Exhibit 4.9
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE
SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN FIRST OFFER AND CO-SALE AGREEMENT BY
AND BETWEEN THE NOTE HOLDER, THE COMPANY AND CERTAIN HOLDERS OF
NOTES/AND OR STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
ORION
ENERGY SYSTEMS, INC., a Wisconsin corporation (the “
Company ”), the principal office of which is located
at 1204 Pilgrim Road, Plymouth, Wisconsin 53073, for value received
hereby promises to pay to Technology Transformation Venture Fund,
LP, a Delaware limited partnership (the “ Holder
”), the sum of $50,000, or such other amounts as shall then
equal the outstanding principal amount hereof and any unpaid
accrued interest hereon, as set forth below, which shall be due and
payable on the Maturity Date. Payment for all amounts due hereunder
shall be made in accordance with Section 2 hereof.
The
following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the
Holder hereof, by the acceptance of this Note, agrees:
1. Definitions . As used
in this Note, the following terms, unless the context otherwise
requires, have the following meanings:
(i) “ Articles of
Incorporation ” means the Company’s Amended and
Restated Articles of Incorporation dated July 31, 2006.
(ii) “ Change in Control
” means (a) the acquisition by any person or entity, or
two or more persons or entities acting in concert, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934)
of 50.1% or more of the outstanding shares of either voting stock
of Company or voting ownership interests of Company.
(iii) “ Common Stock
” means the Company’s common stock.
(iv) “ Company ”
includes any corporation that, to the extent permitted by this
Note, shall succeed to or assume the obligations of the Company
under this Note.
(v) “ Existing Transaction
Documents ” means the Amended and Restated Investor
Rights Agreement, the Amended and Restated Right of First Refusal
and Co-Sale Agreement and the Note Purchase Agreement, in each case
by and among the Company and the other parties a signatory thereto
and dated effective as of August 3, 2007.
(vi) “ Holder ”
when the context refers to a holder of this Note, shall mean any
person who shall at the time be the registered holder of this
Note.
(vii) “ Holders ”
means all of the holders of the Notes.
(viii) “ Independent
Directors ” means the members of the Board of Directors
who are not employees of the Company and were not employees of the
Company during the twenty-four (24) month period prior to the
Original Issue Date.
(ix) “ Maturity Date
” means the earliest to occur of (a) when declared due
and payable by the Holder upon the occurrence of an Event of
Default (as defined below), or (b) August 3, 2012.
(x) “ Notes ”
means each of the substantially identical Convertible Subordinated
Promissory Notes sold pursuant to the Note Purchase
Agreements.
(xi) “ Note Purchase
Agreement ” means that certain Note Purchase Agreement
among the Company, GE Capital Equity Investments, Inc., Clean
Technology Fund II, L.P., CapVest Venture Fund, LP, and Technology
Transformation Venture Fund, LP dated August 3, 2007.
(xii) “ Original Issue
Date ” means the date on which this Note was first
issued.
(xiii) “ QExit ”
means a merger or sale of at least a majority of the Company assets
or stock resulting in consideration on a per share basis of a
value, on or before August 3, 2009, of at least $11.23 per
share, and after such date, of at least $13.47 per share (subject
to appropriate adjustment for stock splits, stock dividends,
combinations and other similar recapitalizations affecting such
shares).
(xiv) “ QIPO ”
means the closing of the sale of shares of Common Stock at a price
to the public, on or before August 3, 2009, of at least $11.23
per share, and after such date, of at least $13.47 per share
(subject to appropriate adjustment for stock splits, stock
dividends, combinations and other similar recapitalizations
affecting such shares), in a firm-commitment underwritten public
offering
pursuant to an
effective registration statement under the Securities Act of 1933,
as amended, resulting in at least $30,000,000 of net proceeds to
the Company after deduction of underwriters’ commissions and
expenses payable by the Company.
(xv) “ Securities Act
” means the Securities Act of 1933, as amended.
2. Interest; Payment Upon
Maturity Date .
