EXHIBIT 4.4
NEITHER THIS DEBENTURE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
DEBENTURE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES. THIS DEBENTURE AND THE
SECURITIES ISSUABLE UPON CONVERSION OF THIS DEBENTURE MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
Original Issue Date: May 30, 2002
No. 1 $25,000,000
MERIX CORPORATION
6.5% CONVERTIBLE DEBENTURE DUE MAY 30, 2007
THIS DEBENTURE is one of a series of duly authorized and issued
debentures of Merix Corporation, a corporation organized under the laws of the
state of Oregon (the "Company"), designated as its 6.5% Convertible Debentures
due May 30, 2007 in the aggregate principal amount of Twenty Five Million
Dollars ($25,000,000) (collectively, the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to the order of SF
Capital Partners Ltd. or its registered assigns (the "Holder") the principal sum
of Twenty Five Million Dollars ($25,000,000) and any additional sums due
pursuant to the terms hereof, on May 30, 2007, or such earlier date as the
Debentures are required or permitted to be repaid as provided hereunder (the
"Maturity Date"), and to pay interest to the Holder on the principal amount of
this Debenture in accordance with the provisions hereof. This Debenture is
subject to the following additional provisions.
1. Definitions. As used in this Debenture, the following terms shall
have the meanings set forth in this Section 1:
"Bankruptcy Event" means any of the following events: (a) the Company
or any subsidiary thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
relating to the Company or any subsidiary thereof; (b) there is commenced
against the Company or any subsidiary thereof any such case or proceeding that
is not dismissed within 60 days after commencement; (c) the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d) the Company
or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 days; (e) the Company or any subsidiary thereof
makes a general assignment for the benefit of creditors; (f) the Company or any
subsidiary thereof fails to pay, or states that it is unable to pay or is unable
to pay, its debts generally as they become due; (g) the Company or any
subsidiary thereof calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or (h) the Company or any
subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York or the State of Oregon are authorized or required by law or
other governmental action to close.
"Change of Control Prepayment Price" for the principal amount of the
Debentures to be prepaid under Section 7 shall mean the sum of: (i) 110% of the
principal amount then outstanding of the Debentures to be prepaid and (ii) all
accrued and unpaid interest, other amounts, costs, expenses and liquidated
damages due in respect of the Debentures.
"Change of Control Transaction" means the occurrence of any of: (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, , unless approved by the Company's Board of
Directors, then in excess of 50% of the voting securities of the Company, (ii) a
replacement at one time or over time of more than one-half of the members of the
Company's board of directors which is not approved by a majority of those
individuals who are members of the board of directors on the date hereof (or by
those individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a majority of
the members of the board of directors who are members on the date hereof), (iii)
the merger of the Company with or into another entity that is not wholly-owned
by the Company, immediately after the closing of which either: (x) the holders
of the voting securities of the Company immediately prior to the merger own less
than 66 2/3% of the voting securities of the surviving corporation immediately
after the merger or (y) a majority of the board of directors of the surviving
corporation does not consist of persons who were directors of the Company
immediately prior to the closing of the merger, (iv) a consolidation or sale of
50% or more of the assets of the Company in one or a series of related
transactions, or (v) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i)-(iv).
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Closing Price" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then listed or
quoted on an Eligible Market, the closing sales price per share of the Common
Stock for such date (or the nearest preceding date) on the primary Eligible
Market on which the Common Stock is then listed or quoted; (b) if the Common
Stock is not then listed or quoted on an Eligible Market and if prices for the
Common Stock are then quoted on the OTC Bulletin Board, the closing sales price
per share of the
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Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on an Eligible
Market or the OTC Bulletin Board and if prices for the Common Stock are then
reported in the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent sales price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Holder.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, no par value, and
stock of any other class into which such shares may be reclassified or changed.
"Common Stock Equivalents" means any securities of the Company or a
subsidiary thereof which entitle the holder thereof to acquire Common Stock at
any time, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"Conversion Date" is the date specified in a Conversion Notice to
effect conversions of Debentures under Section 5(b)(i), which date may not be
prior to the date the Holder delivers such Conversion Notice. If no Conversion
Date is specified in a Conversion Notice, then the Conversion Date for such
notice shall be the date that such notice is deemed delivered hereunder.
