Amendment to Registration of Securities of a Small-Business Issuer — Form 10-SB Filing Table of Contents
Document/ExhibitDescriptionPagesSize
1: 10SB12G/A Spiralfrog, Inc. Form 10SB12G/A HTML 1.14M
2: EX-3.5 Articles of Incorporation/Organization or By-Laws HTML 16K
7: EX-4.10 Instrument Defining the Rights of Security Holders HTML 15K
3: EX-4.6 Instrument Defining the Rights of Security Holders HTML 193K
4: EX-4.7 Instrument Defining the Rights of Security Holders HTML 138K
5: EX-4.8 Instrument Defining the Rights of Security Holders HTML 80K
6: EX-4.9 Instrument Defining the Rights of Security Holders HTML 88K
EX-4.7 — Instrument Defining the Rights of Security Holders
NEITHER
THE ISSUANCE AND SALE OF THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE
IS
EXCHANGEABLE 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 IN THE ABSENCE OF (I) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS
AMENDED, OR (II) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO
THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THIS NOTE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE. ANY
TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(ii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON EXCHANGE
HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO
SECTION 3(c)(ii) OF THIS NOTE.
FOR
VALUE
RECEIVED, Mohen, Inc. d/b/a Spiral Frog, a Delaware corporation (the
"Company"), hereby promises to pay to DISTRESSED HIGH YIELD
TRADING OPPORTUNITIES FUND, LTD. or registered assigns
("Holder") the amount set out above as the Original Principal
Amount (as reduced pursuant to the terms hereof pursuant to redemption, exchange
or otherwise, the "Principal") when due, whether upon the
Maturity Date (as defined below), acceleration, redemption or otherwise (in
each
case in accordance with the terms hereof) and to pay interest
("Interest") on any outstanding Principal at a rate per annum
equal to the 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 an Interest Date (as defined below), or the
Maturity Date, acceleration, exchange, redemption or otherwise (in each case
in
accordance with the terms hereof). This Senior Secured Exchangeable Note
(including all Senior Secured Exchangeable Notes issued in exchange, transfer
or
replacement hereof, this "Note") is one of an issue of Senior
Secured Exchangeable Notes issued pursuant to the Purchase Agreement (as defined
below) (collectively, the "Notes" and such other Senior Secured
Exchangeable Notes, the "Other Notes"). Certain
capitalized terms are defined in Section 28.
(a) Interest
on any outstanding Principal payable pursuant to this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of a 360-day
year, compounded monthly and actual days elapsed and shall be payable in arrears
for each Calendar Month during the period beginning on the Issuance Date and
ending on, and including, the Maturity Date (each, an "Interest
Date") with the first Interest Date being October 1, 2007.
Interest shall be payable on each Interest Date, to the record holder
of
this Note on the applicable Interest Date.
(b) From
and after the occurrence of an Event of Default, the Interest Rate shall be
increased to eighteen percent (18%). In the event that such Event of
Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided
that
the Interest as calculated at such increased rate during the continuance of
such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date
of
cure of such Event of Default.
3. EXCHANGE
OF NOTES. This Note shall be exchangeable into shares of Class A
Common Stock of the Company, par value $.001 per share (the "Common
Stock"), on the terms and conditions set forth in this Section
3.
(a) Exchange
Right. At any time or times on or after the date that the Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange
Act
of 1934, the Holder shall be entitled to exchange any portion of the outstanding
and unpaid Exchange Amount (as defined below) into fully paid and nonassessable
shares of Common Stock in accordance with Section 3(c), at the Exchange Rate
(as
defined below). The Company shall not issue any fraction of a share
of Common Stock upon any exchange. If the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company shall round
such
fraction of a share of Common Stock up to the nearest whole share. The
Company shall pay any and all taxes that may be payable with respect to the
issuance and delivery of Common Stock upon exchange of any Exchange
Amount.