2.1 Interest Rates .
(i) Interest Rate . Prior to
the Maturity Date, interest shall accrue on the aggregate unpaid
principal amount outstanding under this Note at the rate of six
percent (6%) per annum simple, allocated as follows: (A) 3.9%
per annum shall accrete to the principal balance of the Note
quarterly in arrears and (B) 2.1% per annum shall be payable
in cash quarterly in arrears (collectively, the “ Interest
Rate ”).
(ii) Deferral Rate . If the
Company is prohibited or otherwise restricted from paying any
amounts owing to Holder due to obligations or restrictions related
to its senior indebtedness or under applicable law, the Company
shall have the right to defer any such payment(s); provided,
however, that from the date of such deferral, the interest rate
applicable to such deferred payment shall increase to eight percent
(8%) per annum (3.9% accreting to principal and 4.1% payable in
cash), compounding, until such payment is made.
(iii) Default Rate . If an
Event of Default has occurred and is continuing, interest at the
same rate as the Interest Rate plus four percent (4%) shall be
payable, in cash, on the balance of any unpaid principal until such
balance is paid.
(iv) Payments . All cash
payments of interest provided pursuant to this Section 2.1
shall be payable by wire transfer to an account designated in
writing by Holder. If the Note is converted into shares of Common
Stock in accordance with Section 6, any unpaid cash interest
shall be due and payable on the date of such conversion.
2.2 Payment Upon Maturity Date
.
(i) Holder may elect to have the
Company pay this Note in full by delivering written notice of such
election to the Company, with a copy to the other Holders, one
hundred and twenty (120) days in advance of the Maturity Date
(or 120 days in advance of any other date after the Maturity
Date), in which event the Company shall pay this Note (including
all accrued and accreted interest) in three (3) semi-annual
installments beginning on the Maturity Date or such later
date.
(ii) All payments of principal and
interest provided pursuant to this Section 2.2 shall be
payable by wire transfer to an account designated in writing by
Holder.
3. Events of Default .
If any of the events specified in this Section 3 shall occur
(herein individually referred to as an “ Event of
Default ”), the Holder of the Note may, so long as such
condition exists, declare the entire principal and unpaid accrued
interest hereon immediately due and payable, by notice in writing
to the Company:
(i) Default in the payment of the
principal and unpaid accrued interest of this Note when due and
payable if such default is not cured by the Company within ten
(10) days after the Holder has given the Company written
notice of such default;
(ii) Any breach by the Company of any
representation, warranty, or covenant in the Note Purchase
Agreement; provided, that, in the event of any such breach, to the
extent such breach is susceptible to cure, such breach shall not
have been cured by the Company within fifteen (15) days after
the earliest to occur of (a) written notice to the Company of
such breach, and (b) the Company’s actual knowledge of
such breach;
(iii) Any breach by the Company of
any covenant in the Existing Transaction Documents; provided, that,
in the event of any such breach, to the extent such breach is
susceptible to cure, such breach shall not have been cured by the
Company within fifteen (15) days after the earliest to occur
of (a) written notice to the Company of such breach, and (b)
the Company’s actual knowledge of such breach;
(iv) The institution by the Company
of proceedings to be adjudicated as bankrupt or insolvent, or the
consent by it to institution of bankruptcy or insolvency
proceedings against it or the filing by it of a petition or answer
or consent seeking reorganization or release under the federal
Bankruptcy Act, or any other applicable federal or state law, or
the consent by it to the filing of any such petition or the
appointment of a receiver, liquidator, assignee, trustee or other
similar official of the Company, or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the taking of corporate action by the Company in
furtherance of any such action (a “ Voluntary Bankruptcy
Proceeding ”);
(v) If, within sixty (60) days
after the commencement of an action against the Company (and
service of process in connection therewith on the Company) seeking
any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute,
law or regulation, such action shall not have been resolved in
favor of the Company or all orders or proceedings thereunder
affecting the operations or the business of the Company or of all
or any substantial part of the properties of the Company,
such
appointment
shall not have been vacated (an “ Involuntary Bankruptcy
Proceeding ”);
(vi) Any Change in Control that is
not a QIPO or QExit;
(vii) Company shall fail within
thirty days to pay, bond or otherwise discharge any judgment or
order for the payment of money in excess of $1,000,000 (or multiple
judgments or orders for the payment of an aggregate amount in
excess of $2,000,000) which is not stayed on appeal or otherwise
being appropriately contested in good faith and as to which no
enforcement actions have been commenced;
(viii) Delivery of a
“Repurchase Notice” (as defined in the Articles of
Incorporation);
(ix) Payment or declaration (but not
the accrual) of any dividend to holders of Series C Preferred Stock
or any other class of equity securities; or
(x) The occurrence of a “Deemed
Liquidation Event” (as defined in the Articles of
Incorporation) that is not a QIPO or QExit.
