NEITHER THIS NOTE NOR THE SHARES OF THE ISSUER'S COMMON STOCK ISSUABLE
UPON CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. THIS NOTE HAS BEEN
(AND ANY SUCH SHARES WILL BE) ACQUIRED FOR THE ACCOUNT OF THE HOLDER AND NOT
WITH A VIEW TOWARDS, OR FOR RESALE IN CONNECTION WITH A PUBLIC OFFERING AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THIS NOTE UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES LAW, OR AN EXEMPTION FROM SUCH REGISTRATION OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.
No. 1 $14,000,000
UNILAB CORPORATION
7.5% Convertible Subordinated Note Due 2006
Unilab Corporation, a Delaware corporation (the "Issuer"), for value
received, hereby promises to pay to Meris Laboratories, Inc. (the "Holder") and
its successors, transferees and assigns by wire transfer of immediately
available funds to an account (the "Bank Account") designated by the Holder by
notice to the Issuer the principal sum of fourteen million dollars ($14,000,000)
plus accrued interest, if any, on November 5, 2006 in such coin or currency of
the United States of America as at the time of payment shall be legal tender for
the payment of public and private debts.
The principal amount of this Note shall bear interest at the rate of
7.5% per annum (the "Interest Rate") payable in cash or in kind, at the Issuer's
option (other than the payment on November 4, 2006 which will be payable in
cash), semiannually commencing on May 5, 1999 and on each May 5 and November 5
until such principal sum is paid in full. The Issuer may, at its option, on each
interest payment date, in lieu of payment in cash, pay interest on this Note
through the issuance, dated as of such relevant interest payment date, of
additional Notes of like tenor, and with the same terms and restrictions as this
Note (the "Secondary Notes") in an aggregate principal amount equal to the
amount of interest that would be payable with respect to this Note if such
interest were paid in cash. The issuance of such a Secondary Note will be
considered payment of interest on this Note in accordance with the terms hereof.
Each Secondary Note issued shall bear a legend in a form substantially the same
as the legend which appears on the face hereof.
This Note is the duly authorized note of the Issuer (the "Note")
referred to in the Asset Purchase Agreement (the "Asset Purchase Agreement")
dated as of September 16, 1998 among the Issuer and the Holder. It is the
intention of the Issuer and the Holder that the terms of this Note comply with,
among other things, applicable covenants and restrictions set forth in the
Indenture (the "Indenture") dated as of March 14, 1996 between the Issuer and
Marine Midland Bank, as trustee.
This Note may be transferred or assigned in whole or in part in a
minimum aggregate amount of $1,000,000, and the Issuer agrees to issue to the
Holder or any permitted transferee of the Holder from time to time a replacement
Note or Notes in the form hereof, provided that the transfer or assignment is
made in compliance with applicable securities laws, and evidence of the transfer
or assignment reasonably satisfactory to the Issuer, together with the original
Note, are delivered to the Issuer. References to "Note" shall include the Note
or Notes issued following a permitted transfer or assignment of this Note in
whole or in part to a permitted transferee or transferees and shall also include
all Secondary Notes. In addition, after delivery of an indemnity in form and
substance satisfactory to the Issuer in its reasonable discretion, the Issuer
also agrees to issue a replacement Note if this Note has been lost, stolen,
mutilated or destroyed.
The Issuer agrees to record this Note on the Register referred to
below. The Note recorded on the Register ("Registered Note") may not be
evidenced by a note other than a Registered Note and, upon the registration of
the Note, any promissory note (other than a Registered Note) evidencing the same
shall be null and void and shall be returned to the Issuer. The Note, once
recorded on the Register, may not be removed from the Register so long as it
remains outstanding and a Registered Note may not be exchanged for a note that
is not a Registered Note.
The Issuer shall maintain, or cause to be maintained, a register (the
"Register") on which it enters the name of the Holder as the registered owner of
this Note. A Registered Note may be assigned or sold in whole or in part, in a
minimum aggregate amount of $1,000,000, only by registration of such assignment
or sale on the Register (and each Registered Note shall expressly so provide).
Any assignment or sale of all or part of such Registered Note may be affected
only by registration of such assignment or sale on the Register, together with
the surrender of the Registered Note, if any, evidencing the same duly endorsed
by (or accompanied by a written instrument of assignment or sale duly executed
by) the holder of such Registered Note, whereupon, at the request of the
designated assignee(s) or transferee(s), one or more new Registered Note in the
same aggregate principal amount shall be issued to the designated assignee(s) or
transferee(s). Prior to the registration of assignment or sale of any Registered
Note, the Issuer shall treat the person in whose name such Registered Note is
registered as the owner thereof for the purpose of receiving all payments
thereon and for all other purposes.
In the event that the Holder sells participations in any Registered
Note, each in a minimum aggregate amount of $1,000,000, the Holder shall
maintain a register on which it enters the name of all participants in such
Registered Note (the "Participant Register"). A Registered Note may be
participated in whole or in part only by registration of such participation on
the Participant Register (and each Registered Note shall expressly so provide).
