Exhibit 4.2
NEITHER THE ISSUANCE AND SALE OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF
THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING
SECTIONS 3(c)(iii) AND 19(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE
UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON
THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS
NOTE.
A SCENDIA B RANDS, I NC.
A MENDED A ND R ESTATED S ENIOR S ECURED C ONVERTIBLE N OTE
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Issuance Date: August 2, 2006
Amendment Date: December 30,
2006
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Original Principal Amount: U.S.
$91,000,000
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WHEREAS, Ascendia Brands, Inc.
(f/k/a Cenuco, Inc.), a Delaware corporation (the “
Company ”) and certain Buyers (the “ Original
Note Buyers ”) entered into that certain Securities
Purchase Agreement, dated as of October 10, 2005, which was
subsequently amended and restated in that certain Amended and
Restated Securities Purchase Agreement (the “ Original
Note Agreement ”), dated November 16, 2005 (the “
Original Note Agreement Date ”) with respect to the
potential acquisition by the Original Note Buyers of (a) secured
convertible notes (the “ Original Notes ”),
which were to be convertible into shares of the Company’s
common stock, par value $0.001 (the “ Common Stock
”) and (b) certain warrants (the “ Original Note
Warrants ”)
WHEREAS, on the Original Note
Agreement Date, the Company and certain of its subsidiaries entered
into temporary financing arrangements with certain of the Original
Note Buyers, as secured lenders (the “ Bridge Lenders
”), and as more fully set forth in a Bridge Term Loan
Agreement (the “ Bridge Agreement ”) by and
among the Company, Lander Intangibles Corporation, Hermes
Acquisition Company I LLC, and Lander Co., Inc., as borrowers
(collectively, the “ Bridge Borrowers ”), and
their subsidiaries signatory thereto (together with the Bridge
Borrowers, the “ Bridge Loan Parties ”), Prencen
Lending LLC, a Delaware limited liability company (“
Prencen Lending ”), as agent for the Lenders (in such
capacity, the “ Bridge Agent ”), and the Bridge
Lenders, as lenders, and certain other security and ancillary
documents
related thereto (the “
Bridge Facility ”), pursuant to which the Original
Note Buyers made available to the Bridge Borrowers a $80 million
secured term loan.
WHEREAS, Prencen Lending acquired
the Obligations (as defined in the Bridge Agreement) owed by the
Company to Highgate House Funds, Ltd. (a Bridge Lender) under the
Bridge Facility, such that Prencen Lending now owns all of the
Obligations (as defined in the Bridge Agreement).
WHEREAS, on May 15, 2006, the Bridge
Facility matured and the Bridge Lenders, the Original Note Buyers
and the Company agreed (a) to forgo any short-term extensions of
the Bridge Facility, (b) to extend the Company’s Obligations,
as secured by Collateral (as defined in the Security Documents),
through the Company’s issuance of Notes (as defined below) as
an amendment and restatement of the outstanding Obligations
pursuant to the Bridge Facility, which provides a longer maturity
date for such Obligations and the right to convert such Obligations
into equity, (c) to the Company’s payment to Prencen Lending
of the Obligations (excluding any outstanding principal amounts,
but including accrued and unpaid interest and any other amounts
payable as of August 2, 2006) pursuant to the Bridge Agreement and
(d) to ratify and confirm security interests to secure such
Obligations in accordance with the Security Documents.
WHEREAS, the Company, Prencen
Lending and certain buyers entered into that certain Second Amended
and Restated Securities Purchase Agreement dated as of June 30,
2006 (as amended, modified or supplemented, the “
Securities Purchase Agreement ”) pursuant to which the
Bridge Facility was amended and restated and the Company issued to
Prencen Lending a Senior Secured Convertible Note, dated as of
August 2, 2006, in the principal amount of $91,000,000 (the “
Existing Note ”).
WHEREAS, the Company, Prencen LLC
and Prencen Lending have entered into (a) that certain Amendment
and Exchange Agreement, dated as of December 27, 2006 (as amended
from time to time, the “ Exchange Agreement ”)
and (b) that certain Amendment Agreement, dated as of December 30,
2006 (the “ Amendment Agreement ”) pursuant to
which, among other things, the Company and Prencen Lending agreed
to amend and restate the Existing Note in this Amended and Restated
Senior Convertible Note (the date of such Amendment Agreement, the
“ Amendment Date ”).
