THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”). THE ISSUANCE TO THE HOLDER OF
THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
AND IN PAYMENT OF INTEREST ON THIS NOTE ARE NOT COVERED BY A
REGISTRATION STATEMENT UNDER THE 1933 ACT. PURSUANT TO THE NOTE
PURCHASE AGREEMENT, THIS NOTE HAS BEEN ACQUIRED, AND SUCH SHARES
MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE
RESALE THEREOF UNDER THE 1933 ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
BERLINER COMMUNICATIONS,
INC.
7% SENIOR SUBORDINATED SECURED
CONVERTIBLE NOTE DUE 2008
FOR VALUE RECEIVED, BERLINER COMMUNICATIONS, INC. , a
Delaware corporation (hereinafter called the
“Company”), hereby promises to pay to Sigma Opportunity
Fund, LLC, 800 Third Avenue, New York, NY 10022 or registered
assigns (the “Holder”), or order, the sum of three
million dollars ($3,000,000), on the Maturity Date, and to pay
interest on the unpaid principal balance hereof at the Applicable
Rate from the date hereof, until the same becomes due and payable,
whether at maturity or upon acceleration or by repurchase in
accordance with the terms hereof or otherwise. Any amount,
including, without limitation, principal of or interest on this
Note or the Optional Redemption Price or the Repurchase Price, that
is payable under this Note and that is not paid when due shall bear
interest at the Default Rate from the due date thereof until the
same is paid (“Default Interest”). Regular interest
shall be payable in arrears on each Interest Payment Date,
commencing on April 1, 2007, on the principal amount
outstanding on such date. Regular interest on this Note shall be
computed on the basis of a 360-day year of twelve 30-day months and
actual days elapsed. No regular interest shall be payable on an
Interest Payment Date on any portion of the principal amount of
this Note which shall have been redeemed prior to such Interest
Payment Date so long as the Company shall have complied in full
with its obligations with respect to such redemption.
All
payments of principal of and premium, if any, interest, and other
amounts on this Note shall be made in lawful money of the United
States of America. All cash payments shall be made by wire transfer
of immediately available funds to such account as the Holder may
from time to time designate by written notice in accordance with
the provisions of this Note. Whenever any amount expressed to be
due by the terms of this Note is due on any day which is not a
Business Day, the same shall instead be due on the next succeeding
day which is a Business Day and, in the case of any Interest
Payment Date which is not the date on which this
Note is paid in
full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on
such date. Certain capitalized terms used in this Note are defined
in Article VI.
The
obligations of the Company under this Note shall rank junior to
(i) the existing line of credit with Presidential Financial
Corporation of Delaware Valley (“Presidential”) and
(ii) a working capital facility with a working capital
lender(s) approved by Sigma in a principal amount not to exceed
$10 million secured by a first priority security interest in
all of the Company’s and its Subsidiaries’ assets and
the proceeds thereof; provided that in no event shall the total
line of credit with Presidential and the working capital facility
exceed $10 million in the aggregate (collectively, the
“Senior Debt”). The obligations of the Company under
this Note shall rank senior to all other obligations of the Company
for indebtedness for borrowed money or the purchase price of
property other than the Senior Debt (except for indebtedness
permitted under clause (9) of the definition of Permitted
Indebtedness to the extent that such indebtedness is secured solely
by the equipment purchased or leased). This Note is issued pursuant
to the Note Purchase Agreement and the Holder of this Note and this
Note are subject to the terms and entitled to the benefits of the
Note Purchase Agreement.
The
following terms shall apply to this Note:
1.1 Optional Redemption . (a) At any time during
the Optional Redemption Period, the Company shall have the right to
redeem at any one time all or from time to time any part of the
outstanding principal amount of this Note at the Optional
Redemption Price pursuant to this Section 1.1 on any Optional
Redemption Date, so long as the following conditions are
met:
(1) during a
period of 30 consecutive Trading Days ending not more than three
Trading Days prior to the date the Company gives a particular
Optional Redemption Notice, (A) on each such Trading Day the
Market Price of the Common Stock shall be at least 150 percent
of the Conversion Price in effect on such Trading Day, and
(B) the Average Daily Trading Volume Threshold is
met;
(2) on the date an
Optional Redemption Notice is given and at all times to and
including the applicable Optional Redemption Date, no Event of
Default and no event which, with notice or passage of time, or
both, would become an Event of Default has occurred and is
continuing (unless the requirements of this clause (2) will be
satisfied immediately after the redemption of this Note on the
applicable Optional Redemption Date and the Company shall furnish
Company Certificates to the Holder to such effect on the date the
applicable Optional Redemption Notice is given to the Holder and on
the applicable Optional Redemption Date);
-2-
(3) on the date an
Optional Redemption Notice is given and at all times to and
including the applicable Optional Redemption Date, no Repurchase
Event has occurred with respect to which the Holder has the right
to exercise repurchase rights pursuant to Sections 4.1 and 4.2 with
respect to which the Holder has exercised such repurchase rights
and the Repurchase Price has not been paid to the Holder and no
event which, with notice or passage of time, or both, would become
a Repurchase Event has occurred and is continuing;
(4) on the date
the Optional Redemption Notice is given and at all times thereafter
to and including the applicable Optional Redemption Date, the
Registration Statement shall be effective and available for use by
the Holder and the holders of the Warrants for the resale of the
shares of Common Stock issued and issuable upon conversion of this
Note and issued or issuable upon exercise of the Warrant other than
“Blackout Periods” permitted under the Note Purchase
Agreement not to exceed two trading days during such period, as the
case may be, and is reasonably expected to remain effective and
available for such use for at least 60 days after the applicable
Optional Redemption Date; and
(5) on the date an
Optional Redemption Notice is given, the Company has funds
available to pay the Optional Redemption Price.
