THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH, OR
PURSUANT TO AN EXEMPTION FROM, THE REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
THE OBLIGATIONS UNDER THIS NOTE ARE SECURED PURSUANT TO THAT CERTAIN SECURITY
AGREEMENT DATED AS OF DECEMBER 4, 2002 BETWEEN ROBOTIC VISION SYSTEMS, INC. AND
XXX X. XXXXX, THE SECURITY INTERESTS WHICH ARE GRANTED THEREUNDER BEING SUBJECT
AND SUBORDINATE TO THE SENIOR SECURITY INTERESTS IN THE SAME COLLATERAL GRANTED
TO PNC BANK NA PURSUANT TO THAT CERTAIN REVOLVING CREDIT AND SECURITY AGREEMENT
DATED AS OF APRIL 28, 2000 BY AND BETWEEN ROBOTIC VISION SYSTEMS, INC. AND PNC
BANK NA AS LENDER AND AGENT, AS IT MAY BE AMENDED FROM TIME TO TIME.
--------------------
ROBOTIC VISION SYSTEMS, INC.
9% CONVERTIBLE SENIOR NOTE DUE DECEMBER 4, 2005
December 4, 2002 $500,000.00
Robotic Vision Systems, Inc., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to Xxx X. Xxxxx (the "Holder") (i) on
December 4, 2005 the principal amount of Five Hundred Thousand and 00/100
Dollars ($500,000.00) plus any accrued and unpaid interest (or such other
amounts as provided herein), in such coin or currency of the United States of
America as at the time of payment shall be legal tender for public and private
debts, and (ii) on each May 15 and November 15 of each year (each, an "Interest
Payment Date") interest (computed on the basis of a 360-day year), in like coin
or currency, on the unpaid portion of said principal amount plus any interest
due and owing but not paid on any prior Interest Payment Date, such payments
(each, an "Interest Payment") to commence on May 15, 2003 at a fixed rate equal
to 9% per annum (the "Note Interest Rate").
This Note has been issued to the Holder concurrently with that certain
Common Stock Warrant Expiring December 4, 2005, dated as of the date hereof, by
and between the Company and the Holder.
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The terms defined in this Article whenever used
in this Note shall have the respective meanings hereinafter specified.
"Applicable Laws" means any and all applicable foreign, federal, state and
local statutes, laws, regulations, ordinances, policies, and rules or common law
(whether now existing or hereafter enacted or promulgated), of any and all
governmental authorities, agencies, departments, commissions, boards, courts, or
instrumentalities of the United States, any state of the United States, any
other nation, or any political subdivision of the United States, any state of
the United States or any other nation, and all
applicable judicial and administrative, regulatory or judicial decrees,
judgments and orders, including common law rules and determinations.
"Board" means the Board of Directors of the Company.
"Business Day" means each day other than a Saturday, a Sunday or any day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
"Closing Date" shall mean December 4, 2002.
"Change of Control" means a change in the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the Company, whether through the ownership of voting securities, by
agreement or otherwise; provided, however, that such a change will not result in
a Change of Control if as a result of such change, the Company's shareholders
receive or are entitled to receive cash or marketable securities with an
aggregate value of at least three times (3x) the Conversion Price.
"Conversion Date" shall have the meaning set forth in Section 3.2.
"Conversion Notice" shall have the meaning set forth in Section 3.2.
"Conversion Price" means 125% of the average of the closing bid prices of
Common Stock on The Nasdaq SmallCap Market (or if different, the principal
trading market for the Company's Common Stock) for the thirty (30) consecutive
trading days ending on the day prior to the Closing Date.
"Conversion Shares" means that number of shares of Common Stock obtained
by dividing the face value of this Note plus any accrued but unpaid interest, by
the Conversion Price.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Final Maturity Date" means December 4, 2005.
"Holder" or "Holders" means the person named in the preamble hereto or any
Person who shall thereafter become a recordholder of this Note as provided in
Section 2 hereof.
"Mandatory Conversion" shall have the meaning set forth in Section 3.1(b).
"Note" means this Convertible Note or such other Note exchanged therefor
as provided in Section 2.1 and, in the event that this Note shall be transferred
to more than one Holder as provided in Section 2.1, the term "Notes" shall refer
to the convertible notes issued in such transfer to the Holders.
"Notification Event" shall have the meaning set forth in Section 3.5.
"Optional Redemption" shall have the meaning set forth in Section 3.1(c).
