THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED
OR OTHERWISE TRANSFERRED OR DISPOSED EXCEPT IN COMPLIANCE WITH SUCH ACT AND THE
APPLICABLE RULES AND REGULATIONS THEREUNDER.
US $2,000,000 New York, New York
January 26, 1998
T/F PURIFINER, INC.
12% SENIOR SUBORDINATED CONVERTIBLE NOTE DUE 2003
T/F Purifiner, Inc., a Delaware corporation (the "Issuer"),
for value received hereby promises to pay to Quantum Industrial Partners LDC or
registered assigns (the "Holder") the principal amount of TWO MILLION DOLLARS
($2,000,000) plus any accrued and unpaid interest at such place or such bank
account in the United States of America as the Holder may from time to time
direct on January 1, 2003 in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
This Security is issued pursuant to a Note Exchange Agreement
dated as of January 26, 1998 by and between the Issuer and the Holder (the
"Exchange Agreement"). This Security is transferable and assignable at any time,
in whole or in part, to one or more purchasers or other persons. The Issuer
agrees to issue from time to time replacement Securities in the form hereof to
facilitate such transfers and assignments. In addition, after delivery of an
indemnity in form and substance satisfactory to the Issuer, the Issuer also
agrees to issue replacement Securities for the Security which have been lost,
stolen, mutilated or destroyed.
The Issuer shall keep at its principal office a register (the
"Register") in which shall be entered the names and addresses of the registered
holder(s) of the Security and particulars of all transfers of the Security. The
ownership of the Security shall be proven by the Register. For the purpose of
paying interest and principal on the Security, the Issuer shall be entitled to
rely on the name(s) and address(es) in the Register and notwithstanding anything
to the contrary contained in this Security, no Event of Default (as defined
below) shall occur under Section 6 if payment of principal is made in accordance
with the names and addresses and particulars contained in the Register.
No provision of this Security shall alter or impair the
obligations of the Issuer, which are absolute and unconditional, to pay the
principal of and interest on this Security at the place, times, rate, and in the
currency, herein prescribed.
1. Principal and Interest
The principal of this Security shall bear interest at the rate
of 12% per annum (the "Interest Rate") which shall accrue from the most recent
Interest Payment Date to which interest has been paid on this Security, or if no
interest has been paid on this Security from December 19, 1997 until payment in
full of the principal amount has been made and be payable in cash quarterly on
April 1, July 1, October 1 and January 1 of each year (an "Interest Payment
Date"), commencing on April 1, 1998, to the Holder hereof until the principal
amount is paid or made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment will be paid to
the Holder of the Security at the close of business on the Record Date for the
interest payable on such Interest Payment Date. The "Record Date" for any
interest payment is the close of business on March 15, June 15, September 15 or
December 15, as the case may be, whether or not a Business Day, immediately
preceding the Interest Payment Date on which such Interest is payable; provided,
however, that at the option of the Company, on any Interest Payment Date,
interest may, in lieu of being paid in cash, accrue and be added to the
principal balance of this Security. "Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized by law to close.
Any amounts that have become due and payable hereunder and
remain unpaid by the Issuer shall accrue interest thereafter until payment in
full of such amount at the rate of fifteen percent (15%) (the "Default Rate")
per annum and shall be payable upon demand by the Holder.
Interest, whether at the Interest Rate or the Default Rate,
will be computed on the basis of a fraction, the denominator of which is 360 and
the numerator of which is the actual number of days elapsed from the date such
interest becomes due and payable.
Each of the Interest Rate and the Default Rate shall be
effective both before and after any judgment may be rendered in a court of
competent jurisdiction, provided, however, that if either the Interest Rate or
Default Rate is deemed to be in excess of the amount permitted to be charged by
the Issuer under applicable laws, the Holder shall be entitled to collect an
Interest Rate or Default Rate, as the case may be, only at the highest rate
permitted by law, and any interest collected by the Holder in excess of such
lawful amount shall be deemed a payment in reduction of the Principal Amount
then outstanding under this Security and shall be so applied.
