Exhibit 4.4
[FORM OF SENIOR SECURED
CONVERTIBLE NOTES]
N ANOGEN , I NC .
S ENIOR S ECURED C ONVERTIBLE N OTE
|
|
|
|
|
Issuance Date:
August [•], 2008
|
|
Original Principal Amount:
U.S.
|
|
|
|
$[
] 1
|
FOR VALUE RECEIVED,
Nanogen, Inc., a Delaware
corporation (the “ Company ”), hereby promises
to pay to [PORTSIDE GROWTH AND OPPORTUNITY FUND] [CAPITAL VENTURES
INTERNATIONAL] [ENABLE OPPORTUNITY PARTNERS LP] [PIERCE DIVERSIFIED
STRATEGY MASTER FUND LLC, ENA] [ENABLE GROWTH PARTNERS LP]
[HIGHBRIDGE INTERNATIONAL LLC] [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, amortization 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 a series of senior secured
convertible notes issued pursuant to Section 1(a) of the
Second Amendment and Exchange Agreement (collectively, the “
Notes ” and such Notes, other than this Note, the
“ Other Notes ”; provided, for the avoidance of
doubt that the “Notes” do not include the Indenture
Notes, the Bridge Notes and the Amended and Restated 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 all outstanding Principal, accrued and unpaid
Interest and accrued and unpaid Late Charges, if any, on such
Principal and Interest (the “ Maturity Date Payment
”). The “ Maturity Date ” shall be
August 27, 2010, 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, but
subject to the rights of the Company in Section 5(c). 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, if any, on Principal
and Interest.
|
1
|
An aggregate principal amount
equal to 20% of Amended and Restated Notes.
|
(2) INTEREST; INTEREST RATE
.
(a) 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
360-day year comprised of twelve 30-day months 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 such date and the Maturity Date, an “
Interest Date ”) with the first Interest Date being
September 30, 2008. Interest shall be payable on each Interest
Date, to the record holder of this Note on the Record Date
immediately preceding applicable Interest Date, in shares of Common
Stock (“ Interest Shares ”), so long as
(i) there has been no Equity Conditions Failure (unless the
Holder has waived such Equity Conditions Failure) and (ii) the
Required Stockholder Approval has been obtained; provided ,
however , that the Company may, at its option as indicated
on the Interest Election Notice (as defined below), 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 tenth (10 th ) Trading Day prior to the
Interest Date (the date such notice is delivered to all of the
holders, the “ Interest Notice Date ”) which
notice (i) 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
(ii) in the case of payment in Interest Shares certifies that
there has been no Equity Conditions Failure. If any portion of
Interest for a particular Interest Date shall be paid in Interest
Shares, then (1) contemporaneously with the delivery of the
Interest Election Notice on the applicable Interest Notice Date,
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 Initial
Interest Conversion Price (the “ Pre-Interest Shares
”) and (2) on the applicable Interest Date, the Company
shall deliver to the Holder, in accordance with Section 2(b),
any Interest Balance Shares. Interest to be paid on an Interest
Notice Date or 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.
(b) When any Interest Shares are to
be issued on an Interest Notice Date or an Interest Date, as
applicable, then the Company shall (i) (X) provided that
the Transfer Agent is participating in the Fast Automated
Securities Transfer Program of the Depository Trust Company
(“ DTC ”) 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
2
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, an unlegended
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 all such Interest in
cash as Cash Interest if, unless consented to 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, either (A) the Holder may require the Company to pay
the Interest due on the applicable Interest Date as Cash Interest
(including any Interest represented by Pre-Interest Shares) and, in
conjunction with receipt of such cash payment, shall return the
applicable number of Pre-Interest Shares or (B) the Company
shall pay an additional amount to the Holder as Cash Interest equal
to the Interest Balance Amount.
(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 twelve percent
(12.0%) (the “ Default Interest 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.
(3) CONVERSION OF NOTES .
After the Required Stockholder Approval has been obtained, 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 taxes and similar 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 or similar tax
due by the Holder with respect to the Note or such Common
Stock.
3
(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, (C) accrued and unpaid Late
Charges with respect to such Principal and Interest and
(D) the applicable Present Value of Interest, in connection
with (I) the Holder’s exercise of its optional
conversion right pursuant to Section 3(c), (II) a Holder
Change of Control Redemption pursuant to Section 5(b), or
(III) a Company Change of Control Redemption pursuant to
Section 5(c), as applicable.
