EXHIBIT 10.7
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE
REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
SUCH STATE SECURITIES LAWS.
THE INDEBTEDNESS SECURED BY THIS NOTE IS SUBORDINATED TO OTHER INDEBTEDNESS
PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE SUBJECT TO THE
TERMS OF, THE SUBORDINATION AGREEMENT DATED AS OF FEBRUARY 18, 2003 BY AND AMONG
THE HOLDER AND SILICON VALLEY BANK.
SATCON TECHNOLOGY CORPORATION
Secured Convertible Promissory Note
due __________ __, 2006
No. CN-03-__ $____________
Dated: ____________ __, 2003
For value received, SATCON TECHNOLOGY CORPORATION, a Delaware corporation
(the "MAKER"), hereby promises to pay to the order of _______________________
(together with its successors, representatives, and permitted assigns, the
"HOLDER"), in accordance with the terms hereinafter provided, the principal
amount of ________________________ ($______________), together with interest
thereon. Concurrently with the issuance of this Note, the Maker is issuing
separate notes (the "OTHER NOTES") to separate purchasers (the "OTHER HOLDERS")
pursuant to the Purchase Agreement (as defined in Section 1.1 hereof).
All payments under or pursuant to this Note shall be made in United States
Dollars in immediately available funds to the Holder at the address of the
Holder first set forth above or at such other place as the Holder may designate
from time to time in writing to the Maker or by wire transfer of funds to the
Holder's account, instructions for which are attached hereto as EXHIBIT A. The
outstanding principal balance of this Note shall be due and payable on
__________ __, 2006 (the "MATURITY DATE") or at such earlier time as provided
herein.
ARTICLE I
Section 1.1 PURCHASE AGREEMENT. This Note has been executed and delivered
pursuant to the Note and Warrant Purchase Agreement, dated as of February 18,
2003 (the "PURCHASE
AGREEMENT"), by and among the Maker and the purchasers listed therein.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.
Section 1.2 INTEREST. Beginning on the issuance date for the purchase of
this Note (the "ISSUANCE DATE"), the outstanding principal balance of this Note
shall bear interest, in arrears, at a rate per annum equal to ten percent (10%),
increasing to a rate per annum equal to twelve percent (12%) on January 1, 2004,
payable quarterly at the option of the Maker in cash or in shares of the Maker's
common stock, par value $.01 per share (the "COMMON STOCK"). The number of
shares of Common Stock to be issued as payment of accrued and unpaid interest
shall be determined by dividing (a) the total amount of accrued and unpaid
interest to be converted into Common Stock by (b) the greater of (x) 80% of the
average of the Closing Bid and Ask Price (as defined in Section 3.2(d) hereof)
of the Common Stock on the Nasdaq National Market for the fifteen (15) Trading
Days ending on the eleventh (11th) Trading Day prior to the required payment
date and (y) the Conversion Price (as defined in Section 3.2 hereof).
Notwithstanding the foregoing, the interest payment for the twelve (12) months
following the Issuance Date shall be payable on the Issuance Date to the Holder
in shares of Common Stock in an amount equal to the average of the Closing Bid
and Ask Price for the five (5) Trading Days prior to the Issuance Date. Interest
shall be computed on the basis of a 360-day year of twelve (12) 30-day months
and shall accrue commencing on the Issuance Date. Furthermore, upon the
occurrence of an Event of Default (as defined in Section 2.1 hereof), then to
the extent permitted by law, the Maker will pay interest to the Holder, payable
on demand, on the outstanding principal balance of the Note from the date of the
Event of Default until such Event of Default is cured at the rate of the lesser
of fourteen percent (14%) and the maximum applicable legal rate per annum.
Section 1.3 SECURITY AGREEMENT. The obligations of the Maker hereunder
shall be secured by, and the Holder shall be entitled to the rights and security
granted by the Maker pursuant to, the Security Agreement dated as of the date
hereof by the Maker for the benefit of the Holder (the "SECURITY AGREEMENT").
All payments due under this Note shall be subordinated and made junior, in all
respects to the payment in full of all principal, all interest accrued thereon
and all other amounts due on any indebtedness outstanding under the Loan and
Security Agreement dated September 13, 2002 between the Maker and Silicon Valley
Bank, as amended.
Section 1.4 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made
shall be due on a Saturday, Sunday or a public holiday under the laws of the
State of New York, such payment may be due on the next succeeding business day
and such next succeeding day shall be included in the calculation of the amount
of accrued interest payable on such date.
Section 1.5 TRANSFER. This Note may be transferred or sold, subject to the
provisions of Section 4.8 of this Note, or pledged, hypothecated or otherwise
granted as security by the Holder.
Section 1.6 REPLACEMENT. Upon receipt of a duly executed, notarized and
unsecured written statement from the Holder with respect to the loss, theft or
destruction of this Note (or any replacement hereof), and without requiring an
indemnity bond or other security, or, in the case of a mutilation of this Note,
upon surrender and cancellation of such Note, the Maker shall
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issue a new Note, of like tenor and amount, in lieu of such lost, stolen,
destroyed or mutilated Note.
ARTICLE II
EVENTS OF DEFAULT; REMEDIES
Section 2.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall be an "EVENT OF DEFAULT" under this Note:
(a) the Maker shall fail to make the payment of any amount of principal
outstanding on the date such payment is due hereunder; or
(b) the Maker shall fail to make any payment of interest in cash or shares
of Common Stock for a period of five (5) days after the date such interest is
due; or
(c) the failure of the Registration Statement to be declared effective by
the Securities and Exchange Commission ("SEC") on or prior to the date which is
one hundred twenty (120) days after the Execution Date (as defined in the
Registration Rights Agreement); or
(d) the suspension from listing, without subsequent listing on any one of,
or the failure of the Common Stock to be listed on at least one of the Nasdaq
National Market, the Nasdaq SmallCap Market, The OTC Bulletin Board, The New
York Stock Exchange, Inc. or The American Stock Exchange, Inc. for a period of
five (5) consecutive Trading Days; or
(e) the Maker's notice to the Holder, including by way of public
announcement, at any time, of its inability to comply (including for any of the
reasons described in Section 3.8(a) hereof) or its intention not to comply with
proper requests for conversion of this Note into shares of Common Stock; or
(f) the Maker shall fail to (i) timely delivery the shares of Common Stock
upon conversion of the Note or any interest accrued and unpaid, (ii) timely file
the Registration Statement (as defined in the Registration Rights Agreement) or
(iii) make the payment of any fees and/or liquidated damages under this Note,
the Purchase Agreement or the Registration Rights Agreement, which failure in
the case of items (i) and (iii) of this Section 2.1(f) is not remedied within
seven (7) business days after the incurrence thereof; or
(g) while the Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the
Holder for sale of the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of ten (10)
consecutive Trading Days, PROVIDED that the cause of such lapse or
unavailability is not due to factors primarily within the control of Holder; or
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(h) default shall be made in the performance or observance of (i) any
material covenant, condition or agreement contained in this Note (other than as
set forth in clause (f) of this Section 2.1) and such default is not fully cured
within five (5) business days after the occurrence thereof or (ii) any material
covenant, condition or agreement contained in the Purchase Agreement, the
Security Agreement, the Other Notes or the Registration Rights Agreement which
is not covered by any other provisions of this Section 2.1 and such default is
not fully cured within seven (7) business days after the occurrence thereof; or
(i) any material representation or warranty made by the Maker herein or in
the Purchase Agreement, the Security Agreement, the Registration Rights
Agreement or the Other Notes shall prove to have been false or incorrect or
breached in a material respect on the date as of which made; or
(j) the Maker shall hereafter issue any debt securities which are not
subordinate to this Note and the Other Notes on such terms as are not acceptable
to the Holders of at least 80% of the aggregate outstanding principal amount of
this Note and the Other Notes purchased under the Purchase Agreement; or
(k) Intentionally Omitted.
