THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER SUCH ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
CONVERTIBLE PROMISSORY
NOTE
Finisar
Corporation, a Delaware corporation (the “ Company
”), for value received, promises to pay to Parviz Tayebati
(“ Holder ”) the principal sum of One Million
Three Hundred Fifty-seven Thousand Dollars ($1,357,000), together
with interest on the outstanding principal balance of this
Convertible Promissory Note (this “ Note ”) at
the rate of five percent (5.0%) per annum. This Note is issued
pursuant to that Purchase Agreement dated as of the date hereof to
which Company and Holder are parties (the “ Purchase
Agreement ”).
1.
Definitions . As used in this Note, the following terms
shall have the definitions ascribed to them below:
1.1.
“ Commission ” means the United States
Securities and Exchange Commission.
1.2.
“ Common Stock ” means the common stock, $0.001
par value, of the Company, and any securities into which such
common stock may hereafter be classified.
1.3.
“ Conversion Event ” has the meaning set forth
in Section 3.1 below.
1.4.
“ Conversion Price ” means the average closing
trading price per share of the Common Stock on the Nasdaq National
Market (“ NNM ”) for the three (3) Trading
Days ending two (2) days prior to the Conversion
Event.
1.4.
“ Conversion Shares ” has the meaning set forth
in Section 3.2 below.
1.5.
“ Deferred Amounts ” has the meaning set forth
in Section 2.1 below.
1.6.
“ Escrow Agreement ” means the Escrow Agreement
dated March 26 2007, by and among the Company, Holder,
Sellers’ Representative and Comerica Bank (the “
Escrow Agent ”).
1.7.
“ Initial Consideration Note ” means that
certain convertible note in the original principal amount of
Fifteen Million Five Hundred Ninety-two Thousand Nine
Hundred
twenty-six
Dollars ($15,592,926) issued by the Company to Holder simultaneous
herewith pursuant to the Purchase Agreement.
1.8.
“ Maturity Date ” means that date twelve
(12) months following the date hereof.
1.9.
“ Securities Act ” means the Securities Act of
1933, as amended.
1.10.
“ Trading Day ” means a day on which trading
occurs on the NNM (or any successor thereto).
2.1.
Payment . The entire outstanding balance of and accrued but
unpaid interest on this Note shall be due and payable, if not
converted pursuant to Section 3 below, on the Maturity Date;
provided, however, if an Indemnified Person (as such term is
defined in the Purchase Agreement) provides notice to the Holder
and the Escrow Agent of an Indemnity Claim or Claims (as such term
is defined in the Escrow Agreement) pursuant to Section 9.2(A)
of the Purchase Agreement for which the amount of Escrow Cash (as
defined in the Purchase Agreement) is insufficient, then the
Company may, in its sole discretion, defer payments under this Note
in an amount equal to the lesser of (i) such insufficiency or
(ii) the Indemnity Claim or Claims that have not been resolved
at the Maturity Date; and provided further, if an Indemnified
Person provides notice to the Holder and the Escrow Agent of a
claim for indemnification against Holder pursuant to
Section 9.3 of the Purchase Agreement then the Company may, in
its sole discretion, defer payments under this Note in an amount
equal to the Indemnity Claim or Claims that have not been resolved
at the Maturity Date (the amount determined pursuant to this first
sentence of Section 2.1 being the “ Deferred
Amounts ”). Within five (5) business days following
the date on which the Company and the Holder agree or the
arbitrator under Section 10.3 of the Escrow Agreement
determines that a Indemnified Person is entitled to recover an
amount with respect to the Indemnity Claim or Claims (the “
Resolved Amount ”), such Resolved Amount shall be
offset without further action or notice against the Deferred
Amounts. If the Resolved Amount is less than the Deferred Amounts,
the Company shall pay the remaining principal balance on this Note
(after offset of the Resolved Amount) to the Holder within five
(5) business days after the date on which the offset is
applied. The Company shall have the right at any time and without
premium or penalty to prepay this Note, in whole or in part, in
lieu of conversion pursuant to Section 3 below, on or prior to
the Maturity Date.
2.2.
Interest . The Company shall pay interest to the Holder on
the outstanding principal balance of this Note at the rate of five
percent (5.0%) per annum, which shall be payable at the
Company’s option in (a) cash or (b) additional
shares of Common Stock if this Note is converted pursuant to
Section 3 below. Payment of the interest in cash shall be made
on the Maturity Date and payment of the interest in shares of
Common Stock shall be made on the date(s) for delivery of
certificates representing the Conversion Shares provided for in
Section 3.3. Interest shall be calculated on the basis of a
365-day year and shall accrue daily commencing on the date
hereof.
2
2.3.
Currency . All payments shall be in lawful money of the
United States of America.
3.
Conversion . This Note shall convert into Common Stock as
follows:
3.1.
Conversion Event . Provided that the Registration Statement
(as defined in the Purchase Agreement) filed by the Company with
the Commission shall have been declared effective (the “
Conve
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