8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 2, 2019

 

 

MannKind Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   000-50865   13-3607736

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

30930 Russell Ranch Road, Suite 300

Westlake Village, California

  91362
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (818) 661-5000

N/A

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. of Form 8-K):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Trading

Symbol(s)

  

Name of each exchange

on which registered

Common Stock    MNKD    The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 1.01

Entry into a Material Definitive Agreement.

MidCap Credit Facility

On August 6, 2019 (the “Closing Date”), MannKind Corporation (“MannKind”) entered into a Credit and Security Agreement (the “MidCap Credit Facility”), by and among MannKind, MannKind LLC, MannKind’s wholly owned subsidiary (“MannKind LLC”, and together with MannKind, collectively, the “Company”), the lenders party thereto from time to time and MidCap Financial Trust (“MidCap”), as agent.

The MidCap Credit Facility provides a secured term loan facility in an aggregate principal amount of up to $75.0 million. The Company borrowed the first advance of $40.0 million (“Tranche 1”) on August 6, 2019. Under the terms of the MidCap Credit Facility, the second advance of $10.0 million (“Tranche 2”) will be available to the Company until April 15, 2020, subject to the Company’s satisfaction of certain conditions described in the MidCap Credit Facility, including the Company achieving Afrezza Net Revenue (as defined in the MidCap Credit Facility) of at least $30.0 million on a trailing twelve month basis. Under the terms of the MidCap Credit Facility, the third advance of $25.0 million (“Tranche 3”) will be available to the Company until June 30, 2021, subject to the satisfaction of certain milestone conditions associated with Treprostinil Technosphere.

Tranche 1 and, if borrowed, Tranche 2 and Tranche 3, each accrue interest at an annual rate equal to LIBOR plus 6.75%, subject to a LIBOR floor of 2.00%. Interest on each term loan advance is due and payable monthly in arrears. Principal on each term loan advance under Tranche 1 and Tranche 2 is payable in 36 equal monthly installments beginning September 1, 2021, until paid in full on August 1, 2024, and principal on each term loan advance under Tranche 3 is payable beginning on the later of (i) September 1, 2021, and (ii) the first day of the first full calendar month immediately following such term loan advance, in an amount equal to the outstanding term loan advance in respect of Tranche 3 divided by the number of full calendar months remaining before August 1, 2024. The Company has the option to prepay the term loans, in whole or in part, subject to early termination fees in an amount equal to 3.00% of principal prepaid if prepayment occurs on or prior to the first anniversary of the Closing Date, 2.00% of principal prepaid if prepayment occurs after the first anniversary of the Closing Date but on or prior to the second anniversary of the Closing Date, and 1.00% of principal prepaid if prepayment occurs after the second anniversary of the Closing Date and prior to or on the third anniversary of the Closing Date. In connection with execution of the MidCap Credit Facility, the Company paid MidCap a $375,000 origination fee.

Upon termination of the MidCap Credit Facility, the Company is required to pay an exit fee equal to 6.00% of the principal amount of all term loans advanced to the Company under the MidCap Credit Facility.

The Company’s obligations under the MidCap Credit Facility are secured by a security interest on substantially all of its assets, including intellectual property. Additionally, the Company’s future subsidiaries, if any, may be required to become co-borrowers or guarantors under the credit facility.

The MidCap Credit Facility contains customary affirmative covenants and customary negative covenants limiting the Company’s ability and the ability of the Company’s subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions. The Company must also comply with a financial covenant relating to trailing twelve month minimum Afrezza Net Revenue requirements (as defined in the MidCap Credit Facility), tested on a monthly basis, and a minimum cash covenant of $15.0 million at all times prior to the funding of Tranche 2, and $20.0 million at all times following the funding of Tranche 2 or Tranche 3.

The MidCap Credit Facility also contains customary events of default relating to, among other things, payment defaults, breaches of covenants, a material adverse change, listing of the Company’s common stock, bankruptcy and insolvency, cross defaults with certain material indebtedness and certain material contracts, judgments, and inaccuracies of representations and warranties. Upon an event of default, the agent and the lenders may declare all or a portion of the Company’s outstanding obligations to be immediately due and payable and exercise other rights and remedies provided for under the MidCap Credit Facility. During the existence of an event of default, interest on the term loans could be increased by 2.00%.


The Company also agreed to issue warrants to purchase shares of MannKind’s common stock (the “MidCap Warrants”) upon the drawdown of each term loan advance under the MidCap Credit Facility in an aggregate amount equal to 3.25% of the amount drawn, divided by the exercise price per share for that tranche. The exercise price per share is equal to the volume-weighted average closing price of MannKind’s common stock for the ten business days immediately preceding the second business day before the issue date. As a result of Tranche 1, the Company issued warrants to purchase an aggregate of 1,171,614 shares of the Company’s common stock, at an exercise price equal to $1.11 per share (the “Tranche 1 Warrants”). The MidCap Warrants are immediately exercisable and expire on the earlier to occur of the seventh anniversary of the respective issue date or, in certain circumstances, the closing of a merger, sale or other consolidation transactions in which the consideration is cash, stock of a publicly traded acquirer, or a combination thereof.

The foregoing descriptions of the MidCap Credit Facility and MidCap Warrants do not purport to be complete and are qualified in their entirety by reference to the MidCap Credit Facility and MidCap Warrants, copies of which are attached as Exhibits 99.1 and 4.1, respectively, to this report.

Exchange of 2021 Convertible Notes for 2024 Convertible Notes and the Indenture for the 2024 Convertible Notes

On August 6, 2019, MannKind entered into a privately-negotiated exchange agreement (the “2021 Note Exchange Agreement”) with Bruce & Co., Inc., for itself and on behalf of the beneficial owners of the holders of MannKind’s outstanding 5.75% Convertible Senior Subordinated Exchange Notes due 2021 (the “Existing 2021 Notes”), pursuant to which MannKind agreed to, among other things, (i) repay $1,470,147 in cash to such holders ($1,500,000 less the amount of interest accruing under the Existing 2021 Notes between August 6, 2019 and August 15, 2019), (ii) issue 4,017,857 shares of MannKind’s common stock to such holders (at a conversion price of $1.12 per share) (the “2021 Exchange Shares”), (iii) issue new 5.75% Convertible Senior Subordinated Exchange Notes due 2024 (the “2024 Convertible Notes”) to such holders pursuant to the provisions of an indenture (the “Indenture”) in an aggregate principal amount of $5,000,000 and (iv) issue two non-interest bearing promissory notes to such holders, each in the amount of $2,630,750, one of which will mature on June 30, 2020 (the “June 2020 Note”) and the other of which will mature on December 31, 2020 (the “December 2020 Note”, and together with the June 2020 Note, the “2020 Notes”), in exchange for the cancellation of the $18.7 million in principal amount of the Existing 2021 Notes. The 2020 Notes may be prepaid at any time on or prior to their respective maturity dates at the option of MannKind. In addition, MannKind may elect to pay the 2020 Notes at any time on or prior to their respective maturity dates, if certain conditions are met, in shares of MannKind’s common stock at a price per share equal to the last reported sale price on the trading day immediately prior to the payment date. The exchange pursuant to the 2021 Note Exchange Agreement was effected on August 6, 2019.

The 2024 Convertible Notes were issued pursuant to an indenture, dated as of August 6, 2019, between MannKind and U.S. Bank National Association, as trustee. The 2024 Convertible Notes are MannKind’s general, unsecured obligations, and are subordinated in right of payment to the indebtedness incurred pursuant to the MidCap Credit Facility. The 2024 Convertible Notes rank equally in right of payment with MannKind’s other unsecured senior debt. The 2024 Convertible Notes accrue interest at the rate of 5.75% per year on the principal amount, payable semiannually in arrears on February 15 and August 15 of each year, beginning February 15, 2020, with interest accruing from August 6, 2019. Interest on the 2024 Convertible Notes will be payable in cash or, at the option of MannKind if certain conditions are met, in shares of MannKind’s common stock at a price per share equal to the last reported sale price on the trading day immediately prior to the interest payment date. The 2024 Convertible Notes will mature on the earlier of (i) November 4, 2024 or (ii) the 91st day after the payment in full of, and termination and discharge of all obligations (other than contingent indemnity obligations) under the MidCap Credit Facility.

The 2024 Convertible Notes will be convertible, at the option of the holder, at any time on or prior to the close of business on the business day immediately preceding the stated maturity date, into shares of MannKind’s common stock at a conversion rate of 333.3333 shares per $1,000 principal amount of 2024 Convertible Notes, which is equal to a conversion price of approximately $3.00 per share. The conversion rate will be subject to adjustment under certain circumstances described in the Indenture.

The Indenture includes customary events of default, including:

 

  (1)

the Company fails to pay when due the principal of or premium, if any, on any of the 2024 Convertible Notes at maturity, upon repurchase, acceleration or otherwise;


  (2)

the Company fails to pay an installment of interest on any of the 2024 Convertible Notes for 30 days after the date when due;

 

  (3)

the Company fails to deliver when due all shares of the Company’s common stock, together with cash instead of fractional shares, and/or other property, if applicable, deliverable upon conversion of the 2024 Convertible Notes, which failure continues for 10 days;

 

  (4)

the Company fails to perform or observe any other term, covenant or agreement contained in the 2024 Convertible Notes or the Indenture for a period of 60 days after written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company;

 

  (5)

(i) the Company fails to make any payment by the end of the applicable grace period, if any, after the maturity of any indebtedness for borrowed money in an amount in excess of $25,000,000 or (ii) there is an acceleration of any indebtedness for borrowed money in an amount in excess of $25,000,000 because of a default with respect to such indebtedness without such indebtedness having been discharged or such acceleration having been cured, waived, rescinded or annulled, in the case of either (i) or (ii) above, for a period of 30 days after written notice to the Company;

 

  (6)

the Company fails to provide a fundamental change company notice; and

 

  (7)

certain events of bankruptcy, insolvency or reorganization of the Company.

If certain bankruptcy and insolvency-related events of default occur, the principal of, and accrued and unpaid interest on, all of the then outstanding 2024 Convertible Notes shall automatically become due and payable. If an event of default other than certain bankruptcy and insolvency-related events of defaults occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then-outstanding 2024 Convertible Notes, by written notice to the Trustee, may declare the 2024 Convertible Notes due and payable at their principal amount plus any accrued and unpaid interest, and thereupon the Trustee may, at its discretion, proceed to protect and enforce the rights of the holders by the appropriate judicial proceedings. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will, for the first 180 days after such event of default, consist exclusively of the right to receive additional interest on the 2024 Convertible Notes.

If MannKind undergoes certain fundamental changes, except in certain circumstances, each holder of 2024 Convertible Notes will have the option to require MannKind to repurchase all or any portion of that holder’s 2024 Convertible Notes. The fundamental change repurchase price will be 100% of the principal amount of the 2024 Convertible Notes to be repurchased plus accrued and unpaid interest, if any.

MannKind may elect at its option to cause all or any portion of the 2024 Convertible Notes to be mandatorily converted in whole or in part at any time prior to the close of business on the business day immediately preceding the maturity date, if the last reported sale price of its common stock equals or exceeds 120% of the conversion price then in effect for at least 10 trading days in any 20 trading day period, ending within five business days prior to the date of the mandatory conversion notice.

The foregoing descriptions of the 2021 Note Exchange Agreement, 2024 Convertible Notes, Indenture, June 2020 Note and December 2020 Note do not purport to be complete and are qualified in their entirety by reference to the 2021 Note Exchange Agreement, 2024 Convertible Notes, Indenture, June 2020 Note and December 2020 Note, copies of which are attached as Exhibits 99.2, 4.2, 4.3, 4.4 and 4.5, respectively, to this report.

Exchange of Mann Group Note

On August 5, 2019, MannKind entered into a privately-negotiated exchange agreement (the “Mann Group Exchange Agreement”) with The Mann Group LLC (the “Mann Group”), pursuant to which MannKind agreed to, among other things, (i) repay $3,000,000 in cash to the Mann Group, (ii) issue 7,142,857 shares of MannKind’s common stock to the Mann Group (at a conversion price of $1.12 per share) (the “Mann Group Exchange Shares”), (iii) issue a new convertible promissory note (the “Mann Group Convertible Note”) to the Mann Group in an aggregate principal amount of $35,000,000 and (iv) issue a new non-convertible promissory note (the “Mann Group Non-Convertible Note”) to the Mann Group in an aggregate principal amount of $35,050,750, in exchange for the cancellation of the $70.1 million in principal amount and accrued interest on the amended and restated promissory note dated March 11, 2018 held by the Mann Group.

The Mann Group Convertible Note and Mann Group Non-Convertible Note will each accrue interest at the rate of 7.00% per year on the principal amount, payable quarterly in arrears on the first day of each calendar quarter beginning October 1, 2019.


The Mann Group Convertible Note will mature on November 3, 2024. The principal and any accrued and unpaid interest under the Mann Group Convertible Note may be converted, at the option of the Mann Group, at any time on or prior to the close of business on the business day immediately preceding the stated maturity date, into shares of MannKind’s common stock at a conversion rate of 400 shares per $1,000 of principal and/or accrued and unpaid interest, which is equal to a conversion price of $2.50 per share. The conversion rate will be subject to adjustment under certain circumstances described in the Mann Group Convertible Note. Interest on the Mann Group Convertible Note will be payable in kind by adding the amount thereof to the principal amount; provided that with respect to interest accruing from and after January 1, 2021, MannKind may, at its option, elect to pay any such interest on any interest payment date, if certain conditions are met, in shares of MannKind’s common stock at a price per shall equal to the last reported sale price on the trading day immediately prior to the payment date.

The Mann Group Non-Convertible Note will mature on the earlier of (i) November 3, 2024 or (ii) the 90th day after the repayment in full, and termination and discharge of all obligations (other than contingent indemnity obligations) under the MidCap Credit Facility. Interest on the Mann Group Non-Convertible Note will be payable in kind by adding the amount thereof to the principal amount; provided that MannKind may, at its option, elect to pay any such interest on any interest payment date, if certain conditions are met, in shares of MannKind’s common stock at a price per shall equal to the last reported sale price on the trading day immediately prior to the interest payment date.

The foregoing descriptions of the Mann Group Exchange Agreement, Mann Group Convertible Note and Mann Group Non-Convertible Note do not purport to be complete and are qualified in their entirety by reference to the Mann Group Exchange Agreement, Mann Group Convertible Note and Mann Group Non-Convertible Note, copies of which are attached as Exhibits 99.3, 4.6 and 4.7, respectively, to this report.

Exchange of Deerfield Notes

On August 6, 2019, the Company entered into an Exchange Agreement (the “Deerfield Exchange Agreement”) with Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. (collectively, “Deerfield”) pursuant to which the Company agreed to, among other things, (i) repay $2,000,000 of the aggregate principal amount under the 9.75% Senior Convertible Notes due 2019 held by Deerfield (the “Deerfield Tranche 1 Notes”) and pay all accrued and unpaid interest on the Deerfield Tranche 1 Notes then-outstanding, (ii) issue an aggregate of 2,678,571 shares of MannKind’s common stock (the “Deerfield Exchange Shares”) to Deerfield in exchange for $3,000,000 aggregate principal amount of Deerfield Tranche 1 Notes and (iii) cancel the Deerfield Tranche 1 Notes. The principal amount being repaid and exchanged under the Deerfield Tranche 1 Notes represents the final outstanding principal amount that would otherwise have become due and payable on August 31, 2019.

The foregoing description of the Deerfield Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the Deerfield Exchange Agreement, a copy of which is attached as Exhibit 99.4 to this report.


Amphastar Amendment

On August 2, 2019, MannKind entered into a Fifth Amendment to Supply Agreement (the “Fifth Amendment”) with Amphastar Pharmaceuticals, Inc. pursuant to which the parties agreed to, among other things, extend the term of the supply agreement an additional two years (to December 31, 2026) and restructure the annual purchase commitments as follows:

 

     As of June 30, 2019      As amended August 2, 2019  

2019

   2.3 million      —    

2020

   15.9 million      6.6 million  

2021

   15.9 million      6.6 million  

2022

   19.8 million      8.5 million  

2023

   19.8 million      10.9 million  

2024

   8.6 million      14.6 million  

2025

   —        15.5 million  

2026

   —        19.4 million  

In connection with Fifth Amendment, MannKind is obligated to pay amendment fees of $1.5 million by September 15, 2019 and $1.25 million by December 15, 2019.

The foregoing description of the Fifth Amendment does not purport to be complete and is qualified in its entirety by reference to the Fifth Amendment, a copy of which is attached as Exhibit 99.5 to this report.

 

Item 2.03.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information in Item 1.01 above is incorporated by reference into this Item 2.03.

 

Item 3.02

Unregistered Sales of Equity Securities.

The information set forth under Item 1.01 of this report is incorporated by reference into this Item 3.02. MannKind offered the Tranche 1 Warrants, the 2024 Convertible Notes, the 2021 Exchange Shares, the 2020 Notes, the Mann Group Exchange Shares, the Mann Group Convertible Note and the Deerfield Exchange Shares in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act of 1933, as amended, and expects to rely on such exemptions for (i) any issuance of shares of its common stock upon exercise of the Tranche 1 Warrants, (ii) any issuance of shares of its common stock upon conversion of the 2024 Convertible Notes, the 2020 Notes and the Mann Group Convertible Note and (iii) any issuance of shares of its common stock as payments for interest on the 2024 Convertible Notes, the Mann Group Convertible Note and the Mann Group Non-Convertible Note.

 

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit
Number

  

Description

  4.1    Form of Warrant to Purchase Stock.
  4.2    Form of 5.75% Convertible Senior Subordinated Exchange Notes Due 2024 (included in Exhibit 4.3 as Exhibit A thereto).
  4.3    Indenture, dated as of August 6, 2019, by and between MannKind Corporation and U.S. Bank National Association.
  4.4    Promissory Note due June 30, 2020 made by MannKind Corporation in favor of Bruce & Co., Inc., dated August 6, 2019.
  4.5    Promissory Note due December 31, 2020 made by MannKind Corporation in favor of Bruce & Co., Inc., dated August 6, 2019.
  4.6    Convertible Promissory Note made by MannKind Corporation in favor of The Mann Group LLC, dated August 6, 2019.
  4.7    Promissory Note made by MannKind Corporation in favor of The Mann Group LLC, dated August 6, 2019.


99.1†    Credit and Security Agreement, dated August 6, 2019, by and among MannKind Corporation, MannKind LLC, the lenders party thereto from time to time and MidCap Financial Trust, as agent.
99.2    Exchange Agreement, dated August 6, 2019, by and between MannKind Corporation and Bruce & Co., Inc.
99.3    Exchange Agreement, dated August 5, 2019, by and between MannKind Corporation and The Mann Group LLC.
99.4    Exchange Agreement, dated August 6, 2019, by and among MannKind Corporation, MannKind LLC, Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P.
99.5†    Fifth Amendment to Supply Agreement, dated August 2, 3019, by and between MannKind Corporation and Amphastar Pharmaceuticals, Inc.

 

Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to confidential treatment.

Forward-Looking Statements

Statements contained in this report regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about the financial capacity available under the MidCap Credit Facility, the subsequent tranches and milestones under the MidCap Credit Facility, the anticipated net proceeds to us from the MidCap Credit Facility and our anticipated use of the net proceeds from the MidCap Credit Facility. Words such as “believes,” “anticipates,” “plans,” “expects,” “intends,” “will,” “goal,” “potential” and similar expressions are intended to identify forward-looking statements, though not all forward-looking statements necessarily contain these identifying words. These forward-looking statements are based upon management’s current expectations, are subject to known and unknown risks, and involve assumptions that may never materialize or may prove to be incorrect. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties, including, without limitation, the risk that the anticipated financial capacity under the new senior debt facility may not be available when expected, or at all, risks associated with the process of developing, marketing and commercializing our products, the Company’s ability to achieve and sustain sufficient market acceptance, and the capabilities of our product and service solutions to keep pace with rapidly changing technology and customer requirements. These and other factors are described in greater detail in our filings with the Securities and Exchange Commission, including without limitation our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019. All forward-looking statements contained in this press release speak only as of the date on which they were made, and we undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    MANNKIND CORPORATION

Dated: August 7, 2019

    By:  

/s/ David Thomson

      David Thomson, Ph.D., J.D.
      Corporate Vice President, General Counsel and Secretary
EX-4.1

Exhibit 4.1

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

WARRANT TO PURCHASE STOCK

 

Company:   MannKind Corporation, a Delaware corporation
Number of Shares:   [                    ] (Subject to adjustment as hereinafter provided)
Class of Stock:   Common Stock
Warrant Price:   $1.11 per share (Subject to adjustment as hereinafter provided)
Issue Date:   August 6, 2019
Expiration Date:   The earlier to occur of the (i) expiration of this Warrant pursuant to Section 1.6 hereof or (ii) 7th anniversary after the Issue Date
Credit Facilities:   This Warrant is issued in connection with the Credit and Security Agreement, dated as of August 6, 2019, among the Company, the other Borrowers (as defined therein) from time to time party thereto, MidCap Financial Trust, a Delaware statutory trust, as Agent and the lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

THIS WARRANT TO PURCHASE STOCK (this “Warrant”) CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Credit Agreement (defined above), [                    ] (together with any registered holder from time to time of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class and series of capital stock of the Company at the Warrant Price, all as set forth above or herein below and as adjusted pursuant to the terms of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. As used herein, “Share” or “Shares” shall refer to either (i) the shares of stock issuable upon the exercise or conversion of this Warrant and any shares of capital stock into which such shares may be converted or exchanged, or (ii) the authorized or issued and outstanding shares of capital stock of the Company which are of the same class and series as the shares of stock issuable upon the exercise or conversion of this Warrant, in either case as the specific provisions of this Warrant or the context may require.

ARTICLE 1.    EXERCISE.

1.1    Method of Exercise. Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the Company’s General Counsel at the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a certified check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.


1.2    Conversion Right. In lieu of exercising this Warrant as specified in Section 1.1, Holder may at any time and from time to time after the Issue Date convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate Fair Market Value of the number of Shares or the securities otherwise issuable upon exercise of the portion of this Warrant with respect to which Holder elects to convert this Warrant minus the aggregate Warrant Price of such Shares by (b) the Fair Market Value of one Share (or the securities otherwise issuable upon exercise of this Warrant), and by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the Company’s General Counsel at the principal office of the Company. The “Fair Market Value” of a Share (or the securities otherwise issuable upon exercise of this Warrant) shall be determined pursuant to Section 1.3.

1.3    Fair Market Value. If the Company’s common stock is traded on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”) and the Shares are common stock, the Fair Market Value of each Share shall be the closing price of a Share reported for the business day ending immediately before Holder delivers its Notice of Exercise to the Company. In the event of an exercise in connection with an Acquisition, the Fair Market Value of a Share shall be the value to be received per Share by all holders of such Shares in such transaction. In any other instance, the Fair Market Value of a Share shall be as the Board of Directors of the Company shall determine in its reasonable good faith judgment.

1.4    Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant pursuant to Section 1.1 or 1.2, respectively, and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall promptly deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant of like tenor representing the Shares not so acquired. This Warrant shall be deemed to have been exercised and such certificates deemed issued, and Holder shall become the holder of record of the Shares for all purposes, as of the date of Holder’s delivery of the exercise notice pursuant to Section 1.1 or 1.2 and payment of the Warrant Price, if applicable. If an exercise or conversion is to be made in connection with an Acquisition, such exercise may at the election of Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

1.5    Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall, at the expense of Holder, execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

1.6    Treatment of Warrant Upon Acquisition of Company.

1.6.1    “Acquisition”. For the purpose of this Warrant, “Acquisition” means (a) any sale, exclusive license, or other disposition of all or substantially all of the assets of the Company, or (b) any reorganization, consolidation, share exchange, take-over, plan of arrangement or merger of or involving the Company with, by or into another person or entity, or sale of outstanding securities of the Company by the holders thereof, in each case where the holders of the Company’s securities before the transaction beneficially own less than fifty percent (50%) of the outstanding voting securities of the successor, acquiring or surviving person or entity after the transaction.

 

2


1.6.2    Treatment of Warrant Upon Acquisition.

A)    Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that (i) is not described in Section 1.6.1(a), (ii) in which the sole consideration is cash, and (iii) in connection with or as a result of which all holders of the Shares are receiving or have the right to receive solely cash in the same proportions in respect of all of their Shares, then either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition, or (b) if Holder elects not to exercise or convert the Warrant, this Warrant will expire upon the consummation of such Acquisition, subject to Section 5.8. The Company shall provide Holder with written notice of its request relating to the foregoing (together with such reasonable information as Holder may reasonably request in connection with such contemplated Acquisition giving rise to such notice), which notice is to be delivered to Holder not less than ten (10) business days prior to the closing of the proposed Acquisition.

B)    Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is described in Section 1.6.1(a) and is an “arm’s-length” transaction with a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), Holder may (a) exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such True Asset Sale, (b) permit this Warrant to continue (unless exercised in the interim) until the earlier of the Expiration Date or the dissolution and/or liquidation of the Company following the closing of any such True Asset Sale, subject to Section 5.8, or (c) elect to have the terms of Section 1.6.2(D) below apply. The Company shall provide Holder with written notice of its request relating to the foregoing (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which notice is to be delivered to Holder not less than ten (10) business days prior to the closing of the proposed True Asset Sale.

C)    Upon the written request of the Company, Holder agrees that, in the event of an Acquisition (i) in which the consideration is a combination of cash and equity securities of the acquirer listed for trading on a U.S. national securities exchange and which may be freely resold pursuant to a resale registration statement or under Rule 144 of the Act without any restriction or limitation (including without limitation volume and manner of sale restrictions), (ii) in connection with or as a result of which all holders of the Shares are receiving or have the right to receive solely cash and/or such securities in the same proportions in respect of all of their Shares, and (iii) on the record date for which the Fair Market Value of one Share (or other securities issuable upon exercise of this Warrant) is greater than the Warrant Price, Holder may (a) exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition, or (b) if Holder elects not to exercise or convert the Warrant, this Warrant will expire upon the consummation of such Acquisition, subject to Section 5.8. The Company shall provide Holder with written notice of its request relating to the foregoing (together with such reasonable information as Holder may reasonably request in connection with such contemplated Acquisition giving rise to such notice), which notice is to be delivered to Holder not less than ten (10) business days prior to the closing of the proposed Acquisition.

D)    Upon the closing of any Acquisition other than those particularly described in subsections (A), (B) and (C) above (or in the case of an Acquisition described in Section 1.6.2(B)

 

3


above if Holder elects to have the terms of this Section 1.6.2(D) apply), the successor, surviving or acquiring entity shall assume in writing the obligations of this Warrant, including agreements to deliver to Holder in exchange for this Warrant a written instrument issued by the successor, surviving or acquiring entity pursuant to which this Warrant shall thereafter be exercisable for the kind, amount and value of securities, cash, and property as would have been payable for the Shares issuable upon exercise of the unexercised portion of this Warrant had such Shares been outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price and/or number of Shares shall be adjusted accordingly.

E)    Conditional Exercise. Notwithstanding any other provision hereof, if an exercise or conversion of this Warrant is to be made in connection with an Acquisition, such exercise may at the election of Holder be conditioned upon the consummation of such transaction, in which case such exercise or conversion shall not be deemed to be effective until immediately prior to the consummation of such transaction.

As used herein “Affiliate” shall mean any person or entity that owns or controls directly or indirectly ten percent (10%) or more of the voting securities of the Company, any person or entity that controls, is controlled by or is under common control with any such person or entity, and each of such person’s or entity’s officers, directors, members, managers, joint venturers or partners, as applicable (whether as a result of the ownership of voting securities, by contract or otherwise).

ARTICLE 2.    ADJUSTMENTS TO THE SHARES.

2.1    Stock Dividends, Subdivisions and Combinations. If the Company declares or pays a dividend on the Shares payable in common stock or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification, stock split, split-up or otherwise into a greater number of shares or takes any other action which increases the number of shares of any class or series of capital stock into which the Shares are convertible, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares purchasable hereunder shall be proportionately decreased.

2.2    Reclassification, Exchange, Combination or Substitution. Upon any reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of the underlying securities as to which purchase rights under this Warrant exist, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number, amount and kind of securities, money and property that Holder would have ultimately received upon the completion of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event if this Warrant had been exercised immediately before such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, combination, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The

 

4


amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the amended Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, reorganizations, mergers, consolidations or other events.

2.3    [Reserved].

2.4    [Reserved].

2.5    Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the Fair Market Value of a full Share.

2.6    Certificate as to Adjustments. Upon each adjustment of the Warrant Price or the kind or number of securities issuable under this Warrant pursuant to this Article 2, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Executive Officer, Corporate Secretary or a senior financial officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price and the number and kind of securities issuable under this Warrant in effect upon the date thereof and the series of adjustments leading to such Warrant Price and such number and kind of securities.

ARTICLE 3.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

3.1    Representations and Warranties. The Company represents and warrants and covenants to Holder as follows:

(a)    The Company has all requisite legal and corporate power and authority, and has taken all corporate action on the part of itself, its officers, directors and stockholders necessary, to execute, issue and deliver this Warrant, to issue the Shares issuable upon exercise or conversion of this Warrant and the securities issuable upon conversion of the Shares, and to carry out and perform its obligations under this Warrant, and this Warrant constitutes the legally binding and valid obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, or to principles of equity.