(b) Exchange
Rate. The number of shares of Common Stock issuable upon exchange of
any Exchange Amount pursuant to Section 3(a) shall be equal to the quotient
of
(x) such Exchange Amount divided by (y) the Exchange Price (the
"Exchange Rate").
(i) "Exchange
Amount" means the portion of the Principal, together with Interest and
Late Charges thereon, to be exchanged, redeemed or otherwise with respect to
which this determination is being made.
(i)Optional
Exchange. To exchange any Exchange Amount into shares of Common Stock
on any date (a "Exchange Date"), the Holder shall (A) transmit
by facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m.,
New
York Time, on such date, a copy of an executed notice of exchange in a
reasonably acceptable form (the "Exchange Notice")
to the Company and (B) if required by Section 3(c)(ii), surrender this Note
(or
an indemnification undertaking and such other documentation as may be reasonably
required by the Company with respect to this Note in the case of its loss,
theft
or destruction) to a nationally recognized overnight delivery service for
delivery to the Company. On or before the next Business Day following the
date of receipt of an Exchange Notice, the Company shall transmit by facsimile
a
confirmation of receipt of such Exchange Notice to the Holder and the Transfer
Agent. The Company shall cause the Transfer Agent or the Company if
no Transfer Agent has been appointed to issue and deliver to the address as
specified in the Exchange Notice, a certificate, registered in the name of
the
Holder or its designee, for the number of shares of Common Stock to which the
Holder shall be entitled and pay to the Holder in cash an amount equal to the
accrued and unpaid Interest on the Exchange Amount up to and including the
Exchange Date. If this Note is physically surrendered for exchange as
required by Section 3(c)(ii) and the outstanding Principal of this Note is
greater than the Principal portion of the Exchange Amount being exchanged,
then
the Company shall, as soon as practicable and in no event later than two
Business Days after receipt of this Note and at its own expense, or shall cause
the Transfer Agent to issue and deliver to the holder a new Note (in accordance
with Section 18(d)) representing the outstanding Principal not exchanged.
The Person or Persons entitled to receive the shares of Common Stock issuable upon an exchange of this
Note shall be treated
for all purposes as the record holder or holders of such shares of Common Stock
on the Exchange Date.
(ii)Registration;
Book-Entry. The Company shall maintain a register (the
"Register") for the recordation of the names and addresses of
the holders of each Note and the principal amount of the Notes held by such
holders (the "Registered Notes"). The entries in the
Register shall be conclusive and binding for all purposes absent manifest
error. The Company and the holders of the Notes shall treat each
Person whose name is recorded in the Register as the owner of a Note for all
purposes, including, without limitation, the right to receive payments of
principal and interest hereunder. A Registered Note may be assigned
or sold in whole or in part only by registration of such assignment or sale
on
the Register. Upon its receipt of a request to assign or sell all or
part of any Registered Note by a Holder, the Company shall record the
information contained therein in the Register and issue one or more new
Registered Notes in the same aggregate principal amount as the principal amount
of the surrendered Registered Note to the designated assignee or transferee
pursuant to Section 17. Notwithstanding anything to the contrary set
forth herein, upon exchange 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 Exchange Amount represented by this Note
is
being exchanged or (B) the Holder has provided the Company with prior written
notice (which notice may be included in an Exchange Notice) requesting physical
surrender and reissue of this Note. The Holder and the Company shall
maintain records showing the Principal, Interest and Late Charges exchanged
and
the dates of such exchanges 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 exchange.