"Conversion Price" means $19.41 subject to adjustment in accordance
with Section 5.
"Debt Ratio" means, on any Business Day, a fraction where the numerator
equals the aggregate Indebtedness of the Company on such Business Day and the
denominator equals the sum of the (i) aggregate Indebtedness of the Company on
such Business Day, (ii) Shareholders' equity reflected on the latest balance
sheet contained in the Company's most recent report on Form 10-Q or Form 10-K
filed with the Commission and (iii) changes in the Company's common stock
account and preferred stock account since the date of such balance sheet, as
certified by the Company's Chief Financial Officer, if requested by a Holder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Eligible Market" means any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq or the Nasdaq SmallCap Market.
"Equity Conditions" means, with respect to a specified issuance of
Common Stock, that each of the following conditions is satisfied: (i) the number
of authorized but unissued and otherwise unreserved shares of Common Stock is
sufficient for such issuance; (ii) such shares of Common Stock are registered
for resale by the Holder pursuant to an effective registration statement, and
the prospectus thereunder is available for use by the Holder to sell such shares
or all such shares may be sold without volume restrictions pursuant to Rule
144(k) under the Securities Act; (iii) the Common Stock is listed or quoted (and
is not suspended from trading) on an Eligible Market and such shares of Common
Stock are approved for listing on such Eligible
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Market upon issuance; (iv) such issuance would be permitted in full without
violating the rules or regulations of the Eligible Market on which such shares
are listed or quoted; and (v) no Event of Default nor any event that with the
passage of time and without being cured would constitute a Event of Default has
occurred and not been cured.
"Event of Default" means the occurrence of any one or more of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of principal or liquidated
damages in respect of any Debentures, as and when the same becomes due and
payable (whether by acceleration or otherwise) or any default in the payment of
interest in respect of any Debentures, within five Business Days of when the
same becomes due and payable;
(ii) the Company or any Subsidiary defaults in any of its
obligations under any other debenture or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or evidenced, any
indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company or any Subsidiary in an amount exceeding
$1,000,000, whether such indebtedness now exists or is hereafter created, and
such default results in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and payable;
(iii) a Bankruptcy Event;
iv) the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion hereunder
that comply with the provisions hereof prior to the tenth Business Day after the
Conversion Date or the Company shall provide notice to any Holder, including by
way of public announcement, at any time, of its intention not to comply with
requests for conversion of Debentures in accordance with the terms hereof;
(v) the Company shall fail for any reason to pay in full the
amount of cash due pursuant to a Buy-In within seven days after notice therefor
is delivered hereunder or shall fail to pay any liquidated damages due pursuant
to the Transaction Documents within seven days of the date of the request for
such payment;
(vi) the Company shall fail to have available a sufficient
number of authorized and unreserved shares of Common Stock to issue to such
Holder upon a conversion hereunder; or
(vii) the Company shall incur any Indebtedness which results in
a Debt Ratio equal to or in excess of 33%.
"Indebtedness" means any debt for borrowed money or capital leases.
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"Interest Payment Date" means each March 31, June 30, September 30 and
December 31, beginning on June 30, 2002, except if such date is not a Trading
Day, in which case such Interest Payment Date shall be the next succeeding
Trading Day
"Liquidation" means for any Person, any liquidation, dissolution or
winding-up of such Person, whether voluntary or involuntary, by operation or law
or otherwise.
"Mandatory Prepayment Amount" for any Debentures shall equal the
principal amount of Debentures to be prepaid and, if applicable, the Reinstated
Principal, plus all accrued and unpaid interest thereon.
"Nasdaq" means the Nasdaq National Market.
"Original Issue Date" means the date of the first issuance of any
Debentures regardless of the number of transfers of any particular Debenture and
regardless of the number of certificates which may be issued to evidence such
Debentures.
"Optional Prepayment Price" for the principal amount of the Debentures
to be prepaid under Section 8, shall mean the sum of: (i) the principal amount
of the Debentures to be prepaid and (ii) all accrued and unpaid interest, other
amounts, costs, expenses and liquidated damages due in respect of the
Debentures.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened concerning the interpretation,
enforcement or defense of any transaction contemplated by any Transaction
Document (whether brought against a party hereto or such parties affiliates,
directors, officers, employees or agents).
