Exhibit 99.2
[FORM OF SENIOR SECURED CONVERTIBLE NOTE]
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF
THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING
SECTIONS 3(c)(iii) AND 19(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.
US Dataworks,
Inc.
Senior Secured
Convertible Note
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Issuance Date:
November 13, 2007
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Original Principal Amount: U.S. $
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FOR VALUE RECEIVED, US DATAWORKS, INC., a Nevada corporation
(the “Company”) hereby promises to pay to ___ 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 one of an issue of Senior Secured Convertible Notes issued
pursuant to the Securities Purchase Agreement (collectively, the
“ Notes ” and such other Senior Secured
Convertible Notes, the “ Other Notes ”). Certain
capitalized terms used herein are defined in Section 29.
(1)
MATURITY . 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 (as defined in Section 24(b)), if any.
The “ Maturity Date ” shall be November 13,
2010, as may be extended at the option of the Holder (i) in
the event that, and for so long as, an Event of Default (as defined
in Section 4(a)) shall have occurred and be continuing on the
Maturity Date (as may be extended pursuant to this Section 1)
or any event shall have occurred and be continuing on the Maturity
Date (as may be extended pursuant to this Section 1) that with
the passage of time and the failure to cure would result in an
Event of Default, and (ii) through the date that is ten
(10) Business Days after the consummation of a Change of
Control in the event that a Change of Control is publicly announced
or a Change of Control Notice (as defined in Section 5(b)) is
delivered prior to the Maturity Date. Other than as specifically
permitted by this Note, the Company may not prepay any portion of
the outstanding Principal, accrued and unpaid Interest or accrued
and unpaid Late Charges, if any.
(2)
INTEREST; INTEREST RATE . (a) Interest on this Note
shall commence accruing on the Issuance Date 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 arrears for each
Calendar Quarter on January 15, April 15, July 15
and October 15 of each year (each, an “ Interest
Date ”) with the first Interest Date being
January 15, 2008. Interest shall be payable on each Interest
Date, to the record holder of this Note on the applicable Interest
Date, in cash.
(b)
Prior to the payment of Interest on an Interest Date, Interest on
this Note shall accrue at the Interest Rate and be payable by way
of inclusion of the Interest in the Conversion Amount on each
Conversion Date in accordance with Section 3(b)(i). From and
after the occurrence and during the continuance of an Event of
Default, the Interest Rate shall be increased to eighteen percent
(18.0%) per annum. 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 cure of such Event of Default.
(3)
CONVERSION OF NOTES . This Note shall be convertible into
shares of the Company’s common stock, par value $0.0001 per
share (the “ Common Stock ”), on the terms and
conditions set forth in this Section 3.
(a)
Conversion Right . Subject to the provisions of
Section 3(d), at any time or times on or after the Issuance
Date, the Holder shall be entitled to convert any portion of the
outstanding and unpaid Conversion Amount (as defined below) into
fully paid and nonassessable
shares
of Common Stock in accordance with Section 3(c), at the
Conversion Rate (as defined below). The Company shall not issue any
fraction of a share of Common Stock upon any conversion. If the
issuance would result in the issuance of a fraction of a share of
Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay
any and all 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
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determined by
dividing (x) such Conversion Amount by (y) the Conversion
Price (the “ Conversion Rate ”).
(i)
“ Conversion Amount ” means the sum of
(A) the portion of the Principal to be converted, redeemed or
otherwise with respect to which this determination is being made,
(B) accrued and unpaid Interest, if any, with respect to such
Principal and (C) accrued and unpaid Late Charges, if
any.
(ii)
“ Conversion Price ” means, as of any Conversion
Date (as defined below) or other date of determination, $0.43,
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)(iv), surrender this Note
to a common carrier for delivery to the Company as soon as
practicable on or following such date (or an indemnification
undertaking with respect to this Note in the case of its loss,
theft or destruction). On or before the first (1 st ) Trading Day
following the date of receipt of a Conversion Notice, the Company
shall transmit by facsimile a confirmation of receipt of such
Conversion Notice to the Holder and the Company’s transfer
agent (the “Transfer Agent”). On or before the second
(2 nd )
Trading Day following the date of receipt of a Conversion Notice
(the “ Share Delivery Date ”), the Company shall
(1) (x) provided that the Transfer Agent is participating in
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 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, by wire transfer
of immediately available funds, an amount equal to the sum of
(x) the Make-Whole Amount and (y) the accrued and unpaid
Interest, if any, and Late Charges, if any, to but excluding the
Conversion Date; provided, however, that the Company shall not pay
any amounts of accrued and unpaid Interest or Late Charges to the
extent that the Conversion Amount being so converted includes such
amounts of accrued and unpaid Interest or Late Charges as indicated
on the Conversion Notice. 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
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
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this Note shall
be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date.