(l) if required by applicable law, rule or regulation, the stockholders of
the Maker shall fail to approve the proposal presented and recommended by the
Board of Directors of the Maker to approve the Holder acquiring in excess of
19.99% of the issued and outstanding shares of Common Stock upon conversion of
this Note and/or exercise of the Warrants; or
(m) the Maker shall (i) default in any payment of any amount or amounts of
principal of or interest on any Indebtedness (other than the Indebtedness
hereunder) the aggregate principal amount of which Indebtedness is in excess of
$100,000 or (ii) default in the observance or performance of any other agreement
or condition relating to any Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders or beneficiary or
beneficiaries of such Indebtedness to cause with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity; or
(n) the Maker shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property or assets, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the United States Bankruptcy Code (as now or hereafter in effect) or under
the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors'
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue a
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or
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(o) a proceeding or case shall be commenced in respect of the Maker,
without its application or consent, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, moratorium, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets in connection with the liquidation or dissolution
of the Maker or (iii) similar relief in respect of it under any law providing
for the relief of debtors, and such proceeding or case described in clause (i),
(ii) or (iii) shall continue undismissed, or unstayed and in effect, for a
period of sixty (60) days or any order for relief shall be entered in an
involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic)
against the Maker or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the
Maker and shall continue undismissed, or unstayed and in effect for a period of
sixty (60) days; or
(p) the failure of the Maker to instruct its transfer agent to remove any
legends from shares of Common Stock eligible to be sold under Rule 144 of the
Securities Act and issue such unlegended certificates to the Holder within three
(3) business days of the Holder's request so long as the Holder has provided the
standard representations regarding the Rule 144 sale; or
(q) the failure of the Maker to pay any amounts due to the Holder herein
or in the Purchase Agreement, the Security Agreement or the Registration Rights
Agreement within three (3) business days of receipt of notice to the Maker; or
(r) the occurrence of an Event of Default under the Other Notes; or
(s) default shall be made in the performance or observance of any material
covenant, condition or agreement contained in the Series A Preferred Stock
Purchase Agreement or the other Transaction Documents (as defined in the Series
A Preferred Stock Purchase Agreement) and such default is not fully cured within
seven (7) business days after the occurrence thereof.
Section 2.2 REMEDIES UPON AN EVENT OF DEFAULT. If an Event of Default
shall have occurred and shall be continuing, the Holder of this Note may at any
time at its option, subject to the provisions of the Subordination Agreement
dated as of February 18, 2003 between the Holder and Silicon Valley Bank, (a)
declare the entire unpaid principal balance of this Note, together with all
interest accrued hereon, due and payable, and thereupon, the same shall be
accelerated and so due and payable, without presentment, demand, protest, or
notice, all of which are hereby expressly unconditionally and irrevocably waived
by the Maker; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default
described in (i) Sections 2.1 (n) or (o), the outstanding principal balance and
accrued interest hereunder shall be automatically due and payable and (ii)
Sections 2.1 (c)-(m), demand the prepayment of this Note pursuant to Section 3.7
hereof, (b) demand that the principal amount of this Note then outstanding and
all accrued and unpaid interest thereon shall be converted into shares of Common
Stock at a Conversion Price per share calculated pursuant to Section 3.1 hereof
assuming that the date that the Event of Default occurs is the Conversion Date
(as defined in Section 3.2(a) hereof), or (c) exercise or otherwise enforce any
one or more of the Holder's rights, powers, privileges, remedies and interests
under this Note, the Purchase Agreement, the Security Agreement, the
Registration Rights Agreement or applicable law. No course of delay on the part
of the Holder shall operate
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as a waiver thereof or otherwise prejudice the right of the Holder. No remedy
conferred hereby shall be exclusive of any other remedy referred to herein or
now or hereafter available at law, in equity, by statute or otherwise.
ARTICLE III
CONVERSION; ANTIDILUTION; PREPAYMENT
Section 3.1 CONVERSION OPTION.
(a) At any time on or after the Issuance Date, this Note shall be
convertible (in whole or in part), at the option of the Holder (the "CONVERSION
OPTION"), into such number of fully paid and non-assessable shares of Common
Stock (the "CONVERSION RATE") as is determined by dividing (x) that portion of
the outstanding principal balance under this Note as of such date that the
Holder elects to convert by (y) the Conversion Price (as hereinafter defined)
then in effect on the date on which the Holder faxes a notice of conversion (the
"CONVERSION NOTICE"), duly executed, to the Maker (facsimile number (617)
349-0898, Attn.: Chief Financial Officer) (the "VOLUNTARY CONVERSION DATE"),
provided, however, that the Conversion Price shall be subject to adjustment as
described in Section 3.6 below. The Holder shall deliver this Note to the Maker
at the address designated in the Purchase Agreement at such time that this Note
is fully converted. With respect to partial conversions of this Note, the Maker
shall keep written records of the amount of this Note converted as of each
Conversion Date.
(b) On the Mandatory Conversion Date (as defined below), the principal
amount of this Note plus all accrued and unpaid interest shall automatically and
without any action on the part of the Holder, convert into a number of fully
paid and nonassessable shares of Common Stock equal to the quotient of (i) the
principal amount of the Note plus all accrued and unpaid interest outstanding on
the Mandatory Conversion Date divided by (ii) the Conversion Price in effect on
the Mandatory Conversion Date. As used herein, a "MANDATORY CONVERSION DATE"
shall be the first date which is at least ninety (90) days following the
Effectiveness Date, that (i) the Closing Bid and Ask Price (as defined in
Section 3.2(d) hereof) of the Common Stock exceeds $2.50 for a period of twenty
(20) consecutive Trading Days; and (ii) that the Registration Statement is
effective or the shares of Common Stock into which this Note can be converted
may be offered for sale to the public pursuant to Rule 144(k) under the
Securities Act. Notwithstanding the foregoing, the Mandatory Conversion Date
shall be extended for as long as (A) the conversion of this Note would violate
Section 3.4(c), or (B) a Triggering Event (as defined in Section 3.7(f) hereof)
shall have occurred and be continuing. The Mandatory Conversion Date and the
Voluntary Conversion Date collectively are referred to in this Note as the
"CONVERSION DATE."
Section 3.2 CONVERSION PRICE.
(a) The term "FIXED CONVERSION PRICE" shall mean $1.25 per share, subject
to adjustment under Section 3.6 hereof. Notwithstanding any adjustment
hereunder, at no time shall the Fixed Conversion Price be greater than $1.25 per
share; PROVIDED HOWEVER that the Conversion Price may be greater than $1.25 per
share if it is adjusted pursuant to Section 3.6(a).
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(b) In the event that the Maker fails to achieve EBITDA (as defined below)
of at least $1.00 and a minimum of $13,500,000 in revenue determined in
accordance with GAAP for the fourth quarter of fiscal year 2003, the Holder may,
commencing on the earlier of the date that the Maker publicly discloses such
numbers for the fourth quarter of fiscal year 2003 and the date that the Maker
files its annual report on Form 10-K for the fiscal year ending September 30,
2003, elect to apply an "ALTERNATIVE CONVERSION PRICE," which shall equal the
Closing Bid and Ask Price (as defined below) for the Maker's Common Stock on the
Conversion Date, subject to adjustment under Section 3.6 hereof. Notwithstanding
any adjustment hereunder, at no time shall the Alternative Conversion Price be
less than $0.75 (the "ALTERNATIVE CONVERSION PRICE FLOOR"). Additionally, in no
event shall the Alternative Conversion Price exceed the Fixed Conversion Price.
The Fixed Conversion Price and the Alternative Conversion Price collectively are
referred to in this Note as the "CONVERSION PRICE." For purposes hereof,
"EBITDA" shall mean the revenues of the Maker and its subsidiaries for any
period from continuing operations excluding interest expense, tax, depreciation
and amortization.
(c) Notwithstanding the foregoing to the contrary, if during any period (a
"BLACK-OUT PERIOD"), a Holder is unable to trade any Common Stock issued or
issuable upon conversion of the Notes immediately due to the postponement of
filing or delay or suspension of effectiveness of a registration statement or
because the Maker has otherwise informed such Holder that an existing prospectus
cannot be used at that time in the sale or transfer of such Common Stock
(provided that such postponement, delay, suspension or fact that the prospectus
cannot be used is not due to factors solely within the control of the Holder of
the Notes or due to the Maker exercising its rights under Section 3(n) of the
Registration Rights Agreement), such Holder shall have the option but not the
obligation on any Conversion Date within ten (10) Trading Days following the
expiration of the Black-out Period of using the Conversion Price applicable on
such Conversion Date or any Conversion Price selected by such Holder that would
have been applicable had such Conversion Date been at any earlier time during
the Black-out Period or within the ten (10) Trading Days thereafter. In no event
shall the Black-out Period have any effect on the Maturity Date of this Note.
(d) The term "CLOSING BID AND ASK PRICE" shall mean, for any security as
of any date, the last average of the closing bid and ask price of such security
on the Nasdaq National Market for such security as reported by Bloomberg, or, if
no closing bid or ask price is reported for such security by Bloomberg, the last
closing trade price of such security as reported by Bloomberg, or, if no last
closing trade price is reported for such security by Bloomberg, the average of
the bid and ask prices of any market makers for such security as reported in the
"pink sheets" by the National Quotation Bureau, Inc. If the Closing Bid and Ask
Price cannot be calculated for such security on such date on any of the
foregoing bases, the Closing Bid and Ask Price of such security on such date
shall be the fair market value as mutually determined by the Maker and the
holders of a majority of the principal amount of the Notes outstanding.
