|
Exhibit 4.5
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED, AND ACCORDINGLY MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT.
October 13, 2006
FIRST SENIOR CONVERTIBLE PROMISSORY
NOTE
FOR THE VALUE RECEIVED, TERCICA, INC., a Delaware corporation
(the Company ), promises to pay Ipsen, S.A. a French
société anonyme , or its registered assigns
(the Holder ) the principal sum of Twenty Five
Million Thirty Seven Thousand Dollars ($25,037,000) on the Maturity
Date (as specified herein), together with interest computed on the
basis of a 360-day year of twelve 30-day months (a) on the
unpaid principal balance hereof at a rate equal to 2.5% per
annum from the date hereof, which interest shall be compounded
quarterly on
March 31, June 30, September 30 and
December 31 of each year, commencing January 1, 2007, and
(b) to the extent permitted by law on any overdue payment of
principal or interest at a rate per annum equal to Default Rate,
which default interest shall be payable on demand. Payment shall be
made in lawful tender of the United States to the Holder by the
method and at the address specified for such purpose by the Holder
from time to time.
1. D EFINITIONS
|
(a)
|
Additional Shares of Common
Stock has the meaning attributed to it in
Section 3(f) of this Note.
|
|
(b)
|
Adjustment Events means
(1) any reclassification or change of Common Stock (other than
a change in par value, as a result of a Subdivision or
Combination), (2) any consolidation, merger or mandatory share
exchange of the Company with or into another corporation (other
than a merger or mandatory share exchange with another corporation
in which the Company is a continuing corporation and which does not
result in any reclassification or change other than a change in par
value or as a result of a Subdivision or Combination).
|
|
(c)
|
Affiliate means, in respect of
any Person, any other Person directly or indirectly controlling,
controlled by, or under common control with, such Person or any of
its subsidiaries, and the term "control" (including the terms
"controlled by" and "under common control with") means having,
directly or indirectly, the power to direct or cause the direction
of the management and policies of a Person, whether through
ownership of voting securities or by contract or otherwise.
|
|
(d)
|
Affiliation Agreement means that
certain Affiliation Agreement dated as of the date hereof by and
among the Company, Ipsen S.A., a French société
anonyme and Suraypharm, a French société par
actions simplifiée .
|
|
(e)
|
Aggregate Consideration has the
meaning attributed to it in Section 3(d) of this Note.
|
|
(f)
|
The terms beneficial owner ,
beneficial ownership and beneficially
own have the meanings attributed to them in the Affiliation
Agreement.
|
|
(g)
|
Board means the Board of
Directors of the Company.
|
|
(h)
|
Business Day means a day, other
than Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by applicable law to
close.
|
|
(i)
|
Capital Lease means any lease
that is required to be capitalized on the balance sheet of the
lessee in accordance with generally accepted accounting
principles.
|
|
(j)
|
Combination has the meaning
attributed to in Section 4(c) of this Note.
|
|
(k)
|
Common Stock means the
Company’s common stock with a par value of $0.001 per
share.
|
|
(l)
|
Conversion Amount means, with
respect to any conversion of this Note, the sum of (1) the
principal amount of this Note to be converted in such conversion
plus (2) accrued and unpaid interest on such principal amount
at the interest rates provided in this Note to the Conversion Date
plus (3) Default Interest, if any, on the interest referred to
in the immediately preceding clause (2).
|
|
(m)
|
Conversion Date has the meaning
attributed to it in Section 2(a) of this Note.
|
|
(n)
|
Conversion Price means $7.41, as
adjusted pursuant to Sections 3 and 4 of this Note.
|
|
(o)
|
Convertible Notes has the
meaning attributed to it in the Purchase Agreement.
|
|
(p)
|
Convertible Securities has the
meaning attributed to it in Section 3(e) of this Note.
|
|
(q)
|
Covenant Defeasance has the
meaning attributed to it in Section 8.1(c) of this
Note.
