Exhibit 10
Amended and Restated 5% Convertible Subordinated Note Due 2008,
Originally Issued January 30, 2003, Modified per Letter Agreement
dated December 14, 2004 and Amended December 30, 2004
THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES AND OTHER JURISDICTIONS.
RAINING DATA CORPORATION
AMENDED AND RESTATED
5% CONVERTIBLE SUBORDINATED NOTE DUE 2008
Originally Issued January 30, 2003
Modified per Letter Agreement dated December 14, 2004 and
Amended December 30, 2004
No. A-2 $20,749,581
RAINING DATA CORPORATION, a Delaware corporation (the "Company"),
for value received, hereby promises to pay to ASTORIA CAPITAL PARTNERS, L.P.,
or registered assigns, the principal sum of TWENTY MILLION SEVEN HUNDRED
FORTY-NINE THOUSAND FIVE HUNDRED EIGHTY-ONE Dollars ($20,749,581) on May 30,
2008 and to pay interest thereon, from October 1, 2005, or from the most
recent interest payment date to which interest has been paid, quarterly on
each January 1, April 1, July 1 and October 1 in each year, commencing
October 1, 2005, at the rate of 5% per annum until the principal hereof is
due and in the manner set forth below. The Company, at its option, may pay
interest due on each interest payment date either in cash or by issuing a
note in substantially the form of this Security (but bearing interest from
such interest payment date) (a "PIK Note") having a principal amount equal to
the interest due on such date. The interest so payable on any interest
payment date or the PIK Note so issuable will be paid or issued to the Person
in whose name this Security (or one or more predecessor Securities) is
registered at 5:00 p.m., California time, on the regular record date for such
interest, which shall be the date Five (5) Business Days immediately prior to
the interest payment date. Payment of the principal of this Security shall
be made upon the surrender of this Security to the Company, at its chief
executive office (or such other office within the United States as shall be
designated by the Company to the holder hereof) (the "Designated Office"), in
such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts.
Payment of interest in cash and all other amounts payable in cash with
respect to this Security shall be made by wire transfer to the holder,
provided that if the holder shall not have furnished wire instructions in
writing to the Company on or prior to the third Business Day immediately
prior to the date on which the Company makes such payment, such payment may
be made by U.S. dollar check mailed to the address of the Person entitled
thereto as such address shall appear in the Company security register. PIK
Notes issued from time to time shall be mailed via certified mail, return
receipt requested, to the address of the Person entitled thereto as such
CUSIP No. 000000000 SCHEDULE 13D Page 2 of 27
address shall appear in the Company security register. Capitalized terms
used and not otherwise defined herein, shall have the respective meanings
given to those terms in Section 8 hereof.
1. Redemption. This Security is subject to redemption, as a whole or
from time to time in part (in any amount that is an integral multiple of
$1,000), upon not less than 30 nor more than 60 days' notice in the manner
provided in Section 9(b) (provided that any conditions set forth below in
this Section 1 are satisfied), at the election of the Company, at a
redemption price of 100% of the principal amount thereof, together with
accrued interest to the redemption date, but interest installments whose
stated maturity is on or prior to such redemption date will be payable to the
holder of this Security, or one or more predecessor Securities, of record at
the close of business on the relevant record dates referred to on the face
hereof.
2. Conversion.
(a) (1) The holder of this Security is entitled at any time and from
time to time on or after October 1, 2005 and before the close of business on
May 29, 2008 (or, in case this Security is called for redemption or the
holder hereof has exercised his right to require the Company to repurchase
this Security or a portion hereof pursuant to Section 3 hereof, then in
respect of this Security or such portion hereof, as the case may be, until
and including, but (unless the Company defaults in making the payment due
upon redemption or repurchase) not after, 5:00 p.m., California time, on the
Business Day prior to the redemption date or the Repurchase Date, as the case
may be), to convert this Security (or any portion of the principal amount
hereof that is an integral multiple of $1,000), into fully paid and
nonassessable Common Stock (as hereinafter defined) (calculated as to each
conversion to the nearest 1/100 of a share) of the Company at the rate (or at
the then current adjusted rate if an adjustment has been made as provided
below) of 200 shares of Common Stock for each $1,000 principal amount of
Security (the "Conversion Rate") by surrender of this Security, duly endorsed
or assigned to the Company or in blank to the Company at the Designated
Office, accompanied by written notice to the Company that the holder hereof
elects to convert this Security (or if less than the entire principal amount
hereof is to be converted, specifying the portion hereof to be converted).
Notwithstanding the foregoing, such holder shall be deemed for all purposes
to have converted this Security against delivery of the Common Stock and cash
payable for fractional shares upon such conversion (which surrender may take
place before or after the date of such deemed conversion, without affecting
the validity thereof), immediately prior to the close of business on the
redemption date, if this Security is redeemed pursuant to Section 1 hereof,
if the Closing Price of the Common Stock for at least 20 Trading Days within
a period of any 30 consecutive Trading Days ending on the date prior to the
date of sending of the notice of redemption exceeds 150% of the Conversion
Price. The term "Conversion Price" on any day shall equal $1,000 divided by
the Conversion Rate in effect on such day.
(2) In the event that the conversion of this Security into
shares of Common Stock would require the Company and the holder of this
Security to file notification and report forms with the Federal Trade
Commission and Antitrust Division of the Department of Justice (the "FTC")
pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
CUSIP No. 000000000 SCHEDULE 13D Page 3 of 27
amended (the "HSR Act"), then the holder of this Security and the Company
agree (i) to use their best efforts to complete all applicable filings and
provide all necessary information as required pursuant to the HSR Act, and
(ii) such conversion of this Security into shares of Common Stock shall not
occur until such time as the required filings are made pursuant to the HSR
Act and the required waiting periods have passed or early termination
notifications have been granted by the FTC.
The Company shall, if the holder so elects, deliver the Common Stock
issuable upon conversion of this Security to any third party designated by
the holder, subject to compliance with Sections 2(f) and 9(c)-(g) hereof.
(b) The Conversion Rate will be subject to adjustments from time to
time as follows:
(1) In case the Company shall pay or make a dividend or other
distribution on Common Stock of the Company payable in Common Stock, the
Conversion Rate in effect at the opening of business on the day following the
Determination Date (as hereinafter defined) for such dividend or other
distribution shall be increased by dividing such Conversion Rate by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on such Determination Date and the
denominator shall be the sum of such number of shares of Common Stock and
the total number of shares of Common Stock constituting such dividend or
other distribution, such increase to become effective immediately after the
opening of business on the day following such Determination Date. For the
purposes of this paragraph (1), the number of shares of Common Stock at any
time outstanding shall not include Common Stock held in the treasury of the
Company but shall include Common Stock issuable in respect of scrip
certificates issued in lieu of fractions of Common Stock. The Company will
not pay any dividend or make any distribution on Common Stock held in the
treasury of the Company.
(2) In case the Company shall issue rights, options or warrants
to all holders of its Common Stock entitling them to subscribe for or
purchase Common Stock at a price per share less than the current market price
per share (determined as provided in paragraph (8) of this Section 2(b)) of
the Common Stock on the Determination Date for such distribution, the
Conversion Rate in effect at the opening of business on the day following
such Determination Date shall be increased by dividing such Conversion Rate
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on such Determination Date plus
the number of shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market price and the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on such Determination Date plus the number of shares of
Common Stock so offered for subscription or purchase, such increase to become
effective immediately after the opening of business on the day following such
Determination Date. The Company will not issue any rights, options or
warrants in respect of Common Stock held in the treasury of the Company.