2. Subordination
The payment obligations evidenced by this Security shall be
subordinate to any indebtedness of the Issuer for cash advanced by any bank or
other financial institution ("Bank Debt") but shall rank senior to all other
indebtedness of the Issuer. The Issuer shall not issue, directly or indirectly,
any indebtedness which is senior to the indebtedness evidenced by this Security
unless such indebtedness is Bank Debt.
2
3. Redemption
A. Optional Redemption. This Security will be redeemable at
the option of the Issuer at any time, in whole or in part, upon not less than
thirty (30) nor more than sixty (60) days' notice, at 100% principal amount
thereof, plus accrued and unpaid interest.
At least thirty (30) days but not more than sixty (60) days
before a redemption date, the Issuer shall send a notice of redemption,
first-class mail, postage prepaid, facsimile with answer back and courier to
follow to the Holder(s) of this Security to be redeemed at the address(es) of
the Holder as they appear in the Register.
If this Security is redeemed subsequent to a Record Date with
respect to any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid on such Interest
Payment Date to the Holder of the Security on such Record Date.
B. Mandatory Redemption. The Security will be redeemable at
the option of the Holder(s) in whole or in part at any time on or after the
earlier of (i) January 1, 2001 and (ii) the date on which the Issuer raises cash
proceeds aggregating at least $10 million from any transaction or series of
transactions involving the sale of debt, equity or assets (a "Put Date") upon
not less than five (5) business days written notice to the Issuer at 100%
principal amount thereof, plus accrued and unpaid interest. The Issuer covenants
and agrees that it will immediately (but in any event within one (1) Business
Day) advise the Holder of the occurrence of any Put Date described in clause
(ii) above.
4. Affirmative Covenants of Issuer
X. Xxxxxx and Inspections. The Issuer will permit the Holder,
upon reasonable notice, to (i) visit and inspect the properties of the Issuer
during business hours, (ii) inspect and make extracts from and copies of its
books and records, and (iii) discuss with and obtain information from its
principal officers, its business, assets, liabilities, financial position,
results of operations and business prospects. The Issuer will also permit the
Holder to discuss with its respective auditors its businesses, assets,
liabilities, financial positions, results of operations and business prospects.
B. Reporting. The IssuerCD will make available or cause to be
made available to each Holder as soon as practicable (except to the extent such
Holder specifically requests otherwise):
(i) all annual, quarterly and periodic reports
prescribed by Sections 13, 14 and 15(d) of
the Exchange Act (whether or not the Issuer
is subject to such requirements);
(ii) all reports furnished to the Issuer's board
members and securityholders;
3
(iii) any reports (including management reports)
submitted to the Issuer by the Issuer's
independent public accountants
(iv) a copy of the annual budget for the Issuer
(in no event later than 60 days after the
commencement of each fiscal year) and any
material amendment thereto;
(v) notice of the commencement of and progress
of any material proceedings or
investigations by or before any governmental
body, court or arbitrator against, or to the
extent known to the Issuer, in any other way
relating adversely to the Issuer;
(vi) notice of any material adverse change with
respect to the business, financial position,
results of operations or prospects of the
Issuer;
(vii) notice and details of any default or the
occurrence or non-occurrence of any event
which constitutes, or which with the passage
of time or giving of notice or both would
constitute a default by the Issuer under any
material agreement other than this Agreement
to which the Issuer is party or by which any
of its properties may be bound;
(viii) such other information or reports relating
to the Issuer as the Holder may reasonably
request.
C. Reservation and Issuance of Common Stock. The Issuer
covenants that it will at all times reserve and keep available out of its
authorized shares of Common Stock par value $.001 per share (the "Common
Stock"), free from preemptive rights, solely for the purpose of issue upon
conversion of the Securities as herein provided, such number of shares of the as
shall then be issuable upon the conversion of all outstanding shares of the
Securities into Common Stock. The Issuer covenants that all shares of Common
Stock which shall be so issuable shall, when issued, be duly and validly issued
and fully paid and non-assessable.
D Compliance With Governmental Requirements. The Issuer
covenants that if any shares of Common Stock required to be reserved for
purposes of conversion of Securities hereunder require registration with or
approval of any governmental authority under any Federal or State law, or any
national securities exchange, before such shares may be issued upon conversion,
the Issuer will use its best efforts to cause such shares to be duly registered
or approved, as the case may be.