(ii)
Company’s Failure to Timely Convert . If the Company
shall fail to issue a certificate to the Holder or credit the
Holder’s balance account with DTC, as applicable, for the
number of shares of Common Stock to which the Holder is entitled
upon conversion of any Conversion Amount on or prior to the date
which is three (3) Trading Days after the Conversion Date (a
“ Conversion Failure ”), then (A) the
Company shall pay damages to the Holder for each 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)(iii) 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 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.
(iii)
Registration; Book-Entry . The Company shall maintain a
register (the “ Register ”) for the recordation
of the names and addresses of the holders of each Note and the
principal amount of the Notes held by such holders (the “
Registered Notes ”). The entries in the Register shall
be conclusive and binding for all purposes absent manifest error.
The Company and the holders of the Notes shall treat each Person
whose name is recorded in the Register as the owner of a Note for
all purposes, including, without limitation, the right to receive
payments of Principal and Interest hereunder, notwithstanding
notice to the contrary. A Registered Note may be assigned or sold
in whole or in part only by registration of such assignment or sale
on the Register. Upon its
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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.
(iv)
Pro Rata Conversion; Disputes . In the event that the
Company receives a Conversion Notice from more than one holder of
Notes for the same Conversion Date and the Company can convert
some, but not all, of such portions of the Notes submitted for
conversion, the Company, subject to Section 3(d), shall
convert from each holder of Notes electing to have Notes converted
on such date a pro rata amount of such holder’s portion of
its Notes submitted for conversion based on the principal amount of
Notes submitted for conversion on such date by such holder relative
to the aggregate principal amount of all Notes submitted for
conversion on such date. In the event of a dispute as to the number
of shares of Common Stock issuable to the Holder in connection with
a conversion of this Note, the Company shall issue to the Holder
the number of shares of Common Stock not in dispute and resolve
such dispute in accordance with Section 23.
(d)
Limitations on Conversions .
(i)
Beneficial Ownership . The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have
the right to convert any portion of this Note pursuant to
Section 3(a), to the extent that after giving effect to such
conversion, the Holder (together with the Holder’s
affiliates) would beneficially own in excess of 4.99% (the “
Maximum Percentage ”) of the number of shares of
Common Stock outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its
affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Note with respect to which the
determination of such sentence is being made, but shall exclude the
number of shares of Common Stock which would be issuable upon
(A) conversion of the remaining, nonconverted portion of this
Note beneficially owned by the Holder or any of its affiliates and
(B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without
limitation, any Other Notes or Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates. Except
as set forth in the preceding sentence, for purposes of this
Section 3(d)(i), beneficial ownership shall be calculated in
accordance
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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-KSB, Form 10-Q Form 8-K, or
other public filing with the SEC, 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 (61 st ) day after
such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder and not to any
other holder of Notes.
(ii)
Eligible Market Regulation . The Company shall not be
obligated to issue any shares of Common Stock upon conversion of
this Note, and the Holder of this Note shall not have the right to
receive upon conversion of this Note any shares of Common Stock, if
the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which the Company may
issue upon conversion or exercise, as applicable, of the Notes and
Warrants without breaching the Company’s obligations under
the rules or regulations of any applicable Eligible Market (the
“ Exchange Cap ”), except that such limitation
shall not apply in the event that the Company (A) obtains the
approval of its stockholders as required by the applicable rules of
such Eligible Market for issuances of Common Stock in excess of
such amount or (B) obtains a written opinion from outside
counsel to the Company that such approval is not required, which
opinion shall be reasonably satisfactory to the Required Holders.
Until such approval or written opinion is obtained, no purchaser of
the Notes pursuant to the Securities Purchase Agreement (each a
“ Purchaser ” and, collectively, the “
Purchasers ”) shall be issued in the aggregate, upon
conversion or exercise, as applicable, of Notes or Warrants, shares
of Common Stock in an amount greater than the product of the
Exchange Cap multiplied by a fraction, the numerator of which is
the principal amount of Notes issued to each Purchaser pursuant to
the Securities Purchase Agreement on the Closing Date and the
denominator of which is the aggregate principal amount of all Notes
issued to the Purchasers pursuant to the Securities Purchase
Agreement on the Closing Date (with respect to each Purchaser, the
“ Exchange Cap Allocation ”). In the event that
any Purchaser shall sell or otherwise transfer any of such
Purchaser’s Notes, the transferee shall be allocated a pro
rata portion of such Purchaser’s Exchange Cap Allocation, and
the restrictions of the prior sentence shall apply to such
transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any
holder of Notes shall convert all of such holder’s Notes into
a number of shares of Common Stock which, in the aggregate, is less
than such holder’s Exchange Cap Allocation, then the
difference between such holder’s Exchange Cap Allocation
and
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the number of
shares of Common Stock actually issued to such holder shall be
allocated to the respective Exchange Cap Allocations of the
remaining holders of Notes on a pro rata basis in proportion to the
aggregate principal amount of the Notes then held by each such
holder.