NOW THEREFORE, in consideration of
the premises and the covenants and agreements contained herein, the
Bridge Facility and all indebtedness and other obligations
thereunder and the Existing Note are hereby amended and restated by
the Notes with terms and conditions as follows:
FOR VALUE RECEIVED,
the Company hereby promises to pay
to the order of PRENCEN LENDING LLC or registered assigns (“
Holder ”) the amount set out above as the Original
Principal Amount (as reduced pursuant to the terms hereof pursuant
to redemption, conversion or otherwise, and including the amount of
any Capitalized Interest (as defined below), the “
Principal ”) when due, whether upon the Maturity Date
(as defined below), acceleration, redemption or otherwise (in each
case in accordance with the terms hereof) and to pay interest
(“ Interest ”) on any outstanding Principal at a
rate per annum equal to the Interest
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Rate, from the date set out above as
the Issuance Date (the “ Issuance Date ”)
until the same becomes due and payable, whether upon an Interest
Date (as defined below), the Maturity Date, acceleration,
conversion, redemption or otherwise (in each case in accordance
with the terms hereof). This Amended and Restated Senior Secured
Convertible Note (including all Amended and Restated Senior Secured
Convertible Notes issued in exchange, transfer or replacement
hereof, this “ Note ” and, to the extent any
principal amount of this Note is transferred, such other Amended
and Restated Senior Secured Convertible Notes issued in connection
with such transfer, the “ Other Notes ”
and collectively with this Note, the “ Notes ”)
amends, supplements, modifies and completely restates and
supersedes the Existing Note issued by the Company to the Holder,
but shall not, except as specifically amended hereby or as set
forth in the Amendment Agreement, constitute a release,
satisfaction or novation of any of the obligations under the
Existing Note or any other Transaction Document (as defined in the
Securities Purchase Agreement). This Note is the Amended and
Restated Senior Secured Convertible Note issued pursuant to the
Amendment Agreement. Certain capitalized terms used herein are
defined in Section 29.
(1)
MATURITY . On the Maturity Date, the Company shall pay to
the Holder an amount in cash equal to all of the Obligations then
due and owing hereunder. The “ Maturity Date
” shall be December 30, 2016, as may be extended in writing
at the sole option of the Holder (i) in the event that, and for so
long as, an Event of Default (as defined in Section 4(a)) shall
have occurred and be continuing or any event shall have occurred
and be continuing which with the passage of time and the failure to
cure would result in an Event of Default and (ii) through the date
that is ten days after the consummation of a Change of Control in
the event that a Change of Control is publicly announced or a
Change of Control Notice (as defined in Section 5) is delivered
prior to the Maturity Date.
(2)
INTEREST . Interest on this Note shall commence accruing on
the Issuance Date and shall be computed on the basis of a 365-day
year and actual days elapsed and shall be payable in arrears on the
last day of each calendar month during the period beginning on the
Issuance Date and ending on, and including, the Maturity Date
(each, an “ Interest Date ”) with the
first Interest Date being December 31, 2006. Interest shall be
payable on each Interest Date, to the record holder of this Note on
the applicable Interest Date in cash; provided, however, that all
or any portion of the Interest due on each Interest Date prior to
earlier of (a) the consummation of the Acquisition and (b) March
31, 2007 (the “ Deferral Period ”) may be
deferred, and such deferred Interest shall be compounded monthly
during the Deferral Period, at the option of the Company, so long
as the Company delivers written notice (an “ Interest
Notice ”) to the Holder, no more than five (5) or less
than two (2) Business Days prior to such Interest Date. At the end
of the Deferral Period, all Interest accrued and unpaid hereunder
as of such date shall be paid in cash to the Holder, which Interest
shall include $3,392,802.50 in accrued and unpaid interest deferred
under the Existing Note (and as further compounded monthly
hereunder) between the Issuance Date and the Amendment Date.
Following the consummation of the Acquisition and incurrence of the
Permitted Acquisition Indebtedness provided by a third-party which
is unaffiliated with the Holder (the “ Third-Party
Permitted Acquisition Indebtedness ”), Interest due
hereunder shall be capitalized on and as of each Interest Date by
adding it to the outstanding Principal on this Note (the “
Capitalized Interest ”). In the event that, following
the consummation of the Acquisition, the Holder or any of its
Affiliates provides all of the Permitted Acquisition Indebtedness,
Interest due hereunder shall be
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due and payable in cash on each
Interest Date until such time as all outstanding Permitted
Acquisition Indebtedness is Third-Party Permitted Acquisition
Indebtedness. Upon the occurrence and during the continuance of an
Event of Default, the Interest Rate on the Obligations shall be
increased to fifteen percent (15%). In the event that such Event of
Default is subsequently cured, such increased Interest Rate shall
no longer be in effect as of the date of such cure; provided that
the Interest as calculated at such increased rate during the
continuance of such Event of Default shall continue to apply to the
extent relating to the days after the occurrence of such Event of
Default through and including the date of cure of such Event of
Default.
(3)
CONVERSION OF NOTES . This Note shall be convertible into
shares of common stock of the Company, $0.001 par value per share
(the “ Common Stock ”), on the terms and
conditions set forth in this Section 3.
(a)
Conversion Right . Subject to the provisions of Section
3(d), at any time or times on or after the Issuance Date, the
Holder shall be entitled to convert any portion of the outstanding
and unpaid Conversion Amount (as defined below) into fully paid and
nonassessable shares of Common Stock in accordance with Section
3(c), at the Conversion Rate (as defined below). The Company shall
not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock up to the nearest whole share.
The Company shall pay any and all taxes that may be payable with
respect to the issuance and delivery of Common Stock upon
conversion of any Conversion Amount.
