EXHIBIT 4.1
[FORM OF AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE
NOTE]
INKSURE TECHNOLOGIES INC.
AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE
Issuance Date: September 30, 2005 Original Principal Amount:
U.S. $[______]
FOR VALUE RECEIVED, InkSure Technologies Inc., a Delaware
corporation (the
"COMPANY"), hereby promises to pay to [SMITHFIELD FIDUCIARY
LLC][OTHER BUYERS]
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, 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 equal to six percent (6.0%) per
annum (the
"INTEREST 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 amends,
supplements,
modifies and completely restates and supersedes the Senior Secured
Convertible
Note, dated as of the Issuance Date (the "EXISTING NOTE"), issued
by the Company
to the Holder with an Original Principal Amount of $[_______], but
shall not,
except as specifically amended hereby or as set forth in the
Holder's Amendment,
Exchange and Purchase Agreement (as defined below), 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 Amended and Restated Senior Secured Convertible
Note (including
all Convertible Notes issued in exchange, transfer or replacement
hereof, this
"NOTE") is one of an issue of Amended and Restated Senior Secured
Convertible
Notes (collectively, the "NOTES" and such other Amended and
Restated Senior
Secured Convertible Notes, the "OTHER NOTES") amending and
restating the terms
of the Existing Note pursuant to Section 1 of those certain
Amendment, Exchange
and Purchase Agreements, dated as of April 8, 2008 (the "EXCHANGE
DATE"), by
and between each of the Buyers (as defined in the Securities
Purchase Agreement)
and the Company (individually, with respect to any Buyer, the
"AMENDMENT,
EXCHANGE AND PURCHASE AGREEMENT" and collectively, with respect to
all Buyers,
the "AMENDMENT, EXCHANGE AND PURCHASE AGREEMENTS"). Certain
capitalized terms
are defined in Section 30.
(1) MATURITY. On the Maturity Date, the Holder shall surrender
this Note to
the Company and the Company shall pay to the Holder an amount in
cash
representing all outstanding Principal, accrued and unpaid Interest
and accrued
and unpaid Late Charges, if any. The "MATURITY DATE" shall be
September 30,
2010, as may be extended at the 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 (10) Business 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 RATE. Interest on this Note shall
commence accruing
on the Exchange 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 Quarter during the period beginning on the Exchange Date
and ending on,
and including, the Maturity Date (each, an "INTEREST DATE") with
the first
Interest Date being June 30, 2008. Interest shall be payable on
each Interest
Date in cash. Prior to the payment of Interest on an Interest Date,
Interest on
this Note shall accrue at the Interest Rate and be payable by way
of inclusion
of the Interest in the Conversion Amount in accordance with Section
3(b)(i).
From and after the occurrence of an Event of Default, the Interest
Rate shall be
increased to twelve percent (12.0%). In the event that such Event
of Default is
subsequently cured, the adjustment referred to in the preceding
sentence shall
cease to be effective 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, par value $0.01 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); provided, however, that the Holder may not
convert more
than twenty percent (20%) of the Original Principal Amount of
this Note in
any ten (10) Trading Day period. 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 to be converted, redeemed or otherwise with
respect to which
this determination is being made, (B) accrued and unpaid
Interest 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, $0.60,
subject to
adjustment as provided herein.
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(c) MECHANICS OF CONVERSION.
(i) OPTIONAL CONVERSION. To convert (an "OPTIONAL
CONVERSION")
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 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 (1st) Business 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 second (2nd) Business Day following the date
of receipt of
a Conversion Notice (the "SHARE DELIVERY DATE"), the
Company shall (A)
(X) provided the Transfer Agent is participating in the
Depository
Trust Company ("DTC") Fast Automated Securities Transfer
Program and
the shares of Common Stock issuable upon conversion are
registered for
resale or are exempt from registration, 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 (Y) if the
Transfer
Agent is not participating in the DTC Fast Automated
Securities
Transfer Program, issue and deliver 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 and (B) pay to the Holder in
cash an amount
equal to the applicable Pro Rata Amount for the Holder
that is
released from the Cash Collateral Account in connection
with such
conversion. 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 (3) 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 20(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.
