Attached files
Exhibit 4.1
EXECUTION VERSION
SENIOR CONVERTIBLE NOTE
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 0 AND 0 HEREOF. THE
PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE
FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
TUNGSTEN CORP.
SENIOR CONVERTIBLE NOTE
Issuance Date: January 2, 2014 Original Principal Amount: U.S. $127,500
FOR VALUE RECEIVED, TUNGSTEN CORP., a Nevada corporation (the
"COMPANY"), hereby promises to pay to the order of HANOVER HOLDINGS I, LLC or
its registered assigns ("HOLDER") the amount set out above as the Original
Principal Amount (as reduced pursuant to the terms hereof pursuant to
redemption, conversion or otherwise, the "PRINCIPAL") when due, whether upon the
Maturity Date (as defined below), acceleration, redemption or otherwise (in each
case in accordance with the terms hereof) and to pay interest ("INTEREST") on
any outstanding Principal (as defined below) at the applicable Interest Rate (as
defined below) from the date set out above as the Issuance Date (the "ISSUANCE
DATE") until the same becomes due and payable, whether upon the Maturity Date or
acceleration, conversion, redemption or otherwise (in each case in accordance
with the terms hereof). This Senior Convertible Note (this "NOTE", including all
Senior Convertible Notes issued in exchange, transfer or replacement hereof,
collectively, the "NOTES") was initially issued pursuant to the Note Purchase
Agreement (as defined below) on the Closing Date (as defined below). Certain
capitalized terms used herein are defined in Section 28.
1. PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay to
the Holder an amount in cash representing all outstanding Principal, accrued and
unpaid Interest and accrued and unpaid Late Charges (as defined in Section
23(c)) on such Principal and Interest (as adjusted with respect to any Note
Reduction (as defined in Section 12)). Other than as specifically permitted by
this Note, the Company may not prepay any portion of the outstanding Principal,
accrued and unpaid Interest or accrued and unpaid Late Charges on Principal and
Interest, if any.
2. INTEREST; INTEREST RATE.
(a) Interest on this Note shall commence accruing on the Issuance Date and
shall be computed on the basis of a 360-day year and twelve 30-day months and
shall be payable in cash on the Maturity Date or any applicable Redemption Date,
subject to adjustment with respect to any Note Reduction.
(b) Prior to the payment of Interest on the Maturity Date or any applicable
Redemption Date, Interest on this Note shall accrue at the Interest Rate and be
payable by way of inclusion of the Interest in the Conversion Amount on each
Conversion Date in accordance with Section 3(b)(i). From and after the
occurrence and during the continuance of any Event of Default, the Interest Rate
shall automatically be increased to eighteen percent (18.0%) per annum. In the
event that such Event of Default is subsequently cured, the adjustment referred
to in the preceding sentence shall cease to be effective as of the calendar day
immediately following the date of such cure; provided that the Interest as
calculated and unpaid at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
such cure of such Event of Default.
3. CONVERSION OF NOTES. This Note shall be convertible into validly issued,
fully paid and non-assessable shares of Common Stock (as defined below), on the
terms and conditions set forth in this Section 3.
(a) Conversion Right. Subject to the provisions of Section 3(d), at any
time or times on or after the Issuance Date, the Holder shall be entitled to
convert any portion of the outstanding and unpaid Conversion Amount (as defined
below) into validly issued, fully paid and non-assessable shares of Common Stock
in accordance with Section 3(c), at the Conversion Rate (as defined below). The
Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
transfer, stamp, issuance and similar taxes that may be payable with respect to
the issuance and delivery of Common Stock upon conversion of any Conversion
Amount.
(b) Conversion Rate. The number of shares of Common Stock issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price (the
"CONVERSION RATE").
(i) "CONVERSION AMOUNT" means the portion of the Principal to be
converted, redeemed or otherwise with respect to which this determination
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is being made, plus all accrued and unpaid Interest with respect to such
portion of the Principal amount and accrued and unpaid Late Charges with
respect to such portion of such Principal and such Interest.
(ii) "CONVERSION PRICE" means, as of any Conversion Date or other date
of determination, $0.0325, subject to adjustment as provided herein.
(c) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into shares
of Common Stock on any date (a "CONVERSION DATE"), the Holder shall deliver
(whether via facsimile or otherwise), for receipt on or prior to 11:59
p.m., New York time, on such date, a copy of an executed notice of
conversion in the form attached hereto as Exhibit I (the "CONVERSION
NOTICE") to the Company. If required by Section 3(c)(iii), the Holder shall
surrender this Note to a nationally recognized overnight delivery service
for delivery to the Company (or an indemnification undertaking with respect
to this Note in the case of its loss, theft or destruction as contemplated
by Section 17(b)). On or before the first (1st) Trading Day following the
date of receipt of a Conversion Notice, the Company shall transmit by
facsimile an acknowledgment of confirmation, in the form attached hereto as
Exhibit II, of receipt of such Conversion Notice to the Holder and the
Company's transfer agent (the "TRANSFER AGENT") . On or before the second
(2nd) Trading Day following the date of receipt of a Conversion Notice, the
Company shall (1) provided that the Transfer Agent is participating in The
Depository Trust Company's ("DTC") Fast Automated Securities Transfer
Program, credit such aggregate number of shares of Common Stock to which
the Holder shall be entitled to the Holder's or its designee's balance
account with DTC through its Deposit/Withdrawal at Custodian system or (2)
if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver (via reputable overnight
courier) to the address as specified in the Conversion Notice, a
certificate, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder shall be entitled. If
this Note is physically surrendered for conversion as required by Section
3(c)(iii) and the outstanding Principal of this Note is greater than the
Principal portion of the Conversion Amount being converted, then the
Company shall as soon as practicable and in no event later than three (3)
Trading Days after receipt of this Note and at its own expense, issue and
deliver to the Holder (or its designee) a new Note (in accordance with
Section 17(d)) representing the outstanding Principal not converted. The
Person or Persons entitled to receive the shares of Common Stock issuable
upon a conversion of this Note shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Conversion
Date.
(ii) Company's Failure to Timely Convert. If the Company shall fail,
for any reason or for no reason, to issue to the Holder within five (5)
Trading Days after the Company's receipt of a Conversion Notice (whether
via facsimile or otherwise) (the "SHARE DELIVERY DEADLINE"), a certificate
for the number of shares of Common Stock to which the Holder is entitled
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and register such shares of Common Stock on the Company's share register or
to credit the Holder's or its designee's balance account with DTC for such
number of shares of Common Stock to which the Holder is entitled upon the
Holder's conversion of any Conversion Amount (as the case may be) (a
"CONVERSION FAILURE") then, in addition to all other remedies available to
the Holder, (1) the Company shall pay in cash to the Holder on each day
after such Share Delivery Deadline that the issuance of such shares of
Common Stock is not timely effected an amount equal to 2% of the product of
(A) the sum of the number of shares of Common Stock not issued to the
Holder on a timely basis and to which the Holder is entitled multiplied by
(B) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the last possible date which the Company could have
issued such shares of Common Stock to the Holder without violating Section
3(c)(i) and (2) the Holder, upon written notice to the Company, may void
its Conversion Notice with respect to, and retain or have returned (as the
case may be) any portion of this Note that has not been converted pursuant
to such Conversion Notice, provided that the voiding of a Conversion Notice
shall not affect the Company's obligations to make any payments which have
accrued prior to the date of such notice pursuant to this Section 3(c)(ii)
or otherwise. In addition to the foregoing, if on or prior to the Share
Delivery Deadline, the Company shall fail to issue and deliver a
certificate to the Holder and register such shares of Common Stock on the
Company's share register or credit the Holder's or its designee's balance
account with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder's conversion hereunder (as the case may
be), and if on or after such Share Delivery Deadline the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of all or any portion of
the number of shares of Common Stock, or a sale of a number of shares of
Common Stock equal to all or any portion of the number of shares of Common
Stock, issuable upon such conversion that the Holder so anticipated
receiving from the Company, then, in addition to all other remedies
available to the Holder, the Company shall, within three (3) Business Days
after receipt of the Holder's written request, pay cash to the Holder in an
amount equal to the Holder's total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the shares of
Common Stock so purchased (including, without limitation, by any other
Person in respect, or on behalf, of the Holder) (the "BUY-IN Price"), at
which point the Company's obligation to so issue and deliver such
certificate or credit the Holder's balance account with DTC for the number
of shares of Common Stock to which the Holder is entitled upon the Holder's
conversion hereunder (as the case may be) (and to issue such shares of
Common Stock) shall terminate.