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of May 30, 2002, to which the Company and the original Holders are parties, as
amended, modified or supplemented from time to time in accordance with its
terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May 30, 2002, to which the Company and the original
Holders are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
"Registration Statement" means a registration statement meeting the
requirements of the Registration Rights Agreement and covering the resale of all
Underlying Shares by the Holders who shall be named as "selling shareholders"
thereunder.
"Reinstated Principal" means the principal amount of Debentures
converted during the ten Trading Days preceding the delivery of an Event of
Default Notice, for which the Company issued or was obligated to issue
Underlying Shares to the Holder.
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"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means: (a) a day on which the shares of Common Stock are
traded on an Eligible Market, or (b) if the shares of Common Stock are not
listed on an Eligible Market, a day on which the shares of Common Stock are
traded in the over-the-counter market, as reported by the OTC Bulletin Board, or
(c) if the shares of Common Stock are not quoted on the OTC Bulletin Board, a
day on which the shares of Common Stock are 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,
that in the event that the shares of Common Stock are not listed or quoted as
set forth in (a), (b) and (c) hereof, then Trading Day shall mean a Business
Day.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
"Underlying Shares" means, collectively, the shares of Common Stock
issuable upon conversion of Debentures in accordance with the terms hereof.
2. Interest. The Company shall pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Debenture at
the rate of 6.5% per annum, payable quarterly in arrears on each Interest
Payment Date. Interest shall be payable in cash and shall be calculated on the
basis of a 365-day year and calendar month and shall accrue daily commencing on
the Original Issue Date. If the Company fails for any reason to pay interest in
cash by the third Trading Day following an Interest Payment Date, a Holder may
(but shall not be required to) treat such interest as if it had been added to
the principal amount of the Debentures as of such Interest Payment Date. Any
interest that is not paid within three Trading Days following an Interest
Payment Date and that is not added to the principal amount of the Debentures
shall continue to accrue and shall entail a late fee, which must be paid in
cash, at the rate of 12% per annum or the lesser rate permitted by applicable
law (such fees to accrue daily, from the date such interest is due hereunder
through and including the date of payment).
3. Registration of Debentures. The Company shall register the
Debentures upon records to be maintained by the Company for that purpose (the
"Debenture Register") in the name of each record holder thereof from time to
time. The Company may deem and treat the registered Holder of this Debenture as
the absolute owner hereof for the purpose of any conversion hereof or any
payment of interest hereon, and for all other purposes, absent actual notice to
the contrary.
4. Registration of Transfers and Exchanges. The Company shall
register the transfer of any portion of this Debenture in the Debenture Register
upon surrender of this Debenture to the Company at its address for notice set
forth herein. Upon any such registration or transfer, a new debenture, in
substantially the form of this Debenture (any such new debenture, a "New
Debenture"), evidencing the portion of this Debenture so transferred shall be
issued to the transferee and a New Debenture evidencing the remaining portion of
this Debenture not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Debenture by the transferee thereof shall be
deemed the acceptance by such transferee of all of the rights and obligations of
a holder of a Debenture. This Debenture is exchangeable for an
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equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge or other fee will be imposed in connection with any such registration of
transfer or exchange. Transfers of this Debenture and the shares of Common Stock
issuable on conversion thereof hereby are governed by Section 4.1 of the
Purchase Agreement.
5. Conversion.
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(a) (i) At the Option of the Holder. All or a minimum of
$100,000 (unless a smaller amount of principal is then outstanding) of the
principal amount of this Debenture then outstanding shall be convertible into
shares of Common Stock (subject to the limitations set forth in Section
5(a)(ii)), at the option of the Holder, at any time and from time to time from
and after the Original Issue Date. Holders shall effect conversions under this
Section 5(a)(i) by delivering the Company with a written notice in the form
attached hereto as Exhibit A (a "Conversion Notice"). The number of Underlying
Shares issuable upon any conversion hereunder shall (subject to the limitations
of Section 5(a)(ii))equal the outstanding principal amount of this Debenture to
be converted divided by the Conversion Price.