E. Notification of Certain Matters. The Issuer shall notify
the Holders promptly (and in any event no later than 10 days prior to any
applicable record date) of any proposal for the authorization or issuance of
rights or other distributions to
4
securityholders, any subdivision, combination or reclassification affecting the
capital stock, any merger or consolidation affecting the Issuer, the voluntary
or involuntary dissolution, liquidation or winding-up of the Issuer or any sale
or transfer of any significant portion of the Issuer's assets.
5. Negative Covenants
A. Restricted Payments. Without the written consent of a
majority of holders of an aggregate principal amount of the Securities
outstanding (the "Majority Holders"), the Issuer will not make to any Person (i)
any dividend or other payment or distribution on any capital stock of the
Issuer; (ii) any payment on account of the purchase, redemption, retirement or
other acquisition of any shares of the Issuer's capital stock any option,
warrant or other right to acquire shares of the Issuer's capital stock, or (iii)
any defeasance, redemption, repurchase or other acquisition or retirement for
value prior to scheduled maturity of any indebtedness ranked pari passu or
subordinate in right of payment to the Securities and having a maturity date
subsequent to the maturity of the Securities. "Person" means an individual,
corporation, limited liability company, partnership, association, trust or other
entity or organizations, including a government or political subdivision or an
agency or instrumentality thereof.
B. Transactions with Affiliates. Without the written consent
of the Majority Holders, the Issuer shall not conduct any business or enter into
any transactions or series of similar transactions with an Affiliate of the
Issuer or any legal or beneficial owner of 5% or more of any class of capital
stock of the Issuer with an Affiliate of such owner unless the terms of such
business transaction or series of transactions are set forth in writing and as
favorable to the Issuer as terms that would be obtainable at the time for a
comparable transaction or series of similar transactions in arm's length
dealings with an unrelated third person. For purposes of this paragraph B,
Quantum Industrial Partners LDC shall not be deemed to be and Affiliate.
Notwithstanding the foregoing, the Issuer shall not make, or cause any other
party to make, any loans to any shareholders of the Company. The Company further
agrees that it will not enter into any transaction with any Affiliate or any
legal or beneficial owner of 5% or more of any class of capital stock of the
Company or an Affiliate or family member of such person unless the terms of such
transaction have been presented to and approved by the Board of Directors of the
Issuer. "Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
C. Amendment to Certain Documents. The Issuer shall not enter
into any amendment of, or agree to or accept or consent to any waiver of any of
the material
5
provisions of its certificate of incorporation (including any certificate of
designation) or By-laws.
6. Default
The occurrence of any of the following events or conditions
shall constitute an event of default (each an "Event of Default") with respect
to the Issuer of this Security:
(a) Any amounts due under this Security are not paid on the
day after the due date therefore.
(b) The Issuer or any subsidiary of the Issuer (i) shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or Issuer shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against Issuer any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of ninety
(90) days.
(c) The Issuer shall fail to perform any agreement or covenant
on its part contained herein or in the Exchange Agreement.
(d) Any default by the Issuer or any subsidiary with respect
to any indebtedness (whether existing or hereinafter created) which
would permit the holder thereof to declare such indebtedness to be due
and payable prior to its stated maturity.
Upon the occurrence and during the continuance of an Event of
Default, the Holder will have the option, upon notice to the Issuer, of
declaring the principal amount hereunder together with unpaid accrued interest
thereon to be immediately due and payable.
The Issuer agrees to pay on demand all of the Holder's costs
and expenses, including without limitation reasonable attorneys' fees, in
connection with the collection of any sums due the Holder, the enforcement or
protection of its rights hereunder, any amendment to this Security or any waiver
hereunder or under the Exchange Agreement.
