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Exhibit 10.14
[FORM OF SENIOR 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 (THE “1933 ACT”), 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 1933 ACT, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT (II) UNLESS SOLD OR
TRANSFERRED TO A “QUALIFIED INSTITUTIONAL BUYER” WITHIN
THE MEANING OF RULE 144A UNDER THE 1933 ACT OR TO AN
“ACCREDITED INVESTOR” AS THAT TERM IS DEFINED IN RULE
501(A) OF REGULATION D OR (III) 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 HOLDER OF THIS NOTE AGREES TO THE TERMS AND PROVISIONS SET
FORTH IN SECTION 4(o) OF THE SECURITIES PURCHASE AGREEMENT
REGARDING THE COLLATERAL AGENT (AS DEFINED IN THE SECURITIES
PURCHASE AGREEMENT). 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.
AMISH NATURALS INC.
SENIOR SECURED CONVERTIBLE NOTE
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| Issuance Date: February [__], 2008 |
Original Principal
Amount: U.S. $3,125,000 |
FOR VALUE
RECEIVED, Amish Naturals Inc., a Nevada corporation (the
“ Company ”), hereby promises to pay to the
order of CASTLERIGG MASTER INVESTMENTS LTD. 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
the applicable 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) or the Maturity Date, acceleration,
conversion, redemption or otherwise (in each case in accordance
with the terms hereof). This Senior Secured Convertible Note
(including all Senior Secured Convertible Notes issued in exchange,
transfer or replacement hereof, this “ Note ”)
is one of an issue of Senior Secured Convertible Notes issued
pursuant to the Securities Purchase Agreement (as defined below) on
the Closing Date (collectively, the “ Notes ”
and such other Senior Secured Convertible Notes, the “
Other Notes ”). Certain capitalized terms used
herein are defined in Section 29.
(1)
PAYMENTS OF PRINCIPAL . On the Maturity Date, the Company
shall pay to the Holder an amount in cash representing 135% of all
outstanding Principal, accrued and unpaid Interest and accrued and
unpaid Late Charges, if any, on such Principal and Interest. The
“ Maturity Date ” shall be February [__],
2010 (the “ Stated Maturity Date ”), as may be
extended 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 on the Maturity Date (as may be
extended pursuant to this Section 1) or any event that shall have
occurred and be continuing that 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) 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(b)) is delivered prior to the Maturity Date.
Other than as specifically permitted by this Note, the Company may
not prepay any portion of the outstanding Principal, accrued and
unpaid Interest or accrued and unpaid Late Charges on Principal and
Interest, if any. Notwithstanding any provision of this Section 1
to the contrary, the Holder may, at its option and in its sole
discretion, deliver a written notice to the Company at least two
(2) days prior to the Stated Maturity Date electing to have the
payment of all or any portion of the Principal and Interest, if
any, payable on the Stated Maturity Date deferred (such amount
deferred, the “ Deferral Amount ”) up to a date
that is two (2) years after the Stated Maturity Date, which date
shall thereafter be the “Maturity Date” for all
purposes hereunder. Any notice delivered by the Holder pursuant to
this Section 1 shall set forth (i) the Deferral Amount and (ii) the
date that such Deferral Amount shall now be payable.
