THE SECURITIES REPRESENTED HEREBY HAVE NOT 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, ASSIGNED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION THEREFROM. THE PRINCIPAL AMOUNT REPRESENTED
HEREBY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE
AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(A)(5) HEREOF. A
PROSPECTIVE ACQUIROR HEREOF IS ADVISED TO CONTACT THE ISSUER HEREOF AS TO THE
ACTUAL OUTSTANDING PRINCIPAL AMOUNT HEREOF.
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER
AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT (THE
"SUBORDINATION AGREEMENT") DATED AS OF AUGUST 14, 2002, AMONG GENUS, INC., THE
SUBORDINATED CREDITORS NAMED THEREIN AND SILICON VALLEY BANK, TO THE SENIOR
INDEBTEDNESS (AS DEFINED IN THE SUBORDINATION AGREEMENT); AND EACH HOLDER OF
THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE
SUBORDINATION AGREEMENT.
GENUS, INC.
7% CONVERTIBLE SUBORDINATED NOTE DUE 2005
No. U.S.$
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SECURITIES.
This Security is one of a duly authorized series of 7% Convertible Subordinated
Notes due 2005 of Genus, Inc., a California corporation (including any successor
corporation, the "Company"). Capitalized terms used and not otherwise defined
herein, shall have the respective meanings given to those terms in Section 9
hereof.
PRINCIPAL AND INTEREST.
The Company for value received, hereby promises to pay to , or its
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registered assigns, the principal sum of U.S $ on August 15, 2005 (the
-------
"Final Maturity Date") and to pay interest thereon at the rate equal to 7% per
annum (the "Interest Rate") from August 14, 2002 (the "Issuance Date"), until
repayment in full at the Final Maturity Date, conversion or repurchase.
Interest is payable in cash or, at the election of the Company, in Common Stock
in accordance with Section 2(b) hereof.
Interest on this Security shall be computed on the basis of a 365-day year and
actual days elapsed and shall be payable semi-annually in arrears on February 15
and August 15 of each year (each an "Interest Payment Date"), commencing
February 15, 2003, with
1
interest payable in U.S. dollars to the Holder in whose name this Security (or
one or more predecessor Securities) was registered at the close of business on
the Business Day immediately preceding such Interest Payment Date (each a
"Regular Record Date"). The Company may elect to pay interest by delivery of
shares of Common Stock (the "Interest Shares") pursuant to this Section 2(b) if,
and only if, the following conditions have been satisfied:
The Company delivers written notice of such election (an "Interest Election
Notice") to each holder of the Securities then outstanding at least 10 Trading
Days prior to the Interest Payment Date (an "Interest Election Date");
The Shelf Registration Statement (as defined in the Registration Rights
Agreement) covering the Interest Shares is effective and available for the
resale of all of the Registrable Securities (as defined in the Registration
Rights Agreement) relating to this Security on each day during the period
beginning on and including the Interest Election Date and ending on and
including the Interest Payment Date, and such Shelf Registration Statement is
expected to remain effective for the 30 days following the Interest Payment
Date;
The Common Stock (A) is, or shall have been, approved for quotation on the
Nasdaq Stock Market or listing on the New York Stock Exchange, in either case,
prior to the Interest Payment Date and (B) is not suspended from trading on any
Trading Day during the period beginning on and including the applicable Interest
Election Date and ending on and including the applicable Interest Payment Date,
unless consented to in writing by the Holder;
All shares of Common Stock that may be issued with respect to the payment of
interest on this Security will be issued out of the Company's authorized but
unissued Common Stock and, will upon issue, be duly and validly issued and fully
paid and non-assessable and free of any preemptive rights; and
Neither any event constituting an Event of Default nor an event that with the
passage of time and assuming it were not cured would constitute an Event of
Default has occurred and is continuing on any day during the period beginning on
and including the applicable Interest Election Date and ending on and including
the Interest Payment Date, unless consented to in writing by the Holder.
If all of the preceding conditions set forth in this Section 2(b) are not
satisfied in accordance with the terms thereof, the interest required to be paid
or duly provided for by the Company pursuant to this Section shall be paid by
the Company only in cash. Interest to be paid on an Interest Payment Date in
Interest Shares shall be paid in a number of fully paid and nonassessable shares
of Common Stock equal to the quotient of (a) the amount of interest payable on
such Interest Payment Date and (b) the Interest Conversion Price in effect on
such Interest Payment Date.
If the Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, and so long as the
certificate for the Interest Shares to be issued is not required to bear a
legend and the Holder is not then required to return such certificate for the
placement of a legend thereon and the Holder has provided the Company with the
information required by DTC relating to the DTC account of the Holder or such
Holder's nominee, the Company shall cause its transfer agent to electronically
transmit the Interest Shares to the Holder by crediting the account of the
Holder or its nominee with DTC through its Deposit Withdrawal Agent
2
Commission system (such transfer, a "DTC Transfer"). If the aforementioned
conditions for a DTC Transfer are not satisfied, the Company shall deliver to
the Holder physical certificates representing the Interest Shares. Further, even
if the aforementioned conditions to a DTC Transfer are satisfied, the Holder may
instruct the Company in writing to deliver to the Holder physical certificates
representing the Interest Shares in lieu of delivering such shares by way of DTC
Transfer.
The Company will not issue fractional shares of Common Stock in connection with
the payment of interest. In lieu thereof, the Company will pay an amount in
cash for the current market value of the fractional shares. The current market
value of a fractional share shall be determined (calculated to the nearest
1/1000th of a share) by multiplying the Closing Price of the Common Stock on the
Trading Day immediately prior to the interest payment date by such fractional
share and rounding the product to the nearest whole cent.
Interest shall be due and payable on this Security as follows:
The Holder of this Security as of the close of business on a Regular Record Date
shall be entitled (except as otherwise indicated in this Section 2) to receive
and shall receive, as the registered Holder as of such Regular Record Date,
interest on this Security on the corresponding Interest Payment Date.
In the event that this Security is converted pursuant to Section 3 and the
Conversion Date occurs after a Regular Record Date and prior to the
corresponding Interest Payment Date, the Holder submitting this Security for
conversion (rather than the Holder as of such Regular Record Date) shall be
entitled to receive and shall receive the accrued and unpaid interest on this
Security from the preceding Interest Payment Date (or such earlier date on which
interest was last paid) to, but not including, the Conversion Date, and in such
circumstance, no interest shall be paid to the Holder of this Security as of the
close of business on the Regular Record Date; provided that in the event that
--------
the Conversion Date is the Interest Payment Date, the Holder of this Security as
of the close of business on a Regular Record Date shall be entitled to receive
such interest in accordance with Section 2(c)(1) hereof and not the Person
submitting this Security for conversion on such Conversion Date.
In the event that this Security becomes subject to repurchase pursuant to
Section 4 and the Change of Control Repurchase Date occurs after a Regular
Record Date and prior to the corresponding Interest Payment Date, the Holder
submitting this Security for repurchase (rather than the Holder as of such
Regular Record Date) shall be entitled to receive and shall receive the accrued
and unpaid interest on this Security from the preceding Interest Payment Date
(or such earlier date on which interest was last paid) to, but not including,
the Change of Control Repurchase Date, and in such circumstance, no interest
shall be paid to the Holder of this Security as of the close of business on the
Regular Record Date; provided that in the event that the Change of Control
--------
Repurchase Date is the Interest Payment Date, the Holder of this Security as of
the close of business on a Regular Record Date shall be entitled to receive such
interest in accordance with Section 2(c)(1) hereof and not the Person submitting
this Security for purchase on such Change of Control Repurchase Date.
In addition to the amounts set forth in Section 2(c), the Holder shall be
entitled, pursuant and subject to the Registration Rights Agreement, to receive
Liquidated Damages, if any,
3
in addition to receipt or payment of any interest on this Security. Pursuant to
the Registration Rights Agreement, any Liquidated Damages shall be received or
paid on dates corresponding to the Interest Payment Dates.
Payment of the principal of (and premium, if any, on) this Security shall be
made upon the surrender of this Security to the Company, at the office
designated by the Company for delivery of notices pursuant to Section 10(a)
hereof (the "Designated Office"), in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts. Payment of principal (and premium, if any), interest
and all other amounts payable with respect to the Securities shall be made by
wire transfer of immediately available funds to the Holder entitled thereto in
accordance with the wire transfer instructions provided by the Holder to the
Company at least three Business Days prior to the Interest Payment Date or, if
no such instructions have been so provided, by U.S. dollar check mailed to the
address of the Holder entitled thereto as such address shall appear in the Note
Register.
CONVERSION.
This Note shall be convertible into shares of the Common Stock on the terms and
conditions set forth in this Section 3.
(7) Subject to the provisions of Sections 3(a)(8) and 3(a)(9), the Holder of
this Security may convert the principal amount of this Security (or any portion
hereof equal to $1,000 or any integral multiple of $1,000 in excess thereof)
into Common Stock at any time after the Issuance Date, but prior to the close of
business on the Final Maturity Date, at the Conversion Price then in effect;
provided, however, that, if this Security is submitted for repurchase and such
- -------- --------
repurchase request is not withdrawn pursuant to Section 4, such conversion right
shall terminate at the close of business on the Business Day immediately
preceding the Change of Control Repurchase Date, provided that, if the Change of
-------- ----
Control Repurchase Price is not paid when due, such conversion right shall be
reinstated until such payment is made. In the case of a Change of Control for
which the Holder has delivered a Change of Control Purchase Notice exercising
the option of such Holder to require the Company to purchase this Security or a
portion hereof, such Holder must first withdraw the Change of Control Purchase
Notice in accordance with Section 4(c) and such conversion right in respect of
this Security or portion hereof shall expire at the close of business on the
Business Day immediately preceding the Change of Control Purchase Date. Upon
conversion of this Security, the Holder of this Security shall also be entitled,
on the Share Delivery Date (as defined below), to receive with respect to this
Security (or such portion hereof so converted) accrued and unpaid interest and
Liquidated Damages, if any, to, but excluding the Conversion Date; provided,
--------
however, that if the Conversion Date is an Interest Payment Date, installments
- -------
of interest and Liquidated Damages, if any, on this Security shall be payable to
the Holder of this Security, or one or more predecessor Securities, registered
as such on the relevant Regular Record Date according to the terms and
provisions of Section 2; provided, further, that the Company may elect to pay
-------- -------
interest by delivery of shares of Common Stock pursuant to Section 2(b).