(ii) the
Company's (A) failure to deliver the required number of shares of Common Stock
within five (5) Business Days after the applicable Exchange Date or (B) written
notice to any holder of the Notes, including by way of public announcement
or
through any of its authorized agents, at any time, of its intention not to
comply with a request for exchange of any Notes into shares of Common Stock
that
is tendered in accordance with the provisions of the Notes;
(iii) the
failure of the Company to maintain such number of authorized shares of Common
Stock as equals 200% of the number of shares of Common Stock that the Holder
would be entitled to receive upon an exchange of the full Exchange Amount of
this Note (without regard to any limitations on exchange set forth
herein);
(iv) the
Company's failure to pay to the Holder any amount of Principal (including,
without limitation, any redemption payment), Interest, Late Charges or other
amounts when and as due under this Note or any other Transaction Document (as
defined in the Purchase Agreement) or any other agreement, document, certificate
or other instrument delivered in connection with the transactions contemplated
hereby and thereby to which the Holder is a party, except, in the case of a
failure to pay Interest and Late Charges when and as due, in which case only
if
such failure continues for a period of at least five (5) Business
Days;
(v) any
default under, redemption of or acceleration prior to maturity of any
Indebtedness in excess of $100,000, in the aggregate, of the
Company;
(vii) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that (A) is for relief against the Company in an involuntary case,
(B) appoints a Custodian of the Company or (C) orders the liquidation
of the Company and such order or decree is not dismissed within sixty
(60) days;
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(viii) a
final
judgment or judgments for the payment of money aggregating in excess of $500,000
are rendered against the Company and which judgments are not, within
sixty (60) days after the entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within sixty (60) days after the expiration of
such stay; provided, however, that any judgment which is covered by insurance
or
an indemnity from a credit worthy party shall not be included in calculating
the
$500,000 amount set forth above so long as the Company provides the Holder
a
written statement from such insurer or indemnity provider (which written
statement shall be reasonably satisfactory to the Holder) to the effect that
such judgment is covered by insurance or an indemnity and the Company will
receive the proceeds of such insurance or indemnity within thirty (30) days
of
the issuance of such judgment;
(ix) the
Company materially breaches any representation, warranty, covenant or other
term
or condition of any Transaction Document, specifically including but not limited
to Section 4(d) of the Purchase Agreement, except, in the case of a material
breach of a covenant which is curable, only if such material breach continues
beyond the applicable cure period allowed for in such Transaction Document
or,
if no such cure period is otherwise specified in such Transaction Document,
for
a period of at least ten (10) consecutive Business Days, provided that an Event
of Default under another sub-section of Section 4(a) shall not be covered by
this sub-section 4(a)(ix); or
(x) any
breach or failure in any respect to comply with (x) Section 15 of this Note
or
(y) any of the Potential Partner Conditions;
(xi) the
Company (A) defaults under any of the agreements or arrangements with respect
to
the Company’s indebtedness described in Schedule 3(o) to the Purchase Agreement,
except with respect to any payment obligation that is being satisfied by a
payment from the escrow by the Escrow Agent or (B) after five (5) days of the
Closing a Lien (as defined in the Security Agreement) exists against the Company
excluding any Lien arising under or disclosed in the schedules to the Security
Agreement or any Permitted Lien; and
(xii) the
failure of the applicable Registration Statement required to be filed pursuant
to the Registration Rights Agreement to be declared effective by the SEC on
or
prior to the date that is thirty (30) days after the applicable Effectiveness
Deadline (as defined in the Registration Rights Agreement), or, while the
applicable Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the applicable Registration Statement lapses for any reason
(including, without limitation, the issuance of a stop order) or is unavailable
to any holder of the Notes for sale of all of such holder's Registrable
Securities (as defined in the Registration Rights Agreement) in accordance
with
the terms of the Registration Rights Agreement, and such lapse or unavailability
continues for a period of ten (10) consecutive days or for more than an
aggregate of thirty (30) days in any 365-day period (other than days during
an
Allowable Grace Period (as defined in the Registration Rights
Agreement)).
(b) Redemption
Right. Upon the occurrence of an Event of Default with respect to this
Note, the Company shall within two (2) Business Days after the day on which
the
Company is aware of the Event of Default deliver written notice thereof via
facsimile and overnight courier (an "Event of Default Notice")
to the Holder.
5. RIGHTS
UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption.
