Exhibit 2
EXCHANGE AGREEMENT
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This EXCHANGE AGREEMENT (this "Agreement"), dated as of June 2, 2005,
is among PSi Technologies Holdings, Inc., a corporation organized and existing
under the laws of the Philippines ("Holdings"), PSi Technologies, Inc., a
corporation organized and existing under the laws of the Philippines and the
principal operating subsidiary of Holdings (the "Company"), and Xxxxxxx Xxxxx
Global Emerging Markets Partners, LLC ("Purchaser").
WHEREAS, any benefit to the Company is deemed a benefit to Holdings,
and in consideration for the Invested Principal Amount (as defined below) paid
to the Company, Purchaser received 10.00% Exchangeable Senior Subordinated Notes
Due 2009 of the Company (the "Notes"), pursuant to the Purchase Agreement, dated
as of the date hereof (the "Purchase Agreement"), among Holdings, the Company
and Purchaser; and
WHEREAS, the parties have agreed that the Notes owned by Purchaser are
to be exchangeable into Common Stock (as defined below) at any time and from
time to time.
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and intending to be legally
bound hereby, it is agreed by the parties as follows:
1. Definitions
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(a) Unless otherwise defined herein, the terms below shall have the
following meanings (such meanings being equally applicable to singular and
plural forms of the terms defined):
"ADSs" means the American Depositary Shares of Holdings, each ADS
representing one share of Common Stock.
"Affiliate" shall mean, with respect to any specified Person, any
other Person that directly, or indirectly through one or more
intermediaries, Controls, is Controlled by, or is under common Control
with, such specified Person.
"Aggregate Converted Principal" means, at a specified date, the sum of
all the Conversion Principal Amounts in respect of which Holdings issued
shares of Common Stock to Purchaser from the date hereof to such specified
date.
"Board" means the board of directors of Holdings.
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"BSP" means the Bangko Sentral ng Pilipinas or the central monetary
authority of the Philippines or any Governmental Authority of the
Philippines that assumes the functions thereof.
"BSRD" means the Bangko Sentral Registration Document issued by the
BSP, which allows the holder to source foreign exchange from the Philippine
banking system.
"Business Day" means any day other than a Saturday, Sunday or any
other day that is a legal holiday under the laws of the State of New York
or Taguig, Philippines or a day on which national banking associations in
New York or Taguig, Philippines are authorized or required by law or other
governmental action to close.
"Common Stock" means the common stock, par value PHP 1 2/3 per share
of Holdings.
"Controls" means (including the terms "Controlled by" and "under
common Control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect
a majority of the board of directors or similar body governing the affairs
of such Person.
"Conversion Principal Amount" means, at a specified date, (a) an
amount set forth in an Exchange Notice that represents the portion of the
Current Invested Principal Amount of the Notes that Purchaser is requesting
to be converted into Common Stock pursuant to such Exchange Notice or (b)
an amount set forth in a Mandatory Issuance Notice that represents the
portion of the Current Invested Principal Amount of the Notes that the
Purchaser is requesting to be used to calculate the number of shares of
Common Stock to be issued in the Mandatory Issuance relating to such
Mandatory Issuance Notice.
"Current Invested Principal Amount" means, at a specified date, an
amount equal to the Invested Principal Amount less the Aggregate Converted
Principal, in each case, from the date hereof to such specified date.
"Current Market Price" means in respect of any share of Common Stock
on any date herein specified the average of the daily market prices of the
Common Stock or ADSs for five consecutive trading days commencing ten
trading days before the public announcement of any sale or other issuance
of Common Stock or Common Stock Equivalents. The daily market price for
each such trading day shall be the last reported sale price on such day on
the Nasdaq SmallCap Market (the "Nasdaq") or, if the Common Stock or ADSs
are not so listed or admitted, the last reported sale price on such day on
the Nasdaq or any other trading facility on which such Common Stock or ADSs
are then listed; provided, however, that if no sale takes place on such day
on any such exchange, market or trading facility, the average of the last
reported closing bid and ask prices on such day as officially quoted on
such exchange, market or trading facility shall be the daily market price
for such trading day. If the Common Stock or ADSs are not
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listed on Nasdaq or any other trading facility at the time of such
calculation, the "Current Market Price" of one share of Common Stock shall
be determined by the Board in good faith.
"EBITDA" shall mean, without duplication, the consolidated net income
of Holdings and its subsidiaries determined in accordance with generally
accepted accounting principles in the United States consistently applied,
plus any amounts subtracted in calculating Net Income in respect of net
interest expense, income taxes, depreciation and amortization, less (i) any
gain plus any loss realized in connection with the sale of any assets or
disposition of any securities, other than those included in cash flow from
operations, (ii) any extraordinary or non-recurring gain plus any loss or
(iii) any non-cash extraordinary gain, plus (iv) any non-cash extraordinary
loss; provided, however, that all expenses arising directly out of the
transactions contemplated by the Purchase Agreement, this Agreement and the
Notes, and the Subscription Agreement and Note Assignment, if applicable,
and expenses arising directly out of future capital raising transactions
shall be deemed extraordinary expenses and excluded from EBITDA for
purposes of this definition.
