THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON MARCH 27,
1998, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE TRANSFER OF SUCH SECURITY IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE NOTE
PURCHASE AGREEMENT DATED AS OF MARCH 27, 1998, AS IN EFFECT FROM TIME TO TIME,
BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN INVESTOR(S), AND THE COMPANY
RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN REQUEST, A COPY
OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT
CHARGE.
GARDENBURGER, INC.
CONVERTIBLE SENIOR SUBORDINATED NOTE
March 27, 1998 $15,000,000
Gardenburger, Inc., an Oregon corporation and f/k/a Wholesome
and Hearty Foods, Inc. (the "Company"), for value received, hereby promises to
pay to the order of Dresdner Kleinwort Xxxxxx Private Equity Partners LP
("Dresdner"), or registered assigns, the principal amount of Fifteen Million
dollars ($15,000,000) on April 1, 2003 (the "Maturity Date") together with
interest thereon calculated from the date hereof in accordance with the
provisions contained herein. The Company will maintain a register in which it
will record the initial ownership of the Convertible Notes and changes in the
ownership of Convertible Notes of which it receives notice. The holder of this
Convertible Note indicated at any time in such register will be the "Registered
Holder" of this Convertible Note.
This Convertible Note was issued pursuant to a Note Purchase
Agreement, dated as of March 27, 1998 (as in effect from time to time, the
"Purchase Agreement"), among the Company and Dresdner, and this Convertible Note
is one of the "Convertible Notes" referred to in the Purchase Agreement. The
Purchase Agreement contains terms governing the rights of the holder of this
Convertible Note, and all provisions of the Purchase Agreement are hereby
incorporated in this Convertible Note in full by reference. Except as defined in
Section 9 of this Convertible Note or otherwise indicated in this Convertible
Note, each capitalized term used in this Convertible Note has the meaning set
forth in the Purchase Agreement.
1. PAYMENT OF PRINCIPAL.
(a) SCHEDULED PAYMENT. The Company will pay the entire unpaid
principal amount of this Convertible Note on the Maturity Date.
(b) OPTIONAL PREPAYMENT. Subject to paragraph 2H of the
Purchase Agreement, the Company may prepay the principal amount of this
Convertible Note, in whole or in any $1,000 increment, at any time and from time
to time; provided, however, (i) if any such optional prepayment occurs during
the period beginning on April 1, 2000 and ending on March 31, 2001, then the
Company shall pay a pre-payment premium to the then Registered Holder equal to
2.8% of the principal amount of this Convertible Note then pre-paid, and (ii) if
any such optional prepayment occurs during the period beginning on April 1, 2001
and ending on March 31, 2002, then the Company shall pay a pre-payment premium
to the then Registered Holder equal to 1.4% of the principal amount of this
Convertible Note then pre-paid. The holder of this Convertible Note may convert
all or any portion of the outstanding principal amount of this Convertible Note
pursuant to Section 5 until such time as such amount has been paid. The Company
shall mail written notice by overnight delivery (with a copy sent by facsimile
on the date mailed) of each such optional prepayment of any Convertible Note to
each Registered Holder of the Convertible Notes not more than 20 nor less than 5
business days prior to the date on which such optional prepayment is to be made.
Upon mailing any such notice of optional prepayment, the Company shall become
obligated to prepay the principal amount of Convertible Notes specified in such
notice, together with the applicable pre-payment premium and all unpaid accrued
interest thereon, at the time of the optional prepayment specified therein.
(c) OTHER PREPAYMENTS OR ACQUISITIONS. The Company shall not,
nor shall it permit any Subsidiary to, prepay any principal amount of any
Convertible Note or otherwise acquire any Convertible Notes, except as expressly
authorized herein.
(d) SPECIAL PREPAYMENTS FOR A CHANGE OF CONTROL OR SALE EVENT.
If a Change of Control has occurred, the Company obtains knowledge that a Change
of Control is proposed to occur or a Sale Event is proposed to occur, the
Company shall give written notice within five business days of such Change of
Control or the date it obtains knowledge of such proposed Change of Control or
Sale Event describing in reasonable detail the material terms and date of
consummation or proposed consummation thereof to the Registered Holder of this
Convertible Note, and the Company shall give the Registered Holder of this
Convertible Note prompt written notice of any material change in the terms or
timing of any such transaction. The Registered Holder of this Convertible Note
may require the Company to prepay all or any portion of the unpaid principal
amount of this Convertible Note (along with a pre-payment premium equal to 20%
of the principal amount of this Convertible Note the Registered Holder has
elected to have pre-paid) by giving written notice to the Company of such
election prior to the later of (a) the twenty-first day after receipt of the
Company's notice and (b) the fifth day prior to the consummation of the Change
of Control or Sale Event, as the case may be.
Upon receipt of any such election, the Company shall be
obligated to prepay the unpaid principal amount of this Convertible Note as
specified therein, together with the applicable pre-payment premium and all
unpaid accrued interest thereon, on the later of (a) the occurrence of the
Change of Control or Sale Event, as the case may be, and (b) the fifth day after
the Company's receipt of such election. If any proposed Change of Control or
Sale Event does not occur, all requests for prepayment in connection therewith
shall be automatically rescinded; provided, that, if there has been a material
change in the terms or the timing of the transaction, the Registered Holder of
this Convertible Note may rescind such Registered Holder's request for
prepayment by giving written notice of such rescission to the Company.
