EXHIBIT 99.4
EXHIBIT A
TO
PURCHASE
AGREEMENT
NEITHER THIS SECURITY NOR THE ISSUANCE TO THE HOLDER OF THE SECURITIES INTO
WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE 1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THIS NOTE IN THE EVENT OF A
PARTIAL CONVERSION. AS A RESULT, FOLLOWING ANY CONVERSION OF ANY PORTION OF THIS
NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN
THE PRINCIPAL AMOUNT SET FORTH BELOW.
7% CONVERTIBLE NOTE DUE 2006
OF
VIRAGEN, INC.
NO. ________ $ _____________
DATED ________________, 0000 XXX XXXX, XXX XXXX
FOR VALUE RECEIVED, VIRAGEN, INC., a Delaware corporation (the
"Company") hereby promises to pay to or upon the order of [NAME] or its
registered assigns or successors-in-interest (the "Holder") the principal sum of
Dollars ($ ), on the Maturity Date, and to pay interest thereon at the
Applicable Rate from the date hereof on the Interest Payment Dates until the
same becomes due and payable (except as otherwise provided in Section 2(c)(5)) ,
whether at maturity or upon acceleration or by redemption or repurchase in
accordance with the terms hereof, or otherwise. Interest on this Note shall be
computed on the basis of a 360-day year of 30-day months and actual days elapsed
and shall be payable in accordance with Section 2 hereof. Notwithstanding
anything contained herein, this Note shall bear interest on the outstanding
principal amount from and after the occurrence and during the continuance of an
Event of Default, at the rate (the "Default Rate") equal to the lower of sixteen
percent (16%) per annum or the highest rate permitted by applicable law. Unless
otherwise determined by the Holder or required by applicable law, payments will
be applied first to any unpaid collection costs, then to unpaid interest and
fees and any remaining amount to unpaid principal.
All payments of principal of and interest on this Note shall
be made in lawful money of the United States of America or, at the option of the
Company and subject to the provisions of this Note, interest payable on the
Interest Payment Dates may be paid in whole or in part in fully paid and
nonassessable shares of Common Stock. All cash payments by the Company shall be
made by wire transfer of immediately available funds to such account as the
Holder may from time to time designate by written notice in accordance with the
provisions of this Note. This Note may not be prepaid in whole or in part except
as specifically provided herein. Whenever any amount expressed to be due by the
terms of this Note is due on any day which is not a Business Day (as defined
below), the same shall instead be due on the next succeeding day which is a
Business Day and, in the case of any Interest Payment Date that is not the date
on which this Note is paid in full, the extension of the due date thereof shall
not be taken into account in determining the amount of interest due on such
date.
The obligations of the Company under this Note shall rank in
right of payment on a parity with all other unsubordinated obligations of the
Company for indebtedness for borrowed money or the purchase price of property.
This Note is issued pursuant to the Purchase Agreement and the Holder of this
Note and this Note are subject to the terms and entitled to the benefits of the
Purchase Agreement.
The following terms and conditions shall apply to this Note:
1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement.
(b) All the agreements or instruments herein defined shall
mean such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms thereof and of this Note.
(c) For purposes hereof the following terms shall have the
meanings ascribed to them below:
"Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with the subject Person.
For purposes of this definition, "control" (including, with correlative meaning,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
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to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Aggregation Parties" shall have the meaning provided in
Section 6(g)(1).
"AMEX" means the American Stock Exchange, Inc.
"Applicable Rate" means seven percent per annum or, if an
Event of Default shall occur, then so long as any Event of Default shall
continue, 16 percent per annum (or in either case such lesser rate as shall be
the highest rate permitted by applicable law) or, in case the Company shall
exercise its rights under Section 2(c)(5), one percent per annum.
"Board of Directors" means the Board of Directors of the
Company.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors, or duly authorized committee thereof (to the extent
permitted by applicable law), and to be in full force and effect on the date of
such certification, and delivered to the Holder.
"Business Day" means any day other than a Saturday, Sunday or
a day on which commercial banks in the City of New York, New York are authorized
or required by law or executive order to remain closed.
"Closing Date" shall have the meaning provided in the Purchase
Agreement.
"Common Stock" means the Common Stock, par value $.01 per
share, or any shares of capital stock of the Company into which such shares
shall be changed or reclassified after the Escrow Funding Date.
"Common Stock Equivalent" means any warrant, option,
subscription or purchase right with respect to shares of Common Stock, any
security convertible into, exchangeable for, or otherwise entitling the holder
thereof to acquire, shares of Common Stock or any warrant, option, subscription
or purchase right with respect to any such convertible, exchangeable or other
security.
"Common Stock Warrant" means the Common Stock Purchase Warrant
in the form attached as EXHIBIT F issuable as part of the Optional Redemption
Consideration.
"Company Certificate" means a certificate of the Company
signed by an Officer.
"Company Notice" means a Company Notice in the form attached
as EXHIBIT D.
"Conversion Date" means the date on which a Conversion Notice
is given in accordance with Section 6(b)(1).
"Conversion Delay Payments" shall have the meaning provided in
Section 6(c)(5)(C).
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"Conversion Notice" means a duly executed Notice of Conversion
of 7% Convertible Note due 2006 substantially in the form of EXHIBIT A to this
Note.
"Conversion Price" means $[BEFORE SIGNING PURCHASE AGREEMENT,
INSERT ARITHMETIC AVERAGE OF CLOSING BID PRICE OF COMMON STOCK FOR FIVE TRADING
DAYS ENDING ON AND INCLUDING THE TRADING DAY BEFORE DATE OF SIGNING], subject to
adjustment as provided in Section 6(c).
"Current Market Price" shall mean the arithmetic average of
the daily Market Prices per share of Common Stock for the five consecutive
Trading Days immediately prior to the date in question; PROVIDED, HOWEVER, that
(1) if the "ex" date (as hereinafter defined) for any event (other than the
issuance or distribution requiring such computation) that requires an adjustment
to the Conversion Price pursuant to Section 6(c)(1), (2), (3), (4), (5), (6), or
(7), occurs during such ten consecutive Trading Days, the Market Price for each
Trading Day prior to the "ex" date for such other event shall be adjusted by
multiplying such Market Price by the same fraction by which the Conversion Price
is so required to be adjusted as a result of such other event, (2) if the "ex"
date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 6(c)(1), (2), (3), (4), (5), (6), or (7), occurs on or after the "ex"
date for the issuance or distribution requiring such computation and prior to
the day in question, the Market Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying such Market Price by
the reciprocal of the fraction by which the Conversion Price is so required to
be adjusted as a result of such other event, and (3) if the "ex" date for the
issuance or distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant to clause
(1) or (2) of this proviso, the Market Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any cash and
the fair market value (as determined by the Board of Directors in a manner
consistent with any determination of such value for purposes of Section 6(c)(4)
or (6), whose determination shall be conclusive and described in a Board
Resolution) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any computation under
Section 6(c)(4), the Current Market Price of the Common Stock on any date shall
be deemed to be the arithmetic average of the daily Market Prices per share of
Common Stock for such day and the next two succeeding Trading Days; PROVIDED,
HOWEVER, that if the "ex" date for any event (other than the Tender Offer
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to Section 6(c)(1), (2), (3), (4), (5), (6), or (7), occurs on or after
the Expiration Time for the Tender Offer requiring such computation and prior to
the day in question, the Market Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying such Market Price by
the reciprocal of the fraction by which the Conversion Price is so required to
be adjusted as a result of such other event. For purposes of this paragraph, the
term "ex" date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades, regular way, on the
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relevant exchange or in the relevant market from which the Market Price was
obtained without the right to receive such issuance or distribution, (2) when
used with respect to any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades, regular way, on such
exchange or in such market after the time at which such subdivision or
combination becomes effective, and (3) when used with respect to any Tender
Offer means the first date on which the Common Stock trades, regular way, on
such exchange or in such market after the Expiration Time of such Tender Offer.
Notwithstanding the foregoing, whenever successive adjustments to the Conversion
Price are called for pursuant to Section 6(c), such adjustments shall be made to
the Current Market Price as may be necessary or appropriate to effectuate the
intent of Section 6(c) and to avoid unjust or inequitable results as determined
in good faith by the Board of Directors.
"DTC" shall have the meaning provided in Section 6(b)(2).
"Effective Date" means the date on which a Registration
Statement covering all the Underlying Shares and other Registrable Securities
(as defined in the Registration Rights Agreement) is declared effective by the
SEC.
"Eligible Bank" means a corporation organized or existing
under the laws of the United States or any other state, having combined capital
and surplus of at least $100 million and subject to supervision by federal or
state authority and which has a branch located in New York, New York.
"Escrow Funding Date" shall have the meaning provided in the
Purchase Agreement.
"Event of Default" shall have the meaning provided in Section
5(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Shares" shall have the meaning provided in Section
6(g)(1).
"Extended Market Price Redemption Date" means with respect to
any portion of this Note to which Section 2(c)(4) applies, the date that is 30
Trading Days after the latest date on which the Restricted Ownership Percentage
no longer restricts the Holder's right to convert the remaining Unconverted
Portion, but in no event later than the Maturity Date.
"Expiration Time" shall have the meaning provided in Section
6(c)(6).
"Fundamental Change" means
(a) Any consolidation or merger of the Company or any
Subsidiary with or into another entity (other than a merger or
consolidation of a Subsidiary into the Company or a wholly-owned
Subsidiary) where the stockholders of the Company immediately prior to
such transaction do not collectively own at least 51% of the
outstanding voting securities of the surviving corporation of such
consolidation or merger immediately following such transaction; or the
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sale of all or substantially all of the assets of the Company and the
Subsidiaries in a safe transaction or a series of related transactions;
or
(b) The occurrence of any transaction or event in connection
with which all or substantially all the Common Stock shall be exchanged
for, converted into, acquired for or constitute the right to receive
consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all
common stock which is (or will, upon consummation of or immediately
following such transaction or event, will be) listed on a registered
national securities exchange or approved for quotation on Nasdaq or any
similar United States system of automated dissemination of transaction
reporting of securities prices; or
(c) The acquisition by a Person or entity or group of Persons
or entities acting in concert as a partnership, limited partnership,
syndicate or group, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or otherwise, of
beneficial ownership of securities of the Company representing 50% or
more of the combined voting power of the outstanding voting securities
of the Company ordinarily (and apart from rights accruing in special
circumstances) having the right to vote in the election of directors.
"Holder Notice" means a Holder Notice in the form attached as
EXHIBIT E.
"Indebtedness" means, when used with respect to any Person,
without duplication:
(1) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person for borrowed money (including
obligations of such Person in respect of overdrafts, foreign exchange
contracts, currency exchange agreements, Interest Rate Protection
Agreements, and any loans or advances from banks, whether or not
evidenced by notes or similar instruments) or evidenced by bonds,
debentures, notes or other instruments for the payment of money, or
incurred in connection with the acquisition of any property, services
or assets (whether or not the recourse of the lender is to the whole of
the assets of such Person or to only a portion thereof), other than any
account payable or other accrued current liability or obligation to
trade creditors incurred in the ordinary course of business in
connection with the obtaining of materials or services;
(2) all reimbursement obligations and other liabilities
(contingent or otherwise) of such Person with respect to letters of
credit, bank guarantees, bankers' acceptances, surety bonds,
performance bonds or other guaranty of contractual performance;
(3) all obligations and liabilities (contingent or otherwise)
in respect of (a) leases of such Person required, in conformity with
generally accepted accounting principles, to be accounted for as
capitalized lease obligations on the balance sheet of such Person and
(b) any lease or related documents (including a purchase agreement) in
connection with the lease of real property which provides that such
Person is contractually obligated to purchase or cause a third party to
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purchase the leased property and thereby guarantee a minimum residual
value of the leased property to the landlord and the obligations of
such Person under such lease or related document to purchase or to
cause a third party to purchase the leased property;
(4) all obligations of such Person (contingent or otherwise)
with respect to an interest rate or other swap, cap or collar agreement
or other similar instrument or agreement or foreign currency hedge,
exchange, purchase or similar instrument or agreement;
(5) all direct or indirect guaranties or similar agreements by
such Person in respect of, and obligations or liabilities (contingent
or otherwise) of such Person to purchase or otherwise acquire or
otherwise assure a creditor against loss in respect of, indebtedness,
obligations or liabilities of another Person of the kind described in
clauses (1) through (4);
(6) any indebtedness or other obligations described in clauses
(1) through (5) secured by any mortgage, pledge, lien or other
encumbrance existing on property which is owned or held by such Person,
regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person; and
(7) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any indebtedness,
obligation or liability of the kind described in clauses (1) through
(6).
"Interest Payment Date" means each January 1, April 1, July 1
and October 1, commencing on the first such date after the Issuance Date, and
the Maturity Date.
"Interest Payment Shares" means the shares of Common Stock
issuable in payment of interest on this Note in accordance with Section 2(a).
"Interest Rate Protection Agreement" means, with respect to
any Person, any interest rate swap agreement, interest rate cap or collar
agreement or other financial agreement or arrangement designed to protect such
Person against fluctuations in interest rates, as in effect from time to time.
"Interest Share Price" means for any Interest Payment Date the
arithmetic average of the Market Price of the Common Stock for all of the
Trading Days during the period of 20 consecutive Trading Days ending on and
including the Trading Day immediately preceding such Interest Payment Date.
"Issuance Date" means the "Closing Date" as defined in the
Purchase Agreement.
"Majority Holders" means at any time such of the holders of
this Note and the Other Notes which hold Notes and Other Notes which, based on
the outstanding principal amounts thereof, represent a majority of the aggregate
outstanding principal amount of this Note and the Other Notes.
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"Market Price" with respect to any security on any day shall
mean the closing bid price of such security on such day on the Nasdaq, the NYSE
or the AMEX, as applicable, or, if such security is not listed or admitted to
trading on the Nasdaq, the NYSE or the AMEX, on the principal national
securities exchange or quotation system on which such security is quoted or
listed or admitted to trading, in any such case as reported by Bloomberg, L.P.
(or if such source ceases to be available, comparable source selected by the
Majority Holders and acceptable to the Company in its reasonable judgment) or,
if not quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the closing bid and asked prices of
such security on the over-the-counter market on the day in question, as reported
by the National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or if not so available, in such manner as furnished by any
NYSE member firm selected from time to time by the Board of Directors for that
purpose, or a price determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution.
"Market Price Optional Redemption Date" means the Business Day
on which this Note is to be redeemed in whole pursuant to Section 2(c).
"Market Price Optional Redemption Notice" means a Market Price
Optional Redemption Notice in the form attached hereto as EXHIBIT C.