(ii) Certain Conversion Restrictions. Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired by a Holder upon any conversion of Debentures (or otherwise
in respect hereof) shall be limited to the extent necessary to insure that,
following such conversion (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with such Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 4.999% of the total number of issued and outstanding shares of Common
Stock (including for such purpose the shares of Common Stock issuable upon such
conversion). For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. Each delivery of a Conversion Notice hereunder will
constitute a representation by the applicable Holder that it has evaluated the
limitation set forth in this paragraph and determined that issuance of the full
number of Underlying Shares issuable in respect of such Conversion Notice does
not violate the restriction contained in this paragraph. This provision shall
not restrict the number of shares of Common Stock which a Holder may receive or
beneficially own in order to determine the amount of securities or other
consideration that such Holder may receive in the event of a merger, sale or
other business combination or reclassification involving the Company as
contemplated herein.
(b) Mechanics of Conversion.
-----------------------
(i) By the third Trading Day after each Conversion Date,
the Company shall issue or cause to be issued and cause to be delivered to or
upon the written order of the Holder and in such name or names as the Holder may
designate a certificate for the Underlying Shares issuable upon such conversion
which, unless required by the Purchase Agreement, shall be free of all
restrictive legends. The Holder, or any Person so designated by the Holder to
receive Underlying Shares, shall be deemed to have become the holder of record
of such Underlying Shares as of the Conversion Date. If the Company's transfer
agent is eligible to participate in the Depositary Trust Corporation DWAC system
and no legends are required to be
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included on the certificates representing Underlying Shares pursuant to the
Purchase Agreement, the Company shall, upon request of the Holder, use its best
efforts to deliver Underlying Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions.
(c) To effect conversions hereunder, the Holder shall not be
required to physically surrender this Debenture unless the aggregate principal
amount represented by such Debenture is being converted, in which event, the
Holder shall deliver such Debenture promptly to the Company (it being understood
that such delivery is not a condition precedent to the Company's obligations to
deliver Underlying Shares upon such conversion). Conversions hereunder shall
have the effect of lowering the outstanding principal amount represented by such
Debenture in an amount equal to the applicable conversion, which shall be
evidenced by entries set forth in the Conversion Schedule attached as Schedule
I, which will be maintained by the Company and the Holder.
(d) The Company's obligations to issue and deliver Underlying
Shares upon conversion of this Debenture in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of such Underlying Shares.
(e) If by the third Trading Day after a Conversion Date the
Company fails to deliver to the Holder such Underlying Shares in such amounts
and in the manner required pursuant to Section 5(b), then the Holder will have
the right to rescind such conversion.
(f) If by the third Trading Day after a Conversion Date the
Company fails to deliver to the Holder such Underlying Shares in such amounts
and in the manner required pursuant to Section 5(b), and if after such third
Trading Day 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 Underlying Shares which the Holder anticipated receiving upon such
conversion (a "Buy-In"), then the Company shall (A) pay in cash to the Holder
(in addition to any remedies available to or elected by the Holder) the amount
by which (x) the Holder's total purchase price (including brokerage commissions,
if any) for the shares of Common Stock so purchased exceeds (y) the amount
obtained by multiplying (1) the aggregate number of Underlying Shares that the
Company was required to deliver to the Holder in connection with the conversion
at issue by (2) the Closing Price at the time of the obligation giving rise to
such purchase obligation and (B) at the option of the Holder, either reinstate
the principal amount of Debentures and equivalent number of Underlying Shares
for which such conversion was not timely honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its conversion and delivery obligations hereunder. For
example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
with a market price on the date of conversion totaling $10,000, under clause (A)
of the immediately preceding
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sentence, the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder and details as to the dates and amounts of trades executed by the Holders
specifically in respect of the Buy-In.
(g) Adjustments to Conversion Price. The Conversion Price in
effect on any Conversion Date shall be subject to adjustments in accordance with
this Section 5(g):
(i) Stock Dividends and Splits. If the Company, at any
time while any Debentures are outstanding, (i) pays a stock dividend on its
Common Stock or otherwise makes a distribution on any class of capital stock
that is payable in shares of Common Stock, (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, or (iii) combines outstanding
shares of Common Stock into a smaller number of shares, then in each such case
the Conversion Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to
clause (i) of this paragraph shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.
