FORM OF NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY APPLICABLE LAW OR REGULATION OF ANY STATE AND IS NOT
TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN SECTION 4.3 OF THE
PURCHASE AGREEMENT REFERRED TO HEREIN.
THE NOTES REPRESENTED BY THIS INSTRUMENT AND THE OTHER SECURITIES WHICH
MAY BECOME ISSUABLE UPON EXERCISE OF CERTAIN CONTINGENT RIGHTS HEREUNDER
HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY OTHER SECURITIES
LAWS, AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY "U.S. PERSON" (AS DEFINED IN
REGULATION S UNDER THE ACT) PRIOR TO FEBRUARY 10, 1998, UNLESS REGISTERED
UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT IS AVAILABLE. THE CONTINGENT RIGHTS SET FORTH IN THIS INSTRUMENT MAY
NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON (AS DEFINED IN
REGULATION S UNDER THE ACT) UNLESS THE SECURITIES ISSUABLE UPON THE
EXERCISE THEREOF ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
METALCLAD CORPORATION
ZERO COUPON SECURED NOTE
Due December 31, 2002
$______________ Dated as of December 31, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, the undersigned, METALCLAD CORPORATION, a Delaware
corporation (herein, together with any successor, referred to as the
"Company"), hereby promises to pay to ________________________________or
its registered assigns, the principal sum of $__________ on December 31,
2002 without interest, except in the event of the occurrence of an Event
of Default. Upon the occurrence of an Event of Default (hereinafter
defined), interest at the Default Rate shall be paid on the "Discounted
Present Value" of this Note. As used herein "Discounted Present Value"
shall be based on a simple interest rate of 9 1/3% per annum without
compounding and shall be calculated in accordance with the following
formula:
n
----
PP + (46 2/3% PP x 1826)
wherein PP equals the "Purchase Price" (hereinafter defined) of this Note,
n equals the number of days elapsed from and including the date of
issuance of this Note to and including (A) the date of payment pursuant to
a demand by the Noteholder for redemption pursuant to the exercise by the
Noteholder of its contingent right of redemption or (B) the date of
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payment pursuant to the exercise by the Company of its contingent right of
prepayment or (C) upon the occurrence of an Event of Default, as the case
may be, and 1826 equals the total number of days from and including the
date of issuance to and including the date of maturity of the Note
(December 31, 1997 through and including December 31, 2002). Upon the
occurrence of an Event of Default, the Discounted Present Value of this
Note shall become immediately due and payable and shall bear interest at
the Default Rate from the date of such occurrence until paid in full.
The "Default Rate" shall be a per annum interest rate equal to the
greater of (w) 15% or (x) the sum of 60/o plus the rate announced from
time to time by Citibank, N.A. as its prime or stated rate for unsecured
short-term U.S. dollar commercial loans within the United States (the
"Prime Rate"), provided, however, that in no event shall the Default Rate
exceed the maximum nonusurious per annum interest rate permitted by
applicable law. As used herein, the term "Purchase Price" shall mean the
principal amount of this Note multiplied times .68181819, and the term
"Event of Default" shall have the meaning set forth in the "Purchase
Agreement" hereinafter referred to.
If any payment of Default interest due hereunder becomes due and
payable on a day which is not a "Business Day" (as defined in the Purchase
Agreement), the due date thereof shall be the next preceding day which is
a Business Day, and the interest payable on such next preceding Business
Day shall be the interest which would otherwise have been payable on the
due date which was not a Business Day.
Payments of principal and interest shall be made in lawful money of
the United States of America at the principal office of the Company at
Newport Beach, California, or at such other place as the Company shall
have designated for such purpose to the holder hereof in writing, as
provided in the Purchase Agreement referred to below, or to the address or
account designated by the holder hereof for such purpose.
This Note is one of a duly authorized issue of Zero Coupon Secured
Notes in an aggregate principal amount of U.S. $2,200,000 maturing
December 31, 2002 issued pursuant to a Purchase Agreement dated as of
December 31, 1997 between the Company and the purchasers ("Purchasers"
and, individually, a "Purchaser") named in the Purchase Agreement
("Purchase Agreement").
