EXHIBIT A
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES 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, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN A MANNER CONSISTENT WITH THE SECURITIES ACT IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
No. [ ] $[ ]
Original Issue Date: April 4, 2005
CALYPTE BIOMEDICAL CORPORATION
SECURED 8% CONVERTIBLE PROMISSORY NOTE DUE APRIL 3, 2007
THIS NOTE is one of a series of duly authorized and issued notes of
Calypte Biomedical Corporation, a Delaware corporation (the "COMPANY"),
designated as its Secured 8% Convertible Promissory Notes due April 3, 2007, in
the original aggregate principal amount eight million dollars ($8,000,000)
(collectively, the "NOTES" and each Note comprising the Notes, a "NOTE").
FOR VALUE RECEIVED, the Company promises to pay to the order of [ ] or its
registered assigns (the "INVESTOR"), the principal sum of [ ] ($), on April 3,
2007 or such earlier date as this Note is required to be repaid as provided
hereunder (the "MATURITY DATE"), and to pay interest to the Investor on the
principal amount of this Note outstanding from time to time in accordance with
the provisions hereof. All holders of Notes are referred to collectively as the
"INVESTORS." This Note is subject to the following additional provisions:
1. Definitions. In addition to the terms defined elsewhere in this
Note: (a) capitalized terms that are used but not otherwise defined herein have
the meanings given to such terms in the Purchase Agreement, dated as of April 4,
2005, among the Company and the Investors identified therein (the "PURCHASE
AGREEMENT"), and (b) the following terms have the meanings indicated below:
"BANKRUPTCY EVENT" means any of the following events: (a) the Company or
any Subsidiary 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 any such case or proceeding that is not dismissed within 60 days
after commencement; (c) the Company or any subsidiary is adjudicated by a court
of competent jurisdiction 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 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) under applicable law the Company or any Subsidiary makes a general
assignment for the benefit of creditors; (f) the Company or any Subsidiary 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 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, 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.
"CHANGE OF CONTROL" means the occurrence of any of the following in one or
a series of related transactions: (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1) under
the Exchange Act) of more than one-third of the voting rights or equity
interests in the Company; (ii) a replacement of more than one-half of the
members of the Company's board of directors in a single election of directors
that is not approved by those individuals who are members of the board of
directors on the date hereof (or other directors previously approved by such
individuals); (iii) a Fundamental Transaction (as defined in Section 11(c)), a
merger or consolidation of the Company or any Subsidiary or a sale of more than
one-half of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company's securities prior to the first such transaction continue
to hold at least a majority of the voting rights and equity interests in the
surviving entity or acquirer of such assets; (iv) a recapitalization,
reorganization or other transaction involving the Company or any Subsidiary that
constitutes or results in a transfer of more than fifty percent of the voting
rights or equity interests in the Company, unless following such transaction or
series of transactions, the holders of the Company's securities prior to the
first such transaction continue to hold at least fifty percent of the voting
rights and equity interests in the surviving entity or acquirer of such assets;
(v) consummation of a "Rule 13e-3 transaction" as defined in Rule 13e-3 under
the Exchange Act with respect to the Company, or (vi) the execution by the
Company or its controlling stockholders of an agreement providing for or
reasonably likely to result in any of the foregoing events.
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"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 last trade 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 prices for the Common
Stock are then quoted on the OTC Bulletin Board, the closing bid price per share
of the Common Stock for such date (or the nearest preceding date) so quoted; (c)
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 bid
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
qualified appraiser selected in good faith and paid for by a majority in
interest of the Investors.
"COMMON STOCK" means the common stock of the Company, $0.03 par value per
share, and any securities into which such common stock may hereafter be
reclassified.
"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" means the date a Conversion Notice together with the
Conversion Schedule is delivered to the Company in accordance with Section 5(a).
"CONVERSION NOTICE" means a written notice in the form attached hereto as
Exhibit A.
"CONVERSION PRICE" means $0.30 subject to adjustment from time to time
pursuant to Section 11.
"DEFAULT" means any event or condition which constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"ELIGIBLE MARKET" means any of the New York Stock Exchange, the American
Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
"EQUITY CONDITIONS ARE SATISFIED" means, as of any date of determination,
that each of the following conditions is (or would be) satisfied on such date,
if the Company were to issue on such date all of the Underlying Shares then
issuable upon (1) conversion in full of the outstanding principal amount of all
Notes, and (2) the payment on such date of accrued and unpaid interest on all
Notes: (i) the number of authorized but unissued and otherwise unreserved shares
of Common Stock is sufficient for such issuance, (ii) 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 Market upon
issuance, (iii) such Common Stock is registered for resale under the
Registration Statement and the prospectus under such Registration Statement is
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available for the sale of all Registrable Securities held by the Investor, (iv)
such issuance would be permitted in full without violating Section 5(b) hereof
or the rules or regulations of the Eligible Market on which such shares are
listed or quoted, (v) both immediately before and after giving effect thereto,
no Default shall or would exist, and (vi) no public announcement of a pending or
proposed Change of Control transaction has occurred that has not been
consummated.
"EVENT EQUITY VALUE" means the average of the Closing Prices for the five
consecutive Trading Days preceding either: (a) the date of an Event Notice or
the date the Company becomes obligated to pay the Event Price under Section
7(b), as applicable, or (b) the date on which the Event Price with respect
thereto (together with any other payments, expenses and liquidated damages then
due and payable under the Transaction Documents) is paid in full, whichever is
greater.