|
|
(r)
|
Default has the meaning
attributed to it in Section 11 of this Note.
|
|
(s)
|
Default Interest means the
interest payable at the Default Rate in respect of this Note as
provided herein.
|
Page 2 of 40
|
(t)
|
Default Rate means the rate of
interest that is the greater of (i) 5.52% and (ii) 3%
over the applicable Libor Rate.
|
|
(u)
|
Disposition means the sale,
lease or other disposition of any property by any Person.
|
|
(v)
|
EBITDA means, for any period,
the sum, for the Company and its subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP), of
the following: (i) net income for such period plus
(ii) Interest Expense for such period, together with any
original issue discount to the extent deducted in calculating net
income plus (iii) income taxes for such period
plus (iv) depreciation and amortization (to the extent
deducted in computing net income) for such period.
|
|
(w)
|
Effective Price has the meaning
attributed to it in Section 3(g) of this Note.
|
|
(x)
|
Guaranty , with respect to any
Person, means all obligations of such Person guaranteeing or in
effect guaranteeing any Indebtedness ("primary obligations") of any
other Person (the "primary obligor") in any manner, whether
directly or indirectly, including obligations incurred through an
agreement, contingent or otherwise, by such Person (a) to
purchase such primary obligation or any property or assets
constituting security therefor, (b) to advance or supply funds
(i) for the purchase or payment of such primary obligation or
(ii) to maintain working capital or equity capital, or
otherwise to advance or make available funds for the purchase or
payment of such primary obligation, (c) to purchase property,
securities or services primarily for the purpose of assuring the
owner of such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or
(d) otherwise to assure the owner of such primary obligation
against loss in respect thereof; provided that the term
"Guaranty" shall not include any endorsement of a matured
instrument for collection or deposit in the ordinary course of
business. The amount of any Guaranty shall be deemed to be an
amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty is made or, if not
stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith. The
verb "Guarantee" shall have a correlative meaning.
|
|
(y)
|
Increlex License has the meaning
attributed to it in the Purchase Agreement.
|
|
(z)
|
Indebtedness , with respect to
any Person, means all items (other than capital stock, capital
surplus, retained earnings, obligations payable in capital stock of
such Person and deferred credits) which in accordance with
generally accepted accounting principles would be included in
determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date of which Indebtedness
is to be determined. The term "Indebtedness" shall also include,
whether or not so reflected, (i) indebtedness, obligations and
liabilities secured by
|
Page 3 of 40
-
-
any Lien on property of such Person whether or
not the indebtedness secured thereby shall have been assumed by
such Person, (ii) the amount that would appear on the
liabilities side of a balance sheet of such Person as at the date
of determination in respect of rentals under Capital Leases,
(iii) obligations of such Person to pay the deferred purchase
price or acquisition price of property or services, other than
trade accounts payable (other than for borrowed money) arising in
the ordinary course of business, (iv) payment obligations with
respect to interest rate swaps, currency swaps and similar
obligations, and (v) all Guaranties of any of the above.
Notwithstanding the foregoing, in determining the indebtedness of
any Person, there shall be included all indebtedness of such Person
deemed to be extinguished under generally accepted accounting
principles but for which such Person remains legally liable. The
amount of any limited recourse Indebtedness shall be equal to the
principal amount of such limited recourse debt for which such
Person provides credit support of any kind is liable as a guarantor
or otherwise.
|
(aa)
|
Indemnitees has the meaning
attributed to it in Section 12 of this Note.
|
|
(bb)
|
Interest Expense means, for any
period, the sum, for the Company and its subsidiaries (determined
on a consolidated basis without duplication in accordance with
GAAP), of the following: (i) all cash interest in respect of
Indebtedness (including, without limitation, the interest component
of any payments in respect of Capital Lease Obligations) accrued
during such period (whether or not actually paid during such
period) plus (ii) the net amount payable (or minus
the net amount receivable) under the Interest Rate Protection
Agreements during such period (whether or not actually paid or
received during such period).