"Person" means an individual, corporation, partnership, limited liability
company, association, trust, joint venture, unincorporated organization or any
government, governmental department or agency or political subdivision thereof.
"Sale of a Division of the Company" means a single transaction or a series
of related transactions pursuant to which a Person or Persons acquire all or
substantially all of the assets of a reporting segment
2
of the Company as reflected in the Company's audited financial statements filed
as part of its reporting obligations under the Securities Exchange Act of 1934,
as amended.
"Security Agreement" shall have the meaning set forth in Section 2.6.
"Voluntary Conversion" shall have the meaning set forth in Section 3.1(a).
ARTICLE 2
EXCHANGES AND TRANSFER; INTEREST PAYMENTS
SECTION 2.1. Exchange and Registration of Transfer of Notes. Subject to
Section 4.2, the Holder may, at its option, surrender this Note at the office of
the Company and receive in exchange therefor a Note or Notes, each in the
minimum denomination of $1,000 or an integral multiple of $1,000 in excess
thereof, dated as of the date of this Note, and payable to such Person, or
order, as may be designated by such Holder. The aggregate principal amount of
such Note or Notes exchanged in accordance with this Section 2.1 shall equal the
aggregate unpaid principal amount of this Note as of the date of such surrender;
provided, however, that upon such exchange there shall be filed with the Company
the name and address for all purposes hereof of the Holder or Holders of the
Note or Notes delivered in such exchange. This Note, when presented for
registration of transfer or for exchange, conversion or payment, shall (if so
required by the Company) be duly endorsed by, or be accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company duly
executed by, the Holder or its attorney duly authorized in writing.
SECTION 2.2. Loss, Theft, Destruction of Note. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note and, in the case of any such loss, theft or destruction, upon receipt
of indemnity or security reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of this Note, the
Company will make and deliver, in lieu of such lost, stolen, destroyed or
mutilated Note, a new Note of like tenor and unpaid principal amount dated as of
the date hereof. This Note shall be held and owned upon the express condition
that the provisions of this Section 2.2 are exclusive with respect to the
replacement of a mutilated, destroyed, lost or stolen Note and shall preclude
any and all other rights and remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement of
negotiable instruments or other securities without their surrender.
SECTION 2.3. Who Deemed Absolute Owner. The Company may deem the Person or
Persons in whose name the Notes shall be registered upon the registry books of
the Company to be, and may treat such Person or Persons as, the absolute owner
of the Notes (whether or not the Notes shall be overdue) for the purpose of
receiving payment of or on account of the principal of the Notes, for the
conversion of the Notes and for all other purposes, and the Company shall not be
affected by any notice to the contrary. All such payments and such conversion
shall be valid and effectual to satisfy and discharge the liability upon the
Notes to the extent of the sum or sums so paid or the conversion so made.
SECTION 2.4. Final Maturity. On the Final Maturity Date the Company shall
retire this Note by paying to the Holder in cash an amount equal to the
outstanding principal amount of the Note plus all accrued and unpaid interest
through the date the Note is paid in full by the Company.
SECTION 2.5. Interest Payments. The Company shall pay semi-annually on the
Interest Payment Date, in cash or in kind, an amount equal to the interest due
and payable to the Holder on such Interest Payment Date, as well as any accrued
and unpaid interest from prior Interest Payment Dates.
3
SECTION 2.6. Security. The Company is securing its obligations to pay the
principal of and all interest on this Note by granting to the Holder a security
interest in the Collateral (as defined in the Security Agreement) of the Company
as set forth in that certain Security Agreement dated as of the date hereof,
between the Company and the Holder (the "Security Agreement"). In the event of a
conflict between the provisions of the Security Agreement and this Note, the
provisions of the Security Agreement shall govern.
ARTICLE 3
CONVERSION OF NOTE
SECTION 3.1. Conversion; Conversion Price.
(a) Voluntary Conversion. At the option of the Holder, at any time
and from time to time following the Closing Date until this Note is paid in
full, this Note may be converted, either in whole or in part, together with
accrued and unpaid interest thereon to the Conversion Date, into Conversion
Shares, at the Conversion Price (a "Voluntary Conversion").
(b) Mandatory Conversion. If at any time following the Closing Date
the closing bid price of the Common Stock on The Nasdaq SmallCap Market (or if
different, the principal trading market for the Company's Common Stock) is
greater, for 30 consecutive trading days, than 200% of the Conversion Price, the
Company shall have the right to require conversion of the Note, either in whole
or in part, together with accrued and unpaid interest thereon to the Conversion
Date, into Conversion Shares, at the Conversion Price (a "Mandatory
Conversion").
