THE
SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS
(I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO
THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES
MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE
SECURITIES LAWS.
THIRD AMENDED AND RESTATED
SENIOR SECURED CONVERTIBLE NOTE
THIS THIRD
AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE (this “
Note ”) executed by Zila, Inc., a Delaware corporation
(“ Company ”), amends, restates and replaces
that certain Second Amended and Restated Senior Secured Convertible
Note, dated as of November 28, 2006 (the “ Second
Restated Note ”), in the principal amount of
, executed by Company in favor
of
(the “ Holder
”), which amended, restated and replaced that certain Amended
and Restated Senior Secured Convertible Note, dated as of
November 28, 2006 (the “ Restated Note ”),
in the principal amount of
, executed by Company in favor of
the Holder, which amended, restated and replaced that certain 6%
Senior Secured Convertible Note, dated as of November 28, 2006
(the “ Original Note ”), in the principal amount
of
, executed by Company in favor of
the Holder. This Note, the Second Restated Note, the Restated Note
and the Original Note constitute a single, ongoing obligation of
the Company.
FOR
VALUE RECEIVED, the Company hereby unconditionally promises to pay
to the order of the Holder, having an address at
, at such address or at such other place as may be designated in
writing by the Holder, or its assigns, the aggregate principal sum
of
Million United States Dollars ($
), together with interest from June 3, 2008 on the unpaid
principal balance of this Note outstanding at a rate equal to seven
percent (7%) per annum (computed on the basis of the actual number
of days elapsed in a 360-day year) and continuing on the
outstanding principal until this Note is converted into Common
Stock as provided herein or indefeasibly and irrevocably paid in
full by the Company. Notwithstanding the preceding sentence, the
Company shall have the right, at its option, to pay interest at a
rate equal to eight percent (8%) per annum (computed on the basis
of the actual number of days elapsed in a 360-day year) in the form
of duly authorized, fully paid and nonassessable shares of Common
Stock (the “ PIK Shares ”). Each PIK Share shall
have a value equal to 90% of the average closing bid price per
share of the Common Stock for the ten (10) Trading Days
immediately prior to the relevant Interest Payment Date. Interest
on this Note shall accrue and shall be payable quarterly on each
January 31, April 30, July 31, and
October 31
for the
preceding quarter (each, an “ Interest Payment Date
”), commencing on October 31, 2007. Subject to the other
provisions of this Note, the principal of this Note and all accrued
and unpaid interest hereon shall mature and become due and payable
on July 31, 2010 (the “ Stated Maturity Date
”). Except as provided herein, all payments of principal and
interest by the Company under this Note shall be made in United
States dollars in immediately available funds to an account
specified by the Holder. In no event shall any interest charged,
collected or reserved under this Note exceed the maximum rate then
permitted by applicable law and if any such payment is paid by the
Company, then such excess sum shall be credited by the Holder as a
payment of principal.
Upon
the occurrence and during the continuation of any Event of Default
hereunder, all amounts outstanding hereunder shall bear interest at
an annual rate of fifteen percent (15%). For purposes of any of the
covenants set forth in Sections 5(a)(xiii) and 5(a)(xiv) only,
any Event of Default caused by a breach of any such covenant shall
be cured and shall no longer continue upon the satisfaction by the
Company of such covenant for the next succeeding quarter, to the
extent applicable. In no event shall any interest charged,
collected or reserved under this Note exceed the maximum rate then
permitted by applicable law and if any such payment is paid by the
Company, then such excess sum shall be credited by the Holder as a
payment of principal.
This
Note is one of a series of Notes (the “ Company Notes
”) of like tenor in an aggregate principal amount of Twelve
Million One and 20/100 United States Dollars ($12,000,001.20)
issued by the Company pursuant to the terms of the Purchase
Agreement (as defined below) and amended and restated pursuant to
the terms of the Amendment Agreement (as defined below) and further
amended and restated pursuant to (i) the terms of the Second
Amendment Agreement (as defined below) and (ii) the terms of
the Third Amendment Agreement (as defined below).