|
|
(cc)
|
Investor has the meaning
attributed to it in the Affiliation Agreement.
|
|
(dd)
|
Investor Directors has the
meaning attributed to it in the Affiliation Agreement.
|
|
(ee)
|
Libor Rate shall mean, for any
date, the rate appearing on Page 3750 of the Dow Jones Markets
Service (or on any successor or substitute page of such Service, or
any successor to or substitute for such Service, providing rate
quotations comparable to those currently provided on such page of
such Service, as determined by the Holder from time to time for
purposes of providing quotations of interest rates applicable to
dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, on such date with a three-month
maturity. In the event that such rate is not available at such time
for any reason, then the Libor Rate shall be the arithmetic average
of the rates (rounded upwards, if necessary, to the next 1/16 of
1%) at which dollar deposits of $5,000,000 and for a maturity of
three months are offered by the principal London office of Barclays
Bank plc in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, on such
date.
|
Page 4 of 40
|
(ff)
|
Lien means any lien, pledge,
mortgage, deed of trust, security interest, attachment, easement or
other similar encumbrance of any kind.
|
|
(gg)
|
Losses has the meaning
attributed to in Section 12 of this Note.
|
|
(hh)
|
Material Adverse Effect means a
material adverse change in, or a material adverse effect upon
(i) the operations, business, assets, properties, liabilities
or financial condition of the Company and its subsidiaries taken as
a whole or (ii) the ability of the Company to make any
payments due in respect of this Note.
|
|
(ii)
|
Maturity Date has the meaning
attributed to it in Section 2(a) of this Note.
|
|
(jj)
|
Net Indebtedness means as of any
date (i) Indebtedness as of such date minus (ii) cash
and cash equivalents held by the Company as of such date.
|
|
(kk)
|
New Note has the meaning
attributed to in Section 4(a) of this Note.
|
|
(ll)
|
Note Adjustment Factor means a
fraction, the numerator of which is the total number of shares
outstanding immediately after the relevant Subdivision, Combination
or Stock Dividend, and the denominator of which is the total number
of shares existing immediately prior to such event.
|
|
(mm)
|
Note Conversion Shares has the
meaning attributed to it in Section 2(a) of this Note.
|
|
(nn)
|
Note Ledger has the meaning
attributed to it in Section 2(c) of this Note.
|
|
(oo)
|
Notice of Conversion means a
notice to the Company of the Holder’s intention to convert
all or a portion of this Note in accordance, such notice to be
consistent with the form of notice attached as Annex A to this
Note.
|
|
(pp)
|
Opinion of Counsel has the
meaning attributed to it in Section 8.1(d)(iv) of this
Note.
|
|
(qq)
|
Ownership Trigger has the
meaning attributed to it in Section 2(a) of this Note.
|
|
(rr)
|
Permitted Indebtedness means
(i) Indebtedness of the Company hereafter incurred in the
ordinary course of business, (ii) Indebtedness listed on
Schedule 1(rr) hereto, (iii) Indebtedness of the Company in
respect of obligations under Capital Leases and other purchase
money indebtedness, in each case incurred to finance expenditures
that, in accordance with generally accepted accounting principles,
are included in "capital expenditures," "additions to property,
plant or equipment" or comparable items in the financial statements
of the Company incurred in the ordinary course of business, not to
exceed One Million Dollars ($1,000,000) at any time outstanding,
(iv) trade payables arising in the ordinary course of
business, (v) Guarantees of Indebtedness permitted hereunder,
(vi) loans by the Company or wholly-owned subsidiaries of the
Company made in the
|
Page 5 of 40
-
-
ordinary course of business to the
Company’s subsidiaries not to exceed, in the aggregate and at
any time, One Million Dollars ($1,000,000) of principal amount
outstanding, (vii) loans by the Company’s subsidiaries
to the Company, (viii) payment obligations with respect to
interest rate swaps, currency swaps and similar obligations entered
into in the ordinary course of business and not for speculative or
trading purposes, (ix) Indebtedness in respect of performance,
bid, surety, indemnity, appeal bonds, completion guarantees and
other obligations of like nature and Guarantees and or obligations
as an account party in respect of the face amount of trade letters
of credit in respect thereof (including worker’s compensation
claims, environmental remediation and other environmental matters
and obligations in connection with self-insurance or similar
requirements), in each such case to the extent provided in the
ordinary course of business, (x) subordinated indebtedness,
(xi) Indebtedness of a Person existing at the time such Person
becomes a subsidiary of the Company and not in contemplation
thereof, provided such Indebtedness is repaid (and the commitments
thereunder terminated) not later than 180 days following the date
on which such Person becomes a subsidiary, and
(x) Indebtedness of the Company as an account party or
applicant in respect of letters of credit issued to landlords in an
aggregate and at any time, One Million Dollars ($1,000,000) of
principal amount outstanding.