"EVENT OF DEFAULT" means any one 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 (free of any claim of
subordination), when the same becomes due and payable (whether on a Prepayment
Date, the Maturity Date or by acceleration or prepayment or otherwise), of (a)
liquidated damages in respect of this Note which default continues unremedied
for a period of three Trading Days after the date on which written notice of
such default is first given to the Company by the Investor, or (b) principal
under or interest in respect of this Note.
(ii) the Company or any Subsidiary (1) fails to pay when due
or there is an acceleration of any monetary obligation (regardless of amount)
under any currently existing or hereafter arising debenture (other than a Note)
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 or under any long term
leasing or factoring arrangement, if the aggregate amount of the obligations and
liabilities of the Company and the subsidiaries thereunder exceeds $50,000 (each
of the foregoing a "MATERIAL DEBT AGREEMENT"), or (2) fails to observe or
perform any other obligation under any Material Debt Agreement, and such failure
results in the obligations thereunder becoming or being declared due and payable
prior to the date on which they would otherwise become due and payable.
(iii) the occurrence of a Change in Control or the entry by
the Company or any subsidiary into any transaction that would result in a Change
of Control of the Company.
(iv) the Company shall fail to observe or perform any
covenant, condition or agreement contained in any Transaction Document (other
than those specified in clause (i) above and clause (xvi) below), and such
failure shall continue unremedied for a period of five Trading Days after the
date on which written notice of such default is first given to the Company by
the Investor (it being understood that no prior notice need be given in the case
of a default that cannot reasonably be cured within five Trading Days).
4
(v) the occurrence and continuance of an Event of Default
under any other Note.
(vi) any prepayment by the Company of any other Note or any
other Indebtedness issued by it or any issuance of securities in exchange for
any Notes issued by it (other than Underlying Shares upon conversion of such
Notes in accordance with their terms as in effect on the Original Issue Date
thereof), except in each case (i) if the Company offers to the Investor in
writing the same prepayment of this Note and all other Notes then held by such
Investor on the same economic terms on which the Company prepays or offers to
prepay (whichever is more favorable to the holder of such Note) such Notes, and
(ii) the Investor consents to such prepayment of this Note in accordance with
the prepayment provisions of Section 13 of this Note.
(vii) any of the Company's representations and warranties set
forth in any Transaction Document shall be incorrect in any material respect as
of the date made or as of the Original Issue Date.
(viii) the occurrence of a Bankruptcy Event.
(ix) one or more judgments for the payment of money in an
aggregate amount in excess of $50,000 shall be rendered against the Company or
any subsidiary or any combination thereof (which shall not be fully covered by
insurance without taking into account any applicable deductibles) and which
shall remain undischarged or unbonded for a period of 30 consecutive days during
which execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of the Company or
any subsidiary to enforce any such judgment.
(x) any Transaction Document shall cease, for any reason, to
be in full force and effect, or the Company shall so assert in writing or shall
disavow any of its obligations thereunder.
(xi) the Common Stock shall not be listed or quoted, or is
suspended from trading, on an Eligible Market for a period of five Trading Days
(which need not be consecutive Trading Days).
(xii) the Company fails to deliver a stock certificate
evidencing Underlying Shares to an Investor within five Trading Days after a
Conversion Date or in the case of exercises under a Warrant, within five Trading
days after a Date of Exercise under, and as such term is defined in, such
Warrant, or the conversion or exercise rights of the Investors pursuant to the
terms hereof or the terms of the Warrants are otherwise suspended for any reason
(other than as a result of the limitations set forth in Section 5(b)(i)).
(xiii) the Company fails to have available a sufficient number
of authorized but unissued and otherwise unreserved shares of Common Stock
available to issue Underlying Shares upon any conversion of Notes or upon any
exercise of Warrants.
(xiv) the Company effects or publicly announces its intention
to effect any exchange, recapitalization or other transaction that effectively
requires or rewards physical delivery of certificates evidencing the Common
Stock, unless
5
following such transaction, the holders of the Company's securities prior to the
first such transaction continue to beneficially own at least a majority
(one-third in the case of a Change in Control) of the voting rights and equity
interests in the surviving entity or acquirer of such assets.
(xv) a Registration Statement under Section 2(a) of the
Registration Rights Agreement is not declared effective by the Commission by the
120th day following the Closing Date, or is not effective as to all Underlying
Shares issuable upon the conversion of the Notes (other than any which
constitutes interest accreted to principal of the Notes), and available for use
by the holders of such Underlying Shares, for in excess of an aggregate of 20
Trading Days (which need not be consecutive Trading Days) in any twelve month
period during the Effectiveness Period (as defined in the Registration Rights
Agreement).
(xvi) the Company fails to make any cash payment required
under the Transaction Documents (other than as set forth in paragraph (i) above)
and such failure is not cured within five Trading Days after notice of such
default is first given to the Company by an Investor.
(xvii) any violation of the Prior Placements or Amendment
thereto.
"INDEBTEDNESS" has the meaning given to the term "Debt" in the Purchase
Agreement.
"ORIGINAL ISSUE DATE" has the meaning set forth on the face of this Note.