(ii) Additional Distributions. If the Company, at any time
while any Debentures are outstanding, shall distribute to all holders of Common
Stock (and not to Holders) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security ("Distribution Rights"), then
in each such case the Conversion Price at which the principal amount of
Debentures shall thereafter be convertible shall be determined by multiplying
the Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such Distribution Rights by a
fraction of which the denominator shall be the Closing Price determined as of
the record date mentioned above, and of which the numerator shall be such
Closing Price on such record date less the then fair market value at such record
date of the portion of the Distribution Rights applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good faith (the
"Adjusted Conversion Price"). In either case the adjustments shall be described
in a statement provided to the Holders of the Distribution Rights applicable to
one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above. Upon conversion of the Debentures at the Adjusted
Conversion Price, the Holder will not be entitled to receive the Distribution
Rights granted to other holders of Common Stock. Upon the expiration or
termination of the Distribution Rights, the Adjusted Conversion Price shall be
adjusted back to the original Conversion Price.
(iii) Subsequent Equity Sales. If, at any time or from time
to time while this Debenture is outstanding during the period between the
Original Issue Date and the 180th day following the Effective Date, the Company
or any Subsidiary issues additional shares of Common Stock or Common Stock
Equivalents in a financing transaction which is exempt from the registration
requirements of the Securities Act, at an effective net price to the Company per
share of Common Stock (the "Effective Price") less than the then applicable
Conversion Price, then, at the option of the Holder, the Conversion Price shall
be reduced to equal the
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product of: (A) the Conversion Price in effect immediately prior to such
issuance of Common Stock or Common Stock Equivalents times (B) a fraction, the
numerator of which is the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issuance, plus (2) the number of shares of
Common Stock which the aggregate Effective Price of the Common Stock issued (or
deemed to be issued) would purchase at the Conversion Price on the Trading Day
of the issuance of such additional shares of Common Stock or Common Stock
Equivalents, and the denominator of which is the aggregate number of shares of
Common Stock outstanding or deemed to be outstanding immediately after such
issuance. Notwithstanding the foregoing, no adjustment will be made under this
paragraph (iii) in respect of the granting of options to employees, officers,
directors and bona fide consultants of the Company pursuant to any stock option
plan duly adopted by the Company or to the issuance of Common Stock upon
exercise of such options.
(iv) Calculations. All calculations under this Section 5
shall be made to the nearest cent or the nearest 1/100th of a share, as the case
may be. The number of shares of Common Stock outstanding at any given time shall
not include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.
(v) Notice of Adjustments. Whenever the Conversion Price
is adjusted pursuant to the terms hereof the Company shall promptly mail to each
Holder, a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(h) Reclassifications; Share Exchanges. In case of any
reclassification of the Common Stock, or any compulsory share exchange pursuant
to which the Common Stock is converted into other securities, cash or property
(other than compulsory share exchanges which constitute Change of Control
Transactions), the Holders of the Debentures then outstanding shall have the
right thereafter to convert such shares only into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the Holders
shall be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of Common Stock of the Company into
which such shares of Debentures could have been converted immediately prior to
such reclassification or share exchange would have been entitled. This provision
shall similarly apply to successive reclassifications or share exchanges.
(i) Notice of Corporate Events. If (a) the Company shall
declare a dividend (or any other distribution) on the Common Stock, (b) the
Company shall declare a special nonrecurring cash dividend on or a redemption of
the Common Stock, (c) the Company shall authorize the granting to all holders of
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights, (d) the approval of any
stockholders of the Company shall be required in connection with any Change of
Control Transaction, (e) the entering into an agreement to effectuate a Change
of Control Transaction, or (f) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then the Company shall file a press release or Current Report on Form
8-K to disclose such occurrence and notify the Holders at their last addresses
as they shall appear upon the stock books of the Company, at least 25 calendar
days prior to the
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applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which any such Change of Control Transaction is
expected to become effective or close, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
Common Stock for securities, cash or other property deliverable upon any such
Change of Control Transaction, provided, that the failure to mail such notice or
any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice, which failure
shall not effect the obligations of the Company and the rights of the Holders
hereunder. Holders are entitled to convert principal amount of this Debenture
during the 20-day period commencing the date of such notice to the effective
date of the event triggering such notice.
(j) The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of Common Stock solely
for the purpose of issuance upon conversion of Debentures, each as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of shares of
Common Stock as shall be issuable upon the conversion of all outstanding
principal amount of Debentures. The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly and validly
authorized and issued and fully paid and nonassessable.