Any participation of such Registered Note may be effected only by the
registration of such participation on the Participant Register. No participant
will have any independent rights under this Note and any rights must be
exercised through a Holder.
Any foreign person who purchases or is assigned or participates in any
portion of any Registered Note shall provide the Issuer (in the case of a
purchase or assignment) or the Holder (in the case of a participation) with a
completed Internal Revenue Service Form W-8 (Certificate of Foreign Status) or a
substantially similar form for such purchaser, participant or any other
affiliate who is a holder of beneficial interests in any Registered Note.
SECTION 1. Certain Terms Defined. For all purposes of this Note,
terms defined in this Note shall have the meaning set forth herein.
The following terms shall have the respective meanings specified
below. Terms defined in this Note include the plural as well as the
singular.
"Accreted Amount" means the principal amount of this Note or any
portion thereof plus accrued but unpaid interest thereon.
"Average Closing Price" of the Common Stock on the date of computation
means the arithmetic average of the daily volume-weighted average price of the
Common Stock, as reported on the American Stock Exchange, Inc. (the "AMEX"), or
if the Common Stock is not then listed on the AMEX, as reported by the principal
securities exchange or inter-dealer quotation system on which the Common Stock
is then traded, for the 30-Trading Day period immediately preceding the date of
computation.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Closing Price" of the Common Stock on a given Trading Day means the
daily volume-weighted average price of the Common Stock for such Trading Day, as
reported on the AMEX, or if the Common Stock is not then listed on the AMEX, as
reported by the principal securities exchange or inter-dealer quotation system
on which the Common Stock is then traded.
"Common Stock" means the common stock of the Issuer.
"Conversion Price" means three dollars ($3.00) per share, subject to
certain adjustments as described in Section 5.7.
"Debt" of any Person means at any date, without duplication, (i) all
obligations, including accrued and unpaid interest and premium, of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit, bankers' acceptance or other similar
instruments (or reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred purchase price of property or
services, except Trade Payables, (v) all obligations of such Person as lessee
which are capitalized in accordance with generally accepted accounting
principles, (vi) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, and (vii) all Debt
of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default
"Existing Bank Debt" means any Debt incurred by the Issuer pursuant to
the Healthcare Receivables Purchase Agreement dated as of July 31, 1996 between
the Issuer and Daiwa Healthco. - 2 L.L.C.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner
the obligee of such Debt for the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Issuer Conversion Date" means the date on which the Issuer first
elects to convert the Note, in whole or in part, subject to Section 5.1(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Note, the Issuer shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capitalized lease or
other title retention agreement relating to such asset.
"Market Disruption Event" means, with respect to the Common Stock (1) a
suspension, absence or material limitation of trading of the Common Stock on the
primary market for the Common Stock for more than two hours of trading or during
the one-half hour period preceding the close of trading in such market; (2) a
suspension or material limitation on the primary market for trading in options
contracts related to the Common Stock, if available, during the one-half hour
period preceding the close of trading in the applicable market; or (3) any
limitation pursuant to the rules of the American Stock Exchange, Section 3, Rule
117 (or any applicable rule or regulation enacted or promulgated by the AMEX,
any other self-regulatory organization or the Securities and Exchange Commission
of similar scope) on trading during significant market fluctuations. For
purposes of determining whether a Market Disruption Event has occurred: (1) a
limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange; and (2) a decision to permanently
discontinue trading in the relevant options contract will not constitute a
Market Disruption Event.
"Maturity Date" means November 5, 2006.
"Offer Date" means a date that is not later than the fifth Business Day
after the last day of a Premium Period as to which the Premium Period Price is
greater than the Trigger Price.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Premium" means the number represented by a fraction, the numerator of
which is the Premium Period Price and the denominator of which is the Conversion
Price.
"Premium Period" means any 30 consecutive Trading Days.
"Premium Period Price" for any Premium Period means the arithmetic
average of the 27 highest Closing Prices of the Common Stock for Trading Days
during such Premium Period.
"Redemption Date" means the date on which the Issuer exercises its
option to redeem the Note subject to the terms of Section 4.
"Redemption Price" means the product of (i) the face value of all or
the portion of the Note being redeemed and (ii) the Premium.
"Senior Debt" means (a) the Existing Bank Debt, and any refinancing or
replacement thereof or additions thereto in an aggregate principal amount not to
exceed $30,000,000 and (b) the Senior Notes, and any refinancing or replacement
thereof or additions thereto in an aggregate principal amount not to exceed
$140,000,000.
"Senior Notes" means the notes issued pursuant to the Indenture.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Issuer.
"Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed by the Issuer or any
Subsidiary of the Issuer in the ordinary course of business in connection with
the obtaining of materials or services.
"Trading Day" means a day which is also a Business Day, on which
trading is generally conducted (i) on the American Stock Exchange, Inc. and (ii)
on any successor exchange on which the Common Stock is listed, and on which a
Market Disruption Event has not occurred.
"Trigger Event" means the occurrence of any Change of Control event as
defined in the Indenture.
"Trigger Price" means $3.60 per share.