4. Subordination . The
indebtedness evidenced by this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all the
Company’s Senior Indebtedness, as hereinafter defined.
4.1 Senior Indebtedness . As
used in this Note, the term “ Senior Indebtedness
” shall mean the principal of and unpaid accrued interest on:
(i) all existing indebtedness of the Company to banks,
commercial finance lenders, insurance companies or other financial
institutions regularly engaged in the business of lending money,
which is for money borrowed by the Company (whether or not
secured); (ii) all indebtedness of the Company to banks,
commercial finance lenders, insurance companies, or other financial
institutions regularly engaged in the business of lending money,
which may arise under any line of credit of the Company existing on
the Original Issue Date (whether or not secured);
(iii) indebtedness pursuant to a capital lease with Wells
Fargo Equipment Finance, Inc. (or an affiliate) consistent with
that certain lease proposal dated July 25, 2007, a copy of
which has been provided to Holder, and (iv) any such
indebtedness or any debentures, notes or other evidence of
indebtedness issued in exchange for or to refinance such Senior
Indebtedness, or any indebtedness arising from the satisfaction of
such Senior Indebtedness by a guarantor.
4.2 Default on Senior
Indebtedness . If there should occur any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization or arrangements with creditors (whether or not
pursuant to bankruptcy or other insolvency laws), sale of all or
substantially all of the assets, dissolution, liquidation or any
other marshalling of the assets and liabilities of the Company then
(i) no amount shall be paid by the Company in respect of the
principal of or interest on this Note at the time outstanding,
unless and until the principal of and interest on the Senior
Indebtedness
then
outstanding shall be satisfied, and (ii) no claim or proof of
claim shall be filed with the Company by or on behalf of the Holder
of this Note that shall assert any right to receive any payments in
respect of the principal of and interest on this Note, except
subject to the satisfaction of the principal of and interest on all
of the Senior Indebtedness then outstanding. If there occurs an
event of default that has been declared in writing with respect to
any Senior Indebtedness permitting the holder of such Senior
Indebtedness to accelerate the maturity thereof, then, unless and
until such event of default shall have been cured or waived or
shall have ceased to exist, or all Senior Indebtedness shall have
been satisfied, no payment shall be made in respect of the
principal of or interest on this Note.
4.3 Effect of Subordination .
Subject to the rights, if any, of the holders of Senior
Indebtedness under this Section 4 to receive cash, securities
or other properties otherwise payable or deliverable to the Holder
of this Note, nothing contained in this Section 4 shall
impair, as between the Company and the Holder, the obligation of
the Company, subject to the terms and conditions hereof, to pay to
the Holder the principal hereof and interest hereon as and when the
same become due and payable, or shall prevent the Holder of this
Note, upon default hereunder, from exercising all rights, powers
and remedies otherwise provided herein or by applicable law.
4.4 Undertaking . By its
acceptance of this Note, the Holder agrees to execute and deliver
such documents as may be reasonably requested from time to time by
the Company or the lender of any Senior Indebtedness in order to
implement the foregoing provisions of this Section 4, at the
expense of the Company.
5. Prepayment . The
Company shall not be permitted to prepay any outstanding principal
under this Note or interest thereon without Holder’s prior
written consent.