Upon the expiration of any right, option or warrant to purchase Common Stock
the issuance of which resulted in an adjustment to the Conversion Rate
pursuant to this paragraph (2) of Section 2(b), if any such right, option or
warrant shall expire and shall not have been exercised, the Conversion Rate
CUSIP No. 000000000 SCHEDULE 13D Page 4 of 27
shall immediately upon such expiration be recomputed to the Conversion Rate
which would have been in effect had the adjustment of the Conversion Rate
made upon the issuance of such right, option or warrant been made on the
basis of offering for subscription or purchase only that number of shares of
Common Stock actually purchased upon the exercise of such right, option and
warrant actually exercised.
(3) In case outstanding Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Rate in effect at
the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased, and,
conversely, in case outstanding Common Stock shall each be combined into a
smaller number of shares of Common Stock, the Conversion Rate in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately reduced, such increase
or reduction, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision
or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its indebtedness,
shares of any class of capital stock, or other property (including
securities, but excluding (i) any rights, options or warrants referred to in
paragraph (2) of this Section 2(b), (ii) any dividend or distribution paid
exclusively in cash, (iii) any dividend or distribution referred to in
paragraph (1) of this Section 2(b) and (iv) any merger or consolidation to
which Section 2(h) applies (the "Distributed Property")), the Conversion Rate
shall be adjusted so that the same shall equal the rate determined by
dividing the Conversion Rate in effect immediately prior to the close of
business on the Determination Date for such distribution by a fraction of
which the numerator shall be the current market price per share (determined
as provided in paragraph (8) of this Section 2(b)) of the Common Stock on
such Determination Date less the then fair market value (as determined in
good faith by the Board of Directors of the Company in accordance with the
provisions of this paragraph (4) of Section 2(b)) of the portion of the
assets, shares or evidences of indebtedness so distributed applicable to one
share of Common Stock and the denominator shall be such current market price
per share of the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following such
Determination Date; provided, however, that if the Distributed Property
consists of shares of capital stock of a Subsidiary, the Company may, at its
option and in lieu of the foregoing adjustment to the Conversion Rate, elect
to make adequate provision so that the holder of this Security shall have the
right to receive upon conversion the amount of such shares of capital stock
that such holder of this Security would have received if such holder of this
Security had converted such Security on the record date. If the Board of
Directors determines the fair market value of any distribution for purposes
of this paragraph (4) by reference to the actual or when issued trading
market for any securities constituting such distribution, it must in doing so
consider the prices in such market over the same period used in computing the
current market price per share pursuant to paragraph (8) of this Section
2(b).
If the Company should adopt a shareholder rights plan (a "Rights Plan"),
upon conversion of this Security into Common Stock, the holder of this
CUSIP No. 000000000 SCHEDULE 13D Page 5 of 27
Security will receive, in addition to the Common Stock, the rights described
therein (whether or not the rights have separated from the Common Stock at
the time of conversion), subject to the limitations set forth in the Rights
Plan. Any distribution of rights or warrants pursuant to the Rights Plan in
compliance with the requirements set forth in the immediately preceding
sentence of this paragraph shall not constitute a distribution of rights or
warrants pursuant to this Section 2(b).
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of
the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Trigger Event"): (i) are deemed to be transferred with
such shares of Common Stock; (ii) are not exercisable; and (iii) are also
issued in respect of future issuances of Common Stock, shall be deemed not to
have been distributed for purposes of this Section 2(b) (and no adjustment to
the Conversion Rate under this Section 2(b) will be required) until the
occurrence of the earliest Trigger Event, whereupon such rights and warrants
shall be deemed to have been distributed and an appropriate adjustment (if
any is required) to the Conversion Rate shall be made under this Section
2(b). If any such right or warrant, including any such existing rights or
warrants distributed prior to the original issue date of this Security, are
subject to events, upon the occurrence of which such rights or warrants
become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each
such event shall be deemed to be the date of distribution and record date
with respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event (of
the type described in the preceding sentence) with respect thereto that was
counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Rate under this Section was made, (x) in the
case of any such rights or warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Rate
shall be readjusted upon such final redemption or repurchase to give effect
to such distribution or Trigger Event, as the case may be, as though it were
a cash distribution, equal to the per share redemption or repurchase price
received by a holder or holders of Common Stock with respect to such rights
or warrants (assuming such holder had retained such rights or warrants), made
to all holders of Common Stock as of the date of such redemption or
repurchase, and (y) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any holders thereof, the
Conversion Rate shall be readjusted as if such rights and warrants had not
been issued.
(5) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that
is distributed as part of a distribution referred to in paragraph (4) of
Section 2(b)) in aggregate amount that, combined together with (I) the
aggregate amount of any other cash distributions to all holders of its Common
Stock made exclusively in cash within the twelve (12) months preceding the
date of payment of such distribution and in respect of which no adjustment
pursuant to this paragraph (5) of Section 2(b) has been made and (II) the
aggregate of any cash plus the fair market value (as determined by the Board
CUSIP No. 000000000 SCHEDULE 13D Page 6 of 27
of Directors, whose determination shall be conclusive and described in a
board resolution) of consideration payable in respect of any tender offer by
the Company or any of its subsidiaries for all or any portion of the Common
Stock concluded within the twelve (12) months preceding the date of payment
of such distribution and in respect of which no adjustment pursuant to
paragraph (6) of Section 2(b) has been made (the "combined cash and tender
amount"), exceeds ten percent (10%) of the product of the current market
price per share of the Common Stock (determined as provided in paragraph (7)
of this Section 2(b)) on the date for the determination of holders of shares
of Common Stock entitled to receive such distribution times the number of
shares of Common Stock outstanding on such date (the "aggregate current
market price"), then, and in each such case, immediately after the close of
business on such date for determination, the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by dividing the
Conversion Rate in effect immediately prior to the close of business on the
date fixed for determination of the stockholders entitled to receive such
distribution by a fraction (i) the numerator of which shall be equal to the
current market price per share of the Common Stock on the date fixed for such
determination less an amount equal to the quotient of (x) the excess of such
combined cash and tender amount over ten percent (10%) of such aggregate
current market price divided by (y) the number of shares of Common Stock
outstanding on such date for determination and (ii) the denominator of which
shall be equal to the current market price per share of the Common Stock on
such date for determination.
(6) In case of a tender offer made by the Company or any
Subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender offer or exchange (as amended upon the expiration
thereof) shall require the payment to stockholders (based on the acceptance
(up to any maximum specified in the terms of the tender offer) of Purchased
Shares (as defined below)) of an aggregate consideration having a fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a board resolution), that combined together with
(I) the aggregate of the cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and described
in a board resolution), as of the expiration of such tender or exchange
offer, of consideration payable in respect of any other tender or exchange
offer by the Company or any Subsidiary of the Company for all or any portion
of the Common Stock expiring within the 12 months preceding the expiration of
such tender or exchange offer and in respect of which no adjustment pursuant
to this paragraph (6) of Section 2(b) has been made and (II) the aggregate
amount of any cash distributions to all holders of the Company's Common Stock
within twelve (12) months preceding the expiration of such tender or exchange
offer and in respect of which no adjustment pursuant to paragraph (5) of
Section 2(b) has been made (the "combined tender and cash amount") exceeds
ten percent (10%) of the product of the current market price per share of the
Common Stock (determined as provided in paragraph (7) of this Section 2(b))
as of the last time (the "Expiration Time") tenders or exchange could have
been made pursuant to such tender or exchange offer (as it may be amended)
times the number of shares of Common Stock outstanding (including any
tendered or exchange shares) as of the Expiration Time, then, and in each
such case, immediately prior to the opening of business on the day after the
date of the Expiration Time, the Conversion Rate shall be adjusted so that
the same shall equal the rate determined by dividing the Conversion Rate
immediately prior to close of business on the date of the Expiration Time by
CUSIP No. 000000000 SCHEDULE 13D Page 7 of 27
a fraction (i) the numerator of which shall be equal to (A) the product of
(I) the current market price per share of Common Stock on the date of the
Expiration Time multiplied by (II) the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) on the date of the
Expiration Time less (B) the combined tender and cash amount, and (ii) the
denominator of which shall be equal to the product of (A) the current market
price per share of the Common Stock as of the Expiration Time multiplied by
(B) the number of shares of Common Stock outstanding (including any tendered
or exchanged shares) as of the Expiration Time less the number of all shares
validly tendered or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted up to and any such maximum, being referred to
as the "Purchased Shares").