1.
Definitions. Capitalized terms used herein shall have the
respective meanings ascribed thereto in the Purchase Agreement
unless otherwise defined herein. Unless the context otherwise
requires, when used herein the following terms shall have the
meaning indicated:
“
Additional Rights ” has the meaning set forth in
Section 4 hereof.
“
Affiliate ” shall mean, with respect to any Person,
any other Person which directly or indirectly through one or more
intermediaries Controls, is controlled by, or is under common
control with, such Person.
“
Amendment Agreement ” means the Amendment Agreement,
dated August 13, 2007, among the Company, the Investors party
thereto and Balyasny Asset Management, L.P.
“
Board ” shall mean the Board of Directors of
Company.
“
Business Day ” other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction
of business.
“
Cash Equivalents ” means (a) marketable direct
obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the
full faith and credit of the United States, in each case maturing
within one
2
year from the
date of acquisition; (b) certificates of deposit, time
deposits, eurodollar time deposits or overnight bank deposits
having maturities of six months or less from the date of
acquisition issued by any commercial bank organized under the laws
of the United States or any state thereof having combined capital
and surplus of not less than $500,000,000; (c) commercial
paper of an issuer rated at least A-1 by Standard &
Poor’s Ratings Services (“ S&P ”) or
P-1 by Moody’s Investors Service, Inc. (“
Moody’s ”), or carrying an equivalent rating by
a nationally recognized rating agency, if both of the two named
rating agencies cease publishing ratings of commercial paper
issuers generally, and maturing within six months from the date of
acquisition; (d) repurchase obligations of any commercial bank
satisfying the requirements of clause (b) of this definition,
having a term of not more than 30 days, with respect to
securities issued or fully guaranteed or insured by the United
States government; (e) securities with maturities of one year
or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case
may be) are rated at least A by S&P or A by Moody’s;
(f) securities with maturities of six months or less from the
date of acquisition backed by standby letters of credit issued by
any commercial bank satisfying the requirements of clause
(b) of this definition; or (g) shares of money market mutual
or similar funds which invest exclusively in assets satisfying the
requirements of clauses (a) through (f) of this
definition or money market funds that (i) comply with the
criteria set forth in Securities and Exchange Commission
Rule 2a-7 under the Investment Company Act of 1940, as
amended, (ii) are rated AAA by S&P and Aaa by
Moody’s and (iii) have portfolio assets of at least
$5,000,000,000.
“
Closing Date ” has the meaning set forth in the
Purchase Agreement.
“
Common Stock ” shall mean the Common Stock, par value
$0.001 per share, of the Company or any securities into which
shares of Common Stock may be reclassified after the date
hereof.
“
Company ” has the meaning set forth in the first
paragraph hereof.
“
Company Notes ” has the meaning set forth in the third
paragraph hereof.
“
Consolidated Net Income ” means, for any period, the
aggregate net income (or loss) of the Company and its Subsidiaries
for such period on a consolidated basis, determined in accordance
with GAAP, consistently applied for all relevant periods, less
(i) gains and losses from any sale, lease, conveyance,
transfer or other disposition of any assets or property of the
Company and its Subsidiaries, other than in the ordinary course of
business, including the tax effects thereof and (ii) items
classified under GAAP, consistently applied for all relevant
periods, as extraordinary, unusual or non-recurring gains and
losses, and the related tax effects thereof.
“
Control ” (including the terms
“controlling”, “controlled by” or
“under common control with”) means the possession,
direct or indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract or
otherwise.
3
“
Conversion Price ” shall mean initially $2.20 per
share, subject to adjustment as provided in
Section 4.
“
Conversion Shares ” means the shares of Common Stock
issuable upon conversion of this Note.
“
Convertible Securities ” has the meaning set forth in
Section 4 hereof.