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Section 3.3 MECHANICS OF CONVERSION.
(a) Not later than three (3) Trading Days after any Conversion Date, the
Maker or its designated transfer agent, as applicable, shall issue and deliver
to the Depository Trust Company ("DTC") account on the Holder's behalf via the
Deposit Withdrawal Agent Commission System ("DWAC") as specified in the
Conversion Notice, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled. In the
alternative, not later than three (3) Trading Days after any Conversion Date,
the Maker shall deliver to the applicable Holder by express courier a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by Section 5.1 of the Purchase
Agreement) representing the number of shares of Common Stock being acquired upon
the conversion of this Note. If in the case of any Conversion Notice such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the third Trading Day after the Conversion Date (the
"DELIVERY DATE"), the Holder shall be entitled by written notice to the Maker at
any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Maker shall
immediately return this Note tendered for conversion, whereupon the Maker and
the Holder shall each be restored to their respective positions immediately
prior to the delivery of such notice of revocation, except that any amounts
described in Sections 3.3(b) and (c) shall be payable through the date notice of
rescission is given to the Maker.
(b) The Maker understands that a delay in the delivery of the shares of
Common Stock upon conversion of this Note beyond the Delivery Date could result
in economic loss to the Holder. If the Maker fails to deliver to the Holder such
certificate or certificates pursuant to this Section hereunder by the Delivery
Date, the Maker shall pay to such Holder, in cash, an amount per Trading Day for
each Trading Day until such certificates are delivered, together with interest
on such amount at a rate of 10% per annum, accruing until such amount and any
accrued interest thereon is paid in full, equal to the greater of (A) (i) 1% of
the aggregate principal amount of the Notes requested to be converted for the
first five (5) Trading Days after the Delivery Date and (ii) 2% of the aggregate
principal amount of the Notes requested to be converted for each Trading Day
thereafter and (B) $2,000 per day (which amount shall be paid as liquidated
damages and not as a penalty). Nothing herein shall limit a Holder's right to
pursue actual damages for the Maker's failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief). Notwithstanding anything to the contrary
contained herein, the Holder shall be entitled to withdraw a Conversion Notice,
and upon such withdrawal the Maker shall only be obligated to pay the liquidated
damages accrued in accordance with this Section 3.3(b) through the date the
Conversion Notice is withdrawn.
(c) In addition to any other rights available to the Holder, if the Maker
fails to deliver to the Holder such certificate or certificates pursuant to
Section 3.3(a) by the Delivery Date and if after the Delivery Date the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Holder of the Conversion Shares which
the Holder anticipated receiving upon such conversion (a "BUY-IN"), then the
Maker shall pay in cash to the Holder (in addition to any remedies available to
or elected by the Holder) an amount equal to (A) the aggregate amount paid by
such Holder for the shares of
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Common Stock so purchased minus (B) the aggregate amount of net proceeds, if
any, received by such Holder from the sale of the shares of Common Stock issued
by the Maker pursuant to such conversion, together with interest thereon at a
rate of the lesser of 15% and the maximum applicable legal rate per annum,
accruing until such amount and any accrued interest thereon is paid in full
(which amount shall be paid as liquidated damages and not as a penalty). For
example, if the Holder purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted conversion of
$10,000 aggregate principal amount of this Note, the Maker shall be required to
pay the Holder $1,000, plus interest. The Holder shall provide the Maker written
notice indicating the amounts payable to the Holder in respect of the Buy-In.
Section 3.4 OWNERSHIP CAP AND CERTAIN CONVERSION RESTRICTIONS.
(a) Notwithstanding anything to the contrary set forth in Section 3 of
this Note, at no time may the Holder convert all or a portion of this Note if
the number of shares of Common Stock to be issued pursuant to such conversion
would exceed, when aggregated with all other shares of Common Stock owned by the
Holder at such time, the number of shares of Common Stock which would result in
the Holder owning more than 4.999% of all of the Common Stock outstanding at
such time; PROVIDED, HOWEVER, that upon the Holder providing the Maker with
sixty-one (61) days notice (pursuant to Section 4.1 hereof) (the "WAIVER
NOTICE") that the Holder would like to waive this Section 3.4(a) with regard to
any or all shares of Common Stock issuable upon conversion of this Note, this
Section 3.4(a) will be of no force or effect with regard to all or a portion of
the Note referenced in the Waiver Notice; PROVIDED, FURTHER, that this provision
shall be of no further force or effect during the sixty-one (61) days
immediately preceding the first to occur of the Mandatory Conversion Date and
the Maturity Date.
(b) Notwithstanding anything to the contrary set forth in Section 3 of
this Note, at no time may the Holder convert all or a portion of this Note if
the number of shares of Common Stock to be issued pursuant to such conversion
would exceed, when aggregated with all other shares of Common Stock owned by the
Holder at such time, would result in the Holder beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock outstanding at such time; PROVIDED, HOWEVER, that upon the Holder
providing the Maker with a Waiver Notice that the Holder would like to waive
Section 3.4(b) of this Note with regard to any or all shares of Common Stock
issuable upon conversion of this Note, this Section 3.4(b) shall be of no force
or effect with regard to all or a portion of the Note referenced in the Waiver
Notice; PROVIDED, FURTHER, that this provision shall be of no further force or
effect during the sixty-one (61) days immediately preceding the first to occur
of the Mandatory Conversion Date and the Maturity Date.
(c) Notwithstanding anything to the contrary set forth herein, the Maker
shall not be obligated to issue in excess of an aggregate of 3,408,677 shares of
Common Stock upon conversion of the Notes, conversion of the Maker's Series A
Convertible Preferred Stock and any shares of Common Stock issuable in
connection with the Purchase Agreement and the Series A Preferred Stock Purchase
Agreement (including upon the exercise of the warrants issued thereto and to
placement agents for the transactions contemplated by such agreements), which
number of shares shall be subject to adjustment pursuant to Section 3.6 (the
"ISSUABLE
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MAXIMUM"). The Issuable Maximum equals 19.999% of the number of shares of Common
Stock outstanding immediately prior to the Closing. If on any Conversion Date
(A) the Common Stock is listed for trading on the Nasdaq National Market or the
Nasdaq SmallCap Market, (B) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock previously issued upon conversion of
Notes or otherwise issued in connection with the Purchase Agreement and the
Series A Preferred Stock Purchase Agreement (including upon the exercise of the
warrants issued thereto and to placement agents for the transactions
contemplated by such agreements), would equal or exceed the Issuable Maximum,
and (C) the Maker shall not have previously obtained the vote of stockholders
(the "STOCKHOLDER APPROVAL"), if any, as may be required by the applicable rules
and regulations of The Nasdaq Stock Market, Inc. (or any successor entity)
applicable to approve the issuance of shares of Common Stock in excess of the
Issuable Maximum pursuant to the terms hereof, then the Maker shall issue to the
Holder so requesting such number of shares of Common Stock equal to such
Xxxxxx's pro rata portion of the Issuable Maximum as of the initial purchase
date and, with respect to the remainder of shares of Common Stock which would
result in an issuance of shares of Common Stock in excess of the Issuable
Maximum (the "EXCESS SHARES"), the Maker shall have the option to either (1) use
its reasonable efforts to obtain the Stockholder Approval applicable to such
issuance as soon as is possible, but in any event not later than the later of
June 15, 2003 and the 90th day after such request, or (2) deliver to the Holder
cash in an amount equal to the product of (x) the Closing Bid and Ask Price on
the applicable Conversion Date, and (y) the number of shares of Common Stock in
excess of such Holder's pro rata portion of the Issuable Maximum that would have
otherwise been issuable to the Holder but for the provisions of this Section
(such amount of cash being hereinafter referred to as the "REPURCHASE AMOUNT").
If the Maker fails to pay the Repurchase Amount in full pursuant to this Section
within fifteen (15) days after the Maker fails to obtain Stockholder Approval
pursuant to (1) above or the date payable pursuant to (2) above, the Maker will
pay interest thereon at a rate of 10% per annum to the Holder, accruing daily
from the applicable Conversion until such amount, plus all such interest
thereon, is paid in full. The Maker and the Holder understand and agree that
shares of Common Stock issued to and then held by the Holder as a result of
conversion of the Notes or as a result of exercise of the Warrants shall not be
entitled to cast votes on any resolution to obtain Stockholder Approval.
Section 3.5 INTENTIONALLY OMITTED.
Section 3.6 ADJUSTMENT OF CONVERSION PRICE.
