EXHIBIT 10.1
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 REASONABLY 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 18(a) HEREOF. THE PRINCIPAL
AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE
SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE LESS THAN THE
AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
RED ROCK PICTURES HOLDINGS, INC.
SENIOR SECURED CONVERTIBLE NOTE
Issuance Date: December __,
2008 Original Principal Amount:
U.S. $100,000
FOR VALUE RECEIVED, Red Rock Pictures
Holdings, Inc., a Nevada corporation
(the "Company"), hereby promises to pay to
Emerald Asset Advisors, LLC, a
company domiciled in Delaware, 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), the Maturity Date,
acceleration, conversion, redemption or
otherwise (in each case in accordance with
the terms hereof). This Senior
Secured Convertible Note (including all Senior Secured
Convertible Notes issued
in exchange, transfer or replacement
hereof, this "Note") is being issued in
connection with the Holder's delivery of $100,000 to the Company on
December __,
2008. Certain capitalized terms used herein are defined in Section
29.
21
<PAGE>
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 December __, 2009, 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. The
Company may prepay any portion of the outstanding Principal,
accrued and unpaid
Interest or accrued and unpaid Late Charges, if
any, on such Principal and
Interest, without penalty for early payment.
INTEREST; INTEREST RATE. Interest on this Note shall
commence accruing on the
Issuance Date at a rate of ten percent (10.0%) per annum
("Interest Rate") and
shall be computed on the basis of a 360-day year comprised of
twelve (12) thirty
(30) day months and shall be payable in cash on the Maturity
Date (an "Interest
Date"). Prior to the payment of Interest on the 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), provided a
conversion occurs. From and after the occurrence
of an Event of Default, the
Interest Rate shall be increased to twenty percent
(20.0%) ("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 the
Default Interest 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.
22
<PAGE>
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.
Conversion Right. Subject to the provisions
of Section 3(d), at any time or
times on or after the date hereof, the Holder shall be
entitled to convert any
portion of the outstanding and unpaid Conversion Amount (as
defined below) into
fully paid and nonassessable shares of Common Stock in
accordance with Section
3(c), at the Conversion Rate (as defined below). The Company shall
not issue any
fraction of a share of Common Stock upon any
conversion. If the issuance would
result in the issuance of a fraction of a share of
Common Stock, the Company
shall round such fraction of a share of Common
Stock up to the nearest whole
share. The Company shall pay any and all taxes that may be
payable with respect
to the issuance and delivery of Common Stock upon conversion
of any Conversion
Amount.
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").
"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.
"Conversion Price" means, as of any Conversion Date (as
defined below) or other
date of determination, $006, subject to adjustment as provided
herein.
Mechanics of Conversion.
Optional Conversion. To convert any
Conversion Amount into shares of Common
Stock on any date (a "Conversion Date"),
the Holder shall (A) transmit by
facsimile (or otherwise deliver), for receipt on
or prior to 11:59 p.m., New
York Time, on such date, a copy of an executed notice of
conversion in the form
attached hereto as Exhibit I (the "Conversion Notice") to the
Company and (B) if
required by Section 3(c)(iii), surrender
this Note to a common carrier for
delivery to the Company as soon as practicable on or
following such date (or an
indemnification undertaking with respect to this Note
in the case of its loss,
theft or destruction). On or before the first
(1st) 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 (2nd)
23
<PAGE>
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 record
holder or holders of such shares of
Common Stock on the Conversion Date.
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 conversion of any
Conversion Amount (a "Conversion
Failure"), then (A) the Company shall pay damages to the
Holder for each 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) Trading 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
24
<PAGE>
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 (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.
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.
Limitations on Conversions. The Company shall not effect any
conversion of this
Note, and the Holder of this Note shall not
have the right to convert any
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
25
<PAGE>
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) 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 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 from time to time
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
(61st) 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.
RIGHTS UPON EVENT OF DEFAULT.
----------------------------
Event of Default. Each of the following events
shall constitute an "Event of
Default":
the failure of the Company to timely file its SEC
reports on Form 10-Q or Form
10-K;
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;
26
<PAGE>
the failure of the Company to redeem all outstanding
Principal and Interest of
the Note upon its completion of a Qualified Financing.
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;
at any time following the tenth
(10th) 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);
the Company's failure to pay to the Holder any amount of
Principal, Redemption
Price, Interest, Late Charges or other amounts when and
as due under this Note
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 three (3) Business Days;
any default under, redemption of or
acceleration prior to maturity of any
Indebtedness of the Company or any of its subsidiaries
("Subsidiaries");
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;
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;
a final judgment or judgments for the payment of money
aggregating in excess of
$75,000 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
creditworthy party shall
not be included in calculating the $75,000 amount set forth above
so long as the
Company provides the Holder a written statement from
such insurer or indemnity
provider (which written statement shall
be reasonably satisfactory to the
Holder) to the effect that such judgment is covered by insurance or
an indemnity
and the Company will receive the proceeds of such insurance or
indemnity within
thirty (30) days of the issuance of such judgment;
27
<PAGE>
the Company breaches any representation,
warranty, covenant or other term or
condition of the Note, except, in the case of a breach
of a covenant which is
curable, only if such breach continues for
a period of at least ten (10)
consecutive Business Days; or
any breach or failure in any respect to comply with Section 14 of
this Note.