(b)    This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. All Shares which may be issued upon the exercise of the purchase or conversion right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances (including preemptive or other similar rights) except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

 

5


(c)    The execution, delivery, and performance of this Warrant by the Company will not result in a violation of, be in conflict with, or constitute a default under, with or without the passage of time or giving of notice, any provision of the Company’s Amended and Restated Certificate of Incorporation, the Company’s by-laws, any provision of any judgment, decree, or order to which the Company is a party, by which it is bound, or to which any of its material assets are subject, any contract, obligation, or commitment to which the Company is a party or by which it is bound, or any statute, rule, or governmental regulation applicable to the Company, or the creation of any lien, charge, or encumbrance upon any assets of the Company.

(d)    Company has previously furnished or made available (including by way of filing with the Securities and Exchange Commission (“SEC”)) to Holder complete and accurate copies, as amended or supplemented, of its (a) Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and (b) all other reports filed by Company under Section 13 or subsections (a) or (c) of Section 14 of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) with the SEC since December 31, 2018 (such reports are collectively referred to herein as the “Company Reports”). The Company Reports constitute all of the documents required to be filed by Company under Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act with the SEC from December 31, 2018 through the date of this Warrant. The Company Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder when filed. As of their respective dates, the Company Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

3.2    Notice of Certain Events; Information. If the Company proposes at any time (a) to declare any dividend or distribution upon any of its stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to effect any reclassification or recapitalization of any of its stock; (c) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, (d) to approve or participate in any Acquisition, (e) to liquidate, dissolve or wind up, or (f) to take any action or to effect any transaction which requires the Company to provide notice to other holders of the Shares, then, in connection with each such event, the Company shall give Holder: (1) at least ten (10) business days prior written notice of the date on which a record will be taken for such dividend or distribution (and specifying the date on which the holders of stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) above; and (2) in the case of the matters referred to in (b), (c), (d), (e) or (f) above, at least ten (10) business days prior written notice of the date when the same will take place (and, if applicable, specifying the date on which the holders of stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event). The Company will also provide such information in its possession as is reasonably requested by Holder in a timely manner to enable Holder to comply with Holder’s accounting or reporting requirements.

ARTICLE 4.    REPRESENTATIONS AND WARRANTIES OF HOLDER. Holder represents and warrants to the Company as follows:

4.1    Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act and Holder has no present intention of selling or engaging in any public

 

6


distribution of the same except pursuant to a registration or exemption or any transfer contemplated by or permitted under Section 3.3. Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2    Disclosure of Information. Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

4.3    Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4    Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

4.5    The Act. Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

ARTICLE 5.    MISCELLANEOUS.

5.1    Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date. The conditions under which the Warrant shall automatically convert on the Expiration Date are set forth in Section 5.8 below.

5.2    Legends. For purposes of this Section 5.2, the term “Holder” shall be deemed to include any holder of the Shares issued or issuable upon the exercise or conversion of this Warrant.

(a)    The Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE

 

7


SECURITIES LAWS OF ANY STATE AND, EXCEPT PURSUANT TO THE PROVISIONS OF ARTICLE 5 OF THE WARRANT PURSUANT TO WHICH THE SHARES REPRESENTED HEREBY WERE ISSUED, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR UNLESS SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR UNLESS, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

(b)    Notwithstanding the foregoing, no certificate or instrument evidencing the Shares shall bear, and the Company hereby agrees to remove, within ten (10) days of any written request (together with such evidence or documentation described in the following provisions) by Holder, pursuant to the following provisions of this Section 5.2(b), or not to affix, as applicable, any restrictive or other legend, notice or provision restricting the sale or transfer of the Shares, in each case provided that Holder has provided reasonable evidence to the Company (including any customary broker’s or transferring stockholder’s letters but expressly excluding an opinion of counsel other than with respect to clause (D) below) that: (A) a transfer of the Shares, as applicable, has been made pursuant to SEC Rule 144 (assuming the transferor is not an “affiliate” (as defined in SEC Rule 144) of the Company); (B) the Shares are then eligible for transfer pursuant to SEC Rule 144; (C) a transfer of the Shares has been made for no consideration to an affiliate of Holder or any assignee or purchaser of Holder’s or its affiliate’s rights under the Credit Agreement or any interest or participation therein or has otherwise been made to any affiliate of Holder who is an “accredited investor” as defined in Regulation D promulgated under the Act, and that is otherwise in compliance with all applicable securities laws; or (D) in connection with any other sale or transfer, provided that upon the request of the Company, such Holder provides the Company with an opinion of counsel to such Holder, in a reasonably acceptable form to the Company, to the effect that such sale or transfer may be made without registration under the applicable requirements of the Act and that such a legend, notice or provision is not required by, and is not required in order to establish compliance with any provisions of, the Act. For all purposes of Section 1.4, the Company shall not be deemed to have delivered to Holder Shares unless and until the Company shall have fully complied with all of the terms and conditions of this Section 5.2(b) (if removal has been requested by Holder in compliance with this Section 5.2(b)).

5.3    Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and, subject to Section 5.2(b), legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or any assignee or purchaser of Holder’s or its affiliate’s rights under the Credit Agreement or any interest or participation therein. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144. For purposes of this Section 5.3, the term “Holder” shall be deemed to include any holder of the Shares issued or issuable upon the exercise or conversion of this Warrant.

 

8


5.4    Transfer Procedure. Subject to the provisions of Section 5.3 and upon and effective immediately as of providing Company with written notice substantially in the form attached as Appendix 2, Holder and any permitted transferee may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, Holder or such transferee will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and, in the case of transfer to a transferee who is not an affiliate of the Holder, Holder or such transferee promptly thereafter surrenders this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

5.5    Notices. All notices, requests, documents and other communications (collectively, “Notices”) from the Company to Holder, or vice versa, shall be in writing and deemed validly delivered effective as of the earliest to occur of (a) when actually received, (b) when transmitted by facsimile or electronic mail (PDF), (c) the first business day after mailing by first-class registered or certified mail, postage prepaid, or after deposit with a reputable overnight courier with all charges paid, in each case other than actual receipt at such mailing, facsimile or electronic mail address as may have been furnished to the Company or Holder, as the case may be. As used in this Warrant, “business days” shall refer to all days other than any Saturday, Sunday or day on which the Company’s primary depository bank is closed. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

[                    ]

With a copy to:

[                    ]

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

MannKind Corporation

30930 Russell Ranch Road, Suite 300

Westlake Village, CA 91362

Attention: David Thomson, General Counsel

Fax:

E-Mail: dthomson@mannkindcorp.com

5.6    Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and the Holder.

5.7    Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute in a final non-appealable judgment shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

9


5.8    Automatic Conversion upon Expiration. Unless Holder notifies the Company in writing to the contrary prior to such automatic conversion, in the event that, upon the earliest to occur of the Expiration Date or any expiration, involuntary termination or cancellation of this Warrant, including with respect to Section 1.6.2, the Fair Market Value of one Share as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed as of immediately before such date to have been converted pursuant to Section 1.2 above as to all Shares for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares issued upon such conversion to the Holder.

5.9    Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

5.10    Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York, in each case (except to the extent the General Corporation Law of the State of Delaware applies) without giving effect to its principles regarding conflicts of law (other than Section 5-1401 of the General Obligations Law).

5.11    Headings. The various headings in this Warrant are inserted for convenience only and shall not affect the meaning or interpretation of this Warrant or any provisions hereof.

5.12    Severability. In the event any one or more of the provisions of this Warrant shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision.

[Balance of Page Intentionally Left Blank]

 

10


“COMPANY”
MANNKIND CORPORATION
By:  

 

Name:  

 

  (Print)
Title:  

 


“HOLDER”

[                    ]

 

By:  

 

Name:  
Title:  


APPENDIX 1

NOTICE OF EXERCISE

1.    Holder elects to purchase                  shares of the Common Stock of MannKind Corporation pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

[or]

1.    Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for                  of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2.    Please issue a certificate or certificates representing the shares in the name specified below:

 

 

 

Holder’s Name

 

 

 

 

 

(Address)

 

3.    By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

 

HOLDER:

 

By:  

                                              

Name:  

 

Title:  

 

(Date):  

                            


APPENDIX 2

ASSIGNMENT

For value received, [                ] hereby sells, assigns and transfers unto

Name:

Address:

Tax ID:

that certain Warrant to Purchase Stock issued by MannKind Corporation (the “Company”), on [                    ] (the “Warrant”) together with all rights, title and interest therein.

 

[                    ]
By:  

                                      

Name:  

 

  (Print)
Title:  

                                  

 

Date:


By its execution below, and for the benefit of the Company,                      makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

[NAME OF TRANSFEREE]
By:  

                              

Name:  

 

Title:  

 

EX-4.3

Exhibit 4.3

 

 

 

MANNKIND CORPORATION

AND

U.S. BANK NATIONAL ASSOCIATION

as Trustee

INDENTURE

Dated as of August 6, 2019

5.75% Convertible Senior Subordinated Exchange Notes Due 2024

 

 

 


TABLE OF CONTENTS

 

 

 

         PAGE  
 

ARTICLE 1

DEFINITIONS; INTERPRETATIONS

  

SECTION 1.01.

 

Definitions

     1  

SECTION 1.02.

 

References to Interest

     13  

ARTICLE 2

ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

 

 

SECTION 2.01.

 

Designation and Amount

     13  

SECTION 2.02.

 

Form of Notes

     13  

SECTION 2.03.

 

Date and Denomination of Notes; Payments of Interest

     15  

SECTION 2.04.

 

Execution, Authentication and Delivery of Notes

     18  

SECTION 2.05.

 

Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary; Automatic Exchange

     19  

SECTION 2.06.

 

Mutilated, Destroyed, Lost or Stolen Notes

     25  

SECTION 2.07.

 

Temporary Notes

     26  

SECTION 2.08.

 

Cancellation of Notes Paid, Etc

     27  

SECTION 2.09.

 

CUSIP and ISIN Numbers

     27  

SECTION 2.10.

 

Additional Notes; Purchases

     27  

SECTION 2.11.

 

Purchases

     28  

ARTICLE 3

SATISFACTION AND DISCHARGE

 

 

SECTION 3.01.

 

Satisfaction and Discharge

     28  

SECTION 3.02.

 

Deposited Monies To Be Held In Trust

     28  

SECTION 3.03.

 

Return Of Unclaimed Monies

     29  

ARTICLE 4

PARTICULAR COVENANTS OF THE COMPANY

 

 

SECTION 4.01.

 

Payment of Principal and Interest

     29  

SECTION 4.02.

 

Corporate Existence

     30  

SECTION 4.03.

 

Rule 144A Information Requirement and Reports

     30  

SECTION 4.04.

 

Compliance Certificate

     30  

SECTION 4.05.

 

Maintenance of Office or Agency

     31  

SECTION 4.06.

 

Paying Agents

     31  

SECTION 4.07.

 

Appointment to Fill Vacancy in Office of Trustee

     32  

 

i


ARTICLE 5

HOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

 

 

SECTION 5.01.

 

Company to Furnish Trustee Names and Addresses of Holders

     32  

SECTION 5.02.

 

Preservation Of Information; Communications With Holders

     33  

SECTION 5.03.

 

Reports by the Trustee

     33  

ARTICLE 6

DEFAULT AND REMEDIES

 

 

SECTION 6.01.

 

Events of Default

     33  

SECTION 6.02.

 

Acceleration of Maturity; Rescission and Annulment

     35  

SECTION 6.03.

 

Other Remedies

     37  

SECTION 6.04.

 

Waiver of Past Defaults

     37  

SECTION 6.05.

 

Control by Majority

     37  

SECTION 6.06.

 

Limitation On Suit

     38  

SECTION 6.07.

 

Unconditional Rights of Holders to Receive Payment and to Convert

     39  

SECTION 6.08.

 

Collection of Indebtedness and Suits For Enforcement By the Trustee

     39  

SECTION 6.09.

 

Trustee May File Proofs of Claim

     40  

SECTION 6.10.

 

Restoration of Rights and Remedies

     40  

SECTION 6.11.

 

Rights and Remedies CumulatIVE

     40  

SECTION 6.12.

 

Delay or Omission Not Waiver

     41  

SECTION 6.13.

 

Application of Money CollectED

     41  

SECTION 6.14.

 

Undertaking For Costs

     41  

SECTION 6.15.

 

Waiver of Stay or Extension Laws

     42  

Section 6.16.

 

Notice OF DEFAULT

     42  

ARTICLE 7

CONCERNING THE TRUSTEE

 

 

SECTION 7.01.

 

Certain Duties and Responsibilities of Trustee

     42  

SECTION 7.02.

 

Certain Rights of Trustee

     44  

SECTION 7.03.

 

Trustee Not Responsible for Recitals or Issuance or Notes

     46  

SECTION 7.04.

 

May Hold Notes

     46  

SECTION 7.05.

 

Moneys Held in Trust

     46  

SECTION 7.06.

 

Compensation and Reimbursement

     46  

SECTION 7.07.

 

Reliance on Officer’s Certificate and Opinions

     47  

SECTION 7.08.

 

Disqualification; Conflicting Interests

     48  

SECTION 7.09.

 

Corporate Trustee Required; Eligibility

     48  

SECTION 7.10.

 

Resignation and Removal; Appointment of Successor

     48  

SECTION 7.11.

 

Acceptance of Appointment By Successor

     49  

SECTION 7.12.

 

Merger, Conversion, Consolidation or Succession to Business

     51  

SECTION 7.13.

 

Preferential Collection of Claims Against the Company

     51  

 

ii


ARTICLE 8

CONCERNING THE HOLDERS

 

 

SECTION 8.01.

 

Evidence of Action by Holders

     51  

SECTION 8.02.

 

Proof of Execution by Holders

     52  

SECTION 8.03.

 

Who May be Deemed Owners

     52  

SECTION 8.04.

 

Certain Notes Owned by Company Disregarded

     53  

SECTION 8.05.

 

Actions Binding on Future Holders

     53  

ARTICLE 9

AMENDMENTS; SUPPLEMENTS AND WAIVERS

 

 

SECTION 9.01.

 

Without Consent of Holders

     54  

SECTION 9.02.

 

With Consent of Holders

     55  

SECTION 9.03.

 

Effect of Supplemental Indentures

     56  

SECTION 9.04.

 

Securities Affected by Supplemental Indentures

     56  

SECTION 9.05.

 

Execution of Supplemental Indentures

     56  

ARTICLE 10

CONSOLIDATION; MERGER; CONVEYANCE; TRANSFER OR LEASE

 

 

SECTION 10.01.

 

Company May Consolidate, Etc., Only on Certain Terms

     57  

SECTION 10.02.

 

Successor Substituted

     58  

ARTICLE 11

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

 

 

SECTION 11.01.

 

No Recourse

     58  

ARTICLE 12

ADDITIONAL INTEREST

 

 

SECTION 12.01.

 

Additional Interest

     59  

ARTICLE 13

CONVERSION OF NOTES

 

 

SECTION 13.01.

 

Conversion Privilege and Conversion Rate

     59  

SECTION 13.02.

 

Conversion Procedure

     60  

 

iii


SECTION 13.03.

 

Fractional Shares

     62  

SECTION 13.04.

 

Taxes on Conversion

     62  

SECTION 13.05.

 

Company to Provide Common Stock

     62  

Section 13.06.

 

Adjustment of Conversion Rate

     63  

SECTION 13.07.

 

When No Adjustment is Required

     69  

SECTION 13.08.

 

Notice of Adjustment

     70  

SECTION 13.09.

 

Notice of Certain Transactions

     70  

SECTION 13.10.

 

Effect of Reclassification, Consolidation, Merger or Sale On Conversion Privilege

     71  

SECTION 13.11.

 

Trustee’s Disclaimer

     72  

SECTION 13.12.

 

Voluntary Increase; Nasdaq Compliance

     72  

SECTION 13.13.

 

Rights Plan

     73  

SECTION 13.14.

 

Exchange in Lieu of Conversion

     73  

ARTICLE 14

REDEMPTION; COMPANY CONVERSION OPTION

 

 

SECTION 14.01.

 

No Sinking Fund

     74  

SECTION 14.02.

 

No Right to Redeem the Notes

     74  

SECTION 14.03.

 

Company Conversion Option

     74  

ARTICLE 15

REPURCHASE OF NOTES

 

 

SECTION 15.01.

 

Repurchase of Notes at Option of the Holder Upon a Fundamental Change

     77  

SECTION 15.02.

 

Effect of Fundamental Change Purchase Notice

     80  

SECTION 15.03.

 

Deposit of Fundamental Change Purchase Price

     80  

SECTION 15.04.

 

Repayment to the Company

     81  

SECTION 15.05.

 

Notes Purchased In Part

     81  

SECTION 15.06.

 

Compliance With Securities Laws Upon Purchase of Notes

     81  

ARTICLE 16

MEETING OF HOLDERS OF NOTES

 

 

SECTION 16.01.

 

Purposes For Which Meetings May Be Called

     82  

SECTION 16.02.

 

Call Notice and Place of Meetings

     82  

SECTION 16.03.

 

Persons Entitled to Vote at Meetings

     82  

SECTION 16.04.

 

Quorum; Action

     83  

SECTION 16.05.

 

Determination of Voting Rights; Conduct and Adjournment of Meetings

     83  

SECTION 16.06.

 

Counting Votes and Recording Action of Meetings

     84  

 

iv


 

ARTICLE 17

MISCELLANEOUS PROVISIONS

  

SECTION 17.01.

 

Provisions Binding on Company’s Successors

     85  

SECTION 17.02.

 

Official Acts by Successor

     85  

SECTION 17.03.

 

Notices

     85  

SECTION 17.04.

 

Governing Law

     85  

SECTION 17.05.

 

Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee

     85  

SECTION 17.06.

 

Legal Holidays

     86  

SECTION 17.07.

 

No Security Interest Created

     86  

SECTION 17.08.

 

Benefits of Indenture

     86  

SECTION 17.09.

 

Table of Contents, Headings, Etc

     86  

SECTION 17.10.

 

Execution in Counterparts

     87  

SECTION 17.11.

 

Severability

     87  

SECTION 17.12.

 

Waiver of Jury Trial

     87  

SECTION 17.13.

 

Consent to Jurisdiction

     87  

SECTION 17.14.

 

Force Majeure

     88  

SECTION 17.15.

 

Calculations

     88  

SECTION 17.16.

 

U.S.A. Patriot Act

     88  
 

ARTICLE 18

SUBORDINATION

  

SECTION 18.01.

 

Subordination

     88  

Exhibit A — Form of Note

  

 

v


INDENTURE dated as of August 6, 2019 between MannKind Corporation, a Delaware corporation, as issuer (the “Company”) and U.S. Bank National Association, as trustee, a national banking association organized under the laws of the United States of America (the “Trustee”).

W I T N E S S E T H:

WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issue of its 5.75% Convertible Senior Subordinated Exchange Notes Due 2024 (the “Notes”), initially in an aggregate principal amount of $5,000,000, and in order to provide the terms and conditions upon which the Notes are to be authenticated, issued and delivered, the Company has duly authorized the execution and delivery of this Indenture; and

WHEREAS, the Form of Note, the certificate of authentication to be borne by each Note, the Form of Notice of Conversion, the Form of Fundamental Change Purchase Notice and the Form of Assignment and Transfer to be borne by the Notes are to be substantially in the forms hereinafter provided; and

WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee or a duly authorized authenticating agent, as in this Indenture provided, the valid, binding and legal obligations of the Company, and to constitute these presents a valid agreement according to its terms, have been done and performed, and the execution of this Indenture and the issue hereunder of the Notes have in all respects been duly authorized.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered, and in consideration of the premises and of the purchase and acceptance of the Notes by the Holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as otherwise provided below), as follows:

ARTICLE 1

DEFINITIONS; INTERPRETATIONS

Section 1.01. Definitions. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture that are defined in the Trust Indenture Act or that are by

 

1


reference therein defined in the Securities Act (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meanings assigned to such terms in said Trust Indenture Act and in the Securities Act as in force at the date of the execution of this Indenture. The words “herein,” “hereof,” “hereunder,” and words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include the plural as well as the singular. Unless otherwise noted, references to “U.S. Dollars” or “$” shall mean the currency of the United States.

Additional Interest” shall have the meaning specified in Section 12.01(a).

Additional Note” or “Additional Notes” shall have the meaning specified in Section 2.10.

Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

Agent Members” shall have the meaning specified in Section 2.02(b).

Applicable Procedures” means, with respect to any conversion, transfer, exchange or repurchase of beneficial ownership interests in a Global Note, the rules and procedures of the Depositary, to the extent applicable to such conversion, transfer, exchange or repurchase.

Bankruptcy Law” shall have the meaning specified in Section 6.01.

Board of Directors” means the Board of Directors of the Company or any duly authorized committee of such Board.

Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, and to be in full force and effect on the date of such certification.

Business Day” means any day other than a day on which federal or state banking institutions in the Borough of Manhattan, the City of New York, or in the city of the Corporate Trust Office of the Trustee, are authorized or obligated by law, executive order or regulation to close.

 

2


Capital Stock” of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) the equity of such Person, but excluding any debt securities convertible into such equity.

Cash” or “cash” means such coin or currency of the United States as at any time of payment is legal tender for the payment of public and private debts.

Change of Control” means the occurrence of any of the following events from and after the Issue Date:

(i)    the acquisition by any “person”, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of the beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions of shares of the Company’s Capital Stock entitling that person to exercise 50% or more of the total voting power of all shares of the Company’s Voting Stock, other than (x) any acquisition by the Company, any Subsidiary or any of the Company’s employee benefit plans; (y) any acquisition during the lifetime of Mann by Mann or his estate, by any trust where Mann is the trustee or grantor, by any not-for-profit entity where the acquisition is directed by Mann or by any entity wholly-owned by Mann or his estate; provided that the total beneficial ownership of all such Persons, together with the Persons in (z), does not exceed 70% or more of the total voting power of all shares of the Company’s Voting Stock; and (z) any acquisition by any Person so long as the shares acquired by such Person are acquired directly from one of the Persons listed in (y) and no consideration is paid in connection with such acquisition;

(ii)    the Company (A) recapitalizes, reclassifies or changes the Common Stock (other than changes resulting from a subdivision or combination) as a result of which the Common Stock would be converted into, or exchanged for, stock, other securities, other property or assets or (B) exchanges its shares of Common Stock with, consolidates with, or merges with or into, another Person or any Person exchanges its shares of common stock with, consolidates or merges with or into the Company, or (C) conveys, transfers, sells, leases or otherwise disposes of all or substantially all of its properties and assets to another Person, in each case other than (x) any transaction pursuant to which holders of the Company’s Capital Stock immediately prior to the transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of the Voting Stock of the continuing or surviving entity of such transaction; or (y) any merger solely for the purpose of changing the Company’s jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of common stock of the surviving entity traded or quoted on a U.S. national securities exchange, and as a result of such merger the Notes become convertible into such shares; or

 

3


(iii)    the Company’s stockholders approve a plan of liquidation or dissolution.

Notwithstanding anything to the contrary set forth herein, a Change of Control will be deemed not to have occurred if, in the case of a merger or consolidation, at least 90% of the consideration (excluding cash payments for fractional shares and cash payments pursuant to dissenters’ appraisal rights) in a transaction or transactions otherwise constituting a Change of Control consists of shares of common stock or American depository receipts traded or quoted on a U.S. national securities exchange, or which will be so traded or quoted when issued or exchanged in connection with the transaction or transactions, and as a result of the transaction or transactions the Notes become convertible solely into such consideration.

close of business” means 5:00 p.m. (New York City time).

Commission” means the Securities and Exchange Commission.

Common Stock” means the shares of common stock of the Company, par value $0.01 per share, as it exists on the date of this Indenture or any other shares of Capital Stock of the Company into which the Common Stock shall be reclassified or changed.

Company” means MannKind Corporation, a corporation duly organized and existing under the laws of the State of Delaware, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor Person.

Company Conversion Option” shall have the meaning specified in Section 14.03(a).

Company Order” means a written order of the Company, signed by the Company’s Chief Executive Officer, Chief Financial Officer, President, Executive Vice President or any Vice President (whether or not designated by a number or numbers or word or words added before or after the title “Vice President”), Treasurer or Assistant Treasurer or Secretary or any Assistant Secretary, and delivered to the Trustee.

Conversion Agent” means the office or agency designated by the Company pursuant to Section 4.05 where Notes may be presented for conversion.

Conversion Date” shall have the meaning specified in Section 13.02(a).

 

4


Conversion Price” per share of Common Stock as of any day means the result obtained by dividing (i) $1,000 by (ii) the then applicable Conversion Rate.

Conversion Rate” means the rate at which shares of Common Stock shall be delivered upon conversion, which rate shall be initially 333.3333 shares of Common Stock for each $1,000 principal amount of Notes, as adjusted from time to time pursuant to the provisions of this Indenture.

Corporate Trust Office” means the office of the Trustee at which, at any particular time, its corporate trust business shall be principally administered, which office at the date hereof is located at 60 Livingston Avenue St. Paul MN 55107-2292, attention: Global Corporate Trust Services - MannKind Administrator.

Custodian” means U.S. Bank National Association, as custodian for The Depository Trust Company, with respect to the Global Notes, or any successor entity thereto.

Default” means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.

Defaulted Interest” means any interest on any Note that is payable, but is not punctually paid or duly provided for, on any February 15 or August 15.

Depositary” means, with respect to the Global Notes, the Person specified in Section 2.05(b) as the Depositary with respect to such Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, “Depositary” shall mean or include such successor.

Designated Senior Debt” means the principal of, premium, if any, interest on, including any interest accruing after the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowed as a claim in the proceeding, or termination payment with respect to or in connection with, and all fees, costs, expenses and other amounts accrued or due on or under or in respect of, the term loans made and other obligations incurred under that certain Credit and Security Agreement, dated as of August 6, 2019, among the Company, MannKind LLC, as borrowers, MidCap Financial Trust, as Agent and the lenders from time to time party thereto as amended, restated, supplemented or otherwise modified from time to time.

DTC” shall have the meaning specified in Section 2.05(b).

 

5


“Equity Conditions” means, with respect to any exercise of the Company Conversion Option or the payment of interest in Interest Shares:

(i) either (1) all shares of Common Stock issuable upon conversion of the Notes (in the case of an exercise of the Company Conversion Option) or all of the Interest Shares (in the case of a payment of interest in Interest Shares) and held by a non-Affiliate of the Company shall be eligible for sale without the need for registration under any applicable federal or state securities laws or (2) a shelf registration statement registering the resale of such shares of Common Stock issuable upon conversion of the Notes or Interest Shares, as applicable, has been filed by the Company and been declared effective by the Commission or is automatically effective and is available for use, and the Company expects such shelf registration statement to remain effective and available for use from the Mandatory Conversion Notice Date or the applicable Interest Payment Date, as the case may be, until thirty (30) days following the Mandatory Conversion Date or the applicable Interest Payment Date, respectively;

(ii) during the applicable Equity Conditions Measuring Period, the Common Stock is listed or traded on an Eligible Market and shall not have been suspended from trading on such Eligible Market (other than suspensions of not more than two Trading Days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by such Eligible Market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such Eligible Market;

(iii) during the applicable Equity Conditions Measuring Period, to the extent any Notes have been delivered to the Company for conversion in accordance with the terms of the Notes, the Company shall have delivered and paid the number of shares of Common Stock and the amount of cash due upon conversion of the Notes to the Holders in accordance with Section 13;

(iv) any applicable shares of Common Stock to be issued upon conversion (in the case of an exercise of the Company Conversion Option) or any applicable Interest Shares (in the case of a payment of interest in Interest Shares) may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock delivered upon conversion is then listed or trading; and

(v) the applicable shares of Common Stock to be issued upon conversion (in the case of an exercise of the Company Conversion Option) or any applicable Interest Shares (in the case of a payment of interest in Interest Shares) shall be duly authorized and will be validly issued, fully paid and non-assessable upon issuance in accordance with the terms of this Indenture; and

(vi) no Default or Event of Default shall have occurred and be continuing.

 

6


“Equity Conditions Measuring Period” means:

(i)    in the case of an exercise of the Company Conversion Option, the period (x) commencing on the date a Mandatory Conversion Notice with respect to such exercise is delivered to Holders and (y) ending on the applicable Mandatory Conversion Date; and

(ii)    in the case of a payment of interest in Interest Shares, the period (x) commencing on the Interest Notice Date with respect to such interest payment and (y) ending on the applicable Interest Payment Date.

Ex-Dividend Date” means, in respect of an issuance, a dividend or distribution to holders of Common Stock, the first date on which shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such issuance, dividend or distribution in question.

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Exchange Settlement Property” shall have the meaning specified in Section 13.14(b)

Expiration Date” shall have the meaning specified in Section 13.06(e).

Expiration Time” shall have the meaning specified in Section 13.06(e).

Event of Default” shall have the meaning specified in Section 6.01.

Financial Institution” shall have the meaning specified in Section 13.14(a).

Form of Assignment and Transfer” shall mean the “Form of Assignment and Transfer” attached as Attachment 3 to the Form of Note attached hereto as Exhibit A.

Form of Fundamental Change Purchase Notice” shall mean the “Form of Fundamental Change Purchase Notice” attached as Attachment 2 to the Form of Note attached hereto as Exhibit A.

Form of Note” shall mean the “Form of Note” attached hereto as Exhibit A.

Form of Notice of Conversion” shall mean the “Form of Notice of Conversion” attached as Attachment 1 to the Form of Note attached hereto as Exhibit A.

 

7


Fundamental Change” means the occurrence of either a Change of Control or a Termination of Trading.

Fundamental Change Company Notice” shall have the meaning specified in Section 15.01(b).

Fundamental Change Effective Date” means the date on which any Fundamental Change becomes effective.

Fundamental Change Purchase Date” shall have the meaning specified in Section 15.01(a).