|
(ss)
|
Permitted Investments means
(i) investments made in accordance with the Company’s
investment policy, attached hereto as Schedule 1(ss)(1),
(ii) investments of subsidiaries or the Company in or to other
subsidiaries that are not wholly owned not to exceed $250,000 in
the aggregate in any calendar year, (iii) investments
(including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business,
(iv) investments received as consideration in connection with
a permitted disposition of any assets or received in satisfaction
of judgments not to exceed $2,000,000, and (v) loans, advances
or ownership existing on the date of this Note and set forth in
Schedule 1(ss)(2) hereto.
|
|
(tt)
|
Permitted Liens means
(i) any Lien for taxes, assessments or governmental charges or
levies not yet due or payable or being contested in good faith by
appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting
principles applied on a consistent basis, (ii) any statutory
Lien and Liens of carriers, warehousemen, mechanics, materialmen,
repairmen and suppliers and other Liens imposed by law or pursuant
to customary reservations or retentions of title, in each case,
arising in the ordinary course of business by operation of law with
respect to a liability that is not past due or which is being
contested in good faith by appropriate proceedings and for which
reserves have been established in accordance with GAAP,
(iii) Liens securing equipment subject to Capital Leases that
qualify as Permitted Indebtedness above, which Liens are in favor
of the party from whom the Company is leasing the equipment,
(iv) Liens existing on the date hereof and set
|
Page 6 of 40
-
-
forth in Schedule 1(tt) hereto, (v) pledges
or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other
social security legislation, (vi) easements, rights-of-way,
restrictions and other similar encumbrances affecting real property
which do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary
conduct of the business of the applicable Person, (vii) Liens
securing judgments for the payment of money (or appeal or other
surety bonds relating to such judgments) not constituting an Event
of Default, (viii) leases or subleases granted to others not
interfering in any material respect with the Company’s
business, (ix) any interest of title of a lessor under, and
Liens arising from UCC financing statements (or equivalent filings,
registrations or agreements in foreign jurisdictions) relating to,
leases permitted hereunder, (x) normal and customary rights of
setoff upon deposits of cash in favor of banks or other depository
institutions, (xi) Liens of a collection bank arising under
Section 4-210 of the Uniform Commercial Code on items in the
course of collection, (xii) Liens of sellers of goods arising
under Article 2 of the Uniform Commercial Code or similar
provisions of applicable law in the ordinary course of business,
covering only the goods sold and securing only the unpaid purchase
price for such goods and related expenses, (xiii) Liens in
favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the
importation of goods, or (xiv) Liens solely on deposits,
advances, contractual payments, including implementation allowances
or escrows made or paid by any loan party or any subsidiary to or
with customers, clients or landlords in the ordinary course of
business, provided that , such deposits, advances,
contractual payments, implementation allowances or escrows do not,
in the aggregate and at any one time, exceed One Million Dollars
($1,000,000).