(iii) Book-Entry. Notwithstanding anything to the contrary set forth
in this Section 3, following conversion of any portion of this Note in
accordance with the terms hereof, the Holder shall not be required to
physically surrender this Note to the Company unless (A) the full
Conversion Amount represented by this Note is being converted (in which
event this Note shall be delivered to the Company following conversion
thereof as contemplated by Section 3(c)(i)) or (B) the Holder has provided
the Company with prior written notice (which notice may be included in a
Conversion Notice) requesting reissuance of this Note upon physical
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surrender of this Note. The Holder and the Company shall maintain records
showing the Principal, Interest and Late Charges converted and/or paid
and/or adjusted (as the case may be) and the dates of such conversions
and/or payments and/or adjustments (as the case may be) or shall use such
other method, reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of this Note upon conversion.
(iv) Pro Rata Conversion; Disputes. In the event of a dispute as to
the number of shares of Common Stock issuable to the Holder in connection
with a conversion of this Note, the Company shall issue to the Holder the
number of shares of Common Stock not in dispute and resolve such dispute in
accordance with Section 22.
(d) Limitations on Conversions. Notwithstanding anything to the contrary
contained in this Note, this Note shall not be convertible by the Holder hereof,
and the Company shall not effect any conversion of this Note or otherwise issue
any shares of Common Stock pursuant hereto, to the extent (but only to the
extent) that after giving effect to such conversion or other share issuance
hereunder the Holder (together with its affiliates) would beneficially own in
excess of 9.99% (the "MAXIMUM PERCENTAGE") of the Common Stock. To the extent
the above limitation applies, the determination of whether this Note shall be
convertible (vis-a-vis other convertible, exercisable or exchangeable securities
owned by the Holder or any of its affiliates) and of which such securities shall
be convertible, exercisable or exchangeable (as among all such securities owned
by the Holder and its affiliates) shall, subject to such Maximum Percentage
limitation, be determined on the basis of the first submission to the Company
for conversion, exercise or exchange (as the case may be). No prior inability to
convert this Note, or to issue shares of Common Stock, pursuant to this
paragraph shall have any effect on the applicability of the provisions of this
paragraph with respect to any subsequent determination of convertibility. For
purposes of this paragraph, beneficial ownership and all determinations and
calculations (including, without limitation, with respect to calculations of
percentage ownership) shall be determined in accordance with Section 13(d) of
the 1934 Act (as defined in the Note Purchase Agreement) and the rules and
regulations promulgated thereunder. The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity with the terms of
this paragraph to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a
successor Holder of this Note. The holders of Common Stock shall be third party
beneficiaries of this paragraph and the Company may not waive this paragraph
without the consent of holders of a majority of its Common Stock. For any reason
at any time, upon the written or oral request of the Holder, the Company shall
within one (1) Business Day confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding, including by virtue of any
prior conversion or exercise of convertible or exercisable securities into
Common Stock, including, without limitation, pursuant to this Note or securities
issued pursuant to the Note Purchase Agreement.
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4. RIGHTS UPON EVENT OF DEFAULT.
(a) Event of Default. Each of the following events shall constitute an
"EVENT OF DEFAULT":
(i) the suspension (or threatened suspension) from trading or the
failure (or threatened failure) of the Common Stock to be trading or listed
(as applicable) on an Eligible Market for a period of five (5) consecutive
days or for more than an aggregate of ten (10) days in any 365-day period,
or the imposition of any suspension of, or restriction on, accepting
additional deposits of the Common Stock, or electronic trading or
book-entry services by DTC with respect to the Common Stock;
(ii) the Company's or any Subsidiary's (as defined in the Note
Purchase Agreement) failure to pay to the Holder any amount of Principal,
Interest, Late Charges or other amounts when and as due under this Note
(including, without limitation, the Company's or any Subsidiary's failure
to pay any redemption payments or amounts hereunder) or any other
Transaction Document (as defined in the Note Purchase Agreement) or any
other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby, except,
in the case of a failure to pay Interest and Late Charges when and as due,
in which case only if such failure remains uncured for a period of at least
five (5) days;
(iii) the occurrence of any default under, redemption of or
acceleration prior to maturity of an aggregate of any Indebtedness (as
defined in the Note Purchase Agreement) of the Company or any of its
Subsidiaries;
(iv) bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings for the relief of debtors shall be instituted by or
against the Company or any Subsidiary and, if instituted against the
Company or any Subsidiary by a third party, shall not be dismissed within
thirty (30) days of their initiation;
(v) the commencement by the Company or any Subsidiary of a voluntary
case or proceeding under any applicable federal, state or foreign
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree, order, judgment or other similar
document in respect of the Company or any Subsidiary in an involuntary case
or proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable federal, state or foreign law, or the consent by it to
the filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or any Subsidiary or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the execution of a composition of debts, or
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the occurrence of any other similar federal, state or foreign proceeding,
or the admission by it in writing of its inability to pay its debts
generally as they become due, the taking of corporate action by the Company
or any Subsidiary in furtherance of any such action or the taking of any
action by any Person to commence a Uniform Commercial Code foreclosure sale
or any other similar action under federal, state or foreign law;
(vi) the entry by a court of (i) a decree, order, judgment or other
similar document in respect of the Company or any Subsidiary of a voluntary
or involuntary case or proceeding under any applicable federal, state or
foreign bankruptcy, insolvency, reorganization or other similar law or (ii)
a decree, order, judgment or other similar document adjudging the Company
or any Subsidiary as bankrupt or insolvent, or approving as properly filed
a petition seeking liquidation, reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Subsidiary under any
applicable federal, state or foreign law or (iii) a decree, order, judgment
or other similar document appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or
any Subsidiary or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of any such
decree, order, judgment or other similar document or any such other decree,
order, judgment or other similar document unstayed and in effect for a
period of thirty (30) consecutive days;
(vii) a final judgment or judgments for the payment of money
aggregating in excess of $100,000 are rendered against the Company and/or
any of its Subsidiaries and which judgments are not, within thirty (30)
days after the entry thereof, bonded, discharged or stayed pending appeal,
or are not discharged within thirty (30) days after the expiration of such
stay; provided, however, any judgment which is covered by insurance or an
indemnity from a credit worthy party shall not be included in calculating
the $100,000 amount set forth above so long as the Company provides the
Holder a written statement from such insurer or indemnity provider (which
written statement shall be reasonably satisfactory to the Holder) to the
effect that such judgment is covered by insurance or an indemnity and the
Company or such Subsidiary (as the case may be) will receive the proceeds
of such insurance or indemnity within thirty (30) days of the issuance of
such judgment;
(viii) the Company and/or any Subsidiary, individually or in the
aggregate, either (i) fails to pay, when due, or within any applicable
grace period, any payment with respect to any Indebtedness in excess of
$100,000 due to any third party (other than, with respect to unsecured
Indebtedness only, payments contested by the Company and/or such Subsidiary
(as the case may be) in good faith by proper proceedings and with respect
to which adequate reserves have been set aside for the payment thereof in
accordance with GAAP) or is otherwise in breach or violation of any
agreement for monies owed or owing in an amount in excess of $100,000,
which breach or violation permits the other party thereto to declare a
default or otherwise accelerate amounts due thereunder, or (ii) suffer to
exist any other circumstance or event that would, with or without the
passage of time or the giving of notice, result in a default or event of
default under any agreement binding the Company or any Subsidiary, which
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default or event of default would or is likely to have a material adverse
effect on the business, assets, operations (including results thereof),
liabilities, properties, condition (including financial condition) or
prospects of the Company or any of its Subsidiaries, individually or in the
aggregate;
(ix) other than as specifically set forth in another clause of this
Section 4(a), the Company or any Subsidiary breaches any representation,
warranty, covenant or other term or condition of any Transaction Document,
except, in the case of a breach of a covenant or other term or condition
that is curable, only if such breach remains uncured for a period of three
(3) consecutive Trading Days;
(x) any Material Adverse Effect (as defined in the Note Purchase
Agreement) occurs; or
(xi) any Change of Control occurs.