No failure on the part of the Holder or other holders hereof
to exercise any right or remedy hereunder, whether before or after the happening
of a default shall constitute a waiver thereof, and no waiver of any past
default shall constitute waiver of
6
any future default or of any acceptance of a past due installment, or indulgence
granted from time to time shall be construed to be a waiver of the right to
insist upon prompt payment thereafter or to impose late charges retroactively or
prospectively, or shall be deemed to be a novation of this Security or as a
reinstatement of the debt evidenced hereby or as a waiver of such right or
acceleration or any other right, or be construed so as to preclude the exercise
of any right which the Holder may have, whether by the laws of the State of New
York, by agreement or otherwise; and the Issuer hereby expressly waives the
benefit of any statute or rule of law or equity which would produce a result
contrary to or in conflict with the foregoing.
7. Conversion
Subject to and upon compliance with the provisions of this
Section, the principal amount of this Security, or any portion thereof may, at
any time and at or before the close of business on January 1, 2003, or
thereafter if any Event of Default shall occur and be continuing, be converted
into duly authorized, validly issued, fully-paid and nonassessable shares of
Common Stock at $2.75 per share (the "Conversion Price"), or, in case an
adjustment in the Conversion Price and the securities or other property issuable
upon conversion has taken place pursuant to Section 8 hereof, then at the
applicable Conversion Price and in such securities or other property as so
adjusted, upon surrender of the Security or Securities, the principal amount of
which is so to be converted, to the Issuer at any time during usual business
hours at the Issuer's offices, accompanied by a written notice of election to
convert as provided in the form attached hereto and, if so required by the
Issuer, by a written instrument or instruments of transfer in form satisfactory
to the Issuer duly executed by the registered holder or his attorney duly
authorized in writing.
No payment or adjustment will be made for dividends on any
Common Stock except as provided in Section 8 hereof. On conversion of a
Security, that portion of any interest accrued and unpaid interest attributable
to the period from December 19, 1997 to the Conversion Date with respect to the
converted Security shall not be canceled, extinguished or forfeited, but rather
shall be deemed to be paid in full to the Holder thereof through delivery of the
Common Stock, in exchange for the Security being converted pursuant to the
provisions hereof. If the Holder converts more than one Security at the same
time, the number of shares of Common Stock issuable upon the conversion shall be
based on the total Principal Amount of the Securities converted.
As promptly as practicable after the surrender, as herein
provided, of any Security or securities for conversion, the Issuer shall deliver
or cause to be delivered at its said office or agency to or upon the written
order of the holder of the Security or securities so surrendered a certificate
or certificates representing the number of duly authorized, validly issued,
fully-paid and nonassessable shares of Common Stock, into which such Security or
Securities may be converted in accordance with the provisions of Section 7.
Prior to delivery of such certificate or certificates, the Issuer shall require
a written notice at its said office or agency from the Holder of the Security or
securities so
7
surrendered stating that the holder irrevocably elects to convert such Security
or Securities, or, if less than the entire principal amount thereof is to be
converted, stating the portion thereof to be converted. Such notice shall also
state the name or names (with address and social security or other taxpayer
identification number) in which said certificate or certificates are to be
issued. Such conversion shall be deemed to have been made at the time that such
Security or Securities shall have been surrendered for conversion and such
notice shall have been received by the Issuer, the rights of the holder of such
Security or Securities as a Securityholder shall cease at such time, the person
or persons entitled to receive the shares of Common Stock, upon conversion of
such Security or Securities shall be treated for all purposes as having become
the record holder or holders of such shares of Common Stock at such time and
such conversion shall be at the Conversion Price in effect at such time. In the
case of any Security which is converted in part only, upon such conversion, the
Issuer shall execute and deliver to the holder thereof, as requested by such
holder, a new Security or securities of authorized denominations in aggregate
principal amount equal to the unconverted portion of such Security.
8. Adjustment of Conversion Price
The Conversion Price in effect at any time shall be subject to
adjustment from time to time upon the happening of certain events, as follows:
(i) In case the Issuer shall at any time after the
date hereof (1) declare or pay a dividend in shares of Common
Stock or make a distribution of Common Stock, (2) subdivide
its outstanding shares of Common Stock, (3) combine its
outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (4) issue any shares of its capital
stock in a reclassification of Common Stock (including any
such reclassification in connection with a consolidation or
merger in which the Issuer is the continuing entity), the
number of shares of Common Stock purchasable upon conversion
immediately prior thereto shall be adjusted so that the Holder
of the Securities shall be entitled to receive the number
shares of Common Stock or other securities of the Issuer which
he would have owned or have been entitled to receive after the
happening of any of the events described above, had conversion
occurred immediately prior to the happening of such event or
any record date with respect thereto. An adjustment made
pursuant to this paragraph (i) shall become effective
immediately after the effective date of such event retroactive
to the record date, if any, for such event.