In order to
exercise its right of redemption under this Section 1.1, the
Company shall give an Optional Redemption Notice to the Holder not
less than 30 Trading Days or more than 40 Trading Days prior to the
Optional Redemption Date stating that: (1) the Company is
exercising its right to redeem a specified portion (which may be
all, if so specified by the Company) of this Note in accordance
with this Section 1.1, (2) the principal amount of this
Note to be redeemed, (3) the Optional Redemption Price,
(4) the Optional Redemption Date and that all of the
conditions of this Section 1.1 entitling the Company to call
this Note for redemption have been met. On the applicable Optional
Redemption Date (or such later date as the Holder surrenders this
Note to the Company) the Company shall pay to or upon the order of
the Holder, by wire transfer of immediately available funds to such
account as shall be specified for such purpose by the Holder at
least one Business Day prior to the Optional Redemption Date, an
amount equal to the Optional Redemption Price of the portion (which
may be all) of this Note to be redeemed. In each such case the
aggregate principal amount of this Note to be so redeemed shall be
at least $500,000.00 or such lesser aggregate principal amount of
this Note as shall remain outstanding at the time an Optional
Redemption Notice is given.
1.2 No Prepayment . Except as specifically provided
in Section 1.1, this Note may not be prepaid, redeemed or
repurchased at the option of the Company prior to December 29,
2008.
-3-
So
long as the Company shall have any obligation under this Note for
the payment of the indebtedness evidenced hereby:
2.1 Limitations on Certain Indebtedness . The Company
will not itself, and will not permit any Subsidiary to, create,
assume, incur or in any manner become liable in respect of,
including, without limitation, by reason of any business
combination transaction (all of which are referred to herein as
“incurring”), any Indebtedness other than Permitted
Indebtedness.
2.2 Payment of Obligations . The Company will pay and
discharge, and will cause each Subsidiary to pay and discharge, all
their respective material obligations and liabilities, including,
without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings and the Company
shall have established adequate reserves therefor on its
books.
2.3 Maintenance of Property; Insurance . (a) The
Company will keep, and will cause each Subsidiary to keep, all
property which, in the reasonable business judgment of the Company,
is useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(b) The
Company will maintain, and will cause each Subsidiary to maintain,
with financially sound and responsible insurance companies,
insurance, in at least such amounts and against such risks as is
reasonably adequate for the conduct of their respective businesses
and the value of their respective properties.
2.4 Conduct of Business and Maintenance of Existence
. The Company will continue, and will cause each Significant
Subsidiary to continue, to engage in business of the same general
type as now conducted by the Company, and will preserve, renew and
keep in full force and effect, and will cause each Significant
Subsidiary to preserve, renew and keep in full force and effect
their respective corporate existence and their respective rights,
privileges and franchises necessary or desirable in the normal
conduct of business, except where the failure to do so would not
have a material adverse effect on (i) the business,
properties, operations, condition (financial or other), results of
operation or prospects of the Company and the Subsidiaries, taken
as a whole or (ii) the ability of the Company to pay and
perform its obligations under the Transaction Documents.
2.5 Compliance with Laws . The Company will comply,
and will cause each Subsidiary to comply, in all material respects
with all applicable laws, ordinances, rules, regulations,
decisions, orders and requirements of governmental authorities and
courts (including, without limitation, environmental laws) except
where compliance therewith is contested in good faith by
appropriate proceedings.
-4-
2.6 Investment Company Act . The Company will not be
or become an open-end investment trust, unit investment trust or
face-amount certificate company that is or is required to be
registered under Section 8 of the Investment Company Act of
1940, as amended.