The number of shares of Common Stock issuable upon conversion of this Security
shall be determined by dividing the principal amount of this Security or portion
hereof
4
surrendered for conversion by the Conversion Price in effect on the
Conversion Date. The initial conversion price is $ per share and is subject
----
to adjustment as provided in this Section 3 (as such price may be adjusted, the
"Conversion Price"). To convert this Security on any date (a "Conversion
Date"), the Holder hereof shall: (x) send by facsimile (or otherwise deliver)
prior to 5:00 p.m., San Francisco time, on such date a copy of the fully
executed conversion notice in the form attached as Exhibit A hereto (the
---------
"Conversion Notice") to the Company, (y) if required by Section 3(a)(5),
surrender this Security 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 Security in the case of its loss, theft or destruction) and (z)
pay any transfer taxes or other applicable taxes or duties, if any, required in
connection with the issuance of shares of Common Stock in the name of someone
other than the Holder. Upon receipt by the Company of a facsimile copy of a
Conversion Notice from the Holder, the Company shall as soon as practicable, but
in any event on or before the second Business Day following the date of receipt
of the Conversion Notice, send, via facsimile, a confirmation to the Holder and
the transfer agent for the Common Stock stating that the Conversion Notice has
been received, the date upon which the Company expects to deliver the Common
Stock issuable upon such conversion and the name and telephone number of a
contact person at the Company regarding the conversion. The Company shall not
be obligated to issue shares of Common Stock upon a conversion unless the Holder
complies with the foregoing requirements set forth in this paragraph.
On or prior to the third Business Day after any Conversion Date (the "Share
Delivery Date"), the Company shall issue and deliver to the Holder or its
nominee (x) that number of shares of Common Stock issuable upon conversion of
the portion of this Security being converted, as well as any shares of Common
Stock, if any, that the Company elects to issue in accordance with Section 2(b)
in satisfaction of any accrued and unpaid interest on such converted portion of
this Security, (y) if required pursuant to Section 3(a)(5), a new Security in
the form hereof representing the balance of the principal amount hereof not
being converted, if any, and (z) if applicable, cash in lieu of any fractional
shares pursuant to Section 3(a)(6). If the Company's transfer agent is
participating in DTC's Fast Automated Securities Transfer program, and so long
as the certificate for the Common Stock to be issued upon conversion of this
Security is not required to bear a legend and the Holder is not then required to
return such certificate for the placement of a legend thereon and the Holder has
provided the Company with the information required by DTC relating to the DTC
account of the Holder or such Holder's nominee, the Company shall cause its
transfer agent to electronically transmit the Common Stock issuable upon
conversion to the Holder by crediting the account of the Holder or its nominee
with DTC through its Deposit Withdrawal Agent Commission system. If the
aforementioned conditions for a DTC Transfer are not satisfied, the Company
shall deliver to the Holder physical certificates representing the Common Stock
issuable upon conversion. Further, even if the aforementioned conditions to a
DTC Transfer are satisfied, the Holder may instruct the Company in writing to
deliver to the Holder physical certificates representing the Common Stock
issuable upon conversion in lieu of delivering such shares by way of DTC
Transfer.
(2) The Holder, as such, is not entitled to any rights of a
holder of Common Stock until the Holder has converted this Security into Common
Stock, and
5
only to the extent this Security is deemed to have been converted
into Common Stock pursuant to this Section 3.
This Security shall be deemed to have been converted immediately prior to the
close of business on the Conversion Date, and at such time the rights of the
Holder of this Security as the Holder hereof shall cease with respect to the
portion of this Security converted on such Conversion Date, and the Person or
Persons entitled to receive the shares of Common Stock issuable upon conversion
shall be deemed to be a stockholder of record on the Conversion Date; provided,
--------
however, that no surrender of this Security on any date that is not a Business
- -------
Day shall be effective to constitute the person or persons entitled to receive
the shares of Common Stock upon such conversion as the record holder or holders
of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the person or persons entitled to receive such shares of
Common Stock as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding Business Day.
If the Holder converts more than one Security at the same time, the number of
shares of Common Stock issuable upon the conversion shall be based on the
aggregate principal amount of Securities and interest converted.
Notwithstanding anything to the contrary set forth herein, upon conversion of
any portion of this Security in accordance with the terms hereof, the Holder
shall not be required to physically surrender this Security to the Company
unless (A) the entire outstanding principal amount of this Security 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 physical
surrender and reissue of this Security. The Company shall maintain records
showing the principal and interest converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the Holder, so as not
to require physical surrender of this Security upon conversion. If this
Security is physically surrendered for conversion as required by this Section
3(a)(5) and the outstanding principal amount of this Security is greater than
the principal amount of the portion of this Security being converted, then the
Company shall as soon as practicable and in no event later than three Business
Days after receipt of this Security and at its own expense, issue and deliver to
the Holder a new Security (in accordance with Section 10(a)) representing the
outstanding principal amount not converted.
The Company will not issue fractional shares of Common Stock upon conversion of
this Security. In lieu thereof, the Company will pay an amount in cash for the
current market value of the fractional shares. The current market value of a
fractional share shall be determined (calculated to the nearest 1/1000th of a
share) by multiplying the Closing Price of the Common Stock on the Trading Day
immediately prior to the Conversion Date by such fractional share and rounding
the product to the nearest whole cent.
The Company shall, if the Holder so elects, deliver the Common Stock issuable
upon conversion of this Security to any third party designated by the Holder,
subject to compliance with Sections 3(e) and 10(b) hereof.
The Company shall not effect any conversion of this Security, and the Holder of
this Security shall not have the right to convert any portion of this Security
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% of the number of shares of Common Stock
outstanding immediately after giving effect to such conversion.
6
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 Security with respect to
which the determination of such sentence is being made, but shall exclude the
number of shares of Common Stock that would be issuable upon (A) conversion of
the remaining, nonconverted portion of this Security 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 Securities 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(a)(8),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. For purposes of this Section
3(a)(8), 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 recently filed Form 10-Q or Form 10-K, as the case may
be, (y) a more recent public announcement by the Company or (z) any other
written 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 three Business Days
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 Security, by the Holder or its
affiliates since the date as of which such number of outstanding shares of
Common Stock was last publicly reported. For purposes of determining the maximum
number of shares of Common Stock that the Company may issue to the Holder
pursuant to this Section 3(a)(8) upon conversion of this Security on a
particular Conversion Date, the Company shall be entitled to rely on a written
statement by the Holder that, upon the issuance of the shares of Common Stock to
be issued on such Conversion Date, the Holder and its affiliates' aggregate
beneficial ownership of shares of Common Stock on such Conversion Date as
determined in accordance with this Section 3(a)(8) shall not exceed 4.99% of the
number of shares of Common Stock outstanding immediately after giving effect to
such conversion, which statement shall be delivered by the Holder to the Company
on the date on which the Holder delivers the corresponding Conversion Notice.
The Conversion Price will be subject to adjustments from time to time as
follows:
In case the Company shall hereafter pay a dividend or make a distribution to all
holders of the outstanding Common Stock in shares of Common Stock, the
Conversion Price in effect on the day following the Record Date shall be reduced
by multiplying such Conversion Price by a fraction: the numerator of which shall
be the number of shares of Common Stock outstanding at the close of business on
the Record Date fixed for the determination of the holders entitled to such
dividend or distribution; and the denominator of which shall be the sum of such
number of shares referred to in (A) above and the total number of shares
constituting such dividend or other distribution.
Such reduction in the Conversion Price shall become effective immediately after
the opening of business on the day following the Record Date.
7
In case the outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Price in effect on the
day following the day upon which such subdivision becomes effective shall be
proportionately reduced, and conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common Stock,
the Conversion Price in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as applicable, to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
If at any time on or after the Closing Date, the Company issues or sells, or in
accordance with this Section 3(b)(3) is deemed to have issued or sold, any
Additional Shares for a consideration per share less than a price (the
"Applicable Price") equal to the Conversion Price in effect immediately prior to
such time (each such sale or issuance, a "Dilutive Issuance"), then concurrent
with such Dilutive Issuance, the Conversion Price then in effect shall be
reduced to a price (rounded to the nearest cent) equal to the product of (a) the
Conversion Price in effect immediately prior to such Dilutive Issuance
multiplied by (b) the quotient determined by dividing (1) the sum of (i) number
of shares of Fully Diluted Common Stock outstanding immediately prior to such
Dilutive Issue plus (ii) the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number of
Additional Shares so issued would purchase at such Conversion Price in effect
immediately prior to such Dilutive Issuance, by (2) the sum of the number of
shares of Fully Diluted Common Stock outstanding immediately prior to such
Dilutive Issue plus the number of such Additional Shares so issued; provided,
--------
however, in no event shall the Conversion Price be adjusted, as a result of one
- -------
or more Dilutive Issuances, pursuant to this Section 3(b)(3) to a price that is
less than $_____ (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions after the Issuance Date). Subject to
the exceptions described below, the Company agrees that, so long as any
Securities or Warrants are outstanding, neither the Company nor its subsidiaries
will, without the prior written consent of the holders of Securities
representing a majority of the aggregate principal amount of Securities then
outstanding, issue or sell any Additional Shares at a price less than the
Closing Price (as adjusted to reflect any stock split, stock dividend,
recapitalization or otherwise) for a period of 180 days from and including the
Issuance Date. Subject to the exceptions described below, the Company agrees
that, so long as any Securities or Warrants are outstanding, the Company shall
not in any manner issue or sell convertible securities or options (other than
convertible securities or options having conversion price or exercise price
adjustments that are the same or similar to those contained in this Security or
the Warrants) that are convertible into or exercisable for Common Stock at a
price which varies with the market price of the Common Stock, including by way
of one or more adjustments or resets to a fixed price or the issuance of
additional securities without the payment of any additional consideration (the
formulation for such variable price being herein referred to as, the "Variable
Price"). In the event the Company desires to issue or sell securities
containing a Variable Price, the Company shall provide written notice thereof
via facsimile and overnight courier to each holder of Securities. The holders
of the Securities representing at least a majority of the aggregate principal
amount of Securities then outstanding may provide written notice via facsimile
and overnight
8
courier to the Company that such holders consent to the issuance or sale of such
Variable Price securities.
