercise its right of redemption under this Section 2(c) the Company
shall give the Market Price Optional Redemption Notice to the Holder not less
than 30 Trading Days or more than 40 Trading Days prior to the Market Price
Optional Redemption Date stating that: (1) the Company is exercising its right
to redeem this Note in accordance with this Section 2(c), (2) the principal
amount of this Note to be redeemed, (3) the amount of the Market Price Optional
Redemption Price, (4) the Market Price Optional Redemption Date and (5) that all
of the conditions of this Section 2(c) entitling the Company to call this Note
for redemption have been met. On the Market Price Optional Redemption Date (or
such later date as the Holder surrenders this Note to the Company) the Company
shall pay to or upon the order of the Holder, by wire transfer of immediately
available funds to such account as shall be specified for such purpose by the
Holder at least one Business Day prior to the Market Price Optional Redemption
Date, an amount equal to the Market Price Optional Redemption Price.
(2) The Company shall not be entitled to give the Market Price
Optional Redemption Notice or to redeem any portion of this Note with respect to
which the Holder has given a Conversion Notice on or prior to the date the
Company gives the Market Price Optional Redemption Notice. Notwithstanding the
giving of the Market Price Optional Redemption Notice, the Holder shall be
entitled to convert this Note in accordance with the terms of this Note by
giving a Conversion Notice at any time on or prior to the later of (1) the date
which is one Trading Day prior to the Market Price Optional Redemption Date and
(2) if the Company fails to pay and deliver to the Holder or deposit in
accordance with Section 7(k) the Market Price Optional Redemption Price on or
before the Market Price Optional Redemption Date, the date on which the Company
pays and delivers to the Holder or deposits in accordance with Section 7(k) the
Market Price Optional Redemption Price. The Market Price Optional Redemption
Price set forth in the Market Price Optional Redemption Notice shall be adjusted
to reflect the reduced outstanding principal amount of this Note and related
accrued
-24-
interest and Default Interest on the Market Price Optional Redemption Date
resulting from any permitted conversions of this Note after the Market Price
Optional Redemption Notice is given.
(3) In order that the Company shall not discriminate among the
Holder and the holders of the Other Notes, the Company agrees that redemption of
this Note pursuant to this Section 2(c) shall be made at the same time as a
redemption by the Company of the Other Notes. In order that the Company not
discriminate among the Holders and the holders of the Other Notes, the Company
agrees that it shall not redeem any of the Other Notes pursuant to the
provisions thereof similar to this Section 2(c) unless the Company
simultaneously redeem this Note pursuant to this Section 2(c).
(4) (A) Notwithstanding any other provision of this Note or
applicable law to the contrary, in case the Company shall give the Market Price
Optional Redemption Notice to the Holder, and on the date the Company gives the
Market Price Optional Redemption Notice or at any time thereafter to and
including the applicable Market Price Optional Redemption Date, the Holder shall
be restricted in converting any portion of this Note by reason of the Restricted
Ownership Percentage (the "Unconverted Portion"), then the Market Price Optional
Redemption Date for the Unconverted Portion so called for redemption by the
Company and which the Holder may not convert at any such time during such period
from the date the Company gives such Market Price Optional Redemption Notice to
the Market Price Optional Redemption Date shall be extended to be the Extended
Market Price Optional Redemption Date. On the applicable Extended Market Price
Optional Redemption Date, the Company shall pay the Market Price Optional
Redemption Price for any portion of this Note redeemed on such Extended Market
Price Optional Redemption Date. Any portion of this Note for which there is an
Extended Market Price Redemption Date shall remain convertible by the Holder in
accordance with Section 6 at any time to and including the close of business on
the Business Day prior to the applicable Extended Market Price Optional
Redemption Date.
(B) Notwithstanding anything to the contrary contained in Section
6(g), solely for the purposes of calculating the Restricted Ownership Percentage
for purposes of this Section 2(c), the shares of Common Stock issuable upon
exercise of the Warrants held by the Holder shall not be deemed to be Excluded
Shares and shall be taken into account in calculating the Restricted Ownership
Percentage to determine the
-25-
amount of the Unconverted Portion.
(5) If on the Market Price Optional Redemption Date or Extended
Market Price Optional Redemption Date, as the case may be, any principal amount
of this Note remains outstanding the Company shall have the right, exercisable
by notice given to the Holder within three Business Days after the Market Price
Optional Redemption Date or Extended Market Price Optional Redemption Date, as
the case may be, to extend the date for payment of the Market Price Optional
Redemption Price to such date, not later than the Maturity Date, as stated in
such notice. In case the Company exercises such right, from and after the Market
Price Optional Redemption Date or Extended Market Price Optional Redemption
Date, as the case may be, the Applicable Rate shall become one percent per
annum. The Company shall have the right to extend further the Market Price
Optional Redemption Date or Extended Market Price Optional Redemption Date, as
the case may be, for one or more successive periods (in no case ending after the
Maturity Date) by similarly giving notice thereof to the Holder within three
Business Days after the end of the then current extension period. Any portion of
this Note that remains outstanding during any such extension made by the Company
pursuant to this Section 2(c)(5) may be converted by the Holder in accordance
with Section 6 at any time to and including the close of business on the
Business Day preceding the last day of such extension period.
(d) NO OTHER PREPAYMENT. Except as specifically provided in Sections
2(b) and 2(c), this Note may not be prepaid, redeemed or repurchased at the
option of the Company prior to the Maturity Date. In order that the Company not
discriminate among the Holder and the holders of the Other notes, the Company
agrees that it shall not repurchase or otherwise acquire any of the Other Notes
unless the Company offers simultaneously to redeem, repurchase or otherwise
acquire a pro rata portion of this Note for cash at the same price per unit of
outstanding principal amount as the Other Note or Other Notes.
SECTION 3. CERTAIN COVENANTS.
So long as the Company shall have any obligation under this Note,
unless otherwise consented to in advance by the Majority Holders:
(a) LIMITATIONS ON CERTAIN INDEBTEDNESS. The Company will not
itself, and will not permit any Subsidiary to, create,
-26-
assume, incur or in any manner become liable in respect of, including, without
limitation, by reason of any business combination transaction (all of which are
referred to herein as "incurring"), any Indebtedness other than Permitted
Indebtedness.
(b) PAYMENT OF OBLIGATIONS. The Company will pay and discharge, and
will cause each Subsidiary to pay and discharge, all their respective material
obligations and liabilities, including, without limitation, tax liabilities,
except where the same may be contested in good faith by appropriate proceedings
and the Company shall have established adequate reserves therefor on its books.
(c) MAINTENANCE OF PROPERTY; INSURANCE. (1) The Company will keep,
and will cause each Subsidiary to keep, all property which, in the reasonable
business judgment of the Company, is useful and necessary in its business in
good working order and condition, ordinary wear and tear excepted.
(2) The Company will maintain, and will cause each Subsidiary to
maintain, with financially sound and responsible insurance companies, insurance,
in at least such amounts and against such risks as is reasonably adequate for
the conduct of their respective businesses and the value of their respective
properties.
(d) CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company
will continue, and will cause each Subsidiary to continue, to engage in business
of the same general type as now conducted by the Company, and will preserve,
renew and keep in full force and effect, and will cause each Subsidiary to
preserve, renew and keep in full force and effect their respective corporate
existence and their respective rights, privileges and franchises necessary or
desirable in the normal conduct of business other than where the failure to do
so in respect of a Subsidiary would not have a material adverse effect on (i)
the business, properties, operations, condition (financial or other), results of
operation or prospects of the Company and the Subsidiaries, taken as a whole, or
(ii) the ability of the Company to pay and perform its obligations under the
Transaction Documents.
(e) COMPLIANCE WITH LAWS. The Company will comply, and will cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, decisions, orders and requirements of
governmental
-27-
authorities and courts (including, without limitation, environmental laws)
except (i) where compliance therewith is contested in good faith by appropriate
proceedings or (ii) where non-compliance therewith could not reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise), operations, performance, properties or prospects of the Company
and the Subsidiaries, taken as a whole.
(f) INVESTMENT COMPANY ACT. The Company will not be or become an
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
(g) LIMITATIONS ON ASSET SALES, LIQUIDATIONS, ETC.; CERTAIN MATTERS.
The Company shall not
(1) sell, convey or otherwise dispose of all or substantially all of
the assets of the Company as an entirety or substantially as an entirety in a
single transaction or in a series of related transactions; or
(2) liquidate, dissolve or otherwise wind up the affairs of the
Company.
(h) LIMITATION ON CERTAIN ISSUANCES. The Company shall not (A)
offer, sell or issue, or enter into any agreement, arrangement or understanding
to offer, sell or issue, any Common Stock Equivalent for which the price at
which the holder of such Common Stock Equivalent is entitled to acquire shares
of Common Stock varies based on the market or trading price of the Common Stock,
or (B) offer, sell or issue, or enter into any agreement, arrangement or
understanding to offer, sell or issue, any Common Stock or Common Stock
Equivalent on terms which provide for adjustment or repricing of the purchase
price or number of shares or other units of such Common Stock or Common Stock
Equivalents; provided, however, that nothing in this Section 3(h) shall prohibit
the Company from issuing (1) shares of Common Stock for cash for the account of
the Company in an offering that is underwritten on a firm commitment basis and
registered with the SEC under the 1933 Act or (2) the Other Notes and the
Warrants.