2.7 Limitations on Asset Sales, Liquidations, Etc.; Certain
Matters . The Company shall not
(a) sell,
convey or otherwise dispose of all or substantially all of the
assets of the Company as an entirety or substantially as an
entirety in a single transaction or in a series of related
transactions; or
(b) liquidate,
dissolve or otherwise wind up the affairs of the
Company.
2.8 Limitation on Certain Issuances . The Company
shall not (A) offer, sell or issue, or enter into any
agreement, arrangement or understanding to offer, sell or issue,
any Common Stock Equivalent for which the price at which the holder
of such Common Stock Equivalent is entitled to acquire shares of
Common Stock varies based on the market or trading price of the
Common Stock.
2.9 Limitations on Liens . The Company will not
itself, and will not permit any Subsidiary to, create, assume or
suffer to exist any mortgage, lien, pledge, security interest or
other charge or encumbrance (including, without limitation, the
lien or retained security title of a conditional vendor), all of
which are referred to below as “liens”, upon all or any
part of its property of any character, whether owned at the date
hereof or thereafter acquired, except:
(a) liens
upon any property of any Subsidiary or Subsidiaries as security for
indebtedness owing by such Subsidiary to the Company;
(b) liens
securing this Note and the Other Notes ratably;
(c) liens
for taxes or assessments or governmental charges or levies on its
property if such taxes or assessments or charges or levies shall
not at the time be due and payable or if the amount, applicability,
or validity of any such tax, assessment, charge or levy shall
currently be contested in good faith by appropriate proceedings or
necessary preliminary steps are being taken to contest, compromise
or settle the amount thereof or to determine the applicability or
validity thereof and if the Company or such Subsidiary, as the case
may be, shall have set aside on its books reserves (segregated to
the extent required by sound accounting practice) deemed by it
adequate with respect thereto; deposits or pledges to secure
payment of worker’s compensation, unemployment insurance, old
age pensions or other social security; deposits or pledges to
secure performance of bids, tenders, contracts (other than
contracts for the payment of money borrowed or credit extended),
leases, public or statutory obligations, surety or appeal bonds, or
other deposits or pledges for purposes of like general nature in
the ordinary course of business; mechanics’, carriers’,
workers’, repairmen’s or other like liens arising in
the ordinary course of business securing obligations which are not
overdue for a period of 60 days, or which are in good faith
being contested or litigated, or deposits to obtain the release of
such liens; liens created by or resulting from any litigation or
legal proceedings or proceedings being
-5-
contested in
good faith by appropriate proceedings, provided any execution
levied thereon shall be stayed; leases made, or existing on
property acquired, in the ordinary course of business;
landlords’ liens under leases to which the Company or any
Subsidiary is a party; and zoning restrictions, easements, licenses
or restrictions on the use of real property or minor irregularities
in title thereto; provided that all such liens described in this
subsection (d) do not, in the aggregate, materially impair the
use of such property in the operations of the business of the
Company or any Subsidiary or the value of such property for the
purpose of such business;
(d) liens
existing on the Issuance Date and listed in Schedule 4(r) to the
Note Purchase Agreement; and
(e) liens
securing Indebtedness permitted in clauses (6) through
(10) of the definition of “Permitted
Indebtedness.”
2.10 Transactions with Affiliates . The Company will
not pay, and will not permit any Subsidiary, directly or
indirectly, to pay, any funds to or for the account of, make any
investment (whether by acquisition of stock or Indebtedness, by
loan, advance, transfer of property, guarantee or other agreement
to pay, purchase or service, directly or indirectly, any
Indebtedness, or otherwise) in, lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to, or participate
in, or effect any transaction in connection with, any joint
enterprise or other joint arrangement with, any Affiliate of the
Company, except, on terms to the Company or such Subsidiary no less
favorable than terms that could be obtained by the Company or such
Subsidiary from a Person that is not an Affiliate of the Company,
as determined in good faith by the Board of Directors; provided,
however, this Section 2.10 shall not in any way restrict
(x) advances and repayment of advances among the Company and
BCI Communications, Inc. (“BCI”) or (y )
regularly occurring transactions with Affiliates as disclosed in
the Company’s filings with the SEC or which, on an annual
basis, do not exceed the amount of $60,000 in the
aggregate.