"Market Price Optional Redemption Period" means the period
which commences on the date that is one year after the Issuance Date and ends on
the Maturity Date.
"Market Price Optional Redemption Price" means an amount in
cash (or in the case of the amount referred to in the succeeding clause (2), in
shares of Common Stock in accordance with Section 2(a)) equal to the sum of (1)
an amount equal to 100% the principal amount of this Note that is outstanding on
the Market Price Optional Redemption Date PLUS (2) accrued and unpaid interest
on such principal amount to the Market Price Optional Redemption Date PLUS (3)
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (2) at the rate provided in this Note to the Market
Price Optional Redemption Date.
"Maturity Date" means March 31, 2006.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Nasdaq" means the Nasdaq National Market.
"Newly Issued Shares" shall have the meaning provided in
Section 6(c)(7).
"Note" means this instrument as originally executed, or if
later amended or supplemented in accordance with its terms, then as so amended
or supplemented.
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"NYSE" means the New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President or the Chief Financial Officer of the Company.
"Optional Redemption Consideration" means (1) an amount in
cash equal to the sum of (A) an amount equal to 110% the principal amount of
this Note that is outstanding on the Optional Redemption Date PLUS (B) accrued
and unpaid interest on such principal amount to the Optional Redemption Date
PLUS (C) accrued and unpaid Default Interest, if any, on the amount referred to
in the immediately preceding clause (B) at the rate provided in this Note to the
Optional Redemption Date and (2) a Common Stock Warrant that initially (I)
entitles the holder thereof to purchase a number of shares of Common Stock equal
to the quotient obtained by dividing (x) the principal amount of this Note
outstanding immediately prior to redemption of this Note on the Optional
Redemption Date BY (y) the Conversion Price in effect immediately prior to
redemption of this Note on the Optional Redemption Date and (II) has a Purchase
Price (as defined in the Common Stock Warrant) equal to the Conversion Price in
effect immediately prior to redemption of this Note on the Optional Redemption
Date, subject to adjustment as provided in the Common Stock Warrant.
"Optional Redemption Date" means the Business Day on which
this Note is to be redeemed in whole pursuant to Section 2(b).
"Optional Redemption Notice" means an Optional Redemption
Notice in the form attached hereto as EXHIBIT B.
"Optional Redemption Period" means the period which commences
on the date that is ten Trading Days after the Effective Date and ends on the
Maturity Date.
"Other Common Stock Warrants" means the Common Stock Purchase
Warrants issuable by the Company upon optional redemption of the Other Notes.
"Other Notes" means the several 7% Convertible Notes due 2006
issued by the Company pursuant to the Other Purchase Agreements.
"Other Purchase Agreements" means the several Purchase
Agreements, dated as of March 31, 2004, by and between the Company and the
respective original holders of the Other Notes.
"Permitted Indebtedness" means:
(1) Indebtedness outstanding on the Issuance Date prior to
issuance of this Note and listed on SCHEDULE ____ to the Purchase
Agreement; and
(2) Indebtedness evidenced by the Note and the Other Notes;
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(3) Indebtedness incurred after the Issuance Date in an
aggregate amount not to exceed $1 million at any one time outstanding
so long as (x) such Indebtedness is incurred for the purpose of
acquiring equipment owned or used or to be owned or used by the Company
or any Subsidiaries (or for the purpose of acquiring the capital stock
or similar equity interests of a Subsidiary that is formed for the
limited purpose of owning same and does not own or hold any other
material assets) and does not exceed the purchase price of the
equipment, capital stock or other equity interest so acquired plus
reasonable transaction expenses and (y) such Indebtedness, if secured,
is secured solely by the interest of the Company or one of its
Subsidiaries in the equipment so acquired and rights related thereto;
(4) Indebtedness incurred after the Issuance Date that is
secured solely by raw materials, works in progress and finished goods
inventory and accounts receivable in a financing by a bank, finance
company or other institutional lender providing receivables or
inventory financing;
(5) endorsements for collection or deposit in the ordinary
course of business; and
(6) in the case of any Subsidiary, Indebtedness owed by such
Subsidiary to the Company.
"Person" means any natural person, corporation, partnership,
limited liability company, trust, incorporated organization, unincorporated
association or similar entity or any government, governmental agency or
political subdivision.
"Principal Market" means the AMEX or such other U.S. market or
exchange which is the principal market on which the Common Stock is then listed
for trading.
"Purchase Agreement" means the Purchase Agreement, dated as of
April 1, 2004, by and between the Company and the original holder of this Note
or its predecessor instrument pursuant to which this Note or its predecessor
instrument was originally issued.
"Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of stockholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
"Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Repurchase Event" means the occurrence of any one or more of
the following events:
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(a) For any period of five consecutive Trading Days following
the date hereof there shall be no reported sale price of the Common
Stock on any of Nasdaq, the NYSE or the AMEX;
(b) The Common Stock ceases to be listed for trading on
Nasdaq, the NYSE or the AMEX for a period of five consecutive Trading
Days;
(c) Any Fundamental Change; or
(d) The adoption of any amendment to the Company's Certificate
of Incorporation (other than any certificate designating a series of
preferred stock of the Company and other than the amendment necessary
to effect the Reverse Stock Split) which materially and adversely
affects the rights of the Holder or the taking of any other action by
the Company which materially and adversely affects the rights of the
Holder in respect of the Holder's interest in the Common Stock in a
different and more adverse manner than it affects the rights of holders
of Common Stock generally;
(e) The inability of the Holder or holders of any Other Note
for 20 Trading Days (whether or not consecutive) during any period of
365 consecutive days occurring on or after the SEC Effective Date to
sell shares of Common Stock issued or issuable upon conversion of this
Note or the Other Notes or exercise of the Warrants or issued as
Interest Payment Shares pursuant to the Registration Statement (1) by
reason of the requirements of the 1933 Act, the 1934 Act or any of the
rules or regulations under either thereof or (2) due to the
Registration Statement containing any untrue statement of material fact
or omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or other
failure of the Registration Statement to comply with the rules and
regulations of the SEC;
(f) The Company fails to file the Registration Statement with
the SEC within 25 days after the Closing Date;
(g) The Registration Statement required by Section 2(a)(i) of
the Registration Rights Agreement is not declared effective by the SEC
within 85 days following the Closing Date, or the Registration
Statement required by Section 2(a)(ii) of the Registration Rights
Agreement is not declared effective by the SEC within 90 days following
demand of the Holder pursuant to the Registration Rights Agreement.
"Repurchase Price" means with respect to any repurchase
pursuant to Sections 5.1 and 5.2 an amount in cash equal to the sum of (1) 110%
of the outstanding principal amount of this Note PLUS (2) accrued and unpaid
interest on such principal amount to the date of such repurchase PLUS (3)
accrued and unpaid Default Interest, if any, thereon at the rate provided in
this Note to the date of such repurchase.
"Restricted Ownership Percentage" shall have the meaning
provided in Section 6(g)(1).
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"Reverse Stock Split" shall have the meaning provided in the
Purchase Agreement.
"SEC" means the U.S. Securities and Exchange Commission.
"Share Interest Payment Limitation" means, with respect to any
Interest Payment Date, a number of Interest Payment Shares equal to 20% of the
aggregate number of shares of Common Stock traded on the AMEX (or other
principal market on which the Common Stock in listed at the time of such
determination) on all of the Trading Days during the period from and including
the date that is 35 Trading Days prior to such Interest Payment Date to and
including the date that is 26 Trading Days prior to such Interest Payment Date
(as reported by Bloomberg, L.P. or if such source ceases to be available, a
comparable source selected by the Majority Holders at the request of the Company
and acceptable to the Company in its reasonable judgment), equitably adjusted
for stock splits, stock dividends and similar events that are reflected in the
trading market for the Common Stock during such period.
"Share Interest Payment Option" shall have the meaning
provided in Section 2(a)(1).
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on which the Principal Market is
open for the general trading of securities.
"Transaction Documents" means this Note, the Other Notes, the
Purchase Agreement, the Other Purchase Agreements, the Warrants, the Common
Stock Warrant and the Other Common Stock Warrants.
"Transfer Agent" shall mean the institution acting as transfer
agent for the Common Stock.
"Unconverted Portion" shall have the meaning provided in
Section 2(c)(4)(A).
"Underlying Shares" means the shares of Common Stock issued or
issuable upon conversion of, or in lieu of cash payment of interest on, this
Note in accordance with the terms hereof and the Purchase Agreement.
"Warrants" means Common Stock Purchase Warrants of the Company
issued to the original Holder of this Note pursuant to the Purchase Agreement
and issued to the original holders of the Other Notes pursuant to the Other
Purchase Agreements.
SECTION 2. PAYMENT OF CERTAIN INTEREST IN COMMON STOCK;
OPTIONAL REDEMPTION.
(a) ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (1) If
the Company exercises its option to make a payment of interest on this Note
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wholly or partly in Common Stock (herein sometimes called the "Share Interest
Payment Option"), the issuance of Interest Payment Shares upon such exercise of
the Share Interest Payment Option shall have been authorized by the Board of
Directors of the Company.
(2) The Company shall not be permitted to exercise the Share
Interest Payment Option with respect to any payment of interest on this Note if:
(i) the number of shares of Common Stock authorized, unissued
and unreserved for all purposes, or held in the Company's treasury, is
insufficient to pay the portion of such interest to be paid in Common
Stock;
(ii) the issuance or delivery of Interest Payment Shares or
the public resale of such Interest Payment Shares by the Holder would
require registration or filing with or approval of any governmental
authority under any law or regulation, and such registration, filing or
approval has not been effected or obtained or is not in effect or on
such Interest Payment Date or the date the Company delivers such
Interest Payment Shares to the Holder the Registration Statement is
unavailable for use by the Holder for the resale of the Interest
Payment Shares or is not expected to be available for such use for at
least 15 Trading Days after the date the Company delivers such Interest
Payment Shares to the Holder;
(iii) the outstanding shares of Common Stock are neither (A)
listed or admitted for trading on a national securities exchange nor
(B) quoted on the Nasdaq; or the Interest Payment Shares shall not at
the time of issuance have been authorized for listing, upon official
notice of issuance, on the principal securities exchange on which the
Common Stock is then listed and traded;
(iv) the Interest Share Price for the Interest Payment Shares
is less than the par value of the Common Stock; or
(v) an Event of Default has occurred and is continuing on the
date the Company makes such election or on the applicable Interest
Payment Date.
(3) (A) The Company may exercise its right to elect the Share
Interest Payment Option with respect to any Interest Payment Date only by giving
notice of such election to the Holder not less than 25 or more than 29 Trading
Days prior to such Interest Payment Date, which notice shall state the
percentage of the interest payable on such Interest Payment Date which is to be
paid in Interest Payment Shares. The Company shall have the right to elect the
Share Interest Payment Option with respect to this Note only if the Company also
elects the similar option which it has with respect to the Other Notes for the
interest due thereon on the date which is such Interest Payment Date and in each
such case pro rata among this Note and the Other Notes, based on the amounts of
interest due on such date hereon and thereon. If the Company elects the Share
Interest Payment Option with respect to a particular Interest Payment Date, the
Company shall issue to the Holder in respect of such Interest Payment Date the
aggregate number of whole shares of Common Stock determined by dividing the per
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share Interest Share Price of the Common Stock on the applicable Interest
Payment Date into an amount equal to the total amount of lawful money of the
United States of America which the Holder would receive if the aggregate amount
of interest on this Note which is being paid in Common Stock were being paid in
such lawful money. Notwithstanding any other provision of this Note, in no event
may the Company issue in respect of the interest payable on this Note and the
Other Notes on any Interest Payment Date a number of Interest Payment Shares in
excess of the Share Interest Payment Limitation.
(B) IF THE COMPANY ELECTS THE SHARE INTEREST PAYMENT OPTION
WITH RESPECT TO AN INTEREST PAYMENT DATE, THE INTEREST PAYMENT SHARES
FOR SUCH INTEREST PAYMENT DATE SHALL BECOME ISSUABLE ON SUCH INTEREST
PAYMENT DATE AND THE COMPANY SHALL DELIVER, OR CAUSE TO BE DELIVERED,
THE APPROPRIATE NUMBER OF SHARES OF COMMON STOCK TO THE HOLDER WITHIN
THREE TRADING DAYS AFTER THE APPLICABLE INTEREST PAYMENT DATE. IF IN
ANY CASE THE COMPANY SHALL FAIL TO DELIVER OR CAUSE TO BE DELIVERED
SUCH NUMBER OF SHARES OF COMMON STOCK TO THE HOLDER WITHIN SUCH PERIOD
OF THREE TRADING DAYS, THEN IN ADDITION TO ANY OTHER LIABILITIES THE
COMPANY MAY HAVE HEREUNDER AND UNDER APPLICABLE LAW (1) THE COMPANY
SHALL PAY OR REIMBURSE THE HOLDER ON DEMAND FOR ALL OUT-OF-POCKET
EXPENSES, INCLUDING, WITHOUT LIMITATION, REASONABLE FEES AND EXPENSES
OF LEGAL COUNSEL, INCURRED BY THE HOLDER AS A RESULT OF SUCH FAILURE,
(2) IF AS A RESULT OF SUCH FAILURE THE HOLDER SHALL SUFFER ANY DIRECT
DAMAGES OR LIABILITIES FROM SUCH FAILURE (INCLUDING, WITHOUT
LIMITATION, MARGIN INTEREST AND THE COST OF PURCHASING SECURITIES TO
COVER A SALE (WHETHER BY THE HOLDER OR THE HOLDER'S SECURITIES BROKER)
OR BORROWING OF SHARES OF COMMON STOCK BY THE HOLDER FOR PURPOSES OF
SETTLING ANY TRADE INVOLVING A SALE OF SHARES OF COMMON STOCK MADE BY
THE HOLDER DURING THE PERIOD BEGINNING ON THE DATE THE COMPANY NOTIFIED
THE HOLDER OF THE COMPANY'S ELECTION OF THE SHARE INTEREST PAYMENT
OPTION AND ENDING ON THE DATE THE COMPANY DELIVERS OR CAUSES TO BE
DELIVERED TO THE HOLDER THE SHARES OF COMMON STOCK ISSUABLE IN RESPECT
THEREOF), THEN THE COMPANY SHALL UPON DEMAND OF THE HOLDER PAY TO THE
HOLDER AN AMOUNT EQUAL TO THE ACTUAL DIRECT, OUT-OF-POCKET DAMAGES AND
LIABILITIES SUFFERED BY THE HOLDER BY REASON THEREOF WHICH THE HOLDER
DOCUMENTS TO THE REASONABLE SATISFACTION OF THE COMPANY, AND (3) THE
HOLDER MAY BY WRITTEN NOTICE (WHICH MAY BE GIVEN BY MAIL, COURIER,
PERSONAL SERVICE OR TELEPHONE LINE FACSIMILE TRANSMISSION) OR ORAL
NOTICE (PROMPTLY CONFIRMED IN WRITING), GIVEN AT ANY TIME PRIOR TO
DELIVERY TO THE HOLDER OF THE SHARES OF COMMON STOCK ISSUABLE IN
CONNECTION WITH SUCH EXERCISE OF THE SHARE INTEREST PAYMENT OPTION,
REQUIRE PAYMENT IN CASH OF THE INTEREST IN RESPECT OF WHICH THE COMPANY
EXERCISED THE SHARE INTEREST PAYMENT OPTION, IN WHICH CASE THE AMOUNT
OF SUCH INTEREST SHALL BE IMMEDIATELY DUE AND PAYABLE, WITH DEFAULT
INTEREST THEREON FROM THE APPLICABLE INTEREST PAYMENT DATE UNTIL PAID
IN FULL AND THE COMPANY SHALL NOT BE OBLIGATED OR ENTITLED TO ISSUE
SUCH INTEREST PAYMENT SHARES IN RESPECT OF SUCH INTEREST PAYMENT DATE.