Fundamental Change Purchase Notice” shall have the meaning specified in Section 15.01(c).

Fundamental Change Purchase Price” of any Note, means 100% of the principal amount of the Note to be repurchased plus unpaid interest, if any, accrued and unpaid to, but excluding, the Fundamental Change Purchase Date; provided that if the Fundamental Change Purchase Date is after a Regular Record Date and on or prior to the corresponding Interest Payment Date, the Fundamental Change Purchase Price shall not include any accrued and unpaid interest.

Global Note” shall have the meaning specified in Section 2.02(b).

Holder” or “Holder of a Note” means the person in whose name a Note is registered on the Note Registrar’s books.

Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented.

Interest Notice Date” shall have the meaning set forth in Section 2.03(c).

Interest Payment Date” means each February 15 and August 15 of each year, beginning on February 15, 2020; provided, however, that if any Interest Payment Date falls on a date that is not a Business Day, such payment of interest will be postponed until the next succeeding Business Day, and no interest or other amount will be paid as a result of such postponement.

Interest Share Payment Notice” shall have the meaning set forth in Section 2.03(c).

Interest Shares” shall have the meaning set forth in Section 2.03(c).

Issue Date” of any Note means the date on which the Note was originally issued or deemed issued as set forth on the face of the Note.

 

8


Last Reported Sale Price” means on any Business Day or Trading Day, the reported last sale price per share of the Company’s Common Stock (or if no last sale price is reported, the average of the bid and ask prices per share or, if more than one in either case, the average of the average bid and the average ask prices per share) on such date reported by the Nasdaq Global Market or, if the Company’s Common Stock (or the applicable security) is not quoted on the Nasdaq Global Market, as reported by the principal national securities exchange on which the Company’s Common Stock (or such other security) is listed (each, an “Eligible Market”), or if no such prices are available, the Last Reported Sale Price per share shall be the fair value of a share of Common Stock (or such other security) as reasonably determined by the Board of Directors (which determination shall be conclusive and shall be evidenced by an Officer’s Certificate delivered to the Trustee).

“Mandatory Conversion Date” shall have the meaning specified in Section 14.03(c).

“Mandatory Conversion Notice” shall have the meaning specified in Section 14.03(c).

“Mandatory Conversion Notice Date” shall have the meaning specified in Section 14.03(c).

“Mandatory Conversion Trigger Period” shall have the meaning specified in Section 14.03(a).

Mann” means the individual Alfred E. Mann.

Market Disruption Event” means (1) a failure by the primary exchange or quotation system on which the Common Stock trades or is quoted to open for trading during its regular trading session or (2) the occurrence or existence, prior to 1:00 p.m., New York City time, on any Trading Day for the Common Stock, of an aggregate one half-hour period of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Common Stock or in any options, contracts or future contracts relating to the Common Stock.

Maturity Date” means the earlier of (i)November 4, 2024, and (ii) the 91st day after the payment in full of, and termination and discharge of all obligations (other than contingent indemnity obligations) under the Designated Senior Debt.

Nasdaq Cap” shall have the meaning set forth in Section 2.03(c).

Nonpayment Default” has the meaning set forth in Section 18.01(b)(ii).

 

9


Note” or “Notes” shall have the meaning specified in the first “Whereas” clause of this Indenture.

Note Register” shall have the meaning specified in Section 2.05(a).

Note Registrar” shall have the meaning specified in Section 2.05(a).

Officer” means, with respect to the Company, the chairman of the Board of Directors, a chief executive officer, a president, a chief financial officer, chief operating officer, any executive vice president, any senior vice president, any vice president, the treasurer or any assistant treasurer, the controller or any assistant controller or the secretary or any assistant secretary.

Officer’s Certificate,” means a certificate signed by any Officer. Each such certificate shall include the statements provided for in Section 17.05, if and to the extent required by the provisions thereof.

open of business” means 9:00 a.m. (New York City time).

Opinion of Counsel” means a written opinion, subject to customary exceptions, from legal counsel who is reasonably acceptable to the Trustee that is delivered to the Trustee in accordance with the terms hereof. The counsel may be an employee of or counsel to the Company. Each such opinion shall include the statements provided for in Section 17.05 if and to the extent required by the provisions thereof.

Outstanding,” when used with reference to Notes, shall, subject to the provisions of Section 8.04, mean, as of any particular time, all Notes authenticated and delivered by the Trustee under this Indenture, except:

(a)    Notes theretofore canceled by the Trustee or accepted by the Trustee for cancellation;

(b)    Notes that have been paid pursuant to Section 2.08 or Notes in lieu of which, or in substitution for which, other Notes shall have been authenticated and delivered pursuant to the terms of Section 2.06 unless proof satisfactory to the Trustee is presented that any such Notes are held by protected purchasers in due course; and

(c)    Notes converted pursuant to Article 13.

Paying Agent” means the office or agency designated by the Company pursuant to Section 4.05 where Notes may be presented for payment.

Payment Blockage Notice” has the meaning set forth in Section 18.01(b) (ii).

 

10


Payment Default” has the meaning set forth in Section 18.01(b)(i).

Person” or “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act or any other entity.

Physical Notes” means permanent, certificated, non-Global Notes in registered form issued in denominations of $1,000 principal amount and integral multiples thereof.

Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.06 in lieu of or in exchange for a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note that it replaces.

Receiver” shall have the meaning specified in Section 6.01.

Reference Property” shall have the meaning specified in Section 13.10.

Regular Record Date,” with respect to any Interest Payment Date, shall mean the February 1 or August 1 (whether or not such day is a Business Day) immediately preceding such Interest Payment Date.

Resale Restriction Termination Date” shall have the meaning specified in Section 2.05(b).

Responsible Officer” means any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

Restricted Note” means each Additional Note that is subject to transfer restrictions under the Securities Act (or other applicable securities laws), as determined by the Company.

Restricted Securities” shall have the meaning specified in Section 2.05(b).

 

11


Rights” means any common stock or preferred stock purchase right or warrant, as the case may be, that all or substantially all shares of Common Stock may be entitled to receive under a Rights Plan.

Rights Plan” means any common stock or preferred stock rights plan or any similar plan adopted by the Company after the date hereof.

Rule 144” means Rule 144 as promulgated under the Securities Act.

Rule 144A” means Rule 144A as promulgated under the Securities Act.

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

Special Interest” shall have the meaning specified in Section 6.02.

Spin-Off” shall have the meaning specified in Section 13.06(c).

Subsidiary” means a corporation or other entity more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries of the Company, or by the Company and one or more other Subsidiaries of the Company.

Termination of Trading” means the occurrence of the Common Stock (or other common stock into which the Notes are convertible) not being listed for trading on a United States national securities exchange nor approved for listing on any United States system of automated dissemination of quotations of securities prices nor traded in over-the-counter securities markets and no American Depositary Shares or similar instruments for the Common Stock are so listed or approved for listing in the United States.

Trading Day” means any day during which trading in the Common Stock generally occurs on the primary exchange or quotation system on which the Common Stock then trades or is quoted and there is no Market Disruption Event, unless the Common Stock is not so traded or quotes, in which case “Trading Day” means a Business Day.

transfer” shall have the meaning specified in Section 2.05(b).

Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.

Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is then a Trustee hereunder.

 

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United States” means the United States of America.

Valuation Period” shall have the meaning specified in Section 13.06(c).

Voting Stock” of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency within the control of such person to satisfy) to vote in the election of directors, managers or trustees thereof.

Section 1.02 . References to Interest. Any reference to the payment of interest on, or in respect of, any Note in this Indenture shall be deemed to include mention of the payment of Special Interest (if applicable) and Additional Interest (if applicable) if, in such context, Special Interest and Additional Interest, as applicable, was, or would be, payable pursuant to Section 6.01 and Section 12.01, respectively. An express mention of the payment of Special Interest (if applicable) or Additional Interest (if applicable) in any provision hereof shall not be construed as excluding Additional Interest or Special Interest, as applicable, in those provisions hereof where such express mention is not made.

ARTICLE 2

ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

Section 2.01. Designation and Amount. The Notes shall be designated as the “5.75% Convertible Senior Subordinated Exchange Notes Due 2024.” The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is initially limited to $5,000,000, subject to Section 2.10, and except for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other Notes pursuant to Section 2.05, Section 2.06 and Section 2.07.

Section 2.02. Form of Notes.

(a)    The Notes and the Trustee’s certificate of authentication to be borne by such Notes shall be substantially in the respective forms set forth in Exhibit A, which are incorporated in and made a part of this Indenture. All of the Notes shall be issued initially in the form of one or more Physical Notes, registered in such names and authorized in such denominations as a Holder shall request, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Company shall execute and the Trustee shall, in accordance with this 0 authenticate and deliver initially one or more Physical Notes that (1) shall be registered in such names and authorized in such denominations as each Holder shall request, and (2) shall be delivered by the Trustee to each Holder or pursuant to such Holder’s instructions.

 

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(b)    Upon request of any Holder, subject to the consent of the Company and the Notes meeting the eligibility requirements of the Depositary, any of such Holder’s Notes may be exchanged for one or more Notes in global form (each, a “Global Note”) pursuant to Section 2.02(f). The transfer and exchange of beneficial interests in a Global Note that does not involve the issuance of a Physical Note shall be effected through the Depositary (but not the Trustee or the Custodian) in accordance with the Indenture (including the restrictions on transfer set forth herein) and the procedures for the Depositary therefor. Members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of any Holder.

(c)    Each Physical Note or Global Note, as applicable, shall represent such principal amount of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be increased or reduced to reflect repurchases, cancellations, conversions, transfers or exchanges permitted thereby.

(d)    Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends or endorsements as the officer executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, or to conform to usage or to indicate any special limitations or restrictions to which any particular Notes are subject.

(e)    Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Indenture as may be required by the Custodian or the Depositary, or as may be required to comply with any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation system upon which the Notes may be listed or traded or designated for issuance or to conform with any usage with respect thereto, or to indicate any such special limitations or restrictions to which any particular Notes are subject.

 

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(f)    If required by any Holder, the Company shall execute and the Trustee shall, in accordance with this Section 2.02(f), authenticate and deliver one or more Global Notes in exchange for the Physical Notes that (1) shall be registered in the name of the Depositary, (2) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary’s instructions, (3) shall be assigned a restricted or unrestricted CUSIP numbers, as applicable, and (4) shall bear the applicable legend as set forth on Exhibit A hereto. The Global Note shall represent such principal amount of the Outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate principal amount of Outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of Outstanding Notes represented thereby may from time to time be increased or reduced to reflect purchases, conversions, transfers, exchanges or issuances of additional Notes permitted hereby. Any endorsement of the Global Note to reflect the amount of any increase or decrease in the amount of Outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in such manner and upon instructions given by the Holder of such Notes in accordance with this Indenture. Payment of principal (including any Fundamental Change Purchase Price) of, and accrued and unpaid interest, if any, on, the Global Note shall be made to the Holder of such Note on the date of payment, unless a record date or other means of determining Holders eligible to receive payment is provided for herein.

The terms and provisions contained in the Form of Note attached as Exhibit A hereto shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.

Section 2.03. Date and Denomination of Notes; Payments of Interest.

(a)    The Notes shall be issuable in registered form without coupons in denominations of $1,000 principal amount and multiples thereof.

(b)    Each Note shall be dated the date of its authentication and shall bear interest (a) in the case of Notes issued on the date hereof, from August 6, 2019 and (b) in the case of any Additional Notes, from the date of issuance of such Note or from the most recent date to which interest has been paid or duly provided for, to the date the principal amount of such Note is paid or deemed paid, as the case may be. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months.

 

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(c)    Interest shall be payable on each Interest Payment Date in cash (“Cash Interest”), however, the Company may, at its option, elect to, pay interest on any Interest Payment Date in validly issued, fully paid and non-assessable shares of Common Stock (as defined below) (“Interest Shares”) so long as each of the Equity Conditions are satisfied on each day during the Equity Conditions Measuring Period applicable to such Interest Payment Date. If the Company intends to issue Interest Shares, the Company shall deliver a written notice (including via e-mail) to the Trustee (the “Interest Share Payment Notice”) on or prior to the fifth Trading Day prior to the applicable Interest Payment Date (the date such Interest Share Payment Notice is delivered to the Trustee, the “Interest Notice Date”), electing to pay all or any portion of the interest payable on such Interest Payment Date in Interest Shares, which Interest Share Payment Notice shall be irrevocable and shall specify the amount of interest to be paid in Interest Shares, together with an Officer’s Certificate certifying that the Equity Conditions with respect to such payment in Interest Shares have been met as of the Interest Notice Date. Notwithstanding anything herein to the contrary, if the Equity Conditions fail to have been met as of the Interest Payment Date, interest shall be payable in cash. Interest to be paid on an Interest Payment Date in Interest Shares shall be paid in a number of validly issued, fully paid and non-assessable shares of Common Stock equal to the quotient of (1) the amount of interest payable on such Interest Payment Date less any interest paid in cash, divided by (2) the Last Reported Sale Price on the Trading Day immediately prior to the Interest Payment Date. If the issuance of Interest Shares 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 to the nearest whole share (with 0.5 being rounded up). When any Interest Shares are to be issued on an Interest Payment Date, the Company shall (i) (A) provided that the Company’s stock transfer agent is participating in the DTC Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of Interest Shares 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 (B) if the stock transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, or upon request of the Holder, issue and deliver to the Trustee no later than the second (2) Business Day after the applicable Interest Payment Date certificates registered in the name of each registered Holder for the number of Interest Shares to which each Holder shall be entitled, (C) deposit such Interest Shares with the Depositary in accordance with the Applicable Procedures, or (D) otherwise deliver the applicable Interest Shares in accordance with procedures reasonably acceptable to the Trustee and the Holder and (ii) pay to the Holders, in cash by wire transfer of immediately available funds, the entire amount of any interest payable in cash.

(d)    The Person in whose name any Note (or its Predecessor Note) is registered on the Note Register at the close of business on any Regular Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date. Interest payable in cash shall be

 

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payable at the office of the Paying Agent, which shall initially be the Corporate Trust Office of the Trustee as the Company’s Paying Agent and Note Registrar. The Company shall pay interest payable in cash on any Physical Notes (i) to the Person entitled thereto having an aggregate principal amount of $2,000,000 or less, by check mailed to such Person at the address set forth in the Note Register and (ii) to the Person entitled thereto having an aggregate principal amount of more than $2,000,000, either by check mailed to such Person or, upon application by such Person to the Note Registrar not later than the relevant Regular Record Date, by wire transfer in immediately available funds to such Person’s account within the United States, which application and wire transfer instructions shall remain in effect until such Person notifies, in writing, the Note Registrar to the contrary.

Any Defaulted Interest shall forthwith cease to be payable to the Holder of such Note on the relevant Regular Record Date by virtue of its having been such Holder, and such Defaulted Interest shall be paid by the Company, at its election in each case, as provided in clause (1) or (2) below:

(1)    The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment (which shall be not less than 20 days after the receipt by the Trustee of such notice, unless the Trustee shall consent to an earlier date), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Company shall fix a special record date for the payment of such Defaulted Interest which shall be not more than fifteen days and not less than ten days prior to the date of the proposed payment, and not less than ten days after the receipt by the Trustee of the notice of the proposed payment. The Company shall promptly notify the Trustee in writing of such special record date and the Trustee, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be delivered, or in the case of Physical Notes, mailed, first-class postage prepaid, to each Holder at its address as it appears in the Note Register, not less than ten days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such special record date and shall no longer be payable pursuant to the following clause (2) of this Section 2.03.

 

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(2)    The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange or automated quotation system on which the Notes may be listed or designated for issuance, and upon such notice as may be required by such exchange or automated quotation system, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee.

If the Company makes a distribution of property to holders of Common Stock that would be taxable to them as a dividend for United States federal income tax purposes and the Conversion Rate is increased, the Company may offset any withholding tax applicable to non-United States Holders against cash payments of interest payable on the Notes.

Section 2.04. Execution, Authentication and Delivery of Notes. The Notes shall be signed in the name and on behalf of the Company by the manual or facsimile signature of any Officer.

At any time and from time to time after the date of the execution and delivery of this Indenture, the Company may, in accordance with the terms of this Indenture, deliver additional Notes executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Company Order shall authenticate and deliver such Notes, without any further action by the Company hereunder.

Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth on the Form of Note attached as Exhibit A hereto, executed manually by a Responsible Officer of the Trustee (or an authorized officer of an authenticating agent appointed by the Trustee), shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate of authentication executed by the Trustee (or such an authenticating agent) upon any Note executed by the Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture.

All Notes shall be dated that date of their authentication.

In case any Officer of the Company who shall have signed any of the Notes shall cease to be such Officer before the Notes so signed shall have been authenticated and delivered by the Trustee, or disposed of by the Company, such Notes nevertheless may be authenticated and delivered or disposed of as though

 

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the Person who signed such Notes had not ceased to be such Officer of the Company; and any Note may be signed on behalf of the Company by such Person as, at the actual date of the execution of such Note, shall be an Officer of the Company, although at the date of the execution of this Indenture any such Person was not such an Officer.

The Trustee shall have the right to decline to authenticate and deliver any Notes under this Indenture if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith shall determine that such action would expose the Trustee to personal liability.

Section 2.05. Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary; Automatic Exchange. (a) The Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office or in any other office or agency of the Company being herein sometimes collectively referred to as the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Note Register shall be in written form or in any form capable of being converted into written form within a reasonable period of time. The Trustee is hereby appointed “Note Registrar” for the purpose of registering Notes and transfers of Notes as herein provided. The Company may appoint a new Note Registrar without prior notice to Holders. The Company may appoint one or more co-registrars.

Upon surrender for registration of transfer of any Note to the Note Registrar or any co-registrar, and satisfaction of the requirements for such transfer set forth in this Section 2.05, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture.

Notes may be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or agency maintained by the Company pursuant to Section 4.05. Whenever any Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Notes that the Holder making the exchange is entitled to receive, bearing registration numbers not contemporaneously outstanding.

All Notes presented or surrendered for registration of transfer or for exchange, purchase or conversion shall (if so required by the Company, the Trustee, the Note Registrar or any co-registrar) be duly endorsed, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and duly executed, by the Holder thereof or its attorney-in-fact duly authorized in writing.

 

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No service charge shall be charged by the Company, the Trustee, the Notes Registrar or any Paying Agent to the Holder for any exchange or registration of transfer of Notes, but the Holder may be required by the Company, the Trustee, the Notes Registrar or any Paying Agent or otherwise to pay a sum sufficient to cover any tax, assessments or other governmental charges that may be imposed in connection therewith as a result of the name of the Holder of the new Notes issued upon such exchange or registration of transfer of Notes being different from the name of the Holder of the old Notes presented or surrendered for such exchange or registration of transfer.

None of the Company, the Trustee, the Note Registrar or any co-registrar shall be required to exchange or register a transfer of any Notes surrendered for conversion or repurchase except for any portion of that Note that is not being repurchased, redeemed or converted, as the case may be.

All Notes issued upon any registration of transfer or exchange of Notes in accordance with this Indenture shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Notes surrendered upon such registration of transfer or exchange. For greater certainty, all Notes issued upon any registration of transfer or exchange of Notes will be issued as evidence of the same continuing indebtedness of the Company under this Indenture and in no circumstances is the Company obligated under the Indenture to repay the principal amount of the exchanged Notes by virtue of the registration of a transfer or exchange.

(b)    The Depositary shall be a clearing agency registered under the Exchange Act. The Company initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to any Global Note. To the extent any Global Notes are issued and the DTC acts as the Depositary, such Global Notes shall be issued to the Depositary, registered in the name of Cede & Co., as the nominee of the Depositary, and deposited with the Trustee as custodian for DTC (unless otherwise directed by the DTC or pursuant to the Applicable Procedures). If (i) the Depositary notifies the Company at any time that the Depositary is unwilling or unable to continue as depositary for the Global Notes and a successor depositary is not appointed within 90 days, (ii) the Depositary ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days or (iii) an Event of Default with respect to the Notes has occurred and is continuing and a beneficial owner of any Note requests that its beneficial interest therein be issued as a Physical Note, the Company will execute, and the Trustee, upon receipt of an Officer’s Certificate and a Company Order for the authentication and delivery of Notes, shall authenticate and deliver (x) in the case of clause (iii), a Physical Note to such

 

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beneficial owner in a principal amount equal to the principal amount of such Note corresponding to such beneficial owner’s beneficial interest and (y) in the case of clauses (i) and (ii), Physical Notes to each beneficial owner of the related Global Notes (or a portion thereof) in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, and upon delivery of the Global Note to the Trustee such Global Note shall be canceled. The transfer and exchange of beneficial interests in a Global Note that does not involve the issuance of a Physical Note shall be effected through the Depositary (but not the Trustee or the Custodian) in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depositary therefor. Members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of any Holder.

Physical Notes issued in exchange for all or a part of the Global Note pursuant to this Section 2.05(b) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Upon execution and authentication, the Trustee shall deliver such Physical Notes to the Persons in whose names such Notes are so registered.

Notwithstanding any other provisions of this Indenture (other than the provisions set forth in this Section 2.05(b)), a Global Note may not be transferred as a whole or in part except (i) by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary and (ii) for exchange of a Global Note or a portion thereof for one or more Physical Notes in accordance with the terms of this Indenture.

At such time as all interests in a Global Note have been converted, canceled, repurchased or transferred, such Global Note shall be, upon receipt thereof, canceled by the Trustee in accordance with standing procedures and existing instructions between the Depositary and the Custodian. At any time prior to such cancellation, if any interest in a Global Note is exchanged for Physical Notes, converted, canceled, repurchased or transferred to a transferee who receives Physical Notes therefor or any Physical Note is exchanged or transferred

 

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for part of such Global Note, the principal amount of such Global Note shall, in accordance with the standing procedures and instructions existing between the Depositary and the Custodian, be appropriately reduced or increased, as the case may be, and an endorsement shall be made on such Global Note, by the Trustee or the Custodian, at the direction of the Trustee, to reflect such reduction or increase.

None of the Company, the Trustee nor any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

The Trustee shall have no obligation or duty to monitor, determine or inquire into compliance with any restriction on transfer imposed under the Indenture or applicable law with respect to any transfer of any Note (including any transfers between or among Depositaries or beneficial owners of interests in any Global Notes) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of the Indenture, and to examine the same to determine substantial compliance as to form with the express requirements of the Indenture.

(c)    Every Additional Note that bears or is required under this Section 2.05(b) to bear the legend set forth in this Section 2.05(b) (together with any Common Stock issued upon conversion of the Additional Notes and required to bear a similar legend, the “Restricted Securities”) shall be subject to the restrictions on transfer set forth in this Section 2.05(b) (including the legend set forth below), and the holder of each such Restricted Security, by such holder’s acceptance thereof, agrees to be bound by all such restrictions on transfer. As used in this Section 2.05(b), the term “transfer” encompasses any sale, pledge, transfer or other disposition whatsoever of any Restricted Security.

Until the date (the “Resale Restriction Termination Date”) that is the later of (i) the date that is one year after the date of issuance of any Restricted Note, or such shorter period of time as permitted by Rule 144 or any successor provision thereto, and (ii) such later date, if any, as may be required by applicable laws, any certificate evidencing such Restricted Note (and all securities issued in exchange therefor or substitution thereof, and all shares of Common Stock, if any, issued upon conversion thereof, if applicable) shall bear a legend in substantially the following form (unless such Restricted Notes or shares of Common Stock, if any, have been transferred pursuant to a registration statement that has become or been declared effective under the Securities Act and that continues to be effective at the time of such transfer, pursuant to the exemption from registration provided by Rule 144 or any similar provision then in force under the Securities Act, or

 

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unless otherwise agreed by the Company in writing, with written notice thereof to the Trustee):

THE SALE OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND ACCORDINGLY, THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, OR OF A BENEFICIAL OWNERSHIP HEREIN, THE ACQUIRER: (I) REPRESENTS THAT IT, AND ANY ACCOUNT FOR WHICH IT IS ACTING, IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, AND (II) AGREES (1) THAT IT WILL NOT WITHIN THE LATER OF (X) ONE YEAR AFTER THE DATE OF ISSUANCE OF THIS NOTE AND (Y) 90 DAYS AFTER IT CEASES TO BE AN AFFILIATE (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF MANNKIND CORPORATION (THE “COMPANY”), OFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER THE NOTES EVIDENCED HEREBY, THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTES OR ANY BENEFICIAL OWNERSHIP HEREIN, EXCEPT: (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF; (B) UNDER A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT; (C) TO A PERSON THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER AND TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, ALL IN COMPLIANCE WITH RULE 144A (IF AVAILABLE); OR (D) UNDER ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING RULE 144, IF AVAILABLE; AND (2) THAT IT WILL, PRIOR TO ANY TRANSFER OF THIS NOTE WITHIN THE LATER OF (X) SIX MONTHS (OR, IF THE COMPANY HAS NOT SATISFIED THE CURRENT PUBLIC INFORMATION REQUIREMENTS OF RULE 144, ONE YEAR) AFTER THE DATE OF ISSUANCE OF THIS NOTE AND (Y) 90 DAYS AFTER IT CEASES TO BE AN AFFILIATE (WITHIN THE MEANING OF RULE 144) OF THE COMPANY, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REQUIRE AND MAY RELY UPON TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. IN ANY EVENT, NO AFFILIATE OF THE COMPANY

 

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MAY RESELL THIS NOTE OTHER THAN UNDER A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IN A TRANSACTION THAT RESULTS IN SUCH NOTE NO LONGER BEING “RESTRICTED SECURITIES” (AS DEFINED UNDER RULE 144). NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER AND TRANSFEREE OF A NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF A NOTE WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING OF THE NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTE THAT (A) ITS PURCHASE AND HOLDING OF THE NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTE IS NOT MADE ON BEHALF OF OR WITH “PLAN ASSETS” OF ANY PLAN SUBJECT TO TITLE I OF ERISA, SECTION 4975 OF THE CODE OR ANY SIMILAR LAW OR (B) ITS PURCHASE AND HOLDING OF THE NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTE WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA, SECTION 4975 OF THE CODE OR ANY SIMILAR LAW.

Any Common Stock issued upon conversion of a Restricted Note prior to the applicable Resale Restriction Termination Date shall bear a similar legend.

No transfer of any Restricted Note prior to the applicable Resale Restriction Termination Date will be registered by the Note Registrar unless the applicable box on the Form of Assignment and Transfer has been checked.

Notwithstanding anything to the contrary contained in this Indenture or any Restricted Note, such Restricted Note (or security issued in exchange or substitution therefor) (i) as to which such restrictions on transfer shall have expired in accordance with their terms, (ii) has been transferred pursuant to a registration statement that has become effective or been declared effective under the Securities Act and that continues to be effective at the time of such transfer or (iii) that has been sold pursuant to the exemption from registration provided by Rule 144 or any similar provision then in force under the Securities Act, may, upon surrender of such Restricted Note for exchange to the Note Registrar in accordance with the provisions of this Section 2.05, be exchanged for a new Note or Notes, of like tenor and aggregate principal amount, which shall not bear the restrictive legend required by this Section 2.05(b). The Company shall be entitled to instruct the Trustee in writing to so surrender any Global Note as to which any of the conditions set forth in clause (i) through (iii) of the immediately preceding sentence have been satisfied, and, upon such instruction, the Trustee shall so surrender such Global Note for exchange; and any new Global Note so exchanged therefor shall not bear the restrictive legend specified in this Section 2.05(c) and shall not be assigned a restricted CUSIP.

 

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(d)    The Company may cause the removal of the legends required by Sections 2.05(c) from any Global Note at any time on or after the Resale Restriction Date by: (i) instructing the Trustee to remove the such legends from such Global Note; (ii) providing to the Trustee and the Depositary written notice to change the CUSIP number for the Notes to the applicable unrestricted CUSIP number; and (iii) complying with any Applicable Procedures for delegending or otherwise exchanging such Global Note for a Global Note not bearing the restrictive legend (including DTC’s mandatory exchange process, if applicable); whereupon any legends otherwise required by Section 2.05(c) shall be removed from any Global Notes without any further action on the part of the Holders.

Section 2.06.    Mutilated, Destroyed, Lost or Stolen Notes. In case any Note shall become mutilated or be destroyed, lost or stolen, the Company in its discretion may execute, and upon its written request the Trustee or an authenticating agent appointed by the Trustee shall authenticate and deliver, a new Note, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall furnish to the Company, to the Trustee and, if applicable, to the authenticating agent, such security or indemnity as may be required by them to save each of them harmless from any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company, to the Trustee and, if applicable, to the authenticating agent, evidence to their satisfaction of the destruction, loss or theft of such Note and of the ownership thereof.

The Trustee or the authenticating agent, if applicable, may authenticate any such substituted Note and deliver the same upon the receipt of such security or indemnity as the Trustee, the Company and, if applicable, the authenticating agent may require. Upon the issuance of any substitute Note, the Company or the Trustee may require the payment by the Holder of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Note that has matured or is about to mature or has been tendered for purchase upon a Fundamental Change or is about to be converted shall become mutilated or be destroyed, lost or stolen, the Company may, in its sole discretion, instead of issuing a substitute Note, pay or authorize the payment of or convert or authorize the conversion of the same (without surrender thereof except in the case of a mutilated Note), as the case may be, if the applicant for such payment or conversion shall furnish to the Company, to the Trustee and, if applicable, to the authenticating agent, such security or indemnity as may be required by them to save each of them harmless for any loss, liability, cost or expense caused by or

 

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connected with such substitution, and, in every case of destruction, loss or theft, evidence satisfactory to the Company, the Trustee and, if applicable, any Paying Agent or Conversion Agent evidence of their satisfaction of the destruction, loss or theft of such Note and of the ownership thereof.