(7) For the purpose of any computation under paragraphs (2),
(4), (5) or (6) of this Section 2(b), the current market price per share of
Common Stock on any date shall be calculated by the Company and be deemed to
be the average of the daily Closing Prices for the five (5) consecutive
Trading Days commencing ten (10) Trading Days before the earlier of (i) the
day in question and (ii) the day before the "ex" date with respect to the
issuance or distribution requiring such computation. For purposes of this
paragraph, the term "ex date", when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular
way in the applicable securities market or on the applicable securities
exchange without the right to receive such issuance or distribution.
(8) No adjustment in the Conversion Rate shall be required
unless such adjustment (plus any adjustments not previously made by reason
of this paragraph (8)) would require an increase or decrease of at least one
percent (1%) in such rate; provided, however, that any adjustments which by
reason of this paragraph (8) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 1 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
(9) The Company may make such increases in the Conversion Rate,
for the remaining term of the Securities or any shorter term, in addition to
those required by paragraphs (1), (2), (3), (4), (5) and (6) of this Section
2(b) as it considers to be advisable in order to avoid or diminish any income
tax to any holders of Common Stock resulting from any dividend or
distribution of stock or issuance of rights or warrants to purchase or
subscribe for stock or from any event treated as such for income tax
purposes.
(c) Whenever the Conversion Rate is adjusted as provided in
Section 2(b), the Company shall compute the adjusted Conversion Rate in
accordance with Section 2(b) and shall prepare a certificate signed by the
chief financial officer of the Company setting forth the adjusted Conversion
Rate and showing in reasonable detail the facts upon which such adjustment is
based, and shall promptly deliver such certificate to the holder of this
Security.
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(d) In case:
(1) the Company shall declare a dividend or other
distribution on its Common Stock that would require any adjustment pursuant
to Section 2(b); or
(2) the Company shall authorize the granting to the holders
of its Common Stock of rights, options or warrants to subscribe for or
purchase any shares of capital stock of any class or of any other rights; or
(3) of any reclassification of the Common Stock of the
Company, or of any consolidation, merger or share exchange to which the
Company is a party and for which approval of any shareholders of the Company
is required, or of the conveyance, sale, transfer or lease of all or
substantially all of the assets of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(5) the Company or any Subsidiary shall commence a tender
offer for all or a portion of the Company's outstanding Common Stock (or
shall amend any such tender offer);
then the Company shall cause to be delivered to the holder of this Security,
at least twenty (20) days (or ten (10) days in any case specified in clause
(1) or (2) above) prior to the applicable record, expiration 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, rights,
options 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,
distribution, rights, options or warrants are to be determined, (y) the date
on which the right to make tenders under such tender offer expires or (z) the
date on which such reclassification, consolidation, merger, conveyance,
transfer, sale, lease, dissolution, liquidation or winding up is expected to
become effective, 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 such reclassification,
consolidation, merger, conveyance, transfer, sale, lease, dissolution,
liquidation or winding up. Neither the failure to give such notice nor any
defect therein shall affect the legality or validity of the proceedings
described in clauses (1) through (5) of this Section 2(d).
(e) The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued Common Stock,
for the purpose of effecting the conversion of the Security, the full number
of shares of Common Stock then issuable upon the conversion of this Security.
(f) Except as provided in the next sentence, the Company will pay
any and all taxes and duties that may be payable in respect of the issue or
delivery of Common Stock on conversion of the Security. The Company shall
not, however, be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue and delivery of Common Stock
in a name other than that of the holder of this Security, and no such issue
or delivery shall be made unless and until the Person requesting such issue
has paid to the Company the amount of any such tax or duty, or has
CUSIP No. 000000000 SCHEDULE 13D Page 9 of 27
established to the satisfaction of the Company that such tax or duty has been
paid.
(g) The Company agrees that all Common Stock which may be
delivered upon conversion of the Security, upon such delivery, will have been
duly authorized and validly issued and will be fully paid and nonassessable
(and shall be issued out of the Company's authorized but unissued Common
Stock) and, except as provided in Section 2(f), the Company will pay all
taxes, liens and charges with respect to the issue thereof.
(h) In case of any recapitalization or reclassification of the
Common Stock (other than a change in par value, or as a result of a
subdivision or combination covered by paragraph (3) of this Section 2(b)), or
any consolidation of the Company with any other Person, any merger of the
Company into another Person or of another Person into the Company (other than
a merger which does not result in a reclassification, conversion, exchange or
cancellation of the outstanding Common Stock), or any conveyance, sale,
transfer or lease of all or substantially all of the properties and assets of
the Company (collectively, a "Capital Reorganization"), the Company or the
Person formed by such Capital Reorganization, as the case may be, shall
execute and deliver to the holder of this Security a supplemental agreement
providing that such holder has the right thereafter, during the period this
Security shall be convertible as specified in Section 2(a), to convert this
Security only into the kind and amount of securities, cash and other property
receivable upon such Capital Reorganization by a holder of the number of
shares of Common Stock of the Company into which this Security might have
been converted immediately prior to such Capital Reorganization, assuming
such holder of Common Stock of the Company (i) is not a Person with which
the Company consolidated, into which the Company merged or which merged into
the Company or to which any conveyance, sale, transfer or lease was made, as
the case may be (a "Constituent Person"), or an Affiliate of a Constituent
Person and (ii) failed to exercise its rights of election, if any, as to the
kind or amount of securities, cash and other property receivable upon such
Capital Reorganization (provided that if the kind or amount of securities,
cash and other property receivable upon such Capital Reorganization is not
the same for each share of Common Stock of the Company held immediately prior
to such Capital Reorganization by others than a Constituent Person or an
Affiliate thereof and in respect of which such rights of election shall not
have been exercised ("Non-electing Share"), then for the purpose of this
Section 2(h) the kind and amount of securities, cash and other property
receivable upon such Capital Reorganization by the holders of each Non-
electing Share shall be deemed to be the kind and amount so receivable per
share by a plurality of the Non-electing Shares). Such supplemental
agreement shall provide for adjustments which, for events subsequent to the
effective date of such supplemental agreement, shall be equivalent to the
adjustments provided for in this Section 2. The above provisions of this
Section 2(h) shall similarly apply to successive Capital Reorganizations. If
this Section 2(h) applies to any event or occurrence, then the other
provisions of Section 2(b) shall not apply.