For purposes of determining the adjusted Conversion Price under this Section
3(b)(3), the following shall be applicable:
(A) For the purpose of determining the number of Additional
Shares included in a Dilutive Issuance, if the Company in any manner grants or
sells any Options and the lowest price per share for which a share of Common
Stock is issuable upon the exercise of any such Option or upon conversion,
exchange or exercise of any Convertible Securities issuable upon exercise of
such Option is less than the Applicable Price, then all such shares of Common
Stock shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such price per
share. For purposes of this Section 3(b)(3)(A), the "lowest price per share for
which a share of Common Stock is issuable upon the exercise of any such Option
or upon conversion, 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
share of Common Stock upon the granting or sale of the Option and upon exercise
of the Option and upon conversion, 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 Common Stock or
of such Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion, exchange or exercise of
such Convertible Securities.
(B) For the purpose of determining the number of Additional
Shares included in a Dilutive Issuance, if the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which a
share of Common Stock is issuable upon such conversion, exchange or exercise
thereof is less than the Applicable Price, then all such shares of Common Stock
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 3(b)(3)(B), the "lowest
price per share for which a share of Common Stock is issuable upon such
conversion, 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 share of Common Stock upon the issuance or sale of the
Convertible Security and upon the conversion, exchange or exercise of such
Convertible Security. No further adjustment of the Conversion Price shall be
made upon the actual issuance of such Common Stock upon conversion, 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 is to be made pursuant to other provisions
of this Section 3(b)(3), no further adjustment of the Conversion Price shall be
made by reason of such issue or sale.
(C) If the purchase or exercise 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
9
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 3(b)(3), if the terms of any Option or
Convertible Security that was outstanding as of the date of issuance of the
Securities are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change. No adjustment shall be made if such
adjustment would result in an increase of the Conversion Price then in effect.
(D) In case any Common Stock, Option or Convertible Security is
issued in connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction the aggregate consideration
receivable by the Company upon the issuance or sale of such Common Stock, Option
or Convertible Security and such other security shall be allocated between the
components of such transaction based upon their relative fair market values
(except that in the event that any Option is issued in such an integrated
transaction, the value of the consideration receivable by the Company upon the
granting or sale of such Option shall be deemed to be $0.01 for purposes of
Section 3(b)(3)(A)) and the provisions of this Section 3(b) shall be applied
separately to each security that is a component of such transaction. If any
Common Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefore will be
deemed to be the gross amount received by the Company therefor. If any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of marketable securities, in which case the amount of
consideration received by the Company will be the arithmetic average of the
Closing Price of such securities during the ten (10) consecutive Trading Days
ending on the date of receipt of such securities. The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the holders of Securities representing a majority of the aggregate
principal amount of the Securities then outstanding, provided that any dispute
--------
as to such fair value shall be determined by the Company and the holders in
accordance with Section 10(d).
(E) If the Company takes a record of the holders of Common Stock
for the purpose of entitling them to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities, then such record
date will be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution, as the case may be.
The Company may make such reductions in the Conversion Price, in addition to
those required by Sections 3(b)(1), (2) or (3) as the Board of Directors
considers to be advisable to avoid or diminish any income tax to holders of
Common Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes or otherwise.
To the extent permitted by applicable law, the Company from time to time may
reduce the Conversion Price by any amount for any period of time if the period
is at least 20 days and the reduction is irrevocable during the period and the
Board of Directors
10
determines in good faith that such reduction would be in the
best interests of the Holder, which determination shall be conclusive and set
forth in a Board Resolution. Whenever the Conversion Price is reduced pursuant
to the preceding sentence, the Company shall mail to the Holder of this
Security, at the Holder's address as it appears in the Note Register, a notice
of the reduction at least 15 days prior to the date the reduced Conversion Price
takes effect, and such notice shall state the reduced Conversion Price and the
period during which it will be in effect. In the event that the Company elects
to temporarily reduce the Conversion Price pursuant to this Section 3(b)(5), the
Conversion Price shall be adjusted upon the expiration of such temporary
reduction to the Conversion Price that otherwise would then be in effect if such
temporary reduction had not occurred, and the Conversion Price shall at no time
be greater than the Conversion Price that otherwise would be in effect if such
temporary reduction had not occurred.
No adjustment in the Conversion Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in such price; provided,
--------
however, that any adjustments which by reason of this Section 3(b)(6) are not
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required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 3 shall be made by
the Company in good faith and shall be made to the nearest cent or to the
nearest one hundredth of a share, as applicable. No adjustment need be made for
a change in the par value or no par value of the Common Stock.
Whenever the Conversion Price is adjusted as provided in Section 3(b), the
Company shall compute the adjusted Conversion Price in accordance with Section
3(b) and shall prepare a certificate signed by an executive officer of the
Company setting forth the adjusted Conversion Price and showing in reasonable
detail the facts upon which such adjustment is based, and shall mail such
certificate to the Holder of this Security at his last address in the Note
Register within 5 Business Days of the effective date of such adjustment.
Neither the failure to deliver such notice nor the existence of any defect
therein shall affect the legality or validity of any such adjustment.
For purposes of this Section 3(b), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company
but shall include shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock. The Company will not pay any
dividend or make any distribution on shares of Common Stock held in the treasury
of the Company.
For purposes hereof, "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of stockholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
In case at any time after the date hereof:
11
the Company shall declare a dividend (or any other distribution) on its Common
Stock that would result in an adjustment to the Conversion Price pursuant to
this Section 3; the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares of
Capital Stock of any class (or of securities convertible into shares of Capital
Stock of any class) or of any other rights; there shall occur any
reclassification of the Common Stock of the Company (other than a subdivision or
combination of its outstanding Common Stock, a change in par value, a change
from par value to no par value or a change from no par value to par value), or
any merger, consolidation, statutory share exchange or combination to which the
Company is a party and for which approval of any stockholders of the Company is
required, or the sale, transfer or conveyance of all or substantially all of the
assets of the Company; or there shall occur the voluntary or involuntary
dissolution, liquidation or winding up of the Company;
the Company shall cause to be provided to the Holder of this Security in
accordance with Section 10(a), at least 20 days (or 10 days in any case
specified in clause (1) or (2) above) prior to the applicable record or
effective date hereinafter specified, a written notice (which notice shall not
include any material non-public information) stating: the date on which a record
is to be taken for the purpose of such dividend, distribution, grant of rights
or warrants, or, if a record is not to be taken, the date as of which the
holders of shares of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined; or
the date on which such reclassification, merger, consolidation, statutory share
exchange, combination, sale, transfer, conveyance, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of shares of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, merger, consolidation, statutory share
exchange, sale, transfer, dissolution, liquidation or winding up.
Neither the failure to give such notice nor any defect therein shall affect the
legality or validity of the proceedings or actions described in clauses (1)
through (4) of this Section 3(c).
The Company shall at all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued shares of Common Stock, for the
purpose of effecting the conversion of this Security, the full number of shares
of Common Stock then issuable upon the conversion of this Security. The Company
covenants that all shares of Common Stock that may be issued upon conversion of
this Security will upon issue be validly issued, fully paid and nonassessable.
Except as provided in the next sentence, the Company will pay any and all taxes
(other than taxes on income) and duties that may be payable in respect of the
issue or delivery of Common Stock upon conversion of this Security. The Company
shall not, however, be required to pay any tax or duty that may be payable in
respect of any transfer involved in the issue and delivery of Common Stock in a
name other than that of the Holder of this Security, and no such issue or
delivery shall be made unless and until the Person requesting such issue has
paid to the Company the amount of any such tax or duty, or has established
12
to the reasonable satisfaction of the Company that such tax or duty has been
paid.
If any of following events occur:
any reclassification or change of the outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), as a result
of which holders of Common Stock shall be entitled to receive Capital Stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock;
any merger, consolidation, statutory share exchange or combination of the
Company with another Person as a result of which holders of Common Stock shall
be entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock; or
any sale or conveyance of the properties and assets of the Company as, or
substantially as, an entirety to any other Person as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
then the Company or the successor or purchasing entity, as applicable, shall
execute with the Holder of this Security a supplemental agreement providing that
this Security shall be convertible into the kind and amount of shares of capital
stock and other securities or property or assets (including cash) that such
Holder would have been entitled to receive upon such reclassification, change,
merger, consolidation, statutory share exchange, combination, sale or conveyance
had this Security been converted into Common Stock immediately prior to such
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance assuming the Holder, as a holder of Common
Stock, did not exercise its rights of election, if any, as to the kind or amount
of securities, cash or other property receivable upon such reclassification,
change, merger, consolidation, statutory share exchange, combination, sale or
conveyance (provided that, if the kind or amount of securities, cash or other
--------
property receivable upon such reclassification, change, merger, consolidation,
statutory share exchange, combination, sale or conveyance is not the same for
each of the shares of Common Stock in respect of which such rights of election
shall not have been exercised ("Non-Electing Share"), then for the purposes of
this Section 3(f) the kind and amount of securities, cash or other property
receivable upon such reclassification, change, merger, consolidation, statutory
share exchange, combination, sale or conveyance for each Non-Electing Share
shall be deemed to be the kind and amount so receivable per share by a plurality
of the Non-Electing Shares). Such supplemental agreement shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 3. If, in the case of any such
reclassification, change, merger, consolidation, statutory share exchange,
combination, sale or conveyance, the stock or other securities and assets
receivable thereupon by a holder of Common Stock includes shares of stock or
other securities and assets of a person other than the successor, purchasing or
transferee entity, as applicable, in such reclassification, change, merger,
consolidation, statutory share exchange, combination, sale or conveyance, then
such supplemental agreement shall also be executed by such other person and
shall contain such additional provisions to protect the interests of the Holder
as the Board of Directors shall reasonably consider necessary by reason of the
foregoing.
