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Exhibit 10.2
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 TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN
A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE
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 16(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.
VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.
Senior Convertible Note
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Issuance
Date: July 7, 2008
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Original
Principal Amount: U.S. $
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FOR VALUE RECEIVED, Valley Forge Composite Technologies,
Inc., a Florida corporation (the “ Company ”),
hereby promises to pay to the order of __________________________,
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 or acceleration, conversion,
redemption or otherwise (in each case in accordance with the terms
hereof). This Senior Convertible Note (including all Senior
Convertible Notes issued in exchange, transfer or replacement
hereof, this “ Note ”) is one of
an issue of Senior Convertible Notes issued pursuant to the
Securities Purchase Agreement on the Closing Date (collectively,
the “ Notes ” and such
other Senior Convertible Notes, the “ Other Notes ”). Certain
capitalized terms used herein are defined in Section
26.
1.
PAYMENTS
OF PRINCIPAL . On the Maturity Date, the Company shall pay
to the Holder the outstanding Principal amount, together with any
accrued and unpaid Interest or accrued and unpaid Late Charges on
Principal and Interest. 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.
2.
INTEREST;
INTEREST RATE .
(a)
Interest
on this Note shall commence accruing on the Issuance Date, shall
accrue daily at the Interest Rate on the outstanding Principal
amount from time to time, shall be computed on the basis of a
360-day year comprised of twelve (12) thirty (30) day months and
shall be payable in arrears for each Quarter on the first Business
Day immediately following the end of such Quarter during the period
beginning on the Issuance Date and ending on, and including, the
Maturity Date (each, an “ Interest Date ”), with the
first Interest Date being October 1, 2008. Interest shall be
payable on each Interest Date to the record holder of this Note on
the applicable Interest Date, and to the extent that any Principal
amount of this Note is converted prior to such Interest Date,
accrued and unpaid Interest with respect to such converted
Principal amount and accrued and unpaid Late Charges with respect
to such Principal and Interest shall be paid on the applicable
Conversion Date (as defined below) to the record holder of this
Note, in cash or in shares of Common Stock at the Interest
Conversion Rate (as defined below), or a combination thereof;
provided ,
however ,
payment in shares of Common Stock may only occur if during the
fifteen (15) Business Days immediately prior to the applicable
Interest Date and through and including the date such shares of
Common Stock are issued to the Holder, all of the Equity Conditions
have been met and the Company shall have given the Holder notice in
accordance with the notice requirements set forth
below. From and after the occurrence and during the
continuance of any Event of Default, the Interest Rate shall be
increased to sixteen percent (16%). In the event that such Event of
Default is subsequently cured, the adjustment referred to in the
preceding sentence shall cease to be effective as of the date of
such cure; provided that
the Interest as calculated and unpaid at such increased rate during
the continuance of such Event of Default shall continue to apply to
the extent relating to the days after the occurrence of such Event
of Default through and including the date of such cure of such
Event of Default.
(b)
Subject
to the terms and conditions herein, the decision whether to pay
interest hereunder in cash or shares of Common Stock shall be at
the discretion of the Company. Not less than fifteen
(15) Business Days prior to each Interest Date, the Company shall
provide the Holder with written notice of its election to pay
interest hereunder either in cash or shares of Common Stock (the
Company may indicate in such notice that the election contained in
such notice shall continue for later periods until
revised). Within fifteen (15) Business Days prior to an
Interest Date, the Company’s election (whether specific to an
Interest Date or continuous) shall be irrevocable as to such
Interest Date. Subject to the aforementioned conditions,
failure to timely provide such written notice shall be deemed an
election by the Company to pay the interest on such Interest Date
in cash. Payment of interest in shares of Common Stock
shall otherwise occur pursuant to Section 3(c) and only for
purposes of the payment of interest in shares, the Interest Date
shall be deemed the Conversion Date. Interest shall
cease to accrue with respect to any principal amount converted,
provided that the Company in fact delivers the shares of Common
Stock within the time period required by Section
3(c)(ii). Except as otherwise provided herein, if at any
time the Company pays interest partially in cash and partially in
shares of Common Stock, then such payment shall be distributed
ratably among the Holders based upon the principal amount of the
Notes held by each Holder. Notwithstanding anything to
the contrary contained herein, if on any Interest Date the Company
has elected to pay interest in Common Stock and is not able to pay
accrued interest in the form of Common Stock because it does not
then satisfy the conditions for payment in the form of Common Stock
set forth above, then, at the option of the Holder, the Company, in
lieu of delivering either shares of Common Stock pursuant to this
Section 2 or paying the regularly scheduled cash interest payment,
shall deliver, within three (3) Business Days of each applicable
Interest Date, an amount in cash equal to the product of the number
of shares of Common Stock otherwise deliverable to the Holder in
connection with the payment of interest due on such Interest Date
and the highest VWAP during the period commencing on the Interest
Date and ending on the Business Day prior to the date such payment
is made.
