EXHIBIT 2.7
THIS INSTRUMENT AND THE COMMON STOCK ISSUABLE UPON ITS CONVERSION HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OR PURSUANT TO THE REGISTRATION PROVISIONS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES.
CATAPULT COMMUNICATIONS INTERNATIONAL LIMITED
2% CONVERTIBLE SUBORDINATED NOTE DUE 2004
No. 1 U.S. $10,000,000
Catapult Communications International Limited, a company
organized under the laws of Ireland (the "Company"), for value received, hereby
promises to pay to Tekelec, a California corporation, the lesser of Ten Million
U.S. Dollars ($10,00,000) or the outstanding principal balance hereof, on August
30, 2004 (the "Maturity Date"), and to pay interest thereon, at the rate of 2%
per annum until the principal hereof is paid in full. Payment of interest and
all other amounts payable in cash with respect to this Instrument shall be made
by wire transfer to the holder, provided that if the holder shall not have
furnished wire instructions in writing to the Company on or prior to the second
Business Day immediately preceding the date on which the Company makes such
payment, such payment may be made by U.S. Dollar check mailed to the address of
the holder as such address appears in the Company security register (or to any
address subsequently provided in writing by the holder to the Company for
purposes of payment hereunder). This 2% Convertible Subordinated Note Due 2004
(this "Instrument") is being issued in connection with that certain Asset
Purchase Agreement, dated as of July 15, 2002 (the "Purchase Agreement"), by and
between Catapult Communications Corporation (the "Parent") and Tekelec. The
Parent has guaranteed the obligations of the Company under this Instrument
pursuant to that certain Subordinated Guaranty, dated as of July 15, 2002 (the
"Guaranty"). Capitalized terms used and not otherwise defined herein, shall have
the respective meanings given to those terms in Section 6 hereof.
1. PAYMENT TERMS.
(a) On the Maturity Date and upon the surrender of this
Instrument to the Company, at c/o Catapult Communications Corporation, 000 Xxxxx
Xxxxxxx Xxxx, Xxxxxxxx Xxxx, XX 00000, Attention Chief Operating Officer (or
such other office within the United States as shall be designated by the Company
to the holder hereof) (the "Designated Office"), the Company shall pay the
outstanding principal balance of this Instrument, in any combination of the
following: (A) U.S. Dollars and/or (B) Common Stock, provided that each share of
Common Stock (as hereinafter defined) transferred to the holder of this
Instrument in lieu of a cash payment pursuant to this provision shall be valued
at the AVWAP times 0.825, together with all accrued and unpaid interest thereon,
in U.S. Dollars.
(b) At any time, the Company may elect to pre-pay outstanding
principal amounts due hereunder by setting-off, in accordance with the terms of
the Purchase Agreement, Indemnification Set-Off Amounts (as such term is defined
in the Purchase Agreement) due the Parent pursuant to the Purchase Agreement
against the outstanding principal payment obligations due hereunder. The Company
shall give to the holder of this Instrument written notice of the application of
any such Indemnification Set-Off Amount within three Business Days after the
date thereof. Any Indemnification Set-Off Amounts set-off against principal
obligations under this Instrument shall be applied dollar for dollar in
satisfaction of such principal obligations, without penalty or premium.
(c) Interest shall be computed based on the actual number of days
elapsed.
(d) Except as expressly provided in Section 1(b) herein, the
Company shall not have any right to prepay any amounts owed hereunder to the
holder of this Instrument.
2. CONVERSION.
(a) (1) Provided that there are no unresolved claims for losses
incurred by the Parent pursuant to the indemnification provisions of Section 8
of the Purchase Agreement, the holder of this Instrument is entitled at any time
after August 30, 2003 and from time to time before the close of business on the
Maturity Date, to convert the principal amount of this Instrument (or any
portion of the principal amount hereof that is an integral multiple of $1,000),
into fully paid and nonassessable Common Stock (calculated as to each conversion
to the nearest 1/100 of a share) of the Parent at the rate of 62.50 shares of
Common Stock for each $1,000 principal amount of Instrument (or at the then
current adjusted rate if an adjustment has been made as provided below) (the
"Conversion Rate") by surrender of this Instrument, duly endorsed or assigned to
the Company or in blank to the Company at the Designated Office, accompanied by
written notice to the Company, in the form attached hereto, that the holder
hereof elects to convert this Instrument (or if less than the entire principal
amount hereof is to be converted, specifying the portion hereof to be
converted). If the holder elects to exercise its conversion right hereunder,
then the Company shall, within five (5) Business Days after receipt of written
notice of such election, deliver or cause to be delivered to the holder at the
address specified by the holder to the Company in the conversion notice a
certificate or certificates for the Common Stock issued upon such conversion and
any replacement Instrument issued as a result of any partial conversion of this
Instrument.
(2) Upon surrender of this Instrument for conversion, the
holder will be entitled to payment in cash within three (3) Business Days
thereafter of the interest accrued on the principal amount of this Instrument
then being converted and unpaid to such date of conversion (a "Company
Conversion Date").
(3) Subject to Section 2(b) below, no payment or adjustment
is to be made on conversion for dividends on the Common Stock issued on
conversion hereof. No fractions of shares or scrip representing fractions of
shares will be issued on conversion, but instead of any fractional interest, the
Company shall pay a cash adjustment, computed on the basis of the Closing Price
of the Common Stock on the Trading Day immediately prior to the Company
Conversion Date, or, at its option, the Company shall round up to the next
higher whole share.
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(4) In the event that the conversion of this Instrument into
shares of Common Stock would require the Parent and the holder of this
Instrument to file notification and report forms with the Federal Trade
Commission (the "FTC") and Antitrust Division of the Department of Justice (the
"DOJ") pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), then (i) the holder of this Instrument shall, and the
Company shall cause the Parent to use best efforts to complete all applicable
filings and provide all necessary information as required pursuant to the HSR
Act, and (ii) the holder of this Instrument and the Company agree that such
conversion of this Instrument into shares of Common Stock shall not occur until
such time as the required filings are made pursuant to the HSR Act and the
required waiting period(s) have expired or early termination of the required
waiting period(s) has been granted by the FTC or the DOJ. The Parent and the
holder will each bear their own respective filing fees for any filings made
pursuant to the HSR Act, and the Company shall cause the Parent to pay any such
fees to be borne by it.
The Company shall, if the holder so elects, and within the time period
prescribed in Section 2(a)(1) hereof, deliver or cause to be delivered the
Common Stock issuable upon conversion of this Instrument to any third party or
parties designated by the holder, subject to compliance with Sections 2(f), 8(d)
and 8(f) hereof.
(b) The Conversion Rate will be subject to adjustments from time
to time as follows:
(1) In case the Parent shall pay or make a dividend or other
distribution on Common Stock of the Parent payable in Common Stock, the
Conversion Rate in effect at the opening of business on the day following the
Determination Date (as hereinafter defined) for such dividend or other
distribution shall be increased by dividing such Conversion Rate by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on such Determination Date and the denominator shall be
the sum of such number of shares of Common Stock and the total number of shares
of Common Stock constituting such dividend or other distribution, such increase
to become effective immediately after the opening of business on the day
following such Determination Date. For the purposes of this paragraph (1), the
number of shares of Common Stock at any time outstanding shall not include
Common Stock held in the treasury of the Parent but shall include Common Stock
issuable in respect of scrip certificates issued in lieu of fractions of Common
Stock. The Parent will not pay any dividend or make any distribution on Common
Stock held in the treasury of the Parent.