NOTWITHSTANDING THE FOREGOING THE COMPANY SHALL NOT BE LIABLE TO THE
HOLDER UNDER CLAUSE (2) OF THE IMMEDIATELY PRECEDING SENTENCE TO THE
EXTENT THE FAILURE OF THE COMPANY TO DELIVER OR TO CAUSE TO BE
DELIVERED SUCH SHARES OF COMMON STOCK RESULTS FROM FIRE, FLOOD, STORM,
EARTHQUAKE, SHIPWRECK, STRIKE, WAR, ACTS OF TERRORISM, CRASH INVOLVING
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FACILITIES OF A COMMON CARRIER, ACTS OF GOD, OR ANY SIMILAR EVENT
OUTSIDE THE CONTROL OF THE COMPANY (IT BEING UNDERSTOOD THAT THE ACTION
OR FAILURE TO ACT OF THE TRANSFER AGENT SHALL NOT BE DEEMED AN EVENT
OUTSIDE THE CONTROL OF THE COMPANY EXCEPT TO THE EXTENT RESULTING FROM
FIRE, FLOOD, STORM, EARTHQUAKE, SHIPWRECK, STRIKE, WAR, ACTS OF
TERRORISM, CRASH INVOLVING FACILITIES OF A COMMON CARRIER, ACTS OF GOD,
OR ANY SIMILAR EVENT OUTSIDE THE CONTROL OF THE TRANSFER AGENT OR THE
BANKRUPTCY, LIQUIDATION OR REORGANIZATION OF THE TRANSFER AGENT UNDER
ANY BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR LAW). THE HOLDER SHALL
NOTIFY THE COMPANY IN WRITING (OR BY TELEPHONE CONVERSATION, CONFIRMED
IN WRITING) AS PROMPTLY AS PRACTICABLE FOLLOWING THE THIRD TRADING DAY
AFTER SUCH INTEREST PAYMENT DATE IF THE HOLDER BECOMES AWARE THAT
SHARES OF COMMON STOCK SO ISSUABLE HAVE NOT BEEN RECEIVED AS PROVIDED
HEREIN BUT ANY FAILURE TO GIVE SUCH NOTICE SHALL NOT AFFECT THE
HOLDER'S RIGHTS UNDER THIS NOTE OR OTHERWISE. IF THE COMPANY SHALL HAVE
EXERCISED THE SHARE INTEREST PAYMENT OPTION WITH RESPECT TO A
PARTICULAR INTEREST PAYMENT DATE AND EITHER (1) THE COMPANY SHALL
NOTIFY THE HOLDER ON OR AFTER SUCH INTEREST PAYMENT DATE THAT THE
INTEREST PAYMENT SHARES MIGHT NOT BE DELIVERED WITHIN THREE TRADING
DAYS AFTER SUCH INTEREST PAYMENT DATE OR (2) THE HOLDER LEARNS AFTER
THE DATE WHICH IS THREE TRADING DAYS AFTER SUCH INTEREST PAYMENT DATE
THAT THE HOLDER HAS NOT RECEIVED SUCH INTEREST PAYMENT SHARES, THEN,
WITHOUT RELEASING THE COMPANY OF ITS OBLIGATIONS WITH RESPECT THERETO,
FROM AND AFTER THE TRADING DAY NEXT SUCCEEDING THE EARLIER OF THE
EVENTS DESCRIBED IN THE PRECEDING CLAUSES (1) AND (2) OF THIS SENTENCE
THE HOLDER SHALL MAKE REASONABLE EFFORTS NOT TO SELL SHARES OF COMMON
STOCK IN ANTICIPATION OF RECEIPT OF SUCH INTEREST PAYMENT SHARES IN A
MANNER WHICH IS LIKELY TO INCREASE MATERIALLY THE LIABILITY OF THE
COMPANY UNDER CLAUSE (2) OF THE SECOND PRECEDING SENTENCE. NO
FRACTIONAL SHARES OF COMMON STOCK SHALL BE ISSUED IN PAYMENT OF
INTEREST ON THIS NOTE. IN LIEU THEREOF, THE COMPANY MAY, AT ITS OPTION,
ISSUE A NUMBER OF SHARES OF COMMON STOCK WHICH REFLECTS A ROUNDING UP
TO THE NEXT WHOLE NUMBER OR MAY PAY LAWFUL MONEY OF THE UNITED STATES
OF AMERICA IN LIEU OF ISSUANCE OF SUCH FRACTIONAL SHARE.
(4) If the Company elects the Share Interest Payment Option
with respect to a payment of interest on this Note with respect to a particular
Interest Payment Date, the Company shall deliver to the Holder, on or prior to
the date on which Interest Payment Shares for such payment of interest on this
Note are to be received by the Holder, a Company Certificate setting forth (i)
the total amount of the cash interest payment to which the Holder is entitled,
(ii) the portion of such interest payment being made in Interest Payment Shares
and the amount which is 100% thereof, (iii) the number of Interest Payment
Shares allocable to such payment, as calculated pursuant to this Section 2(a),
(iv) any rounding adjustment to such number or any payment necessary to be made
pursuant to Section 2(a)(3), (v) a brief statement of the facts requiring such
adjustment, and (vi) a brief statement that none of the conditions set forth in
Section 2(a)(2) has occurred and is existing and that all of the requirements of
this Section 2(a) have been met. The Interest Payment Shares shall be duly
issued in the name of the Holder or its nominee. Such Company Certificate shall
be conclusive evidence of the correctness of the calculation of the number of
Interest Payment Shares allocable to the payments to which such Company
Certificate relates and of any adjustments to such number made pursuant to this
Section 2(a) in the absence of manifest error. On or before the pertinent
payment date, the Company shall issue, or cause the transfer agent for the
Common Stock to prepare and issue, the Interest Payment Shares in the name of
the Holder or its nominee before being so delivered by the Company on the
payment date.
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(5) The Interest Payment Shares, when issued pursuant to and
in compliance with this Section 2(a), shall be, and for all purposes shall be
deemed to be, validly issued, fully paid and nonassessable shares of Common
Stock; the issuance and delivery thereof is in all respects hereby authorized;
and the issuance thereof, together with lawful money of the United States of
America, if any, paid in lieu of fractional shares of Common Stock, will be, and
for all purposes shall be deemed to be, in full discharge and satisfaction of
the Company's obligation to pay the interest on this Note to which such Interest
Payment Shares relate.
(b) OPTIONAL REDEMPTION. (1) At any time during the Optional
Redemption Period, the Company shall have the right, on one occasion only, to
redeem this Note in full by payment of the Optional Redemption Consideration
pursuant to this Section 2(b) on the Optional Redemption Date, so long as the
following conditions are met:
(A) on the date the Optional Redemption Notice is given and at
all times to and including the Optional Redemption Date, no Event of
Default and no event which, with notice or passage of time, or both,
would become an Event of Default has occurred and is continuing (unless
the requirements of this clause (A) will be satisfied immediately after
the redemption of this Note and the Other Notes on the applicable
Optional Redemption Date and the Company shall furnish Company
Certificates to the Holder to such effect on the date the Optional
Redemption Notice is given to the Holder and on the Optional Redemption
Date),
(B) on the date the Optional Redemption Notice is given and at
all times to and including the Optional Redemption Date, no Repurchase
Event has occurred with respect to which the Holder has the right to
exercise repurchase rights pursuant to Sections 5.1 and 5.2 or with
respect to which the Holder has exercised such repurchase rights and
the Repurchase Price has not been paid to the Holder and no event
which, with notice or passage of time, or both, would become a
Repurchase Event has occurred and is continuing,
(C) on the date the Optional Redemption Notice is given and at
all times thereafter to and including the applicable Optional
Redemption Date, the Registration Statement shall be effective and
available for use by the Holder, the holders of the Other Notes and the
holders of the Warrants for the resale of the shares of Common Stock
issued and issuable upon conversion of this Note and the Other Notes
and issued or issuable upon exercise of the Warrants, as the case may
be, and is reasonably expected to remain effective and available for
such use for at least 30 days after the applicable Optional Redemption
Date;
(D) on the date the Optional Redemption Notice is given and at
all times thereafter to and including the Optional Redemption Date one
or more registration statements under the 1933 Act covering the resale
of the shares of Common Stock issuable to the Holder upon exercise of
the Common Stock Warrant issuable to the Holder in payment of a portion
of the Optional Redemption Consideration shall be effective under the
1933 Act and available for use by the Holder for the resale of such
shares of Common Stock and each such registration statement shall be
expected to remain available for such use for 30 Trading Days after the
Optional Redemption Date, and
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(E) on the date an Optional Redemption Notice is given, the
Company has funds available to pay the cash portion of Optional
Redemption Consideration.
In order to exercise its right of redemption under this Section 2(b) the Company
shall give the Optional Redemption Notice to the Holder not less than 30 Trading
Days or more than 40 Trading Days prior to the Optional Redemption Date stating
that: (1) the Company is exercising its right to redeem this Note in accordance
with this Section 2(b), (2) the principal amount of this Note to be redeemed,
(3) the amount of the cash portion of the Optional Redemption Consideration, (4)
the number of shares of Common Stock and the purchase price therefor to be
contained in the Common Stock Warrant included in the Optional Redemption
Consideration, (5) the Optional Redemption Date and (6) that all of the
conditions of this Section 2(b) entitling the Company to call this Note for
redemption have been met. On the Optional Redemption Date (or such later date as
the Holder surrenders this Note to the Company) the Company shall (x) pay to or
upon the order of the Holder, by wire transfer of immediately available funds to
such account as shall be specified for such purpose by the Holder at least one
Business Day prior to the Optional Redemption Date, an amount equal to the cash
portion of the Optional Redemption Consideration and (y) issue and deliver to
the Holder the portion of the Optional Redemption Consideration consisting of
the Common Stock Warrants, which will be deemed for all purposes to have been
issued to the Holder on the Optional Redemption Date, unless the Company shall
have failed to pay the amount specified in the immediately preceding clause (x)
when due.
(2) The Company shall not be entitled to give the Optional
Redemption Notice or to redeem any portion of this Note with respect to which
the Holder has given a Conversion Notice on or prior to the date the Company
gives the Optional Redemption Notice. Notwithstanding the giving of the Optional
Redemption Notice, the Holder shall be entitled to convert this Note in
accordance with the terms of this Note by giving a Conversion Notice at any time
on or prior to the later of (1) the date which is one Trading Day prior to the
Optional Redemption Date and (2) if the Company fails to pay and deliver to the
Holder or deposit in accordance with Section 7(k) the Optional Redemption
Consideration on or before the Optional Redemption Date, the date on which the
Company pays and delivers to the Holder or deposits in accordance with Section
7(k) the Optional Redemption Consideration. The Optional Redemption
Consideration set forth in the Optional Redemption Notice shall be adjusted to
reflect the reduced outstanding principal amount of this Note and related
accrued interest and Default Interest on the Optional Redemption Date resulting
from any permitted conversions of this Note after the Optional Redemption Notice
is given.
(3) In order that the Company shall not discriminate among the
Holder and the holders of the Other Notes, the Company agrees that redemption of
this Note pursuant to this Section 2(b) shall be made at the same time as a
redemption by the Company of the Other Notes. In order that the Company not
discriminate among the Holders and the holders of the Other Notes, the Company
agrees that it shall not redeem any of the Other Notes pursuant to the
provisions thereof similar to this Section 2(b) or repurchase or otherwise
acquire any of the Other Notes (other than a mandatory redemption pursuant to
provisions of the Other Notes comparable to Section 5) unless the Company offers
simultaneously to redeem, repurchase or otherwise acquire a pro rata portion
(based on outstanding principal amount) of this Note for cash at the same unit
price as the Other Note or Other Notes.
(c) MARKET PRICE OPTIONAL REDEMPTION. (1) At any time during
the Market Price Optional Redemption Period, the Company shall have the right,
on one occasion only, to redeem this Note in full by payment of the Market Price
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Optional Redemption Price pursuant to this Section 2(c) on the Market Price
Optional Redemption Date, so long as the following conditions are met:
(A) on the date the Market Price Optional Redemption Notice is
given and at all times to and including the Market Price Optional
Redemption Date, no Event of Default and no event which, with notice or
passage of time, or both, would become an Event of Default has occurred
and is continuing,
(B) on the date the Market Price Optional Redemption Notice is
given and at all times to and including the Market Price Optional
Redemption Date, no Repurchase Event has occurred with respect to which
the Holder has the right to exercise repurchase rights pursuant to
Sections 5.1 and 5.2 or with respect to which the Holder has exercised
such repurchase rights and the Repurchase Price has not been paid to
the Holder and no event which, with notice or passage of time, or both,
would become a Repurchase Event has occurred and is continuing,
(C) on the date the Market Price Optional Redemption Notice is
given and at all times thereafter to and including the applicable
Market Price Optional Redemption Date, the Registration Statement shall
be effective and available for use by the Holder, the holders of the
Other Notes and the holders of the Warrants for the resale of the
shares of Common Stock issued and issuable upon conversion of this Note
and the Other Notes and issued or issuable upon exercise of the
Warrants, as the case may be, and is reasonably expected to remain
effective and available for such use for at least 30 days after the
applicable Market Price Optional Redemption Date;
(D) on each Trading Day in the period of 30 consecutive
Trading Days ending on and including a Trading Day that is not less
than five Trading Days prior to the date the Company gives the Market
Price Optional Redemption Notice the Market Price of the Common Stock
shall have been at least 200 percent of the Conversion Price in effect
on such Trading Day.
