EXHIBIT 10.3
NEITHER THIS SECURITY NOR THE
SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND
THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
THE SECURITIES REPRESENTED HEREBY
ARE SUBJECT TO A SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT, DATED
AS OF APRIL 5, 2007, BY AND BETWEEN THE COMPANY AND THE INVESTOR
REFERRED TO THEREIN (THE “PURCHASE AGREEMENT”), AND THE
HOLDER OF THE NOTE, BY ACCEPTANCE OF THIS NOTE, AGREES TO BE BOUND
BY ALL APPLICABLE PROVISIONS OF THE PURCHASE AGREEMENT. THE
SECURITIES REPRESENTED HEREBY ARE ALSO SUBJECT TO A REGISTRATION
RIGHTS AGREEMENT, DATED AS OF APRIL 5, 2007, BY AND BETWEEN THE
COMPANY AND THE INVESTOR REFERRED TO THEREIN (THE
“REGISTRATION RIGHTS AGREEMENT”) AND THE HOLDER OF THE
NOTE, BY ACCEPTANCE OF THIS NOTE, AGREES TO BE BOUND BY ALL
APPLICABLE PROVISIONS OF THE REGISTRATION RIGHTS
AGREEMENT.
Original Issue Date:
April 5, 2007
Original Conversion Price (subject to adjustment
herein): $4.36
$10,000,000
8% SECURED CONVERTIBLE PROMISSORY
NOTE
DUE APRIL 5, 2013
FOR VALUE RECEIVED, GeoPharma, Inc.,
a Florida corporation with its principal place of business at 6950
Bryan Dairy Road, Largo, Florida 33777 (the “ Company
”), hereby
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promises to pay in lawful money of the United
States to the order of Whitebox Pharmaceutical Growth Fund, Ltd. or
its registered successors or assigns (the “ Holder
”), at the office of the Holder at 3033 Excelsior Boulevard,
Suite 300, Minneapolis, Minnesota 55416, or at such other place as
the Holder may from time to time designate in writing, the
principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000) on
April 5, 2013 (the “ Maturity Date ”) or
such earlier date as this Note is required or permitted to be
repaid as provided hereunder, and to pay interest to the Holder on
the aggregate unconverted and then outstanding principal amount of
this Note in accordance with the provisions hereof. This Note is
being issued in connection with that certain Secured Convertible
Note Purchase Agreement, dated as of the date hereof, between the
Company and the Holder (the “ Purchase Agreement
”). This Note is subject to the following additional
provisions:
Section 1
. Definitions . For the
purposes hereof, in addition to the terms defined elsewhere in this
Note, (a) capitalized terms not otherwise defined herein shall
have the meanings set forth in the Purchase Agreement and
(b) the following terms shall have the following
meanings:
“ Accreted Principal
” shall have the meaning set forth in
Section 2(a).
“ Accreted Principal
Amount ” shall have the meaning set forth in
Section 2(a).
“ Alternate
Consideration ” shall have the meaning set forth in
Section 5(e).
“ Bank of America Loan
Agreement ” shall mean that certain loan agreement
between the Company and Bank of America entered into on
February 27, 2007 (as the same may be amended, modified or
supplemented from time to time).
“ Bankruptcy Event
” means any of the following events: (a) the Company or
any Significant Subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X) thereof commences a case or other proceeding
under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction relating to the Company or any
Significant Subsidiary thereof; (b) there is commenced against
the Company or any Significant Subsidiary thereof any such case or
proceeding that is not dismissed within 60 days after commencement;
(c) the Company or any Significant Subsidiary thereof is
adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered;
(d) the Company or any Significant Subsidiary thereof suffers
any appointment of any custodian or the like for it or any
substantial part of its property that is not discharged or stayed
within 60 calendar days after such appointment; (e) the
Company or any Significant Subsidiary thereof makes a general
assignment for the benefit of creditors; (f) the Company or
any Significant Subsidiary thereof calls a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring
of its debts; or (g) the Company or any Significant Subsidiary
thereof, by
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any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of
effecting any of the foregoing.
“ Base Conversion Price
” shall have the meaning set forth in
Section 5(b).
“ Business Day ”
means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
“ Change in Control
Date ” shall mean the date on which a Change of Control
Transaction shall occur.