(2) In case the Parent shall issue rights, options or
warrants to all holders of its Common Stock entitling them to subscribe for or
purchase Common Stock at a price per share less than the current market price
per share (determined as provided in paragraph (7) of this Section 2(b)) of the
Common Stock on the Determination Date for such distribution, the Conversion
Rate in effect at the opening of business on the day following such
Determination Date shall be increased by dividing such Conversion Rate by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on such Determination Date plus the number
of shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase would
purchase at such current market price and the denominator shall be the number of
shares of Common Stock
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outstanding at the close of business on such Determination Date plus the number
of shares of Common Stock so offered for subscription or purchase, such increase
to become effective immediately after the opening of business on the day
following such Determination Date. For the purposes of this paragraph (2), the
number of shares of Common Stock at any time outstanding shall not include
Common Stock held in the treasury of the Parent but shall include Common Stock
issuable in respect of scrip certificates issued in lieu of fractions of Common
Stock. The Parent will not issue any rights, options or warrants in respect of
Common Stock held in the treasury of the Parent. Upon the expiration of any
right, option or warrant to purchase Common Stock the issuance of which resulted
in an adjustment to the Conversion Rate pursuant to this paragraph (2) of
Section 2(b), if any such right, option or warrant shall expire and shall not
have been exercised, the Conversion Rate shall immediately upon such expiration
be recomputed to the Conversion Rate which would have been in effect had the
adjustment of the Conversion Rate made upon the issuance of such right, option
or warrant been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such right, option and warrant actually exercised.
(3) In case outstanding Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, in case
outstanding Common Stock shall each be combined into a smaller number of shares
of Common Stock, the Conversion Rate in effect at the opening of business on the
day following the day upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(4) In case the Parent shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its indebtedness,
shares of any class of capital stock, or other property (including securities,
but excluding (i) any rights, options or warrants referred to in paragraph (2)
of this Section 2(b), (ii) any dividend or distribution paid exclusively in
cash, (iii) any dividend or distribution referred to in paragraph (1) of this
Section 2(b) and (iv) any merger or consolidation to which Section 2(h) applies
(the "Distributed Property"), the Conversion Rate shall be adjusted so that the
same shall equal the rate determined by dividing the Conversion Rate in effect
immediately prior to the close of business on the Determination Date for such
distribution by a fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (7) of this Section 2(b))
of the Common Stock on such Determination Date less the then fair market value
(as determined in good faith by the Board of Directors of the Parent in
accordance with the provisions of this paragraph 4 of Section 2(b)) of the
portion of the assets, shares or evidences of indebtedness so distributed
applicable to one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day following such
Determination Date; provided, however, that if the Distributed Property consists
of shares of capital stock of a Subsidiary, the Parent may, at its option and in
lieu of the foregoing adjustment to the Conversion Rate, elect to make adequate
provision so that the holder of this Instrument shall have the right to receive
upon conversion the amount of such shares of capital stock that such holder of
this Instrument would have received if such holder of this Instrument had
converted such Instrument
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on the record date. If the Board of Directors determines the fair market value
of any distribution for purposes of this paragraph (4) by reference to the
actual or when issued trading market for any securities constituting such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the current market price per share pursuant to
paragraph (7) of this Section 2(b).
In the event the Parent implements a stockholder's rights plan (a
"Rights Plan"), upon conversion of this Instrument into Common Stock, to the
extent that the Rights Plan is still in effect upon such conversion, the holder
of this Instrument will receive, in addition to the Common Stock, the rights
described therein (whether or not the rights have separated from the Common
Stock at the time of conversion), subject to the limitations set forth in the
Rights Plan. Any distribution of rights or warrants pursuant to the Rights Plan
in compliance with the requirements set forth in the immediately preceding
sentence of this paragraph shall not constitute a distribution of rights or
warrants pursuant to this Section 2(b).
Rights or warrants distributed by the Parent to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Parent's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 2(b) (and no adjustment to the Conversion Rate under
this Section 2(b) will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) to the Conversion
Rate shall be made under this Section 2(b). If any such right or warrant,
including any such existing rights or warrants distributed prior to the original
issue date of this Instrument, are subject to events, upon the occurrence of
which such rights or warrants become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the date of the
occurrence of any and each such event shall be deemed to be the date of
distribution and record date with respect to new rights or warrants with such
rights (and a termination or expiration of the existing rights or warrants
without exercise by any of the holders thereof). In addition, in the event of
any distribution (or deemed distribution) of rights or warrants, or any Trigger
Event or other event (of the type described in the preceding sentence) with
respect thereto that was counted for purposes of calculating a distribution
amount for which an adjustment to the Conversion Rate under this section was
made, (x) in the case of any such rights or warrants which shall all have been
redeemed or repurchased without exercise by any holders thereof, the Conversion
Rate shall be readjusted upon such final redemption or repurchase to give effect
to such distribution or Trigger Event, as the case may be, as though it were a
cash distribution, equal to the per share redemption or repurchase price
received by a holder or holders of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase, and
(y) in the case of such rights or warrants which shall have expired or been
terminated without exercise by any holders thereof, the Conversion Rate shall be
readjusted as if such rights and warrants had not been issued.
(5) In case the Parent shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that is
distributed as part of a distribution
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referred to in paragraph (4) of Section 2(b)) in an aggregate amount that,
combined with (I) the aggregate amount of any other cash distributions to all
holders of its Common Stock made exclusively in cash within the twelve (12)
months preceding the date of payment of such distribution and in respect of
which no adjustment pursuant to this paragraph (5) of Section 2(b) has been made
and (II) the aggregate of any cash plus the fair market value (as determined by
the Parent's Board of Directors, whose determination shall be conclusive and
described in a board resolution) of consideration payable in respect of any
tender offer by the Parent or any of its subsidiaries for all or any portion of
the Common Stock concluded within the twelve (12) months preceding the date of
payment of such distribution and in respect of which no adjustment pursuant to
paragraph (6) of Section 2(b) has been made (the "combined cash and tender
amount"), exceeds ten percent (10%) of the product of the current market price
per share of the Common Stock (determined as provided in paragraph (7) of this
Section 2(b)) on the date for the determination of holders of shares of Common
Stock entitled to receive such distribution times the number of shares of Common
Stock outstanding on such date (the "aggregate current market price"), then, and
in each such case, immediately after the close of business on such date for
determination, the Conversion Rate shall be adjusted so that the same shall
equal the rate determined by dividing the Conversion Rate in effect immediately
prior to the close of business on the date fixed for determination of the
stockholders entitled to receive such distribution by a fraction (i) the
numerator of which shall be equal to the current market price per share of the
Common Stock on the date fixed for such determination less an amount equal to
the quotient of (x) the excess of such combined cash and tender amount over ten
percent (10%) of such aggregate current market price divided by (y) the number
of shares of Common Stock outstanding on such date for determination and (ii)
the denominator of which shall be equal to the current market price per share of
the Common Stock on such date for determination.
