EXHIBIT
4.13
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS
3(c)(iii) AND 19(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY
THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
THIS
NOTE IS SUBJECT TO THE TERMS AND PROVISIONS OF THE INTERCREDITOR
AGREEMENT DATED AS OF FEBRUARY 9, 2007 (AS AMENDED, RESTATED,
SUPPLEMENTED, OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
“INTERCREDITOR AGREEMENT”), BY AND AMONG WELLS FARGO
FOOTHILL, INC., AS FIRST LIEN AGENT, WELLS FARGO FOOTHILL, INC., AS
SECOND LIEN COLLATERAL AGENT, WATERSHED ADMINISTRATIVE, LLC, AS
SECOND LIEN ADMINISTRATIVE AGENT, WELLS FARGO FOOTHILL, INC., AS
THIRD LIEN COLLATERAL AGENT, AND PRENCEN LENDING LLC, WATERSHED
CAPITAL PARTNERS, L.P., AND WATERSHED CAPITAL INSTITUTIONAL
PARTNERS, L.P., AS THIRD LIEN LENDERS AND PRENCEN LLC. IN THE EVENT
OF ANY CONFLICT BETWEEN THE TERMS OF THE INTERCREDITOR AGREEMENT
AND THIS NOTE, THE TERMS OF THE INTERCREDITOR AGREEMENT SHALL
GOVERN AND CONTROL.
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Issuance
Date: February 9, 2007
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Original
Principal Amount: U.S. $[76,000,000.00]
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[WATERSHED
AMOUNT]
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FOR VALUE RECEIVED, Ascendia Brands, Inc., a Delaware
corporation (the “ Company ”) hereby promises to
pay to the order of PRENCEN LENDING LLC [WATERSHED CAPITAL
PARTNERS, L.P.] [WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.] or
registered assigns (“ Holder ”) the amount set
out above as the Original Principal Amount (as reduced pursuant to
the terms hereof pursuant to redemption, conversion or
otherwise,
and including the amount of any Capitalized Interest (as defined
below), the “ Principal ”) when due, whether
upon the Maturity Date (as defined below), acceleration, redemption
or otherwise (in each case in accordance with the terms hereof) and
to pay interest (“ Interest ”) on any
outstanding Principal at a rate per annum equal to the Interest
Rate, from the date set out above as the Issuance Date until the
Obligations hereunder are paid in full, whether upon an Interest
Date (as defined below), the Maturity Date, acceleration,
conversion, redemption or otherwise (in each case in accordance
with the terms hereof). This Note is one of the Secured Convertible
Notes issued pursuant to the Securities Purchase Agreements.
[INSERT IN PRENCEN NOTE: The notes issued under the
Watershed Securities Purchase Agreement are referred to as the
“ Other Notes ”; and the Other Notes together
with the notes issued pursuant to the Prencen Securities Agreement
are collectively referred to as the “ Notes ”.
] [INSERT IN WATERSHED NOTE: The notes issued under
the Prencen Securities Purchase Agreement are referred to as the
“ Other Notes ”; and the Other Notes together
with the notes issued pursuant to the Watershed Securities Purchase
Agreement are collectively referred to as the “ Notes
”. ] Certain capitalized terms used herein are defined
in Section 29.
(1)
MATURITY . On the Maturity Date, the Company shall pay to
the Holder an amount in cash equal to all of the Obligations then
due and owing hereunder. The “ Maturity Date
” shall be December 30, 2016, as may be extended in writing
at the sole option of the Holder (i) in the event that an Event of
Default (as defined in Section 4(a)) shall have occurred and be
continuing or any event shall have occurred and be continuing which
with the passage of time and the failure to cure would result in an
Event of Default, in which case, the Maturity Date shall be
extended until the later of the date such Event of Default is cured
and the date there no longer exists any event which with the
passage of time and the failure to cure would result in an Event of
Default and (ii) through the date that is ten (10) days after the
consummation of a Change of Control in the event that a Change of
Control is publicly announced or a Change of Control Notice (as
defined in Section 5) is delivered prior to the Maturity Date. On
the Business Day immediately preceding the Maturity Date, the
Company shall deliver a written notice to the Holder certifying
that (A) (1) no Event of Default has occurred and is continuing and
(2) no event has occurred and is continuing which with the passage
of time and the failure to cure would result in an Event of Default
or (B) an event specified in clause (A) has occurred and is
continuing.
(2)
INTEREST . Interest on this Note shall commence accruing on
the Issuance Date and shall be computed on the basis of a 365-day
year and actual days elapsed and shall be payable in arrears on the
last day of each calendar month during the period beginning on the
Issuance Date and ending on, and including, the date that this Note
is repaid in full (each, an “ Interest Date
”) with the first Interest Date being February 28, 2007.