Notwithstanding the foregoing, at any time prior to the date the Company makes a
pre-payment pursuant to this Section 1(d), the Registered Holder may elect (by
delivery of written notice to the Company) to receive such payment, in whole or
in part, in shares of Common Stock with a Market Price as of the date of payment
equal to the amount of principal, premium and/or interest the Registered Holder
has elected to receive in shares of Common Stock rather than cash.
(e) SPECIAL PREPAYMENTS FOR A MANAGEMENT CHANGE. If a
Management Change has occurred or the Company obtains knowledge that a
Management Change is about to occur, the Company shall give written notice
within five business days of such Management Change to the Registered Holder of
this Convertible Note. The Registered Holder of this Convertible Note may
require the Company to prepay all or any portion of the unpaid principal amount
of this Convertible Note (along with a pre-payment premium equal to 20% of the
principal amount of this Convertible Note the Registered Holder has elected to
have pre-paid) by giving written notice to the Company of such election prior to
the twenty-first day after receipt of the Company's notice of such Management
Change. Upon receipt of any such election, the Company shall be obligated to
prepay the unpaid principal amount of this Convertible Note as specified
therein, together with the applicable pre-payment premium and all unpaid accrued
interest thereon, on the fifth day after the Company's receipt of such election.
Notwithstanding the foregoing, at any time prior to the date the Company makes a
pre-payment pursuant to this Section 1(e), the Registered Holder may elect (by
delivery of written notice to the Company) to receive such payment, in whole or
in part, in shares of Common Stock with a Market Price as of the date of payment
equal to the amount of principal, premium and/or interest the Registered Holder
has elected to receive in shares of Common Stock rather than cash.
2. INTEREST. Interest will accrue at the rate of seven percent
(7%) per annum (computed on the basis of a 360-day year, as appropriate, and the
actual number of days elapsed in any year) on the unpaid principal amount of
this Convertible Note outstanding from time to time, or (if less) at the highest
rate then permitted under applicable law. Interest accruing hereunder, and any
interest accruing as provided in Section 4(b)(iii), will be payable to the
Registered Holder in cash, in arrears, on each March 31 and September 30 (each
an "Interest Payment Date") and will be payable to the Registered Holder in cash
in any event on the Maturity Date. Any accrued interest which is not paid on any
March 31 or September 30 will bear interest at such rate as provided herein
until such interest is paid. Interest will accrue on any amount of principal or
interest until such time as payment therefor is actually delivered to the
Registered Holder of this Convertible Note.
Notwithstanding the foregoing, on any Interest Payment Date,
the Company may, at its election, pay the interest payable to the Registered
Holder on such Interest Payment Date by delivery to the Registered Holder of a
number of shares of Common Stock equal to (A) the amount of interest accrued as
of such Interest Payment Date divided by (B) the lesser of (x) the Conversion
Price and (y) the Market Price per share of the Common Stock, in each case, as
of such Interest Payment Date; provided, that the Company may make such election
only if the Liquidity Test (as herein defined) has been met as of such Interest
Payment Date. If the Company makes such election, the Company may pay the
Registered Holder cash in lieu of issuing any fractional shares of Common Stock.
As of any Interest Payment Date, the "Liquidity Test" shall be met if the
Registered Holder receives shares of Common Stock which the Registered Holder
can immediately sell to any Person without violating the Securities Act and such
shares are received by the Registered Holder no later than the fifth day after
the applicable Interest Payment Date; provided, however, that, notwithstanding
the foregoing, the Liquidity Test shall not be met if either (i) the Market
Price per share of Common Stock has been below $5.00 per share (such number to
be appropriately adjusted for any stock split, reverse stock split, stock
dividend or other subdivision or combination of Common Stock after the original
date of issuance of this Convertible Note) for each of the 90 days prior to such
Interest Payment Date, (ii) the average daily trading volume of the Common Stock
as quoted in the NASDAQ System for the 30 business days prior to such Interest
Payment Date is less than 15,000 shares per day, (iii) at any time prior to such
Interest Payment Date, the Company has received a notice from a Person with the
requisite authority which states that the Common Stock has been delisted from
the NASDAQ System and the Common Stock is not listed on the New York or American
Stock Exchange, or (iv) an Event of Default (as herein defined) has occurred at
or prior to and is continuing as of such Interest Payment Date.
3. PRO RATA PAYMENT. Except as otherwise permitted by Sections
1(d) or 1(e) hereof, all payments to the holders of the Convertible Notes
(whether for principal, interest or otherwise) will be made pro rata among such
holders based upon the aggregate unpaid principal amount of the Convertible
Notes held by each such holder. By its acceptance of this Convertible Note, the
holder of this Convertible Note agrees that if any holder of a Convertible Note
obtains any payment (whether voluntary, involuntary, by application of offset or
otherwise) of principal, interest or any other amount with respect to any
Convertible Note in excess of such holder's pro rata share of such payments
obtained by all holders of the Convertible Notes (unless permitted by Sections
1(d) or 1(e) hereof)), such holder will purchase from the other holders of the
Convertible Notes such participation in the Convertible Notes held by them as is
necessary to cause such holders to share the excess payment ratably among each
of them as provided in this Section 3.