(i) The Company (i) will effect all registrations with, and obtain
all approvals by, all governmental authorities that may be necessary under
any United States Federal or state law (including the Securities Act, the
Exchange Act and state securities and Blue Sky laws) for the Common Stock
issuable upon conversion of this Security to be lawfully issued and delivered
CUSIP No. 000000000 SCHEDULE 13D Page 10 of 27
as provided herein, and thereafter publicly traded (if permissible under the
Securities Act) and qualified or listed as contemplated by clause (ii) (it
being understood that the Company shall not be required to register the
offer, sale or resale of Common Stock issuable on conversion hereof under the
Securities Act except pursuant to the Registration Rights Agreement between
the Company and the initial holder of this Security); and (ii) if required,
will list the Common Stock required to be issued and delivered upon
conversion of Securities, prior to such issuance or delivery, on each
national securities exchange on which outstanding Common Stock is listed or
quoted at the time of such delivery, or if the Common Stock is not then
listed on any securities exchange, to qualify the Common Stock for quotation
on the Nasdaq National Market or such other inter-dealer quotation system, if
any, on which the Common Stock is then quoted.
3. Right to Require Repurchase.
(a) In the event that a Change in Control (as hereinafter defined)
shall occur, then the holder of this Security shall have the right, at such
holder's option, to require the Company to repurchase, and upon the exercise
of such right the Company shall repurchase, this Security, or any portion of
the principal amount hereof that is equal to $1,000 or any integral multiple
thereof, on the date (the "Repurchase Date") that is 30 Trading Days (or such
longer period as required by applicable law) after the date on which the
Company gives notice of such Change of Control to the holder of this
Security, at a purchase price equal to the Repurchase Price (as hereinafter
defined). The Company agrees to give the holder of this Security notice, in
the manner provided in Section 9(b), of any Change in Control, promptly and
in any event within five (5) Trading Days of the occurrence thereof.
(b) To exercise a repurchase right, the holder shall deliver to
the Company on or before the 5th day prior to the Repurchase Date, together
with this Security, written notice of the holder's exercise of such right,
which notice shall set forth the name of the holder, the principal amount of
this Security to be repurchased (and, if this Security is to be repurchased
in part, the portion of the principal amount thereof to be repurchased) and a
statement that an election to exercise the repurchase right is being made
thereby. Such written notice shall be irrevocable, except that the right of
the holder to convert this Security (or the portion hereof with respect to
which the repurchase right is being exercised) shall continue until the close
of business on the Trading Day prior to the Repurchase Date.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be paid
to the holder the Repurchase Price in cash on the Repurchase Date in the
manner set forth in the introductory paragraph to this Security.
(d) If this Security is to be repurchased only in part, it shall
be surrendered to the Company at the Designated Office (with, if the Company
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company duly executed by, the holder hereof or his
attorney duly authorized in writing), and the Company shall execute and make
available for delivery to the holder without service charge, a new Security
or Securities, containing identical terms and conditions, each in an
authorized denomination in aggregate principal amount equal to and in
CUSIP No. 000000000 SCHEDULE 13D Page 11 of 27
exchange for the unrepurchased portion of the principal of the Security so
surrendered.
(e) For purposes of this Section 3:
(1) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 promulgated by the Securities and Exchange
Commission pursuant to the Exchange Act;
(2) a "Change in Control" shall be deemed to have occurred at
the time, after the original issuance of this Security, of:
(i) the acquisition by any Person of beneficial
ownership, directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of capital stock
of the Company entitling such Person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company entitled to vote
generally in the elections of directors (any shares of voting stock of which
such Person is the beneficial owner that are not then outstanding being
deemed outstanding for purposes of calculating such percentage) other than
any such acquisition by the Company or any employee benefit plan of the
Company; or
(ii) any consolidation or merger of the Company with or
into, any other Person, any merger of another Person with or into the
Company, or any conveyance, transfer, sale, lease or other disposition of all
or substantially all of the assets of the Company to another Person (other
than (a) any such transaction pursuant to which holders of Common Stock
immediately prior to such transaction have the entitlement to exercise,
directly or indirectly, 50% or more of the total voting power of all shares
of capital stock entitled to vote generally in the election of directors of
the continuing or surviving Person immediately after such transaction and (b)
any merger (x) which does not result in any reclassification, conversion,
exchange or cancellation of outstanding Common Stock or (y) which is effected
solely to change the jurisdiction of incorporation of the Company and results
in a reclassification, conversion or exchange of outstanding Common Stock
into solely shares of common stock);
However, a Change in Control will not be deemed to have occurred if (i)
the Closing Price per share of the Company's Common Stock for any five (5)
Trading Days within the period of ten (10) consecutive Trading Days ending
immediately after the later of the Change in Control or the public
announcement of the Change in Control, in the case of a Change in Control
relating to an acquisition of capital stock, or the period of ten (10)
consecutive Trading Days ending immediately before the Change in Control,
in the case of Change in Control relating to a merger, consolidation or asset
sale, equals or exceeds 105% of the Conversion Price of this Security; or
(ii) 95% of the consideration (excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights) in a merger
or consolidation otherwise constituting the Change of Control described in
clause (ii) above consists of shares of common stock traded or to be traded
immediately following such Change of Control on a national securities
exchange or quoted on the Nasdaq National Market and as a result of such
transaction or transactions this Security becomes convertible solely into
such common stock.
CUSIP No. 000000000 SCHEDULE 13D Page 12 of 27
(iii) the "current market price" of a share of Common
Stock shall be the Closing Price of the Common Stock on the Trading Day
immediately preceding the Repurchase Date; and
(iv) "Repurchase Price" means the sum of (a) 100% of the
principal amount of this Security to be repurchased pursuant to this Section
3 and (b) accrued and unpaid interest on this Security to the date of
payment.
4. Certain Covenants.
(a) This Security is entitled to the benefits of the covenants set
forth in the Note Agreement.
(b) Whether or not required by the rules and regulations of the
Commission, so long as this Security is outstanding, the Company will furnish
to the holders of this Security (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-QSB and 10-KSB (or any successor forms) if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required
to be filed with the Commission on Form 8-K (or any successor form) if the
Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Company will
file a copy of all such information and reports with the Commission for
public availability (unless the Commission will not accept such a filing) and
make such information available to securities analysts and prospective
investors upon request. In addition, the Company has agreed that, for so
long as this Security remains outstanding, it will furnish to the holder of
this Security and to securities analysts and prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
5. Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be 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):
(1) default in the payment of any principal on this Security
when due or interest upon this Security when it becomes due and payable, and
continuance of such default for a period of 30 days; or
(2) default by the Company in the performance of its
obligations in respect of any conversion of this Security (or any portion
hereof) in accordance with Section 2 for a period of 5 days; or
(3) failure by the Company to give any notice of a Change of
Control required to be delivered in accordance with Section 3(a); or
CUSIP No. 000000000 SCHEDULE 13D Page 13 of 27
(4) default in the performance, or breach, of any other
covenant of the Company herein (other than a covenant a default in the
performance or breach of which is specifically dealt with elsewhere in this
Section 5(a)) and continuance of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to the
Company by the holder of this Security a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(5) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company, or under any
agreement, mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company, with a principal amount then outstanding in excess
of $10,000,000, whether such indebtedness now exists or shall hereafter be
created, which default shall constitute a failure to pay the principal of
such indebtedness (in whole or in any part greater than $10,000,000) when
due and payable or shall have resulted in such indebtedness (in whole or in
any part greater than $10,000,000) becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable,
without such indebtedness having been discharged, or such acceleration having
been rescinded or annulled, within a period of 30 days after there shall have
been given, by registered or certified mail, to the Company by the holder of
this Security a written notice specifying such default and requiring the
Company to cause such indebtedness to be discharged or cause such
acceleration to be rescinded or annulled and stating that such notice is a
"Notice of Default" hereunder; or
(6) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a decree
or order approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under
any applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect for
a period of 60 consecutive days; or
(7) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by the Company to the
entry of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
either the Company, or the filing by either the Company of a petition or
answer or consent seeking reorganization or similar relief under any
applicable Federal or State law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of the property of the
CUSIP No. 000000000 SCHEDULE 13D Page 14 of 27
Company, or the making by either the Company of an assignment for the benefit
of creditors, or the admission by either the Company in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action.