Interest shall be payable on each Interest Date, to the record
holder of this Note on the applicable Interest Date by capitalizing
such Interest on and as of each Interest Date by adding it to the
then outstanding Principal of this Note (the “ Capitalized
Interest ”). Upon the occurrence and during the
continuance of an Event of Default, or, the occurrence and
continuation of any of the events described in Sections 4(a)(i),
4(a)(ii), 4(a)(iii)(B), 4(a)(iv)(B), or 4(a)(vii) through
4(a)(xiii) prior to such time as the Permitted Senior Indebtedness
has been repaid in full, the Interest Rate on the Obligations shall
be increased to fifteen percent (15%). In the event that such Event
of Default or event, as applicable, is subsequently cured, such
increased Interest Rate shall no longer be in effect as of the date
of such cure; provided that the Interest as calculated at such
increased rate
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during
the continuance of such Event of Default or event, as applicable,
shall continue to apply to the extent relating to the days after
the occurrence of such Event of Default or event, as applicable,
through and including the date of cure of such Event of Default or
event. In addition, to the extent that the Company owes the Holder
any Permitted Accrued Third Lien Fees/Penalties (as defined in
Section 9 of the Intercreditor Agreement), such owed amounts shall,
until paid by the Company to the Holder to the extent allowed by
the Intercreditor Agreement, accrue interest at the then applicable
Interest Rate under this Note and the interest on such Permitted
Accrued Third Lien Fees/Penalties shall be capitalized at the same
time(s) and in the same manner that interest on the Principal of
this Note is capitalized.
(3)
CONVERSION OF NOTES . This Note shall be convertible into
shares of common stock of the Company, $0.001 par value per share
(the “ Common Stock ”), on the terms and
conditions set forth in this Section 3.
(a)
Conversion Right . Subject to the provisions of Section
3(d), at any time or times on or after the Issuance Date, the
Holder shall be entitled to convert any portion of the outstanding
and unpaid Conversion Amount (as defined below) into fully paid and
nonassessable shares of Common Stock in accordance with Section
3(c), at the Conversion Rate (as defined below). The Company shall
not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock up to the nearest whole share.
The Company shall pay any and all taxes that may be payable with
respect to the issuance and delivery of Common Stock upon
conversion of any portion of the Conversion Amount.
(b)
Conversion Rate . The number of shares of Common Stock
issuable upon conversion of any portion of the Conversion Amount
pursuant to Section 3(a) shall be determined by dividing (x) such
Conversion Amount by (y) the Conversion Price (the “
Conversion Rate ”).
(i) “
Conversion Amount ” means the sum of (A) the Principal
under this Note, (B) accrued and uncapitalized interest, with
respect to such Principal and (C) accrued and unpaid Late Charges
(as defined in Section 25(b)) with respect to such Principal and
Interest.
(ii) “
Conversion Price ” means, as of any Conversion Date
(as defined below) or other date of determination, $0.42, subject
to adjustment as provided herein.
(c)
Mechanics of Conversion .
(i)
Optional Conversion . To convert any portion of the
Conversion Amount into shares of Common Stock on any date (a
“ Conversion Date ”), the Holder shall (A)
transmit by facsimile (or otherwise deliver), for receipt on or
prior to 11:59 p.m., New York Time, on such date, a copy of an
executed notice of conversion in the form attached hereto as
Exhibit I (the “ Conversion Notice ”) to
the Company and (B) if required by Section 3(c)(iii), surrender
this Note to a common carrier for delivery to the
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Company
as soon as practicable on or following such date (or an
indemnification undertaking with respect to this Note in the case
of its loss, theft or destruction). On or before the first (1
st ) Trading Day following the date of receipt of a
Conversion Notice, the Company shall transmit by facsimile a
confirmation of receipt of such Conversion Notice to the Holder and
the Company’s transfer agent (the “ Transfer
Agent ”). On or before the third (3 rd )
Trading Day following the date of receipt of a Conversion Notice
(the “ Share Delivery Date ”), the
Company shall (1) provided that the Transfer Agent is participating
in the Fast Automated Securities Transfer Program of the Depository
Trust Company (“ DTC ”) credit such aggregate
number of shares of Common Stock to which the Holder shall be
entitled to the Holder’s or its designee’s participant
account with DTC through its Deposit Withdrawal Agent Commission
system or (2) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and deliver no
later than the Share Delivery Date, to the address as specified in
the Conversion Notice, a certificate, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to
which the Holder shall be entitled. If this Note is physically
surrendered for conversion pursuant to Section 3(c)(iii) and the
outstanding Principal of this Note is greater than the Principal
portion of the Conversion Amount being converted, then the Company
shall as soon as practicable and in no event later than three
Business Days after receipt of this Note and at its own expense,
issue and deliver to the holder a new Note (in accordance with
Section 19(d)) representing the outstanding Principal not
converted. The Person or Persons entitled to receive the shares of
Common Stock issuable upon a conversion of all or a portion of this
Note shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Conversion
Date.