In order to exercise its right of redemption under this Section 2(c) the Company
shall give the Market Price Optional Redemption Notice to the Holder not less
than 30 Trading Days or more than 40 Trading Days prior to the Market Price
Optional Redemption Date stating that: (1) the Company is exercising its right
to redeem this Note in accordance with this Section 2(c), (2) the principal
amount of this Note to be redeemed, (3) the amount of the Market Price Optional
Redemption Price, (4) the Market Price Optional Redemption Date and (5) that all
of the conditions of this Section 2(c) entitling the Company to call this Note
for redemption have been met. On the Market Price Optional Redemption Date (or
such later date as the Holder surrenders this Note to the Company) the Company
shall pay to or upon the order of the Holder, by wire transfer of immediately
available funds to such account as shall be specified for such purpose by the
Holder at least one Business Day prior to the Market Price Optional Redemption
Date, an amount equal to the Market Price Optional Redemption Price.
(2) The Company shall not be entitled to give the Market Price
Optional Redemption Notice or to redeem any portion of this Note with respect to
which the Holder has given a Conversion Notice on or prior to the date the
Company gives the Market Price Optional Redemption Notice. Notwithstanding the
giving of the Market Price Optional Redemption Notice, the Holder shall be
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entitled to convert this Note in accordance with the terms of this Note by
giving a Conversion Notice at any time on or prior to the later of (1) the date
which is one Trading Day prior to the Market Price Optional Redemption Date and
(2) if the Company fails to pay and deliver to the Holder or deposit in
accordance with Section 7(k) the Market Price Optional Redemption Price on or
before the Market Price Optional Redemption Date, the date on which the Company
pays and delivers to the Holder or deposits in accordance with Section 7(k) the
Market Price Optional Redemption Price. The Market Price Optional Redemption
Price set forth in the Market Price Optional Redemption Notice shall be adjusted
to reflect the reduced outstanding principal amount of this Note and related
accrued interest and Default Interest on the Market Price Optional Redemption
Date resulting from any permitted conversions of this Note after the Market
Price Optional Redemption Notice is given.
(3) In order that the Company shall not discriminate among the
Holder and the holders of the Other Notes, the Company agrees that redemption of
this Note pursuant to this Section 2(c) shall be made at the same time as a
redemption by the Company of the Other Notes. In order that the Company not
discriminate among the Holders and the holders of the Other Notes, the Company
agrees that it shall not redeem any of the Other Notes pursuant to the
provisions thereof similar to this Section 2(c) unless the Company
simultaneously redeem this Note pursuant to this Section 2(c).
(4) (A) Notwithstanding any other provision of this Note or
applicable law to the contrary, in case the Company shall give the Market Price
Optional Redemption Notice to the Holder, and on the date the Company gives the
Market Price Optional Redemption Notice or at any time thereafter to and
including the applicable Market Price Optional Redemption Date, the Holder shall
be restricted in converting any portion of this Note by reason of the Restricted
Ownership Percentage (the "Unconverted Portion"), then the Market Price Optional
Redemption Date for the Unconverted Portion so called for redemption by the
Company and which the Holder may not convert at any such time during such period
from the date the Company gives such Market Price Optional Redemption Notice to
the Market Price Optional Redemption Date shall be extended to be the Extended
Market Price Optional Redemption Date. On the applicable Extended Market Price
Optional Redemption Date, the Company shall pay the Market Price Optional
Redemption Price for any portion of this Note redeemed on such Extended Market
Price Optional Redemption Date. Any portion of this Note for which there is an
Extended Market Price Redemption Date shall remain convertible by the Holder in
accordance with Section 6 at any time to and including the close of business on
the Business Day prior to the applicable Extended Market Price Optional
Redemption Date.
(B) Notwithstanding anything to the contrary contained in
Section 6(g), solely for the purposes of calculating the Restricted Ownership
Percentage for purposes of this Section 2(c), the shares of Common Stock
issuable upon exercise of the Warrants held by the Holder shall not be deemed to
be Excluded Shares and shall be taken into account in calculating the Restricted
Ownership Percentage to determine the amount of the Unconverted Portion.
(5) If on the Market Price Optional Redemption Date or
Extended Market Price Optional Redemption Date, as the case may be, any
principal amount of this Note remains outstanding the Company shall have the
right, exercisable by notice given to the Holder within three Business Days
-19-
after the Market Price Optional Redemption Date or Extended Market Price
Optional Redemption Date, as the case may be, to extend the date for payment of
the Market Price Optional Redemption Price to such date, not later than the
Maturity Date, as stated in such notice. In case the Company exercises such
right, from and after the Market Price Optional Redemption Date or Extended
Market Price Optional Redemption Date, as the case may be, the Applicable Rate
shall become one percent per annum. The Company shall have the right to extend
further the Market Price Optional Redemption Date or Extended Market Price
Optional Redemption Date, as the case may be, for one or more successive periods
(in no case ending after the Maturity Date) by similarly giving notice thereof
to the Holder within three Business Days after the end of the then current
extension period. Any portion of this Note that remains outstanding during any
such extension made by the Company pursuant to this Section 2(c)(5) may be
converted by the Holder in accordance with Section 6 at any time to and
including the close of business on the Business Day preceding the last day of
such extension period.
(d) NO OTHER PREPAYMENT. Except as specifically provided in
Sections 2(b) and 2(c), this Note may not be prepaid, redeemed or repurchased at
the option of the Company prior to the Maturity Date. In order that the Company
not discriminate among the Holder and the holders of the Other notes, the
Company agrees that it shall not repurchase or otherwise acquire any of the
Other Notes unless the Company offers simultaneously to redeem, repurchase or
otherwise acquire a pro rata portion of this Note for cash at the same price per
unit of outstanding principal amount as the Other Note or Other Notes.
SECTION 3. CERTAIN COVENANTS.
So long as the Company shall have any obligation under this
Note, unless otherwise consented to in advance by the Majority Holders:
(a) LIMITATIONS ON CERTAIN INDEBTEDNESS. The Company will not
itself, and will not permit any Subsidiary to, create, assume, incur or in any
manner become liable in respect of, including, without limitation, by reason of
any business combination transaction (all of which are referred to herein as
"incurring"), any Indebtedness other than Permitted Indebtedness.
(b) PAYMENT OF OBLIGATIONS. The Company will pay and
discharge, and will cause each Subsidiary to pay and discharge, all their
respective material obligations and liabilities, including, without limitation,
tax liabilities, except where the same may be contested in good faith by
appropriate proceedings and the Company shall have established adequate reserves
therefor on its books.
(c) MAINTENANCE OF PROPERTY; INSURANCE. (1) The Company will
keep, and will cause each Subsidiary to keep, all property which, in the
reasonable business judgment of the Company, is useful and necessary in its
business in good working order and condition, ordinary wear and tear excepted.
(2) The Company will maintain, and will cause each Subsidiary
to maintain, with financially sound and responsible insurance companies,
insurance, in at least such amounts and against such risks as is reasonably
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adequate for the conduct of their respective businesses and the value of their
respective properties.
(d) CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Company will continue, and will cause each Subsidiary to continue, to engage in
business of the same general type as now conducted by the Company, and will
preserve, renew and keep in full force and effect, and will cause each
Subsidiary to preserve, renew and keep in full force and effect their respective
corporate existence and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business other than where the
failure to do so in respect of a Subsidiary would not have a material adverse
effect on (i) the business, properties, operations, condition (financial or
other), results of operation or prospects of the Company and the Subsidiaries,
taken as a whole, or (ii) the ability of the Company to pay and perform its
obligations under the Transaction Documents.
(e) COMPLIANCE WITH LAWS. The Company will comply, and will
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, decisions, orders and requirements of
governmental authorities and courts (including, without limitation,
environmental laws) except (i) where compliance therewith is contested in good
faith by appropriate proceedings or (ii) where non-compliance therewith could
not reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Company and the Subsidiaries, taken as a whole.
(f) INVESTMENT COMPANY ACT. The Company will not be or become
an open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
(g) LIMITATIONS ON ASSET SALES, LIQUIDATIONS, ETC.; CERTAIN
MATTERS. The Company shall not
(1) sell, convey or otherwise dispose of all or substantially
all of the assets of the Company as an entirety or substantially as an entirety
in a single transaction or in a series of related transactions; or
(2) liquidate, dissolve or otherwise wind up the affairs of
the Company.
(h) LIMITATION ON CERTAIN ISSUANCES. The Company shall not (A)
offer, sell or issue, or enter into any agreement, arrangement or understanding
to offer, sell or issue, any Common Stock Equivalent for which the price at
which the holder of such Common Stock Equivalent is entitled to acquire shares
of Common Stock varies based on the market or trading price of the Common Stock,
or (B) offer, sell or issue, or enter into any agreement, arrangement or
understanding to offer, sell or issue, any Common Stock or Common Stock
Equivalent on terms which provide for adjustment or repricing of the purchase
price or number of shares or other units of such Common Stock or Common Stock
Equivalents; PROVIDED, HOWEVER, that nothing in this Section 3(h) shall prohibit
the Company from issuing (1) shares of Common Stock for cash for the account of
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the Company in an offering that is underwritten on a firm commitment basis and
registered with the SEC under the 1933 Act or (2) the Other Notes and the
Warrants.
(i) LIMITATIONS ON LIENS. The Company will not itself, and
will not permit any Subsidiary to, create, assume or suffer to exist any
mortgage, lien, pledge, security interest or other charge or encumbrance
(including, without limitation, the lien or retained security title of a
conditional vendor), all of which are referred to below as "liens", upon all or
any part of its property of any character, whether owned at the date hereof or
thereafter acquired, except:
(1) LIENS UPON ANY PROPERTY OF ANY SUBSIDIARY OR SUBSIDIARIES
AS SECURITY FOR INDEBTEDNESS OWING BY SUCH SUBSIDIARY TO THE COMPANY;
(2) purchase money liens upon any property acquired by the
Company or any Subsidiary, or liens existing on such property at the
time of acquisition and in any such case securing Permitted
Indebtedness described in clause (3) of the definition of the term
Permitted Indebtedness; provided that (i) no such lien shall extend to
or cover any other property of the Company or any Subsidiary, (ii) the
principal amount of Indebtedness secured by each such lien on any such
property shall not exceed the cost (including such principal amount of
the Indebtedness secured thereby) to the Company or the Subsidiary of
the property subject thereto, and (iii) the aggregate principal amount
of all Indebtedness of the Company and all Subsidiaries secured by all
liens described in this subsection (2) and any extensions, renewals or
replacements thereof, at any one time outstanding, shall not exceed $1
million for the Company and the Subsidiaries; and the extending,
renewing or replacing of any lien permitted by this subsection (2) or
of the Indebtedness secured thereby; PROVIDED, HOWEVER, that in any
such case the lien by which any lien is extended, renewed or replaced
shall not extend to or cover any other property of the Company or any
Subsidiary and the principal amount of such Indebtedness extended,
renewed or replaced shall not be increased;
(3) liens securing this Note and the Other Notes ratably and
not securing any other Indebtedness of the Company, any Subsidiary or
any other Person;
(4) liens for taxes or assessments or governmental charges or
levies on its property if such taxes or assessments or charges or
levies shall not at the time be due and payable or if the amount,
applicability, or validity of any such tax, assessment, charge or levy
shall currently be contested in good faith by appropriate proceedings
or necessary preliminary steps are being taken to contest, compromise
or settle the amount thereof or to determine the applicability or
validity thereof and if the Company or such Subsidiary, as the case may
be, shall have set aside on its books reserves (segregated to the
extent required by sound accounting practice) deemed by it adequate
with respect thereto; deposits or pledges to secure payment of worker's
compensation, unemployment insurance, old age pensions or other social
security; deposits or pledges to secure performance of bids, tenders,
contracts (other than contracts for the payment of money borrowed or
credit extended), leases, public or statutory obligations, surety or
appeal bonds, or other deposits or pledges for purposes of like general
nature in the ordinary course of business; mechanics', carriers',
workers', repairmen's or other like liens arising in the ordinary
course of business securing obligations which are not overdue for a
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period of 60 days, or which are in good faith being contested or
litigated, or deposits to obtain the release of such liens; liens
created by or resulting from any litigation or legal proceedings or
proceedings being contested in good faith by appropriate proceedings,
provided any execution levied thereon shall be stayed; leases made, or
existing on property acquired, in the ordinary course of business;
landlords' liens under leases to which the Company or any Subsidiary is
a party; and zoning restrictions, easements, licenses or restrictions
on the use of real property or minor irregularities in title thereto;
provided that all such liens described in this subsection (4) do not,
in the aggregate, materially impair the use of such property in the
operations of the business of the Company or any Subsidiary or the
value of such property for the purpose of such business;
(5) liens existing on the Issuance Date and either disclosed
in the SEC Filings or listed in SCHEDULE 3.13 to the Purchase
Agreement; and
(6) liens upon raw materials, works in progress and finished
goods inventory and accounts receivable granted to a bank, finance
company or other institutional lender providing receivables and
inventory financings.
(j) TRANSACTIONS WITH AFFILIATES. The Company will not pay,
and will not permit any Subsidiary, directly or indirectly, to pay, any funds to
or for the account of, make any investment (whether by acquisition of stock or
Indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Indebtedness,
or otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with, any joint enterprise or other joint arrangement with, any
Affiliate of the Company, except, on terms to the Company or such Subsidiary no
less favorable than terms that could be obtained by the Company or such
Subsidiary from a Person that is not an Affiliate of the Company, as determined
in good faith by the Board of Directors.
(k) NOTICE OF DEFAULTS. The Company shall notify the Holder
promptly, but in any event not later than five days after the Company becomes
aware of the fact, of any failure by the Company to comply with this Section 3.
(l) LISTING ELIGIBILITY REPORTING. The Company shall notify
the Holder from time to time within five days after the Company first learns
that it does not meet any of the applicable requirements for the continued
listing of the Common Stock on the principal securities market or exchange on
which the Common Stock is listed from time to time and shall make appropriate
public announcement thereof so that the content of such notice shall not
constitute material non-public information for purposes of the 1934 Act.
SECTION 4. EVENTS OF DEFAULT.
