SECOND AMENDED AND RESTATED
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, 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 GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF
THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING
SECTIONS 3(c)(iii) AND 20(a) HEREOF. THE HOLDER OF THIS NOTE AGREES
TO THE TERMS AND PROVISIONS SET FORTH IN SECTION 4(q) 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.
Second
Amended and Restated Senior Secured Convertible Note
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Original
Issuance Date: February 29, 2008
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Original Principal Amount: U.S.
$2,150,000.00
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Amendment and
Restatement Date: July 14, 2009
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FOR VALUE RECEIVED, Stinger Systems, 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 as may be required by Section 2, until the same
becomes due and payable, whether upon the Maturity Date,
acceleration, conversion, redemption or otherwise (in each case in
accordance with the terms hereof). This Second Amended and Restated
Senior Secured Convertible Note (including all Senior Secured
Convertible Notes issued in exchange, transfer or replacement
hereof, this “ Note ”) amends, supplements,
modifies and completely restates and supersedes the Amended and
Restated Senior Secured Convertible Note dated September 12,
2008, in the original principal amount of
$2,150,000.00,
which amended, supplemented, modified and completely restated and
superseded the Senior Secured Convertible Note, with an original
issuance date of February 29, 2008, issued by the Company to
the Holder in the original Principal amount of $2,150,000.00, but
shall not, except as specifically amended hereby or as set forth in
the July 2009 Securities Purchase Agreement, constitute a
release, satisfaction or novation of any of the obligations under
any other Transaction Document (as defined in the Securities
Purchase Agreement). This Note is one of an issue of Amended and
Restated Notes issued pursuant to Section 1(a) of the
July 2009 Securities Purchase Agreement on the Amendment and
Restatement Date (collectively, the “ Notes ”
and such other Amended and Restated Senior Secured Convertible
Notes, the “ Other Notes ”). Certain capitalized
terms used herein are defined in Section 30.
(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 March 1, 2011,
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 shall have occurred and be continuing on the Maturity
Date (as may be extended pursuant to this Section 1 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.
(a)
INTEREST; INTEREST RATE . Interest on this Note in an amount
equal to $641,775.00 has been prepaid to the Holder as of the date
set out above as the Issuance Date (the “ Issuance
Date ”). Notwithstanding the foregoing, in the event the
Maturity Date is extended by the Holder in accordance with
Section 1(ii), Interest on this Note shall accrue at a rate
equal to nine and ninety-five hundredths percent (9.95%) per annum
for such period commencing on March 1, 2011 through such
extended Maturity Date. From and after the occurrence and during
the continuance of an Event of Default, Interest shall accrue at
the rate of six percent (6.0%) per annum, provided, however, if the
Maturity Date is extended by the Holder in accordance with
Section 1(i), Interest shall accrue at the rate of fifteen
percent (15.0%) per annum for such period commencing on March 1,
2011 through such extended Maturity Date. In the event that such
Event of Default is subsequently cured, the Interest referred to in
the preceding sentence shall cease to accrue 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. Interest accrued pursuant to
this Section 2 (other than as a result of an extension of the
Maturity Date) shall be due and payable to the Holder in cash
within five (5) Business Days of the date such Interest ceases to
accrue hereunder.
2
(2)
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, $0.20, 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
Company’s 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
3
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 20(d))
representing the outstanding Principal not converted. The Person or
Persons entitled to receive the shares of Common Stock issuable
upon a conversion of this Note shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on the
Conversion Date.
(ii)
Company’s Failure to Timely Convert . 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 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 ”), 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.
(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.
4
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 20.
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 .
(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 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
5
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.
(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
6
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.
(3)
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 ten (10) 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, other than pursuant to
Section 3(d);
(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 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;
(v) 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;
(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;
7
(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 (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;
(ix) 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;
(x) any
breach or failure in any respect to comply with either of
Sections 8 or 16 of this Note;
(xi) any
Event of Default (as defined in the Other Notes, the Amended and
Restated Exchanged Notes or the New Notes) occurs with respect to
any Other Notes, Exchanged Note or the New 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) 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
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 14. To
the extent redemptions required by this Section 4(b) are deemed
or
8
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.
(4)
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 reasonably satisfactory to the Required Holders
and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of
Notes in exchange for such Notes a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to the Notes, including, without limitation, having a
principal amount and interest rate equal to the principal amounts
and the interest rates of the Notes then outstanding held by such
holder, having similar conversion rights 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 (a “ Public
Successor Entity ”). 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 . (i) 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
9
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) 130% of
the Conversion Amount being redeemed and (ii) the product of
(a) the Equity Value Redemption Premium and (b) the
product of (1) the Conversion Amount being redeemed multiplied
by (2) the quotient determined by dividing (I) the
aggregate cash consideration and the aggregate cash value of any
non-cash consideration per Common Share to be paid to the holders
of the Common Shares 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
(y) 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 14 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.