(b) Notice of an Event of Default; Redemption Right. Upon the occurrence of
an Event of Default with respect to this Note, the Company shall within one (1)
Business Day deliver written notice thereof via facsimile and overnight courier
(with next day delivery specified) (an "EVENT OF DEFAULT NOTICE") to the Holder.
At any time after the earlier of the Holder's receipt of an Event of Default
Notice and the Holder becoming aware of an Event of Default, the Holder may
require the Company to redeem (regardless of whether such Event of Default has
been cured) all or any portion of this Note by delivering written notice thereof
(the "EVENT OF DEFAULT REDEMPTION NOTICE") to the Company, which Event of
Default Redemption Notice shall indicate the portion of this Note the Holder is
electing to redeem. Each portion of this Note subject to redemption by the
Company pursuant to this Section 4(b) shall be redeemed by the Company at a
price equal to the greater of (i) the product of (A) the Conversion Amount to be
redeemed multiplied by (B) the Redemption Premium and (ii) the product of (X)
the Conversion Rate with respect to the Conversion Amount in effect at such time
as the Holder delivers an Event of Default Redemption Notice multiplied by (Y)
the product of (1) the Redemption Premium multiplied by (2) the greatest Closing
Sale Price of the Common Stock on any Trading Day during the period commencing
on the date immediately preceding such Event of Default and ending on the date
the Company makes the entire payment required to be made under this Section 4(b)
(the "EVENT OF DEFAULT REDEMPTION PRICE"). Redemptions required by this Section
4(b) shall be made in accordance with the provisions of Section 10. To the
extent redemptions required by this Section 4(b) are deemed or determined by a
court of competent jurisdiction to be prepayments of this Note by the Company,
such redemptions shall be deemed to be voluntary prepayments. Notwithstanding
anything to the contrary in this Section 4, but subject to Section 3(d), until
the Event of Default Redemption Price (together with any Late Charges thereon)
is paid in full, the Conversion Amount submitted for redemption under this
Section 4(b) (together with any Late Charges thereon) may be converted, in whole
or in part, by the Holder into Common Stock pursuant to the terms of this Note.
In the event of the Company's redemption of any portion of this Note under this
Section 4(b), the Holder's damages would be uncertain and difficult to estimate
because of the parties' inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity
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for the Holder. Accordingly, any redemption premium due under this Section 4(b)
is intended by the parties to be, and shall be deemed, a reasonable estimate of
the Holder's actual loss of its investment opportunity and not as a penalty.
5. RIGHTS UPON FUNDAMENTAL TRANSACTION; OTHER CORPORATE EVENTS.
(a) Assumption. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes in writing all
of the obligations of the Company under this Note and the other Transaction
Documents in accordance with the provisions of this Section 5(a) pursuant to
written agreements in form and substance satisfactory to the Holder and approved
by the Holder prior to such Fundamental Transaction, including agreements to
deliver to each holder of Notes in exchange for such Notes a security of the
Successor Entity evidenced by a written instrument substantially similar in form
and substance to the Notes, including, without limitation, having a principal
amount and interest rate equal to the principal amounts then outstanding and the
interest rates of the Notes held by such holder, having similar conversion
rights as the Notes and having similar ranking to the Notes, and satisfactory to
the Holder and (ii) the Successor Entity (including its Parent Entity) is a
publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so
that from and after the date of such Fundamental Transaction, the provisions of
this Note and the other Transaction Documents referring to the "Company" shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Note and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of a
Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this
Note at any time after the consummation of such Fundamental Transaction, in lieu
of the shares of the Company's Common Stock (or other securities, cash, assets
or other property (except such items still issuable under Section 14, which
shall continue to be receivable thereafter) issuable upon the conversion or
redemption of the Notes prior to such Fundamental Transaction, such shares of
the publicly traded common stock (or their equivalent) of the Successor Entity
(including its Parent Entity) which the Holder would have been entitled to
receive upon the happening of such Fundamental Transaction had this Note been
converted immediately prior to such Fundamental Transaction (without regard to
any limitations on the conversion of this Note), as adjusted in accordance with
the provisions of this Note. Notwithstanding the foregoing, the Holder may
elect, at its sole option, by delivery of written notice to the Company to waive
this Section 5(a) to permit the Fundamental Transaction without the assumption
of this Note.
(b) Other Corporate Events. In addition to and not in substitution for any
other rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a "CORPORATE EVENT"), the Company shall make appropriate provision to
insure that the Holder will thereafter have the right to receive upon a
conversion of this Note (i) in addition to the shares of Common Stock receivable
upon such conversion, such securities or other assets to which the Holder would
have been entitled with respect to such shares of Common Stock had such shares
of Common Stock been held by the Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the
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convertibility of this Note) or (ii) in lieu of the shares of Common Stock
otherwise receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection with the
consummation of such Corporate Event in such amounts as the Holder would have
been entitled to receive had this Note initially been issued with conversion
rights for the form of such consideration (as opposed to shares of Common Stock)
at a conversion rate for such consideration commensurate with the Conversion
Rate. Provision made pursuant to the preceding sentence shall be in a form and
substance satisfactory to the Holder.
(c) The provisions of this Section 5 shall apply similarly and equally to
successive Fundamental Transactions and Corporate Events and shall be applied
without regard to any limitations on the conversion of this Note.