(i) LIMITATIONS ON LIENS. The Company will not itself, and will not
permit any Subsidiary to, create, assume or suffer to exist any mortgage, lien,
pledge, security interest or other charge or encumbrance (including, without
limitation, the
-28-
xxxx or retained security title of a conditional vendor), all of which are
referred to below as "liens", upon all or any part of its property of any
character, whether owned at the date hereof or thereafter acquired, except:
(1) liens upon any property of any Subsidiary or Subsidiaries as
security for Indebtedness owing by such Subsidiary to the Company;
(2) purchase money liens upon any property acquired by the Company
or any Subsidiary, or liens existing on such property at the time of
acquisition and in any such case securing Permitted Indebtedness described
in clause (3) of the definition of the term Permitted Indebtedness;
provided that (i) no such lien shall extend to or cover any other property
of the Company or any Subsidiary, (ii) the principal amount of
Indebtedness secured by each such lien on any such property shall not
exceed the cost (including such principal amount of the Indebtedness
secured thereby) to the Company or the Subsidiary of the property subject
thereto, and (iii) the aggregate principal amount of all Indebtedness of
the Company and all Subsidiaries secured by all liens described in this
subsection (2) and any extensions, renewals or replacements thereof, at
any one time outstanding, shall not exceed $1 million for the Company and
the Subsidiaries; and the extending, renewing or replacing of any lien
permitted by this subsection (2) or of the Indebtedness secured thereby;
provided, however, that in any such case the lien by which any lien is
extended, renewed or replaced shall not extend to or cover any other
property of the Company or any Subsidiary and the principal amount of such
Indebtedness extended, renewed or replaced shall not be increased;
(3) liens securing this Note and the Other Notes ratably and not
securing any other Indebtedness of the Company, any Subsidiary or any
other Person;
(4) liens for taxes or assessments or governmental charges or levies
on its property if such taxes or assessments or charges or levies shall
not at the time be due and payable or if the amount, applicability, or
validity of any such tax, assessment, charge or levy shall currently be
contested in good faith by appropriate proceedings or necessary
preliminary steps are being taken to contest, compromise or settle the
amount thereof or to determine the applicability or validity thereof and
if the Company or such Subsidiary, as the case may be, shall have
-29-
set aside on its books reserves (segregated to the extent required by
sound accounting practice) deemed by it adequate with respect thereto;
deposits or pledges to secure payment of worker's compensation,
unemployment insurance, old age pensions or other social security;
deposits or pledges to secure performance of bids, tenders, contracts
(other than contracts for the payment of money borrowed or credit
extended), leases, public or statutory obligations, surety or appeal
bonds, or other deposits or pledges for purposes of like general nature in
the ordinary course of business; mechanics', carriers', workers',
repairmen's or other like liens arising in the ordinary course of business
securing obligations which are not overdue for a period of 60 days, or
which are in good faith being contested or litigated, or deposits to
obtain the release of such liens; liens created by or resulting from any
litigation or legal proceedings or proceedings being contested in good
faith by appropriate proceedings, provided any execution levied thereon
shall be stayed; leases made, or existing on property acquired, in the
ordinary course of business; landlords' liens under leases to which the
Company or any Subsidiary is a party; and zoning restrictions, easements,
licenses or restrictions on the use of real property or minor
irregularities in title thereto; provided that all such liens described in
this subsection (4) do not, in the aggregate, materially impair the use of
such property in the operations of the business of the Company or any
Subsidiary or the value of such property for the purpose of such business;
(5) liens existing on the Issuance Date and either disclosed in the
SEC Filings or listed in SCHEDULE 3.13 to the Purchase Agreement; and
(6) liens upon raw materials, works in progress and finished goods
inventory and accounts receivable granted to a bank, finance company or
other institutional lender providing receivables and inventory financings.
(j) TRANSACTIONS WITH AFFILIATES. The Company will not pay, and will
not permit any Subsidiary, directly or indirectly, to pay, any funds to or for
the account of, make any investment (whether by acquisition of stock or
Indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Indebtedness,
or otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or
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participate in, or effect any transaction in connection with, any joint
enterprise or other joint arrangement with, any Affiliate of the Company,
except, on terms to the Company or such Subsidiary no less favorable than terms
that could be obtained by the Company or such Subsidiary from a Person that is
not an Affiliate of the Company, as determined in good faith by the Board of
Directors.
(k) NOTICE OF DEFAULTS. The Company shall notify the Holder
promptly, but in any event not later than five days after the Company becomes
aware of the fact, of any failure by the Company to comply with this Section 3.
(l) LISTING ELIGIBILITY REPORTING. The Company shall notify the
Holder from time to time within five days after the Company first learns that it
does not meet any of the applicable requirements for the continued listing of
the Common Stock on the principal securities market or exchange on which the
Common Stock is listed from time to time and shall make appropriate public
announcement thereof so that the content of such notice shall not constitute
material non-public information for purposes of the 1934 Act.
SECTION 4. EVENTS OF DEFAULT.
(a) If any of the following events of default (each, an "Event of
Default") shall occur:
(1) FAILURE TO PAY PRINCIPAL, INTEREST, ETC. The Company fails (1)
to pay the principal, the Optional Redemption Consideration or the
Repurchase Price hereof when due, whether at maturity, upon acceleration
or otherwise, as applicable, or (2) to pay any installment of interest
hereon when due and, in the case of this clause (2) of this Section
4(a)(1) only, such failure continues for a period of five Business Days
after the due date thereof; or
(2) CONVERSION AND THE SHARES. The Company fails to issue or cause
to be issued shares of Common Stock to the Holder or the holder of any
Other Note upon exercise of the conversion or purchase rights of the
Holder or such holder within two Trading Days after the due date therefor
in accordance with the terms of this Note, any Other Note, or any Warrant
or fails to transfer any certificate for any such shares of Common Stock
or any shares of Common Stock issued in payment of interest on this Note
or any Other
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Note as and when required by this Note and the Purchase Agreement or any
Other Note and the applicable Other Purchase Agreement, as the case may
be; or
(3) BREACH OF CERTAIN COVENANTS. The Company fails to comply with
Section 3(a), (g), (h), (i), (k) or (l) or fails to obtain the listing of
the Underlying Shares and the Warrant Shares on AMEX, as contemplated by
Section 6.9 of the Purchase Agreement, within 30 days after the Closing
Date (rather than on or before the Closing Date, as provided in Section
6.9 of the Purchase Agreement); or
(4) BREACH OF OTHER COVENANTS. The Company fails to comply in any
material respect with any other provision of Section 3 of this Note (other
than as specified in the immediately preceding clause (3)) or breaches any
other material covenant or other material term or condition of this Note
or any of the other Transaction Documents (other than as specifically
provided in clauses (1), (2) and (3) of this Section 4(a)), and such
breach continues for a period of 15 days after written notice thereof to
the Company from the Holder; or
(5) BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
warranty of the Company made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Transaction Documents) shall be false
or misleading in any material respect when made; or
(6) CERTAIN VOLUNTARY PROCEEDINGS. The Company or any Subsidiary
shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property,
or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit
of creditors, or shall fail generally to pay its debts as they become due
or shall admit in writing its inability generally to pay its debts as they
become due; or
(7) CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary
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case or other proceeding shall be commenced against the Company or any
Subsidiary seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of 60
consecutive days; or
(8) JUDGMENTS. Any court of competent jurisdiction shall enter one
or more final judgments against the Company or any Subsidiary or any of
their respective properties or other assets in an aggregate amount in
excess of $250,000, which is not vacated, bonded, stayed, discharged,
satisfied or waived for a period of 30 consecutive days; or
(9) DEFAULT UNDER OTHER AGREEMENTS. (a) The Company or any
Subsidiary shall (i) default in any payment with respect to any
Indebtedness for borrowed money (other than this Note) which Indebtedness
has an outstanding principal amount in excess of $250,000 individually or
$750,000 in the aggregate for all such Indebtedness, beyond the period of
grace, if any, provided in the instrument or agreement under which such
Indebtedness was created or (ii) default in the observance or performance
of any agreement, covenant or condition relating to any such Indebtedness
or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee or agent
on behalf of such holder or holders) to cause, any such Indebtedness to
become due prior to its stated maturity and such default or event shall
continue beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created (after giving effect
to any consent or waiver obtained and then in effect thereunder) and such
default shall continue for five days (or to such earlier date as the
holder of any other Indebtedness shall declare the same due and payable by
reason of such default; or (b) any Indebtedness of the Company or any
Subsidiary which has an outstanding principal amount in excess of the
$250,000 individually or $750,000 in the aggregate for all such
Indebtedness shall, in accordance with its terms, be declared to be due
and
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payable, or required to be prepaid other than by a regularly scheduled or
required payment prior to the stated maturity thereof;
then, upon the occurrence and during the continuation of any Event of Default
specified in clause (1), (2), (3), (4), (5), (8) or (9) of this Section 4(a), at
the option of the Holder, and upon the occurrence of any Event of Default
specified in clause (6) or (7) of this Section 4(a): (X) the Company shall, pay
to the Holder an amount equal to 110% of the sum of (i) the outstanding
principal amount of this Note plus (ii) accrued and unpaid interest on such
principal amount to the date of payment plus (iii) accrued and unpaid Default
Interest, if any, thereon at the rate provided in this Note to the date of
payment, (Y) all other amounts payable by the Company hereunder or under any of
the other Transaction Documents shall immediately become due and payable, all
without demand, presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, reasonable legal fees
and expenses, of collection, and (Z) the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity.
