NOTE
ALL CAPITALIZED TERMS SHALL BE DEEMED TO HAVE THE DEFINITIONS
ASCRIBED TO THEM IN THE PURCHASE AGREEMENTS, AS DEFINED IN
SECTION 1 OF THIS DOCUMENT.
_________________, 1997
FOR VALUE RECEIVED, SUNRISE TECHNOLOGIES INTERNATIONAL,
INC., a Delaware corporation ("Maker"), hereby promises to pay to
the order of
_________________________________________________________ or its
registered assigns ("Payee"), in legal and lawful money of the
United States of America, the aggregate sum of
_________________________________________________________
($__________________) with interest thereon according to the
terms hereof. The principal amount hereof, and all accrued and
unpaid interest hereon, shall be paid in full to Payee on
_____________ (the date two years from the Closing Date, as
defined in the Purchase Agreement).
Section 1. Purchase Agreements. This Note and certain
other similar notes aggregating $[ ] principal amount have
been issued pursuant to a U.S. Note and Warrant Purchase
Agreement dated of even date herewith among Maker, Payee,
Pennsylvania Merchant Group Ltd. ("PMG") and certain other
investors (the "U.S. Purchase Agreement") and an Offshore Note
and Warrant Purchase Agreement dated of even date herewith among
Maker, Payee, PMG and certain other investors (the "Offshore
Purchase Agreement"). Pursuant to the U.S. Purchase Agreement
and the Offshore Purchase Agreement (collectively, the "Purchase
Agreements") warrants (the "Warrants") to purchase Maker's Common
Stock have also been issued to Payee.
Section 2. Interest. Interest shall accrue on the
outstanding principal hereof at an annual rate of 5.0%. Accrued
interest shall be payable at maturity or conversion. Interest
shall be payable in cash or, at the option of Maker, shares of
Maker's Common Stock, calculated based on the average of the last
reported sale prices for the last five days prior to the payment
date.
Section 3. Conversion. Subject to the conditions
herein contained, this Note shall be convertible at any time and
from time to time, at the option of Payee, into fully paid and
nonassessable shares of Maker's Common Stock upon surrender to
Maker of this Note; and upon receipt by Maker of such surrendered
Note with any appropriate endorsement thereon, and upon written
notice to Maker by Xxxxx of Payee's election to convert the same
and setting forth the name or names in which shares of Maker's
Common Stock are to be issued, Payee shall be entitled to receive
a certificate or certificates representing the shares of Maker's
Common Stock into which this Note is convertible. Such
conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of this Note,
and the person or persons entitled to receive the shares of
Maker's Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock as of such date; provided, however, that
any such surrender on any date when the stock transfer books of
Maker shall be closed shall constitute the person or persons
entitled to receive the shares of
1
Maker's Common Stock issuable
upon such conversion as the record holder or holders of such
shares of Maker's Common Stock for all purposes at the close of
business on the next succeeding day on which such transfer books
are open. Maker's Board of Directors shall at all times reserve
a sufficient number of authorized but unissued shares of Maker's
Common Stock to cover the conversion of any outstanding Notes.
(a) Conversion Price. The basis for the conversion of
this note shall be the Conversion Price in effect at the time of
conversion. Initially, the Conversion Price shall be $[ ].
In connection with effecting any transfer to Maker for
cancellation of this Note upon conversion of the same into
Maker's Common Stock, Maker may, but shall not be obliged to,
issue a certificate or certificates for fractions of a share of
Maker's Common Stock. If Maker elects not to issue a certificate
or certificates for fractions of a share of Maker's Common Stock,
Maker shall pay in lieu thereof an amount equal to the Conversion
Price of such fractional share (computed to the nearest hundredth
of a share) in effect at the close of business on the date of
conversion.
(b) Adjustment of Conversion Price and Number of
Shares. The number of shares of Maker's Common Stock issuable
upon the exercise or exchange of this Note and the Conversion
Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(i) Adjustment for Change in Capital Stock. If
at any time after the Closing Date, Maker:
(1) pays a dividend or makes a
distribution on its Common Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares
of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of
Common Stock into a smaller number
of shares;
(4) makes a distribution on its Common
Stock in shares of its capital
stock other than Common Stock; or
(5) issues by reclassification of its
Common Stock any shares of its
capital stock;
then the Conversion Price in effect immediately prior to such
action shall be adjusted so that Payee may receive, upon exchange
of this Note, the number of shares of Common Stock of Maker which
Payee would have owned immediately following such action if Payee
had exchanged this Note immediately prior to such action.