Every substitute Note issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any Note is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be found at any time, and shall be entitled to all the benefits of (but shall be subject to all the limitations set forth in) this Indenture equally and proportionately with any and all other Notes duly issued hereunder. To the extent permitted by law, all Notes shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment or conversion or purchase of mutilated, destroyed, lost or stolen Notes and shall preclude any and all other rights or remedies, notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment or conversion of negotiable instruments or other securities without their surrender.

For greater certainty, every substitute Note issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any Note is mutilated, destroyed, lost or stolen will be issued as evidence of the same continuing indebtedness of the Company under this Indenture and in no circumstances is the Company obligated under the Indenture to repay the principal amount of the substituted Note by virtue of such mutilation, destruction or loss.

Section 2.07. Temporary Notes. Pending the preparation of Physical Notes, the Company may execute and the Trustee or an authenticating agent appointed by the Trustee shall, upon written request of the Company, authenticate and deliver temporary Notes (printed or lithographed). Temporary Notes shall be issuable in any authorized denomination, and substantially in the form of the Physical Notes but with such omissions, insertions and variations as may be appropriate for temporary Notes, all as may be determined by the Company. Every such temporary Note shall be executed by the Company and authenticated by the Trustee or such authenticating agent upon the same conditions and in substantially the same manner, and with the same effect, as the Physical Notes. Without unreasonable delay, the Company will execute and deliver to the Trustee or such authenticating agent Physical Notes (other than any Global Note) and thereupon any or all temporary Notes (other than any Global Note) may be surrendered in exchange therefor, at each office or agency maintained by the Company pursuant to Section 4.05 and the Trustee or such authenticating agent shall authenticate and deliver in exchange for such temporary Notes an equal aggregate principal amount of Physical Notes. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits and subject to the same limitations under this Indenture as the Physical Notes authenticated and delivered hereunder.

 

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For greater certainty, each Note issued pursuant to the provisions of this Section 2.07 in exchange for a temporary Note will be issued as evidence of the same continuing indebtedness of the Company under this Indenture and in no circumstances is the Company obligated under the Indenture to repay the principal amount of the temporary Note by virtue of the exchange.

Section 2.08. Cancellation of Notes Paid, Etc. All Notes surrendered for the purpose of payment, purchase, conversion, exchange or registration of transfer, shall, if surrendered to the Company or any Paying Agent or any Note Registrar or any Conversion Agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be promptly canceled by it, and no Notes shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee shall dispose of canceled Notes in accordance with its customary procedures and, after such disposition, shall deliver a written confirmation of such disposition to the Company, at the Company’s written request. If the Company shall acquire any of the Notes, such acquisition shall not operate as satisfaction of the indebtedness represented by such Notes unless and until the same are delivered to the Trustee for cancellation.

Section 2.09. CUSIP and ISIN Numbers. The Company in issuing the Notes may use “CUSIP” and “ISIN” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” and “ISIN” numbers in all notices issued to Holders of the Notes as a convenience to such Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or on such notice and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify the Trustee in writing of any change in the “CUSIP” or “ISIN” numbers.

Section 2.10. Additional Notes; Purchases. The Company may, without the consent of the Holders of the Notes and notwithstanding Section 2.01, issue additional Notes hereunder (“Additional Notes”) which shall have substantially identical terms as the Notes, other than with respect to (i) the date of issuance, (ii) the issue price and principal amount, (iii) the initial date from which interest begins to accrue and (iv) if applicable, the existence of “transfer” restrictions pursuant to the Securities Act; provided, further, that, in the case of any Additional Note that is a Global Note, no Additional Notes may be issued with the same “CUSIP” or “ISIN” number as other Notes unless it is so permitted in accordance with applicable law and such Additional Notes are fungible with the Notes for U.S. federal tax and securities law purposes. The Notes issued on the Issue Date and any Additional Notes shall be treated as a single class for all purposes under this Indenture. With respect to any Additional Notes, the

 

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Company shall set forth in an Officer’s Certificate, a copy of which shall be delivered to the Trustee, and in a supplemental indenture, the following information: (1) the aggregate principal amount of Notes outstanding immediately prior to the issuance of such Additional Notes; (2) the issue price, if any, the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture and the issue date of such Additional Notes; (3) the certificate number, in the case of an Additional Note that is a Physical Note, (4) the “CUSIP” or “ISIN” number, as applicable, in the case of an Additional Note that is a Global Note; and (5) whether such Additional Notes will be Restricted Securities.

Section 2.11 Purchases. The Company may also from time to time purchase the Notes in open market purchases or negotiated transactions without prior notice to Holders. Any Notes purchased by the Company shall be deemed to be no longer Outstanding under this Indenture.

ARTICLE 3

SATISFACTION AND DISCHARGE

Section 3.01. Satisfaction and Discharge. This Indenture shall upon request of the Company contained in an Officer’s Certificate cease to be of further effect, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) (i) the Company delivers to the Trustee all Outstanding Notes (other than Notes replaced pursuant to Section 2.06) for cancellation; or (ii) the Company has irrevocably deposited with the Trustee or delivered to Holders of Notes, as applicable, after the Notes have become due and payable, whether at the Maturity Date, or any Fundamental Change Purchase Date, or upon conversion or otherwise, cash and/or (in the case of conversion) shares of Common Stock (together with cash in lieu of fractional shares), as applicable, sufficient to pay all of the Outstanding Notes and all other sums payable under this Indenture by the Company; and (b) the Company has delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 7.06 shall survive such satisfaction and discharge.

Section 3.02. Deposited Monies To Be Held In Trust. Subject to Section 3.03 hereof, all monies deposited with the Trustee pursuant to Section 3.01 hereof shall be held in trust and applied by it to the payment, either directly or through any Paying Agent (including the Company if acting as its own Paying Agent), to the Holders for the payment or repurchase of which such monies have been deposited with the Trustee, of all sums due and to become due thereon for

 

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principal, premium, if any, and interest. All monies deposited with the Trustee pursuant to Section 3.01 hereof (and held by it or any Paying Agent) for the payment of Notes subsequently converted shall be returned to the Company upon request of the Company.

Section 3.03. Return Of Unclaimed Monies. Subject to applicable escheat laws, the Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal of or accrued and unpaid interest on the Notes that remains unclaimed for two years after the date upon which such payment shall have become due. Notwithstanding the foregoing, the Trustee and Paying Agent shall have the right to withhold payment of such money to the Company until the Trustee or Paying Agent at the expense of the Company mails to each Holder, a notice stating that such money shall be repaid to the Company if unclaimed after a date no less than 30 days from the mailing. After payment to the Company by the Trustee or Paying Agent, all liability of the Trustee and the Paying Agent with respect to such money shall cease, and Holders entitled to the money must look to the Company for payment as general creditors, subject to applicable law.

ARTICLE 4

PARTICULAR COVENANTS OF THE COMPANY

Section 4.01. Payment of Principal and Interest. (a) The Company shall promptly make all payments in respect of the Notes on the dates and in the manner provided in the Notes and this Indenture. A payment of principal or interest shall be considered paid on the date it is due if the Paying Agent holds by 10:00 a.m. (New York City time) on that date money or securities, deposited by or on behalf of the Company sufficient to make the payment. The Company shall, to the fullest extent permitted by law, pay interest in immediately available funds on overdue principal amount and interest at the annual rate borne by the Notes compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand.

(b)    Payment of the principal of and interest, if any, on the Notes shall be made at the office or agency of the Company maintained for that purpose, which shall initially be at the Trustee’s Corporate Trust Office, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, subject to Section 2.03, the Company may pay principal and interest in respect of any Physical Note by check or wire transfer payable in such money. Notwithstanding the foregoing, so long as the Notes are registered in the name of a Depositary or its nominee, all payments thereon shall be made by wire transfer of immediately available funds to the account of the Depositary or its nominee.

 

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Section 4.02. Corporate Existence. Subject to Article 10 hereof, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and rights (charter and statutory); provided, however, that the Company shall not be required to preserve any such right or franchise if the Company determines that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders.

Section 4.03. Rule 144A Information Requirement and Reports. (a) At any time the Company is not subject to Sections 13 or 15(d) of the Exchange Act, the Company shall, so long as any of the Notes or any shares of Common Stock issuable upon conversion thereof shall, at such time, constitute “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, upon written request, provide to any Holder, beneficial owner or prospective purchaser of such Notes or any shares of Common Stock issued upon conversion of such Notes, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to facilitate the resale of such Notes or shares of Common Stock pursuant to Rule 144A under the Securities Act.

(b)    The Company shall furnish to the Trustee within 15 calendar days after the Company is required to file any documents or reports with the Commission pursuant to Sections 13 or 15(d) of the Exchange Act (giving effect to all applicable grace periods provided under the Exchange Act including that provided by Rule 12b-25 under the Exchange Act) copies of such documents or reports. Any such document or report that the Company files with the Commission through the Commission’s EDGAR system shall be deemed furnished to the Trustee for purposes of this Section 4.03(b) at the time such documents are filed or furnished via the Commission’s EDGAR system, provided that the Trustee shall have no responsibility for determining whether such filing has taken place, nor shall the Trustee have any liability for the timeliness or content of any filing or report hereunder.

Section 4.04. Compliance Certificate. The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending December 31, 2019) an Officer’s Certificate stating whether or not, to the knowledge of such officer, the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. Within five Business Days of an Officer of the Company coming to have actual knowledge of a Default or Event of Default, regardless of the date, the Company shall deliver an Officer’s Certificate to the Trustee specifying such Default or Event of Default and the nature and status thereof.

 

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Section 4.05. Maintenance of Office or Agency. So long as any Notes remain Outstanding, the Company agrees to maintain an office or agency with respect to such Notes and at such other location or locations as may be designated as provided in this Section 4.05, where (i) Notes may be presented for conversion (“Conversion Agent”), (ii) Notes may be presented for payment (“Paying Agent”), (iii) Notes may be presented as herein above authorized for registration of transfer and exchange, and (iv) notices and demands to or upon the Company in respect of the Notes and this Indenture may be given or served, such designation to continue with respect to such office or agency until the Company shall, by written notice signed by any officer authorized to sign an Officer’s Certificate and delivered to the Trustee, designate some other office or agency for such purposes or any of them. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, notices and demands. The Company initially appoints the Corporate Trust Office of the Trustee as Conversion Agent and Paying Agent with respect to the Notes.

Section 4.06. Paying Agents. (a) If the Company shall appoint one or more paying agents for the Notes, other than the Trustee, the Company will cause each such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 4.06:

(i)    that it will hold all sums held by it as such agent for the payment of the principal of (and premium, if any) or interest on the Notes (whether such sums have been paid to it by the Company or by any other obligor of such Notes) in trust for the benefit of the Persons entitled thereto;

(ii)    that it will give the Trustee notice of any failure by the Company to make any payment of the principal of (and premium, if any) or interest on the Notes when the same shall be due and payable;

(iii)    that it will, at any time during the continuance of any failure referred to in the preceding paragraph (a)(ii) above, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent; and

(iv)    that it will perform all other duties of paying agent as set forth in this Indenture.

 

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(b)    If the Company shall act as its own paying agent with respect to any Notes, it will on or before each due date of the principal of (and premium, if any) or interest on the Notes, set aside, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay such principal (and premium, if any) or interest so becoming due on Notes until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of such action, or any failure to take such action. The Trustee shall have no liability or responsibility for the action or inaction of any Paying Agent (that is not the Trustee).

(c)    Notwithstanding anything in this Section 4.06 to the contrary, (i) the agreement to hold sums in trust as provided in this Section 4.06 is subject to the provisions of Section 3.02 and Section 3.03, and (ii) the Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct any paying agent to pay, to the Trustee all sums held in trust by the Company or such paying agent, such sums to be held by the Trustee upon the same terms and conditions as those upon which such sums were held by the Company or such paying agent; and, upon such payment by the Company or any paying agent to the Trustee, the Company or such paying agent shall be released from all further liability with respect to such money.

Section 4.07. Appointment to Fill Vacancy in Office of Trustee. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.10, a Trustee, so that there shall at all times be a Trustee hereunder.

ARTICLE 5

HOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

Section 5.01. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (a) within 10 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such regular record date, provided that the Company shall not be obligated to furnish or cause to furnish such list at any time that the list shall not differ in any respect from the most recent list furnished to the Trustee by the Company and (b) at such other times as the Trustee may request in writing within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that, in either case, no such list need be furnished for any Notes for which the Trustee shall be the Note Registrar.

 

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Section 5.02. Preservation Of Information; Communications With Holders.

(a)    The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders of Notes contained in the most recent list furnished to it as provided in Section 5.01 and as to the names and addresses of Holders of Notes received by the Trustee in its capacity as Note Registrar (if acting in such capacity).

(b)    The Trustee may destroy any list furnished to it as provided in Section 5.01 upon receipt of a new list so furnished.

(c)    The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Notes, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act.

(d)    Every Holder, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant hereto or otherwise in accordance with the Trust Indenture Act.

Section 5.03. Reports by the Trustee.

(a)    On or before July 1 in each year, commencing July 1, 2020, in which any of the Notes are Outstanding, the Trustee shall transmit by mail, first class postage prepaid or in accordance with Applicable Procedures, to the Holders, as their names and addresses appear upon the Note Register, a brief report dated as of the preceding May 1, if and to the extent required under Section 313(a) of the Trust Indenture Act.

(b)    The Trustee shall comply with Section 313(b) and 313(c) of the Trust Indenture Act.

(c)    A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with the Company, with each securities exchange upon which any Notes are listed (if so listed) and also with the Securities and Exchange Commission. The Company agrees to notify the Trustee when any Notes become listed on any securities exchange.

ARTICLE 6

DEFAULT AND REMEDIES

Section 6.01. Events of Default. An “Event of Default” shall occur when any of the following occurs:

(a)    the Company fails to pay when due the principal of or premium, if any, on any of the Notes at the Maturity Date, upon repurchase, acceleration or otherwise; or

 

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(b)    the Company fails to pay an installment of interest on any of the Notes for 30 days after the date when due; or

(c)    the Company fails to deliver when due all shares of Common Stock, together with cash instead of fractional shares, and/or other property, if applicable, deliverable upon conversion of the Notes pursuant to Article 13, which failure continues for 10 days; or

(d)    the Company fails to perform or observe any other term, covenant or agreement contained in the Notes or this Indenture for a period of 60 days after written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the then-Outstanding Notes; or

(e)    (i) the Company fails to make any payment by the end of the applicable grace period, if any, after the maturity of any indebtedness for borrowed money in an amount in excess of $25,000,000 or (ii) there is an acceleration of any indebtedness for borrowed money in an amount in excess of $25,000,000 because of a default with respect to such indebtedness without such indebtedness having been discharged or such acceleration having been cured, waived, rescinded or annulled, in the case of either (i) or (ii) above, for a period of 30 days after written notice to the Company by the Trustee or to the Company and the Trustee by Holders of at least 25% in aggregate principal amount of the then-Outstanding Notes; or

(f)    the Company fails to provide a Fundamental Change Company Notice in accordance with Section 15.01; or

(g)    a court having jurisdiction enters a decree or order under any Bankruptcy Law that: (i) for relief against the Company in an involuntary case or proceeding; or adjudicates the Company bankrupt or insolvent; or (ii) appoints a Receiver of the Company or of any substantial part of its property; or (iii) orders the winding up or liquidation of the Company, and (iv) the decree or order remains unstayed and in effect for a period of 90 days; or

(h)    the Company pursuant to or within the meaning of any Bankruptcy Law:

(i)    commences as a debtor a voluntary case or proceeding;

 

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(ii)    consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it;

(iii)    consents to the appointment of a Receiver of it or for all or substantially all of its property;

(iv)    makes a general assignment for the benefit of its creditors;

(v)    files a petition in bankruptcy or answer or consent seeking reorganization or relief; or

(vi)    consents to the filing of such a petition or the appointment of or taking possession by a Receiver.

The term “Bankruptcy Law” means Title 11 of the United States Code (or any successor thereto) or any similar federal or state law for the relief of debtors. The term “Receiver” means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.

Section 6.02. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Outstanding Notes (other than an Event of Default specified Section 6.01(g) or 6.01(h) hereof in respect of the Company) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then-Outstanding Notes, by written notice to the Trustee, may declare the Notes due and payable at their principal amount plus any accrued and unpaid interest, and thereupon the Trustee may, at its discretion, proceed to protect and enforce the rights of the Holders by the appropriate judicial proceedings. Such declaration may be rescinded and annulled with the written consent of the Holders of a majority in aggregate principal amount of the then-Outstanding Notes, subject to the provisions of this Indenture.

If an Event of Default specified in Section 6.01(g) or 6.01(h) hereof occurs and is continuing, then all unpaid principal of and accrued and unpaid interest on the Outstanding Notes shall become immediately due and payable, without any declaration or other act on the part of the Trustee or any Holder.

Notwithstanding the foregoing, at the election of the Company, the sole remedy for an Event of Default specified in Section 6.01(d) relating to the failure by the Company to comply with its reporting obligations under Section 4.03 and for any failure to comply with the requirements of Section 314(a)(1) of the Trust Indenture Act, shall (i) for the first 90 days after the occurrence of such an Event of Default, consist exclusively of the right to receive special interest on Notes (the “Special Interest”) at an annual rate equal to 0.25% of the principal amount of the Outstanding Notes, and (ii) for the next 90 days after the expiration of such 90 day period, consist exclusively of the right to receive Special Interest on the Notes at an annual rate equal to 0.50% of the principal amount of the Outstanding Notes.

 

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The Special Interest shall be paid semi-annually in arrears, with the first semi-annual payment due on the first Interest Payment Date following the date on which the Special Interest began to accrue on any Notes. The Special Interest will accrue on all Outstanding Notes from and including the date on which an Event of Default relating to a failure to comply with the reporting obligations under Section 4.03 or a failure to comply with the requirements of Section 314(a)(1) of the Trust Indenture Act first occurs to but not including the 180th day thereafter (or such earlier date on which the Event of Default relating to such reporting obligations shall have been cured or waived). On such 180th day (or earlier, if such Event of Default is cured or waived pursuant to Section 6.04 prior to such 180th day), such Special Interest will cease to accrue and, if such Event of Default relating to such reporting obligations has not been cured or waived prior to such 180th day the Notes shall be subject to acceleration as provided above in this Section 6.02. The provisions described in this paragraph shall not affect the rights of the Holders in the event of the occurrence of any other Event of Default. In the event the Company does not elect to pay Special Interest upon an Event of Default in accordance with this paragraph, the Notes will be subject to acceleration as provided in this Section 6.02. If the Company elects to pay Special Interest as the sole remedy for an Event of Default specified in Section 6.01(d) relating to the failure by the Company to comply with its obligations under Section 4.03 or any failure to comply with the requirements of Section 314(a)(1) of the Trust Indenture Act, the Company shall notify in writing, in the manner provided for in Section 17.03, the Holders and the Trustee of such election at any time on or before the close of business on the date on which such Event of Default first occurs.

The Holders of a majority in aggregate principal amount of the then-Outstanding Notes by written notice to the Trustee may rescind and annul an acceleration and its consequences if:

(1)    all existing Events of Default, other than the nonpayment of principal (including the Fundamental Change Purchase Price, if applicable) of or interest on the Notes which has become due solely because of the acceleration, have been remedied, cured or waived, and

(2)    the rescission would not conflict with any judgment or decree of a court of competent jurisdiction;

provided, however, that in the event such declaration of acceleration has been made based on the existence of an Event of Default under Section 6.01(e) hereof and such Event of Default has been remedied, cured or waived in accordance with Section 6.01(e) hereof, then, without any further action by the

 

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Holders, such declaration of acceleration shall be rescinded automatically and the consequences of such declaration shall be annulled. No such rescission or annulment shall affect any subsequent Default or impair any right consequent thereon.

Section 6.03. Other Remedies. If an Event of Default with respect to Outstanding Notes occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes. The Trustee may maintain a proceeding even if it does not possess any of the securities or does not produce any of them in the proceeding.

Section 6.04. Waiver of Past Defaults. The Holders, either (a) through the written consent of not less than a majority in aggregate principal amount of the Notes then Outstanding or (b) by the adoption of a resolution, at a meeting of Holders of the Notes then Outstanding at which a quorum is present, by the Holders of at least a majority in aggregate principal amount of the Outstanding Notes represented at such meeting, may, on behalf of the Holders of all of the Notes, waive an existing Default or Event of Default, except a Default or Event of Default:

(1)    in the payment of the principal of or premium, if any, or interest on any Note;

(2)    in respect of the right to convert any Note in accordance with Article 13; or

(3)    in respect of the covenants or provisions hereof which, under Section 9.02 hereof, cannot be modified or amended without the consent of the Holder of each Outstanding Note affected.

Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; provided, however, that no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05. Control by Majority. The Holders, either (a) through the written consent of not less than a majority in aggregate principal amount of the Notes then Outstanding, or (b) by the adoption of a resolution, at a meeting of Holders of the Notes then Outstanding at which a quorum is present, by the Holders of at least a majority in aggregate principal amount of the Outstanding Notes represented at such meeting, shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, subject to the

 

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provisions of this Indenture. However, the Trustee may refuse to follow any direction that:

(a)    conflicts with any law or with this Indenture,

(b)    the Trustee determines may be unduly prejudicial to the rights of the Holders not joining therein, or

(c)    in the Trustee’s reasonable judgment may expose the Trustee to personal liability.

The Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

Section 6.06. Limitation On Suit. No Holder of any Note may pursue any remedy with respect to this Indenture or the Notes (including instituting any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver or trustee), except, in the case of a Default or Event of Default in the payment of the principal of or premium on, if any, or interest on the Notes unless:

(a)    such Holder has previously given written notice to the Trustee of an Event of Default that is continuing;

(b)    the Holders of at least 25% in aggregate principal amount of the Notes then Outstanding shall have made a written request to the Trustee, and shall have offered to the Trustee indemnity satisfactory to the Trustee, to pursue the remedy;

(c)    no direction inconsistent with such written request has been given to the Trustee by the Holders of a majority in aggregate principal amount of the Notes then Outstanding (or such amount as shall have acted at a meeting pursuant to the provisions of this Indenture);

(d)    such Holder or Holders have offered the Trustee security or indemnity satisfactory to the Trustee against any costs, liabilities or expenses incurred in complying with such request; and

(e)    the Trustee has failed to comply with the request for 60 days after the receipt of such request and an offer of indemnity.

A Holder of Notes may not use this Indenture to prejudice the rights of another Holder of Notes or to obtain a preference or priority over another Holder of Notes (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders).

 

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Section 6.07. Unconditional Rights of Holders to Receive Payment and to Convert. In addition to the other rights and remedies set forth in this Article 6, the following shall apply with respect to the Notes under this Indenture.

Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal amount (including the Fundamental Change Purchase Price, if applicable) and interest in respect of the Notes held by such Holder, on or after the respective due dates expressed in the Notes and this Indenture, and to convert such Note in accordance with Article 13, and to bring suit for the enforcement of any such payment on or after such respective due dates or for the right to convert in accordance with Article 13, and shall not be impaired or affected without the consent of such Holder.

Section 6.08. Collection of Indebtedness and Suits For Enforcement By the Trustee. The Company covenants that if an Event of Default occurs under Section 6.01(a) or Section 6.01(b), then the Company shall, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Notes, the whole amount then due and payable (as expressed therein or as a result of any acceleration effected pursuant to Section 6.02 hereof) on such Notes for principal (including the Fundamental Change Purchase Price, if applicable) and premium, if any, and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (including the Fundamental Change Purchase Price, if applicable) and premium, if any, and on any overdue interest, in each case at the rate borne by the Notes from the required payment date, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company, wherever situated.

If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Notes by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

 

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Section 6.09. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or the property of the Company or its creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (1) to file and prove a claim for the whole amount of principal (including the Fundamental Change Purchase Price, if applicable) and premium, if any, and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee hereunder) and of the Holders of Notes allowed in such judicial proceeding, and (2) to collect and receive any moneys or other property payable or deliverable on any such claim and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceedings is hereby authorized by each Holder of Notes to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Notes, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee under this Indenture.

Nothing contained herein shall be deemed to authorize the Trustee to authorize or consent to or accept, or adopt on behalf of any Holder of a Note, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder of a Note in any such proceeding.

Section 6.10. Restoration of Rights and Remedies. If the Trustee or any Holder of a Note has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of Notes shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

Section 6.11. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in Section 2.05(d), no right or remedy conferred in this Indenture upon or reserved to the Trustee or to the Holders of Notes is intended to be

 

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exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 6.12. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders of Notes may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders of Notes, as the case may be.

Section 6.13. Application of Money Collected. Any money and property collected by the Trustee pursuant to this Article 6 shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money and property on account of principal (including the Fundamental Change Purchase Price, if applicable) or premium, if any, or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts due the Trustee, including its agents and counsel;

SECOND: To the payment of the amounts then due and unpaid for principal (including the Fundamental Change Purchase Price, if applicable) of and premium, if any, and interest on the Notes and coupons in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal (including the Fundamental Change Purchase Price, if applicable) and premium, if any, and interest, respectively; and

THIRD: Any remaining amounts shall be repaid to the Company.

Section 6.14. Undertaking For Costs. All parties to this Indenture agree, and each Holder of any Note by such Holder’s acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but

 

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the provisions of this Section 6.14 shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in aggregate principal amount of the Notes then Outstanding, or to any suit instituted by any Holder of any Note for the enforcement of the payment of the principal (including the Fundamental Change Purchase Price, if applicable) of or premium, if any, or interest on any Note on or after the stated maturity expressed in such Note (or, in the case of exercise of a repurchase right in connection with a Fundamental Change, on or after the Fundamental Change Purchase Date) or for the enforcement of the right to convert any Note in accordance with Article 13.

Section 6.15. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim to take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 6.16. Notice of Default. If any Default or any Event of Default occurs and is continuing and if such Default or Event of Default is actually known to a Responsible Officer of the Trustee, the Trustee shall within 90 days of the occurrence of a Default or Event of Default, mail to each Holder notice of all uncured Defaults or Events of Default known to the Trustee, unless such Default or Event of Default has been cured; provided, however, that, except in the case of a default in the payment of the principal of (including upon repurchase) or premium, if any, or interest on any Note, the Trustee shall be protected in withholding such notice if the Trustee in good faith determines that the withholding of such notice is in the best interest of such Holders.

ARTICLE 7

CONCERNING THE TRUSTEE

Section 7.01. Certain Duties and Responsibilities of Trustee.

(a)    The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform with respect to the Notes such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default has occurred (that has not been cured or waived), the Trustee shall exercise with respect to the Notes

 

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such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(b)    No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i)    prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred:

(A)    the duties and obligations of the Trustee shall with respect to the Notes be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable with respect to the Notes except for the performance of such duties and obligations as are specifically set forth in this Indenture and subject to the terms of this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(B)    in the absence of negligence or willful misconduct on the part of the Trustee, the Trustee may with respect to the Notes conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;

(ii)    the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(iii)    the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in principal amount of the Notes at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture with respect to the Notes; and

(iv)    None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur

 

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personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it.

Section 7.02. Certain Rights of Trustee. Except as otherwise provided in Section 7.01:

(a)    the Trustee may rely conclusively and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b)    any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by a Board Resolution or an instrument signed in the name of the Company by any authorized officer of the Company (unless other evidence in respect thereof is specifically prescribed herein);

(c)    the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted hereunder in good faith and in reliance thereon;

(d)    the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered the Trustee security or indemnity satisfactory to the Trustee against loss, costs, expenses and liabilities that may be incurred therein or thereby;

(e)    the Trustee shall not be liable for any action taken or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;

(f)    the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security, or other papers or documents, unless requested in writing so to do by the Holders of not less than a majority in principal amount of the Outstanding Notes affected thereby (determined as provided in Section 8.04); provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require indemnity satisfactory to it against such costs, expenses or liabilities as a condition to so proceeding. The reasonable expense of every such examination shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand;

 

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(g)    the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys or other professionals or consultants and may retain such parties in furtherance of its administration hereunder and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney or other professional appointed with due care by it hereunder;

(h)    in no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;

(i)    the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder;

(j)    the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder;

(k)    the Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture;

(l)    under no circumstances shall the Trustee be liable in its individual capacity for the obligations evidenced by the Notes.

(m)    The permissive right of the Trustee to do things enumerated in the documents shall not be construed as a duty.

In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (1) any Event of Default occurring pursuant to Section 6.01(a) and 6.01(b)) or (2) any Default or Event of Default of which the Trustee shall have received written notification in the manner set forth in this Indenture or a Responsible Officer of the Trustee shall have obtained actual knowledge. Delivery of reports, information and documents to the Trustee under Section 4.03 is for informational purposes only and the information and the Trustee’s receipt of the foregoing shall not constitute constructive notice of any information contained therein, or determinable from information contained therein including the Company’s compliance with any of their covenants thereunder (as to which the Trustee is entitled to rely conclusively on an Officer’s Certificate).

 

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Section 7.03. Trustee Not Responsible for Recitals or Issuance or Notes.

(a)    The recitals contained herein and in the Notes shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same.

(b)    The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes;

(c)    The Trustee shall not be accountable for the use or application by the Company of any of the Notes or of the proceeds of such Notes, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture, or for the use or application of any moneys received by any Paying Agent other than the Trustee, acting in such capacity.

