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EXHIBIT 4.1
THIS CONVERTIBLE NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR ANY SUCH OFFER, SALE OR TRANSFER IS MADE UNDER AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
AMENDED AND RESTATED CONVERTIBLE NOTE
Date: October 9, 2001 $__________
FOR VALUE RECEIVED, LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC., a
corporation organized under the laws of the State of Delaware (the "CORPORATION"
or the "BORROWER"), hereby promises to pay to the order of _______________ or
any assign registered on the books and records of the Corporation (individually,
the "HOLDER," and collectively with the holders of all other notes of same like
and tenor, the "HOLDERS") the sum of _______________________ Dollars ($___) on
July 25, 2005 (the "SCHEDULED MATURITY DATE"), and to pay interest on the unpaid
principal balance hereof for each year (or portion thereof) that this Note is
outstanding in an amount equal to seven and one-half percent (7.5%) per annum,
compounded annually. Interest shall accrue on the unpaid principal balance
hereof from July 25, 2000 (the "ISSUE DATE") until the same becomes due and
payable, whether at maturity or upon prepayment, repayment or otherwise. Any
amounts on this Note which are not paid when due shall bear interest at the rate
equal to the lower of fifteen percent (15%) per annum and the highest rate
permitted by law from the due date thereof until the same is paid. Interest
shall be calculated based on a 360-day year and shall commence accruing on the
Issue Date and, to the extent not converted in accordance with the provisions
hereof, shall be payable in arrears at such time as the outstanding principal
balance hereof with respect to which such interest has accrued becomes due and
payable hereunder. All payments of principal and interest (to the extent not
converted in accordance with the terms hereof) shall be made in, and all
references herein to monetary denominations shall refer to, lawful money of the
United States of America. All payments shall be made at such address as the
Holder shall have given or shall hereafter give to the Borrower by written
notice in accordance with the provisions of this Note.
This Note is being issued by the Borrower along with similar
convertible subordinated term notes (the "OTHER NOTES" and, together with this
Note, the "NOTES") pursuant to that certain Agreement, dated as of the date
hereof, by and among the Borrower and the other signatories thereto.
Payment of this Note is secured by a security interest in certain
property of the Corporation pursuant to a deed of hypothec and a security
agreement, each of even date herewith between the Corporation, Capital Ventures
International, Inc. and Castle Creek Technology
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Partners LLC (collectively, the "DEED OF HYPOTHEC"). The indebtedness evidenced
by this Note, and the payment of the principal hereof, and any interest hereon,
is senior in all respects to all other indebtedness of the Corporation now
existing or hereinafter incurred, except for the indebtedness set forth on
SCHEDULE A hereto and except for Senior Indebtedness. "Senior Indebtedness"
means (i) any equipment lease financing or purchase money security interest
entered into by the Corporation pursuant to which the Corporation grants a
security interest in leased or purchased equipment and (ii) deferrals, renewals,
extensions and refundings of any such indebtedness or obligations described in
(i) above, and (iii) any other indebtedness of the Corporation which the
Corporation and the holders of more than 50% of the unpaid principal amount of
the Notes then outstanding may hereafter from time to time expressly and
specifically agree in writing shall constitute Senior Indebtedness.
Notwithstanding the foregoing, Senior Indebtedness shall not include
indebtedness of the Company evidenced by the other Notes, which shall rank
equally and ratably with this Note.
ARTICLE I
PREPAYMENT
A. PERMITTED PREPAYMENT BY CORPORATION. This Note may be prepaid
by the Corporation in whole or in part at any time and from time to time. Any
such prepayment shall be without premium or penalty.
B. MANDATORY PREPAYMENT AT ELECTION OF HOLDER.
Upon the occurrence of an Event of Default (as defined below) and the
election by the Holder to require prepayment, this Note shall be prepaid by the
Corporation in accordance with the provisions of Article VI hereof.
ARTICLE II
CERTAIN DEFINITIONS
The following terms shall have the following meanings:
A. "CLOSING BID PRICE" means, for any security as of any date,
the closing bid price of such security on the principal United States securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg Financial Markets (or a comparable reporting service of national
reputation selected by the Corporation and reasonably acceptable to Holders of a
majority of the aggregate principal amount represented by the then outstanding
Notes ("MAJORITY HOLDERS") if Bloomberg Financial Markets is not then reporting
closing bid prices of such security) (collectively, "BLOOMBERG"), or if the
foregoing does not apply, the last reported sale price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no sale price is reported for such security by
Bloomberg, the average of the bid prices of all market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each
case for such date or, if such date was not a trading date for such security, on
the next preceding date which was a trading date. If the Closing Bid Price
cannot be calculated for such security as of either of such dates on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as reasonably determined by an investment banking firm
selected by the
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Corporation and reasonably acceptable to the Majority Holders, with the costs of
such appraisal to be borne by the Corporation.
B. "CONVERSION AMOUNT" means the portion of the principal amount
of this Note being converted plus any accrued and unpaid interest thereon
through the Conversion Date, each as specified in the notice of conversion in
the form attached hereto (the "NOTICE OF CONVERSION").
C. "CONVERSION DATE" means, for any Optional Conversion (as
defined below), the date specified in the Notice of Conversion so long as the
copy of the Notice of Conversion is faxed (or delivered by other means resulting
in notice) to the Corporation at or before 11:59 p.m., New York City time, on
the Conversion Date indicated in the Notice of Conversion; provided, however,
that if the Notice of Conversion is not so faxed or otherwise delivered before
such time, then the Conversion Date shall be the date the Holder faxes or
otherwise delivers the Notice of Conversion to the Corporation.
D. "CONVERSION PRICE" means, for any Conversion Date, $1.44,
subject to adjustment as provided herein.
E. "VOLUME WEIGHTED AVERAGE PRICE" means, for any security as of
any date, the Volume Weighted Average Price of such security on the principal
United States securities exchange or trading market where such security is
listed or traded as reported by Bloomberg, or if the foregoing does not apply,
the last reported sale price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no sale price is reported for such security by Bloomberg, the average of the bid
prices of all market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc., in each case for such date or, if such
date was not a trading date for such security, on the next preceding date which
was a trading date. If the Volume Weighted Average Price cannot be calculated
for such security as of either of such dates on any of the foregoing bases, the
Volume Weighted Average Price of such security on such date shall be the fair
market value as reasonably determined by an investment banking firm selected by
the Corporation and reasonably acceptable to the Majority Holders, with the
costs of such appraisal to be borne by the Corporation.