(ii) In case the Issuer shall at any time after the
date hereof issue rights, options or warrants to all holders
of its outstanding Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share
which is lower at the record date mentioned below than the
higher (A) of the market price per share of the Common Stock
(as
8
defined in Section (v) below) and (B) the Conversion Price,
then the number of shares of Common Stock thereafter
purchasable upon conversion shall be determined by multiplying
the number of shares of Common Stock theretofore purchasable
upon conversion by a fraction, of which the numerator shall be
the number of shares of Common Stock outstanding on the record
date for determining stockholders entitled to receive such
rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares of
Common Stock outstanding on the record date for determining
stockholders entitled to receive such rights, options or
warrants plus the number of shares which the aggregate
offering price of the total number of shares of Common Stock
so offered would purchase at the current market price per
share of Common Stock at such record date. Such adjustment
shall be made whenever such rights, options or warrants are
issued, and shall become effective as of immediately after the
record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(iii) In case the Issuer shall at any time after the
date hereof distribute to all holders of its shares of Common
Stock evidences of its indebtedness or assets (including
securities and cash dividends not paid out of funds legally
available for the payment of dividends under the laws of the
jurisdiction of incorporation of the Issuer or not made in the
ordinary course of business), but excluding dividends or
distributions referred to in Section (i) above or rights or
options or warrants referred to in Section (ii) above, then in
each case the number of shares of Common Stock thereafter
purchasable upon conversion shall be determined by multiplying
the number of shares of Common Stock theretofore purchasable
upon conversion by a fraction, of which the numerator shall be
then current market price per share of Common Stock (as
defined in Section (v) below) on the date of such
distribution, and of which the denominator shall be then
current market price per share of Common Stock, less then fair
value (as reasonably determined in good faith by the Board of
Directors of the Issuer, whose reasonable determination shall
be conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights or
securities or warrants applicable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date
of distribution retroactive to the record date for the
determination o shareholders entitled to receive such
distribution.
(iv) In case the Issuer shall at any time after the
date hereof issue shares of Common Stock, or rights, options,
warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock
(excluding (A) shares, rights, options, warrants
9
or convertible or exchangeable securities issued in any of the
transactions described in Sections (i) through (iii) above and
(B) 42,650 options contemplated to be issued to G & S
Technologies, Inc., as described in Schedule 3.8 to the
Exchange Agreement, a price per share of Common Stock (as
determined in accordance with Section (v) below) that is lower
than the higher of (A) the current market value per share of
Common Stock (as determined in accordance with Section (v)
below) on the date of such sale or issuance or on the date of
the agreement for such sale or issuance (whichever is more)
and (B) the Conversion Price, then in each case the number of
shares of Common Stock thereafter purchasable upon conversion
shall be increased by multiplying the number of shares of
Common Stock theretofore purchasable upon the conversion by a
fraction, the numerator of which shall be (I) the total number
of shares of Common Stock issuable in connection with such
sale and issuance, and the denominator of which shall be (II)
the number of shares of Common Stock that the aggregate
consideration received (determined as provided below) for such
sale or issuance would purchase at the higher of the prices
referred to in (A) and (B) above. Such adjustment shall be
made successively whenever such an issuance is made. For the
purposes of such adjustments, the shares of Common Stock that
the holder of such rights, options, warrants, or convertible
or exchangeable securities shall be entitled to subscribe for
or purchase shall be deemed to be issued and outstanding as of
the date of such sale and issuance and the consideration
received by the Issuer therefor shall be deemed to be the
consideration received by the Issuer, plus the consideration
or premiums stated in such rights, options, warrants or
convertible or exchangeable securities to be paid for the
shares of Common Stock covered thereby. In case the issuer
shall sell and issue shares of Common Stock or rights,
options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase Common
Stock, for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in
determining the "price per share of Common Stock" and the
"consideration received by the Issuer" for purposes of the
first sentence of this Section (iv), the Board of Directors of
the Issuer shall determine, on a reasonable basis and in good
faith, the fair value of such property. In case the Issuer
shall sell and issue rights, options, warrants or convertible
or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock together with one or
more other securities as part of a unit at a price per unit,
then in determining the "price per share of Common Stock" and
the consideration received by the Issuer for purposes of the
first sentence of this Section (iv), the Board of Directors
shall determine, on a reasonable basis and in good faith, the
fair value of the rights, options, warrants or convertible or
exchangeable securities then being sold as part of such unit.