4. EVENTS OF DEFAULT.
(a) DEFINITION. An "Event of Default" will be deemed to have
occurred if:
(i) the Company fails to pay any amount of the principal of
any Convertible Note as and when required pursuant to the terms of
such Convertible Note or the Purchase Agreement;
(ii) the Company fails to pay any amount of the interest on
any Convertible Note within five (5) days of when such payment is
required pursuant to the terms of such Convertible Note or the
Purchase Agreement;
(iii) the Company fails to perform or observe any covenant or
agreement contained in paragraphs 2C or 2G of the Purchase Agreement;
(iv) the Company fails to perform or observe any other
covenant or agreement contained in the Convertible Notes, the Purchase
Agreement or any of the other Investment Documents, and such failure
is not cured within ten (10) days after the occurrence of such
failure;
(v) any representation, warranty, statement or information
contained in the Purchase Agreement or any other Investment Document
or required to be furnished to any holder of the Convertible Notes
pursuant to the Purchase Agreement or any other Investment Document is
false or misleading in any material respect on the date made or
furnished;
(vi) the Company or any Subsidiary makes an assignment for the
benefit of creditors or admits in writing its inability to pay its
debts generally as they become due; or an order, judgment or decree is
entered adjudicating the Company or any Subsidiary bankrupt or
insolvent; or any order for relief with respect to the Company or any
Subsidiary is entered under the Federal Bankruptcy Code; or the
Company or any Subsidiary petitions or applies to any tribunal for the
appointment of a custodian, trustee, receiver or liquidator of the
Company or any Subsidiary, or of any substantial part of the assets of
the Company or any Subsidiary, or commences any proceeding (other than
a proceeding for the voluntary liquidation and dissolution of any
Subsidiary) relating to the Company or any Subsidiary under any
bankruptcy reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction; or any such
petition or application is filed, or any such proceeding is commenced,
against the Company or any Subsidiary and either (A) the Company or
any such Subsidiary by any act indicates its approval thereof, consent
thereto or acquiescence therein or (B) such petition, application or
proceeding is not dismissed within 30 days;
(vii) a judgment in excess of $250,000 (exclusive of
insurance) is rendered against the Company or any Subsidiary and,
within 30 days after entry thereof, such judgment is not discharged in
full or execution thereof stayed pending appeal, or within 30 days
after the expiration of any such stay, such judgment is not discharged
in full; or
(viii) the Company or any Subsidiary defaults in the
performance of any obligation or agreement, including with respect to
any Indebtedness, if the effect of such default is to cause an amount
exceeding $250,000 to become due prior to its stated maturity or to
permit the holder or holders of any obligation or agreement to cause
an amount exceeding $250,000 to become due prior to its stated
maturity.
The foregoing will constitute Events of Default whatever the reason or
cause for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If any Event of Default (other than an Event of Default of
a type described in Sections 4(a)(iii) and 4(a)(vi)) has occurred and
is continuing, then the holder or holders of a majority of the unpaid
principal amount of the Convertible Notes then outstanding may declare
(by written notice delivered to the Company) all or any portion of the
outstanding principal amount of the Convertible Notes (together with
all accrued interest thereon) to be immediately due and payable and
may demand immediate payment of all or any portion of the outstanding
principal amount of the Convertible Notes and interest thereon in
accordance with paragraph 2H of the Purchase Agreement.
(ii) If an Event of Default of the type described in Sections
4(a)(iii) or 4(a)(vi) has occurred, then the aggregate principal
amount of the Convertible Notes (together with all accrued interest
thereon and all other amounts due and payable with respect thereto)
will become immediately due and payable without any action on the part
of the holders of the Convertible Notes. Subject to paragraph 2H of
the Purchase Agreement, the Company will immediately pay to the
holders of the Convertible Notes all amounts due and payable with
respect to the Convertible Notes upon the occurrence of such Event of
Default.
(iii) If any Event of Default of a type described in Sections
4(a)(i) or 4(a)(ii) has occurred and is continuing, the interest rate
on the Convertible Notes will increase immediately by an increment of
3 percentage points (i.e., 300 basis points), to the extent permitted
by applicable law. Any such increase of the interest rate resulting
from the operation of this Section 4(b)(iii) will terminate as of the
close of business on the next date on which no Event of Default exists
(subject to subsequent increases pursuant to this Section).
(iv) Each holder of the Convertible Notes will also have any
other rights which such holder may have been afforded under any
contract or agreement at any time and any other rights which such
holder may have pursuant to applicable law. The Company hereby waives
diligence, presentment, protest and demand and notice of protest and
demand, dishonor and nonpayment of the Convertible Notes, and
expressly agrees that the Convertible Notes, or any payment
thereunder, may be extended from time to time and that the holders
thereof may accept security for the Convertible Notes or release
security for the Convertible Notes, all without in any way affecting
the liability of the Company thereunder.
5. CONVERSION.
(a) CONVERSION PROCEDURE.
(i) VOLUNTARY CONVERSION. At any time and from time to time
prior to the payment of this Convertible Note in full, the holder of
this Convertible Note may convert all or any portion of the unpaid
principal amount of this Convertible Note plus any unpaid accrued
interest thereon into a number of shares of the Conversion Stock
determined by dividing (A) the unpaid principal and interest amount
designated by such holder to be converted, by (B) the Conversion Price
then in effect.