“ Change in Control
Optional Redemption ” shall have the meaning set forth in
Section 6(c).
“ Change in Control Put
” shall have the meaning set forth in
Section 6(a).
“ Change of Control
Transaction ” means the occurrence after the date hereof
of any of (i) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 40%
of the voting securities of the Company (other than by means of
conversion or exercise of the Notes and the Securities issued
together with the Notes), or (ii) the Company merges into or
consolidates with any other Person, or any Person merges into or
consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to
such transaction own less than 66% of the aggregate voting power of
the Company or the successor entity of such transaction, or
(iii) the Company sells or transfers all or substantially all
of its assets to another Person and the stockholders of the Company
immediately prior to such transaction own less than 66% of the
aggregate voting power of the acquiring entity immediately after
the transaction, or (iv) a replacement at one time or within a
three-year period of more than one-half of the members of the
Company’s board of directors which is not approved by a
majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are
serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of
the members of the board of directors who are members on the date
hereof), or (v) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing
for any of the events set forth in clauses (i) through
(iv) above.
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“ Common Stock ”
means the common stock, par value $.01 per share, of the Company
and stock of any other class of securities into which such
securities may hereafter be reclassified or changed
into.
“ Conversion Date
” shall have the meaning set forth in
Section 4(a).
“ Conversion Price
” shall have the meaning set forth in
Section 4(b).
“ Conversion Shares
” means, collectively, the shares of Common Stock issuable
upon conversion of this Note in accordance with the terms
hereof.
“ Current Assets
” shall have the meaning set forth in
Section 6(c).
“ Dilutive Issuance
” shall have the meaning set forth in
Section 5(b).
“ Dilutive Issuance
Notice ” shall have the meaning set forth in
Section 5(b).
“ Effectiveness Period
” shall have the meaning set forth in the Registration Rights
Agreement.
“ Effective Date
” shall mean the effective date of any registration statement
filed with the SEC covering all or such portion of the Conversion
Shares as may be specified in such registration
statement.
“ Equity Conditions
” shall mean, during the period in question, (i) the
Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring by virtue of one or more Notices of
Conversion of the Holder, if any, (ii) the Company shall have
paid all liquidated damages and other amounts owing and then due to
the Holder in respect of this Note, (iii) there is an
effective Registration Statement pursuant to which the Holder is
permitted to utilize the prospectus thereunder to resell such
number of Conversion Shares of the Holder as shall be permitted or
required to be registered under the terms of the Registration
Rights Agreement (and the Company believes, in good faith, that
such effectiveness will continue uninterrupted for the foreseeable
future), (iv) the Common Stock is trading on a Trading Market
and all of the shares issuable pursuant to the Transaction
Documents are listed for trading on such Trading Market (and the
Company believes, in good faith, that trading of the Common Stock
on a Trading Market will continue uninterrupted for the foreseeable
future), (v) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction
Documents, (vi) there is no existing Event of Default or no
existing event which, with the passage of time or the giving of
notice, would constitute an Event of Default, (vii) the
issuance of the shares in question to the Holder would not violate
the limitations set forth in Section 4(c)(i) and
Section 4(c)(ii) herein, (viii) there has been
no
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public announcement of a pending or
proposed Fundamental Transaction or Change of Control Transaction
that has not been consummated and (ix) the Holder is not in
possession of any information provided by the Company that
constitutes, or may constitute, material non-public
information.
“ Event of Default
” shall have the meaning set forth in
Section 8.
“ Exchange Act ”
means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
“ Exempt Issuance
” means the issuance of (a) shares of Common Stock or
options to employees, officers, consultants or directors of the
Company pursuant to the Company’s 1999 Employee Stock Option
Plan, 1999 Non-Employee Director Stock Option Plan, Treasury Stock
Repurchase Plan or Annual Performance Incentive Plan (provided that
any such issuances shall not exceed 10% of the Company’s
outstanding shares and/or options, in the aggregate, in any
twelve-month period), (b) securities upon the exercise or
exchange of or conversion of any securities issued pursuant to the
Purchase Agreement and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued
and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement
to increase the number of such securities or to decrease the
exercise, exchange or conversion price of such securities, and
(c) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors
of the Company, provided any such issuance shall only be to a
person which is, itself or through its subsidiaries, an operating
company in a business synergistic with or complementary to the
business of the Company and in which the Company receives benefits
in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary
business is investing in securities.