(b) If an Event of Default (other than an Event of Default
specified in Section 5(a)(6) or 5(a)(7)) occurs and is continuing, then in
every such case the holder of this Security may declare the principal hereof
(or, if there is at such time more than one holder, holders of least
twenty-five percent (25%) of the outstanding principal amount of all then
outstanding securities of the same series as this Security may declare the
principal amount of this Security and all other such securities then
outstanding to be due and payable immediately, by a notice in writing to the
Company, and upon any such declaration such principal and all accrued
interest thereon shall become immediately due and payable. For purposes of
the immediately preceding sentence, "securities of the same series" shall
mean collectively this Security, any PIK Notes and any notes issued upon a
Transfer of a portion of this Security. If an Event of Default specified in
Section 5(a)(6) or 5(a)(7) occurs and is continuing with respect to the
Company, the principal of, and accrued interest on, this Security shall ipso
facto become immediately due and payable without any declaration or other act
of the holders.
(c) The Company will give the holder of this Security notice,
within ten (10) Trading Days of the occurrence thereof, of any Event of
Default or any event that, with the giving of notice or passage of time or
both, would become an Event of Default. Such notice shall be given in the
manner provided in Section 9(b).
6. Consolidation, Merger, Etc.
(a) The Company shall not consolidate with or merge into any other
Person or, directly or indirectly, convey, transfer, sell or lease all or
substantially all of its properties and assets to any Person, and the Company
shall not permit any Person to consolidate with or merge into the Company or,
directly or indirectly, convey, transfer, sell or lease all or substantially
all of its properties and assets to the Company, unless:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer, sell or lease all or substantially all of
its properties and assets to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance, transfer or sale, or which leases, all or
substantially all the properties and assets of the Company shall be a
corporation, limited liability company, partnership or trust, shall be
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia, and shall expressly
assume, if other than the Company, by an agreement supplemental hereto,
executed and delivered to the holder of this Security in form satisfactory to
the holder, the due and punctual payment of the principal of and any interest
on this Security and the performance or observance of every covenant of this
Security on the part of the Company to be performed or observed, including
the conversion rights provided herein;
CUSIP No. 000000000 SCHEDULE 13D Page 15 of 27
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing; and
(b) Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer, sale or lease of
all or substantially all of the properties and assets of the Company in
accordance with Section 6(a), the successor Person formed by such
consolidation or into which the Company is merged or to which such
conveyance, transfer, sale or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Security with the same effect as if such successor Person had been named
as the Company herein, and thereafter, except in the case of a lease, the
predecessor Person shall be relieved of all obligations and covenants under
this Security.
7. Subordination.
(a) The Company covenants and agrees, and the holder of this
Security by its acceptance hereof likewise covenants and agrees, that this
Security is subject to the provisions of this Section 7; and each Person
holding this Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees to be bound by such
provisions.
The payment of the principal of, premium, if any, and interest on this
Security (including, but not limited to, the redemption price or repurchase
price with respect to this Security) shall, to the extent and in the manner
hereinafter set forth, be subordinated to the prior payment in full, in cash
or in such other form of payment as may be acceptable to the holders of
Senior Indebtedness, of all Senior Indebtedness, whether outstanding at the
date of original issuance of this Security or thereafter incurred or created.
No provision of this Section 7 shall prevent the occurrence of any
default or Event of Default under this Security.
(b) Payments to Holders. No payment (including pursuant to any
redemption or repurchase of this Security) shall be made with respect to the
principal of, or premium, if any, or interest on this Security, if:
(1) a default in the payment of principal, premium, if any,
or interest or other payment due on Senior Indebtedness occurs and is
continuing beyond any applicable period of grace (a "Payment Default"); or
(2) a default, other than a Payment Default, occurs and is
continuing with respect to Designated Senior Indebtedness that then permits
holders of the Designated Senior Indebtedness as to which such default
related to accelerate its maturity and the holder of this Security and the
Company receive a written notice of such default (a "Payment Blockage
Notice") from a representative of Designated Senior Indebtedness or a holder
of Designated Senior Indebtedness or the Company (a "Non-Payment Default").
The Company may and shall resume payments on this Security (1) in the
case of a Payment Default, on the date upon which such default is cured or
waived or ceases to exist, and (2) in the case of a Non-Payment Default with
CUSIP No. 000000000 SCHEDULE 13D Page 16 of 27
respect to Designated Senior Indebtedness, on the earlier of the date on
which the Non-Payment Default is cured or waived or ceases to exist or 179
days have passed after the date on which the applicable Payment Blockage
Notice is received.
No new period of payment blockage may be commenced pursuant to a Payment
Blockage Notice unless at least 365 days shall have elapsed since the
Company's receipt of the immediately prior Payment Blockage Notice. No
default (whether or not such event of default is on the same issue of
Designated Senior Indebtedness) that existed or was continuing on the date
of delivery of any Payment Blockage Notice to the holder of this Security
shall be, or be made, the basis for a subsequent Payment Blockage Notice.
If payment of this Security is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of
the acceleration.
Notwithstanding the foregoing, in the event that the holder of this
Security receives any payment or distribution of assets of the Company of any
kind in contravention of any term of this Section 7, whether in cash,
property or securities, including, without limitation, by way of setoff or
otherwise, before all Senior Indebtedness is paid in full, in cash or such
other form of payment as may be acceptable to the holders of Senior
Indebtedness, then such payment or distribution shall be held by the
recipient or recipients in trust for the benefit of, and shall immediately
be paid over or delivered to, the holders of Senior Indebtedness or their
respective representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any Senior
Indebtedness may have been issued, as their respective interests may appear,
as calculated by the Company, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to make payment in
full, in cash or such other form of payment as may be acceptable to the
holders of Senior Indebtedness, of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution, or provision
therefor, to or for the holders of such Senior Indebtedness.
(c) Bankruptcy and Dissolution, Etc. Upon any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to creditors upon any dissolution,
winding-up, liquidation or reorganization of the Company, whether voluntary
or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due or to become due upon all Senior Indebtedness
shall first be paid in full, in cash or in such other form of payment as may
be acceptable to the holders of Senior Indebtedness, before any payment is
made on account of the principal or premium, if any, and interest on this
Security; and upon any such dissolution, winding-up, liquidation or
reorganization or bankruptcy, insolvency, receivership or other such
proceedings, any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the holders of this Security would be entitled, except for the
provisions of this Section 7, shall (except as aforesaid) be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, or by the holder of this
Security if received by it, directly to the holders of Senior Indebtedness
(pro rata to such holders on the basis of the respective amounts of Senior
CUSIP No. 000000000 SCHEDULE 13D Page 17 of 27
Indebtedness held by such holders, or as otherwise required by law or a
court order) or their respective representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness
in full in cash or in such other form of payment as may be acceptable to the
holders of Senior Indebtedness after giving effect to any concurrent payment
or distribution to or for the holders of Senior Indebtedness, before any
payment or distribution is made to the holder of this Security.