(a) The Conversion Price and the Alternative Conversion Price Floor shall
be subject to adjustment from time to time as follows:
(i) ADJUSTMENTS FOR STOCK SPLITS AND COMBINATIONS. If the Maker
shall at any time or from time to time after the Issuance Date, effect a stock
split of the outstanding Common Stock, the applicable Conversion Price and the
Alternative Conversion Price Floor in effect immediately prior to the stock
split shall be proportionately decreased. If the Maker shall at any time or from
time to time after the Issuance Date, combine the outstanding shares of Common
Stock, the applicable Conversion Price and the Alternative Conversion Price
Floor in effect immediately prior to the combination shall be proportionately
increased. Any adjustments under this Section 3.6(a)(i) shall be effective at
the close of business on the date the stock split or combination occurs.
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(ii) ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the
Maker shall at any time or from time to time after the Issuance Date, make or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, then, and in each event, the applicable Conversion Price and the
Alternative Conversion Price Floor in effect immediately prior to such event
shall be decreased as of the time of such issuance or, in the event such record
date shall have been fixed, as of the close of business on such record date, by
multiplying, as applicable, the applicable Conversion Price and the Alternative
Conversion Price Floor then in effect by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date; and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution.
(iii) ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the Maker
shall at any time or from time to time after the Issuance Date, make or issue or
set a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in other than shares of Common
Stock, then, and in each event, an appropriate revision to the applicable
Conversion Price and the Alternative Conversion Price Floor shall be made and
provision shall be made (by adjustments of the Conversion Price and the
Alternative Conversion Price Floor or otherwise) so that the holders of this
Note shall receive upon conversions thereof, in addition to the number of shares
of Common Stock receivable thereon, the number of securities of the Maker which
they would have received had this Note been converted into Common Stock on the
date of such event and had thereafter, during the period from the date of such
event to and including the Conversion Date, retained such securities (together
with any distributions payable thereon during such period), giving application
to all adjustments called for during such period under this Section 3.6(a)(iii)
with respect to the rights of the holders of this Note and the Other Notes;
PROVIDED, HOWEVER, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Price and the Alternative Conversion Price Floor
shall be adjusted pursuant to this paragraph as of the time of actual payment of
such dividends or distributions.
(iv) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If
the Common Stock issuable upon conversion of this Note at any time or from time
to time after the Issuance Date shall be changed to the same or different number
of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends provided for in Sections 3.6(a)(i),
(ii) and (iii), or a reorganization, merger, consolidation, or sale of assets
provided for in Section 3.6(a)(v)), then, and in each event, an appropriate
revision to the Conversion Price and the Alternative Conversion Price Floor
shall be made and provisions shall be made (by adjustments of the Conversion
Price and the Alternative Conversion Price Floor or otherwise) so that the
Holder shall have the right thereafter to convert this Note into the kind and
amount of shares of stock and other securities receivable upon reclassification,
exchange, substitution or other
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change, by holders of the number of shares of Common Stock into which such Note
might have been converted immediately prior to such reclassification, exchange,
substitution or other change, all subject to further adjustment as provided
herein.
(v) ADJUSTMENTS FOR REORGANIZATION, MERGER, CONSOLIDATION OR SALES
OF ASSETS. If at any time or from time to time after the Issuance Date there
shall be a capital reorganization of the Maker (other than by way of a stock
split or combination of shares or stock dividends or distributions provided for
in Section 3.6(a)(i), (ii) and (iii), or a reclassification, exchange or
substitution of shares provided for in Section 3.6(a)(iv)), or a merger or
consolidation of the Maker with or into another corporation where the holders of
outstanding voting securities prior to such merger or consolidation do not own
over 50% of the outstanding voting securities of the merged or consolidated
entity, immediately after such merger or consolidation, or the sale of all or
substantially all of the Maker's properties or assets to any other person (an
"ORGANIC CHANGE"), then as a part of such Organic Change an appropriate revision
to the Conversion Price and the Alternative Conversion Price Floor shall be made
and provision shall be made (by adjustments of the Conversion Price and the
Alternative Conversion Price Floor or otherwise) so that the Holder shall have
the right thereafter to convert such Note into the kind and amount of shares of
stock and other securities or property of the Maker or any successor corporation
resulting from Organic Change. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section 3.6(a)(v) with respect
to the rights of the Holder after the Organic Change to the end that the
provisions of this Section 3.6(a)(v) (including any adjustment in the applicable
Conversion Price and the Alternative Conversion Price Floor then in effect and
the number of shares of stock or other securities deliverable upon conversion of
this Note and the Other Notes) shall be applied after that event in as nearly an
equivalent manner as may be practicable.
(vi) ADJUSTMENTS FOR ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
(1) In the event the Maker, shall, at any time, from
time to time, issue or sell any shares of additional shares of common stock
(otherwise than as provided in the foregoing subsections (i) through (v) of this
Section 3.6(a) or pursuant to Common Stock Equivalents (hereafter defined)
granted or issued prior to the Issuance Date) ("ADDITIONAL SHARES OF COMMON
STOCK"), at a price per share less than the Conversion Price then in effect or
without consideration, then the Conversion Price and the Alternative Conversion
Price Floor upon each such issuance shall be adjusted to that price (rounded to
the nearest cent) determined by multiplying each of the Conversion Price and the
Alternative Conversion Price Floor then in effect by a fraction:
(A) the numerator of which shall be equal to
the sum of (x) the number of shares of Common Stock outstanding immediately
prior to the issuance of such Additional Shares of Common Stock PLUS (y) the
number of shares of Common Stock (rounded to the nearest whole share) which the
aggregate consideration for the total number of such Additional Shares of Common
Stock so issued would purchase at a price per share equal to the Conversion
Price and the Alternative Conversion Price Floor then in effect,as applicable,
and
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(B) the denominator of which shall be equal to
the number of shares of Common Stock outstanding immediately after the issuance
of such Additional Shares of Common Stock.
(2) The provisions of paragraph (1) of Section
3.6(a)(vi) shall not apply to any issuance of Additional Shares of Common Stock
for which an adjustment is provided under Section 3.6(a)(vii). No adjustment of
the number of shares of Common Stock for which this Note shall be convertible
shall be made under paragraph (1) of Section 3.6(a)(vi) upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to the exercise of
any Common Stock Equivalents, if any such adjustment shall previously have been
made upon the issuance of such Common Stock Equivalents pursuant to Section
3.6(a)(vii).
(vii) ISSUANCE OF COMMON STOCK EQUIVALENTS. If the Maker, at any
time after the Issuance Date, shall issue any securities convertible into or
exchangeable for, directly or indirectly, Common Stock ("CONVERTIBLE
SECURITIES"), other than the Notes, or any rights or warrants or options to
purchase any such Common Stock or Convertible Securities, shall be issued or
sold (collectively, the "COMMON STOCK EQUIVALENTS") and the aggregate of the
price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent, plus the consideration
received by the Maker for issuance of such Common Stock Equivalent divided by
the number of shares of Common Stock issuable pursuant to such Common Stock
Equivalent (the "AGGREGATE PER COMMON SHARE PRICE") shall be less than the
applicable Conversion Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall make the Aggregate Per Share Common Price be less than the
applicable Conversion Price in effect at the time of such amendment or
adjustment, then the applicable Conversion Price and the Alternative Conversion
Price Floor upon each such issuance or amendment shall be adjusted as provided
in the first sentence of subsection (vi) of this Section 3.6(a) on the basis
that (1) the maximum number of Additional Shares of Common Stock issuable
pursuant to all such Common Stock Equivalents shall be deemed to have been
issued (whether or not such Common Stock Equivalents are actually then
exercisable, convertible or exchangeable in whole or in part) as of the earlier
of (A) the date on which the Maker shall enter into a firm contract for the
issuance of such Common Stock Equivalent, or (B) the date of actual issuance of
such Common Stock Equivalent. No adjustment of the applicable Conversion Price
and the Alternative Conversion Price Floor shall be made under this subsection
(vii) upon the issuance of any Convertible Security which is issued pursuant to
the exercise of any warrants or other subscription or purchase rights therefor,
if any adjustment shall previously have been made to the exercise price of such
warrants then in effect upon the issuance of such warrants or other rights
pursuant to this subsection (vii). No adjustment shall be made to the Conversion
Price and the Alternative Conversion Price Floor upon the issuance of Common
Stock pursuant to the exercise, conversion or exchange of any Convertible
Security or Common Stock Equivalent where an adjustment to the Conversion Price
and the Alternative Conversion Price Floor was made as a result of the issuance
or purchase of any Convertible Security or Common Stock Equivalent.