13
The above provisions of this Section 3(f) shall apply to successive or a series
of related reclassifications, changes, mergers, consolidations, statutory share
exchanges, combinations, sales and conveyances. If this Section 3(f) applies to
any event or occurrence, then the other provisions of Section 3(b) shall not
apply to the issuance of securities pursuant to such event or occurrence,
provided that such other provisions shall continue to apply to all other
issuances.
The Company (i) will effect all registrations with, and obtain all approvals by,
all governmental authorities that may be necessary under any United States
federal or state law (including the Securities Act, the Exchange Act and state
securities and Blue Sky laws) for the Common Stock issuable upon conversion of
this Security to be lawfully issued and delivered as provided herein, and
thereafter publicly traded (if permissible under the Securities Act) and
qualified or listed as contemplated by clause (ii) (it being understood that the
Company shall not be required to register the Common Stock issuable on
conversion hereof under the Securities Act except pursuant to the Registration
Rights Agreement); and (ii) will list the Common Stock required to be issued and
delivered upon conversion of this Security, prior to such issuance or delivery,
on each national securities exchange on which outstanding Common Stock is listed
or quoted at the time of such delivery, or if the Common Stock is not then
listed on any national securities exchange, to qualify the Common Stock for
quotation on the Nasdaq Stock Market or such other inter-dealer quotation
system, if any, on which the Common Stock is then quoted.
REPURCHASE AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL.
In the event that a Change of Control shall occur, the Holder of this Security
shall have the right (the "Change of Control Repurchase Right"), at the Holder's
option, but subject to the provisions of Sections 4(b) and 4(d), to require the
Company to repurchase, and upon the exercise of such right the Company shall
repurchase, this Security or any portion of the principal amount hereof that is
equal to $1,000 or an integral multiple thereof as directed by such Holder
(provided that this Security may not be repurchased in part unless the portion
of the principal amount hereof to be outstanding after such repurchase is equal
to $1,000 (or an integral multiple thereof)) on the date (the "Change of Control
Repurchase Date") on which the Change of Control is consummated at a purchase
price equal to 110% of the principal amount hereof to be repurchased (the
"Change of Control Repurchase Price"), plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to, but excluding, the Change of Control
Repurchase Date; provided, however, that if the Change of Control Repurchase
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Date is an Interest Payment Date, installments of interest and Liquidated
Damages, if any, on this Security shall be payable to the Holder of this
Security, or one or more predecessor Securities, registered as such on the
relevant Regular Record Date according to the terms and the provisions of
Section 2; provided, further, that in the event that the proposed consummation
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of a Change of Control is not publicly announced at least 15 days prior to the
consummation of such Change of Control, the Change of Control Repurchase Date
with respect to such Change of Control shall be the date that is 15 days after
the date of such public announcement. To the extent permitted by applicable
law, the Company's payment of the Change of Control Repurchase Price shall have
priority over the Company's payments to its stockholders in connection with a
Change of Control.
14
No sooner than 15 days nor later than 10 days prior to the expected date of
consummation of a Change of Control, but in no event 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"). The Change of Control Notice shall include a form of notice (which
shall be in substantially the form included in Exhibit B hereto) (the "Change of
---------
Control Repurchase Notice") to be completed by the Holder and delivered to the
Company pursuant to Section 4(d), and shall state the following:
that it is a Change of Control Notice pursuant to this Section 4;
the events causing the Change of Control and the expected date of such Change of
Control;
the procedures with which such Holder must comply to exercise its right to have
this Security repurchased pursuant to Section 4(a), including the date by which
the completed Change of Control Repurchase Notice and this Security must be
delivered to the Company in order to have it repurchased by the Company pursuant
to Section 4(a), the address for delivery, the existence of the Holder's
conversion rights pursuant to Section 3, including that the Holder's right to
convert its Security will terminate on the close of business on the Business Day
immediately prior to the Change of Control Repurchase Date, and the Conversion
Price then in effect and any adjustments thereto and that this Security as to
which a Change of Control Repurchase Notice has been given may be converted, if
it is otherwise convertible pursuant to Section 3, only if the completed and
delivered Change of Control Repurchase Notice has been withdrawn in accordance
with the terms of this Security;
the expected Change of Control Repurchase Date and the Change of Control
Repurchase Price; and
that, unless the Company defaults in making payment of such Change of Control
Repurchase Price, interest and Liquidated Damages, if any, on this Security, if
surrendered for repurchase by the Company, will cease to accrue on and after the
Change of Control Repurchase Date.
No failure by the Company to give the foregoing Change of Control Notice shall
limit the Holder's right to exercise its rights pursuant to Section 4(a) or
affect the validity of the proceedings for the repurchase of this Security.
Notwithstanding anything herein to the contrary, any Holder which has delivered
a completed Change of Control Repurchase Notice with respect to this Security to
the Company shall have the right to withdraw such Change of Control Repurchase
Notice by delivery of a written notice of withdrawal delivered to the office of
the Company in accordance with the Change of Control Repurchase Notice at any
time prior to the close of business on the Business Day immediately preceding
the Change of Control Repurchase Date specifying:
15
the certificate number, if any, of this Security;
the principal amount of this Security with respect to which such notice of
withdrawal is being submitted; and
the principal amount, if any, of this Security which remains subject to the
original Change of Control Repurchase Notice and which has been or will be
delivered for repurchase by the Company.
To exercise a Change of Control Repurchase Right pursuant to Section 4(a), a
Holder must deliver to the Company at its Designated Office on or prior to the
close of business on the Business Day prior to the Change of Control Repurchase
Date the following: a completed Change of Control Repurchase Notice, the form of
which is contained in Exhibit B hereto; and
---------
this Security, with, if the Company so requires, due endorsement by, or a
written instrument of transfer, in form satisfactory to the Company duly
executed by, the Holder or such Holder's attorney duly authorized in writing.
If the Holder has exercised its rights pursuant to Section 4(a) and has
satisfied the conditions for the exercise of such rights in accordance with
Section 4(d), then the Company shall, prior to 10:00 a.m. (New York City time)
on the Change of Control Repurchase Date, pay the Change of Control Repurchase
Price and accrued interest to, but excluding, the Change of Control Repurchase
Date and any Liquidated Damages with respect to any Security or portion of such
Security to the Holder in the manner specified in Section 2(e).
The Company will promptly return to the Holder hereof this Security with respect
to which a Change of Control Repurchase Notice has been withdrawn in compliance
with this Section 4.
If this Security is delivered for repurchase pursuant to Section 4 and is not so
paid on the Change of Control Repurchase Date, the principal amount of this
Security, together with any premium thereon, shall, until it is paid, bear
interest from the Change of Control Repurchase Date to, but not including, the
date of actual payment hereunder at the Interest Rate, and this Security shall
remain convertible into shares of Common Stock pursuant to Section 3 until this
Security shall have been paid.
Upon receipt by the Company of a Change of Control Repurchase Notice with
respect to this Security, the Holder of this Security shall (unless such Change
of Control Repurchase Notice is withdrawn pursuant to Section 4(c)) thereafter
be entitled to receive solely the Change of Control Repurchase Price with
respect to this Security, and, if applicable, any accrued and unpaid interest
and any Liquidated Damages on this Security, provided that the Company complies
with its obligations under this Section 4. If a Change of Control Repurchase
Notice has been delivered by the Holder hereof, this Security may not be
converted pursuant to Section 3 on or after the date of delivery of the Change
of Control Repurchase Notice unless the Change of Control Repurchase Notice has
first been validly withdrawn pursuant to Section 4(c).
16
If this Security is to be repurchased only in part, it shall be surrendered at
the Company's Designated Office (with, if the Company so requires, due
endorsement by, or a written instrument of transfer in form reasonably
satisfactory to the Company duly executed by, the Holder hereof or the Holder's
attorney duly authorized in writing) and the Company shall execute and deliver
to the Holder, without service charge, a new Security or Securities, of any
authorized denomination as requested by the Holder in principal amount equal to,
and in exchange for, the portion of the principal of this Security so
surrendered that is not repurchased.
COVENANTS OF THE COMPANY.
The Company covenants and agrees that it will duly and punctually pay or cause
to be paid the principal of, premium (if any), interest, Liquidated Damages, if
any, and, if applicable, Change of Control Repurchase Price on this Security, at
the respective times and in the manner provided for herein.
Unless otherwise permitted herein, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence and
the rights (charter and statutory) of the Company and each Significant
Subsidiary; provided, however, that the Company shall not be required to
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preserve any such right if (a) the Company shall determine in good faith that
the preservation thereof is no longer desirable in the conduct of the business
of the Company and its Subsidiaries as a whole and that the loss thereof is not
disadvantageous in any material respect to the Holder or (b) the Company or such
Significant Subsidiary shall no longer continue to have such right as a result
of a good faith, arms-length transaction with a Person that is not an Affiliate
of the Company.
The Holder, as the holder of this Note, shall be entitled to such dividends paid
and distributions, including any rights offering, made to the holders of Common
Stock to the same extent as if the Holder had converted this Note into Common
Stock (without regard to any limitations on conversion herein or elsewhere) and
had held such shares of Common Stock on the record date for such dividends and
distributions; provided, however, that in the event that an adjustment to the
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Conversion Price is made pursuant to Section 3(b) as a result of such dividend
or distribution, no payment shall be made to the Holder pursuant to this Section
5(c) as a result of such dividend or distribution. Payments under the preceding
sentence shall be made concurrently with the dividend or distribution to the
holders of Common Stock.