(k) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Closing Price on the applicable
Conversion Date. If any fraction of an Underlying Share would, except for the
provisions of this Section, be issuable upon a conversion hereunder, the Company
shall pay an amount in cash equal to the Conversion Price multiplied by such
fraction.
(l) The issuance of certificates for Common Stock on conversion
of principal amount of this Debenture shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such Debentures so
converted.
(m) Any and all notices or other communications or deliveries to
be provided by the Holders, including, without limitation, any Conversion
Notice, shall be in writing and delivered personally, by facsimile or sent by a
nationally recognized overnight courier service, addressed to the attention of
the Chief Financial Officer of the Company addressed to 0000 Xxxxxx Xxxx, Xxxxxx
Xxxxx, Xxxxxx, Facsimile No.: (000) 000-0000, attention Chief Financial Officer
and to the Controller of the Company addressed to 0000 Xxxxxx Xxxx, Xxxxxx
Xxxxx, Xxxxxx, Facsimile No.: (000) 000-0000, attention Controller, or to such
other address or facsimile number as shall be specified in writing by the
Company for such purpose. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile or sent by a nationally recognized overnight
-11-
courier service, addressed to each Holder at the facsimile telephone number or
address of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 p.m. (New
York City time)(with confirmation of transmission), (ii) the date after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section later than 6:30 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date (with confirmation of transmission), (iii) upon receipt, if
sent by a nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
6. Prepayment Upon Event of Defaults. Upon the occurrence of a Event
of Default, each Holder shall (in addition to all other rights it may have
hereunder or under applicable law), have the right, exercisable at the sole
option of such Holder, and by delivery of a written notice to the Company to
require the Company (an "Event of Default Notice") to prepay all or a portion of
the Debentures then held by such Holder and, at the option of the Holder, all or
a portion of the Reinstated Principal, for an amount, in cash, equal to the
Mandatory Prepayment Amount. The Mandatory Prepayment Amount shall be due and
payable within five Trading Days of the date of the Event of Default Notice. For
purposes of this Section, principal amount of Debentures shall remain
outstanding until such date as the Holder shall have received Underlying Shares
upon a conversion (or attempted conversion) thereof that meets the requirements
hereof. Notwithstanding anything herein to the contrary, upon the occurrence of
a Bankruptcy Event, all outstanding principal and accrued but unpaid interest on
this Debenture shall immediately become due and payable in full in cash, without
any further action by the Holder, and the Company shall immediately be obligated
to pay the Mandatory Prepayment Amount pursuant to this paragraph as if the
Holder had delivered a Event of Default Notice immediately prior to the
occurrence of any such Event of Default. The Holder need not provide and the
Company hereby waives any presentment, demand, protest or other notice of any
kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such declaration may be rescinded and
annulled by Xxxxxx at any time prior to payment hereunder. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
7. Change of Control Transaction.
-----------------------------
(a) During the period between the public announcement of a
Change of Control Transaction and the 20th day immediately preceding the
consummation of such Change of Control Transaction (the date of such
consummation, the "Consummation Date"), the Holder shall (in addition to all
other rights it may have hereunder or under applicable law), have the right,
exercisable at the sole option of the Holder, and by delivery of a written
notice to the Company during such period, to require the Company to prepay all
or a portion of the Debentures then held by the Holder for an amount in cash,
equal to the Change of Control Prepayment Price. Such prepayment price shall be
due and payable on the Consummation Date.
-12-
For purposes of this Section, principal amount of Debentures shall remain
outstanding until such date as the Holder shall have received Underlying Shares
upon a conversion (or attempted conversion) thereof that meets the requirements
hereof. The Holder may convert any portion of the outstanding principal amount
of the Debentures subject to a prepayment hereunder prior to the Consummation
Date.