(i) “ Conversion Price
” means, as of any Conversion Date (as defined below) or
other date of determination, $0.4764, 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 5:00 p.m., New York
City 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 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 ) 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 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 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
4
record holder or holders of such shares of
Common Stock on the Conversion Date. In the event of a partial
conversion of this Note pursuant hereto, the principal amount
converted at the Holder’s option shall be deducted from the
Maturity Date Payment or from any other amount owing from the
Company pursuant hereto as set forth by the Holder in the
Conversion Notice.
(ii) Company’s Failure to
Timely Convert . 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 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 issue and deliver such
certificate or to credit the Holder’s balance account with
DTC for the number of Common Stock to which the Holder is entitled
upon such Holder’s conversion of any Conversion Amount 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.
(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.
5
(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 .
(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, Indenture Notes, Amended and Restated Notes, Bridge 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 “ Exchange 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 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 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 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.
6
(ii) Principal Market
Regulation . The Company shall not be obligated to issue any
shares of Common Stock upon conversion of this Note, and the Holder
of this Note shall not have the right to receive upon conversion of
this Note any shares of Common Stock, if the issuance of such
shares of Common Stock would exceed the aggregate number of shares
of Common Stock which the Company may issue upon conversion of the
Notes without breaching the Company’s obligations under the
rules or regulations of the Principal Market (the “
Exchange Cap ”), except that such limitation shall not
apply in the event that the Company (A) obtains the approval
of its stockholders as required by the applicable rules of the
Principal Market for issuances of Common Stock in excess of such
amount or (B) obtains a written opinion from outside counsel
to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the Required Holders. Until
such approval or written opinion is obtained, no purchaser of the
Notes pursuant to the Second Amendment and Exchange Agreement (the
“ Purchasers ”) shall be issued in the
aggregate, upon conversion of the Notes, 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
the Notes issued to such Purchaser pursuant to the Second Amendment
and Exchange Agreement on the Closing Date (as defined in the
Second Amendment and Exchange Agreement) and the denominator of
which is the aggregate principal amount of all Notes issued to the
Purchasers pursuant to the Second Amendment and Exchange 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.
(e) Automatic Conversion . If
at any time from and after the Amendment Date (the “
Automatic Conversion Eligibility Date ”), (i) the
arithmetic average of the Weighted Average Price of the Common
Stock for any ten (10) Trading Days in any fifteen
(15) consecutive Trading Day period following the Automatic
Conversion Eligibility Date (the “ Automatic Conversion
Measuring Period ”) equals or exceeds 150% of the
then-effective Conversion Price (the date such condition has been
met, the “ Automatic Conversion Triggering Date
”) and (ii) there is not then an Equity Conditions
Failure, then all of the Conversion Amount then remaining under
this Note shall be converted into fully paid, validly issued and
nonassessable shares of Common Stock in accordance with
Section 3(c) hereof at the Conversion Rate as of the Automatic
Conversion Notice Date (as defined below) with respect to the
Conversion Amount (the “ Automatic Conversion
”). The Company shall deliver, within not more than one
(1) Trading Day following the Automatic Conversion Triggering
Date, a written notice thereof by facsimile and overnight courier
to all, but not less than all, of the holders of Notes and the
Transfer Agent (the “ Automatic Conversion Notice
” and the date all of the holders received such notice is
referred to as the “ Automatic Conversion Notice Date
”). The Automatic Conversion Notice shall state (1) the
aggregate Conversion Amount of the Notes that shall be subject to
the Automatic Conversion pursuant hereto (and analogous provisions
under
7
the Other Notes), (2) the number of shares
of Common Stock to be issued to the Holder on the applicable
Automatic Conversion Date, and (3) the determination of the
arithmetic average of the Weighted Average Price of the Common
Stock during the Automatic Conversion Measuring Period. The
mechanics of conversion set forth in Section 3(c) shall apply
to the Automatic Conversion as if the Company and the Transfer
Agent had received from the Holder on the Automatic Conversion
Notice Date with respect to the Conversion Amount remaining under
this Note.