3.
CONVERSION OF
NOTES . This Note shall be convertible into shares of Common
Stock (as defined below), 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
non-assessable 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 portion of the Principal to be
converted, redeemed or otherwise with respect to which this
determination is being made.
(ii)
“
Conversion
Price ” means, as of any Conversion Date or other date
of determination, $.50, 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 nationally recognized
overnight delivery service for delivery to the Company (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 an
acknowledgment of confirmation of receipt of such Conversion Notice
to the Holder and the Company’s transfer agent (the “
Transfer
Agent ”). On or before the third (3rd) Trading Day
following the date of receipt of a Conversion Notice (the “
Share
Delivery Date ”), the
Company shall (1) provided that the Transfer Agent is participating
in The Depository Trust Company’s (“ 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 (via reputable
overnight courier) 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; and (2) pay to the Holder in cash an
amount equal to the accrued and unpaid Interest on the Conversion
Amount up to and including the Conversion Date, including accrued
and unpaid Late Charges with respect to such Conversion Amount and
Interest. 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
(or its designee) a new Note (in accordance with Section 16(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. In the event of a partial conversion of this Note
pursuant hereto, the Principal amount converted shall be deducted
as set forth in the Conversion Notice.
(ii)
Company’s
Failure to Timely Convert . If the Company shall fail, for
any reason or for no reason, to issue to the Holder within three
(3) Trading Days after the Company’s receipt of a facsimile
copy of a Conversion Notice, a certificate for the number of shares
of Common Stock to which the Holder is entitled and register such
shares of Common Stock on the Company’s share register or to
credit the Holder’s or its designee’s balance account
with DTC for such number of shares of Common Stock to which the
Holder is entitled upon the Holder’s conversion of any
Conversion Amount (as the case may be) (a “ Conversion Failure
”), then, in addition to all other remedies available to the
Holder, (1) the Company shall pay in cash to the Holder on each day
after such third (3rd) Trading Day that the issuance of such shares
of Common Stock is not timely effected an amount equal to 2% of the
product of (A) the sum of the number of shares of Common Stock not
issued to the Holder on a timely basis and to which the Holder is
entitled and (B) the Closing Sale Price of the Common Stock on the
Trading Day immediately preceding the last possible date which the
Company could have issued such shares of Common Stock to the Holder
without violating Section 3(c)(i) and (2) 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 and register such shares of
Common Stock on the Company’s share register or credit the
Holder’s or its designee’s balance account with DTC for
the number of shares of Common Stock to which the Holder is
entitled upon the Holder’s conversion hereunder (as the case
may be), and if on or after such third (3rd) Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of
shares 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 such
certificate (and to issue such shares of Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such shares of
Common Stock or credit the Holder’s balance account with DTC
for the number of shares of Common Stock to which the Holder is
entitled upon the Holder’s conversion hereunder (as the case
may be) 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 Sale Price of the
Common Stock on the Trading Day immediately preceding the
Conversion Date.
(iii)
Book-Entry .
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 converted and/or paid (as the case may be) and the dates of
such conversions and/or payments (as the case may be) 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 21.
(d)
Limitations on
Conversions .
