EXHIBIT 4.1
ANNEX I
TO
SECURITIES PURCHASE AGREEMENT
(PROTOTYPE FOR EACH ISSUANCE)
[NOTE: EACH BUYER WILL BE ISSUED TWO DEBENTURE CERTIFICATES, EACH REPRESENTING
HALF OF THE TOTAL PRINCIPAL OF THE DEBENTURES TO BE ISSUED TO SUCH BUYER. SEE
SECTION 4(O)(III) OF SECURITIES PURCHASE AGREEMENT.]
FORM OF DEBENTURE
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. 06-01C-(1-2) US $__________(3)
RIM SEMICONDUCTOR COMPANY
7% SENIOR SECURED CONVERTIBLE DEBENTURE
SERIES 06-01C DUE ________, 200_(4)
THIS DEBENTURE is one of a duly authorized issue of up to $_________(5)
in Debentures of RIM SEMICONDUCTOR COMPANY, a corporation organized and existing
under the laws of the State of Utah (the "Company") designated as its 7% Senior
Secured Convertible Debentures Series 06-01C.
FOR VALUE RECEIVED, the Company promises to pay to _____________, The
registered holder hereof (the "Holder"), the principal sum of
_______________________ and 00/100
__________________
(1) Insert unique Debenture number for each issuance.
(2) Insert "A" for one Debenture and "B" for second Debenture.
(3) Insert principal amount equal to fifty percent (50%) of Buyer's Purchase
Price for each of "A" Debenture and "B" Debenture (aggregate equal to one
hundred percent (100%) of the Purchase Price).
(4) Insert date which is second anniversary of the Closing Date
(5) Insert amount equal to the Aggregate Purchase Price.
1
Dollars (US $__________________)(6) on _____________________, 200_(7), (the
"Maturity Date") and to pay interest, on a compound basis, on the principal sum
outstanding from time to time in arrears at the rate of 7% per annum, accruing
from _______________, 200_(8), the date of initial issuance of this Debenture
(the "Issue Date"), on the date (each, an "Interest Payment Date") which is the
earlier of (i) the last calendar day of June and December of each calendar year
(each, a "Scheduled Interest Payment Date"), except that the first Scheduled
Interest Payment Date shall be June 30, 2006, (ii) a Conversion Date (as defined
below) or (iii) the Maturity Date, as the case may be. Interest shall accrue
semi-annually (pro-rated on a daily basis for any period longer or shorter than
a half year) from the later of the Issue Date or the previous Interest Payment
Date) and shall be payable in cash or, at the Company's option but subject to
the other provisions of this Debenture, in Common Stock. If not paid in full on
an Interest Payment Date, interest shall be fully cumulative and shall accrue on
a daily basis, based on a 365-day year semi-annually or until paid, whichever is
earlier. Additional provisions regarding the payment of interest are provided in
Section 4(D) below (the terms of which shall govern as if this sentence were not
included in this Debenture).
This Debenture is being issued pursuant to the terms of the Securities
Purchase Agreement, dated March 6, 2006 (the "Securities Purchase Agreement"),
to which the Company and the Holder (or the Holder's predecessor in interest)
are parties. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Securities Purchase Agreement.
This Debenture is subject to the following additional provisions:
1. The Debentures will initially be issued in denominations determined
by the Company, but are exchangeable for an equal aggregate principal amount of
Debentures of different denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws and the terms of the Securities
Purchase Agreement. In the event of any proposed transfer of this Debenture, the
Company may require, prior to issuance of a new Debenture in the name of such
other person, that it receive reasonable transfer documentation that is
sufficient to evidence that such proposed transfer
_____________________
(6) See footnote 3.
(7) See footnote 4.
(8) Insert the Closing Date.