SECTION 5. REPURCHASE UPON A REPURCHASE EVENT.
(A) REPURCHASE RIGHT UPON REPURCHASE EVENT. If a Repurchase Event
occurs, in addition to any other right of the Holder, the Holder shall have the
right, at the Holder's option, to require the Company to repurchase all of this
Note, or any portion hereof on the repurchase date that is five Business Days
after the date of the Holder Notice delivered with respect to such Repurchase
Event. The Holder shall have the right to require the Company to repurchase all
or any such portion of this Note if a Repurchase Event occurs at any time while
any portion of the principal amount of this Note is outstanding at a price equal
to the Repurchase Price.
(B) NOTICES; METHOD OF EXERCISING REPURCHASE RIGHTS, ETC. (1) On or
before the fifth Business Day after the occurrence of a Repurchase Event, the
Company shall give to the Holder a Company Notice of the occurrence of the
Repurchase Event and of the repurchase right set forth herein arising as a
result thereof. Such Company Notice shall set forth:
(i) the date by which the repurchase right must be exercised, and
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(ii) a description of the procedure (set forth in this Section
5(b)) which the Holder must follow to exercise the repurchase right.
No failure of the Company to give a Company Notice or defect therein shall limit
the Holder's right to exercise the repurchase right or affect the validity of
the proceedings for the repurchase of this Note or portion hereof.
(2) To exercise the repurchase right, the Holder shall deliver
to the Company on or before the 30th day after a Company Notice (or if no such
Company Notice has been given, within 40 days after the Holder first learns of
the Repurchase Event) (i) a Holder Notice setting forth the name of the Holder
and the principal amount of this Note to be repurchased, and (ii) this Note,
duly endorsed for transfer to the Company of the portion of the outstanding
principal amount of this Note to be repurchased. A Holder Notice may be revoked
by the Holder at any time prior to the time the Company pays the applicable
Repurchase Price to the Holder.
(3) If the Holder shall have given a Holder Notice, then on
the date which is five Business Days after the date such Holder Notice is given
(or such later date as the Holder surrenders this Note) the Company shall make
payment in immediately available funds of the applicable Repurchase Price to
such account as specified by the Holder in writing to the Company at least one
Business Day prior to the applicable repurchase date.
(c) OTHER. A Holder Notice given by the Holder shall be deemed
for all purposes to be in proper form unless the Company notifies the Holder
within three Business Days after the Holder gives such Holder Notice (which
notice from the Company shall specify all defects in such Holder Notice), and
any Holder Notice containing any such defect shall nonetheless be effective on
the date given if the Holder promptly undertakes to correct all such defects. No
such claim of defect shall limit or delay performance of the Company's
obligation to repurchase any portion of this Note, the repurchase of which is
not in dispute.
SECTION 6. CONVERSION.
(a) RIGHT TO CONVERT. Subject to and upon compliance with the
provisions of this Note, the Holder shall have the right, at the Holder's
option, at any time prior to the close of
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business on the Maturity Date (except that, if the Holder shall have exercised
repurchase rights under Sections 5(a) and 5(b) or the Company shall have
exercised its redemption rights under Section 2(b), such conversion right shall
terminate with respect to the portion of this Note to be repurchased or
redeemed, as the case may be, at the close of business on the last Trading Day
prior to the later of (x) the Optional Redemption Date or the date the Company
is required to make such repurchase, as the case may be, and (y) the date the
Company pays or deposits in accordance with Section 7(k) the applicable
Repurchase Price or Optional Redemption Consideration unless in any such case
the Company shall default in payment due upon repurchase or redemption hereof),
to convert the principal amount of this Note, or any portion of such principal
amount which is at least $10,000 (or such lesser principal amount of this Note
as shall be outstanding at such time), plus accrued and unpaid interest, into
that number of fully paid and non-assessable shares of Common Stock (as such
shares shall then be constituted) obtained by dividing (1) the sum of (x) the
principal amount of this Note or portion thereof being converted plus (y)
accrued and unpaid interest on the portion of the principal amount of this Note
being converted to the applicable Conversion Date plus (z) accrued and unpaid
Default Interest, if any, on the amount referred to in the immediately preceding
clause (y) to the applicable Conversion Date by (2) the Conversion Price in
effect on the applicable Conversion Date, by giving a Conversion Notice in the
manner provided in Section 6(b); provided, however, that, if at any time this
Note is converted in whole or in part pursuant to this Section 6(a), the Company
does not have available for issuance upon such conversion as authorized and
unissued shares or in its treasury at least the number of shares of Common Stock
required to be issued pursuant hereto, then, at the election of the Holder made
by notice from the Holder to the Company, this Note (or portion hereof as to
which conversion has been requested), to the extent that sufficient shares of
Common Stock are not then available for issuance upon conversion, shall be
converted into the right to receive from the Company, in lieu of the shares of
Common Stock into which this Note or such portion hereof would otherwise be
converted and which the Company is unable to issue, payment in an amount equal
to the product obtained by multiplying (x) the number of shares of Common Stock
which the Company is unable to issue times (y) the arithmetic average of the
Market Price for the Common Stock during the five consecutive Trading Days
immediately prior to the applicable Conversion Date. Any such payment shall, for
all purposes of this Note, be deemed to be a payment of principal plus a premium
equal to the total amount payable less the
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principal portion of this Note converted as to which such payment is required to
be made because shares of Common Stock are not then available for issuance upon
such conversion. The Holder is not entitled to any rights of a holder of Common
Stock until the Holder has converted this Note to Common Stock, and only to the
extent this Note is deemed to have been converted to Common Stock under this
Section 6. For purposes of Sections 6(e) and 6(f), whenever a provision
references the shares of Common Stock into which this Note (or a portion hereof)
is convertible or the shares of Common Stock issuable upon conversion of this
Note (or a portion hereof) or words of similar import, any determination
required by such provision shall be made as if a sufficient number of shares of
Common Stock were then available for issuance upon conversion in full of this
Note.
(b) EXERCISE OF CONVERSION RIGHT; ISSUANCE OF COMMON STOCK ON
CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. (1) In order to exercise
the conversion privilege with respect to this Note, the Holder shall give a
Conversion Notice (or such other notice which is acceptable to the Company) to
the Company and the Issuing Agent or to the office or agency designated by the
Company for such purpose by notice to the Holder. A Conversion Notice may be
given by telephone line facsimile transmission to the numbers set forth on the
form of Conversion Notice.
(2) As promptly as practicable, but in no event later than
three Trading Days, after a Conversion Notice is given, the Company shall issue
and shall deliver to the Holder or the Holder's designee the number of full
shares of Common Stock issuable upon such conversion of this Note or portion
hereof in accordance with the provisions of this Article and deliver a check or
cash in respect of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 6(b)(6) and, if applicable,
any cash payment required pursuant to the proviso to the first sentence of
Section 6(a) (which payment, if any, shall be paid no later than three Trading
Days after the applicable Conversion Date). In lieu of delivering physical
certificates for the shares of Common Stock issuable upon any conversion of this
Note, provided the Company's transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon
request of the Holder, the Company shall use commercially reasonable efforts to
cause its transfer agent electronically to transmit such shares of Common Stock
issuable upon conversion to the Holder (or its designee), by crediting
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the account of the Holder's (or such designee's) broker with DTC through its
Deposit Withdrawal Agent Commission system (provided that the same time periods
herein as for stock certificates shall apply).
(3) Each conversion of this Note (or portion hereof) shall be
deemed to have been effected on the applicable Conversion Date, and the person
in whose name any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become on such
Conversion Date the holder of record of the shares represented thereby;
provided, however, that if a Conversion Date is a date on which the stock
transfer books of the Company shall be closed such conversion shall constitute
the person in whose name the certificates are to be issued as the record holder
thereof for all purposes on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion Price in effect
on the applicable Conversion Date. Upon conversion of this Note or any portion
hereof, the accrued and unpaid interest on this Note (or portion hereof) to (but
excluding) the applicable Conversion Date shall be deemed to be paid to the
Holder of this Note through receipt of such number of shares of Common Stock
issued upon conversion of this Note or portion hereof as shall have an aggregate
Current Fair Market Value on the Trading Day immediately preceding such
Conversion Date equal to the amount of such accrued and unpaid interest.