(4)
RIGHTS UPON EVENT OF DEFAULT .
(a)
Event of Default . Each of the following events shall
constitute an “ Event of Default ”:
(i)
the failure of the applicable Registration Statement required to be
filed pursuant to the Registration Rights Agreement to be declared
effective by the SEC on or prior to the date that is sixty
(60) days after the applicable Effectiveness Deadline (as
defined in the Registration Rights Agreement), or, while the
applicable Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the applicable Registration
Statement lapses for any reason (including, without limitation, the
issuance of a stop order) or is unavailable to any holder of the
Notes for sale of all of such holder’s Registrable Securities
(as defined in the Registration Rights Agreement) in accordance
with the terms of the Registration Rights Agreement, and such lapse
or unavailability continues for a period of ten
(10) consecutive days or for more than an aggregate of thirty
(30) days in any 365-day period (other than days during an
Allowable Grace Period (as defined in the Registration Rights
Agreement));
(ii)
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;
(iii)
the Company’s (A) failure to cure a Conversion Failure
by delivery of the required number of shares of Common Stock within
ten (10) Trading 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;
(iv)
at any time following the tenth (10 th ) consecutive
Business Day that the Holder’s Authorized Share Allocation is
less than the number of shares of Common Stock that the Holder
would be entitled to receive upon a conversion of the full
Conversion Amount of this Note (without regard to any limitations
on conversion set forth in Section 3(d) or otherwise);
(v)
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 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/or Late Charges when and as
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due, in which
case only if such failure continues for a period of at least three
(3) Business Days;
(vi)
the occurrence of any default under, redemption of or acceleration
prior to maturity of any Indebtedness of the Company or any of its
Subsidiaries (as defined in Section 3(a) of the Securities Purchase
Agreement), other than with respect to any Other Notes;
(vii)
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;
(viii)
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;
(ix)
a final judgment or judgments for the payment of money aggregating
in excess of $250,000 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 $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 will receive
the proceeds of such insurance or indemnity within thirty
(30) days of the issuance of such judgment;
(x)
other than as specifically set forth in another clause of this
Section 4(a), the Company breaches any representation,
warranty, covenant or other term or condition of any Transaction
Document, except, in the case of a breach of a covenant which is
curable, only if such breach continues for a period of at least
fifteen (15) consecutive Business Days;
(xi)
any breach or failure in any respect to comply with Sections 8
or 14 of this Note;
(xii)
the Company or any Subsidiary shall fail to perform or comply with
any covenant or agreement contained in any Security Agreement to
which it is a party, any Pledge Agreement to which it is a party or
any Mortgage to which it is a party (each of the foregoing as
defined in the Security Documents);
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(xiii)
any material provision of any Security Document (as determined by
the Collateral Agent) shall at any time for any reason (other than
pursuant to the express terms thereof) cease to be valid and
binding on or enforceable against the Company or any Subsidiary
intended to be a party thereto, or the validity or enforceability
thereof shall be contested by any party thereto, or a proceeding
shall be commenced by the Company or any Subsidiary or any
governmental authority having jurisdiction over any of them,
seeking to establish the invalidity or unenforceability thereof, or
the Company or any Subsidiary shall deny in writing that it has any
liability or obligation purported to be created under any Security
Document;
(xiv)
any Security Agreement, any Pledge Agreement, any Mortgage or any
other security document, after delivery thereof pursuant hereto,
shall for any reason fail or cease to create a valid and perfected
and, except to the extent permitted by the terms hereof or thereof,
first priority Lien in favor of the Collateral Agent for the
benefit of the holders of the Notes on any Collateral (as defined
in the Security Documents) purported to be covered thereby;
(xv)
any bank at which any deposit account, blocked account, or lockbox
account of the Company or any Subsidiary is maintained shall fail
to comply with any material term of any deposit account, blocked
account, lockbox account or similar agreement to which such bank is
a party or any securities intermediary, commodity intermediary or
other financial institution at any time in custody, control or
possession of any investment property of the Company or any
Subsidiary shall fail to comply with any of the terms of any
investment property control agreement to which such Person is a
party (it being understood that only accounts pursuant to which the
Collateral Agent has requested account control agreements should be
subject to this clause (xv));
(xvi)
any material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen
(15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the
Company or any Subsidiary, if any such event or circumstance could
reasonably be expected to have a Material Adverse Effect (as
defined in the Securities Purchase Agreement); or
(xvii)
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 (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 Conversion Amount
of this Note the Holder is
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electing to
require the Company 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 (1)
the Closing Sale Price of the Common Stock on the date immediately
preceding such Event of Default, (2) the Closing Sale Price of
the Common Stock on the date immediately following such Event of
Default and (3) the Closing Sale Price of the Common Stock on
the date the Holder delivers the Event of Default Redemption Notice
(the “ Event of Default Redemption Price ”).