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(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) Business Days
after the
Conversion Date (a "CONVERSION FAILURE"), then (A) the
Company shall
pay damages to the Holder for each date of such
Conversion Failure in
an amount equal to 1.0% (the "INITIAL PENALTY") 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)(ii) 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) Business Days (or ten (10) Business Days
if the
failure to deliver Common Stock is due to a Force Majeure
Event) after
the Holder's request and in the Holder's discretion,
either (i) pay
cash to the Holder in an amount equal to the Holder's
total purchase
price (including brokerage commissions, 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 (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 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. Notwithstanding the foregoing, the
Company shall
not be required to pay the Initial Penalty in the event
that a
Conversion Failure is caused, directly or indirectly, by
acts of God,
acts of the public enemy, acts of any governmental body
in its
sovereign or contractual capacity, fires, floods,
epidemics, strikes,
labor disputes, inability to obtain labor, material,
equipment or
transportation, freight embargoes, sabotage, civil
disturbances, any
outbreak, attack or escalation of hostilities or
declaration of war,
national emergency, act of terrorism or other national or
international calamity or crisis or change in economic,
financial or
political conditions, including changes on the financial
markets of
the United States or Israel (any of the foregoing, a
"FORCE MAJEURE
EVENT").
(iii) REGISTRATION; BOOK-ENTRY. The Company shall
maintain a
register (the "Register") for the recordation of the
names and
addresses of the holders of each Note and the principal
amount of the
Notes held by such holders (the "Registered Notes"). The
entries in
the Register shall be conclusive and binding for all
purposes absent
manifest error. The Company and the holders of the Notes
shall treat
each Person whose name is recorded in the Register as the
owner of a
Note for all purposes, including, without limitation, the
right to
receive payments of principal and interest hereunder,
notwithstanding
notice to the contrary. A Registered Note may be assigned
or sold in
whole or in part only by registration of such assignment
or sale on
the Register. Upon its receipt of a request to assign or
sell all or
part of any Registered Note by a Holder, the Company
shall record the
information contained therein in the Register and issue
one or more
new Registered Notes in the same aggregate principal
amount as the
principal amount of the surrendered Registered Note to
the designated
assignee or transferee pursuant to Section 20.
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 physical surrender and reissue of this Note.
The Holder and
the Company shall maintain records showing the Principal,
Interest and
Late Charges 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.
- 4 -
(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 25.
(d) LIMITATIONS ON CONVERSIONS. 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 4.99%
(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 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 beneficially owned by the Holder or
any of its
affiliates (including, without limitation, any Other Notes or
warrants)
subject to a limitation on conversion or exercise analogous to
the
limitation contained herein. 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-KSB, Form 10-K, Form 10-QSB,
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 three (3) Business Days 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
increase or
decrease the Maximum Percentage to any other percentage not in
excess of
9.99% specified in such notice; provided that (i) any such
increase will
not be effective until the sixty-first (61st) 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.
- 5 -
(4) RIGHTS UPON EVENT OF DEFAULT.
(a) EVENT OF DEFAULT. Each of the following events shall
constitute an
"EVENT OF DEFAULT":
(i) the suspension from trading or failure of the
Common Stock to
be listed on the Principal Market or on an Eligible
Market for a
period of five (5) consecutive days or for more than an
aggregate of
ten (10) days in any 365-day period;
(ii) 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;
(iii) at any time following the tenth (10th)
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);
(iv) the Company's failure to pay to the Holder any
amount of
Principal, Interest, Late Charges or other amounts when
and as due
under this Note or any other Transaction Document (as
defined in the
Securities Purchase Agreement), 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 (A) at least three
(3) Business
Days with respect to Interest and (B) at least ten (10)
Business Days
with respect to Late Charges;
(v) (A) any payment default under any Indebtedness
(as defined in
Section 3(s) of the Securities Purchase Agreement) of the
Company or
any of its Subsidiaries (as defined in Section 3(a) of
the Securities
Purchase Agreement) having an aggregate principal amount
equal to or
greater than $500,000, (B) any default (other than a
payment default)
occurs under any Indebtedness of the Company or any of
its
Subsidiaries having an aggregate principal amount equal
to or greater
than $500,000 that results in the redemption of or
acceleration prior
to maturity of such Indebtedness, in each case other than
with respect
to any Other Notes;
(vi) 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;
- 6 -
(vii) 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;
(viii) a final judgment or judgments for the payment
of money
aggregating in excess of $500,000 are rendered against
the Company or
any of its Subsidiaries and which judgments are not,
within ninety
(90) days after the entry thereof, bonded, discharged or
stayed
pending appeal, or are not discharged within ninety (90)
days after
the expiration of such stay; provided, however, that any
judgment
which is covered by insurance or an indemnity from a
credit worthy
party shall not be included in calculating the $500,000
amount set
forth above so long as the Company provides the Holder a
written
statement from such insurer or indemnity provider (which
written
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;
(ix) the Company breaches, in any material respect,
any
representation, warranty, covenant or other term or
condition of any
Transaction Document, except, in the case of a breach of
a covenant
which is curable, only if such breach continues for a
period of at
least twenty (20) consecutive Business Days;
(x) (A) any breach or failure in any respect to
comply with
Section 16 of this Note, (B) the failure to deliver the
Cash
Collateral Release Notice in accordance with Section
4(g)(ii)(1), (3),
(4), (5) or (6) of the Amendment, Exchange and Purchase
Agreements or
(C) a Public Information Failure (as defined in the
Amendment and
Exchange Agreements); or
(xi) any Event of Default (as defined in the Other
Notes) occurs
with respect to any Other Notes.