6. Conversion .
6.1 Automatic Conversion . The
principal and accrued interest outstanding under this Note shall be
converted, immediately, automatically and without election on the
part of the Holder hereof, upon the closing of a QIPO or a QExit
into shares of the Company’s Common Stock at a conversion
price equal to $4.49 per share (the “ Base Conversion
Price ”). For each quarter in which interest accretes to
the principal balance of this Note in accordance with Section
2.1(i)(A), the aggregate Base Conversion Price will increase by
.975% of the original Base Conversion Price (on a quarterly basis)
in order to ensure that this Note shall at all times be convertible
into an aggregate of 11,136 shares of Common Stock (subject to
anti-dilution adjustment as provided herein) (as adjusted, the
“ Conversion Price ”). In connection with a
conversion effectuated pursuant to this Section 6.1, the
number of shares of Common Stock into which this Note may be
converted shall be determined by dividing the aggregate outstanding
principal (including, for the avoidance of doubt, any interest
which has accreted to the principal balance as provided in
Section 2.1(i)(A) but excluding any cash payments of interest
paid to Holder as provided in Section 2.1) through the date of the
conversion of the Note by the Conversion Price.
6.2 Optional Conversion into
Common Stock. At any time, all but not less than all of the
principal amount then outstanding under this Note (including, for
the avoidance of doubt, any interest which has accreted to the
principal balance as provided in Section 2.1(i)(A) but
excluding any cash payments of interest paid to Holder as provided
in Section 2.1) may, at the election of the Holder, be
converted into Common Stock of the Company, with such conversion to
be effected at the Conversion Price. The Holder shall exercise this
optional conversion right, if at all, by giving notice thereof to
the Company at least ten (10) days prior to the date of
conversion.
6.3 Notice Regarding QIPO or
QExit . At least ten (10) business days prior to the
anticipated closing of a QIPO or transaction which would constitute
a QExit, written notice shall be delivered to the Holder at the
address last shown on the records of the Company for the Holder or
given by the Holder to the Company for the purpose of notice or, if
no such address appears or is given, at the place where the
principal executive office of the Company is located,
(1) notifying the Holder of the QIPO or QExit,
(2) specifying (A) in the case of a QExit, the terms and
conditions thereof, (B) the then outstanding principal amount
of the Note, (C) the then outstanding amount of accreted
interest as provided for in Section 2.1(i)(A), and
(D) the date on which such transaction will close (which in no
event shall be less than ten (10) business days following
delivery of said notice), and, (3) if the Note is subject to
automatic conversion pursuant to Section 6.1, calling upon
such Holder to surrender the Note to the Company in the manner and
at the place designated in such notice.
6.4 Mechanics and Effect of
Conversion . No fractional shares of Common Stock shall be
issued upon conversion of this Note. In lieu of the Company issuing
any fractional shares to the Holder upon the conversion of this
Note, the Company shall pay to the Holder the amount outstanding
that is not so converted, such payment to be in made by Company
check in an amount equal to the fractional share multiplied by the
Conversion Price. At its expense, the Company shall, as soon as
practicable following conversion of this Note and surrender of this
Note to the Company, issue and deliver to the Holder at its
principal office a certificate or certificates for the number of
shares of Common Stock to which the Holder shall be entitled upon
such conversion (bearing such legends as are required by any
applicable purchase documents and applicable state and federal
securities laws in the opinion of counsel to the Company), together
with any other securities and property to which the Holder is
entitled upon such conversion under the terms of this Note,
including a check payable to the Holder for any cash amounts
payable as described above. Upon conversion of this Note, the
Company shall be forever released from all its obligations and
liabilities under this Note, except that the Company shall be
obligated to pay the Holder, within ten (10) days after the
date of such conversion, the cash equivalent of any fractional
shares that otherwise would have been issued upon such conversion,
and no more.
6.5 Reservation of Stock Issuable
Upon Conversion . The Company covenants and agrees that the
Company shall re
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