(viii) CONSIDERATION FOR STOCK. In case any shares of Common Stock or
any Common Stock Equivalents shall be issued or sold:
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(1) in connection with any merger or consolidation in
which the Maker is the surviving corporation (other than any consolidation or
merger in which the previously outstanding shares of Common Stock of the Maker
shall be changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefore shall be, deemed to be the
fair value, as determined reasonably and in good faith by the Board of Directors
of the Maker, of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such shares of
Common Stock, Convertible Securities, rights or warrants or options, as the case
may be; or
(2) in the event of any consolidation or merger of the
Maker in which the Maker is not the surviving corporation or in which the
previously outstanding shares of Common Stock of the Maker shall be changed into
or exchanged for the stock or other securities of another corporation, or in the
event of any sale of all or substantially all of the assets of the Maker for
stock or other securities of any corporation, the Maker shall be deemed to have
issued a number of shares of its Common Stock for stock or securities or other
property of the other corporation computed on the basis of the actual exchange
ratio on which the transaction was predicated, and for a consideration equal to
the fair market value on the date of such transaction of all such stock or
securities or other property of the other corporation. If any such calculation
results in adjustment of the applicable Conversion Price and the Alternative
Conversion Price Floor, or the number of shares of Common Stock issuable upon
conversion of the Notes, the determination of the applicable Conversion Price
and the Alternative Conversion Price Floor or the number of shares of Common
Stock issuable upon conversion of the Notes immediately prior to such merger,
consolidation or sale, shall be made after giving effect to such adjustment of
the number of shares of Common Stock issuable upon conversion of the Notes. In
the event Common Stock is issued with other shares or securities or other assets
of the Maker for consideration which covers both, the consideration computed as
provided in this Section 3.6(viii) shall be allocated among such securities and
assets as determined in good faith by the Board of Directors of the Maker.
(b) RECORD DATE. In case the Maker shall take record of the
holders of its Common Stock for the purpose of entitling them to subscribe for
or purchase Common Stock or Convertible Securities, then the date of the issue
or sale of the shares of Common Stock shall be deemed to be such record date.
(c) CERTAIN ISSUES EXCEPTED. Anything herein to the contrary
notwithstanding, the Maker shall not be required to make any adjustment to the
Conversion Price and the Alternative Conversion Price Floor upon (i) the Maker's
issuance of any Additional Shares of Common Stock and warrants therefore in
connection with a merger and/or acquisition, consolidation, sale or disposition
of all or substantially all of the Maker's assets, (ii) the Maker's issuance of
Additional Shares of Common Stock or warrants therefore in connection with
strategic license agreements so long as such issuances are not for the purpose
of raising capital, (iii) the Maker's issuance of Common Stock or the issuance
or grants of options to purchase Common Stock pursuant to the Maker's stock
option plans and employee stock purchase plans as they now exist, (iv) the
Maker's issuance of Common Stock or the issuance or grants of options to
purchase Common Stock pursuant to any future stock option plan or employee stock
purchase plan which is approved by the Board of Directors or any amendment to
the Maker's existing stock option plans and employee stock purchase plans which
is approved by the Board of Directors so long as
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such issuances in the aggregate do not exceed 1,700,000 shares of Common Stock,
(v) any transaction where the first use of proceeds from such transaction would
be used to redeem all of the shares of the Maker's Series A Preferred Stock in
accordance with Section 8(h) of the Certificate of Designation of the Series A
Preferred Stock, (vi) the issuance of Common Stock or warrants therefor in
connection with any acquisition of assets, product lines or businesses so long
as such issuances in the aggregate do not exceed twenty percent (20%) of the
Maker's issued and outstanding shares of Common Stock as of the date hereof,
(vii) any issuances of Common Stock pursuant to Maker 401(k) matches, (viii) any
issuances of securities to consultants, financial advisers, public relations
consultants or secured lenders to the Maker so long as such issuances to such
secured lenders do not in the aggregate exceed ten percent (10%) of the Maker's
issued and outstanding shares of Common Stock as of the date hereof, (ix) any
issuances of warrants issued to a Purchaser pursuant to the Purchase Agreement
and any issuances of warrants issued to the holders of the Maker's Series A
Preferred Stock issued pursuant to the Series A Preferred Stock Purchase
Agreement, (x) any warrants issued to X.X. Xxxxxxxxxx & Co., Inc. as placement
agent for the transactions contemplated by the Purchase Agreement and the Series
A Preferred Stock Purchase Agreement, (xi) the payment of any dividends on the
Series A Preferred Stock and the payment of any interest on the Notes, (xii) any
securities issued pursuant to Section 3.9 of the Purchase Agreement and Section
3.9 of the Series A Preferred Stock Purchase Agreement, (xiii) any securities
issued to the holders of Series A Preferred Stock as payment of a penalty upon
redemption of such shares of Series A Preferred Stock and any securities issued
to the holders of the Notes as payment of a penalty upon prepayment of such
Notes or otherwise, (xiv) any securities issued pursuant to the Series A
Preferred Stock Purchase Agreement, and (xv) the issuance of common stock upon
the exercise or conversion of any securities described in clauses (i) through
(xiv) above.
(d) NO IMPAIRMENT. The Maker shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Maker, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 3.6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the Holder against
impairment. In the event a Holder shall elect to convert any Notes as provided
herein, the Maker cannot refuse conversion based on any claim that such Holder
or any one associated or affiliated with such Holder has been engaged in any
violation of law, violation of an agreement to which such Holder is a party or
for any reason whatsoever, unless, an injunction from a court, or notice,
restraining and or adjoining conversion of all or of said Notes shall have
issued and the Maker posts a surety bond for the benefit of such Holder in an
amount equal to 130% of the amount of the Notes the Holder has elected to
convert, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder in the event it obtains judgment.
(e) CERTIFICATES AS TO ADJUSTMENTS. Upon occurrence of each
adjustment or readjustment of the Conversion Price and the Alternative
Conversion Price Floor or number of shares of Common Stock issuable upon
conversion of this Note pursuant to this Section 3.6, the Maker at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to the Holder a certificate setting forth such
adjustment and
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readjustment, showing in detail the facts upon which such adjustment or
readjustment is based. The Maker shall, upon written request of the Holder, at
any time, furnish or cause to be furnished to the Holder a like certificate
setting forth such adjustments and readjustments, the applicable Conversion
Price and the Alternative Conversion Price Floor in effect at the time, and the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon the conversion of this Note.
Notwithstanding the foregoing, the Maker shall not be obligated to deliver a
certificate unless such certificate would reflect an increase or decrease of at
least one percent (1%) of such adjusted amount.
(f) ISSUE TAXES. The Maker shall pay any and all issue and
other taxes, excluding federal, state or local income taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on conversion of
this Note pursuant thereto; PROVIDED, HOWEVER, that the Maker shall not be
obligated to pay any transfer taxes resulting from any transfer requested by the
Holder in connection with any such conversion.
(g) FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of this Note. In lieu of any fractional shares to
which the Holder would otherwise be entitled, the Maker shall pay cash equal to
the product of such fraction multiplied by the average of the Closing Bid and
Ask Prices of the Common Stock for the five (5) consecutive Trading Days
immediately preceding the Conversion Date.
(h) RESERVATION OF COMMON STOCK. The Maker shall at all times when
this Note shall be outstanding, reserve and keep available out of its authorized
but unissued Common Stock, such number of shares of Common Stock as shall from
time to time be sufficient to effect the conversion of this Note and all
interest accrued thereon; PROVIDED that the number of shares of Common Stock so
reserved shall at no time be less than 120% of the number of shares of Common
Stock for which this Note and all interest accrued thereon are at any time
convertible. The Maker shall, from time to time in accordance with the Delaware
General Corporation Law, increase the authorized number of shares of Common
Stock if at any time the unissued number of authorized shares shall not be
sufficient to satisfy the Maker's obligations under this Section 3.6(h).
(i) REGULATORY COMPLIANCE. If any shares of Common Stock to be
reserved for the purpose of conversion of this Note or any interest accrued
thereon require registration or listing with or approval of any governmental
authority, stock exchange or other regulatory body under any federal or state
law or regulation or otherwise before such shares may be validly issued or
delivered upon conversion, the Maker shall, at its sole cost and expense, in
good faith and as expeditiously as possible, endeavor to secure such
registration, listing or approval, as the case may be.
Section 3.7 PREPAYMENT.