(ii) Notwithstanding
anything to the contrary contained above, if the Successor Entity
in a Change of Control transaction is a Public Successor Entity and
has a market capitalization in excess of $350 million as of
the Change of Control Notice Due Date (as defined below) and the
consideration being paid to the holders of Common Stock in such
Change of Control consists solely of its publicly traded common
stock, the Successor Entity may, in lieu of paying the Change of
Control Redemption Price in cash, elect to pay some or all of the
Conversion Amount to be redeemed (the “ Change of Control
Redemption Amount ” ) to the Holder of this Note
by causing the conversion of such Change of Control Redemption
Amount, provided there has been no Equity Conditions Failure (other
than with respect to clause (vi)(A) of the definition of Equity
Condition), in accordance with this Section 5(b) (a “
Successor Conversion ”). On or prior to the date which
is the tenth (10 th )
Trading Day prior to the date of the consummation of the Change of
Control transaction (the “ Change of Control Notice Due
Date ”), the Successor Entity shall deliver written
notice (each, a “ Successor Change of Control Notice
” and the date all of the holders receive such notice is
referred to as to the “ Successor Change of Control Notice
Date ”), to each holder of Notes, which Successor Change
of Control Notice shall (A) state, if applicable, what portion
of the Change of Control Redemption Amount
10
of such
holder’s Note the Successor Entity elects to have converted
upon receipt of a Change of Control Redemption Notice, pursuant to
a Successor Conversion (such amount to be converted, the “
Successor Conversion Amount ”) and (B) state, if
applicable, what portion of the Change of Control Redemption Amount
the Successor Entity elects to have redeemed, upon receipt of a
Change of Control Redemption Notice, or would be required to be
redeemed in accordance with the provisions of the Notes and
(ii) if some or all of the Change of Control Redemption Amount
is to be paid pursuant to a Successor Conversion, certify that the
Equity Conditions (other than with respect to clause (vi)(A) of the
definition of Equity Condition) have been satisfied as of the date
of the Successor Change of Control Notice. Each Successor Change of
Control Notice shall be irrevocable. If the Successor Entity does
not timely deliver a Successor Change of Control Notice in
accordance with this Section 5(b), then the Successor Entity
shall be deemed to have delivered an irrevocable Successor Change
of Control Notice stating that the entire Change of Control
Redemption Price shall be paid in cash. Except as expressly
provided in this Section 5(b)(ii), the Company shall convert
or redeem the applicable Change of Control Redemption Amount of
this Note pursuant to this Section 5(b) and the corresponding
Change of Control Redemption Amounts of the Other Notes in the same
pro rata proportion pursuant to the corresponding provisions of the
Other Notes in the same manner. The Successor Conversion Amount
(whether set forth in the Successor Change of Control Notice or by
operation of this Section 5(b)) shall be converted in
accordance with Section 5(b)(iii) and the Successor Entity
Redemption Amount shall be redeemed in accordance with
Section 5(b)(i).
(iii) Subject
to Section 3(d), if the Successor Entity delivers a Successor
Change of Control Notice and elects a Successor Conversion in
accordance with Section 5(b)(ii), then the applicable Change
of Control Redemption Price shall be converted by converting such
Change of Control Redemption Price at the Successor Conversion
Price (A) on the date of the consummation of the Change of
Control if the Change of Control Redemption Notice is received
prior to the consummation of the Change of Control or
(B) within five (5) Business Days after the
Company’s receipt of such Change of Control Redemption Notice
otherwise (the “ Change of Control Conversion Date
”); provided that the Equity Conditions have been satisfied
(or waived in writing by the Holder). If the Equity Conditions are
not satisfied (or waived in writing by the Holder), then at the
option of the Holder designated in writing to the Company and the
Successor Entity, the Holder may require the Company to do any one
or more of the following: (i) the Company shall redeem all or
any part designated by the Holder of the unconverted Successor
Conversion Amount (such designated amount is referred to as the
“ First Redemption Amount ”) on the Change of
Control Conversion Date and the Company shall pay to the Holder on
the Change of Control Conversion Date, by wire transfer of
immediately available funds, an amount in cash equal to 130% of
such First Redemption Amount, and/or (ii) the Successor
Conversion shall be null and void with respect to all or any part
designated by the Holder of the unconverted Change of Control
Redemption Price and the Holder shall be entitled to all the rights
of a holder of this Note with respect to such amount of the Change
of Control Redemption Price; provided , however ,
that the Conversion Price for such unconverted Change of Control
Redemption Price shall thereafter be adjusted to equal the lesser
of (A) the Successor Conversion Price as in effect on the date
on which the Holder voided the Successor Conversion and
(B) the Successor Conversion Price that would be in effect as
if the Change of Control was consummated on the date on which the
Holder delivers a Conversion Notice. If the Company fails to redeem
any First Redemption Amount on or before the Change of Control
Conversion Date by payment of such amount on the Change of Control
Conversion
11
Date, then the
Holder shall have the rights set forth in Section 14
(a) as if the Company failed to pay the applicable Redemption
Price and all other rights under this Note (including, without
limitation, such failure constituting an Event of Default described
in Section 4(a)). Notwithstanding anything to the contrary in
this Section 5(b)(iii), but subject to 3(d), until the Company
or the Successor Entity, as applicable, delivers the Change of
Control Redemption Price to the Holder, the Change of Control
Redemption Price may be converted by the Holder into Common Stock
pursuant to Section 3. Notwithstanding the foregoing, if the
Change of Control Conversion Date occurs after the consummation of
the Change of Control, the Successor Entity shall be obligated, in
lieu of the Company, to deliver the Change of Control Redemption
Price, whether by delivery of the Successor Conversion Amount at
the Successor Conversion Price or by delivery of the Change of
Control Redemption Amount.
(5)
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 . 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.
(6)
RIGHTS UPON ISSUANCE OF OTHER SECURITIES .
12
(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
Conv
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