(ii)
Company’s Failure to Timely Convert . If the Company
shall fail to issue a certificate to the Holder or credit the
Holder’s participant account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon
conversion of any portion of the Conversion Amount on or prior to
the date which is five (5) Trading Days after the Conversion Date
(a “ Conversion Failure ”), then (A) the Company
shall pay damages to the Holder for each day of such Conversion
Failure until the earlier of the date such failure is cured and the
Revocation Date (as defined below) in an amount equal to 1.5% of
the product of (I) the aggregate number of shares of Common Stock
not issued to the Holder on or prior to the Share Delivery Date and
to which the Holder is entitled, and (II) the Closing Sale Price of
the Common Stock on the Share Delivery Date and (B) the Holder,
upon written notice to the Company, may void its Conversion Notice
with respect to, and retain or have returned, as the case may be,
any portion of this Note that has not been converted pursuant to
such Conversion Notice (the date such notice is given, the “
Revocation Date ”); provided that the voiding
of a Conversion Notice shall not affect the Company’s
obligations to make any payments which have accrued prior to the
date of such notice pursuant to this Section 3(c)(ii) or otherwise
and once such payment is made no Conversion Failure shall exist
with respect to such voided portion of such conversion. In addition
to the foregoing, if within three (3) Trading Days after the
Company’s receipt of the facsimile copy of a Conversion
Notice the Company shall fail to issue and deliver a certificate to
the Holder or credit the Holder’s participant account with
DTC for the number of shares of Common Stock to which the Holder is
entitled upon such holder’s conversion of any portion of
the
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Conversion
Amount, and if on or after such scheduled Share Delivery Date the
Holder purchases (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by the Holder of
Common Stock issuable upon such conversion that the Holder
anticipated receiving from the Company (a
“Buy-In” ), then the Company shall, within three
(3) Trading Days after the Holder’s request and in the
Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including
brokerage commissions and other out-of-pocket expenses, if any) for
the shares of Common Stock so purchased (the “Buy-In
Price” ), at which point the Company’s obligation
to deliver such certificate or credit such Holder’s
participant account with DTC (and to issue such Common Stock) shall
terminate and the Conversion Amount of this Note shall be reduced
by the Conversion Amount applicable to such portion of the failed
Conversion Notice, or (ii) promptly honor its obligation to deliver
to the Holder a certificate or certificates representing such
Common Stock or credit such Holder’s participant account with
DTC and pay cash to the Holder in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the
Conversion Date.
(iii)
Registration; Book-Entry . The Company shall maintain a
register (the “ Register ”) for the recordation
of the names and addresses of the holders of each Note and the
principal amount of the Notes held by such holders (the “
Registered Notes ”). The entries in the Register shall
be conclusive and binding for all purposes absent manifest error.
The Company and the holders of the Notes shall treat each Person
whose name is recorded in the Register as the owner of a Note for
all purposes, including, without limitation, the right to receive
payments of Principal and Interest hereunder, notwithstanding
notice to the contrary. A Registered Note may be assigned or sold
in whole or in part only by registration of such assignment or sale
on the Register. Upon its receipt of a request to assign or sell
all or part of any Registered Note by a Holder, the Company shall
record the information contained therein in the Register and issue
one or more new Registered Notes in the same aggregate principal
amount as the principal amount of the surrendered Registered Note
to the designated assignee or transferee pursuant to Section 19.
Notwithstanding anything to the contrary set forth herein, upon
conversion of any portion of this Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender
this Note to the Company unless (A) the full Conversion Amount
represented by this Note is being converted or (B) the Holder has
provided the Company with prior written notice (which notice may be
included in a Conversion Notice) requesting reissuance of this Note
upon physical surrender. The Holder and the Company shall maintain
records showing the Principal converted and the dates of such
conversions or shall use such other method, reasonably satisfactory
to the Holder and the Company, so as not to necessitate the
physical surrender of this Note upon conversion.
(iv)
Pro Rata Conversion; Disputes . In the event that the
Company receives a Conversion Notice from more than one holder of
Notes for the same Conversion Date and the Company can convert
some, but not all, of such portions of the Notes submitted for
conversion, the Company, subject to Section 3(d), shall convert
from each holder of Notes electing to have Notes converted on such
date a pro rata amount of such holder’s portion of its Notes
submitted for conversion based on the principal amount
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of
Notes submitted for conversion on such date by such holder relative
to the aggregate principal amount of all Notes submitted for
conversion on such date; provided, however, that no holder shall
receive shares of Common Stock upon conversion of its Note in
excess of its Authorized Share Allocation (as defined in Section
11(a)); provided, further, however, such pro rata conversion shall
not cure any default or Event of Default occurring hereunder
resulting from such failure to fully effect the conversion
otherwise required by this Note. In the event of a dispute as to
the number of shares of Common Stock issuable to the Holder in
connection with a conversion of this Note, the Company shall issue
to the Holder the number of shares of Common Stock not in dispute
and resolve such dispute in accordance with Section 24.
(d)
Limitations on Conversions .
(i)
Beneficial Ownership . The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have
the right to convert any portion of this Note pursuant to Section
3(a), to the extent that after giving effect to such conversion,
[INSERT IN WATERSHED NOTE ONLY: and taking into account all
other shares of Common Stock beneficially owned by the Holder and
its Affiliates, ] the Holder (together with the
Holder’s Affiliates) would beneficially own in excess of
9.99% (the “ Maximum Percentage ”) of the
number of shares of Common Stock outstanding immediately after
giving effect to such conversion. For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates shall include the number of shares
of Common Stock issuable upon conversion of this Note with respect
to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would be
issuable upon (A) conversion of the remaining, nonconverted portion
of this Note beneficially owned by the Holder or any of its
Affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company
(including, without limitation, any Other Notes or warrants)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any
of its Affiliates [INSERT IN WATERSHED NOTE ONLY : , in each
case if such conversion or exercise of such instrument is not
permitted in order to keep the Holder’s beneficial ownership
of Common Stock at or below the Maximum Percentage ] .
