Exhibit 4.2
[FORM OF SENIOR 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 18(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.
Liberator Medical
Holdings, Inc.
Senior Convertible
Note
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| Issuance Date:May 22, 2008 |
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Original Principal Amount:
U.S. $
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FOR VALUE RECEIVED, Liberator
Medical Holdings, Inc., a Nevada corporation (the “
Company ”), hereby promises to pay to
[ ] or
its 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 rate of three percent (3%) 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) or the Maturity Date,
acceleration, conversion, redemption or otherwise (in each case in
accordance with the terms hereof). This Senior Convertible Note
(including all Senior Convertible Notes issued in exchange,
transfer or replacement hereof, this “ Note ”)
is one of an issue of Senior Convertible Notes issued pursuant to
the Securities Purchase Agreement (as defined below) on the Closing
Date (collectively, the “ Notes ” and such other
Senior Convertible Notes, the “ Other Notes ”).
Certain capitalized terms used herein are defined in
Section 28.
(1) PAYMENTS OF
PRINCIPAL . On the Maturity Date, 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, on such
Principal and Interest. The “ Maturity Date ”
shall be the two year anniversary of the Issuance 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 the Note, the Company may not prepay any portion of
the outstanding Principal, accrued and unpaid Interest or accrued
and unpaid Late Charges, if any, on Principal and Interest.
(2) INTEREST; INTEREST
RATE . Interest on the outstanding Principal amount of 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 semi-annually, in arrears, on November 15 and
May 15 of each year (each, an “ Interest Date
”), with the first Interest Date being November 15,
2008. Interest shall be payable on each Interest Date, to the
record holder of this Note on each November 1 and May 1 immediately
preceding the applicable Interest Date (each, an “ Record
Date ”), in cash. Prior to the payment of Interest on an
Interest Date, Interest on this Note shall accrue at the Interest
Rate. From and after the occurrence and during the continuance of
an Event of Default, the Interest Rate shall be increased to ten
percent (10%) (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 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 but not including the date of cure of such Event of
Default.
(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 taxes that may be payable
with respect to the issuance and delivery of Common Stock upon
conversion of any Conversion Amount; provided that the Company
shall not be required to pay any tax that may be payable in respect
of any issuance of Common Stock to any Person other than the
converting Holder or with respect to any income tax due by the
Holder with respect to such Common Stock.
(b)
Conversion Rate . The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to
Section 3(a) shall be
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determined by dividing (x) such Conversion Amount by
(y) the Conversion Price (the “ Conversion Rate
”).
(i) “
Conversion Amount ” means the portion of the Principal
to be converted, redeemed or otherwise with respect to which this
determination is being made.
(ii) “
Conversion Price ” means, as of any Conversion Date
(as defined below) or other date of determination, $0.80, 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 10:00 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 third (3 rd ) 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
second (2 nd ) Trading 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
Depository Trust Company (“ 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 five (5) 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 18(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 . If within five
(5) 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
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Company
shall, within five (5) 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 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 (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 Weighted Average 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 18. 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 23.
(d)
Limitations on Conversions . The Company shall not effect
any conversion of this Note, and the Holder of this Note shall not
have the right to convert any
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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
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. Except as set forth in the preceding sentence,
for purposes of this Section 3(d), beneficial ownership shall
be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “ Exchange Act
”). For purposes of this Section 3(d), 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 at any time, upon the
written or oral request of the Holder, the Company shall within two
(2) Business Days 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 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.
(4) RIGHTS UPON EVENT OF
DEFAULT .
(a)
Event of Default . Each of the following events shall
constitute an “ Event of Default ”:
(i) 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 fifteen
(15) Trading Days in any 365-day period;
(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 fifteenth (15 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);
(iv) the
Company’s failure to pay to the Holder any amount of
Principal (including, without limitation, any redemption payments),
Interest, Late Charges or other amounts when and as due under this
Note, 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;
(v) the
Company or the Guarantor shall either (i) fail to pay, when
due, or within any applicable grace period, any payment with
respect to any Indebtedness in excess of $500,000, individually or
in the aggregate, due to any third party, other than, with respect
to unsecured Indebtedness only, payments contested by the Company
or the Guarantor, as the case may be, in good faith by proper
proceedings and with respect to which adequate reserves have been
set aside for the payment thereof in accordance with GAAP, or
otherwise be in breach or violation of any agreement for monies
owed or owing in an amount in excess of $500,000, individually or
in the aggregate, which breach or violation permits the other party
thereto to declare a default or otherwise accelerate amounts due
thereunder, or (ii) suffer to exist any other circumstance or
event that would, with or without the passage of time or the giving
of notice, result in a default or event of default under any
agreement binding the Company or the Guarantor, as the case may be,
which default or event of default would or is likely to have a
material adverse effect on the business, operations, properties,
prospects of financial condition of the Company and its
Subsidiaries, taken as a whole; provided, however, that this clause
(v) shall not apply to any lease on a premises occupied by the
Company or any of its Subsidiaries until the payment obligations
under any such lease have been accelerated or collateral securing
such obligations have been foreclosed on;
(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 $750,000 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
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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 $750,000 amount set forth above;
(ix) the
Company or the Guarantor breaches any material covenant or any
material representation or warranty under this Note or the
Securities Purchase Agreement, except, 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;
(x) the
Guaranty shall fail to be in full force or effect; or
(xi) any
Event of Default (as defined in the Other Notes) occurs with
respect to any Other Notes.