“
Deposit Account Control Agreement ” means an agreement
with a depository pursuant to which the Agent will have the right,
upon an Event of Default, to control accounts of the Company and
the Subsidiary Guarantors (as defined in the Security
Agreement).
“
EBITDA ” means, for any period, Consolidated Net
Income for such period plus, without duplication and to the extent
reflected as a charge in the statement of such Consolidated Net
Income for such period, the sum of (a) income tax expense,
(b) interest expense, amortization or write-off of debt
discount and debt issuance costs and commissions, discounts and
other fees and charges associated with Indebtedness,
(c) depreciation and amortization expense,
(d) amortization of intangibles (including, but not limited
to, goodwill) and organization costs and (e) other non-cash
items reducing Consolidated Net Income and minus, to the extent
included in the statement of such Consolidated Net Income for such
period, (x) interest income and (y) all other non-cash
items increasing Consolidated Net Income, all as determined on a
consolidated basis.
“
Event of Default ” has the meaning set forth in
Section 6 hereof.
“
Exchange Act ” shall mean the Securities Exchange Act
of 1934, as amended.
“
Excluded Issuances ” has the meaning set forth in
Section 4(j) hereof.
“
Fiscal Year ” means the period commencing on August 1
of any year and ending on July 31 of the following year.
“
Free Cash ” as of any date means the sum of the
Company’s unrestricted cash and Cash Equivalents, determined
on a consolidated basis.
“
GAAP ” means generally accepted accounting principles
in the United States applied on a consistent basis as in effect on
the date hereof.
“
Hedging Agreement ” means any interest rate swap,
collar, cap, floor or forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in
connection with hedging the interest rate exposure of any Person
and any confirming letter executed pursuant to such agreement, all
as amended, supplemented, restated or otherwise modified from time
to time.
“
Holder ” has the meaning set forth in the first
paragraph hereof.
“
Indebtedness ” means any liability or obligation
(i) for borrowed money, other than trade payables incurred in
the ordinary course of business, (ii) evidenced by
bonds,
4
debentures,
notes, or other similar instruments, (iii) in respect of
letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), except letters of credit or
other similar instruments issued to secure payment of trade
payables or obligations in respect of workers’ compensation,
unemployment insurance and other social security laws or
regulation, all arising in the ordinary course of business
consistent with past practices, (iv) to pay the deferred
purchase price of property or services, except trade payables
arising in the ordinary course of business consistent with past
practices, (v) as lessee under capitalized leases,
(vi) secured by a Lien on any asset of the Company or a
Subsidiary, whether or not such obligation is assumed by the
Company or such Subsidiary.
“
Investment ” means, for any Person: (a) the
acquisition (whether for cash, property, services or securities or
otherwise) of capital stock, bonds, notes, debentures, partnership
or other ownership interests or other securities of any other
Person or any agreement to make any such acquisition (including,
without limitation, any “short sale” or any sale of any
securities at a time when such securities are not owned by the
Person entering into such sale); (b) the making of any deposit
with, or advance, loan or other extension of credit to, any other
Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise,
to resell such property to such Person), but excluding any such
advance, loan or extension of credit having a term not exceeding
90 days arising in connection with the sale of inventory or
supplies by such Person in the ordinary course of business;
(c) the entering into of any guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any
other Person and (without duplication) any amount committed to be
advanced, lent or extended to such Person; or (d) the entering
into of any Hedging Agreement.
“
Investors ” has the meaning set forth in the Purchase
Agreement.
“
Lien ” means any lien, mortgage, deed of trust,
pledge, security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention agreement,
any lease in the nature thereof and any agreement to give any of
the foregoing).
“
Majority Holders ” has the meaning set forth in
Section 8 hereof.