(a) PREPAYMENT UPON AN EVENT OF DEFAULT. Notwithstanding anything
to the contrary contained herein, upon the occurrence of an Event of Default
described in Sections 2.1(c)-(m) hereof, the Holder shall have the right, at
such Holder's option, to require the Maker to prepay all or a portion of this
Note at a price equal to the Triggering Event Prepayment Price (as defined in
Section 3.7(c) below) applicable at the time of such request (the "EVENT OF
DEFAULT
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PREPAYMENT PRICE"); PROVIDED that the Maker shall have the sole option to pay
the Event of Default Prepayment Price in cash or shares of Common Stock. If the
Maker elects to pay the Event of Default Prepayment Price in shares of Common
Stock, the price per share shall be based upon the quotient of (i) the Event of
Default Prepayment Price divided by (ii) the greater of (x) 80% of the average
of the Closing Bid and Ask Price of the Common Stock on the Nasdaq National
Market for the fifteen (15) Trading Days ending on the eleventh (11th) Trading
Day prior to the date of delivery of written notice of such Event of Default via
facsimile and overnight courier which shall be delivered one day after the
occurrence of such Event of Default and (y) the Conversion Price then in effect
on the day preceding the date of delivery of such notice. Nothing in this
Section 3.7(a) shall limit the Holder's rights under Section 2.2 hereof.
(b) PREPAYMENT OPTION UPON MAJOR TRANSACTION. In addition to all
other rights of the Holder contained herein, simultaneous with the occurrence of
a Major Transaction (as defined below), the Holder shall have the right, at the
Holder's option, to require the Maker to prepay all or a portion of the Holder's
Notes at a price equal to 100% of the aggregate principal amount of this Note
plus all accrued and unpaid interest (the "MAJOR TRANSACTION PREPAYMENT PRICE");
PROVIDED that the Maker shall have the sole option to pay the Major Transaction
Prepayment Price in cash or shares of Common Stock. If the Maker elects to pay
the Major Transaction Prepayment Price in shares of Common Stock, the price per
share shall be based upon the quotient of (i) the Major Transaction Prepayment
Price divided by (ii) the greater of (x) 80% of the average of the Closing Bid
and Ask Price of the Common Stock on the Nasdaq National Market for the fifteen
(15) Trading Days ending on the eleventh (11th) Trading Day prior to the date of
delivery of the Notice of Prepayment at Option of Buyer Upon Major Transaction
(as hereafter defined) and (y) the Conversion Price then in effect on the day
preceding the date of delivery of the Notice of Prepayment at Option of Buyer
Upon Major Transaction.
(c) PREPAYMENT OPTION UPON TRIGGERING EVENT. In addition to all
other rights of the Holder contained herein, after a Triggering Event (as
defined below), the Holder shall have the right, at the Holder's option, to
require the Maker to prepay all or a portion of the Holder's Notes at a price
equal to 120% of the aggregate principal amount of this Note plus all accrued
and unpaid interest (the "TRIGGERING EVENT PREPAYMENT PRICE," and, collectively
with the "MAJOR TRANSACTION PREPAYMENT PRICE," the "PREPAYMENT PRICE"); PROVIDED
that with respect to the Triggering Events described in clauses (i), (ii) and
(iii) of Section 3.7(f), the Maker shall have the sole option to pay the
Triggering Event Prepayment Price in cash or shares of Common Stock; and
PROVIDED, FURTHER, that with respect to the Triggering Events described in
clause (iv) of Section 3.7(f), the Maker shall pay the Triggering Event
Prepayment Price in cash. If the Maker elects to pay the Triggering Event
Prepayment Price in shares of Common Stock in accordance with this Section
3.7(c), the price per share shall be based upon the quotient of (i) the
Triggering Event Prepayment Price divided by (ii) the greater of (x) 80% of the
average of the Closing Bid and Ask Price of the Common Stock on the Nasdaq
National Market for the fifteen (15) Trading Days ending on the eleventh (11th)
Trading Day prior to the date of delivery of the Notice of Prepayment at Option
of Buyer Upon Triggering Event (as hereafter defined) and (y) the Conversion
Price then in effect on the day preceding the date of delivery of the Notice of
Prepayment at Option of Buyer Upon Triggering Event.
(d) INTENTIONALLY OMITTED.
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(e) "MAJOR TRANSACTION." A "MAJOR TRANSACTION" shall be deemed to
have occurred at such time as any of the following events:
(i) the consolidation, merger or other business
combination of the Maker with or into another Person (as defined in Section 4.13
hereof) (other than (A) pursuant to a migratory merger effected solely for the
purpose of changing the jurisdiction of incorporation of the Maker or (B) a
consolidation, merger or other business combination in which holders of the
Maker's voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting power of the surviving
entity or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities).
(ii) the sale or transfer of more than 50% of the Maker's
assets (based on the fair market value as determined in good faith by the
Maker's Board of Directors) other than inventory in the ordinary course of
business in one or a related series of transactions; or
(iii) closing of a purchase, tender or exchange offer made
to the holders of more than 50% of the outstanding shares of Common Stock.
(f) "TRIGGERING EVENT." A "TRIGGERING EVENT" shall be deemed to
have occurred at such time as any of the following events:
(i) so long as any Notes are outstanding, the
effectiveness of the Registration Statement, after it becomes effective, (i)
lapses for any reason (including, without limitation, the issuance of a stop
order) or (ii) is unavailable to the Holder for sale of the shares of Common
Stock, and such lapse or unavailability continues for a period of twenty (20)
consecutive Trading Days, and the shares of Common Stock into which the Holder's
Notes can be converted cannot be sold in the public securities market pursuant
to Rule 144(k), provided that the cause of such lapse or unavailability is not
due to factors solely within the control of the Holder of the Notes; and
provided further that a Triggering Event shall not have occurred if and to the
extent the Maker exercised its rights set forth in Section 3(n) of the
Registration Rights Agreement;
(ii) the suspension from listing, without subsequent
listing on any one of, or the failure of the Common Stock to be listed on at
least one of the Nasdaq National Market, the Nasdaq SmallCap Market, The OTC
Bulletin Board, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc., for a period of five (5) consecutive Trading Days;
(iii) the Maker's notice to any holder of the Notes,
including by way of public announcement, at any time, of its inability to comply
(including for any of the reasons described in Section 3.8) or its intention not
to comply with proper requests for conversion of any Notes into shares of Common
Stock; or
(iv) the Maker's failure to comply with a Conversion Notice
tendered in accordance with the provisions of this Note within ten (10) business
days after the receipt by the Maker of the Conversion Notice.
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(g) INTENTIONALLY OMITTED.
(h) MECHANICS OF PREPAYMENT AT OPTION OF HOLDER UPON MAJOR
TRANSACTION. No sooner than fifteen (15) days nor later than ten (10) days prior
to the consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Maker shall deliver written notice
thereof via facsimile and overnight courier ("NOTICE OF MAJOR TRANSACTION") to
the Holder of this Note. At any time after receipt of a Notice of Major
Transaction (or, in the event a Notice of Major Transaction is not delivered at
least ten (10) days prior to a Major Transaction, at any time within ten (10)
days prior to a Major Transaction), any holder of the Notes then outstanding may
require the Maker to prepay, effective immediately prior to the consummation of
such Major Transaction, all of the holder's Notes then outstanding by delivering
written notice thereof via facsimile and overnight courier ("NOTICE OF
PREPAYMENT AT OPTION OF HOLDER UPON MAJOR TRANSACTION") to the Maker, which
Notice of Prepayment at Option of Holder Upon Major Transaction shall indicate
(i) the number of Notes that such holder is electing to prepay and (ii) the
applicable Major Transaction Prepayment Price, as calculated pursuant to Section
3.7(b) above.
(i) MECHANICS OF PREPAYMENT AT OPTION OF HOLDER UPON TRIGGERING
EVENT. Within one (1) day after the occurrence of a Triggering Event, the Maker
shall deliver written notice thereof via facsimile and overnight courier
("NOTICE OF TRIGGERING EVENT") to each holder of the Notes. At any time after
the earlier of a holder's receipt of a Notice of Triggering Event and such
holder becoming aware of a Triggering Event, any holder of this Note and the
Other Notes then outstanding may require the Maker to prepay all of the Notes on
a pro rata basis by delivering written notice thereof via facsimile and
overnight courier ("NOTICE OF PREPAYMENT AT OPTION OF HOLDER UPON TRIGGERING
EVENT") to the Maker, which Notice of Prepayment at Option of Holder Upon
Triggering Event shall indicate (i) the amount of the Note that such holder is
electing to have prepaid and (ii) the applicable Triggering Event Prepayment
Price, as calculated pursuant to Section 3.7(c) above. A holder shall only be
permitted to require the Maker to prepay the Note pursuant to Section 3.7 hereof
for the greater of a period of ten (10) days after receipt by such holder of a
Notice of Triggering Event or for so long as such Triggering Event is
continuing.
(j) INTENTIONALLY OMITTED.