10
(v) For the purpose of any computation under sections
(ii) through (iv) above, the current market price per share of
Common Stock at any date shall be the average of the current
market value of Common Stock for the 20 consecutive trading
days commencing 30 trading days prior to such date; provided,
that, if the Common Stock is not then publicly traded, the
current market price per share shall be the average of the
market value of the Common Stock of the last 20 consecutive
trading days prior to the last day of trading; provided,
however that such date is not earlier than 180 days prior to
the date as of which such price is required to be determined,
and otherwise such price shall be determined by an opinion of
a nationally recognized independent investment bank selected
by the mutual agreement of the Issuer and the Holder. In the
case of rights, options, warrants or convertible or
exchangeable securities, the price per share of Common Stock
shall be determined by dividing (x) the total amount received
or receivable by the Issuer in consideration of the sale and
issuance of such rights, options, warrants or convertible or
exchangeable securities, plus the total consideration payable
to the Issuer upon exercise or conversion or exchange thereof,
by (y) the total number of shares of Common Stock covered by
such rights, options, warrants or convertible or exchangeable
securities.
(vi) No adjustment in the number of shares of Common
Stock convertible hereunder shall be required unless such
adjustment would result in an increase or decrease of at least
one percent (1%) of the number of shares of Common Stock for
which shares of the Securities are convertible; provided, that
any adjustments which by reason of this Section (vi) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. Whenever an adjustment
shall be made pursuant to (i) through (v) above, the
Conversion Price shall be adjusted accordingly. All
calculations shall be made to the nearest one-thousandth of a
share.
(vii) No adjustment in the number of shares of Common
Stock received upon conversion need be made under Sections
(ii) through (iv) above if the Issuer issues or distributes to
the Holder of the Securities shares of Common Stock, the
shares, rights, options, warrants, or evidences of
indebtedness or assets referred to in those Sections which
such Holder would have been entitled to receive had this
conversion not occurred prior to the happening of such event
or the record date with respect thereto.
(viii) For the purpose of this Section 8, the term
"shares of Common Stock" shall mean (i) Common Stock of the
Issuer, or (ii) any other class of stock resulting from
successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value
11
to no par value, or from no par value to par value. In the
event that at any time, as a result of an adjustment made
pursuant to clause (ii) above, the Holders shall become
entitled to receive any securities of the Issuer other than
shares of Common Stock, thereafter the number of such other
shares so receivable upon conversion shall be subject to
adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock contained in Section (i)
through (iv) above, and the other provisions of this Section 8
shall apply on like terms to any such other securities.
(ix) Except as provided in Sections (i) through (iii)
above, no adjustment in respect of any dividends shall be made
during the term of the Securities or upon the conversion of
the Securities.
(x) Upon the expiration of any rights, options,
warrants or conversion or exchange privileges with respect to
which an adjustment shall have been made pursuant to Section
(ii) or (iv) above, if any rights, options, warrants or
conversion or exchange privileges thereof have not been
exercised, the number of shares of Common Stock purchasable
upon conversion will, upon such expiration, be readjusted and
will thereafter be such as it would have been had it been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (i) the only shares of
Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options or warrants or conversion or exchange rights and (ii)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Issuer upon such
exercise, conversion or exchange plus the aggregate
consideration, if any actually received by the Issuer for the
issuance, sale or grant of all such rights, options or
warrants, whether or not exercised.