6. RIGHTS UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment of Conversion Price upon Issuance of Common Stock. If and
whenever on or after the Closing Date the Company issues or sells, or in
accordance with this Section 6(a) is deemed to have issued or sold, any shares
of Common Stock (including the issuance or sale of shares of Common Stock owned
or held by or for the account of the Company, but excluding any Excluded
Securities issued or sold or deemed to have been issued or sold) for a
consideration per share (the "NEW ISSUANCE PRICE") less than a price equal to
the Conversion Price in effect immediately prior to such issue or sale or deemed
issuance or sale (such Conversion Price then in effect is referred to herein as
the "APPLICABLE PRICE") (the foregoing a "DILUTIVE ISSUANCE"), then, immediately
after such Dilutive Issuance, the Conversion Price then in effect shall be
reduced to an amount equal to the New Issuance Price. For all purposes of the
foregoing (including, without limitation, determining the adjusted Conversion
Price and consideration per share under this Section 6(a)), the following shall
be applicable:
(i) Issuance of Options. If the Company in any manner grants or sells
any Options and the lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Convertible Securities issuable upon exercise
of any such Option is less than the Applicable Price, then such share 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 6(a)(i), the "lowest
price per share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option" shall be
equal to (1) the lower of (x) the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting or sale of such Option,
upon exercise of such Option and upon conversion, exercise or exchange of
any Convertible Security issuable upon exercise of such Option and (y) the
lowest exercise price set forth in such Option for which one share of
Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable
upon exercise of any such Option, minus (2) the sum of all amounts paid or
payable to the holder of such Option (or any other Person) upon the
10
granting or sale of such Option, upon exercise of such Option and upon
conversion, exercise or exchange of any Convertible Security issuable upon
exercise of such Option plus the value of any other consideration received
or receivable by, or benefit conferred on, the holder of such Option (or
any other Person). Except as contemplated below, no further adjustment of
the Conversion Price shall be made upon the actual issuance of such share
of Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such share of Common Stock upon
conversion, exercise or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities and the lowest price per share
for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof is less than the Applicable Price, then such
share 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 6(a)(ii), the "lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange thereof" shall
be equal to (1) the lower of (x) the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect
to one share of Common Stock upon the issuance or sale of the Convertible
Security and upon conversion, exercise or exchange of such Convertible
Security and (y) the lowest conversion price set forth in such Convertible
Security for which one share of Common Stock is issuable upon conversion,
exercise or exchange thereof minus (2) the sum of all amounts paid or
payable to the holder of such Convertible Security (or any other Person)
upon the issuance or sale of such Convertible Security plus the value of
any other consideration received or receivable by, or benefit conferred on,
the holder of such Convertible Security (or any other Person). Except as
contemplated below, no further adjustment of the Conversion Price shall be
made upon the actual issuance of such share of Common Stock upon
conversion, exercise or exchange 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 has been or is to
be made pursuant to other provisions of this Section 6(a), except as
contemplated below, no further adjustment of the Conversion Price shall be
made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase or
exercise price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion, exercise or exchange of any
Convertible Securities, or the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for shares of Common Stock
increases or decreases at any time, the Conversion Price in effect at the
time of such increase or decrease shall be adjusted to the Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities provided for such increased or decreased purchase
price, additional consideration or increased or decreased conversion rate
(as the case may be) at the time initially granted, issued or sold. For
purposes of this Section 6(a)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the Closing Date are
11
increased or decreased in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the shares of Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such increase or decrease.
No adjustment pursuant to this Section 6(a) shall be made if such
adjustment would result in an increase of the Conversion Price then in
effect.
(iv) Calculation of Consideration Received. If any Option or
Convertible Security or Adjustment Right is issued or deemed issued in
connection with the issuance or sale or deemed issuance or sale of any
other securities of the Company, together comprising one integrated
transaction, (x) such Option or Convertible Security (as applicable) or
Adjustment Right (as applicable) will be deemed to have been issued for
consideration equal to the Black Scholes Consideration Value thereof and
(y) the other securities issued or sold or deemed to have been issued or
sold in such integrated transaction shall be deemed to have been issued for
consideration equal to the difference of (I) the aggregate consideration
received or receivable by the Company minus (II) the Black Scholes
Consideration Value of each such Option or Convertible Security (as
applicable) or Adjustment Right (as applicable). If any shares of Common
Stock, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor will
be deemed to be the net amount of consideration received by the Company
therefor. If any shares of Common Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, the amount of such
consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of publicly traded
securities, in which case the amount of consideration received by the
Company for such securities will be the average of the Closing Bid Price of
such security for each Trading Day during the five (5) Trading Day period
immediately preceding the date of receipt. If any shares of Common Stock,
Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is
the surviving entity, the amount of consideration therefor will be deemed
to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such shares of Common Stock,
Options or Convertible Securities (as the case may be). The fair value of
any consideration other than cash or publicly traded securities will be
determined jointly by the Company and the Holder. If such parties are
unable to reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the "VALUATION EVENT"), the fair value of such
consideration will be determined within five (5) Trading Days after the
tenth (10th) day following such Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the Holder. The
determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be
borne by the Company.
(v) Record Date. If the Company takes a record of the holders of
shares of Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in shares of Common Stock, Options
or in Convertible Securities or (B) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will
12
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 or the date of the granting of such
right of subscription or purchase (as the case may be).
(b) Adjustment of Conversion Price upon Subdivision or Combination of
Common Stock. Without limiting any provision of Section 5 or Section 6(a), if
the Company at any time on or after the Closing Date subdivides (by any stock
split, stock dividend, stock combination, recapitalization or other similar
transaction) one or more classes of its outstanding shares of Common Stock into
a greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced. Without limiting any provision
of Section 5 or Section 6(a), if the Company at any time on or after the Closing
Date combines (by any stock split, stock dividend, stock combination,
recapitalization or other similar transaction) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased. Any adjustment pursuant to this Section 6(b) shall
become effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this Section 6(b) occurs
during the period that a Conversion Price is calculated hereunder, then the
calculation of such Conversion Price shall be adjusted appropriately to reflect
such event.
(c) Other Events. In the event that the Company (or any Subsidiary) shall
take any action to which the provisions hereof are not strictly applicable, or,
if applicable, would not operate to protect the Holder from dilution or if any
event occurs of the type contemplated by the provisions of this Section 6 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company's board of directors shall in good faith
determine and implement an appropriate adjustment in the Conversion Price so as
to protect the rights of the Holder, provided that no such adjustment pursuant
to this Section 6(c) will increase the Conversion Price as otherwise determined
pursuant to this Section 6, provided further that if the Holder does not accept
such adjustments as appropriately protecting its interests hereunder against
such dilution, then the Company's board of directors and the Holder shall agree,
in good faith, upon an independent investment bank of nationally recognized
standing to make such appropriate adjustments, whose determination shall be
final and binding and whose fees and expenses shall be borne by the Company.
7. NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Certificate of Incorporation (as defined
in the Note Purchase Agreement), Bylaws (as defined in the Note Purchase
Agreement) or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Note, and will at all times in good faith carry out all
of the provisions of this Note and take all action as may be required to protect
the rights of the Holder of this Note. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon conversion of this Note above the Conversion Price
then in effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the conversion of this Note, and
13
(iii) shall, so long as any of the Notes are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Notes, the maximum number of shares of Common Stock as shall from time to
time be necessary to effect the conversion of the Notes then outstanding
(without regard to any limitations on conversion).