SECTION 2. Events of Default and Remedies.
SECTION 2.1. Event of Default Defined; Acceleration of Maturity; Waiver
of Default. In case one or more of the following events ("Events of Default")
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
(a) default in the payment when due of all or any
part of the principal of or interest on the Note, which failure
to pay continues for a period of 10 calendar days after the due
date of such payment; or
(b) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the Issuer in
an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Issuer or for any substantial part
of the property of the Issuer or ordering the winding up or
liquidation of the affairs of the Issuer, and such decree or
order shall remain unstayed and in effect for a period of 60
days; or
(c) the Issuer shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or consent to the entry of an order for
relief in an involuntary case under any such law, or consent to
the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official)
of the Issuer or for any substantial part of the property of the
Issuer, or the Issuer shall make any general assignment for the
benefit of creditors; or
(d) the Issuer shall fail to comply with the
covenant contained in Section 3.2 of this Note; or
(e) a Senior Debt Default (as described below in
Section 6.2(b)) shall have occurred;
then, and in each and every such case, the Holder, by notice in writing to the
Issuer, may declare the aggregate Accreted Amount of the Note to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable.
SECTION 2.2. Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default. No right or remedy herein conferred upon or reserved to the
Holder is intended to be exclusive of any other right or remedy, and every right
and remedy shall, to the extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. No delay or omission of the
Holders to exercise any right or power accruing upon any Default or Event of
Default occurring and continuing as aforesaid shall impair any such right or
power or shall be construed to be a waiver of any such Default or Event of
Default or an acquiescence therein; and every power and remedy given by this
Note or by law may be exercised from time to time, and as often as shall be
deemed expedient, by the Holder.
SECTION 2.3. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Note may waive any past Default or Event of Default
hereunder and its consequences. In the case of any such waiver, the Issuer and
the Holder shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereon. Upon any such waiver, such Default shall
cease to exist and be deemed to have been cured and not to have occurred, and
any Default or Event of Default arising therefrom shall be deemed to have been
cured, and not to have occurred for every purpose of the Note; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereon.
SECTION 3. Covenants. The Issuer agrees that, so long as any
amount payable under this Note remains unpaid:
SECTION 3.1. Information. The Issuer shall deliver to the Holder:
(a) within five days after any officer of the Issuer
obtains actual knowledge of any Default, a certificate of the
chief financial officer or the chief accounting officer of the
Issuer setting forth the details thereof and the action which
the Issuer is taking or proposes to take with respect thereto;
(b) promptly after the Issuer has actual knowledge of
the occurrence of a Trigger Event, a certificate of an executive
officer of the Issuer, stating that such Trigger Event has
occurred; and
(c) promptly upon the filing thereof, the quarterly
and annual financial reports that the Issuer is required to file
with the Securities and Exchange Commission pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 or,
in the event the Issuer is not required to file such reports,
reports containing substantially the same information as would
be required in such reports (it being understood that the
foregoing shall not be construed to require presentation in the
manner required by such Act and the regulations thereunder so
long as the data required thereunder is so provided).
SECTION 3.2. Restriction on Senior Debt. For so long as any principal
or interest shall remain outstanding under this Note, the aggregate outstanding
amount of Senior Debt of the Issuer shall not exceed $170 million.
SECTION 4. Redemption.
SECTION 4.1. Issuer's Redemption; Xxxxxx's Redemption; Maturity. (a)
Subject to the provisions of this Section 4, at the Issuer's option the Note may
be redeemed, in whole or in part, at the Redemption Price, upon notice by the
Issuer on any Offer Date (a "Redemption Offer Date"), provided that the Holder
may, within 10 Business Days after any Redemption Offer Date, exercise its right
to convert the Note or the applicable portion thereof under Section 5.1(b). If
the Holder elects to exercise such right to convert upon the Issuer's notice of
redemption, the Issuer may (in its sole discretion) within two (2) Business Days
after the Holder's election to convert, (i) redeem that portion of the amount
originally sought to be redeemed that exceeds the amount the Holder has so
elected to convert, or (ii) decline to redeem any portion of the Note, whereupon
the redemption notice shall be deemed withdrawn and shall be of no further force
or effect (provided that such failure to redeem shall not affect the Holder's
rights under Section 5 of this Note). If the Note is redeemed in part, or
converted in part pursuant to Section 5, the Issuer shall have the option to
redeem the remainder (the "Remainder") of the Note in whole or in part (a
"Remainder Redemption"), subject to the provisions of the first sentence of this
subsection.
(b) The Issuer shall repay the Note or Remainder, as the case may be,
in whole at the Maturity Date by paying to the Holder on the Maturity Date cash
in an amount equal to the Accreted Amount on the Maturity Date of the Note or
the Remainder, as the case may be.
(c) Notwithstanding Section 4.1(a), if, within 45 days after an Offer
Date, the Issuer fails to redeem or convert the Note in whole or in part (other
than as a result of the Holder's election to convert the Note) then no Offer
Date will occur, and the Issuer shall have no right to redeem the Note in whole
or in part pursuant to Section 4.1(a), until the date that is six months after
such Offer Date.