Notwithstanding the foregoing, in the event that the holder of this
Security receives any payment or distribution of assets of the Company of any
kind in contravention of any term of this Security, whether in cash, property
or securities, including, without limitation, by way of setoff or otherwise,
before all Senior Indebtedness is paid in full, in cash or such other form of
payment as may be acceptable to the holders of Senior Indebtedness, then such
payment or distribution shall be held by the recipient or recipients in trust
for the benefit of, and shall immediately be paid over or delivered to, the
holders of Senior Indebtedness or their respective representative or
representatives, or to the trustee or trustees under any indenture pursuant
to which any instruments evidencing any Senior Indebtedness may have been
issued, as their respective interests may appear, as calculated by the
Company, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to make payment in full, in cash or such other
form of payment as may be acceptable to the holders of Senior Indebtedness,
of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the
holders of such Senior Indebtedness.
For purposes of Section 7(b) hereof and this Section 7(c), the words
"cash, property or securities" shall not be deemed to include shares of stock
of the Company as reorganized or readjusted, or securities of the Company or
any other corporation provided for by a plan of reorganization or
readjustment, the payment of which is subordinated (at least to the extent
provided in this Section 7 with respect to this Security) to the payment of
all Senior Indebtedness which may at the time be outstanding. The
consolidation of the Company with, or the merger of the Company into, another
corporation or the liquidation or dissolution of the Company following the
conveyance or transfer of its property as an entirety, or substantially as an
entirety, to another corporation upon the terms and conditions provided for
in Section 6 shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section 7(c) if such other
corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Section 6.
(d) Subrogation. Subject to the payment in full in cash, or in
such other form of payment as may be acceptable to the holders of Senior
Indebtedness, of all Senior Indebtedness, the rights of the holder of this
Security shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Indebtedness pursuant to the provisions
of this Section 7 (equally and ratably with the holders of all indebtedness
of the Company which by its express terms is subordinated to other
indebtedness of the Company to substantially the same extent as this Security
is subordinated and is entitled to like rights of subrogation) to the rights
CUSIP No. 000000000 SCHEDULE 13D Page 18 of 27
of the holders of Senior Indebtedness to receive payments or distributions
of cash, property or securities of the Company applicable to the Senior
Indebtedness until the principal of, and premium, if any, and interest on
this Security shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holder of this
Security would be entitled except for the provisions of this Section 7, and
no payment over pursuant to the provisions of this Section 7, to or for the
benefit of the holders of Senior Indebtedness by holders of this Security,
shall, as between the Company, its creditors other than holders of Senior
Indebtedness, and the holder of this Security, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness; and no payments or
distributions of cash, property or securities to or for the benefit of the
holder of this Security pursuant to the subrogation provisions of this
Section 7, which would otherwise have been paid to the holders of Senior
Indebtedness shall be deemed to be a payment by the Company to or for the
account of this Security. It is understood that the provisions of this
Section 7 are and are intended solely for the purposes of defining the
relative rights of the holder of this Security, on the one hand, and the
holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Section 7 or elsewhere in this Security is
intended to or shall impair, as among the Company, its creditors other than
the holders of Senior Indebtedness, and the holder of this Security, the
obligation of the Company, which is absolute and unconditional, to pay to the
holder of this Security the principal of, and premium, if any, and interest
on the Security as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the holder of this Security and creditors of the Company other than
the holders of the Senior Indebtedness, nor shall anything herein or therein
prevent the holder of this Security from exercising all remedies otherwise
permitted by applicable law upon default under this Security, subject to the
rights, if any, under this Section 7 of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Section 7, the holder of this Security shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which such
bankruptcy, dissolution, winding-up, liquidation or reorganization
proceedings are pending, or a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment
or distribution, delivered to the holder of this Security, for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section 7.
(e) Notice. The Company shall give prompt written notice to the
holder of this Security of any fact known to the Company which would prohibit
the making of any payment of monies in respect of this Security pursuant to
the provisions of this Section 7.
The holder of this Security shall be entitled to rely on the delivery to
it of a written notice by a Person representing itself to be a holder of
CUSIP No. 000000000 SCHEDULE 13D Page 19 of 27
Senior Indebtedness (or a trustee on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness or a trustee on
behalf of any such holder or holders. In the event that the holder of this
Security determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Section 7, the
holder of this Security may request such Person to furnish evidence to the
reasonable satisfaction of the holder of this Security as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Section 7, and if such
evidence is not furnished the holder of this Security may defer any payment
to such Person pending judicial determination as to the right of such Person
to receive such payment.
(f) No Impairment of Subordination. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act,
in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Security, regardless of any
knowledge thereof which any such holder may have or otherwise be charged
with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of the Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the holder of this Security,
without incurring responsibility to the holder of this Security, and without
impairing or releasing the subordination provided in this Security or the
obligations of the holder of this Security to the holders of the Senior
Indebtedness, do any one or more of the following: (a) change the manner,
place, or terms of payment (including any change in the rate of interest) or
extend the time of payment of, or renew, amend, modify, alter, or grant any
waiver or release with respect to, or consent to any departure from, any
Senior Indebtedness or any instrument evidencing the same or any agreement
evidencing, governing, creating, guaranteeing or securing any Senior
Indebtedness; (b) sell, exchange, release, or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable under or in respect of the Senior Indebtedness;
(d) fail or delay in the perfection of liens securing the Senior
Indebtedness; (e) exercise or refrain from exercising any rights against
Company and any other Person; or (f) amend, or grant any waiver or release
with respect to, or consent to any departure from, any guarantee for all or
any of the Senior Indebtedness.
(g) Certain Conversions Deemed Payment. For the purposes of this
Section 7 only, (1) the issuance and delivery of junior securities upon
conversion of this Security in accordance with Section 2 shall not be deemed
to constitute a payment or distribution on account of the principal of (or
premium, if any) or interest on this Security or on account of the purchase
or other acquisition of this Security, and (2) the payment, issuance or
delivery of cash (including cash paid for fractional shares upon conversion
of this Security in accordance with Section 2), property or securities (other
CUSIP No. 000000000 SCHEDULE 13D Page 20 of 27
than junior securities) upon conversion of this Security in accordance with
Section 2 shall be deemed to constitute payment on account of the principal
of this Security. For the purposes of this Section, the term "junior
securities" means (a) shares of any stock of any class of the Company and (b)
securities of the Company which are subordinated in right of payment to all
Senior Indebtedness which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a
greater extent than, this Security is so subordinated as provided in this
Section 7. Nothing contained in this Section 7 or elsewhere in this Security
is intended to or shall impair, as among the Company, its creditors other
than holders of Senior Indebtedness and the holder of this Security, the
right, which is absolute and unconditional, of the holder of this Security
to convert this Security in accordance with Section 2.
8. Definitions. Unless otherwise defined in this Security, the
following capitalized terms shall have the following respective meanings when
used herein:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which the banking institutions in California
are authorized or obligated by law or executive order to close or be closed.
"Cash Distribution" means the distribution by the Company to all holders
of its Common Stock of cash, other than any cash that is distributed upon a
merger or consolidation to which Section 2(h) applies or as part of a
distribution referred to in paragraph (4) of Section 2(b).
"Closing Price" means, with respect to the Common Stock of the Company,
for any day, the reported last sale price per share on the Nasdaq National
Market, or, if the Common Stock is not admitted to trading on the Nasdaq
National Market, on the principal national securities exchange or inter-
dealer quotation system on which the Common Stock is listed or admitted to
trading, or if not admitted to trading on the Nasdaq National Market, or
listed or admitted to trading on any national securities exchange or inter-
dealer quotation system, the closing bid price per share in the over-the-
counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that purpose.