"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.
"STOCKHOLDER APPROVAL" shall have the meaning set forth in Section
5(b)(ii).
"STRATEGIC TRANSACTION" shall have the meaning set forth in the Purchase
Agreement.
"TRADING DAY" means (i) a day on which the Common Stock is traded on an
Eligible Market, or (ii) if the Common Stock is not listed on an Eligible
Market, a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board or the National Quotation Bureau
Incorporated, or (iii) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion of the Notes and payment of interest thereunder.
"VWAP" means, with respect to any date of determination, the daily volume
weighted average price (as reported by Bloomberg using the VAP function) of the
Common Stock on such date of determination, or if there is no such price on such
date of determination, then the daily volume weighted average price on the date
nearest preceding such date.
6
2. Interest. (a) The Company shall pay interest to the Investor on the
aggregate unconverted and then outstanding principal amount of this Note at the
rate of 8% per annum, payable quarterly in cash or, subject to the conditions of
Section 2(b), by adding the amount of such interest to the then outstanding
principal amount under this Note, in arrears on each three month anniversary of
the Original Issue Date (each, an "INTEREST PAYMENT DATE"), except if such date
is not a Trading Day, in which case such interest shall be payable on the next
succeeding Trading Day. Interest shall be calculated on the basis of a 360-day
year for the actual number of days elapsed and shall accrue daily commencing on
the Original Issue Date.
(b) Subject to the conditions and limitations set forth below, from
and after such time as the Company has obtained Stockholder Approval and if the
Equity Conditions Are Satisfied, in lieu of paying interest in cash the Company
may, at its option, on each Interest Payment Date, add the amount of interest
due on an Interest Payment Date to the principal amount under this Note. The
Company must deliver written notice to the Investor indicating the manner in
which it intends to pay interest at least ten Trading Days prior to each
Interest Payment Date, but the Company may indicate in any such notice that the
election contained therein shall continue for subsequent Interest Payment Dates
until rescinded. Failure to timely provide such written notice shall be deemed
an irrevocable election by the Company to pay such interest in cash. All
interest payable in respect of the Notes on any Interest Payment Date must be
paid in the same manner. Investor shall have the right, but not the obligation,
to add to the principal amount of the Notes any interest not fully paid, which
may be converted at the Conversion Price.
3. Registration of Notes. The Company shall register the Notes upon
records maintained by the Company for that purpose (the "NOTE REGISTER") in the
name of each record Investor thereof from time to time. The Company may deem and
treat the registered Investor of this Note 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 from such record Investor.
4. Registration of Transfers and Exchanges. The Company shall register the
transfer of any portion of this Note in the Note Register upon surrender of this
Note to the Company at its address for notice set forth herein. Upon any such
registration or transfer, a new Note, in substantially the form of this Note
(any such new debenture, a "NEW NOTE"), evidencing the portion of this Note so
transferred shall be issued to the transferee and a New Note evidencing the
remaining portion of this Note not so transferred, if any, shall be issued to
the transferring Investor. The acceptance of the New Note by the transferee
thereof shall be deemed the acceptance by such transferee of all of the rights
and obligations of a holder of a Note. The Company agrees that its prior consent
is not required for the transfer of any portion of this Note; provided, however,
that the Company shall be entitled to reasonable assurance, including an opinion
of counsel reasonably acceptable to Company, that such transfer complies with
applicable federal and state securities laws. This Note is exchangeable for an
equal aggregate principal amount of Notes of different authorized denominations,
as requested by the Investor surrendering the same. No service charge or other
fee will be imposed in connection with any such registration of transfer or
exchange.
7
5. Conversion.
(a) (i) At the Option of the Investor. All or any portion of the
principal amount of this Note then outstanding together with any accrued and
unpaid interest hereunder shall be convertible into shares of Common Stock at
the Conversion Price (subject to limitations set forth in Section 5(b)), at the
option of the Investor, at any time and from time to time from and after the
Original Issue Date. The Investor may effect conversions under this Section
5(a), by delivering to the Company a Conversion Notice together with a schedule
in the form of Schedule 1 attached hereto (the "CONVERSION SCHEDULE"). If the
Investor is converting less than all of the principal amount represented by this
Note, or if a conversion hereunder may not be effected in full due to the
application of Section 5(b), the Company shall honor such conversion to the
extent permissible hereunder and shall promptly deliver to the Investor a
Conversion Schedule indicating the principal amount which has not been
converted.