(k) PAYMENT OF PREPAYMENT PRICE. Upon the Maker's receipt of a
Notice(s) of Prepayment at Option of Holder Upon Triggering Event or a Notice(s)
of Prepayment at Option of Holder Upon Major Transaction from any holder of the
Notes, the Maker shall immediately notify each holder of the Notes by facsimile
of the Maker's receipt of such Notice(s) of Prepayment at Option of Holder Upon
Triggering Event or Notice(s) of Prepayment at Option of Holder Upon Major
Transaction and each holder which has sent such a notice shall promptly submit
to the Maker such holder's certificates representing the Notes which such holder
has elected to have prepaid. Other than with respect to the Triggering Event
described in clause (iv) of Section 3.7(f), the Maker shall have the sole option
to pay the Prepayment Price in cash or shares of Common Stock in accordance with
Sections 3.7(b) and (c) of this Note. The Maker shall deliver the applicable
Triggering Event Prepayment Price, in the case of a prepayment pursuant to
Section 3.7(i), to such holder within five (5) business days after the Maker's
receipt of a Notice of Prepayment at Option of Holder Upon Triggering Event and,
in the case of a
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prepayment pursuant to Section 3.7(k), the Maker shall deliver the applicable
Major Transaction Prepayment Price immediately prior to the consummation of the
Major Transaction; PROVIDED that a holder's original Note shall have been so
delivered to the Maker; PROVIDED further that if the Maker is unable to prepay
all of the Notes to be prepaid, the Maker shall prepay an amount from each
holder of the Notes being prepaid equal to such holder's pro-rata amount (based
on the number of Notes held by such holder relative to the number of Notes
outstanding) of all Notes being prepaid. If the Maker shall fail to prepay all
of the Notes submitted for prepayment (other than pursuant to a dispute as to
the arithmetic calculation of the Prepayment Price), in addition to any remedy
such holder of the Notes may have under this Note, the Security Agreement and
the Purchase Agreement, the applicable Prepayment Price payable in respect of
such Notes not prepaid shall bear interest at the rate of 2.0% per month
(prorated for partial months) until paid in full. Until the Maker pays such
unpaid applicable Prepayment Price in full to a holder of the Notes submitted
for prepayment, such holder shall have the option (the "VOID OPTIONAL PREPAYMENT
OPTION") to, in lieu of prepayment, require the Maker to promptly return to such
holder(s) all of the Notes that were submitted for prepayment by such holder(s)
under this Section 3.7 and for which the applicable Prepayment Price has not
been paid, by sending written notice thereof to the Maker via facsimile (the
"VOID OPTIONAL PREPAYMENT NOTICE"). Upon the Maker's receipt of such Void
Optional Prepayment Notice(s) and prior to payment of the full applicable
Prepayment Price to such holder, (i) the Notice(s) of Prepayment at Option of
Holder Upon Triggering Event or the Notice(s) of Prepayment at Option of Holder
Upon Major Transaction, as the case may be, shall be null and void with respect
to those Notes submitted for prepayment and for which the applicable Prepayment
Price has not been paid, (ii) the Maker shall immediately return any Notes
submitted to the Maker by each holder for prepayment under this Section 3.7(h)
and for which the applicable Prepayment Price has not been paid and (iii) the
Conversion Price of such returned Notes shall be adjusted to the lesser of (A)
the Conversion Price as in effect on the date on which the Void Optional
Prepayment Notice(s) is delivered to the Maker and (B) the lowest Closing Bid
and Ask Price during the period beginning on the date on which the Notice(s) of
Prepayment of Option of Holder Upon Major Transaction or the Notice(s) of
Prepayment at Option of Holder Upon Triggering Event, as the case may be, is
delivered to the Maker and ending on the date on which the Void Optional
Prepayment Notice(s) is delivered to the Maker; provided that no adjustment
shall be made if such adjustment would result in an increase of the Conversion
Price then in effect. A holder's delivery of a Void Optional Prepayment Notice
and exercise of its rights following such notice shall not effect the Maker's
obligations to make any payments which have accrued prior to the date of such
notice. Payments provided for in this Section 3.7 shall have priority to
payments to other stockholders in connection with a Major Transaction.
(l) MAKER PREPAYMENT OPTION. The Maker may prepay all or any
portion of the outstanding principal amount of this Note together with all
accrued and unpaid interest thereon upon five (5) days prior written notice to
the Holder (the "MAKER'S PREPAYMENT NOTICE") at a price equal to 150% of the
aggregate principal amount of this Note plus any accrued but unpaid interest
(the "MAKER'S PREPAYMENT PRICE"); PROVIDED, HOWEVER, that if a holder has
delivered a Conversion Notice to the Maker or delivers a Conversion Notice
within twenty-four (24) hours of receipt of the Maker's Prepayment Notice, up to
fifty percent (50%) of the principal amount of the Notes designated to be
converted may be prepaid by the Maker; PROVIDED FURTHER that if during the
period between delivery of the Maker's Prepayment Notice and the Maker's
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Prepayment Date (as defined below), a holder shall become entitled to deliver a
Notice of Prepayment at Option of Holder Upon Major Transaction or Notice of
Prepayment at Option of Holder upon Triggering Event, then the such rights of
the holders shall take precedence over the previously delivered Maker Prepayment
Notice. The Maker's Prepayment Notice shall state the date of prepayment which
date shall be the sixth (6th) day after the Maker has delivered the Maker's
Prepayment Notice (the "MAKER'S PREPAYMENT DATE"), the Maker's Prepayment Price
and the amount of Notes to be prepaid by the Maker. The Maker shall deliver the
Maker's Prepayment Price to the Holder within five (5) business days after the
Maker has delivered the Maker's Prepayment Notice, PROVIDED, that if the
holder(s) delivers a Conversion Notice before the Maker's Prepayment Date, then
the portion of the Maker's Prepayment Price which would be paid to prepay the
Notes covered by such Conversion Notice shall be returned to the Maker upon
delivery of the Common Stock issuable in connection with such Conversion Notice
to the holder(s). On the Maker's Prepayment Date, the Maker shall pay the
Maker's Prepayment Price, subject to any adjustment pursuant to the immediately
preceding sentence, to the holder(s) on a pro rata basis, PROVIDED, however,
that upon receipt by Maker of the Notes to be prepaid pursuant to this Section
3.7(l), the Maker shall, on the next business day following the date of receipt
by the Maker of the original Note, pay the Maker's Prepayment Price to the
holder(s) on a pro rata basis. If the Maker fails to pay the Maker's Prepayment
Price by the sixth (6th) business day after the Maker has delivered the Maker's
Prepayment Notice, the prepayment will be declared null and void and the Maker
shall lose its right to serve a Maker 's Prepayment Notice pursuant to this
Section 3.7(l) in the future.
Section 3.8 INABILITY TO FULLY CONVERT.
(a) HOLDER'S OPTION IF MAKER CANNOT FULLY CONVERT. If, upon the
Maker's receipt of a Conversion Notice, the Maker cannot issue shares of Common
Stock registered for resale under the Registration Statement for any reason,
including, without limitation, because the Maker (w) does not have a sufficient
number of shares of Common Stock authorized and available, (x) failed to call
the Stockholder Meeting within the time period set forth in Section 3.4(c)
hereof, (y) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Maker or any of its
securities from issuing all of the Common Stock which is to be issued to the
Holder pursuant to a Conversion Notice or (z) fails to have a sufficient number
of shares of Common Stock registered for resale under the Registration
Statement, then the Maker shall issue as many shares of Common Stock as it is
able to issue in accordance with the Holder's Conversion Notice and, with
respect to the unconverted portion of this Note, the Holder, solely at Holder's
option, can elect to:
(i) require the Maker to prepay that portion of this Note
for which the Maker is unable to issue Common Stock in accordance with the
Holder's Conversion Notice (the "MANDATORY PREPAYMENT") at a price per share
equal to the Triggering Event Prepayment Price as of such Conversion Date (the
"MANDATORY PREPAYMENT PRICE"); provided that the Maker shall have the sole
option to pay the Mandatory Prepayment Price in cash or shares of Common Stock;
(ii) if the Maker's inability to fully convert is pursuant
to Section 3.8(a)(y) above, require the Maker to issue restricted shares of
Common Stock in accordance with such holder's Conversion Notice;
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(iii) void its Conversion Notice and retain or have
returned, as the case may be, this Note that was to be converted pursuant to the
Conversion Notice (provided that the Holder's voiding its Conversion Notice
shall not effect the Maker's obligations to make any payments which have accrued
prior to the date of such notice).