The Company shall not enter into or be party to a Fundamental Transaction
unless (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 Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of Notes in exchange for such Notes a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to the Notes, including, without limitation, having a principal amount
and interest rate equal to the principal amounts and the interest rates of
the
Notes held by such holder, having similar conversion or exchange rights as
the
Notes and having similar ranking to the Notes, and satisfactory to the Required
Holders. Upon the occurrence of any Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the
date
of such Fundamental Transaction, the provisions of this Note referring to the
"Company" shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Note with the same effect as if such Successor Entity had
been named as the Company herein. Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation
that
there shall be issued upon exchange or redemption of this Note at any time
after
the consummation of the Fundamental Transaction, in lieu of the shares of Common
Stock (or other securities, cash, assets or other property) issuable upon the
exchange of the Notes prior to such Fundamental Transaction, such shares of
publicly traded common stock (or their equivalent) of the Successor Entity,
as
adjusted in accordance with the provisions of this Note. The provisions of
this Section shall apply similarly and equally to successive Fundamental
Transactions and shall be applied without regard to any limitations on the
exchange of this Note.
6. RIGHTS
UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
(a) Purchase
Rights. If at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the Holder will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which the Holder could have acquired if the Holder
had
held the number of shares of Common Stock acquirable upon complete exchange
of
this Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record
is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are
to
be determined for the grant, issue or sale of such Purchase Rights.
(a) Adjustment
of Exchange Price upon Issuance of Common Stock. If at any time after
the Subscription Date the Company issues or sells, or in accordance with this
Section 7(a) is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or held by
or
for the account of the Company, but excluding shares of Common Stock deemed
to
have been issued or sold by the Company in connection with any Excluded
Securities) for a consideration per share (the "New Issuance
Price") less than a price (the "Applicable Price")
equal to Exchange Price in effect immediately prior to such issue or sale (the
foregoing a "Dilutive Issuance"), then immediately after such
Dilutive Issuance, the Exchange Price then in effect shall be reduced to the
New
Issuance Price. For purposes of determining the adjusted Exchange Price
under this Section 7(a), the following shall be applicable:
(i)Issuance
of Options. If the Company in any manner grants or sells any Options
and the lowest price per share for which one share of Common Stock is issuable
upon the exercise of any such Option or upon conversion or exchange or exercise
of any Convertible Securities issuable upon exercise of such Option is less
than
the Applicable Price, then 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 7(a)(i), the "lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Option or upon conversion or
exchange or exercise of any Convertible Securities issuable upon exercise of
such Option" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one share
of
Common Stock upon granting or sale of the Option, upon exercise of the Option
and upon conversion or exchange or exercise of any Convertible Security issuable
upon exercise of such Option. No further adjustment of the Exchange Price
shall be made upon the actual issuance of such share of Common Stock or of
such
Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon
conversion or exchange or
exercise of such Convertible Securities.
8
(ii)Issuance
of Convertible Securities. If the Company in any manner issues or
sells any Convertible Securities and the lowest price per share for which one
share of Common Stock is issuable upon such conversion or exchange or exercise
thereof is less than the Applicable Price, then 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 7(a)(ii), the "lowest price
per share for which one share of Common Stock is issuable upon such conversion
or exchange or exercise" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to
any
one share of Common Stock upon the issuance or sale of the Convertible Security
and upon the conversion or exchange or exercise of such Convertible Security.
No further adjustment of the Exchange Price shall be made upon the actual
issuance of such share of Common Stock upon conversion or exchange or exercise
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustment
of the Exchange Price had been or are to be made pursuant to other provisions
of
this Section 7(a), no further adjustment of the Exchange Price shall be made
by
reason of such issue or sale.
(iii)Change
in Option Price or Rate of Exchange. If the purchase price provided
for in any Options, the additional consideration, if any, payable upon the
issue, conversion, exchange or exercise of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Stock changes at any time, the Exchange
Price in effect at the time of such change shall be adjusted to the Exchange
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion or exchange rate, as the case may be, at
the
time initially granted, issued or sold. For purposes of this Section
7(a)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the Subscription Date are changed in the manner described
in
the immediately preceding sentence, then such Option or Convertible Security
and
the Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change. No
adjustment shall be made if such adjustment would result in an increase of
the
Exchange Price then in effect.