8. RESERVATION OF AUTHORIZED SHARES.
(a) Reservation. The Company shall initially reserve out of its authorized
and unissued Common Stock a number of shares of Common Stock for each of the
Notes equal to 150% of the entire Conversion Rate with respect to the entire
Conversion Amount of each such Note as of the Issuance Date. So long as any of
the Notes are outstanding, the Company shall take all action necessary to
reserve and keep available out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Notes, 150% of the
number of shares of Common Stock as shall from time to time be necessary to
effect the conversion of all of the Notes then outstanding, provided that at no
time shall the number of shares of Common Stock so reserved be less than the
number of shares required to be reserved by the previous sentence (without
regard to any limitations on conversions) (the "REQUIRED RESERVE AMOUNT").
(b) Insufficient Authorized Shares. If, notwithstanding Section 8(a), and
not in limitation thereof, at any time while any of the Notes remain outstanding
the Company does not have a sufficient number of authorized and unreserved
shares of Common Stock to satisfy its obligation to reserve for issuance upon
conversion of the Notes at least a number of shares of Common Stock equal to the
Required Reserve Amount (an "AUTHORIZED SHARE FAILURE"), then the Company shall
immediately take all action necessary to increase the Company's authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Notes then outstanding. Without limiting the
generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than sixty
(60) days after the occurrence of such Authorized Share Failure, the Company
shall hold a meeting of its stockholders for the approval of an increase in the
number of authorized shares of Common Stock. In connection with such meeting,
the Company shall provide each stockholder with a proxy statement and shall use
its best efforts to solicit its stockholders' approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal. In the event that
the Company is prohibited from issuing shares of Common Stock upon any
conversion due to the failure by the Company to have sufficient shares of Common
Stock available out of the authorized but unissued shares of Common Stock (such
unavailable number of shares of Common Stock, the "AUTHORIZATION FAILURE
SHARES"), in lieu of delivering such Authorization Failure Shares to the Holder,
the Company shall pay cash in exchange for the redemption of such portion of the
Conversion Amount convertible into such Authorized Failure Shares at a price
equal to the sum of (i) the product of (x) such number of Authorization Failure
Shares and (y) the greatest Closing Sale Price of the Common Stock on any
Trading Day during the period commencing on the date the Holder delivers the
applicable Conversion Notice with respect to such Authorization Failure Shares
to the Company and ending on the date of such issuance and payment under this
Section 8(b) and (ii) to the extent the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
14
sale by the Holder of Authorization Failure Shares, any brokerage commissions
and other out-of-pocket expenses, if any, of the Holder incurred in connection
therewith. Nothing contained in Section 8(a) or this Section 8(b) shall limit
any obligations of the Company under any provision of the Note Purchase
Agreement.
9. Company Optional Redemption. At any time after the Issuance Date, the
Company shall have the right to redeem all, but not less than all, of the
Conversion Amount then remaining under this Note (the "COMPANY OPTIONAL
REDEMPTION AMOUNT") on the Company Optional Redemption Date (as defined below)
(a "COMPANY OPTIONAL Redemption"). The portion of this Note subject to
redemption pursuant to this Section 9 shall be redeemed by the Company in cash
at a price (the "COMPANY OPTIONAL REDEMPTION PRICE") equal to 140% of the
Conversion Amount of this Note then outstanding. The Company may exercise its
right to require redemption under this Section 9 by delivering an irrevocable
written notice thereof by facsimile and overnight courier to the Holder (the
"COMPANY OPTIONAL REDEMPTION NOTICE" and the date the Holder receives such
notice is referred to as the "COMPANY OPTIONAL REDEMPTION NOTICE DATE"). The
Company may deliver only one Company Optional Redemption Notice in any ninety
(90) day period. The Company Optional Redemption Notice shall (x) state the date
on which the Company Optional Redemption shall occur (the "COMPANY OPTIONAL
REDEMPTION DATE") which date shall not be less than sixty (60) calendar days nor
more than ninety (90) calendar days following the Company Optional Redemption
Notice Date, and (y) state the aggregate Conversion Amount of the Notes which is
being redeemed in such Company Optional Redemption from the Holder pursuant to
this Section 9 on the Company Optional Redemption Date. Notwithstanding anything
herein to the contrary, at any time prior to the date the Company Optional
Redemption Price is paid, in full, the Company Optional Redemption Amount may be
converted, in whole or in part, by the Holder into shares of Common Stock
pursuant to Section 3. All Conversion Amounts converted by the Holder after the
Company Optional Redemption Notice Date shall reduce the Company Optional
Redemption Amount of this Note required to be redeemed on the Company Optional
Redemption Date. Redemptions made pursuant to this Section 9 shall be made in
accordance with Section 10.
10. REDEMPTIONS.
(a) Mechanics. The Company shall deliver the applicable Event of Default
Redemption Price to the Holder in cash within five (5) Business Days after the
Company's receipt of the Holder's Event of Default Redemption Notice. The
Company shall deliver the applicable Company Optional Redemption Price to the
Holder in cash on the applicable Company Optional Redemption Date. In the event
of a redemption of less than all of the Conversion Amount of this Note, the
Company shall promptly cause to be issued and delivered to the Holder a new Note
(in accordance with Section 17(d)) representing the outstanding Principal which
has not been redeemed. The Holder's delivery of a notice voiding a Redemption
Notice and exercise of its rights following such notice shall not affect the
Company's obligations to make any payments of Late Charges which have accrued
prior to the date of such notice with respect to the Conversion Amount subject
to such notice.
11. VOTING RIGHTS. The Holder shall have no voting rights as the holder of
this Note, except as required by law (including, without limitation, the Nevada
Revised Statutes) and as expressly provided in this Note.
15
12. NOTE REDUCTIONS.
(a) Filing Date Reduction. As of the Trading Day immediately following the
Filing Deadline (as such term is defined in the Registration Rights Agreement),
if (i) the Company has properly filed a registration statement with the SEC on
or prior to the Filing Deadline covering the resale by the Holder of all of the
shares of Common Stock issued or issuable upon conversion of this Note or
otherwise pursuant to the terms of this Note in accordance with the 1933 Act and
the Registration Rights Agreement and (ii) no Event of Default or an event that
with the passage of time or giving of notice would constitute an Event of
Default has occurred on or prior to such date, then $20,000 of the outstanding
Principal hereunder (together with any accrued and unpaid Interest with respect
to such portion of the Principal amount and accrued and unpaid Late Charges with
respect to such portion of such Principal and such Interest) shall be
automatically extinguished and shall no longer remain outstanding hereunder
without any payment thereof by the Company.
(b) Effective Date Reduction. As of the Trading Day immediately following
the Effectiveness Deadline (as such term is defined in the Registration Rights
Agreement), if (i) the Company has filed a registration statement with the SEC
that has been declared effective by the SEC on or prior to the Effectiveness
Deadline and the prospectus contained therein is available for use by the Holder
for the resale by the Holder of all of the shares of Common Stock issued or
issuable upon conversion of this Note or otherwise pursuant to the terms of this
Note and (ii) no Event of Default or an event that with the passage of time or
giving of notice would constitute an Event of Default has occurred on or prior
to such date, then $22,500 of the outstanding Principal hereunder (together with
any accrued and unpaid Interest with respect to such portion of the Principal
amount and accrued and unpaid Late Charges with respect to such portion of such
Principal and such Interest) shall be automatically extinguished and shall no
longer remain outstanding hereunder without any payment thereof by the Company.
