EXHIBIT 4.3
NEITHER THIS SECURITY NOR THE ISSUANCE TO THE HOLDER OF THE SECURITIES INTO
WHICH THIS SECURITY IS CONVERTIBLE OR WHICH ARE ISSUABLE UPON REDEMPTION OF THIS
SECURITY 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 OR REDEMPTION. AS A RESULT, FOLLOWING ANY CONVERSION OR
REDEMPTION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT STATED ON THE
FACE OF THIS NOTE.
AMENDED AND RESTATED
CONVERTIBLE NOTE DUE 2005-2008
OF
ZIX CORPORATION
NO. __ $10,000,000.00
DATED _______ ___, 2005 NEW YORK, NEW YORK
FOR VALUE RECEIVED, ZIX CORPORATION, a Texas corporation (the
"Company"), hereby promises to pay to or upon the order of [NAME OF REGISTERED
HOLDER], or its registered assigns or successors-in-interest (the "Holder"), the
principal sum of Ten Million Dollars ($10,000,000.00), in installments on the
Installment Maturity Dates and on the Final 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, 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. 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, as required by Section 2(d)
and subject to the provisions of this Note, principal of this Note shall be
redeemed through issuance of shares of Common Stock in accordance with Section
2(c), and 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 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. Payment and performance of the Company's obligations under this Note
and the other Transaction Documents is secured pursuant to the Security
Agreement.
This Note amends and restates a Convertible Note due 2005-2008
issued on the Issuance Date pursuant to the Purchase Agreement. This Note is one
of a duly authorized issue of the Company's Amended and Restated Convertible
Notes due 2005-2008 limited to an aggregate principal amount of $20,000,000
(excluding Amended and Restated Convertible Notes due 2005-2008 issued in
replacement of lost, stolen, destroyed or mutilated notes or issued on transfer
of such notes).
The following terms and conditions shall apply to this Note:
SECTION 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
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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:
"Acquisition Transaction" means a transaction in which the Company
acquires another business or its tangible or intangible assets.
"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 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 Party" means a person whose beneficial ownership of
Common Stock would be aggregated with the beneficial ownership of Common Stock
by the Holder for purposes of determining whether a "group" exists or for
purposes of determining the Holder's beneficial ownership of Common Stock for
purposes of Section 13(d) of the 1934 Act and Regulation 13D-G thereunder.
"Allocated Redemption Percentage" means with respect to a particular
Share Redemption the product obtained by multiplying 20 percent by a fraction,
of which the numerator is the original principal amount of the principal
installment of this Note that is being redeemed in such Share Redemption, as
identified in the applicable Share Redemption Notice, and the denominator is the
aggregate original principal amount of the principal installments of this Note
and the Other Note being redeemed in, or contemporaneously with, such Share
Redemption, as identified in the applicable Share Redemption Notice and the
applicable notice given to the holder of the Other Note; provided however, that
if all of the outstanding principal amount of such installment of principal of
this Note is being redeemed in such Share Redemption, as identified in the
applicable Share Redemption Notice, and less than all of the outstanding
principal amount of such principal installment of the Other Note is being
redeemed contemporaneously with such Share Redemption, as identified in the
applicable notice given to the holder of the Other Note, then the Allocated
Redemption Percentage of this Note shall be the product obtained by multiplying
20 percent by a fraction, of which the numerator is the principal amount of such
installment of this Note being redeemed in such Share Redemption, as identified
in the applicable Share Redemption Notice, and the denominator is the aggregate
principal amount of such principal installments of
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this Note and the Other Note being redeemed in or contemporaneously with such
Share Redemption, as identified in the applicable Share Redemption Notice and
the applicable notice given to the holder of the Other Note (and the Allocated
Redemption Percentage shall be analogously determined if less than all of such
principal installment of this Note and all of such principal installment of the
Other Note are being redeemed contemporaneously with such Share Redemption, as
so identified in such notices).
"AMEX" means the American Stock Exchange, Inc.
"Applicable Rate" means for each Interest Period a rate per annum
equal to LIBOR for such Interest Period, plus three percent (or such lesser rate
as shall be the highest rate permitted by applicable law) or, if an Event of
Default shall occur, then so long as any Event of Default shall continue, the
Default Rate.
"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 or Dallas, Texas are
authorized or required by law or executive order to remain closed.
"Cash and Cash Equivalents Balances" of any Person on any date shall
be determined on an unconsolidated basis from such Person's books maintained in
accordance with Generally Accepted Accounting Principles, and means, without
duplication, the sum of (1) the cash held by such Person on such date and
available for use by such Person on such date, (2) all assets which would, on a
balance sheet of such Person prepared as of such date in accordance with
Generally Accepted Accounting Principles, be classified as cash equivalents;
provided, however, that (x) for purposes of computing the Cash and Cash
Equivalents Balances as of any date, no amount shall be included as cash or a
cash equivalent if such amount is subject to any lien, charge, equity or
encumbrance in favor of any other Person or is subject to any agreement,
arrangement or understanding by the Company with any other Person to maintain
the amount thereof or which restricts the use thereof by the Company (in any
such case, other than as provided in Section 3(m) of this Note and the Other
Note and other than the lien and security interest in favor of the Collateral
Agent arising under the Security Agreement) and (y) cash and cash equivalents
described in the preceding clauses (1) and (2) that are held at any time as
Collateral under the Security Agreement and in which the Collateral Agent has a
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perfected first priority security interest and which are not subject to any
lien, charge, equity or encumbrance in favor of any other Person shall be
included in determining the amount of Cash and Cash Equivalents Balances at such
time.
"Closing Date" shall have the meaning provided in the Purchase
Agreement.
"Collateral Agent" means Law Offices of ▇▇▇▇▇ ▇ ▇▇▇▇▇, as collateral
agent pursuant to the Security Agreement, and from time to time its duly
appointed and acting successor or successors.
"Common Stock" means the Common Stock, $0.01 par value, or any
shares of capital stock of the Company into which such shares shall be changed
or reclassified after the Closing 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.
"Company Certificate" means a certificate of the Company signed by
an Officer.
"Company Conversion Date" means the conversion date set forth in the
Company Conversion Notice and selected by the Company in accordance with Section
6(d)(2).
"Company Conversion Notice" means a Company Conversion Notice in the
form attached hereto as EXHIBIT F.
"Company Notice" means a Company Notice in the form attached as
EXHIBIT C.
"Computed Price" means, with respect to a particular Trading Day in
the Share Redemption Computation Period for a particular Share Redemption, 90
percent of the VWAP of the Common Stock for such Trading Day.
"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(b)(5)(C).
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"Conversion Notice" means a duly executed Notice of Conversion of
Amended and Restated Convertible Note due 2005-2008 substantially in the form of
EXHIBIT A to this Note.
"Conversion Price" means $6.00, 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 ten 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
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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 and the definition of the term
"VWAP", 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 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.
"Default Rate" means 16 percent per annum (or such lesser rate as
shall be the highest rate permitted by applicable law).
"DTC" means The Depository Trust Company.
"DWAC" means DTC's Deposit Withdrawal Agent Commission system.
"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 first 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 $250 million and subject to supervision by federal or state
authority and which has a branch located in New York, New York.
"Event of Default" shall have the meaning provided in Section 4(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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"Excluded Shares" means securities or rights to acquire securities
that entitle the holder or owner to acquire shares of Common Stock and that have
limitations on the holder's or owner's right to convert, exercise or purchase
similar to the limitations in Section 6(h).
"Extended Company Conversion Date" means with respect to any portion
of this Note to which Section 6(d)(3)(A) 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 Inconvertible
Portion, but in no event later than the date that is 90 days after the Final
Maturity Date.
"Expiration Time" shall have the meaning provided in Section
6(c)(6).
"FAST" means DTC's Fast Automated Securities Transfer program.
"Final Maturity Date" means November 2, 2008.
"Fundamental Change" means
(a) Any consolidation or merger of the Company or any material
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;
(b) The sale of (i) all or substantially all of the assets of the
Company and the Subsidiaries in a single transaction or a series of
transactions or (ii) one or more Subsidiaries or the assets of one or more
Subsidiaries which sale individually or in the aggregate is material to
the Company and the subsidiaries taken as a whole, in the case of the
preceding clause (ii) other than any such sale or sales which individually
or in the aggregate could not reasonably be expected to have a material
adverse effect on (i) the business, properties, operations, condition
(financial or other), results of operation or financial prospects of the
Company and the Subsidiaries, taken as a whole, (ii) the validity or
enforceability of, or the ability of the Company to perform its
obligations under, the Transaction Documents; (iii) the rights and
remedies of the Holder under the terms of the Transaction Documents; or
(iv) the Collateral or the first priority perfected security interest in
the Collateral granted to the Collateral Agent pursuant to the Security
Agreement;
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(c) 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
capital 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
(d) 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 that term is defined for purposes of Section 13(d)
of the 1934 Act and Regulation 13D-G thereunder), 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 D.
"Inconvertible Portion" shall have the meaning provided in Section
6(d)(3).
"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, currency purchase or similar 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
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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 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 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
(3);
(5) any indebtedness or other obligations described in clauses (1)
through (4) 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 be
payable by or shall have been assumed by such Person; and
(6) 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 (5).
"Installment Maturity Dates" mean November 2, 2005, November 2, 2006
and November 2, 2007.
"Interest Payment Date" means each February 1, May 1, August 1 and
November 1, commencing on the first such date after the Issuance Date, and the
Final 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 Period" means with respect to any outstanding principal of
this Note,
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(1) initially the period commencing on the Issuance Date and ending
on the date that is six months thereafter; and
(2) thereafter each period commencing on the last day of the next
preceding Interest Period and ending six months thereafter;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the limitation that any Interest Period for any installment of
principal that would otherwise extend beyond the Installment Maturity Date or
the Final Maturity Date, as the case may be, for such installment shall end on
such Installment Maturity Date or the Final Maturity Date, as the case may be.
"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 an amount
equal to 90 percent of the arithmetic average of the daily VWAPs of the Common
Stock for all of the Trading Days during the period of ten 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.
"LIBOR" means, with respect to each Interest Period, the six month
London Interbank Offered Rate at 11:00 a.m., London time, on the date that is
two London banking days before the first day of such Interest Period, as
reported by Bloomberg Financial L.P., using the BBAM function and the Official
BBA LIBOR quote shown thereby.
"Majority Holders" means at any time, the holders of two-thirds of
the aggregate outstanding principal amount of this Note and the Other Note.
"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
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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.
"Maximum Share Amount Deficiency" shall have the meaning provided in
the Purchase Agreement.
"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)(A).
"Note" means this instrument as originally executed, or if later
amended or supplemented in accordance with its terms, then as so amended or
supplemented.