(b)
Conversion Rate . The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to
Section 3(a) shall be determined by dividing (x) such Conversion
Amount by (y) the Conversion Price (the “ Conversion
Rate ”).
(i) “
Conversion Amount ” means the sum of (A) the portion
of the Principal (including any Capitalized Interest) to be
converted, redeemed or otherwise with respect to which this
determination is being made, (B) accrued and unpaid Interest,
compounded monthly, with respect to such Principal and (C) accrued
and unpaid Late Charges with respect to such Principal and
Interest.
(ii) “
Conversion Price ” means, as of any Conversion Date
(as defined below) or other date of determination, $0.42, subject
to adjustment as provided herein.
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(c)
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Mechanics of
Conversion .
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(i)
Optional Conversion . To convert any Conversion Amount into
shares of Common Stock on any date (a “ Conversion
Date ”), the Holder shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 11:59 p.m., New York
Time, on such date, a copy of an executed notice of conversion in
the form attached hereto as Exhibit I (the “
Conversion Notice ”) to the Company and (B) if
required by Section 3(c)(iii), surrender this Note to a common
carrier for delivery to the Company as
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soon as practicable on or following
such date (or an indemnification undertaking with respect to this
Note in the case of its loss, theft or destruction). On or before
the first (1 st ) Trading Day following the date of
receipt of a Conversion Notice, the Company shall transmit by
facsimile a confirmation of receipt of such Conversion Notice to
the Holder and the Company’s transfer agent (the “
Transfer Agent ”). On or before the third (3
rd ) Trading Day following the date of receipt of a
Conversion Notice (the “ Share Delivery Date
”), the Company shall (1) provided that the Transfer Agent is
participating in the Fast Automated Securities Transfer Program of
the Depository Trust Company (“ DTC ”) credit
such aggregate number of shares of Common Stock to which the Holder
shall be entitled to the Holder’s or its designee’s
balance account with DTC through its Deposit Withdrawal Agent
Commission system or (2) if the Transfer Agent is not participating
in the DTC Fast Automated Securities Transfer Program, issue and
deliver no later than the Share Delivery Date, to the address as
specified in the Conversion Notice, a certificate, registered in
the name of the Holder or its designee, for the number of shares of
Common Stock to which the Holder shall be entitled. If this Note is
physically surrendered for conversion as required by Section
3(c)(iii) and the outstanding Principal of this Note is greater
than the Principal portion of the Conversion Amount being
converted, then the Company shall as soon as practicable and in no
event later than three Business Days after receipt of this Note and
at its own expense, issue and deliver to the holder a new Note (in
accordance with Section 19(d)) representing the outstanding
Principal not converted. The Person or Persons entitled to receive
the shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on the Conversion Date.
(ii)
Company’s Failure to Timely Convert . If the Company
shall fail to issue a certificate to the Holder or credit the
Holder’s balance account with DTC for the number of shares of
Common Stock to which the Holder is entitled upon conversion of any
Conversion Amount on or prior to the date which is five (5) Trading
Days after the Conversion Date (a “ Conversion Failure
”), then (A) the Company shall pay damages to the Holder for
each day of such Conversion Failure in an amount equal to 1.5% of
the product of (I) the sum of the number of shares of Common Stock
not issued to the Holder on or prior to the Share Delivery Date and
to which the Holder is entitled, and (II) the Closing Sale Price of
the Common Stock on the Share Delivery Date and (B) the Holder,
upon written notice to the Company, may void its Conversion Notice
with respect to, and retain or have returned, as the case may be,
any portion of this Note that has not been converted pursuant to
such Conversion Notice; provided that the voiding of a
Conversion Notice shall not affect the Company’s obligations
to make any payments which have accrued prior to the date of such
notice pursuant to this Section 3(c)(iii) or otherwise. In addition
to the foregoing, if within three (3) Trading Days after the
Company’s receipt of the facsimile copy of a Conversion
Notice the Company shall fail to issue and deliver a certificate to
the Holder or credit the Holder’s balance account with DTC
for the number of shares of Common Stock to which the Holder is
entitled upon such holder’s conversion of any Conversion
Amount, and if on or after such Trading Day the Holder purchases
(in an open market transaction or otherwise) Common Stock to
deliver in satisfaction of a sale by the Holder of Common Stock
issuable upon such conversion that the Holder anticipated receiving
from the Company (a “Buy-In” ), then the Company
shall, within three (3) Trading Days after the Holder’s
request and in the
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Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (the “Buy-In Price” ), at which point
the Company’s obligation to deliver such certificate or
credit such Holder’s balance account with DTC (and to issue
such Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates
representing such Common Stock or credit such Holder’s
balance account with DTC and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock, times (B) the Closing
Bid Price on the Conversion Date.
(iii)
Book-Entry . Notwithstanding anything to the contrary set
forth herein, upon conversion of any portion of this Note in
accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Company unless (A) the
full Conversion Amount represented by this Note is being converted
or (B) the Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice)
requesting reissuance of this Note upon physical surrender. The
Holder and the Company shall maintain records showing the Principal
converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Holder and the Company, so
as not to require physical surrender of this Note upon
conversion.