Except as set forth in the preceding sentence, for purposes of this
Section 3(d)(i), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. For purposes of this Section 3(d)(i), in
determining the number of outstanding shares of Common Stock, the
Holder may rely on the number of outstanding shares of Common Stock
as reflected in (x) the Company’s most recent Form 10-K, Form
10-Q or Form 8-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company
or the Transfer Agent setting forth the number of shares of Common
Stock outstanding. For any reason and at any time, upon the written
or oral request of the Holder, the Company shall within one (1)
Business Day confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the
Company, including this Note, by the Holder or its Affiliates since
the date as of which such number of outstanding shares of Common
Stock was reported. By written notice to the Company, the Holder
may from time to time increase or decrease the Maximum Percentage
to any other percentage specified in such notice so long as such
specified Maximum Percentage shall not exceed 9.99%; provided that
(i) any such increase will not be effective until the sixty-first
(61 st ) day after such notice is delivered to the
Company, and (ii) any such increase or decrease will apply only to
the Holder and not to any other holder of Notes.
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(ii)
Principal Market Regulation . Without limiting the rights of
the Holder under Section 11 hereunder, the Company shall not be
obligated to issue any shares of Common Stock upon conversion of
this Note, the Other Notes or the Preferred Shares or exercise of
the Warrants, and the Holder of this Note shall not have the right
to receive upon conversion of this Note any shares of Common Stock,
if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which the Company may
issue upon conversion or exercise, as applicable, of the Notes, the
Preferred Shares and Warrants without breaching the Company’s
obligations under the rules or regulations of the Principal Market
(the “ Exchange Cap ”), except that such
limitation shall not apply in the event that the Company (A)
obtains the approval of its stockholders as required by the
applicable rules of the Principal Market for issuances of Common
Stock in excess of such amount or (B) obtains a written opinion
from outside counsel to the Company that such approval is not
required, which opinion shall be reasonably satisfactory to the
Required Holders. Until such approval or written opinion is
obtained, (1) the Watershed Funds (as defined in Section 15(h))
shall not be issued in the aggregate upon conversion of the
Watershed Notes shares of Common Stock in an amount greater than
11.6% of the Exchange Cap and (2) the Prencen Group shall not be
issued in the aggregate, upon conversion or exercise, as
applicable, of the Prencen Note, Preferred Shares or Warrants,
shares of Common Stock in an amount greater than 88.4% of the
Exchange Cap (with respect to each of the Watershed Funds and the
Prencen Group, the “ Exchange Cap Allocation ”).
In the event that any of the Watershed Funds and/or the Prencen
Group shall sell or otherwise transfer any of such holder’s
Notes, the transferee shall be allocated a pro rata portion of such
holder’s Exchange Cap Allocation, and the restrictions of the
prior sentence shall apply to such transferee with respect to the
portion of the Exchange Cap Allocation allocated to such
transferee. In the event that any holder of Notes shall convert all
of such holder’s Notes into a number of shares of Common
Stock which, in the aggregate, is less than such holder’s
Exchange Cap Allocation, then the difference between such
holder’s Exchange Cap Allocation and the number of shares of
Common Stock actually issued to such holder shall be allocated to
the respective Exchange Cap Allocations of the remaining holders of
Notes on a pro rata basis in proportion to the aggregate principal
amount of the Notes then held by each such holder.
(e)
Holder’s Right of Exchange . To the extent, but only
to the extent, required by the Principal Market pursuant to its
listing requirements at any time following the consummation of the
Acquisition, up to $40,000,000 in outstanding Principal amount of
the Notes together with any accrued and unpaid Interest thereon and
Late Charges on such Principal and Interest, if any (such amount,
the “ Exchange Amount ”) shall be exchanged on a
pro rata basis (the “ Exchange ”) for a new
series of convertible preferred stock that will be convertible into
the Company’s Common Stock (the “ New Securities
”) of the Company, which
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New
Securities shall have such rights, designations and preferences as
the Required Holders and the Company shall mutually agree. Upon the
consummation of the Exchange, the Company shall (i) deliver to the
Holder the Holder Pro Rata Amount of the New Securities and (ii)
pay to the Holder, in cash, an amount equal to 15% of the Holder
Pro Rata Amount of the Exchange Amount by wire transfer of
immediately available funds in accordance with the Holder’s
written wire transfer instructions.
(4)
RIGHTS UPON EVENT OF DEFAULT .