"Encumbrance" means any lien, mortgage, pledge, collateral assignment,
security interest, hypothecation or other encumbrance, other than as
established by, under or in connection with, the terms of this Agreement,
the Notes or the Purchase Agreement, and the Subscription Agreement and the
Note Assignment, if applicable, or the transactions contemplated thereby.
"Governmental Agency" means any supranational, multinational,
municipal, provincial, federal, state, local, foreign or other governmental
agency, instrumentality, commission, authority, board or body.
"Holder" shall mean Purchaser and any transferee of Purchaser.
"Invested Principal Amount" means USD$7,000,000, plus any accreted
interest added to the Invested Principal Amount pursuant to Section 2.01 of
the Notes.
"Law" means all laws, statutes and ordinances of the United States,
any state of the United States, any foreign country, any foreign state and
any political subdivision thereof, including all decisions, orders,
judgments or decrees of courts having the effect of law in each such
jurisdiction.
"Net Income" shall mean with respect to any fiscal year, or part
thereof, the net income (or net loss) of Holdings for such period as
determined on a consolidated basis and in accordance with generally
accepted accounting principles in the United States consistently applied.
"Person" shall mean any individual, corporation, partnership, joint
venture, firm, trust, unincorporated organization, government or any agency
or political subdivision thereof or other entity.
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"Philippine SEC" means the Securities and Exchange Commission of the
Philippines.
"PHP" shall mean the lawful currency of the Republic of the
Philippines.
"Regulation" means any rule or regulation of any Governmental Agency
having the effect of Law or any rule or regulation of any self-regulatory
organization.
(b) The following terms have the meanings set forth in the section set
forth opposite such term:
"Agreement"..................................................Preamble
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"Closing"....................................................3(e)
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"Closing Date"...............................................2(e)
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"Common Stock Equivalents"...................................5(b)
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"Company"....................................................Preamble
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"Exchange Closing"...........................................2(e)
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"Exchange Notice"............................................2(c)
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"Exchange Right".............................................2(a)
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"Exchange Shares"............................................2(i)
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"Exchange Subsequent Closing"................................2(e)
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"Extraordinary Common Stock Event"...........................5(e)
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"Holdings"...................................................Preamble
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"Issuance Purchase Price"....................................3(a)
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"Mandatory Issuance".........................................3(a)
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"Mandatory Issuance Closing".................................3(e)
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"Mandatory Issuance Closing Date"............................3(e)
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"Mandatory Issuance Notice"..................................3(b)
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"Mandatory Issuance Rights"..................................3(a)
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"Mandatory Issuance Shares"..................................3(f)(i)
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"Mandatory Issuance Subsequent Closing"......................3(e)
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"Net Consideration Per Share"................................5(c)
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"Note Assignment"............................................3(f)(i)
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"Note Exercise Price"........................................2(a)
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"Notes"......................................................Recitals
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"Notes BSRD".................................................6(e)(i)
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"Purchase Agreement".........................................Recitals
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"Purchaser"..................................................Preamble
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"Redemption Payment".........................................3(c)
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"Shares BSRD"................................................6(e)(ii)
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"Subscription Agreement".....................................3(f)(i)
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"Subsequent Closing".........................................3(e)
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2. Exchange of Notes for Common Stock
(a) Grant of Exchange Right. Subject to the terms and conditions set
forth herein, Holdings hereby grants Purchaser an irrevocable right to exchange
all or part of its Notes
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for Common Stock (an "Exchange Right") at a price per share of Common Stock
initially equal to USD$1.00 (the "Note Exercise Price"); provided, however,
that:
(i) if Holdings' EBITDA for the three-month period ending December 31,
2005 is less than USD$5.5 million, then the Note Exercise Price shall
be reduced to USD$0.90; and
(ii) if Holdings' EBITDA for the three-month period ending March 31, 2006
is less than USD$6.7 million, then the Note Exercise Price shall be
reduced to (A) USD$0.80, if the Note Exercise Price was reduced
pursuant to clause (i) above and, (B) USD$0.90, if the Note Exercise
Price was not reduced pursuant to clause (i) above;
provided further that if Purchaser exercises an Exchange Right prior to the
occurrence of either or both of clauses (i) and (ii) above, any subsequent
reduction in the Note Exercise Price shall not retroactively apply to such
previous exercise of Exchange Rights and Purchaser shall not be entitled to any
additional shares of Common Stock or other compensation as a result of such
subsequent reduction in the Note Purchase Price.
The Note Exercise Price is subject to adjustment as set forth in Section 5.
(b) Exercise Period of Exchange Right. At any time after the date
hereof and from time to time, the Exchange Right may be exercised by Purchaser
in its sole discretion, in whole or in part until such time as all of the Notes
are exchanged for Common Stock, paid at maturity or redeemed in accordance with
their terms.