The Company covenants that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law that would prohibit or forgive the Company
from paying all or any portion of the principal of, premium (if any), interest
or other amounts due on this Security as contemplated herein, whenever enacted,
now or at any time hereinafter in force, or which may affect the covenants of
performance in this Security and the Company hereby expressly waives all benefit
or advantage of any such law, and covenants that it will not, by resort to any
such law, hinder, delay or impede the execution of any power granted herein to
the Holder of this Security, but will suffer and permit the execution of every
such power as though no such law had been enacted.
17
EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the following events
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
18
the Company defaults in the payment of the principal or premium, if any (a
"Defaulted Payment"), on any of the Securities when the same becomes due and
payable at the Final Maturity Date, upon repurchase or upon declaration, by the
Company or otherwise, whether or not such payment is prohibited by Section 8
hereof;
the Company defaults in the payment of an installment of interest or Liquidated
Damages, if any, on any of the Securities when the same becomes due and payable
and such default continues for a period of 30 days, whether or not such payment
is prohibited by Section 8;
the failure of the Shelf Registration Statement (as defined in the Registration
Rights Agreement) to be declared effective by the SEC on or prior to the date
that is 45 Business Days after the Effectiveness Target Date (as defined in the
Registration Rights Agreement), or, while the Shelf Registration Statement is
required to be maintained effective pursuant to the terms of the Registration
Rights Agreement, the effectiveness of the Shelf Registration Statement lapses
for any reason (including, without limitation, the issuance of a stop order) or
is unavailable to any holder of the Securities for sale of all of such holder's
Registrable Shares (as defined in the Registration Rights Agreement) except, in
either case, as permitted in accordance with the terms of the Registration
Rights Agreement, and such lapse or unavailability continues for a period of
five consecutive Business Days or for more than an aggregate of 45 Business Days
in any 365-day period;
the suspension from trading or failure of the Common Stock to be listed on the
Nasdaq Stock Market, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc. for more than an aggregate of 30 Business Days in any 365-day
period;
a final judgment or judgments for the payment of money aggregating in excess of
$5 million in any period of 12 consecutive months are entered against the
Company or any of its Subsidiaries and which judgments are not, within 60 days
after the entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay; provided, however,
that any judgement which is covered by insurance or an indemnity from a
creditworthy party shall not be included in calculating the $5 million amount
set forth above so long as the Company provides the Holder with 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 60 days of the entry of such judgment; the
Company fails to perform or observe any other term, covenant or agreement
contained in this Security or any material term, covenant, or agreement
contained in the Purchase Agreement or the Registration Rights Agreement and, in
any case, the default continues for a period of 60 days after written notice of
such failure, requiring the Company to remedy the same, shall have been given to
the Company by the holders of at least 25% in aggregate principal amount of the
outstanding Securities;
the Company, a Significant Subsidiary, or any group of two or more Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary (A) fails to
make any payment at maturity, including any grace period, in respect of any
obligation for borrowed money evidenced by an Instrument in an outstanding
principal amount in excess of $2 million and such failure continues without such
Indebtedness having been discharged within 30 days after written notice to the
Company by the holders of at least
19
25% in aggregate principal amount of the outstanding Securities or (B) defaults
with respect to any Instrument, which default results in the acceleration of
Indebtedness represented by such Instrument in an amount in excess of $2 million
without such acceleration having been cured, waived, rescinded or annulled
within 30 days after written notice to the Company by the holders of at least
25% in aggregate principal amount of the outstanding Securities;
the entry by a court having jurisdiction in the premises of (A) a decree or
order for relief in respect of the Company or any Significant Subsidiary in an
involuntary case or proceeding under any applicable U.S. federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a decree or
order adjudging the Company or any Significant Subsidiary bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Significant
Subsidiary, under any applicable U.S. federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company 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 or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
the commencement by the Company or any Significant Subsidiary, of a voluntary
case or proceeding under any applicable U.S. federal or state 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 the
Company or any Significant Subsidiary, to the entry of a decree or order for
relief in respect of the Company or any Significant Subsidiary in an involuntary
case or proceeding under any applicable U.S. federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against the Company or any
Significant Subsidiary, or the filing by the Company or any Significant
Subsidiary of a petition or answer or consent seeking reorganization or relief
under any applicable U.S. federal or state law, or the consent by the Company or
any Significant Subsidiary to the filing of such petition or to the appointment
of or the taking of possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any
Significant Subsidiary or of any substantial part of its property, or the making
by the Company or any Significant Subsidiary of an assignment for the benefit of
creditors, or the admission by the Company or any Significant Subsidiary in
writing of its inability to pay its debts generally as they become due, or the
taking of corporate action by the Company or any Significant Subsidiary
expressly in furtherance of any such action.
A default under clause (6) or (7) above is not an Event of Default until the
holders of at least 25% of the principal amount of the Securities at the time
outstanding notify the Company, of the default and the Company does not cure
such default (and such default is not waived) within the time specified in
clause (6) or (7) above after actual receipt of such notice. Any such notice
must specify the default, demand that it be remedied and state that such notice
is a "Notice of Default".
If an Event of Default (other than an Event of Default specified in Section
6(a)(8) or 6(a)(9) hereof with respect to the Company) occurs and is continuing,
the holders of at least 25% in principal amount of the outstanding Securities,
by written notice to the Company, may declare due and payable the principal and
premium, if any, of this
20
Security and all other outstanding Securities, plus any accrued and unpaid
interest and Liquidated Damages, if any, to the date of payment. Upon a
declaration of acceleration, such principal and premium, if any, and accrued and
unpaid interest and Liquidated Damages, if any, to the date of payment shall be
immediately due and payable.
If an Event of Default specified in Section 6(a)(8) and 6(a)(9) occurs with
respect to the Company, the principal and premium, if any, and accrued and
unpaid interest and Liquidated Damages, if any, on this Security shall become
and be immediately due and payable, without any declaration or other act on the
part of the Holder.
The holders of not less than 60% of the principal of the outstanding Securities
may, on behalf of the holders of all of the Securities, rescind and annul an
acceleration and its consequences (including waiver of any defaults) if:
all existing Events of Default, other than the nonpayment of a Defaulted Payment
on this Security and any of the other Securities that have become due solely
because of the acceleration, have been remedied, cured or waived, and
the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction; provided, however, that in the event such declaration of
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acceleration has been made based on the existence of an Event of Default under
Section 6(a)(7) and the default with respect to the Instrument for money
borrowed which gave rise to such Event of Default has ceased or been cured,
waived, rescinded or annulled, then such Event of Default shall be deemed to be
likewise cured and any acceleration with respect thereto rescinded. No such
rescission shall affect any subsequent default or impair any right consequent
thereon.
If an Event of Default with respect to this Security occurs and is continuing,
the Holder may pursue any available remedy by proceeding at law or in equity
(including a decree of specific performance and/or other injunctive relief) to
collect the Defaulted Payment or interest or any other amount due and payable on
this Security or to enforce the performance of any provision of this Security.
Notwithstanding any other provision in this Security, the Holder of this
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal, premium, if any, Change of Control Repurchase Price,
interest or Liquidated Damages, if any, in respect of the Securities held by the
Holder, on or after the respective due dates, to convert the Securities in
accordance with Section 3 or to bring suit for the enforcement of any such
payment on or after such respective dates or the right to convert, and such
rights shall not be impaired or affected adversely without the consent of the
Holder. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance thereof).
If the Holder of this Security has instituted any proceeding to enforce any
right or remedy under this Security and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Holder, then
and in every such case, subject to any determination in such proceeding, the
Company and the Holder shall be restored severally and respectively to their
former positions hereunder and thereafter all
21
rights and remedies of the Holder shall continue as though no such proceeding
had been instituted.
Except as otherwise provided herein, no right or remedy conferred in this
Security upon the Holder is intended to be exclusive of any other right or
remedy available to the Holder under this Security, the Warrants, the Purchase
Agreement and the Registration Rights Agreement, and every right and remedy
shall, to the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or hereafter existing at law or in equity
or otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy. The Company acknowledges that in the event that
the Company breaches its obligation to deliver shares of Common Stock upon the
conversion of this Security in accordance with Section 3 such breach will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate; therefore, the Company agrees that in the event of any such
breach or threatened breach, the Holder shall be entitled to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
No delay or omission of the Holder of this Security to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or any acquiescence therein.
Every right and remedy given by this Section 6 or by law or in equity to the
Holder may be exercised from time to time, and as often as may be deemed
expedient, by the Holder.
The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim to take
the benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or the
performance of this Security; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Holder hereof, but will suffer and permit the
execution of every such power as though no such law had been enacted.
CONSOLIDATION, MERGER, ETC.
The Company shall not consolidate with or merge into any other Person or,
directly or indirectly, convey, transfer, sell or lease its properties and
assets as, or substantially as, an entirety to any Person unless:
in the event that the Company shall consolidate with or merge into another
Person or convey, transfer, sell or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance, transfer or sale, or which leases, all or substantially all of
the properties and assets of the Company shall be a corporation, partnership,
limited liability company or other business entity organized and validly
existing under the laws of the United States of America, any State thereof or
the District of Columbia, which shall, prior to or upon the consummation of such
transaction,
22
expressly assume, if other than the Company, by an agreement supplemental
hereto, executed and delivered to the Holder of this Security in form
satisfactory to the Holder, the due and punctual payment of the principal of and
any interest on this Security and the performance or observance of every
covenant of this Security on the part of the Company to be performed or
observed, including without limitation the conversion, purchase, repurchase and
redemption rights provided herein; and
immediately after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing.
Upon any consolidation of the Company with, or merger of the Company into, any
other Person or any conveyance, transfer, sale or lease of all or substantially
all of the properties and assets of the Company in accordance with Section 7(a),
the successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer, sale or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Security with the same effect as if such successor Person
had been named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants
under this Security.
SUBORDINATION.