(a)
Event of Default . Each of the following events shall
constitute an “ Event of Default ”:
(i) after
the Permitted Senior Indebtedness has been repaid in full, (A) the
failure of the applicable Registration Statement required to be
filed pursuant to the Registration Rights Agreement to be declared
effective by the SEC on or prior to the date that is sixty (60)
days after the applicable Effectiveness Deadline (as defined in the
Registration Rights Agreement), or (B) while the applicable
Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the applicable Registration Statement lapses for
any reason (including, without limitation, the issuance of a stop
order) or is unavailable to any holder of the Notes for sale of all
of such holder’s Registrable Securities (as defined in the
Registration Rights Agreement) in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability
continues for a period of ten (10) consecutive days or for more
than an aggregate of thirty (30) days in any 365-day period (other
than days during an Allowable Grace Period (as defined in the
Registration Rights Agreement));
(ii) after
the Permitted Senior Indebtedness has been repaid in full, the
suspension from trading or failure of the Common Stock to be listed
on an Eligible Market for a period of five (5) consecutive Trading
Days or for more than an aggregate of ten (10) Trading Days in any
365-day period;
(iii) (A)
the failure to pay to the Holder any amount due on this Note or any
other Transaction Document on the Maturity Date and (B) after the
Permitted Senior Indebtedness has been repaid in full, the
Company’s failure to pay to the Holder any amount of
Principal (including, without limitation, the Company’s
failure to pay any redemption payments), Interest, Late Charges or
other amounts (other than Registration Delay Payments) when and as
due under this Note or any other Transaction Document (as defined
in the Securities Purchase Agreements) to which the Holder is a
party, except, in the case of a failure to pay Interest and Late
Charges when and as due, in which case only if such failure
continues for a period of at least three (3) Business
Days;
(iv) (A)
the occurrence of both an event of default under and acceleration
of any Permitted Senior Indebtedness and (B) after the Permitted
Senior Indebtedness has been repaid in full, the occurrence of any
default under or acceleration prior to maturity of any Indebtedness
of the Company or any of its Subsidiaries (as defined in Section
3(a) of the Securities Purchase Agreements), other than with
respect to any Other Notes;
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(v) the
Company or any of its Subsidiaries, pursuant to or within the
meaning of Title 11, U.S. Code, or any similar Federal, foreign or
state law for the relief of debtors (collectively, “
Bankruptcy Law ”), (A) commences a voluntary case, (B)
consents to the entry of an order for relief against it in an
involuntary case, (C) consents to the appointment of a receiver,
trustee, assignee, liquidator or similar official (a “
Custodian ”), (D) makes a general assignment for the
benefit of its creditors or (E) admits in writing that it is
generally unable to pay its debts as they become due;
(vi) a
court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company or any of
its Subsidiaries in an involuntary case, (B) appoints a Custodian
of the Company or any of its Subsidiaries or (C) orders the
liquidation of the Company or any of its Subsidiaries and such
order or decree remains undismissed or unstayed for a period of
sixty (60) days;
(vii) after
the Permitted Senior Indebtedness has been repaid in full, a final
judgment or judgments for the payment of money aggregating in
excess of $500,000 are rendered against the Company or any of its
Subsidiaries and which judgments are not, within sixty (60) days
after the entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within sixty (60) days after the
expiration of such stay; provided, however, that any judgment which
is covered by insurance or an indemnity from a creditworthy party
shall not be included in calculating the $500,000 amount set forth
above so long as the Company provides the Holder a written
statement from such insurer or indemnity provider (which written
statement shall be reasonably satisfactory to the Holder) to the
effect that such judgment is covered by insurance or an indemnity
and the Company will receive the proceeds of such insurance or
indemnity within thirty (30) days of the issuance of such
judgment;
(viii) after
the Permitted Senior Indebtedness has been repaid in full, the
Company breaches any representation, warranty, covenant or other
term or condition of any Transaction Document that is not
specifically addressed by any other Event of Default set forth in
this Section 4(a), except, subject to clause (ii) hereof, (i) in
the case of a breach of a covenant which is curable, only if such
breach continues for a period of at least ten (10) consecutive
Business Days or (ii) in the case of any breach that arises solely
by virtue of the Transaction Stockholder Approval or the Authorized
Share Stockholder Approval not being obtained at or prior to the
Closing Date specified in the Securities Purchase Agreements and
the amendments to the certificate of incorporation of the Company
not having been filed with the Secretary of State of Delaware to
effectuate the amendments specified in clauses (x) and (y) of
Section 4(p)(ii) of the Securities Purchase Agreements at or prior
to the Closing Date specified in the Securities Purchase
Agreements;
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-
(ix) after
the Permitted Senior Indebtedness has been repaid in full, any
breach or failure in any respect to comply with Section 15 of this
Note;
(x) after
the Permitted Senior Indebtedness has been repaid in full, failure
to obtain the Authorized Share Stockholder Consent or the
Authorized Share Stockholder Approval, as the case may be, by June
1, 2007;
(xi) after
the Permitted Senior Indebtedness has been repaid in full, the
Company or any Subsidiary shall fail to perform or comply with any
covenant or agreement contained in the Security Agreement or any
other Security Document to which it is a party;
(xii) after
the Permitted Senior Indebtedness has been repaid in full, any
material provision of any Security Document (as reasonably
determined by the Collateral Agent) shall at any time for any
reason (other than pursuant to the express terms thereof) cease to
be valid and binding on or enforceable against the Company or any
Subsidiary intended to be a party thereto, or the validity or
enforceability thereof shall be contested by any party thereto, or
a proceeding shall be commenced by the Company or any Subsidiary or
any governmental authority having jurisdiction over any of them,
seeking to establish the invalidity or unenforceability thereof, or
the Company or any Subsidiary shall deny in writing that it has any
liability or obligation purported to be created under any Security
Document;
(xiii) after
the Permitted Senior Indebtedness has been repaid in full, the
Security Agreement or any other Security Document, after delivery
thereof pursuant hereto, shall for any reason fail or cease to
create a valid and perfected and, except to the extent permitted by
the terms hereof or thereof, Lien in favor of the Collateral Agent
for the benefit of the holders of the Notes on any Collateral (as
defined in the Security Documents) purported to be covered thereby;
or
(xiv) any
Event of Default (as defined in the Other Notes) occurs with
respect to any Other Notes.