Any adjustment of the Conversion Price shall become
effective immediately after the record date in the case of a
dividend or distribution, and immediately after the effective
date in the case of a subdivision, combination or
reclassification.
2
(ii) Adjustment for Other Distributions. If at any
time after the Closing Date, the Maker distributes to all holders
of its Common Stock any of its assets or debt securities, the
Conversion Price following the record date shall be adjusted in
accordance with the following formula:
C' = C x M-F
M
where: C' = the adjusted Conversion Price.
C = the Conversion Price immediately prior to
the adjustment.
M = the current market price (as defined
below) per share of Maker's Common Stock
on the record date of the distribution.
F = the aggregate fair market value (as
conclusively determined by Maker's Board
of Directors) on the record date of the
assets or debt securities to be
distributed divided by the number of
outstanding shares of Maker's Common
Stock.
The adjustment shall be made successively whenever any
such distribution is made and shall become effective immediately
after the record date for the determination of stockholders
entitled to receive the distribution. In the event that such
distribution is not actually made, the Conversion Price shall
again be adjusted to the Conversion Price as determined without
giving effect to the calculation provided hereby. In no event
shall the Conversion Price be adjusted to an amount less than
zero.
This Section 3(b)(ii) does not apply to cash dividends
or cash distributions paid out of consolidated current or
retained earnings as shown on the books of Maker and paid in the
ordinary course of business.
(iii) Current Market Price. The current market
price per share of Maker's Common Stock on any date is the
average of the Quoted Prices of the Common Stock for the
30 consecutive trading days commencing 45 trading days before the
date in question. The "Quoted Price" of Maker's Common Stock is
the last reported sales price of Maker's Common Stock as reported
by Nasdaq, or the primary national securities exchange on which
Maker's Common Stock is then quoted; provided, however, that if
quotes for the Common Stock are not reported by Nasdaq and the
Maker's Common Stock is neither traded on the Nasdaq National
Market, on a national securities exchange, on the Nasdaq Small
Cap Market nor on the OTC Electronic Bulletin Board, the price
referred to above shall be the price reflected in the over-the-
counter market as reported by the National Quotation Bureau, Inc.
or any organization performing a similar function, and provided,
further, that if Maker's Common Stock is not then publicly
traded, the market price shall equal the Conversion Price.
Section 4. Optional Redemption by the Company. The
Notes are subject to redemption, at the option of the Company, in
whole but not in part, at any time on or after
3
March 31, 1997,
upon not more than 60 nor fewer than 30 days' notice prior to the
date fixed by the board of directors of the Company for such
redemption (the "Redemption Date"), which notice ("Redemption
Notice") shall be irrevocable. Any such redemption shall be at a
price equal to the principal of the Notes then outstanding plus
accrued and unpaid interest to the Redemption Date. Upon issuing
a Redemption Notice, the Company shall establish an account with
a federally insured bank (the "Redemption Account") and shall
deposit into the Redemption Account an amount equal to the
Redemption Price. At any time prior to the Redemption Date, any
holder of Notes may convert such Notes into Common Stock in
accordance with Section 3 of the Notes, in which case, the
Company may withdraw from the Redemption Account the amount that
otherwise would have been payable to such Noteholder.
Section 5. Place of Payment. All payments due to
Payee hereunder shall be paid to Payee at the following address
on or before the due date of such payment as provided herein: c/o
Pennsylvania Merchant Group Ltd., Four Falls Corporate Center,
West Conshohocken, Pennsylvania 19428-2961, or to such other
address of which Payee shall give written notice to Maker.