SECTION 4.2. Notice of Redemption; Subsequent Rights of Holders. (a) In
the event the Issuer shall redeem the Note or any portion thereof pursuant to
Section 4.1(a), the notice of such redemption shall be given by first class
mail, postage prepaid, mailed on the Redemption Offer Date to the Holder of the
Note at such Xxxxxx's address as the same appears on the Register. Each such
notice shall state: (i) the proposed Redemption Date (which shall be the
eleventh Business Day after the Redemption Offer Date); (ii) the aggregate
principal of Note to be redeemed and, if only a portion of the Note is to be
redeemed, the aggregate principal of Note to be redeemed from such Holder; (iii)
the Redemption Price and the Average Closing Price; (iv) the place or places
where Note is to be surrendered for payment of the redemption price; and (v)
that interest on the portion of the Note to be redeemed ceased to accrue on the
Redemption Date.
(b) Notice having been mailed as aforesaid, from and after the
Redemption Date (unless default shall be made by the Issuer in providing money
for the payment of the redemption price of the Note or portion thereof called
for redemption), interest on the Note or portion thereof so called for
redemption shall cease to accrue, and all rights of the Holder of the Note
thereunder (except the right to receive from the Issuer the redemption price)
shall cease. Upon surrender in accordance with said notice of the certificate
for any Note so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors of the Issuer shall so require and the notice shall so
state), such Note (or a portion thereof, as the case may be) shall be redeemed
by the Issuer at the aforesaid Redemption Price. In case the Note is redeemed in
part, a new Note shall be issued representing the unredeemed portions of such
Note without cost to the Holder thereof.
SECTION 5. Conversion.
SECTION 5.1. Issuer's Conversion Right; Xxxxxx's Conversion Right;
Automatic Conversion. (a) Subject to the provisions of this Section 5, at
Issuer's option, the Note may be converted at the Conversion Price, in whole or
in part, upon notice by the Issuer on any Offer Date into shares of Common
Stock. If the Note is converted in part, or redeemed in part pursuant to Section
4, the Issuer shall have the option to convert the Remainder of the Note at any
future Offer Date (the "Remainder Conversion Date"), in whole or in part,
subject to the provisions of this Section 5.
(b) The Holder shall have the right at any time to convert at the
Conversion Price (i) up to seven million dollars ($7,000,000) of the outstanding
principal amount of the Note plus the principal amount of all Secondary Notes
issued with respect to $7,000,000 of the original principal amount of this Note,
computed from the date hereof through the Holder Conversion Date, into shares of
fully paid and non-assessable shares of Common Stock at any time on or before
November 5, 2002, or (ii) any or all of the outstanding balance of the Note into
shares of fully paid and non-assessable shares of Common Stock at any time on or
after November 6, 2002 (in each case, the "Holder Conversion Date").
(c) Where the Note is converted in part, the Conversion Price will be
applied to the principal amount to be converted to determine the number of
shares of Common Stock to be delivered. On conversion of this Note, the interest
attributable to the period from the last interest payment date to the date of
conversion shall be deemed to be paid in full to the Holder thereof through the
delivery of Common Stock in accordance with the foregoing provisions in exchange
for this Note. No claim for accrued interest will survive conversion of this
Note into Common Stock.
(d) Subject to the provisions of Section 6, the outstanding principal
amount of this Note shall be converted automatically, in whole and not in part,
into fully paid and non-assessable shares of Common Stock upon the occurrence of
a Trigger Event; provided, that if (i) the cash component being offered for the
Common Stock on the date of such Trigger Event is less than the Conversion Price
and (ii) the Closing Price on the date of such Trigger Event is less than the
Trigger Price, Holder may, at its option by written notice to Issuer within 5
days of the date of such Trigger Event, either (i) convert the Accreted Amount
of the Note or Remainder, as the case may be, at the Conversion Price, into
fully paid and non-assessable shares of Common Stock or, (ii) elect to not
convert the Note. Notwithstanding any provision of this Note, upon the
occurrence of a Trigger Event, any such conversion shall take place under the
terms specified by such Trigger Event, and any and all Common Stock issued as a
result of such conversion shall be subject to the same terms as all other Common
Stock issued upon the occurrence of such Trigger Event. Any conversion pursuant
to this paragraph shall occur automatically, without further action on the part
of the Holder or the Issuer.
(e) Notwithstanding Section 5.1(a), if, within 45 days after an Offer
Date, the Issuer fails to redeem or convert the Note in whole or in part (other
than as a result of the Holder's election to convert the Note), then no Offer
Date will occur, and the Issuer shall have no right to convert the Note in whole
or in part pursuant to Section 5.1(a), until the date that is six months after
such Offer Date.