The Company covenants and agrees, and the Holder of this Security
by its acceptance hereof likewise covenants and agrees, that this Security is
subject to the provisions of the Subordination Agreement attached hereto as
Exhibit C (the "Subordination Agreement"), entered into between Silicon Valley
- ---------
Bank and the initial Holder of this Security, and each other Person holding this
Security, whether upon original issue or upon transfer, assignment or exchange
hereof, accepts and agrees to be bound by the provisions of the Subordination
Agreement and, to the extent required by such Subordination Agreement, agrees to
execute a copy of Subordination Agreement in favor of Silicon Valley Bank or its
successors and assigns.
DEFINITIONS. Unless otherwise defined in this Security, the following
capitalized terms shall have the following respective meanings when used herein:
"Additional Shares" means shares of Common Stock other than shares of Common
Stock: (i) issued or deemed to have been issued by the Company to officers,
directors, or employees of, or consultants to, the Company pursuant to a stock
grant, stock option or purchase plan or other employee stock incentive or
similar agreement approved by the Board of Directors (each, an "Approved Stock
Plan"); (ii) issued or deemed to have been issued to vendors, customers,
lenders, suppliers, or equipment lessors upon terms approved by the Board of
Directors (or, if any such entity is an Affiliate of the Company, upon terms
approved by a majority of the disinterested members of the Board of Directors)
the principal purpose of which is other than to raise capital; (iii) issued or
deemed to have been issued upon issuance of the Securities or the Warrants, or
issued upon conversion of the Securities or exercise of the Warrants or for the
payment of interest on the Securities in accordance with Section 2 hereof; (iv)
issued upon exercise of Options or Convertible Securities that are outstanding
on the date immediately preceding the Closing Date, provided that such issuance
--------
of shares of Common Stock
23
upon exercise of such Options or Convertible Securities is made pursuant to the
terms of such Options or Convertible Securities in effect on the date
immediately preceding the Closing Date and such Options or Convertible
Securities are not amended after the date immediately preceding the Closing Date
other than with respect to Options originally issued pursuant to an Approved
Stock Plan; (v) issued or deemed to have been issued to the public pursuant to
an underwritten offering registered pursuant to the Securities Act (but in all
events excluding offerings pursuant to "equity lines" or similar products); (vi)
for which adjustment of the Conversion Price is made pursuant to Section 3(b)(1)
or 3(b)(2) or which are issued to holders of the Securities as a result of an
adjustment to the Conversion Price pursuant to Section 3(b)(3); (vii) in
connection with a joint venture agreement (including the grant or exercise of
any call right or put right with respect to such joint venture) or strategic
partnership or acquisition agreement upon the terms approved by the Board of
Directors (viii) issued or deemed to have been issued in connection with a
transaction covered by Rule 145 under the 1933 Act or any other merger,
acquisition or asset purchase, or the resale of securities issued in any such
transaction, or (ix) issued or deemed to have been issued in connection with the
rights issued under the Company's Rights Plan. "Affiliate" of any specified
Person means any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified Person. For
the purposes of this definition, "control", when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Board of Directors" means the board of directors of the Company or any
authorized committee of the board of directors.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which the banking institutions in the State of New York are
authorized or obligated by law or executive order to close or be closed.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interest
in (however designated) equity of such Person, but excluding any debt securities
convertible into such equity.
A "Change in Control" shall be deemed to have occurred if any of the following
occurs after the date hereof:
(1) the consolidation, merger or other business combination
(including, without limitation, a reorganization or recapitalization) of the
Company with or into another Person (other than (A) a consolidation, merger or
other business combination (including, without limitation, reorganization or
recapitalization) in which holders of the Company's voting power immediately
prior to the transaction continue after the transaction to hold, directly or
indirectly, the voting power of the surviving entity or entities necessary to
elect a majority of the members of the board of directors (or their equivalent
if other than a corporation) of such entity or entities, or (B) pursuant to a
migratory merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company);
(2) the sale or transfer of all or substantially all of the
Company's assets; or
(3) the consummation of a purchase, tender or exchange offer made
to and accepted by the holders of more than the 50% of the outstanding shares of
Common Stock (other than a purchase or tender or exchange offer made by the
Company or any of its subsidiaries that does not result in the transaction
constituting a "Rule 13e-3 transaction" for purposes of Rule 13e-3 under the
Exchange Act). "Closing Bid Price" means, as of any date, the last reported bid
price per share of the Common Stock for such date on the Nasdaq National Market
(the "NNM") or, if the Common Stock is not listed or admitted to trading on the
NNM, on the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if the Common Stock is not listed or admitted
to trading on the NNM or any national securities exchange, the last reported bid
price per share of the Common Stock as quoted on NASDAQ or any comparable system
or, if the Common Stock is not quoted on NASDAQ or any comparable system, the
average of the closing bid prices, as furnished by any two members of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If the Closing Bid Price cannot be calculated for
a security on a particular date on any of the foregoing bases, the Closing Bid
Price of such security on such date shall be the fair market value as mutually
determined by the Company and the holders of Securities representing a majority
of the aggregate principal amount of the Securities then outstanding, provided
--------
that any dispute as to such Closing Bid Price shall be determined by
the Company and the holders in accordance with Section 10(d).
"Closing Date" means the date of the closing of the purchase and sale of the
Securities and Warrants pursuant to the Purchase Agreement.
"Closing Price" means, as of any date, the last reported sales price per share
of Common Stock on such date or, in case no such reported sale takes place on
such date, the average of the reported closing bid and asked prices in either
case on the Nasdaq National Market (the "NNM") or, if the Common Stock is not
listed or admitted to trading on the NNM, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed or admitted to trading on the NNM or any national
securities exchange, the last reported sales price of the Common Stock as quoted
on NASDAQ or, in case no reported sales take place, the average of the closing
bid and asked prices as quoted on NASDAQ or any comparable system or, if the
Common Stock is not quoted on NASDAQ or any comparable system, the closing sales
price or, in case no reported sale takes place, the average of the closing bid
and asked prices, as furnished by any two members of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose. If the Closing Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Price of such
security on such date shall be the fair market value as mutually determined by
the Company and the holders of Securities representing a majority of the
aggregate principal amount of the Securities then outstanding, provided that any
--------
dispute as to such Closing Price shall be determined by the Company and the
holders in accordance with Section 10(d).
"Commission" means the United States Securities and Exchange Commission, or any
other federal agency at the time administering the Securities and Exchange Act
of 1934,
24
as amended, or the Securities Act, whichever is the relevant statute for the
particular purpose.
"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Section 3(f) hereof, shares assumable on conversion of the
Securities shall include only shares of the class designated as Common Stock, no
par value per share, of the Company at the date of execution of this Security or
shares of any class or classes resulting from any reclassification or
reclassifications thereof and which have no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to redemption
by the Company, provided that if at any time there shall be more than one such
--------
resulting class, the shares of each such class then so assumable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
"Convertible Securities" shall mean any evidences of indebtedness, shares (other
than Common Stock) or other securities convertible into or exchangeable for
Common Stock.
"Current Market Price" means the lesser of (a) the average of the Volume
Weighted Average Prices of the Common Stock for the 10 consecutive Trading Days
ending on the fifth Trading Day immediately preceding the Interest Payment Date
and (b) the Closing Bid Price of the Common Stock on the Trading Day prior to
the Interest Payment Date. For purposes of determining the Current Market
Price, such determination shall be appropriately adjusted by the Board of
Directors in good faith for any stock dividend, stock split or other similar
transaction during such period.
"Defaulted Payment" has the meaning set forth in Section 6(a)(1) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended and the
rules and regulations promulgated thereunder.
"fair market value" shall, except as otherwise specifically defined elsewhere,
mean, if there is a current market for the asset, debt or transaction in
question, the amount that a willing buyer would pay a willing seller in an arm's
length transaction or, in the absence of a current market for such asset, debt
or transaction, the amount determined in good faith by the Board of Directors
that represents its determination of the fair market value of the asset.
"Final Maturity Date" has the meaning set forth in Section 2(a) hereof.
"Fully Diluted Common Stock" for purposes of Section 3(b) hereof shall mean the
number of shares of Common Stock outstanding immediately prior to such issue
calculated on a fully diluted basis, as if all the Securities and all
Convertible Securities had been fully converted into, or exchanged for, shares
of Common Stock immediately prior to such issuance and any outstanding warrants
(including the Warrants), options or other rights for the purchase of either
shares of Common Stock or Convertible Securities had been fully exercised
immediately prior to such issuance (and the resulting securities fully converted
into, or exchanged for, shares of Common Stock, if so convertible or
exchangeable) as of such date, but not including in such calculation any
additional shares of Common Stock issuable with respect to the Securities,
Convertible Securities, or
25
outstanding options, warrants (including the Warrants), or other rights for the
purchase of shares of Common Stock or Convertible Securities, solely as a result
of the adjustment of the Conversion Price (or other conversion ratios) pursuant
to Section 3 hereof resulting from the issuance of the Additional Shares causing
the adjustment in question.
"Holder" means the person in whose name this Security is registered on the Note
Register.
"Indebtedness" means, with respect to any Person, at any date of determination
(without duplication):
all obligations and other liabilities (contingent or otherwise) of such Person
for borrowed money (including obligations of the Company in respect of
overdrafts, foreign exchange contracts, currency exchange agreements, interest
rate protection agreements, and any loans or advances from banks, whether or not
evidenced by notes or similar instruments) or evidenced by bonds, debentures,
notes or similar instruments (whether or not the recourse of the lender is to
the whole of the assets of such Person or to only a portion thereof),
all reimbursement obligations and other liabilities (contingent or otherwise) of
such Person with respect to letters of credit, bank guarantees or bankers'
acceptances,
all obligations and liabilities (contingent or otherwise) in respect of leases
of such Person required, in conformity with generally accepted accounting
principles, to be accounted for as capitalized lease obligations on the balance
sheet of such Person,
all obligations of such Person (contingent or otherwise) with respect to an
interest rate swap, cap or collar agreement or other similar instrument or
agreement,
all direct or indirect guaranties or similar agreements by such Person in
respect of, and obligations or liabilities (contingent or otherwise) of such
Person to purchase or otherwise acquire or otherwise assure a creditor against
loss in respect of, indebtedness, obligations or liabilities of another Person
of the kind described in clauses (a) through (d),
any indebtedness or other obligations described in clauses (a) through (e)
secured by any mortgage, pledge, lien or other encumbrance existing on property
which is owned or held by such Person, regardless of whether the indebtedness or
other obligation secured thereby shall have been assumed by such Person and
any and all deferrals, renewals, extensions and refunding of, or amendments,
modifications or supplements to, any indebtedness, obligation or liability of
the kind described in clauses (a) through (f).