(b) REDEMPTION RIGHT. Promptly after the occurrence of an
Event of
Default with respect to this Note or any Other Note, the
Company shall
deliver written notice thereof via facsimile and overnight
courier (an
"EVENT OF DEFAULT NOTICE") to the Holder. At any time during
the period
commencing after the earlier of the Holder's receipt of an
Event of Default
Notice and the Holder becoming aware of an Event of Default
and ending
forty-five (45) days after such applicable 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
product of (i) the
Conversion Amount to be redeemed and (ii) the Redemption
Premium (the
"EVENT OF DEFAULT REDEMPTION PRICE"). Redemptions required by
this Section
4(b) shall be made in accordance with the provisions of
Section 13. 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 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.
- 7 -
(5) RIGHTS UPON FUNDAMENTAL TRANSACTION, CHANGE OF CONTROL AND
INK BUSINESS
SALE.
(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
reasonably
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 and having similar
ranking to the
Notes, and satisfactory to the Required Holders and (ii) other
than in
connection with a Cash Transaction, 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 (a
"PUBLIC SUCCESSOR
ENTITY"). 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 the
Company's Common
Stock (or other securities, cash, assets or other property)
purchasable
upon the conversion or redemption of the Notes prior to such
Fundamental
Transaction, such shares of the publicly traded common stock
(or its
equivalent) of the Successor Entity (including its Parent
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 or redemption of this Note.
- 8 -
(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 on the date of the consummation of such Change of
Control (or, in
the event a Change of Control Notice is not delivered at least
ten (10)
days prior to a Change of Control, at any time on or after the
date which
is ten (10) days prior to a Change of Control and ending ten
(10) 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
the Company
at a price equal to 125% of the Conversion Amount being
redeemed (the
"CHANGE OF CONTROL REDEMPTION PRICE"). Notwithstanding
anything to the
contrary in this Section 5(b), 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(b) may be
converted, in whole
or in part, by the Holder into Common Stock pursuant to
Section 3.
Redemptions required by this Section 5 shall be made in
accordance with the
provisions of Section 13 and shall have priority to payments
to
shareholders 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. 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
Change of Control 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.
(c) REDEMPTION AT THE COMPANY'S ELECTION UPON CASH
TRANSACTION. In
connection with a pending, proposed or intended Cash
Transaction, the
Company shall have the right, in its sole discretion, to
require that all,
but not less than all, of the outstanding Notes be redeemed (a
"CASH
TRANSACTION REDEMPTION ELECTION") at a price equal to the sum
of (i) the
Change of Control Redemption Price, (ii) an amount equal to
the applicable
Pro Rata Amount that is released from the Cash Collateral
Account for the
Holder in connection with such redemption, (iii) to the extent
in excess of
such Pro Rata Amount, the amount of any accrued but unpaid
Interest on such
Principal amount being redeemed through the Cash Transaction
Election
Redemption Date plus (iv) accrued and unpaid Late Charges, if
any, with
respect to such Principal amount and Interest through the Cash
Transaction
Election Redemption Date (such price in connection with a Cash
Transaction
Redemption Election, the "CASH TRANSACTION REDEMPTION PRICE").