|
(uu)
|
Permitted Transfer means the
(i) Disposition of obsolete or worn out property or property
no longer used or useful in the conduct of business, whether now
owned or hereafter acquired, in the ordinary course of business,
(ii) Disposition of inventory in the ordinary course of
business, (iii) Disposition of equipment or real property in
the ordinary course of business to the extent that (x) such
property is exchanged for credit against the purchase price of
similar replacement property or is otherwise reinvested in the
business of the Company or its subsidiaries or (y) the
proceeds of such disposition are applied within 180 days to the
purchase price of similar replacement property or is otherwise
reinvested in the business of the Company and its subsidiaries,
(iv) Disposition of assets by any subsidiary of the Company to
the Company, (v) the granting of a non-exclusive license or
sublicense by the Company and its subsidiaries of software,
trademarks, patents and other intellectual property in the ordinary
course of business, and which do not materially interfere with the
business of the Company and its subsidiaries taken as a whole or
otherwise conflict with any contract or license to which the
Company or any of its subsidiaries are bound, and only to the
extent that such grant does not require the Holder’s consent
pursuant to Section 8.1(a), (vi) Dispositions of cash
equivalents and (vi) liquidation, winding up or dissolution of
a subsidiary of the Company that has no operations or
revenues.
|
Page 7 of 40
|
(vv)
|
Person means an individual, a
limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
|
|
(ww)
|
Purchase Agreement means that
certain Stock Purchase and Master Transaction Agreement dated as of
July 18, 2006 by and between the Company and Ipsen, S.A., a
French société anonyme .
|
|
(xx)
|
Reference Price means
$4.75.
|
|
(yy)
|
Registration Rights Agreement
has the meaning attributed to it in the Purchase Agreement.
|
|
(zz)
|
Rights has the meaning
attributed to it in the Rights Agreement.
|
|
(aaa)
|
Rights Agreement has the meaning
attributed to it in the Affiliation Agreement.
|
|
(bbb)
|
Somatuline Autogel License has
the meaning attributed to it in the Purchase Agreement.
|
|
(ccc)
|
Stock Dividend means a payment
by the Company of a dividend or other distribution in Common Stock
to all holders of Common Stock.
|
|
(ddd)
|
Subdivision has the meaning
attributed to in Section 4(b) of this Note.
|
|
(eee)
|
Tax means any tax (whether
income, documentary, sales, stamp, registration, issue, capital,
property, excise or otherwise), duty, assessment, levy, impost,
fee, compulsory loan, charge or withholding.
|
|
(fff)
|
Transaction Documents has the
meaning attributed to it in the Purchase Agreement.
|
|
(ggg)
|
Trigger Price has the meaning
attributed to it in Section 3(a) of this Note.
|
|
(hhh)
|
Triggering Sale has the meaning
attributed to it in the Affiliation Agreement.
|
|
(iii)
|
Trustee has the meaning
attributed to it in Section 8.1(d)(i) of this Note.
|
|
(jjj)
|
Trustee Account has the meaning
attributed to it in Section 8.1(d)(i) of this Note.
|
|
(kkk)
|
Warrant has the meaning
attributed to it in the Purchase Agreement.