(ii) EFFECTIVENESS OF CONVERSION. Except as otherwise provided
herein, each conversion of this Convertible Note will be deemed to
have been effected as of the close of business on the date on which
this Convertible Note has been surrendered for conversion at the
office of the Company specified for delivery of notices pursuant to
the Purchase Agreement. At such time as such conversion has been
effected, the rights of the holder of this Convertible Note as such
holder to the extent of the conversion will cease, and the Person or
Persons in whose name or names any certificate or certificates for
shares of Conversion Stock are to be issued upon such conversion will
be deemed to have become the holder or holders of record of the shares
of Conversion Stock represented thereby.
(iii) CONTINGENT CONVERSION. Notwithstanding any other
provision hereof, if a conversion of all or any portion of this
Convertible Note is to be made in connection with a registered public
offering, a Change of Control, a Sale Event, a Management Change, a
proposed sale of the underlying Conversion Stock or any other
transaction or event, then such conversion may, at the election of the
holder of this Convertible Note, be conditioned upon the consummation
of such transaction or the occurrence of such event, in which case
such conversion will not be deemed to be effective until such
consummation or occurrence.
(iv) ACTIONS BY THE COMPANY. As soon as possible after a
conversion has been effected (but in any event within five business
days thereafter), the Company will deliver to the converting holder a
certificate or certificates representing the number of shares of
Conversion Stock issuable by reason of such conversion, in such name
or names and such denomination or denominations as the converting
holder has specified, and a new Convertible Note representing any
portion of the principal amount which was represented by this
Convertible Note but which was not converted.
(v) CHARGES, ETC. The issuance of certificates for shares of
Conversion Stock upon conversion of any principal amount of this
Convertible Note will be made without charge to the holder of this
Convertible Note or the Conversion Stock to be issued for any issuance
tax in respect thereof or other cost incurred by the Company in
connection with such conversion and the related issuance of shares of
Conversion Stock. Upon conversion of this Convertible Note, the
Company will take all such actions as are necessary in order to insure
that the Conversion Stock issuable with respect to such conversion
will be validly issued, fully paid and nonassessable, free and clear
of all taxes, liens, charges and encumbrances with respect to the
issuance thereof. The Company will not close its books against the
transfer of this Convertible Note or of Conversion Stock issued or
issuable upon conversion of this Convertible Note in any manner which
interferes with the timely conversion of this Convertible Note. The
Company will assist and cooperate with any holder of this Convertible
Note or Conversion Stock issuable upon any such conversion which is
required to make any governmental filings or obtain any governmental
approval prior to or in connection with the conversion of this
Convertible Note (including making any filings required to be made by
the Company).
(vi) RESERVATION. The Company will at all times reserve and
keep available out of its authorized but unissued shares of Conversion
Stock, solely for the purpose of issuance upon the conversion of the
Convertible Notes, such number of shares of Conversion Stock issuable
upon the conversion of all outstanding Convertible Notes. All shares
of Conversion Stock which are so issuable will, when issued, be duly
and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges. The Company will take all such actions as
may be necessary to assure that all such shares of Conversion Stock
may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities
exchange upon which shares of Conversion Stock may be listed (except
for official notice of issuance which will be immediately delivered by
the Company upon each such issuance). The Company will not take any
action which would cause the number of authorized but unissued shares
of Conversion Stock to be less than the number of such shares issuable
upon conversion in full of the Convertible Notes and the conversion,
exercise or exchange in full of all other Equity Securities of the
Company then outstanding.
(vii) RELATED CONVERSION. If any Conversion Stock issuable by
reason of conversion of this Convertible Note is immediately
convertible into or immediately exchangeable for any other stock or
securities of the Company, then the Company will, at the converting
holder's option and upon surrender of this Convertible Note by such
holder as provided herein together with any notice, statement or
payment required to effect such conversion or exchange of such
Conversion Stock, deliver to such holder (or as otherwise specified by
such holder) a certificate or certificates representing the stock or
securities into which the shares of Conversion Stock issuable by
reason of such conversion are so convertible or exchangeable,
registered in such name or names and in such denomination or
denominations as such holder has specified.
(b) CONVERSION PRICE.
(i) The initial Conversion Price will be $12.90. In order to
prevent dilution of the conversion rights granted under the
Convertible Notes, the Conversion Price will be subject to adjustment
from time to time as provided in this Section 5(b).
(ii) If and whenever on or after the original date of issuance
of this Convertible Note the Company issues or sells, or in accordance
with Section 5(c) is deemed to have issued or sold, any Conversion
Stock for a consideration per share which is less than the Conversion
Price in effect immediately prior to such issuance or sale, then
immediately upon such issue or sale or deemed issue or sale the
Conversion Price will be reduced to the Conversion Price determined by
dividing (A) an amount equal to the sum of (x) the product derived by
multiplying the Conversion Price in effect immediately prior to such
issue or sale or deemed issue or sale by the number of shares of
Conversion Stock Deemed Outstanding immediately prior to such issue or
sale or deemed issue or sale, plus (y) the consideration, if any,
received by the Company upon such issue or sale or deemed issue or
sale, by (B) the number of shares of Conversion Stock Deemed
Outstanding immediately after such issue or sale or deemed issue or
sale; provided that no adjustment in the Conversion Price will be made
pursuant to this Section 5(b) in connection with any Exempt Issuance.