(c) Disputes. In the event of a dispute as to the arithmetic calculation of
any Note Reduction, the Company and the Holder shall resolve such dispute in
accordance with Section 22.
13. COVENANTS. Until all of the Notes have been converted, redeemed or
otherwise satisfied in accordance with their terms:
(a) Restricted Payments. The Company shall not, and the Company shall cause
each of its Subsidiaries to not, directly or indirectly, redeem, defease,
repurchase, repay or make any payments in respect of, by the payment of cash or
cash equivalents (in whole or in part, whether by way of open market purchases,
tender offers, private transactions or otherwise), all or any portion of any
Indebtedness, whether by way of payment in respect of principal of (or premium,
if any) or interest on, such Indebtedness if at the time such payment is due or
is otherwise made or, after giving effect to such payment, (i) an event
constituting an Event of Default has occurred and is continuing or (ii) an event
that with the passage of time and without being cured would constitute an Event
of Default has occurred and is continuing.
(b) Restricted Issuances. The Company shall not, directly or indirectly,
without the prior written consent of the holders of a majority in aggregate
16
principal amount of the Notes then outstanding, (i) issue any Notes (other than
as contemplated by the Note Purchase Agreement and the Notes) or (ii) issue any
other securities that would cause a breach or default under the Notes.
14. PARTICIPATION. In addition to any adjustments pursuant to Section 6,
the Holder, as the holder of this Note, shall be entitled to receive such
dividends paid and distributions 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.
Payments under the preceding sentence shall be made concurrently with the
dividend or distribution to the holders of Common Stock (provided, however, to
the extent that the Holder's right to participate in any such dividend or
distribution would result in the Holder exceeding the Maximum Percentage, then
the Holder shall not be entitled to participate in such dividend or distribution
to such extent (or the beneficial ownership of any such shares of Common Stock
as a result of such dividend or distribution to such extent) and such dividend
or distribution to such extent shall be held in abeyance for the benefit of the
Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Maximum Percentage).
15. AMENDING THE TERMS OF THIS NOTE. The prior written consent of the
Holder shall be required for any change or amendment to this Note.
16. TRANSFER. This Note and any shares of Common Stock issued upon
conversion of this Note may be offered, sold, assigned or transferred by the
Holder without the consent of the Company, subject only to the provisions of
Section 4.4 of the Note Purchase Agreement.
17. REISSUANCE OF THIS NOTE.
(a) Transfer. If this Note is to be transferred, the Holder shall surrender
this Note to the Company, whereupon the Company will forthwith issue and deliver
upon the order of the Holder a new Note (in accordance with Section 17(d)),
registered as the Holder may request, representing the outstanding Principal
being transferred by the Holder and, if less than the entire outstanding
Principal is being transferred, a new Note (in accordance with Section 17(d)) to
the Holder representing the outstanding Principal not being transferred. The
Holder and any assignee, by acceptance of this Note, acknowledge and agree that,
by reason of the provisions of Section 3(c)(iii) following conversion or
redemption of any portion of this Note, the outstanding Principal represented by
this Note may be less than the Principal stated on the face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence), and, in the
case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 17(d))
representing the outstanding Principal.
17
(c) Note Exchangeable for Different Denominations. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 17(d) and in
principal amounts of at least $1,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.
(d) Issuance of New Notes. Whenever the Company is required to issue a new
Note pursuant to the terms of this Note, such new Note (i) shall be of like
tenor with this Note, (ii) shall represent, as indicated on the face of such new
Note, the Principal remaining outstanding (or in the case of a new Note being
issued pursuant to Section 17(a) or Section 17(c), the Principal designated by
the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, and (v) shall represent accrued and unpaid
Interest and Late Charges on the Principal and Interest of this Note, from the
Issuance Date.
18. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF. The remedies provided in this Note shall be cumulative and in addition
to all other remedies available under this Note and any of the other Transaction
Documents at law or in equity (including a decree of specific performance and/or
other injunctive relief), and nothing herein shall limit the Holder's right to
pursue actual and consequential damages for any failure by the Company to comply
with the terms of this Note. The Company covenants to the Holder that there
shall be no characterization concerning this instrument other than as expressly
provided herein. 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). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law
for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the Holder shall be entitled, in
addition to all other available remedies, to an injunction restraining any such
breach or any such threatened breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall
provide all information and documentation to the Holder that is requested by the
Holder to enable the Holder to confirm the Company's compliance with the terms
and conditions of this Note (including, without limitation, compliance with
Section 6).
19. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note 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 Note or to enforce the provisions of this Note or
(b) there occurs any bankruptcy, reorganization, receivership of the Company or
other proceedings affecting Company creditors' rights and involving a claim
under this Note, then the Company shall pay the costs incurred by the Holder for
such collection, enforcement or action or in connection with such bankruptcy,
18
reorganization, receivership or other proceeding, including, without limitation,
attorneys' fees and disbursements. The Company expressly acknowledges and agrees
that no amounts due under this Note shall be affected, or limited, by the fact
that the purchase price paid for this Note was less than the original Principal
amount hereof.
20. CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted
by the Company and the Holder and shall not be construed against any Person as
the drafter hereof. The headings of this Note are for convenience of reference
and shall not form part of, or affect the interpretation of, this Note. Terms
used in this Note but defined in the other Transaction Documents shall have the
meanings ascribed to such terms on the Closing Date in such other Transaction
Documents unless otherwise consented to in writing by the Holder.
21. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. No waiver shall be effective unless it is
in writing and signed by an authorized representative of the waiving party.
22. DISPUTE RESOLUTION. In the case of a dispute as to the determination of
the Conversion Price (including, without limitation, any disputed adjustment
thereto or any dispute as to whether any issuance or sale or deemed issuance or
sale was an issuance or sale or deemed issuance or sale of Excluded Securities),
the Company Conversion Price, any Redemption Price, the Closing Bid Price, the
Closing Sale Price or fair market value (as the case may be) or the arithmetic
calculation of the Conversion Rate, any Note Reduction or the applicable
Redemption Price (as the case may be), the Company or the Holder (as the case
may be) shall submit the disputed determinations or arithmetic calculations (as
the case may be) via facsimile (i) within two (2) Business Days after receipt of
the applicable notice giving rise to such dispute to the Company or the Holder
(as the case may be) or (ii) if no notice gave rise to such dispute, at any time
after the Holder learned of the circumstances giving rise to such dispute. If
the Holder and the Company are unable to agree upon such determination or
calculation within two (2) Business Days of such disputed determination or
arithmetic calculation (as the case may be) being submitted to the Company or
the Holder (as the case may be), then the Company shall, within two (2) Business
Days, submit via facsimile (a) the disputed determination of the Conversion
Price, the Company Conversion Price, any Redemption Price, the Closing Bid
Price, the Closing Sale Price or fair market value (as the case may be) to an
independent, reputable investment bank selected by the Company and approved by
the Holder or (b) the disputed arithmetic calculation of the Conversion Rate,
any Note Reduction or any Redemption Price (as the case may be) to an
independent, outside accountant selected by the Holder that is reasonably
acceptable to the Company. The Company shall cause at its expense the investment
bank or the accountant (as the case may be) to perform the determinations or
calculations (as the case may be) and notify the Company and the Holder of the
results no later than ten (10) Business Days from the time it receives such
disputed determinations or calculations (as the case may be). Such investment
bank's or accountant's determination or calculation (as the case may be) shall
be binding upon all parties absent demonstrable error.