2.11 Rule 144A Information Requirement . Within
the period prior to the expiration of the holding period applicable
to sales hereof under Rule 144(k) under the 1933 Act (or any
successor provision), the Company shall, during any period in which
it is not subject to Section 13 or 15(d) under the 1934 Act,
make available to the Holder and any prospective purchaser of this
Note from the Holder, the information required pursuant to
Rule 144A(d)(4) under the 1933 Act upon the request of the
Holder and it will take such further action as the Holder may
reasonably request, all to the extent required from time to time to
enable the Holder to sell this Note without registration under the
1933 Act within the limitations of the exemption provided by Rule
144A, as Rule 144A may be amended from time to time. Upon the
request of the Holder, the Company will deliver to the Holder a
written statement as to whether it has complied with such
requirements.
2.12 Notice of Defaults . The Company shall notify
the Holder promptly, but in any event not later than five days
after the Company becomes aware of the fact, of any failure by the
Company to comply with this Article II.
-6-
3.1 If any of the following events of default (each, an
“Event of Default”) shall occur:
(a) Failure
to Pay Principal, Interest, Etc . The Company fails
(1) to pay the principal, the Optional Redemption Price or the
Repurchase Price hereof when due, whether at maturity, upon
acceleration or otherwise, as applicable, or (2) to pay any
installment of interest hereon when due; or
(b)
Conversion and the Shares . The Company fails to issue
or cause to be issued shares of Common Stock to the Holder or the
holder of any Other Note upon exercise of the conversion or
purchase rights of the Holder or such holder within three Trading
Days after the due date therefor in accordance with the terms of
this Note, any Other Note or any Warrant or Other Warrant or fails
to transfer any certificate for any such shares of Common Stock as
and when required by this Note and the Note Purchase Agreement or
the Other Note or any Warrant or Other Warrant, as the case may be;
or
(c) Breach
of Certain Covenants . The Company fails to comply with
Section 2.1, 2.7 or 2.8; or
(d) Breach
of Other Covenants . The Company fails to comply with any
other provision of Article II of this Note (other than
Section 2.1, 2.7 or 2.8) or breaches any other covenant or
other term or condition of this Note or any of the other
Transaction Documents (other than as specifically provided in
clauses (a), (b), and (c) of this Section 3.1) and such
failure continues unremedied for 30 calendar days after receipt by
the Company of notice thereof from the Holder; or
(e) Breach
of Representations and Warranties . Any representation or
warranty of the Company made herein or in any agreement, statement
or certificate given in writing pursuant hereto (or pursuant to any
Transaction Documents) shall be false or misleading when made;
or
(f) Certain
Voluntary Proceedings . The Company or any Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become
due or shall admit in writing its inability generally to pay its
debts as they become due; or
-7-
(g) Certain
Involuntary Proceedings . An involuntary case or other
proceeding shall be commenced against the Company or any Subsidiary
seeking liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for
a period of 90 consecutive days; or
(h)
Judgments . Any court of competent jurisdiction shall
enter one or more final judgments against the Company or any
Subsidiary or any of their respective properties or other assets in
an aggregate amount in excess of $250,000, which is not vacated,
appealed, bonded, stayed, discharged, satisfied or waived for a
period of 30 consecutive days; or
(i) Default
Under Other Agreements . (a) The Company or any
Subsidiary shall (i) default in any payment with respect to
any Indebtedness for borrowed money (other than this Note) which
Indebtedness has an outstanding principal amount in excess of
$100,000 individually or $250,000 in the aggregate for all such
Indebtedness, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created
or (ii) default in the observance or performance of any
agreement, covenant or condition relating to any such Indebtedness
or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is
to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to
cause, any such Indebtedness to become due prior to its stated
maturity and such default or event shall continue beyond the period
of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created (after giving effect to any
consent or waiver obtained and then in effect thereunder) and such
default shall continue for five days (or to such earlier date as
the holder of any other Indebtedness shall declare the same due and
payable by reason of such default; or (b) any Indebtedness of
the Company or any Subsidiary which has an outstanding principal
amount in excess of the $100,000 individually or $250,000 in the
aggregate for all such Indebtedness shall, in accordance with its
terms, be declared to be due and payable, or required to be prepaid
other than by a regularly scheduled or required payment prior to
the stated maturity thereof;
(1) upon the
occurrence and during the continuation of any Event of Default
specified in clause (a), (b), (c), or (e) of this
Section 3.1, at the option of the Holder, and upon the
occurrence of any Event of Default specified in clause (f) or
(g) of this Section 3.1: (X) the Company shall pay
to the Holder an amount equal to the outstanding principal amount
of this Note plus accrued and unpaid interest on such
principal amount to the date of payment plus accrued and
unpaid Default Interest, if any, thereon at the rate provided in
this Note to the date of payment, (Y) all other amounts
payable hereunder or under any of the other Transaction Documents
shall immediately become due and
-8-
payable, all
without demand, presentment or notice, all of which hereby are
expressly waived, together with all costs, including, without
limitation, reasonable legal fees and expenses of collection, and
(Z) the Holder shall be entitled to exercise all other rights
and remedies available at law or in equity; and
(2) upon the
occurrence and during the continuation of any Event of Default
specified in clause (d), (h) or (i) of this
Section 3.1: (A) if any Event of Default continues during
the period of 30 consecutive days following the occurrence of such
Event of Default, then thereafter so long as any Event of Default
is continuing (i) at the option of the Holder the Company
shall pay to the Holder an amount equal to the outstanding
principal amount of this Note plus accrued and unpaid
interest on such principal amount to the date of payment
plus accrued and unpaid Default Interest, if any, thereon at
the rate provided in this Note to the date of payment,
(ii) all other amounts payable hereunder shall immediately
become due and payable, all without demand, presentment or notice,
all of which hereby are expressly waived, together with all costs,
including, without limitation, reasonable legal fees and expenses,
of collection, and (B) the Holder shall be entitled to
exercise all rights and remedies available at law or in equity
other than those set forth in the immediately preceding clause
(A).