(iv)
Pro Rata Conversion; Disputes . In the event that the
Company receives a Conversion Notice from more than one holder of
Notes for the same Conversion Date and the Company can convert
some, but not all, of such portions of the Notes submitted for
conversion, the Company, subject to Section 3(d), shall convert
from each holder of Notes electing to have Notes converted on such
date a pro rata amount of such holder’s portion of its Notes
submitted for conversion based on the principal amount of Notes
submitted for conversion on such date by such holder relative to
the aggregate principal amount of all Notes submitted for
conversion on such date. In the event of a dispute as to the number
of shares of Common Stock issuable to the Holder in connection with
a conversion of this Note, the Company shall issue to the Holder
the number of shares of Common Stock not in dispute and resolve
such dispute in accordance with Section 24.
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(d)
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Limitations on
Conversions .
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(i)
Beneficial Ownership . The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have
the right to convert any portion of this Note pursuant to Section
3(a), to the extent that after giving effect to such conversion,
the Holder (together with the Holder’s affiliates) would
beneficially own in excess of 9.99% (the “ Maximum
Percentage ”) of the number of shares of Common Stock
outstanding immediately after giving effect to such conversion. For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Common Stock issuable upon
conversion of this Note with respect to which the determination of
such sentence is being made, but shall exclude the number of shares
of Common Stock which would be
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issuable upon (A) conversion of the
remaining, nonconverted portion of this Note beneficially owned by
the Holder or any of its affiliates and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any Other Notes or
warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by
the Holder or any of its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 3(d)(i),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. For
purposes of this Section 3(d)(i), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (x)
the Company’s most recent Form 10-K, Form 10-Q or Form 8-K,
as the case may be, (y) a more recent public announcement by the
Company or (z) any other notice by the Company or the Transfer
Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral
request of the Holder, the Company shall within one (1) Business
Day confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Note, by the Holder or its affiliates since the date
as of which such number of outstanding shares of Common Stock was
reported. By written notice to the Company, the Holder may from
time to time increase or decrease the Maximum Percentage to any
other percentage specified in such notice not in excess of 9.99%;
provided that (i) any such increase will not be effective until the
sixty-first (61 st ) day after such notice is delivered
to the Company, and (ii) any such increase or decrease will apply
only to the Holder and not to any other holder of Notes.
(ii)
Principal Market Regulation . The Company shall not be
obligated to issue any shares of Common Stock upon conversion of
this Note or the Preferred Shares or exercise of the Warrants, and
the Holder of this Note shall not have the right to receive upon
conversion of this Note any shares of Common Stock, if the issuance
of such shares of Common Stock would exceed the aggregate number of
shares of Common Stock which the Company may issue upon conversion
or exercise, as applicable, of the Notes, the Preferred Shares and
Warrants without breaching the Company’s obligations under
the rules or regulations of the Principal Market (the “
Exchange Cap ”), except that such limitation shall not
apply in the event that the Company (A) obtains the approval of its
stockholders as required by the applicable rules of the Principal
Market for issuances of Common Stock in excess of such amount or
(B) obtains a written opinion from outside counsel to the Company
that such approval is not required, which opinion shall be
reasonably satisfactory to the Required Holders. Until such
approval or written opinion is obtained, no purchaser of the Notes
pursuant to the Securities Purchase Agreement (the “
Purchasers ”) shall be issued in the aggregate, upon
conversion or exercise, as applicable, of Notes, Preferred Shares
or Warrants, shares of Common Stock in an amount greater than the
product of the Exchange Cap multiplied by a fraction, the numerator
of which is the number of Registrable Securities of such Purchaser
pursuant to the Registration Rights Agreement on the Amendment Date
and the denominator of which is the aggregate amount of all
Registrable Securities on the Amendment Date (with respect to each
Purchaser, the “ Exchange Cap Allocation ”).
In
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the event that any Purchaser shall
sell or otherwise transfer any of such Purchaser’s Notes, the
transferee shall be allocated a pro rata portion of such
Purchaser’s Exchange Cap Allocation, and the restrictions of
the prior sentence shall apply to such transferee with respect to
the portion of the Exchange Cap Allocation allocated to such
transferee. In the event that any holder of Notes shall convert all
of such holder’s Notes into a number of shares of Common
Stock which, in the aggregate, is less than such holder’s
Exchange Cap Allocation, then the difference between such
holder’s Exchange Cap Allocation and the number of shares of
Common Stock actually issued to such holder shall be allocated to
the respective Exchange Cap Allocations of the remaining holders of
Notes on a pro rata basis in proportion to the aggregate principal
amount of the Notes then held by each such holder.