(6) In case of a tender offer made by the Parent or any
Subsidiary of the Parent for all or any portion of the Common Stock shall expire
and such tender offer or exchange (as amended upon the expiration thereof) shall
require the payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as determined
by the Parent's Board of Directors, whose determination shall be conclusive and
described in a board resolution), that combined together with (I) the aggregate
of the cash plus the fair market value (as determined by the Parent's Board of
Directors, whose determination shall be conclusive and described in a board
resolution), as of the expiration of such tender or exchange offer, of
consideration payable in respect of any other tender or exchange offer by the
Parent or any Subsidiary of the Parent for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to this paragraph
(6) of Section 2(b) has been made and (II) the aggregate amount of any cash
distributions to all holders of the Parent's Common Stock within twelve (12)
months preceding the expiration of such tender or exchange offer and in respect
of which no adjustment pursuant to paragraph (5) of Section 2(b) has been made
(the "combined tender and cash amount") exceeds ten percent (10%) of the product
of the current market price per share of the Common Stock (determined as
provided in paragraph (7) of this Section 2(b)) as of the last time (the
"Expiration Time") tenders or exchange could have been made pursuant to such
tender or exchange offer (as it may be amended) times the number of shares of
Common Stock outstanding (including any tendered or exchange shares) as of the
Expiration Time, then, and in each such case, immediately prior to the opening
of business on the day after the date of the Expiration Time, the Conversion
Rate shall be adjusted so
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that the same shall equal the rate determined by dividing the Conversion Rate
immediately prior to close of business on the date of the Expiration Time by a
fraction (i) the numerator of which shall be equal to (A) the product of (I) the
current market price per share of Common Stock on the date of the Expiration
Time multiplied by (II) the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the date of the Expiration Time
less (B) the combined tender and cash amount, and (ii) the denominator of which
shall be equal to the product of (A) the current market price per share of the
Common Stock as of the Expiration Time multiplied by (B) the number of shares of
Common Stock outstanding (including any tendered or exchanged shares) as of the
Expiration Time less the number of all shares validly tendered or exchanged and
not withdrawn as of the Expiration Time (the shares deemed so accepted up to and
any such maximum, being referred to as the "Purchased Shares").
(7) For the purpose of any computation under paragraphs (2),
(4), (5) or (6) of this Section 2(b), the current market price per share of
Common Stock on any date shall be calculated by the Parent and be deemed to be
the average of the daily Closing Prices for the ten (10) consecutive Trading
Days before the earlier of (i) the day in question and (ii) the day before the
"ex" date with respect to the issuance or distribution requiring such
computation or, if such Closing Prices are not available, then such current
market price shall be deemed to be such value as is determined in good faith by
the Board of Directors of the Parent, whose determination shall be conclusive
and described in a board resolution. For purposes of this paragraph, the term
"ex date", when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way in the applicable
securities market or on the applicable securities exchange without the right to
receive such issuance or distribution.
(8) No adjustment in the Conversion Rate shall be required
unless such adjustment (plus any adjustments not previously made by reason of
this paragraph (8)) would require an increase or decrease of at least one
percent (1%) in such rate; provided, however, that any adjustments which by
reason of this paragraph (8) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 2 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(9) The Company may make such increases in the Conversion
Rate, for the remaining term of this Instrument or any shorter term, in addition
to those required by paragraphs (1), (2), (3), (4), (5) and (6) of this Section
2(b) as it considers to be advisable in order to avoid or diminish any income
tax to any holders of Common Stock resulting from any dividend or distribution
of stock or issuance of rights or warrants to purchase or subscribe for stock or
from any event treated as such for income tax purposes.
(c) Whenever the Conversion Rate is adjusted as provided in
Section 2(b), the Company shall or shall cause the Parent to compute the
adjusted Conversion Rate in accordance with Section 2(b) and shall promptly
prepare a certificate which will be signed by the chief financial officer of the
Parent setting forth the adjusted Conversion Rate and showing in reasonable
detail the facts upon which such adjustment is based, and the Company shall or
shall cause the Parent, within 15 Business Days following such adjustment, to
deliver such certificate to the holder of this Instrument.
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(d) In case:
(1) the Parent shall declare a dividend or other distribution
on its Common Stock that would require any adjustment pursuant to Section 2(b);
or
(2) the Parent shall authorize the granting to the holders of
its Common Stock of rights, options or warrants to subscribe for or purchase any
shares of capital stock of any class or of any other rights; or
(3) of any reclassification of the Common Stock of the
Parent, or of any consolidation, merger or share exchange to which the Parent is
a party and for which approval of any shareholders of the Parent is required, or
of the conveyance, sale, transfer or lease of all or substantially all of the
assets of the Parent; or
(4) of the voluntary or involuntary dissolution, liquidation
or winding up of the Parent; or
(5) the Parent or any Subsidiary shall commence a tender
offer for all or a portion of the Parent's outstanding Common Stock (or shall
amend any such tender offer);
then the Company shall or shall cause the Parent to deliver to the holder of
this Instrument, at least twenty (20) days (or ten (10) days in any case
specified in clause (1) or (2) above) prior to the applicable record, expiration
or effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution, rights,
options or warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such dividend,
distribution, rights, options or warrants are to be determined, (y) the date on
which the right to make tenders under such tender offer expires or (z) the date
on which such reclassification, consolidation, merger, conveyance, transfer,
sale, lease, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for securities, cash
or other property deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, sale, lease, dissolution, liquidation or winding up.
Neither the failure to give such notice nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (1) through (5) of
this Section 2(d).
(e) The Company shall cause the Parent at all times to reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Stock, for the purpose of effecting the conversion of this
Instrument, the full number of shares of Common Stock then issuable upon the
conversion of this Instrument, without regard to any limitations on conversion.
(f) Except as provided in the next sentence, the Company will pay
any and all taxes and duties that may be payable in respect of the issue or
delivery of Common Stock on conversion of the Instrument. The Company shall not,
however, be required to pay any tax or duty which may be payable in respect of
any transfer involved in the issue and delivery of Common Stock in a name other
than that of the holder of this Instrument, and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the
Company the amount of any
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such tax or duty, or has established to the satisfaction of the Company that
such tax or duty has been paid.
(g) The Company shall cause, and shall ensure that Parent causes,
all Common Stock which may be delivered upon conversion of this Instrument, upon
such delivery, to have been duly authorized and validly issued and will be fully
paid and nonassessable (and shall be issued out of the Parent's authorized but
unissued shares of Common Stock) and, except as provided in Section 2(f), the
Company will pay all taxes, liens and charges with respect to the issue thereof.