(c) Exercise of Exchange Right. The Exchange Right shall be exercised
by written notice from Purchaser to Holdings (an "Exchange Notice") stating that
Purchaser desires to exercise an Exchange Right and setting forth: (i) the
proposed closing date, which (subject to the earlier satisfaction or waiver of
the condition set forth in Section 7) shall be within three days after the date
of delivery of such notice; provided, however, if Holdings has not received the
Notes BSRD described in Section 6(d) by such third day after the delivery of the
Exchange Notice, the Closing shall occur as soon as practicable following the
receipt of such Notes BSRD by Holdings, and (ii) the amount of Notes to be
exchanged expressed as a Conversion Principal Amount and such Conversion
Principal Amount shall be in multiples of $25,000.
(d) Exchange of Notes. (i) The Exchange Right will be deemed to be
exercised on the date of delivery of the Exchange Notice. The number of shares
of Common Stock to be issued and delivered to Purchaser in connection with the
delivery of the Exchange Notice shall be determined by dividing the Conversion
Principal Amount as set forth in such Exchange Notice by the Note Exercise Price
then in effect.
(ii) Any accrued and unpaid interest (other than accrued and unpaid
interest added to the Invested Principal Amount pursuant to Section 2.01 of the
Notes) in respect of any Notes to be exchanged into shares of Common Stock
pursuant to an Exchange Notice shall be paid in cash by the Company at the time
such Notes are exchanged.
(iii) No fractional shares of Common Stock or scrip representing
fractional shares of Common Stock shall be issued upon the exchange of the Note.
In lieu of any fractional
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share of Common Stock to which the Holder would otherwise be entitled, the
Company shall make a cash payment equal to the Note Exercise Price multiplied by
such fraction.
(e) Closing. The consummation of the exchange of Notes for Common
Stock contemplated by this Agreement (the "Exchange Closing") shall occur within
3 days after the date (a "Closing Date") of delivery of an Exchange Notice;
provided, however, if Holdings has not received the Notes BSRD described in
Section 6(d) by such third day after the delivery of the Exchange Notice, the
Closing shall occur as soon as practicable following the receipt of such Notes
BSRD by Holdings and the Company. In the event that all of Purchaser's Notes are
not exchanged pursuant to this Agreement at the Closing, Purchaser may engage in
successive closings (each, an "Exchange Subsequent Closing") with respect to the
completion of the exchange of its Notes for Common Stock.
(f) Closing Deliveries.
(i) At the Exchange Closing or any Exchange Subsequent Closing, as the
case may be, Holdings shall deliver to Purchaser (A) certificates
evidencing such number of shares of Common Stock (as calculated in
accordance with Section 2(d) above) (the "Exchange Shares"), pursuant to
the Exchange Notice to which the Exchange Closing or such Exchange
Subsequent Closing relates, in definitive form and registered in the name
of Purchaser and/or such assigns permitted pursuant to the Note and in such
denominations as Purchaser shall reasonably request, (B) proof of the
payment prior to such Closing Date of applicable documentary stamp taxes
and any other fees or costs imposed on the issuance of the Exchange Shares
by any Governmental Agency having jurisdiction over such issuance, and (C)
one or more of the Notes BSRDs, covering such amounts as necessary to cause
the registration of the Exchange Shares with the BSP and any other
document, certificate or report that may be required by the BSP in respect
of such registration.
(ii) At the Exchange Closing or any Exchange Subsequent Closing, as
the case may be, the Company shall deliver to Purchaser (A) an amount in
cash equal to any accrued and unpaid interest (other than accrued and
unpaid interest added to the Invested Principal Amount pursuant Section
2.01 of the Notes) in respect of the Notes exchanged into Common Stock
pursuant to the Exchange Notice delivered to Holdings under Section 2(d)
above and (B) a new Note representing the Current Invested Principal
Amount, if any.
(iii) At the Exchange Closing or any Exchange Subsequent Closing, as
the case may be, Purchaser shall deliver to Holdings such number of Notes
owned by Purchaser with an aggregate principal amount equal to the
Conversion Principal Amount as set forth in the Exchange Notice to which
the Exchange Closing or such Exchange Subsequent Closing relates, together
with an instrument of transfer reasonably satisfactory to Holdings duly
executed by Purchaser. Upon such delivery, and subject to Section 2(d)(ii)
above, Holdings shall receive the relevant Notes and all the rights
pertaining to a holder thereof other than the Exchange Rights.
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3. Mandatory Issuance of Common Stock
(a) Mandatory Issuance Rights. Subject to the terms and conditions set
forth herein, at any time after the date hereof and from time to time,
Purchaser, in its sole discretion, may elect to replace all of its Exchange
Rights with the right (the "Mandatory Issuance Rights") to (i) assign a
portion or all of the Notes to Holdings; provided, however, that prior to
such assignment, the Company shall redeem a portion of such Notes pursuant
to Section 3(c) hereof, and (ii) subscribe for shares of Common Stock (the
"Mandatory Issuance") at a price per share equal to the then par value of
one share of Common Stock (the "Issuance Purchase Price").