"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 105 percent of the principal amount
of this Note that is outstanding on the applicable Optional Redemption Date plus
(B) accrued and unpaid interest on such principal amount to the applicable
Optional Redemption Date plus (C) accrued and unpaid interest, if any, at the
Default Rate on the amount referred to in the immediately preceding clause (B)
to the applicable Optional Redemption Date and (2) a Redemption Warrant that
initially (I) entitles the holder thereof to purchase a number of shares of
Common Stock equal to 70 percent of the quotient obtained by dividing (x) the
principal amount of this Note outstanding immediately prior to redemption of
this Note on the applicable Optional Redemption Date by (y) the Conversion Price
in effect immediately prior to redemption of this Note on the applicable
Optional Redemption Date and (II) has a Purchase Price (as defined in the
Redemption Warrant) equal to the Conversion Price in effect immediately prior to
redemption of this Note on the applicable Optional Redemption Date, subject to
adjustment as provided in the Redemption
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Warrant.
"Optional Redemption Date" means, with respect to a particular
redemption of this Note or a portion hereof under Section 2(b), the Business
Day, selected by the Company in accordance with Section 2(b), on which this Note
or such portion hereof is to be redeemed 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 that commences on the
date that is ten Trading Days after the Effective Date and ends on the Final
Maturity Date.
"Other Note" means the Amended and Restated Convertible Note due
2005-2008 issued by the Company upon amendment and restatement of the Company's
Convertible Note due 2005-2008 originally issued pursuant to the Other Purchase
Agreement, and any or all such instruments issued upon transfer or split-up
thereof.
"Other Purchase Agreement" means the Purchase Agreement, dated as of
November 1, 2004, by and between the Company and the original holder of the
Other Note or its predecessor instrument.
"Other Redemption Warrants" means any Common Stock Purchase Warrants
issuable or issued by the Company upon optional redemption of the Other Note
pursuant to Section 2(b) thereof.
"Permitted Indebtedness" means:
(1) Indebtedness outstanding on the Issuance Date prior to issuance
of this Note and reflected in the Company's financial statements included
in the SEC Filings;
(2) Indebtedness evidenced by this Note and the Other Note;
(3) Indebtedness outstanding on, or incurred after, the Issuance
Date in an aggregate amount not to exceed $5 million at any one time
outstanding so long as (A) such Indebtedness (x) is incurred for the
purpose of acquiring equipment owned or used or to be owned or used by the
Company or any Subsidiary (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
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interest so acquired plus reasonable transaction expenses and (y) 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 or
(B) is the reimbursement obligations and other liabilities (contingent or
otherwise) of the Company or any Subsidiary with respect to letters of
credit issued in lieu of cash security deposits for leases of real
property or equipment used by the Company or any Subsidiary, or commercial
or standby letters of credit issued in the ordinary course of the business
of the Company and its Subsidiaries (the amount of which shall for this
purpose be deemed to be the maximum reimbursement obligations and other
liabilities (contingent or otherwise) with respect to such letters of
credit, whether or not a drawing thereunder has been made);
(4) Indebtedness incurred after the Issuance Date that is unsecured
and that is subordinated as to payment to the Indebtedness evidenced by
this Note and the Other Note on terms that have been approved in writing
by the Majority Holders before the incurrence of such Indebtedness;
(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 at any time Nasdaq 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
November 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, as amended by the Purchase
Agreement Amendment.
"Purchase Agreement Amendment" means Amendment No. 1 to Purchase
Agreement, dated as of April___ , 2005, by and between the Company and the
original holder of the Convertible Promissory Note due 2005-2008 that was
amended and restated by this Note or this Note's predecessor instrument.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
-14-
"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).
"Redemption Delay Payments" shall have the meaning provided in
Section 2(c)(6)(C).
"Redemption Warrant" means any Common Stock Purchase Warrant in the
form attached as EXHIBIT E issuable or issued as part of the Optional Redemption
Consideration.
"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:
(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;
(d) The adoption of any amendment to the Company's Articles of
Incorporation (other than any certificate designating a series of
preferred stock of the Company) 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 30
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 Note or exercise of the Warrants or issued as Interest Payment
-15-
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, excluding
any such inability to sell that results from an untrue statement of a
material fact in such Registration Statement or Prospectus or omission to
state a material fact required to be stated in such Registration Statement
or Prospectus in order to make the statements therein not misleading,
which misstatement or omission was made by the Holder in written
information it furnished to the Company specifically for inclusion in such
Registration Statement or Prospectus which such information was
substantially relied upon by the Company in preparation of the
Registration Statement or Prospectus or any amendment or supplement
thereto, unless the Company shall have failed timely to amend or
supplement such Registration Statement or Prospectus after the Holder
shall have corrected such misstatement or omission; or
(f) The Registration Statement required by Section 2(a)(i) of the
Registration Rights Agreement is not declared effective by the SEC within
95 days (or 125 days if the SEC staff determines to review such
Registration Statement) 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 95 days (or 125 days
if the SEC staff determines to review such Registration Statement)
following demand of the Holder pursuant to the Registration Rights
Agreement.
"Repurchase Price" means with respect to any repurchase pursuant to
Section 5 an amount in cash equal to the greater of (1) the sum of (A) the
outstanding principal amount of this Note that the Holder has elected to be
repurchased plus (B) accrued and unpaid interest on such principal amount to the
date of such repurchase plus (C) accrued and unpaid interest, if any, at the
Default Rate on the amount referred to in the immediately preceding clause (B)
to the date of such repurchase and (2) the product obtained by multiplying (A)
the Current Market Price on the date the Repurchase Event occurs, the date the
Company gives the Company Notice to the Holder, the date the Holder gives the
Holder Notice to the Company or the applicable repurchase date pursuant to
Section 5, whichever such Current Market Price is the highest, times (B) the
number of shares of Common Stock which would be issuable upon conversion of the
principal amount of this Note (and interest thereon as provided in Section 6(a))
to be repurchased by reason of the occurrence of such Repurchase Event
(determined without regard to any limitation on conversion contained in Section
6) if such conversion were made on the date for which, pursuant to the
immediately preceding clause (A), the
-16-
Current Market Price is used for the computation of the Repurchase Price
pursuant to this clause (2).
"Required Cash Amount" means for any date the amount set forth below
with respect to such date:
DATE AMOUNT
---- ------
Issuance Date through November 2, 2007 $10,000,000.00
thereafter $ 5,000,000.00
; provided, however, that the reduction shown in the foregoing table shall occur
only if all installments of principal due on or before the date of such
scheduled reduction have been paid and all installments of principal required by
Section 2(d) to be redeemed on or before the date of such scheduled reduction
have been redeemed in accordance with Section 2(d); provided further, however,
that if the Company redeems in full in accordance with Section 2(d)(2) the
installments of principal of this Note scheduled to be due on November 2, 2005
and November 2, 2008 on or before the respective redemption dates therefor
specified in Section 2(d)(2), then thereafter through November 2, 2006 the
Required Cash Amount shall be $9,000,000.00, subject to the next succeeding
proviso, and, if the Company also pays in accordance with Section 2(d)(1) the
full amount of the installment of principal due on November 2, 2006 then
thereafter the Required Cash Amount shall be $5,000,000.00; and provided
further, however, that if the Company redeems in full in accordance with Section
2(d)(2) the installments of principal of this Note scheduled to be due on
November 2, 2005 and November 2, 2008 on or before the respective redemption
dates therefor specified in Section 2(d)(2), and thereafter the Holder or the
holder of the Other Note requires the Company to redeem all or any portion of
this Note in accordance with Section 6.16(b)(2) of the Purchase Agreement or the
Other Purchase Agreement, as the case may be, then to the extent any such
redemption reduces the aggregate outstanding principal amount of this Note and
the Other Note to an amount less than $9,000,000.00, then immediately following
such redemption the Required Cash Amount shall be reduced to the aggregate
outstanding principal amount of this Note and the Other Note immediately after
such redemption.
"Restricted Ownership Percentage" shall have the meaning provided in
Section 6(h).
"Rule 144A" means Rule 144A as promulgated under the 1933 Act or any
successor rule thereto.
"SEC" means the U.S. Securities and Exchange Commission.
-17-
"SEC Filings" shall have the meaning provided in the Purchase
Agreement.
"Security Agreement" means the Security Agreement, dated as of
November 2, 2004, by and between the Company and the Collateral Agent.
"Share Interest Payment Limitation" means, with respect to any
Interest Payment Date, a number of Interest Payment Shares equal to 50% of the
aggregate number of shares of Common Stock traded on the Principal Market on all
of the Trading Days during the period from and including the date that is 29
Trading Days prior to such Interest Payment Date to and including the date that
is 20 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, unless the Majority Holders consent in
writing to a higher number of shares with respect to any particular Interest
Payment Date.
"Share Interest Payment Option" shall have the meaning provided in
Section 2(a)(1).
"Share Redemption" means a redemption of this Note or a portion
hereof pursuant to Section 2(c).
"Share Redemption Computation Period" means, with respect to a
particular Share Redemption, the period of 15 consecutive Trading Days ending on
and including the Trading Day immediately preceding the applicable Share
Redemption Date for such Share Redemption.
"Share Redemption Daily Amount" means, with respect to a particular
Trading Day in the Share Redemption Computation Period for a particular Share
Redemption, the lesser of following amounts:
(1) an amount equal to one-fifteenth of the Share Redemption Price
stated in the applicable Share Redemption Notice for such Share
Redemption, and
(2) the Share Redemption Daily Limitation for such Trading Day.
"Share Redemption Daily Limitation" means, with respect to a
particular Trading Day in the Share Redemption Computation Period for a
particular Share Redemption, the sum of (x) 105 percent of the product obtained
by multiplying (A) the product obtained by multiplying (i) the Allocated
Redemption
-18-
Percentage for such Share Redemption times (ii) the number of shares of Common
Stock traded on such Trading Day, as reported by Bloomberg Financial, L.P.,
based on a Trading Day from 9:30 a.m., Eastern Time, to 4:00 p.m., Eastern Time,
using the AQR Function for such Trading Day times (B) the Computed Price , plus
(y) accrued and unpaid interest on an amount equal to 100 percent of the product
of the amount in clause (A) in the immediately preceding clause (x) times the
amount in clause (B) in the immediately preceding clause (x) to the applicable
Share Redemption Date, computed as if the amount on which such interest were
being calculated were principal of this Note to be redeemed on the applicable
Share Redemption Date plus (z) accrued and unpaid interest, if any, computed at
the Default Rate on the amount specified in the immediately preceding clause
(y).
"Share Redemption Date" means, with respect to a particular
redemption of this Note or a portion hereof under Section 2(c), the Trading Day
selected by the Company in accordance with Section 2(c), on which this Note or
such portion hereof is to be redeemed pursuant to Section 2(c).