“
Market Price ”, as of a particular date (the “
Valuation Date ”), shall mean the following:
(a) if the Common Stock is then listed on a national stock
exchange, the closing sale price of one share of Common Stock on
such exchange on the last Trading Day prior to the Valuation Date;
(b) if the Common Stock is then quoted on the National
Association of Securities Dealers, Inc. OTC Bulletin Board (the
“ Bulletin Board ”) or such similar quotation
system or association, the closing sale price of one share of
Common Stock on the Bulletin Board or such other quotation system
or association on the last Trading Day prior to the Valuation Date
or, if no such closing sale price is available, the average of the
high bid and the low asked price quoted thereon on the last trading
day prior to the Valuation Date; (c) if such security is then
included in the “pink sheets,” the closing sale price
of one share of Common Stock on the “pink sheets” on
the last Trading Day prior to the Valuation Date or, if no such
closing sale price is available, the average of the high bid and
the low ask price quoted on the “pink sheets” as of the
end of the last Trading Day prior to the Valuation Date; or
(d) if the Common Stock is not then listed on a national stock
exchange or quoted on the Bulletin Board,
5
the “pink
sheets” or such other quotation system or association, the
fair market value of one share of Common Stock as of the Valuation
Date, as determined in good faith by the Board of Directors of the
Company and the Holder. If the Common Stock is not then listed on a
national securities exchange or quoted on the Bulletin Board, the
“pink sheets” or other quotation system or association,
the Board of Directors of the Company shall respond promptly, in
writing, to an inquiry by the Holder as to the fair market value of
a share of Common Stock as determined by the Board of Directors of
the Company. In the event that the Board of Directors of the
Company and the Holder are unable to agree upon the fair market
value in respect of subpart (d) of this paragraph, the Company
and the Holder shall jointly select an appraiser, who is
experienced in such matters. The decision of such appraiser shall
be final and conclusive, and the cost of such appraiser shall be
borne equally by the Company and the Holder.
“
Mortgage Financing ” means the incurrence of up to
$2,000,000 in aggregate principal amount of Indebtedness secured
only by the Owned Real Estate; provided that the Company retains
fee ownership of the Owned Real Estate.
“
Note ” has the meaning set forth in the first
paragraph hereof.
“
Optional Conversion Date ” has the meaning set forth
in Section 4(a) hereof.
“
Options ” has the meaning set forth in Section 4
hereof.
“
Owned Real Estate ” means the real property,
improvements and related fixtures and appurtenances thereto owned
by the Company.
“
Permitted Indebtedness ” means:
(a) Unsecured
Indebtedness existing on the Closing Date and refinancings,
renewals and extensions of any such Indebtedness if (i) the
average life to maturity thereof is greater than or equal to that
of the Indebtedness being refinanced or extended (ii) the
principal amount thereof or interest payable thereon is not
increased, and (iii) the terms thereof are not less favorable
to the Company or the Subsidiary incurring such Indebtedness than
the Indebtedness being refinanced, renewed or extended;
(b) Working
capital Indebtedness of the Company that is secured by the
Company’s accounts and inventory and otherwise containing
terms and conditions approved by the Majority Holders, such
approval not to be unreasonably withheld;
(c) Guaranties
by any Subsidiary of any “Permitted Indebtedness” of
the Company or another Subsidiary;
(d) Indebtedness
representing the deferred purchase price of property and capital
lease obligations which collectively does not exceed $1,000,000 in
aggregate principal amount;
(e) the
Mortgage Financing; and
6
(f) Indebtedness
of the Company to any wholly owned Subsidiary and Indebtedness of
any wholly owned Subsidiary to the Company or another wholly owned
Subsidiary which constitutes “Permitted
Indebtedness.”