Redemption Right. Upon the occurrence of an
Event of Default with respect to
this Note, the Company shall within one (1) Business Day
deliver written notice
thereof via facsimile and overnight courier (an "Event
of Default Notice") to
the Holder. At any time after the earlier of the Holder's receipt
of an Event of
Default Notice and the Holder becoming aware of an Event of
Default, the Holder
may require the Company to redeem all or any portion of this Note
by delivering
written notice thereof (the "Event of
Default Redemption Notice") to the
Company, which Event of Default Redemption Notice shall
indicate the portion of
this Note the Holder is electing to redeem. Each portion of this
Note subject to
redemption by the Company pursuant to this Section 4(b) shall be
redeemed by the
Company at a price equal to the greater of (i) the product of (A)
the Conversion
Amount to be redeemed and (B) the Redemption Premium and (ii) the
product of (A)
the Conversion Rate with respect to such
Conversion Amount in effect at such
time as the Holder delivers an Event of Default
Redemption Notice and (B) the
greater of (I) the Closing Sale
Price of the Common Stock on the
date
immediately preceding such Event of Default, (II) the Closing
Sale Price of the
Common Stock on the date immediately after such Event
of Default and (III) 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. 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.
28
<PAGE>
Mandatory Redemption. In the event that the Company raises gross
proceeds in the
amount of $1,000,000 or more at anytime while
this Note is outstanding, the
Company shall be required to immediately
redeem all of the then outstanding
Principal, Interest and Penalties, if any, then due under this
Note.
RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
---------------------------------------------------------
Assumption. The Company shall not
enter into or be party to a Fundamental
Transaction unless (i) the Successor Entity
assumes in writing all of the
obligations of the Company under this Note and the other
Transaction Documents
in accordance with the provisions of this
Section 5(a) pursuant to written
agreements in form and substance satisfactory to the Holder
and approved by the
Holder prior to such Fundamental Transaction, including agreements
to deliver to
each holder of Notes in exchange for such Notes a
security of the Successor
Entity evidenced by a written instrument
substantially similar in form and
substance to the Notes, including, without limitation, having a
principal amount
and interest rate equal to the principal
amounts then outstanding and the
interest rates of the Notes held by such
holder, having similar conversion
rights as the Notes and having similar ranking to the Notes, and
satisfactory to
the 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 (specifically
excluding the Principal Market).
Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall
succeed to, and be substituted for (so
that from and after the date of such
Fundamental Transaction, the provisions of this Note
referring to the "Company"
shall refer instead to the Successor Entity), and may
exercise every right and
power of the Company and shall assume all of
the obligations of the Company
under this Note with the same effect as if such Successor
Entity had been named
as the Company herein. Upon consummation of the
Fundamental Transaction, the
Successor Entity shall deliver to the Holder
confirmation that there shall be
issued upon conversion or redemption
of this Note at any time after
the
consummation of the Fundamental
Transaction, in lieu of the shares of 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, 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.
29
<PAGE>
Redemption Right. No sooner than fifteen (15) days nor later
than ten (10) days
prior to the consummation of a Change of Control,
but not prior to the public
announcement of such Change of Control, the Company shall deliver
written notice
thereof via facsimile and overnight courier to the Holder (a
"Change of Control
Notice"). At any time during the period beginning
on the date of the Holder's
receipt of a Change of Control Notice and ending twenty (20)
Trading Days after
the consummation of such Change of Control, the Holder
may require the Company
to redeem all or any portion of this Note by delivering
written notice thereof
("Change of Control Redemption Notice") to the Company, which
Change of Control
Redemption Notice shall indicate the Conversion Amount the Holder
is electing to
redeem. The portion of 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) the product of (x) the Conversion Amount being redeemed and (y)
the quotient
determined by dividing (A) the greater of the Closing
Sale Price of the Common
Stock immediately prior to the consummation
of the Change of Control, the
Closing Sale Price immediately
following the public announcement of
such
proposed Change of Control and the Closing
Sale Price of the Common Stock
immediately prior to the public announcement of such proposed
Change of Control
by (B) the Conversion Price and (ii)
125% of the Conversion Amount being
redeemed (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(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(c) may be converted, in whole or in
part, by the
Holder into shares of Common Stock, or in the event the Conversion
Date is after
the consummation of the Change of Control, shares
of publicly traded common
stock (or their equivalent) of the Successor Entity
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 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.
30
<PAGE>
RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.
------------------------------------------------------------------
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.
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
Holder. 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.
31
<PAGE>
RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
----------------------------------------
Adjustment of Conversion Price upon Issuance of Common Stock. If
and whenever on
or after 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. For
purposes of determining the adjusted Conversion Price
under this Section 7(a),
the following shall be applicable:
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 each 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 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.
32
<PAGE>
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 each
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.
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.
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 a value determined by use of the
Black
Scholes Option Pricing
Model (the "Option Value") 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 Option Value. 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,
33
<PAGE>
Op