(2)
INTEREST; INTEREST RATE . (a) If the Maturity Date of this
Note is extended at the Holder’s option in accordance with
Section 1, Interest on this Note shall commence accruing on the
Stated Maturity Date and shall be computed on the basis of a
360-day year comprised of twelve (12) thirty (30) day months and
shall be payable in arrears for each Calendar Quarter on the first
day of the succeeding Calendar Quarter during the period beginning
on the Stated Maturity Date and ending on, and including, the
Maturity Date (each, an “ Interest Date
”) with the first Interest Date being the earlier of (a)
April 1, 2010 and (b) the Maturity Date. Interest shall be payable
on each Interest Date, to the record holder of this Note on the
applicable Interest Date, in shares of Common Stock (“
Interest Shares ”) so long as there has been no Equity
Conditions Failure; provided however, that the Company may, at its
option following notice to the Holder, pay Interest on any Interest
Date in cash (“ Cash Interest ”) or in a
combination of Cash Interest and Interest Shares. The Company shall
deliver a written notice (each, an “ Interest Election
Notice ”) to each holder of the Notes on or prior to the
Interest Notice Due Date (the date such notice is delivered to all
of the holders, the “ Interest Notice Date ”)
which notice (1) either (A) confirms that Interest to be paid on
such Interest Date shall be paid entirely in Interest Shares or (B)
elects to pay Interest as Cash Interest or a combination of Cash
Interest and Interest Shares and specifies the amount of Interest
that shall be paid as Cash Interest and the amount of Interest, if
any, that shall be paid in Interest Shares and (2) certifies that
there has been no Equity Conditions Failure; provided, however,
that the Company shall not be entitled to pay any portion of
Interest on an Interest Date in Interest Shares in excess of the
Holder Pro Rata Amount of the applicable Volume Limitation. If any
portion of Interest for a particular Interest Date shall be paid in
Interest Shares, then the Company shall pay to the Holder, in
accordance with Section 2(b), a number of shares of Common Stock
equal to (x) the amount of Interest payable on the applicable
Interest Date in Interest Shares divided by (y) the applicable
Interest Conversion Price. Interest to be paid on an Interest Date
in Interest Shares shall be paid in a number of fully paid and
nonassessable shares of Common Stock (rounded to the nearest whole
share). If the Equity Conditions are not satisfied as of the
Interest Notice Date, then unless the Company has elected to pay
such Interest in cash, the Interest Notice shall indicate that
unless the Holder waives the Equity Conditions, the Interest shall
be paid in cash. If the Equity Conditions were satisfied as of the
Interest Notice Date but the Equity Conditions are no longer
satisfied at any time prior to the Interest Date, the Company shall
provide the Holder a subsequent notice to that effect indicating
that unless the Holder waives the Equity Conditions, the Interest
shall be paid in cash.
2
(b)
When any Interest Shares are to be paid on an Interest Date, the
Company shall (i) (A) 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 (B) 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 and (ii) with respect to each Interest Date, pay
to the Holder, in cash by wire transfer of immediately available
funds, the amount of any Cash Interest. Notwithstanding the
foregoing, the Company shall not be entitled to pay Interest in
Interest Shares and shall be required to pay such Interest in cash
as Cash Interest on the applicable Interest Date if, unless waived
in writing by the Holder, there has been an Equity Conditions
Failure. If an Event of Default or Equity Conditions Failure occurs
during the Interest Measuring Period, then on the Interest Date, at
the Holder’s option, the Holder may require the Company to
pay all or any specified portion of the Interest due on the
applicable Interest Date as Cash Interest.
(c)
Prior to the payment of Interest 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 and during the
continuance of an Event of Default, the Interest Rate shall be
increased to fifteen percent (15.0%) per annum; provided, however,
that in the event an Event of Default occurs at any time prior to
the Stated Maturity, the Company shall pay Interest to the Holder,
in addition to any previously paid Interest, at an Interest Rate
equal to five percent (5.0%). 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 and unpaid 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 taxes that may be payable with respect to the issuance and
delivery of Interest Shares.
3
(3)
CONVERSION OF NOTES . This Note shall be convertible into
shares of the Company’s common stock, par value $0.001 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 transfer, stamp and similar 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 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, $ 1.75,
subject to adjustment as provided herein.
(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 (1
st ) Business Day following the date of receipt of a
Conversion Notice, the Company shall transmit by facsimile a
confirmation (the “ Conversion Confirmation ”)
of receipt of such Conversion Notice to the Holder and the Transfer
Agent. On or before the (2 nd ) second Business Day
following the date of receipt of a Conversion Notice (the “
Share Delivery Date ”), the Company shall (X)
provided that the Transfer Agent is participating in the DTC Fast
Automated Securities Transfer Program, credit such aggregate number
of shares of Common Stock (including any 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 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
(including any Interest Shares) 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 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
this Note shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Conversion
Date.