“
Permitted Investments ” means:
(a) direct
obligations of the United States of America, or of any agency
thereof, or obligations guaranteed as to principal and interest by
the United States of America, or of any agency thereof, in either
case maturing not more than 90 days from the date of
acquisition thereof;
(b) certificates
of deposit issued by any bank or trust company organized under the
laws of the United States of America or any State thereof and
having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 90 days from the date of
acquisition thereof; and
(c) commercial
paper rated A-1 or better or P-1 by Standard & Poor’s
Ratings Services or Moody’s Investors Services, Inc.,
respectively, maturing not more than 90 days from the date of
acquisition thereof; in each case so long as the same
(x) provide for the payment of principal and interest (and not
principal alone or interest alone) and (y) are not subject to
any contingency regarding the payment of principal or
interest.
“
Permitted Liens ” means:
(a) Liens
imposed by law for taxes that are not yet due or are being
contested in good faith and for which adequate reserves have been
established on the Company’s books and records in accordance
with U.S. generally accepted accounting principles, consistently
applied;
(b) carriers’,
warehousemen’s, mechanics’, materialmen’s,
repairmen’s and other like Liens imposed by law, arising in
the ordinary course of business and securing obligations that are
not overdue by more than 30 days or that are being contested
in good faith and by appropriate proceedings;
(c) pledges
and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits
to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the
ordinary course of business;
(e) easements,
zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of
business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Company or
any of its Subsidiaries; and
7
(f) Liens
granted to secure the obligations of the Company or any Subsidiary
under any Indebtedness permitted under clauses (b), (d) and
(e) of the definition of “Permitted Indebtedness”;
provided, however, that any Liens securing Indebtedness permitted
under (i) clause (b) of such definition shall be limited
to the Company’s accounts and inventory, (ii) clause
(d) of such definition shall be limited to the property
acquired through such Indebtedness and (iii) clause (e) of
such definition shall be limited to the Owned Real Property. Upon
the Company’s request, the Investors shall subordinate or
release their security interests in the Owned Real Property to
permit the Mortgage Financing on terms approved by the Majority
Holders, such approval not to be unreasonably withheld.
“
Person ” means an individual, corporation,
partnership, limited liability company, trust, business trust,
association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority
or any other form of entity not specifically listed
herein.
“
Purchase Agreement ” shall mean the Purchase
Agreement, dated as of November 13, 2006, and as that
agreement may be amended from time to time, by and among the
Company and the Investors.
“
Qualifying Event of Default ” means an Event of
Default of the type specified in Sections 6(b), 6(g) and
6(j).
“
Restricted Payment ” has the meaning set forth in
Section 5(b)(iv) hereof.
“
Second Amendment Agreement ” means the Second
Amendment Agreement, dated June 3, 2008, among the Company,
the Investors party thereto and Balyasny Asset Management,
L.P.
“
Security Agreement ” has the meaning set forth in the
Purchase Agreement.
“
Security Documents ” means the collective reference to
the Security Agreement, the Deposit Account Control Agreements and
each other agreement or writing pursuant to which the Company
purports to pledge or grant a security interest in any property or
assets securing the Company’s obligations or any such Person
purports to guaranty the payment and/or performance of the
Company’s obligations, in each case, as amended, restated,
supplemented or otherwise modified from time to time.
“
Stated Maturity Date ” has the meaning set forth in
the first paragraph hereof.
“
Subsidiary ” of any Person means another Person, an
amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity
interests of which) is owned directly or indirectly by such first
Person.
“
Third Amendment Agreement ” means the Third Amendment
Agreement, dated September 11, 2008, among the Company and the
Investors party thereto.
8
“
Trading Day ” means (i) if the relevant stock or
security is listed or admitted for trading on The New York Stock
Exchange, Inc., the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market or any other national securities
exchange, a day on which such exchange is open for business;
(ii) if the relevant stock or security is quoted on a system
of automated dissemination of quotations of securities prices, a
day on which trades may be effected through such system; or
(iii) if the relevant stock or security is not listed or
admitted for trading on any national securities exchange or quoted
on any system of automated dissemination of quotation of securities
prices, a day on which the relevant stock or security is traded in
a regular way in the over-the-counter market and for which a
closing bid and a closing asked price for such stock or security
are available, shall mean a day, other than a Saturday or Sunday,
on which The New York Stock Exchange, Inc. is open for
trading.