(a) If any of the following events of default (each, an "Event
of Default") shall occur:
(1) FAILURE TO PAY PRINCIPAL, INTEREST, ETC. The Company fails
(1) to pay the principal, the Optional Redemption Consideration or the
Repurchase Price hereof when due, whether at maturity, upon
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acceleration or otherwise, as applicable, or (2) to pay any installment
of interest hereon when due and, in the case of this clause (2) of this
Section 4(a)(1) only, such failure continues for a period of five
Business Days after the due date thereof; or
(2) CONVERSION AND THE SHARES. The Company fails to issue or
cause to be issued shares of Common Stock to the Holder or the holder
of any Other Note upon exercise of the conversion or purchase rights of
the Holder or such holder within two Trading Days after the due date
therefor in accordance with the terms of this Note, any Other Note, or
any Warrant or fails to transfer any certificate for any such shares of
Common Stock or any shares of Common Stock issued in payment of
interest on this Note or any Other Note as and when required by this
Note and the Purchase Agreement or any Other Note and the applicable
Other Purchase Agreement, as the case may be; or
(3) BREACH OF CERTAIN COVENANTS. The Company fails to comply
with Section 3(a), (g), (h), (i), (k) and (l); or
(4) BREACH OF OTHER COVENANTS. The Company fails to comply in
any material respect with any other provision of Section 3 of this Note
(other than as specified in the immediately preceding clause (3)) or
breaches any other material covenant or other material term or
condition of this Note or any of the other Transaction Documents (other
than as specifically provided in clauses (1), (2) and (3) of this
Section 4(a)), and such breach continues for a period of 15 days after
written notice thereof to the Company from the Holder; or
(5) BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation or warranty of the Company made herein or in any
agreement, statement or certificate given in writing pursuant hereto or
in connection herewith (including, without limitation, the Transaction
Documents) shall be false or misleading in any material respect when
made; or
(6) CERTAIN VOLUNTARY PROCEEDINGS. The Company or any
Subsidiary shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due or shall admit in writing
its inability generally to pay its debts as they become due; or
(7) CERTAIN INVOLUNTARY PROCEEDINGS. An involuntary case or
other proceeding shall be commenced against the Company or any
Subsidiary seeking liquidation, reorganization or other relief with
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respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of 60 consecutive days; or
(8) JUDGMENTS. Any court of competent jurisdiction shall enter
one or more final judgments against the Company or any Subsidiary or
any of their respective properties or other assets in an aggregate
amount in excess of $250,000, which is not vacated, bonded, stayed,
discharged, satisfied or waived for a period of 30 consecutive days; or
(9) DEFAULT UNDER OTHER AGREEMENTS. (a) The Company or any
Subsidiary shall (i) default in any payment with respect to any
Indebtedness for borrowed money (other than this Note) which
Indebtedness has an outstanding principal amount in excess of $250,000
individually or $750,000 in the aggregate for all such Indebtedness,
beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created or (ii) default in
the observance or performance of any agreement, covenant or condition
relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of
such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, any such Indebtedness to become due prior to its
stated maturity and such default or event shall continue beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created (after giving effect to any consent
or waiver obtained and then in effect thereunder) and such default
shall continue for five days (or to such earlier date as the holder of
any other Indebtedness shall declare the same due and payable by reason
of such default; or (b) any Indebtedness of the Company or any
Subsidiary which has an outstanding principal amount in excess of the
$250,000 individually or $750,000 in the aggregate for all such
Indebtedness shall, in accordance with its terms, be declared to be due
and payable, or required to be prepaid other than by a regularly
scheduled or required payment prior to the stated maturity thereof;
then, upon the occurrence and during the continuation of any Event of Default
specified in clause (1), (2), (3), (4), (5), (8) or (9) of this Section 4(a), at
the option of the Holder, and upon the occurrence of any Event of Default
specified in clause (6) or (7) of this Section 4(a): (X) the Company shall, pay
to the Holder an amount equal to [110% OF] [THE SUM OF (I)] the outstanding
principal amount of this Note PLUS [(II)] accrued and unpaid interest on such
principal amount to the date of payment PLUS [(III)] accrued and unpaid Default
Interest, if any, thereon at the rate provided in this Note to the date of
payment, (Y) all other amounts payable by the Company hereunder or under any of
the other Transaction Documents shall immediately become due and payable, all
without demand, presentment or notice, all of which hereby are expressly waived,
together with all costs, including, without limitation, reasonable legal fees
and expenses, of collection, and (Z) the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity.
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SECTION 5. REPURCHASE UPON A REPURCHASE EVENT.
(a) REPURCHASE RIGHT UPON REPURCHASE EVENT. If a Repurchase
Event occurs, in addition to any other right of the Holder, the Holder shall
have the right, at the Holder's option, to require the Company to repurchase all
of this Note, or any portion hereof on the repurchase date that is five Business
Days after the date of the Holder Notice delivered with respect to such
Repurchase Event. The Holder shall have the right to require the Company to
repurchase all or any such portion of this Note if a Repurchase Event occurs at
any time while any portion of the principal amount of this Note is outstanding
at a price equal to the Repurchase Price.
(b) NOTICES; METHOD OF EXERCISING REPURCHASE RIGHTS, ETC. (1)
On or before the fifth Business Day after the occurrence of a Repurchase Event,
the Company shall give to the Holder a Company Notice of the occurrence of the
Repurchase Event and of the repurchase right set forth herein arising as a
result thereof. Such Company Notice shall set forth:
(i) the date by which the repurchase right must be exercised,
and
(ii) a description of the procedure (set forth in this Section
5(b)) which the Holder must follow to exercise the repurchase right.
No failure of the Company to give a Company Notice or defect therein shall limit
the Holder's right to exercise the repurchase right or affect the validity of
the proceedings for the repurchase of this Note or portion hereof.
(2) To exercise the repurchase right, the Holder shall deliver
to the Company on or before the 30th day after a Company Notice (or if no such
Company Notice has been given, within 40 days after the Holder first learns of
the Repurchase Event) (i) a Holder Notice setting forth the name of the Holder
and the principal amount of this Note to be repurchased, and (ii) this Note,
duly endorsed for transfer to the Company of the portion of the outstanding
principal amount of this Note to be repurchased. A Holder Notice may be revoked
by the Holder at any time prior to the time the Company pays the applicable
Repurchase Price to the Holder.
(3) If the Holder shall have given a Holder Notice, then on
the date which is five Business Days after the date such Holder Notice is given
(or such later date as the Holder surrenders this Note) the Company shall make
payment in immediately available funds of the applicable Repurchase Price to
such account as specified by the Holder in writing to the Company at least one
Business Day prior to the applicable repurchase date.
(c) OTHER. A Holder Notice given by the Holder shall be deemed
for all purposes to be in proper form unless the Company notifies the Holder
within three Business Days after the Holder gives such Holder Notice (which
notice from the Company shall specify all defects in such Holder Notice), and
any Holder Notice containing any such defect shall nonetheless be effective on
the date given if the Holder promptly undertakes to correct all such defects. No
such claim of defect shall limit or delay performance of the Company's
obligation to repurchase any portion of this Note, the repurchase of which is
not in dispute.
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SECTION 6. CONVERSION.
(a) RIGHT TO CONVERT. Subject to and upon compliance with the
provisions of this Note, the Holder shall have the right, at the Holder's
option, at any time prior to the close of business on the Maturity Date [(except
that, if the Holder shall have exercised repurchase rights under Sections 5(a)
and 5(b) or the Company shall have exercised its redemption rights under Section
2(b), such conversion right shall terminate with respect to the portion of this
Note to be repurchased or redeemed, as the case may be, at the close of business
on the last Trading Day prior to the later of (x) the Optional Redemption Date
or the date the Company is required to make such repurchase, as the case may be,
and (y) the date the Company pays or deposits in accordance with Section 7(k)
the applicable Repurchase Price or Optional Redemption Consideration unless in
any such case the Company shall default in payment due upon repurchase or
redemption hereof)] to convert the principal amount of this Note, or any portion
of such principal amount which is at least $10,000 (or such lesser principal
amount of this Note as shall be outstanding at such time), plus accrued and
unpaid interest, into that number of fully paid and non-assessable shares of
Common Stock (as such shares shall then be constituted) obtained by dividing (1)
the sum of (x) the principal amount of this Note or portion thereof being
converted PLUS (y) accrued and unpaid interest on the portion of the principal
amount of this Note being converted to the applicable Conversion Date PLUS (z)
accrued and unpaid Default Interest, if any, on the amount referred to in the
immediately preceding clause (y) to the applicable Conversion Date BY (2) the
Conversion Price in effect on the applicable Conversion Date, by giving a
Conversion Notice in the manner provided in Section 6(b); PROVIDED, HOWEVER,
that, if at any time this Note is converted in whole or in part pursuant to this
Section 6(a), the Company does not have available for issuance upon such
conversion as authorized and unissued shares or in its treasury at least the
number of shares of Common Stock required to be issued pursuant hereto, then, at
the election of the Holder made by notice from the Holder to the Company, this
Note (or portion hereof as to which conversion has been requested), to the
extent that sufficient shares of Common Stock are not then available for
issuance upon conversion, shall be converted into the right to receive from the
Company, in lieu of the shares of Common Stock into which this Note or such
portion hereof would otherwise be converted and which the Company is unable to
issue, payment in an amount equal to the product obtained by multiplying (x) the
number of shares of Common Stock which the Company is unable to issue TIMES (y)
the arithmetic average of the Market Price for the Common Stock during the five
consecutive Trading Days immediately prior to the applicable Conversion Date.
Any such payment shall, for all purposes of this Note, be deemed to be a payment
of principal plus a premium equal to the total amount payable less the principal
portion of this Note converted as to which such payment is required to be made
because shares of Common Stock are not then available for issuance upon such
conversion. The Holder is not entitled to any rights of a holder of Common Stock
until the Holder has converted this Note to Common Stock, and only to the extent
this Note is deemed to have been converted to Common Stock under this Section 6.
For purposes of Sections 6(e) and 6(f), whenever a provision references the
shares of Common Stock into which this Note (or a portion hereof) is convertible
or the shares of Common Stock issuable upon conversion of this Note (or a
portion hereof) or words of similar import, any determination required by such
provision shall be made as if a sufficient number of shares of Common Stock were
then available for issuance upon conversion in full of this Note.
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(b) EXERCISE OF CONVERSION RIGHT; ISSUANCE OF COMMON STOCK ON
CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. (1) In order to exercise
the conversion privilege with respect to this Note, the Holder shall give a
Conversion Notice (or such other notice which is acceptable to the Company) to
the Company and the Issuing Agent or to the office or agency designated by the
Company for such purpose by notice to the Holder. A Conversion Notice may be
given by telephone line facsimile transmission to the numbers set forth on the
form of Conversion Notice.
(2) As promptly as practicable, but in no event later than
three Trading Days, after a Conversion Notice is given, the Company shall issue
and shall deliver to the Holder or the Holder's designee the number of full
shares of Common Stock issuable upon such conversion of this Note or portion
hereof in accordance with the provisions of this Article and deliver a check or
cash in respect of any fractional interest in respect of a share of Common Stock
arising upon such conversion, as provided in Section 6(b)(6) and, if applicable,
any cash payment required pursuant to the proviso to the first sentence of
Section 6(a) (which payment, if any, shall be paid no later than three Trading
Days after the applicable Conversion Date). In lieu of delivering physical
certificates for the shares of Common Stock issuable upon any conversion of this
Note, provided the Company's transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon
request of the Holder, the Company shall use commercially reasonable efforts to
cause its transfer agent electronically to transmit such shares of Common Stock
issuable upon conversion to the Holder (or its designee), by crediting the
account of the Holder's (or such designee's) broker with DTC through its Deposit
Withdrawal Agent Commission system (provided that the same time periods herein
as for stock certificates shall apply).
(3) Each conversion of this Note (or portion hereof) shall be
deemed to have been effected on the applicable Conversion Date, and the person
in whose name any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become on such
Conversion Date the holder of record of the shares represented thereby;
PROVIDED, HOWEVER, that if a Conversion Date is a date on which the stock
transfer books of the Company shall be closed such conversion shall constitute
the person in whose name the certificates are to be issued as the record holder
thereof for all purposes on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion Price in effect
on the applicable Conversion Date. Upon conversion of this Note or any portion
hereof, the accrued and unpaid interest on this Note (or portion hereof) to (but
excluding) the applicable Conversion Date shall be deemed to be paid to the
Holder of this Note through receipt of such number of shares of Common Stock
issued upon conversion of this Note or portion hereof as shall have an aggregate
Current Fair Market Value on the Trading Day immediately preceding such
Conversion Date equal to the amount of such accrued and unpaid interest.
(4) The Company shall notify the Holder of any claim by the
Company of manifest error in a Conversion Notice within two Trading Days after
the Holder gives such Conversion Notice and no such claim of error shall limit
or delay performance of the Company's obligation to issue upon such conversion
the number of shares of Common Stock which are not in dispute. A Conversion
Notice shall be deemed for all purposes to be in proper form unless the Company
notifies the Holder by telephone line facsimile transmission within two Trading
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Days after a Conversion Notice has been given (which notice from the Company
shall specify all defects in the Conversion Notice) and any Conversion Notice
containing any such defect shall nonetheless be effective on the date given if
the Holder promptly undertakes to correct all such defects and in due course in
fact corrects such defects. The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock or other securities or property on conversion
of this Note in a name other than that of the Holder, and the Company shall not
be required to issue or deliver any such shares or other securities or property
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid. The Holder shall be
responsible for the amount of any withholding tax payable in connection with any
conversion of this Note.
(5) (A) If the Holder shall have given a Conversion Notice in
accordance with the terms of this Note, the Company's obligation to issue and
deliver the certificates for Common Stock shall be absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any person or any action to enforce the same, any failure or
delay in the enforcement of any other obligation of the Company to the Holder,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with such
conversion; PROVIDED, HOWEVER, that nothing herein shall limit or prejudice the
right of the Company to pursue any such claim in any other manner permitted by
applicable law. The occurrence of an event which requires an adjustment of the
Conversion Price as contemplated by Section 6(c) shall in no way restrict or
delay the right of the Holder to receive certificates for Common Stock upon
conversion of this Note and the Company shall use its best efforts to implement
such adjustment on terms reasonably acceptable to the Holder within two Trading
Days of such occurrence.
