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EXHIBIT 10.4
[FORM OF SECURED CONVERTIBLE NOTE]
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 FORM REASONABLY ACCEPTABLE
TO THE COMPANY, 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 20(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.
WHITEHALL JEWELLERS, INC.
SECURED CONVERTIBLE NOTE
Issuance Date: _________ __, 200_
Principal: U.S. $50,000,000
FOR VALUE RECEIVED, WHITEHALL JEWELLERS, INC.., a Delaware
corporation (the "COMPANY"), hereby
promises to pay to the order of [PWJ FUNDING
LLC] [OTHER BUYERS] 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, 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
equal to twelve percent (12.0%) per annum
(the "INTEREST RATE"), from the date set
out above as the Issuance Date (the
"ISSUANCE DATE") until the same becomes due
and payable, 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
Convertible Note (including all Convertible
Notes issued in exchange, transfer
or replacement hereof, this "NOTE") is one
of an issue of Convertible Notes
(collectively, the "NOTES" and such other
Convertible Notes, the "OTHER NOTES")
issued pursuant to the Securities Purchase
Agreement (as defined below). Certain
capitalized terms are defined in Section
30.
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(1) MATURITY. On the Maturity Date, the Holder shall surrender
this Note to the Company and the Company
shall pay to the Holder an amount in
cash representing all outstanding
Principal, accrued and unpaid Interest and
accrued and unpaid Late Charges, if any.
The "MATURITY DATE" shall be [insert
three year anniversary from the Issuance
Date] (the "ORIGINAL MATURITY DATE"),
as may be extended (a) by the Company as
provided in the immediately succeeding
sentence and (b) at the option of the
Holder (i) in the event that, and for so
long as, 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
or (ii) through the date that is ten (10)
Business 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. The Company
shall have the right to extend the
Original Maturity Date until [insert four
year anniversary from the issuance
Date] by giving written notice to each
Holder not less than 30 nor more than 60
day's notice prior to the Original Maturity
Date and, if so extended, may
further extend the Original Maturity Date
until [insert five year anniversary
from the Issuance Date] by giving written
notice to each Holder not less than 30
nor more than 60 day's notice prior to
[insert four year anniversary from the
issuance date]; provided that the Company
may not extend the Maturity Date if
between the date such notice is delivered
and the Maturity Date (as extended, if
applicable) 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.
(2) INTEREST; INTEREST RATE. 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 Quarter during the
period beginning on the Issuance Date
and ending on, and including, the Maturity
Date (each, an "INTEREST DATE") with
the first Interest Date being [insert last
day of first Calendar Quarter after
Issuance Date]. If any Interest Date is not
a Business Day, Interest shall be
paid on the next Business Day immediately
succeeding the applicable Interest
Date. Interest shall be payable on each
Interest Date, to the record holder of
this Note on the applicable Interest Date,
in a number of fully paid and
nonassessable shares (rounded to the
nearest whole share in accordance with
Section 3(a)) of Common Stock ("INTEREST
SHARES") equal to the quotient of (a)
the amount of Interest payable on such
Interest Date and (b) the Conversion
Price in effect on the applicable Interest
Date. In connection with the payment
of Interest Shares paid on an Interest
Date, the Company shall (X) provided that
the Company's transfer agent (the "TRANSFER
AGENT") is participating in the
Depository Trust Company ("DTC") Fast
Automated Securities Transfer Program and
such action is not prohibited by applicable
law or regulation or any applicable
policy of DTC, credit such aggregate number
of Interest Shares to which the
Holder shall be entitled to the Holder's or
its designee's balance account with
DTC through its Deposit Withdrawal Agent
Commission system, or (Y) if the
foregoing shall not apply, issue and
deliver on the applicable Interest Date, to
the address set forth in the register
maintained by the Company for such purpose
pursuant to the Securities Purchase
Agreement or to such address as specified by
the Holder in writing to the Company at
least two (2) Business Days prior to the
applicable Interest Date, a certificate,
registered in the name of the Holder or
its designee, for the number of Interest
Shares to which the Holder shall be
entitled. Notwithstanding the foregoing,
the Company may not pay Interest in
Interest Shares but shall be obligated to
pay interest in cash on all Interest
Dates occurring after the Original Maturity
Date. Prior to the payment of
Interest
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on an Interest Date, Interest on this Note
shall accrue at the Interest Rate and
be payable by way of inclusion of the
Interest in the Conversion Amount in
accordance with Section 3(b)(i). From and
after the occurrence of an Event of
Default, the Interest Rate shall be
increased to eighteen percent (18%) (the
"DEFAULT RATE"). In the event that such
Event of Default is subsequently cured,
the adjustment referred to in the preceding
sentence shall cease to be effective
as of the date of such cure; provided that
the Interest as calculated at such
increased rate during the continuance of
such Event of Default shall continue to
apply to the extent relating to the days
after the occurrence of such Event of
Default through and including the date of
cure of such Event of Default. The
Company shall pay any and all documentary
stamp or similar taxes that may be
payable with respect to the issuance and
delivery of Interest Shares.