(v)Record
Date. If the Company takes a record of the holders of Common Stock for
the purpose of entitling them (A) to receive a dividend or other distribution
payable in Common Stock, Options or in Convertible Securities or (B) to
subscribe for or purchase Common Stock, Options or Convertible Securities,
then
such record date will be deemed to be the date of the issue or sale of the
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 Exchange Price upon Subdivision or Combination of Common Stock. If
the Company at any time on or after the Subscription Date subdivides (by any
stock split, stock dividend, recapitalization or otherwise) one or more classes
of its outstanding shares of Common Stock into a greater number of shares,
the
Exchange Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller
number of shares, the Exchange Price in effect immediately prior to such
combination will be proportionately increased.
(c) Other
Events. If any event occurs of the type contemplated by the provisions
of this Section 7 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 will make any adjustment in the Exchange Price it deems, in its
reasonable discretion, to be necessary to protect the rights of the Holder
under
this Note; provided that no such adjustment will increase the Exchange Price
as
otherwise determined pursuant to this Section 7.
(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
200% of the Exchange Rate with respect to the Exchange 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
exchange of the Notes, 200% of the number of shares of Common Stock as shall
from time to time be necessary to effect the exchange 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 of the
previous sentence (without regard to any limitations on exchanges) (the
"Required Reserve Amount"). The initial number of
shares of Common Stock reserved for exchanges of the Notes and each increase
in
the number of shares so reserved or increase in the number of reserved shares,
as the case may be (the "Authorized Share Allocation") shall be
allocated pro rata among the Holders of the Notes based on the principal amount
of the Notes held by each holder at the Closing (as defined in the Purchase
Agreement). In the event that a holder shall sell or otherwise
transfer any of such holder’s Notes, each transferee shall be allocated a pro
rata portion of such holder’s Authorized Share Allocation. Any shares
of Common Stock reserved and allocated to any Person which ceases to hold any
Notes shall be allocated to the remaining holders of the Notes, pro rata based
on the principal amount of the Notes then held by such holders.
(b) Insufficient
Authorized Shares. If 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 exchange 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 ninety (90) days after
the
occurrence of such Authorized Share Failure, the Company shall hold a meeting
of
its shareholders 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 shareholder with a proxy or information statement and shall use
its
reasonable best efforts to solicit its shareholders' approval of such increase
in authorized shares of Common Stock and to cause its board of directors to
recommend to the shareholders that they approve such proposal.
(b) Redemption
by Other Holders. Upon the Company's receipt of notice from any
of the holders of the Other Notes for redemption or repayment as a result of
an
event or occurrence substantially similar to the events or occurrences described
in Section 4(b) or Section 5(b) (each, an "Other Redemption
Notice"), the Company shall immediately, but no later than one (1)
Business Day of its receipt thereof, forward to the Holder by facsimile a copy
of such notice. If the Company receives a Redemption Notice and one
or more Other Redemption Notices, during the seven (7) Business Day period
beginning on and including the date which is three (3) Business Days prior
to
the Company's receipt of the Holder's Redemption Notice and ending on and
including the date which is three (3) Business Days after the Company's receipt
of the Holder's Redemption Notice and the Company is unable to redeem all
principal, interest and other amounts designated in such Redemption Notice
and
such Other Redemption Notices received during such seven (7) Business Day
period, then the Company shall redeem a pro rata amount from each holder of
the
Notes (including the Holder) based on the principal amount of the Notes
submitted for redemption pursuant to such Redemption Notice and such Other
Redemption Notices received by the Company during such seven (7) Business Day
period.
13. RESTRICTION
ON REDEMPTION AND CASH DIVIDENDS. Until all of the Notes have been
exchanged, redeemed or otherwise satisfied in accordance with their terms,
the
Company shall not, directly or indirectly, redeem, repurchase or declare or
pay
any cash dividend or distribution on its Common Stock or Preferred Stock without
the prior express written consent of the Required Holders.