Section 7.04. May Hold Notes. The Trustee or any Paying Agent or Note Registrar, in its individual or any other capacity, may become the owner or pledgee of Notes with the same rights it would have if it were not Trustee, Paying Agent or Note Registrar.

Section 7.05. Moneys Held in Trust. Subject to the provisions of Section 3.03, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree to in writing with the Company to pay thereon.

Section 7.06. Compensation and Reimbursement.

(a)    The Company covenants and agrees to pay to the Trustee, and the Trustee shall receive such compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) as the Company and the Trustee may from time to time agree in writing, for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and, except as otherwise expressly provided herein, the Company will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ), except any such expense, disbursement or advance as may arise from its negligence or willful misconduct and except as the Company and Trustee may from time to time agree in writing. The Company also covenants to indemnify the Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any loss, liability or expense incurred without

 

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negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses of defending itself against any claim of liability in the premises.

(b)    The obligations of the Company under this Section 7.06 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for reasonable expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders.

(c)    The Company covenants and agrees to indemnify the Trustee for, and hold it harmless from and against, any loss, liability, damages, claims, costs or expense including taxes (other than taxes based upon, measured by or determined by the income of the Trustee) reasonably incurred by it arising out of or in connection with the acceptance or administration of the trust or trusts hereunder or the performance of its duties hereunder, including the reasonable costs and expenses of defending itself against any claim (whether asserted by the Company, or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder or in connection with enforcing the provisions of this Section, except to the extent any such loss, liability or expense may be attributable to its negligence or willful misconductas determined by a final non-appealable decision of a court of competent jurisdiction.

(d)    In addition and without prejudice to the rights provided to the Trustee under any of the provisions of this Indenture, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 6.01(g) or Section 6.01(h), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal and State bankruptcy, insolvency or other similar law.

(e)    The Company’s obligations under this Section 7.06 and the lien referred to in Section 7.06(b) shall survive the resignation or removal of the Trustee, the discharge of the Company’s obligations under Article Eleven of this Indenture and/or the termination of this Indenture.

Section 7.07. Reliance on Officers Certificate and Opinions. Except as otherwise provided in Section 7.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it reasonably necessary or desirable that a matter be proved or established prior to taking or suffering or omitting to take any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of

 

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negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officer’s Certificate and Opinion of Counsel delivered to the Trustee and such certificate or opinion, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted to be taken by it under the provisions of this Indenture upon the faith thereof.

Section 7.08. Disqualification; Conflicting Interests. If the Trustee has or shall acquire any “conflicting interest” within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the Company shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.

Section 7.09. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee with respect to the Notes issued hereunder which shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or other Person permitted to act as trustee by the Securities and Exchange Commission, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial, or District of Columbia authority.

If such corporation or other Person publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 7.09, the combined capital and surplus of such corporation or other Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.09, the Trustee shall resign promptly in the manner and with the effect specified in Section 7.10.

Section 7.10. Resignation and Removal; Appointment of Successor.

(a)    The Trustee or any successor hereafter appointed may at any time resign with respect to the Notes by giving written notice thereof to the Company. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee with respect to the Notes by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee, at the expense of the Company, may petition any court of competent jurisdiction for the appointment of a successor trustee with respect to the Notes, or

 

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any Holder who has been a bona fide Holder of Notes for at least six months may on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.

(b)    In case at any time any one of the following shall occur:

(i)    the Trustee shall fail to comply with the provisions of Section 7.08 after written request therefor by the Company or by any Holder who has been a bona fide Holder of Notes for at least six months;

(ii)    the Trustee shall cease to be eligible in accordance with the provisions of Section 7.09 and shall fail to resign after written request therefor by the Company or by any such Holder; or

(iii)    the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or commence a voluntary bankruptcy proceeding, or a receiver of the Trustee or of its property shall be appointed or consented to, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, the Company may remove the Trustee with respect to the Notes and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or any Holder who has been a bona fide Holder of Notes for at least six months may, on behalf of that Holder and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.

(c)    The Holders of a majority in aggregate principal amount of the Notes at the time Outstanding may at any time remove the Trustee by so notifying the Trustee and the Company in writing and may appoint a successor Trustee with the consent of the Company.

(d)    Any resignation or removal of the Trustee and appointment of a successor trustee with respect to the Notes pursuant to any of the provisions of this Section 7.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.11.

Section 7.11. Acceptance of Appointment By Successor.

(a)    In case of the appointment hereunder of a successor trustee with respect to all Notes, every such successor trustee so appointed shall execute,

 

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acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor trustee all the rights, powers, and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring Trustee hereunder. The trustee shall have no liability or responsibility for the action or inaction of any successor Trustee.

(b)    In case of the appointment hereunder of a successor trustee with respect to some, but not all of the Notes, the Company, the retiring Trustee and each successor trustee with respect to such Notes shall execute and deliver an indenture supplemental hereto wherein each successor trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Notes to which the appointment of such successor trustee relates, (ii) shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Notes as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (iii) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust, that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee and that no Trustee shall be responsible for any act or failure to act on the part of any other Trustee hereunder; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein, such retiring Trustee shall with respect to the Notes to which the appointment of such successor trustee relates have no further responsibility for the exercise of rights and powers or for the performance of the duties and obligations vested in the Trustee under this Indenture, and each such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Notes to which the appointment of such successor trustee relates; but, on request of the Company or any successor trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor trustee, to the extent contemplated by such supplemental indenture, the property and money held by such retiring Trustee hereunder with respect to the Notes to which the appointment of such successor trustee relates.

 

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(c)    Upon request of any such successor trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section 7.11, as the case may be.

(d)    No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article 7.

(e)    Upon acceptance of appointment by a successor trustee as provided in this Section 7.11, the Company shall transmit notice of the succession of such trustee hereunder by mail, first class postage prepaid or in accordance with the Applicable Procedures, to the Holders, as their names and addresses appear upon the Note Register. If the Company fails to transmit such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be transmitted at the expense of the Company.

Section 7.12. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes.

Section 7.13. Preferential Collection of Claims Against the Company. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship described in Section 311(b) of the Trust Indenture Act. A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent included therein.

ARTICLE 8

CONCERNING THE HOLDERS

Section 8.01. Evidence of Action by Holders. Whenever in this Indenture it is provided that the Holders of a majority or specified percentage in aggregate principal amount of the Notes may take any action (including the making of any

 

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demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the holders of such majority or specified percentage of such Notes have joined therein may be evidenced by any instrument or any number of instruments of similar tenor executed by such Holders of such Notes in person or by agent or proxy appointed in writing.

If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other action, the Company may, at its option, as evidenced by an Officer’s Certificate, fix in advance a record date for such Notes for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after the record date, but only the Holders of record at the close of business on the record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the Outstanding Notes shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Holders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.

Section 8.02. Proof of Execution by Holders. Subject to the provisions of Section 7.01, proof of the execution of any instrument by a Holder (such proof will not require notarization) or his agent or proxy and proof of the holding by any Person of any of the Notes shall be sufficient if made in the following manner:

(a)    The fact and date of the execution by any such Person of any instrument may be proved in any reasonable manner acceptable to the Trustee.

(b)    The ownership of Notes shall be proved by the Note Register or by a certificate of the Note Registrar thereof.

The Trustee may require such additional proof of any matter referred to in this Section 8.02 as it shall deem necessary.

Section 8.03. Who May be Deemed Owners. Prior to the due presentment for registration of transfer of any Note, the Company, the Trustee, any paying agent and any Note Registrar may deem and treat the Person in whose name such Note shall be registered upon the books of the Company as the absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any

 

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notice of ownership or writing thereon made by anyone other than the Note Registrar) for the purpose of receiving payment of or on account of the principal of, premium, if any, and (subject to Section 2.03) interest on such Note and for all other purposes; and neither the Company nor the Trustee nor any paying agent nor any Note Registrar shall be affected by any notice to the contrary.

Section 8.04. Certain Notes Owned by Company Disregarded. In determining whether the Holders of the requisite aggregate principal amount of Notes have concurred in any direction, consent or waiver under this Indenture, the Notes that are owned by the Company or any other obligor on the Notes or by any Affiliate of the Company or any other obligor on the Notes shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Notes that the Trustee actually knows are so owned shall be so disregarded. The Notes so owned that have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 8.04, if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not a Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.

Section 8.05. Actions Binding on Future Holders. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the Holders of the majority or percentage in aggregate principal amount of the Notes specified in this Indenture in connection with such action, any Holder of a Note that is shown by the evidence to be included in the Notes the Holders of which have consented to such action may, by filing written notice with the Trustee, and upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Note. Except as aforesaid any such action taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note, and of any Note issued in exchange therefor, on registration of transfer thereof or in place thereof, irrespective of whether or not any notation in regard thereto is made upon such Note. Any action taken by the Holders of the majority or percentage in aggregate principal amount of the Notes specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Trustee and the Holders.

 

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ARTICLE 9

AMENDMENTS; SUPPLEMENTS AND WAIVERS

Section 9.01. Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Notes without notice to or consent of any Holder of a Note for any of the following purposes:

(a)    to add to the covenants of the Company for the benefit of the Holders of Notes;

(b)    to surrender any right or power herein conferred upon the Company;

(c)    to make provision with respect to the conversion rights of Holders of Notes pursuant to Section 13.10 hereof;

(d)    to provide for the assumption of the Company’s obligations to the Holders of Notes in the case of a merger, consolidation, conveyance, transfer or lease pursuant to Article 10 hereof;

(e)    to increase the Conversion Rate; provided, however, that such increase in the Conversion Rate shall not adversely affect the interests of the Holders of Notes in any material respect;

(f)    to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act;

(g)    to cure any ambiguity, correct or supplement any provision herein which may be inconsistent with any other provision herein or which is otherwise defective; provided, that such action pursuant to this clause (g) does not adversely affect the interests of the Holders of Notes in any material respect;

(h)    to add or modify any other provisions which the Company and the Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders of Notes in any material respect; or

(i)    to provide for the issuance of Additional Notes pursuant to Section 2.10.

After an amendment, supplement or waiver under this Section 9.01 becomes effective, the Company, or, at the written request of the Company, the Trustee, shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver.

 

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Section 9.02. With Consent of Holders. Except as provided below in this Section 9.02, this Indenture or the Notes may be amended or supplemented, and noncompliance by the Company in any particular instance with any provision of this Indenture or the Notes may be waived, in each case (i) with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then Outstanding or (ii) by the adoption of a resolution, at a meeting of Holders of the Notes then Outstanding at which a quorum is present, by the Holders of a majority in aggregate principal amount of the Outstanding Notes represented at such meeting.

Without the written consent or the affirmative vote of each Holder of an affected Note, an amendment, supplement or waiver to this Indenture or the Notes may not:

(a)    change the stated maturity of the principal of, or the time of payment of any installment of interest on, any Note;

(b)    reduce the principal amount of any Note;

(c)    reduce the interest rate or interest on any Note;

(d)    change the currency of payment of principal of, premium, if any, or interest on any Note;

(e)    impair the right to institute suit for the enforcement of any payment with respect to, or the conversion of, any Note;

(f)    except as otherwise permitted by Section 13.10 hereof, adversely affect the right to convert any Note as provided in Article 13 hereof;

(g)    adversely affect the right of Holders to require the Company to purchase the Notes in the event of a Fundamental Change;

(h)    modify any of the provisions of this Section 9.02, Section 6.04 or Section 6.12, except to increase any percentage contained herein or therein or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Note affected thereby; or

(i)    reduce the percentage in aggregate principal amount of the Outstanding Notes required for the adoption of a resolution or the quorum required at any meeting of Holders of Notes at which a resolution is adopted.

It shall not be necessary for the consent of Holders of Notes under this Section 9.02 to approve the particular form of any proposed modification, amendment or waiver, but it shall be sufficient if such act shall approve the substance thereof.

 

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After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company, or, at the written request of the Company, the Trustee, shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver.

Section 9.03. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture pursuant to the provisions of this Article 9 or Section 10.01 this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders of Notes affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

Section 9.04. Notes Affected by Supplemental Indentures. Notes affected by a supplemental indenture, authenticated and delivered after the execution of such supplemental indenture pursuant to the provisions of this Article 9 or Section 10.01, may bear a notation in form approved by the Company, provided such form meets the requirements of any securities exchange upon which such Notes may be listed, as to any matter provided for in such supplemental indenture. If the Company shall so determine, new securities so modified as to conform, in the opinion of the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Notes then Outstanding.

Section 9.05. Execution of Supplemental Indentures. Upon the request of the Company, accompanied by its Board Resolutions authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Holders required to consent thereto as aforesaid (if such consent is required pursuant to this Article), the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. The Trustee, subject to the provisions of Section 7.01, shall receive and will be fully protected in relying upon an Officer’s Certificate and an Opinion of Counsel stating that any supplemental indenture executed pursuant to this Article is authorized or permitted by, and conforms to, the terms of this Article 9, constitutes a valid, binding and legal obligation, enforceable against the Company (subject to customary qualifications) and that it is proper for the Trustee under the provisions of this Article 9 to join in the execution thereof.

 

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Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Company shall transmit by mail, first class postage prepaid, a notice, setting forth in general terms the substance of such supplemental indenture, to the Holders of all Notes affected thereby as their names and addresses appear upon the Note Register. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

ARTICLE 10

CONSOLIDATION; MERGER; CONVEYANCE; TRANSFER OR LEASE

Section 10.01. Company May Consolidate, Etc., Only on Certain Terms. The Company may not, without the consent of the Holders, consolidate with, merge into or convey, transfer or lease all or substantially all of the property and assets of the Company and its Subsidiaries, taken as a whole, to another Person unless:

(a)    either (1) the Company shall be the resulting or surviving corporation or (2) the Person (if other than the Company) formed by such consolidation or into which the Company is merged, or the Person which acquires by transfer or lease all or substantially all of the property and assets of the Company, shall (i) be a corporation incorporated and existing under the laws of the United States of America or any State thereof or the District of Columbia and (ii) expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the obligations of the Company under the Notes and this Indenture;

(b)    after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and

(c)    if the Company will not be the resulting or surviving corporation, the Company shall have, at or prior to the effective date of such consolidation, merger, conveyance, transfer or lease, delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease complies with this Article 10 and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture complies with this Article 10, and that all conditions precedent herein provided for relating to such transaction have been complied with.

 

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Section 10.02. Successor Substituted. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of all or substantially all of the properties and assets of the Company and its Subsidiaries, taken as a whole, in accordance with Section 10.01, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, and except for obligations the predecessor Person may have under a supplemental indenture, the predecessor Person shall be relieved of all obligations and covenants under the Indenture and the Notes.

ARTICLE 11

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

Section 11.01. No Recourse. No recourse under or upon any obligation, covenant or agreement of this Indenture, or of the Notes, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company or of any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors as such, of the Company or of any predecessor or successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Notes or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Notes or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of the Notes.

 

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ARTICLE 12

ADDITIONAL INTEREST

Section 12.01. Additional Interest. (a) The Company will pay additional interest (“Additional Interest”) on the principal amount of any Restricted Notes if required by, and on the terms set forth in, the supplemental indenture which was executed in connection with the issuance of such Restricted Notes.

(b)    Notwithstanding the foregoing, the Company shall not be required to pay Additional Interest on any date if (i) the Company has filed a shelf registration statement for the resale of the Notes and any shares of Common Stock issued upon conversion of the Notes, (ii) such shelf registration statement is effective and usable by Holders of the Notes identified therein as selling security holders for the resale of the Notes and any shares of Common Stock issued upon conversion of the Notes, and (iii) the Holders may register the resale of their Notes under such shelf registration statement on terms customary for the resale of convertible securities offered in reliance on Rule 144A.

(c)    Under no circumstances will the combined rate of Additional Interest or Special Interest exceed 1.00% per annum.

(d)    The Company shall provide written notice to the Trustee prior to paying any Additional Interest.

ARTICLE 13

CONVERSION OF NOTES

Section 13.01. Conversion Privilege and Conversion Rate. (a) The conversion rights pursuant to this Article 13 shall commence on the Issue Date of the Notes and expire at the close of business on the Business Day immediately preceding the Maturity Date unless previously redeemed or repurchased, subject to the provisions of this Indenture and, in the case of conversion of any Global Note, to any Applicable Procedures. If a Note is submitted or presented for purchase pursuant to Article 15, subject to the last paragraph of Section 13.02(b), such conversion right shall terminate at the close of business on the Business Day prior to the Fundamental Change Purchase Date for such Note (unless the Company shall fail to make the Fundamental Change Purchase Price payment when due in accordance with Article 15, in which case the conversion right shall terminate at the close of business on the Business Day prior to the date such failure is cured and such Note is repurchased).

(b)    Provisions of this Indenture that apply to conversion of all of a Note also apply to conversion of a portion of a Note.

 

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(c)    A Holder of Notes is not entitled to any rights of a holder of Common Stock until such Holder has converted its Notes into Common Stock, and only to the extent such Notes are deemed to have been converted into Common Stock pursuant to this Article 13.

(d)    The Conversion Rate shall be adjusted in certain instances as provided in Section 13.01(e) and Section 13.06.

(e)    [Reserved]

(f)    By delivering the number of shares of Common Stock issuable on conversion to the Trustee, plus a cash payment for any fractional share, the Company will be deemed to have satisfied its obligation to pay the principal amount of the Notes so converted and its obligation to pay accrued and unpaid interest attributable to the period from the most recent Interest Payment Date through the Conversion Date (which amount will be deemed satisfied and extinguished).

(g)    The Company may also elect to convert the Notes pursuant to the exercise of the Company Conversion Option under Section 14.03(a).

Section 13.02. Conversion Procedure. (a) To convert a Physical Note, a Holder must (1) complete and manually sign the Notice of Conversion on the back of the Note, or facsimile of such Notice of Conversion, and deliver such Notice of Conversion to the Conversion Agent, which shall become irrevocable upon receipt by the Conversion Agent, (2) surrender the Note to the Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Note Registrar or the Conversion Agent, (4) pay an amount equal to the interest payable on the next Interest Payment Date to which the Holder is not entitled as required by Section 13.02(c) and (5) pay all transfer or similar taxes, if required pursuant to Section 13.04. Anything herein to the contrary notwithstanding, in the case of Global Notes, Notices of Conversion may be delivered and such Notes may be surrendered for conversion in accordance with clauses (3), (4) and (5) of this Section 13.02(a) and the Applicable Procedures as in effect from time to time. The date on which the Holder satisfies all the requirements set forth in this Section 13.02(a) is the “Conversion Date.”

(b)    Each conversion shall be deemed to have been effected as to any Notes surrendered for conversion on the Conversion Date and the person in whose name the shares of Common Stock shall be issuable upon conversion shall be deemed to be the holder of record of such Common Stock as of the close of business on such Conversion Date, and the Company shall deliver the consideration due in respect of any conversion on the third Business Day immediately following the relevant Conversion Date; provided, however, that no surrender of a Note on any Conversion Date when the stock transfer books of the

 

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Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open. Upon conversion of a Note, such person shall no longer be the Holder of such Note. Except as set forth in this Indenture, no payment or adjustment will be made for dividends or distributions declared or made on shares of Common Stock issued upon conversion of a Note prior to the issuance of such shares.

A Holder that has delivered a Fundamental Change Purchase Notice pursuant to Section 15.01 with respect to a Note may not surrender such Note for conversion until such Holder has withdrawn the Fundamental Change Purchase Notice in accordance with Section 15.01(c).

(c)    Holders of Notes surrendered for conversion (in whole or in part) during the period from the close of business on any Regular Record Date to the open of business on the next succeeding Interest Payment Date will receive the semiannual interest payable on the principal amount of such Notes being surrendered for conversion on the corresponding Interest Payment Date notwithstanding the conversion. Upon surrender of any such Notes for conversion, such Notes shall also be accompanied by payment in funds to the Conversion Agent acceptable to the Company of an amount equal to the interest payable on such corresponding Interest Payment Date (but excluding any overdue interest on the principal amount of such Note so converted if any overdue interest exists at the time such Holder surrenders such Note for conversion); provided, however, that no such payment need be made (i) if the Company has specified a Fundamental Change Purchase Date that is after such Regular Record Date and on or prior to the next succeeding Interest Payment Date, or (ii) if conversion occurs after the last Regular Record Date prior to the Maturity Date. Except as otherwise provided in this Section 13.02(c), no payment or adjustment will be made for accrued interest on a converted Note and any such accrued interest shall be deemed satisfied and extinguished.

(d)    Subject to Section 13.02(c), nothing in this Section 13.02 shall affect the right of a Holder in whose name any Note is registered at the close of business on a Regular Record Date to receive the interest payable on such Note on the related Interest Payment Date in accordance with the terms of this Indenture and the Notes. If a Holder converts more than one Note at the same time, the number of shares of Common Stock issuable upon the conversion (and the amount of any cash in lieu of fractional shares pursuant to Section 13.03) shall be based on the aggregate principal amount of all Notes so converted.

 

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(e)    In the case of any Note which is converted in part only, upon such conversion the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, without service charge, a new Note or Notes of authorized denominations in an aggregate principal amount equal to, and in exchange for, the unconverted portion of the principal amount of such Note. A Note may be converted in part, but only if the principal amount of such part is an integral multiple of $1,000 and the principal amount of such Note to remain Outstanding after such conversion is equal to $1,000 or any integral multiple of $1,000 in excess thereof.

Section 13.03. Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of any Note or Notes. If more than one Note shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issued upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock which would otherwise be issued upon conversion of any Note or Notes (or specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction (calculated to the nearest one-100th of a share) in an amount equal to the same fraction of the Last Reported Sale Price of the Common Stock as of the Trading Day preceding the Conversion Date.

Section 13.04. Taxes on Conversion. Except as provided in the next sentence, the Company will pay any and all documentary, stamp or similar issue or transfer tax due and duties on the issuance of shares of Common Stock upon conversion of Notes pursuant hereto. A Holder delivering a Note for conversion shall be liable for and will be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Note or Notes to be converted, and no such issue or delivery shall be made unless the Person requesting such issue has paid to the Company the amount of any such tax or duty, or has established to the satisfaction of the Company that such tax or duty has been paid.

Section 13.05. Company to Provide Common Stock. (a) The Company shall, prior to issuance of any Notes hereunder, and from time to time as may be necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares of Common Stock to permit the conversion of all Outstanding Notes into shares of Common Stock.

(b)    All shares of Common Stock delivered upon conversion of the Notes shall be newly issued shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive or similar rights and free of any lien or adverse claim as the result of any action by the Company.

 

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Section 13.06. Adjustment of Conversion Rate. The Conversion Rate shall be adjusted from time to time by the Company as follows:

(a)    If the Company issues shares of Common Stock as a dividend or distribution on shares of Common Stock, or effects a share split or share combination, the Conversion Rate will be adjusted based on the following formula:

 

LOGO

where,

 

CR0      =      the applicable Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for such dividend or distribution, or immediately prior to the open of business on the effective date of such share split or share combination, as the case may be;
CR      =      the applicable Conversion Rate in effect immediately after the open of business on the Ex-Dividend Date for such dividend or distribution, or immediately after the open of business on the effective date of such share split or share combination, as the case may be;
OS0      =      the number of shares of Common Stock outstanding immediately prior to such dividend, distribution, share split or share combination, as the case may be; and
OS      =      the number of shares of Common Stock outstanding immediately after giving effect to such dividend, distribution, share split or share combination, as the case may be.

Any adjustments made pursuant to this Section 13.06(a) shall become effective immediately on or after (x) the open of business on the Ex-Dividend Date for such dividend or distribution or (y) the effective date of such split or combination, as applicable. If any dividend or distribution described in this Section 13.06(a) is declared but not so paid or made, the new Conversion Rate shall again be adjusted to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(b)    If the Company distributes to all holders of Common Stock any rights or warrants entitling them to purchase, for a period of not more than 45 days after the Ex-Dividend Date for the distribution, shares of Common Stock at a price per share less than the average of the Last Reported Sale Prices of the

 

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Common Stock for the 10 consecutive Trading-Day period ending on the Trading Day immediately preceding the declaration date for such distribution, the Conversion Rate will be adjusted based on the following formula:

 

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where,

 

CR0      =      the Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for such distribution;
CR      =      the new Conversion Rate in effect immediately after the open of business on the Ex-Dividend Date for such distribution;
OS0      =      the number of shares of Common Stock outstanding immediately prior to the open of business on the Ex-Dividend Date for such distribution;
X      =      the total number of shares of Common Stock issuable pursuant to such rights or warrants; and
Y      =      the number of shares of Common Stock equal to the aggregate price payable to exercise such rights or warrants divided by the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading-Day period ending on the Trading Day immediately preceding the declaration date for such distribution.

For purposes of this Section 13.06(b), in determining whether any rights or warrants entitle the Holders to subscribe for or purchase shares of Common Stock at less than the average of the Last Reported Sale Prices of the Common Stock for the applicable 10 consecutive Trading-Day period, there shall be taken into account any consideration received by the Company for such rights or warrants and any amount payable on exercise thereof, with the value of such consideration if other than cash, to be determined by the Board of Directors. If any right or warrant described in this Section 13.06(b) is not exercised prior to the expiration of the exercisability thereof, the new Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect if such right or warrant had not been so issued. Any adjustment made pursuant to this Section 13.06(b) shall become effective immediately after the Ex-Dividend Date for the applicable distribution.

 

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(c)    If the Company distributes shares of its Capital Stock, evidences of its indebtedness or other assets or property of the Company to all holders of the Common Stock, excluding

(i)    dividends or distributions (including share splits) as to which an adjustment is effected in Section 13.06(a) or Section 13.06(b);

(ii)    dividends or distributions covered by Section 13.06(d);

(iii)    dividends or distributions that constitute Reference Property following an event pursuant to Section 13.10; and

(iv)    Spin-Offs to which the provisions set forth below in this Section 13.06(c) shall apply,

then the applicable Conversion Rate will be adjusted based on the following formula:

 

LOGO

where,

 

CR0      =      the applicable Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for such distribution;
CR      =      the applicable Conversion Rate in effect immediately after the open of business on the Ex-Dividend Date for such distribution;
SP0      =      the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading-Day period ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and
FMV      =      the fair market value (as determined in good faith by the Board of Directors) of the shares of Capital Stock, evidences of indebtedness, assets or property distributed with respect to each outstanding share of Common Stock as of the open of business on the Ex-Dividend Date for such distribution.

If the then fair market value of the portion of the shares of Capital Stock, evidences of indebtedness or other assets or property so distributed applicable to one share of Common Stock is equal to or greater than the average of the Last Reported Sales Prices of the Common Stock over the 10 consecutive Trading-Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such distribution, in lieu of the foregoing adjustment, adequate provisions

 

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shall be made so that each Holder of a Note shall have the right to receive on conversion in respect of each Note held by such Holder, in addition to any amounts to which such Holder is entitled to receive, the amount and kind of securities and assets such Holder would have received had such Holder already owned a number of shares of Common Stock equal to the applicable Conversion Rate immediately prior to the open of business on the Ex-Dividend Date for the distribution of the securities or assets.

With respect to an adjustment pursuant to this Section 13.06(c) where there has been a payment of a dividend or other distribution on the Common Stock of shares of the Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit that are, or, when issued, will be, traded or quoted on any national or regional securities exchange or other market (a “Spin-Off”), the applicable Conversion Rate will instead be adjusted based on the following formula:

 

LOGO

where,

 

CR0      =      the applicable Conversion Rate in effect immediately prior to the tenth Trading Day immediately following the effective date for such Spin-Off;
CR      =      the applicable Conversion Rate in effect immediately after the open of business on the tenth Trading Day immediately following the effective date for such Spin-Off;
FMV      =      the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of Common Stock applicable to one share of Common Stock over the first 10 consecutive Trading-Day period immediately following the effective date for such Spin-Off (such period, the “Valuation Period”); and
MP0      =      the average of the Last Reported Sale Prices of Common Stock over the Valuation Period.

Such adjustment shall occur immediately after the tenth Trading Day immediately following, and including, the effective date of such Spin-Off; provided that, for purposes of determining the Conversion Rate in respect of any conversion during the 10 Trading Days following the effective date of any Spin-Off, references within this Section 13.06(c) related to “Spin-Offs” to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the effective date of such Spin-Off and the relevant Conversion Date.

 

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If any such dividend or distribution described in this Section 13.06(c) is declared but not paid or made, the new Conversion Rate shall be readjusted to be the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(d)    If any cash dividend or distribution is made to all holders of Common Stock, the Conversion Rate will be adjusted based on the following formula:

 

LOGO

where,

 

CR0      =      the applicable Conversion Rate in effect immediately prior to the open of business on the Ex-Dividend Date for such distribution;
CR      =      the applicable Conversion Rate in effect immediately after the open of business on the Ex-Dividend Date for such distribution;
SP0      =      the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading-Day period ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and
C      =      the amount in cash per share of Common Stock the Company distributes to holders of Common Stock.

An adjustment to the Conversion Rate made pursuant to this Section 13.06(d) shall become effective immediately after the open of business on the Ex-Dividend Date for the applicable dividend or distribution. If any dividend or distribution described in this Section 13.06(d) is declared but not so paid or made, the new Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

If the amount in cash per share of Common Stock so paid or distributed is equal to or greater than the average of the Last Reported Sales Prices of the Common Stock over the 10 consecutive Trading-Day period ending on the Trading Day immediately preceding the Ex-Dividend Date for such cash dividend or distribution, in lieu of the foregoing adjustment, adequate provisions shall be made so that each Holder of a Note shall have the right to receive on conversion in respect of each Note held by such Holder, in addition to any amounts to which

 

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such Holder is entitled to receive, the amount in cash such Holder would have received had such Holder already owned a number of shares of Common Stock equal to the applicable Conversion Rate immediately prior to the record date for such cash dividend or distribution.