(b)
Redemption Right . Upon the occurrence of an Event of
Default with respect to this Note or any Other Note, the Company
shall within one (1) Business Day deliver written notice thereof
via facsimile and overnight courier (an “ Event of Default
Notice ”) to all of the holders of Notes. Subject to the
Intercreditor Agreement, at any time after the earlier of the
holders’ receipt of an Event of Default Notice and the
holders becoming aware of an Event of Default, a holder of Notes
may elect to require the Company to redeem all of its Note by
delivering written notice thereof (the “ Event of Default
Redemption Notice ”) to the Company. Notwithstanding the
foregoing, the Company shall only be required to consummate a
redemption pursuant to this Section 4(b) upon the Company’s
receipt of Event of Default Redemption Notices from one or more
holders of Notes constituting the Required Holders (the “
Event of Default Redemption Trigger Date ”) and
the Company shall notify all of the holders of the Notes of the
receipt of such redemption notices promptly, but in no event later
than (1) Business Day, following the Event of Default Redemption
Trigger Date; provided, however, if an Event of Default exists at
the Maturity Date, any holder of the Notes may exercise its right
to require the redemption by the Company of such holder’s
Note under this Section 4(b). Subject to the Intercreditor
Agreement, as of the Event of Default Redemption Trigger Date, the
Company shall be required to redeem all of the outstanding Notes
in
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10 -
accordance
with this Section 4(b). Each Note redeemed by the Company pursuant
to this Section 4(b) shall be redeemed by the Company at a price
equal to the greater of (i) the product of (x) the portion of the
Conversion Amount to be redeemed and (y) the Redemption Premium and
(ii) the product of (A) the Conversion Rate with respect to such
Conversion Amount in effect at such time as the Required Holders
deliver an Event of Default Redemption Notice and (B) the greatest
of the Closing Sale Price of the Common Stock on the date
immediately preceding such Event of Default, the Closing Sale Price
of the Common Stock on the date immediately following such Event of
Default and the Closing Sale Price of the Common Stock on the Event
of Default Redemption Trigger Date (the “ Event of
Default Redemption Price ”). Redemptions required
by this Section 4(b) shall be made in accordance with the
provisions of Section 12. To the extent redemptions required by
this Section 4(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments. The
parties hereto agree that in the event of the Company’s
redemption of all or a portion of such Note under this Section
4(b), the holders’ damages would be uncertain and difficult
to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a
suitable substitute investment opportunity for the holders.
Accordingly, any Redemption Premium due under this Section 4(b) is
intended by the parties to be, and shall be deemed, a reasonable
estimate of the holders’ actual loss of its investment
opportunity and not as a penalty. Notwithstanding anything to the
contrary in this Section 4, but subject to Section 3(d), until the
Holder receives the Event of Default Redemption Price, the Holder
may convert this Note, in whole or in part, into Common Stock
pursuant to Section 3, and any such conversion shall reduce the
amount otherwise redeemable pursuant to this Section 4.
(c)
Absence of Event of Default in Certain Circumstances .
Notwithstanding anything in this Note to the contrary, until the
Permitted Senior Indebtedness has been repaid in full, no Event of
Default shall occur under this Note or any Other Note or any other
Transaction Document unless an event of default has occurred or
contemporaneously occurs under and pursuant to the terms of the
Permitted Senior Indebtedness.
(5)
RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL
.
(a)
Assumption . The Company shall not enter into or be party to
a Fundamental Transaction unless (i) the Successor Entity assumes
in writing all of the obligations of the Company under this Note
and the other Transaction Documents in accordance with the
provisions of this Section 5(a) pursuant to written agreements in
form and substance satisfactory to the Required Holders and
approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of
Notes in exchange for such Notes a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to the Notes, including, without limitation, having a
principal amount and interest rate equal to the principal amounts
and the interest rates of the Notes held by such holder, having
similar conversion rights as the Notes and having similar ranking
to the Notes, and satisfactory to the Required Holders and (ii) the
Successor Entity (including its Parent Entity) is a publicly traded
corporation whose common stock is quoted on or listed for trading
on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after
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11 -
the
date of such Fundamental Transaction, the provisions of this Note
referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the
Company and shall assume all of the obligations of the Company
under this Note with the same effect as if such Successor Entity
had been named as the Company herein. Upon consummation of the
Fundamental Transaction, the Successor Entity shall deliver to the
Holder confirmation that there shall be issued upon conversion or
redemption of this Note at any time after the consummation of the
Fundamental Transaction, in lieu of the shares of Common Stock (or
other securities, cash, assets or other property) issuable upon the
conversion of the Notes prior to such Fundamental Transaction, such
shares of publicly traded common stock (or their equivalent) of the
Successor Entity, and the Conversion Price of this Note in effect
immediately prior to such Fundamental Transaction shall be adjusted
so that upon conversion of this Note immediately after such
Fundamental Transaction the Holder shall be entitled to receive the
aggregate number of shares of the Successor Entity that the Holder
would have been entitled to receive if the Note had been converted
immediately prior to such Fundamental Transaction, as adjusted
thereafter in accordance with the provisions of this Note. The
provisions of this Section shall apply similarly and equally to
successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion of this
Note.