(e)
Holder’s Right of Exchange . If required by the
Principal Market pursuant to its listing requirements at any time
following the consummation of the Acquisition, up to $40,000,000 in
outstanding Principal amount of this Note together with any accrued
and unpaid Interest thereon and Late Charges on such Principal and
Interest, if any (such amount, the “ Exchange Amount
”) shall be exchanged (the “ Exchange ”)
for a new series of convertible preferred stock (the “ New
Securities ”) of the Company, which New Securities shall
have such rights, designations and preferences as the Holder and
the Company shall mutually agree. Upon the consummation of the
Exchange, the Company shall (i) deliver to the Holder the New
Securities and (ii) pay to the Holder, in cash, an amount equal to
15% of the Exchange Amount by wire transfer of immediately
available funds in accordance with the Holder’s written wire
transfer instructions.
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(4)
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RIGHTS UPON EVENT OF
DEFAULT .
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(a)
Event of Default . Each of the following events shall
constitute an “ Event of Default ”:
(i) (A)
the failure of the applicable Registration Statement required to be
filed pursuant to the Registration Rights Agreement to be declared
effective by the SEC on or prior to the date that is sixty (60)
days after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or (B) while the applicable
Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the applicable Registration Statement lapses for
any reason (including, without limitation, the issuance of a stop
order) or is unavailable to any holder of the Notes for sale of all
of such holder’s Registrable Securities (as defined in the
Registration Rights Agreement) in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability
continues for a period of ten (10) consecutive days or for more
than an aggregate of thirty (30) days in any 365-day period (other
than days during an Allowable Grace Period (as defined in the
Registration Rights Agreement));
(ii) the
suspension from trading or failure of the Common Stock to be listed
on an Eligible Market for a period of five (5) consecutive Trading
Days or for more than an aggregate of ten (10) Trading Days in any
365-day period;
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(iii) the
Company’s (A) failure to cure a Conversion Failure by
delivery of the required number of shares of Common Stock within
ten (10) Business Days after the applicable Conversion Date or (B)
notice, written or oral, to any holder of the Notes, including by
way of public announcement or through any of its agents, at any
time, of its intention not to comply with a request for conversion
of any Notes into shares of Common Stock that is tendered in
accordance with the provisions of the Notes;
(iv) at
any time following the tenth (10 th ) consecutive
Business Day that the Holder’s Authorized Share Allocation is
less than the number of shares of Common Stock that the Holder
would be entitled to receive upon a conversion of the full
Conversion Amount of this Note (without regard to any limitations
on conversion set forth in Section 3(d) or otherwise);
(v) the
Company’s failure to pay to the Holder any amount of
Principal (including, without limitation, the Company’s
failure to pay any redemption payments), Interest, Late Charges or
other amounts (other than Registration Delay Payments) when and as
due under this Note or any other Transaction Document (as defined
in the Securities Purchase Agreement) to which the Holder is a
party, except, in the case of a failure to pay Interest and Late
Charges when and as due, in which case only if such failure
continues for a period of at least three (3) Business
Days;
(vi) the
occurrence of any default under, redemption of or acceleration
prior to maturity of any Indebtedness of the Company or any of its
Subsidiaries (as defined in Section 3(a) of the Securities Purchase
Agreement), other than with respect to any Other Notes;
(vii) the
Company or any of its Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, or any similar Federal, foreign or
state law for the relief of debtors (collectively, “
Bankruptcy Law ”), (A) commences a voluntary case, (B)
consents to the entry of an order for relief against it in an
involuntary case, (C) consents to the appointment of a receiver,
trustee, assignee, liquidator or similar official (a “
Custodian ”), (D) makes a general assignment for the
benefit of its creditors or (E) admits in writing that it is
generally unable to pay its debts as they become due;
(viii) a
court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company or any of
its Subsidiaries in an involuntary case, (B) appoints a Custodian
of the Company or any of its Subsidiaries or (C) orders the
liquidation of the Company or any of its Subsidiaries;
(ix) a
final judgment or judgments for the payment of money aggregating in
excess of $100,000 are rendered against the Company or any of its
Subsidiaries and which judgments are not, within sixty (60) days
after the entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within sixty (60) days after the
expiration of such stay; provided, however, that any judgment which
is covered by insurance or an indemnity from a creditworthy party
shall not be included in calculating the $100,000 amount set forth
above so long as the Company provides the Holder a written
statement from such insurer or indemnity provider (which
written
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statement shall be reasonably
satisfactory to the Holder) to the effect that such judgment is
covered by insurance or an indemnity and the Company will receive
the proceeds of such insurance or indemnity within thirty (30) days
of the issuance of such judgment;
(x) the
Company breaches any representation, warranty, covenant or other
term or condition of any Transaction Document that is not
specifically addressed by any other Event of Default set forth in
this Section 4(a), except, subject to clause (ii) hereof, (i) in
the case of a breach of a covenant which is curable, only if such
breach continues for a period of at least ten (10) consecutive
Business Days or (ii) in the case of any breach that arises solely
by virtue of the Transaction Stockholder Approval or the Authorized