(b) Exercise of Mandatory Issuance Rights. The Mandatory Issuance
Right shall be exercised by written notice from Purchaser to Holdings (a
"Mandatory Issuance Notice") stating that Purchaser desires to exercise a
Mandatory Issuance Right and setting forth: (i) the proposed closing date,
which (subject to the earlier satisfaction or waiver of the condition set
forth in Section 7) shall be within three days after the date of delivery
of such notice, and (ii) the number of shares of Common Stock to be issued
to Purchaser in connection with the delivery of the Mandatory Issuance
Notice, which shall be determined by dividing (A) the Conversion Principal
Amount specified in the Mandatory Issuance Notice by (B) the Note Exercise
Price then in effect; provided, however, that if the Holder would receive
any fractional share of Common Stock pursuant to this calculation, the
Company shall make a cash payment to Purchaser equal to the Note Exercise
Price then in effect multiplied by such fraction.
(c) Redemption of Notes. Simultaneously with the consummation of the
Mandatory Issuance, the Company shall redeem from Purchaser for a cash
payment (including any accrued and unpaid interest (other than accrued and
unpaid interest added to the Invested Principal Amount pursuant to Section
2.01 of the Notes) relating to such redeemed Notes, the "Redemption
Payment") a portion of the Conversion Principal Amount of the Notes
specified in the Mandatory Issuance Notice equal to the aggregate Issuance
Purchase Price of the Shares being issued in the Mandatory Issuance. Such
redemption shall not be taken into account in calculating the number of
Mandatory Issuance Shares to be issued pursuant to Section 3(b)(ii) above.
(d) Payment of Interest. Any accrued and unpaid interest (other than
accrued and unpaid interest added to the Invested Principal Amount pursuant
to Section 2.01 of the Notes) on the assigned Notes shall be paid in cash
by the Company at the time such Notes are assigned.
(e) Closing. The consummation of the Mandatory Issuance contemplated
by this Agreement (the " Mandatory Issuance Closing", together with the
Exchange Closing, the "Closing") shall occur within three days after the
date (a "Mandatory Issuance Closing Date") of delivery of a Mandatory
Issuance Notice. In the event that all of Purchaser's Notes are not
assigned pursuant to this Agreement at the Mandatory Issuance Closing,
Purchaser may engage in successive closings (each, a "Mandatory Issuance
Subsequent Closing", together with an Exchange Subsequent Closing, a
"Subsequent Closing") with respect to the completion of the Mandatory
Issuance.
(f) Closing Deliveries.
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(i) At the Mandatory Issuance Closing or any Mandatory Issuance
Subsequent Closing, as the case may be, Holdings shall deliver to Purchaser
(A) certificates evidencing such number of shares of Common Stock (as
calculated in accordance with Section 3(b)(ii) above) (the "Mandatory
Issuance Shares"), pursuant to the Mandatory Issuance Notice to which the
Mandatory Issuance Closing or such Mandatory Issuance Subsequent Closing
relates, in definitive form and registered in the name of Purchaser and/or
such assigns permitted pursuant to the Note and in such denominations as
Purchaser shall reasonably request, (B) proof of the payment prior to such
Mandatory Issuance Closing Date of applicable documentary stamp taxes and
any other fees or costs imposed on the issuance of the Mandatory Issuance
Shares by any Governmental Agency having jurisdiction over such issuance,
(C) an executed signature page of the Subscription Agreement, a form of
which is attached hereto as Exhibit A (the "Subscription Agreement") and
(D) an executed signature page of the Note Assignment, a form of which is
attached hereto as Exhibit B (the "Note Assignment").
(ii) At the Mandatory Issuance Closing or any Mandatory Issuance
Subsequent Closing, as the case may be, the Company shall deliver to
Purchaser (A) an amount in cash equal to the sum of (x) any accrued and
unpaid interest (other than accrued and unpaid interest added to the
Invested Principal Amount pursuant Section 2.01 of the Notes) in respect of
the Notes assigned pursuant to the Mandatory Issuance Notice delivered to
Holdings under Section 3(b)(ii) above, (y) any cash payment in lieu of any
fractional share of Common Stock pursuant to Section 3(b)(ii) above, and
(z) the Redemption Payment, and (B) a new Note representing the Current
Invested Principal Amount, if any.
(iii) At the Mandatory Issuance Closing or any Mandatory Issuance
Subsequent Closing, as the case may be, Purchaser shall deliver to Holdings
(A) an executed signature page of the Subscription Agreement, (B) an
executed signature page of the Note Assignment, (C) such number of Notes
owned by Purchaser with an aggregate principal amount equal to the
Conversion Principal Amount as set forth in the Mandatory Issuance Notice
to which the Mandatory Issuance Closing or such Mandatory Issuance
Subsequent Closing relates, together with an instrument of transfer
reasonably satisfactory to Holdings duly executed by Purchaser, and (D) the
Issuance Purchase Price for the Mandatory Issuance Shares. Upon such
delivery, and subject to Section 3(c) above, Holdings shall receive the
relevant Notes and all the rights pertaining to a holder thereof other than
the Exchange Rights.