(b) During the period between the public announcement of a
Change of Control Transaction and the 20/th/ day immediately preceding the
Consummation Date, the Company shall have the right, exercisable at the sole
option of the Company, and by delivery of a written notice to the Holder during
such period (a "Company Prepayment Notice" and the date such notice is received
by the Holder, a "Company Notice Date"), to prepay all or a portion of the
principal amount of Debentures then held by the Holder for an amount in cash
equal to the Change of Control Prepayment Price, payable on the Consummation
Date. Notwithstanding anything herein to the contrary, the Company shall only be
entitled to deliver a Company Prepayment Notice if all of the Equity Conditions
set forth in (i)-(iv) are satisfied with respect to all shares of Common Stock
issuable on a Company Notice Date. If any of Equity Conditions set forth in
(i)-(iv) shall cease to be in effect during the period between the Company
Notice Date and the date the Change of Control Prepayment Price is due pursuant
to this Section 7(b) is paid in full, then the Holder subject to such prepayment
may elect, by written notice to the Company given at any time after any of the
Equity Conditions set forth in (i)-(iv) shall cease to be in effect, to
invalidate ab initio such optional prepayment, notwithstanding anything herein
contained to the contrary. The Holder may convert any portion of the outstanding
principal amount of the Debentures subject to a prepayment hereunder prior to
the Consummation Date. Once delivered, the Company shall not be entitled to
rescind a Company Prepayment Notice.
(c) If any portion of the Change of Control Prepayment Price due
pursuant to Section 7(b) remains unpaid by the Consummation Date, the Holder
subject to such prepayment may elect by written notice to the Company to
invalidate ab initio such optional prepayment, notwithstanding anything herein
contained to the contrary. If the Holder makes such an election, the aggregate
principal amount under this Debenture and all interest due hereunder shall be
increased by any accrued liquidated damages and the Company shall no longer have
any prepayment rights under Section 7(b).
(d) In case neither the Company nor the Holder shall have timely
exercised its respective rights pursuant to Section 7(a) or (b) hereof (as
applicable) in connection with a Change of Control Transaction or in case,
subsequent to the exercise by the Company or the Holder of its respective rights
pursuant to Section 7(a) or (b) hereof (as applicable), there shall remain a
principal amount outstanding under the Debentures on the Consummation Date,
then: (x) the Company shall require the surviving entity to issue debentures in
such principal amount equal to the principal amount of the Debentures held by
the Holder on the Consummation Date, plus all other amounts owing thereon, which
newly issued debentures shall have identical terms to the terms of the
Debentures and the Holder shall be entitled to all of the rights and privileges
of a Holder as set forth herein and the agreements pursuant to which the
Debentures were issued, and (y) simultaneously with the issuance of such
convertible debentures, the Holder shall have the right to convert such
debentures into shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
Change of Control Transaction (the conversion price applicable for the newly
issued convertible debentures
-13-
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such Change of Control Transaction and the
Conversion Price stated herein).
8. Prepayment at the Option of the Company.
---------------------------------------
(a) On or at any time after the 27/th/ month anniversary of the
Original Issue Date, the Company shall be entitled to prepay not less than all
of the Debentures then held by the Holder for an amount in cash equal to the
Optional Prepayment Price. The Company shall initiate such prepayment by
providing 20 Trading Days' prior written notice to the Holder (an "Optional
Prepayment Notice" and the date such notice is received by the Holder, the
"Notice Date"). Notwithstanding anything herein to the contrary, the Company
shall only be entitled to deliver an Optional Prepayment Notice pursuant to the
terms hereof if: (x) the Closing Price for each of the 40 Trading Days
immediately preceding the Notice Date is equal to or greater than 150% of the
Conversion Price and (y) the Equity Conditions are satisfied with respect to all
shares of Common Stock issuable upon a Notice Date. If any of Equity Conditions
shall cease to be in effect during the period between the Notice Date and the
date the Optional Prepayment Price is paid in full, then the Holder subject to
such prepayment may elect, by written notice to the Company given at any time
after any of the Equity Conditions shall cease to be in effect, to invalidate ab
initio such optional prepayment, notwithstanding anything herein contained to
the contrary. The Holder may convert any portion of the outstanding principal
amount of the Debentures subject to an Optional Prepayment Notice prior to the
date that the Optional Prepayment Price is due and paid in full. Once delivered,
the Company shall not be entitled to rescind an Optional Prepayment Notice.