SECTION 5.2. Exercise Procedure. (a) In the event the Issuer shall
exercise its right to convert the Note in whole or in part pursuant to Section
5.1(a), notice of such exercise shall be given by first class mail, postage
prepaid, mailed on the Issuer Conversion Date or the Remainder Conversion Date
(as the case may be) to the Holder of the Note at such Holder's address as the
same appears on the Register. In the event the Holder shall exercise its right
to convert the Note in whole or in part pursuant to Section 5.1(b), notice of
such exercise shall be given by first class mail, postage prepaid, mailed on the
Holder Conversion Date to the Issuer at the Issuer's address on the signature
page of this Note or at such other address as the Issuer shall have previously
designated in writing to the Holder.
(b) Promptly upon (i) receipt by the Holder of written notice from the
Issuer of its exercise of its right to convert this Note in whole or in part,
(ii) mailing of notice by the Holder of the exercise of its right to convert the
Note in whole or in part, or (iii) automatic conversion of the Note pursuant to
Sections 5.1(d) or 5.1(e), the Holder shall surrender this Note at the office of
the Issuer.
(c) As promptly as practicable, and in any event within ten Business
Days, after the surrender by the Holder as aforesaid, the Issuer shall issue and
shall deliver to such Holder, a certificate or certificates for the number of
shares of Common Stock issuable upon the conversion of this Note in accordance
with the provisions of this Section 5. In case the Note is converted in part, a
new Note shall be issued representing the unconverted portions of such Note
without cost to the Holder thereof.
(d) Each conversion shall be deemed to have been effected (i) in the
case of any conversion pursuant to Section 5.1(a) or (b), on the Issuer
Conversion Date, the Remainder Conversion Date, or the Holder Conversion Date,
as the case may be; (ii) in the case of any conversion pursuant to Section
5.1(d), on the date of the Trigger Event, (iii) in the case of any conversion
pursuant to Section 5.1(e), on the Maturity Date, and the Person in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder of
record of the shares of Common Stock represented thereby at such time on such
date and such conversion shall be into the number of shares of Common Stock
determined by dividing the Accreted Amount of the Note being converted at such
time by the Conversion Price (subject to Section 5.6 as it relates to fractional
shares). All shares of Common Stock delivered upon conversion of this Note will
upon delivery be duly and validly issued and fully paid and non-assessable, free
of all Liens and charges and not subject to any preemptive rights. Upon the
conversion of this Note, the principal amount or portion thereof, as the case
may be, so converted shall no longer be deemed to be outstanding and all rights
of the Holder with respect to this Note or portion thereof surrendered for
conversion shall immediately terminate except the right to receive the Common
Stock and other amounts, if any, payable pursuant to this Section 5.
SECTION 5.3. Effect of Election. (a) Upon the delivery to the Holder by
the Issuer, or to the Issuer by the Holder, of a notice of election to convert
the Note in whole, the right of the Issuer to redeem this Note shall terminate,
regardless of whether a notice of redemption has been mailed as aforesaid.
(b) The Accreted Amount of this Note shall cease to accrue in respect
of the converted portion of this Note on the date such conversion shall be
deemed to have been effected pursuant to Section 5.2(d). From and after such
date, the Holder of this Note shall participate equally and ratably with the
holders of shares of Common Stock in all dividends paid on the Common Stock as
if this Note had been converted to shares of Common Stock at such time.
SECTION 5.4. Issuance of Shares. (a) The Issuer covenants that it shall
at all times reserve and keep available, free from preemptive rights, such
number of its authorized but unissued shares of Common Stock as shall be
required for the purpose of effecting the conversion of this Note.
(b) Prior to the delivery of any securities which the Issuer shall be
obligated to deliver upon conversion of this Note, the Issuer shall comply with
respect to the issuance of such securities with all applicable federal and state
laws and regulations which require action to be taken by the Issuer.
SECTION 5.5. Taxes on Conversion. The Issuer will pay any and all
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on conversion of this Note pursuant
hereto; provided that the Issuer shall not be required to pay any tax which may
be payable in respect of any transfer involving the issue or delivery of shares
of Common Stock in a name other than that of the Holder and no such issue or
delivery shall be made unless and until the Person requesting such issue or
delivery has paid to the Issuer the amount of any such tax or has established,
to the satisfaction of the Issuer, that such tax has been paid.
SECTION 5.6. No Fractional Shares. In connection with the conversion of
this Note or a portion hereof, no fractions of shares of Common Stock shall be
issued, but in lieu thereof the Issuer shall pay a cash adjustment in respect of
such fractional interest in an amount equal to such fractional interest.
SECTION 5.7. Anti-Dilution. (a) The terms of conversion of the
Note shall be subject to the following adjustments:
(i) If the Issuer shall declare and pay to the holders of the
Common Stock a dividend or other distribution payable in shares of
Common Stock, the Holder of the Note thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common
Stock which such Holder would have owned or been entitled to receive
after the declaration and payment of such dividend or other
distribution if such Note had been converted immediately prior to the
record date for the determination of stockholders entitled to receive
such dividend or other distribution.
(ii) If the Issuer shall subdivide the outstanding shares of
Common Stock into a greater number of shares of Common Stock, or
combine the outstanding shares of Common Stock into a lesser number of
shares, or issue by reclassification of its shares of Common Stock any
shares of the Issuer, the Conversion Price in effect immediately prior
thereto shall be adjusted so that the Holder of the Note thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock which such Holder would have owned or been
entitled to receive after the happening of any and each of the events
described above if such Note had been converted immediately prior to
the happening of each such event on the day upon which such
subdivision, combination or reclassification, as the case may be,
becomes effective.