ARTICLE III
CONVERSION
A. CONVERSION AT THE OPTION OF THE HOLDER. Subject to the
limitations on conversions contained in Paragraph D of this Article III, the
Holder may, at any time and from time to time on or after the Issue Date,
convert (an "OPTIONAL CONVERSION") all or any part of the outstanding principal
amount of this Note, plus all accrued interest thereon through the Conversion
Date, into a number of fully paid and nonassessable shares of Common Stock
determined in accordance with the following formula:
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CONVERSION AMOUNT
Conversion Price
B. MECHANICS OF CONVERSION. In order to effect an Optional
Conversion, a Holder shall: (x) fax (or otherwise deliver) a copy of the fully
executed Notice of Conversion to the Corporation and (y) surrender or cause to
be surrendered this Note, duly endorsed, along with a copy of the Notice of
Conversion as soon as practicable thereafter to the Corporation. Upon receipt by
the Corporation of a facsimile copy of a Notice of Conversion from a Holder, the
Corporation shall as soon as practicable thereafter send, via facsimile, a
confirmation to such Holder stating that the Notice of Conversion has been
received, the date upon which the Corporation expects to deliver the Common
Stock issuable upon such conversion and the name and telephone number of a
contact person at the Corporation regarding the conversion. The Corporation
shall not be obligated to issue shares of Common Stock upon a conversion unless
either this Note is delivered to the Corporation as provided above, or the
Holder notifies the Corporation or the transfer agent that this Note has been
lost, stolen or destroyed and delivers the documentation to the Corporation
required by Article IX.H hereof.
(i) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon the
surrender of this Note accompanied by a Notice of Conversion, the Corporation
shall, no later than the later of (a) the second business day following the
Conversion Date and (b) the business day following the date of such surrender
(or, in the case of lost, stolen or destroyed certificates, after delivery of
the documentation required by Article IX.H) (the "DELIVERY PERIOD"), cause its
transfer agent to issue and deliver to the Holder or its nominee (x) that number
of shares of Common Stock issuable upon conversion of the portion of this Note
being converted and (y) a new Note in the form hereof representing the balance
of the principal amount hereof not being converted, if any. If the Corporation's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, and so long as the certificates therefor
do not bear a legend and the Holder thereof is not then required to return such
certificate for the placement of a legend thereon, the Corporation shall cause
its transfer agent to electronically transmit the Common Stock issuable upon
conversion to the Holder by crediting the account of the Holder or its nominee
with DTC through its Deposit Withdrawal Agent Commission system ("DTC
TRANSFER"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Corporation shall cause its transfer agent to deliver to the
Holder physical certificates representing the Common Stock issuable upon
conversion. Further, a Holder may instruct the Corporation to cause its transfer
agent to deliver to the Holder physical certificates representing the Common
Stock issuable upon conversion in lieu of delivering such shares by way of DTC
Transfer.
(ii) TAXES. The Corporation shall pay any and all taxes
which may be imposed upon it with respect to the issuance and delivery of the
shares of Common Stock upon the conversion of this Note.
(iii) NO FRACTIONAL SHARES. If any conversion of this Note
would result in the issuance of a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon conversion of the Notes shall be the next higher whole number of
shares.
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(iv) CONVERSION DISPUTES. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with subparagraph (i)
above. If such dispute involves the calculation of the Conversion Price or the
Conversion Amount, the Corporation shall submit the disputed calculations to an
independent outside accountant via facsimile within two business days of receipt
of the Notice of Conversion. The accountant, at the Corporation's sole expense,
shall review the calculations and notify the Corporation and the Holder of the
results no later than two business days from the date it receives the disputed
calculations. If after such independent accountant's review the Corporation and
the Holder cannot resolve such dispute, the Corporation and the Holder shall use
their best efforts to resolve such dispute through mediation prior to commencing
litigation. Upon resolution of such dispute (through mediation or otherwise),
the Corporation shall then issue the appropriate number of shares of Common
Stock in accordance with subparagraph (i) above.
C. MANDATORY CONVERSION
(i) If at any time all of the Required Conditions (as
defined in subparagraph (iii) below) are satisfied, the Corporation shall have
the right, subject to the limitations set forth in Article III.D), to require
the conversion (a "MANDATORY CONVERSION") of the outstanding principal amount of
this Note, plus all accrued interest thereon, into a number of fully paid and
nonassessable shares of Common Stock at the Conversion Price in effect on the
Effective Date of Mandatory Conversion (as defined below). If the Mandatory
Conversion occurs, the Corporation and the Holders shall follow the applicable
conversion procedures set forth in Article III.B (including the requirement that
the Holder deliver this Note to the Corporation); provided, however, that the
Holder shall not be required to deliver a Notice of Conversion to the
Corporation. The Holder may convert all or any portion of the outstanding
principal amount of this Note, plus all accrued interest thereon, into a number
of fully paid and nonassessable shares of Common Stock by delivering a Notice of
Conversion to the Corporation at any time prior to the Effective Date of
Mandatory Conversion.
(ii) The Corporation shall effect a Mandatory Conversion
by giving at least 30 trading days but not more than 40 trading days' prior
written notice (the "MANDATORY CONVERSION NOTICE") to the Holder, of the date on
which such Mandatory Conversion is to become effective (the "Effective Date of
Mandatory Conversion"), which Mandatory Conversion Notice shall be deemed to
have been delivered to the Holder on the trading day after the Corporation's fax
(with a copy sent by overnight courier) of such notice to the Holder. The
Mandatory Conversion Notice shall be accompanied by a certificate of the
President of the Corporation certifying as to the satisfaction of the Required
Conditions. No Mandatory Conversion Notice shall be effective hereunder unless
it is delivered to all Holders of Notes within ten trading days of any
satisfaction of all of the Required Conditions set forth in subparagraph (iii)
below; provided, however, the Corporation shall be entitled to deliver such
notice after such ten day period if all of the Required Conditions continue to
be satisfied. The failure of the Company to deliver a Mandatory Conversion
Notice upon satisfaction of the Required Conditions shall not preclude the
Company from subsequently delivering such notice if the Required Conditions are
again satisfied. Upon the surrender of this Note, the Corporation shall issue
and deliver to the Holder the shares of Common Stock to which the Holder is
entitled upon the Mandatory Conversion.