(ii) At the Option of the Company. Subject to the provisions
of this Section 5(a)(ii), at any time after the eighteenth month anniversary of
the Closing Date, the Company may deliver (via certified United States mail with
a return receipt requested) a written notice (such notice, a "COMPANY CONVERSION
NOTICE") to the Investor within five days after any day (such day, the "TEST
DATE") on which the conditions in (i), (ii), (iii) and (iv) below shall be
satisfied, stating its irrevocable election to convert at the Conversion Price
of all (but not less than all) of the outstanding principal amount of this Note,
provided that: (i) the VWAP for each of the 20 consecutive Trading Days prior to
the Test Date is greater than the price per share derived by multiplying the
Conversion Price by the number two (2) (subject to equitable adjustment as a
result of the events set forth in Sections 11(a), (b) and (c)), (ii) the Equity
Conditions Are Satisfied, (iii) the average daily trading volume of the Common
Stock during the entire period referred to in clause (i) of this subparagraph
(ii) shall be at least 450,000 shares (subject to equitable adjustment as a
result of intervening stock splits and reverse stock splits), and (iv)
immediately before or after giving effect to such issuance on such date, no
Event of Default or Default shall or would exist. Subject to the terms and
conditions of this Section 5(a)(ii), the Company shall effect the conversion of
this Note pursuant to a Company Conversion Notice on the 10th Trading Day
immediately succeeding the date of the Company Conversion Notice (the "COMPANY
CONVERSION DATE"). Notwithstanding anything to the contrary set forth in this
Note, the Investor shall have the right to nullify such Company Conversion
Notice if any of the conditions set forth in this Section 5(a)(ii) shall not
have been met on each date during the entire period referred to in clause (i)
above. The Company covenants and agrees that it will honor all Conversion
Notices tendered from the time of delivery of the Company Conversion Notice
through 6:30 p.m. (California time) on the Trading Day prior to the Company
Conversion Date. Notwithstanding the foregoing, the Company and the Investor
agree that, if and to the extent Section 5(b) of this Note would restrict the
right of the Company to issue or the right of the Investor to receive any of the
Underlying Shares otherwise issuable upon the conversion in respect of a Company
Conversion Notice, then notwithstanding anything to the contrary set forth in
the Company Conversion Notice, the Company Conversion Notice shall be deemed
automatically amended to apply only to such portion of this Note as would permit
conversion in full in compliance with Section 5(b). The Investor will promptly
(and, in any event, prior to the Company Conversion Date) notify the Company in
writing following receipt of a Company Conversion Notice if Section 5(b)(i)
would restrict its right to receive the full number of otherwise issuable
Underlying Shares following such Company Conversion Notice.
8
(b) Certain Conversion Restrictions.
(i) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by an Investor upon
each conversion of Notes (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 Investor and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with such Investor's for purposes
of Section 13(d) of the Exchange Act, does not exceed 9.999% 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.
This provision shall not restrict the number of shares of Common Stock which an
Investor may receive or beneficially own in order to determine the amount of
securities or other consideration that such Investor may receive in the event of
a Fundamental Transaction (defined below) involving the Company as contemplated
herein. This restriction may not be waived.(1)
(ii) Notwithstanding anything to the contrary in this Note, if
the Company has not previously obtained Stockholder Approval, then the Company
may not issue shares of Common Stock in excess of the Issuable Maximum upon
conversions of this Note. The "Issuable Maximum" means, as of any date, a number
of shares of Common Stock equal to 34,224,397. Each Investor shall be entitled
to a portion of the Issuable Maximum equal to the quotient obtained by dividing:
(x) the principal amount of Notes issued and sold to such Investor on the
Original Issue Date by (y) the aggregate principal amount of all Notes issued
and sold by the Company on the Original Issue Date. If any Investor shall no
longer hold Notes, then such Investor's remaining portion of the Issuable
Maximum shall be allocated pro-rata among the remaining Investors, giving effect
to the Company's desire to allocate this limitation among the class of
securities known as the Notes. If on any Conversion Date or Company Conversion
Date, or at such time as an Investor shall notify the Company that the condition
in (A) following this clause shall be in effect: (A) the aggregate number of
shares of Common Stock that would then be issuable upon conversion in full of
all then outstanding principal amount of Notes would exceed the Issuable Maximum
on such date, and (B) the Company shall not have previously obtained the vote of
shareholders, as may be required by the applicable rules and regulations of the
American Stock Exchange (or any successor entity or any other Trading Market on
which the Company's securities then trade), applicable to approve the issuance
of shares of Common Stock in excess of the Issuable Maximum pursuant to the
terms hereof (the "STOCKHOLDER APPROVAL"), then, the Company shall issue to the
Investor a number of shares of Common Stock such that the total number of shares
issued pursuant to the Purchase Agreement is equal to the Issuable Maximum and,
with respect to the remainder of the principal amount of Notes then held by the
Investors for which a conversion would result in an issuance of shares of Common
Stock in excess of the Issuable Maximum, the Company must use its best efforts
to seek and obtain Stockholder Approval as soon as possible, but in any event
not later than the 90th day following such Conversion Date, Company Conversion
Date or the date of such request. The Company and the Investor understand and
agree that Underlying Shares issued to and then held by the Investor as a result
of conversions of Notes shall not be entitled to cast votes on any resolution to
obtain Stockholder Approval pursuant hereto.
---------------------------
(1) This provision will not appear in the Xxxx note.
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6. Mechanics of Conversion.
(a) The number of Underlying Shares issuable upon any conversion
hereunder shall equal the outstanding principal amount of this Note to be
converted, divided by the Conversion Price on the Conversion Date (or the
Company Conversion Date), plus (if indicated in the applicable Conversion Notice
or the Company Conversion Notice) the amount of any accrued but unpaid interest
on this Note through the Conversion Date (or the Company Conversion Date),
divided by the Conversion Price on the Conversion Date (or the Company
Conversion Date).