(iii) In case the Issuer shall effect a reorganization, shall
merge with or consolidate into another corporation, or shall sell,
transfer or otherwise dispose of all or substantially all of its
property, assets or business and, pursuant to the terms of such
reorganization, merger, consolidation or disposition of assets, shares
of stock or other securities, property or assets of the Issuer, or of
its successor or transferee or an affiliate of any thereof, or cash are
to be received by or distributed to the holders of Common Stock, then
the Holder of the Note shall be given a written notice from the Issuer
informing such Holder of the terms of such reorganization, merger,
consolidation or disposition of assets and of the record date thereof
for any distribution pursuant thereto, at least ten days in advance of
such record date, and, if such record date shall precede the Maturity
Date, the Holder of the Note shall have the right thereafter to
receive, upon conversion of the Note the number of shares of stock or
other securities, property or assets of the Issuer, or of its successor
or transferee or any affiliate thereof, or cash receivable upon or as a
result of such reorganization, merger, consolidation or disposition of
assets that would have been received by a holder of the number of
shares of Common Stock equal to the number of shares the Holder of the
Note would have received had such Holder converted the Note prior to
such event at the Conversion Price immediately prior to such event. The
provisions of this subparagraph (iii) shall similarly apply to
successive reorganizations, mergers, consolidations or dispositions of
assets.
(iv) Whenever the terms of conversion shall be adjusted
pursuant to this Section 5.7, the Issuer shall forthwith obtain, and
cause to be delivered to the Holder of the Note, a certificate signed
by the principal financial or accounting officer of the Issuer, setting
forth in reasonable detail the event requiring the adjustment and the
method by which such adjustments were calculated and specifying the new
Conversion Price. In the cases referred to in subparagraph (iii), such
a certificate shall be issued describing the amount and kind of stock,
securities, property or assets or cash which shall be receivable upon
conversion of the Note after giving effect to the provisions of such
subparagraph.
(v) No adjustment to the Conversion Price shall be required
unless such adjustment would require a change of at least 1% in such
rate; provided, however, that any adjustments which by reason of this
paragraph (v) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
SECTION 6. Subordination.
SECTION 6.1. Subordination to Senior Debt. The Issuer and the Holder
agree for the benefit of the Senior Debt holders that all indebtedness evidenced
by this Note, including principal, premium, if any, and interest, and all other
amounts payable to the Holder hereunder (including, for all purposes of this
Note any payment in respect of redemption or purchase or other acquisition
hereof) shall, in the manner hereinafter set forth, be subordinate and junior in
right of payment to all Senior Debt of the Issuer. All indebtedness evidenced by
this Note shall rank pari passu to all Debt of the Issuer other than Senior
Debt. Without limiting the generality of the foregoing, the Issuer and the
Holder agree that no payment shall be made in respect of the Note that would
contravene the terms of the Indenture.
SECTION 6.2. Issuer Not to Make Payments hereunder in Certain
Circumstances. Without limiting the generality of the foregoing: (a) Upon the
maturity of all or any part of the Senior Debt by lapse of time, acceleration or
otherwise, such Senior Debt shall first be paid in full, or such payment shall
be duly provided for in cash or in a manner satisfactory to the Senior Debt
holders of such superior indebtedness, before any payment by the Issuer or any
Subsidiary is made on account of the principal of or premium, if any, or
interest on the Note or to redeem the Note.
(b) In the event and during the continuation of any default in
respect of any Senior Debt, including, without limitation, any default arising
from either a default in the payment of principal or interest in respect of any
Senior Debt (each such default being referred to herein as a "Senior Debt
Default"), no payment shall be made by the Issuer on or with respect to the
principal of, or, premium, if any, or interest on, the Note or to redeem the
Note unless and until such Senior Debt Default shall have been remedied, nor
shall any such payment be made if after giving effect, as if paid, to such
payment, any Senior Debt Default would exist. In any such event, no Holder of
the Note shall demand, accept or receive, any direct or indirect payment (in
cash or property or by setoff, exercise of contractual or statutory rights or
otherwise) of or on account of the Note, notwithstanding the terms of the Note
or of any agreement or instrument which governs the Note, and no such payment
shall be due.
(c) Prior to November 5, 2006, if a default or event of default
exists under the Senior Debt, the Issuer shall not make, and no Holder of the
Note shall demand, accept or receive (in cash or property or by setoff, exercise
of contractual or statutory rights or otherwise), or shall attempt to collect or
commence any legal proceedings to collect, any direct or indirect payment on
account of the Note prior to the date such payment becomes due and payable
pursuant to the terms thereof or, if later, prior to the first date such amount
is not prohibited from being paid pursuant to this Section 6. Notwithstanding
the foregoing, the Holder shall be entitled to accept and retain any payment by
the Issuer pursuant to Section 4 hereof, or any Common Stock issuable upon
conversion of this Note, in whole and in part, pursuant to Section 5 hereof.