4. Representations and Warranties of Holdings and Purchaser
(a) As of the date hereof and as of the date of the Closing and each
Subsequent Closing, Holdings hereby represents and warrants to Purchaser as
follows:
(i) Existence. Holdings is a corporation duly organized, validly
existing and in good standing under the laws of the Philippines and has
full corporate power and authority to conduct its business and own and
operate its properties as now conducted, owned and operated.
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(ii) Authorization and Enforceability. Holdings has the full power and
authority and has taken all required corporate and other action necessary
to authorize and permit Holdings to execute and deliver this Agreement and
to carry out the terms hereof and to issue and deliver the Common Stock,
and none of such actions will violate any provision of Holdings' Articles
of Incorporation or any applicable Law, or rule of any stock exchange where
the ADSs are listed, or result in the breach of, or constitute a default
(or event which, with notice or lapse of time or both, would constitute a
default) under, any agreement, instrument or understanding to which
Holdings is a party or by which it is bound. This Agreement constitutes a
legal, valid and binding obligation of Holdings, enforceable against
Holdings in accordance with its terms, except to the extent limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and similar laws of general application related to the
enforcement of creditor's rights generally and (ii) general principles of
equity.
(iii) Issuance of Common Stock. The shares of Common Stock that may be
issued pursuant to this Agreement have been duly authorized and, when
issued and delivered in accordance with this Agreement, will be validly
issued and outstanding and will be fully paid, nonassessable and
registrable with the BSP.
(b) As of the date hereof and as of the date of the Closing and each
Subsequent Closing, Purchaser hereby represents and warrants to Holdings and the
Company as follows:
(i) Existence. Purchaser is a limited liability company, duly
organized and validly existing and in good standing under the laws of the
State of Delaware.
(ii) Authorization and Enforceability. Purchaser has the full power
and authority and has taken all action necessary to authorize and permit it
to execute and deliver this Agreement and to carry out the terms hereof and
none of such actions will violate any provision of Purchaser's
organizational documents or any applicable Law, or result in the breach of,
or constitute a default (or event which, with notice or lapse of time or
both, would constitute a default) under, any agreement, instrument or
understanding to which Purchaser is a party or by which it is bound. This
Agreement constitutes a legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except to the
extent limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application related to the
enforcement of creditor's rights generally and (ii) general principles of
equity.
5. Anti-Dilution Adjustments
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(a) If Holdings shall, while Purchaser's Exchange Rights or Mandatory
Issuance Rights under this Agreement are outstanding, issue or sell shares of
Common Stock or Common Stock Equivalents (as defined below) without
consideration or at a price per share or Net Consideration Per Share (as defined
below) less than the Current Market Price in effect immediately prior to such
issuance or sale then in such case the Note Exercise Price, except as
hereinafter provided, shall be lowered so as to be equal to an amount determined
by multiplying such Note Exercise Price by the following fraction:
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(N0+N1)/(N0+N2)
Where:
N0 = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares of Common
Stock or Common Stock Equivalents (calculated on a fully diluted basis
assuming the exercise or conversion of all then exercisable or
convertible options, warrants, purchase rights and convertible
securities).
N1 = the number of shares of Common Stock which the
aggregate consideration (without giving effect to any underwriter's
discounts or commissions) if any (including the Net Consideration Per
Share with respect to the issuance of Common Stock Equivalents),
received or receivable by Holdings for the total number of such
additional shares of Common Stock so issued or deemed to be issued
would purchase at the Current Market Price in effect immediately prior
to such issuance.
N2 = the number of such additional shares of Common Stock so
issued or deemed to be issued.
(b) For purposes of this Section 5, if a part or all of the
consideration received by Holdings in connection with the issuance of any
securities described in this Section 5 consists of property other than cash,
such consideration shall be deemed to have a fair market value as is reasonably
determined in good faith by the Board or a committee thereof. For the purposes
of this Section 5, the issuance of any warrants, options or subscription or
purchase rights with respect to shares of Common Stock and the issuance of any
securities convertible into or exchangeable for shares of Common Stock,
including the ADSs, and the issuance of any warrants, options or subscription or
purchase rights with respect to such convertible or exchangeable securities
(collectively, "Common Stock Equivalents") shall be deemed an issuance of Common
Stock. For the avoidance of doubt, if a Common Stock Equivalent is issued or
sold as part of a unit with any other security of Holdings or its Affiliates
that is not independent of a Common Stock Equivalent, such other security shall
not constitute a Common Stock Equivalent. Any obligation, agreement or
undertaking to issue Common Stock Equivalents at any time in the future shall be
deemed to be an issuance at the time such obligation, agreement or undertaking
is made or arises and no additional adjustment of the Note Exercise Price shall
be made upon issuance of the Common Stock pertaining thereto.