(b) The Optional Prepayment Price shall be due on the 20/th/ Trading
Day immediately following the Notice Date. If any portion of the Optional
Prepayment Price shall not be timely paid by the Company, interest shall accrue
thereon at the rate of 12% per annum (or the maximum rate permitted by
applicable law, whichever is less) until the Optional Prepayment Price plus all
such interest is paid in full, which payment shall constitute liquidated damages
and not a penalty. In addition, if any portion of the Optional Prepayment Price
remains unpaid after such date, the Holder subject to such prepayment may elect
by written notice to the Company to invalidate ab initio such optional
prepayment, notwithstanding anything herein contained to the contrary. If the
Holder makes such an election, the aggregate principal amount under this
Debenture shall be increased by any accrued liquidated damages and the Company
shall no longer have any prepayment rights under this Section 8.
9. Ranking. This Debenture ranks pari passu with all other
Debentures now or hereafter issued pursuant to the Transaction Documents. No
indebtedness of the Company is senior to this Debenture in right of payment,
whether with respect of interest, damages or upon liquidation or dissolution or
otherwise.
10. Miscellaneous.
-------------
(a) This Debenture shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns.
-14-
(b) Subject to Section 10(a), above, nothing in this Debenture
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this
Debenture. This Debenture shall inure to the sole and exclusive benefit of the
Company and the Holder.
(c) All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for any proceeding, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any New York Court or that a New York
Court is an inconvenient forum for such Proceeding. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Debenture and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal Proceeding. The prevailing party in a
Proceeding shall be reimbursed by the other party for its attorney's fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
(d) The headings herein are for convenience only, do not
constitute a part of this Debenture and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this Debenture
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Debenture shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Debenture.
(f) No provision of this Debenture may be waived or amended
except in a written instrument signed by the Company and the Holder. No waiver
of any default with respect to any provision, condition or requirement of this
Debenture shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
(g) If it shall be found that any interest due hereunder shall
violate applicable laws governing usury, the applicable rate of interest due
hereunder shall be reduced to the maximum permitted rate of interest under such
law.
-15-
(h) Except pursuant to Sections 6, 7 and 8 hereunder, the
outstanding principal amount and interest under this Debenture may not be
prepaid by the Company without the prior written consent of the Holder.
(i) Except as otherwise set forth herein, this Debenture shall not
entitle the Holder to any of the rights of a shareholder of the Company,
including without limitation, the right to vote, to receive dividends and other
distributions, or to receive any notice of, or to attend, meetings of
shareholders or any other proceedings of the Company, unless and to the extent
converted into Underlying Shares in accordance with the terms hereof.
(j) If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a New Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
-16-
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
MERIX CORPORATION
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chairman, Chief Executive Officer
and President
-17-
EXHIBIT A
CONVERSION NOTICE
(To be Executed by the Registered Holder
in order to convert Debentures)
The undersigned hereby elects to convert the principal amount of
Debenture indicated below, into shares of Common Stock of Merix Corporation as
of the date written below. If shares are to be issued in the name of a Person
other than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any. All terms used in this notice shall have the meanings set forth in the
Debenture.
Conversion calculations: _____________________________________________________
Date to Effect Conversion
_____________________________________________________
Principal amount of Debenture owned prior to
conversion
_____________________________________________________
Principal amount of Debenture to be Converted
_____________________________________________________
Principal amount of Debenture remaining after
Conversion
_____________________________________________________
Number of shares of Common Stock to be Issued
Conversion Price ____________________________________
Signature ___________________________________________
Name ________________________________________________
Address _____________________________________________
By the delivery of this Conversion Notice, the Holder represents and
warrants to the Company that: (x) its ownership of the Common Stock does not
exceed the restrictions set forth in Section 5(b) of the Debenture and (y) it
has or will sell the shares of Common Stock issuable upon conversion of this
Debenture pursuant to the Company's registration statement covering the resale
by the Holder of such shares and, in connection therewith, has or will comply
with its prospectus delivery requirements under Federal securities laws.
Schedule 1
CONVERSION SCHEDULE
6.5% Convertible Debentures, due May 30, 2007, in the aggregate principal amount
of $25,000,000 issued by Merix Corporation. This Conversion Schedule reflects
conversions made under the above referenced Debentures.
Dated:
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Date of Conversion Amount of Conversion Aggregate Principal Applicable Mandatory
Amount Remaining Conversion Price Prepayment Amount
Subsequent to and applicable
Conversion Liquidating
Conversion Price
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