|
Page 8 of 40
2. P AYMENT
; C ONVERSION
OF N OTE
|
(a)
|
The entire principal balance of this Note,
together with interest accrued thereon, shall be immediately due
and payable, in cash, on the date which is the later of
(i) the date that is the fifth anniversary of the date hereof
and (ii) two years following the date on which the Holder
provides notice to the Company that it will not convert this Note
in full (the Maturity Date ); provided however
, that such amount will become due and payable, at the option of
the Holder, by notice to the Company upon the occurrence of and at
any time after an Ownership Trigger. For purposes of this Note, an
Ownership Trigger shall occur if, after the date
hereof, (x) the provisions of Section 3 of the
Affiliation Agreement remain in effect and (1) any Person or
"group" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) (other than the Holder
or its Affiliates) that is not already the beneficial owner of more
than 9.9% of the then outstanding Common Stock acquires beneficial
ownership of greater than 9.9% of the then outstanding Common
Stock, or (2) any Person or "group" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) (other than the Holder or its Affiliates) currently
beneficially owning greater than 9.9% of the outstanding Common
Stock increases the percentage of the outstanding Common Stock
currently beneficially owned by such Person or group; or
(y) the provisions of Section 3 of the Affiliation
Agreement shall cease to be effective and any Person or "group"
(within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) (other than the Holder or its
Affiliates) acquires beneficial ownership of greater than 50% of
the then outstanding Common Stock. All payments made in respect of
the Notes shall be made on a pari passu basis. The Company shall
not be permitted to prepay any interest or principal due under the
Note without the prior written consent of the Holder. The Holder
shall have the right, at its option, at any time from and after the
date of this Note, to convert the principal amount of this Note and
all accrued interest thereon, or any portion of such principal
amount and interest, into that number of fully paid and
nonassessable shares of Common Stock (as such shares shall then be
constituted) determined pursuant to this Section 2. The number
of shares of Common Stock to be issued upon each conversion of this
Note (the Note Conversion Shares ) shall be
determined by dividing the Conversion Amount by the Conversion
Price in effect on the date (the Conversion Date ) a
Notice of Conversion is delivered to the Company by the Holder by
facsimile or other reasonable means of communication dispatched
prior to 5:00 p.m., New York Time.
|
|
(b)
|
The Company (i) shall promptly irrevocably
instruct its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Note and (ii) agrees
that its issuance of this Note shall constitute full authority to
its officers and agents who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates
for shares of Common Stock in accordance with the terms and
conditions of this Note.
|
Page 9 of 40
|
(c)
|
Notwithstanding anything to the contrary set
forth herein, upon conversion of this Note in accordance with the
terms hereof, the Holder shall not be required to physically
surrender this Note to the Company unless the entire unpaid
principal amount of this Note is so converted. Rather, records
showing the principal amount converted (or otherwise repaid) and
the date of such conversion or repayment shall be maintained on a
ledger in a form to be reasonably acceptable to the Company and the
Holder (the Note Ledger ) (a copy of which shall be
delivered to the Company or transfer agent with each Notice of
Conversion). It is specifically contemplated that the Company
hereof shall act as the calculation agent for conversions and
repayments. In the event of any dispute or discrepancies, such
records maintained by the Company shall be controlling and
determinative in the absence of manifest error. The Holder and any
assignee, by acceptance of this Note, acknowledge and agree that,
by reason of the provisions of this paragraph, following a
conversion of a portion of this Note, the principal amount
represented by this Note will be the amount indicated on the Note
Ledger (which may be less than the amount stated on the face
hereof).
|
|
(d)
|
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 (or in street name), 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 (other than the
Holder or the custodian in whose street name such shares are to be
held for the Holder’s account) 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.
|
|
(e)
|
Upon receipt by the Company of a Notice of
Conversion, the Holder shall be deemed to be the holder of record
of the Common Stock issuable upon such conversion, the outstanding
principal amount and the amount of accrued and unpaid interest on
this Note shall be reduced to reflect such conversion, and, unless
the Company defaults on its obligations under this Section 2,
all rights with respect to the portion of this Note being so
converted shall forthwith terminate except the right to receive the
Common Stock or other securities, cash or other assets, as herein
provided, on such conversion. If the Holder shall have given a
Notice of Conversion as provided herein, the Company’s
obligation to issue and deliver the certificates for shares of
Common Stock shall be absolute and unconditional, irrespective of
the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the
recovery of any judgment against any Person or any action by the
Holder to enforce the same, any failure or delay in the enforcement
of any other obligation of the Company to the Holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder of any obligation to the
Company, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection
|
Page 10 of 40
-
-
with such conversion. The date of receipt
(including receipt via telecopy) of such Notice of Conversion shall
be the Conversion Date so long as it is received before 5:00 p.m.,
New York Time, on such date.