(i)
Beneficial
Ownership . Notwithstanding anything to the contrary
contained in this Note, this Note shall not be convertible by the
Holder hereof, and the Company shall not effect any conversion of
this Note or otherwise issue any shares of Common Stock to the
extent (but only to the extent) that, if after giving effect to
such conversion, the Holder or any of its affiliates would
beneficially own in excess of 9.99% (the “ Maximum Percentage
”) of the outstanding shares of Common Stock
immediately after giving effect to such conversion. To the extent
the above limitation applies, the determination of whether this
Note shall be convertible (vis-à-vis other convertible,
exercisable or exchangeable securities owned by the Holder) shall,
subject to such Maximum Percentage limitation, be determined on the
basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability to
convert this Note, or to issue shares of Common Stock, pursuant to
this paragraph shall have any effect on the applicability of the
provisions of this paragraph with respect to any subsequent
determination of convertibility. For purposes of this paragraph,
beneficial ownership and all determinations and calculations
(including, without limitation, with respect to calculations of
percentage ownership) shall be determined by the Holder in
accordance with Section 13(d) of the 1934 Act (as defined in the
Securities Purchase Agreement) and the rules and regulations
promulgated thereunder. The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity with
the terms of this paragraph to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the
intended Maximum Percentage beneficial ownership limitation herein
contained or to make changes or supplements necessary or desirable
to properly give effect to such Maximum Percentage limitation. The
limitations contained in this paragraph shall apply to a successor
Holder of this Note. 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, including by virtue of
any prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation,
pursuant to this Note or securities issued pursuant to the
Securities Purchase Agreement. Each delivery of a
Conversion Notice by the Holder will constitute a representation by
the Holder that it has evaluated the limitation set forth in this
paragraph and determined that issuance of the full number of
Conversion Shares requested by the Holder in such Conversion Notice
is permitted under this paragraph.
4.
RIGHTS
UPON EVENT OF DEFAULT .
(a)
Event of
Default . Each of the following events shall
constitute an “ Event of Default
”:
(i)
the
suspension from trading or failure of the
Common Stock to be listed on an Eligible Market for a period of
five (5) consecutive days or for more than an aggregate of ten (10)
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
five (5) Trading Days after the applicable Conversion Date or (B)
notice, written or oral, to any holder of the Notes, including,
without limitation, 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 requested in accordance with the provisions of the Notes,
other than pursuant to Section 3(d);
(iii)
at
any time following the tenth (10th) consecutive 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 or any Subsidiary’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 or any Subsidiary’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 remains uncured
for a period of at least five (5) Trading Days;
(v)
the
Company fails to remove any restrictive legend on any certificate
or any shares of Common Stock issued to the Holder upon conversion
or exercise (as the case may be) of any Securities acquired by the
Holder under the Securities Purchase Agreement (including this
Note) as and when required by such Securities or the Securities
Purchase Agreement, unless otherwise then prohibited by applicable
federal securities laws, and any such remains uncured for at least
five (5) Trading Days;
(vi)
the
occurrence of any default under, redemption of or acceleration
prior to maturity of any Indebtedness (as defined in the Securities
Purchase Agreement) of the Company or any of its Subsidiaries,
other than with respect to (A) Permitted Senior Indebtedness and
(B) any Other Notes;
(vii)
bankruptcy,
insolvency, reorganization or liquidation proceedings or other
proceedings for the relief of debtors shall be instituted by or
against the Company or any Subsidiary and, if instituted against
the Company or any Subsidiary by a third party, shall not be
dismissed within thirty (30) days of their initiation;
(viii)
the
commencement by the Company or any Subsidiary of a voluntary case
or proceeding under any applicable federal, state or foreign
bankruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree, order,
judgment or other similar document in respect of the Company or any
Subsidiary in an involuntary case or proceeding under any
applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal, state or
foreign law, or the consent by it to the filing of such petition or
to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Subsidiary or of any
substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the execution of a
composition of debts, or the occurrence of any other similar
federal, state or foreign proceeding, or the admission by it in