(iii) If, as of July 1, 1998, the Alternative Market Price per
share of Common Stock (such amount per share, the "July 1998
Alternative Market Price") is less than $10.75 per share (such number
to be appropriately adjusted for any stock split, reverse stock split,
stock dividend or other subdivision or combination of Common Stock
after the original date of issuance of this Convertible Note), then
the Conversion Price shall be reduced to an amount equal to the July
1998 Alternative Market Price multiplied by 120%; provided, that in no
event will the Conversion Price be increased pursuant to this Section
5(b)(iii); provided, further, that in no event will the Conversion
Price be decreased below $11.40 (such number to be proportionately
adjusted along with the Conversion Price if the Conversion Price is
adjusted pursuant to Section 5(b)(ii) after the original date of
issuance of this Convertible Note) pursuant to this Section 5(b)(iii).
(c) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Conversion Price under Section 5(b) and only if an
adjustment to the Conversion Price is required under Section 5(b), the following
will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner grants or sells any Options and the price per share for which
Conversion Stock is issuable upon the exercise of such Options, or
upon conversion or exchange of any Convertible Securities issuable
upon exercise of such Options, is less than the Conversion Price in
effect immediately prior to the time of the granting or sale of such
Options, then the maximum number of shares of Conversion Stock
issuable upon the exercise of such Options, or upon conversion or
exchange of the maximum amount of such Convertible Securities issuable
upon the exercise of such Options, will be deemed to be outstanding
and to have been issued and sold by the Company at the time of the
granting or sale of such Options for such price per share. For
purposes of this Section 5(c)(i), the "price per share for which
Conversion Stock is issuable upon exercise of such Options, or upon
conversion or exchange of any Convertible Securities issuable upon
exercise of such Options" will be determined by dividing (A) the total
amount, if any, received or receivable by the Company as consideration
for the granting or sale of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the
exercise of all such Options, plus in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the maximum number of shares of Conversion
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. No adjustment of the Conversion
Price will be made upon the actual issuance of such Conversion Stock
or of such Convertible Securities upon the exercise of such Options or
upon the actual issuance of such Conversion Stock upon conversion or
exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities and the price per
share for which Conversion Stock is issuable upon conversion or
exchange thereof is less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the maximum
number of shares of Conversion Stock issuable upon conversion or
exchange of all such Convertible Securities will be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such
price per share. For the purposes of this Section 5(b)(ii), the "price
per share for which Conversion Stock is issuable upon conversion or
exchange thereof" will be determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue
or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (B) the maximum number of
shares of Conversion Stock issuable upon the conversion or exchange of
all such Convertible Securities. No adjustment of the Conversion Price
will be made upon the actual issue of such Conversion Stock upon
conversion or exchange of such Convertible Securities, and if any such
issue or sale of such Convertible Securities is made upon exercise of
any Options for which adjustments of the Conversion Price had been or
are to be made pursuant to other provisions of this Section 5(c), no
further adjustment of the Conversion Price will be made by reason of
such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the
purchase price provided for in any Option, the additional
consideration (if any) payable upon the issue, conversion or exchange
of any Convertible Security, the quantity of Conversion Stock issuable
directly or indirectly upon the exercise, conversion or exchange of
any Option or Convertible Security, or the rate at which any
Convertible Security is convertible into or exchangeable for
Conversion Stock changes at any time, then the Conversion Price in
effect immediately prior to the time of such change will be adjusted
immediately to the Conversion Price which would have been in effect at
such time had such Option or Convertible Security originally provided
for such changed purchase price, additional consideration, changed
quantity or changed conversion rate, as the case may be, at the time
initially granted, issued or sold; provided that in no event will the
Conversion Price be increased pursuant to this Section 5(c)(iii). For
purposes of this Section 5(c), if the terms of any Option or
Convertible Security which was outstanding as of the date of the
original issuance of this Convertible Note are changed in the manner
described in the immediately preceding sentence, then such Option or
Convertible Security and the Conversion Stock deemed issuable upon
exercise, conversion or exchange thereof will be deemed to have been
issued as of the date of such change; provided that in no event will
the Conversion Price be increased pursuant to this Section 5(c)(iii).
(iv) CALCULATION OF CONSIDERATION RECEIVED. If any Conversion
Stock, Options or Convertible Securities are issued or sold or deemed
to have been issued or sold for cash, then the consideration received
therefor will be deemed to be the net amount received by the Company
therefor. If any Conversion Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, then the
amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof
as of the date of receipt. If any Conversion Stock, Options or
Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the
surviving entity, then the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such
Conversion Stock, Options or Convertible Securities, as the case may
be. The fair value of any consideration other than cash and securities
will be determined jointly by the Company and the holder or holders of
a majority of the outstanding unpaid principal amount of the
Convertible Notes. If such parties are unable to reach agreement
within a reasonable period of time, then such fair value will be
determined by an appraiser jointly selected by the Company and the
holder or holders of a majority of the outstanding unpaid principal
amount of the Convertible Notes. The determination of such appraiser
will be final and binding upon the Company and all holders of
Convertible Notes, and the fees and expenses of such appraiser will be
borne by the Company.
(v) INTEGRATED TRANSACTIONS. If any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options will be deemed to have been issued without consideration.
(vi) TREASURY SHARES. The disposition of any Conversion Stock
owned or held by the Company or any Subsidiary (including in treasury)
will be considered an issue or sale of Conversion Stock.