3. P RICE -B
ASED A NTI -D ILUTION A DJUSTMENT OF C ONVERSION P RICE
|
(a)
|
If at any time or from time to time after the
date hereof, the Company issues or sells, or is deemed by the
express provisions of this Section 3 to have issued or sold,
Additional Shares of Common Stock, other than as provided in
Sections 4(a)-4(d) below, for an Effective Price less than the
lower of (i) the Reference Price or (ii) the then
effective Conversion Price (such lower amount, the Trigger
Price ), then and in each such case, the then effective
Conversion Price shall be reduced, as of the opening of business on
the date of such issue or sale, to a price determined in accordance
with the following formula:
|
| |
|
|
|
|
|
A = B x
|
|
[C + (D/E)]
|
|
|
| |
|
[C + F]
|
|
|
|
(b)
|
For the purposes of Section 3(a), the number
of shares of Common Stock deemed to be outstanding ( Common
Stock Outstanding ) as of a given date shall be the sum of
(A) the number of shares of Common Stock outstanding, plus
(B) the number of shares of Common Stock into which the then
outstanding Convertible Notes could be converted if fully converted
on the day immediately preceding the given date, plus (C) the
number of shares of Common Stock which are issuable upon the
exercise of the Warrant on the day immediately preceding the given
date.
|
Page 11 of 40
|
(c)
|
No adjustment shall be made to the Conversion
Price under this Section 3 in an amount less than one cent per
share. Any adjustment required by this Section 3 shall be
rounded to the nearest one cent ($0.01) per share. Any adjustment
otherwise required by this Section 3 that is not required to
be made due to the preceding two sentences shall be included in any
subsequent adjustment to the Conversion Price.
|
|
(d)
|
For the purpose of making any adjustment required
under this Section 3, the aggregate consideration received by
the Company for any issue or sale of securities (the
Aggregate Consideration ) shall be defined as:
(A) to the extent it consists of cash, be computed at the
gross amount of cash received by the Company before deduction of
any underwriting or similar commissions, compensation or
concessions paid or allowed by the Company in connection with such
issue or sale and without deduction of any expenses payable by the
Company, (B) to the extent it consists of property other than
cash, be computed at the fair value of that property as determined
in good faith by the Board, and (C) if Additional Shares of
Common Stock, Convertible Securities or rights or options to
purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration which
covers both, be computed as the portion of the consideration so
received that may be reasonably determined in good faith by the
Board (in a manner consistent with comparable activities such as
valuing stock options for accounting purposes) to be allocable to
such Additional Shares of Common Stock, Convertible Securities or
rights or options.
|
|
(e)
|
For the purpose of the adjustment required under
this Section 3, if the Company issues or sells
(x) capital stock, options, warrants, purchase rights or other
securities convertible into, Additional Shares of Common Stock,
other than the Rights (such convertible stock or securities being
herein referred to as Convertible Securities ), or
(y) rights (other than the Rights) or options for the purchase
of Additional Shares of Common Stock or Convertible Securities and
if the Effective Price of such Additional Shares of Common Stock is
less than the Conversion Price, in each case the Company shall be
deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such
shares an amount equal to the total amount of the consideration, if
any, received by the Company for the issuance of such rights or
options or Convertible Securities plus:
|
|
|
(i)
|
in the case of such rights or options, the
minimum amounts of consideration, if any, payable to the Company
upon the exercise of such rights or options; and
|
|
|
(ii)
|
in the case of Convertible Securities, the
minimum amounts of consideration, if any, payable to the Company
upon the conversion thereof (other than by cancellation of
liabilities or obligations evidenced by such
|
Page 12 of 40
-
-
-
Convertible Securities); provided that if
the minimum amounts of such consideration cannot be ascertained,
but are a function of antidilution or similar protective clauses,
the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses.
|
|
(iii)
|
If the minimum amount of consideration payable to
the Company upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of
antidilution or similar protective adjustments, the Effective Price
shall be recalculated using the figure to which such minimum amount
of consideration is reduced; provided howe
|
|