(e)    If the Company or any of its Subsidiaries makes a payment in respect of a tender or exchange offer for Common Stock (other than tender offers or exchange offers not subject to Rule 13e-4 of the Exchange Act or odd lot tender offers), to the extent that the cash and value of any other consideration included in the payment per share of Common Stock exceeds the Last Reported Sale Price of the Common Stock on the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer (the “Expiration Date”), the Conversion Rate shall be increased based on the following formula:

 

LOGO

where,

 

CR0      =      the applicable Conversion Rate in effect immediately prior to the open of business on the Trading Day next succeeding the Expiration Date;
CR      =      the applicable Conversion Rate in effect immediately after the open of business on the Trading Day next succeeding the Expiration Date;
AC      =      the aggregate value of all cash and any other consideration (as determined by the Board of Directors) paid or payable for shares purchased in such tender offer or exchange offer;
OS0      =      the number of shares of Common Stock outstanding immediately prior to time (the “Expiration Time”) such tender or exchange offer expires (prior to giving effect to such tender offer or exchange offer);
OS      =      the number of shares of Common Stock outstanding immediately after the expiration time (after giving effect to such tender offer or exchange offer); and
SP      =      the average of the Last Reported Sale Prices of Common Stock over the 10 consecutive Trading-Day period commencing on, and including, the Trading Day next succeeding the Expiration Date.

 

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The adjustment to the Conversion Rate under this Section 13.06(e) shall become effective immediately following the tenth Trading Day next succeeding the date such tender offer or exchange offer expires; provided that, for purposes of determining the Conversion Rate, in respect of any conversion during the 10 Trading Days following the date that any tender or exchange offer expires, references within this Section 13.06(e) to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed between the date such tender or exchange offer expires and the relevant Conversion Date. If the Company or one of its Subsidiaries is obligated to purchase Common Stock pursuant to any such tender or exchange offer but are permanently prevented by applicable law from effecting any such purchase or all such purchases are rescinded, the new Conversion Rate shall be readjusted to be the Conversion Rate that would be in effect if such tender or exchange offer had not been made.

(f)    Notwithstanding the foregoing, if a Conversion Rate adjustment becomes effective on any Ex-Dividend Date pursuant to Section 13.06(a) through Section 13.06(e), and a Holder that has converted its Notes on or after such Ex-Dividend Date and on or prior to the related record date would be treated as the record holder of the Common Stock as of the related Conversion Date based on an adjusted Conversion Rate for such Ex-Dividend Date, then, notwithstanding Section 13.06(a) through Section 13.06(e), the Conversion Rate adjustment relating to such Ex-Dividend Date will not be made for such converting Holder. Instead, such Holder shall be treated as if such Holder were the record owner of the Common Stock on an unadjusted basis and participate in the related dividend, distribution or other event giving rise to such adjustment.

Section 13.07. When No Adjustment is Required. (a) No adjustment in the Conversion Rate shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Rate as last adjusted; provided, however, that any adjustments which would be required to be made but for this Section 13.07(a) shall be carried forward and taken into account in any subsequent adjustment and any carry forward amount shall be paid to the Holder upon conversion regardless of the 1% threshold. All calculations under this Article 13 shall be made to the nearest cent or to the nearest one-hundredth of a share.

(b)    Without limiting the foregoing provisions of Section 13.06, no adjustment will be made thereunder, nor shall an adjustment be made to the ability of a Holder to convert, for any distribution described therein if the Holder will otherwise participate in the distribution without conversion of such Holder’s Notes as if such Holder held a number of shares of Common Stock equal to the applicable Conversion Rate, multiplied by the principal amount (expressed in thousands) of Notes held by such Holder, without having to convert its Notes. Further, if the application of the foregoing formulas in Section 13.06 would result in a decrease in the Conversion Rate, no adjustment to the Conversion Rate will be made (except on account of share combinations).

 

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(c)    No adjustment to the Conversion Rate will be made unless as specifically set forth in Section 13.06 and Section 13.01(e). Without limiting the foregoing, no adjustment to the Conversion Rate need be made:

(i)    upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any plan;

(ii)    upon the issuance of any shares of Common Stock or options or rights to purchase shares of Common Stock pursuant to any present or future employee, director or consultant benefit plan or program or employee stock purchase plan of, or assumed by, the Company or any of its Subsidiaries;

(iii)    upon the issuance of any shares of Common Stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security not described in clause (ii) above and outstanding as of the Issue Date;

(iv)    for a change in the par value of the Common Stock; or

(v)    for accrued and unpaid interest (including any Special Interest and Additional Interest, if applicable).

Section 13.08. Notice of Adjustment. Whenever the Conversion Rate or conversion privilege is required to be adjusted pursuant to this Indenture, the Company shall promptly mail to Holders a notice of the adjustment and file with the Trustee an Officer’s Certificate briefly stating the facts requiring the adjustment, the adjusted Conversion Rate and the manner of computing it. Failure to mail such notice or any defect therein shall not affect the validity of any such adjustment. Unless and until the Trustee shall receive an Officer’s Certificate setting forth an adjustment of the Conversion Rate, the Trustee may assume without inquiry that the Conversion Rate has not been adjusted and that the last Conversion Rate of which it has knowledge remains in effect.

Section 13.09. Notice of Certain Transactions. In the event that there is a dissolution or liquidation of the Company, the Company shall mail to Holders and file with the Trustee a notice stating the proposed effective date. The Company shall mail such notice at least 20 days before such proposed effective date. Failure to mail such notice or any defect therein shall not affect the validity of any transaction referred to in this Section 13.09.

 

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Section 13.10. Effect of Reclassification, Consolidation, Merger or Sale On Conversion Privilege. If any of the following events occur:

(a)    any recapitalization, reclassification or change of the outstanding shares of Common Stock (other than a changes resulting from a subdivision or combination),

(b)    any consolidation, merger, or combination involving the Company with another corporation, or

(c)    any sale, conveyance or lease to any other corporation of all or substantially all of the property and assets of the Company,

(d)    any statutory share exchange,

in each case as a result of which holders of Common Stock shall be entitled to receive stock, other securities or other property or assets (including cash or any combination thereof) (the “Reference Property”) with respect to or in exchange for such Common Stock, the Holders of the Notes then Outstanding will be entitled thereafter to convert those Notes into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) which they would have owned or been entitled to receive upon such transaction had such notes been converted into Common Stock immediately prior to such transaction. In the event holders of Common Stock have the opportunity to elect the form of consideration to be received in such transaction, the reference property will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such election. The Company shall notify the Holders of the weighted average as soon as practicable after such determination is made. The Company may not become a party to any such transaction unless its terms are consistent with the preceding. None of the foregoing provisions shall affect the right of a Holder of Notes to convert its Notes into shares of Common Stock prior to the effective date of such transaction.

The above provisions of this Section 13.10 shall similarly apply to successive recapitalizations, reclassifications, mergers, consolidations, statutory share exchanges, combinations, sales and conveyances.

If this Section 13.10 applies to any event or occurrence, Section 13.06 hereof shall not apply.

The Company shall not become a party to any such transaction unless its terms are consistent with the foregoing. None of the foregoing provisions shall affect the right of a Holder to convert the Notes as set forth in Section 13.01 prior to the effective time of such transaction.

 

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Section 13.11. Trustees Disclaimer. (a) The Trustee shall have no duty to determine, or liability in connection therewith, when an adjustment under this Article 13 should be made, how it should be made or what such adjustment should be, but may accept as conclusive evidence of that fact or the correctness of any such adjustment, and shall be protected in relying upon, an Officer’s Certificate, including the Officer’s Certificate with respect thereto which the Company is obligated to file with the Trustee pursuant to Section 13.08. Unless and until the Trustee receives such Officer’s Certificate delivered pursuant to Section 13.08, the Trustee may assume without inquiry that no such adjustment has been made and the last Conversion Rate of which the Trustee has knowledge remains in effect. The Trustee makes no representation as to the validity or value of any securities or assets issued upon conversion of Notes, and the Trustee shall not be responsible for the Company’s failure to comply with any provisions of this Article 13.

(b)    The Trustee shall not be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture executed pursuant to Section 13.10, but may accept as conclusive evidence of the correctness thereof, and shall be fully protected in relying upon, the Officer’s Certificate and Opinion of Counsel, with respect thereto which the Company are obligated to file with the Trustee pursuant to Section 13.10 and Section 10.01, respectively.

Section 13.12. Voluntary Increase; Nasdaq Compliance. Subject to Section 9.01(e), the Company from time to time may increase the Conversion Rate, to the extent permitted by law and subject to any applicable stockholder approval requirements pursuant to the listing standards of the Nasdaq Stock Market or such other United States securities exchange on which the Common Stock is traded, by any amount for any period of at least 20 days. The Company may make such increase in the Conversion Rate (in addition to others provided in this Indenture) as the Board of Directors deems advisable to avoid or diminish any income tax to holders of Common Stock resulting from a dividend or distribution of stock, or rights to acquire stock, or similar event, and the Company provides 15 days’ prior written notice of any increase in the Conversion Rate to the Trustee and the Holders: provided, however, that in no event may the Company increase the Conversion Rate such that it causes the Conversion Price to be less than the par value of a share of Common Stock.

The Company may not take any voluntary actions that would result in an adjustment to the Conversion Rate pursuant to Section 13.06 without complying, if applicable, with the stockholder approval rules of the NASDAQ Global Market and any similar rule of any stock exchange on which the Common Stock is listed at the relevant time. In accordance with such listing standards, this restriction shall apply at any time when the Notes are Outstanding, regardless of whether the Company then has a class of securities listed on the NASDAQ Global Market.

 

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Section 13.13. Rights Plan. To the extent that the Company has a Rights Plan in effect upon conversion of the Notes into Common Stock, the Holder will receive upon conversion of the Notes in respect of which the Company has elected to deliver Common Stock, if applicable, the Rights under the Rights Plan, unless prior to any conversion, the Rights have separated from the Common Stock, in which case, and only in such case, the Conversion Rate will be adjusted at the time of separation as if the Company distributed to all holders of Common Stock shares of the Company’s Capital Stock, evidences of indebtedness or assets as described in Section 13.06(c) above, subject to readjustment in the event of the expiration, termination or redemption of such Rights. In lieu of any such adjustment, the Company may amend such applicable Rights Plan to provide that upon conversion of the Notes the Holders will receive, in addition to the Common Stock issuable upon such conversion, the Rights which would have attached to such Common Stock if the Rights had not become separated from the Common Stock under such applicable Rights Plan.

Section 13.14. Exchange in Lieu of Conversion. (a) Notwithstanding anything in this Indenture to the contrary, when a Holder surrenders Notes for conversion, the Company may, at its election, direct the Conversion Agent to surrender, on or prior to the second Business Day immediately following the Conversion Date (assuming for purposes of this Section 13.14 that the date such Holder surrenders such Notes for conversion is the Conversion Date for such Notes), such Notes to a financial institution designated by the Company (a “Financial Institution”) for exchange in lieu of conversion.

(b)    In order to accept any such Notes surrendered for conversion, the Financial Institution must agree to deliver, in exchange for such Notes, shares of Common Stock (and cash in lieu of fractional shares) equal to the consideration due upon conversion under Section 13.01(a) (the “Exchange Settlement Property”).

(c)    By the close of business on the second Business Day immediately following the Conversion Date, the Company must notify the Holder surrendering Notes for conversion that it has directed the Financial Institution to make an exchange in lieu of conversion and the Financial Institution shall be required to notify the Conversion Agent whether it will deliver the Exchange Settlement Property upon exchange.

(d)    If the Financial Institution accepts any such Notes, it shall deliver the Exchange Settlement Property to the Conversion Agent and the Conversion Agent shall deliver such Exchange Settlement Property to the applicable Holder no later than the third Business Day following the Conversion Date. Any Notes exchanged by the Financial Institution shall remain Outstanding, subject to Applicable Procedures.

 

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(e)    If the Financial Institution agrees to accept any Notes for exchange but does not timely deliver the related consideration, or if the Financial Institution does not accept the Notes for exchange, the Company shall deliver such conversion consideration as if the Company had not made an exchange election.

The Company’s designation of the Financial Institution to which the Notes may be submitted for exchange does not require the Financial Institution to accept any Notes. The Company shall not pay any consideration to, or otherwise enter into any agreement with, the financial institution designated as the Financial Institution for or with respect to such designation.

ARTICLE 14

REDEMPTION; COMPANY CONVERSION OPTION

Section 14.01. No Sinking Fund. No sinking fund is provided for the Notes.

Section 14.02 No Right To Redeem the Notes. The Company may not redeem the Notes.

Section 14.03 Company Conversion Option.

(a)    The Company may elect at its option to cause all or any portion of the Notes to be mandatorily converted in whole or in part (the “Company Conversion Option”) at any time prior to the close of business on the Business Day immediately preceding the Maturity Date, if the Last Reported Sale Price of the Common Stock equals or exceeds 120% of the Conversion Price then in effect for at least 10 Trading Days in any 20 Trading Day period (any such period, a “Mandatory Conversion Trigger Period”), ending within five Business Days prior to the Mandatory Conversion Notice Date. For the avoidance of doubt, the Company may exercise its right to cause more than one Company Conversion Option during the term of the Indenture so long as it complies with the other requirements of this Section 14.03.

(b) Notwithstanding the foregoing, the Company may only exercise the Company Conversion Option pursuant to Section 14.03(a) if, as evidenced by an Officer’s Certificate, each of the Equity Conditions are satisfied on each day during the Equity Conditions Measuring Period.

(c) In order to exercise the Company Conversion Option pursuant to Section 14.03(a), the Company or, at the written request and expense of the Company, the Trustee on behalf of the Company, shall deliver to each Holder a notice (a “Mandatory Conversion Notice”) of exercise of the Company Conversion Option within five Business Days after the end of the applicable

 

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Mandatory Conversion Trigger Period (the date such Mandatory Conversion Notice is sent to the Holders in the manner herein provided, the “Mandatory Conversion Notice Date”). The Company will select the date on which the Notes will be converted pursuant to the Company Conversion Option, which shall be not more than 30 Trading Days but not less than 3 Trading Days after the Mandatory Conversion Notice Date (such date, the “Mandatory Conversion Date”). The Company shall also deliver a copy of such Mandatory Conversion Notice to the Trustee concurrently with the delivery thereof to the Holders to the extent that the Trustee does not deliver such Mandatory Conversion Notice on behalf of the Company. If such Mandatory Conversion Notice is to be given by the Trustee, the Company shall prepare and provide the form and content of such Mandatory Conversion Notice to the Trustee. The Mandatory Conversion Notice, if sent in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not any Holder receives such Mandatory Conversion Notice.

(e) The Mandatory Conversion Notice shall state:

(i) the Mandatory Conversion Notice Date;

(ii) the Mandatory Conversion Trigger Period;

(iii) the aggregate principal amount of Notes to be mandatorily converted;

(iv) the CUSIP or similar number or numbers of the Notes being converted, in the case of a Global Note;

(v) the certificate numbers of the Notes to be mandatorily converted, in the case of Physical Notes;

(vi) the Mandatory Conversion Date;

(vii) the Conversion Rate then in effect;

(viii) that on and after the Mandatory Conversion Date interest on the Notes to be converted will cease to accrue; and

(ix) the name and address of each Paying Agent and Conversion Agent and the place or places where such Notes are to be surrendered for conversion.

(f)    If fewer than all of the Notes are to be mandatorily converted, the Mandatory Conversion Notice shall identify the Notes to be mandatorily converted (including the certificate number or numbers, if any). In case any Note is to be mandatorily converted in part only, the Mandatory Conversion Notice shall state the portion of the principal amount thereof to be mandatorily converted

 

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and shall state that, on and after the Mandatory Conversion Date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unconverted portion thereof will be issued.

(g)     If the Company opts to mandatorily convert fewer than all of the outstanding Notes, the Trustee shall select the Notes to be mandatorily converted (such that the principal amount of a Holder’s Note not to be converted equals $1,000 or an integral multiple of $1,000 in excess thereof) by lot, on a pro rata basis or by another method the Trustee deems fair and appropriate, in all cases in which such Notes are in the form of Global Notes in accordance with the Applicable Procedures. To the extent any Note or portion thereof selected for a Company Conversion Option is submitted for voluntary conversion pursuant to Section 13.01, the portion of such Note submitted for voluntary conversion shall be deemed (so far as may be possible) to be from the portion selected for the Company Conversion Option (with any remaining portion being voluntarily converted pursuant to Section 13.01 hereof).

(h)     Each Holder of a Note, by the Holder’s acceptance thereof, agrees to take the following actions prior to the Mandatory Conversion Date in respect of the portion of its Notes subject to a Company Conversion Option: (i) if a Physical Note, surrender the mandatorily converted Note, or portion thereof, to the Conversion Agent (or in respect of a Global Note, take any actions required for the surrender of a beneficial interest in such Note pursuant to the Applicable Procedures), (ii) furnish appropriate endorsements and transfer documents if required by the Registrar, the Conversion Agent or the Applicable Procedures, (iii) pay any transfer or other tax, if required by Section 13.01, (iv) if the Note is a Global Note, complete and deliver to the Depositary any required instructions pursuant to the Applicable Procedures and (v) any other action necessary to effectuate the Company Conversion Option as may be reasonably requested by the Company. In the event that a Holder does not take any of the actions set forth in the immediately preceding sentence prior to the Mandatory Conversion Date, each Holder of a Note, by such Holder’s acceptance thereof, authorizes and directs the Company to take any action on such Holder’s behalf to effectuate the Company Conversion Option and appoints the Company such Holder’s attorney-in-fact for any and all such purposes.

Upon presentation of any Note converted in part only, the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder thereof, at the expense of the Company, a new Note or Notes, of authorized denominations, in principal amount equal to the unconverted portion of the Note or Notes so presented (subject to the Applicable Procedures in the case of Global Notes).

(i)    With respect to any Notes subject to the Company Conversion Option, the Company will deliver to the Holders of such Notes, on the third

 

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Business Day immediately following the Mandatory Conversion Date for such Notes, (i) a number of shares of Common Stock equal to the product of (A)(x) the aggregate principal amount of such Notes to be converted divided by (y) $1,000 and (B) the Conversion Rate in effect on such Conversion Date, rounded down to the nearest whole number, and (ii) an amount of cash equal to the product of (A) the fraction of a share of Common Stock eliminated by such rounding and (B) the Last Reported Sale Price of the Common Stock on such Mandatory Conversion Date (or if such Mandatory Conversion Date is not a Trading Day, the immediately preceding Trading Day). Upon the Mandatory Conversion Date, unless the Company defaults in delivering or paying the amounts due pursuant to the foregoing sentence, interest on the Notes or portion of Notes so called for the Company Conversion Option shall cease to accrue and, except as provided in Section 6.08, such Notes shall cease to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Notes except the right to receive the shares of Common Stock and cash, if any, to which they are entitled pursuant to this Section 14.03. Upon a conversion pursuant to this Section 14.03, the Person in whose name such shares of Common Stock will be registered will become the holder of record of such shares of Common Stock at the Close of Business on the Mandatory Conversion Date for such Note.

If any of the provisions of this Section 10.12 are inconsistent with applicable law at the time of such Company Conversion Option, such law shall govern.

ARTICLE 15

REPURCHASE OF NOTES

Section 15.01. Repurchase of Notes at Option of the Holder Upon a Fundamental Change. (a) If a Fundamental Change occurs prior to the Maturity Date, each Holder of a Note shall have the right, at the option of the Holder, to require the Company to repurchase all or any portion of the Notes of such Holder equal to $1,000 principal amount (or an integral multiple thereof) at the Fundamental Change Purchase Price, on the date specified by the Company that is not less than 20 days and not more than 35 days after the date of the Fundamental Change Company Notice pursuant to Section 15.01(b) (the “Fundamental Change Purchase Date”). If the Fundamental Change Purchase Date is after a Regular Record Date and on or prior to the corresponding Interest Payment Date, the Company shall pay accrued and unpaid interest to the Holder of a Note of record at the close of business on such Regular Record Date, subject to Applicable Procedures.

(b)    On or before the tenth day after the Fundamental Change Effective Date, the Company, or, at the request of the Company, the Trustee, shall mail a written notice of the occurrence of the Fundamental Change, and of the

 

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repurchase right arising therefrom, to the Trustee, Paying Agent and to each Holder (and to beneficial owners as required by applicable law) (the “Fundamental Change Company Notice”). Simultaneously with providing such Fundamental Change Company Notice, the Company shall publish a notice containing the information that is required in the Fundamental Change Company Notice in a newspaper of general circulation in The City of New York or publish information on a website of the Company or through such other public medium the Company may use at that time. The Fundamental Change Company Notice shall set forth the Holder’s right to require the Company to purchase the Notes and specify:

(i)    the events causing such Fundamental Change;

(ii)    the date of such Fundamental Change;

(iii)    the last date by which the Fundamental Repurchase Notice must be delivered to elect the repurchase option pursuant to this Section 15.01;

(iv)    the Fundamental Change Purchase Price;

(v)    the Fundamental Change Purchase Date;

(vi)    the name and address of each Paying Agent and Conversion Agent, if applicable;

(vii)    that the Notes with respect to which a Fundamental Change Notice has been delivered by a Holder may be converted only if the Holder withdraws the Fundamental Change Purchase Notice in accordance with the terms of this Indenture; and

(viii)    the procedures that the Holder must follow to require the Company to repurchase its Notes under this Section 15.01.

At the Company’s request, the Trustee shall give such Fundamental Change Company Notice in the Company’s name and at the Company’s expense; provided that, unless otherwise agreed by the Trustee, the Company makes such request at least five (5) Business Days prior to the date by which such Fundamental Change Company Notice must be given to the Holders in accordance with this Section 15.01; provided, further, that the text of such Fundamental Change Company Notice shall be prepared by the Company. If any of the Notes is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the Applicable Procedures relating to the purchase of Global Notes. The Trustee shall not be obligated on behalf of the Company to publish a notice containing the information that is required in the Fundamental Change Company Notice in a newspaper of general circulation in The City of New York or publish information on a website of the Company or through such other public medium the Company may use at that time.

 

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No failure of the Company to give the foregoing notices or defect therein shall limit any Holder’s right to exercise its right to cause the Company to repurchase such Holder’s Notes pursuant to this Section 15.01.

(c)    A Holder may exercise its rights specified in this Section 15.01 upon delivery of (1) the Note to be repurchased, duly endorsed for transfer, together with (2) a written purchase notice and the form entitled “Fundamental Change Purchase Notice” on the reverse of the Note duly completed and which may be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written form onto the Paying Agent (in the case of Notes held in book-entry form, in accordance with DTC’s Applicable Procedures) of the exercise of such rights (a “Fundamental Change Purchase Notice”) to the Paying Agent at any time on or before the close of business on the Fundamental Change Purchase Date, subject to extension to comply with applicable law.

(i)    The Fundamental Change Purchase Notice shall state: (A) the certificate number (if such Note is held in certificated form) of the Note which the Holder will deliver to be repurchased (or, if the Note is held in global form, any other items required to comply with the Applicable Procedures), (B) the portion of the principal amount of the Note which the Holder will deliver to be repurchased and (C) that such Note shall be repurchased as of the Fundamental Change Purchase Date pursuant to the terms and conditions specified in the Notes and in this Indenture.

(ii)    The delivery of a Note for which a Fundamental Change Purchase Notice has been timely delivered to any Paying Agent, on or before the Business Day immediately preceding the Fundamental Change Purchase Date (together with all necessary endorsements) at the office of such Paying Agent shall be a condition to the receipt by the Holder of the Fundamental Change Purchase Price therefor (or, if the Note is held in global form, any items required to comply with the Applicable Procedures).

(iii)    The Company shall only be obliged to purchase, pursuant to this Section 15.01, a portion of a Note if the principal amount of such portion is $1,000 or an integral multiple of $1,000 (provisions of this Indenture that apply to the purchase of all of a Note also apply to the purchase of such portion of such Note).

(iv)    A Paying Agent shall promptly notify the Company of the receipt by it of any Fundamental Change Purchase Notice.

 

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(v)    Anything herein to the contrary notwithstanding, in the case of Global Notes, any Fundamental Change Purchase Notice may be delivered and such Notes may be surrendered or delivered for purchase in accordance with the Applicable Procedures as in effect from time to time.

(vi)    A Holder may withdraw any Fundamental Change Purchase Notice in whole or in part by written notice of withdrawal delivered to the Paying Agent or in accordance with DTC’s Applicable Procedures prior to the close of business on the Business Day prior to the Fundamental Change Purchase Date. Such notice of withdrawal shall state: (A) the principal amount of the withdrawn Note , (B) the certificate number (if such Note is held in certificated form) of the withdrawn Note (or, if the Note is held in global form, any other items required to comply with the Applicable Procedures), and (C) the principal amount, if any, which remains subject to the Fundamental Change Purchase Notice.

(d)    The Company shall deposit cash at the time and in the manner as provided in Section 15.03, sufficient (as determined by the Company) to pay the aggregate Fundamental Change Purchase Price of all Notes to be purchased pursuant to this Section 15.01.

Section 15.02. Effect of Fundamental Change Purchase Notice. Upon receipt by any Paying Agent of a properly completed Fundamental Change Purchase Notice from a Holder, the Holder of the Note in respect of which such Fundamental Change Purchase Notice was given shall thereafter be entitled to receive the Fundamental Change Purchase Price with respect to such Note. Such Fundamental Change Purchase Price shall be paid to such Holder promptly following the later of (1) the Fundamental Change Purchase Date (provided that the conditions in Section 15.01 have been satisfied) and (2) the time of book-entry transfer or delivery of such Note to a Paying Agent by the Holder thereof in the manner required by Section 15.01(c), subject to extension to comply with applicable law.

Section 15.03. Deposit of Fundamental Change Purchase Price. (a) On or before the applicable Fundamental Change Purchase Date, the Company shall deposit with the Paying Agent (or if the Company or an Affiliate of the Company is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 7.06) an amount of money (in immediately available funds if deposited on or after such Fundamental Change Purchase Date), sufficient (as determined by the Company) to pay the aggregate Fundamental Change Purchase Price of all the Notes or portions thereof that are to be purchased as of the Fundamental Change Purchase Date. Payment by the Paying Agent of the Fundamental Change Purchase Price following receipt of the Fundamental Change Purchase Price from the Company shall be made promptly following the later of the Fundamental Change Purchase Date or the time of book-entry transfer or delivery of such Notes.

 

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(b)    If the Paying Agent holds, on the Fundamental Change Purchase Date, in accordance with the terms hereof, money or securities sufficient to pay the Fundamental Change Purchase Price of any Note for which a Fundamental Change Purchase Notice has been tendered then, immediately following the applicable Fundamental Change Purchase Date, whether or not book-entry transfer of the Note is made or whether or not the Note is delivered to the Paying Agent, each such Note shall cease to be Outstanding, interest, including additional interest, if any, shall cease to accrue, and all other rights of the Holder in respect of the Note shall terminate (other than the right to receive the Fundamental Change Purchase Price upon delivery or transfer of the Note as aforesaid).

(c)    If a Fundamental Change Purchase Date falls after a Regular Record Date and on or before the related Interest Payment Date, then interest on the Notes payable on such Interest Payment Date will be payable to the Holders in whose names the Notes are registered at the close of business on such Regular Record Date.

Section 15.04. Repayment to the Company. To the extent that the aggregate amount of cash deposited by the Company pursuant to Section 15.03 exceeds the aggregate Fundamental Change Purchase Price of the Notes or portions thereof that the Company is obligated to purchase, then promptly after the Fundamental Change Purchase Date the Paying Agent shall return any such excess cash to the Company.

Section 15.05. Notes Purchased In Part. Any Note that is to be purchased only in part shall be surrendered at the office of a Paying Agent, and promptly after the Fundamental Change Purchase Date, the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Note, without service charge, a new Note or Notes, of such authorized denomination or denominations as may be requested by such Holder (which must be equal to $1,000 principal amount or any integral thereof), in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Note so surrendered that is not purchased.

Section 15.06. Compliance With Securities Laws Upon Purchase of Notes. In connection with any offer to purchase of Notes under Section 15.01, the Company shall (a) comply with Rule 13e-4 and Rule 14e-1 (or any successor to either such Rule), and any other tender offer rules, if applicable, under the Exchange Act, (b) file the related Schedule TO (or any successor or similar schedule, form or report) if required under the Exchange Act, and (c) otherwise comply with all applicable federal and state securities laws in connection with such offer to purchase or purchase of Notes, all so as to permit the rights of the

 

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Holders and obligations of the Company under Section 15.01 through Section 15.05 to be exercised in the time and in the manner specified therein. To the extent that compliance with any such laws, rules and regulations would result in a conflict with any of the terms hereof, this Indenture is hereby modified to the extent required for the Company to comply with such laws, rules and regulations.

ARTICLE 16

MEETING OF HOLDERS OF NOTES

Section 16.01. Purposes For Which Meetings May Be Called. A meeting of Holders of Notes may be called at any time and from time to time pursuant to this Article 16 to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Notes.

Notwithstanding anything contained in this Article 16, the Trustee may, during the pendency of a Default or an Event of Default, call a meeting of Holders of Notes in accordance with its standard practices.