"Share Redemption Notice" means a Share Redemption Notice in the
form attached hereto as EXHIBIT G.
"Share Redemption Period" means the period that commences three
Trading Days after the Company files the Current Report on Form 8-K contemplated
by Section 6.3 of the Purchase Agreement Amendment and ends on December 31,
2005.
"Share Redemption Price" means an amount equal to the sum of (1) 105
percent of the principal amount of this Note that is to be redeemed on the
applicable Share Redemption Date plus (2) accrued and unpaid interest on such
principal amount to the applicable Share Redemption Date plus (3) accrued and
unpaid interest, if any, at the Default Rate on the amount referred to in the
immediately preceding clause (2) to the applicable Share Redemption Date.
"Share Redemption Share Amount" means, with respect to a particular
Share Redemption, an amount determined by computing for each Trading Day in the
Share Redemption Computation Period for such Share Redemption the quotient
obtained by dividing (x) the Share Redemption Daily Amount for such Trading Day
by (y) the Computed Price for such Trading Day and then computing the sum of
such quotients for all of the Trading Days in such Share Redemption Computation
Period.
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means at any time a day on which the Principal Market
is open for the general trading of securities.
-19-
"Transaction Documents" means this Note, the Other Note, the
Purchase Agreement, the Purchase Agreement Amendment, the Other Purchase
Agreement, the Security Agreement, the Warrants, the Redemption Warrant and the
Other Redemption Warrants.
"Transfer Agent" shall mean the institution acting as transfer agent
for the Common Stock.
"Trigger Event" shall have the meaning provided in Section 6(c)(4).
"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.
"VWAP" of any security on any Trading Day or for any period of
Trading Days means the volume-weighted average price of such security on such
Trading Day or for such period of Trading Days on the Principal Market, as
reported by Bloomberg Financial, L.P., based on a Trading Day from 9:30 a.m.,
Eastern Time, to 4:00 p.m., Eastern Time, using the AQR Function, for such
Trading Day or for such period of Trading Days; provided, however, that during
any period that the daily VWAP is being determined or for any period for which
the VWAP is being determined, such VWAP shall be subject to equitable
adjustments from time to time on terms consistent with Section 6(c) and
otherwise reasonably acceptable to the Majority Holders for (i) stock splits,
(ii) stock dividends, (iii) combinations, (iv) capital reorganizations, (v)
issuance to all holders of Common Stock of rights or warrants to purchase shares
of Common Stock, (vi) distribution by the Company to all holders of Common Stock
of evidences of indebtedness of the Company or cash (other than regular
quarterly cash dividends), (vii) Tender Offers by the Company or any Subsidiary
for, or other repurchases of shares of, Common Stock in one or more transactions
which, individually or in the aggregate, result in the purchase of more than ten
percent of the Common Stock outstanding, and (viii) similar events relating to
the Common Stock, in each case which occur, or with respect to which the "ex"
date occurs, during such period.
"Warrants" means Common Stock Purchase Warrants of the Company
issued to the original Holder of this Note or its predecessor instrument
pursuant to the Purchase Agreement and issued to the original holders of the
Other Note or their predecessor instruments pursuant to the Other Purchase
Agreement, as amended pursuant to the Purchase Agreement Amendment and the like
amendments to the Other Purchase Agreement.
-20-
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 wholly
or partly in Common Stock (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) on the date the Company notifies the Holder of the Company's
election to exercise the Share Interest Payment Option or on the date the
Company is required to deliver the Interest Payment Shares, 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 by or is not in effect on the date the
Company notifies the Holder of the Company's election to exercise the
Share Interest Payment Option or at any time thereafter to and including
the later of (A) such Interest Payment Date and (B) the date the Company
delivers such Interest Payment Shares to the Holder, the Registration
Statement (x) is unavailable for use by the Holder for the resale of the
Interest Payment Shares or (y) 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 and in either case in the preceding
clause (x) or (y) the Interest Payment Shares are ineligible for resale by
the Holder under Rule 144(k) under the 1933 Act, unless in any such case
described in this clause (ii) the Holder notifies the Company that it will
accept such Interest Payment Shares notwithstanding the failure to satisfy
this clause (ii);
(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 Market;
(iv) the Interest Share Price for the Interest Payment Shares is
less
-21-
than the par value of the Common Stock;
(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; or
(vi) on the date the Company notifies the Holder of the Company's
election to exercise the Share Interest Payment Option or at any time
thereafter to and including the later of (A) such Interest Payment Date
and (B) the date the Company delivers such Interest Payment Shares to the
Holder a Maximum Share Amount Deficiency exists.
(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 15 or more than 19 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. Time shall be of the essence in the giving of
such notice. 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 Note 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 Note, 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 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 due
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 Note
on any Interest Payment Date an aggregate number of Interest Payment Shares in
excess of the Share Interest Payment Limitation and any interest on this Note
not paid in Interest Payment Shares due to the Share Interest Payment Limitation
shall be paid in cash.
(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
-22-
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 interest
thereon, if any, at the Default Rate 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 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
-23-
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,
expressed in dollars and as a percentage, (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 representation and warranty, which, if false or
misleading, shall be an Event of Default under Section 4(a)(5), 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. 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. The Interest Payment
Shares shall be duly issued in the name of the Holder or its nominee. On or
before the applicable Interest Payment Date, the Company shall issue, or cause
the Transfer Agent 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 such
Interest Payment Date.
(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
-24-
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.
(6) Any amount of interest not paid in Interest Payment Shares shall
be due and payable in cash on the applicable Interest Payment Date.
(b) OPTIONAL AND MANDATORY REDEMPTION. (1) At any time during the
Optional Redemption Period, the Company shall have the right to redeem the
principal installments stated in Section 2(d)(1) to be due on November 2, 2006
and November 2, 2007 in whole or from time to time in part, and on the
respective dates specified in Section 2(d)(2), the Company shall have the
obligation to redeem the then remaining outstanding amounts of the principal
installments stated in Section 2(d)(1) to be due on November 2, 2005 and
November 2, 2008 in full, in each such case by payment of the Optional
Redemption Consideration pursuant to this Section 2(b) on the applicable
Optional Redemption Date, so long as the following conditions precedent are
satisfied:
(A) on the date a particular Optional Redemption Notice is given and
at all times thereafter to and including the applicable 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, by reason of such redemption, the requirements
of this clause (A) will be satisfied immediately after the redemption of
this Note and the Other Note on the applicable Optional Redemption Date
and the Company shall furnish Company Certificates to the Holder to such
effect on the date such Optional Redemption Notice is given to the Holder
and on the applicable Optional Redemption Date);
(B) on the date such Optional Redemption Notice is given and at all
times thereafter to and including the applicable Optional Redemption Date,
no Repurchase Event has occurred with respect to which the Holder has the
right to exercise repurchase rights pursuant to Section 5 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 such 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 Note and the holders of the Warrants for
the resale of the shares of Common Stock issued and issuable upon
conversion of
-25-
this Note and the Other Note 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, and the Company shall be in
compliance in all material respects with its obligations under the
Registration Rights Agreement;
(D) on the date such Optional Redemption Notice is given and at all
times thereafter to and including the applicable 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
Redemption Warrants issuable to the Holder in payment of a portion of the
Optional Redemption Consideration on the applicable Optional Redemption
Date and any Redemption Warrants previously issued to the Holder 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 reasonably be expected to remain available for such use for at least
30 Trading Days after the applicable Optional Redemption Date;
(E) on the date such Optional Redemption Notice is given, the
Company has funds available to pay the cash portion of the Optional
Redemption Consideration payable on the applicable Optional Redemption
Date;
(F) other than in the case of a redemption required by Section
2(d)(2) or by Section 6.16(b)(2) of the Purchase Agreement, the Optional
Redemption Date selected by the Company in accordance with this Section
2(b) and set forth in such Optional Redemption Notice shall be at least
365 days after any earlier Optional Redemption Date;
(G) except as otherwise provided in Section 6.16(b)(2) of the
Purchase Agreement, on the date such Optional Redemption Notice is given
and at all times thereafter to and including the applicable Optional
Redemption Date no Maximum Share Amount Deficiency exists (unless, by
reason of such redemption, the requirements of this clause (G) will be
satisfied immediately after the redemption of this Note and the Other Note
on the applicable Optional Redemption Date and the Company shall furnish
Company Certificates to the Holder to such effect on the date such
Optional Redemption Notice is given to the Holder and on the applicable
Optional Redemption Date); and
(H) during the period beginning five days prior to the date the
Company gives such Optional Redemption Notice and ending on the applicable
Optional Redemption Date the Company shall not have been engaged in
discussions or negotiations concerning, or entered in to an
-26-
agreement or received any proposal for, any transaction that might result
in a Fundamental Change, and the Company shall not enter into any
agreement or accept any proposal for, any transaction that might result in
a Fundamental Change for a period of 60 days after the applicable Optional
Redemption Date.
In order to exercise its right of redemption under this Section 2(b) the Company
shall give the particular Optional Redemption Notice to the Holder not less than
20 Trading Days or more than 40 Trading Days prior to the applicable 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 payable on such Optional Redemption Date (assuming no
conversion of this Note from the date the Company gives such Optional Redemption
Notice to the applicable Optional Redemption Date); (4) the number of shares of
Common Stock and the purchase price therefor to be contained in the Redemption
Warrant included in such Optional Redemption Consideration (assuming no
conversion of this Note from the date the Company gives such Optional Redemption
Notice to the applicable Optional Redemption Date); (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 applicable
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
such Optional Redemption Consideration consisting of the Redemption Warrant,
which will be deemed for all purposes to have been issued to the Holder on the
applicable 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 an 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 such
Optional Redemption Notice. Notwithstanding the giving of a particular Optional
Redemption Notice, the Holder shall be entitled to convert all or any portion of
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 applicable 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 payable on the applicable Optional
Redemption Date on or before the applicable Optional Redemption Date, the date
on which the Company pays and delivers to the Holder, or deposits in
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accordance with Section 7(k), such Optional Redemption Consideration. If after
giving effect to any such conversion of this Note that occurs after the date the
Company gives a particular Optional Redemption Notice to the Holder, the
principal amount of this Note remaining outstanding is less than the amount
thereof to be redeemed as stated in the applicable Optional Redemption Notice,
then 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 interest, if any, thereon at the
Default Rate) on the applicable Optional Redemption Date resulting from any such
conversions of this Note after the Company gives such Optional Redemption Notice
to the Holder. Any redemption of this Note pursuant to this Section 2(b), other
than a redemption required by Section 2(d)(2), shall be applied to the
installments of principal outstanding on the applicable Optional Redemption Date
first to the principal installment stated in Section 2(d)(1) to be due on
November 2, 2007, second to the principal installment stated in Section 2(d)(1)
to be due on November 2, 2006 and thereafter to the remaining principal
installments in the inverse order of their maturity stated in Section 2(d)(1),
and any redemption of this Note pursuant to this Section 2(b) that is required
by Section 2(d)(2) shall be applied to the installment of principal outstanding
on the applicable Optional Redemption Date that is required by Section 2(d)(2)
to be redeemed under this Section 2(b) on such Optional Redemption Date.