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(iii) The "REQUIRED CONDITIONS" shall consist of the
following:
(1) at least 30 months shall have elapsed since
the Issue Date;
(2) the Volume Weighted Average Price for the
Common Stock for any 40 consecutive trading day period equals or exceeds $50.00
(subject to equitable adjustment for stock splits, stock dividends,
recapitalizations and similar events ("EQUITABLE ADJUSTMENTS")), provided that
such period commences after or during the final two months of the 30-month
period referred to in subparagraph (1) above;
(3) the average trading volume (excluding block
trades) of the Common Stock on the NASDAQ National Market ("NASDAQ") or, if the
Common Stock is not then traded on NASDAQ, the principal United States
securities exchange where the Common Stock is then traded, during such 40
consecutive trading day period equals or exceeds 120,000 shares per day;
(4) all shares of Common Stock issuable upon
conversion of this Note are then (a) authorized and reserved for issuance, (b)
registered under the Securities Act for resale by the Holders (and, in the case
of subparagraphs (2) and (3) above, have been so registered throughout such 40
consecutive trading day period) or may be immediately resold by the Holders
pursuant to Rule 144 under the Securities Act without any limitation on the
number of such shares that can be immediately resold and (c) eligible to be
listed or traded on any of the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX") or the NASDAQ (or the successor to any of them); and
(5) no Event of Default (as defined in Article
VI below) shall have occurred without having been cured.
For purposes of this Note, a "block trade" is a trade of either 25,000 or more
shares or a quantity of shares having a market value of $200,000 or more.
D. LIMITATIONS ON CONVERSIONS. The conversion of this Note shall
be subject to the following limitation:
(i) NO FIVE PERCENT HOLDERS. In no event shall a Holder
of the Notes have the right to convert any portion of this Note into shares of
Common Stock or to dispose of any portion of this Note to the extent that such
right to effect such conversion or disposition would result in the Holder or any
of its affiliates beneficially owning more than 4.99% of the outstanding shares
of Common Stock. To the extent the Holder of this Note owns other securities
with a limitation on conversion, exercise or disposition analogous to the
limitation set forth in this Article III.D, the limitations on conversion,
exercise and disposition of this Note and such securities shall be applied
collectively to all such securities so that the Holder may select the order in
which it wishes to convert, exercise or dispose of such securities and the
Holder of this Note will only have the right to effect conversions, exercises
and dispositions of all such securities to the extent that such conversions,
exercises and dispositions do not result in the Holder or any of its affiliates
beneficially owning more than 4.99% of the outstanding shares of Common Stock.
For purposes of this subparagraph, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and
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Regulation 13 D-G thereunder. The restriction contained in this subparagraph D
shall not be altered, amended, deleted or changed in any manner whatsoever
unless the holders of a majority of the outstanding shares of Common Stock, the
Holder and the Holders of a majority of the outstanding principal amount of the
Notes shall approve, in writing, such alteration, amendment, deletion or change.
ARTICLE IV
RESERVATION OF SHARES OF COMMON STOCK
A. RESERVED AMOUNT. On the Issue Date, the Corporation shall
reserve 10,800,000 shares of the authorized but unissued shares of Common Stock
for issuance upon conversion of the Notes, and thereafter the number of
authorized but unissued shares of Common Stock so reserved (the "RESERVED
AMOUNT") shall not be decreased and shall at all times be sufficient to provide
for the full conversion of the Notes (including an amount equal to the interest
that would accrue over a two-year period on the original principal balance of
this Note) at a price equal to the Conversion Price, taking into account any
adjustments pursuant to Article VII hereof, and to provide for any shares of
Common Stock issued or then issuable as a result of a Conversion Default
hereunder, the occurrence of an Event of Default hereunder or any other payment
convertible into shares of Common Stock pursuant to the terms hereof or that
certain Registration Rights Agreement, as amended (the "REGISTRATION RIGHTS
AGREEMENT") by and among the Corporation and the other signatories thereto
entered in connection with the Securities Purchase Agreement, as amended, by and
among the Corporation and the Holders (the "SECURITIES PURCHASE AGREEMENT"). The
Reserved Amount shall be allocated to the Holders of the Notes as provided in
Article IX.D.
B. INSUFFICIENT SHARES. If the Corporation is prohibited, at any
time, from issuing shares of Common Stock upon conversion of the Notes to any
Holder because the Corporation does not then have available a sufficient number
of authorized and unissued shares of Common Stock, the Holder shall be entitled
to exercise the remedies set forth in Article VI.
ARTICLE V
FAILURE TO SATISFY CONVERSIONS
A. CONVERSION DEFAULTS. The following shall constitute a
"CONVERSION DEFAULT": (i) following the submission by a Holder of a Notice of
Conversion, the Corporation fails for any reason to deliver, in accordance with
the delivery instructions contained in the Notice of Conversion, on or prior to
the tenth trading day following the expiration of the Delivery Period for such
conversion, such number of freely tradeable shares of Common Stock to which such
Holder is entitled upon such conversion or (ii) other than in accordance with
Article III.B(iv), the Corporation provides notice (or otherwise indicates) to
any Holder at any time of its intention not to issue freely tradeable shares of
Common Stock upon exercise by any Holder of its conversion rights in accordance
with the terms of the Notes, or (iii) the Corporation is prohibited, at any
time, from issuing shares of Common Stock upon the conversion of the Notes to
any Holder because the Corporation does not have available a sufficient number
of or authorized and unissued shares of Common Stock. Upon the occurrence of a
Conversion Default and until the Default Cure Date, the Holder shall be entitled
to the remedies set forth in Article VI; provided, however, that the Holder
shall not be entitled to exercise the remedies set forth in Article VI
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hereof for a Conversion Default of the type enumerated in Article V.A(i) hereof
until the eighth trading day after the date that such Conversion Default remains
uncured.
"DEFAULT CURE DATE" means (i) with respect to a Conversion Default
described in clause (i) of its definition, the date the Corporation effects the
conversion of all of the outstanding Notes, subject to the applicable Notice of
Conversion, and (ii) with respect to a Conversion Default described in clause
(ii) of its definition, the date the Corporation issues freely tradeable shares
of Common Stock in satisfaction of all conversions of the Notes in accordance
with Article V.A, and (iii) with respect to either type of a Conversion Default,
the date on which the Corporation prepays the Notes held by such Holder pursuant
to paragraph B of this Article V.