(b) The Company shall, by the third Trading Day following each
Conversion Date (and on the Company Conversion Date), issue or cause to be
issued and cause to be delivered to or upon the written order of the Investor
and in such name or names as the Investor may designate a certificate for the
Underlying Shares issuable upon such conversion, free of restrictive legends if
at such time a Registration Statement is then effective and available for use by
the Investor. The Investor, or any Person so designated by the Investor to
receive Underlying Shares, shall be deemed to have become holder of record of
such Underlying Shares as of such Conversion Date (or the Company Conversion
Date). The Company shall use its best efforts to deliver Underlying Shares
hereunder electronically (via a DWAC) through the Depository Trust Corporation
or another established clearing corporation performing similar functions.
(c) The Investor shall not be required to deliver the original Note
in order to effect a conversion hereunder. Execution and delivery of the
Conversion Notice shall have the same effect as cancellation of the Note and
issuance of a New Note representing the remaining outstanding principal amount.
(d) The Company's obligations to issue and deliver Underlying Shares
upon conversion of this Note in accordance with the terms hereof are absolute
and unconditional, irrespective of any action or inaction by the Investor 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 Investor or any other Person of any obligation
to the Company or any violation or alleged violation of law by the Investor or
any other Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Investor in connection
with the issuance of such Underlying Shares.
(e) If by the third Trading Day after a Conversion Date or the
Company Conversion Date the Company fails to deliver to the Investor such
Underlying Shares in such amounts and in the manner required pursuant to Section
5, then the Investor will have the right to rescind the Conversion Notice or the
Company Conversion Notice pertaining thereto by giving written notice to the
Company prior to such Investor's receipt of such Underlying Shares.
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(f) If by the third Trading Day after a Conversion Date or the
Company Conversion Date the Company fails to deliver to the Investor the
required number of Underlying Shares in the manner required pursuant to Section
5, and if after such third Trading Day and prior to the receipt of such
Underlying Shares, the Investor purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Investor of the Underlying Shares which the Investor anticipated receiving upon
such conversion (a "BUY-IN"), then the Company shall: (1) pay in cash to the
Investor (in addition to any other remedies available to or elected by the
Investor) the amount by which (x) the Investor's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (A) the number of Underlying
Shares that the Company was required to deliver to the Investor in connection
with the exercise at issue by (B) the Closing Price on the Conversion Date or
the Company Conversion Date and (2) at the option of the Investor, either void
the conversion at issue and reinstate the principal amount of Notes (plus
accrued interest therein) for which such conversion was not timely honored or
deliver to the Investor the number of shares of Common Stock that would have
been issued had the Company timely complied with its exercise and delivery
obligations hereunder. The Investor shall provide the Company reasonably
detailed evidence or written notice indicating the amounts payable to the
Investor in respect of the Buy-In.
7. Events of Default.
(a) At any time or times following the occurrence and during the
continuance of an Event of Default (other than under clause (viii) of such
defined term with respect to the Company), the Investor may elect, by notice to
the Company (an "EVENT NOTICE"), to require the Company to purchase all or any
portion of the outstanding principal amount of this Note, as indicated in such
Event Notice, at a purchase price in Dollars in cash equal to the greater of:
(A) 100% of such outstanding principal amount (except that such amount shall
equal 115% of such outstanding principal amount in the case of an Event of
Default under clause (iii) of the definition of "Event of Default"), plus all
accrued but unpaid interest thereon and any unpaid liquidated damages and other
amounts then owing to the Investor under the Transaction Documents, through the
date of purchase, or (B) the Event Equity Value of the Underlying Shares that
would be issuable upon conversion of such principal amount and payment in Common
Stock of all such accrued but unpaid interest thereon (without regard to any
condition precedent or conversion limitation contained herein). The aggregate
amount payable pursuant to the preceding sentence is referred to as the "EVENT
PRICE." The Company shall pay the aggregate Event Price to the Investor (free of
any claim of subordination) no later than the third Trading Day following the
date of delivery of the Event Notice, and upon receipt thereof the Investor
shall deliver the original Note so repurchased to the Company.
(b) Upon the occurrence of any Bankruptcy Event with respect to the
Company, all outstanding principal and accrued but unpaid interest on this Note
and any unpaid liquidated damages and other amounts then owing under the
Transaction Documents shall immediately become due and payable in full in
Dollars in cash (free of any claim of subordination), without any action by the
Investor, and the Company shall immediately be obligated to repurchase this Note
held by such Investor at the Event Price pursuant to the preceding paragraph as
if the Investor had delivered an Event Notice immediately prior to the
occurrence of such Bankruptcy Event.
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(c) In connection with any Event of Default, the Investor need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind (other than the Event Notice), and the Investor may
immediately enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Any such declaration may be
rescinded and annulled by the Investor at any time prior to payment hereunder.
No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereto.
8. Ranking. This Note ranks pari passu with all other Notes now or
hereafter issued pursuant to the Transaction Documents. The Company will not,
directly or indirectly, enter into, create, incur, assume or suffer to exist any
Indebtedness of any kind that is senior in any respect to the Company's
obligations under the Notes.
9. Charges, Taxes and Expenses. Issuance of certificates for Underlying
Shares upon conversion of (or otherwise in respect of) this Note shall be made
without charge to the Investor for any issue or transfer tax, withholding tax,
transfer agent fee or other incidental tax or expense in respect of the issuance
of such certificate, all of which taxes and expenses shall be paid by the
Company; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Underlying Shares or Notes in a name other than that of
the Investor. The Investor shall be responsible for all other tax liability that
may arise as a result of holding or transferring this Note or receiving
Underlying Shares in respect hereof.