(3) CONVERSION OF NOTES. This Note shall be convertible into
shares of common stock of the Company, par
value $0.001 per share (the "COMMON
STOCK"), on the terms and conditions set
forth in this Section 3.
(a) Conversion Right. 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 Conversion Amount.
(b) Conversion Rate. The number of shares of Common
Stock issuable upon conversion of any
Conversion Amount pursuant to Section 3(a)
shall be determined by dividing (x) such
Conversion Amount plus the Make Whole
Interest Amount, if any, by (y) the
Conversion Price (the "CONVERSION RATE").
(i) "CONVERSION AMOUNT" means the sum of (A)
the portion of the Principal to be
converted, redeemed or otherwise with respect
to which this determination is being made,
(B) accrued and unpaid Interest with
respect to such Principal and (C) accrued
and unpaid Late Charges with respect
to such Principal and Interest.
(ii) "CONVERSION PRICE" means, as of any
Conversion Date (as defined below) or other
date of determination, $.751,
subject to adjustment as provided
herein.
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Assumes the number of shares of Common
Stock outstanding is 13,969,297 as of the
Closing Date and represents the price
determined by dividing the Original
Principal Amount of all Notes by the number
of shares of Common Stock that would
represent 87% of the issued and outstanding
capital stock of the Company as of
the Closing Date, less the sum of (i)
24,027,753 Interest Shares assumed to be
paid over the term of the Note, at the
Interest Rate, and (ii) the number of
shares issuable as of the Closing Date upon
exercise of the Warrants. Such
number shall be adjusted to reflect any
changes in the outstanding shares of
Common Stock between the Subscription Date
and the Closing Date and to reflect
the reverse stock split contemplated by the
Securities Purchase Agreement.
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(c) Mechanics of Conversion.
(i) Optional Conversion. To convert any
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 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
(1st) Business 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 Transfer
Agent. On or before the second (2nd)
Business Day following the date of receipt
of a Conversion Notice (the "SHARE
DELIVERY DATE"), the Company shall (X)
provided the Transfer Agent is
participating in DTC Fast Automated
Securities Transfer Program credit such
aggregate number of shares of Common Stock
to which the Holder shall be entitled
to the Holder's or its designee's balance
account with DTC through its Deposit
Withdrawal Agent Commission system or (Y)
if the Transfer Agent is not
participating in the DTC Fast Automated
Securities Transfer Program, issue and
deliver 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 as
required by 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 (3)
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 20(d)) representing
the outstanding Principal not
converted. The Person or Persons entitled
to receive the shares of Common Stock
issuable upon a conversion 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. 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 balance
account with DTC for the number of shares
of Common Stock to which the Holder is
entitled upon such holder's conversion of
any Conversion Amount (a "CONVERSION
FAILURE"), and if on or after such Trading
Day 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) Business 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, 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 (and
to issue such Common Stock) shall
terminate, or (ii) promptly honor its
obligation to deliver to the Holder a
certificate or certificates representing
such Common Stock 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.
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(iii) Book-Entry. 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 physical surrender and
reissue of this Note. The Holder and
the Company shall maintain records showing
the Principal, Interest and Late
Charges 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
require 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 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 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. 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 25.
(4) RIGHTS UPON EVENT OF DEFAULT.
(a) Event of Default. Each of the following events
shall constitute an "EVENT OF DEFAULT":
(i) 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, 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) the Company's (A) failure to cure a
Conversion Failure by delivery of the
required number of shares of Common Stock
within ten (10) Business Days after the
applicable Conversion Date or (B)
notice, written or oral, to any holder of
the Notes, including by way of public
announcement or through any of its agents,
at any time, of its intention not to
comply with a request for conversion of any
Notes into shares of Common Stock
that is tendered in accordance with the
provisions of the Notes;
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(iii) at any time following the forty-fifth
(45th) consecutive Business Day that the
Holder's Authorized Share Allocation is
less than the number of shares of Common
Stock that the Holder would be entitled
to receive upon a conversion of the full
Conversion Amount of this Note (without
regard to any limitations on
conversion);
(iv)
the Company's failure to pay to the
Holder any amount of Principal, Interest,
Late Charges or other amounts when and
as due under this Note or any other
Transaction Document (as defined in the
Securities Purchase Agreement), 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 Business
Days;
(v) any default shall have occurred and be
continuing that gives the holder of
Indebtedness the right to accelerate the
payment of, redemption of or acceleration
prior to maturity of any Indebtedness
(as defined in Section 3(s) of the
Securities Purchase Agreement) of more than
$1 million individually of the Company or
any of its Subsidiaries (as defined in
Section 3(a) of the Securities Purchase
Agreement) other than with respect to
any Other Notes;
(vi) 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;
(vii) 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;
(viii) a final judgment or judgments for the
payment of money aggregating in excess of
$250,000 are rendered against the
Company or any of its Subsidiaries and
which judgments are not, within ninety
(90) days after the entry thereof, bonded,
discharged or stayed pending appeal,
or are not discharged within ninety (90)
days after the expiration of such stay;
provided, however, that any judgment which
is covered by insurance or an
indemnity from a credit worthy party shall
not be included in calculating the
$250,000 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;
(ix) (1) any representation or warranty made
by the Company in the Securities Purchase
Agreement was breached in a material
respect when made and was not known by the
Majority Buyer (as defined in the
Securities Purchase Agreement) on or before
the Closing Date and, if so known,
would have given the Majority Buyer (as so
defined) the right not
<PAGE>
to have closed under the Securities
Purchase Agreement or (2) any covenant or
other term in the Transaction Documents has
been breached by the Company and
such breach continues unwaived and uncured
for at least (10) consecutive
Business Days after notice thereof is given
by the Holder to the Company;
(x) any breach or failure in any respect to
comply with Section 16(a), (b) and (d) of
this Note; or
(xi) any Event of Default (as defined in the
Other Notes) occurs with respect to any
Other Notes.