(c) Optional Redemption. At the option of the Holder, the Company
shall be required to purchase all or any part of the Note held by the Holder
upon (i) a Change of Control, (ii) the closing of an equity or other offering by
the Company with net proceeds to the Company of not less than $20 million or
(iii) the closing of a Sale of a Division of the Company, at a purchase price
equal to 100% of the principal amount hereof together with accrued and unpaid
interest thereon to the Conversion Date (an "Optional Redemption").
SECTION 3.2. Exercise of Conversion Right. A conversion of this Note (or
any portion of principal amount thereof) shall be deemed to have been effected
as of the close of business on the date on which (a "Conversion Date"), (i) in
the case of a Voluntary Conversion pursuant to Section 3.1(a) or an Optional
Redemption pursuant to Section 3.1(c), a written notice, substantially as set
forth in Exhibit A hereto is delivered to the Company, and (ii) in the case of a
Mandatory Conversion pursuant to Section 3.1(b), a written notice of the Company
is delivered to the Holder (in each case, the "Conversion Notice"). On the
Conversion Date, the rights of the Holder (including the right to receive
interest payments) shall cease and the Person or Persons in whose name or names
any certificate or certificates for shares of Common Stock are to be issued upon
such conversion shall be deemed to have become the Holder of record of the
shares of Common Stock represented thereby.
SECTION 3.3. Delivery of Conversion Shares Upon Conversion.
(a) As soon as practicable after the Conversion Date (but in any
event within ten Business Days after delivery of the Conversion Notice and after
the Holder has delivered this Note for conversion), the Company shall deliver to
the converting Holder:
(i) a certificate or certificates evidencing, in the
aggregate, the number of shares of Common Stock issued upon such
conversion, in the same name or names as
4
designated by the Holders of the converted Note and in such
denomination or denominations as the converting Holder shall specify
and a check for cash with respect to any fractional interest in
shares of Common Stock as provided in Section 3.4; and
(ii) a replacement Note representing the portion of the Note
that was not converted, if any.
(b) The issuance of certificates for shares of Common Stock upon
conversion of this Note (or portion of principal amount thereof) shall be made
without charge to the Holder for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such conversion and the related
issuance of shares of Common Stock. Upon conversion of this Note (or portion of
principal amount thereof), the Company shall take all such actions as are
necessary in order to ensure that the shares of Common Stock so issued upon such
conversion shall be validly issued, fully paid and nonassessable.
(c) The Company shall not close its books against the transfer of a
replacement Note or of shares of Common Stock issued or issuable upon conversion
of this Note in any manner that interferes with the timely conversion of this
Note. The Company shall assist and cooperate with the Holder if it is required
to make any governmental filings or obtain any governmental approval prior to or
in connection with the conversion of this Note hereunder (including, without
limitation, making any filings required to be made by the Company).
(d) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
issuance upon the conversion of this Note, such number of shares of Common Stock
as are issuable upon the conversion of this Note. All shares of Common Stock
that are so issuable shall, when issued, be duly and validly issued, fully paid
and nonassessable and free from all taxes, liens and charges. The Company shall
take all such actions as may be necessary to assure that all such shares of
Common Stock may be so issued without violation of any Applicable Law or any
requirements of any national securities exchange or over-the-counter market upon
which shares of Common Stock may be listed or quoted (except for official notice
of issuance which shall be immediately delivered by the Company upon each such
issuance).
SECTION 3.4. Fractional Shares. No fractional Conversion Shares or scrip
representing fractional Conversion Shares shall be issued upon conversion of
this Note. If any conversion of this Note would create a fractional Conversion
Share or a right to acquire a fractional Conversion Share, the Company shall pay
a cash adjustment in respect of such fractional Conversion Share equal to the
fair market value of such fractional interest as determined by the Board.