writing of its inability to pay its debts generally as they become
due, the taking of corporate action by the Company or any
Subsidiary in furtherance of any such action or the taking of any
action by any Person to commence a UCC foreclosure sale or any
other similar action under federal, state or foreign
law;
(ix)
the
entry by a court of (i) a decree, order, judgment or other similar
document in respect of the Company or any Subsidiary of a voluntary
or involuntary case or proceeding under any applicable federal,
state or foreign bankruptcy, insolvency, reorganization or other
similar law or (ii) a decree, order, judgment or other similar
document adjudging the Company or any Subsidiary as bankrupt or
insolvent, or approving as properly filed a petition seeking
liquidation, reorganization, arrangement, adjustment or composition
of or in respect of the Company or any Subsidiary under any
applicable federal, state or foreign law or (iii) a decree, order,
judgment or other similar document appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Subsidiary or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree,
order, judgment or other similar document or any such other decree,
order, judgment or other similar document unstayed and in effect
for a period of thirty (30) consecutive days;
(x)
a
final judgment or judgments for the payment of money aggregating in
excess of $250,000 are rendered against the Company and/or any of
its Subsidiaries and which judgments are not, within thirty (30)
days after the entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within thirty (30) 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
$250,000 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 or such Subsidiary (as the case may
be) will receive the proceeds of such insurance or indemnity within
thirty (30) days of the issuance of such judgment;
(xi)
the
Company and/or any Subsidiary, individually or in the aggregate,
either (i) fails to pay, when due, or within any applicable grace
period, any payment with respect to any Indebtedness in excess of
$250,000 due to any third party, other than, with respect to
unsecured Indebtedness only, payments contested by the Company
and/or such Subsidiary (as the case may be) in good faith by proper
proceedings and with respect to which adequate reserves have been
set aside for the payment thereof in accordance with GAAP, or
otherwise be in breach or violation of any agreement for monies
owed or owing in an amount in excess of $250,000, which breach or
violation permits the other party thereto to declare a default or
otherwise accelerate amounts due thereunder, or (ii) suffer to
exist any other circumstance or event that would, with or without
the passage of time or the giving of notice, result in a default or
event of default under any agreement binding the Company or any
Subsidiary, which default or event of default would or is likely to
have a material adverse effect on the business, assets, operations
(including results thereof), liabilities, properties, condition
(including financial condition) or prospects of the Company or any
of its Subsidiaries, individually or in the aggregate;
(xii)
the
Company or any Subsidiary materially breaches any representation,
warranty, covenant or other term or condition of any Transaction
Document, except, in the case of a breach of a covenant of any
Transaction Document which is curable, only if such breach remains
uncured for a period of at least five (5) Trading
Days;
(xiii)
any
material breach or failure in any respect by the Company or any
Subsidiary to comply with any provision of Section 12 of this Note;
or
(xiv)
any
Event of Default (as defined in the Other Notes) occurs with
respect to any Other Notes.
(b)
Redemption
Right . Upon the occurrence of an Event of Default with
respect to this Note or any Other Note, the Company shall within
one (1) Business Day deliver written notice thereof via facsimile
and overnight courier (with next day delivery specified) (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 sum of the Conversion Amount to be redeemed
together with accrued and unpaid Interest with respect to such
Conversion Amount and accrued and unpaid Late Charges with respect
to such Conversion Amount and Interest and (B) the Redemption
Premium and (ii) the product of (X) the Conversion Rate with
respect to such sum of the Conversion Amount together with accrued
and unpaid Interest with respect to such Conversion Amount and
accrued and unpaid Late Charges with respect to such Conversion
Amount and Interest in effect at such time as the Holder delivers
an Event of Default Redemption Notice and (Y) the product of (1)
the Equity Value Redemption Premium and (2) 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 10. 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. Notwithstanding anything to the contrary in this
Section 4, but subject to Section 3(d), until the Event of Default
Redemption Price (together with any interest thereon) is paid in
full, the Conversion Amount submitted for redemption under this
Section 4(b) (together with any interest thereon) 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, the Principal amount redeemed shall be deducted as
set forth 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.
5.
RIGHTS
UPON FUNDAMENTAL TRANSACTION .
(a)
Assumption .