REPURCHASE UPON A REPURCHASE
EVENT
4.1 Repurchase Right Upon Repurchase Event . If a
Repurchase Event occurs, in addition to any other right of the
Holder, the Holder shall have the right, at the Holder’s
option, to require the Company to repurchase all of this Note, or
any portion hereof on the repurchase date that is five Business
Days after the date of the Holder Notice delivered with respect to
such Repurchase Event. The Holder shall have the right to require
the Company to repurchase all or any such portion of this Note if a
Repurchase Event occurs at any time while any portion of the
principal amount of this Note is outstanding at a price equal to
the Repurchase Price.
4.2 Notices; Method of Exercising Repurchase Rights, Etc
. (a) On or before the fifth Business Day after the
occurrence of a Repurchase Event, the Company shall give to the
Holder a Company Notice of the occurrence of the Repurchase Event
and of the repurchase right set forth herein arising as a result
thereof. Such Company Notice shall set forth:
(i) the date by
which the repurchase right must be exercised, and
(ii) a description
of the procedure (set forth in this Section 4.2) which the
Holder must follow to exercise the repurchase right.
No failure of
the Company to give a Company Notice or defect therein shall limit
the Holder’s right to exercise the repurchase right or affect
the validity of the proceedings for the repurchase of this Note or
portion hereof.
-9-
(b) To
exercise the repurchase right, the Holder shall deliver to the
Company on or before the 30th day after a Company Notice (or if no
such Company Notice has been given, within 40 days after the
Holder first learns of the Repurchase Event) (i) a Holder
Notice setting forth the name of the Holder and the principal
amount of this Note to be repurchased, and (ii) this Note,
duly endorsed for transfer to the Company of the portion of the
outstanding principal amount of this Note to be repurchased. A
Holder Notice may be revoked by the Holder at any time prior to the
time the Company pays the applicable Repurchase Price to the
Holder.
(c) If
the Holder shall have given a Holder Notice, then on the date which
is five Business Days after the date such Holder Notice is given
(or such later date as the Holder surrenders this Note) the Company
shall make payment in immediately available funds of the applicable
Repurchase Price to such account as specified by the Holder in
writing to the Company at least one Business Day prior to the
applicable repurchase date.
4.3 Other . A Holder Notice given by the Holder shall
be deemed for all purposes to be in proper form unless the Company
notifies the Holder within three Business Days after such Holder
Notice has been given (which notice shall specify all defects in
such Holder Notice), and any Holder Notice containing any such
defect shall nonetheless be effective on the date given if the
Holder promptly undertakes to correct all such defects. No such
claim of defect shall limit or delay performance of the
Company’s obligation to repurchase any portion of this Note,
the repurchase of which is not in dispute.