Section 6. Events of Default and Remedies. If any of
the following events of default (individually, an "Event of
Default") shall occur for any reason whatsoever (and whether it
shall be voluntary or involuntary or occur or be affected by
operation of law or otherwise):
A. Maker fails to make payment when due of any
principal or interest payable under this Note, and such failure
continues for a period of 5 days after written notice that such
payment is due and unpaid;
B. Maker defaults in the observance or
performance of any material agreement or condition under this
Note or the Warrants, and such default continues for a period of
30 days after written notice of such default is given to Maker by
Xxxxx;
C. Any representation or warranty made by Maker
in the Purchase Agreements shall prove to have been false in any
material respect on the date when made;
D. Maker shall default under any material
agreement for borrowed money which causes the other party thereto
to accelerate such obligation;
E. Maker shall (i) file, or consent by answer or
otherwise to the filing against it of a petition for relief or
reorganization or arrangement or any other petition in bankruptcy
or insolvency law of any jurisdiction, (ii) make an assignment
for the benefit of its creditors, (iii) consent to the
appointment of a custodian, receiver, trustee, or other officer
with similar powers of itself or of any substantial part of its
property, (iv) be adjudicated insolvent or be liquidated or
(v) take appropriate action for the purpose of any of the
foregoing;
F. A court or governmental authority of
competent jurisdiction shall enter an order appointing a
custodian, receiver, trustee or other officer with similar powers
with respect to Maker or any substantial amount of its
properties, or if an order for relief with respect to Maker shall
be entered in any case or proceeding for liquidation or
reorganization or otherwise
4
to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or ordering the
dissolution, winding up or liquidation of Maker, or if any
petition for any such relief shall be filed against Maker, and
such order or petition shall not be dismissed or stayed within
60 days after the date of such filing, then automatically upon
the occurrence of such Event of Default the entire unpaid
principal amount of, and the unpaid accrued interest on, this
Note shall become immediately due and payable.
Section 7. Security. To secure Maker's obligations
under the Notes, Maker has designated Pennsylvania Merchant Group
Ltd., as agent for the Payees, and has granted a security
interest in all of its pending and issued ophthalmic patents,
pursuant to a pledge agreement dated _____________, 1997.
Section 8. Additional Remedies. If any Event of
Default hereunder shall have occurred, Xxxxx may proceed to
protect and enforce its rights under this Note by exercising such
remedies as are available to it in respect thereof under the
terms of this Note or applicable law, either by suit in equity or
by action at law, or both, whether for specific performance of
any agreement contained in this Note or in aid of the exercise of
any power granted in this Note. No remedy is intended to be
exclusive and each such remedy shall be cumulative.
Section 9. Amendments and Waivers. PMG and the
holders of at least 80% of the outstanding principal balance of
all Notes issued pursuant to the Purchase Agreements may, by
written instrument: (a) extend the time for the performance of
any of the obligations or other acts of Maker, including without
limitation, payment obligations; (b) waive compliance with any of
the covenants of Maker contained herein and (c) waive Maker's
performance of any of its obligations hereunder. Neither the
failure of Payee nor any delay on the part of Payee to exercise
any right, power or privilege under this Note shall operate as a
waiver thereof, nor shall any single or partial exercise by Payee
of any right, power or privilege preclude any other or further
exercise of that or any other right, power or privilege.
Section 10. Expenses. Upon the occurrence of an Event
of Default hereunder, Maker shall reimburse Payee promptly for
all reasonable counsel fees, costs and other expenses incurred by
Payee in connection with the collection and/or enforcement of
this Note.
Section 11. Payment Due on Holidays. If the principal
of or interest on this Note falls due on a Saturday, Sunday or
legal holiday at the place of payment, such payment shall be made
on the next succeeding business day and such extended time shall
be included in computing interest.
Section 12. Applicable Law. The construction,
interpretation and enforcement of this Note shall be governed by
the laws of the Commonwealth of Pennsylvania.
Section 13. Severability. If any provision of this
Note shall be held invalid under any applicable laws, such
invalidity shall not affect any other provision of this Note that
can be given effect without the invalid provision and, to this
end, the provisions hereof are severable.
5
IN WITNESS WHEREOF, and intending to be legally bound
hereby, Maker has caused this Note to be executed and delivered
by its proper and duly authorized officers as of the date first
above written.
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
By:_____________________________________________
Xxxxx Xxxxx
Chairman of the Board and Chief Executive Officer
Attest:__________________________________________
Secretary
6