2
complies with the Act and other applicable state and foreign securities laws and
the terms of the Securities Purchase Agreement. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
4. A. (i) At any time on or after the Commencement Date (as defined
below) and prior to the time this Debenture is paid in full in accordance with
its terms (including, without limitation, after the Prepayment Date, as defined
below, and after the occurrence of an Event of Default, as those terms are
defined below, or, if the Debenture is not fully paid or converted after the
Maturity Date), the Holder of this Debenture is entitled, at its option, subject
to the following provisions of this Section 4, to convert this Debenture at any
time into shares of Common Stock, $0.001 par value ("Common Stock"), of the
Company at the Conversion Price (as defined below). The minimum principal amount
of each conversion shall be $10,000 or, if the outstanding principal amount of
this Debenture is less than $10,000, the outstanding principal balance of this
Debenture.
(ii) On the Maturity Date the Company shall pay the principal
and accrued interest (through the actual date of payment) of any portion of this
Debenture which is then outstanding.
(iii) For purposes of this Debenture, the following terms shall
have the meanings indicated below:
"Commencement Date" means the earlier of (x) the date which is
sixty-five (65) days after the Issue Date, or (y) the Effective Date.
"Conversion Price" means the lower of (x) the Variable Conversion Price
or (y) the Lowest Fixed Conversion Price (each of which amount is
subject to adjustment as provided herein).
"Variable Conversion Price" means the amount equal to (x) the VWAP for
the twenty (20) Regular Trading Days ending on the Trading Day
immediately preceding the relevant Conversion Date, multiplied by (y)
(1) one hundred percent (100%), less (2) the Effective Percentage.
"VWAP" means the volume weighted average price of the Common Stock on
the Principal Trading Market for the relevant Regular Trading Day(s),
as reported by the Reporting Service.
"Reporting Service" means Bloomberg LP or if that service is not then
reporting the relevant information regarding the Common Stock, a
comparable reporting service of national reputation selected by a
Majority in Interest of the Holders and reasonably acceptable to the
Company.
3
"Effective Percentage" means thirty percent (30%), which percentage is
subject to increase under certain conditions as contemplated in the
Securities Purchase Agreement.
"Lowest Fixed Conversion Price" means the lowest New Transaction Price
from any New Transaction (as those terms are defined in the Securities
Purchase Agreement) (which amount, if any, is subject to subsequent
adjustment as provided herein).
B. Conversion shall be effectuated by faxing a Notice of Conversion (as
defined below) to the Company as provided in this paragraph. The Notice of
Conversion shall be executed by the Holder of this Debenture and shall evidence
such Holder's intention to convert this Debenture or a specified portion hereof
in the form annexed hereto as Exhibit A. If paid in Common Stock as contemplated
hereby, interest accrued or accruing from the Issue Date to the relevant
Interest Payment Date and not previously paid shall be paid in Common Stock at
the Conversion Price applicable as of such Interest Payment Date. No fractional
shares of Common Stock or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The date on which notice of conversion is given (the "Conversion
Date") shall be deemed to be the date on which the Holder faxes or otherwise
delivers the conversion notice ("Notice of Conversion") to the Company so that
it is received by the Company on or before such specified date, provided that,
if such conversion would convert the entire remaining principal of this
Debenture, the Holder shall deliver to the Company the original Debentures being
converted no later than five (5) Trading Days thereafter. Delivery of the Notice
of Conversion shall be accepted by the Company by hand, mail or courier delivery
at the address specified in said Exhibit A or at the facsimile number specified
in said Exhibit A (each of such address or facsimile number may be changed by
notice given to the Holder in the manner provided in the Securities Purchase
Agreement). Certificates representing Common Stock upon conversion ("Conversion
Certificates") will be delivered to the Holder at the address specified in the
Notice of Conversion (which may be the Holder's address for notices as
contemplated by the Securities Purchase Agreement or a different address), via
express courier, by electronic transfer or otherwise, within three (3) Trading
Days (such third Trading Day, the "Delivery Date") after the relevant Conversion
Date and, if interest is paid by Common Stock with respect to any other Interest
Payment Date, the Interest Payment Date. The Holder shall be deemed to be the
holder of the shares issuable to it in accordance with the provisions of this
Section 4(B) on the Conversion Date.
C. Notwithstanding any other provision hereof or of any of the other
Transaction Agreements, in no event (except (i) as specifically provided herein
as an exception to this provision, or (ii) while there is outstanding a tender
offer for any or all of the shares of the Company's Common Stock) shall the
Holder be entitled to convert any portion of this Debenture, or shall the
Company have the obligation to convert such Debenture (and the Company shall not
have the right to pay interest hereon in shares of Common Stock) to the extent
that, after such conversion or issuance of stock in payment of interest, the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures or other convertible securities or of the unexercised portion of
warrants or other rights to purchase Common Stock), and (2) the number of shares
of Common Stock issuable upon the conversion of
4
the Debentures with respect to which the determination of this proviso is being
made, would result in beneficial ownership by the Holder and its affiliates of
more than 4.99% of the outstanding shares of Common Stock (after taking into
account the shares to be issued to the Holder upon such conversion). For
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, except as otherwise provided in clause (1) of
such sentence. The Holder, by its acceptance of this Debenture, further agrees
that if the Holder transfers or assigns any of the Debentures to a party who or
which would not be considered such an affiliate, such assignment shall be made
subject to the transferee's or assignee's specific agreement to be bound by the
provisions of this Section 4(C) as if such transferee or assignee were the
original Holder hereof. Nothing herein shall preclude the Holder from disposing
of a sufficient number of other shares of Common Stock beneficially owned by the
Holder so as to thereafter permit the continued conversion of this Debenture.
D. (i) Subject to the terms of Section 4(C) and to the other terms of
this Section 4(D), interest on the principal amount of this Debenture converted
pursuant to a Notice of Conversion shall be due and payable, at the option of
the Company, in cash or Common Stock on the Interest Payment Date.
(ii) If the interest is to be paid in cash, the Company shall
make such payment within three (3) Trading Days of the Interest Payment Date. If
the interest is not paid by such third Trading Day, the interest must be paid in
Common Stock in accordance with the provisions of this Section 4(D), unless the
Holder consents otherwise in each specific instance.
(iii) If interest is to be paid in Common Stock (whether at the
election of the Company or as required hereunder), the number of shares of
Common Stock to be received shall be determined by dividing the dollar amount of
the interest by the Conversion Price in effect on the relevant Interest Payment
Date. In such event, the Common Stock shall be delivered to the Holder, or per
Holder's instructions, (i) if being issued in connection with a conversion of
this Debenture, on the Delivery Date for the related Conversion Certificates
pursuant to the preceding provisions of this Section 4 (such date, a "Delivery
Date"), and (ii) with respect to all other instances, within five (5) Trading
Days after the Interest Payment Date (such fifth Trading Day, a "Delivery
Date"), with the shares issuable then based on the cumulative accrued interest
through such effective date.
(iv) If not paid in full on an Interest Payment Date, interest
shall be fully cumulative and shall accrue on a daily basis, based on a 365-day
year, semi-annually or until paid, whichever is earlier.
E. Reference is made to the provisions of Section 4(g) of the Securities
Purchase Agreement, the terms of which are incorporated herein by reference. The
Conversion Price and other provisions of this Debenture shall be adjusted as
provided in the applicable provisions of said Section 4(g) of the Securities
Purchase Agreement.
F. (i) Anything in the other provisions of this Debenture or any of the
other Transaction Agreements to the contrary notwithstanding, the Company shall
have the right to prepay
5
the outstanding principal of this Debenture, together with all accrued interest
thereon, in whole or in part, on the terms and conditions provided in this
Section 4(F). If the Company elects to make such a prepayment, the Company shall
give the Holder a written notice (the "Prepayment Notice") of its election to
prepay all or a portion of then outstanding Debenture. The prepayment amount
shall be equal to one hundred twenty percent (120%) of the sum of (x) the
principal of this Debenture being prepaid, plus (y) accrued interest thereon
through the Prepayment Date. Additional terms regarding this prepayment right
are provided below. The Company's rights under this Section 4(F) may only be
exercised if the Registration Statement is effective on the date the Prepayment
Notice is given and on each Trading Day thereafter through and including the
Prepayment Date.
(ii) The Prepayment Notice shall specify (x) the principal
amount of the Debenture being prepaid by the Company (the "Prepayment Principal
Amount"), (y) the date (the "Prepayment Date"), which shall be not less than ten
(10) Trading Days after the Prepayment Notice is received by the Holder, on
which such prepayment will be made, and (z) identify the bank (the "Prepayment
Bank") where the Prepayment Funds (as defined below) have been deposited. The
Prepayment Notice shall be accompanied by the Prepayment Bank's confirmation to
the Holder that funds (the "Prepayment Funds") equal to the Prepayment Principal
Amount plus all accrued but unpaid interest thereon through the Prepayment Date
have been deposited with the Prepayment Bank and instructions for the method by
which the Holder can provide instructions to the Prepayment Bank to make payment
of the Prepayment Funds to the Holder (such payment to made by check or wire, as
specified by the Holder) on the Prepayment Date.
(iii) Even after the issuance of a Prepayment Notice, the Holder
may continue to convert this Debenture as provided in the other provisions of
this Debenture until this Debenture is paid in full. If the Holder converts any
portion of this Debenture after the date of the Prepayment Notice and prior to
the payment of the Prepayment Funds to the Holder (the "Prepayment Conversion
Period"), so that the then outstanding principal of this Debenture is less than
the Prepayment Principal Amount, the Holder shall notify the Prepayment Bank of
the then outstanding principal of this Debenture; provided, however, if the
Prepayment Principal Amount is less than the principal of the then Unconverted
Debenture, any such conversions made during the Prepayment Conversion Period
shall be deemed made in the following order of priority: (x) first, out of
principal of the Unconverted Debenture in excess of the Prepayment Principal
Amount, and (y) then, out of the Prepayment Principal Amount. To the extent that
any conversions made during the Prepayment Conversion Period are deemed made out
of the Prepayment Principal Amount, the Prepayment Funds will then be adjusted
to and be deemed to be equal such outstanding principal plus all accrued but
unpaid interest thereon through the Prepayment Date.
(iv) If the Prepayment Funds are not timely paid or made
available to the Holder, the Holder will have the option, exercisable at any
time prior to the actual payment of the Prepayment Funds (together with any
additional interest accruing on the Prepayment Principal Amount after the
Prepayment Date) to effect either or both of the following actions: (x)
cancellation, ab initio, of the prepayment contemplated by the Prepayment Notice
and (y) cancellation of the Company's prepayment right under this Section 4(F).
6
5. A. Subject to the terms of the Securities Purchase Agreement, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Debenture at the time, place, and rate, and in the coin or currency or,
where contemplated herein, in shares of its Common Stock, as applicable, as
herein prescribed. This Debenture and all other Debentures now or hereafter
issued of similar terms are direct obligations of the Company.
B. Payment of this Debenture is secured pursuant to the terms of the
Security Interest Agreement, dated as of March 6, 2006 (the "Security Interest
Agreement") executed by the Company, as debtor, in favor of the Buyer and the
Other Buyers, as secured parties. The terms of the Security Interest Agreement
are incorporated herein by reference.
6. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
7. All payments contemplated hereby to be made "in cash" shall be made
in immediately available good funds of United States of America currency by wire
transfer to an account designated in writing by the Holder to the Company (which
account may be changed by notice similarly given). All payments of cash and each
delivery of shares of Common Stock issuable to the Holder as contemplated hereby
shall be made to the Holder at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to
time; except that the Holder can designate, by notice to the Company, a
different delivery address for any one or more specific payments or deliveries.
8. If, for as long as this Debenture remains outstanding, the Company
enters into a merger (other than where the Company is the surviving entity) or
consolidation with another corporation or other entity or a sale or transfer of
all or substantially all of the assets of the Company to another person
(collectively, a "Sale"), the Company will require, in the agreements reflecting
such transaction, that the surviving entity expressly assume the obligations of
the Company hereunder. Notwithstanding the foregoing, if the Company enters into
a Sale and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as a
condition of such Sale, the Company and any such successor, purchaser or
transferee will agree that the Debenture may thereafter be converted on the
terms and subject to the conditions set forth above into the kind and amount of
stock, securities or property receivable upon such merger, consolidation, sale
or transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable. In the event of any such proposed Sale, (i)
the Holder hereof shall have the right to convert by delivering a Notice of
Conversion to the Company within fifteen (15) days of receipt of notice of such
Sale from the Company, except that Section 4(C) shall not apply to such
conversion.
7
9. If, at any time while any portion of this Debenture remains
outstanding, the Company spins off or otherwise divests itself of a part of its
business or operations or disposes of all or of a part of its assets in a
transaction (the "Spin Off") in which the Company, in addition to or in lieu of
any other compensation received and retained by the Company for such business,
operations or assets, causes securities of another entity (the "Spin Off
Securities") to be issued to security holders of the Company, the Company shall
cause (i) to be reserved Spin Off Securities equal to the number thereof which
would have been issued to the Holder had all of the Holder's Debentures
outstanding on the record date (the "Record Date") for determining the amount
and number of Spin Off Securities to be issued to security holders of the
Company (the "Outstanding Debentures") been converted as of the close of
business on the Trading Day immediately before the Record Date (the "Reserved
Spin Off Shares"), and (ii) to be issued to the Holder on the conversion of all
or any of the Outstanding Debentures, such amount of the Reserved Spin Off
Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction,
of which (I) the numerator is the principal amount of the Outstanding Debentures
then being converted, and (II) the denominator is the principal amount of the
Outstanding Debentures.
10. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Conversion Price or the Lowest Fixed Conversion Price, if any,
and any other fixed amounts calculated as contemplated hereby or by any of the
other Transaction Agreements shall be equitably adjusted to reflect such action.
By way of illustration, and not in limitation, of the foregoing, (i) if the
Company effectuates a 2:1 split of its Common Stock, thereafter, with respect to
any conversion for which the Company issues shares after the record date of such
split, the Lowest Fixed Conversion Price, if any, shall be deemed to be one-half
of what it had been immediately prior to such split; (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues shares after the record date of
such reverse split, the Lowest Fixed Conversion Price shall be deemed to be ten
times what it had been calculated to be immediately prior to such split; and
(iii) if the Company declares a stock dividend of one share of Common Stock for
every 10 shares outstanding, thereafter, with respect to any conversion for
which the Company issues shares after the record date of such dividend, the
Conversion Price (whether or not based on a Lowest Fixed Conversion Price) shall
be deemed to be such amount multiplied by a fraction, of which the numerator is
the number of shares (10 in the example) for which a dividend share will be
issued and the denominator is such number of shares plus the dividend share(s)
issuable or issued thereon (11 in the example).
11. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
12. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the exclusive
8
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Debenture
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on FORUM NON COVENIENS, to the bringing of any
such proceeding in such jurisdictions. To the extent determined by such court,
the Company shall reimburse the Holder for any reasonable legal fees and
disbursements incurred by the Holder in enforcement of or protection of any of
its rights under any of this Debenture.
13. JURY TRIAL WAIVER. The Company and the Holder hereby waive a trial
by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out of or in
connection with this Debenture.
14. (i) Prior to the Maturity Date, the following shall constitute an
"Event of Default":
a. The Company shall default in the payment of principal or
interest on this Debenture or any other Debenture in
this Series or any other amount due hereunder or
thereunder, and, (i) with respect to a payment of
interest on a Scheduled Interest Payment Date, such
default shall continue for a period of five (5) Trading
Days after the Holder gives the Company's written notice
thereof, and (ii) in all other instances, such default
shall continue for a period of five (5) Trading Days; or
b. Any of the representations or warranties made by the
Company herein, in the Securities Purchase Agreement or
any of the other Transaction Agreements or in any
certificate or financial or other written statements
heretofore or hereafter furnished by the Company in
connection with the execution and delivery of this
Debenture or the Securities Purchase Agreement shall be
false or misleading in any material respect at the time
made; or
c. Subject to the terms of the Securities Purchase
Agreement, the Company fails to authorize or to cause
its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Debenture
(provided, however, that for purposes of this provision,
such failure to cause the Transfer Agent to issue such
shares shall not be deemed to occur until two (2)
Trading Days after the Delivery Date), fails to transfer
or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the
Holder upon conversion of this Debenture and when
required by this Debenture or any other Transaction
Agreement, and such transfer is otherwise lawful, or
fails to remove any restrictive legend on any
certificate or fails to cause its Transfer Agent to
remove such restricted legend, in each case where such
removal is lawful, as and when required by this
Debenture, or any other Transaction Agreement, and any
such failure shall continue uncured for ten (10) Trading
Days; or
9
d. The Company shall fail to perform or observe, in any
material respect, any other covenant, term, provision,
condition, agreement or obligation of any Debenture in
this series and such failure shall continue uncured for
a period of thirty (30) days after the Company's receipt
written notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any
material respect, any covenant, term, provision,
condition, agreement or obligation of the Company under
any of the Transaction Agreements and such failure, if
capable of being cured, shall continue uncured for a
period of thirty (30) days after the Holder gives the
Company written notice thereof (but if not capable of
being cured, such thirty day period shall be deemed
expired immediately upon the giving of such notice); or
f. The Company shall (1) admit in writing its inability to
pay its debts generally as they mature; (2) make an
assignment for the benefit of creditors or commence
proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or
receiver for its or for a substantial part of its
property or business; or
g. A trustee, liquidator or receiver shall be appointed for
the Company or for a substantial part of its property or
business without its consent and shall not be discharged
within sixty (60) days after such appointment; or
h. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any
substantial portion of the properties or assets of the
Company and shall not be dismissed within sixty (60)
days thereafter; or
i. Any money judgment, writ or warrant of attachment, or
similar process in excess of Five Hundred Thousand
($500,000) Dollars in the aggregate shall be entered or
filed against the Company or any of its properties or
other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of forty-five (45)
days or in any event later than five (5) days prior to
the date of any proposed sale thereunder; or
j. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed
within sixty (60) days after such institution or the
Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or
admit the material allegations of, or default in
answering a petition filed in any such proceeding; or
10
k. The Company shall have its Common Stock suspended from
trading on, or delisted from, the Principal Trading
Market for in excess of five (5) Trading Days.
(ii) After the Maturity Date, the term "Event of Default"
shall mean:
a. The Company shall default in the payment of principal or
interest on this Debenture or any other amount due
hereunder, and, in any such instance, the same shall
continue for a period of five (5) Trading Days; or
b. Subject to the terms of the Securities Purchase
Agreement, the Company fails to authorize or to cause
its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Debenture
(provided, however, that for purposes of this provision,
such failure to cause the Transfer Agent to issue such
shares shall not be deemed to occur until two (2)
Trading Days after the Delivery Date), fails to transfer
or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the
Holder upon conversion of this Debenture and when
required by this Debenture or any other Transaction
Agreement, and such transfer is otherwise lawful, or
fails to remove any restrictive legend on any
certificate or fails to cause its Transfer Agent to
remove such restricted legend, in each case where such
removal is lawful, as and when required by this
Debenture, or any other Transaction Agreement, and any
such failure shall continue uncured for ten (10) Trading
Days.
(iii) If an Event of Default shall have occurred and is
continuing, then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been cured or waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any subsequent
default), at the option of the Holder and in the Holder's sole discretion, the
Holder may elect to redeem all or part of the Unconverted Debenture (as defined
below) on the terms provided in Section 15 hereof.
15. A. The Company acknowledges that if there is an Event of Default,
the Holder may require the Company to immediately redeem all or any part of the
outstanding portion of this Debenture for an amount equal to the Redemption
Amount (as defined below).