Redemptions required by this Section 4(b) shall be made in
accordance with the provisions of Section 11. 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.
(5)
RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL
.
(a)
Assumption . The Company shall not enter into or be party to
a Fundamental Transaction unless 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 Required Holders and approved by the
Required Holders prior to such Fundamental Transaction, including
agreements to deliver to each holder of Notes in exchange for such
Notes a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the
Notes, including, without limitation, having a principal amount and
interest rate equal to the principal amounts and the interest rates
of the Notes held by such holder, having similar conversion rights
as the Notes and having similar ranking to the Notes, and
satisfactory to the Required Holders. 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 of the Notes prior to such Fundamental Transaction, such
shares of 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
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successive
Fundamental Transactions and shall be applied without regard to any
limitations on the conversion of this Note.
(b)
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 of
the Common Stock 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 11 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 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 Common Stock pursuant to
Section 3. The parties hereto agree that in the event of the
Company’s redemption of any portion of the Note under this
Section 5(b), the Holder’s damages would be uncertain
and difficult to estimate because of the parties’ inability
to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for
the Holder. Accordingly, any 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 . 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
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this Note)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
(b)
Other Corporate Events . In addition to and not in
substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for
shares of Common Stock (a “ Corporate Event ”),
the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon a conversion
of this Note, at the Holder’s option, (i) in addition to
the shares of Common Stock receivable upon such conversion, such
securities or other assets to which the Holder would have been
entitled with respect to such shares of Common Stock had such
shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event (without taking into account
any limitations or restrictions on the convertibility of this Note)
or (ii) in lieu of the shares of Common Stock otherwise
receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection
with the consummation of such Corporate Event in such amounts as
the Holder would have been entitled to receive had this Note
initially been issued with conversion rights for the form of such
consideration (as opposed to shares of Common Stock) at a
conversion rate for such consideration commensurate with the
Conversion Rate. Provision made pursuant to the preceding sentence
shall be in a form and substance satisfactory to the Required
Holders. The provisions of this Section shall apply similarly and
equally to successive Corporate Events and shall be applied without
regard to any limitations on the conversion or redemption of this
Note.
(7)
RIGHTS UPON ISSUANCE OF OTHER SECURITIES .
(a)
Adjustment of Conversion Price upon Issuance of Common Stock
. If and whenever on or after the Subscription Date, the Company
issues or sells, or in accordance with this Section 7(a) is deemed
to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for
the account of the Company, but excluding shares of Common Stock
deemed to have been issued or sold by the Company in connection
with any Excluded 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 the New Issuance Price. For purposes
of determining the adjusted Conversion Price under this
Section 7(a), the following shall be applicable:
(i)
Issuance of Options . If the Company in any manner grants or
sells any Options and the lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such
Option or upon conversion or exchange or exercise of any
Convertible Securities issuable upon exercise of such Option is
less than the Applicable Price, then 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
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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.
(ii)
Issuance of Convertible Securities . If the Company in any
manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable
upon such conversion or exchange or exercise thereof is less than
the Applicable Price, then 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.
(iii)
Change in Option Price or Rate of Conversion . If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion, exchange
or exercise of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable or
exercisable for Common Stock changes at any time, the Conversion
Price in effect at the time of such change shall be adjusted to the
Conversion Price which would have been in effect at such time had
such Options or Convertible Securities provided for such changed
purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or
sold. For purposes of this Section 7(a)(iii), if the terms of
any Option or Convertible Security that was outstanding as of the
Subscription Date are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued
as of the date of such change. No adjustment shall be made if such
adjustment would result in an
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