Share Stockholder Approval not being obtained at or prior to the
Closing Date specified in the Amendment Agreement and the
amendments to the certificate of incorporation of the Company not
having been filed with the Secretary of State of Delaware to
effectuate the amendments specified in clauses (x) and (y) of
Section 7(b)(ii) of the Amendment Agreement at or prior to the
Closing Date specified in the Amendment Agreement; provided,
however, that the breach of any covenants set forth on Schedule
I shall not be deemed an Event of Default unless (A) other than
a default specified under clause (1) of Schedule I , such
breach remains uncured as of the termination of the Acquisition
Special Cure Period or (B) with respect to any covenant requiring
satisfaction as of the end of a fiscal period, such covenant is not
satisfied as of the end of the fiscal period immediately following
the Acquisition Special Cure Period;
(xi) any
breach or failure in any respect to comply with Section 15 of this
Note;
(xii) failure
to obtain the Authorized Share Stockholder Consent or the
Authorized Share Stockholder Approval, as the case may be, by June
1, 2007;
(xiii) the
Company or any Subsidiary shall fail to perform or comply with any
covenant or agreement contained in any Security Agreement to which
it is a party, any Pledge Agreement to which it is a party or any
Mortgage to which it is a party;
(xiv) any
material provision of any Security Document (as determined by the
Collateral Agent) shall at any time for any reason (other than
pursuant to the express terms thereof) cease to be valid and
binding on or enforceable against the Company or any Subsidiary
intended to be a party thereto, or the validity or enforceability
thereof shall be contested by any party thereto, or a proceeding
shall be commenced by the Company or any Subsidiary or any
governmental authority having jurisdiction over any of them,
seeking to establish the invalidity or unenforceability thereof, or
the Company or any Subsidiary shall deny in writing that it has any
liability or obligation purported to be created under any Security
Document;
(xv) any
Security Agreement, any Pledge Agreement, any Mortgage or any other
security document, after delivery thereof pursuant hereto, shall
for any reason fail or cease to create a valid and perfected and,
except to the extent permitted by the terms hereof or thereof,
first priority Lien in favor of the Collateral Agent for
the
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benefit of the holders of the Note
on any Collateral (as defined in the Security Documents) purported
to be covered thereby;
(xvi) any
bank at which any deposit account, blocked account, or lockbox
account of the Company or any Subsidiary is maintained shall fail
to comply with any material term of any deposit account, blocked
account, lockbox account or similar agreement to which such bank is
a party or any securities intermediary, commodity intermediary or
other financial institution at any time in custody, control or
possession of any investment property of the Company or any
Subsidiary shall fail to comply with any of the terms of any
investment property control agreement to which such Person is a
party (it being understood that only accounts pursuant to which the
Collateral Agent has requested account control agreements should be
subject to this clause (xv));
(xvii) any material
damage to, or loss, theft or destruction of, any Collateral,
whether or not insured, or any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or other
casualty which causes, for more than fifteen (15) consecutive days,
the cessation or substantial curtailment of revenue producing
activities at any facility of the Company or any Subsidiary, if any
such event or circumstance could reasonably be expected to have a
Material Adverse Effect (as defined in the Securities Purchase
Agreement); or
(xviii) any
Event of Default (as defined in the Other Notes) occurs with
respect to any Other Notes.
(b)
Redemption Right . Upon the occurrence of an Event of
Default with respect to this Note or any Other Note, the Company
shall within one (1) Business Day deliver written notice thereof
via facsimile and overnight courier (an “ Event of Default
Notice ”) to the Holder. At any time after the earlier of
the Holder’s receipt of an Event of Default Notice and the
Holder becoming aware of an Event of Default, the Holder may
require the Company to redeem all or any portion of this Note by
delivering written notice thereof (the “ Event of Default
Redemption Notice ”) to the Company, which Event of
Default Redemption Notice shall indicate the portion of this Note
the Holder is electing to redeem. Each portion of this Note subject
to redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the Company at a price equal to the greater of (i) the
product of (x) the Conversion Amount to be redeemed and (y) the
Redemption Premium and (ii) the product of (A) the Conversion Rate
with respect to such Conversion Amount in effect at such time as
the Holder delivers an Event of Default Redemption Notice and (B)
the greater of the Closing Sale Price of the Common Stock on the
date immediately preceding such Event of Default, the Closing Sale
Price of the Common Stock on the date immediately following such
Event of Default and the Closing Sale Price of the Common Stock on
the date the Holder delivers the Event of Default Redemption Notice
(the “ Event of Default Redemption Price
”). Redemptions required by this Section 4(b) shall be made
in accordance with the provisions of Section 12. To the extent
redemptions required by this Section 4(b) are deemed or determined
by a court of competent jurisdiction to be prepayments of the Note
by the Company, such redemptions shall be deemed to be voluntary
prepayments. The parties hereto agree that in the event of the
Company’s redemption of any portion of the Note under this
Section 4(b), the
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Holder’s damages would be
uncertain and difficult to estimate because of the parties’
inability to predict future interest rates and the uncertainty of
the availability of a suitable substitute investment opportunity
for the Holder. Accordingly, any Redemption Premium due under this
Section 4(b) is intended by the parties to be, and shall be deemed,
a reasonable estimate of the Holder’s actual loss of its
investment opportunity and not as a penalty.