(4) The Company shall notify the Holder of any claim by the
Company of manifest error in a Conversion Notice within two Trading Days after
the Holder gives such Conversion Notice and no such claim of error shall limit
or delay performance of the Company's obligation to issue upon such conversion
the number of shares of Common Stock which are not in dispute. A Conversion
Notice shall be deemed for all purposes to be in proper form unless the Company
notifies the Holder by telephone line facsimile transmission within two Trading
Days after a Conversion Notice has been given (which notice from the Company
shall specify all defects in the Conversion Notice) and any Conversion Notice
containing any such defect shall nonetheless be effective on the date given if
the Holder promptly undertakes to correct all such defects and in due course in
fact corrects such defects. The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock or other securities or property on conversion
of this Note in a name other than that of the Holder, and the Company shall not
be required to issue or deliver any such shares or other securities
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or property unless and until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of any such tax or shall have
established to the satisfaction of the Company that such tax has been paid. The
Holder shall be responsible for the amount of any withholding tax payable in
connection with any conversion of this Note.
(5) (A) If the Holder shall have given a Conversion Notice in
accordance with the terms of this Note, the Company's obligation to issue and
deliver the certificates for Common Stock shall be absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any person or any action to enforce the same, any failure or
delay in the enforcement of any other obligation of the Company to the Holder,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with such
conversion; provided, however, that nothing herein shall limit or prejudice the
right of the Company to pursue any such claim in any other manner permitted by
applicable law. The occurrence of an event which requires an adjustment of the
Conversion Price as contemplated by Section 6(c) shall in no way restrict or
delay the right of the Holder to receive certificates for Common Stock upon
conversion of this Note and the Company shall use its best efforts to implement
such adjustment on terms reasonably acceptable to the Holder within two Trading
Days of such occurrence.
(B) If in any case the Company shall fail to issue and deliver
the shares of Common Stock to the Holder in connection with a particular
conversion of this Note within three Trading Days after the Holder gives the
Conversion Notice for such conversion, in addition to any other liabilities the
Company may have hereunder and under applicable law (i) the Company shall pay or
reimburse the Holder on demand for all out-of-pocket expenses, including,
without limitation, reasonable fees and expenses of legal counsel, incurred by
the Holder as a result of such failure, (ii) if as a result of such failure the
Holder shall suffer any direct damages or liabilities from such failure
(including, without limitation, margin interest and the cost of purchasing
securities to cover a sale (whether by the Holder or the Holder's securities
broker) or borrowing of shares
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of Common Stock by the Holder for purposes of settling any trade involving a
sale of shares of Common Stock made by the Holder during the period beginning on
the Issuance Date and ending on the date the Company delivers or causes to be
delivered to the Holder such shares of Common Stock), then the Company shall
upon demand of the Holder pay to the Holder an amount equal to the actual
direct, out-of-pocket damages and liabilities suffered by the Holder by reason
thereof which the Holder documents to the reasonable satisfaction of the
Company, and (iii) the Holder may by written notice (which may be given by mail,
courier, personal service or telephone line facsimile transmission) or oral
notice (promptly confirmed in writing), given at any time prior to delivery to
the Holder of the shares of Common Stock issuable in connection with such
exercise of the Holder's conversion right, rescind such exercise and the
Conversion Notice relating thereto, in which case the Holder shall thereafter be
entitled to convert that portion of this Note as to which such exercise is so
rescinded and to exercise its other rights and remedies with respect to such
failure by the Company. Notwithstanding the foregoing the Company shall not be
liable to the Holder under clause (ii) of the immediately preceding sentence to
the extent the failure of the Company to deliver or to cause to be delivered
such shares of Common Stock results from fire, flood, storm, earthquake,
shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, acts of God, or any similar event outside the control of the
Company (it being understood that the action or failure to act of the Transfer
Agent shall not be deemed an event outside the control of the Company except to
the extent resulting from fire, flood, storm, earthquake, shipwreck, strike,
war, acts of terrorism, crash involving facilities of a common carrier, acts of
God, or any similar event outside the control of the Transfer Agent or the
bankruptcy, liquidation or reorganization of the Transfer Agent under any
bankruptcy, insolvency or other similar law). The Holder shall notify the
Company in writing (or by telephone conversation, confirmed in writing) as
promptly as practicable following the third Trading Day after the Holder gives a
Conversion Notice if the Holder becomes aware that such shares of Common Stock
so issuable have not been received as provided herein, but any failure so to
give such notice shall not affect the Holder's rights under this Note or
otherwise. If the Holder shall have exercised the conversion right in any
particular instance and either (1) the Company shall notify the Holder on or
after such that the shares of Common Stock issuable upon such conversion might
not be delivered within three Trading Days after the date the Holder gives such
Conversion Notice or (2) the Holder learns after the date which is three Trading
Days
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after the date the Holder gives such Conversion Notice that the Holder has not
received such shares of Common Stock, then, without releasing the Company of its
obligations with respect thereto, from and after the Trading Day next succeeding
the earlier of the events described in the preceding clauses (1) and (2) of this
sentence the Holder shall make reasonable efforts not to sell shares of Common
Stock in anticipation of receipt of such shares of Common Stock in a manner
which is likely to increase materially the liability of the Company under clause
(2) of the second preceding sentence.
(C) If the Company fails to deliver or cause to be delivered
to the Holder such shares of Common Stock pursuant to this Section 6 (free of
any restrictions on transfer or legends except to the extent permitted under
Section 6.12 of the Purchase Agreement) in accordance herewith, within five
Trading Days after a particular conversion of this Note, then, in addition to
any other liability the Company may have, the Company shall pay to the Holder,
in cash, an amount, computed at the rate of 2% per month of the Current Fair
Market Value of the shares of Common Stock (or Other Securities) not timely
delivered by the Company, for the period such failure continues (the "Conversion
Delay Payments"), without duplication of any amount payable to the Holder
pursuant to clause (F) of Section 2(c)(i) of the Registration Rights Agreement,
with each change in the Current Fair Market Value during such period being given
effect. such payments shall be made on the last day of each calendar month so
long as the Company's obligation to make such payments continues and on the date
the Company makes such delivery of such shares of Common Stock.
(6) No fractional shares of Common Stock shall be issued upon
conversion of this Note but, in lieu of any fraction of a share of Common Stock
which would otherwise be issuable in respect of such conversion, the Company may
round the number of shares of Common Stock issued on such conversion up to the
next highest whole share or may pay lawful money of the United States of America
for such fractional share, based on a value of one share of Common Stock being
equal to the Market Price of the Common Stock on the applicable Conversion Date.
(c) ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall
be adjusted from time to time by the Company as follows:
(1) ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS IN
COMMON STOCK. In case the Company shall on or
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after the Escrow Funding Date pay a dividend or make a distribution to all
holders of the outstanding Common Stock in shares of Common Stock, the
Conversion Price in effect at the opening of business on the date following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the Record Date fixed for
such determination and the denominator shall be the sum of such number of shares
and the total number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of business on
the day following the Record Date. If any dividend or distribution of the type
described in this Section 6(c)(1) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(2) WEIGHTED ADJUSTMENTS FOR CERTAIN ISSUANCES OF RIGHTS OR
WARRANTS. In case the Company shall on or after the Escrow Funding Date issue
rights or warrants (other than any rights or warrants referred to in Section
6(c)(4) to all holders of its outstanding shares of Common Stock entitling them
(for a period expiring within 45 days after the date fixed for the determination
of stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price on the Record Date fixed for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect at the opening of business on the date after such
Record Date by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding at the close of business on the Record Date plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Current Market Price, and the
denominator shall be the number of shares of Common Stock outstanding on the
close of business on the Record Date plus the total number of additional shares
of Common Stock so offered for subscription or purchase. Such adjustment shall
become effective immediately after the opening of business on the day following
the Record Date fixed for determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not delivered
pursuant to such rights or warrants, upon the expiration or termination of such
rights or warrants, the
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Conversion Price shall be readjusted to the Conversion Price which would then be
in effect had the adjustments made upon the issuance of such rights or warrants
been made on the basis of delivery of only the number of shares of Common Stock
actually delivered. In the event that such rights or warrants are not so issued,
the Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holder to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received for such rights or
warrants, the value of such consideration, if other than cash, to be determined
by the Board of Directors.
(3) ADJUSTMENTS FOR CERTAIN SUBDIVISIONS OF THE COMMON STOCK.
In case the outstanding shares of Common Stock shall on or after the Escrow
Funding Date be subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the earlier of the day
following the day upon which such subdivision becomes effective and the day on
which "ex-" trading of the Common Stock begins with respect to such subdivision
shall be proportionately reduced, and conversely, in case outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common Stock,
the Conversion Price in effect at the opening of business on the earlier of the
day following the day upon which such combination becomes effective and the day
on which "ex-" trading of the Common Stock with respect to such combination
begins shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the earlier of the day following the day upon which such subdivision or
combination becomes effective and the day on which "ex-" trading of the Common
Stock begins with respect to such subdivision or combination.