SECTION 3.5. Notice of Certain Events. In the event that at any time prior
to the conversion of the Note:
(a) the Company shall declare any dividend or distribution payable
to the holders of its Common Stock or any other class of its capital stock;
(b) the Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock or any rights to subscribe
thereto;
(c) there shall be any recapitalization of the Company, or
consolidation or merger of the Company with, or sale of all or substantially all
of its assets or of any material asset to, another corporation or business
organization or any other extraordinary event or transaction;
5
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company in a single transaction or a series of
related transactions;
(e) the Company shall declare any share split, share dividend,
subdivision, combination or similar distribution with respect to the shares of
Common Stock, regardless of the effect of any such event on the outstanding
number of shares of Common Stock; or
(f) there shall be an occurrence as described under Section 3.1(c)
hereof,
(each such event, a "Notification Event"), then, in any one or more of such
cases, the Company shall give Holder written notice of the date on which a
record shall be taken for such Notification Event or for determining
stockholders entitled to vote upon such Notification Event or winding up and of
the date, if determined, when any such transaction shall take place, as the case
may be. Such notice shall also specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such Notification Event, as the
case may be. Such notice shall describe the proposed transaction in reasonable
detail and specify the consideration to be received by Holder in respect
thereto. The Company shall also furnish to Holder all notices and materials
furnished to its stockholders in connection with such transaction as and when
such notices and materials are furnished to its stockholders. Such written
notice shall be given not less than 10 days prior to the record date with
respect thereto or such other date if impracticable.
ARTICLE 4
STATUS; RESTRICTIONS ON TRANSFER
SECTION 4.1. Status of Note. This Note is a direct, general and
unconditional obligation of the Company, and constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting creditors' rights
and to general principles of equity. The Company agrees that it will not,
without the prior written consent of the Holder, take any action, nor fail to
take any action which would in any manner adversely affect the rights of the
Holder pursuant to this Note or subject the Holder to any liability.
SECTION 4.2. Registration Rights. The Company agrees to be bound by the
provisions of Schedule 4.2 hereto, and the Holder agrees to be bound by the
restrictions on transfer, and the procedures for registration of the Conversion
Shares and other agreements applicable to the Holder set forth in Schedule 4.2
hereto. The Holder further consents that the certificates representing the
Conversion Shares may bear a restrictive legend to such effect.
ARTICLE 5
COVENANTS
The Company covenants and agrees that so long as this Note shall be
outstanding:
SECTION 5.1. Payment of Note. The Company will punctually, according to
the terms hereof, (a) pay or cause to be paid all amounts due under this Note
and (b) issue Conversion Shares upon conversion.
6
SECTION 5.2. Notice of Default. If any one or more events occur which
constitute or which, with the giving of notice or the lapse of time or both,
would constitute an Event of Default or if the Holder shall demand payment or
take any other action permitted upon the occurrence of any such Event of
Default, the Company will forthwith give notice to the Holder, specifying the
nature and status of the Event of Default or other event or of such demand or
action, as the case may be.
SECTION 5.3. Sufficient Number of Authorized Shares of Common Stock. So
long as this Note shall be outstanding, the Company shall at all times have
authorized and reserved for issuance, free from preemptive rights, a sufficient
number of Conversion Shares to satisfy the conversion rights of the Holder
pursuant to the terms and conditions hereof.
SECTION 5.4. Compliance with Laws. The Company will comply in all material
respects with all Applicable Laws, except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
ARTICLE 6
REMEDIES
SECTION 6.1. Events of Default. "Event of Default" wherever used herein
means any one of the following events:
(a) the Company shall fail to issue and deliver the Conversion
Shares within ten Business Days of its receipt of the original Note and the
original Conversion Notice in accordance with Section 3.3;
(b) default in the due and punctual payment of the principal of, or
any other amount owing in respect of, this Note when and as the same shall
become due and payable, and continuance of such default for a period of 30 days
after notice thereof;
(c) default in the performance or observance of any covenant or
agreement of the Company in this Note (other than a covenant or agreement a
default in the performance of which is specifically provided for elsewhere in
this Section), and the continuance of such default for a period of 30 days after
there has been given to the Company by a Holder a written notice specifying such
default and requiring it to be remedied;
(d) the entry of a decree or order by a court having jurisdiction
adjudging the Company as bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee, trustee or
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 unstayed and in effect for a
period of 60 calendar days;
(e) the institution by the Company of proceedings to be adjudicated
as bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under the Federal Bankruptcy
Code or any other applicable federal or state law, or the consent by it to the
filing of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the Company or
of any substantial part of its property, or the making by it of an assignment
7
for the benefit of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due;
(f) (i) the Company is unable to pay its debts as they come due,
stops, suspends, or threatens in writing to stop or suspend payment of all or
any material part of its debts (other than debts contested in good faith by
appropriate proceedings) or seeks the appointment of a statutory manager or
proposes in writing or makes a general assignment or an arrangement or
composition with or for the benefit of its creditors or any group or class
thereof or files a petition for suspension of payments or other relief of
debtors or a moratorium or statutory management is agreed or declared in respect
of or affecting all or any material part of the indebtedness of the Company, or
(ii) the Company ceases or threatens in writing to cease to carry on all or any
material part of the business carried on by the Company and as a result of such
cessation or threat of cessation, the Company will not be able to perform or
comply with its payment obligations under this Note;
(g) it becomes unlawful for the Company to perform or comply with
its obligations under this Note.