"Commission" means the United States Securities and Exchange Commission,
or any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
"Common Stock" means the Common Stock, par value $0.10 per share, of the
Company authorized at the date of this instrument as originally executed.
Subject to the provisions of Section 2, shares issuable on conversion of this
CUSIP No. 000000000 SCHEDULE 13D Page 21 of 27
Security shall include only Common Stock or shares of any class or classes of
common stock resulting from any reclassification or reclassifications
thereof; provided, however, that if at any time there shall be more than one
such resulting class, the shares so issuable on conversion of this Security
shall include shares of all such classes, and the shares of each such class
then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications
bears to the total number of shares of all such classes resulting from all
such reclassifications.
"Conversion Price" has the meaning given to such term in Section 2(a).
"Conversion Rate" has the meaning given to such term in Section 2(a).
"Designated Senior Indebtedness" means the Company's obligations under
any Senior Indebtedness in which the instrument creating or evidencing the
same or the assumption or guarantee thereof (or related agreements or
documents to which the Company is a party) expressly provides that such
Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes
of this Security (provided that such instrument, agreement or other document
may place limitations and conditions on the right of such Senior Indebtedness
to exercise the rights of Designated Senior Indebtedness).
"Determination Date" means, in the case of a dividend or other
distribution, including the issuance of rights, options or warrants, to
shareholders, the date fixed for the determination of shareholders entitled
to receive such dividend or other distribution and, in the case of a tender
offer, the last time that tenders could have been made pursuant to such
tender offer.
"Excess Purchase Payment" means the product of (A) the excess, if any,
of (i) the amount of cash plus the fair market value (as determined in good
faith by the Company's Board of Directors) of any non-cash consideration
required to be paid with respect to one share of Common Stock acquired or
to be acquired in a tender offer made by the Company or any Subsidiary of the
Company for all or any portion of the Common Stock over (ii) the current
market price per share as of the last time that tenders could have been made
pursuant to such tender offer and (B) the number of shares of Common Stock
validly tendered and not withdrawn as of the Determination Date in respect of
such tender offer.
"Exchange Act" means the Securities Exhange Act of 1934, as amended.
"Indebtedness" means, with respect to any Person:
(a) All obligations, contingent or otherwise, of such Person (i)
for borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii)
evidenced by a note, debenture, bond or written instrument (including a
purchase money obligation), (iii) in respect of leases of such Person
required, in conformity with generally accepted accounting principles,
to be accounted for as capitalized lease obligations on the balance
sheet of such Person and all obligations and other liabilities
(contingent or otherwise) under any lease or related document (including
a purchase agreement) in connection with the lease of real property
CUSIP No. 000000000 SCHEDULE 13D Page 22 of 27
which provides that such Person is contractually obligated to purchase
or cause a third party to purchase the leased property and thereby
guarantee a minimum residual value of the leased property to the
lessor and the obligations of such Person under such lease or related
document to purchase or to cause a third party to purchase such leased
property; or (iv) in respect of letters of credit (including
reimbursement obligations with respect thereto), local guarantees or
bankers' acceptances;
(b) All obligations secured by a mortgage, pledge, lien,
encumbrance, charge or adverse claim affecting title or resulting in an
encumbrance to which the property or assets of such Person are subject,
whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be such Person's legal liability;
(c) To the extent not otherwise included, all obligations of such
Person under interest rate and currency swap agreements, cap, floor and
collar agreements, spot and forward contracts and similar agreements and
arrangements;
(d) All obligations of others of the type described in clauses
(a), (b), or (c) above assumed by or guaranteed in any manner by such
Person or in effect guaranteed by such Person through an agreement to
purchase, contingent or otherwise (and the obligations of such Person
under any such assumptions, guarantees or other such arrangements); and
(e) All obligations, contingent or otherwise, of such Person under
or in respect of any and all deferrals, renewals, extensions and
refundings of, or amendments, modifications or supplements to, any
liability of the kinds described in any of the preceding clauses (a),
(b), (c) or (d).
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
"PIK Note" has the meaning given to such term in the introductory
paragraph of this Security.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of September 27, 2001, between the Company and the
initial holder of this Security, as amended, modified or otherwise
supplemented from time to time.
"Repurchase Date" has the meaning given to such term in Section 2(a)
hereof.
"Securities" means the 5% Convertible Subordinated Note due 2008 issued
by the Company pursuant to the Agreement and such other securities that are
issued upon transfer or exchange or replacement thereof (or successive
transfers, exchanges or replacements) pursuant to Section 9 hereof and any
PIK Notes, as amended, modified or supplemented from time to time.
CUSIP No. 000000000 SCHEDULE 13D Page 23 of 27
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means the principal of, premium, if any, interest
on (including any interest accruing after the filing of a petition by or
against the Company under any bankruptcy law, whether or not allowed as a
claim after such filing in any proceeding under such bankruptcy law) and any
other payment due pursuant to, any Indebtedness, whether outstanding on the
date of this Security or thereafter incurred or created; provided that
Senior Indebtedness shall not include (i) any indebtedness of any kind of
the Company to any Subsidiary of the Company, a majority of the voting stock
of which is owned, directly or indirectly, by the Company, (ii) indebtedness
for trade payables or constituting the deferred purchase price of assets or
services incurred in the ordinary course of business, or (iii) any
indebtedness which by its terms is pari passu in right of payment with or
subordinate in right of payment to this Security.
"Subsidiary" shall mean (a) any corporation of which more than 50% of
the issued and outstanding equity securities having ordinary voting power to
elect a majority of the board of directors of such corporation is at the
time directly or indirectly owned or controlled by the Company, (b) any
partnership, joint venture, limited liability company or other association
of which more than 50% of the equity interests having the power to vote,
direct or control the management of such partnership, joint venture, limited
liability company or other association is at the time directly or indirectly
owned and controlled by the Company, and (c) any other entity included in
the financial statements of the Company on a consolidated basis.
"Trading Day" means (i) if the Common Stock is admitted to trading on
the Nasdaq National Market or any other system of automated dissemination of
quotations of securities prices, a day on which trades may be effected
through such system; (ii) if the Common Stock is listed or admitted for
trading on the New York Stock Exchange or any other national securities
exchange, a day on which such exchange is open for business; or (iii) if the
Common Stock is not admitted to trading on the Nasdaq National Market or
listed or admitted for trading on any national securities exchange or any
other system of automated dissemination of quotation of securities prices, a
day on which the Common Stock is traded regular way in the over-the-counter
market and for which a closing bid and a closing asked price for the Common
Stock are available.
9. Other.
(a) No provision of this Security shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest, if any, on this Security at the times, places and
rate, and in the coin or currency, herein prescribed or to convert this
Security as herein provided.
(b) The Company will give prompt written notice to the holder of
this Security of any change in the location of the Designated Office. Any
notice to the Company or to the holder of this Security shall be given in
the manner set forth in the Note Exchange Agreement, dated as of January 30,
2003, among the Company and the initial holder of this Security (the
CUSIP No. 000000000 SCHEDULE 13D Page 24 of 27
"Agreement"), provided that the holder of this Security, if not a party to
the Agreement, may specify alternative notice instructions to the Company.