This Note is subject to the provisions of, is entitled to the
benefits of, and is subject to the rights of the Company and the
obligations of the holder set forth in the Purchase Agreement which
provide, inter alia that in the event that the "Market Price" (as defined
in the Purchase Agreement) of the Common Stock of the Company ("Common
Stock") shall equal or exceed U.S. $1.50 per share for not less than ten
consecutive trading days (hereinafter sometimes referred to as the
"Trigger Event"): (I) this Note shall automatically become convertible,
and may thereafter be converted at the option of the holder hereof
(subject to the rights of the Company under subdivision (iv) below and the
last sentence of the succeeding paragraph hereof) without necessity of
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further act (other than the receipt by the holder from the Company of
notice that the "Trigger Event" has occurred, which notice the Company is
obliged to give pursuant to the terms of the Purchase Agreement within ten
calendar days after the occurrence of the "Trigger Event"), in whole or in
part (in increments of not less than U.S. $50,000.00 of the Purchase Price
of this Note) into the Common Stock ("Common Stock") of the Company at the
conversion rate of 667 shares of Common Stock for each U.S. $1,000.00 of
such Purchase Price subject to adjustment pursuant to the anti-dilution
provisions set forth in the Purchase Agreement and referred to therein as
the "OFW Rachet Clause" (said conversion rate as the same may be so
adjusted being hereinafter sometimes referred to as the "Conversion
Rate"), (ii) at such time, if ever, as this Note becomes convertible as
hereinabove set forth, and if this Note is so converted, the right of the
holder hereof to receive any and all interest ("Total Interest") in
respect of this Note, whether accrued or to be accrued, which amount of
interest from issuance through maturity is agreed to be equal to .318181
multiplied times the face amount of this Note so that if this Note becomes
convertible following the occurrence of a "Trigger Event" and is
converted, the right of the holder of this Note to receive Total Interest
shall be canceled, (iii) the Company shall forthwith issue to the holder
of this Note 1,000 Warrants "Warrants" as defined in the Purchase
Agreement to purchase shares of the Common Stock of the Company at an
exercise price of $1.50 per share for each $1,000 portion of the Purchase
Price of this Note, pro rated for amounts of less than $1,000 (said
exercise price as the same may be adjusted pursuant to the OFW Rachet
Clause, being hereinafter sometimes referred to as the "Warrant Exercise
Price"), said Warrants to expire at 5:00 p.m., California time, on
December 31, 2002, and (iv) shall be converted upon (A) the occurrence of
a "Trigger Event" and the receipt of notice thereof by the holder from the
Company, and (B) notice that the Company has exercised its right to
require the holder hereof to convert this Note into shares of the
Company s Common Stock at the Conversion Rate upon receipt by the holder
from the Company of not less than 5 nor more than 15 calendar days after
the occurrence of an "MTLC Optional Conversion Event." As used herein, the
term "MTLC Optional Conversion Event" shall mean the occurrence of any
period during which the Market Price of the Common Stock equals or exceeds
$3.00 per share for not less than 60 consecutive trading days, it being
understood that the failure of the Company to give the holder, and the
holder to receive, such notice of the occurrence of an MTLC Optional
Conversion Event within such 15-day period shall cause the lapse of the
Company s right to require such conversion in respect of such MTLC
Optional Conversion Event without prejudice to the further exercise of
such right upon the occurrence of another MTLC Optional Conversion Event
prior to the maturity of this Note provided the Company gives, and the
holder receives, such notice of the occurrence of such MTLC Conversion
Event within 15 calendar days following the occurrence thereof.
Notwithstanding the foregoing, the holder of this Note shall have the
right, exercisable at any time on or after April 15, 1999, of requiring
the Company to redeem this Note ("Mandatory Redemption") at a price equal
to the Discounted Present Value hereof as at the date payment is made
pursuant to such demand for redemption. In the event of such a demand for
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redemption, payment shall be effected within 30 calendar days following
the date of such demand and concurrently with such payment the Company
will issue to the holder of this Note 1,000 Warrants for each $1,000.00 of
the Purchase Price of the Notes being redeemed (provided such Warrants
have not been previously issued to the Noteholder). Further,
notwithstanding the foregoing, the Company shall have the right at any
time after April 15, 1999 and prior to receipt by the Company of notice
from any Noteholder of the exercise of any right of conversion it may then
have to prepay all the Notes at their Discounted Present Value calculated
to the date of such prepayment provided concurrently therewith the Company
issues to the holders of the Notes, 1,000 Warrants for each $1,000.00 of
the Purchase Price thereof (provided such Warrants have not been
previously issued to the Noteholder)
The Note is transferable only upon the terms and conditions specified
in the Purchase Agreement.
If an Event of Default, as defined in Section 7 of the Purchase
Agreement, shall occur and be continuing, the Discounted Present Value of
this Note may be declared immediately due and payable in the manner and
with the effect provided in the Purchase Agreement and this Note.
No reference herein to the Purchase Agreement and no provision hereof
or thereof shall alter or impair the obligations of the Company, which are
absolute and unconditional, to pay the principal hereof and interest
hereon at the respective times and places specified herein and in the
Purchase Agreement.
This Note is delivered in and shall be construed and enforced in
accordance with and governed by the laws of the State of New York (other
than any conflict of laws rules which might result in the application of
the laws of any other jurisdiction).
Subject to the provisions of Section 4.3 of the Purchase Agreement,
the Company may treat the person in whose name this Note is registered as
the owner and holder of this Note for the purpose of receiving payment of
principal of, premium, if any, and interest on this Note and for all other
purposes whatsoever, and the Company shall not be affected by any notice
to the contrary (except that the Company shall comply with the provisions
of Section 4.3 of the Purchase Agreement regarding the issuance of a new
Note or Notes to permitted transferees).
IN WITNESS WHEREOF, Metalclad Corporation has caused this Note to be
duly executed and delivered as of December 31, 1997.
METALCLAD CORPORATION
By: /S/Xxxxx x. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx, President
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