(h) In case of any recapitalization or reclassification of the
Common Stock (other than a change in par value, or as a result of a subdivision
or combination covered by paragraph (3) of Section 2(b)), or any consolidation
of the Parent with any other Person, any merger of the Parent into another
Person or of another Person into the Parent (other than a merger which does not
result in a reclassification, conversion, exchange or cancellation of the
outstanding Common Stock), or any conveyance, sale, transfer or lease of all or
substantially all of the properties and assets of the Parent (collectively, a
"Capital Reorganization"), the Parent or the Person formed by such Capital
Reorganization, as the case may be, shall execute and deliver to the holder of
this Instrument a supplemental agreement providing that such holder has the
right thereafter, during the period this Instrument shall be convertible as
specified in Section 2(a), to convert this Instrument only into the kind and
amount of securities, cash and other property receivable upon such Capital
Reorganization by a holder of the number of shares of Common Stock of the Parent
into which this Instrument might have been converted immediately prior to such
Capital Reorganization, assuming such holder of Common Stock of the Parent (i)
is not a Person with which the Parent consolidated, into which the Parent merged
or which merged into the Parent or to which any conveyance, sale, transfer or
lease was made, as the case may be (a "Constituent Person"), or an Affiliate of
a Constituent Person and (ii) failed to exercise its rights of election, if any,
as to the kind or amount of securities, cash and other property receivable upon
such Capital Reorganization (provided that if the kind or amount of securities,
cash and other property receivable upon such Capital Reorganization is not the
same for each share of Common Stock of the Parent held immediately prior to such
Capital Reorganization by others than a Constituent Person or an Affiliate
thereof and in respect of which such rights of election shall not have been
exercised ("Non-electing Share"), then for the purpose of this Section 2(h) the
kind and amount of securities, cash and other property receivable upon such
Capital Reorganization by the holders of each Non-electing Share shall be deemed
to be the kind and amount so receivable per share by a plurality of the
Non-electing Shares). Such supplemental agreement shall provide for adjustments
which, for events subsequent to the effective date of such supplemental
agreement, shall be equivalent to the adjustments provided for in this Section
2. The above provisions of this Section 2(h) shall similarly apply to successive
Capital Reorganizations. If this Section 2(h) applies to any event or
occurrence, then the other provisions of Section 2(b) shall not apply.
(i) The Company will cause the Parent to take all necessary
actions to list the Common Stock required to be issued and delivered upon
conversion of this Instrument, on each national securities exchange on which
outstanding Common Stock of the Parent is listed or quoted, or if the Common
Stock is not then listed on any securities exchange, to qualify the Common Stock
for quotation on the Nasdaq National Market or such other inter-dealer quotation
system, if any, on
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which the Common Stock is then quoted. The Company represents and warrants that,
as of the date hereof, the Common Stock is qualified for quotation on the Nasdaq
National Market.
3. EVENTS OF DEFAULT.
(a) "Event of Default", wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of principal on this Instrument
when due on the Maturity Date or on any Repurchase Date; or
(2) default in the payment of any interest on this Instrument
when it becomes due and payable, including without limitation on any Repurchase
Date; or
(3) default in the performance, or breach, of any other
covenant of the Company (other than a covenant the default in the performance or
breach of which is specifically dealt with elsewhere in this Section 3(a)) and,
in the case only of defaults and breaches which are capable of being cured,
continuance of such default or breach for a period of 40 days after there has
been given, by registered or certified mail, to the Company by the holder of
this Instrument a written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(4) commencement of an involuntary case, petition or other
proceeding against the Company or Parent seeking liquidation, receivership,
examinership, reorganization, assignment, adjustment or composition of or in
respect to the Company or Parent or other relief with respect to it or its debts
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, examiner, liquidator, custodian or other similar official of it or any
substantial part of its assets, and such involuntary case or other proceeding
shall remain undismissed or unstayed for a period of 60 consecutive days or
anything analogous thereto occurring in the case of the Company pursuant to the
laws of the jurisdiction where the Company is incorporated and constituted; or
(5) the commencement by the Company or Parent of a voluntary
case or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or to be wound up, or the consent by the
Company or Parent to the entry of a decree or order for relief in respect of the
Company or Parent in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
either the Company or Parent, or the filing by either the Company or Parent of a
petition or answer or consent seeking reorganization or similar relief under any
applicable Federal or State law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
examiner, liquidator, assignee, trustee, sequestrator or other similar official
of the Company or Parent or of any substantial part of the property of the
Company or Parent, or the making by either the Company or Parent of an
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assignment for the benefit of creditors, or the admission by either the Company
or Parent in writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Company or Parent in furtherance
of any such action or anything analogous thereto occurring in the case of the
Company pursuant to the laws of the jurisdiction where the Company is
incorporated and constituted; or
(6) the failure by the Company to duly observe or perform any
of the covenants on the part of the Company in the Convertible Cash Note and, in
the case only of defaults and breaches which are capable of being cured,
continuance of such default or breach for a period of 40 days after there has
been given to the Company by the holder of this Instrument a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under this Instrument; or
(7) the liquidation, examinership, winding up or dissolution
of the Company or Parent and in the case of the Company, its receivership or
examination.
(b) If an Event of Default (other than an Event of Default
specified in Sections 3(a)(4) or 3(a)(5)) occurs and is continuing, then in
every such case the holder of this Instrument may declare the principal hereof
to be due and payable immediately, by a notice in writing to the Company, and
upon any such declaration such principal and all accrued interest thereon shall
become immediately due and payable. If an Event of Default specified in Sections
3(a)(4) or 3(a)(5) occurs and is continuing with respect to the Company or
Parent, the principal of, and accrued interest on, this Instrument shall ipso
facto become immediately due and payable without any declaration or other act of
the holders.
4. CONSOLIDATION, MERGER, ETC.
(a) The Company shall not (so far as it is able) consolidate with
or merge into any other Person, or (so far as it is able) register the transfer
of any shares in its share register with respect to any such consolidation or
merger, or directly or indirectly, convey, transfer, sell or lease all or
substantially all of its properties and assets to any Person, and the Company
shall not permit any Person to consolidate with or merge into the Company or,
directly or indirectly, convey, transfer, sell or lease all or substantially all
of its properties and assets to the Company, unless:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer, sell or lease all or substantially all of
its properties and assets to any Person, the Person formed by such consolidation
or into which the Company is merged or the Person which acquires by conveyance,
transfer or sale, or which leases, all or substantially all the properties and
assets of the Company shall be a corporation, limited liability company,
partnership or trust, shall be organized and validly existing under the laws of
the United States of America, any State thereof or the District of Columbia, and
shall expressly assume, if other than the Company , by an agreement supplemental
hereto, executed and delivered to the holder of this Instrument in form
satisfactory to the holder, the due and punctual payment of the principal of and
any interest on this Instrument and the performance or observance of every
covenant of this Instrument on the part of the Company to be performed or
observed, including the conversion rights provided herein;
-11-
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing; and
(b) Upon any consolidation of the Company with, or merger of the
Company into, any other Person, or transfer of a controlling interest in the
Company, or any conveyance, transfer, sale or lease of all or substantially all
of the properties and assets of the Company in accordance with Section 4(a), the
successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer, sale or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Instrument with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Instrument.
5. SUBORDINATION.
(a) The Company covenants and agrees, and the holder of this
Instrument by its acceptance hereof likewise covenants and agrees, that this
Instrument is subject to the provisions of this Section 5; and each Person
holding this Instrument, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees to be bound by such
provisions.