19
23. NOTICES; CURRENCY; PAYMENTS.
(a) Notices. Whenever notice is required to be given under this Note,
unless otherwise provided herein, such notice shall be given in accordance with
Section 9(f) of the Note Purchase Agreement. The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Note,
including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen (15) days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with respect to any
grant, issuances, or sales of any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property to holders of shares of
Common Stock or (C) for determining rights to vote with respect to any
Fundamental Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to the Holder.
(b) Currency. All dollar amounts referred to in this Note are in United
States Dollars ("U.S. DOLLARS"), and all amounts owing under this Note shall be
paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall
be converted into the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. "EXCHANGE RATE" means, in relation to
any amount of currency to be converted into U.S. Dollars pursuant to this Note,
the U.S. Dollar exchange rate as published in the Wall Street Journal on the
relevant date of calculation (it being understood and agreed that where an
amount is calculated with reference to, or over, a period of time, the date of
calculation shall be the final date of such period of time).
(c) Payments. Whenever any payment of cash is to be made by the Company to
any Person pursuant to this Note, unless otherwise expressly set forth herein,
such payment shall be made in lawful money of the United States of America by a
certified check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to the
Company in writing (which address, in the case of each of the Buyers, shall
initially be as set forth on the Schedule of Buyers attached to the Note
Purchase Agreement), provided that the Holder may elect to receive a payment of
cash via wire transfer of immediately available funds by providing the Company
with prior written notice setting out such request and the Holder's wire
transfer instructions. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day. Any amount of
Principal or other amounts due under the Transaction Documents which is not paid
when due shall result in a late charge being incurred and payable by the Company
in an amount equal to interest on such amount at the rate of eighteen percent
(18%) per annum from the date such amount was due until the same is paid in full
("LATE CHARGE").
24. CANCELLATION. After all Principal, accrued Interest, Late Charges and
other amounts at any time owed on this Note have been paid in full, this Note
shall automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.
20
25. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
irrevocably waives demand, notice, presentment, protest and all other demands
and notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note and the Note Purchase Agreement.
26. GOVERNING LAW. This Note shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and performance of this Note shall be governed by, the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York. The Company hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company
in any other jurisdiction to collect on the Company's obligations to the Holder,
to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. THE COMPANY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
27. MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to establish
or require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Holder and thus refunded to the Company.
28. CERTAIN DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:
(a) "ADJUSTMENT RIGHT" means any right granted with respect to any
securities issued in connection with, or with respect to, any issuance or sale
(or deemed issuance or sale in accordance with Section 6) of shares of Common
Stock that could result in a decrease in the net consideration received by the
Company in connection with, or with respect to, such securities (including,
21
without limitation, any cash settlement rights, cash adjustment or other similar
rights).
(b) "APPROVED STOCK PLAN" means any employee benefit plan (including any
equity compensation agreement not issued pursuant to a plan) which has been
approved by the board of directors of the Company prior to or subsequent to the
date hereof pursuant to which shares of Common Stock and standard options to
purchase Common Stock may be issued to any employee, officer or director for
services provided to the Company in their capacity as such.
(c) "BLACK SCHOLES CONSIDERATION VALUE" means the value of the applicable
Option, Convertible Security or Adjustment Right (as the case may be) as of the
date of issuance thereof calculated using the Black Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg utilizing (i) an underlying price
per share equal to the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the public announcement of the execution of definitive
documents with respect to the issuance of such Option, Convertible Security or
Adjustment Right (as the case may be), (ii) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of such Option, Convertible Security or Adjustment Right (as the case may be) as
of the date of issuance of such Option, Convertible Security or Adjustment Right
(as the case may be), (iii) a zero cost of borrow and (iv) an expected
volatility equal to the greater of 100% and the 100 day volatility obtained from
the HVT function on Bloomberg (determined utilizing a 365 day annualization
factor) as of the Trading Day immediately following the date of issuance of such
Option, Convertible Security or Adjustment Right (as the case may be).
(d) "BLOOMBERG" means Bloomberg, L.P.
(e) "BUSINESS DAY" means any day other than Saturday, Sunday or other day
on which commercial banks in The City of New York are authorized or required by
law to remain closed.
(f) "CHANGE OF CONTROL" means any Fundamental Transaction other than (i)
any merger of the Company or any of its, direct or indirect, wholly-owned
Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization,
recapitalization or reclassification of the shares of Common Stock in which
holders of the Company's voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, are, in all material respects, the holders of the voting
power of the surviving entity (or entities with the authority or voting power to
elect the members of the board of directors (or their equivalent if other than a
corporation) of such entity or entities) after such reorganization,
recapitalization or reclassification, or (iii) pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or any of its Subsidiaries.
(g) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any security as
of any date, the last closing bid price and last closing trade price,
respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price, respectively,
22
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by OTC
Markets Group Inc. (formerly Pink Sheets LLC).
(h) "CLOSING DATE" shall have the meaning set forth in the Note Purchase
Agreement, which date is the date the Company initially issued the Note pursuant
to the terms of the Note Purchase Agreement.
(i) "COMMON STOCK" means (i) the Company's common stock, $0.0001 par value
per share, and (ii) any capital stock into which such common stock shall have
been changed or any share capital resulting from a reclassification of such
common stock.
(j) "CONVERTIBLE SECURITIES" means any stock or other security (other than
Options) that is at any time and under any circumstances, directly or
indirectly, convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(k) "ELIGIBLE MARKET" means the NASDAQ Global Market, the NASDAQ Global
Select Market, the NASDAQ Capital Market, the New York Stock Exchange, NYSE
Arca, the NYSE MKT, the OTCQX Marketplace or the OTCQB Marketplace operated by
OTC Markets Group Inc. (or any successor to any of the foregoing) or the
Principal Market.
(l) "EXCLUDED SECURITIES" means any (i) shares of Common Stock or standard
options to purchase Common Stock to directors, officers or employees of the
Company in their capacity as such pursuant to an Approved Stock Plan (as defined
below), provided that (A) all such issuances (taking into account the shares of
Common Stock issuable upon exercise of such options granted after the date of
this Note, but not such shares issuable upon exercise of such options granted
before the date of this Note) after the date hereof pursuant to this clause (i)
do not, in the aggregate, exceed more than 5.0% of the Common Stock issued and
outstanding immediately prior to the date hereof and (B) the exercise price of
any such options is not lowered, none of such options are amended to increase
the number of shares issuable thereunder and none of the terms or conditions of
any such options are otherwise materially changed in any manner that adversely
affects any of the Buyers; (ii) shares of Common Stock issued upon the
conversion or exercise of Convertible Securities (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan that are covered
by clause (i) above) issued prior to the date hereof, provided that the
conversion price of any such Convertible Securities (other than standard options
to purchase Common Stock issued pursuant to an Approved Stock Plan that are
covered by clause (i) above) is not lowered, none of such Convertible Securities
(other than standard options to purchase Common Stock issued pursuant to an
Approved Stock Plan that are covered by clause (i) above) are amended to
23
increase the number of shares issuable thereunder or extend the maturity date or
expiration date of such Convertible Securities (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan that are covered
by clause (i) above) and none of the terms or conditions of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Stock Plan that are covered by clause (i) above) are otherwise
materially changed in any manner that adversely affects any of the Buyers; (iii)
the shares of Common Stock issuable upon conversion of the Notes or otherwise
pursuant to the terms of the Notes and (iv) any shares of Common Stock issued to
the Holder or any of its affiliates.