(3) In order that the Company shall not discriminate among the
Holder and the holders of the Other Note, the Company agrees that each
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 Note and that such redemption
shall be made pro rata based on the principal amounts of this Note and the Other
Note outstanding on the date the Company gives the particular Optional
Redemption Notice. In order that the Company not discriminate among the Holder
and the holders of the Other Note, the Company agrees that it shall not redeem
any of the Other Note pursuant to the provisions thereof similar to this Section
2(b) or repurchase or otherwise acquire any of the Other Note (other than a
mandatory redemption pursuant to provisions of the Other Note comparable to
Section 5 or as provided in Sections 6.2 and 6.16 of the Purchase Agreement and
the Other Purchase Agreement) 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 Note.
(c) SHARE REDEMPTION. (1) During the Share Redemption Period, the
Company shall, as provided in Sections 2(d)(2) and 2(d)(3), redeem the principal
installments of this Note due on November 2, 2005 and November 2, 2008 in whole
or from time to time in part, in each such case by issuing the number of shares
of Common Stock to the Holder determined as provided in Section 2(c)(2), so long
as
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the following conditions precedent are satisfied:
(A) on the date a particular Share Redemption Notice is given and at
all times thereafter to and including the applicable Share 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, by reason of such redemption, the requirements of this
clause (A) will be satisfied immediately after the redemption of this Note
and the Other Note on the applicable Share Redemption Date and the Company
shall furnish Company Certificates to the Holder to such effect on the
date such Share Redemption Notice is given to the Holder and on the
applicable Share Redemption Date);
(B) on the date such Share Redemption Notice is given and at all
times thereafter to and including the applicable Share Redemption Date, no
Repurchase Event has occurred with respect to which the Holder has the
right to exercise repurchase rights pursuant to Section 5 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 such Share Redemption Notice is given and at all
times thereafter to and including the applicable Share Redemption Date,
the Registration Statement shall be effective and available for use by the
Holder, the holders of the Other Note and the holders of the Warrants for
the resale of the shares of Common Stock issued and issuable upon such
Share Redemption and issued or issuable upon conversion of this Note and
the Other Note 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 Share
Redemption Date, and the Company shall be in compliance in all material
respects with its obligations under the Registration Rights Agreement;
(D) on the date such Share Redemption Notice is given, the Company
has authorized and unissued shares of Common Stock not reserved for any
purpose other than Share Redemption of this Note in an amount sufficient
to satisfy the applicable Share Redemption Price by issuance of shares of
Common Stock;
(E) the Share Redemption Date selected by the Company in accordance
with this Section 2(c) and set forth in such Share Redemption Notice shall
be at least 24 Trading Days after any earlier Share Redemption Date;
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(F) the Company shall have complied with Section 3(o) with respect
to all Share Redemptions occurring prior to the giving of such Share
Redemption Notice;
(G) on the date such Share Redemption Notice is given and at all
times thereafter to and including the applicable Share Redemption Date no
Maximum Share Amount Deficiency exists and no Maximum Share Amount
Deficiency would result from such Share Redemption or the contemporaneous
redemption of the Other Note pursuant to Section 2(c) thereof;
(H) during the period beginning five days prior to the date the
Company gives such Share Redemption Notice and ending on the applicable
Share Redemption Date the Company shall not have been engaged in
discussions or negotiations concerning, or entered in to an agreement or
received any proposal for, any transaction that might result in a
Fundamental Change, and the Company shall not enter into any agreement or
accept any proposal for, any transaction that might result in a
Fundamental Change for a period of 60 days after the applicable Share
Redemption Date; and
(I) the Computed Price for such Share Redemption is not less than
the par value of the Common Stock.
In order to exercise its right of redemption under this Section 2(c) the Company
shall give the particular Share Redemption Notice to the Holder not less than 17
Trading Days or more than 19 Trading Days prior to the applicable Share
Redemption Date, stating: (1) that 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 (assuming no conversion of this Note from the date the
Company gives such Share Redemption Notice to the applicable Share Redemption
Date and that the Share Redemption Share Amount for such Share Redemption will
be computed based on the entire such principal amount), (3) the amount of the
Share Redemption Price payable on such Share Redemption Date (assuming no
conversion of this Note from the date the Company gives such Share Redemption
Notice to the applicable Share Redemption Date and that the Share Redemption
Share Amount for such Share Redemption will be computed based on the entire
principal amount included such Share Redemption Price), (4) the principal
installment to which such Share Redemption shall be applied, (5) the applicable
Share Redemption Date and (6) that all of the conditions of this Section 2(c)
entitling the Company to call this Note for redemption have been met. As
promptly as practicable, but in no event later than three Trading Days, after
the applicable Share Redemption Date, 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 Share Redemption of
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this Note or portion hereof in accordance with the provisions of this Section
2(c) and deliver a check or cash in respect of any fractional interest in
respect of a share of Common Stock arising upon such redemption, as provided in
Section 2(c)(7). In lieu of delivering physical certificates for the shares of
Common Stock issuable upon any such redemption of this Note, provided the
Transfer Agent is participating in FAST, upon request of the Holder, the Company
shall use commercially reasonable efforts to cause the Transfer Agent
electronically to transmit such shares of Common Stock issuable upon redemption
to the Holder (or its designee), by crediting the account of the Holder's (or
such designee's) broker or other participant with DTC through DWAC (provided
that the same time periods herein as for stock certificates shall apply). The
Holder shall have the right, exercisable by notice given to the Company from
time to time after the Company gives a Share Redemption Notice for a particular
Share Redemption, to require the Company to deliver to the Holder a portion of
the shares of Common Stock issuable in connection with a particular Share
Redemption in advance of the date that is three Trading Days after the
applicable Share Redemption Date, in which case the shares so requested shall be
delivered within three Trading Days after the Holder gives such notice to the
Company. The aggregate number of shares of Common Stock required to be so
delivered in advance of a particular Share Redemption Date may not exceed the
sum for the elapsed Trading Days in the applicable Share Redemption Computation
Period of quotient obtained by dividing (1) the Share Redemption Daily Amount
for each such Trading Day by (2) the Computed Price for such Trading Day.
(2) The number of shares of Common Stock issuable by the Company in
respect of each Share Redemption shall be the Share Redemption Share Amount for
such Share Redemption. Notwithstanding the principal amount of this Note to be
redeemed as stated in the Share Redemption Notice for a particular Share
Redemption, the principal amount actually redeemed shall be the sum, for all of
the Trading Days in the Share Redemption Computation Period for such Share
Redemption, of (x) the principal amount of this Note included in the amount
specified in clause (1) of the definition of Share Redemption Daily Amount for
each Trading Day in such Share Redemption Computation Period for which the Share
Redemption Daily Amount for such Trading Day is computed under clause (1) of
such definition, or (y) the product obtained by multiplying (i) the amount set
forth in subclause (A) of the definition of Share Redemption Daily Limitation
times (ii) the amount set forth in subclause (B) of the definition of Share
Redemption Daily Limitation for each Trading Day in such Share Redemption
Computation Period for which the Share Redemption Daily Amount for such Trading
Day is computed under clause (2) of such definition.
(3) The Company shall not be entitled to give a Share 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 such
Share Redemption Notice. Notwithstanding the giving of a particular Share
Redemption
-31-
Notice, the Holder shall be entitled to convert all or any portion of this Note,
in accordance with the terms of this Note, to be redeemed by reason of the
giving of such Share Redemption Notice 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
applicable Share Redemption Date and (2) if the Company fails to issue or
deliver to the Holder the shares of Common Stock issuable in satisfaction of
such Share Redemption Price on or before the due date therefor, the date on
which the Company issues and delivers to the Holder such shares of Common Stock.
If after giving effect to any such conversion of this Note that occurs after the
date the Company gives a particular Share Redemption Notice to the Holder, the
principal amount of a particular principal installment of this Note remaining
outstanding is less than the amount thereof to be redeemed as stated in the
applicable Share Redemption Notice, then the Share Redemption Share Amount for
such Share Redemption shall be reduced form what it otherwise would be to
reflect the reduced outstanding principal amount of this Note and related
accrued interest (and interest, if any, thereon at the Default Rate) on the
applicable Share Redemption Date resulting from any such conversions of this
Note after the Company gives such Share Redemption Notice to the Holder. Such
reduction of the Share Redemption Share amount shall be made by reducing the
Share Redemption Daily Amounts used to calculate the Share Redemption Share
Amount for such Share Redemption in the inverse of their chronological order to
the extent necessary to reduce the principal amount reflected in such Share
Redemption Share Amount by the principal amount so converted. Any redemption of
this Note pursuant to this Section 2(c) that is required by Section 2(d)(2)
shall be applied to the installments of principal outstanding on the applicable
Share Redemption Date first to the principal installment stated by Section
2(d)(1) to be due on November 2, 2005 and then to the principal installment
stated by Section 2(d)(1) to be due on November 2, 2008.
(4) Each redemption of this Note (or portion hereof) pursuant to
this Section 2(c) shall be deemed to have been effected on the applicable Share
Redemption Date, and the person in whose name any certificate or certificates
for shares of Common Stock shall be issuable upon such redemption shall be
deemed to have become on such Share Redemption Date the holder of record of the
shares represented thereby; provided, however, that if a Share Redemption Date
is a date on which the stock transfer books of the Company shall be closed such
redemption 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. Upon redemption of this Note or any
portion hereof pursuant to this Section 2(c), the accrued and unpaid interest on
this Note (or portion hereof) so redeemed to (but excluding) the applicable
Share Redemption 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 redemption
of this Note or portion hereof as shall have an aggregate Current Market Price
on the Trading Day
-32-
immediately preceding such Share Redemption Date equal to the amount of such
accrued and unpaid interest.
(5) 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 redemption of this
Note pursuant to this Section 2(c) 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 income or
withholding tax payable in connection with any such redemption of this Note.
(6) (A) If the Company shall have given a Share Redemption Notice in
accordance with the terms of this Note, the Company's obligation to issue and
deliver the shares of Common Stock upon such redemption on the terms and subject
to the conditions of this Note 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 redemption;
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.