(5)
RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL
.
(a)
Assumption . The Company shall not enter into or be party to
a Fundamental Transaction unless (i) the Successor Entity
assumes in writing all of the obligations of the Company under this
Note and the other Transaction Documents in accordance with the
provisions of this Section 5(a) pursuant to written agreements in
form and substance satisfactory to the Required Holders and
approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of
Notes in exchange for such Notes a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to the Notes, including, without limitation, having a
principal amount and interest rate equal to the principal amounts
and the interest rates of the Notes held by such holder, having
similar conversion rights as the Notes and having similar ranking
to the Notes, and satisfactory to the Required Holders and
(ii) the Successor Entity (including its Parent Entity) is a
publicly traded corporation whose common stock is quoted on or
listed for trading on an Eligible Market. Upon the occurrence of
any Fundamental Transaction, the Successor Entity shall succeed to,
and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Note referring to
the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Note
with the same effect as if such Successor Entity had been named as
the Company herein. Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or
redemption of this Note at any time after the consummation of the
Fundamental Transaction, in lieu of the shares of Common Stock (or
other securities, cash, assets or other property) issuable upon the
conversion of the Notes prior to such Fundamental Transaction, such
shares of publicly traded common stock (or their equivalent) of the
Successor Entity, as adjusted in accordance with the provisions of
this Note. The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions and shall be applied
without regard to any limitations on the conversion of this
Note.
(b)
Redemption Right . No sooner than fifteen (15) days nor
later than ten (10) days prior to the consummation of a Change of
Control, but not prior to the public announcement of such Change of
Control, the Company shall deliver written notice thereof via
facsimile and overnight courier to the Holder (a “ Change
of Control Notice ”). At any time during the
period beginning after the Holder’s receipt of a Change of
Control Notice and ending twenty (20) Trading Days after the
consummation of such Change of Control, the Holder may require the
Company to redeem all or any portion of this Note by delivering
written notice thereof (“ Change of Control Redemption
Notice ”) to the Company, which Change of Control
Redemption Notice shall indicate the Conversion Amount the Holder
is electing to redeem. The portion of this Note subject to
redemption pursuant to this Section 5 shall be redeemed
by
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the Company in cash at a price equal
to the greater of (i) the product of (x) the Conversion Amount
being redeemed and (y) the quotient determined by dividing (A) the
greater of the Closing Sale Price of the Common Stock immediately
prior to the consummation of the Change of Control, the Closing
Sale Price immediately following the public announcement of such
proposed Change of Control and the Closing Sale Price of the Common
Stock immediately prior to the public announcement of such proposed
Change of Control by (B) the Conversion Price and (ii) 120% of the
Conversion Amount being redeemed (the “ Change of Control
Redemption Price ”). Redemptions required by this Section
5 shall be made in accordance with the provisions of Section 12 and
shall have priority to payments to stockholders in connection with
a Change of Control. To the extent redemptions required by this
Section 5(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments.
Notwithstanding anything to the contrary in this Section 5, but
subject to Section 3(d), until the Change of Control Redemption
Price is paid in full, the Conversion Amount submitted for
redemption under this Section 5(c) may be converted, in whole or in
part, by the Holder into Common Stock pursuant to Section 3. In the
event of a partial redemption of this Note pursuant hereto, the
principal amount redeemed shall be deducted from the Installment
Amounts relating to the applicable Installment Dates as set forth
in the Change of Control Redemption Notice. The parties hereto
agree that in the event of the Company’s redemption of any
portion of the Note under this Section 5(b), the Holder’s
damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any redemption premium due
under this Section 5(b) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder’s actual loss
of its investment opportunity and not as a penalty.
(6)
RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS .
(a)
Purchase Rights . If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property pro rata to the
record holders of any class of Common Stock (the “
Purchase Rights ”), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Note (without taking into account
any limitations or restrictions on the convertibility of this Note)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
(b)
Other Corporate Events . In addition to and not in
substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for
shares of Common Stock (a “ Corporate Event ”),
the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon a conversion
of this Note, at the Holder’s option, (i) in addition to the
shares of Common Stock receivable upon such conversion, such
securities or other assets to
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which the Holder would have been
entitled with respect to such shares of Common Stock had such
shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event (without taking into account
any limitations or restrictions on the convertibility of this Note)
or (ii) in lieu of the shares of Common Stock otherwise receivable
upon such conversion, such securities or other assets received by
the holders of shares of Common Stock in connection with the
consummation of such Corporate Event in such amounts as the Holder
would have been entitled to receive had this Note initially been
issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for
such consideration commensurate with the Conversion Rate. Provision
made pursuant to the preceding sentence shall be in a form and
substance satisfactory to the Required Holders. The provisions of
this Section shall apply similarly and equally to successive
Corporate Events and shall be applied without regard to any
limitations on the conversion or redemption of this
Note.
|
|
(7)
|
RIGHTS UPON ISSUANCE OF OTHER
SECURITIES .