ARTICLE VI
EVENTS OF DEFAULT
A. EVENTS OF DEFAULT. In the event (each of the events described
in clauses (i)-(vii) below after expiration of the applicable cure period (if
any) being an "EVENT OF DEFAULT"):
(i) the Corporation fails to pay the principal hereof or
any accrued and unpaid interest hereon when due, whether at maturity, upon
acceleration or otherwise and such failure continues for a period of five
trading days after the due date thereof;
(ii) the Corporation either (a) fails to pay, when due, or
within any applicable grace period, any payment with respect to any indebtedness
of the Corporation in excess of $250,000 due to any third party (including,
without limitation, any of the Other Notes), other than payments contested by
the Corporation in good faith, or otherwise is in breach or violation of any
agreement for monies owed or owing in an amount in excess of $250,000 which
breach or violation permits the other party thereto to declare a default or
otherwise accelerate amounts due thereunder, or (b) suffers to exist any other
default or event of default under any agreement binding the Corporation which
default or event of default would or is likely to have a material adverse effect
on the business, operations, properties, prospects or financial condition of the
Corporation, other than as set forth in Article VI.A(vii);
(iii) after December 31, 2002, the Common Stock (including
any of the shares of Common Stock issuable upon conversion of the Notes), is
suspended from trading on any of, or is not listed (and authorized) for trading
on at least one of, the NYSE, the AMEX or NASDAQ for an aggregate of ten trading
days in any nine month period;
(iv) the amendment to the Registration Statement referred
to in Section 3(b) of the Registration Rights Agreement, as amended to date, has
not been filed with the SEC within 30 days of the date of this Note or has not
been declared effective within 60 days of the date of such filing, or the
Registration Statement cannot be utilized by the Holders of the Notes for the
resale of all of their Registrable Securities (as defined in the Registration
Rights Agreement) for an aggregate of more than 30 days during any 365-day
period. Notwithstanding the foregoing, in the event the Company exercises its
rights under Section 3(f) of the Registration Rights Agreement, no Event of
Default under this Article VI.A(iv) shall be deemed to have occurred unless the
Registration Statement cannot be utilized by the Holders of the Notes for the
resale of
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all of their Registrable Securities (as defined in the Registration Rights
Agreement) for an aggregate of more than 45 days during any 365-day period;
(v) the Corporation fails to remove any restrictive
legend on any certificate or any shares of Common Stock issued to the Holders of
the Notes upon conversion of any of the Notes as and when required by this Note,
the Securities Purchase Agreement or the Registration Rights Agreement (a
"LEGEND REMOVAL FAILURE"), and any such failure continues uncured for fifteen
trading days after the Corporation has been notified thereof in writing by the
Holder;
(vi) other than in accordance with Article III.B(iv), the
Corporation provides notice (or otherwise indicates) to any Holder of the Notes,
including by way of public announcement, at any time, of its intention not to
issue, or otherwise refuses to issue, shares of Common Stock to any Holder of
the Notes upon conversion in accordance with the terms of the Notes;
(vii) the Corporation otherwise shall breach any material
term hereunder (other than as set forth in Article VI.A(i) and including,
without limitation, Article IV hereof) or under Agreements, dated the date
hereof, between the Corporation and each of the Holders (as defined herein) (the
"Agreement"), the Securities Purchase Agreement, as amended, or the Registration
Rights Agreement (as defined in the Securities Purchase Agreement, as amended),
the Deed of Hypothec or the Security Agreement (each as defined in the
Agreement) including, without limitation, the representations and warranties
contained therein and if such breach if curable, remains uncured for more than
60 days after the Corporation has been notified thereof in writing by the Holder
or the Corporation fails to diligently pursue the cure of such breach during
such 60-day period;
(viii) the Corporation or any subsidiary of the Corporation
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial part of
its property or business, or such a receiver or trustee shall otherwise be
appointed; or
(ix) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any subsidiary of the Corporation and if instituted against the Corporation by a
third party, shall not be dismissed within 60 days of their initiation;
then, upon the occurrence of any such Event of Default, at the option of each
Holder, exercisable in whole or in part at any time and from time to time by
delivery of a Default Notice (as defined below) to the Corporation while such
Event of Default continues, the Corporation shall pay such Holder (and upon the
occurrence of an Event of Default specified in subparagraphs (viii) and (ix) of
this Paragraph A, the Corporation shall be required to pay the Holders), the
outstanding principal amount of the Notes and accrued and unpaid interest
thereon, all without demand, presentment or notice, all of which are hereby
expressly waived, together with all costs, including, without limitation, legal
fees and expenses of collection, and the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity. For the avoidance
of doubt, the occurrence of any event described in clauses (vi), (viii) or (ix)
above shall immediately constitute an Event of Default and there shall be no
cure period.
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Following the submission of a Default Notice, the Holder of this Note
shall have the right to continue to submit Notices of Conversion and to convert
this Note until such time (if any) as the Corporation pays to the Holder the
Default Amount.
Upon the Corporation's receipt of any Default Notice hereunder (other
than during the three trading day period following the Corporation's delivery of
a Default Announcement (as defined below) to all of the Holders in response to
the Corporation's initial receipt of a Default Notice from a Holder of the
Notes), the Corporation shall immediately (and in any event within three trading
days following such receipt) deliver a written notice (a "DEFAULT ANNOUNCEMENT")
to all Holders of the Notes stating the date upon which the Corporation received
such Default Notice and the amount of the Notes covered thereby. The Corporation
shall not redeem any Notes during the three trading day period following the
delivery of a required Default Announcement hereunder. At any time and from time
to time during such three trading day period, each Holder of the Notes may
request (either orally or in writing) information from the Corporation with
respect to the instant default (including, but not limited to, the aggregate
principal amount outstanding of Notes covered by Default Notices received by the
Corporation) and the Corporation shall furnish (either orally or in writing) as
soon as practicable such requested information to such requesting Holder. In the
event the Corporation is not able to repay all of the outstanding Notes within
five trading days after its receipt of a notice requiring such payment (a
"DEFAULT NOTICE") the Corporation shall repay the outstanding Notes to each
Holder pro rata, based on the total amounts due under the Notes at the time of
repayment included by such Holder in all Default Notices delivered prior to the
date upon which such repayment is to be effected relative to the total amounts
due under all Notes at the time of repayment included in all of the Default
Notices delivered prior to the date upon which such payment is to be effected.
ARTICLE VII
ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time
as follows:
A. STOCK SPLITS, STOCK DIVIDENDS, ETC. If, at any time on or
after the Issue Date, the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend, combination, or other similar event,
the Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.
B. ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. Subject to
Section 4(h) of the Securities Purchase Agreement, if, at any time after the
Issue Date, there shall be (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 or merger of the Corporation with any
other entity (other than a merger in which the Corporation is the surviving or
continuing entity and its capital stock is unchanged), (iii) any sale or
transfer of all or substantially all of the assets of the Corporation or (iv)
any share exchange pursuant to which all of the outstanding shares of
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Common Stock are converted into other securities or property (each of (i) - (iv)
above being a "CORPORATE CHANGE"), then the Holders of the Notes shall
thereafter have the right to receive upon conversion, in lieu of the shares of
Common Stock otherwise issuable, such shares of stock, securities and/or other
property as would have been issued or payable in such Corporate Change with
respect to or in exchange for the number of shares of Common Stock which would
have been issuable upon conversion (without giving effect to the limitations
contained in Article III.D) had such Corporate Change not taken place, and in
any such case, appropriate provisions (in form and substance reasonably
satisfactory to the Holders of a majority of the principal amount of the Notes
then outstanding) shall be made with respect to the rights and interests of the
Holders of the Notes to the end that the economic value of the Notes are in no
way diminished by such Corporate Change and the provisions hereof (including,
without limitation, in the case of any such consolidation, merger or sale in
which the successor entity or purchasing entity is not the Corporation). The
Corporation shall not effect any Corporate Change unless (i) each Holder of the
Notes has received written notice of such transaction at least 20 days prior
thereto and (ii) if required by Section 4(h) of the Securities Purchase
Agreement, the consent of the Purchasers (as defined in the Securities Purchase
Agreement) shall have been obtained in accordance with such Section 4(h). The
above provisions shall apply regardless of whether or not there would have been
a sufficient number of shares of Common Stock authorized and available for
issuance upon conversion of the Notes outstanding as of the date of such
transaction, and shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
C. ADJUSTMENT DUE TO DISTRIBUTION. If, at any time after the
Issue Date, the Corporation shall declare or make any distribution of its assets
(or rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off))
(a "DISTRIBUTION"), then the Holders of the Notes shall be entitled, upon any
conversion of the Notes after the date of record for determining stockholders
entitled to such Distribution, to receive the amount of such assets which would
have been payable to the Holder with respect to the shares of Common Stock
issuable upon such conversion (without giving effect to the limitations
contained in Article III.D) had such Holder been the holder of such shares of
Common Stock on the record date for the determination of stockholders entitled
to such Distribution. If the Distribution involves rights, warrants, options or
any other form of convertible securities and the right to exercise or convert
such securities would expire in accordance with its terms prior to the
conversion of this Note, then the terms of such securities shall provide that
such exercise or convertibility right shall remain in effect until 30 days after
the date the Holder of the Notes receives such securities pursuant to the
conversion hereof.
D. ISSUANCE OF OTHER SECURITIES. If, at any time after the date
of this Note, the Corporation issues or sells, or in accordance with Article
VII.D(i) hereof is deemed to have issued or sold, any shares of Common Stock for
no consideration or for a consideration per share less than the Market Price on
the Measurement Date (as such terms as hereinafter defined) (a "DILUTIVE
ISSUANCE"), then effective immediately upon the Dilutive Issuance, the
Conversion Price will be adjusted in accordance with the following formula:
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C' = C x O+P/M
-----
CSDO
where:
C' = the adjusted Conversion Price;
C = the then current Conversion Price;
M = the Market Price on the Measurement Date:
O = the number of shares of Common Stock outstanding
immediately prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set
forth in Article VII.D(i) hereof, received by the
Corporation upon such Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined in Article VII.D(ii) below)
immediately after the Dilutive Issuance.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Article VII.D if such adjustment would result in an increase in the Conversion
Price.
(i) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Conversion Price under this Article VII.D,
the following will be applicable:
(a) ISSUANCE OF RIGHTS OR OPTIONS. Except as
otherwise set forth in this Article VII.D, if the
Corporation in any manner issues or grants any
warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to
purchase Common Stock or other securities
exercisable, convertible into or exchangeable for
Common Stock ("CONVERTIBLE SECURITIES") (such
warrants, rights and options to purchase Common Stock
or Convertible Securities are hereinafter referred to
as "OPTIONS") and the price per share for which
Common Stock is issuable upon the exercise of such
Options is less than the Market Price in effect on
the Measurement Date ("BELOW MARKET OPTIONS"), then
the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Market
Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable)
will, as of the date of the issuance or grant of such
Below Market Options, be deemed to be outstanding and
to have been issued and sold by the Corporation for
such price per share. For purposes of the preceding
sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Market
Options" is determined by dividing (i) the total
amount, if any, received or receivable by the
Corporation as consideration for the issuance or
granting of all such Below Market Options, plus the
minimum aggregate amount of additional consideration,
if any, payable to the Corporation upon the exercise
of all such Below Market Options, plus, in the case
of Convertible Securities issuable
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upon the exercise of all such Below Market Options,
the minimum aggregate amount of additional
consideration payable upon the exercise, conversion
or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise of
such Below Market Options (assuming full conversion
of Convertible Securities, if applicable). No further
adjustment to the Conversion Price will be made upon
the actual issuance of such Common Stock upon the
exercise of such Below Market Options or upon the
exercise, conversion or exchange of Convertible
Securities issuable upon exercise of such Below
Market Options. If, in any case, the total number of
shares of Common Stock issuable upon exercise of any
Below Market Options or upon exercise, conversion or
exchange of any Convertible Securities is not, in
fact, issued and the rights to exercise such option
or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the
Conversion Price then in effect will be readjusted to
the Conversion Price which would have been in effect
at the time of such expiration or termination had
such Below Market Options or Convertible Securities,
to the extent outstanding immediately prior to such
expiration or termination (other than in respect of
the actual number of shares of Common Stock issued
upon exercise or conversion thereof), never been
issued.
(b) ISSUANCE OF CONVERTIBLE SECURITIES.
(AA) If the Corporation in any manner issues or
sells any Convertible Securities, whether or not immediately convertible (other
than where the same are issuable upon the exercise of Options) and the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange (as determined pursuant to Article VII.D(i)(b)(BB) if applicable) is
less than the Market Price in effect on the Measurement Date, then the maximum
total number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities will, as of the date of the issuance
of such Convertible Securities, be deemed to be outstanding and to have been
issued or sold by the Corporation for such price per share. For the purposes of
the preceding sentence, the "price per share for which Common Stock is issuable
upon such exercise, conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities (taking into account the
value of any warrants or other securities issued to the purchasers of such
Convertible Securities), plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange thereof at the time such Convertible Securities first become
exercisable, convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities. No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon exercise, conversion
or exchange of such Convertible Securities.