(c) For purposes of this Section 5, the "Net Consideration Per Share"
which shall be receivable by Holdings for any Common Stock issued upon the
exercise or conversion of any Common Stock Equivalents shall be determined as
follows:
(i) The amount equal to the total amount of consideration, if any,
received by Holdings for the issuance of such Common Stock Equivalents
(without giving effect to any underwriting discounts or commissions), plus
the minimum amount of consideration, if any, payable to Holdings upon
exercise, or conversion or exchange thereof, divided by
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the aggregate number of shares of Common Stock that would be issued if all
such Common Stock Equivalents were exercised, exchanged or converted.
(ii) In each instance such determination shall be made as of the date
of issuance of Common Stock Equivalents without giving effect to any
possible future upward price adjustments or rate adjustments which may be
applicable with respect to such Common Stock Equivalents.
(d) Section 5(a) shall not apply under any of the circumstances that
would constitute an Extraordinary Common Stock Event (as described below).
Further, Section 5(a) shall not apply with respect to the issuance or sale of
shares of Common Stock, or the grant of options or other Common Stock
Equivalents exercisable therefor, to current or former directors, officers,
employees and consultants of Holdings or any subsidiary pursuant to any
qualified or non-qualified stock option plan or agreement, stock purchase plan
or agreement, stock restriction agreement, employee stock ownership plan,
consulting agreement, or such other options, issuances, arrangements, agreements
or plans intended principally as a means of providing compensation for
employment or services, provided that in each such case such plan, agreement, or
other arrangement or issuance is approved by the vote or consent of the Board.
(e) Upon the happening of an Extraordinary Common Stock Event (as
described below), simultaneously with the happening of such Extraordinary Common
Stock Event, the Note Exercise Price shall be adjusted by multiplying the Note
Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such Extraordinary Common Stock
Event, and the product so obtained shall thereafter be the Note Exercise Price.
An "Extraordinary Common Stock Event" shall mean (i) the issue of
additional shares of Common Stock as a dividend or other distribution on
outstanding shares of Common Stock, (ii) a subdivision of outstanding shares of
Common Stock into a greater number of shares of Common Stock, or (iii) a
combination or reverse stock split of outstanding shares of Common Stock into a
smaller number of shares of the Common Stock.
(f) If the Common Stock shall be changed into the same or a different
number of shares of any other class or classes of capital stock, whether by
capital reorganization, recapitalization, reclassification or consolidation or
merger of Holdings with another corporation, or the sale of all or substantially
all of its assets to another corporation or otherwise (other than an
Extraordinary Common Stock Event), then in each such event Purchaser shall have
the right thereafter to receive upon exercise hereof, in lieu of the number of
shares of Common Stock which Purchaser would otherwise have been entitled to
receive, the kind and amount of shares of capital stock and other securities and
property which it would have received upon such reorganization,
recapitalization, reclassification or consolidation or merger of Holdings with
another corporation, or the sale of all or substantially all of its assets or
other change had Purchaser exercised the Exchange Right or Mandatory Issuance
Right immediately prior to such reorganization, recapitalization,
reclassification or consolidation or merger of Holdings with another
corporation, or the sale of all or substantially all of its assets or change,
all subject to
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further adjustment as provided herein. The provision for such
adjustments shall be a condition precedent to the consummation by Holdings of
any such transaction.
(g) Whenever on or after the date of this Agreement the number of
shares of Common Stock for which this Exchange Right or Mandatory Issuance Right
is exercisable or the Note Exercise Price is adjusted, as herein provided,
Holdings shall promptly give notice thereof to Purchaser, in accordance with
Section 9(b), by delivering a certificate which sets forth the Note Exercise
Price after such adjustment and a brief statement of the facts requiring such
adjustment. Such certificate shall also set forth the kind and amount of stock
or other securities or property for which this Exchange Right shall be
exercisable following the occurrence of any of the events specified above. The
foregoing anti-dilution adjustments shall not apply to any securities
outstanding prior to the date hereof.
6. Covenants
---------
(a) Holdings Reservation of the Common Stock. Holdings shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purposes of issuance upon exchange of the Notes or
pursuant to a Mandatory Issuance in accordance with this Agreement, such number
of shares of the Common Stock as are issuable upon the exchange of all then
outstanding Notes or pursuant to a Mandatory Issuance pursuant to this
Agreement. For the avoidance of doubt, the number of shares of Common Stock to
be reserved pursuant to the foregoing sentence shall be in addition to any
Common Stock reserved pursuant to the Company's 10.00% Exchangeable Senior
Subordinated Notes due 2008. All shares of Common Stock that are so issuable
shall, when issued, be duly and validly issued, fully paid and non-assessable
and free from all taxes, charges and Encumbrances. Holdings shall take all such
actions as may be necessary to assure that all such shares of Common Stock may
be so issued without violation of any applicable Law or Regulation or of any
requirements of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance, which shall be
immediately transmitted by Holdings upon issuance).