10. Reservation of Underlying Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Underlying Shares as required hereunder, the number of
Underlying Shares which are then issuable and deliverable upon the conversion of
(and otherwise in respect of) this entire Note (taking into account the
adjustments of Section 11), free from preemptive rights or any other contingent
purchase rights of persons other than the Investor. The Company covenants that
all Underlying Shares so issuable and deliverable shall, upon issuance in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.
11. Certain Adjustments. The Conversion Price is subject to adjustment
from time to time as set forth in this Section 11.
(a) Stock Dividends and Splits. If the Company, at any time while
this Note is 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.
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(b) Pro Rata Distributions. If the Company, at any time while this
Note is outstanding, distributes to all holders of Common Stock (i) evidences of
its indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe for
or purchase any security, or (iv) any other asset (in each case, "DISTRIBUTED
PROPERTY"), then, at the request of the Investor delivered before the 90th day
after the record date fixed for determination of stockholders entitled to
receive such distribution, the Company will deliver to the Investor, within five
Trading Days after such request (or, if later, on the effective date of such
distribution), the Distributed Property that the Investor would have been
entitled to receive in respect of the Underlying Shares for which this Note
could have been converted immediately prior to such record date. If such
Distributed Property is not delivered to the Investor pursuant to the preceding
sentence, then upon any conversion of this Note that occurs after such record
date, the Investor shall be entitled to receive, in addition to the Underlying
Shares otherwise issuable upon such conversion, the Distributed Property that
the Investor would have been entitled to receive in respect of such number of
Underlying Shares had the Investor been the record holder of such Underlying
Shares immediately prior to such record date. Notwithstanding the foregoing,
this Section 11(b) shall not apply to any distribution of rights or securities
in respect of adoption by the Company of a stockholder rights plan, which events
shall be covered by Section 11(a).
(c) Fundamental Transactions. If, at any time while this Note is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock tender or
exchange their shares for other securities, cash or property, or (iv) the
Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock covered by Section 11(a)
above) (in any such case, a "FUNDAMENTAL TRANSACTION"), then upon any subsequent
conversion of this Note, the Investor shall have the right to: (x) declare an
Event of Default pursuant to clause (iii) thereunder, (y) receive, for each
Underlying Share that would have been issuable upon such conversion absent such
Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the "ALTERNATE
CONSIDERATION") or (z) require the surviving entity to issue to the Investor an
instrument identical to this Note (with an appropriate adjustment to the
Conversion Price). For purposes of any such conversion, the Company shall
apportion the Conversion Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Investor shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Note following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction (or, if different, the ultimate parent of such successor or entity
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or the entity issuing the Alternate Consideration) shall issue to the Investor a
new debenture consistent with the foregoing provisions and evidencing the
Investor's right to convert such debenture into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this paragraph (c) and insuring that this Note (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
(d) Subsequent Equity Sales.
(i) If the Company or any subsidiary thereof, as applicable,
at any time prior to the one year anniversary of the Original Issue Date, shall
issue or enter into any agreement or understanding to issue shares of Common
Stock or Common Stock Equivalents entitling any Person to acquire shares of
Common Stock, at a price per share less than the Conversion Price (if the holder
of the Common Stock or Common Stock Equivalent so issued shall at any time,
whether by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights issued in connection with such issuance, be entitled to
receive shares of Common Stock at a price less than the Conversion Price, such
issuance shall be deemed to have occurred for less than the Conversion Price),
then, the Conversion Price shall be reduced to equal such lower price. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. The Company shall notify the Investor in writing, no later than the
Trading Day following the issuance of any Common Stock or Common Stock
Equivalent subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms.
(ii) For purposes of this subsection 11(d), the following
subsections (d)(ii)(l) to (d)(ii)(6) shall also be applicable:
(1) Issuance of Rights or Options. In case at any time
the Company shall in any manner grant (directly and not by assumption in a
merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "OPTIONS" and such convertible or exchangeable
stock or securities being called "CONVERTIBLE SECURITIES") whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) the sum (which sum shall
constitute the applicable consideration) of (x) the total amount, if any,
received or receivable by the Company as consideration for the granting of such
Options, plus (y) the aggregate amount of additional consideration payable to
the Company upon the exercise of all such Options, plus (z), in the case of such
Options which relate to Convertible Securities, the aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Conversion Price in effect immediately prior to the time of the granting of such
14
Options, then the total number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total amount of
such Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the Conversion
Price. Except as otherwise provided in subsection 11(d)(ii)(3), no adjustment of
the Conversion Price shall be made upon the actual issue of such Common Stock or
of such Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.
(2) Issuance of Convertible Securities. In case the
Company shall in any manner issue (directly and not by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange (determined by dividing (i) the sum (which sum shall constitute the
applicable consideration) of (x) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus (y) the aggregate amount of additional consideration, if any, payable to
the Company upon the conversion or exchange thereof, by (ii) the total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding for purposes of adjusting the
Conversion Price, provided that (a) except as otherwise provided in subsection
11(d)(ii)(3), no adjustment of the Conversion Price shall be made upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities and (b) no further adjustment of the Conversion Price
shall be made by reason of the issue or sale of Convertible Securities upon
exercise of any Options to purchase any such Convertible Securities for which
adjustments of the Conversion Price have been made pursuant to the other
provisions of this subsection 11(d).