(4) ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In
case the Company shall on or after the Escrow Funding Date, by dividend or
otherwise, distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions to which
Section 6(c)(1) applies) or evidences of its indebtedness, cash or other assets
(including securities, but excluding any rights or warrants referred to in
Section 6(c)(2) and dividends
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and distributions paid exclusively in cash and excluding any capital stock,
evidences of indebtedness, cash or assets distributed upon a merger or
consolidation to which Section 6(d) applies) (the foregoing hereinafter in this
Section 6(c)(4) called the "Securities")), then, in each such case, subject to
the second paragraph of this Section 6(c)(4), the Conversion Price shall be
reduced so that the same shall be equal to the price determined by multiplying
the Conversion Price in effect immediately prior to the close of business on the
Record Date with respect to such distribution by a fraction of which the
numerator shall be the Current Market Price on such date less the fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) on such date of the portion of
the Securities so distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price, such reduction to become
effective immediately prior to the opening of business on the day following the
Record Date; provided, however, that in the event the then fair market value (as
so determined) of the portion of the Securities so distributed applicable to one
share of Common Stock is equal to or greater than the Current Market Price on
the Record Date, in lieu of the foregoing adjustment, adequate provision shall
be made so that the Holder shall have the right to receive upon conversion of
this Note (or any portion hereof) the amount of Securities such holder would
have received had such holder converted this Note (or portion hereof)
immediately prior to such Record Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of this
Section 6(c)(4) by reference to the actual or when issued trading market for any
Securities comprising all or part of such distribution, it must in doing so
consider the prices in such market over the same period used in computing the
Current Market Price, to the extent possible.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events (a "Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Stock, shall not be deemed to have been
distributed for purposes of
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this Section 6(c) (and no adjustment to the Conversion Price under this Section
6(c) will be required) until the occurrence of the earliest Trigger Event. If
any such rights or warrants, including any such existing rights or warrants
distributed prior to the Issuance Date, are subject to Trigger Events, upon the
satisfaction of each of which such rights or warrants shall become exercisable
to purchase different securities, evidences of indebtedness or other assets,
then the occurrence of each such Trigger Event shall be deemed to be such date
of issuance and record date with respect to new rights or warrants (and a
termination or expiration of the existing rights or warrants without exercise by
the holder thereof) (so that, by way of illustration and not limitation, the
dates of issuance of any such rights shall be deemed to be the dates on which
such rights become exercisable to purchase capital stock of the Company, and not
the date on which such rights may be issued, or may become evidenced by separate
certificates, if such rights are not then so exercisable). In addition, in the
event of any distribution of rights or warrants, or any Trigger Event with
respect thereto, that was counted for purposes of calculating a distribution
amount for which an adjustment to the Conversion Price under this Section 6(c)
was made (1) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any holders thereof, the
Conversion Price shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or repurchase
price received by a holder or holders of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any holders thereof, the
Conversion Price shall be readjusted as if such rights and warrants had not been
issued.
For purposes of this Section 6(c)(4) and Sections 6(c)(1) and
(2), any dividend or distribution to which this Section 6(c)(4) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which Section 6(c)(2) applies (or
both), shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets, shares of capital stock, rights or warrants
other than such shares of Common Stock or rights or warrants to which Section
6(c)(2) applies (and any Conversion Price reduction required by this
-45-
Section 6(c)(4) with respect to such dividend or distribution shall then be
made) immediately followed by (2) a dividend or distribution of such shares of
Common Stock or such rights or warrants (and any further Conversion Price
reduction required by Sections 6(c)(1) and (2) with respect to such dividend or
distribution shall then be made), except (A) the Record Date of such dividend or
distribution shall be substituted as "the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution", "Record
Date fixed for such determination" and "Record Date" within the meaning of
Section 6(c)(1) and as "the date fixed for the determination of stockholders
entitled to receive such rights or warrants", "the Record Date fixed for the
determination of the stockholders entitled to receive such rights or warrants"
and "such Record Date" within the meaning of Section 6(c)(2) and (B) any shares
of Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the Record Date fixed for such
determination" within the meaning of Section 6(c)(1).
(5) ADJUSTMENTS FOR CERTAIN CASH DIVIDENDS. In case the
Company shall on or after the Escrow Funding Date, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 6(d) applies or as
part of a distribution referred to in Section 6(c)(4) in an aggregate amount
that, combined with (1) the aggregate amount of any other such distributions to
all holders of its Common Stock made exclusively in cash within the 12 months
preceding the date of payment of such distribution, and in respect of which no
adjustment pursuant to this Section 6(c)(5) has been made, and (2) the aggregate
of any cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and set forth in a Board Resolution) of
consideration payable in respect of any Tender Offer by the Company or any
Subsidiary for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to Section 6(c)(6) has been made, exceeds one
percent of the product of (x) the Current Market Price on the Record Date with
respect to such distribution times (y) the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately after the
close of business on such date, unless the Company elects to reserve such cash
for distribution to the Holder upon the conversion of this Note (and shall have
made adequate provision) so that the Holder will receive upon such conversion,
in addition to the shares of
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Common Stock to which the Holder is entitled, the amount of cash which the
Holder would have received if the Holder had, immediately prior to the Record
Date for such distribution of cash, converted this Note into Common Stock, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on such Record Date by a fraction (i) the numerator of
which shall be equal to the Current Market Price on the Record Date less an
amount equal to the quotient of (x) the excess of such combined amount over such
one percent and (y) the number of shares of Common Stock outstanding on the
Record Date and (ii) the denominator of which shall be equal to the Current
Market Price on the Record Date; provided, however, that in the event the
portion of the cash so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price of the Common Stock on the
Record Date, in lieu of the foregoing adjustment, adequate provision shall be
made so that the Holder shall have the right to receive upon conversion of this
Note (or any portion hereof) the amount of cash the Holder would have received
had the Holder converted this Note (or portion hereof) immediately prior to such
Record Date. In the event that such dividend or distribution is not so paid or
made, the Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such dividend or distribution had not been
declared.
(6) ADJUSTMENTS FOR CERTAIN TENDER OFFERS. In case a Tender
Offer on or after the Escrow Funding Date made by the Company or any Subsidiary
for all or any portion of the Common Stock shall expire and such Tender Offer
(as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the terms
of the Tender Offer) of Purchased Shares (as defined below)) of an aggregate
consideration having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) that combined together with (1) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution), as of the expiration
of such Tender Offer, of consideration payable in respect of any other Tender
Offers, by the Company or any Subsidiary for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such Tender
Offer and in respect of which no adjustment pursuant to this Section 6(c)(6) has
been made and (2) the aggregate amount of any distributions to all holders of
-47-
the Company's Common Stock made exclusively in cash within 12 months preceding
the expiration of such Tender Offer and in respect of which no adjustment
pursuant to Section 6(c)(5) has been made, exceeds one percent of the product of
(i) the Current Market Price as of the last time (the "Expiration Time") tenders
could have been made pursuant to such Tender Offer (as it may be amended) times
(ii) the number of shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time, then, and in each such case, immediately prior
to the opening of business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
close of business on the date of the Expiration Time by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding (including
any tendered shares) at the Expiration Time multiplied by the Current Market
Price of the Common Stock on the Trading Day next succeeding the Expiration Time
and the denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the Tender Offer) of all
shares validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) at the Expiration Time and the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction (if any) to become effective immediately prior to the opening of
business on the day following the Expiration Time. In the event that the Company
is obligated to purchase shares pursuant to any such Tender Offer, but the
Company is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect if such
Tender Offer had not been made. If the application of this Section 6(c)(6) to
any Tender Offer would result in an increase in the Conversion Price, no
adjustment shall be made for such Tender Offer under this Section 6(c)(6).
(7) ADJUSTMENTS FOR CERTAIN ISSUANCES OF NEWLY ISSUED SHARES.