SECTION 6.2. Effects of Default. If an Event of Default occurs and is
continuing, then and in every such case the Holder may declare the Note to be
due and payable immediately, by a notice in writing to the Company, and upon any
such declaration, the Company shall pay to the Holder the outstanding principal
amount of the Note plus all accrued and unpaid interest through the date the
Note is paid in full.
SECTION 6.3. Remedies Not Waived. No course of dealing between the Company
and the Holder or any delay in exercising any rights hereunder shall operate as
a waiver by the Holder.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Register. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of this Note.
Upon any transfer of this Note in accordance with Articles 2 and 4 hereof, the
Company shall register such transfer on the Note register.
SECTION 7.2. Withholding. To the extent required by applicable law, the
Company may withhold amounts for or on account of any taxes imposed or levied by
or on behalf of any taxing authority in the United States having jurisdiction
over the Company from any payments made pursuant to this Note.
SECTION 7.3. Notice. Where this Note provides for notice of any event,
such notice shall be given (unless otherwise herein expressly provided) in
writing and either (i) delivered personally, (ii) sent by certified, registered
or express mail, postage prepaid (iii) telexed or sent by facsimile
transmission, and shall be deemed given when so delivered personally, telexed,
sent by facsimile transmission (confirmed in writing) or mailed. Notices shall
be addressed, if to Holder, to the address of Holder appearing in the Note
register referred to in Section 7.1 or, if to the Company, to its principal
office.
SECTION 7.4. Governing Law. This Note shall be governed by, and construed
in accordance with, the laws of the State of Delaware (without giving effect to
any conflicts or choice of law provisions that would cause the application of
the domestic substantive laws of any other jurisdiction). With respect to any
suit, action or proceedings relating to this Note, the Company irrevocably
submits to the non-exclusive jurisdiction of the courts of the State of New York
sitting in and for New York County, and the United States District Court in the
Southern District of New York, as well as to the jurisdiction of all
8
courts to which an appeal may be taken from such courts and hereby waives, to
the fullest extent permitted by applicable law, any and all objections it may
have to venue, including, without limitation, any claim that any such suit,
action or proceeding has been brought in an inconvenient forum.
SECTION 7.5. Headings. The headings of the Articles and Sections of this
Note are inserted for convenience only and do not constitute a part of this
Note.
SECTION 7.6. Amendments. Any provision of this Note may be amended,
modified or waived if and only if the Holder of the Note has consented in
writing to such amendment, modification or waiver of any such provision of this
Note.
SECTION 7.7. No Recourse Against Others. The obligations of the Company
under this Note are solely obligations of the Company and no officer, employee
or stockholder shall as such be liable for any failure by the Company to pay
amounts on the Note when due or perform any other obligation.
9
IN WITNESS WHEREOF, the Company has caused this Note to be signed by its
duly authorized officer on the date hereabove written.
ROBOTIC VISION SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: CFO
WITH RESPECT TO SECTION 4.2 HEREOF:
HOLDER:
By: /s/ Xxx X. Xxxxx
------------------------------------
Name: Xxx X. Xxxxx
EXHIBIT A TO THE CONVERTIBLE NOTE
[FORM OF CONVERSION NOTICE]
TO _____________________:
The undersigned owner of the 9% Convertible Senior Unsecured Note due
December 4, 2005, issued by Robotic Vision Systems, Inc. (the "Note") hereby
irrevocably exercises the option to convert $______________ of the principal
amount and $____________ of accrued and unpaid interest of the Note into shares
of common stock, $.01 par value per share ("Common Stock"), of Robotic Vision
Systems, Inc. (the "Conversion Shares"), in accordance with the terms of the
Note. The undersigned directs that the Conversion Shares issuable and
certificates therefor (to the extent that certificates evidencing Common Stock
are then being issued by Robotic Vision Systems, Inc.) deliverable upon the
conversion, together with any check in payment for fractional Conversion Shares,
be issued in the name of and delivered, if appropriate, to the undersigned
unless a different name has been indicated below.
Dated:__________________
Signature:______________________________
Fill in for registration of Conversion Shares:
Please print name and address:
(including zip code)
Please print social security number or tax identification number:
