EX 10.25
FORM OF CONVERTIBLE NOTE
THIS SECURITY AND ANY SECURITIES ISSUABLE PURSUANT HERETO HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.
____________________
7.0% (SUBJECT TO ADJUSTMENT) CONVERTIBLE SUBORDINATED NOTE DUE
SEPTEMBER 13, 2005
No. R-1 $x,xxx,xxx.00
Access Pharmaceuticals, Inc., a corporation duly organized
and existing under the laws of Delaware (the "Company") for value
received, hereby promises to pay to ___________________, or registered
assigns, the principal sum of ____ Million ____ Hundred _____
Thousand _____ Hundred Dollars ($x,xxx,xxx.00) on September 13,
2005, and to pay interest thereon, from September 13, 2000, or from the
most recent interest payment date to which interest has been paid or duly
provided for, annually on September 13 in each year, commencing
September 13, 2001, at the rate of 7.0% per annum provided, that if the
holder elects to extend the Redemption Commencement Date and the
Conversion Commencement Date as provided in Sections 1 and 2 below,
the rate shall adjust to 7.7% per annum commencing September 13, 2001
and continuing for the balance of the term of this Note, until the principal
hereof is due, and at the rate of 10% per annum on any overdue principal
and premium, if any, and, to the extent permitted by law, on any overdue
interest. The interest so payable, and punctually paid or duly provided
for, on any interest payment date will be paid to the person in whose
name this Security (or one or more predecessor Securities) is registered
at the close of business on the regular record date for such interest, which
shall be September 1 (whether or not a business day), as the case may be,
next preceding such interest payment date. Payment of the principal of
this Security shall be made upon the surrender of this Security to the
Company, at its office at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (or such other office within the United States as shall
be notified by the Company to the holder hereof) (the "Designated
Office"), in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and
private debts, by transfer to a U.S. dollar account maintained by the payee
with a bank in the United States of America. Payment of interest on this
Security shall be made, at the election of the holder, either (a) by transfer
of cash to a U.S. dollar account (such a transfer to be made only if the
holder shall have furnished wire instructions in writing to the Company
no later than 15 days prior to the relevant payment date) maintained by the
payee with a bank in the United States of America, provided that if the holder
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shall not have timely furnished wire instructions in writing to the
Company, payment of interest on this Security shall be made by a check
mailed to the address of the person entitled thereto as such address shall
appear in the Company security register, or (b) by delivery of shares of
Common Stock with a fair market value equal to 100% of the average
Closing Prices for the five consecutive Trading Days ending on and
including the third Trading Day immediately preceding the interest
payment date.
1. Redemption. This Security is subject to redemption
upon not less than 30 nor more than 60 days' notice by mail, at any time
on or after September 30, 2001 (the "Redemption Commencement Date"),
as a whole or in part, (in any amount that is an integral multiple of
$5,500) at the election of the Company, at a redemption price of 100% of
the principal amount thereof, together with accrued interest to the
redemption date, but interest installments whose stated maturity is on or
prior to such redemption date will be payable to the holder of this
Security, or one or more predecessor Securities, of record at the close of
business on the relevant record dates referred to on the face hereof;
provided that this Security may not be redeemed on or after September
30, 2001 unless the Closing Price of the Company Stock exceeds 1.5
times the Conversion Price for any period of 10 consecutive Trading Days
commencing on or after August 30, 2001 and ending not less than two
Trading Days prior to the Company's giving notice of such redemption to
the holder hereof; further provided, that the holder of this Security may
extend the Redemption Commencement Date to December 31, 2002 by
giving written notice to the Company on or before July 1, 2001 of its
election to so extend the Redemption Commencement Date and the
Conversion Commencement Date (as defined below).
2. Conversion. (a) The holder of this Security is
entitled at any time on or after September 13, 2001 (the "Conversion
Commencement Date") and before the close of business on September 13,
2005 (or, in case this Security or a portion hereof is called for redemption
or the holder hereof has exercised his right to require the Company to
repurchase this Security or a portion hereof, then in respect of this
Security or such portion hereof, as the case may be, until and including,
but (unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be) not after, the close of
business on the redemption date or the Repurchase Date, as the case may
be) to convert this Security (or any portion of the principal amount hereof
that is an integral multiple of $5,500), into fully paid and nonassessable
shares (calculated as to each conversion to the nearest 1/100 of a share)
of Common Stock of the Company at the rate of 1,000 shares of Common
Stock (the "Conversion Rate") for each $5,500 principal amount of
Security by surrender of this Security, duly endorsed or assigned to the
Company or in blank to the Company at the Designated Office,
accompanied by written notice to the Company that the holder hereof
elects to convert this Security (or if less than the entire principal amount
hereof is to be converted, specifying the portion hereof to be converted)
provided, that the holder of this Security may extend the Conversion
Commencement Date to December 13, 2002 by giving written notice to
the Company on or before July 1, 2001 of its election to so extend the
Conversion Commencement Date and Redemption Commencement Date.
Upon surrender of this Security for conversion, the holder will be entitled
to receive the interest accruing on the principal amount of this Security
then being converted from the interest payment date next preceding the
date of such conversion to such date of conversion. No payment or
adjustment is to be made on conversion for dividends on the Common
Stock issued on conversion hereof. No fractions of shares or scrip
representing fractions of shares will be
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issued on conversion, but instead
of any fractional interest, the Company shall pay a cash adjustment,
computed on the basis of the Closing Price of the Common Stock on the
date of conversion, or, at its option, the Company shall round up to the
next higher whole share.
(b) The Conversion Rate shall be subject to adjustments
from time to time as follows:
(1) In case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company
payable in shares of Common Stock, the Conversion Rate in effect
at the opening of business on the day following the Determination
Date for such dividend or other distribution shall be increased by
dividing such Conversion Rate by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding at the close of business on such Determination Date
and the denominator shall be the sum of such number of shares
and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after
the opening of business on the day following such Determination
Date. For the purposes of this paragraph (1), the number of
shares of Common Stock at any time outstanding shall not include
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.
(2) Subject to the last sentence of paragraph (7) of this
Section 2(b), in case the Company shall issue rights, options or
warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the current market price per share (determined as
provided in paragraph (8) of this Section 2(b)) of the Common
Stock on the Determination Date for such distribution, the
Conversion Rate in effect at the opening of business on the day
following such Determination Date shall be increased by dividing
such Conversion Rate by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close
of business on such Determination Date plus the number of shares
of Common Stock which the aggregate of the offering price of the
total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market
price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on such
Determination Date plus the number of shares of Common Stock
so offered for subscription or purchase, such increase to become
effective immediately after the opening of business on the day
following such Determination Date. For the purposes of this
paragraph (2), the number of shares of Common Stock at any time
outstanding shall not include 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.
(3) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Rate in effect at the opening of business on the day
following the day upon which such subdivision becomes effective
shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into
a smaller number of shares of Common
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Stock, the Conversion
Rate in effect at the opening of business on the day following the
day upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case
may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision
or combination becomes effective.
(4) Subject to the last sentence of paragraph (7) of this
Section 2(b), in case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness, shares of any class of capital stock, or other property
(including securities, but excluding (i) any rights, options or
warrants referred to in paragraph (2) of this Section 2(b), (ii) any
dividend or distribution paid exclusively in cash, (iii) any dividend
or distribution referred to in paragraph (1) of this Section 2(b) and
(iv) any merger or consolidation to which Section 2(h) applies), the
Conversion Rate shall be adjusted so that the same shall equal the
rate determined by dividing the Conversion Rate in effect
immediately prior to the close of business on the Determination
Date for such distribution by a fraction of which the numerator
shall be the current market price per share (determined as provided
in paragraph (8) of this Section 2(b)) of the Common Stock on
such Determination Date less the then fair market value (as
determined in good faith by the Board of Directors of the
Company) of the portion of the assets, shares or evidences of
indebtedness so distributed applicable to one share of Common
Stock and the denominator shall be such current market price per
share of the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following
such Determination Date. If the Board of Directors determines the
fair market value of any distribution for purposes of this paragraph
(4) by reference to the actual or when issued trading market for
any securities comprising such distribution, it must in doing so
consider the prices in such market over the same period used in
computing the current market price per share pursuant to
paragraph (8) of this Section 2(b).
(5) In case the Company shall, by dividend or otherwise,
make a Cash Distribution, then, and in each such case,
immediately after the close of business on the Determination Date
for such Cash Distribution, the Conversion Rate shall be adjusted
so that the same shall equal the rate determined by dividing the
Conversion Rate in effect immediately prior to the close of
business on such Determination Date by a fraction (a) the
numerator of which shall be equal to the current market price per
share (determined as provided in paragraph (8) of this Section
2(b)) of the Common Stock on such Determination Date less an
amount equal to the quotient of (1) the amount of such Cash
Distribution divided by (2) the number of shares of Common Stock
outstanding on such Determination Date and (b) the denominator
of which shall be equal to the current market price per share
(determined as provided in paragraph (8) of this Section 2(b)) of
the Common Stock on such Determination Date.
(6) In case the Company or any Subsidiary shall make an
Excess Purchase Payment, then, and in each such case,
immediately prior to the opening of business on the day after the
tender offer in respect of which such Excess Purchase Payment is
to be made expires, the Conversion Rate shall be adjusted so that
the same shall equal the rate
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determined by dividing the
Conversion Rate in effect immediately prior to the close of
business on the Determination Date for such tender offer by a
fraction (a) the numerator of which shall be equal to the current
market price per share (determined as provided in paragraph (8)
of this Section 2(b)) of the Common Stock at such Determination
Date less the amount of such Excess Purchase Payment and (b)
the denominator of which shall be equal to the current market
price per share of the Common Stock (determined as provided in
paragraph (8) of this Section 2(b)) as of such Determination Date.
(7) The reclassification of Common Stock into securities
other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 2(h) applies) shall be
deemed to involve (a) a distribution of such securities other than
Common Stock to all holders of Common Stock (and the effective
date of such reclassification shall be deemed to be the
Determination Date), and (b) a subdivision or combination, as the
case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately
thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes
effective" or "the day upon which such combination becomes
effective", as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning
of paragraph (3) of this Section 2(b)). Rights or warrants issued
by the Company to all holders of its Common Stock entitling the
holders thereof to subscribe for or purchase shares of Common
Stock, which rights or warrants (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, in each case in clauses (i) through (iii) until the occurrence
of a specified event or events ("Trigger Event"), shall for purposes
of this Section 2(b) not be deemed issued until the occurrence of
the earliest Trigger Event.
(8) For the purpose of any computation under paragraphs
(2), (4), (5) or (6) of this Section 2(b) the current market price per
share of Common Stock on any date shall be calculated by the
Company and be deemed to be the average of the daily Closing
Prices for the five consecutive Trading Days selected by the
Company commencing not more than 10 Trading Days before, and
ending not later than, the earlier of the day in question and the day
before the "ex" date with respect to the issuance or distribution
requiring such computation. For purposes of this paragraph, the
term "ex date", when used with respect to any issuance or
distribution, means the first date on which the Common Stock
trades regular way in the applicable securities market or on the
applicable securities exchange without the right to receive such
issuance or distribution.
(9) No adjustment in the Conversion Rate shall be required
unless such adjustment (plus any adjustments not previously made
by reason of this paragraph (9)) would require an increase or
decrease of at least one percent in such rate; provided, however,
that any adjustments which by reason of this paragraph (9) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 2 shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be.
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(10) The Company may make such increases in the
Conversion Rate, for the remaining term of the Securities or any
shorter term, in addition to those required by paragraphs (1), (2),
(3), (4), (5) and (6) of this Section 2(b) as it considers to be
advisable in order to avoid or diminish any income tax to any
holders of shares of Common Stock resulting from any dividend
or distribution of stock or issuance of rights or warrants to
purchase or subscribe for stock or from any event treated as such
for income tax purposes.
(c) Whenever the Conversion Rate is adjusted as provided
in Section 2(b), the Company shall compute the adjusted Conversion Rate
in accordance with Section 2(b) and shall prepare a certificate signed by
the chief financial officer of the Company setting forth the adjusted
Conversion Rate and showing in reasonable detail the facts upon which
such adjustment is based, and shall promptly deliver such certificate to the
holder of Security.
(d) In case:
(1) the Company shall declare a dividend or other
distribution on its Common Stock payable (i) otherwise
than exclusively in cash or (ii) exclusively in cash in an
amount that would require any adjustment pursuant to
Section 2(b); or
(2) the Company shall authorize the granting to the
holders of its Common Stock of rights, options or warrants
to subscribe for or purchase any shares of capital stock of
any class or of any other rights; or
(3) of any reclassification of the Common Stock of
the Company, or of any consolidation, merger or share
exchange to which the Company is a party and for which
approval of any shareholders of the Company is required,
or of the conveyance, sale, transfer or lease of all or
substantially all of the assets of the Company; or
(4) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(5) the Company or any Subsidiary shall commence
a tender offer for all or a portion of the Company's
outstanding shares of Common Stock (or shall amend any
such tender offer);
then the Company shall cause to be delivered to the holder of this
Security, at least 10 days prior to the applicable record, expiration or
effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
rights, options or warrants, or, if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights, options or warrants are to be determined,
(y) the date on which the right to make tenders under such tender offer
expires or (z) the date on which such reclassification, consolidation,
merger, conveyance, transfer, sale, lease, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it
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is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, sale, lease, dissolution, liquidation or winding up.
Neither the failure to give such notice nor any defect therein shall affect
the legality or validity of the proceedings described in clauses (1) through
(5) of this Section 2(d).
(e) The Company shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of effecting the conversion of the
Security, the full number of shares of Common Stock then issuable upon
the conversion of this Security.
(f) Except as provided in the next sentence, the Company
will pay any and all stamp or transfer taxes and duties that may be
payable in respect of the issue or delivery of shares of Common Stock on
conversion of the Security. The Company shall not, however, be required
to pay any tax or duty which may be payable in respect of any transfer
involved in the issue and delivery of shares of Common Stock in a name
other than that of the holder of this Security, and no such issue or delivery
shall be made unless and until the person requesting such issue has paid
to the Company the amount of any such tax or duty, or has established to
the satisfaction of the Company that such tax or duty has been paid.
(g) The Company agrees that all shares of Common Stock
which may be delivered upon conversion of the Security, upon such
delivery, will have been duly authorized and validly issued and will be
fully paid and nonassessable (and shall be issued out of the Company's
authorized but unissued Common Stock) and, except as provided in
Section 2(f), the Company will pay all stamp or transfer taxes, liens and
charges with respect to the issue thereof.
(h) In case of any consolidation of the Company with any
other person, any merger of the Company into another person or of
another person into the Company (other than a merger which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company) or any conveyance,
sale, transfer or lease of all or substantially all of the properties and assets
of the Company, the person formed by such consolidation or resulting
from such merger or which acquires such properties and assets, as the
case may be, shall execute and deliver to the holder of this Security a
supplemental agreement providing that such holder have the right there-
after, during the period this Security shall be convertible as specified in
Section 2(a), to convert this Security only into the kind and amount of
securities, cash and other property receivable upon such consolidation,
merger, conveyance, sale, transfer or lease (including any Common Stock
retainable) by a holder of the number of shares of Common Stock of the
Company into which this Security might have been converted immediately
prior to such consolidation, merger, conveyance, sale, transfer or lease,
assuming such holder of Common Stock of the Company (i) is not a
person with which the Company consolidated, into which the Company
merged or which merged into the Company or to which such conveyance,
sale, transfer or lease was made, as the case may be (a "Constituent
Person"), or an Affiliate of a Constituent Person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash
and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease (provided that if the kind or amount of
securities, cash and other property receivable upon such consolidation,
merger, conveyance, sale, transfer, or
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lease is not the same for each share
of Common Stock of the Company held immediately prior to such
consolidation, merger, conveyance, sale, transfer or lease by others than
a Constituent Person or an Affiliate thereof and in respect of which such
rights of election shall not have been exercised ("Non-electing Share"),
then for the purpose of this Section 2(h) the kind and amount of securities,
cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease by the holders of each Non-electing
Share shall be deemed to be the kind and amount so receivable per share
by a plurality of the Non-electing Shares). Such supplemental agreement
shall provide for adjustments which, for events subsequent to the effective
date of such supplemental agreement, shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 2. The
above provisions of this Section 2(h) shall similarly apply to successive
consolidations, mergers, conveyances, sales, transfers or leases. In this
paragraph, "securities of the kind receivable" upon such consolidation,
merger, conveyance, transfer, sale or lease by a holder of Common Stock
means securities that, among other things, are registered and transferable
under the Securities Act, and listed and approved for quotation in all
securities markets, in each case to the same extent as such securities so
receivable by a holder of Common Stock.
(i) The Company (a) will effect all registrations with, and
obtain all approvals by, all governmental authorities that may be necessary
under any United States Federal or state law (including the Securities Act
of 1933, as amended (the "Securities Act"), the Securities Exchange Act
of 1934, as amended, and state securities and Blue Sky laws) for the
shares of Common Stock issuable upon conversion of this Security to be
lawfully issued and delivered as provided herein, and thereafter publicly
traded (if permissible under such Securities Act) and qualified or listed as
contemplated by clause (b) below (it being understood that the Company
shall not be required to register the Common Stock issuable on conversion
hereof under the Securities Act, except pursuant to the Registration Rights
Agreement between the Company and the initial holder of this Security);
and (b) will list the shares of Common Stock required to be issued and
delivered upon conversion of Securities, prior to such issuance or
delivery, on each national securities exchange on which outstanding
Common Stock is listed or quoted at the time of such delivery, or if the
Common Stock is not then listed on any securities exchange, to qualify the
Common Stock for quotation on the Nasdaq National Market or such other
inter-dealer quotation system, if any, on which the Common Stock is then
quoted.
(j) For purposes hereof:
"Affiliate" of any specified person means any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes of
this definition, "control", when used with respect to any specified person,
means the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"Cash Distribution" means the distribution by the Company
to all holders of its Common Stock of cash, other than any cash that is
distributed upon a merger or consolidation to which Section 2(h) applies
or as part of a distribution referred to in paragraph (4) of Section 2(b).
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"Closing Price" means, with respect to the Common Stock
of the Company, for any day, the reported last sale price per share on the
American Stock Exchange, or, if the Common Stock is not admitted to
trading on the American Stock Exchange, on the principal national
securities exchange or inter-dealer quotation system on which the Common
Stock is listed or admitted to trading, or if not admitted to trading on the
Nasdaq National Market, or listed or admitted to trading on any national
securities exchange or inter-dealer quotation system, the average of the
closing bid and asked prices per share in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from
time to time by the Company for that purpose.
"Common Stock" means the Common Stock, par value $.01
per share, of the Company authorized at the date of this instrument as
originally executed. Subject to the provisions of Section 2(h), shares
issuable on conversion or repurchase of this Security shall include only
shares of Common Stock or shares of any class or classes of common
stock resulting from any reclassification or reclassifications thereof;
provided, however, that if at any time there shall be more than one such
resulting class, the shares so issuable on conversion of this Security shall
include shares of all such classes, and the shares of each such class then
so issuable shall be substantially in the proportion which the total number
of shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
"Conversion Price" on any day means an amount equal to
$5,500 divided by the Conversion Rate in effect on such day.
"Determination Date" means, in the case of a dividend or
other distribution, including the issuance of rights, options or warrants,
to shareholders, the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution and, in the case of
a tender offer, the last time that tenders could have been made pursuant
to such tender offer.
"Excess Purchase Payment" means the excess, if any, of
(i) the amount of cash plus the fair market value (as determined in good
faith by the Company's Board of Directors) of any non-cash consideration
required to be paid with respect to one share of Common Stock acquired
or to be acquired in a tender offer made by the Company or any
subsidiary of the Company for all or any portion of the Common Stock
over (ii) the current market price per share as of the last time that tenders
could have been made pursuant to such tender offer.
"Trading Day" means (i) if the Common Stock is listed or
admitted for trading on the New York or American Stock Exchange or
any other national securities exchange, a day on which such exchange is
open for business; (ii) if the Common Stock is admitted to trading on the
Nasdaq National Market or any other system of automated dissemination
of quotations of securities prices, a day on which trades may be effected
through such system; or (iii) if the Common Stock is not admitted to
trading on the Nasdaq National Market or listed or admitted for trading
on any national securities exchange or any other system of automated
dissemination of quotation of securities prices, a day on which the
Common Stock is traded regular way in the
9
over-the-counter market and for which a closing bid and a closing asked
price for the Common Stock are available.
3. Right to Require Repurchase. (a) In the event that
a Change in Control (as hereinafter defined) shall occur, then the holder
of this Security shall have the right, at such holder's option, subject to
the rights of holders of Senior Indebtedness, to require the Company to
repurchase, and upon the exercise of such right the Company shall repur-
chase, this Security, or any portion of the principal amount hereof that is
equal to $5,500 or any integral multiple thereof, on the date (the
"Repurchase Date") that is ten Trading Days after the date on which the
Company gives notice thereof to the holder of this Security, at a purchase
price equal to 105% of the principal amount of this Security to be
repurchased, plus interest accrued to the Repurchase Date (the
"Repurchase Price"); provided, however, that installments of interest on
this Security whose stated maturity is on or prior to the Repurchase Date
shall be payable to the holder of this Security, or one or more predecessor
Securities, registered as such on the relevant Record Date according to
their terms. Upon surrender of this Security for repurchase, the holder
will be entitled to receive the interest accruing on the principal amount of
this Security then being repurchased from the interest payment date next
preceding the date of such repurchase to such date of repurchase. At the
option of the Company, the Repurchase Price may be paid in cash or,
subject to the fulfillment by the Company of the conditions set forth in
Section 3(b), by delivery of shares of Common Stock having a fair market
value equal to the Repurchase Price as described in Section 3(b). The
Company agrees to give the holder of this Security notice of any Change
in Control, by facsimile transmission confirmed in writing by overnight
courier service, promptly and in any event within two Trading Days of the
occurrence thereof.
(b) The Company may elect to pay the Repurchase Price
by delivery of shares of Common Stock pursuant to Section 3(a), if and
only if the following conditions have been satisfied:
(1) The shares of Common Stock deliverable in payment
of the Repurchase Price shall have a fair market value as of the
Repurchase Date of not less than the Repurchase Price. For purposes of
this Section 3(b), the fair market value of shares of Common Stock shall
be equal to 95% of the average of the Closing Prices for the five
consecutive Trading Days ending on and including the third Trading Day
immediately preceding the Repurchase Date;
(2) In the event any shares of Common Stock to be issued
upon repurchase of this Security require registration under any Federal
securities law before such shares may be freely transferable without being
subject to any transfer restrictions under the Securities Act of 1933 upon
issuance, such registration shall have been completed and shall have
become effective prior to the Repurchase Date;
(3) In the event any shares of Common Stock to be issued
upon repurchase of this Security require registration with or approval of
any governmental authority under any State law or any other Federal law
before such shares may be validly issued or delivered upon repurchase,
such registration shall have been completed, have become effective and
such approval shall have been obtained, in each case, prior to the
Repurchase Date;
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(4) Immediately prior to the Repurchase Date the shares of
Common Stock deliverable in payment of the Repurchase Price shall have
been approved for trading or listed on the American Stock Exchange or
the principal national securities exchange or interdealer quotation system
on which the Common Stock is then admitted to trading or listed; and
(5) All shares of Common Stock deliverable in payment of
the Repurchase Price shall be issued out of the Company's authorized but
unissued Common Stock and will, upon issue, be duly and validly issued
and fully paid and non-assessable and free of any preemptive rights.
If all of the conditions set forth in this Section 3(b) are not
satisfied in accordance with the terms thereof, the Repurchase Price shall
be paid by the Company only in cash.
(c) To exercise a repurchase right, the holder shall deliver
to the Company on or before the 5th day prior to the Repurchase Date,
together with this Security, written notice of the holder's exercise of such
right, which notice shall set forth the name of the holder, the principal
amount of this Security to be repurchased (and, if this Security is to be
repurchased in part, the portion of the principal amount thereof to be
repurchased and the name of the person in which the portion thereof to
remain outstanding after such repurchase is to be registered) and a
statement that an election to exercise the repurchase right is being made
thereby, and, in the event that the Repurchase Price shall be paid in shares
of Common Stock, the name or names (with addresses) in which the
certificate or certificates for shares of Common Stock shall be issued.
Such written notice shall be irrevocable, except that the right of the holder
to convert this Security (or the portion hereof with respect to which the
repurchase right is being exercised) shall continue until the close of
business on the Repurchase Date.
(d) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be
paid to the holder the Repurchase Price in cash or shares of Common
Stock, as provided above, or, if shares of Common Stock are to be paid,
as promptly after the Repurchase Date as practicable, together with
accrued and unpaid interest to the Repurchase Date; provided, however,
that installments of interest that mature on or prior to the Repurchase Date
shall be payable in cash, to the holders of this Security, or one or more
predecessor Securities, registered as such at the close of business on the
relevant regular record date.
(e) If this Security (or portion thereof) is surrendered for
repurchase and is not so paid on the Repurchase Date, the principal
amount of this Security (or such portion hereof, as the case may be) shall,
until paid, bear interest to the extent permitted by applicable law from the
Repurchase Date at the rate per annum borne by this Security, and shall
remain convertible into Common Stock until the principal of this Security
(or portion thereof, as the case may be) shall have been paid or duly
provided for.
(f) If this Security is to be repurchased only in part, it shall
be surrendered to the Company at the Designated Office (with, if the
Company so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company duly executed by, the holder
hereof or his attorney duly authorized in writing), and the Company shall
execute and make
11
available for delivery to the holder without service
charge, a new Security or Securities, containing identical terms and
conditions, each in an authorized denomination in aggregate principal
amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
(g) Any issuance of shares of Common Stock in respect of
the Repurchase Price shall be deemed to have been effected immediately
prior to the close of business on the Repurchase Date and the person or
persons in whose name or names any certificate or certificates for shares
of Common Stock shall be issuable upon such repurchase shall be deemed
to have become on the Repurchase Date the holder or holders of record
of the shares represented thereby; provided, however, that any surrender
for repurchase on a date when the stock transfer books of the Company
shall be closed shall constitute the person or persons in whose name or
names the certificate or certificates for such shares are to be issued as the
record holder or holders thereof for all purposes at the opening of
business on the next succeeding day on which such stock transfer books
are open. No payment or adjustment shall be made for dividends or
distributions on any Common Stock issued upon repurchase of this
Security declared prior to the Repurchase Date.
(h) No fractions of shares shall be issued upon repurchase
of this Security. Instead of any fractional share of Common Stock which
would otherwise be issuable on the repurchase of this Security, the
Company will deliver to the holder its check for the current market value
of such fractional share. The current market value of a fraction of a share
shall be determined by multiplying the current market price of a full share
by the fraction, and rounding the result to the nearest cent. For purposes
of this Section 3 the current market price of a share of Common Stock
shall be the Closing Price of the Common Stock on the Trading Day
immediately preceding the Repurchase Date.
(i) Any issuance and delivery of certificates for shares of
Common Stock on repurchase of this Security shall be made without
charge to the holder of this Security for such certificates or for any stamp
or transfer tax or duty in respect of the issuance or delivery of such
certificates or the securities represented thereby; provided, however, that
the Company shall not be required to pay any tax or duty which may be
payable in respect of any transfer involved in the issuance or delivery of
certificates for shares of Common Stock in a name other than that of the
holder of this Security, and no such issuance or delivery shall be made
unless and until the person requesting such issuance or delivery has paid
to the Company the amount of any such tax or duty or has established, to
the satisfaction of the Company, that such tax or duty has been paid.
(j) For purposes of this Section 3;
(1) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934; and
(2) a "Change in Control" shall be deemed to have
occurred at the time, after the original issuance of this Security, of:
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(i) the acquisition by any person of beneficial ownership,
directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of capital
stock of the Company entitling such person to exercise 50% or
more of the total voting power of all shares of capital stock of the
Company entitled to vote generally in the election of directors (any
shares of voting stock of which such person is the beneficial owner
that are not then outstanding being deemed outstanding for
purposes of calculating such percentage) other than any such
acquisition by the Company or any employee benefit plan of the
Company;
(ii) any consolidation or merger of the Company with or
into, any other person, any merger of another person with or into
the Company, or any conveyance, transfer, sale, lease or other
disposition of all or substantially all of the assets of the Company
to another person (other than (a) any such transaction (x) which
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock and (y)
pursuant to which holders of Common Stock immediately prior to
such transaction have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of all shares of
capital stock entitled to vote generally in the election of directors
of the continuing or surviving person immediately after such
transaction and (b) any merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a
reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of common stock);
provided, however, that a Change in Control shall not be deemed to have
occurred if the Closing Price for any five Trading Days within the period
of 10 consecutive Trading Days (x) ending immediately after the later of
the date of the Change in Control or the date of the public announcement
of the Change in Control (in the case of a Change in Control under Clause
(i) above) or (y) ending immediately prior to the date of the Change in
Control (in the case of a Change in Control under Clause (ii) above) shall
equal or exceed 105% of the Conversion Price in effect on each such
Trading Day.
4. Events of Default. (a) "Event of Default",
wherever used herein, means any one of the following events (whatever
the reason for such Event of Default and whether it shall be occasioned
by the provisions of Section 6 or be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon this
Security when it becomes due and payable, and continuance of
such default for a period of 30 days; or
(2) default by the Company in the performance of its
obligations in respect of any conversion of this Security (or any
portion hereof) in accordance with Section 2; or
(3) failure by the Company to give any notice of a Change
of Control required to be delivered in accordance with
Section 3(a); or
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(4) default in the performance, or breach, of any material
covenant or warranty of the Company herein (other than a
covenant or warranty a default in the performance or breach of
which is specifically dealt with elsewhere in this Section 4(a)) and
continuance of such default or breach for a period of 30 days after
there has been given, by registered or certified mail, to the
Company by the holder of this Security a written notice specifying
such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(5) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company, or
under any agreement, mortgage, indenture or instrument under
which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by the Company,
with a principal amount then outstanding in excess of $1,000,000,
whether such indebtedness now exists or shall hereafter be created,
which default shall constitute a failure to pay the principal of such
indebtedness (in whole or in any part greater than $1,000,000)
when due and payable or shall have resulted in such indebtedness
(in whole or in any part greater than $1,000,000) becoming or
being declared due and payable prior to the date on which it would
otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been
rescinded or annulled, within a period of 30 days after there shall
have been given, by registered or certified mail, to the Company
by the holder of this Security a written notice specifying such
default and requiring the Company to cause such indebtedness to
be discharged or cause such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default"
hereunder; or
(6) the entry by a court having jurisdiction in the premises
of (i) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or
state bankruptcy, insolvency, reorganization or other similar law
or (ii) a decree or order adjudging the Company bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or state law,
or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree
or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive days; or
(7) the commencement by the Company of a voluntary
case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or order for
relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or
consent seeking reorganization or similar relief under any
applicable Federal or State law, or the consent by it to the filing
of such petition or to the appointment of or taking possession by
a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or of any substantial part of
its property, or the
14
making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action.
(b) If an Event of Default (other than an Event of Default
specified in Section 4(a)(6) or 4(a)(7)) occurs and is continuing, then in
every such case the holder of this Security may declare the principal
hereof to be due and payable immediately, by a notice in writing to the
Company, and upon any such declaration such principal and all accrued
interest thereon shall become immediately due and payable. If an Event
of Default specified in Section 4(a)(6) or 4(a)(7) occurs and is continuing,
the principal of, and accrued interest on, this Security shall ipso facto
become immediately due and payable without any declaration or other act
of the holders.
5. Consolidation, Merger, Etc. (a) The Company
shall not consolidate with or merge into any other person or, directly or
indirectly, convey, transfer, sell or lease all or substantially all of its
properties and assets to any person, and the Company shall not permit any
person to consolidate with or merge into the Company or, directly or
indirectly, convey, transfer, sell or lease all or substantially all of its
properties and assets to the Company, unless:
(1) in case the Company shall consolidate with or merge
into another person or convey, transfer, sell or lease all or
substantially all of its properties and assets to any person, the
person formed by such consolidation or into which the Company
is merged or the person which acquires by conveyance, transfer or
sale, or which leases, all or substantially all the properties and
assets of the Company shall be a corporation, limited liability
company, partnership or trust, shall be organized and validly
existing and shall expressly assume, by an agreement supplemental
hereto, executed and delivered to the holder of this Security, the
due and punctual payment of the principal of and interest on this
Security and the performance or observance of every covenant of
this Security on the part of the Company to be performed or
observed, including the conversion rights provided herein;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the
Company or a subsidiary of the Company as a result of such
transaction as having been incurred by the Company or such
subsidiary of the Company at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time
or both, would become an Event of Default, shall have happened
and be continuing; and
(3) the Company has delivered to the holder of this
Security an officers' certificate stating that such consolidation,
merger, conveyance, transfer, sale or lease and, if a supplemental
agreement is required in connection with such transaction, such
supplemental agreement, comply with this Section and that all
conditions precedent herein provided for relating to such
transaction have been complied with.
(b) Upon any consolidation of the Company with, or
merger of the Company into, any other person or any conveyance,
transfer, sale or lease of all or substantially all of the
15
properties and assets of the Company in accordance with Section 5(a), the
successor person formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer, sale or lease is made shall
succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Security with the same effect as if such successor
person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor person shall be relieved of all
obligations and covenants under this Security.
6. Subordination. The Company agrees, and the holder
of this Security by accepting a Security agrees, that the indebtedness
evidenced by this Security is subordinated in right of payment to the prior
payment in full of all Senior Indebtedness, and that the subordination is
for the benefit of the holders of Senior Indebtedness.
"Senior Indebtedness" means:
(a) the principal of, interest (including, to the extent
permitted by applicable law, interest on or after the commencement of any
bankruptcy or similar proceeding whether or not representing an allowed
claim in such proceeding) on and any other amounts owing with respect
to (i) any indebtedness of the Company, now or hereafter outstanding, in
respect of borrowed money (other than the Securities), (ii) any
indebtedness of the Company, now or hereafter outstanding, evidenced by
a bond, note, debenture, capitalized lease, letter of credit or other similar
instrument, (iii) any other written obligation of the Company, now or
hereafter outstanding, to pay money issued or assumed as all or part of the
consideration for the acquisition of property, assets or securities and
(iv) any guaranty or endorsement (other than for collection or deposit in
the ordinary course of business) or discount with recourse of, or other
agreement (contingent or otherwise) to purchase, repurchase or otherwise
acquire, to supply or advance funds or to become liable with respect to
(directly or indirectly), any indebtedness or obligation of any person of the
type referred to in the preceding subclauses (i), (ii) and (iii) now or
hereafter outstanding; and
(b) any refundings, renewals or extensions of any
indebtedness or other obligation described in clause (a) above.
Notwithstanding the foregoing, if, by the terms of the
instrument creating or evidencing any indebtedness or obligation referred
to in clauses (a) and (b) above, it is expressly provided that such
indebtedness or obligation is not senior in right of payment to this
Security, such indebtedness or obligation shall not be included as Senior
Indebtedness.
7. Other. (a) No provision of this Security shall alter
or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, premium, if any, and interest on
this Security at the times, places and rate, and in the coin or currency,
herein prescribed or to convert this Security as herein provided.
(b) The Company will give prompt written notice to the
holder of this Security of any change in the location of the Designated
Office.
16
(c) The transfer of this Security is registrable on the
Security Register of the Company upon surrender of this Security for
registration of transfer at the Designated Office, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company duly executed by, the holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of
authorized denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees. Such Securities
are issuable only in registered form without coupons in denominations of
$5,500 and any integral multiple thereof. No service charge shall be
made for any such registration of transfer, but the Company may require
payment of a sum sufficient to recover any tax or other governmental
charge payable in connection therewith. Prior to due presentation of this
Security for registration of transfer, the Company and any agent of the
Company may treat the person in whose name this Security is registered,
as the owner thereof for all purposes, whether or not this Security be
overdue, and neither the Company, nor any such agent shall be affected
by notice to the contrary.
Notwithstanding any other provision of this Security, this
Security and the shares of Common Stock issuable upon conversion hereof
may only be transferred by the holder of this Security (a) in the case of
the Common Stock only, in a public offering registered under the
Securities Act of 1933, as amend; (b) to one or more investors, in one or
more transactions, any one of whom, after such purchase, would hold not
more than 5% of the shares of Common Stock then outstanding (assuming
conversion of any portion of this Security so transferred); (c) to any
person or entity that already controls more than 50% of the voting
securities of the Company prior to such transfer; (d) in a transaction that
complies with the manner of sale restrictions of Rule 144 under the
Securities Act; or (e) in a transaction approved in advance by the Federal
Reserve Board. The holder of this Security, by acceptance thereof, shall
be deemed to have agreed to the foregoing restriction on transfers.
(d) The holder agrees that, at the written request of the
Company or any managing underwriter of any underwritten public
offering of securities of the Company, such holder shall not, without the
prior written consent of the Company or such managing underwriter, sell,
make any short sale of, loan, grant any option for the purchase of, pledge,
encumber, or otherwise dispose of, or exercise any registration rights with
respect to, any Securities or Common Stock of the Company during the
180-day period commencing on the effective date of the registration
statement relating to such underwritten public offering of the Company's
securities; provided, that each officer and director of the Company shall
have entered into a similar agreement.
(e) This Security shall be governed by and construed in
accordance with the laws of the State of Texas, United States of
America.
17
IN WITNESS WHEREOF, the Company has caused this
Security to be duly executed under its corporate seal.
Dated:
By:__________________________
Name: ▇▇▇▇▇ ▇.▇▇▇▇
Title: Chief Executive Officer
Attest:
________________________
Name:
18
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 3(a) of this Security, the
undersigned hereby elects to have all or a portion of this Security
repurchased by the Company.
2. The undersigned hereby directs the Company to pay
[choose one] (a) it or (b) Name: __________________; address:
__________________; Social Security or Other Taxpayer Identification
Number, if any: ____________, an amount in cash or, at the Company's
election, Common Stock valued as set forth in the Security, equal to
100% of the principal amount to be repurchased (as set forth below), plus
interest accrued to the Repurchase Date, as provided herein.
Dated: _______________________
_______________________
Signature
Principal amount to be repurchased
(an integral multiple of $5,500): ______________________
Remaining principal amount following such repurchase
(not less than $5,500): ______________________
NOTICE: The signature to the foregoing Election must correspond to the
name as written upon the face of this Security in every particular, without
alteration or any change whatsoever.
CONVERSION NOTICE
The undersigned holder of this Security hereby irrevocably
exercises the option to convert this Security, or any portion of the
principal amount hereof (which is an integral multiple of $5,500) below
designated, into shares of Common Stock in accordance with the terms of
this Security, and directs that such shares, together with a check in
payment for any fractional share and any Security representing any
unconverted principal amount hereof, be delivered to and be registered in
the name of the undersigned unless a different name has been indicated
below. If shares of Common Stock or Securities are to be registered in
the name of a person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto.
Dated: _____________________
___________________________
Signature
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If shares or Securities are to be registered
in the name of a person other than the
holder, please print such person's name and
address:
_________________________
Name
_________________________
Address
_________________________
Social Security or other Taxpayer
Identification Number, if any
If only a portion of the Securities is to be
converted, please indicate:
1. Principal amount to be converted:
$___________
2. Principal amount and denomination
of Security representing unconverted
principal amount to be issued:
Amount: $________
Denominations: $________
(any integral multiple of $5,500)
20