The payment of the principal of, premium, if any, and interest on this
Instrument shall, to the extent and in the manner hereinafter set forth, be
subordinated to the prior payment in full, in cash or in such other form of
payment as may be acceptable to the holders of Senior Indebtedness, of all
Senior Indebtedness, whether outstanding at the date of original issuance of
this Instrument or thereafter incurred or created.
No provision of this Section 5 shall prevent the occurrence of any
default or Event of Default under this Instrument.
(b) Payments to Holders. No payment shall be made with respect to
the principal of, or premium, if any, or interest on this Instrument, if:
(1) a default in the payment of principal, premium, if any,
or interest or other payment due on Senior Indebtedness occurs and is continuing
beyond any applicable period of grace (a "Payment Default"); or
(2) a default, other than a Payment Default, occurs and is
continuing with respect to Designated Senior Indebtedness that then permits
holders of the Designated Senior Indebtedness as to which such default relates
to accelerate its maturity and the holder of this Instrument and the Company
receive a written notice of such default (a "Payment Blockage Notice") from a
representative of Designated Senior Indebtedness or a holder of Designated
Senior Indebtedness (a "Non-Payment Default") and each such period during which
payments in respect of this Instrument are so prohibited is referred to as a
"Payment Blockage Period."
The Company may and shall resume payments on this Instrument in the case
of a Payment Default, on the date upon which such default is cured or waived or
ceases to exist. The Company
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may and shall resume payments on this Instrument, and the applicable Payment
Blockage Period shall terminate, in the case of a Non-Payment Default, on the
earliest to occur of the following dates: (w) the date upon which such
Non-Payment Default is cured or waived or otherwise ceases to exist; (x) 179
days after the date of receipt by the holder of this Instrument of such Payment
Blockage Notice (provided the Senior Indebtedness shall not theretofore have
been accelerated and provided further, that upon the rescission (if any) of such
acceleration, payments in respect of this Instrument shall resume as and to the
extent set forth below); (y) the date on which the Senior Indebtedness shall
have been discharged or paid in full; or (z) the date on which such Payment
Blockage Period shall have been terminated by written notice to the Company or
the holder of this Instrument from the holder of Senior Indebtedness who
delivered the Payment Blockage Notice or its representative, and after which, in
the case of clauses (w) through (z), the Company shall resume making any and all
required payments in respect of this Instrument, including any payments not made
during the Payment Blockage Period.
At any time (i) after the occurrence of a Payment Default and until the
conditions described in the first sentence of the previous paragraph are
satisfied, or (ii) after the receipt of a Payment Blockage Notice by the holder
of this Instrument and the Company and until the termination of the Payment
Blockage Period, the holder of this Instrument shall have no right to accelerate
the maturity of the amounts due under this Instrument or otherwise demand
payment thereof, enforce any claim with respect to the amounts due under this
Instrument, institute or attempt to institute any bankruptcy or insolvency
proceedings against the Company or the Company's property without the prior
written consent of each holder of Senior Indebtedness, until the first to occur
of (a) acceleration of the Senior Indebtedness; or (b) commencement of judicial
enforcement of any rights or remedies under the documents evidencing the Senior
Indebtedness of applicable law with respect to the Senior Indebtedness or the
documents evidencing the Senior Indebtedness, or commencement of a proceeding of
the nature described in Sections 3(a)(4) or 3(a)(5) above (each, an "Insolvency
Proceeding"), except to the extent (but only to such extent) that the
commencement of a legal action may be required to toll the running of any
applicable statute of limitation.
No new period of payment blockage may be commenced pursuant to a Payment
Blockage Notice unless at least 365 days shall have elapsed since the Company's
receipt of the immediately prior Payment Blockage Notice. No default (whether or
not such event of default is on the same issue of Designated Senior
Indebtedness) that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the holder of this Instrument shall be, or be made,
the basis for a subsequent Payment Blockage Notice.
If payment of this Instrument is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
Notwithstanding the foregoing, in the event that the holder of this
Instrument receives any payment or distribution of assets of the Company of any
kind in contravention of any term of this Section 5, whether in cash, property
or securities, including, without limitation, by way of setoff or otherwise,
before all Senior Indebtedness is paid in full, in cash or such other form of
payment as may be acceptable to the holders of Senior Indebtedness, then such
payment or distribution shall be held by the recipient or recipients in trust
for the benefit of, and shall promptly be paid over or delivered to, the holders
of Senior Indebtedness or their respective representative or representatives,
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or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, as calculated by the Company, for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to make payment in full, in cash or such other form of payment as may
be acceptable to the holders of Senior Indebtedness, of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or distribution,
or provision therefor, to or for the holders of such Senior Indebtedness.
(c) Bankruptcy and Dissolution, Etc. Upon any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to creditors or members upon any dissolution,
winding-up, liquidation, reorganization, receivership, examinership or other
proceeding of the Company, whether voluntary or involuntary or in bankruptcy,
insolvency, examinership, receivership or other proceedings, all amounts due or
to become due upon all Senior Indebtedness shall first be paid in full, in cash
or in such other form of payment as may be acceptable to the holders of Senior
Indebtedness, before any payment is made on account of the principal or premium,
if any, and interest on this Instrument; and upon any such dissolution,
winding-up, liquidation or reorganization or bankruptcy, insolvency,
receivership, examinership or other such proceedings, any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of this Instrument
would be entitled, except for the provisions of this Section 5, shall (except as
aforesaid) be paid by the Company or by any receiver, examiner, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the holder of this Instrument if received by it, directly to
the holders of Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders, or as otherwise
required by law or a court order) or their respective representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay all
Senior Indebtedness in full in cash or in such other form of payment as may be
acceptable to the holders of Senior Indebtedness after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness,
before any payment or distribution is made to the holder of this Instrument.
Notwithstanding the foregoing, in the event that the holder of this
Instrument receives any payment or distribution of assets of the Company of any
kind in contravention of any term of this Instrument, whether in cash, property
or securities, including, without limitation, by way of setoff or otherwise,
before all Senior Indebtedness is paid in full, in cash or such other form of
payment as may be acceptable to the holders of Senior Indebtedness, then such
payment or distribution shall be held by the recipient or recipients in trust
for the benefit of, and shall promptly be paid over or delivered to, the holders
of Senior Indebtedness or their respective representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
make payment in full, in cash or such other form of payment as may be acceptable
to the holders of Senior Indebtedness, of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution, or
provision therefor, to or for the holders of such Senior Indebtedness.
-14-
For purposes of Section 5(b) hereof and this Section 5(c), the words
"cash, property or securities" shall not be deemed to include shares of stock of
the Company as reorganized or readjusted, or securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated (at least to the extent provided in this
Section 5 with respect to this Instrument) to the payment of all Senior
Indebtedness which may at the time be outstanding. The consolidation of the
Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in Section 4 shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section 5(c) if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Section 4.