(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 redemption
of this Note within three Trading Days after the due date therefor, 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
and (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
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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. 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). In the case of the Company's failure to issue
and deliver or cause to be delivered the shares of Common Stock to the Holder
within three Trading Days of the due date therefor, the amount payable by the
Company pursuant to this clause (B) of Section 2(c)(6) with respect to such
conversion shall be reduced by the amount of Redemption Delay Payments
previously paid by the Company to the Holder with respect to such redemption.
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 applicable Share Redemption Date 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 learns after the date which is three
Trading Days after the due date for delivery of shares of Common Stock under
this Section 2(c) 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 date the Holder so learns of
such failure of delivery, 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 (ii) of the first sentence of this clause (B) of Section 2(c)(6).
(C) If the Company fails to deliver or cause to be delivered to the
Holder such shares of Common Stock pursuant to this Section 2(c) (free of any
restrictions on transfer or legends except to the extent permitted under Section
6.11 of the Purchase Agreement) in accordance herewith, within five Trading Days
after a particular Share Redemption Date, then, in addition to any other
liability the Company may have, the Company shall pay to the Holder, in cash,
upon demand of the Holder from time to time an amount, computed at the rate of
2% per month of the VWAP of the Common Stock multiplied by the number of shares
of Common Stock not timely delivered by the Company, for each day in the period
such failure
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continues (the "Redemption 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 VWAP of the Common Stock
during such period being given 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.
(7) No fractional shares of Common Stock shall be issued upon any
Share Redemption of this Note but, in lieu of any fraction of a share of Common
Stock which would otherwise be issuable in respect of such redemption, the
Company may round the number of shares of Common Stock issued on such redemption
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
Share Redemption Date.
(8) In order that the Company shall not discriminate among the
Holder and the holder of the Other Note, the Company agrees that each 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 Note and that the amount of such
redemption shall be made pro rata based on the original principal amounts of the
installments of principal of this Note and the Other Note being redeemed by
reason of, or contemporaneous with, the giving of such Share Redemption Notice
unless the outstanding principal amounts of the installments of principal of
this Note and the Other Note being redeemed are unequal on the applicable Share
Redemption Date and the full amount of the lesser of such installments is being
redeemed in full in or contemporaneous with such Share Redemption. In order that
the Company not discriminate among the Holder and the holder of the Other Note,
the Company agrees that it shall not redeem any of the Other Note pursuant to
the provisions thereof similar to this Section 2(c) or repurchase or otherwise
acquire any of the Other Note (other than a mandatory redemption pursuant to
provisions of the Other Note comparable to Section 5 or as provided in Sections
6.2 and 6.16 of the Purchase Agreement and the Other Purchase Agreement) unless
the Company offers simultaneously to redeem, repurchase or otherwise acquire a
pro rata portion (based on the original outstanding principal amount of the
installment of principal to be redeemed, in the case of redemption under Section
2(c), or otherwise based on outstanding principal amount) of this Note for the
same form of consideration at the same unit price as the Other Note.
(9) (A) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be issued to the Holder by the
Company upon a particular Share Redemption shall not exceed a number that for
purposes of Section 13(d) of the 1934 Act and Regulation 13D-G thereunder
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(including, without limitation, as the same is made applicable to Section 16 of
the 1934 Act and the rules promulgated thereunder), would constitute beneficial
ownership by the Holder of more than 4.9% of the shares of Common Stock for
purposes of Section 13(d) or Section 16 of the 1934 Act and the rules
promulgated thereunder. The Holder shall have the right at any time and from
time to time to reduce the aforesaid 4.9% limitation immediately upon notice to
the Company in the event and only to the extent that Section 13(d) or 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 5% or 10%, as the case may be. If at any time the limits
in this Section 2(c)(9) make any portion of this Note unredeemable in whole or
in part in a particular Share Redemption, the Share Redemption Daily Amounts
used to calculate the Share Redemption Share Amount for such Share Redemption
shall be reduced in the inverse of their chronological order to the extent
necessary to reduce the Share Redemption Share Amount for such Share Redemption
to an amount that will not require issuance of a number of shares of Common
Stock in excess of the limitation provided in this Section 2(c)(9) and the
principal amount of this Note redeemed in such Share Redemption shall be reduced
accordingly, but any such principal amount not so redeemed may be redeemed in a
subsequent Share Redemption on the terms and subject to the conditions of this
Note.
(B) The provisions of Section 6(h)(2) shall be applicable to the
provisions of this Section 2(c)(9).
(d) INSTALLMENTS OF PRINCIPAL; MANDATORY PREPAYMENTS. (1)
INSTALLMENTS. Subject to Section 2(d)(2), the principal of this Note shall
become due in installments as follows:
PRINCIPAL AMOUNT DUE DATE
---------------- --------
$2,500,000.00 November 2, 2005
$2,500,000.00 November 2, 2006
$2,500,000.00 November 2, 2007
$2,500,000.00 November 2, 2008
The amounts of such installments that are payable on each such date are subject
to reduction as provided in Sections 2(b), 2(c), 5 and 6.
(2) EARLY REDEMPTION OF 2005 AND 2008 INSTALLMENTS. The Company
shall redeem the principal installment scheduled to be due on November 2, 2005
not later than July 31, 2005 and shall redeem the principal installment
-36-
scheduled to be due on November 2, 2008 not later than December 31, 2005, in
each case through one or more redemptions pursuant to Section 2(c); provided,
however, that if the Company is unable to redeem all or any portion of either
such installment of principal pursuant to Section 2(c) by the applicable date
provided above in this Section 2(d)(2), then on such applicable date the Company
shall redeem pursuant to Section 2(b) (including, without limitation, by giving
an Optional Redemption Notice as required by Section 2(b)) any amount thereof
not redeemed pursuant to Section 2(c).
(3) CONCERNING SHARE REDEMPTIONS. The Company shall act in good
faith to make the Share Redemptions at such times, with such frequency and in
such amounts as shall be reasonably expected to result in redemption in full of
each installment of principal of this Note through Share Redemptions prior to
the applicable deadlines for completing the same that are specified in Section
2(d)(2).
(e) NO OTHER PREPAYMENT BY THE COMPANY. Except as specifically
provided in Sections 2(b), 2(c) and 2(d), this Note may not be prepaid, redeemed
or repurchased at the option of the Company prior to the applicable Installment
Maturity Dates or the Final Maturity Date, as the case may be. In order that the
Company not discriminate among the Holder and the holders of the Other Note, the
Company agrees that it shall not prepay, redeem, repurchase or otherwise acquire
any of the Other Note, other than pursuant to Section 6.16 of the Other Purchase
Agreement, unless the Company offers simultaneously to prepay, redeem,
repurchase or otherwise acquire a pro rata portion of this Note for the same
form of consideration and at the same price per unit of outstanding principal
amount as the Other Note or Other Note.
(f) REDEMPTION AT THE OPTION OF THE HOLDER. The Holder has the right
to require the Company to redeem this Note as provided in Sections 6.2 and 6.16
of the Purchase Agreement.
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, when due all their
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respective 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 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, in each case other than where the
failure to do so in respect of any Subsidiary or Subsidiaries individually or in
the aggregate could not reasonably be expected to have a material adverse effect
on (i) the business, properties, operations, condition (financial or other),
results of operation or financial 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
financial 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
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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 transactions;
(2) sell one or more Subsidiaries, or permit any one or more
Subsidiaries to sell its the assets, if such sale individually or in the
aggregate is material to the Company and the Subsidiaries taken as a whole,
other than any such sale or sales which individually or in the aggregate could
not reasonably be expected to have a material adverse effect on (i) the
business, properties, operations, condition (financial or other), results of
operation or financial prospects of the Company and the Subsidiaries, taken as a
whole, (ii) the validity or enforceability of, or the ability of the Company to
perform its obligations under, the Transaction Documents; (iii) the rights and
remedies of the Holder under the terms of the Transaction Documents; or (iv) the
Collateral or the first priority perfected security interest in the Collateral
granted to the Collateral Agent pursuant to the Security Agreement; or
(3) liquidate, dissolve or otherwise wind up the affairs of the
Company.
(h) LIMITATION ON CERTAIN ISSUANCES. The Company shall not offer,
sell or issue, or enter into any agreement, arrangement or understanding to
offer, sell or issue, any Common Stock or Common Stock Equivalent (A) that is
convertible into, exchangeable or exercisable for, or includes the right to
receive additional shares of Common Stock either (x) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the Common Stock at any time after the
initial issuance of such Common Stock or Common Stock Equivalent, or (y) with a
fixed conversion, exercise, exchange or purchase price that is subject to being
reset at some future date after the initial issuance of such Common Stock or
Common Stock Equivalent or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock (but excluding customary stock split, reverse stock split,
stock dividend and similar anti-dilution provisions substantially similar to
those set forth in clauses (1) through (7) of Section 6(c)), or (B) pursuant to
an "equity line" structure in which one or more Persons commits to provide
capital to the Company by the purchase of securities of the Company from time to
time, whether at specified times, times determined by the Company or by such
Person(s) or by mutual agreement between the Company and such Person(s), at
prices based on the market prices of the Common Stock at or near the time of
each purchase, which securities are registered for sale or resale pursuant to
the 1933 Act; provided, however, that nothing in this Section 3(h) shall
prohibit the Company from issuing (1) shares of Common Stock for cash for the
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account of 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 Note, the
Warrants, the Redemption Warrant and the Other Redemption 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 $5 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 Note 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
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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 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 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;
provided that no lien described in the preceding clause (1), (2), (4), (5) or
(6) shall extend, cover or relate to the Collateral.
(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
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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
or any other material provision of any Transaction Document.
(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 Market 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.
(m) MAINTENANCE OF CASH AND CASH EQUIVALENTS BALANCES. The Company
shall at all times maintain Cash and Cash Equivalents Balances at least equal to
the Required Cash Amount. The Company shall certify the amount of its Cash and
Cash Equivalents Balances to the Holder as of the end of each calendar quarter,
and from time to time upon request of the Majority Holders, as provided herein.
Not later than the due date for filing with the SEC (determined without regard
to any extension thereof permitted by the SEC) the Company's Quarterly Report on
Form 10-Q (in the case of the first three calendar quarters of each year) or the
Company's Annual Report on Form 10-K (in the case of the fourth calendar quarter
of each year), and within five Business Day after a request therefor made by
notice to the Company from the Majority Holders, the Company shall furnish to
the Holder a Company Certificate, signed by the Company's Chief Financial
Officer or Chief Executive Officer, setting forth the amount of the Company's
Cash and Cash Equivalents Balances as of the end of such calendar quarter or as
of the date of such notice, as the case may be. Each Company Certificate
delivered pursuant to this Section 3(m) shall state (1) the amount of the
Company's Cash and Cash Equivalents Balances and the date as of which such
amount has been determined, (2) separately, the amount of cash and the amount of
cash equivalents included in the amount of Cash and Cash Equivalents Balances
shown in such Company Certificate and (3) that the amount of Cash and Cash
Equivalents Balances stated in such Company Certificate has been determined in
accordance with the terms of this Note. If necessary in order to avoid
furnishing the Holder information that, for purposes of the 1934 Act, would be
considered to be material non-public information if not publicly disclosed, at
the time the Company furnishes each Company Certificate to the Holder the
Company shall make an appropriate public announcement disclosing the information
contained in such Company Certificate relating to the Cash and Cash Equivalents
Balances. Nothing in this Section 3(m) shall entitle the Company to release of
any of the Collateral from the lien of the Security Agreement.