(B) If in any case the Company shall fail to issue and deliver
the shares of Common Stock to the Holder in connection with a particular
conversion of this Note within three Trading Days after the Holder gives the
Conversion Notice for such conversion, in addition to any other liabilities the
Company may have hereunder and under applicable law (i) the Company shall pay or
reimburse the Holder on demand for all out-of-pocket expenses, including,
without limitation, reasonable fees and expenses of legal counsel, incurred by
the Holder as a result of such failure, (ii) if as a result of such failure the
Holder shall suffer any direct damages or liabilities from such failure
(including, without limitation, margin interest and the cost of purchasing
securities to cover a sale (whether by the Holder or the Holder's securities
broker) or borrowing of shares of Common Stock by the Holder for purposes of
settling any trade involving a sale of shares of Common Stock made by the Holder
during the period beginning on the Issuance Date and ending on the date the
Company delivers or causes to be delivered to the Holder such shares of Common
Stock), then the Company shall upon demand of the Holder pay to the Holder an
amount equal to the actual direct, out-of-pocket damages and liabilities
suffered by the Holder by reason thereof which the Holder documents to the
reasonable satisfaction of the Company, and (iii) the Holder may by written
notice (which may be given by mail, courier, personal service or telephone line
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facsimile transmission) or oral notice (promptly confirmed in writing), given at
any time prior to delivery to the Holder of the shares of Common Stock issuable
in connection with such exercise of the Holder's conversion right, rescind such
exercise and the Conversion Notice relating thereto, in which case the Holder
shall thereafter be entitled to convert that portion of this Note as to which
such exercise is so rescinded and to exercise its other rights and remedies with
respect to such failure by the Company. Notwithstanding the foregoing the
Company shall not be liable to the Holder under clause (ii) of the immediately
preceding sentence to the extent the failure of the Company to deliver or to
cause to be delivered such shares of Common Stock results from fire, flood,
storm, earthquake, shipwreck, strike, war, acts of terrorism, crash involving
facilities of a common carrier, acts of God, or any similar event outside the
control of the Company (it being understood that the action or failure to act of
the Transfer Agent shall not be deemed an event outside the control of the
Company except to the extent resulting from fire, flood, storm, earthquake,
shipwreck, strike, war, acts of terrorism, crash involving facilities of a
common carrier, acts of God, or any similar event outside the control of the
Transfer Agent or the bankruptcy, liquidation or reorganization of the Transfer
Agent under any bankruptcy, insolvency or other similar law). The Holder shall
notify the Company in writing (or by telephone conversation, confirmed in
writing) as promptly as practicable following the third Trading Day after the
Holder gives a Conversion Notice if the Holder becomes aware that such shares of
Common Stock so issuable have not been received as provided herein, but any
failure so to give such notice shall not affect the Holder's rights under this
Note or otherwise. If the Holder shall have exercised the conversion right in
any particular instance and either (1) the Company shall notify the Holder on or
after such that the shares of Common Stock issuable upon such conversion might
not be delivered within three Trading Days after the date the Holder gives such
Conversion Notice or (2) the Holder learns after the date which is three Trading
Days after the date the Holder gives such Conversion Notice that the Holder has
not received such shares of Common Stock, then, without releasing the Company of
its obligations with respect thereto, from and after the Trading Day next
succeeding the earlier of the events described in the preceding clauses (1) and
(2) of this sentence the Holder shall make reasonable efforts not to sell shares
of Common Stock in anticipation of receipt of such shares of Common Stock in a
manner which is likely to increase materially the liability of the Company under
clause (2) of the second preceding sentence.
(C) If the Company fails to deliver or cause to be delivered
to the Holder such shares of Common Stock pursuant to this Section 6 (free of
any restrictions on transfer or legends except to the extent permitted under
Section 6.12 of the Purchase Agreement) in accordance herewith, within five
Trading Days after a particular conversion of this Note, then, in addition to
any other liability the Company may have, the Company shall pay to the Holder,
in cash, an amount, computed at the rate of 2% per month of the Current Fair
Market Value of the shares of Common Stock (or Other Securities) not timely
delivered by the Company, for the period such failure continues (the "Conversion
Delay Payments"), without duplication of any amount payable to the Holder
pursuant to clause (F) of Section 2(c)(i) of the Registration Rights Agreement,
with each change in the Current Fair Market Value during such period being given
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effect. such payments shall be made on the last day of each calendar month so
long as the Company's obligation to make such payments continues and on the date
the Company makes such delivery of such shares of Common Stock.
(6) No fractional shares of Common Stock shall be issued upon
conversion of this Note but, in lieu of any fraction of a share of Common Stock
which would otherwise be issuable in respect of such conversion, the Company may
round the number of shares of Common Stock issued on such conversion up to the
next highest whole share or may pay lawful money of the United States of America
for such fractional share, based on a value of one share of Common Stock being
equal to the Market Price of the Common Stock on the applicable Conversion Date.
(C) ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall
be adjusted from time to time by the Company as follows:
(1) ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS IN
COMMON STOCK. In case the Company shall on or after the Escrow Funding Date pay
a dividend or make a distribution to all holders of the outstanding Common Stock
in shares of Common Stock, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the Record Date fixed for such determination and the denominator
shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following the
Record Date. If any dividend or distribution of the type described in this
Section 6(c)(1) is declared but not so paid or made, the Conversion Price shall
again be adjusted to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(2) WEIGHTED ADJUSTMENTS FOR CERTAIN ISSUANCES OF RIGHTS OR
WARRANTS. In case the Company shall on or after the Escrow Funding Date issue
rights or warrants (other than any rights or warrants referred to in Section
6(c)(4) to all holders of its outstanding shares of Common Stock entitling them
(for a period expiring within 45 days after the date fixed for the determination
of stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price on the Record Date fixed for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect at the opening of business on the date after such
Record Date by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding at the close of business on the Record Date plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Current Market Price, and the
denominator shall be the number of shares of Common Stock outstanding on the
close of business on the Record Date plus the total number of additional shares
of Common Stock so offered for subscription or purchase. Such adjustment shall
become effective immediately after the opening of business on the day following
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the Record Date fixed for determination of stockholders entitled to receive such
rights or warrants. To the extent that shares of Common Stock are not delivered
pursuant to such rights or warrants, upon the expiration or termination of such
rights or warrants, the Conversion Price shall be readjusted to the Conversion
Price which would then be in effect had the adjustments made upon the issuance
of such rights or warrants been made on the basis of delivery of only the number
of shares of Common Stock actually delivered. In the event that such rights or
warrants are not so issued, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such date fixed for the
determination of stockholders entitled to receive such rights or warrants had
not been fixed. In determining whether any rights or warrants entitle the holder
to subscribe for or purchase shares of Common Stock at less than such Current
Market Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received for
such rights or warrants, the value of such consideration, if other than cash, to
be determined by the Board of Directors.
(3) ADJUSTMENTS FOR CERTAIN SUBDIVISIONS OF THE COMMON STOCK.
In case the outstanding shares of Common Stock shall on or after the Escrow
Funding Date be subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the earlier of the day
following the day upon which such subdivision becomes effective and the day on
which "ex-" trading of the Common Stock begins with respect to such subdivision
shall be proportionately reduced, and conversely, in case outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common Stock,
the Conversion Price in effect at the opening of business on the earlier of the
day following the day upon which such combination becomes effective and the day
on which "ex-" trading of the Common Stock with respect to such combination
begins shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the earlier of the day following the day upon which such subdivision or
combination becomes effective and the day on which "ex-" trading of the Common
Stock begins with respect to such subdivision or combination.
(4) ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In
case the Company shall on or after the Escrow Funding Date, by dividend or
otherwise, distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions to which
Section 6(c)(1) applies) or evidences of its indebtedness, cash or other assets
(including securities, but excluding any rights or warrants referred to in
Section 6(c)(2) and dividends and distributions paid exclusively in cash and
excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 6(d) applies) (the
foregoing hereinafter in this Section 6(c)(4) called the "Securities")), then,
in each such case, subject to the second paragraph of this Section 6(c)(4), the
Conversion Price shall be reduced so that the same shall be equal to the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on the Record Date with respect to such distribution by a
fraction of which the numerator shall be the Current Market Price on such date
less the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) on such
date of the portion of the Securities so distributed applicable to one share of
Common Stock and the denominator shall be such Current Market Price, such
reduction to become effective immediately prior to the opening of business on
the day following the Record Date; PROVIDED, HOWEVER, that in the event the then
fair market value (as so determined) of the portion of the Securities so
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distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that the Holder shall have the
right to receive upon conversion of this Note (or any portion hereof) the amount
of Securities such holder would have received had such holder converted this
Note (or portion hereof) immediately prior to such Record Date. In the event
that such dividend or distribution is not so paid or made, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in effect
if such dividend or distribution had not been declared. If the Board of
Directors determines the fair market value of any distribution for purposes of
this Section 6(c)(4) by reference to the actual or when issued trading market
for any Securities comprising all or part of such distribution, it must in doing
so consider the prices in such market over the same period used in computing the
Current Market Price, to the extent possible.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events (a "Trigger Event"): (i) are deemed to be transferred with such
shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Stock, shall not be deemed to have been
distributed for purposes of this Section 6(c) (and no adjustment to the
Conversion Price under this Section 6(c) will be required) until the occurrence
of the earliest Trigger Event. If any such rights or warrants, including any
such existing rights or warrants distributed prior to the Issuance Date, are
subject to Trigger Events, upon the satisfaction of each of which such rights or
warrants shall become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such Trigger Event
shall be deemed to be such date of issuance and record date with respect to new
rights or warrants (and a termination or expiration of the existing rights or
warrants without exercise by the holder thereof) (so that, by way of
illustration and not limitation, the dates of issuance of any such rights shall
be deemed to be the dates on which such rights become exercisable to purchase
capital stock of the Company, and not the date on which such rights may be
issued, or may become evidenced by separate certificates, if such rights are not
then so exercisable). In addition, in the event of any distribution of rights or
warrants, or any Trigger Event with respect thereto, that was counted for
purposes of calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 6(c) was made (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per share redemption or repurchase price received by a holder or holders
of Common Stock with respect to such rights or warrants (assuming such holder
had retained such rights or warrants), made to all holders of Common Stock as of
the date of such redemption or repurchase, and (2) in the case of such rights or
warrants which shall have expired or been terminated without exercise by any
holders thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
For purposes of this Section 6(c)(4) and Sections 6(c)(1) and
(2), any dividend or distribution to which this Section 6(c)(4) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which Section 6(c)(2) applies (or
both), shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets, shares of capital stock, rights or warrants
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other than such shares of Common Stock or rights or warrants to which Section
6(c)(2) applies (and any Conversion Price reduction required by this Section
6(c)(4) with respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such shares of Common
Stock or such rights or warrants (and any further Conversion Price reduction
required by Sections 6(c)(1) and (2) with respect to such dividend or
distribution shall then be made), except (A) the Record Date of such dividend or
distribution shall be substituted as "the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution", "Record
Date fixed for such determination" and "Record Date" within the meaning of
Section 6(c)(1) and as "the date fixed for the determination of stockholders
entitled to receive such rights or warrants", "the Record Date fixed for the
determination of the stockholders entitled to receive such rights or warrants"
and "such Record Date" within the meaning of Section 6(c)(2) and (B) any shares
of Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the Record Date fixed for such
determination" within the meaning of Section 6(c)(1).
(5) ADJUSTMENTS FOR CERTAIN CASH DIVIDENDS. In case the
Company shall on or after the Escrow Funding Date, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 6(d) applies or as
part of a distribution referred to in Section 6(c)(4) in an aggregate amount
that, combined with (1) the aggregate amount of any other such distributions to
all holders of its Common Stock made exclusively in cash within the 12 months
preceding the date of payment of such distribution, and in respect of which no
adjustment pursuant to this Section 6(c)(5) has been made, and (2) the aggregate
of any cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and set forth in a Board Resolution) of
consideration payable in respect of any Tender Offer by the Company or any
Subsidiary for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to Section 6(c)(6) has been made, exceeds one
percent of the product of (x) the Current Market Price on the Record Date with
respect to such distribution TIMES (y) the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately after the
close of business on such date, unless the Company elects to reserve such cash
for distribution to the Holder upon the conversion of this Note (and shall have
made adequate provision) so that the Holder will receive upon such conversion,
in addition to the shares of Common Stock to which the Holder is entitled, the
amount of cash which the Holder would have received if the Holder had,
immediately prior to the Record Date for such distribution of cash, converted
this Note into Common Stock, the Conversion Price shall be reduced so that the
same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on such Record Date by a
fraction (i) the numerator of which shall be equal to the Current Market Price
on the Record Date less an amount equal to the quotient of (x) the excess of
such combined amount over such one percent and (y) the number of shares of
Common Stock outstanding on the Record Date and (ii) the denominator of which
shall be equal to the Current Market Price on the Record Date; PROVIDED,
HOWEVER, that in the event the portion of the cash so distributed applicable to
one share of Common Stock is equal to or greater than the Current Market Price
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of the Common Stock on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that the Holder shall have the right to
receive upon conversion of this Note (or any portion hereof) the amount of cash
the Holder would have received had the Holder converted this Note (or portion
hereof) immediately prior to such Record Date. In the event that such dividend
or distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(6) ADJUSTMENTS FOR CERTAIN TENDER OFFERS. In case a Tender
Offer on or after the Escrow Funding Date made by the Company or any Subsidiary
for all or any portion of the Common Stock shall expire and such Tender Offer
(as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the terms
of the Tender Offer) of Purchased Shares (as defined below)) of an aggregate
consideration having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) that combined together with (1) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution), as of the expiration
of such Tender Offer, of consideration payable in respect of any other Tender
Offers, by the Company or any Subsidiary for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such Tender
Offer and in respect of which no adjustment pursuant to this Section 6(c)(6) has
been made and (2) the aggregate amount of any distributions to all holders of
the Company's Common Stock made exclusively in cash within 12 months preceding
the expiration of such Tender Offer and in respect of which no adjustment
pursuant to Section 6(c)(5) has been made, exceeds one percent of the product of
(i) the Current Market Price as of the last time (the "Expiration Time") tenders
could have been made pursuant to such Tender Offer (as it may be amended) TIMES
(ii) the number of shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time, then, and in each such case, immediately prior
to the opening of business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
close of business on the date of the Expiration Time by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding (including
any tendered shares) at the Expiration Time multiplied by the Current Market
Price of the Common Stock on the Trading Day next succeeding the Expiration Time
and the denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the Tender Offer) of all
shares validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) at the Expiration Time and the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction (if any) to become effective immediately prior to the opening of
business on the day following the Expiration Time. In the event that the Company
is obligated to purchase shares pursuant to any such Tender Offer, but the
Company is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect if such
Tender Offer had not been made. If the application of this Section 6(c)(6) to
any Tender Offer would result in an increase in the Conversion Price, no
adjustment shall be made for such Tender Offer under this Section 6(c)(6).