(d) Subrogation. Subject to the payment in full in cash, or in
such other form of payment as may be acceptable to the holders of Senior
Indebtedness, of all Senior Indebtedness, the rights of the holder of this
Instrument shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Indebtedness pursuant to the provisions of
this Section 5 (equally and ratably with the holders of all indebtedness of the
Company which by its express terms is subordinated to other indebtedness of the
Company to substantially the same extent as this Instrument is subordinated and
is entitled to like rights of subrogation) to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of, and premium, if any, and interest on this Instrument shall be paid
in full; and, for the purposes of such subrogation, no payments or distributions
to the holders of the Senior Indebtedness of any cash, property or securities to
which the holder of this Instrument would be entitled except for the provisions
of this Section 5, and no payment over pursuant to the provisions of this
Section 5, to or for the benefit of the holders of Senior Indebtedness by
holders of this Instrument, shall, as between the Company, its creditors other
than holders of Senior Indebtedness, and the holder of this Instrument, be
deemed to be a payment by the Company to or on account of the Senior
Indebtedness; and no payments or distributions of cash, property or securities
to or for the benefit of the holder of this Instrument pursuant to the
subrogation provisions of this Section 5, which would otherwise have been paid
to the holders of Senior Indebtedness shall be deemed to be a payment by the
Company to or for the account of this Instrument. It is understood that the
provisions of this Section 5 are and are intended solely for the purposes of
defining the relative rights of the holder of this Instrument, on the one hand,
and the holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Section 5 or elsewhere in this Instrument is
intended to or shall impair, as among the Company, its creditors other than the
holders of Senior Indebtedness, and the holder of this Instrument, the
obligation of the Company, which is absolute and unconditional, to pay to the
holder of this Instrument the principal of, and premium, if any, and interest on
the Instrument as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative rights of the
holder of this Instrument and creditors of the Company other than the holders of
the Senior Indebtedness, nor shall anything herein or therein prevent the holder
of this Instrument from exercising all remedies otherwise permitted by
applicable law upon default under this Instrument, subject to the rights, if
any, under this Section 5 of the holders of Senior
-15-
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Section 5, the holder of this Instrument shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
bankruptcy, dissolution, winding-up, liquidation, reorganization, receivership
or examinership proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, delivered to the holder of this Instrument, for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Section
5.
(e) Notice. The Company shall give prompt written notice to the
holder of this Instrument of any fact known to the Company which would prohibit
the making of any payment of monies due in respect of this Instrument pursuant
to the provisions of this Section 5.
The holder of this Instrument shall be entitled to rely on the delivery
to it of a written notice by a Person representing itself to be a holder of
Senior Indebtedness (or a trustee on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness or a trustee on
behalf of any such holder or holders. In the event that the holder of this
Instrument determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Section 5, the
holder of this Instrument may request such Person to furnish evidence to the
reasonable satisfaction of the holder of this Instrument as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Section 5, and if such
evidence is not furnished the holder of this Instrument may defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment.
(f) No Impairment of Subordination. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Instrument, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of the Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the holder of this Instrument, without
incurring responsibility to the holder of this Instrument, and without impairing
or releasing the subordination provided in this Instrument or the obligations of
the holder of this Instrument to the holders of the Senior Indebtedness, do any
one or more of the following: (a) change the manner, place, or terms of payment
(including any change in the rate of interest) or extend the time of payment of,
or renew, amend, modify, alter, or grant any waiver or release with respect to,
or consent to any departure from, any Senior Indebtedness or any instrument
evidencing the same or any agreement evidencing, governing, creating,
guaranteeing or securing any
-16-
Senior Indebtedness; (b) sell, exchange, release, or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable under or in respect of the Senior Indebtedness; (d)
fail or delay in the perfection of liens securing the Senior Indebtedness; (e)
exercise or refrain from exercising any rights against Company and any other
Person; or (f) amend, or grant any waiver or release with respect to, or consent
to any departure from, any guarantee for all or any of the Senior Indebtedness.
(g) Certain Conversions Deemed Payment. For the purposes of this
Section 5 only, (1) the issuance and delivery of junior securities in accordance
with Section 1 or upon conversion of this Instrument in accordance with Section
2 shall not be deemed to constitute a payment or distribution on account of the
principal of (or premium, if any) or interest on this Instrument or on account
of the purchase or other acquisition of this Instrument, and (2) the payment,
issuance or delivery of cash (including cash paid for fractional shares upon
conversion of this Instrument in accordance with Section 2), property or
securities (other than junior securities) upon conversion of this Instrument in
accordance with Section 2 shall be deemed to constitute payment on account of
the principal of this Instrument. For the purposes of this Section 5, the term
"junior securities" means (a) shares of any stock of any class of the Company
and (b) securities of the Company which are subordinated in right of payment to
all Senior Indebtedness which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, this Instrument is so subordinated as provided in this Section 5.
Nothing contained in this Section 5 or elsewhere in this Instrument is intended
to or shall impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the holder of this Instrument, the right, which is
absolute and unconditional, of the holder of this Instrument to convert this
Instrument in accordance with Section 2.
6. DEFINITIONS. Unless otherwise defined in this Instrument, the
following capitalized terms shall have the following respective meanings when
used herein:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Averaging Period" means the period of five consecutive Trading Days
ending on the second Trading Day immediately prior to the Maturity Date.
"AVWAP" means the arithmetic average of the daily volume weighted
average prices for the Common Stock as reported by Bloomberg L.P. for each
Trading Day in the Averaging Period.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which the banking institutions in the City of New
York or San Francisco, California are authorized or obligated by law or
executive order to close or be closed.
-17-
"Closing Price" means, with respect to the Common Stock of the Parent,
for any day, the reported last sale price per share on the Nasdaq National
Market, or, if the Common Stock is not admitted to trading on the Nasdaq
National Market, on the principal national securities exchange or inter-dealer
quotation system on which the Common Stock is listed or admitted to trading, or
if not admitted to trading on the Nasdaq National Market, or listed or admitted
to trading on any national securities exchange or inter-dealer quotation system,
the closing bid price per share in the over-the-counter market as furnished by
any New York Stock Exchange member firm selected from time to time by the Parent
for that purpose.
"Common Stock" means the Common Stock, par value $0.001 per share, of
the Parent authorized at the date of this instrument as originally executed.
Subject to the provisions of Section 2, shares issuable on conversion of this
Instrument shall include only Common Stock or shares of any class or classes of
common stock resulting from any reclassification or reclassifications thereof;
provided, however, that if at any time there shall be more than one such
resulting class, the shares so issuable on conversion of this Instrument shall
include shares of all such classes, and the shares of each such class then so
issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
"Convertible Cash Note" has the meaning given to such term in the
Purchase Agreement.
"Designated Senior Indebtedness" means the Company's obligations under
any Senior Indebtedness with a principal amount in excess of Ten Million Dollars
($10,000,000) in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of this Instrument (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness).
"Determination Date" means, in the case of a dividend or other
distribution, including the issuance of rights, options or warrants, to
shareholders, the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution and, in the case of a tender offer,
the last time that tenders could have been made pursuant to such tender offer.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FTC" has the meaning given to the term in Section 2(a)(4).