“
Trigger Issuance ” has the meaning set forth in
Section 4(i) hereof.
2.
Purchase Agreement . This Note is one of the Senior Secured
Convertible Notes of the Company issued pursuant to the Purchase
Agreement and amended and restated pursuant to the Amendment
Agreement and further amended and restated pursuant to (i) the
Second Amendment Agreement and (ii) the Third Amendment
Agreement. This Note is subject to the terms and conditions of, and
entitled to the benefit of, the provisions of the Purchase
Agreement, the Amendment Agreement, the Second Amendment Agreement
and the Third Amendment Agreement. This Note is transferable and
assignable to any Person to whom such transfer is permissible under
the Purchase Agreement and applicable law. The Company agrees to
issue from time to time a replacement Note in the form hereof to
facilitate such transfers and assignments. In addition, after
delivery of an indemnity in form and substance reasonably
satisfactory to the Company, the Company also agrees to promptly
issue a replacement Note if this Note is lost, stolen, mutilated or
destroyed.
3.
Prepayment . This Note shall not be prepayable or redeemable
by the Company prior to the Stated Maturity Date.
(a) The
Holder shall have the right, at its option, exercisable at any
time, effective upon delivery to the Company of a Conversion
Notice, to convert all or a portion of the principal amount of this
Note and any accrued and unpaid interest due on the portion of the
principal amount of this Note being converted into fully paid and
nonassessable shares of the Common Stock at the Conversion Price
then in effect. The date of any optional conversion is hereinafter
referred to as the “ Optional Conversion Date
.”
(c) Promptly
after any Optional Conversion Date, the Holder of this Note shall
deliver this Note to the Company (or, in lieu thereof, an
appropriate lost security affidavit in the event this Note shall
have been lost or destroyed, together with a customary indemnity
agreement) to the Company at its principal office (or such other
office or agency of the Company as the Company may designate by
notice in writing to the Holder), together with a statement of the
name or names (with address) in which the certificate or
certificates for the Conversion
9
Shares issuable
upon such conversion shall be issued. Promptly following the
surrender of this Note (or, in lieu thereof, delivery of an
appropriate lost security affidavit in the event this Note shall
have been lost or destroyed, together with a customary indemnity
agreement) as aforesaid, but in no event more than three
(3) Business Days thereafter, the Company shall issue and
deliver, or cause to be issued and delivered, to the Holder,
registered in such name or names as the Holder may direct in
writing, a certificate or certificates for the number of whole
Conversion Shares issuable upon the conversion of this Note and, in
the case of the conversion of less than the entire amount of this
Note, a new note of like tenor in the principal amount of this Note
not being converted on the relevant Optional Conversion Date. To
the extent permitted by law, such conversion shall be deemed to
have been effected, and the Conversion Price shall be determined,
as of the close of business on the Optional Conversion Date and at
such time, the rights of the Holder shall cease with respect to the
Note, or amount thereof, being converted, and the Person or Persons
in whose name or names any certificate or certificates for
Conversion Shares shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the
Conversion Shares represented thereby.
(d) No
fractional shares shall be issued upon any conversion of this Note
into Common Stock. If any fractional share of Common Stock would,
except for the provisions of the first sentence of this
Section 4(d), be delivered upon such conversion, the Company,
in lieu of delivering such fractional share, shall pay to the
Holder an amount in cash equal to the Market Price of such
fractional share of Common Stock.