(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
(other than closing of the Principal Market generally) or failure
of the Common Stock to be listed on an Eligible Market for a period
of ten (10) consecutive Trading Days or for more than an
aggregate of twenty (20) 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;
(iii) 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);
(iv) the Company’s failure to
pay to the Holder any cash amount of Principal (including, without
limitation, any redemption payments), Interest due in cash, Late
Charges or any other amounts due in cash 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 five (5) Business
Days after notice of such failure;
(v) the Company shall either
(i) fail to pay, when due, or within any applicable grace
period, any payment in respect of any Indebtedness in excess of
$250,000, individually or in the aggregate, due to any third party,
other than, with respect to unsecured Indebtedness only, payments
contested by the Company 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 respect
of any Indebtedness in an amount in excess of $250,000,
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
8
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, 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 or any
of its Subsidiaries, individually or in the aggregate;
(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 generally (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 for substantially all of
its assets (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 for substantially all of
its assets, 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 $500,000 are
rendered against the Company or any of its Subsidiaries and which
judgments are not, within sixty (60) days after the entry
thereof, bonded, discharged or stayed pending appeal, or are not
discharged within sixty (60) days after the expiration of such
stay; provided, however, that any judgment which is covered by
insurance or an indemnity from a credit worthy party shall not be
included in calculating the $500,000 amount set forth
above;
(ix) the Company breaches any
covenant or other term or condition or any material representation
or warranty of any Transaction Document, except, in the case of a
breach of a covenant or other term or condition which is curable,
and provided that the Company delivers prompt notice of such breach
to the Holder, only if such breach continues for a period of at
least ten (10) consecutive Business Days;
(x) (A) Elitech has not invested at
least $1,000,000 on or before each of October 15,
2008, November 15, 2008 and December 31, 2008 (for
an aggregate of at least $3,00,000) in exchange for $3,000,000 in
aggregate principal amount of Bridge Notes, (B) the Elitech
Merger Agreement is terminated for any reason or (C) the
merger contemplated by the Elitech Merger Agreement is not
consummated by March 31, 2009 for any reason;
(xi) any breach or failure in any
respect to comply with Section 8 or Section 14 (other
than Sections 14(g) and 14(j)) of this Note; or
(xii) any Event of Default (as
defined in the Other Notes) occurs with respect to any Indenture
Notes, Amended and Restated Notes, the Bridge Notes or any Other
Notes.
(b) Redemption Right .
Subject to Section 4(c) hereof, upon the occurrence of an
Event of Default with respect to this Note or any Other Note, the
Company
9
shall within one (1) Business Day deliver
written notice thereof via facsimile or e-mail 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, if such Event of Default
is continuing, 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 (x) the Conversion
Amount to be redeemed and (y) the Redemption Premium and
(ii) the product of (A) the Conversion Rate with respect
to such Conversion Amount in effect at such time as the Holder
delivers an Event of Default Redemption Notice and (B) the
greater of (1) the Closing Sale Price of the Common Stock on
the date immediately preceding such Event of Default, (2) the
Closing Sale Price of the Common Stock on the date immediately
after such Event of Default and (3) the Closing Sale Price of
the Common Stock 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 12. To the extent redemptions required by this
Section 4(b) are deemed or determined by a court of competent
jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments. In the
event of a partial redemption of this Note pursuant hereto, at the
Holder’s option, the principal amount being redeemed shall be
deducted from the Maturity Date Payment or from any other amount
owing from the Company pursuant hereto as set forth by the Holder
in the Event of Default Redemption Notice. 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.
(c) Deferral of Certain
Payments . Notwithstanding anything in this Note to the
contrary, Holder agrees to defer payment of the Milestone Event
Payments and the deferral of such payments shall not constitute an
Event of Default, provided, however, that such deferral is
expressly conditioned on and such deferral will only be effective
so long as the Merger Conditions are satisfied (or waived by
holders of Notes representing at least 66.67% of the aggregate
principal amount of the Notes then outstanding) and, provided
further, that if any amounts are deferred pursuant to this
Section 4(c), then Interest shall accrue at the Default
Interest Rate and Late Charges shall accrue on all amounts so
deferred. All amounts deferred pursuant to this Section 4(c)
shall be immediately due and payable upon the earlier of
(i) any time that any of the Merger Conditions is not
satisfied (unless otherwise waived by holders of Notes representing
at least 66.67% of the aggregate principal amount of the Notes then
outstanding), (ii) any Change of Control Redemption Date,
(iii) any Event of Default Redemption Date and (iv) the
Maturity Date.