4
(ii)
Company’s Failure to Timely Convert . If the Company
shall fail to issue a certificate to the Holder or credit the
Holder’s balance account with DTC, as applicable, for the
number of shares of Common Stock to which the Holder is entitled
upon conversion of any Conversion Amount on or prior to the date
which is three (3) Trading Days after the Conversion Date (a
“ Conversion Failure ”), then (A) the Company
shall pay damages to the Holder for each Trading Day of such
Conversion Failure in an amount equal to one and one-half percent
(1.5%) of the product of (I) the sum of the 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; 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. 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, 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
”) or on any date of the Company’s obligation to
deliver shares of Common Stock as contemplated pursuant to clause
(B) below, then the Company shall, within three (3) Business Days
after the Holder’s request and in the Holder’s
discretion, either (A) 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 issue and deliver such certificate or to 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 shall terminate,
or (B) 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 (1) such number of shares of
Common Stock, times (2) the Closing Bid Price on the Conversion
Date.
5
(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 of this Note. The Holder and the Company
shall maintain records showing the Principal, Interest and Late
Charges, if any, 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, 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 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.
(d)
Limitations on Conversions .
6
(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,
the Holder (together with the Holder’s affiliates) would
beneficially own in excess of 4.99% (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. 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 (the
“ 1934 Act ”). 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, Form 8-K or other public filing with the
Securities Exchange Commission, 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 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 increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified
in such notice; 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. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with
the terms of this Section 3(d)(i) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the
intended beneficial ownership limitation herein contained or to
make changes or supplements necessary or desirable to properly give
effect to such limitation.
(ii)
Principal Market Regulation . The Company shall not be
obligated to issue any shares of Common Stock upon conversion of
this Note 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 and Warrants without breaching the Company’s
obligations under the rules or regulations of any applicable
Eligible 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 such Eligible 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, no purchaser of the Notes pursuant to the Securities
Purchase Agreement (each, a “ Purchaser ” and
collectively the “ Purchasers ”) shall be issued
in the aggregate, upon conversion or exercise or otherwise, as
applicable, of Notes or Warrants, shares of Common Stock in an
amount greater than the product of the Exchange Cap multiplied by a
fraction, the numerator of which is the principal amount of Notes
issued to any Purchaser pursuant to the Securities Purchase
Agreement on the Closing Date and the denominator of which is the
aggregate principal amount of all Notes issued to all of the
Purchasers pursuant to the Securities Purchase Agreement on the
Closing Date (with respect to each Purchaser, the “
Exchange Cap Allocation ”). In the event that any
Purchaser shall sell or otherwise transfer any of such
Purchaser’s Notes, the transferee shall be allocated a pro
rata portion of such Purchaser’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.
7
(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 five (5) consecutive days or for more
than an aggregate of twenty (20) days in any 365-day period (other
than days during an Allowable Grace Period (as defined in the
Registration Rights Agreement));
(ii)
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)
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;
(iv)
at any time following the tenth (10 th ) 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 set forth in Section 3(d) or otherwise);
(v)
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 (including, without limitation, the Company’s
failure to pay any redemption payments or amounts hereunder) or any
other Transaction Document (as defined in the Securities Purchase
Agreement) or any other agreement, document, certificate or other
instrument delivered in connection with the transactions
contemplated hereby and thereby 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 five (5) Business Days;
8
(vi)
any default under, redemption of 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 Agreement) other
than with respect to any Other Notes;
(vii)
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;
(viii)
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;
(ix)
a final judgment or judgments for the payment of money aggregating
in excess of (A) $100,000 are rendered against the Company or any
of its Subsidiaries or (B) $50,000 are rendered against any of the
officers or directors of 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 credit worthy party shall not be
included in calculating the amounts 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;
(x)
the Company breaches any representation, warranty, covenant or
other term or condition of any Transaction Document, except, in the
case of a breach of a covenant or other term or condition of any
Transaction Document which is curable, only if such breach
continues for a period of at least ten (10) consecutive Business
Days;
(xi)
any breach or failure in any respect to comply with Section 15 of
this Note;
9
(xii)
the Company or any Subsidiary shall fail to perform or comply with
any covenant or agreement contained in any Security Agreement to
which it is a party, any Pledge Agreement to which it is a party or
any Mortgage to which it is a party;
(xiii)
any material provision of any Security Document (as 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;
(xiv)