(b) Filings; Etc. Subject to the terms and conditions herein provided,
Purchaser, Holdings and the Company shall:
(i) make any required filings, and obtain the consents, approvals,
permits or authorizations, required to be made or obtained prior to the
Closing or a Subsequent Closing, as the case may be, with or from any
Governmental Agency;
(ii) to the extent permitted by Law and Regulation, agree not to
participate in any meeting or discussion with any Governmental Agency in
respect of any filings, investigation or other inquiry concerning this
Agreement or the transactions contemplated hereby unless they consult with
the other parties in advance and, to the extent permitted by such
Governmental Agency, gives the other parties the opportunity to attend and
participate in such meeting or discussion;
(iii) to the extent permitted by Law and Regulation, furnish the other
parties with copies of all correspondence, filings and communications (and
memoranda setting forth the substance thereof) between them and their
subsidiaries and their respective
12
representatives on the one hand, and any Governmental Agency or members of
any such agency's staff on the other hand, with respect to this Agreement
and the transactions contemplated hereby; and
(iv) furnish the other parties with such necessary information and
reasonable assistance as such other parties and their Affiliates may
reasonably request in connection with their preparation of necessary
filings, registrations or submissions of information to any governmental or
regulatory authorities.
(c) Without limiting Section 6(b), Purchaser, Holdings and the Company
shall:
(i) each use reasonable best efforts to avoid the entry of, or to have
vacated, terminated or modified, any decree, order or judgment that would
restrain, prevent or delay the consummation of the transactions
contemplated by this Agreement; and
(ii) each use reasonable best efforts to take any and all steps
necessary to obtain any consents and approvals or make any required filings
under Section 6(b) above or eliminate any impediments to the consummation
of the transactions contemplated by this Agreement.
(d) SEC Notification. In the event of a Mandatory Issuance, on or
prior to the Closing Date or any Subsequent Closing Date, Holdings shall have
notified the Philippine SEC of its exemption from registration requirements
under the Securities Regulation Code with respect to the issuance of the
Mandatory Issuance Shares by Holdings.
(e) BSP Filings. (i) Holdings and the Company agree that, on or prior
to December 31, 2005 they shall have (A) taken all action necessary to register
the full amount of the Notes as a foreign currency loan with the BSP and (B)
obtained the related BSRD (the "Notes BSRD"); provided, however, that if
Purchaser delivers to Holdings an Exchange Notice prior to December 31, 2005,
Holdings and the Company shall promptly take all action necessary to register
the amount of Notes subject to such Exchange Notice and obtain the related Notes
BSRD. Such action shall include filing of proof of receipt of the Purchase
Price, documents pertaining to the use of proceeds from the Purchase Price and
all other documents that may be required by the BSP to register the Notes and
issue the Notes BSRD.
(ii) Holdings and the Company agree that, for the benefit of Purchaser
or any transferee of Purchaser, they shall have (A) within 5 days of the Closing
or any Subsequent Closing, taken all action necessary to register the shares of
Common Stock issuable upon exchange of the Notes or pursuant to Mandatory
Issuance with the BSP and (B) within 30 days of the Closing or the Subsequent
Closing obtained the related BSRD (the "Shares BSRD"); provided, however, that
in the event that both (x) Purchaser exercises an Exchange Right prior to
December 31, 2005 and (y) the Philippine SEC has not approved the confirmatory
ruling, all actions set forth in this Section 7(e)(ii) shall be completed within
60 days of such Closing or Subsequent Closing instead of 30 days. Such action
shall include filing of the requisite Notes BSRD, if applicable, and all other
documents that may be required by the BSP to register the shares of Common Stock
and issue the Shares BSRD.
13
7. Conditions.
----------
The obligations of Holdings and Purchaser to complete the exchange of
Notes for Common Stock upon the exercise of an Exchange Right or to consummate a
Mandatory Issuance upon exercise of a Mandatory Issuance Right shall be subject
to the condition that none of the parties hereto shall be subject to any Law,
decree, order or injunction that prohibits the consummation of the transactions
contemplated hereby issued by a court of competent jurisdiction of (i) the
United States or any state or other jurisdiction in the United States or (ii)
the Republic of the Philippines; provided, however, that, prior to invoking this
condition, each party shall have complied with Section 6(b), and with respect to
other matters not covered by Section 6(b), shall have used its reasonable best
efforts to have any such decree, order or injunction lifted or vacated; and no
Law or Regulation shall have been enacted by any Governmental Agency which
prohibits or makes unlawful the consummation of the transactions contemplated by
this Agreement.
8. Owners of Notes Not Deemed Shareholders.
---------------------------------------
No owner of Notes shall, as such, be entitled to vote or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of
Exchange Rights or Mandatory Issuance Rights for any purpose whatsoever, nor
shall anything contained herein be construed to confer upon the owner of the
Notes, as such, any of the rights of a shareholder of Holdings or any right to
vote for the election of directors or upon any matter submitted to shareholders
at any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock, change
of par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings until such owner shall have exercised Exchange Rights or
Mandatory Issuance Rights in accordance with the provisions hereof.