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(n) RULE 144A INFORMATION REQUIREMENT. Within the period prior to
the expiration of the holding period applicable to sales hereof under Rule
144(k) under the 1933 Act (or any successor provision), the Company shall,
during any period in which it is not subject to Section 13 or 15(d) under the
1934 Act, make available to the Holder and any prospective purchaser of this
Note from the Holder, the information required pursuant to Rule 144A(d)(4) under
the 1933 Act upon the request of the Holder and it will take such further action
as the Holder may reasonably request, all to the extent required from time to
time to enable the Holder to sell this Note without registration under the 1933
Act within the limitations of the exemption provided by Rule 144A, as Rule 144A
may be amended from time to time. Upon the request of the Holder, the Company
will deliver to the Holder a written statement as to whether it has complied
with such requirements.
(o) CERTAIN PUBLIC DISCLOSURES AND REPORTING. (1) Prior to giving
the first Share Redemption Notice, the Company shall make public disclosure by a
press release disseminated in accordance with the requirements of Nasdaq of the
Company's intention to retire the aggregate amount of this Note and the Other
Note stated in such press release through Share Redemptions by a date specified
in such press release. From time to time thereafter, the Company shall, by
timely press release announcement likewise distributed, publicly announce any
material change in the content of such press release. Each such press release
shall be filed by the Company with the SEC as an exhibit to a Current Report on
Form 8-K not later than four Trading Days after the Company issues such press
release (or such shorter period as specified in the Purchase Agreement or
required by applicable law or regulation or the rules or requirements of the
Principal Market at the time).
(2) Within four Trading Days after each Share Redemption Date (or
such shorter period as required by applicable law or regulation or the rules or
requirements of the Principal Market at the time), the Company shall file a
Current Report on Form 8-K reporting the aggregate principal amount of this Note
and the Other Note redeemed pursuant to Section 2(c) hereof and thereof and the
aggregate number of shares of Common Stock issued in redemption of this Note and
the Other Note on such Share Redemption Date.
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 acceleration,
as required by Section 2(d)(2) or otherwise, as applicable, or (2) to pay
any
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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 and delivered 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 or upon redemption of this Note or any
Other Note pursuant to Section 2(c) hereof or thereof 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, except to the
extent, and only to the extent in any particular instance such issuance of
transfer by such date is expressly excused by the specific terms of the
Transaction Documents; or
(3) BREACH OF CERTAIN COVENANTS. The Company fails to comply with
Section 3(a), (g), (h), (i), (k), (l), (m) or (o); 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 other Transaction Document
or in any written agreement, certificate or instrument made pursuant
hereto or thereto or in connection herewith or therewith 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
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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 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 $500,000, which is or are 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; or
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(10) SECURITY AGREEMENT. The occurrence of any "Event of Default" as
defined in the Security Agreement;
then, upon the occurrence and during the continuation of any Event of Default
specified in clause (1), (2), (3), (4), (5), (8), (9) or (10) 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): (W) the Company
shall, pay to the Holder an amount equal to the greater of (A) the sum of (i)
110% of 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 interest, if any, at the Default Rate on the amount referred
to in the immediately preceding clause (ii) to the date of payment and (B) the
product obtained by multiplying (1) the highest Current Market Price of the
Common Stock on any Trading Day from and including the Trading Day immediately
preceding the date the Event of Default occurs to the date of payment, times (2)
the number of shares of Common Stock which would be issuable upon conversion of
the principal amount of this Note (and interest thereon as provided in Section
6(a)) (determined without regard to any limitation on conversion contained in
Section 6) if such conversion were made on the date for which, pursuant to the
immediately preceding clause (1), the Current Market Price is used for the
computation of the payment pursuant to this paragraph, (X) 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, (Y) the Collateral Agent shall be entitled to exercise all rights
and remedies under the Security Agreement and all other rights and remedies
available at law or in equity and (Z) the Holder shall be entitled to exercise
all other rights and remedies available at law or in equity.
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 selected by the Holder,
at a price equal to the Repurchase Price on the repurchase date that is
five Business Days after the date of the Holder Notice delivered with
respect to such Repurchase Event. If the Holder exercises its right to
require repurchase of less than all of the outstanding principal amount of
this Note, the Holder may specify the manner in which the principal amount
repurchased shall be allocated among the outstanding installments of
principal.
(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
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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 actually
(and not merely constructively) 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, which amount may be allocated among the installments of
principal outstanding at such time as determined by the Holder in its sole
discretion, 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.
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
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any time prior to the close of business on the Final 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 interest, if any, at the Default Rate 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
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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.
(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 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. In connection with any conversion of this Note, the Holder may allocate
such conversion among the outstanding installments of principal as determined by
the Holder in its sole discretion, as set forth in a particular 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 Section 6 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 Transfer Agent is participating in FAST, upon request of the
Holder, the Company shall use commercially reasonable efforts to cause the
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 or other participant with DTC through DWAC
(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
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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 Market Price 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
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 income or 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 shares of Common Stock upon such conversion n the term sand subject
to the conditions of this Note 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
-50-
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 not later
than three Trading Days after such occurrence. Any such adjustment shall take
effect on the date provided herein regardless of when the Company implements
such adjustment, the Holder shall be entitled to the benefits of such adjustment
from the time it takes effect and any implementation thereof by the Company
after the date such adjustment takes effect shall be applied retroactively to
the date such adjustment takes effect.
(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
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
-51-
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). In the case of the
Company's failure to issue and deliver or cause to be delivered the shares of
Common Stock to the Holder within three Trading Days of a particular conversion
of this Note, the amount payable by the Company pursuant to this clause (B) of
Section 6(b)(5) with respect to such conversion shall be reduced by the amount
of Conversion Delay Payments previously paid by the Company to the Holder with
respect to such conversion. 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 exercise 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 (ii) of
the first sentence of this clause (B) of Section 6(b)(5).
(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
6.11 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,
upon demand of the Holder from time to time an amount, computed at the rate of
2% per month of the VWAP of the Common Stock multiplied by the number of shares
of Common Stock not timely delivered by the Company, for each day in 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 VWAP of the Common
Stock during such period being given 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.
-52-
(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 Issuance 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 Issuance 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
-53-
purchase. Such adjustment shall become effective immediately after the opening
of business on the day following 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 Issuance 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 Issuance 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(e) applies) (the
foregoing hereinafter in this Section 6(c)(4) called the
-54-
"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 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 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. 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
-55-
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 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 Issuance 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
-56-
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 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 Issuance 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
-57-
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).
(7) ADJUSTMENTS FOR CERTAIN ISSUANCES OF NEWLY ISSUED SHARES. (A) In
case at any time on or after the Issuance 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
-58-
outstanding Common Stock, at a price per share of Common Stock below 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)(A). 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 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 reduction in the Conversion Price provided for in this Section
6(c)(7)(A) may be expressed as the following mathematical formula:
( O +(C / CP)) 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
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
(B) In case at any time on or after November 2, 2006, the Company
shall issue Newly Issued Shares, other than an issuance pro rata to all holders
of its outstanding Common Stock, at a price per share of Common Stock below the
Conversion Price in effect immediately prior to such issuance, then following
such
-59-
issuance of Newly Issued Shares the Conversion Price shall be adjusted as
provided in this Section 6(c)(7)(B) and no adjustment shall be made in respect
of such issuance under Section 6(c)(7)(A). The Conversion Price following any
such adjustment shall be the price per share of Common Stock reflected in the
price at which such Newly Issued Shares are issued.
(C) If the Newly Issued Shares are Common Stock Equivalents, then
the price per share of Common Stock at which the Newly Issued Shares shall be
deemed issued shall be the price per share of Common Stock at which the Newly
Issued Shares are convertible into, exchangeable for, or otherwise entitle the
stockholder to acquire, Common Stock.
(D) 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(g);
(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 Note or the Warrants
or shares of Common Stock upon conversion or redemption of this Note or
the Other Note, in lieu of cash payment of interest on this Note or the
Other Note, or upon exercise of the Warrants, in each such case 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 Note 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 2003 Stock Compensation Plan, 2004 Stock Option Plan, 2004
Directors' Stock Option Plan or any other employee benefit plan approved
by the Board of Directors after the Issuance Date, or the issuance by the
Company of shares of Common Stock to former employees in satisfaction of
severance obligations if such issuance has been approved by the Board of
Directors;
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(vi) the issuance by the Company of Newly Issued Shares (x) to
parties that are suppliers, customers or strategic partners investing in
connection with a commercial relationship with the Company, the primary
purpose of which issuance is not to raise capital, or (y) as consideration
for an Acquisition Transaction, excluding Acquisition Transactions in
which cash or cash equivalents represent more than 20 percent of the
assets acquired; provided that such issuances or deemed issuances pursuant
to this clause (vi) shall not exceed 500,000 shares of Common Stock
(treating Common Stock Equivalents on an as if converted or as if
exercised basis for this purpose) in the aggregate (subject to adjustment
of such amount for stock splits, stock dividends, stock combinations or
other similar transactions after the Issuance Date);
(vii) the issuance by the Company of Newly Issued Shares to the
lessor or vendor in any office lease or equipment lease or similar
equipment financing transaction in which the Company or any Subsidiary
obtains the use of such office space or equipment for its business; and
(viii) the issuance by the Company of (A) 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, in accordance with the terms thereof in effect on the
Issuance Date; or (B) shares of Common Stock in lieu of payment of
principal of or interest on the Secured Promissory Note, dated January 30,
2004, issued by the Company to Aventis Inc. in the original principal
amount of $3,000,000 in accordance with the terms thereof in effect on the
Issuance Date.
(8) 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) and (7), 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.
(9) 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)(9) 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.
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(10) COMPANY NOTICE OF ADJUSTMENTS. Whenever the Conversion Price is
adjusted as herein provided, the Company shall promptly, but in no event later
than five Business 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.
(11) 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 the
Holder any amount in cash in lieu of any fraction pursuant to Section 6(b)(6).