(d) Unless and until the earlier of (i) all principal of, premium, if
any, and interest on and all other obligations of the Issuer under, any Senior
Debt, shall have been paid in full or (ii) November 5, 2006, then:
(i) the Issuer shall not make, and no Holder of the Note
shall demand, accept or receive, or shall attempt to collect or
commence any legal proceedings to collect, any direct or indirect
payment (in cash or property or by setoff, exercise of contractual or
statutory rights or otherwise) of or on account of any amount payable
on or with respect to the Note; and
(ii) no such payment shall be due;
unless such payment is not prohibited by, and is made in accordance with the
terms of, any covenant or restriction set forth in the Indenture, and the
failure to make any payment on or with respect to the Note by reason of any
covenant or restriction in the Indenture shall not constitute a breach of, or
default under, any provision applicable to the Note.
(e) Unless and until the earlier of (i) all principal of, premium, if
any, and interest on, and all other obligations of the Issuer under, the Senior
Debt shall have been paid in full or (ii) November 5, 2006, no Holder of the
Note will commence or maintain any action, suit or any other legal or equitable
proceeding against the Issuer, or join with any creditor in any such proceeding,
under any insolvency, bankruptcy, receivership, liquidation, reorganization or
other similar law, unless the holders of Senior Debt shall also join in bringing
such proceeding, provided that this Section 6.2(e) shall not prohibit a Holder
of the Note from filing a proof of claim or otherwise participating in any such
proceeding not commenced by it.
SECTION 6.3. Note Subordinated to Prior Payment of all Senior Debt on
Dissolution, Liquidation or Reorganization of Issuer. In the event of any
insolvency or bankruptcy proceedings, and any receivership, liquidation,
reorganization or other similar proceedings, relative to the Issuer or to its
creditors, in their capacity as creditors of the Issuer, or to substantially all
of its property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Issuer, whether or not involving
insolvency or bankruptcy,
(a) the holders of all Senior Debt shall first be entitled to receive
payment in full of the principal thereof, premium, if any, interest and all
other amounts payable thereon (accruing before and after the commencement of the
proceedings, whether or not allowed or allowable as a claim in such proceedings)
before the Holder of the Note is entitled to receive any payment on account of
the principal of, premium, if any, or interest on the Note; and
(b) the Note shall forthwith (notwithstanding the terms of Section
6.2) become due and payable and any payment or distribution of assets of the
Issuer of any kind or character, whether in cash, property or securities to
which the Holder of the Note would be entitled, but for the provisions of this
Section 6, shall be paid or distributed by the liquidating trustee or agent or
other person making such payment or distribution, whether the debtor, a trustee
in bankruptcy, a receiver or liquidating trustee or other trustee or agent,
directly to any representative on behalf of the holders of Senior Debt, to the
extent necessary to make payment in full of all principal, premium, if any,
interest and all other amounts payable on all Senior Debt remaining unpaid,
after giving effect to any concurrent payment or distribution to the holders of
the Senior Debt.
SECTION 6.4. Rights of Holders of Senior Debt; Subrogation. (a) Should
any payment or distribution or security or the proceeds of any thereof be
collected or received by the Holder of the Note in respect of the Note, and such
collection or receipt is prohibited hereunder prior to the payment in full of
the Senior Debt, such Holder will forthwith deliver the same to the holders of
the Senior Debt for the equal and ratable benefit of the holders of the Senior
Debt in precisely the form received (except for the endorsement or the
assignment of or by such Holder where necessary) for application to payment of
all Senior Debt in full, after giving effect to any concurrent payment or
distribution to the holders of Senior Debt and, until so delivered, the same
shall be held in trust by such Holder as the property of the holders of the
Senior Debt.
(b) No Holder of the Note shall be subrogated to the rights of the
holders of the Senior Debt to receive payments or distributions of assets of the
Issuer until all amounts payable with respect to the Senior Debt shall be paid
in full; and, for the purposes of such subrogation, no payments or distributions
to the Holder of the Note of any cash, property or securities to which any
Holder of the Note would be entitled except for these provisions shall, as
between the Issuer, its creditors other than the holders of the Senior Debt, and
such holders of Notes, be deemed to be a payment by the Issuer to or on account
of the Senior Debt. The provisions of this Agreement are and are intended solely
for the purpose of defining the relative rights of the holders of Note, on the
one hand, and the holders of the Senior Debt, on the other hand.