9. General Provisions
------------------
(a) Survival of Representation and Warranties. The representations and
warranties of Holdings and Purchaser shall survive the Closing and each
Subsequent Closing until all of the Notes have been exchanged into shares of
Common Stock or assigned to Holdings, as applicable, paid at maturity or are
redeemed in accordance with their terms and all of the Mandatory Issuance Shares
have been issued, if applicable.
(b) Notice Generally. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by courier
service or by facsimile transmission (with written confirmation of receipt) to
the respective parties at the following addresses (or at such other address for
a party as shall be specified by notice given in accordance with this Section
9(b)):
(i) If to Purchaser, at
Xxxxxxx Xxxxx Global Emerging Markets Partners, LLC
World Financial Center, North Tower
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
14
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
and to any Holder, at the address
provided by such Holder
with a copy to:
Shearman & Sterling LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Facsimile: (000) 000-0000
(ii) If to Holdings or the Company, at
PSi Technologies, Inc.
Electronics Avenue
FTI Complex, Taguig
Metro Manila
Philippines
Attention: Xxxxxx X. Xxxxx, Xx.
Facsimile: (000) 000-0000
with a copy to:
Akin Gump Xxxxxxx Xxxxx & Xxxx LLP
0000 Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
and to:
X.X. Xxx Law Offices
No. 48, SMC Court
Celery Drive, Xxxxx Verde 5
Pasig City, Metro Manila
Philippines 1600
Attention: Xxxxx Go Xxx
Facsimile: (000) 000-0000
(c) Successors and Assigns; Third Party Beneficiaries. This Agreement
shall inure to the benefit of and be binding upon the successors and permitted
assigns of the parties hereto as hereinafter provided. The rights of Purchaser
with respect to the Notes shall be transferred to any Person who is a transferee
of such Notes. All obligations of Holdings
15
hereunder shall survive any such transfer. No person other than the parties
hereto and their successors and permitted assigns is intended to be a
beneficiary of this Agreement.
(d) Headings. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
(e) Governing Law; Jurisdiction. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
(i) Any claim, action, suit or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be heard and
determined in any New York State or federal court sitting in The City of
New York, County of Manhattan, and each of the parties hereto hereby
consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom in any such claim, action, suit or
proceeding) and irrevocably waives, to the fullest extent permitted by law,
any objection that it may now or hereafter have to the laying of venue of
any such claim, action, suit or proceeding in any such court or that any
such claim, action, suit or proceeding that is brought in any such court
has been brought in an inconvenient forum.
(ii) Subject to applicable law, process in any such claim, action,
suit or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Nothing
herein shall affect the right of any party to serve legal process in any
manner permitted by law or at equity. WITH RESPECT TO ANY SUCH CLAIM,
ACTION, SUIT OR PROCEEDING IN ANY SUCH COURT, EACH OF THE PARTIES
IRREVOCABLY WAIVES AND RELEASES TO THE OTHER ITS RIGHT TO A TRIAL BY JURY,
AND AGREES THAT IT WILL NOT SEEK A TRIAL BY JURY IN ANY SUCH PROCEEDING.
(f) Severability. If any term or other provision of this Agreement is
held to be invalid, illegal or incapable of being enforced by any rule of Law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions is not affected in any manner materially adverse
to any party. Upon a determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
(g) Amendments. This Agreement may not be amended, supplemented,
modified or restated nor may any provision herein be waived without the express
unanimous written consent of the Holders of a majority of the principal amount
of the Notes outstanding at such time, voting together as a single class;
provided, however, that no amendment, supplement or modification can be made to
the terms of the Exchange Right, including the Note Exercise Price, or the
Mandatory Issuance Rights, without the written consent of each Holder affected
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any
16
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition of this Agreement. The failure of any
Holder to assert any of its rights hereunder shall not constitute a waiver of
any of such rights. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
(h) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto.
(i) Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
(j) Construction. Each party hereto acknowledges and agrees that it
has had the opportunity to draft, review and edit the language of this Agreement
and that no presumption for or against any party arising out of drafting all or
any part of this Agreement will be applied in any dispute relating to, in
connection with or involving this Agreement. Accordingly, the parties hereto
hereby waive the benefit of any rule of Law or any legal decision that would
require, in cases of uncertainty, that the language of a contract should be
interpreted most strongly against the party who drafted such language.
(k) Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
17
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
PSI TECHNOLOGIES HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
----------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: Chairman of the Board and Chief
Executive Officer
PSI TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
----------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
and President
XXXXXXX XXXXX GLOBAL EMERGING
MARKETS PARTNERS, LLC
By: Xxxxxxx Xxxxx Global Emerging Markets
Partners, L.P.
as its Managing Member
By: Xxxxxxx Xxxxx Global Capital, L.L.C.
as its General Partner
By: Xxxxxxx Xxxxx Global Partners, Inc.
as its Managing Member
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Managing Director