|
(a)
Adjustment of Conversion Price upon Issuance of Common Stock
. If and whenever on or after the Subscription Date, the Company
issues or sells, or in accordance with this Section 7(a) is deemed
to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for
the account of the Company, but excluding shares of Common Stock
deemed to have been issued or sold by the Company in connection
with any Excluded Security) for a consideration per share less than
a price (the “ Applicable Price ”) equal to the
Conversion Price in effect immediately prior to such issue or sale
(the foregoing a “ Dilutive Issuance ”), then
immediately after such Dilutive Issuance, the Conversion Price then
in effect shall be reduced to an amount equal to the lowest price
per share at which any share of Common Stock were issued or sold or
deemed to be issued or sold (in accordance with this Section 7(a))
in connection with such Dilutive Issuance; provided, however, that
if the Company issues or sells, or is deemed to have issued or
sold, any shares of Common Stock in a Dilutive Issuance that is a
Permitted Financing, then immediately after such Dilutive Issuance,
the Conversion Price then in effect shall be reduced to an amount
equal to the product of (A) the Conversion Price in effect
immediately prior to such Dilutive Issuance and (B) the
quotient determined by dividing (1) the sum of (I) the product
derived by multiplying the Conversion Price in effect immediately
prior to such Dilutive Issuance and the number of shares of Common
Stock Deemed Outstanding immediately prior to such Dilutive
Issuance plus (II) the consideration, if any, received by the
Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Conversion Price in effect immediately
prior to such Dilutive Issuance by (II) the number of shares
of Common Stock Deemed Outstanding immediately after such Dilutive
Issuance. For purposes of determining the adjusted Conversion Price
under this Section 7(a), the following shall be
applicable:
(i)
Issuance of Options . If the Company in any manner grants or
sells any Options and the lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such
Option or upon conversion or exchange or exercise of any
Convertible Securities issuable upon exercise of such Option is
less than the Applicable Price, then each such share of Common
Stock underlying such Option shall be deemed to be outstanding and
to have been issued and sold by the Company at
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the time of the granting or sale of
such Option for such price per share. For purposes of this Section
7(a)(i), the “lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or
upon conversion or exchange or exercise of any Convertible
Securities issuable upon exercise of such Option” shall be
equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share
of Common Stock upon granting or sale of the Option, upon exercise
of the Option and upon conversion or exchange or exercise of any
Convertible Security issuable upon exercise of such Option. No
further adjustment of the Conversion Price shall be made upon the
actual issuance of such share of Common Stock or of such
Convertible Securities upon the exercise of such Options or upon
the actual issuance of such Common Stock upon conversion or
exchange or exercise of such Convertible Securities.
(ii)
Issuance of Convertible Securities . If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable
upon such conversion or exchange or exercise thereof is less than
the Applicable Price, then each such share of Common Stock
underlying such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for
such price per share. For the purposes of this Section 7(a)(ii),
the “lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange or
exercise” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the issuance or sale
of the Convertible Security and upon the conversion or exchange or
exercise of such Convertible Security. No further adjustment of the
Conversion Price shall be made upon the actual issuance of such
share of Common Stock upon conversion or exchange or exercise of
such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for
which adjustment of the Conversion Price had been or are to be made
pursuant to other provisions of this Section 7(a), no further
adjustment of the Conversion Price shall be made by reason of such
issue or sale.
(iii)
Change in Option Price or Rate of Conversion . If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exchange
or exercise of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable or
exercisable for Common Stock changes at any time, the Conversion
Price in effect at the time of such change shall be adjusted to the
Conversion Price which would have been in effect at such time had
such Options or Convertible Securities provided for such changed
purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or
sold. For purposes of this Section 7(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the
Subscription Date are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued
as of the date of such change. No adjustment shall be made if such
adjustment would result in an increase of the Conversion Price then
in effect.
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(iv)
Calculation of Consideration Received . In case any Option
is issued in connection with the issue or sale of other securities
of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $.01. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will
be deemed to be the net amount received by the Company therefor. If
any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the
fair value of such consideration, except where such consideration
consists of publicly traded securities, in which case the amount of
consideration received by the Company will be the Closing Sale
Price of such securities on the date of receipt. If any Common
Stock, Options or Convertible Securities are issued to the owners
of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the
net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration
other than cash or publicly traded securities will be determined
jointly by the Company and the Required Holders. If such parties
are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the “
Valuation Event ”), the fair value of such
consideration will be determined within five (5) Business Days
after the tenth (10 th ) day following the Valuation
Event by an independent, reputable appraiser jointly selected by
the Company and the Required Holders. The determination of such
appraiser shall be deemed binding upon all parties absent manifest
error and the fees and expenses of such appraiser shall be borne by
the Company.
(v)
Record Date . If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or
in Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record
date will be deemed to be the date of the issue or sale of the
Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(b)
Adjustment of Conversion Price upon Subdivision or Combination
of Common Stock . If the Company at any time on or after the
Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any
time on or after the Subscription Date combines (by combination,
reverse stock split or other