Whenever the number of shares purchasable upon conversion
shall be adjusted as required by the provisions of this Section 8, the Issuer
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and with its stock transfer agent, if any, an officers'
certificate showing the adjusted number of shares determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment and the
manner of computing such adjustment. Each such officers' certificate shall be
signed by the chairman, president or chief financial officer of the Issuer and
by the secretary or any assistant secretary of the Issuer. Each such officers'
certificate shall be made available at all reasonable times for inspection by
any holder of shares of the Securities and the Issuer shall, forthwith after
each such adjustment, mail a copy, by first-class mail, of such certificate to
the each of the Holders.
9. Reclassification, Reorganization, Consolidation or Merger
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In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock of the Issuer (other than a
subdivision or combination of the outstanding Common Stock and other than a
change in the par value of Common Stock) or in case of any consolidation or
merger of the Issuer with or into another corporation (other than a merger with
a subsidiary in which merger the Issuer is the continuing corporation and that
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon conversion) or
in case of any sale, lease, transfer or conveyance to another corporation of the
property and assets of the Issuer as an entirety or substantially as an
entirety, the Issuer shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the right
thereafter, by converting such Xxxxxx's shares of the securities, to receive in
lieu of the receipt of shares of Common Stock the kind and amount of shares of
stock and other securities and property (including cash) receivable upon such
reclassification, capitalization, reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock that would have been received upon conversion immediately prior to
such reclassification, capitalization, reorganization, change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments in respect of such shares of stock and other securities and property
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Security. The foregoing provisions of this paragraph shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such
capitalization reorganization or reclassification, consolidation, merger, sale
or conveyance, additional shares of Common Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for, or of, a security
of the Issuer other than Common Stock, any such issue shall be treated as an
issue of Common Stock covered by the provisions of Paragraph (iv) of Section 8.
10. Miscellaneous
This Security shall be deemed to be a contract under the laws
of the State of New York, and for all purposes shall be construed in accordance
with the laws of said State, without regard to any conflict of law provisions.
The parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Security, except as specifically provided herein, and assent to extensions of
the time of payment, or forbearance or other indulgence without notice. The
Holder of this Security by acceptance of this Security agrees to be bound by the
provisions of this Security which are expressly binding on such Holder.
In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Security, Securities which are owned by the Issuer or any
other obligor on the Securities or by any person directly or indirectly
controlling or controlled by or under direct or
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indirect common control with the Issuer or any other obligor on the Securities
shall be disregarded and deemed not to be outstanding for the purpose of any
such determination; provided that any Securities owned by Quantum Industrial
Partners LDC or any Affiliate thereof shall be deemed outstanding for purposes
of making such a determination.
The Issuer may not assign any of its rights or delegate any of
its obligations under this Security (or any part thereof) without the prior
written consent of the Holder.
The Issuer represents, warrants and covenants to Holder that
it shall use its last efforts to repay this Security in accordance with the
terms hereof.
The Section headings herein are for convenience only and shall
not affect the construction hereof.
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IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.
T/F PURIFINER, INC.
[Seal]
By_________________________
Name:
Title
Dated: ____________________ __, 1998
Attest:
______________________________________
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[FORM OF CONVERSION NOTICE]
12% Senior Subordinated Convertible Note due 2003
To: T/F Purifiner, Inc.
The undersigned owner of this Security hereby: (i) irrevocably
exercises the option to convert this Security, or the portion hereof below
designated, for shares of Common Stock, par value $.01 per share ("Common
Stock"), of T/F Purifiner, Inc. in accordance with the terms of this Security
and (ii) directs that such shares of Common Stock deliverable upon the
conversion, together with any check in payment for fractional shares and any
Security(ies) representing any unconverted principal amount hereof, be issued
and delivered to the registered holder hereof unless a different name has been
indicated below. If shares are to be delivered registered in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Dated:__________
Name:____________________________
Signature________________________
Principal Amount to be Converted: (if less
than all)
$____________________________
Fill in for registration of shares if to be delivered, and of
Securities if to be issued, otherwise than to and in the name of the registered
holder.
____________________________
Social Security or Other
Taxpayer Identification Number
____________________________
(Name)
____________________________
(Street Address)
____________________________
(City, State and Zip Code)
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