(A) In case at any time on or after the Escrow Funding Date the Company shall
issue shares of its Common Stock or Common Stock Equivalents (collectively, the
"Newly Issued Shares"), other than an issuance pro rata to all holders of its
outstanding Common Stock, at a price below the greater of (x)
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the Current Fair Market Value of the Common Stock at the time of such issuance
and (y) the Conversion Price in effect immediately prior to such issuance, then
following such issuance of Newly Issued Shares the Conversion Price shall be
adjusted as provided in this Section 6(c)(7). The Conversion Price following any
such adjustment shall be determined by multiplying the Conversion Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the sum of (a) the number of shares of Common Stock outstanding immediately
prior to the issuance of the Newly Issued Shares (calculated on a fully-diluted
basis assuming the conversion of all options, warrants, purchase rights or
convertible securities which are exercisable at the time of the issuance of the
Newly Issued Shares) plus (b) the number of shares of Common Stock which the
aggregate consideration, if any, received by the Company for the number of Newly
Issued Shares would purchase at a price equal to the greater of (x) the Current
Fair Market Value of the Common Stock at the time of such issuance and (y) the
Conversion Price in effect immediately prior to such issuance, and the
denominator shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to the issuance of the Newly Issued Shares
(calculated on a fully-diluted basis assuming the exercise or conversion of all
options, warrants, purchase rights or convertible securities which are
exercisable or convertible at the time of the issuance of the Newly Issued
Shares) plus (ii) the number of Newly Issued Shares. The adjustment provided for
in this Section 6(c)(7) may be expressed as the following mathematical formula:
( O +(C / x CP MP))
------------------
NCP = ( O + N )
where:
C = aggregate consideration received by the Company for
the Newly Issued Shares
N = number of Newly Issued Shares
O = number of shares of Common Stock outstanding (on a
fully diluted basis, as described above) immediately
prior to the issuance of the Newly Issued Shares
MP = greater of (x) Current Fair Market Value of the
Common Stock at the time of issuance of the Newly
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Issued Shares and (y) Conversion Price in effect
immediately prior to issuance of the Newly Issued
Shares
CP = Conversion Price immediately prior to the issuance of
the Newly Issued Shares
NCP = Conversion Price immediately after the issuance of
the Newly Issued Shares
(B) Notwithstanding the foregoing, no adjustment shall be made
under this Section 6(c)(7) by reason of:
(i) the issuance by the Company of shares of Common Stock pro
rata to all holders of the Common Stock so long as (i) any adjustment
to the Conversion Price that is required by Section 6(c)(1) is made and
(ii) the Company shall have given notice of such issuance thereof to
the Holder pursuant to Section 6(f);
(ii) the issuance by the Company of Newly Issued Shares in an
offering for cash for the account of the Company that is underwritten
on a firm commitment basis and is registered with the SEC under the
1933 Act;
(iii) the issuance by the Company of the Other Notes, or the
Warrants or shares of Common Stock upon conversion of this Note, or the
Other Notes or upon exercise of the Warrants or in accordance with the
terms hereof and thereof;
(iv) the issuance by the Company of shares of Common Stock in
lieu of cash payment of interest on this Note and the Other Notes in
accordance with the terms hereof and thereof;
(v) the issuance by the Company of Newly Issued Shares upon
grant or exercise of options for employees, directors and consultants
under the Company's 1995 Stock Option Plan and 1997 Stock Option Plan;
(vi) the issuance by the Company of Newly Issued Shares to the
lessor or vendor in any equipment lease or similar equipment financing
transaction in which the Company or any Subsidiary obtains the use of
equipment for its business; and
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(vii) the issuance by the Company of Newly Issued Shares upon
conversion or exercise of Common Stock Equivalents outstanding on the date
of the Purchase Agreement and disclosed in the Purchase Agreement or the
SEC Filings.
(8) ADJUSTMENT IN CONNECTION WITH REVERSE STOCK SPLIT. If the
stockholder approval of the Reverse Stock Split contemplated by Section 6.1(b)
of the Purchase Agreement is obtained and, after giving effect to the adjustment
provided for in Section 6(c)(3) in respect of the Reverse Stock Split, the
Conversion Price is greater than the Current Market Price on the 6th Trading Day
after the earlier of (x) the effective date of the Reverse Stock Split and (y)
the first Trading Day on which "ex" trading of the Common Stock begins in
respect of the Reverse Stock Split, the Conversion Price shall be reduced to the
greater of (A) such Current Market Price and (B) the product of $.15 times the
number of shares of Common Stock outstanding immediately prior to the Reverse
Stock Split as shall have, by reason of the Reverse Stock Split, become one
share of Common Stock immediately after the Reverse Stock Split.
(9) ADDITIONAL REDUCTIONS IN CONVERSION PRICE. The Company may make
such reductions in the Conversion Price, in addition to those required by
Sections 6(c)(1), (2), (3), (4), (5), (6), (7), and (8), as the Board of
Directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
(10) DE MINIMUS ADJUSTMENTS. No adjustment in the Conversion Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in such price; provided, however, that any adjustments which by
reason of this Section 6(c)(10) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 6 shall be made by the Company and shall be made to the
nearest cent or to the nearest one hundredth of a share, as the case may be.
No adjustment need be made for a change in the par value of the
Common Stock or from par value to no par value or from no par value to par
value.
(11) COMPANY NOTICE OF ADJUSTMENTS. Whenever the
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Conversion Price is adjusted as herein provided, the Company shall promptly, but
in no event later than five days thereafter, give a notice to the Holder setting
forth the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment, but which statement shall not
include any information which would be material non-public information for
purposes of the 1934 Act. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
(12) EFFECTIVENESS OF CERTAIN ADJUSTMENTS. In any case in which this
Section 6(c) provides that an adjustment shall become effective immediately
after a Record Date for an event, the Company may defer until the occurrence of
such event (i) issuing to the Holder in connection with any conversion of this
Note after such Record Date and before the occurrence of such event the
additional shares of Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of any fraction pursuant to Section 6(b)(6).
(13) OUTSTANDING SHARES. For purposes of this Section 6(c), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock. The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company other than dividends or
distributions payable only in shares of Common Stock.
(d) EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. (1)
If any of the following events occur, namely:
(i) any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a
subdivision or combination),
(ii) any consolidation, merger or combination of the Company with
another corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, or
-52-
(iii) any sale or conveyance of the properties and assets of the
Company as, or substantially as, an entirety to any other corporation as a
result of which holders of Common Stock shall be entitled to receive
stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock, then
in any such case in the preceding clause (i), (ii) or (iii) the Company or the
successor or purchasing Person, as the case may be, shall execute with the
Holder a written agreement providing that:
(x) this Note shall be convertible into the kind and amount of
shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance by the holder of the number of
shares of Common Stock issuable upon conversion of this Note in full
(assuming, for such purposes, a sufficient number of authorized shares of
Common Stock available to convert this Note) immediately prior to such
reclassification, change, consolidation, merger, combination, sale or
conveyance assuming such holder of Common Stock did not exercise such
holder's rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance (provided that, if the kind
or amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance is not the
same for each share of Common Stock in respect of which such rights of
election shall not have been exercised ("non-electing share"), then for
the purposes of this Section 6(d) the kind and amount of securities, cash
or other property receivable upon such consolidation, merger, statutory
exchange, sale or conveyance for each non-electing share shall be deemed
to be the kind and amount so receivable per share by a plurality of the
non-electing shares),
(y) in the case of any such successor or purchasing Person, upon
such consolidation, merger, combination, sale or conveyance such successor
or purchasing Person shall be jointly and severally liable with the
Company for the performance of all of the Company's obligations under this
Note and the Note Purchase Agreement and
(z) if registration or qualification is required
-53-
under the 1933 Act or applicable state law for the public resale by the
Holder of such shares of stock and Other Securities so issuable upon
conversion of this Note, such registration or qualification shall be
completed prior to such reclassification, change, consolidation, merger,
combination or sale.
Such written agreement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
6. If, in the case of any such reclassification, change, consolidation, merger,
combination, sale or conveyance, the stock or other securities and assets
receivable thereupon by a holder of shares of Common Stock includes shares of
stock or other securities and assets of a corporation other than the successor
or purchasing corporation, as the case may be, in such reclassification, change,
consolidation, merger, combination, sale or conveyance, then such written
agreement shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the Holder as the Board
of Directors shall reasonably consider necessary by reason of the foregoing,
including, to the extent practicable, the provisions providing for the
repurchase rights set forth in Section 5 herein.
(2) The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
(3) If this Section 6(d) applies to any event or occurrence, Section
6(c) shall not apply.
(e) RESERVATION OF SHARES; SHARES TO BE FULLY PAID; LISTING OF
COMMON STOCK.
(1) The Company shall reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock or
shares of Common Stock held in treasury, solely for issuance upon conversion of
this Note and the Other Notes, and in addition to the shares of Common Stock
required to be reserved by the terms of the Warrants, sufficient shares to
provide for the conversion of this Note and the Other Notes from time to time as
this Note and the Other Notes are converted.
(2) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of the shares of
Common Stock issuable upon
-54-
conversion of this Note, the Company will take all corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue shares of such Common Stock at such adjusted
Conversion Price.
(3) The Company covenants that all shares of Common Stock issued
upon conversion of this Note will be fully paid and non-assessable by the
Company and free from all taxes, liens and charges with respect to the issue
thereof.
(4) The Company covenants that if any shares of Common Stock to be
provided for the purpose of conversion of this Note hereunder require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued upon conversion, the Company
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
(5) The Company covenants that, so long as the Common Stock shall be
listed on the Nasdaq, the NYSE, the AMEX or any other national securities
exchange, the Company shall obtain and, so long as the Common Stock shall be so
listed on such market or exchange, maintain approval for listing thereon of all
Common Stock issuable upon conversion of or in payment of interest on this Note.
(f) NOTICE TO HOLDER PRIOR TO CERTAIN ACTIONS. In case on or after
the Issuance Date:
(1) the Company shall declare a dividend (or any other distribution)
on its Common Stock (other than in cash out of retained earnings); or
(2) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any share
of any class or any other rights or warrants; or
(3) the Board of Directors shall authorize any reclassification of
the Common Stock of the Company (other than a subdivision or combination
of its outstanding Common Stock, or a change in par value, or from par
value to no par value, or from no par value to par value), or any
consolidation or merger or other business combination transaction to which
the Company is a party and for which approval of any stockholders of the
Company is required, or the sale or transfer of all or substantially all
of the
-55-
assets of the Company; or
(4) there shall be pending the voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
the Company shall give the Holder, as promptly as possible but in any event at
least ten Trading Days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, other business
combination transaction, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record who shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, other business combination
transaction, sale, transfer, dissolution, liquidation or winding-up shall be
determined. Such notice shall not include any information which would be
material non-public information for purposes of the 1934 Act. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. In the case of any such action
of which the Company gives such notice to the Holder or is required to give such
notice to the Holder, the Holder shall be entitled to give a Conversion Notice
which is contingent on the completion of such action.