(12) 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) AUTOMATIC CONVERSION IN CERTAIN CIRCUMSTANCES; CONVERSION BASED
ON VWAP. (1) Any portion of the principal amount of this Note that is due and
remains outstanding on a particular Installment Maturity Date or the Final
Maturity Date, as the case may be, shall be converted into Common Stock on such
Installment Maturity Date or Final Maturity Date, as the case may be, without
further action on the part of the Holder or the Company so long as the following
conditions precedent are satisfied:
(A) during the period of 20 consecutive Trading Days ending on and
including the Trading Day immediately prior to the applicable Installment
Maturity Date or the Final Maturity Date, as the case may be, (i) on each
of at least 15 of the Trading Days in such period the VWAP of the Common
Stock shall have been at least equal to the Conversion Price in effect on
such Trading Day and (ii) no suspension of trading of the Common Stock
shall be in effect,
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(B) on the applicable Installment Maturity Date or the Final
Maturity Date, as the case may be, 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,
(C) on the applicable Installment Maturity Date or the Final
Maturity Date, as the case may be, no Repurchase Event has occurred with
respect to which the Holder has the right to exercise repurchase rights
pursuant to Section 5 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,
(D) during the period of 20 consecutive Trading Days ending on and
including the Trading Day immediately prior to the applicable Installment
Maturity Date or the Final Maturity Date, as the case may be, and on the
applicable Installment Maturity Date or the Final Maturity Date, as the
case may be, the Registration Statement shall be effective and available
for use by the Holder, the holders of the Other Note and the holders of
the Warrants and the Redemption Warrants and the Other Redemption
Warrants, if any, at the time outstanding for the resale of the shares of
Common Stock issued and issuable upon conversion of this Note and the
Other Note and issued or issuable upon exercise of the Warrants and upon
exercise of the Redemption Warrants and the Other Redemption Warrants, if
any, at the time outstanding, 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 Installment Maturity date or the Final Maturity
Date, as the case may be, and the Company shall be in compliance in all
material respects with the Registration Rights Agreement, and
(E) during the period of 20 consecutive Trading Days ending on and
including the Trading Day immediately prior to the applicable Installment
Maturity Date or the Final Maturity Date, as the case may be, and on the
applicable Installment Maturity Date or the Final Maturity Date, as the
case may be, no Maximum Share Amount Deficiency exists, and
(F) on the applicable Installment Maturity Date or the Final
Maturity Date, as the case may be, the Company shall have furnished to the
Holder a Company Certificate, dated such date, confirming the matters set
forth in the immediately preceding clauses (A), (B), (C), (D) and (E) and
stating that all other requirements of the Transaction Documents for such
conversion, other than Section 6(d)(3), have been satisfied.
Such conversion shall otherwise occur in accordance with the provisions of this
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Section 6 as if it were made at the option of the Holder.
(2) (A) The Company shall have the right, by giving the Company
Conversion Notice to the Holder and the holders of the Other Note, to effect
conversion of the entire outstanding principal amount of this Note and the Other
Note into Common Stock without further action on the part of the Holder or the
Company, so long as the following conditions precedent are satisfied:
(i) on the date the Company gives the Company Conversion Notice and
at all times thereafter to and including the applicable Company Conversion
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,
(ii) on the date the Company gives the Company Conversion Notice and
at all times thereafter to and including the applicable Company Conversion
Date, no Repurchase Event has occurred with respect to which the Holder
has the right to exercise repurchase rights pursuant to Section 5 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,
(iii) on the date the Company gives the Company Conversion Notice
and at all times thereafter to and including the applicable Company
Conversion Date, the Registration Statement shall be effective and
available for use by the Holder, the holders of the Other Note and the
holders of the Warrants and the Redemption Warrants and the Other
Redemption Warrants, if any, at the time outstanding for the resale of the
shares of Common Stock issued and issuable upon conversion of this Note
and the Other Note and issued or issuable upon exercise of the Warrants
and upon exercise of the Redemption Warrants and the Other Redemption
Warrants, if any, at the time outstanding, as the case may be, and is
reasonably expected to remain effective and available for such use for at
least 30 days after the Company Conversion Date and the Company shall be
in compliance in all material respects with its obligations under the
Registration Rights Agreement,
(iv) on the date the Company gives the Company Conversion Notice and
at all times thereafter to and including the applicable Company Conversion
Date, no Maximum Share Amount Deficiency exists; and
(v) on at least 15 Trading Days in the period of 20 consecutive
Trading Days ending on and including a Trading Day that is not more than
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five Trading Days prior to the date the Company gives the Company
Conversion Notice, the VWAP of the Common Stock shall have been at least
$11.00 per share (subject to adjustment from time to time on terms
consistent with the relevant provisions of Section 6(c) and otherwise
reasonably acceptable to the Majority Holders for (x) stock splits, (y)
stock dividends and (z) combinations in any such case that occur after the
Issuance Date).
In order to exercise its right of conversion under this Section 6(d)(2) the
Company shall give the Company Conversion Notice to the Holder not less than 20
Trading Days or more than 40 Trading Days prior to the Company Conversion Date
stating that: (1) the Company is exercising its right to convert this Note and
the Other Note in accordance with this Section 6(d)(2) and the comparable
provisions of the Other Note, (2) the principal amount of this Note to be
converted (assuming no further conversions of this Note by the Holder), (3) the
VWAP of the Common Stock on, and date of, each of the Trading Days entitling the
Company to convert this Note, (4) the Company Conversion Date and (5) that all
of the conditions of this Section 6(d)(2) entitling the Company to convert this
Note have been met. Such conversion shall otherwise be made in accordance with
this Section at the Conversion Price in effect on the Company Conversion Date.
(B) The Company shall not be entitled to give the Company Conversion
Notice or to convert 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
Company Conversion Notice. Notwithstanding the giving of the Company Conversion
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 Company Conversion
Date and (2) if the Company fails to issue and deliver to the Holder the shares
of Common Stock issuable on the Company Conversion Date, the date on which the
Company so issues such shares.
(C) In order that the Company shall not discriminate among the
Holder and the holders of the Other Note, the Company agrees that the Company
will exercise its conversion rights under this Section 6(d)(2) only if at the
same time the Company exercises its conversion rights relating to the Other
Note. In order that the Company not discriminate among the Holders and the
holders of the Other Note, the Company agrees that it shall not exercises its
conversion rights for any of the Other Note pursuant to the provisions thereof
similar to this Section 6(d)(2) unless the Company simultaneously exercises its
conversion rights pursuant to this Section 6(d)(2).
(3) (A) Notwithstanding any other provision of this Note or
applicable law to the contrary, in case (1) on any Installment Maturity Date or
the Final Maturity Date or (2) the Company shall give the Company Conversion
Notice
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to the Holder, and on the date the Company gives the Company Conversion Notice
or at any time thereafter to and including the applicable Company Conversion
Date, in either such case in the preceding clause (1) or (2) the Holder shall be
restricted by reason of the Restricted Ownership Percentage in converting any
portion of this Note that would otherwise be required to be converted under this
Section 6(d) (the "Inconvertible Portion"), then the date for conversion under
Section 6(d)(1) or the Company Conversion Date for the Inconvertible Portion, as
the case may be, and which the Holder may not convert on such date, or at any
such time during such period from the date the Company gives such Company
Conversion Notice to the Company Conversion Date, as the case may be, shall be
extended to be the Extended Company Conversion Date. On the applicable Extended
Company Conversion Date, the Company shall issue the shares of Common Stock
issuable upon conversion of any portion of this Note that is converted on such
Extended Company Conversion Date. Any portion of this Note for which there is an
Extended Company Conversion Date shall remain convertible by the Holder in
accordance with this Section 6 at any time to and including the close of
business on the Business Day prior to the applicable Extended Company Conversion
Date; provided, however, that during the period from the Installment Maturity
Date, the Final Maturity Date or the Company Conversion Date, as the case may
be, to the applicable Extended Company Conversion Date any portion of this Note
for which there is an Extended Company Conversion Date shall no longer bear
interest and no further adjustment shall be made pursuant to Section 6(c)(7) to
the Conversion Price or the number of shares of Common Stock issuable upon
conversion of such portion of the Note.
(B) Notwithstanding anything to the contrary contained in Section
6(h), solely for the purposes of calculating the Restricted Ownership Percentage
for purposes of this Section 6(d), 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 Inconvertible Portion.
(e) EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. (1)
If any of the following events occur, namely:
(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
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(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); provided, however, that in any such case in which a
Repurchase Event arises by reason of a Fundamental Change in which the
holders of Common Stock are to receive consideration that consists of a
combination of cash and shares of common stock of the acquiror in such
transaction that are publicly traded, the Holder shall have the right to
require that the amount of cash that would otherwise be received by
conversion of this Note in full after such transaction instead be
allocated to the principal amount of this Note as to which the Holder
exercises repurchase rights under Section 5 by reason of such Fundamental
Changes and that the portion of this Note not so repurchased shall be
convertible in the aggregate, immediately after such transaction, solely
into the number of shares of such acquiror's stock into which this Note
would have been convertible in full had the Holder not exercised such
repurchase rights and such cash not have been allocated thereto, and the
Conversion Price shall be adjusted accordingly
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(subject to further adjustments as required hereby).
(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, the Purchase Agreement and the Registration Rights 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.
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(e) applies to any event or occurrence, Section
6(c) shall not apply.
(f) 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 Note, 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 Note from time to time as
this Note and the Other Note are converted.
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(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.
(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.
(g) 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
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(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.
(h) 4.9% 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
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 all 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 4.9% 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 13(d) or 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 5% or 10%, as the case
may be. If at any time the limits in this Section 6(h) make this Note
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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 Final Maturity Date upon conversion of
this Note as and when shares of Common Stock may be issued in compliance with
such restrictions. For purposes of applying the limitation in this Section 6(h),
shares of Common Stock issuable or issued in a Share Redemption that are or are
deemed to be beneficially owned by the Holder for purposes of Section 13(d) or
Section 16 of the 1934 Act may give rise to limitations under this Section 6(h)
on the number of shares of Common Stock that the Holder may acquire upon
conversion of this Note; provided, however, that notwithstanding any such
limitation, prior to the applicable Share Redemption Date, the Holder shall be
entitled to convert this Note to the extent such conversion would, in accordance
with the terms of this Note, reduce the principal amount of this Note to be
redeemed in such Share Redemption.
(2) For purposes of this Section 6(h), 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 the 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 Note and
the 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.
(3) The number of shares of Common Stock issuable upon conversion of
this Note may be limited as provided in Section 6.16 of the Purchase Agreement.
In connection therewith, the Holder may be entitled to require the Company to
redeem or repurchase this Note on the terms provided in Section 6.16 of the
Purchase Agreement.
SECTION 7. MISCELLANEOUS.