(e) If
the Company shall, at any time or from time to time while this Note
is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares
of Common Stock into a greater number of shares or combine its
outstanding shares of Common Stock into a smaller number of shares
or issue by reclassification of its outstanding shares of Common
Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation), then (i) the
Conversion Price in effect immediately prior to the date on which
such change shall become effective shall be adjusted by multiplying
such Conversion Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately
prior to such change and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after
giving effect to such change and (ii) the number of Conversion
Shares issuable upon conversion of this Note shall be adjusted by
multiplying the number of Conversion Shares issuable upon
conversion of this Note immediately prior to the date on which such
change shall become effective by a fraction, the numerator of which
is shall be the Conversion Price in effect immediately prior to the
date on which such change shall become effective and the
denominator of which shall be the Conversion Price in effect
immediately after giving effect to such change, calculated in
accordance with clause (i) above. Such adjustments shall be
made successively whenever any event listed above shall
occur.
(f) If
any capital reorganization, reclassification of the capital stock
of the Company, consolidation or merger of the Company with another
corporation in which the Company is not the survivor, or sale,
transfer or other disposition of all or substantially all of the
Company’s assets to another Person shall be effected, then,
as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful
and adequate
10
provision shall
be made whereby the Holder shall thereafter have the right, at its
option, either (i) to purchase and receive upon the basis and
upon the terms and conditions herein specified and in lieu of the
Conversion Shares immediately theretofore issuable upon conversion
of this Note such shares of stock, securities or assets as would
have been issuable or payable with respect to or in exchange for a
number of Conversion Shares equal to the number of Conversion
Shares immediately theretofore issuable upon conversion of this
Note, had such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition not taken place, and in
any such case appropriate provision shall be made with respect to
the rights and interests of the Holder to the end that the
provisions hereof (including, without limitation, provision for
adjustment of the Conversion Price) shall thereafter be applicable,
as nearly equivalent as may be practicable in relation to any
shares of stock, securities or assets thereafter deliverable upon
the conversion hereof or (ii) in the event or any such
consolidation or merger of the Company or such sale, transfer or
other disposition of all or substantially all of the
Company’s assets only, to cause the Company to redeem this
Note at a redemption price equal to 110% of the outstanding
principal amount of this Note, together with all accrued and unpaid
interest hereon to the date of redemption, which right must be
exercised by the Holder within ten (10) Business Days after
receipt by it from the Company of written notice of the occurrence
of any transaction giving rise to such right. The Company shall not
effect any such consolidation, merger, sale, transfer or other
disposition unless prior to or simultaneously with the consummation
thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation
purchasing or otherwise acquiring such assets or other appropriate
corporation or entity shall assume the obligation to deliver to the
Holder, at the last address of the Holder appearing on the books of
the Company, such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be
entitled to purchase, without regard to any conversion limitation
specified in Section 4, and the other obligations under this
Note. The provisions of this paragraph (f) shall similarly
apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other
dispositions.
(g) In
case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation) of evidences of
indebtedness or assets (other than cash dividends or cash
distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in
Section 4(e)), or subscription rights or warrants, the
Conversion Price to be in effect after such payment date shall be
determined by multiplying the Conversion Price in effect
immediately prior to such payment date by a fraction, the numerator
of which shall be the total number of shares of Common Stock
outstanding multiplied by the Market Price of Common Stock
immediately prior to such payment date, less the fair market value
(as determined by the Board in good faith) of said assets or
evidences of indebtedness so distributed, or of such subscription
rights or warrants, and the denominator of which shall be the total
number of shares of Common Stock outstanding multiplied by such
Market Price immediately prior to such payment date. Such
adjustment shall be made successively whenever such a payment date
is fixed.
(h) An
adjustment to the Conversion Price shall become effective
immediately after the payment date in the case of each dividend or
distribution and immediately after the effective date of each other
event which requires an adjustment.
11
(i) In
the event that, as a result of an adjustment made pursuant to this
Section 4, the Holder shall become entitled to receive any
shares of capital stock of the Company other than shares of Common
Stock, the number of such other shares so receivable upon
conversion of this Note shall be subject thereafter to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions contained in this Note.
(j) Except
as provided in Section 4(j) hereof, if and whenever the Company
shall issue or sell, or is,
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