(b)
Redemption Right. Promptly after the occurrence
of an Event of Default with respect to this
Note or any Other Note, the Company
shall deliver written notice thereof via
facsimile and overnight courier (an
"EVENT OF DEFAULT NOTICE") to the Holder.
At any time after the earlier of the
Holder's receipt of an Event of Default
Notice and the Holder becoming aware of
an Event of Default, the Holder may require
the Company to redeem all or any
portion of this Note by delivering written
notice thereof (the "EVENT OF DEFAULT
REDEMPTION NOTICE") to the Company, which
Event of Default Redemption Notice
shall indicate the portion of this Note the
Holder is electing to redeem. Each
portion of this Note subject to redemption
by the Company pursuant to this
Section 4(b) shall be redeemed by the
Company at a price equal to the Conversion
Amount to be redeemed (the "EVENT OF
DEFAULT REDEMPTION PRICE"). Redemptions
required by this Section 4(b) shall be made
in accordance with the provisions of
Section 13.
(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 and
having similar ranking to the Notes, and
satisfactory to the Required Holders or
(ii) in the case of a Fundamental
Transaction involving a Change of Control
where the consideration being paid by the
acquiring party for the Common Stock
is cash, the Company complies with its
obligations under Section 5(b) below (a
"CASH TRANSACTION"). Upon the occurrence of
any Fundamental Transaction that is
not a Cash Transaction, the Successor
Entity shall succeed to, and be
substituted for (so that from and after 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. In the event that the Successor
Entity in a Fundamental Transaction that
is not a Cash Transaction is not a publicly
traded entity whose common stock or
equivalent equity
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security is quoted or listed for trading on
an Eligible Market but such
Successor Entity has a Parent Entity, the
Required Holders may elect to treat
such Parent Entity as the Successor Entity
for purposes of this Section 5(a)
and, in such case, 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 the
Company's Common Stock (or other
securities, cash, assets or other property)
purchasable upon the conversion or
redemption of the Notes prior to such
Fundamental Transaction, such shares of the
publicly traded common stock (or its
equivalent) of the Successor Entity
(including its Parent Entity), as adjusted
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 or
redemption 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"). At any time during the period
beginning after the Holder's receipt of a
Change of Control Notice and ending on
the date of the consummation of such Change
of Control (or, in the event a
Change of Control Notice is not delivered
at least ten (10) days prior to a
Change of Control, at any time on or after
the date which is ten (10) days prior
to a Change of Control and ending ten (10)
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 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 at a price equal to
the greater of (i) the product of
(x) the Conversion Amount being redeemed
and (y) the quotient determined by
dividing (A) the Closing Sale Price of the
Common Stock immediately following
the public announcement of such proposed
Change of Control by (B) the Conversion
Price and (ii) 125% of the Conversion
Amount being redeemed (the "CHANGE OF
CONTROL REDEMPTION PRICE"); provided if the
Change of Control giving rise to the
payment of the Change of Control Redemption
Price is not approved by a majority
of the Company Disinterested Directors (if
the approval of the Company's Board
of Directors is required for such Change of
Control), "125%" in clause (ii)
above shall be replaced with 100%.
Redemptions required by this Section 5 shall
be made in accordance with the provisions
of Section 13 and shall have priority
to payments to shareholders in connection
with a Change of Control.
(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 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
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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 insure that the
Holder will thereafter have the right
to receive upon a conversion of this Note,
(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 Subscription Date, the Company
issues or sells, or in accordance with this
Section 7(a) is deemed to have
issued or sold, any shares of