14. VOTING
RIGHTS. The Holder shall have no voting rights as the holder of this
Note, except as required by law, and as expressly provided in this
Note.
15. COVENANTS.
(a) Rank. All
payments due under this Note shall (i) rank pari passu with the Other
Notes and (ii) be senior to all other Indebtedness of the Company.
(b) Existence
of Liens. So long as this Note is outstanding, the Company shall not
directly or indirectly, allow or suffer to exist any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the
Company (collectively, "Liens") other than Permitted
Liens.
(c) Restricted
Payments. The Company shall 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 Permitted 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,
an
event constituting, or that with the passage of time and without being cured
would constitute, an Event of Default has occurred and is
continuing.
16. VOTE
TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a
meeting duly called for such purpose or the written consent without a meeting
of
the Required Holders shall be required for any change or amendment to this
Note
or the Other Notes.
17. TRANSFER.
The Holder acknowledges and agrees that, unless otherwise consented to by
the Company, this Note may only be offered, sold, assigned or transferred by
the
Holder if the provisions of Section 2(f) of the Purchase Agreement are complied
with in all respects.
12
18. 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 issue, promptly following the
satisfaction of the provisions of Section 2(f) of the Purchase Agreement, and
deliver upon the order of the Holder a new Note (in accordance with Section
18(d)), in the name of the validly registered assigns or transferee,
representing the outstanding Principal being transferred by the Holder and,
if
less then the entire outstanding Principal is being transferred, a new Note
(in
accordance with Section 18(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)(ii) and this Section 18(a), following exchange 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, and, in the case of loss, theft or destruction, of
any
indemnification undertaking by the Holder to the Company in customary 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 18(d)) representing the outstanding Principal.
(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 18(d) and in principal
amounts of at least $100,000) 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.
(e) Registered
Instrument. This Note is a registered instrument and is not a
bearer instrument. The Note is registered as to both Principal and
Interest with the Company and its Transfer Agent and all payments hereunder
shall be made to the named Holder or, in the event of a transfer, to the
transferee identified in the record of ownership of the Note maintained by
the
Holder on behalf of the Company and the Transfer Agent. Transfer of this Note
may not be effected except in accordance with the provisions of the Note and
the
Purchase Agreement.
13
19. 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. Amounts set forth or provided for herein with
respect to payments, exchange 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 an Event of Default
hereunder will cause irreparable harm to the Holder and that the remedy at
law
for any such Event of Default may be inadequate. The Company therefore
agrees that, in the event of any Event of Default under this Note, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining such Event of Default, without the necessity of showing economic
loss and without any bond or other security being required.
20. 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,
reorganization, receivership or other proceeding, including, but not limited
to,
attorneys' fees and disbursements.
21. CONSTRUCTION;
HEADINGS. This Note shall be deemed to be jointly drafted by the
Company and all the Purchasers 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.
22. 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.
(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 Purchase Agreement. Unless a specific notice is otherwise required
under this Note, 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 therefor. Without limiting the
generality of the foregoing, the Company will give written notice to the Holder
(i) immediately upon any adjustment of the Exchange Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii)
at least ten 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 pro rata subscription offer to holders
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.
25. CANCELLATION.
After all Principal, accrued Interest and other amounts at any time owed
on this Note has been paid in full, or any redemption premium (including, but
not limited to, those amounts due under Section 4 or 5) is paid in full, this
Note shall automatically be deemed canceled, shall be surrendered to the Company
for cancellation and shall not be reissued.
26. WAIVER
OF NOTICE. To the extent permitted by law, the Company hereby waives
demand, notice, protest and all other demands and notices in connection with
the
delivery, acceptance, performance, default or enforcement of this Note and
the
Purchase Agreement.
15
27. GOVERNING
LAW; JURISDICTION; JURY TRIAL. 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. The Company hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to
such
party at the address set forth in Section 9(f) of the Purchase Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. 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, 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.
(a) "Approved
Stock Plan" means any employee benefit plan which has been approved by
the Board of Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, consultant, officer or director for
services provided to the Company.