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(BB) If the Corporation in any manner issues or
sells any Convertible Securities with a fluctuating conversion or exercise price
or exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" for purposes of the calculation contemplated by Article VII.D
(i)(b)(AA) shall be deemed to be the lowest price per share which would be
applicable (assuming all holding period and other conditions to any discounts
contained in such Convertible Security have been satisfied) if the Market Price
on the Measurement Date was 75% of the Market Price on such date (the "ASSUMED
VARIABLE MARKET PRICE"). Further, if the Market Price at any time or times
thereafter is less than or equal to the Assumed Variable Market Price last used
for making any adjustments under this Article VII.D with respect to any Variable
Rate Convertible Security, the Conversion Price in effect at such time shall be
readjusted to equal the Conversion Price which would have resulted if the
Assumed Variable Market Price at the time of issuance of the Variable Rate
Convertible Security had been 75% of the Market Price existing at the time of
the adjustment required by this sentence.
(c) CHANGE IN OPTION PRICE OR CONVERSION RATE.
If there is a change at any time in (i) the amount of
additional consideration payable to the Corporation
upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the
Corporation upon the exercise, conversion or exchange
of any Convertible Securities; or (iii) the rate at
which any Convertible Securities are convertible into
or exchangeable for Common Stock (in each such case,
other than under or by reason of provisions designed
to protect against dilution), the Conversion Price in
effect at the time of such change will be readjusted
to the Conversion Price which would have been in
effect at such time had such Options or Convertible
Securities still outstanding provided for such
changed additional consideration or changed
conversion rate, as the case may be, at the time
initially granted, issued or sold.
(d) CALCULATION OF CONSIDERATION RECEIVED. If
any Common Stock, Options or Convertible Securities
are issued, granted or sold for cash, the
consideration received therefor for purposes of this
Note will be the amount received by the Corporation
therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other
reasonable expenses paid or incurred by the
Corporation in connection with such issuance, grant
or sale. In case any Common Stock, Options or
Convertible Securities are issued or sold for a
consideration part or all of which shall be other
than cash, including, in the case of a strategic or
similar arrangement in which the other entity will
provide services to the Corporation, purchase
services from the Corporation or otherwise provide
intangible consideration to the Corporation, the
amount of the consideration other than cash received
by the Corporation (including the net present value
of the contribution expected by the Corporation for
the provided or purchased services) will be the fair
market value of such consideration,
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except where such consideration consists of
securities, in which case the amount of consideration
received by the Corporation will be the Market Price
thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued
in connection with any merger or consolidation in
which the Corporation is the surviving corporation,
the amount of consideration therefore will be deemed
to be the fair market value of such portion of the
net assets and business of the non-surviving
corporation as is attributable to such Common Stock,
Options or Convertible Securities, as the case may
be. The Corporation shall calculate, using standard
commercial valuation methods appropriate for valuing
such assets, the fair market value of any
consideration other than cash or securities;
provided, however, that if the Holder does not agree
to such fair market value calculation within three
business days after receipt thereof from the
Corporation, then such fair market value will be
determined in good faith by an investment banker or
other appropriated expert of national reputation
selected by the Corporation and reasonably acceptable
to the Holder, with the costs of such appraisal to be
borne by the Corporation.
(e) EXCEPTIONS TO ADJUSTMENTS OF CONVERSION
PRICE. No adjustment to the Conversion Price will be
made (i) upon the exercise of any warrants, options
or convertible securities issued and outstanding on
July 25, 2000 in accordance with the terms of such
securities as of such date; (ii) upon the grant or
exercise of any stock or options which may hereafter
be granted or exercised under any employee benefit
plan of the Corporation now existing or to be
implemented in the future, so long as the issuance of
such stock or options is approved by a majority of
the non-employee members of the Board of Directors of
the Corporation or a majority of the members of a
committee of non-employee directors established for
such purpose; (iii) upon the issuance of any Notes in
accordance with the terms of the Securities Purchase
Agreement; or (iv) upon conversion of the Notes.
(ii) CERTAIN DEFINITIONS.
(a) "COMMON STOCK DEEMED OUTSTANDING" shall mean
the number of shares of Common Stock actually
outstanding (not including shares of Common Stock
held in the treasury of the Company), plus (x) in the
case of any adjustment required by Article VII.D
resulting from the issuance of any Options, the
maximum total number of shares of Common Stock
issuable upon the exercise of the Options for which
the adjustment is required (including any Common
Stock issuable upon the conversion of Convertible
Securities issuable upon the exercise of such
Options),
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and (y) in the case of any adjustment required by
Article VII.D resulting from the issuance of any
Convertible Securities, the maximum total number of
shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities
for which the adjustment is required, as of the date
of issuance of such Convertible Securities, if any.
(b) "MARKET PRICE," as of any date, (i) means
the average of the closing bid prices for the shares
of Common Stock as reported on NASDAQ by Bloomberg
for the five consecutive trading days immediately
preceding such date, or (ii) if NASDAQ is not the
principal trading market for the shares of Common
Stock, the average of the last reported bid prices as
reported by Bloomberg on the principal trading market
for the Common Stock during the same period, or, if
there is no bid price for such period, the last
reported sales price as reported by Bloomberg for
such period, or (iii) if market value cannot be
calculated as of such date on any of the foregoing
bases, the Market Price shall be the average fair
market value as reasonably determined by an
investment banking firm selected by the Corporation
and reasonably acceptable to the Holder, with the
costs of the appraisal to be borne by the
Corporation. The manner of determining the Market
Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other
security in respect of which a determination as to
market value must be made hereunder.
(c) "COMMON STOCK," for purposes of this Article
VII.D, includes the Common Stock and any additional
class of stock of the Corporation having no
preference as to dividends or distributions on
liquidation, provided that the shares issuable
pursuant to this Note shall include only Common Stock
in respect of which this Note if convertible, or
shares resulting from any subdivision or combination
of such Common Stock, or in the case of any
reclassification, consolidation, merger, or sale of
the character referred to in Article VII.B, the stock
or other securities or property provided for in such
section.
(d) "MEASUREMENT DATE" means (i) for purposes of
any private offering of securities under Section 4(2)
or Regulation D of the Securities Act of 1933, as
amended, the date that the Corporation enters into
legally binding definitive agreements for the
issuance and sale of such securities and (ii) for
purposes of any other issuance of securities, the
date of issuance thereof.