(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any Option referred to in subsection 11(d)(ii)(l) hereof, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subsections 11(d)(ii)(l) or 11(d)(ii)(2),
or the rate at which Convertible Securities referred to in subsections
11(d)(ii)(l) or 11(d)(ii)(2) are convertible into or exchangeable for Common
Stock shall change at any time (including, but not limited to, changes under or
by reason of provisions designed to protect against dilution), the Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. On the termination of any Option for
which any adjustment was made pursuant to this subsection 11(d) or any right to
convert or exchange Convertible Securities for which any adjustment was made
pursuant to this subsection 11(d) (including without limitation upon the
redemption or purchase for consideration of such Convertible Securities by the
Company), the Conversion Price then in effect hereunder shall forthwith be
changed to the Conversion Price which would have been in effect at the time of
such termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such termination, never been issued.
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(4) Stock Dividends. Subject to the provisions of this
Section 11(d), in case the Company shall declare a dividend or make any other
distribution upon any stock of the Company (other than the Common Stock) payable
in Common Stock, Options or Convertible Securities, then any Common Stock,
Options or Convertible Securities, as the case may be, issuable in payment of
such dividend or distribution shall be deemed to have been issued or sold
without consideration.
(5) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the net amount
received by the Company therefor, after deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined in good
faith by the Board of Directors of the Company, after deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any Options shall be issued in
connection with the issue and sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued for such consideration as determined in good faith by the
Board of Directors of the Company. If Common Stock, Options or Convertible
Securities shall be issued or sold by the Company and, in connection therewith,
other Options or Convertible Securities (the "ADDITIONAL RIGHTS") are issued,
then the consideration received or deemed to be received by the Company shall be
reduced by the fair market value of the Additional Rights (as determined using
the Black-Scholes option pricing model or another method mutually agreed to by
the Company and the Investor). The Board of Directors of the Company shall
respond promptly, in writing, to an inquiry by the Investors as to the fair
market value of the Additional Rights. In the event that the Board of Directors
of the Company and the Investors are unable to agree upon the fair market value
of the Additional Rights, the Company and the Investors shall jointly select an
appraiser, who is experienced in such matters. The decision of such appraiser
shall be final and conclusive, and the cost of such appraiser shall be borne by
the Company provided that in the event that the valuation determined by Board of
Directors is within ten percent (10%) of the valuation determined by the
appraiser, such costs shall be borne evenly by the Company and the Investor.
(6) Record Date. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them (i)
to receive a dividend or other distribution payable in Common Stock, Options or
Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
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(iii) Notwithstanding the foregoing, no adjustment will be
made under this paragraph (d) in respect of: (1) the issuance of securities upon
the exercise or conversion of any Common Stock Equivalents issued by the Company
prior to the Original Issue Date of this Note (but this subsection (d) will
apply to any amendments, modifications, and reissuances thereof and as a result
of any changes, resets or adjustments to a Conversion or Exchange Price
thereunder whether or not as a result of any amendment, modification or
reissuance), (2) the grant of options or warrants, or the issuance of additional
securities, under any duly authorized Company stock option, stock incentive
plan, restricted stock plan or stock purchase plan in existence on the Closing
Date or thereafter approved by the stockholders of the Company, (3) shares of
Common Stock or Common Stock Equivalents issued to consultants, employees,
officers or directors of the Company, as compensation for their services to the
Company or any of its direct or indirect Subsidiaries pursuant to arrangements
approved by the Board of Directors of the Company and consistent with past
practice, or (4) the issuance of the Securities pursuant to the Transaction
Documents, or (5) up to 250,000 shares of Common Stock or Common Stock
Equivalents issuable in connection with an equipment financing by Vencore
Solutions, LLC, or (6) the issuance of Common Stock to Logisticorp, Inc., and
Southwest Resource Preservation, Inc., or their successors and assigns, based
upon the issuance and conversion of outstanding convertible debentures, with the
issuance of said Common Stock not to exceed 700,000 shares, or (7) shares of
Common Stock issued as consideration for the acquisition of another company or
business in which the shareholders of the Company do not have an ownership
interest, which acquisition has been approved by the Board of Directors of the
Company, or (8) pursuant to the Anti-Dilution Entitlements and New Entitlements
(each as defined in the Amendment), or (9) shares of Common Stock or Common
Stock Equivalents issued in connection with Strategic Transactions.
(iv) The adjustments that would arise under this paragraph (d)
shall only take effect from such time as the Company has obtained Stockholder
Approval; and if such Stockholder Approval is obtained, then the adjustments
that would have occurred under this paragraph (d) prior to the date of such
Stockholder Approval shall take effect as of the date of such Stockholder
Approval. The Company will use best efforts to include on the ballot for
Stockholder Approval a proposal for the stockholders to approve the transactions
contemplated by the Transaction Documents.
(e) 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 Investor shall have the right thereafter to convert this Note
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 Investor 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 the principal amount
of this Note then outstanding together with any accrued and unpaid interest
hereunder 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.
17
(f) Calculations. All calculations under this Section 11 shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable. 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.