(b)
Redemption Right . No sooner than fifteen (15) days nor
later than ten (10) days prior to the consummation of a Change of
Control, but not prior to the public announcement of such Change of
Control, the Company shall deliver written notice thereof via
facsimile and overnight courier to the Holder (a “ Change
of Control Notice ”). Subject to the Intercreditor
Agreement, at any time during the period beginning after the
Holder’s receipt of a Change of Control Notice and ending
twenty (20) Trading Days after the consummation of such Change of
Control, the Holder may require the Company to redeem all or any
portion of this Note by delivering written notice thereof (“
Change of Control Redemption Notice ”) to the Company,
which Change of Control Redemption Notice shall indicate that
portion of the Conversion Amount the Holder is electing to redeem.
The portion of this Note subject to redemption pursuant to this
Section 5 shall be redeemed by the Company in cash at a price equal
to the greater of (i) the product of (x) that portion of the
Conversion Amount being redeemed and (y) the quotient determined by
dividing (A) the greatest of the Closing Sale Price of the Common
Stock immediately prior to the consummation of the Change of
Control, the Closing Sale Price immediately following the public
announcement of such proposed Change of Control and the Closing
Sale Price of the Common Stock immediately prior to the public
announcement of such proposed Change of Control by (B) the
Conversion Price and (ii) 120% of that portion of the Conversion
Amount being redeemed (the “ Change of Control Redemption
Price ”). Redemptions required by this Section 5 shall be
made in accordance with the provisions of Section 12 and shall have
priority to payments to stockholders in connection with a Change of
Control. To the extent redemptions required by this Section 5(b)
are deemed or determined by a court of competent jurisdiction to be
prepayments of this Note by the Company, such redemptions shall be
deemed to be voluntary prepayments. Notwithstanding anything to the
contrary in this Section 5, but subject to Section 3(d), until the
Change of Control Redemption Price is paid in full, that portion of
the Conversion Amount submitted for redemption under this Section
5(b) may be converted, in whole or in part, by the Holder into
Common Stock pursuant to Section 3. The parties hereto agree that
in the event of the Company’s redemption of any portion of
this Note under this Section 5(b), the Holder’s damages would
be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any redemption premium due
under this Section 5(b) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder’s actual loss
of its investment opportunity and not as a penalty.
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(6)
RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS .
(a)
Purchase Rights . If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property (other than the
Existing Stockholder Warrants (as defined in the Securities
Purchase Agreement)) pro rata to the record holders of any class of
Common Stock (the “ Purchase Rights ”), then the
Holder will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions
on the convertibility of this Note) immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
(b)
Other Corporate Events . In addition to and not in
substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for
shares of Common Stock (a “ Corporate Event ”),
the Company shall make appropriate provision to ensure that the
Holder will thereafter have the right to receive upon a conversion
of this Note, at the Holder’s option, (i) in addition to the
shares of Common Stock receivable upon such conversion, such
securities or other assets to which the Holder would have been
entitled with respect to such shares of Common Stock had such
shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event (without taking into account
any limitations or restrictions on the convertibility of this Note)
or (ii) in lieu of the shares of Common Stock otherwise receivable
upon such conversion, such securities or other assets received by
the holders of shares of Common Stock in connection with the
consummation of such Corporate Event in such amounts as the Holder
would have been entitled to receive had this Note initially been
issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for
such consideration commensurate with the Conversion Rate. Provision
made pursuant to the preceding sentence shall be in a form and
substance satisfactory to the Required Holders. The provisions of
this Section shall apply similarly and equally to successive
Corporate Events and shall be applied without regard to any
limitations on the conversion or redemption of this
Note.
(7)
RIGHTS UPON ISSUANCE OF OTHER SECURITIES .