(a) FAILURE OR INDULGENCY NOT WAIVER. No failure or delay on the
part of the Holder or the Company in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise
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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 Zix Corporation, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer (telephone line
facsimile transmission number (214) 515- 7385). 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 Note,
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 Note affected thereby (i)
extend any scheduled Installment Maturity Date or the Final Maturity Date 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 reduce the principal amount
or the Repurchase Price hereof or reduce or change the form, amount or relative
amounts of the components of the Optional Redemption Consideration, (ii)
increase the Conversion Price or change the method by which the Conversion Price
is adjusted so as to affect the Holder adversely, (iii) release any Collateral
or reduce the amount of Collateral required to be deposited or maintained by the
Company pursuant to the Security Agreement, except as expressly provided in the
Security Agreement, (iv) amend, modify or waive any provision of this Section
7(c), (v) reduce any percentage specified in, or otherwise modify, the
definition of Majority Holders or (vi) 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. Notwithstanding anything to the
contrary contained herein, no amendment or waiver shall increase or eliminate
the Restricted Ownership Percentage or the percentage set forth in Section
2(c)(9)(A), whether permanently or temporarily, unless, in addition to complying
with the other requirements of this Note, such amendment or waiver
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shall have been approved in accordance with the Texas Business Corporation Act
and the Company's by-laws by holders of the outstanding shares of Common Stock
entitled to vote at a meeting or by written consent in lieu of such meeting.
(d) ASSIGNABILITY. This Note shall be binding upon the Company and
its successors, and shall inure to the benefit of the Holder and the Company and
their 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 reasonable
out-of-pocket 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.
(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) or 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
-73-
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 (1) such transferee is (x) an "accredited investor" (as
defined in Regulation D under the 1933 Act) or (y) a QIB in a transfer that
meets the requirements of Rule 144A and (2) 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 financial 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 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. In addition, this Note may not be
transferred (except by operation of law) without the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed;
provided, however, that (a) such consent of the Company shall not be required
for (1) any transfer after the occurrence of an Event of Default if any Event of
Default shall be continuing or a Repurchase Event shall have occurred and (2)
any transfer to an Affiliate of the Holder or any Person who is an investment
fund which has the same investment adviser as the Holder or whose investment
adviser is an Affiliate of the Holder's investment adviser and (b) in the case
of a proposed transfer of this Note to a Person (other than a Person described
in the preceding clause (a) of this proviso) the Company reasonably determines
is one of its competitors, is a Person with whom the Company is or has been
opposed in a dispute in litigation, or is a Person
-74-
with whom the Company is engaged in a significant business dispute, the Company
may withhold its consent in its sole discretion and shall so notify the Holder
promptly.
(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 Note. The Company shall also
maintain a facility for the registration of transfers of this Note and the Other
Note and at which this Note and the Other Note 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.
(k) PAYMENT OF NOTE ON REDEMPTION OR REPURCHASE; DEPOSIT OF OPTIONAL
REDEMPTION CONSIDERATION 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 2(c) or
repurchased as provided in Section 5 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, by issuance of the applicable number of shares of Common Stock
for the particular Share Redemption or at the Repurchase Price. On and after the
applicable Optional Redemption Date, Share 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 Redemption Warrant for a number of shares of Common
Stock sufficient to pay the applicable Optional Redemption Consideration or an
amount in cash sufficient to pay the applicable Repurchase Price or issued and
delivered to the Holder the applicable number of shares of Common Stock for the
particular Share Redemption when due, interest on this Note or the portion of
this
-75-
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 or issuance and delivery
of such shares of Common Stock, as the case may be. 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. No such surrender
of this Note shall be required in connection with a Share Redemption. 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) CONVERSION AND REDEMPTION SCHEDULE. Promptly after each
conversion of this Note pursuant to Section 6 or Share Redemption, the Holder
shall record on a schedule, in substantially the form attached as EXHIBIT H, the
amount by which the outstanding principal of this Note has been reduced by
reason of such conversion or redemption. Such schedule shall be conclusive and
binding on the Company and the Holder, in the absence of manifest error. The
Holder shall from time to time, upon request made by notice from the Company,
furnish a copy of such schedule to the Company. The Holder shall also furnish a
copy of such schedule upon request to any proposed transferee of this Note.
(m) 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]
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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.
ZIX CORPORATION
By:
_________________________________________
Name:
Title:
-77-
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 Zix
Corporation, a Texas 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;
[ ] To a QIB pursuant to and in compliance with Rule 144A; 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)
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order to convert ▇▇▇▇▇▇▇ and Restated
Convertible Note Due 2005-2008)
Re: Amended and Restated Convertible Note Due 2005-2008 issued by ZIX
CORPORATION identified below
The undersigned hereby elects to convert the outstanding principal amount
indicated below of the Amended and Restated Convertible Note due 2005-2008 into
shares of Common Stock, of ZIX CORPORATION, a Texas 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 the 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 6(h) of the Note.
Conversion information:
__________________________________________________
Note Number
__________________________________________________
Conversion Date
__________________________________________________
Principal Amount of Note Being Converted
Portions of installments of principal to
which this conversion is allocated:
Due November 2, 2005: $________________
Due November 2, 2006: $________________
Due November 2, 2007: $________________*
Due November 2, 2008: $ _______________*
-----------------------
[* Substitute dates of due dates change pursuant to Section 2(d)(2) of the Note]
A-1
__________________________________________________
Number of Shares of Common Stock to Be Issued
__________________________________________________
Applicable Conversion Price
By:_______________________________________________
Signature
__________________________________________________
Name
__________________________________________________
Address
A-2
EXHIBIT B
ZIX CORPORATION
OPTIONAL REDEMPTION NOTICE
(SECTION 2(b) OF AMENDED AND RESTATED
CONVERTIBLE NOTE DUE 2005-2008)
TO:__________________________________________________
(Name of Holder)
1. Pursuant to the terms of the Amended and Restated Convertible Note
due 2005-2008 (the "Note"), Zix Corporation, a Texas 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 Redemption 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 ________________________ ZIX CORPORATION
By:___________________________
Title:________________________
B-1
EXHIBIT C
ZIX CORPORATION
COMPANY NOTICE
(SECTION 5(b)(1) OF AMENDED AND RESTATED
CONVERTIBLE NOTE DUE 2005-2008)
TO:__________________________________________________
(Name of Holder)
(1) A Repurchase Event described in the Amended and Restated
Convertible Note due 2005-2008 (the "Note") of Zix Corporation, a Texas
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 D 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 ________________________ ZIX CORPORATION
By:___________________________
Title:________________________
C-1
EXHIBIT D
ZIX CORPORATION
HOLDER NOTICE
(SECTION 5(b)(2) OF AMENDED AND RESTATED
CONVERTIBLE NOTE DUE 2005-2008)
TO: ZIX CORPORATION
(1) Pursuant to the terms of the Amended and Restated Convertible
Note due 2005-2008 (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 interest at the
Default Rate 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 ▇▇▇▇▇▇:
___________________________________
By_________________________________
Signature of Registered Holder
(Must be signed exactly as name
appears in the Note.)
D-1
EXHIBIT F
FORM OF COMPANY CONVERSION NOTICE
(SECTION 6(d)(2))
(To be given by the Company in order
to convert Amended and Restated Convertible Note
Due 2005-2008 pursuant to Section 6(d)(2))
Re: Convertible Note Due 2005-2008 issued by ZIX CORPORATION identified
below
ZIX CORPORATION, a Texas corporation (the "Company"), hereby
notifies the Holder of the Amended and Restated Convertible Note due 2005-2008
that the Company hereby elects to convert the outstanding principal amount of
the Note into shares of Common Stock, according to the terms the Note as
follows:
1. The Company is exercising its right to convert the Note and
the Other Note in accordance with Section 6(d)(2) of the Note and the comparable
provisions of the Other Note.
2. The principal amount of the Note to be converted (assuming no
further conversions of the Note by the Holder) is $_______________.
3. The VWAP of the Common Stock on, and date of, each of the
Trading Days entitling the Company to convert the Note are as follows:
DATE VWAP
F-1
4. The Company Conversion Date is _____________.
5. All of the conditions of Section 6(d)(2) of the Note entitling
the Company to convert the Note have been met.
6. Capitalized terms used herein and not otherwise defined herein
have the respective meanings provided in the Note.
Date ________________________ ZIX CORPORATION
By:___________________________
Title:________________________
F-2
EXHIBIT G
ZIX CORPORATION
SHARE REDEMPTION NOTICE
(SECTION 2(c) OF AMENDED AND RESTATED
CONVERTIBLE NOTE DUE 2005-2008)
TO:__________________________________________
(Name of Holder)
1. Pursuant to the terms of the Amended and Restated Convertible Note
due 2005-2008 (the "Note"), Zix Corporation, a Texas 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.
2. The principal amount of the Note to be redeemed is $_________
(assuming no conversion of the Note that reduces such amount and that the Share
Redemption Share Amount for this Share Redemption will be computed based on the
entire such principal amount).
3. The amount of the Share Redemption Price payable on the Share
Redemption Date is $_______________ (assuming no conversion of this Note from
the date the Company gives such Share Redemption Notice to the applicable Share
Redemption Date and that the Share Redemption Share Amount for this Share
Redemption will be computed based on the entire principal amount included such
Share Redemption Price).
4. The principal installment to which this Share Redemption shall be
applied is the installment scheduled to be due November 2, [2005][2008].
5. The applicable Share Redemption Date is_______________.
6. All of the conditions of Section 2(c) of the Note entitling the
Company to call the Note for this redemption have been met.
7. Capitalized terms used herein and not otherwise defined herein have
the respective meanings provided in the Note.
G-1
Date ________________________ ZIX CORPORATION
By:___________________________
Title:________________________
F-2
EXHIBIT H
ZIX CORPORATION
CONVERSION AND REDEMPTION SCHEDULE
This Conversion and Redemption Schedule shows reductions in the outstanding
principal amount of the Amended and Restated Convertible Note due 2005-2008 (the
"Note") of Zix Corporation, a Texas corporation, upon conversions pursuant to
Section 6 of the Note or Share Redemptions pursuant to Section 2(c) of the Note.
Capitalized terms used in this Schedule and not otherwise defined herein shall
have the respective meanings provided in the Note. .
Principal Amount
Remaining
Date of Conversion Subsequent to Conversion
or Share Redemption Principal Principal Installment or
(or for first Amount of Amount of Maturity to Which Share Redemption
entry, the Issuance Conversion Share Redemption Conversion or (or original Principal
Date) (if applicable) (if applicable) Redemption Applies Amount)
------------------- --------------- ---------------- ------------------ ------------------------
1. 11/2/2004 $ 10.000.000.00
------------------- --------------- ---------------- ------------------ ------------------------
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[continue as necessary]
H-1