5.1 Right to Convert . Subject to and upon compliance
with the provisions of this Note, the Holder shall have the right,
at the Holder’s option, at any time prior to the close of
business on the Maturity Date (except that, if the Holder shall
have exercised repurchase rights under Sections 4.1 and 4.2 or
the Company shall have exercised its redemption rights under
Section 1.1, such conversion right shall terminate with respect to
the portion of this Note to be repurchased or redeemed, as the case
may be, at the close of business on the last Trading Day prior to
the later of (x) the Optional Redemption Date or the date the
Company is required to make such repurchase, as the case may be, or
(y) the date the Company pays or deposits in accordance with
Section 7.10 the applicable Repurchase Price or Optional
Redemption Price unless in any such case the Company shall default
in payment due upon repurchase or redemption hereof) to convert the
principal amount of this Note, or any portion of such principal
amount which is at least $10,000 (or such lesser principal amount
of this Note as shall be outstanding at such time), plus accrued
and unpaid interest, into that number of fully paid and
non-assessable shares of Common Stock (as such shares shall then be
constituted) obtained by dividing (1) the sum of (x) the
principal amount of this Note or portion thereof being converted
plus (y) accrued and unpaid interest on the portion of
the principal amount of this Note being converted to the applicable
Conversion Date plus (z) accrued and unpaid Default
Interest, if any, on the amount referred to in the immediately
preceding clause (y) to the applicable Conversion
-10-
Date by
(2) the Conversion Price in effect on the applicable
Conversion Date, by giving a Conversion Notice in the manner
provided in Section 5.2; provided, however, that, if at
any time this Note is converted in whole or in part pursuant to
this Section 5.1 and after the Charter Amendment is effected
or required to be effected in accordance with the Company’s
obligations under the Note Purchase Agreement, the Company does not
have available for issuance upon such conversion as authorized and
unissued shares or in its treasury at least the number of shares of
Common Stock required to be issued pursuant hereto, then, at the
election of the Holder made by notice from the Holder to the
Company, this Note (or portion hereof as to which conversion has
been requested), to the extent that sufficient shares of Common
Stock are not then available for issuance upon conversion, shall be
converted into the right to receive from the Company, in lieu of
the shares of Common Stock into which this Note or such portion
hereof would otherwise be converted and which the Company is unable
to issue, payment in an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which the
Company is unable to issue times (y) the arithmetic
average of the Market Price for the Common Stock during the five
consecutive Trading Days immediately prior to the applicable
Conversion Date. Any such payment shall, for all purposes of this
Note, be deemed to be a payment of principal plus a premium equal
to the total amount payable less the principal portion of this Note
converted as to which such payment is required to be made because
shares of Common Stock are not then available for issuance upon
such conversion. The Holder is not entitled to any rights of a
holder of Common Stock until the Holder has converted this Note to
Common Stock, and only to the extent this Note is deemed to have
been converted to Common Stock under this Article V. For
purposes of Sections 5.5 and 5.6, whenever a provision
references the shares of Common Stock into which this Note (or a
portion hereof) is convertible or the shares of Common Stock
issuable upon conversion of this Note (or a portion hereof) or
words of similar import, any determination required by such
provision shall be made as if a sufficient number of shares of
Common Stock were then available for issuance upon conversion in
full of this Note.
5.2 Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Interest or Dividends
. (a) In order to exercise the conversion privilege with
respect to this Note, the Holder shall give a Conversion Notice (or
such other notice which is acceptable to the Company) to the
Company and the Transfer Agent or to the office or agency
designated by the Company for such purpose by notice to the Holder.
A Conversion Notice may be given by telephone line facsimile
transmission to the numbers set forth on the form of Conversion
Notice.
(b) As
promptly as practicable, but in no event later than three Trading
Days, after a Conversion Notice is given, the Company shall issue
and shall deliver to the Holder or the Holder’s designee the
number of full shares of Common Stock issuable upon such conversion
of this Note or portion hereof in accordance with the provisions of
this Article and deliver a check or cash in respect of any
fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 5.2(f) and, if
applicable, any cash payment required pursuant to the proviso to
the first sentence of Section 5.1 (which payment, if any,
shall be paid no later than five Trading Days after the applicable
Conversion Date).
(c) Each
conversion of this Note (or portion hereof) shall be deemed to have
been effected on the applicable Conversion Date, and the person in
whose name any certificate
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or certificates
for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become on such Conversion Date the holder
of record of the shares represented thereby; provided,
however, that if a Conversion Date is a date on which the stock
transfer books of the Company shall be closed such conversion shall
constitute the person in whose name the certificates are to be
issued as the record holder thereof for all purposes on the next
succeeding day on which such stock transfer books are open, but
such conversion shall be at the Conversion Price in effect on the
applicable Conversion Date.
(d) The
Company shall notify the Holder of any claim by the Company of
manifest error in a Conversion Notice within two Trading Days after
the Holder gives such Conversion Notice and no such claim of error
shall limit or delay performance of the Company’s obligation
to issue upon such conversion the number of shares of Common Stock
which are not in dispute. A Conversion Notice shall be deemed for
all purposes to be in proper form unless the Company notifies the
Holder by telephone line facsimile transmission within two Trading
Days after a Conversion Notice has been given (which notice from
the Company shall specify all defects in the Conversion Notice) and
any Conversion Notice containing any such defect shall nonetheless
be effective on the date given if the Holder promptly undertakes to
correct all such defects. The Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in
the issuance and delivery of shares of Common Stock or other
securities or property on conversion of this Note in a name other
than that of the Holder, and the Company shall not be required to
issue or deliver any such shares or other securities or property
unless and until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of any such tax
or shall have established to the satisfaction of the Company that
such tax has been paid. The Holder shall be responsible for the
amount of any withholding tax payable in connection with any
conversion of this Note.