Section 16.02. Call Notice and Place of Meetings. (a) The Trustee may at any time call a meeting of Holders of Notes for any purpose specified in Section 16.01 hereof, to be held at such time and at such place in The City of New York. Notice of every meeting of Holders of Notes, setting forth the time and the place of such meeting, in general terms the action proposed to be taken at such meeting and the percentage of the principal amount of the then-Outstanding Notes which shall constitute a quorum at such meeting, shall be given, in the manner provided in the Indenture, not less than 21 nor more than 180 days prior to the date fixed for the meeting.

(b)    In case at any time the Company, pursuant to a resolution of the Board of Directors, or the Holders of at least 10% in principal amount of the Notes then Outstanding shall have requested the Trustee to call a meeting of the Holders of Notes for any purpose specified in Section 16.01 hereof, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first publication of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Notes in the amount specified, as the case may be, may determine the time and the place in The City of New York for such meeting and may call such meeting for such purposes by giving notice thereof as provided in Section 16.02(a).

Section 16.03. Persons Entitled to Vote at Meetings. To be entitled to vote at any meeting of Holders of Notes, a Person shall be (a) a Holder of one or

 

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more Outstanding Notes or (b) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Notes by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

Section 16.04. Quorum; Action. The Persons entitled to vote a majority in principal amount of the then-Outstanding Notes shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Notes, be dissolved. In any other case, the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 16.02(a) hereof, except that such notice need be given only once and not less than five days prior to the date on which the meeting is scheduled to be reconvened.

At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid, any resolution and all matters (except as limited by the third paragraph of Section 9.02 hereof) shall be effectively passed and decided if passed or decided by the Persons entitled to vote not less than a majority in principal amount of Notes then Outstanding represented and voting at such meeting.

Any resolution passed or decisions taken at any meeting of Holders of Notes duly held in accordance with this Section 16.04 shall be binding on all the Holders of Notes, whether or not present or represented at the meeting.

Section 16.05. Determination of Voting Rights; Conduct and Adjournment of Meetings. (a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Notes in regard to proof of the holding of Notes and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate.

(b)    The Trustee shall, by an instrument in writing, appoint a temporary chairman (which may be the Trustee) of the meeting, unless the meeting shall have been called by the Company or by Holders of Notes as provided in Section 16.02 hereof, in which case the Company or the Holders of Notes calling the

 

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meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Notes represented at the meeting.

(c)    At any meeting, each Holder of a Note or proxy shall be entitled to one vote for each $1,000 principal amount of Notes held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Note challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Note or proxy.

(d)    Any meeting of Holders of Notes duly called pursuant to Section 16.02 hereof at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the then-Outstanding Notes represented at the meeting, and the meeting may be held as so adjourned without further notice.

Section 16.06. Counting Votes and Recording Action of Meetings. The vote upon any resolution submitted to any meeting of Holders of Notes shall be by written ballots on which shall be subscribed the signatures of the Holders of Notes or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Notes held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Notes shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 16.02 hereof and, if applicable, Section 16.04 hereof. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.

 

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ARTICLE 17

MISCELLANEOUS PROVISIONS

Section 17.01. Provisions Binding on Companys Successors. All the covenants, stipulations, promises and agreements of the Company contained in this Indenture shall bind its successors and assigns whether so expressed or not.

Section 17.02. Official Acts by Successor. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole successor of the Company.

Section 17.03. Notices. Except as otherwise expressly provided herein, any notice, request or demand that by any provision of this Indenture is required or permitted to be given, made or served by the Trustee or by the Holders or by any other Person pursuant to this Indenture to or on the Company may be given or served by being deposited in first class mail, postage prepaid, addressed (until another address is filed in writing by the Company with the Trustee), as follows: 30930 Russell Ranch Road, Suite 300, Westlake Village, CA 91362. Any notice, election, request or demand by the Company or any Holder or by any other Person pursuant to this Indenture to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Corporate Trust Office of the Trustee or sent electronically in PDF format. Except as otherwise expressly provided herein, any notice or communication to a Holder of a Physical Note may be given or served by being deposited in first class mail, postage prepaid, addressed at the Holder’s address as it appears in the Note Register or sent electronically in PDF format to such address provided by the Holder to the Trustee from time to time and reflected in the Note Register; provided that notices given to Holders of Global Notes may be given by electronic transmission to the facilities of the Depositary.

Section 17.04. Governing Law. THIS INDENTURE AND EACH NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

Section 17.05. Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officer’s Certificate and an Opinion of Counsel stating that such action is permitted by the terms of this Indenture; provided that no such Opinion of Counsel shall be required in connection with the issuance of Notes on the Issue Date.

 

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Each Officer’s Certificate and Opinion of Counsel provided for by or on behalf of the Company in this Indenture and delivered to the Trustee with respect to compliance with this Indenture (other than the Officer’s Certificates provided for in Section 4.04) shall include (a) a statement that the Person making such certification is familiar with the requested action and this Indenture; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statement contained in such certificate is based; (c) a statement that, in the judgment of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed judgment as to whether or not such action is permitted by this Indenture; and (d) a statement as to whether or not, in the judgment of such Person, such action is permitted by this Indenture.

Notwithstanding anything to the contrary in this Section 17.05, if any provision in this Indenture specifically provides that the Trustee shall or may receive an Opinion of Counsel in connection with any action to be taken by the Trustee or the Company hereunder, the Trustee shall be entitled to, or entitled to request, such Opinion of Counsel.

Section 17.06. Legal Holidays. In any case where any Interest Payment Date, Fundamental Change Purchase Date, Conversion Date or Maturity Date is not a Business Day, then any action to be taken on such date need not be taken on such date, but may be taken on the next succeeding Business Day with the same force and effect as if taken on such date, and no interest shall accrue for the period from and after such date.

Section 17.07. No Security Interest Created. Nothing in this Indenture or in the Notes, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction.

Section 17.08. Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Conversion Agent, any authenticating agent, any Note Registrar and their successors hereunder or the Holders of the Notes, any benefit or any legal or equitable right, remedy or claim under this Indenture.

Section 17.09. Table of Contents, Headings, Etc. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

 

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Section 17.10. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture and signature pages for all purposes.

Section 17.11. Severability. In the event any provision of this Indenture or in the Notes shall be invalid, illegal or unenforceable, then (to the extent permitted by law) the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired.

Section 17.12. Waiver of Jury Trial. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.

Section 17.13. Consent to Jurisdiction. (a) The Company hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States sitting in the State and City of New York, County and Borough of Manhattan, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Indenture or the Notes, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such state court sitting in the State and City of New York, County and Borough of Manhattan or, to the extent permitted by law, in such federal court sitting in the State and City of New York, County and Borough of Manhattan. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b)    The Company hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Indenture or the Notes in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

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Section 17.14. Force Majeure. In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts that are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

Section 17.15. Calculations. Except as explicitly stated herein, the Company shall be responsible for making all calculations required pursuant to this Indenture and the Notes, including, without limitation, calculations with respect to determinations of the Conversion Price and Conversion Rate applicable to the Notes. The Company shall make all such calculations in good faith and, absent manifest error, the Company’s calculations shall be binding on the Holders. The Company shall provide a written schedule of such calculations to the Trustee, and the Trustee shall be entitled to conclusively rely upon the accuracy of the Company’s calculations without responsibility for independent verification thereof. The Trustee shall forward a copy of such calculations to any Holder upon such Holder’s written request.

Section 17.16. U.S.A. Patriot Act. The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee. The parties to this Indenture agree that they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot Act.

ARTICLE 18

SUBORDINATION

Section 18.01. Subordination.

(a)    The Company covenants and agrees, and each Holder, by accepting a Note, likewise covenants and agrees, that all payments on the Notes, including the payment of principal, Fundamental Change Purchase Price and interest (including Special Interest and Additional Interest) on the Notes, will be subordinated to the prior payment in full in cash (or other payment satisfactory to the holders of Designated Senior Debt) of all of the Designated Senior Debt and the subordination is for the benefit of and enforceable by the holders of the Designated Senior Debt.

 

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(b)    Upon any distribution of the Company’s assets upon any dissolution, winding up, liquidation, reorganization, bankruptcy, assignment for the benefit of holders or any other marshaling of assets, or similar proceeding, the payment of the principal, Fundamental Change Purchase Price and interest (including Special Interest and Additional Interest) on, the Notes will be subordinated in right of payment to the prior payment in full in cash (or other payment satisfactory to the holders of Designated Senior Debt) of all of the Designated Senior Debt. The Company shall promptly notify holders of Designated Senior Debt if payment of the Notes is accelerated because of an Event of Default or if a Fundamental Change occurs.

Notwithstanding the foregoing, the right of Holders to receive any distributions, which (x) are provided for by a plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in a reorganization proceeding under any applicable Bankruptcy Law relating to the Company and consented to by the holders of the Designated Senior Debt and (y) take the form of the Company’s equity interests or the Company’s indebtedness that is subordinated in right of payment to Designated Senior Debt then outstanding to at least the same extent of the Notes, shall not be subordinated to the prior payment of any Designated Senior Debt or otherwise subject to the subordination provisions of this Section 18.01, and none of the Holders will be obligated to pay over any such distributions to any holder of Designated Senior Debt. The Company may not make any payment on the Notes if:

(i)    at the time any default in the payment of principal, premium, interest or other amounts due on Designated Senior Debt when due, whether at maturity, upon redemption or mandatory repurchase, acceleration, or otherwise, and the default has not been cured or waived (a “Payment Default”); or

(ii)    a default, other than a payment default, on any Designated Senior Debt occurs and is continuing that permits holders of Designated Senior Debt to accelerate its maturity, and the Trustee receives a notice of such default (a “Payment Blockage Notice”) from a holder of Designated Senior Debt electing to effect a payment blockage under this Indenture (a “Nonpayment Default”).

The Company may resume payments and distributions on the Notes:

(i)    in case of a Payment Default, upon the date on which such default is cured or waived or ceases to exist; and

 

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(ii)    in case of a Nonpayment Default, the earlier of (A) the date on which such Nonpayment Default is cured or waived, (B) 91 days after the date the Designated Senior Debt is paid in full in cash (or other payment satisfactory to the holders of the Designated Senior Debt), (C) 179 days after the date on which the Payment Blockage Notice is received by the Trustee, if the maturity of the Designated Senior Debt has not been accelerated and there is no Payment Default, or (D) the date the Payment Blockage Notice has been rescinded.

No Nonpayment Default that existed or was continuing on the date of delivery of any Payment Blockage Notice shall be the basis for any later Payment Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 consecutive days.

(c)    If the Trustee or any Holder receives any payment or distribution of the Company’s assets in contravention of the subordination provisions of this Section 18.01 before all Designated Senior Debt is paid in full in cash or other payment satisfactory to holders of Designated Senior Debt, then such payment or distribution will be held for the benefit of holders of Designated Senior Debt or their representatives and paid over to them to the extent necessary to make payment in full in cash or payment satisfactory to the holders of Designated Senior Debt of all unpaid Designated Senior Debt.

The Trustee shall not be deemed to owe any fiduciary duty to the holders of Designated Senior Debt and shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to Holders or to the Company or to any other person cash, property or securities to which any holders of Designated Senior Debt shall be entitled by virtue of this Article or otherwise. With respect to the holders of Designated Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article and no implied covenants or obligations with respect to holders of Designated Senior Debt shall be read into this Indenture against the Trustee.

Nothing in this Section 18.01 shall prohibit the conversion or exchange of any or all of the Notes into or for shares of Common Stock, including cash payments in lieu of fractional shares of common stock, or the issuance of Interest Shares.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.

 

MANNKIND CORPORATION, as Issuer
By:  

/s/ Steven Binder                                        

  Name: Steven Binder
  Title: Chief Financial Officer
U.S. Bank National Association, as Trustee
By:  

/s/ Richard Prokosch                                        

  Name: Richard Prokosch
  Title: Vice President

 

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EXHIBIT A

[FORM OF FACE OF NOTE]

[INCLUDE IF A GLOBAL NOTE]

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

[INCLUDE IF A RESTRICTED SECURITY]

THE SALE OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND ACCORDINGLY, THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, OR OF A BENEFICIAL OWNERSHIP HEREIN, THE ACQUIRER: (I) REPRESENTS THAT IT, AND ANY ACCOUNT FOR WHICH IT IS ACTING, IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, AND (II) AGREES (1) THAT IT WILL NOT WITHIN THE LATER OF (X) ONE YEAR AFTER THE DATE OF ISSUANCE OF THIS NOTE AND (Y) 90 DAYS AFTER IT CEASES TO BE AN AFFILIATE (WITHIN THE MEANING OF RULE 144 UNDER THE SECURITIES ACT) OF MANNKIND CORPORATION (THE “COMPANY”), OFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER THE NOTES EVIDENCED HEREBY, THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH NOTES OR ANY BENEFICIAL OWNERSHIP HEREIN, EXCEPT: (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF; (B) UNDER A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT; (C) TO A PERSON THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED

 

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INSTITUTIONAL BUYER AND TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, ALL IN COMPLIANCE WITH RULE 144A (IF AVAILABLE); OR (D) UNDER ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING RULE 144, IF AVAILABLE; AND (2) THAT IT WILL, PRIOR TO ANY TRANSFER OF THIS NOTE WITHIN THE LATER OF (X) SIX MONTHS (OR, IF THE COMPANY HAS NOT SATISFIED THE CURRENT PUBLIC INFORMATION REQUIREMENTS OF RULE 144, ONE YEAR) AFTER THE DATE OF ISSUANCE OF THIS NOTE AND (Y) 90 DAYS AFTER IT CEASES TO BE AN AFFILIATE (WITHIN THE MEANING OF RULE 144) OF THE COMPANY, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REQUIRE AND MAY RELY UPON TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. IN ANY EVENT, NO AFFILIATE OF THE COMPANY MAY RESELL THIS NOTE OTHER THAN UNDER A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IN A TRANSACTION THAT RESULTS IN SUCH NOTE NO LONGER BEING “RESTRICTED SECURITIES” (AS DEFINED UNDER RULE 144). NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER AND TRANSFEREE OF A NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF A NOTE WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING OF THE NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTE THAT (A) ITS PURCHASE AND HOLDING OF THE NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTE IS NOT MADE ON BEHALF OF OR WITH “PLAN ASSETS” OF ANY PLAN SUBJECT TO TITLE I OF ERISA, SECTION 4975 OF THE CODE OR ANY SIMILAR LAW OR (B) ITS PURCHASE AND HOLDING OF THE NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTE WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA, SECTION 4975 OF THE CODE OR ANY SIMILAR LAW.

 

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MANNKIND CORPORATION

5.75% Convertible Senior Subordinated Exchange Notes Due 2024

 

No.             

   $            

CUSIP No.

ISIN No.

MannKind Corporation, a corporation duly organized and validly existing under the laws of the state of Delaware (herein called the “Company,” which term includes any successor corporation or other entity under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of $[        ] (which amount may from time to time be increased or decreased to such other principal amounts as permitted by the Indenture by adjustments made on the records of the Trustee or the Custodian of the Depositary as set forth in Schedule A hereto, in accordance with the rules and procedures of the Depositary) on the Maturity Date (as defined in the Indenture), and interest thereon as set forth below.

This Note shall bear interest at the rate of 5.75% per year from the date of issuance of such Note or from the most recent date to which interest has been paid or duly provided for, to the date the principal amount of such Note is paid or deemed paid, as the case may be. Interest is payable semi-annually in arrears on each February 15 and August 15 (or if any such day is not a Business Day, the immediately following Business Day), commencing February 15, 2020, to the holder of record on February 1 or August 1 (whether or not such day is a Business Day) immediately preceding such Interest Payment Date (Regular Record Date).

Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months

Interest not paid when due and any interest on principal or interest not paid when due will be paid to Holders on a special record date, which will be the 15th day preceding the day fixed by the Company for the payment of such interest, whether or not such day is a Business Day. At least 15 days before a special record date, the Company will send to each Holder and to the Trustee a notice that sets forth the special record date, the payment date and the amount of interest to be paid.

Payment of the principal of, and accrued and unpaid interest on, this Note shall be made at the office or agency of the Company maintained for that purpose in such lawful money of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts; provided,

 

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however, that interest on any Physical Notes (i) to the Person entitled thereto having an aggregate principal amount of $2,000,000 or less, by check mailed to such Person at the address set forth in the Note Register and (ii) to the Person entitled thereto having an aggregate principal amount of more than $2,000,000, either by check mailed to such Person or, upon application by such Person to the Note Registrar not later than the relevant Regular Record Date, by wire transfer in immediately available funds to such Person’s account within the United States, which application and wire transfer instructions shall remain in effect until such Person notifies, in writing, the Note Registrar to the contrary.

Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions giving the Holder of this Note the right to convert this Note into shares of Common Stock (together with cash in lieu of fractional shares) on the terms and subject to the limitations set forth in the Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

 

MANNKIND CORPORATION
By:  

                                                             

  Name:
  Title:

 

Dated:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION U.S. Bank National Association,

as Trustee, certifies that this is one of the Notes described in the within-named Indenture.

By:  

 

  Authorized Signatory

 

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[FORM OF REVERSE OF NOTE]

MANNKIND CORPORATION

5.75% Convertible Senior Subordinated Exchange Notes Due 2024

This Note is one of a duly authorized issue of the Notes of the Company, designated as its 5.75% Convertible Senior Subordinated Exchange Notes Due 2024 (herein called the “Notes”), all issued or to be issued under and pursuant to an Indenture dated as of August 6, 2019 (herein called the “Indenture”), between the Company and U.S. Bank National Association (herein called the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Notes. Additional Notes may be issued in an unlimited aggregate principal amount, subject to certain conditions specified in the Indenture.

All payments on the Notes, including the payment of principal, Fundamental Change Purchase Price, interest (including Special Interest and Additional Interest) on the Notes, will be subordinated to the prior payment in full in cash (or other payment satisfactory to the holders of Designated Senior Debt) of all of the Designated Senior Debt and the subordination is for the benefit of and enforceable by the holders of the Designated Senior Debt.

In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of and accrued and unpaid interest, if any, on all Notes may be declared, by either the Trustee or Holders of not less than 25% in aggregate principal amount of Notes then outstanding, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions and certain exceptions set forth in the Indenture.

Subject to the terms and conditions of the Indenture, the Company will make all payments and deliveries in respect of the Fundamental Change Purchase Price and the principal amount on the Maturity Date, as the case may be, to the Holder who surrenders a Note to a Paying Agent to collect such payments in respect of the Note. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts.

The Indenture contains provisions permitting the Company and the Trustee in certain circumstances, without the consent of the Holders of the Notes, and in other circumstances, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures modifying the terms of the Indenture and the Notes as described therein. It is also provided in the Indenture that, subject to certain exceptions, the Holders of a


majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the Holders of all of the Notes waive any past Default or Event of Default under the Indenture and its consequences.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and accrued and unpaid interest, if any, on this Note at the place, at the respective times, at the rate and in the lawful money herein prescribed or to satisfy its obligation to convert the Notes.

The Notes are issuable in registered form without coupons in denominations of $1,000 principal amount and multiples thereof. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations provided in the Indenture, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations, without payment of any service charge but, if required by the Company or Trustee, with payment of a sum sufficient to cover any tax, assessments or other governmental charges that may be imposed in connection therewith as a result of the name of the Holders of the new Notes issued upon such exchange of Notes being different from the name of the Holder of the old Notes surrendered for such exchange.

Upon the occurrence of a Fundamental Change, the Company will offer to purchase any and all of the Notes. The Holder has the right, at such Holder’s option, to accept such offer and require the Company to purchase for cash all of such Holder’s Notes or any portion thereof (in principal amounts of $1,000 or multiples thereof) on the Fundamental Change Purchase Date at a price equal to the Fundamental Change Purchase Price.

Subject to the provisions of the Indenture, the Holder hereof has the right, at its option, prior to the close of business on the Business Day immediately preceding the Maturity Date, to convert any Notes or portion thereof that is $1,000 or a multiple thereof, into shares of Common Stock (together with cash in lieu of fractional shares) at a Conversion Rate specified in the Indenture, as adjusted from time to time as provided in the Indenture.

Terms used in this Note and defined in the Indenture are used herein as therein defined.

 

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ABBREVIATIONS

The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM = as tenants in common

UNIF GIFT MIN ACT = Uniform Gifts to Minors Act

CUST = Custodian

TEN ENT = as tenants by the entireties

JT TEN = joint tenants with right of survivorship and not as tenants in common Additional abbreviations may also be used though not in the above list.

 

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SCHEDULE A

MANNKIND CORPORATION

5.75% Convertible Senior Subordinated Exchange Notes Due 2024

The initial principal amount of this Note is $5,000,000. The following increases or decreases in this Note have been made:

 

Date of Exchange

  

Amount of

decrease in

Principal Amount

of this Note

  

Amount of

increase in

Principal Amount

of this Note

  

Principal Amount
of this Note
following such
decrease or
increase

  

Signature of

authorized

signatory of

Trustee or

Custodian

           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           

 

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ATTACHMENT 1

[FORM OF NOTICE OF CONVERSION]

5.75% Convertible Senior Subordinated Exchange Notes Due 2024

To: MannKind Corporation

The undersigned registered owner of this Note hereby exercises the option to convert this Note, or the portion hereof (that is $1,000 principal amount or a multiple thereof) below designated, and the Company, at its election, may deliver shares of Common Stock (together with cash in lieu of fractional shares) in accordance with the terms of the Indenture referred to in this Note, and directs that any shares of Common Stock issuable and deliverable upon such conversion, and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If any shares of Common Stock or any portion of this Note not converted are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid to the undersigned on account of interest accompanies this Note.

 

Dated:  

 

   

 

                                                                       

 

                                   Signature(s)

                                  

   
Signature Guarantee    
Signature(s) must be guaranteed by an eligible Guarantor Institution    
(banks, stock brokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15 if shares of Common Stock are to be issued, or Notes to be delivered, other than to and in the name of the registered Holder.    


Fill in for registration of shares if to be issued, and Notes if to be delivered, other than to and in the name of the registered Holder:

 

(Name)

 

(Street Address)

 

(City, State and Zip Code)
Please print name and address

 

Principal amount to be converted (if less than all): $            ,000
NOTICE: The above signature(s) of the Holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

 

Social Security or Other Taxpayer
Identification Number


ATTACHMENT 2

[FORM OF FUNDAMENTAL CHANGE PURCHASE NOTICE]

5.75% Convertible Senior Subordinated Exchange Notes Due 2024

To: MannKind Corporation

The undersigned registered owner of this Note hereby acknowledges receipt of a notice from MannKind Corporation (the “Company”) as to the occurrence of a Fundamental Change with respect to the Company, offering to purchase the Notes and specifying the Fundamental Change Purchase Date. The undersigned registered owner of this Note hereby accepts the Company’s offer to purchase the Notes and instructs the Company to pay to the registered Holder hereof in accordance with the applicable provisions of the Indenture referred to in this Note (1) the entire principal amount of this Note, or the portion thereof (that is $1,000 principal amount or a multiple thereof) below designated, and (2) if such Fundamental Change Purchase Date does not fall during the period after a Regular Record Date and on or prior to the corresponding Interest Payment Date, accrued and unpaid interest thereon to, but excluding, such Fundamental Change Purchase Date.

In the case of Physical Notes, the certificate numbers of the Notes to be purchased are as set forth below:

Dated:                                                                   

 

 

Signature(s)

 

Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid (if less than all): $            ,000
NOTICE: The above signature(s) of the Holder(s) hereof must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.


ATTACHMENT 3

[FORM OF ASSIGNMENT AND TRANSFER]

For value received                      hereby sell(s), assign(s) and transfer(s) unto                      (Please insert social security or Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints                       attorney to transfer the said Note on the books of the Company, with full power of substitution in the premises.

In connection with any transfer of the within Note occurring prior to the Resale Restriction Termination Date, as defined in the Indenture governing such Note, the undersigned confirms that such Note is being transferred:

☐    To MannKind Corporation or a subsidiary thereof; or

☐    Pursuant to the registration statement that has become or been declared effective under the Securities Act of 1933, as amended; or

☐    Pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or

☐    Pursuant to and in compliance with Rule 144 under the Securities Act of 1933, as amended; or

☐    Pursuant to another available exemption from registration under the Securities Act of 1933, as amended.


Dated:                                                                                         

 

 

Signature(s)

 

Signature Guarantee
Signature(s) must be guaranteed by an eligible Guarantor Institution (banks, stock brokers, savings and loan associations and credit unions) with membership in an approved signature guarantee medallion program pursuant to Securities and Exchange Commission Rule 17Ad-15 if Notes are to be delivered, other than to and in the name of the registered Holder.

NOTICE: The signature on the assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

EX-4.4

Exhibit 4.4

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT, OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER SECTION 4(A)(7) OF THE SECURITIES ACT OR APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(A)(1) AND A HALF” SALE. NOTWITHSTANDING THE FOREGOING, THE SECURITY MAY BE PLEDGED (BUT NOT TRANSFERRED) IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING SECURED BY THE SECURITY. PRIOR TO THE REGISTRATION OF ANY TRANSFER PURSUANT TO AN EXEMPTION FROM REGISTRATION OTHER THAN RULE 144, BORROWER RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

THIS INSTRUMENT AND THE INDEBTEDNESS, RIGHTS AND OBLIGATIONS EVIDENCED HEREBY AND ANY LIENS OR OTHER SECURITY INTERESTS SECURING SUCH RIGHTS AND OBLIGATIONS ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT (AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME, THE “SUBORDINATION AGREEMENT”) DATED AS OF AUGUST 6, 2019, BY AND AMONG THE SUBORDINATING CREDITORS IDENTIFIED THEREIN AND MIDCAP FINANCIAL TRUST IN ITS CAPACITY AS AGENT FOR CERTAIN LENDERS (TOGETHER WITH ITS SUCCESSORS AND ASSIGNS, “SENIOR CREDITOR AGENT”), TO CERTAIN INDEBTEDNESS, RIGHTS, AND OBLIGATIONS OF MANKIND CORPORATION AND MANNKIND LLC TO SENIOR CREDITOR AGENT AND SENIOR LENDERS (AS DEFINED THEREIN) AND LIENS AND SECURITY INTERESTS OF SENIOR CREDITOR AGENT SECURING THE SAME ALL AS DESCRIBED IN THE SUBORDINATION AGREEMENT; AND EACH HOLDER AND TRANSFEREE OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT

PROMISSORY NOTE

 

$2,630,750    Issue Date: August 6, 2019
   Westlake Village, California

THIS PROMISSORY NOTE (this “Note”), dated as of August 6, 2019, is issued pursuant to the certain Exchange Agreement, dated as of August 6, 2019, by and between MANNKIND CORPORATION, a Delaware corporation (“Borrower”), and BRUCE FUND, INC. (“Lender”).

FOR VALUE RECEIVED, Borrower hereby promises to pay to Lender, in lawful money of the United States of America and in immediately available funds, the principal sum of up to Two Million Six Hundred Thirty Thousand Seven Hundred fifty Dollars ($2,630,750), due and payable on the Maturity Date.

1. Maturity; Repayment.

1.1 Maturity. The outstanding principal amount of this Note shall be due and payable on June 30, 2020; provided that if such date is not a Business Day, the outstanding principal amount of this Note, together with all accrued and unpaid interest thereon, shall be payable on the Business Day immediately succeeding such date (the “Maturity Date”).

1.2 Repayment. Borrower shall pay this Note in lawful money of the United States of America and in immediately available funds or, at its option, in validly issued, fully paid and non-assessable shares of Common Stock (the “New Shares”), so long as each of the Equity Conditions are satisfied on each day during the Equity Conditions


Measuring Period applicable to such Payment Date. In respect of payments to be made in New Shares, Borrower shall deliver a written notice (which may be provided via e-mail) (such notice, a “Payment Notice”) to Lender on or prior to the fifth Trading Day prior to the applicable payment date (such payment date, a “Payment Date”), which Payment Notice shall be irrevocable and shall specify the amount of this Note (the “Payment Amount”) to be paid in New Shares, together with an officer’s certificate certifying that the Equity Conditions with respect to such payment in New Shares have been met as of the applicable Payment Date. Notwithstanding anything herein to the contrary, if the Equity Conditions fail to have been met as of the applicable Payment Date, the applicable Payment Amount shall be payable in cash.

Any payments of this Note to paid with New Shares, shall be paid in a number of validly issued, fully paid and non-assessable shares of Common Stock equal to the quotient of (1) the Payment Amount payable on such Payment Date less any such payment paid in cash, divided by (2) the Last Reported Sale Price on the Trading Day immediately prior to the applicable Payment Date. If the issuance of New Shares would result in the issuance of a fraction of a share of Common Stock, Borrower shall round such fraction of a share of Common Stock to the nearest whole share (with 0.5 being rounded up). When any New Shares are to be issued, Borrower shall (i) (A) provided that Borrower’s stock transfer agent is participating in the DTC Fast Automated Securities Transfer Program, upon the request of Lender, credit such aggregate number of New Shares to which Lender shall be entitled to Lender or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (B) if the stock transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, or upon request of Lender, issue and deliver to Lender no later than the second (2) Business Day after the applicable Payment Date certificates registered in the name of Lender for the number of New Shares to which Lender shall be entitled, (C) deposit such New Shares with the Depositary in accordance with the Applicable Procedures (as defined in the Indenture), or (D) otherwise deliver the applicable New Shares in accordance with procedures reasonably acceptable to the Lender.