In the event a Holder shall elect to convert any portion of its Notes as
provided herein, the Maker cannot refuse conversion based on any claim that such
Holder or any one associated or affiliated with such Holder has been engaged in
any violation of law, violation of an agreement to which such Holder is a party
or for any reason whatsoever, unless, an injunction from a court, on notice,
restraining and or adjoining conversion of all or of said Notes shall have been
issued and the Maker posts a surety bond for the benefit of such Holder in an
amount equal to 130% of the principal amount of the Notes the Holder has elected
to convert, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder in the event it obtains judgment.
(b) MECHANICS OF FULFILLING HOLDER'S ELECTION. The Maker shall
immediately send via facsimile to the Holder, upon receipt of a facsimile copy
of a Conversion Notice from the Holder which cannot be fully satisfied as
described in Section 3.8(a) above, a notice of the Maker's inability to fully
satisfy the Conversion Notice (the "INABILITY TO FULLY CONVERT NOTICE"). Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Maker is
unable to fully satisfy such holder's Conversion Notice, (ii) the amount of this
Note which cannot be converted and (iii) the applicable Mandatory Prepayment
Price. The Holder shall notify the Maker of its election pursuant to Section
3.8(a) above by delivering written notice via facsimile to the Maker ("NOTICE IN
RESPONSE TO INABILITY TO CONVERT").
(c) PAYMENT OF PREPAYMENT PRICE. If the Holder shall elect to have
its Notes prepaid pursuant to Section 3.8(a)(i) above, the Maker shall pay the
Mandatory Prepayment Price to the Holder within thirty (30) days of the Maker's
receipt of the Holder's Notice in Response to Inability to Convert, PROVIDED
that prior to the Maker's receipt of the Holder's Notice in Response to
Xxxxxxxxx to Convert the Maker has not delivered a notice to the Holder stating,
to the satisfaction of the Holder, that the event or condition resulting in the
Mandatory Prepayment has been cured and all Conversion Shares issuable to the
Holder can and will be delivered to the Holder in accordance with the terms of
this Note. If the Maker shall fail to pay the applicable Mandatory Prepayment
Price to the Holder on a timely basis as described in this Section 3.8(c) (other
than pursuant to a dispute as to the determination of the arithmetic calculation
of the Prepayment Price), in addition to any remedy the Holder may have under
this Note and the Purchase Agreement, such unpaid amount shall bear interest at
the rate of 2.0% per month (prorated for partial months) until paid in full.
Until the full Mandatory Prepayment Price is paid in full to the Holder, the
Holder may (i) void the Mandatory Prepayment with respect to that portion of the
Note for which the full Mandatory Prepayment Price has not been paid, (ii)
receive back such Note, and (iii) require that the Conversion Price of such
returned Note be adjusted to the lesser of (A) the Conversion Price as in effect
on the date on which the Holder voided the Mandatory Prepayment and (B) the
lowest Closing Bid and Ask Price during the period beginning on the Conversion
Date and ending on the date the Holder voided the Mandatory Prepayment.
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(d) PRO-RATA CONVERSION AND PREPAYMENT. In the event the Maker
receives a Conversion Notice from more than one holder of the Notes on the same
day and the Maker can convert and prepay some, but not all, of the Notes
pursuant to this Section 3.8, the Maker shall convert and prepay from each
holder of the Notes electing to have its Notes converted and prepaid at such
time an amount equal to such holder's pro-rata amount (based on the principal
amount of the Notes held by such holder relative to the principal amount of the
Notes outstanding) of all the Notes being converted and prepaid at such time.
Section 3.9 NO RIGHTS AS SHAREHOLDER. Nothing contained in this Note shall
be construed as conferring upon the Holder, prior to the conversion of this
Note, the right to vote or to receive dividends or to consent or to receive
notice as a shareholder in respect of any meeting of shareholders for the
election of directors of the Maker or of any other matter, or any other rights
as a shareholder of the Maker.
ARTICLE IV
MISCELLANEOUS
Section 4.1 NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated in the
Purchase Agreement (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The Maker will give written notice to the Holder at least ten (10) days prior to
the date on which the Maker closes its books or takes a record (x) with respect
to any dividend or distribution upon the Common Stock, (y) with respect to any
pro rata subscription offer to holders of Common Stock or (z) for determining
rights to vote with respect to any Organic Change, dissolution, liquidation or
winding-up and in no event shall such notice be provided to such holder prior to
such information being made known to the public. The Maker will also give
written notice to the Holder at least ten (10) days prior to the date on which
any Organic Change, dissolution, liquidation or winding-up will take place and
in no event shall such notice be provided to the Holder prior to such
information being made known to the public. The Maker shall promptly notify the
Holder of this Note of any notices sent or received, or any actions taken with
respect to the Other Notes.
Section 4.2 GOVERNING LAW. This Note shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to the choice of law provisions. This Note shall not be interpreted or
construed with any presumption against the party causing this Note to be
drafted.
Section 4.3 HEADINGS. Article and section headings in this Note are
included herein for purposes of convenience of reference only and shall not
constitute a part of this Note for any other purpose.
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Section 4.4 REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Maker to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the holder thereof and shall
not, except as expressly provided herein, be subject to any other obligation of
the Maker (or the performance thereof). The Maker acknowledges that a breach by
it of its obligations hereunder will cause irreparable and material harm to the
Holder and that the remedy at law for any such breach may be inadequate.
Therefore the Maker agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available rights
and remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.
Section 4.5 ENFORCEMENT EXPENSES. The Maker agrees to pay all costs and
expenses of enforcement of this Note, including, without limitation, reasonable
attorneys' fees and expenses.
Section 4.6 BINDING EFFECT. The obligations of the Maker and the Holder
set forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.
Section 4.7 AMENDMENTS. This Note may not be modified or amended in any
manner except in writing executed by the Maker and the Holder.
Section 4.8 COMPLIANCE WITH SECURITIES LAWS. The Holder of this Note
acknowledges that this Note is being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder shall not offer, sell or otherwise dispose of this Note. This Note
and any Note issued in substitution or replacement therefore shall be stamped or
imprinted with a legend in substantially the following form:
" THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE
AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
LAWS."
Section 4.9 CONSENT TO JURISDICTION. Each of the Maker and the Holder (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court sitting in the
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Southern District of New York and the courts of the State of New York located in
New York county for the purposes of any suit, action or proceeding arising out
of or relating to this Note and (ii) hereby waives, and agrees not to assert in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. Each of the Maker and the Holder consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address in effect for notices to it under the Purchase
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 4.9 shall affect
or limit any right to serve process in any other manner permitted by law. Each
of the Maker and the Holder hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to this Note shall be entitled
to reimbursement for reasonable legal fees from the non-prevailing party.
Section 4.10 PARTIES IN INTEREST. This Note shall be binding upon, inure to
the benefit of and be enforceable by the Maker, the Holder and their respective
successors and permitted assigns.
Section 4.11 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.
Section 4.12 MAKER WAIVERS. Except as otherwise specifically provided
herein, the Maker and all others that may become liable for all or any part of
the obligations evidenced by this Note, hereby waive presentment, demand, notice
of nonpayment, protest and all other demands' and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, and do hereby
consent to any number of renewals of extensions of the time or payment hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon, all without affecting the liability
of the other persons, firms or Maker liable for the payment of this Note, AND DO
HEREBY WAIVE TRIAL BY JURY.
(a) No delay or omission on the part of the Holder in exercising its
rights under this Note, or course of conduct relating hereto, shall operate as a
waiver of such rights or any other right of the Holder, nor shall any waiver by
the Holder of any such right or rights on any one occasion be deemed a waiver of
the same right or rights on any future occasion.
(b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A
PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW,
HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
Section 4.13 DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:
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"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"TRADING DAY" " means (a) a day on which the Common Stock is traded on the
Nasdaq National Market or other registered national stock exchange on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on the
Nasdaq National Market or any registered national stock exchange, a day or which
the Common Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); PROVIDED,
HOWEVER, that in the event that the Common Stock is not listed or quoted as set
forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on which
banking institutions in the State of New York are authorized or required by law
or other government action to close.
SATCON TECHNOLOGY CORPORATION
By:
-----------------------
Name:
Title:
EXHIBIT A
WIRE INSTRUCTIONS.
Payee: _______________________________________________________
Bank: ________________________________________________________
Address: _____________________________________________________
_____________________________________________________
Bank No.: ____________________________________________________
Account No.: _________________________________________________
Account Name: ________________________________________________
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FORM OF
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Note No. ___ into shares of Common Stock of SATCON
TECHNOLOGY CORPORATION (the "Maker") according to the conditions hereof, as of
the date written below.
Date of Conversion _________________________________________________________
Applicable Conversion Price ________________________________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _________________________
Signature
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[Name]
Address:
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