"Instrument" means any bond, debenture, note or similar instrument.
"Interest Conversion Price" means, as of any Interest Payment Date, an amount
equal to 90% of the Current Market Price on such date.
"Liquidated Damages" means all amounts, if any, payable pursuant to Section 3 of
the Registration Rights Agreement.
26
"Note Register" means the register or other ledger maintained by the Company
that records the record owners of the Securities.
"Options" shall mean rights, options, or warrants to subscribe for, purchase or
otherwise acquire Common Stock or Convertible Securities.
"Person" or "person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
"Purchase Agreement" means the Securities Purchase Agreement entered into
between the Company and the initial holder of this Security relating to the sale
and purchase of this Security and Warrants.
"Registration Rights Agreement" means the Resale Registration Rights Agreement,
dated as of August 14, 2002, between the Company and the initial holders of the
Securities.
"Rights Plan" means the Preferred Stock Rights Agreement, dated as of September
26, 2000, between the Company and ChaseMellon Shareholder Services, L.L.C., as
rights agent.
"Securities" means the 7% Convertible Subordinated Notes of the Company due
August 15, 2005 or any of them (each, a "Security"), as amended or supplemented
from time to time, initially issued on August 14, 2002.
"Securities Act" means the Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder.
"Share Delivery Date" has the meaning set forth in Section 3(a)(1) hereof.
"Significant Subsidiary" has the meaning assigned to it under Rule 1-02(w) of
Regulation S-X promulgated by the Commission.
"Subordination Agreement" has the meaning set forth in Section 8 hereof.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers, general partners or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such
Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii)
one or more Subsidiaries of such Person.
"Trading Day" means, with respect to any security, a day during which trading in
the security generally occurs on the Nasdaq National Market or, if the security
is not quoted on the Nasdaq National Market, on the principal other national or
regional securities exchange on which the security then is listed or, if the
security is not listed on a national or regional securities exchange, on the
National Association of Securities Dealers Automated Quotation System, or on the
principal other market on which the security is then traded; provided, however,
that "Trading Day shall not include any day during which trading in the security
is suspended for more than three hours between 9:30 a.m. (New York time) and
4:00 p.m. (New York time).
"Warrants" mean the warrants to purchase Common Stock or any of them (each a
"Warrant") issued to the initial holders of the Securities upon the closing of
the sale of the Securities.
"Volume Weighted Average Price" shall mean, for any security as of any date, the
dollar volume-weighted average price for such security on the Nasdaq Stock
Market during the period beginning at 9:30 a.m., New York City Time, on such
date and ending at 4:00
27
p.m., New York City Time, on such date as reported by Bloomberg through its
"Volume at Price" function or, if the foregoing does not apply, the dollar
volume-weighted average price of such security on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
during the period beginning at 9:30 a.m., New York City Time, on such date and
ending at 4:00 p.m., New York City Time, on such date as reported by Bloomberg
through its "Volume at Price" function or, if neither of the foregoing applies,
the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30 a.m., New York City Time, on such date and
ending at 4:00 p.m., New York City Time, on such date as reported by Bloomberg,
or, if no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau, Inc., for such
date. If the Volume Weighted Average Price cannot be calculated for such
security on such date on any of the foregoing bases, the Volume Weighted Average
Price of such security on such date shall be the fair value of such Security as
mutually determined by the Company and the holders of Securities representing a
majority of the aggregate principal amount of the Securities then outstanding,
provided that any dispute as to such Volume Weighted Average Price shall be
- --------
determined by the Company and the holders in accordance with Section 10(d).
"Voting Stock" of a Person means all classes of Capital Stock or other interests
(including partnership interests) of such Person then outstanding and normally
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof.
MISCELLANEOUS.
The Company will give prompt written notice to the Holder of this Security of
any change in the location of the Designated Office. Any notices, consents,
waivers or other communications required or permitted to be given under the
terms of this Security must be in writing and will be deemed to have been
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile, provided that such notice is also delivered by regular mail;
(iii) 1 Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Genus, Inc.
1139 Karlstad Drive
Sunnyvale, CA 94089
Telephone: (408) 747-7140
Facsimile: (408) 747-7199
Attention: Shum Mukherjee, CFO
28
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
Attention: Mark Reinstra, Esq.
If to the Holder:
To its address and facsimile number set forth on the signature
page to the Purchase Agreement executed by it, with copies to the
Holder's representatives as set forth thereon,
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party 5 days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission, or (C) provided by a
courier or overnight courier service shall be rebuttal evidence of personal
service, receipt by facsimile, or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
(3) The transfer of this Security is registrable on the Note Register upon
surrender of this Security for registration of transfer at the Designated
Office, duly endorsed by, or accompanied by a written instrument of transfer in
form reasonably satisfactory to the Company duly executed by, the Holder hereof
or such Holder's attorney duly authorized in writing, and thereupon one or more
new Securities, of authorized denominations and for the same aggregate principal
amount, will be issued to the designated transferee or transferees. Such
Securities are issuable only in registered form without coupons in denominations
of $1,000 and any integral multiple thereof. No service charge shall be made for
any such registration of transfer, but the Company may require payment of a sum
sufficient to recover any tax or other governmental charge payable in connection
therewith in the event that the Holder requests that this Security or the Common
Stock issuable hereunder be issued in the name of someone other than the Holder.
Prior to due presentation of this Security for registration of transfer, the
Company and any agent of the Company may treat the Person in whose name this
Security is registered as the owner thereof for all purposes, whether or not
this Security be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary. This Security and the Common Stock issuable
upon conversion of this Security have not been registered under the Securities
Act, or the securities laws of any state or other jurisdiction. Neither this
Security nor the Common Stock issuable upon conversion of this Security nor any
interest or participation herein may be reoffered, sold, assigned, transferred,
pledged, encumbered or otherwise disposed of (a "Transfer") in the absence of
such registration or unless such transaction is exempt from, or not subject to,
registration. The Holder by its acceptance of this Security or the Common Stock
issuable
29
upon conversion of this Security agrees that it shall not offer, sell, assign,
transfer, pledge, encumber or otherwise dispose of this Security, other than for
conversions pursuant to the terms hereof, or any portion thereof or interest
therein other than in a minimum denomination of $_______ principal amount (or
any integral multiple of $100,000 in excess thereof) and then (other than with
respect to a Transfer pursuant to a registration statement that is effective at
the time of such Transfer) only (a) to the Company, (b) to an Affiliate of the
Holder, (c) to a person it reasonably believes to be an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act, or (d) pursuant to a
transaction in compliance with Rule 144 under the Securities Act, and in the
case of (b) and (c) above in which the transferor furnishes the Company with
such certifications, legal opinions or other information as the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
Upon presentation of this Security for registration of transfer at the
Designated Office accompanied by (i) certification by the transferor that such
transfer is in compliance with the terms hereof and (ii) by a written instrument
of transfer in a form approved by the Company executed by the Holder, in person
or by the Holder's attorney thereunto duly authorized in writing, and including
the name, address and telephone and fax numbers of the transferee and name of
the contact person of the transferee, such Security shall be transferred on the
Note Register, and a new Security of like tenor and bearing the same legends
shall be issued in the name of the transferee and sent to the transferee at the
address and c/o the contact person so indicated. Transfers and exchanges of
Securities shall be subject to such additional restrictions as are set forth in
the legends on the Securities and to such additional reasonable regulations as
may be prescribed by the Company as specified in Section 10(b)(2) hereof.
Successive registrations of transfers as aforesaid may be made from time to time
as desired, and each such registration shall be noted on the Note register.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Security, and in the case of
loss, theft or destruction, receipt of indemnity reasonably satisfactory to the
Company and upon surrender and cancellation of this Security, if mutilated, the
Company will deliver a new Security of like tenor and dated as of such
cancellation, in lieu of such Security.
The Holder represents that it is an "accredited investor" within the meaning of
Rule 501(a) of the Securities Act. The Holder has been advised that this
Security has not been registered under the Securities Act, or any state
securities laws and, therefore, cannot be resold unless it is registered under
the Securities Act and applicable state securities laws or unless an exemption
from such registration requirements is available. The Holder is aware that the
Company is under no obligation to effect any such registration or to file for or
comply with any exemption from registration. The Holder has not been formed
solely for the purpose of making this investment and is acquiring the Security
for its own account for investment, and not with a view to, or for resale in
connection with, the distribution thereof.