E. PURCHASE RIGHTS. If, at any time after the Issue Date, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the
record holders of any class of Common Stock, then the
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Holders of the Notes will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Notes (without giving effect to the limitations
contained in Article III.D) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
F. NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Article VII, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each Holder of the Notes a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any Holder of the Notes, furnish to such
Holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of any Note.
G. OTHER ACTION AFFECTING CONVERSION PRICE. If the Corporation
takes any action affecting the Common Stock after the date hereof that would be
covered by Article VII.A through F, but for the manner in which such action is
taken or structured, which would in any way diminish the value of this Note,
then the Conversion Price shall be adjusted in such manner as the Board of
Directors of the Company shall in good faith determine to be equitable under the
circumstances.
ARTICLE VIII
REDEMPTION
A. REDEMPTION EVENTS. In the event (each of the events described
in clauses (i) - (iii) below being a "REDEMPTION EVENT"), the Corporation shall:
(i) sell, convey or dispose of all or substantially all
of its assets (the presentation of any such transaction for stockholder approval
being conclusive evidence that such transaction involves the sale of all or
substantially all of the assets of the Corporation);
(ii) merge, consolidate or engage in any other business
combination with any other entity (other than pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Corporation and other than pursuant to a merger in which the Corporation is
the surviving or continuing entity and its capital stock is unchanged); or
(iii) have fifty percent (50%) or more of the voting power
of its capital stock owned beneficially by one person, entity or "group" (as
such term is used under Section 13(d) of the Securities Exchange Act of 1934, as
amended), other than Dr. X. Xxxx Xxxxxx, Xx. Xxxx X. Xxxxxxx, Molex Incorporated
and the Holders, acting together, Molex Incorporated acting individually, or the
Holders acting together or individually;
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then, upon the occurrence of any such Redemption Event, subject to Section 4(h)
of the Securities Purchase Agreement, each Holder at its option, exercisable in
whole or in part at any time and from time to time by delivery of a Redemption
Notice (as defined below) to the Corporation, shall cause the Corporation to
redeem the Notes for a redemption price, payable in cash, in an amount equal to
the outstanding principal amount of the Note plus all accrued interest thereon
(as defined below), plus all other ancillary amounts payable hereunder, together
with all costs, including, without limitation, legal fees and expenses.
Upon the Corporation's receipt of any Redemption Notice hereunder
(other than during the three trading day period following the Corporation's
delivery of a Redemption Announcement (as defined below) to all of the Holders
in response to the Corporation's initial receipt of a Redemption Notice from a
Holder of the Notes), the Corporation shall immediately (and in any event within
three trading days following such receipt) deliver a written notice (a
"REDEMPTION ANNOUNCEMENT") to all Holders of the Notes stating the date upon
which the Corporation received such Redemption Notice and the amount of the
Notes covered thereby. At any time and from time to time during such three
trading day period, each Holder of the Notes may request (either orally or in
writing) information from the Corporation with respect to the applicable
Redemption Event (including, but not limited to, the aggregate principal amount
outstanding of Notes covered by Redemption Notices received by the Corporation)
and the Corporation shall furnish (either orally or in writing) as soon as
practicable such requested information to such requesting Holder. In the event
the Corporation is not able to redeem all of the outstanding Notes within five
trading days after its receipt of a notice of redemption (a "REDEMPTION NOTICE")
the Corporation shall repay the outstanding Notes to each Holder pro rata, based
on the total amounts due under the Notes at the time of redemption included by
such Holder in all Redemption Notices delivered prior to the date upon which
such redemption is to be effected relative to the total amounts due under all
Notes at the time of redemption included in all of the Redemption Notices
delivered prior to the date upon which such redemption is to be effected;
provided, however, the foregoing shall not constitute a waiver by any Holder of
its rights to payment in full of the total Redemption Amount due under each such
Holder's Notes pursuant to this Article VIII.
ARTICLE IX
MISCELLANEOUS
A. FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
part of any 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 or of any
other right, power or privilege.
B. NOTICES. Any notices required or permitted to be given under
the terms of this Note shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
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If to the Corporation:
Lumenon Innovative Lightwave Technology, Inc.
0000 Xxxxx-Xxxxxx Xxxxxxx
Xx. Xxxxxxx, Xxxxxx X00 0X0
Xxxxxx
Attention: Xxxx Xxxxxxxxx
Telecopy: (514) 331- 4721
with copies to:
Davies Xxxx Xxxxxxxx & Xxxxxxxx LLP
0000 XxXxxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxxx Xxxxxxx, Esq.
Telecopy: (000) 000-0000
and:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Esq.
Telecopy: (000) 000-0000
If to the Holder, to the address set forth under such Xxxxxx's name on
the signature page to the Securities Purchase Agreement executed by such Holder.
Each party shall provide notice to the other parties of any change in address.
C. AMENDMENT PROVISION. Except as set forth in Article III.D,
this Note and any provision hereof may only be amended by an instrument in
writing signed by the Corporation and all of the Holders. The term "Note" and
all references thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
D. ASSIGNABILITY; ALLOCATION OF RESERVED AMOUNT; SELLING
RESTRICTIONS. This Note shall be binding upon the Corporation and its successors
and assigns and shall inure to the benefit of the Holder and its successors and
assigns. The Reserved Amount shall be allocated pro rata among the Holders of
the Notes based on the aggregate principal amount of Notes issued to each
Holder. In the event a Holder shall sell or otherwise transfer any of such
Holder's Notes, each transferee shall be allocated a pro rata portion of such
transferor's Reserved Amount. Each increase to the Reserved Amount shall be
allocated pro rata among the Holders of Notes based on the outstanding principal
amount of Notes held by each Holder at the time of the increase in the Reserved
Amount. Any portion of the Reserved Amount which remains allocated to any person
or entity which does not hold any Notes shall be allocated to the remaining
Holders of Notes, pro rata based on the outstanding principal amount of Notes
then held by such Holders. Each transferee of this Note or any portion hereof
shall be bound by the selling restrictions set
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forth in Section 4(k) of the Securities Purchase Agreement, which Section is
incorporated herein by reference.
E. COST OF COLLECTION. If default is made in the payment of this
Note, the Corporation shall pay the Holder hereof costs of collection, including
reasonable attorneys' fees.
F. GOVERNING LAW; JURISDICTION. This Note shall be governed by
and construed in accordance with the laws of the State of Delaware. The
Corporation irrevocably consents to the jurisdiction of the United States
federal courts and the state courts located in the State of Delaware in any suit
or proceeding based on or arising under this Note and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in such
courts. The Corporation irrevocably waives the defense of an inconvenient forum
to the maintenance of such suit or proceeding. The Corporation further agrees
that service of process upon the Corporation mailed by first class mail shall be
deemed in every respect effective service of process upon the Corporation in any
such suit or proceeding. Nothing herein shall affect the right of any Holder to
serve process in any other manner permitted by law. The Corporation 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.