(b) "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.
(c) "Calendar
Month" means the period beginning on and including the first of each
calendar month and ending on and including the last day of such calendar
month.
(d) "Change
of Control" means any Fundamental Transaction other than (i) any
reorganization, recapitalization or reclassification of the 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, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity
or
entities, or (ii) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.
16
(e) [Reserved]
(f) "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,
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 Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing
Bid Price or the Closing Sale Price cannot be calculated for a security on
a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price, as the case may be, of such security on such date shall
be
the fair market value as mutually determined by the Company and the Holder.
If the Company and the Holder are unable to agree upon the fair market
value of such security, then such dispute shall be resolved pursuant to Section
23. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during
the
applicable calculation period.
(g) "Closing
Date" shall have the meaning set forth in the Purchase Agreement, which
date is the date the Company initially issued Notes pursuant to the terms of
the
Purchase Agreement.
(h) "Contingent
Obligation" means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will
be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or
in
part) against loss with respect thereto.
(j)“Eligible
Market” means the Principal Market, The New York Stock Exchange, Inc.,
Nasdaq Select, Nasdaq Global Select or the American Stock Exchange.
(l) "Fundamental
Transaction" means that the Company shall, directly or indirectly, in
one or more related transactions, (i) consolidate or merge with or into (whether
or not the Company is the surviving corporation) another Person, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of
the
properties or assets of the Company to another Person, or (iii) allow another
Person or Persons 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 (not
including any shares of Voting Stock held by the Person or Persons making or
party to, or associated or affiliated with the Person or Persons making or
party
to, such purchase, tender or exchange offer), (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of either the
outstanding shares of Voting Stock (not including any shares of Voting Stock
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 purchase
agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock or (vi) any "person" or "group" (as these terms
are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the "beneficial
owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate
Voting Stock of the Company.
(m) "GAAP"
means United States generally accepted accounting principles, consistently
applied.
18
(n) "Indebtedness"
of any Person means, without duplication (i) all indebtedness for borrowed
money, (ii) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services, including (without limitation) "capital
leases" in accordance with generally accepted accounting principles (other
than
trade payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(v) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in
the
event of default are limited to repossession or sale of such property), (vi)
all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment
of
such indebtedness, (viii) all obligations issued, undertaken or assumed as
part
of any financing facility with respect to accounts receivables of the Company,
including, without limitation, any factoring arrangement of such accounts
receivables and (ix) all Contingent Obligations in respect of indebtedness
or
obligations of others of the kinds referred to in clauses (i) through (viii)
above.
(r) "Interest
Rate" means twelve percent (12%) per annum, subject to periodic
adjustment pursuant to Section 2.
(s) "Market
Price" means, for any given date, the arithmetic average of the
Weighted Average Price of the Common Stock during the five (5) consecutive
Trading Day period immediately prior to and including such given date; provided
that if the Company issues a press release or files a Form 8-K at any point
during such five Trading Day period, the "Market Price" shall mean the
arithmetic average of the Weighted Average Price of the Common Stock during
the
five (5) consecutive Trading Day period beginning on the date that such press
release is issued; provided further, that all such determinations shall be
appropriately adjusted for any stock split, stock dividend, stock combination
or
other similar transaction that proportionately decreases or increases the Common
Stock during such periods.
19
(t) "Options"
means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.
(u) "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.