10
(5) RIGHTS UPON FUNDAMENTAL
TRANSACTION AND CHANGE OF CONTROL .
(a) Reaffirmation . If the
Company enters into or is a party to a Fundamental Transaction the
surviving entity of such Fundamental Transaction (the
“Successor Entity” ), shall deliver to each of
the holders of the Notes, (i) an affirmation that this Note
shall be a continuing obligation of the Successor Entity, and a
reaffirmation of the Successor Entity’s obligations under the
Transaction Documents following such Fundamental Transaction and
(ii) a confirmation that there shall be issuable upon
conversion of the Notes at any time after the consummation of the
Fundamental Transaction, (A) Common Stock or such other shares
of publicly traded common stock (or their equivalent) of the
Successor Entity or (B) if the Successor Entity is not a
publicly traded entity following such 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 of the Notes prior to such Fundamental Transaction, such
shares of stock, securities, cash, assets or any other property
whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had the Notes been
converted immediately prior to such Fundamental Transaction, in
each case as adjusted in accordance with the provisions of this
Note. 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. The
provisions of this Section 5 shall apply similarly and equally
to successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion or redemption of the
Notes.
(b) Holder 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
(with confirmation of transmission) and overnight courier to the
Holder (a “ Change of Control Notice ”) which
Change of Control Notice shall state whether the Company is
exercising its redemption right pursuant to Section 5(c) below
and if so, the additional information required pursuant such
Section. Whether or not the Company exercises its right of
redemption under Section 5(c) below, 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 (a “ Holder Change of
Control Redemption ”) all or any portion of this Note at
the Change of Control Redemption Price by delivering written notice
thereof (“ Holder Change of Control Redemption Notice
”) to the Company, which Holder Change of Control Redemption
Notice shall indicate the Conversion Amount the Holder is electing
to redeem.
(c) Company Redemption Right
. Notwithstanding Section 5(a) hereof, in the event of a
Change of Control, the Company shall have the right to redeem all
of the Notes (a “ Company Change of Control Redemption
”), in whole and not in part, at a price equal to the Change
of Control Redemption Price. The Company shall exercise its right
pursuant to this Section 5(c) by delivery of the Change of
Control Notice (the “ Company Change of Control Redemption
Notice ”) in writing to each of the holders of the Notes,
which notice shall additionally state (i) that, following the
consummation of the Change of Control, the Company shall redeem all
of the outstanding Notes on the Company Change of Control
Redemption Date
11
(as defined below),
(ii) that the Company shall consummate the Company Change of
Control Redemption on the twentieth (20 th ) day following the
consummation of such Change of Control (the “ Company
Change of Control Redemption Date ”), (iii) the
aggregate outstanding Conversion Amount of the Notes subject to
redemption from all the holders of the Notes pursuant to this
Section 5(c), and (iv) the Change of Control Redemption
Price that is to be paid to each holder of the Notes on the Company
Change of Control Redemption Date. The Company Change of Control
Redemption Notice shall be irrevocable.
(d) Redemptions Under This
Section 5 . The portion of this Note subject to redemption
pursuant to this Section 5 shall be redeemed by the Company in
cash at the Change of Control Redemption Price. Redemptions
required by this Section 5 shall be made in accordance with
the provisions of Section 12 and shall have priority to
payments to stockholders in connection with a Change of Control. To
the extent redemptions required by this Section 5 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 may be converted, in whole or in part, by the Holder
into Common Stock pursuant to Section 3. In the event of a
partial redemption of this Note pursuant hereto, at the
Holder’s option, the principal amount redeemed shall be
deducted from the Maturity Date Payment or from any other amount
owing from the Company pursuant hereto as set forth by the Holder
in the Change of Control Redemption Notice. The parties hereto
agree that in the event of the Company’s redemption of any
portion of the Note under this Section 5, 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 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 .
(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 .
Without duplication of any other rights or adjustments 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
12
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, 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 had the Securities been converted immediately
prior to such Corporate Event (without taking into account any
restrictions or limitations on the convertibility of the
Securities). Provision made pursuant to the preceding sentence
shall be in a form and substance satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and
equally to successive Corporate Events and shall be applied without
regard to any limitations on the conversion or redemption of this
Note.