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(7) ADJUSTMENTS FOR CERTAIN ISSUANCES OF NEWLY ISSUED SHARES.
(A) In case at any time on or after the Escrow Funding Date the Company shall
issue shares of its Common Stock or Common Stock Equivalents (collectively, the
"Newly Issued Shares"), other than an issuance pro rata to all holders of its
outstanding Common Stock, at a price below the greater of (x) the Current Fair
Market Value of the Common Stock at the time of such issuance and (y) the
Conversion Price in effect immediately prior to such issuance, then following
such issuance of Newly Issued Shares the Conversion Price shall be adjusted as
provided in this Section 6(c)(7). The Conversion Price following any such
adjustment shall be determined by multiplying the Conversion Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the sum
of (a) the number of shares of Common Stock outstanding immediately prior to the
issuance of the Newly Issued Shares (calculated on a fully-diluted basis
assuming the conversion of all options, warrants, purchase rights or convertible
securities which are exercisable at the time of the issuance of the Newly Issued
Shares) PLUS (b) the number of shares of Common Stock which the aggregate
consideration, if any, received by the Company for the number of Newly Issued
Shares would purchase at a price equal to the greater of (x) the Current Fair
Market Value of the Common Stock at the time of such issuance and (y) the
Conversion Price in effect immediately prior to such issuance, and the
denominator shall be the sum of (i) the number of shares of Common Stock
outstanding immediately prior to the issuance of the Newly Issued Shares
(calculated on a fully-diluted basis assuming the exercise or conversion of all
options, warrants, purchase rights or convertible securities which are
exercisable or convertible at the time of the issuance of the Newly Issued
Shares) PLUS (ii) the number of Newly Issued Shares. The adjustment provided for
in this Section 6(c)(7) may be expressed as the following mathematical formula:
( O +(C / MP)) x CP
--------------
NCP = ( O + N )
where:
C = aggregate consideration received by the Company for
the Newly Issued Shares
N = number of Newly Issued Shares
O = number of shares of Common Stock outstanding (on a
fully diluted basis, as described above) immediately
prior to the issuance of the Newly Issued Shares
MP = greater of (x) Current Fair Market Value of the
Common Stock at the time of issuance of the Newly
Issued Shares and (y) Conversion Price in effect
immediately prior to issuance of the Newly Issued
Shares
CP = Conversion Price immediately prior to the issuance of
the Newly Issued Shares
NCP = Conversion Price immediately after the issuance of
the Newly Issued Shares
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(B) Notwithstanding the foregoing, no adjustment shall be made
under this Section 6(c)(7) by reason of:
(i) the issuance by the Company of shares of Common Stock pro
rata to all holders of the Common Stock so long as (i) any adjustment
to the Conversion Price that is required by Section 6(c)(1) is made and
(ii) the Company shall have given notice of such issuance thereof to
the Holder pursuant to Section 6(f);
(ii) the issuance by the Company of Newly Issued Shares in an
offering for cash for the account of the Company that is underwritten
on a firm commitment basis and is registered with the SEC under the
1933 Act;
(iii) the issuance by the Company of the Other Notes, or the
Warrants or shares of Common Stock upon conversion of this Note, or the
Other Notes or upon exercise of the Warrants or in accordance with the
terms hereof and thereof;
(iv) the issuance by the Company of shares of Common Stock in
lieu of cash payment of interest on this Note and the Other Notes in
accordance with the terms hereof and thereof;
(v) the issuance by the Company of Newly Issued Shares upon
grant or exercise of options for employees, directors and consultants
under the Company's 1995 Stock Option Plan and 1997 Stock Option Plan;
(vi) the issuance by the Company of Newly Issued Shares to the
lessor or vendor in any equipment lease or similar equipment financing
transaction in which the Company or any Subsidiary obtains the use of
equipment for its business; and
(vii) the issuance by the Company of Newly Issued Shares upon
conversion or exercise of Common Stock Equivalents outstanding on the
date of the Purchase Agreement and disclosed in the Purchase Agreement
or the SEC Filings.
(8) ADJUSTMENT IN CONNECTION WITH REVERSE STOCK SPLIT. If the
stockholder approval of the Reverse Stock Split contemplated by Section 6.1(b)
of the Purchase Agreement is obtained and, after giving effect to the adjustment
provided for in Section 6(c)(3) in respect of the Reverse Stock Split, the
Conversion Price is greater than the Current Market Price on the 6th Trading Day
after the earlier of (x) the effective date of the Reverse Stock Split and (y)
the first Trading Day on which "ex" trading of the Common Stock begins in
respect of the Reverse Stock Split, the Conversion Price shall be reduced to the
greater of (A) such Current Market Price and (B) the product of $.15 times the
number of shares of Common Stock outstanding immediately prior to the Reverse
Stock Split as shall have, by reason of the Reverse Stock Split, become one
share of Common Stock immediately after the Reverse Stock Split.
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(9) ADDITIONAL REDUCTIONS IN CONVERSION PRICE. The Company may
make such reductions in the Conversion Price, in addition to those required by
Sections 6(c)(1), (2), (3), (4), (5), (6), (7), and (8), as the Board of
Directors considers to be advisable to avoid or diminish any income tax to
holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
(10) DE MINIMUS ADJUSTMENTS. No adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least 1% in such price; PROVIDED, HOWEVER, that any adjustments
which by reason of this Section 6(c)(10) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 6 shall be made by the Company and shall be made
to the nearest cent or to the nearest one hundredth of a share, as the case may
be.
No adjustment need be made for a change in the par value of
the Common Stock or from par value to no par value or from no par value to par
value.
(11) COMPANY NOTICE OF ADJUSTMENTS. Whenever the Conversion
Price is adjusted as herein provided, the Company shall promptly, but in no
event later than five days thereafter, give a notice to the Holder setting forth
the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment, but which statement shall not include
any information which would be material non-public information for purposes of
the 1934 Act. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
(12) EFFECTIVENESS OF CERTAIN ADJUSTMENTS. In any case in
which this Section 6(c) provides that an adjustment shall become effective
immediately after a Record Date for an event, the Company may defer until the
occurrence of such event (i) issuing to the Holder in connection with any
conversion of this Note after such Record Date and before the occurrence of such
event the additional shares of Common Stock issuable upon such conversion by
reason of the adjustment required by such event over and above the Common Stock
issuable upon such conversion before giving effect to such adjustment and (ii)
paying to such holder any amount in cash in lieu of any fraction pursuant to
Section 6(b)(6).
(13) OUTSTANDING SHARES. For purposes of this Section 6(c),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock. The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company other than dividends or
distributions payable only in shares of Common Stock.
(d) EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
(1) If any of the following events occur, namely:
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(i) any reclassification or change of the outstanding shares
of Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a
subdivision or combination),
(ii) any consolidation, merger or combination of the Company
with another corporation as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property or
assets (including cash) with respect to or in exchange for such Common
Stock, or
(iii) any sale or conveyance of the properties and assets of
the Company as, or substantially as, an entirety to any other
corporation as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock,
then
in any such case in the preceding clause (i), (ii) or (iii) the Company or the
successor or purchasing Person, as the case may be, shall execute with the
Holder a written agreement providing that:
(x) this Note shall be convertible into the kind and amount of
shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance by the holder of the number of
shares of Common Stock issuable upon conversion of this Note in full
(assuming, for such purposes, a sufficient number of authorized shares
of Common Stock available to convert this Note) immediately prior to
such reclassification, change, consolidation, merger, combination, sale
or conveyance assuming such holder of Common Stock did not exercise
such holder's rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance (PROVIDED that, if the
kind or amount of securities, cash or other property receivable upon
such consolidation, merger, statutory exchange, sale or conveyance is
not the same for each share of Common Stock in respect of which such
rights of election shall not have been exercised ("non-electing
share"), then for the purposes of this Section 6(d) the kind and amount
of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance for each
non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares),
(y) in the case of any such successor or purchasing Person,
upon such consolidation, merger, combination, sale or conveyance such
successor or purchasing Person shall be jointly and severally liable
with the Company for the performance of all of the Company's
obligations under this Note and the Note Purchase Agreement and
(z) if registration or qualification is required under the
1933 Act or applicable state law for the public resale by the Holder of
such shares of stock and Other Securities so issuable upon conversion
of this Note, such registration or qualification shall be completed
prior to such reclassification, change, consolidation, merger,
combination or sale.
-39-
Such written agreement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
6. If, in the case of any such reclassification, change, consolidation, merger,
combination, sale or conveyance, the stock or other securities and assets
receivable thereupon by a holder of shares of Common Stock includes shares of
stock or other securities and assets of a corporation other than the successor
or purchasing corporation, as the case may be, in such reclassification, change,
consolidation, merger, combination, sale or conveyance, then such written
agreement shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the Holder as the Board
of Directors shall reasonably consider necessary by reason of the foregoing,
including, to the extent practicable, the provisions providing for the
repurchase rights set forth in Section 5 herein.
(2) The above provisions of this Section shall similarly apply
to successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
(3) If this Section 6(d) applies to any event or occurrence,
Section 6(c) shall not apply.
(e) RESERVATION OF SHARES; SHARES TO BE FULLY PAID; LISTING OF
COMMON STOCK.
(1) The Company shall reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock or
shares of Common Stock held in treasury, solely for issuance upon conversion of
this Note and the Other Notes, and in addition to the shares of Common Stock
required to be reserved by the terms of the Warrants, sufficient shares to
provide for the conversion of this Note and the Other Notes from time to time as
this Note and the Other Notes are converted.
(2) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of the shares of
Common Stock issuable upon conversion of this Note, the Company will take all
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue shares of such Common Stock at
such adjusted Conversion Price.
(3) The Company covenants that all shares of Common Stock
issued upon conversion of this Note will be fully paid and non-assessable by the
Company and free from all taxes, liens and charges with respect to the issue
thereof.
(4) The Company covenants that if any shares of Common Stock
to be provided for the purpose of conversion of this Note hereunder require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued upon conversion, the Company
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
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(5) The Company covenants that, so long as the Common Stock
shall be listed on the Nasdaq, the NYSE, the AMEX or any other national
securities exchange, the Company shall obtain and, so long as the Common Stock
shall be so listed on such market or exchange, maintain approval for listing
thereon of all Common Stock issuable upon conversion of or in payment of
interest on this Note.
(f) NOTICE TO HOLDER PRIOR TO CERTAIN ACTIONS. In case on or
after the Issuance Date:
(1) the Company shall declare a dividend (or any other
distribution) on its Common Stock (other than in cash out of retained
earnings); or
(2) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
share of any class or any other rights or warrants; or
(3) the Board of Directors shall authorize any
reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding Common Stock, or a change
in par value, or from par value to no par value, or from no par value
to par value), or any consolidation or merger or other business
combination transaction to which the Company is a party and for which
approval of any stockholders of the Company is required, or the sale or
transfer of all or substantially all of the assets of the Company; or
(4) there shall be pending the voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
the Company shall give the Holder, as promptly as possible but in any event at
least ten Trading Days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, other business
combination transaction, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record who shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, other business combination
transaction, sale, transfer, dissolution, liquidation or winding-up shall be
determined. Such notice shall not include any information which would be
material non-public information for purposes of the 1934 Act. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. In the case of any such action
of which the Company gives such notice to the Holder or is required to give such
notice to the Holder, the Holder shall be entitled to give a Conversion Notice
which is contingent on the completion of such action.
-41-
(g) 9.9% LIMITATION. (1) Notwithstanding anything to the
contrary contained herein, the number of shares of Common Stock that may be
acquired by the Holder upon conversion of this Note at any time shall not exceed
a number that, when added to the total number of shares of Common Stock deemed
beneficially owned by the Holder (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the Holder's
right to convert, exercise or purchase similar to the limitation set forth
herein (the "Excluded Shares"), together with all shares of Common Stock deemed
beneficially owned at such time (other than by virtue of the ownership of the
Excluded Shares) by Persons whose beneficial ownership of Common Stock would be
aggregated with the beneficial ownership by the Holder for purposes of
determining whether a group exists or for purposes of determining the Holder's
beneficial ownership (the "Aggregation Parties"), in either such case for
purposes of Section 13(d) of the 1934 Act and Regulation 13D-G thereunder
(including, without limitation, as the same is made applicable to Section 16 of
the 1934 Act and the rules promulgated thereunder), would result in beneficial
ownership by the Holder or such group of more than 9.9% of the shares of Common
Stock for purposes of Section 13(d) or Section 16 of the 1934 Act and the rules
promulgated thereunder (as the same may be modified by the Holder as provided
herein, the "Restricted Ownership Percentage"). The Holder shall have the right
at any time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company in the event and only to the extent that
Section 16 of the 1934 Act or the rules promulgated thereunder (or any successor
statute or rules) is changed to reduce the beneficial ownership percentage
threshold thereunder to a percentage less than 10%. If at any time the limits in
this Section 6(g) make this Note inconvertible in whole or in part, the Company
shall not by reason thereof be relieved of its obligation to issue shares of
Common Stock at any time or from time to time thereafter but prior to the
Maturity Date upon conversion of this Note as and when shares of Common Stock
may be issued in compliance with such restrictions.
(2) For purposes of this Section 6(g), in determining the
number of outstanding shares of Common Stock at any time the Holder may rely on
the number of outstanding shares of Common Stock as reflected in (1) the
Company's then most recent Form 10-Q, Form 10-K or other public filing with the
SEC, as the case may be, (2) a public announcement by the Company that is later
than any such filing referred to in the preceding clause (1) or (3) any other
notice by the Company or its transfer agent setting forth the number shares of
Common Stock outstanding and knowledge the Holder may have about the number of
shares of Common Stock issued upon conversion or exercise of Common Stock
Equivalents by any Person, including the Holder, which are not reflected in the
preceding clauses (1) through (3). Upon the written request of the Holder, the
Company shall within three Business Days confirm in writing to the Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of Common Stock Equivalents, including this Note, the
Other Notes, the Warrant, the Initial Warrants and the Other Warrants, by the
Holder or its affiliates or the holders thereof, in each such case subsequent to
the date as of which such number of outstanding shares of Common Stock was
reported.
SECTION 7. MISCELLANEOUS.
(a) FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
-42-
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privileges. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
(b) NOTICES. Except as otherwise specifically provided herein,
any notice herein required or permitted to be given shall be in writing and may
be personally served, sent by telephone line facsimile transmission or delivered
by courier or sent by United States mail and shall be deemed to have been given
upon receipt if personally served, sent by telephone line facsimile transmission
or sent by courier or three days after being deposited in the facilities of the
United States Postal Service, certified, with postage pre-paid and properly
addressed, if sent by mail. For the purposes hereof, the address and facsimile
line transmission number of the Holder shall be as furnished by the Holder for
such purpose and shown on the records of the Company; and the address of the
Company shall be 000 XX 00xx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000,
Attention: Chief Financial Officer (telephone line facsimile transmission number
(000) 000-0000). The Holder or the Company may change its address for notice by
service of written notice to the other as herein provided.