“ Forced Conversion
” shall have the meaning set forth in
Section 6(b).
“ Forced Conversion
Date ” shall have the meaning set forth in
Section 6(b).
“ Forced Conversion
Notice ” shall have the meaning set forth in
Section 6(b).
“ Forced Conversion Notice
Date ” shall have the meaning set forth in
Section 6(b).
“ Fundamental
Transaction ” shall have the meaning set forth in
Section 5(e).
“ Interest Payment Date
” shall have the meaning set forth in
Section 2(a).
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“ Mandatory Default
Amount ” means the sum of (i) the greater of
(A) 115% of the outstanding principal amount of this Note,
plus all accrued and unpaid interest hereon, or (B) the
outstanding principal amount of this Note, plus all accrued and
unpaid interest hereon, divided by the Conversion Price on the date
the Mandatory Default Amount is either (a) demanded (if demand
or notice is required to create an Event of Default) or otherwise
due or (b) paid in full, whichever has a lower Conversion
Price, multiplied by the VWAP on the date the Mandatory Default
Amount is either (x) demanded or otherwise due or
(y) paid in full, whichever has a higher VWAP, and
(ii) all other amounts, costs, expenses and liquidated damages
due in respect of this Note.
“ Minnesota Courts
” shall have the meaning set forth in
Section 9(d).
“ Note Register ”
shall have the meaning set forth in Section 2(c).
“ Notice of Conversion
” shall have the meaning set forth in
Section 4(a).
“ Original Issue Date
” means the date of the first issuance of the Notes,
regardless of any transfers of any Note and regardless of the
number of instruments which may be issued to evidence such
Notes.
“ Permitted
Indebtedness ” means, except as otherwise approved by the
Holder, (a) the Indebtedness existing on the Original Issue
Date and set forth in the Purchase Agreement not to exceed
$25,000,000 in the aggregate, (b) Permitted Purchase Money
Indebtedness, (c) Permitted Acquisition Indebtedness and
(d) additional non-equity linked Indebtedness incurred
directly by the Company with a nationally recognized commercial
lending institution whose primary business is not investing in
securities to be incurred in connection with the replacement of the
Company’s existing direct Indebtedness set forth in the
Purchase Agreement, provided that the terms of such additional
Indebtedness are no less favorable to the Company than the terms of
the existing Indebtedness of the Company set forth on Schedule 4.27
to the Purchase Agreement.
“ Permitted Lien
” means the individual and collective reference to the
following: (a) Liens for taxes, assessments and other
governmental charges or levies not yet due or Liens for taxes,
assessments and other governmental charges or levies being
contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of
the Company) have been established in accordance with GAAP;
(b) Liens imposed by law which were incurred in the ordinary
course of the Company’s business, such as carriers’,
warehousemen’s and mechanics’ Liens, statutory
landlords’ Liens, and other similar Liens arising in the
ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract
from the value of such property or assets or materially impair the
use thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being
contested
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in good faith by appropriate
proceedings, which proceedings have the effect of preventing for
the foreseeable future the forfeiture or sale of the property or
asset subject to such Lien; (c) Liens incurred in connection
with Permitted Indebtedness under clause (c) thereunder, to
the extent such Permitted Indebtedness replaces Permitted
Indebtedness described in clause (a) that is secured;
(d) Liens incurred in connection with Permitted Indebtedness
under clause (a) thereunder (to the extent such Indebtedness
is secured); and (e) Liens incurred in connection with
Permitted Indebtedness under clauses (b) and
(c) thereunder, provided that such Liens are not secured by
assets of the Company or its Subsidiaries other than the assets so
acquired or leased.
“ Person ” means
an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“ Purchase Agreement
” means the Secured Convertible Note Purchase Agreement,
dated as of April 5, 2007, between the Company and the
original Holder, as the same may be amended, modified or
supplemented from time to time in accordance with its
terms.