B. For purposes of this Debenture, the following terms shall
have the meanings indicated below:
"Unconverted Debenture" means the principal amount of this Debenture
which has not been converted as of the relevant date.
"Redemption Payment Date" means the date on which the Company actually
pays the Redemption Amount.
11
"Redemption Amount" means the amount equal to:
V x M
--------
CP
where:
"V" means the principal of an Unconverted Debenture plus
any accrued but unpaid interest thereon;
"CP" means the Conversion Price in effect on the the
Redemption Notice Date (as defined below); and
"M" means the highest closing price per share of the
Common Stock during the period beginning on the Redemption
Notice Date and ending on the Redemption Payment Date.
C. The Holder of an Unconverted Debenture may elect to redeem a portion
of such Unconverted Debenture without electing to redeem the balance of the
Unconverted Debenture. The Holder's option to redeem all or part of the
Unconverted Debenture shall be exercised by the Holder giving written notice of
the exercise of this provision by the Holder (a "Redemption Notice") at any time
after a relevant Event of Default has occurred. The Redemption Notice shall
specify (a) the date (the "Redemption Due Date") on which the Redemption Amount
shall be paid, which date shall be at least five (5) Trading Days after the date
(a "Redemption Notice Date") on which the Holder Redemption Notice is given, and
(b) the wire instructions for the account to which the Redemption Amount is to
be paid; provided, however, that the Company shall have the right to accelerate
the date of such payment.
D. If all of the Unconverted Debentures are being redeemed pursuant to
this Section 5, then, upon payment in full of the Redemption Amount for all of
the Unconverted Debentures in accordance with the provisions of this Section 5,
the Holder shall deliver the Debenture to the Company marked "paid in full".
E. If the Redemption Amount is not timely paid by the Company, the
Holder may declare the Redemption Amount due under this Debenture immediately
due and payable, without presentment, demand, protest or notice of any kinds,
all of which are hereby expressly waived, anything herein or in any note or
other instruments contained to the contrary notwithstanding, and the Holder may
immediately enforce any and all of the Holder's rights and remedies provided
herein or any other rights or remedies afforded by law, including, but not
necessarily limited to, the equitable remedy of specific performance and
injunctive relief. If such outstanding amount is not timely paid in full by the
Company, the unpaid amount computed as of such date will bear interest at the
rate of eighteen percent (18%) or the highest rate allowed by law, whichever is
lower, from the date of the Event of Default until and including the date
actually paid. Any partial payments shall be applied first to all accrued
interest and then to principal.
12
16. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company, unless and to the extent
converted in accordance with the terms hereof.
17. Any notice required or permitted hereunder shall be given in manner
provided in the Section headed "NOTICES" in the Securities Purchase Agreement,
the terms of which are incorporated herein by reference.
[Balance of page intentionally blank]
13
18. In the event for any reason, any payment by or act of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, then IPSO FACTO the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section or
otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section shall control every other provision
of this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: ___________________, 200_
RIM SEMICONDUCTOR COMPANY
By: __________________________________
______________________________________
(Print Name)
______________________________________
(Title)
EXHIBIT A
RIM SEMICONDUCTOR COMPANY
NOTICE OF CONVERSION
OF
7% SENIOR SECURED CONVERTIBLE DEBENTURE
SERIES 06-01 C DUE 1200 -
(To be Executed by the Registered Holder in Order to Convert the Debenture)
TO: RIM SEMICONDUCTOR COMPANY VIA FAX: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
FROM: ______________________________________________________________("Holder")
DATE: _________________________________________________ (the "Conversion Date")
RE: Conversion of $________________ principal amount (the "Converted
Debenture") of the 7% Convertible Debenture Series 06-01 C-__
Due__________, 200_ (the "Debenture") of RIM SEMICONDUCTOR COMPANY (the
"Company") into _______________ shares (the "Conversion Shares") of
Common Stock (defined below)
The captioned Holder hereby gives notice to the Company, pursuant to
the Debenture of RIM SEMICONDUCTOR COMPANY that the Holder elects to convert the