The Company
shall exercise its right to make a Cash Transaction Redemption
Election by
providing each holder of Notes written notice (the "CASH
TRANSACTION
REDEMPTION NOTICE") by facsimile and overnight courier,
concurrently with
the public disclosure of a proposed, pending or intended Cash
Transaction
and at least ten (10) Trading Days prior to the date of
consummation of the
Cash Transaction (the "CASH TRANSACTION ELECTION REDEMPTION
DATE"), which
Cash Transaction Election Redemption Date shall be the date of
the
consummation of the Cash Transaction. The Cash Transaction
Redemption
Notice shall indicate the anticipated Cash Transaction
Election Redemption
Date and such notice shall be irrevocable. If the Company has
exercised its
right of Cash Transaction Redemption Election then all Notes
outstanding at
the time of the consummation of the Cash Transaction shall be
redeemed on
the Cash Transaction Election Redemption Date by payment by or
on behalf of
the Company to each holder of Notes of the Cash Transaction
Redemption
Price for such Notes concurrent with the closing of the Cash
Transaction.
Notwithstanding anything to the contrary in this Section 5(c),
but subject
to Section 3(d), until the Cash Transaction Redemption Price
is paid in
full, the Conversion Amount subject to redemption hereunder
may be
converted, in whole or in part, by the Holder into Common
Stock pursuant to
Section 3. Redemptions required by this Section 5(c) shall be
made in
accordance with the provisions of Section 13 and shall have
priority to
payments to stockholders in connection with a Cash
Transaction.
- 9 -
(d) INK BUSINESS SALE REDEMPTION RIGHT. Contemporaneously
with the
public announcement of an Ink Business Sale, the Company shall
deliver
written notice thereof via facsimile and overnight courier to
the Holder (a
"INK BUSINESS SALE NOTICE") stating (i) the effective date, or
proposed
effective date, as applicable, of such Ink Business Sale and
(ii) the Net
Cash Proceeds received or to be received, as applicable, from
such Ink
Business Sale. At any time during the period beginning after
the Holder's
receipt of a Ink Business Sale Notice and ending on the date
that is [ten
(10)] Business Days after the receipt of such notice, the
Holder may
require the Company to redeem all or any portion of this Note
up to an
amount equal to the Holder's Pro Rata Amount of the Net Cash
Proceeds of
such Ink Business Sale by delivering written notice thereof
("INK BUSINESS
SALE REDEMPTION NOTICE") to the Company, which Ink Business
Sale Redemption
Notice shall indicate the Conversion Amount the Holder is
electing to
redeem (the "INK BUSINESS SALE REDEMPTION AMOUNT"). The
portion of this
Note subject to redemption pursuant to this Section 5 shall be
redeemed by
the Company at a price equal to the product of (i) the Ink
Business Sale
Redemption Amount and (ii) the applicable Company Redemption
Premium (the
"INK BUSINESS SALE REDEMPTION PRICE"). Notwithstanding
anything to the
contrary in this Section 5(d), but subject to Section 3(d),
until the Ink
Business Sale Redemption Price is paid in full, the Ink
Business Sale
Redemption Amount may be converted, in whole or in part, by
the Holder into
Common Stock pursuant to Section 3. Redemptions required by
this Section
5(d) shall be made in accordance with the provisions of
Section 13 and
shall have priority to any payments to shareholders in
connection with an
Ink Business Sale. In the event that following any Ink
Business Sale
Redemption Date, the Company or any Subsidiary receives
additional Net Cash
Proceeds (such as deferred compensation) relating to an Ink
Business Sale,
the Company shall provide an Ink Business Sale Notice to the
Holder in
accordance with this Section 5(d) describing the nature and
amount of such
additional Net Cash Proceeds and the Holder shall have the
right to require
the Company to redeem all or any portion of this Note pursuant
to this
Section 5(d).
(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.
- 10 -
(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, (i)
in addition
to the shares of Common Stock receivable upon such conversion,
such
securities or other assets to 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 until this Note
is fully
converted or paid in full, 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 and excluding a deemed
issuance or
sale in a transaction for which appropriate adjustments are
made under
Sections 6(a) or 7(b)) for a consideration per share (the "NEW
ISSUANCE
PRICE") 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
New Issuance Price. 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 such share of Common Stock shall be deemed to
be
outstanding and to have been issued and sold by the
Company at 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.
- 11 -
(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 such share of Common Stock shall be deemed to
be
outstanding and to have been issued and sold by the
Company at the
time of the issuance of sale of such Convertible
Securities for such
price per share. For the purposes of this Section
7(a)(ii), the "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 c
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