“ Permitted Acquisition
Indebtedness ” means acquisition Indebtedness incurred by
the Company or any of its subsidiaries (whether or not a Subsidiary
on the Original Issue Date), whether by asset purchase, stock or
similar purchase or by merger, through assumption of such
Indebtedness in connection with such acquisition if by asset
purchase or successor liability of such Indebtedness if by stock or
similar purchase or by merger, if each of the conditions is
satisfied: (i) such acquired Indebtedness will not be secured
by any of the Collateral (as defined in the Security Agreement)
other than the specific assets already financed thereby on the date
of the acquisition and the identifiable cash proceeds thereof, and
(b) the principal amount of such acquisition Indebtedness will
not, at the time of the incurrence thereof, exceed the value of the
property so acquired.
“ Permitted Purchase Money
Indebtedness ” means purchase money or capital lease
Indebtedness incurred by the Company or any of its subsidiaries
(whether or not a Subsidiary on the Original Issue Date) from a
source other than Holder to acquire any equipment if each of the
conditions is satisfied: (i) such purchase money and capital
lease Indebtedness will not be secured by any of the Collateral (as
defined in the Security Agreement) other than the specific
equipment financed thereby and the identifiable cash proceeds
thereof, and (b) the principal amount of such purchase money
and capital lease Indebtedness will not, at the time of the
incurrence thereof, exceed the value of the property so
acquired.
“ Receivables Put
Option ” shall have the meaning set forth in
Section 6(c).
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“ Registration Rights
Agreement ” means the Registration Rights Agreement,
dated as of the date of the Purchase Agreement, between the Company
and the original Holder, as the same may be amended, modified or
supplemented from time to time in accordance with its
terms.
“ Registration
Statement ” means a registration statement that registers
the resale of such number of Conversion Shares of the Holder as
shall be permitted or required to be registered under the terms of
the Registration Rights Agreement, names such Holder as a
“selling stockholder” therein, and meets all other
requirements of the Registration Rights Agreement.
“ SEC ” shall
mean the United States Securities and Exchange
Commission.
“ SEC Reports ”
means all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and
the Exchange Act, including pursuant to Section 13(a) and
15(d) thereof.
“ Securities Act
” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
“ Share Delivery Date
” shall have the meaning set forth in
Section 4(d).
“ Shareholder Approval
” shall have the meaning set forth in the Purchase
Agreement.
“ Securities Purchase
Agreement ” shall mean that certain Securities Purchase
Agreement, dated the date hereof, by and between the Company and
the Holder, governing the issuance of certain shares of Common
Stock and Warrants to the Holder by the Company.
“ Subsidiary ”
shall have the meaning set forth in the Purchase
Agreement.
“ Threshold Period
” shall have the meaning set forth in
Section 6(b).
“ Trading Day ”
means a day on which the Nasdaq Stock Market is open for
trading.
“ Trading Market
” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in
question: the American Stock Exchange, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board.
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“ Transaction Documents
” shall have the meaning set forth in the Purchase
Agreement.
“ VWAP ” means,
for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then
listed or quoted for trading as reported by Bloomberg L.P. (based
on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m.
(New York City time); (b) if the OTC Bulletin Board is not a
Trading Market, the volume weighted average price of the Common
Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board; (c) if the Common Stock is not then quoted for
trading on the OTC Bulletin Board and if prices for the Common
Stock are then reported in the “Pink Sheets” published
by Pink Sheets, LLC (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price
per share of the Common Stock so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Holder and reasonably acceptable to the Company.
“ Warrants ”
means warrants issued to Holder by the Company on the date hereof
pursuant to the terms of the Securities Purchase Agreement and
accompanying Warrant.
Section 2
. Interest .
a) Payment of Interest .
Interest shall accrue on the Accreted Principal Amount (as defined
below) at the rate of 8% per annum, payable on a quarterly
basis on January 1, April 1, July 1 and
October 1 of each year (if any such date is not a Business
Day, then the applicable payment shall be due on the next
succeeding Business Day) (each, an “ Interest Payment
Date ”), beginning on the first such date after the
Original Issue Date, on each Forced Conversion Date and on the
Maturity Date (each such date, an “ Interest Payment
Date ”). Interest shall be payable on each Interest
Payment Date and on the Maturity Date. Until the second anniversary
of the Original Issue Date, interest shall be payable on each
Interest Payment Date by adding such accrued interest to the
principal amount of the Note (the “ Accreted Principal
”). At any time, the outstanding principal amount of this
Note, including all accretion amounts added thereto through such
time, is referred to in this Note as the “ Accreted
Principal Amount ” (in each case computed on the basis of
a 365-day year and the actual number of days elapsed in any year).