(w) "Permitted
Liens" means (i) any Lien for taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, (ii) any statutory Lien arising
in the ordinary course of business by operation of law with respect to a
liability that is not yet due or delinquent, (iii) any Lien created by operation
of law, such as materialmen's liens, mechanics' liens and other similar liens,
arising in the ordinary course of business with respect to a liability that
is
not yet due or delinquent or that are being contested in good faith by
appropriate proceedings, (iv) Liens securing the Company's obligations under
the
Notes, (v) Liens (A) upon or in any equipment (as defined in the Security
Agreement) acquired or held by the Company to secure the purchase
price of such equipment or indebtedness incurred solely for the purpose of
financing the acquisition or lease of such equipment, or (B) existing on such
equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds
of
such equipment, (vi) Liens incurred in connection with the extension, renewal
or
refinancing of the indebtedness secured by Liens of the type described in
clauses (i) and (v) above, provided that any extension, renewal or replacement
Lien shall be limited to the property encumbered by the existing Lien and the
principal amount of the Indebtedness being extended, renewed or refinanced
does
not increase, and (vii) Liens with respect to Indebtedness not individually
in
excess of $25,000 or in the aggregate in excess of $100,000, which individually
and in the aggregate are not material to the Company.
20
(x) "Person"
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.
(z) "Principal
Market" means Over-the-Counter Bulletin Board.
(aa) "Redemption
Notices" means, collectively, the Event of Default Redemption Notices
and Change of Control Redemption Notices, and, each of the foregoing,
individually, a Redemption Notice.
(bb) "Redemption
Premium" means 120%.
(cc) "Redemption
Prices" means, collectively, the Event of Default Redemption Price,
Change of Control Redemption Price, and the Company Redemption Amount, the
Holder Optional Redemption Price and the Holder Partial Redemption Price and,
each of the foregoing, individually, a Redemption Price.
(dd) "Required
Holders" means the holders of Notes representing at least fifty-one
percent (51%) of the aggregate principal amount of the Notes then
outstanding.
(ee) "SEC"
means the United States Securities and Exchange Commission.
21
(ff) "Purchase
Agreement" means that certain purchase agreement dated the Subscription
Date by and among the Company and the initial holders of the Notes pursuant
to
which the Company issued the Notes.
(gg) “Security
Agreement” means that certain Security Agreement dated the Subscription
Date by and between the Company and the Collateral Agent (as defined
therein).
(ii) "Successor
Entity" means the Person, which may be the Company, formed by,
resulting from or surviving any Fundamental Transaction or the Person with
which
such Fundamental Transaction shall have been made, provided that if such Person
is not a publicly traded entity whose common stock or equivalent equity security
is quoted or listed for trading on an Eligible Market, Successor Entity shall
mean such Person's Parent Entity.
(jj) "Trading
Day" means any day on which the Common Stock are 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 are then traded; provided that
"Trading Day" shall not include any day on which the Common Stock are scheduled
to trade on such exchange or market for less than 4.5 hours or any day that
the
Common Stock are 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).
(kk)“Transfer
Agent” means Continental Stock Transfer and Trust Co.
(mm) "Weighted
Average Price" means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during
the period beginning at 9:30:01 a.m., New York Time (or such other time as
the
Principal Market publicly announces is the official open of trading), and ending
at 4:00:00 p.m., New York Time (or such other time as the Principal Market
publicly announces is the official close of trading) as reported by Bloomberg
through its "Volume at Price" functions, or, if the foregoing does not apply,
the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30:01 a.m., New York Time (or such other time
as such market publicly announces is the official open of trading), and ending
at 4:00:00 p.m., New York Time (or such other time as such market publicly
announces is the official close of trading) as reported by Bloomberg, or, if
no
dollar volume-weighted average price is reported for such security by Bloomberg
for such hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as reported
in
the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.). If the Weighted Average Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Weighted Average Price
of such security on such date shall be the fair market value as mutually
determined by the Company and the Holder. If the Company and the Holder
are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 23. All such determinations
to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation
period.
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, nonpublic
information relating to the Company, the Company shall within two (2) Business
Days after any such receipt or delivery publicly disclose such material,
nonpublic information on a Current Report on Form 8-K or otherwise. In the
event
that the Company believes that a notice contains material, nonpublic
information, relating to the Company, the Company shall indicate to the Holder
within one (1) Business Day of the 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, nonpublic information
relating to the Company.
[Signature
Page Follows]
23
IN
WITNESS WHEREOF, the Company has
caused this Note to be duly executed as of the Issuance Date set out
above.