(c) The transfer of this Security is registrable on the register
maintained by the Company upon surrender of this Security for registration
of transfer at the Designated Office, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company duly
executed by, the holder hereof or such holder's attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees. Such Securities are issuable only
in registered form without coupons in denominations of $1,000 and any
integral multiple thereof. No service charge shall be made for any such
registration of transfer, but the Company may require payment of a sum
sufficient to recover any tax or other governmental charge payable in
connection therewith. Prior to due presentation of this Security for
registration of transfer, the Company and any agent of the Company may treat
the Person in whose name this Security is registered as the owner thereof
for all purposes, whether or not this Security be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
(d) This Security and the Common Stock issuable upon conversion of
this Security have not been registered under the Securities Act, or the
securities laws of any state or other jurisdiction. Neither this Security
nor the Common Stock issuable upon conversion of this Security nor any
interest or participation herein may be reoffered, sold, assigned,
transferred, pledged, encumbered or otherwise disposed of (a "Transfer") in
the absence of such registration or unless such transaction is exempt from,
or not subject to, registration. The holder by its acceptance of this
Security or the Common Stock issuable upon conversion of this Security
agrees that it shall not offer, sell, assign, transfer, pledge, encumber or
otherwise dispose of this Security or any portion thereof or interest
therein other than (i) in a minimum denomination of $250,000 in principal
amount if the holder is Astoria Capital Partners, L.P. and (ii) in a minimum
denomination equal to the lesser of (A) $5,000,000 in principal amount and
(B) the entire aggregate principal amount of this Security and all PIK Notes
held by the holder if the holder is not Astoria Capital Partners, L.P., and
then in each case (other than with respect to a Transfer pursuant to a
registration statement that is effective at the time of such Transfer) only
(a) to the Company, or (b) to a person it reasonably believes to be an
institutional "accredited investor" within the meaning of Rule
501(a)(1)(2)(3) or (7) under the Securities Act or a qualified institutional
buyer (as defined in Rule 144A under the Securities Act), and, in the case
of (b) above, the transferor shall furnish the Company with such
certifications, legal opinions or other information as the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. In addition to the restrictions set
forth above in this Section 9(d), Transfers permitted hereunder are further
limited so that at no time may the number of holders of Securities and PIK
Notes on the register of the Company maintained pursuant to Section 9(c)
hereof exceed 40.
CUSIP No. 000000000 SCHEDULE 13D Page 25 of 27
(e) Upon presentation of this Security for registration of
transfer at the office of the Company specified herein accompanied by (i)
certification by the transferor that such transfer is in compliance with the
terms hereof and (ii) by a written instrument of transfer in a form approved
by the Company executed by the registered holder, in person or by such
xxxxxx's attorney thereunto duly authorized in writing, and including the
name, address and telephone and fax numbers of the transferee and name of
the contact person of the transferee, such Security shall be transferred on
the Security register, and a new Security of like tenor and bearing the same
legends shall be issued in the name of the transferee and sent to the
transferee at the address and c/o the contact person so indicated.
Transfers and exchanges of Securities shall be subject to such additional
restrictions as are set forth in the legends on the Securities and to such
additional reasonable regulations as may be prescribed by the Company as
specified in Section 9(d) hereof. Subject to Section 9(d), successive
registrations of transfers as aforesaid may be made from time to time as
desired, and each such registration shall be noted on the Security register.
(f) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Security, and in the case of loss, theft or destruction, receipt of
indemnity or security reasonably satisfactory to the Company, and upon
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of such Security, if mutilated, the
Company will deliver a new Security of like tenor and dated as of such
cancellation, in lieu of such Security.
(g) Such holder represents that it is an institutional
"accredited investor" within the meaning of Rule 501(a)(1)(3)(5) or (7) of
the Securities Act or a qualified institutional buyer (as defined in Rule
144A under the Securities Act). Such holder has been advised that this
Security has not been registered under the Securities Act, or any state
securities laws and, therefore, cannot be resold unless it is registered
under the Securities Act and applicable state securities laws or unless an
exemption from such registration requirements is available. Such holder is
aware that the Company is under no obligation to effect any such
registration or to file for or comply with any exemption from registration.
Such holder has not been formed solely for the purpose of making this
investment and is acquiring the Security for its own account for investment,
and not with a view to, or for resale in connection with, the distribution
thereof.
(h) Neither this Security nor any term hereof may be amended or
waived orally or in writing, except that any term of the Securities may be
amended and the observance of any term of the Securities may be waived
(either generally or in a particular instance and either retroactively or
prospectively), and such amendment or waiver shall be applicable to all of
the Securities, upon the approval of the Company and the holders of fifty
percent (50%) or more of the outstanding principal amount of all then
outstanding Securities; provided, however, that any amendment that would (i)
reduce the outstanding principal amount or premium (if any) of the
Securities, (ii) reduce the rate of interest borne by the Securities, (iii)
change the date of maturity or interest payment dates of the Securities,
(iv) reduce any amount payable upon repurchase of the Securities, (v) impair
the right of any holder of this Security to institute suit for the payment
CUSIP No. 000000000 SCHEDULE 13D Page 26 of 27
thereof, (vi) make the principal, premium (if any) or interest payable on
the Securities in a coin or currency other than as set forth in the
Securities, (vii) modify the provisions of the Securities with respect to
subordination or seniority of the Securities in a manner adverse to the
holders of the Securities in any material respect, (viii) change in any
respect the obligation of the Company to repurchase the Securities, (ix)
impair the right of the holders of the Securities to convert the Securities
into Common Stock or (x) modify this Section 9(h) shall require the approval
of the holder of each Security to which such amendment shall apply. The
Company will not amend any provision of any other Security in a manner
favorable to any holder thereof unless a similar amendment is made or
offered with respect to all of the Securities. Each holder of this Security
by its acceptance hereof acknowledges and agrees that the subordination
provisions of this instrument are for the benefit of the holders of the
Senior Indebtedness and that, accordingly, no provision of Section 7 hereof
may be amended or otherwise modified without the prior written consent of
each holder of Senior Indebtedness at such time outstanding.
(i) This Security shall be governed by and construed in accordance
with the internal laws of the State of California.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed.
Dated: October 1, 2005
RAINING DATA CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 3(a) of this Security, the undersigned hereby
elects to have all or a portion of this Security repurchased by the Company.
2. The undersigned hereby directs the Company to pay [choose one] (a)
it or (b) Name: ____________________; address: __________________; Social
Security or Other Taxpayer Identification Number, if any: ____________, an
amount in cash equal to the Repurchase Price, as provided herein.
Dated: __________________
[Holder]
By: ____________________
Name:
Title:
CUSIP No. 000000000 SCHEDULE 13D Page 27 of 27
[Number of shares of Common Stock
owned by the holder and its affiliates: _____________________]
Principal amount to be repurchased
(an integral multiple of $1,000): ______________________
Remaining principal amount following
such repurchase (not less than $1,000): ______________________
NOTICE: The signature to the foregoing Election must correspond to the name
as written upon the face of this Security in every particular, without
alteration or any change whatsoever.
CONVERSION NOTICE
The undersigned holder of this Security hereby irrevocably exercises
the option to convert this Security, or any portion of the principal amount
hereof (which is an integral multiple of $1,000) below designated, into
Common Stock in accordance with the terms of this Security, and directs that
such shares, together with a check in payment for any fractional share and
any Security representing any unconverted principal amount hereof, be
delivered to and be registered in the name of the undersigned unless a
different name has been indicated below. If Common Stock or Securities are
to be registered in the name of a Person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.
Dated: __________________
[Holder]
By:______________________
Name:
Title:
If shares or Securities are to be registered in the name of a Person other
than the holder, please print such Person's name and address:
_________________________
Name
_________________________
Address
_________________________
Social Security or other Taxpayer Identification Number, if any
If only a portion of the Securities is to be converted, please indicate:
1. Principal amount to be converted: $___________
2. Principal amount and denomination of Security representing unconverted
principal amount to be issued:
Amount: $________
Denominations: $________ (any integral multiple of $1,000)