Following the second anniversary of the Original Issue Date,
interest shall be payable on each Interest Payment Date in the
following order: (i) if funds are legally available for the
payment of interest and the Equity Conditions have not been met, in
cash only; (ii) if funds are legally available for the payment
of interest and the Equity Conditions have been met, at the sole
election of the Company, in cash or shares of Common Stock which
shall be valued solely for such purpose at 95% of the average of
the VWAP for the 5
9
Trading Days immediately prior to
such Interest Payment Date; (iii) if funds are not legally
available for the payment of interest and the Equity Conditions
have been met, in shares of Common Stock which shall be valued at
95% of the average of the VWAP for the 5 Trading Days immediately
prior to such Interest Payment Date; (iv) if funds are not
legally available for the payment of interest and the Equity
Conditions have been waived by the Holder, in shares of Common
Stock which shall be valued at 95% of the average of the VWAP for
the 5 Trading Days immediately prior to the Interest Payment Date;
and (v) if funds are not legally available for the payment of
interest and the Equity Conditions have not been met, then, at the
election of the Holder, such interest payment shall accrue to the
next interest payment date or shall be accreted to the outstanding
Accreted Principal Amount. The Holder shall have the same rights
and remedies with respect to the delivery of any such shares of
Common Stock as if such shares were being issued pursuant to
Section 4 below. The Company shall notify the Holder if at any
time the Company shall become unable to lawfully pay interest in
cash. If at any time the Company has the right to pay interest in
cash or Common Stock in the manner specified in subsection
(ii) above, the Company must provide the Holder with at least
10 Trading Days’ notice of its election to pay such interest
payment in shares of Common Stock. Any interest payment, whether
paid in cash or shares, that is not paid within three Trading Days
following an Interest Payment Date must be paid in cash, at the
rate of 18% per annum or the maximum rate permitted by
applicable law until such amount is paid in full.
b) Accrued Interest . Except
as otherwise provided in this Note, the Company shall pay to the
Holder of this Note all accrued interest (including any Accreted
Principal Amount pursuant to Section 2(a)) on the final
maturity date of this Note. Any accrued cash interest required to
be paid in connection with the provisions of Section 2(c)
below which, for any reason, has not theretofore been paid shall
increase the Accreted Principal Amount of the Note and be paid in
full on the date on which the final principal payment on this Note
is made; provided , that any such reason shall not affect or
waive any Event of Default that arises due to the failure to make
such payment. Interest shall accrue on any principal payment due
under this Note (including any Accreted Principal) until such time
as payment therefor is actually delivered to the Holder of this
Note.
c) Holder’s Election to
Receive Interest Payments in Cash . Notwithstanding the terms
set forth in Section 2(a) above, in the event that
(i) the Company’s EBITDA+SE, as reported on the
Company’s most recent Quarterly Report on Form 10-Q or Annual
Report on Form 10-K (as applicable) as filed with the SEC is less
than $1,250,000 for such quarter, or (ii) the Company’s
EBITDA+SE, as reported in the SEC Reports for the trailing four
quarters, is less than $4,000,000 in the aggregate, or
(iii) an event or condition that would constitute a Material
Adverse Effect (as such term is defined in the Purchase Agreement)
for the Company shall have occurred, or (iv) the Company shall
not have filed its latest Quarterly Report on Form 10-Q or Annual
Report on Form 10-K within the timeframe required by the SEC and
the rules and regulations set
10
forth in the Exchange Act, then the
Holder of this Note shall have the option, in its sole discretion,
to require that any interest, for the next subsequent quarterly
payment period, be paid in cash rather than as Accreted Principal.
For purposes of this Section 2(b), the term
“EBITDA+SE” shall be defined as earnings before
interest, income taxes, depreciation, amortization and stock
expense as reported on the financial statements contained in the
Company’s Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, as applicable. Such election by the Holder shall be made
not less than five business days prior to the next subsequent
payment date by written request to the Company; provided ,
however , that the Holder’s election to require that
any quarterly interest payment be made in cash shall cease to be
effective for any subsequent quarterly period for which the
conditions set forth in (i)-(iv) above shall have been
satisfied for such subsequent quarterly period.
d) Interest Calculations .