(m) "FUNDAMENTAL TRANSACTION" means that (i) the Company or any of its
Subsidiaries shall, directly or indirectly, in one or more related transactions,
(1) consolidate or merge with or into (whether or not the Company or any of its
Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease,
license, assign, transfer, convey or otherwise dispose of all or substantially
all of its respective properties or assets to any other Person, or (3) allow any
other Person to make a purchase, tender or exchange offer that is accepted by
the holders of more than 50% of the outstanding shares of Voting Stock of the
Company (not including any shares of Voting Stock of the Company held by the
Person or Persons making or party to, or associated or affiliated with the
Persons making or party to, such purchase, tender or exchange offer), or (4)
consummate a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with any other Person whereby such other Person acquires
more than 50% of the outstanding shares of Voting Stock of the Company (not
including any shares of Voting Stock of the Company held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other
business combination), or (ii) any "person" or "group" (as these terms are used
for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and
regulations promulgated thereunder) is or shall become the "beneficial owner"
(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of
the aggregate ordinary voting power represented by issued and outstanding Voting
Stock of the Company.
(n) "GAAP" means United States generally accepted accounting principles,
consistently applied.
(o) "INTEREST RATE" means twelve percent (12.0%) per annum, as may be
adjusted from time to time in accordance with Section 2.
(p) "MATURITY DATE" shall mean September 2, 2014; provided, however, the
Maturity Date may be extended at the option of the Holder (i) in the event that,
and for so long as, an Event of Default shall have occurred and be continuing or
any event shall have occurred and be continuing that with the passage of time
and the failure to cure would result in an Event of Default or (ii) through the
date that is twenty (20) Business Days after the consummation of a Fundamental
Transaction in the event that a Fundamental Transaction is publicly announced or
a Fundamental Transaction Notice is delivered prior to the Maturity Date,
provided further that if a Holder elects to convert some or all of this Note
pursuant to Section 3 hereof, and the Conversion Amount would be limited
pursuant to Section 3(d) hereunder, the Maturity Date shall automatically be
24
extended until such time as such provision shall not limit the conversion of
this Note.
(q) "NOTE PURCHASE AGREEMENT" means that certain Note Purchase Agreement,
dated as of the Closing Date, by and between the Company and the Holder pursuant
to which the Company issued this Note, as may be amended from time to time.
(r) "OPTIONS" means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.
(s) "PARENT ENTITY" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.
(t) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity or a government or any department or agency
thereof.
(u) "PRINCIPAL MARKET" means the OTC Bulletin Board (or any successor
thereto).
(v) "REDEMPTION NOTICES" means, collectively, the Event of Default
Redemption Notices and the Company Optional Redemption Notices, and each of the
foregoing, individually, a "REDEMPTION NOTICE."
(w) "REDEMPTION PREMIUM" means (i) in the case of the Events of Default
described in Section 4(a) (other than Sections 4(a)(iv) through 4(a)(vi)), 125%
or (ii) in the case of the Events of Default described in Sections 4(a)(iv)
through 4(a)(vi), 100%.
(x) "REDEMPTION PRICES" means, collectively, Event of Default Redemption
Prices, and the Company Optional Redemption Prices and each of the foregoing,
individually, a "REDEMPTION PRICE."
(y) "REGISTRATION RIGHTS AGREEMENT" means that certain registration rights
agreement, dated as of the Closing Date, by and between the Company and the
Holder relating to, among other things, the registration of the resale of the
Common Stock issuable upon conversion of the Notes or otherwise pursuant to the
terms of the Notes, as may be amended from time to time.
(z) "SEC" means the United States Securities and Exchange Commission or the
successor thereto.
(aa) "SUBSIDIARIES" shall all corporations or other entities, if any, of
which at least a majority of the securities or other ownership interest having
ordinary voting power for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries.
25
(bb) "SUCCESSOR ENTITY" means the Person (or, if so elected by the Holder,
the Parent Entity) formed by, resulting from or surviving any Fundamental
Transaction or the Person (or, if so elected by the Holder, the Parent Entity)
with which such Fundamental Transaction shall have been entered into.
(cc) "TRADING DAY" means any day on which the Common Stock is traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded, provided that
"TRADING DAY" shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time) unless such day is otherwise designated
as a Trading Day in writing by the Holder.
(dd) "VOTING STOCK" of a Person means capital stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power to elect, or the general power to appoint, at least a majority of the
board of directors, managers, trustees or other similar governing body of such
Person (irrespective of whether or not at the time capital stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
29. DISCLOSURE. Upon receipt or delivery by the Company of any notice in
accordance with the terms of this Note, unless the Company has in good faith
determined that the matters relating to such notice do not constitute material,
non-public information relating to the Company or any of its Subsidiaries, the
Company shall within one (1) Business Day after any such receipt or delivery
publicly disclose such material, non-public information on a Current Report on
Form 8-K or otherwise. In the event that the Company believes that a notice
contains material, non-public information relating to the Company or any of its
Subsidiaries, the Company so shall indicate to such Holder contemporaneously
with delivery of such notice, and in the absence of any such indication, the
Holder shall be allowed to presume that all matters relating to such notice do
not constitute material, non-public information relating to the Company or its
Subsidiaries. Nothing contained in this Section 29 shall limit any obligations
of the Company, or any rights of the Holder, under Section 4.3 of the Note
Purchase Agreement.
[SIGNATURE PAGE FOLLOWS]
26
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as
of the Issuance Date set out above.
TUNGSTEN CORP.
By:
-----------------------------------
Name:
Title:
SENIOR SECURED CONVERTIBLE NOTE - SIGNATURE PAGE
EXHIBIT I
TUNGSTEN CORP.
CONVERSION NOTICE
Reference is made to the Convertible Note (the "NOTE") issued to the
undersigned by Tungsten Corp. (the "COMPANY"). In accordance with and pursuant
to the Note, the undersigned hereby elects to convert the Conversion Amount (as
defined in the Note) of the Note indicated below into shares of Common Stock,
$0.0001 par value per share (the "COMMON STOCK"), of the Company, as of the date
specified below Capitalized terms not defined herein shall have the meaning as
set forth in the Note.
Date of Conversion:
--------------------------------------------------------
Aggregate Principal to be converted:
---------------------------------------
Aggregate accrued and unpaid
Interest and accrued and unpaid
Late Charges with respect to such
portion of the Aggregate Principal
and such Aggregate Interest to be
converted:
---------------------------------------
AGGREGATE CONVERSION AMOUNT TO BE CONVERTED:
-------------------------------
Please confirm the following information:
Conversion Price:
----------------------------------------------------------
Number of shares of Common Stock to be issued:
-----------------------------
Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:
Issue to:
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Facsimile Number:
----------------------------------------------------------
Holder:
------------------------------------------------------------------
By:
------------------------------------------------------------------
Title:
------------------------------------------------------------------
Dated:
--------------------------------------------------------------------------
Account Number:
------------------------------------------------------------
(if electronic book entry transfer)
Transaction Code Number:
---------------------------------------------------
(if electronic book entry transfer)
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby directs
_________________ to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated _____________, 20__
from the Company and acknowledged and agreed to by ________________________.
TUGSTEN CORP.
By:
--------------------------------------
Name:
Title