(e)
(1) If the Holder shall have given a Conversion Notice in
accordance with the terms of this Note, the Company’s
obligation to issue and deliver the certificates for Common Stock
shall be absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent
with respect to any provision hereof, the recovery of any judgment
against any person or any action to enforce the same, any failure
or delay in the enforcement of any other obligation of the Company
to the Holder, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or
any other person of any obligation to the Company or any violation
or alleged violation of law by the Holder or any other person, and
irrespective of any other circumstance which might otherwise limit
such obligation of the Company to the Holder in connection with
such conversion; provided, however, that nothing herein
shall limit or prejudice the right of the Company to pursue any
such claim in any other manner permitted by applicable law. The
occurrence of an event which requires an adjustment of the
Conversion Price as contemplated by Section 5.3 shall in no
way restrict or delay the right of the Holder to receive
certificates for Common Stock upon conversion of this Note and the
Company shall use its best efforts to implement such adjustment on
terms reasonably acceptable to the Holder within two Trading Days
of such occurrence.
(2) If
in any case the Company shall fail to issue and deliver the shares
of Common Stock to the Holder in connection with a particular
conversion of this Note within three Trading Days after the Holder
gives the Conversion Notice for such conversion, in addition
to
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any other
liabilities the Company may have hereunder and under applicable law
(A) the Company shall pay or reimburse the Holder on demand
for all out-of-pocket expenses, including, without limitation,
reasonable fees and expenses of legal counsel, incurred by the
Holder as a result of such failure, (B) if as a result of such
failure the Holder shall suffer any direct damages or liabilities
from such failure (including, without limitation, margin interest
and the cost of purchasing securities to cover a sale (whether by
the Holder or the Holder’s securities broker) or borrowing of
shares of Common Stock by the Holder for purposes of settling any
trade involving a sale of shares of Common Stock made by the Holder
during the period beginning on the Issuance Date and ending on the
date the Company delivers or causes to be delivered to the Holder
such shares of Common Stock), then the Company shall upon demand of
the Holder pay to the Holder an amount equal to the actual direct,
out-of-pocket damages and liabilities suffered by the Holder by
reason thereof which the Holder documents to the reasonable
satisfaction of the Company, and (C) the Holder may by written
notice (which may be given by mail, courier, personal service or
telephone line facsimile transmission) or oral notice (promptly
confirmed in writing), given at any time prior to delivery to the
Holder of the shares of Common Stock issuable in connection with
such exercise of the Holder’s conversion right, rescind such
exercise and the Conversion Notice relating thereto, in which case
the Holder shall thereafter be entitled to convert that portion of
this Note as to which such exercise is so rescinded and to exercise
its other rights and remedies with respect to such failure by the
Company. Notwithstanding the foregoing the Company shall not be
liable to the Holder under clause (B) of the immediately
preceding sentence to the extent the failure of the Company to
deliver or to cause to be delivered such shares of Common Stock
results from fire, flood, storm, earthquake, shipwreck, strike,
war, acts of terrorism, crash involving facilities of a common
carrier, acts of God, or any similar event outside the control of
the Company (it being understood that the action or failure to act
of the Transfer Agent shall not be deemed an event outside the
control of the Company except to the extent resulting from fire,
flood, storm, earthquake, shipwreck, strike, war, acts of
terrorism, crash involving facilities of a common carrier, acts of
God, or any similar event outside the control of the Transfer Agent
or the bankruptcy, liquidation or reorganization of the Transfer
Agent under any bankruptcy, insolvency or other similar law). The
Holder shall notify the Company in writing (or by telephone
conversation, confirmed in writing) as promptly as practicable
following the third Trading Day after the Holder gives a Conversion
Notice if the Holder becomes aware that such shares of Common Stock
so issuable have not been received as provided herein, but any
failure so to give such notice shall not affect the Holder’s
rights under this Note or otherwise. If the Holder shall have
exercised the conversion right in any particular instance and
either (1) the Company shall notify the Holder on or after the
date the Holder gives such Conversion Notice that the shares of
Common Stock issuable upon such conversion might not be delivered
within three Trading Days after the date the Holder gives such
Conversion Notice or (2) the Holder learns after the date
which is three Trading Days after the date the Holder gives such
Conversion Notice that the Holder has not received such shares of
Common Stock, then, without releasing the Company of its
obligations with respect thereto, from and after the Trading Day
next succeeding the earlier of the events described in the
preceding clauses (1) and (2) of this sentence the Holder
shall make reasonable efforts not to sell shares of Common Stock in
anticipation of receipt of such shares of Common Stock in a manner
which is likely to increase materially the liability of the Company
under clause (2) of the second preceding sentence.