"Indebtedness" means, with respect to any Person:
(a) All obligations, contingent or otherwise, of such Person (i)
for borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii)
evidenced by a note, debenture, bond or written instrument (including a
purchase money obligation), (iii) in respect of leases of such Person
required, in conformity with generally accepted accounting principles,
to be accounted for as capitalized lease obligations on the balance
sheet of such Person and all obligations and other liabilities
-18-
(contingent or otherwise) under any lease or related document (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 purchase the leased property and thereby
guarantee a minimum residual value of the leased property to the lessor
and the obligations of such Person under such lease or related document
to purchase or to cause a third party to purchase such leased property;
or (iv) in respect of letters of credit (including reimbursement
obligations with respect thereto), local guarantees or bankers'
acceptances;
(b) All obligations secured by a mortgage, pledge, lien,
encumbrance, charge or adverse claim affecting title or resulting in an
encumbrance to which the property or assets of such Person are subject,
whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be such Person's legal liability;
(c) To the extent not otherwise included, all obligations of such
Person under interest rate and currency swap agreements, cap, floor and
collar agreements, spot and forward contracts and similar agreements and
arrangements;
(d) All obligations of others of the type described in clauses
(a), (b), or (c) above assumed by or guaranteed in any manner by such
Person or in effect guaranteed by such Person through an agreement to
purchase, contingent or otherwise (and the obligations of such Person
under any such assumptions, guarantees or other such arrangements); and
(e) All obligations, contingent or otherwise, of such Person
under or in respect of any and all deferrals, renewals, extensions and
refundings of, or amendments, modifications or supplements to, any
liability of the kinds described in any of the preceding clauses (a),
(b), (c) or (d).
"Instrument" has the meaning given to such term in the first paragraph
hereof and also refers to any Instrument executed and delivered by the Company
upon partial conversion or in exchange or replacement of this Instrument
pursuant to Sections 2 or 7(d) hereof.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
"Rights Plan" has the meaning given to such term in Section 2(b)(4).
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means, unless expressly subordinated to or made on
a parity with the amounts due under this Note, the principal of (and premium, if
any), unpaid interest on and amounts reimbursable, fees, expenses, costs of
enforcement and other amounts due in connection with, (i) Indebtedness of the
Company, or with respect to which the Company is a guarantor, to banks,
commercial finance lenders, insurance companies, or other lending institutions
regularly engaged in the business of lending money, which is for money borrowed,
whether or not secured, (ii) Indebtedness of the Company secured by assets of
the Company, or (iii) any such Indebtedness or any debentures, notes or other
evidence of Indebtedness issued in exchange for such Indebtedness
-19-
identified in clause (i) or (ii) of this sentence, in each case to the extent
incurred on an arm's length basis with non-Affiliates of the Company.
"Subsidiary" shall mean (a) any corporation of which more than 50% of
the issued and outstanding equity securities having ordinary voting power to
elect a majority of the board of directors of such corporation is at the time
directly or indirectly owned or controlled by the Company, (b) any partnership,
joint venture, limited liability company or other association of which more than
50% of the equity interests having the power to vote, direct or control the
management of such partnership, joint venture, limited liability company or
other association is at the time directly or indirectly owned and controlled by
the Company, and (c) any other entity included in the financial statements of
the Company on a consolidated basis.
"Trading Day" means (i) if the Common Stock is admitted to trading on
the Nasdaq National Market or any other system of automated dissemination of
quotations of securities prices, a day on which trades may be effected through
such system; (ii) if the Common Stock is listed or admitted for trading on the
New York Stock Exchange or any other national securities exchange, a day on
which such exchange is open for business; or (iii) if the Common Stock is not
admitted to trading on the Nasdaq National Market or listed or admitted for
trading on any national securities exchange or any other system of automated
dissemination of quotation of securities prices, a day on which the Common Stock
is traded regular way in the over-the-counter market and for which a closing bid
and a closing asked price for the Common Stock are available.
"U.S. Dollars" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
7. RIGHT TO REQUIRE REPURCHASE.
(a) In the event that a Change in Control (as hereinafter
defined) shall occur, then the holder of this Instrument shall have the right,
at such holder's option, to require the Company to repurchase, and upon the
exercise of such right the Company shall repurchase, all or part of this
Instrument (as provided hereinbelow) on the date (the "Repurchase Date") that is
20 Business Days (or such longer period as required by applicable law) after the
date on which the Company gives notice of such Change of Control to the holder
of this Instrument, at a purchase price equal to the Repurchase Price (as
hereinafter defined). The Company agrees to give the holder of this Instrument
notice, in the manner provided in Section 8(c), of any Change in Control,
promptly and in any event within three (3) Business Days after the occurrence
thereof.
(b) To exercise a repurchase right, the holder shall deliver to
the Company on or before the 5th Business Day prior to the Repurchase Date,
together with this Instrument, written notice of the holder's exercise of such
right, which notice shall set forth the name of the holder, the principal amount
of this Instrument to be repurchased (and, if this Instrument is to be
repurchased in part, the portion of the principal amount thereof to be
repurchased) and a statement that an election to exercise the repurchase right
is being made thereby. Such written notice shall be irrevocable, except that the
right of the holder to convert this Instrument (or the portion hereof with
respect to which the repurchase right is being exercised) shall continue until
the close of business on the Business Day prior to the Repurchase Date.
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(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be paid to
the holder the Repurchase Price in cash on the Repurchase Date in the manner set
forth in the introductory paragraph to this Instrument.
(d) If this Instrument is to be repurchased only in part, it
shall be surrendered to the Company at the Designated Office (with, if the
Company so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company, duly executed by the holder hereof), and the
Company shall execute and deliver to the holder, without service charge, a new
Instrument containing terms and conditions identical to those contained herein
and in a principal amount equal to and in exchange for the unrepurchased portion
of the principal of this Instrument.
(e) For purposes of this Section 7:
(1) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 promulgated by the Securities and Exchange Commission
pursuant to the Exchange Act;
(2) a "Change in Control" shall be deemed to have occurred at
the time, after the original issuance of this Instrument, of:
(i) the acquisition by any Person (including, for
purposes of this Section 7, any group of two or more persons or entities acting
together as contemplated by Section 14(d) of the Exchange Act) of beneficial
ownership, directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of capital stock of
the Company or the Parent entitling such Person to exercise 50% or more of the
total voting power of all shares of capital stock of the Company or the Parent
entitled to vote generally in the elections of directors (any shares of voting
stock of which such Person is the beneficial owner that are not then outstanding
being deemed outstanding for purposes of calculating such percentage) other than
any such acquisition by the Company or the Parent or any employee benefit plan
of the Company or the Parent; or
(ii) any consolidation or merger of the Company or the
Parent with or into, any other Person, any merger of another Person with or into
the Company or the Parent, or any conveyance, transfer, sale, lease or other
disposition of all or substantially all of the assets of the Company or the
Parent to another Person (other than (a) any such transaction pursuant to which
holders of capital stock of the Company (or if applicable, of the Parent)
immediately prior to such transaction have the entitlement to exercise, directly
or indirectly, 50% or more of the total voting power of all shares of capital
stock entitled to vote generally in the election of directors of the continuing
or surviving Person immediately after such transaction and (b) any merger (x)
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding Common Stock or (y) which is effected solely to
change the jurisdiction of incorporation of the Company or the Parent and
results in a reclassification, conversion or exchange of outstanding Common
Stock into solely shares of common stock);
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(iii) "Repurchase Price" means the sum of (a) 100% of the
principal amount of this Instrument to be repurchased pursuant to this Section 7
and (b) accrued and unpaid interest on this Instrument to the date of payment.