(a)
Adjustment of Conversion Price upon Issuance of Common Stock
. If and whenever on or after the Issuance Date, the Company issues
or sells, or in accordance with this Section 7(a) is deemed to have
issued or sold, any shares of Common Stock (including the issuance
or sale of shares of Common Stock owned or held by or for the
account
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13 -
of
the Company, but excluding shares of Common Stock deemed to have
been issued or sold by the Company in connection with any Excluded
Security) for a consideration per share less than a price (the
“ Applicable Price ”) equal to the Conversion
Price in effect immediately prior to such issue or sale (the
foregoing a “ Dilutive Issuance ”), then
immediately upon such Dilutive Issuance, the Conversion Price then
in effect shall be reduced to an amount equal to the lowest price
per share at which any share of Common Stock were issued or sold or
deemed to be issued or sold (in accordance with this Section 7(a))
in connection with such Dilutive Issuance; provided, however, that
if the Company issues or sells, or is deemed to have issued or
sold, any shares of Common Stock in a Dilutive Issuance that is a
Permitted Financing, then immediately after such Dilutive Issuance,
the Conversion Price then in effect shall be reduced to an amount
equal to the product of (A) the Conversion Price in effect
immediately prior to such Dilutive Issuance and (B) the
quotient determined by dividing (1) the sum of (I) the product
derived by multiplying the Conversion Price in effect immediately
prior to such Dilutive Issuance and the number of shares of Common
Stock Deemed Outstanding immediately prior to such Dilutive
Issuance plus (II) the consideration, if any, received by the
Company upon such Dilutive Issuance, by (2) the product derived by
multiplying (I) the Conversion Price in effect immediately
prior to such Dilutive Issuance by (II) the number of shares
of Common Stock Deemed Outstanding immediately after such Dilutive
Issuance. For purposes of determining the adjusted Conversion Price
under this Section 7(a), the following shall be
applicable:
(i)
Issuance of Options . If the Company in any manner grants or
sells any Options and the lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such
Option or upon conversion or exchange or exercise of any
Convertible Securities issuable upon exercise of such Option is
less than the Conversion Price, immediately prior thereto, then
each such share of Common Stock underlying such Option shall be
deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such
price per share. For purposes of this Section 7(a)(i), the
“lowest price per share for which one share of Common Stock
is issuable upon the exercise of any such Option or upon conversion
or exchange or exercise of any Convertible Securities issuable upon
exercise of such Option” shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by
the Company with respect to any one share of Common Stock upon
granting or sale of the Option, upon exercise of the Option and
upon conversion or exchange or exercise of any Convertible Security
issuable upon exercise of such Option. No further adjustment of the
Conversion Price shall be made upon the actual issuance of such
share of Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such Common
Stock upon conversion or exchange or exercise of such Convertible
Securities.
(ii)
Issuance of Convertible Securities . If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable
upon such conversion or exchange or exercise thereof is less than
the Conversion Price, immediately prior thereto, then each such
share of Common Stock underlying such Convertible Securities shall
be deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of
this
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14 -
Section
7(a)(ii), the “lowest price per share for which one share of
Common Stock is issuable upon such conversion or exchange or
exercise” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the issuance or sale
of the Convertible Security and upon the conversion or exchange or
exercise of such Convertible Security. No further adjustment of the
Conversion Price shall be made upon the actual issuance of such
share of Common Stock upon conversion or exchange or exercise of
such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for
which adjustment of the Conversion Price had been or are to be made
pursuant to other provisions of this Section 7(a), no further
adjustment of the Conversion Price shall be made by reason of such
issue or sale.
(iii)
Change in Option Price or Rate of Conversion . If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exchange
or exercise of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable or
exercisable for Common Stock changes at any time, the Conversion
Price in effect at the time of such change shall be adjusted to the
Conversion Price which would have been in effect at such time had
such Options or Convertible Securities provided for such changed
purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or
sold. For purposes of this Section 7(a)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the
Issuance Date are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued
as of the date of such change. No adjustment shall be made if such
adjustment would result in an increase of the Conversion Price then
in effect.
(iv)
Calculation of Consideration Received . In case any Option
is issued in connection with the issue or sale of other securities
of the Company, together comprising one integrated transaction in
which no specific consideration is allocated to such Options by the
parties thereto, the Options will be deemed to have been issued for
a consideration of $.01. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will
be deemed to be the net amount received by the Company therefor. If
any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the
fair value of such consideration, except where such consideration
consists of publicly traded securities, in which case the amount of
consideration received by the Company will be the Closing Sale
Price of such securities on the date of receipt. If any Common
Stock, Options or Convertible Securities are issued to the owners
of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the
net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration
other than cash or publicly traded securities will be determined
jointly by the Company and the Required Holders. If such parties
are unable
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15 -
to
reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the “ Valuation Event
”), the fair value of such consideration will be determined
within fourteen (14) Business Days after the tenth (10
th ) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company
and the Required Holders. The determination of such appraiser shall
be deemed binding upon all parties absent manifest error and the
fees and expenses of such appraiser shall be borne by the
Company.
(v)
Record Date . If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock, Options or
in Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record
date will be deemed to be the date of the issue or sale of the
Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(b)
Adjustment of Conversion Price upon Subdivision or Combination
of Common Stock . If the Company at any time on or after the
Issuance Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any
time on or after the Issuance Date combines (by combination,
reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares,
the Conversion Price in effect immediately prior to such
combination will be proportionately increased.
(c)
Other Events . If any event occurs of the type contemplated
by the provisions of this Section 7 but not expressly provided for
by such provisions (including, without limitation, the granting of
stock appreciation rights, phantom stock rights, other rights with
equity features or any distribution or dividend of securities on
the preferred stock of the Company existing on the date hereof),
then the Company’s Board of Directors will make an
appropriate ad
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