The Company shall not enter into or be party to a Fundamental
Transaction unless (i) the Successor Entity assumes in writing
all of the obligations of the Company under this Note and the other
Transaction Documents in accordance with the provisions of this
Section 5(a) pursuant to written agreements in form and substance
satisfactory to the 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 Holder and (ii) the Successor Entity (including its
Parent Entity) is a publicly traded corporation whose common stock
is quoted on or listed for trading on an Eligible Market. Upon the
occurrence of any Fundamental Transaction, the Successor Entity
shall succeed to, and be substituted for (so that from and after
the date of such Fundamental Transaction, the provisions of this
Note and the other Transaction Documents 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 and
the other Transaction Documents 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 (except such items still issuable under
Section 6, which shall continue to be receivable thereafter)
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) which the Holder would have been
entitled to receive upon the happening of such Fundamental
Transaction had this Note been converted immediately prior to such
Fundamental Transaction (without regard to any limitations on the
conversion of this Note), 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 of this Note.
(b)
Redemption
Right . No sooner than twenty (20) Trading Days nor later
than ten (10) Trading Days prior to the consummation of a
Fundamental Transaction, but not prior to the public announcement
of such Fundamental Transaction, the Company shall deliver written
notice thereof via facsimile and overnight courier to the Holder (a
“ Fundamental Transaction
Notice
”). At any time during the period beginning after the
Holder’s receipt of a Fundamental Transaction Notice and
ending on the later of twenty (20) Trading Days after (A)
consummation of such Fundamental Transaction or (B) the date of
receipt of such Fundamental Transaction Notice, the Holder may
require the Company to redeem all or any portion of this Note by
delivering written notice thereof (“ Fundamental Transaction
Redemption Notice ”) to the Company, which Fundamental
Transaction 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 sum of (x) the product of the Fundamental Transaction
Redemption Premium and the Conversion Amount being redeemed and (y)
the amount of any accrued but unpaid Interest on such Conversion
Amount being redeemed and accrued and unpaid Late Charges, if any,
with respect to such Conversion Amount and Interest through the
date of such redemption payment and (ii) the product of (x) the
Equity Value Redemption Premium and (y) the sum of (1) the product
of (A) the Conversion Amount being redeemed multiplied by (B) the
quotient determined by dividing (I) the aggregate cash
consideration and the aggregate cash value of any non-cash
consideration per share of Common Stock to be paid to the holders
of the shares of Common Stock upon consummation of the Fundamental
Transaction (any such non-cash consideration to be valued at the
higher of the Closing Sale Price of such securities as of the
Trading Day immediately prior to the consummation of such
Fundamental Transaction, the Closing Sale Price on the Trading Day
immediately following the public announcement of such proposed
Fundamental Transaction and the Closing Sale Price on the Trading
Day immediately prior to the public announcement of such proposed
Fundamental Transaction) by (II) the Conversion Price plus (2) the
amount of any accrued but unpaid Interest on such Conversion Amount
being redeemed and accrued and unpaid Late Charges, if any, with
respect to such Conversion Amount and Interest through the date of
such redemption payment, (the “ Fundamental Transaction
Redemption Price ”). Redemptions required
by this Section 5 shall be made in accordance with the provisions
of Section 10 and shall have priority to payments to stockholders
in connection with a Fundamental Transaction. 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 Fundamental
Transaction 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. In the event of a partial redemption of this
Note pursuant hereto, the Principal amount redeemed shall be
deducted as set forth in the Fundamental Transaction 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(b), the Holder’s damages would be uncertain and
difficult to estimate because of the parties’ inability to
predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for
the Holder. Accordingly, any redemption premium due under this
Section 5(b) is intended by the parties to be, and shall be deemed,
a reasonable estimate of the Holder’s actual loss of its
investment opportunity and not as a penalty.
6.
RIGHTS
UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS
.
(a)
Purchase
Rights . In addition to any adjustments pursuant to Section
7 below, 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 ( provided ,
however , that
to the extent that the Holder’s right to participate in any
such Purchase Right would result in the Holder exceeding the
Maximum Percentage, then the Holder shall not be entitled to
participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such
Purchase Right to such extent) and such Purchase Right to such
extent shall be held in abeyance for the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding
the Maximum Percentage).
(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 (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. 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 from and after the Subscription Date
and to and through the date that is two (2) years after the
Subscription Date, the Compan
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