(g) 9.9% LIMITATION. (1) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon conversion of this Note at any time shall not exceed a number
that, when added to the total number of shares of Common Stock deemed
beneficially owned by the Holder (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the Holder's
right to convert, exercise or purchase similar to the limitation set forth
herein (the "Excluded Shares"), together with all shares of Common Stock deemed
beneficially owned at such time (other than by virtue of the ownership of the
Excluded Shares) by Persons whose beneficial ownership of Common Stock would be
aggregated with the beneficial ownership by the
-56-
Holder for purposes of determining whether a group exists or for purposes of
determining the Holder's beneficial ownership (the "Aggregation Parties"), in
either such case for purposes of Section 13(d) of the 1934 Act and Regulation
13D-G thereunder (including, without limitation, as the same is made applicable
to Section 16 of the 1934 Act and the rules promulgated thereunder), would
result in beneficial ownership by the Holder or such group of more than 9.9% of
the shares of Common Stock for purposes of Section 13(d) or Section 16 of the
1934 Act and the rules promulgated thereunder (as the same may be modified by
the Holder as provided herein, the "Restricted Ownership Percentage"). The
Holder shall have the right at any time and from time to time to reduce its
Restricted Ownership Percentage immediately upon notice to the Company in the
event and only to the extent that Section 16 of the 1934 Act or the rules
promulgated thereunder (or any successor statute or rules) is changed to reduce
the beneficial ownership percentage threshold thereunder to a percentage less
than 10%. If at any time the limits in this Section 6(g) make this Note
inconvertible in whole or in part, the Company shall not by reason thereof be
relieved of its obligation to issue shares of Common Stock at any time or from
time to time thereafter but prior to the Maturity Date upon conversion of this
Note as and when shares of Common Stock may be issued in compliance with such
restrictions.
(2) For purposes of this Section 6(g), in determining the number of
outstanding shares of Common Stock at any time the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (1) the Company's then
most recent Form 10-Q, Form 10-K or other public filing with the SEC, as the
case may be, (2) a public announcement by the Company that is later than any
such filing referred to in the preceding clause (1) or (3) any other notice by
the Company or its transfer agent setting forth the number shares of Common
Stock outstanding and knowledge the Holder may have about the number of shares
of Common Stock issued upon conversion or exercise of Common Stock Equivalents
by any Person, including the Holder, which are not reflected in the preceding
clauses (1) through (3). Upon the written request of the Holder, the Company
shall within three Business Days confirm in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion
or exercise of Common Stock Equivalents, including this Note, the Other Notes,
the Warrant, the Initial Warrants and the Other Warrants, by the Holder or its
affiliates or the holders thereof, in each such case subsequent to the date as
of which such number of
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outstanding shares of Common Stock was reported.
SECTION 7. MISCELLANEOUS.
(a) FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
(b) NOTICES. Except as otherwise specifically provided herein, any
notice herein required or permitted to be given shall be in writing and may be
personally served, sent by telephone line facsimile transmission or delivered by
courier or sent by United States mail and shall be deemed to have been given
upon receipt if personally served, sent by telephone line facsimile transmission
or sent by courier or three days after being deposited in the facilities of the
United States Postal Service, certified, with postage pre-paid and properly
addressed, if sent by mail. For the purposes hereof, the address and facsimile
line transmission number of the Holder shall be as furnished by the Holder for
such purpose and shown on the records of the Company; and the address of the
Company shall be 000 XX 00xx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000,
Attention: Chief Financial Officer (telephone line facsimile transmission number
(000) 000-0000). The Holder or the Company may change its address for notice by
service of written notice to the other as herein provided.
(c) AMENDMENT, WAIVER, ETC. In order that the Company not be
entitled to discriminate among the Holder and the holders of the Other Notes,
neither this Note or any Other Note nor any terms hereof or thereof may be
changed, waived, discharged or terminated unless such change, waiver, discharge
or termination is in writing signed by the Company and the Majority Holders,
provided that no such change, waiver, discharge or termination shall, without
the consent of the Holder and the holders of the Other Notes affected thereby
(i) extend the scheduled final maturity of this Note or any Other Note, or
reduce the rate or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default increase in interest
rates) hereon or thereon or reduce the principal amount or the Repurchase Price
hereof or thereof or reduce or change the form or relative amounts of the
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components of the Optional Redemption Consideration, (ii) increase the
Conversion Price, (iii) amend, modify or waive any provision of this Section
7(c), (iv) reduce any percentage specified in, or otherwise modify, the
definition of Majority Holders or (v) except as provided in this Note, change
the method of calculating the Interest Share Price or the Optional Redemption
Consideration in a manner adverse to the Holder.
(d) ASSIGNABILITY. This Note shall be binding upon the Company and
its successors, and shall inure to the benefit of the Holder and its successors
and permitted assigns. The Company may not assign its rights or obligations
under this Note.
(e) CERTAIN EXPENSES. The Company shall pay on demand all expenses
incurred by the Holder, including reasonable attorneys' fees and expenses, as a
consequence of, or in connection with (x) any amendment or waiver of this Note
or any other Transaction Document, (y) any default or breach of any of the
Company's obligations set forth in the Transaction Documents and (z) the
enforcement or restructuring of any right of, including the collection of any
payments due, the Holder under the Transaction Documents, including any action
or proceeding relating to such enforcement or any order, injunction or other
process seeking to restrain the Company from paying any amount due the Holder.
(f) GOVERNING LAW. (1) This Note shall be governed by the internal
laws of the State of New York, without regard to the principles of conflict of
laws.
(2) The Company irrevocably submits to the exclusive jurisdiction of
any State or federal court sitting in the State of New York, County of New York
(such consent shall not be deemed a general consent to jurisdiction and service
for any third party) over any suit, action, or proceeding arising out of or
relating to this Note. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action, or proceeding brought in such a court and
any claim that suit, action, or proceeding has been brought in an inconvenient
forum.
(3) The Company agrees that the service of process upon it mailed by
certified or registered mail (and service so made shall be deemed complete five
Business Days after the same has been posted as aforesaid) by personal service
shall be
-59-
deemed in every respect effective service of process upon it in any such suit or
proceeding. Nothing herein shall affect Holder's right to serve process in any
other manner permitted by law. The Company agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
(4) The Company knowingly and voluntarily waives any and all rights
it may have to a trial by jury with respect to any litigation based on, or
arising out of, under, or in connection with, this Note.
(g) SAVINGS CLAUSE. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Note will not in any way be
affected or impaired thereby. In no event shall the amount of interest paid
hereunder exceed the maximum rate of interest on the unpaid principal balance
hereof allowable by applicable law. If any sum is collected in excess of the
applicable maximum rate, the excess collected shall be applied to reduce the
principal debt. If the interest actually collected hereunder is still in excess
of the applicable maximum rate, the interest rate shall be reduced so as not to
exceed the maximum allowable under law.
(h) TRANSFER OF NOTE. This Note has not been and is not being
registered under the provisions of the 1933 Act or any state securities laws and
this Note may not be transferred prior to the date that is two years after the
Issuance Date unless the Holder shall have delivered to the Company an opinion
of counsel, reasonably satisfactory in form, scope and substance to the Company,
to the effect that this Note may be sold or transferred without registration
under the 1933 Act. Before any such transfer prior to the date that is two years
after the Issuance Date, such transferee shall have represented in writing to
the Company that such transferee has requested and received from the Company all
information relating to the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and the
Subsidiaries deemed relevant by such transferee; that such transferee has been
afforded the opportunity to ask questions of the Company concerning the
foregoing and has had the opportunity to obtain and review the reports and other
information concerning the
-60-
Company which at the time of such transfer have been filed by the Company with
the SEC pursuant to the 1934 Act. If such transfer is intended to assign the
rights and obligations of the Holder under the Purchase Agreement, such transfer
shall otherwise be made in compliance with Section 9.1 of the Purchase
Agreement.
(i) ENFORCEABLE OBLIGATION. The Company represents and warrants that
at the time of the original issuance and delivery to the Holder of this Note it
received the full purchase price payable pursuant to the Purchase Agreement in
an amount at least equal to the original principal amount of this Note, and that
this Note is an enforceable obligation of the Company which is not subject to
any offset, reduction, counterclaim or disallowance of any sort.