(vii) RECORD DATE. If the Company takes a record of the
holders of Conversion Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Conversion Stock,
Options or Convertible Securities or (B) to subscribe for or purchase
Conversion Stock, Options or Convertible Securities, then such record
date will be deemed to be the date of the issue or sale of the shares
of Conversion Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
(d) Subdivision or Combination of Conversion Stock. If the
Company at any time subdivides (by any stock split, stock dividend or otherwise)
one or more classes of its outstanding shares of Conversion Stock into a greater
number of shares, then the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time combines
(by reverse stock split or otherwise) one or more classes of its outstanding
shares of Conversion Stock into a smaller number of shares, then the Conversion
Price in effect immediately prior to such combination will be proportionately
increased.
(e) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE.
(i) ORGANIC CHANGE DEFINED. Any recapitalization,
reorganization, reclassification, consolidation, merger, sale of all
or substantially all of the Company's assets or other transaction,
which in each case is effected in such a manner that holders of
Conversion Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or cash or other assets with
respect to or in exchange for Conversion Stock is referred to herein
as an "Organic Change."
(ii) PROVISIONS FOR ORGANIC CHANGE. Prior to the consummation
of any Organic Change, the Company will make lawful and adequate
provision (in form and substance satisfactory to the holder or holders
of a majority of the outstanding unpaid principal amount of the
Convertible Notes then outstanding) to insure that each holder of any
Convertible Note will thereafter have the right to acquire and
receive, in lieu of or addition to (as the case may be) shares of
Conversion Stock immediately theretofore acquirable and receivable
upon the conversion of such holder's Convertible Note, such shares of
stock, securities, cash or other assets as may be issued or payable
with respect to or in exchange for the number of shares of Conversion
Stock immediately theretofore acquirable and receivable upon
conversion of such holder's Convertible Note had such Organic Change
not taken place. In any such case, appropriate provision (in form and
substance satisfactory to the holder or holders of a majority of the
outstanding unpaid principal amount of the Convertible Notes then
outstanding) will be made with respect to such holder's rights and
interests to insure that the provisions of this Section 5 and Sections
6 and 7 hereof will thereafter be applicable in relation to any shares
of stock, securities, cash or other assets thereafter deliverable upon
the conversion of the Convertible Notes (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment
of the Conversion Price to the value for the Conversion Stock
reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of
Conversion Stock acquirable and receivable upon conversion of the
Convertible Notes; provided that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this Section 5 or
decrease the number of shares of Conversion Stock issuable upon
conversion of the Convertible Notes then outstanding). The Company
will not effect any such consolidation, merger or sale, unless prior
to the consummation thereof, the successor entity (if other than the
Company) resulting from consolidation or merger or the entity
purchasing such assets assumes by written instrument (in form
satisfactory to the holder or holders of a majority of the outstanding
unpaid principal amount of the Convertible Notes then outstanding),
the obligation to deliver to each such holder such shares of stock,
securities, cash or other assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(f) CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 5 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights or securities with
equity or profit participation features), then the Company's board of directors
in good faith will make an appropriate adjustment in the Conversion Price so as
to protect the rights of the holders of the Convertible Notes; provided that no
such adjustment will increase the Conversion Price as otherwise determined
pursuant to this Section 5 or decrease the number of shares of Conversion Stock
issuable upon conversion of the Convertible Notes then outstanding.
(g) NOTICES. Immediately upon any adjustment of the Conversion
Price, the Company will send written notice thereof to the holder of this
Convertible Note, setting forth in reasonable detail and certifying the
calculation of such adjustment. The Company will send written notice to the
holder of this Convertible Note at least 20 days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Conversion Stock, (B) with respect to any pro rata
subscription offer to holders of Conversion Stock or (C) for determining rights
to vote with respect to or to participate in any Organic Change, dissolution or
liquidation. The Company will also give at least 20 days prior written notice to
the holder of this Convertible Note of the date on which any Organic Change,
dissolution or liquidation will take place.
6. LIQUIDATING DIVIDENDS. If the Company declares a dividend
upon the Conversion Stock payable otherwise than in cash out of earnings or
earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend payable in shares
of Conversion Stock (a "Liquidating Dividend"), then the Company will pay to the
holder of this Convertible Note at the time of payment thereof the Liquidating
Dividend which would have been paid to the holder of this Convertible Note on
the Conversion Stock had this Convertible Note been fully converted immediately
prior to the date on which a record is taken for such Liquidating Dividend (or,
if no record is taken, the date as of which the record holders of Conversion
Stock entitled to such dividends are to be determined).
7. PURCHASE RIGHTS. If at any time the Company grants, issues
or sells any Equity Securities or other property pro rata to the holders of any
class of Conversion Stock, then each holder of the Convertible Notes will be
entitled to acquire, upon the terms applicable to such holders of Conversion
Stock, the aggregate Equity Securities or other property which such holder could
have acquired if such holder had held the number of shares of Conversion Stock
acquirable upon conversion of such holder's Convertible Note immediately before
the date on which a record is taken for the grant, issuance or sale of such
Equity Securities or other property (or, if no such record is taken, the date as
of which the record holders of Conversion Stock are to be determined for the
grant, issue or sale of such Equity Securities or other property).