(c) AMENDMENT, WAIVER, ETC. In order that the Company not be
entitled to discriminate among the Holder and the holders of the Other Notes,
neither this Note or any Other Note nor any terms hereof or thereof may be
changed, waived, discharged or terminated unless such change, waiver, discharge
or termination is in writing signed by the Company and the Majority Holders,
provided that no such change, waiver, discharge or termination shall, without
the consent of the Holder and the holders of the Other Notes affected thereby
(i) extend the scheduled final maturity of this Note or any Other Note, or
reduce the rate or extend the time of payment of interest (other than as a
result of waiving the applicability of any post-default increase in interest
rates) hereon or thereon or reduce the principal amount or the Repurchase Price
hereof or thereof or reduce or change the form or relative amounts of the
components of the Optional Redemption Consideration, (ii) increase the
Conversion Price, (iii) amend, modify or waive any provision of this Section
7(c), (iv) reduce any percentage specified in, or otherwise modify, the
definition of Majority Holders or (v) except as provided in this Note, change
the method of calculating the Interest Share Price or the Optional Redemption
Consideration in a manner adverse to the Holder.
(d) ASSIGNABILITY. This Note shall be binding upon the Company
and its successors, and shall inure to the benefit of the Holder and its
successors and permitted assigns. The Company may not assign its rights or
obligations under this Note.
(e) CERTAIN EXPENSES. The Company shall pay on demand all
expenses incurred by the Holder, including reasonable attorneys' fees and
expenses, as a consequence of, or in connection with (x) any amendment or waiver
of this Note or any other Transaction Document, (y) any default or breach of any
of the Company's obligations set forth in the Transaction Documents and (z) the
enforcement or restructuring of any right of, including the collection of any
payments due, the Holder under the Transaction Documents, including any action
or proceeding relating to such enforcement or any order, injunction or other
process seeking to restrain the Company from paying any amount due the Holder.
-43-
(f) GOVERNING LAW. (1) This Note shall be governed by the
internal laws of the State of New York, without regard to the principles of
conflict of laws.
(2) The Company irrevocably submits to the exclusive
jurisdiction of any State or federal court sitting in the State of New York,
County of New York (such consent shall not be deemed a general consent to
jurisdiction and service for any third party) over any suit, action, or
proceeding arising out of or relating to this Note. The Company irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such suit, action, or
proceeding brought in such a court and any claim that suit, action, or
proceeding has been brought in an inconvenient forum.
(3) THE COMPANY AGREES THAT THE SERVICE OF PROCESS UPON IT
MAILED BY CERTIFIED OR REGISTERED MAIL (AND SERVICE SO MADE SHALL BE DEEMED
COMPLETE FIVE BUSINESS DAYS AFTER THE SAME HAS BEEN POSTED AS AFORESAID) BY
PERSONAL SERVICE SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS
UPON IT IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT HOLDER'S
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. THE COMPANY AGREES
THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
OR IN ANY OTHER LAWFUL MANNER.
(4) THE COMPANY KNOWINGLY AND VOLUNTARILY WAIVES ANY AND ALL
RIGHTS IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON,
OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE.
(g) SAVINGS CLAUSE. In case any provision of this Note is held
by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not in
any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected in
excess of the applicable maximum rate, the excess collected shall be applied to
reduce the principal debt. If the interest actually collected hereunder is still
in excess of the applicable maximum rate, the interest rate shall be reduced so
as not to exceed the maximum allowable under law.
(h) TRANSFER OF NOTE. This Note has not been and is not being
registered under the provisions of the 1933 Act or any state securities laws and
this Note may not be transferred prior to the date that is two years after the
Issuance Date unless the Holder shall have delivered to the Company an opinion
of counsel, reasonably satisfactory in form, scope and substance to the Company,
to the effect that this Note may be sold or transferred without registration
under the 1933 Act. Before any such transfer prior to the date that is two years
after the Issuance Date, such transferee shall have represented in writing to
the Company that such transferee has requested and received from the Company all
information relating to the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and the
Subsidiaries deemed relevant by such transferee; that such transferee has been
afforded the opportunity to ask questions of the Company concerning the
-44-
foregoing and has had the opportunity to obtain and review the reports and other
information concerning the Company which at the time of such transfer have been
filed by the Company with the SEC pursuant to the 1934 Act. If such transfer is
intended to assign the rights and obligations of the Holder under the Purchase
Agreement, such transfer shall otherwise be made in compliance with Section 9.1
of the Purchase Agreement.
(i) ENFORCEABLE OBLIGATION. The Company represents and
warrants that at the time of the original issuance and delivery to the Holder of
this Note it received the full purchase price payable pursuant to the Purchase
Agreement in an amount at least equal to the original principal amount of this
Note, and that this Note is an enforceable obligation of the Company which is
not subject to any offset, reduction, counterclaim or disallowance of any sort.
(j) NOTE REGISTER; REPLACEMENT OF NOTES. The Company shall
maintain a register showing the names, addresses and telephone line facsimile
numbers of the Holder and the registered holders of the Other Notes. The Company
shall also maintain a facility for the registration of transfers of this Note
and the Other Notes and at which this Note and the Other Notes may be
surrendered for split up into instruments of smaller denominations or for
combination into instruments of larger denominations. Upon receipt by the
Company of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of this Note and (a) in the case of loss,
theft or destruction, of indemnity from the Holder reasonably satisfactory in
form to the Company (and without the requirement to post any bond or other
security) or (b) in the case of mutilation, upon surrender and cancellation of
this Note, the Company will execute and deliver to the Holder a new Note of like
tenor without charge to the Holder.
-45-
(k) PAYMENT OF NOTE ON REDEMPTION OR REPURCHASE; DEPOSIT OF
REDEMPTION PRICE OR REPURCHASE PRICE, ETC. (a) If this Note or any portion of
this Note is to be redeemed as provided in Section 2(b) or repurchased as
provided in Sections 5.1 and 5.2 and any notice required in connection therewith
shall have been given as provided therein and the Company shall have otherwise
complied with the requirements of this Note with respect thereto, then this Note
or the portion of this Note to be so redeemed or repurchased and with respect to
which any such notice has been given shall become due and payable on the date
stated in such notice for the applicable Optional Redemption Consideration or at
the Repurchase Price. On and after the Optional Redemption Date or repurchase
date so stated in such notice, provided that the Company shall have deposited
with an Eligible Bank on or prior to such Optional Redemption Date or repurchase
date, an amount in cash and a Common Stock Warrant for a number of shares of
Common Stock sufficient to pay the applicable Optional Redemption Consideration
or Repurchase Price, interest on this Note or the portion of this Note to be so
redeemed or repurchased shall cease to accrue, and this Note or such portion
hereof shall be deemed not to be outstanding and shall not be entitled to any
benefit with respect to principal of or interest on the portion to be so
redeemed or repurchased except to receive payment of the applicable Optional
Redemption Consideration or Repurchase Price. On presentation and surrender of
this Note or such portion hereof, this Note or the specified portion hereof
shall be paid and redeemed or repurchased for the applicable Optional Redemption
Consideration or at the Repurchase Price. If a portion of this Note is to be
redeemed or repurchased, upon surrender of this Note to the Company in
accordance with the terms hereof, the Company shall execute and deliver to the
Holder without service charge, a new Note or Notes, having the same date hereof
and containing identical terms and conditions, in such denomination or
denominations as requested by the Holder in aggregate principal amount equal to,
and in exchange for, the unredeemed or unrepurchased portion of the principal
amount of this Note so surrendered.
(l) CONSTRUCTION. The language used in this Note will be
deemed to be the language chosen by the Company and the original Holder of this
Note (or its predecessor instrument) to express their mutual intent, and no
rules of strict construction will be applied against the Company or the Holder.
[SIGNATURE PAGE FOLLOWS]
-46-
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed by one of its officers thereunto duly authorized on the day and in
the year first above written.
VIRAGEN, INC.
By:
------------------------------------
Name:
Title:
-47-
ASSIGNMENT
For value received _______________ hereby sell(s), assign(s)
and transfer(s) unto _______________ (Please insert social security or other
Taxpayer Identification Number of assignee: _______________ the within Note, and
hereby irrevocably constitutes and appoints _______________ attorney to transfer
the said Note on the books of Viragen, Inc., a Delaware corporation (the
"Company"), with full power of substitution in the premises.
In connection with any transfer of the Note within the period
prior to the expiration of the holding period applicable to sales thereof under
Rule 144(k) under the 1933 Act (or any successor provision) (other than any
transfer pursuant to a registration statement that has been declared effective
under the 1933 Act), the undersigned confirms that such Note is being
transferred:
[ ] To the Company or a subsidiary thereof; or
[ ] To an "accredited investor" pursuant to and in compliance with
the 1933 Act; or
[ ] Pursuant to and in compliance with Rule 144 under the 1933 Act;
and unless the box below is checked, the undersigned confirms that, to the
knowledge of the undersigned, such Note is not being transferred to an
"affiliate" of the Company as defined in Rule 144 under the 1933 Act (an
"Affiliate").
[ ] The transferee is an Affiliate of the Company.
Capitalized terms used in this Assignment and not defined in
this Assignment shall have the respective meanings provided in the Note.
Dated: NAME:
-------------- -----------------
------------------------
SIGNATURE(S)
-48-
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order
to convert 7% Convertible Note Due 2006)
Re: 7% Convertible Note Due 2006 issued by VIRAGEN, INC identified
below (the "Note")
The undersigned hereby elects to convert the outstanding Principal Amount (as
defined in the Note) indicated below of the Note into shares of Common Stock, of
VIRAGEN, INC., a Delaware corporation (the "Company") according to the terms
hereof and of the Note, as of the date written below. If shares are to be issued
in the name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any. The undersigned represents as of the date hereof
that, after giving effect to the conversion of the Note pursuant to this
Conversion Notice, the undersigned will not exceed the "Restricted Ownership
Percentage" contained in Section ___ of the Note.
Conversion information:
---------------------------------------------
Note Number
---------------------------------------------
Conversion Date
---------------------------------------------
Principal Amount of Note Being Converted
---------------------------------------------
Number of Shares of Common Stock to Be Issued
---------------------------------------------
Applicable Conversion Price
---------------------------------------------
Signature
---------------------------------------------
Name
---------------------------------------------
Address
A-1
EXHIBIT B
VIRAGEN, INC.
OPTIONAL REDEMPTION NOTICE
(SECTION 2(B) OF 7% CONVERTIBLE NOTE DUE 2006)
TO:
-----------------------------------------------------------------------
(Name of Holder)
1. Pursuant to the terms of the 7% Convertible Note due 2006 (the
"Note"), Viragen, Inc., a Delaware corporation (the "Company"), hereby notifies
the above-named Holder that the Company is exercising its right to redeem the
Note in accordance with Section 2(b) of the Note as set forth below:
(i) The cash portion of Optional Redemption Consideration
(based on the principal amount of the Note outstanding on the date this Notice
is given) is $_______________________.
(ii) The Common Stock Warrant issuable upon such redemption
(based on the principal amount of the Note outstanding on the date this Notice
is given) initially will entitle the holder to purchase shares of Common Stock
at a price of $ per share.
(iii) The Optional Redemption Date is _______________________.
2. All of the conditions of Section 2(b) of the Note for this
redemption have been satisfied.
3. Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date VIRAGEN, INC.
-------------------
By:
----------------------------------------
Title:
-------------------------------------
B-1
EXHIBIT C
VIRAGEN, INC.
MARKET PRICE OPTIONAL REDEMPTION NOTICE
(SECTION 2(C) OF 7% CONVERTIBLE NOTE DUE 2006)
TO:
-----------------------------------------------------
(Name of Holder)
1. Pursuant to the terms of the 7% Convertible Note due 2006 (the
"Note"), Viragen, Inc., a Delaware corporation (the "Company"), hereby notifies
the above-named Holder that the Company is exercising its right to redeem the
Note in accordance with Section 2(c) of the Note as set forth below:
(i) The Market Price of Optional Redemption Price (based on
the principal amount of the Note outstanding on the date this Notice is given)
is $_______________________.
(ii) The Market Price Optional Redemption Date is
_______________________.
2. All of the conditions of Section 2(c) of the Note for this
redemption have been satisfied.
3. Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
Date VIRAGEN, INC.
-------------------
By:
----------------------------------------
Title:
-------------------------------------
C-1
EXHIBIT D
VIRAGEN, INC.
COMPANY NOTICE
(SECTION 5(b)(1) OF 7% CONVERTIBLE NOTE DUE 2006)
TO:
-----------------------------------
(Name of Holder)
(1) A Repurchase Event described in the 7% Convertible Note
due 2006 (the "Note") of Viragen, Inc., a Delaware corporation (the "Company"),
occurred on , 200 . As a result of such Repurchase Event, the Holder is entitled
to exercise its repurchase rights pursuant to Section 5(b)(1) of the Note.
(2) The Holder's repurchase right must be exercised on or
before ______________, 200__.
(3) At or before the date set forth in the preceding paragraph
(2), the Holder must:
(a) deliver to the Company a Holder Notice, in the form
attached as EXHIBIT E to the Note; and
(b) the Note, duly endorsed for transfer to the Company of the
portion of the principal amount to be repurchased.
(4) Capitalized terms used herein and not otherwise defined
herein have the respective meanings provided in the Note.
Date VIRAGEN, INC.
--------------------
By:
------------------------------
TITLE:
D-1
EXHIBIT E
VIRAGEN, INC.
HOLDER NOTICE
(SECTION 5(B)(2) OF 7% CONVERTIBLE NOTE DUE 2006)
TO: VIRAGEN, INC.
(1) Pursuant to the terms of the 7% Convertible Note due 2006
(the "Note"), the undersigned Holder hereby elects to exercise its right to
require repurchase by the Company pursuant to Sections 5(b)(1) and 5(b)(2) of
$_____ of the Note, equal to the sum of $_____ principal amount of the Note,
$_____ of accrued and unpaid interest on such principal amount and $_____ of
Default Interest on such interest at the Repurchase Price provided in the Note.
(2) Capitalized terms used herein and not otherwise defined
herein have the respective meanings provided in the Note.
Date: NAME OF HOLDER:
---------------
By
----------------------------------------------
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
E-1