8. OTHER.
(a) No provision of this Instrument shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and interest, on this Instrument at the times, places and rate, and
in the coin or currency, herein prescribed or to cause the conversion of this
Instrument as herein provided.
(b) The Company will give prompt written notice to the holder of
this Instrument of any change in the location of the Designated Office.
(c) Any notice hereunder to the Company or to the holder of this
Instrument shall be given in the manner set forth in Section 10.1 of the
Purchase Agreement and shall be given to the Company in care of the Parent
pursuant to such Section 10.1.
(d) This Instrument and the Common Stock issuable upon conversion
of this Instrument have not been registered under the Securities Act, or the
securities laws of any state or other jurisdiction. Neither this Instrument nor
the Common Stock issuable upon conversion of this Instrument nor any interest or
participation herein may be reoffered, sold, assigned, transferred, pledged,
encumbered or otherwise disposed of (a "Transfer") in the absence of such
registration or unless such transaction is exempt from, or not subject to,
registration. The holder by its acceptance of this Instrument or the Common
Stock issuable upon conversion of this Instrument agrees that it shall not
offer, sell, assign, transfer, pledge, encumber or otherwise dispose of this
Instrument or any portion thereof or interest therein (other than with respect
to a Transfer of the Common Stock issuable upon conversion of this Instrument
(i) pursuant to a registration statement that is effective at the time of such
Transfer or (ii) pursuant to an exemption from the registration requirements of
the Securities Act).
(e) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Instrument, and in the case of loss, theft or destruction, receipt of indemnity
or security reasonably satisfactory to the Company, and upon reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of such Instrument, if mutilated, the Company will deliver a
new Instrument of like tenor and dated as of such cancellation, in lieu of such
Instrument.
(f) The holder represents that it is an "accredited investor"
within the meaning of Rule 501 of the Securities Act. The holder has been
advised that this Instrument has not been registered under the Securities Act,
or any state securities laws and, therefore, cannot be resold unless it is
registered under the Securities Act and applicable state securities laws or
unless an exemption from such registration requirements is available. Subject to
Section 8(g), the holder is aware that the Company is under no obligation to
effect any such registration or to file for or comply with any exemption from
registration. The holder has not been formed solely for the purpose of
-22-
making this investment and is acquiring the Instrument for its own account for
investment, and not with a view to, or for resale in connection with, the
distribution thereof.
(g) The shares of Common Stock issuable upon conversion of this
Instrument are subject to that certain Registration Rights Agreement, dated as
of July 15, 2002, between the Parent and the holder of this Instrument.
(h) The Company (i) will take all such actions as may be
necessary or appropriate to cause the Parent to validly and legally issue and
deliver fully paid and non-assessable shares of Common Stock upon conversion of
this Instrument; and (ii) will not take any action and will cause the Parent not
to take any action which results in any adjustment of the Conversion Rate, if
after giving effect to such action, the total number of shares of Common Stock
issuable after the conversion of all of the outstanding principal amount of this
Instrument would exceed the total number of shares of Common Stock authorized by
the Parent's certificate of incorporation and available for the purpose of
issuance upon such conversion.
(i) In the case of an Event of Default, the Company, to the
extent permitted by law, waives presentment, demand, notice, protest and all
other demands or notices in connection with the enforcement of this Instrument.
(j) In case any one or more of the provisions contained in this
Instrument shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Instrument, but this Instrument shall be construed
as if such invalid or illegal or unenforceable provision had never been
contained herein.
(k) No failure on the part of the holder to exercise, and no
delay in exercising, any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the holder
from time to time.
(l) Any provision of this Instrument may be amended, waived or
modified upon the written consent of Company and the holder of this Instrument.
The holder of this Instrument by its acceptance hereof acknowledges and agrees
that the subordination provisions of this instrument are for the benefit of the
holders of the Senior Indebtedness and that, accordingly, no provision of
Section 5 hereof may be amended or otherwise modified without the prior written
consent of each holder of Senior Indebtedness at such time outstanding.
(m) THIS INSTRUMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
(n) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
INSTRUMENT MAY BE BROUGHT ONLY IN THE COURTS OF THE COUNTY OF LOS ANGELES, IN
THE STATE OF CALIFORNIA OR ANY COURT OF THE UNITED STATES OF AMERICA FOR THE
CENTRAL DISTRICT OF CALIFORNIA, AND, EACH OF THE
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COMPANY AND THE HOLDER OF THIS INSTRUMENT HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY AND THE HOLDER OF THIS
INSTRUMENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
JURISDICTION. EACH OF THE COMPANY AND THE HOLDER OF THIS INSTRUMENT IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR
PROCEEDING.
(o) The Company agrees to pay to the holder of this Instrument
all expenses (including, without limitation, the reasonable fees and
disbursements of counsel) incurred by the holder solely with respect to the
enforcement of this Instrument and the collection of any and all amounts owed to
the holder hereunder.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed as a deed.
Dated: August 30, 2002
PRESENT when the Official Seal of /s/ Xxxxxxx Xxxxxxxxx
Catapult Communications International -----------------------------
Limited was affixed hereto: XXXXXXX XXXXXXXXX, DIRECTOR
/s/ Xxxxx Xxxxxxxx
-----------------------------
XXXXX XXXXXXXX, DIRECTOR
We Xxxxxxx Xxxxxxxxx and Xxxxx Xxxxxxxx hereby certify that the official seal of
CATAPULT COMMUNICATIONS INTERNATIONAL LIMITED has been affixed to this
Instrument on August 30, 2002 at 000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxx Xxxxxx of America.
/s/ Xxxxxxx Xxxxxxxxx /s/ Xxxxx Xxxxxxxx
--------------------------- -----------------------------
XXXXXXX XXXXXXXXX XXXXX XXXXXXXX
Director Director
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CONVERSION NOTICE
The undersigned holder of this Instrument hereby irrevocably exercises
the option to convert this Instrument, or any portion of the principal amount
hereof (which is an integral multiple of $1,000) below designated, into Common
Stock in accordance with the terms of this Instrument, and directs that such
shares, together with a check in payment for any fractional share and any
Instrument representing any unconverted principal amount hereof, be delivered to
and be registered in the name of the undersigned unless a different name has
been indicated below. If Common Stock is to be registered in the name of a
Person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Dated:
---------------------
TEKELEC
By:
------------------------------
Name:
Title:
If shares are to be registered in the name of a Person other than the holder,
please print such Person's name and address:
-------------------------
Name
-------------------------
Address
-------------------------
Social Instrument or other Taxpayer Identification Number, if any
If only a portion of the Instrument is to be converted, please indicate:
1. Principal amount to be converted: $___________
2. Principal amount of Instrument representing unconverted principal amount to
be issued:
Amount: $________