G. DENOMINATIONS. At the request of Xxxxxx, upon surrender of
this Note, the Corporation shall promptly issue new Notes in the aggregate
outstanding principal amount hereof, in the form hereof, in such denominations
of at least $25,000 as Holder shall request.
H. LOST OR STOLEN NOTES. Upon receipt by the Corporation from a
Holder of (i) evidence of the loss, theft, destruction or mutilation of any Note
and (ii) (y) in the case of loss, theft or destruction, of indemnity (without
any bond or other security) reasonably satisfactory to the Corporation, or (z)
in the case of mutilation, upon surrender and cancellation of any Note, the
Corporation shall execute and deliver a new Note of like tenor and date.
However, the Corporation shall not be obligated to reissue such lost or stolen
Note if the Holder contemporaneously requests the Corporation to convert such
Note.
I. [Intentionally Omitted.]
J. RESTRICTIONS ON SHARES. The shares of Common Stock issuable
upon conversion of this Note may not be sold or transferred unless (i) they
first shall have been registered under the Securities Act and applicable state
securities laws, (ii) the Corporation shall have been furnished with an opinion
of legal counsel (in form, substance and scope customary for opinions in such
circumstances) to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act or (iii) they are sold under
Rule 144 under the Act. Except as otherwise provided in the Securities Purchase
Agreement, each certificate for shares of Common Stock issuable upon conversion
of this Note that have not been so registered and that have not been sold under
an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS
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OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED
HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED
UNDER AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon conversion of this Note, the Corporation shall remove the
foregoing legend from the certificate and issue to such holder a new certificate
therefor free of any transfer legend, if (i) with such request, the Corporation
shall have received either (A) an opinion of counsel, in form, substance and
scope customary for opinions in such circumstances, to the effect that any such
legend may be removed from such certificate, or (B) satisfactory representations
from the Holder that the Holder is eligible to sell such security under Rule 144
or (ii) a registration statement under the Securities Act covering the resale of
such securities is in effect. Nothing in this Note shall (i) limit the
Corporation's obligation under the Registration Rights Agreement, or (ii) affect
in any way the Holder's obligations to comply with applicable securities laws
upon the resale of the securities referred to herein.
K. STATUS AS NOTE HOLDER. Upon submission of a Notice of
Conversion by a Holder of the Notes, (i) the principal amount of the Notes and
the interest thereon covered thereby (other than any portion of the Notes, if
any, which cannot be converted because their conversion could exceed such
Holder's allocated portion of the Reserved Amount or Cap Amount) shall be deemed
converted into shares of Common Stock as of the Conversion Date and (ii) the
Holder's rights as a holder of such Notes shall cease and terminate (but only
with respect to that portion of the Notes covered by such Notice of Conversion),
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Corporation to comply with the terms
of the Notes. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the fifteenth trading day
after the expiration of the Delivery Period with respect to a conversion of
Notes for any reason, then (unless the Holder otherwise elects to retain its
status as a holder of Common Stock by so notifying the Corporation within five
trading days after the expiration of such fifteen trading day period) the
portion of the principal amount and interest thereon subject to such conversion
shall be deemed outstanding under the Notes and the Corporation shall, as soon
as practicable, return the Notes to the Holder. In all cases, the Holder shall
retain all of its rights and remedies for the Corporation's failure to convert
the Notes.
L. OBLIGATION TO CURE. If the Corporation is prohibited from
issuing shares of Common Stock to a Holder for any reason, the Corporation shall
immediately notify the Holders of Notes of such occurrence and shall take
immediate action (including, if necessary, seeking the approval of its
stockholders) to eliminate any prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Corporation or any of
its securities on the Corporation's ability to issue shares of Common Stock.
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22
M. REMEDIES CUMULATIVE. The remedies provided in this Note shall
be cumulative and in addition to all other remedies available under this Note,
at law or in equity (including a decree of specific performance and/or other
injunctive relief, and nothing herein shall limit a Holder's right to pursue
actual damages for any failure by the Corporation to comply with the terms of
this Note. The Corporation acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holders of the Notes and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, that the Holders
of the Notes shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
N. TRADING DAYS. For purposes of this Note, the term "trading
day" means any day on which NASDAQ or, if the Common Stock is not then traded on
NASDAQ, the principal United States securities exchange or trading market where
the Common Stock is then listed or traded, is open for trading.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, Xxxxxxxx has caused this Convertible Note to be
executed by its duly authorized officer.
LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC.
By: ___________________________________
Name:
Title:
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EXHIBIT 1
NOTICE OF CONVERSION
To: Lumenon Innovative Lightwave Technology, Inc.
0000 Xxxxx-Xxxxxx Xxxxxxx
Xx. Xxxxxxx, Xxxxxx X00 0X0
Xxxxxx
Attention: _________________________
Telecopy: (000) 000-0000
The undersigned hereby elects to convert $_____________ principal amount of the
Note (the "CONVERSION"), into shares of common stock ("COMMON STOCK") of Lumenon
Innovative Lightwave Technology, Inc. (the "CORPORATION") according to the
conditions of the Convertible Note dated _____________, 2001 (the "NOTE"), as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will be all transfer taxes payable
with respect thereto. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any.
The Corporation shall electronically transmit the Common Stock issuable pursuant
to this Notice of Conversion to the account of the undersigned or its nominee
(which is _____________) with DTC through its Deposit Withdrawal Agent
Commission System ("DTC TRANSFER").
In the event of partial exercise, please reissue an appropriate Note(s) for the
principal balance which shall not have been converted.
Check Box if Applicable:
In lieu of receiving the shares of Common Stock issuable pursuant to
this Notice of Conversion by way of DTC Transfer, the undersigned
hereby requests that the Corporation issue and deliver to the
undersigned or its nominee (if applicable) physical certificates
representing such shares of Common Stock.
Date of Conversion:________________________________________
Applicable Conversion Price:_______________________________
Amount of Accrued and Unpaid Interest
on the Principal Amount to be converted,
if any:____________________________________________________
Default Amount to be converted, if any:____________________
Number of Shares of
Common Stock to be Issued:_________________________________
Signature:_________________________________________________
Name:______________________________________________________
Address:___________________________________________________
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