any Security Agreement, any Pledge Agreement, any Mortgage 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,
priority 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;
(xv)
any bank at which any deposit account, blocked account, or lockbox
account of the Company or any Subsidiary is maintained shall fail
to comply with any material term of any deposit account, blocked
account, lockbox account or similar agreement to which such bank is
a party or any securities intermediary, commodity intermediary or
other financial institution at any time in custody, control or
possession of any investment property of the Company or any
Subsidiary shall fail to comply with any of the terms of any
investment property control agreement to which such Person is a
party (it being understood that only accounts pursuant to which the
Collateral Agent has requested account control agreements should be
subject to this clause (xv));
(xvi)
any material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive
days, the cessation or substantial curtailment of revenue producing
activities at any facility of the Company or any Subsidiary, if any
such event or circumstance could reasonably be expected to have a
Material Adverse Effect (as defined in the Securities Purchase
Agreement); or 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, the Company shall within one (1) Business Day 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 greater of (i) the product of (A) the Conversion
Amount to be redeemed and (B) 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 Holder delivers an Event of
Default Redemption Notice and (B) the product of (1) the Equity
Value Redemption Premium and (2) the greatest Closing Sale Price of
the Common Stock during the period beginning on the date
immediately preceding such Event of Default and ending on the date
the Holder delivers the Event of Default Redemption Notice (the
“ Event of Default Redemption Price ”).
Redemptions required by this Section 4(b) shall be made in
accordance with the provisions of Section 13. 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 any portion of the Note under this
Section 4(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 4(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.
10
(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
then outstanding 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
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 the
Company’s Common Stock (or other securities, cash, assets or
other property) issuable upon the conversion or redemption of the
Notes prior to such Fundamental Transaction, such shares of the
publicly traded common stock (or their 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.
11
(b)
Redemption Right . No sooner than fifteen (15) Trading Days
nor later than ten (10) Trading 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 twenty (20) Trading Days after
the date of 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 in cash at a price equal to the greater of (i) 150% of the
Conversion Amount being redeemed and (ii) the product of (x) the
Equity Value Redemption Premium and (y) the product of (1) the
Conversion Amount being redeemed multiplied by (2) the quotient
determined by dividing (A) the aggregate cash consideration and the
aggregate cash value of any non-cash consideration per share of
Common Stock to be paid to the holders of the shares of Common
Stock upon consummation of the Change of Control (any such non-cash
consideration consisting of marketable securities to be valued at
the higher of the Closing Sale Price of such securities as of the
Trading Day immediately prior to, the Closing Sale Price as of the
Trading Day 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 (the “
Change of Control Redemption Price ”). Redemptions
required by this Section 5 shall be made in accordance with the
provisions of Section 13 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 the 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 (together with any interest thereon) is paid in
full, the Conversion Amount submitted for redemption under this
Section 5(b) (together with any interest thereon) 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 the 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 Change of Control 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.
(6)
RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS .
12
(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 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, 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 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 Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for
the account of the Company, but excluding shares of Common Stock
deemed to have been issued or sold by the Company in connection
with any Excluded Securities) for a consideration per share (the
“ New Issuance Price ”) less than a price (the
“ Applicable Price ”) equal to the Conversion
Price in effect immediately prior to such issue or sale or deemed
issuance or sale (the foregoing a “ Dilutive Issuance
”), then immediately after such Dilutive Issuance the
Conversion Price then in effect shall be reduced to an amount equal
to the New Issuance Price. For purposes of determining the adjusted
Conversion Price under this Section 7(a), the following shall be
applicable:
13
(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 Applicable Price, then such share of Common Stock
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 Applicable Price, then such share of Common Stock 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
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 increases or decreases at any time,
the Conversion Price in effect at the time of such increase or
decrease 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 increased or decreased 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 Subscription
Date are increased or decreased 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 increase or decrease. No adjustment shall be
made if such adjustment would result in an increase of the
Conversion Price then in effect.
14
(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 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 securities will be determined jointly by the
Company and the Required Holders. If such parties are unable 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 five (5) Business Days after the tenth (10 th )
day following the Valuation Event by an independent, reputable
appraiser jointly selecte
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