Converted Debenture into fully paid and non-assessable shares of Common Stock,
$0.001 par value (the "Common Stock"), of the Company as of the Conversion Date
specified above. Said conversion shall be based on the following Conversion
Price
[ ] $___________, representing the Variable Conversion Price (as
defined in the Debenture)
[ ] $___________, representing the Lowest Fixed Conversion Price (as
defined in the Debenture)
[ ] $___________, representing the Lowest Fixed Conversion Price,
adjusted in accordance with the provisions of the Debenture
1
Based on this Conversion Price, the number of Conversion Shares indicated above
should be issued in the following name(s):
Name and Record Address Conversion Shares
________________________________ _________________
________________________________ _________________
________________________________ _________________
It is the intention of the Holder to comply with the provisions of
Section 4(C) of the Debenture regarding certain limits on the Holder's right to
convert thereunder. Based on the analysis on the attached Worksheet Schedule,
the Holder believe this conversion complies with the provisions of said Section
4(C). Nonetheless, to the extent that, pursuant to the conversion effected
hereby, the Holder would have more shares than permitted under said Section,
this notice should be amended and revised, ab initio, to refer to the conversion
which would result in the issuance of shares consistent with such provision. Any
conversion above such amount is hereby deemed void and revoked.
As contemplated by the Debenture, this Notice of Conversion is being
sent by facsimile to the telecopier number and officer indicated above.
If this Notice of Conversion represents the full conversion of the
outstanding balance of the Converted Debenture, the Holder either (1) has
previously surrendered the Converted Debenture to the Company or (2) will
surrender (or cause to be surrendered) the Converted Debenture to the Company at
the address indicated above by express courier within five (5) Trading Days
after delivery or facsimile transmission of this Notice of Conversion.
The certificates representing the Conversion Shares should be
transmitted by the Company to the Holder via express courier or by electronic
transfer within the time contemplated by the Debenture after receipt of this
Notice of Conversion (by facsimile transmission or otherwise) to:
_____________________________
_____________________________
_____________________________
2
As contemplated by the Debenture, the Company should also pay all
accrued but unpaid interest on the Converted Debenture to the Holder.
-- If the Company elects to pay such interest in Common Stock, as
contemplated by and subject to the provisions of the Debenture,
such shares should be issued in the name of the Holder and
delivered in the same manner as, and together with, the
Conversion Shares.
-- If the Company elects or is required to pay the dividends in
cash, such payment should be made by wire transfer as
follows:(9)
_____________________________
_____________________________
_____________________________
____________________________________
(Print name of Holder)
By: ________________________________
(Signature of Authorized Person)
____________________________________
(Printed Name and Title)
___________________
(9) Information should include the following:
All Wires:
(1) Bank Name
(2) ▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇)
(3) ABA or Wire Routing No.
(4) Account Name
(5) Account Number
If Wire is going to International (Non-US) Bank, all of the above PLUS:
(6) SWIFT Number
3
NOTICE OF CONVERSION
WORKSHEET SCHEDULE
1. Current Common Stock holdings of Holder and Affiliates __________
2. Shares to be issued on current conversion(1) __________
3. Other shares to be issued on other current conversion(s) and
other current exercise(s) __________
4. Other shares eligible to be acquired within next 60 days
without restriction __________
5. Total [sum of Lines 1 through 4] __________
6. Outstanding shares of Common Stock(2) __________
7. Adjustments to Outstanding
a. Shares known to Holder as previously issued
to Holder or others but not included in Line 6 __________
b. Shares to be issued per Line(s) 2 and 3 __________
c. Total Adjustments [Lines 7a and 7b] __________
8. Total Adjusted Outstanding [Lines 6 plus 7c] __________
9. Holder's Percentage [Line 5 divided by Line 8] __________%
[Note: Line 9 not to be above 4.99%]
________________
(1) Includes conversion of principal and assumes interest will be paid in Common
Stock at the Conversion Price.
(2) Based on latest SEC filing by Company or information provided by executive
officer of Company, counsel to Company or transfer agent.