(g) Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 11, the Company at its expense will promptly compute
such adjustment in accordance with the terms hereof and prepare a certificate
describing in reasonable detail such adjustment and the transactions giving rise
thereto, including all facts upon which such adjustment is based. Upon written
request, the Company will promptly deliver a copy of each such certificate to
the Investor.
(h) Notice of Corporate Events. If the Company (i) declares a
dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including without limitation any granting of rights
or warrants to subscribe for or purchase any capital stock of the Company or any
subsidiary, (ii) authorizes and publicly approves, or enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction
or (iii) publicly authorizes the voluntary dissolution, liquidation or winding
up of the affairs of the Company, then the Company shall deliver to the Investor
a notice describing the material terms and conditions of such transaction, at
least 20 calendar days prior to the applicable record or effective date on which
a Person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps reasonably
necessary in order to insure that the Investor is given the practical
opportunity to convert this Note prior to such time so as to participate in or
vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.
12. Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Underlying Shares on conversion of this Note. If any
fraction of an Underlying Share would, except for the provisions of this
Section, be issuable upon conversion of this Note or payment of interest hereon,
the number of Underlying Shares to be issued will be rounded up to the nearest
whole share.
13. Prepayment at Option of Company. This Note may not be prepaid without
the consent of the Investor.
14. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Conversion Notice or the Company
Conversion Notice) shall be in writing and 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 number specified in this Section
prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading
Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section on a day that is
not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading
Day, (iii) the Trading Day following the date of sending, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The addresses for such
18
communications shall be: (i) if to the Company, to 0000 Xxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, XX 00000, facsimile: (000) 000-0000, attention: Chief Financial
Officer, (ii) if to the Investor, to the address or facsimile number appearing
on the Company's stockholder records or such other address or facsimile number
as the Investor may provide to the Company in accordance with this Section.
15. Miscellaneous.
(a) This Note shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Note shall be
construed to give to any person or corporation other than the Company and the
Investor any legal or equitable right, remedy or cause under this Note. This
Note shall inure to the sole and exclusive benefit of the Company and the
Investor.
(c) All questions concerning the construction, validity, enforcement
and interpretation of this Note 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 Note 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 reasonable attorneys' 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 Note 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 Note shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Note 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 Note.
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(f) No provision of this Note may be waived or amended except (i) in
accordance with the requirements set forth in the Purchase Agreement, and (ii)
in a written instrument signed, in the case of an amendment, by the Company and
the Investor or, in the case of a waiver, by the party against whom enforcement
of any such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Note 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) To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or Proceeding that may be brought by any Investor in order to
enforce any right or remedy under the Notes. Notwithstanding any provision to
the contrary contained in the Notes, it is expressly agreed and provided that
the total liability of the Company under the Notes for payments in the nature of
interest shall not exceed the maximum lawful rate authorized under applicable
law (the "MAXIMUM RATE"), and, without limiting the foregoing, in no event shall
any rate of interest or default interest, or both of them, when aggregated with
any other sums in the nature of interest that the Company may be obligated to
pay under the Notes exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Notes is
increased or decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest allowed by law
will be the Maximum Rate of interest applicable to the Notes from the effective
date forward, unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum Rate is paid by
the Company to any Investor with respect to indebtedness evidenced by the Notes,
such excess shall be applied by such Investor to the unpaid principal balance of
any such indebtedness or be refunded to the Company, the manner of handling such
excess to be at such Investor's election.
(h) The obligations under this Note are secured pursuant to the
Security Agreement.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
by a duly authorized officer as of the date first above indicated.
CALYPTE BIOMEDICAL CORPORATION
By:
-----------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: EVP and CFO
20
EXHIBIT A
CONVERSION NOTICE
(To be Executed by the Registered Investor
in order to convert Notes)
The undersigned hereby elects to convert the principal amount of Note
indicated below, into shares of Common Stock of Calypte Biomedical 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 Investor for any conversion, except for such transfer taxes, if
any. All terms used in this notice shall have the meanings set forth in the
Note.
Conversion calculations:
--------------------------------------------------------
Date to Effect Conversion
--------------------------------------------------------
Principal amount of Note owned prior to conversion
--------------------------------------------------------
Principal amount of Note to be Converted
--------------------------------------------------------
Principal amount of Note remaining after Conversion
--------------------------------------------------------
DTC Account
--------------------------------------------------------
Number of shares of Common Stock to be Issued
--------------------------------------------------------
Applicable Conversion Price
--------------------------------------------------------
Name of Investor
By:
-----------------------------------------------------
Name:
Title:
21
By the delivery of this Conversion Notice the Investor represents and
warrants to the Company that its ownership of the Common Stock does not exceed
the restrictions set forth in Section 5(b) of the Note.
22
SCHEDULE 1
Calypte Biomedical Corporation
Secured 8% Convertible Notes due April 3, 2007
CONVERSION SCHEDULE
This Conversion Schedule reflects conversions made under the above
referenced Notes.
Dated:
------------------------------ -------------------------- --------------------- ---------------------------------
Date of Conversion Amount of Conversion Aggregate Applicable Conversion
Principal Price
Amount
Remaining
Subsequent to
Conversion
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
------------------------------ -------------------------- --------------------- ---------------------------------
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