(b)
Remedies upon an Event of Default . Upon the occurrence of
an Event of Default of the type specified in Section 4(a)(vi)
or 4(a)(vii) above (each, a “ Bankruptcy Event of
Default ”), this Note shall immediately become due and
payable without notice, and the Company shall as promptly as
practicable, but in any event within one (1) Business Day
after the Company has written notice or actual knowledge of the
occurrence of such Event of Default, deliver written notice thereof
via facsimile or e-mail and overnight courier (an “ Event
of Default Notice ”) to the Holder. In connection with a
Bankruptcy Event of Default, the Company shall pay to the Holder in
cash the sum of (i) all outstanding Principal of this Note,
plus (ii) accrued and unpaid interest thereon,
plus (iii) accrued and unpaid Late Charges, if any.
Upon the occurrence of any Event Default other than a Bankruptcy
Event of Default, the Company shall within two (2) Business
Days deliver an Event of Default Notice via facsimile or e-mail and
overnight courier to the Holder. At any time after the earlier of
the Holder’s receipt of an Event of Default Notice and the
Holder gives written notice to the Company of an Event of Default,
the Holder, in its sole discretion, may by written notice to the
Company declare this Note to be immediately due and payable (the
“ Acceleration Notice ”). Immediately following
receipt an Acceleration Notice, the Company shall pay to the Holder
in cash the sum of (i) the product of all outstanding
Principal multiplied by 115% (the “ Default
Premium ”), plus (ii) accrued and unpaid
interest thereon, plus (iii) accrued and unpaid Late
Charges, if any. The parties hereto agree that in the event of the
Company’s acceleration of the Principal of this 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 Default 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.
(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 (as defined in the
Securities Purchase Agreement) in accordance with the provisions of
this Section 5(a) pursuant to written agreements in form and
substance satisfactory to the Required Holders and
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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 (other than Pink OTC
Markets Inc.). 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.
(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 on the date of 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 the Conversion Amount the Holder
is electing to redeem. The portion of the Principal of this Note
subject to redemption pursuant to this Section 5 shall be
redeemed by the Company in cash at a price equal to (i) the
product of (x) the Conversion Amount being redeemed and
(y) the Change of Control Premium, plus
(ii) accrued and unpaid Interest and Late Charges, if any, on
the portion of the Principal to be redeemed, to, but not including,
the date of redemption (the “ Change of Control Redemption
Price ”). Redemptions required by this Section 5(b) 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 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 is paid in full, 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
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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.
(6) RIGHTS UPON ISSUANCE OF
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 reasonably 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 upon Issuance of shares of Common Stock . If and
whenever the Company issues or sells, or in accordance with this
Section 7 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 issued or sold or deemed to have
been issued or sold by the Company in connection with any Excluded
Securities for a consideration per share less than a price (the
“ Applicable Price ”) equal to both the
Conversion Price in effect immediately prior to such issue or sale
or deemed issuance or sale and $0.75 (subject to adjustment
corresponding to adjustments made to the Conversion Price under
Sections 7(b) and (c) below, the “ Trigger Price
”) (the foregoing a “Dilutive Issuance" ), then
immediately after such Dilutive Issuance, the Conversion Price in
effect immediately prior to such Dilutive Issuance 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 lower of
(x) the Trigger Price and (y) the Conversion Price in
effect immediately prior to such Dilutive Issuance (such lower
amount, the “ Adjustment Price ”), by 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 Adjustment Price by
(II) the number
-9-
of
shares of Common Stock Deemed Outstanding immediately after such
Dilutive Issuance. Upon each such adjustment of the Conversion
Price hereunder, the number of shares of Common Stock into which
the Principal of this Note is convertible into (the “
Conversion Shares ”) shall be adjusted to the number
of shares of Common Stock determined by multiplying the Conversion
Price in effect immediately prior to such adjustment by the number
of Conversion Shares issuable upon conversion of this Note
immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment. 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
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, exercise or exchange of any Convertible Securities
issuable upon exercise of any such Option is less than the
Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to ha
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