8. AMENDMENT AND WAIVER. The provisions of the Convertible
Notes may be amended and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, only if the
Company has obtained the written consent of the holder or holders of a majority
of the unpaid principal amount of the outstanding Convertible Notes at the time
such action is taken, and any matter as to which such written consent has been
obtained will be effective as against all holders of Convertible Notes; provided
that no such action will (a) decrease the rate at which or the manner in which
interest accrues on the Convertible Notes or the times at which such interest
becomes payable, (b) change any provision relating to the scheduled payments of
principal on the Convertible Notes, (c) increase the Conversion Price or
decrease the number of shares or the class of stock into which the Convertible
Notes are convertible, or (d) the percentage required to approve any change
described in clauses (a), (b) and (c) above and this clause (d), without the
written consent of the holders at least 90% of the unpaid principal amount of
the Convertible Notes then outstanding.
9. DEFINITIONS. For purposes of the Convertible Notes, the
following capitalized terms have the following meaning.
"Alternative Market Price" of any security means the average
of the closing prices of such security's sales on all securities exchanges on
which such security may at the time be listed, or, if there has been no sale on
any such exchange on any day, then the average of the highest bid prices of such
security on all such exchanges at the end of such day, or, if on any day such
security is not so listed, then the representative bid price of such security
quoted in the NASDAQ System as of 4:00 P.M., New York time, on such day, or, if
on any day such security is not quoted in the NASDAQ System, then the highest
bid price of such security on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case, averaged over a period of 30 days
consisting of the day as of which "Alternative Market Price" is being determined
and the 29 consecutive business days prior to such day. If at any time such
security is not listed on any securities exchange or quoted in the NASDAQ System
or the over-the-counter market, then the "Alternative Market Price" will be the
fair value thereof determined jointly by the Company and the Registered Holder
or Holders of a majority of the unpaid principal amount of the Convertible Notes
outstanding at the time of such determination. If such parties are unable to
reach agreement within a reasonable period of time, then such fair value will be
determined by an appraiser jointly selected by the Company and the Registered
Holder or Holders of a majority of the unpaid principal amount of the
Convertible Notes outstanding at the time of such determination. The
determination of such appraiser will be final and binding upon the parties, and
the fees and expenses of such appraiser will be borne by the Company.
"Common Stock" means the Company's Common Stock, no par value,
and any capital stock of any class of the Company hereafter authorized which is
not limited to a fixed sum or percentage of par or stated value in respect to
the rights of the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding up of the
Company.
"Conversion Stock" means Common Stock; provided that if there
is a change such that the securities issuable upon conversion of the Convertible
Notes are issued by an entity other than the Company or there is a change in the
type or class of securities so issuable, then the term "Conversion Stock" will
mean shares of the security issuable upon conversion of this Convertible Note if
such security is issuable in shares, or the smallest unit in which such security
is issuable if such security is not issuable in shares.
"Conversion Stock Deemed Outstanding" means, at any given
time, the number of shares of Conversion Stock actually outstanding at such
time, plus the number of shares of Conversion Stock deemed to be outstanding
pursuant to Sections 5(c)(i) and 5(c)(ii) hereof, regardless of whether or not
the applicable Options and Convertible Securities are actually exercisable at
such time, but excluding any shares of Conversion Stock issuable upon conversion
of the Convertible Notes.
"Convertible Securities" means any Equity Securities directly
or indirectly convertible into or exchangeable for Conversion Stock.
"Exempt Issuance" means the issuance of any Common Stock or
other securities upon the exercise of any ID Warrant, any Management Options or
the Xxxxxx Stock Option, in each case, in accordance with its terms, or upon the
conversion of any Convertible Notes or any issuance of any ID Warrant or any
Permitted ESO Issuances.
"Market Price" of any security means the average of the
closing prices of such security's sales on all securities exchanges on which
such security may at the time be listed, or, if there has been no sale on any
such exchange on any day, then the average of the highest bid prices of such
security on all such exchanges at the end of such day, or, if on any day such
security is not so listed, then the representative bid price of such security
quoted in the NASDAQ System as of 4:00 P.M., New York time, on such day, or, if
on any day such security is not quoted in the NASDAQ System, then the highest
bid price of such security on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case, averaged over a period of 5 days
consisting of the day as of which "Market Price" is being determined and the 4
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, then the "Market Price" will be the fair value thereof
determined jointly by the Company and the Registered Holder or Holders of a
majority of the unpaid principal amount of the Convertible Notes outstanding at
the time of such determination. If such parties are unable to reach agreement
within a reasonable period of time, then such fair value will be determined by
an appraiser jointly selected by the Company and the Registered Holder or
Holders of a majority of the unpaid principal amount of the Convertible Notes
outstanding at the time of such determination. The determination of such
appraiser will be final and binding upon the parties, and the fees and expenses
of such appraiser will be borne by the Company.
"Options" means any Equity Securities directly or indirectly
to subscribe for or purchase Conversion Stock or Convertible Securities.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
10. NOTE TRANSFERABLE. Subject to the transfer conditions
referred to in the legend endorsed on this Convertible Note, this Convertible
Note and all rights hereunder are transferable, in whole or in part, without
charge to the Registered Holder, upon surrender of this Convertible Note,
properly endorsed for transfer, at the office of the Company specified for
delivery of notices pursuant to the Purchase Agreement.
11. NOTE EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Convertible Note is exchangeable, upon the surrender of this Convertible Note by
the holder at the office of the Company specified for delivery of notices
pursuant to the Purchase Agreement, for new Convertible Notes of like tenor
representing in the aggregate the rights under this Convertible Note, and each
of such new Convertible Notes will represent such portion of such rights as is
designated by the holder at the time of such surrender.
12. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Company (it being agreed that an affidavit of the Registered
Holder will be satisfactory) of the ownership and the loss, theft, destruction
or mutilation of any certificate evidencing this Convertible Note, and in the
case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company (it being agreed that if the holder is a
financial institution or other institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Company will (at its expense) execute and deliver in lieu of
such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
13. CANCELLATION. After all principal and accrued interest at
any time owed on this Convertible Note have been paid in full, this Convertible
Note will be surrendered to the Company for cancellation and will not be
reissued.
14. PAYMENTS AND NOTICES. All cash payments to be made to the
holders of the Convertible Notes will be made in the lawful money of the United
States of America in immediately available funds. Payments of principal and
interest in respect of this Convertible Note will be delivered to the Registered
Holder at such Registered Holder's address as it appears in the records of the
Company, or at such other address as the Registered Holder may specify by
written notice to the Company. Notices to be given pursuant to this Convertible
Note will be given in the manner provided in the Purchase Agreement.
15. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive
headings of the several Sections of this Convertible Note are inserted for
convenience only and do not constitute a part of this Convertible Note. The
corporate law of the State of Oregon (as in effect from time to time) will
govern all issues concerning the relative rights of the Company and its
securityholders to the extent of matters addressed therein. All other questions
concerning the construction, validity, enforcement and interpretation of this
Convertible Note will be governed by the internal law of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of law of any jurisdiction other than the State of New York. As
used in this Convertible Note, the term "including" is used by way of example or
illustration, and not as a limitation.
16. BUSINESS DAYS. If any payment is due, or any time period
for giving notice or taking action expires, on a day which is a Saturday, Sunday
or legal holiday in the State of New York or the State of Oregon, then the
payment will be due and payable on, and the time period will automatically be
extended to, the next business day immediately following such Saturday, Sunday
or legal holiday, and interest will continue to accrue at the required rate
under this Convertible Note until any such payment is made.
17. USURY LAWS. It is the intention of the Company and the
holder of this Convertible Note to conform strictly to all applicable usury laws
now or hereafter in force, and any interest payable under this Convertible Note
will be subject to reduction to the amount not in excess of the maximum legal
amount allowed under the applicable usury laws as now or hereafter construed by
the courts having jurisdiction over such matters. If the maturity of this
Convertible Note is accelerated by reason of an election by the holder hereof
resulting from an Event of Default, voluntary prepayment by the Company or
otherwise, then earned interest may never include more than the maximum amount
permitted by law, computed from the date hereof until payment, and any interest
in excess of the maximum amount permitted by law will be canceled automatically
and, if theretofore paid, will at the option of the holder hereof either be
rebated to the Company or credited on the principal amount of this Convertible
Note, or if this Convertible Note has been paid, then the excess will be rebated
to the Company. The aggregate of all interest (whether designated as interest,
service charges, points or otherwise) contracted for, chargeable, or receivable
under this Convertible Note will under no circumstances exceed the maximum legal
rate upon the unpaid principal balance of this Convertible Note remaining unpaid
from time to time. If such interest does exceed the maximum legal rate, it will
be deemed a mistake and such excess will be canceled automatically and, if
theretofore paid, rebated to the Company or credited on the principal amount of
this Convertible Note, or if this Convertible Note has been repaid, then such
excess will be rebated to the Company.
18. SEVERABILITY. If any provision of this Convertible Note is
held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision will be of no force and effect, but such holding
shall have no effect upon the enforceability of any other provision.
19. GENERAL. This Convertible Note:
(a) constitutes, together with the Purchase Agreement and the
Ancillary Agreements, the entire agreement among the parties with respect to the
subject matter hereof;
(b) supersedes any and all prior understandings relating to
such subject matter; and
(c) will be binding upon and inure to the benefit of the
parties and their respective heirs, executors, administrators, successors and
assigns.
20. WAIVER OF JURY TRIAL. THE COMPANY (AND, BY ITS ACCEPTANCE
OF THIS CONVERTIBLE NOTE, THE HOLDER HEREOF) HEREBY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS CONVERTIBLE NOTE OR ANY
OTHER INVESTMENT DOCUMENT OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF.
21. NO STRICT CONSTRUCTION. The Company and the initial holder
of this Convertible Note have participated jointly in the negotiation and
drafting of this Convertible Note. In the event an ambiguity or question of
intent or interpretation arises, this Convertible Note will be construed as if
drafted jointly by the Company and the holder hereof, and no presumption or
burden of proof will arise favoring or disfavoring any Person by virtue of the
authorship of any of the provisions of this Convertible Note.
22. U.S. WITHHOLDING TAX. It is intended that interest paid on
the obligation qualify for the exemption from U.S. withholding tax as a
portfolio debt instrument under Section 871(h) or 881(c) of the IRC.
23. SUBORDINATION. The indebtedness evidenced by this
Convertible Note (i) is and shall be senior to any and all Indebtedness of the
Corporation other than the Senior Indebtedness (to the extent provided in the
Purchase Agreement) and all other Convertible Notes, (ii) shall rank pari-passu
with all other Convertible Notes, and (iii) is not and shall not be pari-passu
with or subordinated to claims of any trade or similar creditors of the Company
except as may be required by bankruptcy or other laws affecting the rights of
creditors generally.
* * * * *
IN WITNESS WHEREOF, the Company has executed and delivered
this Convertible Senior Subordinated Note on the date specified above.
GARDENBURGER, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President and
Chief Financial Officer