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(f) No
fractional shares of Common Stock shall be issued upon conversion
of this Note but, in lieu of any fraction of a share of Common
Stock which would otherwise be issuable in respect of such
conversion, the Company may round the number of shares of Common
Stock issued on such conversion up to the next highest whole share
or may pay lawful money of the United States of America for such
fractional share, based on a value of one share of Common Stock
being equal to the Market Price of the Common Stock on the
applicable Conversion Date.
5.3 Adjustment of Conversion Price . The Conversion
Price shall be adjusted from time to time by the Company as
follows:
(a) In
case the Company shall on or after the Issuance Date pay a dividend
or make a distribution to all holders of the outstanding Common
Stock in shares of Common Stock, the Conversion Price in effect at
the opening of business on the date following the date fixed for
the determination of stockholders entitled to receive such dividend
or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of
business on the Record Date fixed for such determination and the
denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of
business on the day following the Record Date. If any dividend or
distribution of the type described in this Section 5.3(a) is
declared but not so paid or made, the Conversion Price shall again
be adjusted to the Conversion Price which would then be in effect
if such dividend or distribution had not been declared.
(b) In
case the Company shall on or after the Issuance Date issue rights
or warrants (other than any rights or warrants referred to in
Section 5.3(d)) to all holders of its outstanding shares of
Common Stock entitling them (for a period expiring within
45 days after the date fixed for the determination of
stockholders entitled to receive such rights or warrants) to
subscribe for or purchase shares of Common Stock at a price per
share less than the Current Market Price on the Record Date fixed
for the determination of stockholders entitled to receive such
rights or warrants, the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the
Conversion Price in effect at the opening of business on the date
after such Record Date by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close of
business on the Record Date plus the number of shares which the
aggregate offering price of the total number of shares so offered
would purchase at such Current Market Price, and the denominator
shall be the number of shares of Common Stock outstanding on the
close of business on the Record Date plus the total number of
additional shares of Common Stock so offered for subscription or
purchase. Such adjustment shall become effective immediately after
the opening of business on the day following the Record Date fixed
for determination of stockholders entitled to receive such rights
or warrants. To the extent that shares of Common Stock are not
delivered pursuant to such rights or warrants, upon the expiration
or termination of such rights or warrants, the Conversion Price
shall be readjusted to the Conversion Price which would then be in
effect had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. In the event that such
rights or warrants are not so issued, the Conversion Price shall
again be adjusted to be the Conversion Price which would
then
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be in effect if
such date fixed for the determination of stockholders entitled to
receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holder to subscribe for
or purchase shares of Common Stock at less than such Current Market
Price, and in determining the aggregate offering price of such
shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, the value of
such consideration, if other than cash, to be determined by the
Board of Directors.
(c) In
case the outstanding shares of Common Stock shall on or after the
Issuance Date be subdivided into a greater number of shares of
Common Stock, the Conversion Price in effect at the opening of
business on the earlier of the day following the day upon which
such subdivision becomes effective and the day on which
“ex-” trading of the Common Stock begins with respect
to such subdivision shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the
earlier of the day following the day upon which such combination
becomes effective and the day on which “ex-” trading of
the Common Stock with respect to such combination begins shall be
proportionately increased, such reduction or increase, as the case
may be, to become effective immediately after the opening of
business on the earlier of the day following the day upon which
such subdivision or combination becomes effective and the day on
which “ex-” trading of the Common Stock begins with
respect to such subdivision or combination.
(d) In
case the Company shall on or after the Issuance Date, by dividend
or otherwise, distribute to all holders of its Common Stock shares
of any class of capital stock of the Company (other than any
dividends or distributions to which Section 5.3(a) applies) or
evidences of its indebtedness, cash or other assets (including
securities, but excluding any rights or warrants referred to in
Section 5.3(b) and dividends and distributions paid
exclusively in cash and excluding any capital stock, evidences of
indebtedness, cash or assets distributed upon a merger or
consolidation to which Section 5.4 applies) (the foregoing
hereinafter in this Section 5.3(d) called the
“Securities”)), then, in each such case, subject to the
second paragraph of this Section 5.3(d), the Conversion Price shall
be reduced so that the same shall be equal to the price determined
by multiplying the Conversion Price in effect immediately prior to
the close of business on the Record Date with respect to such
distribution by a fraction of which the numerator shall
b
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