(c) Subject to the payment in full of all Senior Debt, the holders of
the Note shall be subrogated (equally and ratably with the holders of all
subordinated indebtedness of the Issuer which, by its terms, is not superior in
right of payment to the Note, and ranks on a parity with the Note) to the rights
of the holders of Senior Debt to receive payments or distributions of cash,
property or securities of the Issuer applicable to the Senior Debt until all
amounts owing on the Note shall be paid in full. For purposes of such
subrogation, no payments or distributions to the Holder of the Note of cash,
property, securities or other assets by virtue of the subrogation herein
provided which otherwise would have been made to the holders of the Senior Debt
shall, as between the Issuer, its creditors other than the holders of Senior
Debt and the Holder of the Note, be deemed to be a payment to or on account of
the Note. The Holder of the Note agrees that, in the event that all or any part
of any payment made on account of the Senior Debt is recovered from the holders
of Senior Debt as a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law, any payment or distribution received by
the Holder of the Note on account of the Note at any time after the date of the
payment so recovered, whether pursuant to the right of subrogation provided for
in this Section 6.4(c) or otherwise, shall be deemed to have been received by
such Holder of the Note in trust as the property of the holders of the Senior
Debt and such Holder shall forthwith deliver the same for the equal and ratable
benefit to the holders of the Senior Debt for application to payment of all
Senior Debt in full.
SECTION 6.5. Renewals, Extensions and Increases of Senior Debt. The
Holder of the Note by its acceptance thereof thereby waives any and all notice
of renewal, extension, accrual or increase in the amount of Senior Debt, present
or future, and agrees and consents that without notice to or assent by any
Holder of the Note:
(a) except as limited by Section 3.2 hereof, the Issuer shall be
permitted to incur Senior Debt, including, without limitation, Senior Debt not
in existence on the date hereof;
(b) except as limited by Section 3.2 hereof, the obligation and
liabilities of the Issuer or any other party or parties for or upon the Senior
Debt (or any promissory note, security document or guaranty evidencing or
securing the same) may, from time to time, in whole or in part, be renewed,
extended, increased, modified, amended, accelerated, compromised, supplemented,
terminated, sold, exchanged, waived or released;
(c) any representative acting on behalf of the holders of any Senior
Debt and any holder of the Senior Debt may exercise or refrain from exercising
any right, remedy or power granted by or in connection with any agreements
relating to the Senior Debt; and
(d) any balance or balances of funds with any holder of the Senior
Debt at any time standing to the credit of the Issuer may, from time to time, in
whole or in part, be surrendered or released;
all as any representative or representatives acting on behalf of any holder of
the Senior Debt and any holder of the Senior Debt may deem advisable and all
without impairing, abridging, diminishing, releasing or affecting the
subordination of the Note to the Senior Debt provided for herein.
SECTION 6.6. Obligation of Issuer Unconditional. Nothing contained in
this Section 6 or in the Note is intended to or shall impair, as between the
Issuer, its creditors other than the holders of the Senior Debt, and the Holder
of the Note, the obligation of the Issuer, which is absolute and unconditional,
to pay to the Holder of the Note the principal of, premium, if any, and interest
on the Note, as and when the same shall become due and payable (except as
provided in this Section 6), by lapse of time, acceleration or otherwise, in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holder of the Note and other creditors of the Issuer other than
the holders of the Senior Debt, nor shall anything herein or therein prevent the
Holder of the Note (i) from taking all appropriate actions to preserve its
rights under the Note not inconsistent with the rights of the holders of the
Senior Debt under this Section 6, or (ii) from exercising all remedies otherwise
permitted by applicable law upon default under the Note, subject to the rights,
if any, under this Section 6 of the holders of the Senior Debt in respect of
cash, property or securities of the Issuer otherwise payable or delivered to
such holders upon the exercise of any such remedy.
SECTION 6.7. Miscellaneous. (a) The Holder of the Note by its
acceptance thereof thereby acknowledges and agrees that the holders of the
Senior Debt have relied upon and will continue to rely upon the subordination
provided for herein in entering into the agreements relating to Senior Debt and
in extending credit to the Issuer pursuant thereto.
(b) No present or future holder of Senior Debt shall be prejudiced in
his right to enforce the subordination contained herein in accordance with the
terms hereof by any act or failure to act on the part of the Issuer or the
Holder of the Note. The subordination provisions contained herein are for the
benefit of the holders of the Senior Debt from time to time and, so long as
Senior Debt is outstanding under any agreement, may not be rescinded, canceled
or modified in any way without the prior written consent thereto of all holders
of Senior Debt.
(c) The subordination provisions hereof shall be binding upon any
Holder of the Note and upon the heirs, legal representatives, successors and
assigns of the Holder of the Note; and, to the extent that the Holder of the
Note is either a partnership or a corporation, all references herein to the
Holder of the Note shall be deemed to include any successor or successors,
whether immediate or remote, to such partnership or corporation.
SECTION 70 Modification of Note. The Note may be modified
with the written consent of the Holder. The Holder may waive compliance by
the Issuer of any provision of the Note.
SECTION 80 Miscellaneous. THIS NOTE, INCLUDING, WITHOUT LIMITATION,
THE TERMS OF SUBORDINATION SET FORTH IN SECTION 6 HEREOF, SHALL BE GOVERNED BY
AND BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICTS OF LAW RULES OF SUCH STATE. The Holder by acceptance of
this Note agrees to be bound by the provisions of this Note. The Section
headings herein are for convenience only and shall not affect the construction
hereof.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
duly executed as of this ____ day of November, 1998.
UNILAB CORPORATION
By:_______________________
Name:
Title:
00000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