(7) RIGHTS UPON ISSUANCE OF OTHER
SECURITIES .
(a) Adjustment of Conversion
Price upon Issuance of Common Stock . If and whenever on or
after the Issuance Date through the eighteen (18) month
anniversary of the Issuance Date, the Company issues or sells, or
in accordance with this Section 7(a) is deemed to have issued
or sold, any shares of Common Stock (including the issuance or sale
of shares of Common Stock owned or held by or for the account of
the Company, but excluding shares of Common Stock deemed to have
been issued or sold by the Company in connection with any Excluded
Security) for a consideration per share (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 (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. If and
whenever after the eighteen (18) month anniversary of the
Issuance Date, the Company issues or sells, or in accordance with
this Section 7(a) is deemed to have issued or sold, any shares
of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but
excluding shares of Common Stock deemed to have been issued or sold
by the Company in connection with any Excluded Security) in a
Dilutive Issuance, then immediately after such Dilutive Issuance,
the Conversion Price then in effect shall be reduced to an amount
equal the product of (A) the Conversion Price in effect
immediately prior to such Dilutive Issuance and (B) the
quotient determined by dividing (1) the sum of (I) the
product derived by multiplying the Conversion Price in effect
immediately prior to such Dilutive Issuance and the number of
shares of Common Stock Deemed Outstanding immediately prior to such
Dilutive Issuance plus (II) the consideration, if any,
received by the Company upon such Dilutive Issuance, by
(2) the product derived by multiplying (I) the Conversion
Price in effect immediately prior to such Dilutive Issuance by
(II) the number of shares of Common Stock Deemed Outstanding
immediately after such Dilutive Issuance. For purposes of
determining the adjusted Conversion Price under this
Section 7(a), the following shall be applicable:
(i) Issuance of Options . If
the Company in any manner grants or sells any Options and the
lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion or
exchange or exercise of any Convertible Securities issuable upon
exercise of such Option is less than the Applicable Price, then
such share of Common Stock underlying such Option shall be deemed
to be outstanding and to have been issued and sold by the Company
at the time of the granting or sale of such Option for such price
per share. For purposes of this
13
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 underlying such Convertible Securities shall
be deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this
Section 7(a)(ii), the “lowest price per share for which
one share of Common Stock is issuable upon such conversion or
exchange or exercise” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the
issuance or sale of the Convertible Security and upon the
conversion or exchange or exercise of such Convertible Security. No
further adjustment of the Conversion Price shall be made upon the
actual issuance of such share of Common Stock upon conversion or
exchange or exercise of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustment of the Conversion
Price had been or are to be made pursuant to other provisions of
this Section 7(a), no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or
Rate of Conversion . If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the
issue, conversion, exchange or exercise of any Convertible
Securities, or the rate at which any Convertible Securities are
convertible into or exchangeable or exercisable for Common Stock
changes at any time, the Conversion Price in effect at the time of
such change shall be adjusted to the Conversion Price which would
have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at
the time initially granted, issued or sold. For purposes of this
Section 7(a)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the Subscription Date are
changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common
Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change.
No adjustment shall be made if such adjustment would result in an
increase of the Conversion Price then in effect.
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,
(x) the Options will be deemed to have been issued for the
Black Scholes Value of such Options and (y) the other
securities issued or sold in such integrated transaction shall be
deemed to have been issued for the difference of (I) the
aggregate consideration received by the Company, less (II) the
Black Scholes Value of such Options. 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 stockholders 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,
at the Company’s expense, within five (5) Business Days
after the tenth (10 th ) day following the
Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination
of such appraiser shall be deemed binding upon all parties absent
manifest error.
(v) Record Date . If the
Company takes a record of the holders of Common Stock for the
purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the Common Stock
deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the case
may be.
(vi) Conversion Floor Price .
Until such time as the Company obtains the approval of its
stockholders as required under the rules and regulations of the
Principal Market in order to allow the Conversion Price to be less
than the Conversion Floor Price (as defined below), including,
without limitation, under the rules and regulations of any exchange
or automated quotation system on which any of the securities of the
Company are listed or designated (the “Required
Stockholder Approval” ), no adjustment pursuant to
Sections 7(a), 7(c), 7(d) or 12(a) shall cause the
15
Convers