(j) NOTE REGISTER; REPLACEMENT OF NOTES. The Company shall maintain
a register showing the names, addresses and telephone line facsimile numbers of
the Holder and the registered holders of the Other Notes. The Company shall also
maintain a facility for the registration of transfers of this Note and the Other
Notes and at which this Note and the Other Notes may be surrendered for split up
into instruments of smaller denominations or for combination into instruments of
larger denominations. Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Note and (a) in the case of loss, theft or destruction, of
indemnity from the Holder reasonably satisfactory in form to the Company (and
without the requirement to post any bond or other security) or (b) in the case
of mutilation, upon surrender and cancellation of this Note, the Company will
execute and deliver to the Holder a new Note of like tenor without charge to the
Holder.
(k) PAYMENT OF NOTE ON REDEMPTION OR REPURCHASE; DEPOSIT OF
REDEMPTION PRICE OR REPURCHASE PRICE, ETC. (a) If this Note or any portion of
this Note is to be redeemed as provided in Section 2(b) or repurchased as
provided in Sections 5.1 and 5.2 and any notice required in connection therewith
shall have been given as provided therein and the Company shall have otherwise
complied with the requirements of this Note with respect thereto, then this Note
or the portion of this Note to be so redeemed or repurchased and with respect to
which any such notice has been given shall become due and payable on the date
stated in such notice for the applicable Optional Redemption Consideration or at
the Repurchase Price. On and after the Optional Redemption Date or repurchase
date so stated in such
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notice, provided that the Company shall have deposited with an Eligible Bank on
or prior to such Optional Redemption Date or repurchase date, an amount in cash
and a Common Stock Warrant for a number of shares of Common Stock sufficient to
pay the applicable Optional Redemption Consideration or Repurchase Price,
interest on this Note or the portion of this Note to be so redeemed or
repurchased shall cease to accrue, and this Note or such portion hereof shall be
deemed not to be outstanding and shall not be entitled to any benefit with
respect to principal of or interest on the portion to be so redeemed or
repurchased except to receive payment of the applicable Optional Redemption
Consideration or Repurchase Price. On presentation and surrender of this Note or
such portion hereof, this Note or the specified portion hereof shall be paid and
redeemed or repurchased for the applicable Optional Redemption Consideration or
at the Repurchase Price. If a portion of this Note is to be redeemed or
repurchased, upon surrender of this Note to the Company in accordance with the
terms hereof, the Company shall execute and deliver to the Holder without
service charge, a new Note or Notes, having the same date hereof and containing
identical terms and conditions, in such denomination or denominations as
requested by the Holder in aggregate principal amount equal to, and in exchange
for, the unredeemed or unrepurchased portion of the principal amount of this
Note so surrendered.
(l) CONSTRUCTION. The language used in this Note will be deemed to
be the language chosen by the Company and the original Holder of this Note (or
its predecessor instrument) to express their mutual intent, and no rules of
strict construction will be applied against the Company or the Holder.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed by one of its officers thereunto duly authorized on the day and in the
year first above written.
VIRAGEN, INC.
By: _______________________________________
Name:
Title:
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ASSIGNMENT
For value received __________ hereby sell(s), assign(s) and
transfer(s) unto __________ (Please insert social security or other Taxpayer
Identification Number of assignee: _______________________the within Note, and
hereby irrevocably constitutes and appoints __________________ attorney to
transfer the said Note on the books of Viragen, Inc., a Delaware corporation
(the "Company"), with full power of substitution in the premises.
In connection with any transfer of the Note within the period prior
to the expiration of the holding period applicable to sales thereof under Rule
144(k) under the 1933 Act (or any successor provision) (other than any transfer
pursuant to a registration statement that has been declared effective under the
1933 Act), the undersigned confirms that such Note is being transferred:
[ ] To the Company or a subsidiary thereof; or
[ ] To an "accredited investor" pursuant to and in compliance with the
1933 Act; or
[ ] Pursuant to and in compliance with Rule 144 under the 1933 Act;
and unless the box below is checked, the undersigned confirms that, to the
knowledge of the undersigned, such Note is not being transferred to an
"affiliate" of the Company as defined in Rule 144 under the 1933 Act (an
"Affiliate").
[ ] The transferee is an Affiliate of the Company.
Capitalized terms used in this Assignment and not defined in this
Assignment shall have the respective meanings provided in the Note.
Dated:_____________________ NAME: ___________________________
_________________________________
Signature(s)
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order
to convert 7% Convertible Note Due 2006)
Re: 7% Convertible Note Due 2006 issued by VIRAGEN, INC identified below
(the "Note")
The undersigned hereby elects to convert the outstanding Principal Xxxxxx (as
defined in the Note) indicated below of the Note into shares of Common Stock, of
VIRAGEN, INC., a Delaware corporation (the "Company"), according to the terms
hereof and of the Note, as of the date written below. If shares are to be issued
in the name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any. The undersigned represents as of the date hereof
that, after giving effect to the conversion of the Note pursuant to this
Conversion Notice, the undersigned will not exceed the "Restricted Ownership
Percentage" contained in Section 6(g) of the Note.
Conversion information: ______________________________________________
Note Number
______________________________________________
Conversion Date
______________________________________________
Principal Amount of Note Being Converted
______________________________________________
Number of Shares of Common Stock to Be Issued
______________________________________________
Applicable Conversion Price
______________________________________________
Signature
A-1
______________________________________________
Name
______________________________________________
Address
A-2
EXHIBIT B
VIRAGEN, INC.
OPTIONAL REDEMPTION NOTICE
(SECTION 2(b) OF 7% CONVERTIBLE NOTE DUE 2006)
TO:
__________________________________
(Name of Holder)
1. Pursuant to the terms of the 7% Convertible Note due 2006 (the "Note"),
Viragen, Inc., a Delaware corporation (the "Company"), hereby notifies the
above-named Holder that the Company is exercising its right to redeem the Note
in accordance with Section 2(b) of the Note as set forth below:
(i) The cash portion of Optional Redemption Consideration (based on
the principal amount of the Note outstanding on the date this Notice is given)
is $ ________.
(ii) The Common Stock Warrant issuable upon such redemption (based
on the principal amount of the Note outstanding on the date this Notice is
given) initially will entitle the holder to purchase ____________ shares of
Common Stock at a price of $ _________ per share.
(iii) The Optional Redemption Date is ______________.
2. All of the conditions of Section 2(b) of the Note for this redemption
have been satisfied.
3. Capitalized terms used herein and not otherwise defined herein have the
respective meanings provided in the Note.
Date VIRAGEN, INC.
__________________
By: _____________________________
Title: __________________________
B-1
EXHIBIT C
VIRAGEN, INC.
MARKET PRICE OPTIONAL REDEMPTION NOTICE
(SECTION 2(c) OF 7% CONVERTIBLE NOTE DUE 2006)
TO: ____________________________
(Name of Holder)
1. Pursuant to the terms of the 7% Convertible Note due 2006 (the "Note"),
Viragen, Inc., a Delaware corporation (the "Company"), hereby notifies the
above-named Holder that the Company is exercising its right to redeem the Note
in accordance with Section 2(c) of the Note as set forth below:
(i) The Market Price of Optional Redemption Price (based on the
principal amount of the Note outstanding on the date this Notice is given) is $
______________ .
(ii) The Market Price Optional Redemption Date is _____________.
2. All of the conditions of Section 2(c) of the Note for this redemption
have been satisfied.
3. Capitalized terms used herein and not otherwise defined herein have the
respective meanings provided in the Note.
Date ______________________ VIRAGEN, INC.
By: _____________________________
Title: __________________________
C-1
EXHIBIT D
VIRAGEN, INC.
COMPANY NOTICE
(SECTION 5(b)(1) OF 7% CONVERTIBLE NOTE DUE 2006)
TO: _______________________________
(Name of Holder)
(1) A Repurchase Event described in the 7% Convertible Note due 2006
(the "Note") of Viragen, Inc., a Delaware corporation (the "Company"), occurred
on _____________, 200_. As a result of such Repurchase Event, the Holder is
entitled to exercise its repurchase rights pursuant to Section 5(b)(1) of the
Note.
(2) The Holder's repurchase right must be exercised on or before
___________, 200_.
(3) At or before the date set forth in the preceding paragraph (2),
the Holder must:
(a) deliver to the Company a Holder Notice, in the form attached as
EXHIBIT E to the Note; and
(b) the Note, duly endorsed for transfer to the Company of the
portion of the principal amount to be repurchased.
(4) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date _____________________ VIRAGEN, INC.
By: _____________________________
Title: __________________________
D-1
EXHIBIT E
VIRAGEN, INC.
HOLDER NOTICE
(SECTION 5(b)(2) OF 7% CONVERTIBLE NOTE DUE 2006)
TO: VIRAGEN, INC.
(1) Pursuant to the terms of the 7% Convertible Note due 2006 (the
"Note"), the undersigned Holder hereby elects to exercise its right to require
repurchase by the Company pursuant to Sections 5(b)(1) and 5(b)(2) of
$_____________ of the Note, equal to the sum of $_____________ principal amount
of the Note, $_____________ of accrued and unpaid interest on such principal
amount and $_____________ of Default Interest on such interest at the Repurchase
Price provided in the Note.
(2) Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date:_________________________ NAME OF XXXXXX:
_________________________________
By ______________________________
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
E-1