Such Purchaser understands that:
until the end of the holding period under Rule 144(k) of the Securities Act (or
any successor provision), this Security (and all securities issued in exchange
therefor or in substitution thereof, other than the Interest Shares or the
shares of Common Stock
30
issuable upon conversion of this Security, which shall
bear the legend set forth in Section 10(b)(6)(B) of this Security, if
applicable) shall bear a legend in substantially the
following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT 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, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company shall issue a new
Security of like tenor and aggregate principal amount, and which shall not bear
the restrictive legend required by this Section 10(b)(6)(A), (i) if, in
connection with a sale transaction, the Holder provides the Company with an
opinion of counsel reasonably acceptable to the Company to the effect that a
public sale, assignment, pledge or transfer of this Security may be made without
registration under the Securities Act, or (ii) upon expiration of the applicable
two-year holding period under Rule 144(k) of the Securities Act (or any
successor rule). The Company shall not require such opinion of counsel for the
sale of Securities in accordance with Rule 144 of the Securities Act in the
event that the Seller provides such representations that the Company shall
reasonably request confirming compliance with the requirements of Rule 144;
until the end of the holding period under Rule 144(k) of the Securities Act (or
any successor provision), any stock certificate representing such shares of
Common Stock shall bear a legend in substantially the following form unless, in
the case of shares of Common Stock issued upon conversion of this Security, the
Security submitted for conversion is not required to bear the legend specified
in Section 10(b)(6)(A):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT 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, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company shall issue a stock
certificate evidencing such shares of Common Stock, as the case may be, without
such legend to the holder of the stock certificate evidencing such shares of
Common Stock and upon which such legend is stamped, (i) if such shares of Common
Stock have been resold or transferred pursuant to the shelf registration
statement contemplated by the Registration Rights Agreement and the shelf
registration statement was effective at the time of such transfer, (ii) if, in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel reasonably acceptable to the Company to the effect that a
public sale, assignment, pledge or transfer of the shares of Common Stock may be
made without registration under the Securities Act, or (iii) upon expiration of
the
31
applicable two-year holding period under Rule 144(k) of the Securities Act (or
any successor rule). The Company shall not require such opinion of counsel for
the sale of such shares of Common Stock in accordance with Rule 144 of the
Securities Act, provided that the Seller provides such representations that the
Company shall reasonably request confirming compliance with the requirements of
Rule 144; and
in the event Rule 144(k) as promulgated under the Securities Act (or any
successor rule) is amended to change the two-year holding period under Rule
144(k) (or the corresponding holding period under any successor rule), (i) each
reference in Sections 2(g)(1) and 2(g)(2) of this Agreement to "two (2) years"
or the "two-year holding period" shall be deemed for all purposes of this
Agreement to be references to such changed period, and (ii) all corresponding
references in the Securities shall be deemed for all purposes to be references
to the changed period, provided that such changes shall not become effective if
they are otherwise prohibited by, or would otherwise cause a violation of, the
then-applicable federal securities laws.
Neither this Security nor any term hereof may be amended or waived orally or in
writing, except that any term of this Security and the other Securities may be
amended and the observance of any term of this Security and the other Securities
may be waived (either generally or in a particular instance and either
retroactively or prospectively), and such amendment or waiver shall be
applicable to all of the Securities, upon the approval of the Company and the
holders of 60% or more of the outstanding principal amount of all then
outstanding Securities; provided, however, that any amendment that would (i)
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change the maturity of the principal of or any installment of interest on any of
the Securities, including any payment of Liquidated Damages with respect to
Common Stock issuable upon conversion of the Securities, (ii) reduce the
principal amount of, or any premium or interest on, including any payment of
Liquidated Damages with respect to Common Stock issuable upon conversion of, any
Security, (iii) change the currency of payment of such note or interest thereon,
(iv) impair the right to institute suit for the enforcement of any payment on or
with respect to any Security, (v) adversely affect the conversion rights of
holders of the Securities other than as provided in Section 3 hereof, (vi)
reduce the percentage in aggregate principal amount of Securities outstanding
necessary to modify or amend the Securities or to waive any past default; (vii)
modify the provisions of the Securities with respect to subordination or
seniority of the Securities in a manner adverse to the holders of the Securities
in any material respect, (viii) modify the percentage of principal amount of
Securities required for the holders of Securities to make a declaration of
acceleration pursuant to Section 6(b) or (ix) modify this Section 10(b)(6)
shall, in each case, require the approval of the holder of each Security to
which such amendment shall apply; provided further that the Company may, without
-------- -------
the consent of any holder of the Securities, amend the Securities for the
purpose (i) of adding to the Company's covenants in the Securities for the
benefit of the holders of the Securities, (ii) surrendering any right or power
conferred upon the Company, (iii) providing for conversion rights of holders of
the Securities if any reclassification or change of the Common Stock or any
consolidation, merger or sale of all or substantially all of the Company's
assets occurs, (iv) providing for the assumption of the Company's obligations to
the holders of the Securities in the case of a merger, consolidation,
conveyance, transfer or lease, (v) reducing the Conversion Price, provided that
the reduction will not adversely affect the interests of the holders of the
Securities, (vi) curing any ambiguity or correcting or
32
supplementing any defective provision contained in the Securities; provided that
such modification or amendment does not, in the good faith opinion of the Board
of Directors, adversely affect the interests of the holders of the Securities in
any material respect, or (vii) adding or modifying any other provisions with
respect to matters or questions arising under the Securities which the Company
may deem necessary or desirable and which will not adversely affect the
interests of the holders of the Securities. The Company will not amend any
provision of any other Security in a manner favorable to any holder thereof
unless a similar amendment is made or offered with respect to all of the
Securities. Each Holder of this Security by its acceptance hereof acknowledges
and agrees that the provisions of the Subordination Agreement are for the
benefit of the holders of the Senior Indebtedness (as defined in such
Subordination Agreement) and that, accordingly, no provision of Section 8 hereof
may be amended or otherwise modified without the prior written consent of each
holder of such Senior Indebtedness at such time outstanding.
In any case in which the date of maturity of, the date of payment of any
interest or premium on, or the date fixed for repurchase of this Security will
not be a Business Day, then payment of such interest or premium on or principal
of this Security need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on such date
of maturity, date of payment or date fixed for repurchase, as the case may be,
and no interest shall accrue for the period from and after such date.
In the case of a dispute as to the determination of the Closing Bid Price, the
Closing Price, the Volume Weighted Average Price, the Conversion Price, the fair
market value of assets (other than cash or securities), or the arithmetic
calculation of the Change of Control Repurchase Price or the number of Interest
Shares or other shares of Common Stock to be issued hereunder, the Company shall
submit the disputed determinations or arithmetic calculations via facsimile
within one Business Day from the manifestation of such dispute to the holders of
the Securities. If the Company and the holders of a majority of the aggregate
principal amount of Securities then outstanding are unable to agree upon such
determination or calculation of the Closing Bid Price, the Closing Price, the
Volume Weighted Average Price, the Conversion Price or the fair market value of
assets (other than cash or securities), or the arithmetic calculation of the
Change of Control Repurchase Price or the number of Interest Shares or other
shares of Common Stock to be issued hereunder, as the case may be, within one
Business Day of such disputed determination or arithmetic calculation being
submitted to the holders, then the Company shall, within 10 Business Days,
submit via facsimile (a) the disputed determination of the Closing Bid Price,
the Closing Price, the Volume Weighted Average Price, the Conversion Price or
the fair market value of assets (other than cash or securities) to an
independent, reputable investment bank selected by the Company and approved by
the Holders of a majority of the aggregate principal amount of Securities then
outstanding or (b) the disputed arithmetic calculation of the Change of Control
Repurchase Price or the number of Interest Shares or other shares of Common
Stock to be issued hereunder to the Company's independent, outside accountant.
The Company shall make reasonable efforts to cause the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the
33
Holder of the results no later than 15 Business Days from the date it receives
the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error. The fees and expenses of the
accountant or investment bank, as the case may be, shall be paid by the party
whose calculation or determination is, on a percentage basis, the least closest
to that determined by the accountant or investment bank; provided, however, that
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if each of the amounts originally determined or calculated by the Company and
the Holder are at least equal to 80% of the amount calculated or determined by
the accountant or investment bank but not more than 120% of the amount
calculated or determined by the accountant or investment bank, then the Company
and the Holder will each pay one half of the fees and expenses of such
accountant of investment bank.
If (a) this Security is placed in the hands of an attorney for collection or
enforcement or is collected or enforced through any legal proceeding or the
Holder otherwise takes action to collect amounts due under this Security or to
enforce the provisions of this Security or (b) there occurs any bankruptcy,
reorganization, receivership of the Company or other proceedings affecting
Company creditors' rights and involving a claim under this Security, then the
Company shall pay the reasonable costs incurred by the Holder for such
collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including but not limited to
reasonable attorneys fees and disbursements.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
[Remainder of page intentionally left blank.]
34
IN WITNESS WHEREOF, the Company has caused this Security to be duly executed.
Dated: August 14, 2002
GENUS, INC.
By:
---------------------------------
Name: Shum Mukherjee
Title:Chief Financial Officer
Attest:
----------------------------------
Name: Mario M. Rosati
Title: Secretary
EXHIBIT A
CONVERSION NOTICE
The undersigned holder of this Security hereby irrevocably exercises the option
to convert this Security, or any portion of the principal amount hereof (which
is an integral multiple of $1,000) below designated, into Common Stock in
accordance with the terms of this Security, and directs that such shares,
together with a check in payment for any fractional share and any Security
representing any unconverted principal amount hereof, be delivered to and be
registered in the name of the undersigned unless a different name has been
indicated below. If shares of Common Stock are to be registered in the name of
a Person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Dated:
-----------------------------
By:
--------------------------------
Name:
Title:
If shares are to be registered in the name of a Person other than the holder,
please print such Person's name and address:
- ---------------------------------
Name
- ---------------------------------
Address
- ---------------------------------
Social Security or other Taxpayer Identification Number, if any
If only a portion of the Securities is to be converted, please indicate:
1. Principal amount to be converted: $
----------------
2. Principal amount and denomination of Security representing unconverted
principal amount to be issued:
Amount: $
--------
Denominations: $ (any integral multiple of $1,000)
--------
EXHIBIT B
ELECTION OF HOLDER TO REQUIRE REPURCHASE
UPON CHANGE OF CONTROL
1. Pursuant to Section 4(a) of this Security, the undersigned hereby
elects to have all or a portion of this Security repurchased by the
Company.
2. The undersigned hereby directs the Company to pay [choose one] (a) it
or (b) Name: ; address:
--------------------
; Social Security or Other
------------------------------------
Taxpayer Identification Number, if any: , an amount in
------------
cash equal to the Change of Control Repurchase Price, as provided
herein.
Dated:
-------------------------
Holder:
------------------------
By:
----------------------------
Name:
Title:
Principal amount to be repurchased
(an integral multiple of $1,000):
-----------------------------
Remaining principal amount following
such repurchase (not less than $1,000):
-----------------------
NOTICE: The signature to the foregoing Election must correspond to the name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
EXHIBIT C
SUBORDINATION AGREEMENT