Interest shall be calculated on the basis of a 365-day year, and
shall accrue daily commencing on the Original Issue Date until
payment in full of the principal sum, together with all accrued and
unpaid interest, liquidated damages and other amounts (including
any Accreted Principal Amount) which may become due hereunder, has
been made. Interest shall cease to accrue with respect to any
principal amount converted, provided that the Company actually
delivers the Conversion Shares within the time period required by
Section 4(d)(ii) herein. Interest hereunder will be paid to
the Person in whose name this Note is registered on the records of
the Company regarding registration and transfers of this Note (the
“ Note Register ”). Except as otherwise provided
herein, if at any time the Company pays interest in cash to the
holders of the Notes (as required under Section 2(c) above),
then such payment of cash shall be distributed ratably among the
holders of the then-outstanding Notes based on their (or their
predecessor’s) initial purchases of Notes pursuant to the
Purchase Agreement.
e) Prepayment . Except for
any Forced Conversion of the Notes by the Company in accordance
with the terms set forth in Section 6(b) below, the Company
may not prepay any portion of the principal amount of this Note
without the prior written consent of the Holder.
Section 3.
Registration of Transfers and
Exchanges .
a) Different Denominations .
This Note is exchangeable for an equal aggregate principal amount
of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be payable for
such registration of transfer or exchange.
b) Investment Representations
. This Note has been issued subject to certain investment
representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state
securities laws and regulations.
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c) Reliance on Note Register
. Prior to due presentment for transfer to the Company of this
Note, the Company and any agent of the Company may treat the Person
in whose name this Note is duly registered on the Note Register as
the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Note is
overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section 4.
Conversion.
a) Voluntary Conversion . At
any time after the Original Issue Date until this Note is no longer
outstanding, this Note shall be convertible, in whole or in part,
into shares of Common Stock at the option of the Holder, at any
time and from time to time (subject to the conversion limitations
set forth in Section 4(c) hereof). The Holder shall effect
conversions by delivering to the Company a Notice of Conversion,
the form of which is attached hereto as Annex A (a “
Notice of Conversion ”), specifying therein the
principal amount of this Note to be converted and the date on which
such conversion shall be effected (such date, the “
Conversion Date ”). If no Conversion Date is specified
in a Notice of Conversion, the Conversion Date shall be the date
that such Notice of Conversion is deemed delivered hereunder. To
effect conversions hereunder, the Holder shall not be required to
physically surrender this Note to the Company unless the entire
principal amount of this Note, plus all accrued and unpaid interest
thereon, has been so converted. Conversions hereunder shall have
the effect of lowering the outstanding principal amount of this
Note in an amount equal to the applicable conversion. The Holder
and the Company shall maintain records showing the principal
amount(s) converted and the date of such conversion(s). The Company
may deliver an objection to any Notice of Conversion within 1
Business Day of delivery of such Notice of Conversion. The
Holder, and any assignee by acceptance of this Note, acknowledges
and agrees that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note may be less than the
amount stated on the face hereof.
b) Conversion Price . The
conversion price in effect on any Conversion Date shall be equal to
$4.36 , subject to adjustment as described herein (the
“ Conversion Price ”).
c) Conversion Limitations
.
i. Issuance Limitations .
Notwithstanding anything herein to the contrary, if the Company has
not obtained Shareholder Approval, then the Company may not issue,
upon conversion of this Note, a number of shares of Common Stock
which, when aggregated with any shares of Common Stock issued on or
after the Original Issue Date and prior to such Conversion Date
in
12
connection with any Notes issued
pursuant to the Purchase Agreement or in connection with any shares
of Common Stock issued pursuant to the Securities Purchase
Agreement or upon exercise of the Warrants (subject to adjustment
for forward and reverse stock splits, recapitalizations and the
like) (such number of shares, the “ Issuable Maximum
”). The Holder shall be entitled to the Issuable
Maximum.
ii. Holder’s Restriction on
Conversion . The Company shall not effect any conversion of
this Note, and a Holder shall not have the right to convert any
portion of this Note, to the extent that after giving effect to the
conversion set forth on the applicable Notice of Conversion, such
Holder (together with such Holder’s Affiliates, and any other
person or entity acting as a group together with such Holder or any
of such Holder’s Affiliates) would beneficially own in excess
of the Beneficial Ownership Limi