2. Interest Rate. This Note shall be non-interest bearing.

3. Prepayment. This Note may be prepaid in whole or in part without penalty or premium.

4. Principal Amount. As of the date hereof, the principal amount of this Note is Two Million Six Hundred Thirty Thousand Seven Hundred Fifty Dollars ($2,630,750). At the time of prepayment of this Note, Lender shall make or cause to be made, an appropriate notation on Exhibit A attached hereto reflecting the amount of such prepayment. The outstanding amount of this Note set forth on Exhibit A shall be prima facie evidence of the principal amount thereof outstanding, but the failure to record, or any error in so recording, shall not limit or otherwise affect the obligations of Borrower to make payments of principal of or interest on this Note when due.

5. Representations and Warranties. Borrower hereby represents and warrants to Lender as follows:

5.1 Borrower has the requisite power and authority to enter into this Note and to consummate the transactions contemplated hereby. The execution and delivery of this Note by Borrower and the consummation by Borrower of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Borrower. This Note has been duly executed and delivered by Borrower and constitutes the legal, valid and binding agreement of Borrower enforceable against Borrower in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) equitable principles of general applicability relating to the availability of specific performance, injunctive relief or other equitable remedies.

5.2 No consent, approval, authorization, order, license, registration or qualification of or with any Governmental Entity is required for the execution and delivery by Borrower of this Note or the transactions contemplated hereby, except such consents, approvals, authorizations, orders, licenses, registrations or qualifications as have been obtained, or which, if not obtained, would not, individually or in the aggregate, have a material adverse effect on the ability of Borrower to perform its obligations hereunder or consummate the transactions contemplated hereby on a timely basis. As used in this Note, the term “Governmental Entity” means any agency, bureau, commission, authority, department, official, political subdivision, tribunal or other instrumentality of any government, whether (i) regulatory, administrative or otherwise (including, without limitation, a self-regulatory organization or stock exchange); (ii) federal, state or local; or (iii) domestic or foreign.

5.3 The execution and delivery by Borrower of this Note, the performance by Borrower of its obligations hereunder, and the consummation by Borrower of the transactions contemplated hereby, will not conflict with or result

 

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in a breach or violation of (i) any of the terms or provisions of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower or any of its subsidiaries is a party or by which Borrower or any of its subsidiaries is bound or to which any of their property or assets is subject or (ii) any applicable law or statute or any order, rule or regulation of any Governmental Entity having jurisdiction over Borrower or any of its subsidiaries or any of their respective properties, except for in the case of either clause (i) or (ii) such conflicts, breaches or violations that would not prevent or delay the consummation of the transactions contemplated by this Note or that would not be reasonably expected to have a material adverse effect on Borrower, nor will any such action result in any violation of the provisions of the organizational documents of Borrower.

5.4 All of the New Shares, when issued in accordance with the terms of this Note, will be duly authorized and duly and validly issued, fully paid and nonassessable, free and clear of all liens, taxes, adverse claims, and will not be issued in violation of, or subject to, any preemptive or similar rights of any Person.

5.5 Borrower has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). None of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Borrower is not in violation of the requirements of the NASDAQ Stock Market (“NASDAQ”) and has no knowledge of any facts or circumstances which could reasonably be expected to lead to delisting or suspension of the Common Stock in the foreseeable future.

5.6 No brokerage or finder’s fees or commissions are or will be payable by Borrower or any of its Affiliates or representatives to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Note. Lender shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 5.6 that may be payable by Borrower or any of its Affiliates or representatives in connection with the transactions contemplated by this Note.

5.7 Assuming the accuracy of the representations and warranties of Lender contained in Section 6 hereof, the offer and issuance of this Note or the issuance of the New Shares by Borrower pursuant hereto will be exempt from the registration requirements of the Securities Act (and such issuances will be or have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws). The amendments and transactions contemplated hereby does not contravene, including the issuance and sale of the New Shares under this Note, or require stockholder approval pursuant to, the rules and regulations of NASDAQ.

5.8 Neither Borrower, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, has made or will make any offers or sales of any security, or has solicited or will solicit any offers to buy any security, under circumstances that would cause the offering and issuance of the New Shares to be integrated with prior offerings by Borrower for purposes of the Securities Act and which would require the registration of any such securities under the Securities Act.

6. Representation and Warranties of Lender. Lender hereby represents and warrants to Borrower as follows:

6.1 Lender has full right, power and authority to enter into this Note and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Note.

6.2 Lender understands that nothing in this Note or any other materials presented to Lender in connection with this Note or the issuance of any New Shares constitutes legal, tax or investment advice. Lender has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with this Note and the issuance of any New Shares.

 

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6.3 Lender understands that the this Note and any New Shares (collectively, the “Securities”) have not been registered under the Securities Act. Lender also understands that the Securities are being offered and issued pursuant to an exemption from registration contained in the Securities Act based in part upon Lender’s representations contained in this Note.

6.4 Lender has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to Borrower so that it is capable of evaluating the merits and risks of the Securities and has the capacity to protect its own interests. Lender must bear the economic risk of the Securities indefinitely (subject to Borrower’s payment obligations under this Note) unless the Securities are registered pursuant to the Securities Act, or an exemption from registration is available. Lender understands that Borrower has no present intention of registering any of the Securities. Lender also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Lender to transfer all or any portion of any of the Securities under the circumstances, in the amounts or at the times Lender might propose.

6.5 Lender is acquiring the Securities for Lender’s own account for investment only, and not with a view towards their distribution.

6.6 Lender has the capacity to protect its own interests in connection with the transactions contemplated in this Note.

6.7 Lender is an accredited investor within the meaning of Regulation D under the Securities Act.

7. Certain Definitions

For purposes of this Note, the following terms shall have the following meanings:

Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. As used in this definition of “Affiliate,” the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or partnership or other ownership interest, by contract, or otherwise.

Business Day” means, with respect to this Note, any day other than a Saturday, a Sunday or a day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.

Commission” means the U.S. Securities and Exchange Commission.

Common Stock” means the common stock of Borrower, par value $0.01 per share.

Equity Conditions means, with respect to the payment of interest in New Shares:

(i)     either (1) all of the New Shares (in the case of a payment in New Shares) and held by a non-Affiliate of Borrower shall be eligible for sale without the need for registration under any applicable federal or state securities laws or (2) a shelf registration statement registering the resale of such New Shares has been filed by Borrower and been declared effective by the Commission or is automatically effective and is available for use, and Borrower expects such shelf registration statement to remain effective and available for use from the applicable Payment Date until thirty (30) days following the applicable Payment Date;

(ii)     during the applicable Equity Conditions Measuring Period, the Common Stock is listed or traded on an Eligible Market and shall not have been suspended from trading on such Eligible Market (as defined below) (other than suspensions of not more than two Trading Days and occurring prior to the applicable date of determination due to business announcements by Borrower) nor shall delisting or suspension by such Eligible Market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such Eligible Market;

 

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(iii)     any applicable New Shares may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or trading;

(vi)     any applicable New Shares shall be duly authorized and will be validly issued, fully paid and non-assessable upon issuance in accordance with the terms of this Note; and

(vi)     no Event of Default shall have occurred and be continuing.

Equity Conditions Measuring Period means the period (x) commencing on the Payment Notice Date with respect to such payment is delivered to Lender and (y) ending on the applicable Payment Date.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Indenturemeans that certain indenture, dated as of August 6, 2019, between Borrower and U.S. Bank National Association, as Trustee, in respect of Borrowers 5.75% Convertible Senior Subordinated Exchange Notes Due 2024.

Last Reported Sale Price” of the Common Stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock is traded (each, an “Eligible Market”). If the Common Stock is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last Reported Sale Price” shall be the last quoted bid price for the Common Stock in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If the Common Stock is not so quoted, the “Last Reported Sale Price” shall be the average of the mid-point of the last bid and ask prices for the Common Stock on the relevant date from each of at least three nationally recognized independent investment banking firms selected by Borrower for this purpose.

Payment Notice Date” means a date on which Borrower delivers a Payment Notice to Lender.

Person” or “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act, or any other entity.

Securities Act” means the Securities Act of 1933, as amended.

Trading Day” means a day on which (i) trading in the Common Stock (or other security for which a closing sale price must be determined) generally occurs on The NASDAQ or, if the Common Stock (or such other security) is not then listed on The NASDAQ, on the principal other U.S. national or regional securities exchange on which the Common Stock (or such other security) is then listed or, if the Common Stock (or such other security) is not then listed on a U.S. national or regional securities exchange, on the principal other market on which the Common Stock (or such other security) is then traded and (ii) a Last Reported Sale Price for the Common Stock (or such other security) is available on such securities exchange or market; provided that if the Common Stock (or such other security) is not so listed or traded, “Trading Day” means a Business Day.

8. Default. Each of the following events shall be an “Event of Default” hereunder:

(a)     Borrower fails to pay timely any of the principal amount due under this Note on the date the same becomes due and payable or within five (5) Business Days thereafter;

(b)     Borrower files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing;

(c)     An involuntary petition is filed against Borrower (unless such petition is dismissed or discharged within sixty (60) days) under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of Borrower; or

 

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(d)     Any representation or warranty made herein or in any other document delivered in connection herewith shall be incorrect or misleading in any material respect when made or deemed made (except where any such representation or warranty by the terms thereof is subject to a materiality standard, in which case such representation or warranty shall be incorrect or misleading in any respect).

Upon the occurrence of an Event of Default hereunder, all unpaid principal and other amounts owing hereunder shall, at the option of Lender, and, in the case of an Event of Default pursuant to (b) or (c) above, automatically, be immediately due, payable and collectible by Lender pursuant to applicable law.

9. Waiver. Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses.

The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the full extent permitted by law.

10. Governing Law. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction. Borrower consents to in personam jurisdiction of the courts in the State of New York sitting in New York County and of the United States District Court of the Southern District of New York for any legal action or proceeding with respect to this Note. Borrower, by execution and delivery of this Note, hereby irrevocably accepts in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.

11. Successors and Assigns. This Note shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns; provided that Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of Lender. Lender may assign to one or more other persons all or a portion of its rights (but not its obligations) under this Note.

12. Integration. This Note reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement or instrument, oral or written, before or after the date hereof.

13. Amendments, Modification, Etc. No amendment, modification or waiver of any provision of this Note, and no consent to any departure by Lender or Borrower and their assigns therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

14. No Waiver. No failure on the part of Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Note preclude any other or further exercise thereof or the exercise of any other right. The rights of Lender under this Note against Borrower are not conditional or contingent on any attempt by Lender to exercise any of its rights under this Note against Borrower or any other person.

15. Expenses. Borrower agrees to reimburse, periodically and upon request, and at the date of effectiveness of this Note or upon termination of this Note, (i) Lender’s reasonable expenses, including the reasonable fees and disbursements of Lender’s attorneys, arising in connection with the preparation, negotiation, execution, delivery, amendment and administration of this Note and related transactions and (ii) Lender’s expenses, including the fees and disbursements of Lender’s attorneys, in connection with the enforcement of this Note or the protection of Lender’s rights under this Note. In addition, Borrower agrees to reimburse Lender for all reasonable expenses, including the reasonable fees and disbursements of Lender’s attorneys, incurred in connection with the licensing of Lender as a finance lender under the California Finance Lenders Law.

16. Indemnity. Borrower shall indemnify, defend and hold harmless Lender and its agents and attorneys (collectively, the “Indemnitees”) from and against (i) any and all transfer taxes, documentary taxes, assessments or charges made by any Governmental Entity by reason of the execution and delivery of this Note or the extension of credit represented hereby, and (ii) any and all liabilities, losses, damages, penalties, judgments, claims, costs and expenses of any kind or nature whatsoever (including reasonable attorneys’ fees, and disbursements in connection with any actual or threatened investigative, administrative or judicial proceeding, whether or not such Indemnitee shall

 

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be designated a party thereto) that may be imposed on, incurred by or asserted against such Indemnitee, in any manner relating to or arising out of this Note, the extension of credit represented hereby or the use or intended use of the proceeds thereof; provided that no Indemnitee shall have the right to be indemnified or held harmless hereunder for its own gross negligence or willful misconduct, as determined by a final judgment of a court of competent jurisdiction.

17. Seniority. Amounts due under this Note shall be subordinated in accordance with that certain Subordination Agreement, dated as of August 6, 2019, between Lender and MidCap Financial Trust.

[Signature Pages Follow]

 

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BORROWER:   MANNKIND CORPORATION
  By:  

  /s/ Steven Binder                                                         

    Name:   Steven Binder
    Title:   Chief Financial Officer                                                   
LENDER:   BRUCE FUND, INC.
  By:  

  /s/ R. Jeffrey Bruce

    Name:   R. Jeffrey Bruce
    Title:   Vice President

 

[Signature Page to Promissory Note (July Deferred Payment)]


Exhibit A

PRINCIPAL SCHEDULE

 

Date

   Repayment      Principal Balance  
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     

 

[Ex. A – Page 1]

EX-4.5

Exhibit 4.5

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT, OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER SECTION 4(A)(7) OF THE SECURITIES ACT OR APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(A)(1) AND A HALF” SALE. NOTWITHSTANDING THE FOREGOING, THE SECURITY MAY BE PLEDGED (BUT NOT TRANSFERRED) IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING SECURED BY THE SECURITY. PRIOR TO THE REGISTRATION OF ANY TRANSFER PURSUANT TO AN EXEMPTION FROM REGISTRATION OTHER THAN RULE 144, BORROWER RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

THIS INSTRUMENT AND THE INDEBTEDNESS, RIGHTS AND OBLIGATIONS EVIDENCED HEREBY AND ANY LIENS OR OTHER SECURITY INTERESTS SECURING SUCH RIGHTS AND OBLIGATIONS ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT (AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME, THE “SUBORDINATION AGREEMENT”) DATED AS OF AUGUST 6, 2019, BY AND AMONG THE SUBORDINATING CREDITORS IDENTIFIED THEREIN AND MIDCAP FINANCIAL TRUST IN ITS CAPACITY AS AGENT FOR CERTAIN LENDERS (TOGETHER WITH ITS SUCCESSORS AND ASSIGNS, “SENIOR CREDITOR AGENT”), TO CERTAIN INDEBTEDNESS, RIGHTS, AND OBLIGATIONS OF MANKIND CORPORATION AND MANNKIND LLC TO SENIOR CREDITOR AGENT AND SENIOR LENDERS (AS DEFINED THEREIN) AND LIENS AND SECURITY INTERESTS OF SENIOR CREDITOR AGENT SECURING THE SAME ALL AS DESCRIBED IN THE SUBORDINATION AGREEMENT; AND EACH HOLDER AND TRANSFEREE OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT

PROMISSORY NOTE

 

$2,630,750    Issue Date: August 6, 2019
   Westlake Village, California

THIS PROMISSORY NOTE (this “Note”), dated as of August 6, 2019, is issued pursuant to the certain Exchange Agreement, dated as of August 6, 2019, by and between MANNKIND CORPORATION, a Delaware corporation (“Borrower”), and BRUCE FUND, INC. (“Lender”).

FOR VALUE RECEIVED, Borrower hereby promises to pay to Lender, in lawful money of the United States of America and in immediately available funds, the principal sum of up to Two Million Six Hundred Thirty Thousand Seven Hundred fifty Dollars ($2,630,750), due and payable on the Maturity Date.

1. Maturity; Repayment.

1.1 Maturity. The outstanding principal amount of this Note shall be due and payable on December 31, 2020; provided that if such date is not a Business Day, the outstanding principal amount of this Note, together with all accrued and unpaid interest thereon, shall be payable on the Business Day immediately succeeding such date (the “Maturity Date”).

1.2 Repayment. Borrower shall pay this Note in lawful money of the United States of America and in immediately available funds or, at its option, in validly issued, fully paid and non-assessable shares of Common Stock (the “New Shares”), so long as each of the Equity Conditions are satisfied on each day during the Equity Conditions


Measuring Period applicable to such Payment Date. In respect of payments to be made in New Shares, Borrower shall deliver a written notice (which may be provided via e-mail) (such notice, a “Payment Notice”) to Lender on or prior to the fifth Trading Day prior to the applicable payment date (such payment date, a “Payment Date”), which Payment Notice shall be irrevocable and shall specify the amount of this Note (the “Payment Amount”) to be paid in New Shares, together with an officer’s certificate certifying that the Equity Conditions with respect to such payment in New Shares have been met as of the applicable Payment Date. Notwithstanding anything herein to the contrary, if the Equity Conditions fail to have been met as of the applicable Payment Date, the applicable Payment Amount shall be payable in cash.

Any payments of this Note to paid with New Shares, shall be paid in a number of validly issued, fully paid and non-assessable shares of Common Stock equal to the quotient of (1) the Payment Amount payable on such Payment Date less any such payment paid in cash, divided by (2) the Last Reported Sale Price on the Trading Day immediately prior to the applicable Payment Date. If the issuance of New Shares would result in the issuance of a fraction of a share of Common Stock, Borrower shall round such fraction of a share of Common Stock to the nearest whole share (with 0.5 being rounded up). When any New Shares are to be issued, Borrower shall (i) (A) provided that Borrower’s stock transfer agent is participating in the DTC Fast Automated Securities Transfer Program, upon the request of Lender, credit such aggregate number of New Shares to which Lender shall be entitled to Lender or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (B) if the stock transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, or upon request of Lender, issue and deliver to Lender no later than the second (2) Business Day after the applicable Payment Date certificates registered in the name of Lender for the number of New Shares to which Lender shall be entitled, (C) deposit such New Shares with the Depositary in accordance with the Applicable Procedures (as defined in the Indenture), or (D) otherwise deliver the applicable New Shares in accordance with procedures reasonably acceptable to the Lender.

2. Interest Rate. This Note shall be non-interest bearing.

3. Prepayment. This Note may be prepaid in whole or in part without penalty or premium.

4. Principal Amount. As of the date hereof, the principal amount of this Note is Two Million Six Hundred Thirty Thousand Seven Hundred Fifty Dollars ($2,630,750). At the time of prepayment of this Note, Lender shall make or cause to be made, an appropriate notation on Exhibit A attached hereto reflecting the amount of such prepayment. The outstanding amount of this Note set forth on Exhibit A shall be prima facie evidence of the principal amount thereof outstanding, but the failure to record, or any error in so recording, shall not limit or otherwise affect the obligations of Borrower to make payments of principal of or interest on this Note when due.

5. Representations and Warranties. Borrower hereby represents and warrants to Lender as follows:

5.1 Borrower has the requisite power and authority to enter into this Note and to consummate the transactions contemplated hereby. The execution and delivery of this Note by Borrower and the consummation by Borrower of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Borrower. This Note has been duly executed and delivered by Borrower and constitutes the legal, valid and binding agreement of Borrower enforceable against Borrower in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) equitable principles of general applicability relating to the availability of specific performance, injunctive relief or other equitable remedies.

5.2 No consent, approval, authorization, order, license, registration or qualification of or with any Governmental Entity is required for the execution and delivery by Borrower of this Note or the transactions contemplated hereby, except such consents, approvals, authorizations, orders, licenses, registrations or qualifications as have been obtained, or which, if not obtained, would not, individually or in the aggregate, have a material adverse effect on the ability of Borrower to perform its obligations hereunder or consummate the transactions contemplated hereby on a timely basis. As used in this Note, the term “Governmental Entity” means any agency, bureau, commission, authority, department, official, political subdivision, tribunal or other instrumentality of any government, whether (i) regulatory, administrative or otherwise (including, without limitation, a self-regulatory organization or stock exchange); (ii) federal, state or local; or (iii) domestic or foreign.

5.3 The execution and delivery by Borrower of this Note, the performance by Borrower of its obligations hereunder, and the consummation by Borrower of the transactions contemplated hereby, will not conflict with or result

 

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in a breach or violation of (i) any of the terms or provisions of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower or any of its subsidiaries is a party or by which Borrower or any of its subsidiaries is bound or to which any of their property or assets is subject or (ii) any applicable law or statute or any order, rule or regulation of any Governmental Entity having jurisdiction over Borrower or any of its subsidiaries or any of their respective properties, except for in the case of either clause (i) or (ii) such conflicts, breaches or violations that would not prevent or delay the consummation of the transactions contemplated by this Note or that would not be reasonably expected to have a material adverse effect on Borrower, nor will any such action result in any violation of the provisions of the organizational documents of Borrower.

5.4 All of the New Shares, when issued in accordance with the terms of this Note, will be duly authorized and duly and validly issued, fully paid and nonassessable, free and clear of all liens, taxes, adverse claims, and will not be issued in violation of, or subject to, any preemptive or similar rights of any Person.

5.5 Borrower has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). None of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Borrower is not in violation of the requirements of the NASDAQ Stock Market (“NASDAQ”) and has no knowledge of any facts or circumstances which could reasonably be expected to lead to delisting or suspension of the Common Stock in the foreseeable future.

5.6 No brokerage or finder’s fees or commissions are or will be payable by Borrower or any of its Affiliates or representatives to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Note. Lender shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 5.6 that may be payable by Borrower or any of its Affiliates or representatives in connection with the transactions contemplated by this Note.

5.7 Assuming the accuracy of the representations and warranties of Lender contained in Section 6 hereof, the offer and issuance of this Note or the issuance of the New Shares by Borrower pursuant hereto will be exempt from the registration requirements of the Securities Act (and such issuances will be or have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws). The amendments and transactions contemplated hereby does not contravene, including the issuance and sale of the New Shares under this Note, or require stockholder approval pursuant to, the rules and regulations of NASDAQ.

5.8 Neither Borrower, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, has made or will make any offers or sales of any security, or has solicited or will solicit any offers to buy any security, under circumstances that would cause the offering and issuance of the New Shares to be integrated with prior offerings by Borrower for purposes of the Securities Act and which would require the registration of any such securities under the Securities Act.

6. Representation and Warranties of Lender. Lender hereby represents and warrants to Borrower as follows:

6.1 Lender has full right, power and authority to enter into this Note and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Note.

6.2 Lender understands that nothing in this Note or any other materials presented to Lender in connection with this Note or the issuance of any New Shares constitutes legal, tax or investment advice. Lender has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with this Note and the issuance of any New Shares.

 

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6.3 Lender understands that the this Note and any New Shares (collectively, the “Securities”) have not been registered under the Securities Act. Lender also understands that the Securities are being offered and issued pursuant to an exemption from registration contained in the Securities Act based in part upon Lender’s representations contained in this Note.

6.4 Lender has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to Borrower so that it is capable of evaluating the merits and risks of the Securities and has the capacity to protect its own interests. Lender must bear the economic risk of the Securities indefinitely (subject to Borrower’s payment obligations under this Note) unless the Securities are registered pursuant to the Securities Act, or an exemption from registration is available. Lender understands that Borrower has no present intention of registering any of the Securities. Lender also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Lender to transfer all or any portion of any of the Securities under the circumstances, in the amounts or at the times Lender might propose.

6.5 Lender is acquiring the Securities for Lender’s own account for investment only, and not with a view towards their distribution.

6.6 Lender has the capacity to protect its own interests in connection with the transactions contemplated in this Note.

6.7 Lender is an accredited investor within the meaning of Regulation D under the Securities Act.

7. Certain Definitions

For purposes of this Note, the following terms shall have the following meanings:

Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. As used in this definition of “Affiliate,” the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or partnership or other ownership interest, by contract, or otherwise.

Business Day” means, with respect to this Note, any day other than a Saturday, a Sunday or a day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.

Commission” means the U.S. Securities and Exchange Commission.

Common Stock” means the common stock of Borrower, par value $0.01 per share.

Equity Conditions means, with respect to the payment of interest in New Shares:

(i)     either (1) all of the New Shares (in the case of a payment in New Shares) and held by a non-Affiliate of Borrower shall be eligible for sale without the need for registration under any applicable federal or state securities laws or (2) a shelf registration statement registering the resale of such New Shares has been filed by Borrower and been declared effective by the Commission or is automatically effective and is available for use, and Borrower expects such shelf registration statement to remain effective and available for use from the applicable Payment Date until thirty (30) days following the applicable Payment Date;

(ii)     during the applicable Equity Conditions Measuring Period, the Common Stock is listed or traded on an Eligible Market and shall not have been suspended from trading on such Eligible Market (as defined below) (other than suspensions of not more than two Trading Days and occurring prior to the applicable date of determination due to business announcements by Borrower) nor shall delisting or suspension by such Eligible Market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such Eligible Market;

 

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(iii)     any applicable New Shares may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or trading;

(vi)     any applicable New Shares shall be duly authorized and will be validly issued, fully paid and non-assessable upon issuance in accordance with the terms of this Note; and

(vi)     no Event of Default shall have occurred and be continuing.

Equity Conditions Measuring Period means the period (x) commencing on the Payment Notice Date with respect to such payment is delivered to Lender and (y) ending on the applicable Payment Date.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Indenturemeans that certain indenture, dated as of August 6, 2019, between Borrower and U.S. Bank National Association, as Trustee, in respect of Borrowers 5.75% Convertible Senior Subordinated Exchange Notes Due 2024.

Last Reported Sale Price” of the Common Stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock is traded (each, an “Eligible Market”). If the Common Stock is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last Reported Sale Price” shall be the last quoted bid price for the Common Stock in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If the Common Stock is not so quoted, the “Last Reported Sale Price” shall be the average of the mid-point of the last bid and ask prices for the Common Stock on the relevant date from each of at least three nationally recognized independent investment banking firms selected by Borrower for this purpose.

Payment Notice Date” means a date on which Borrower delivers a Payment Notice to Lender.

Person” or “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act, or any other entity.

Securities Act” means the Securities Act of 1933, as amended.

Trading Day” means a day on which (i) trading in the Common Stock (or other security for which a closing sale price must be determined) generally occurs on The NASDAQ or, if the Common Stock (or such other security) is not then listed on The NASDAQ, on the principal other U.S. national or regional securities exchange on which the Common Stock (or such other security) is then listed or, if the Common Stock (or such other security) is not then listed on a U.S. national or regional securities exchange, on the principal other market on which the Common Stock (or such other security) is then traded and (ii) a Last Reported Sale Price for the Common Stock (or such other security) is available on such securities exchange or market; provided that if the Common Stock (or such other security) is not so listed or traded, “Trading Day” means a Business Day.

8. Default. Each of the following events shall be an “Event of Default” hereunder:

(a)    Borrower fails to pay timely any of the principal amount due under this Note on the date the same becomes due and payable or within five (5) Business Days thereafter;

(b)    Borrower files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing;

(c)    An involuntary petition is filed against Borrower (unless such petition is dismissed or discharged within sixty (60) days) under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of Borrower; or

 

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(d)    Any representation or warranty made herein or in any other document delivered in connection herewith shall be incorrect or misleading in any material respect when made or deemed made (except where any such representation or warranty by the terms thereof is subject to a materiality standard, in which case such representation or warranty shall be incorrect or misleading in any respect).

Upon the occurrence of an Event of Default hereunder, all unpaid principal and other amounts owing hereunder shall, at the option of Lender, and, in the case of an Event of Default pursuant to (b) or (c) above, automatically, be immediately due, payable and collectible by Lender pursuant to applicable law.

9. Waiver. Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses.

The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the full extent permitted by law.

10. Governing Law. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction. Borrower consents to in personam jurisdiction of the courts in the State of New York sitting in New York County and of the United States District Court of the Southern District of New York for any legal action or proceeding with respect to this Note. Borrower, by execution and delivery of this Note, hereby irrevocably accepts in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.

11. Successors and Assigns. This Note shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns; provided that Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of Lender. Lender may assign to one or more other persons all or a portion of its rights (but not its obligations) under this Note.

12. Integration. This Note reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement or instrument, oral or written, before or after the date hereof.

13. Amendments, Modification, Etc. No amendment, modification or waiver of any provision of this Note, and no consent to any departure by Lender or Borrower and their assigns therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

14. No Waiver. No failure on the part of Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Note preclude any other or further exercise thereof or the exercise of any other right. The rights of Lender under this Note against Borrower are not conditional or contingent on any attempt by Lender to exercise any of its rights under this Note against Borrower or any other person.

15. Expenses. Borrower agrees to reimburse, periodically and upon request, and at the date of effectiveness of this Note or upon termination of this Note, (i) Lender’s reasonable expenses, including the reasonable fees and disbursements of Lender’s attorneys, arising in connection with the preparation, negotiation, execution, delivery, amendment and administration of this Note and related transactions and (ii) Lender’s expenses, including the fees and disbursements of Lender’s attorneys, in connection with the enforcement of this Note or the protection of Lender’s rights under this Note. In addition, Borrower agrees to reimburse Lender for all reasonable expenses, including the reasonable fees and disbursements of Lender’s attorneys, incurred in connection with the licensing of Lender as a finance lender under the California Finance Lenders Law.

16. Indemnity. Borrower shall indemnify, defend and hold harmless Lender and its agents and attorneys (collectively, the “Indemnitees”) from and against (i) any and all transfer taxes, documentary taxes, assessments or charges made by any Governmental Entity by reason of the execution and delivery of this Note or the extension of credit represented hereby, and (ii) any and all liabilities, losses, damages, penalties, judgments, claims, costs and expenses of any kind or nature whatsoever (including reasonable attorneys’ fees, and disbursements in connection with any actual or threatened investigative, administrative or judicial proceeding, whether or not such Indemnitee shall

 

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be designated a party thereto) that may be imposed on, incurred by or asserted against such Indemnitee, in any manner relating to or arising out of this Note, the extension of credit represented hereby or the use or intended use of the proceeds thereof; provided that no Indemnitee shall have the right to be indemnified or held harmless hereunder for its own gross negligence or willful misconduct, as determined by a final judgment of a court of competent jurisdiction.

17. Seniority. Amounts due under this Note shall be subordinated in accordance with that certain Subordination Agreement, dated as of August 6, 2019, between Lender and MidCap Financial Trust.

[Signature Pages Follow]

 

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BORROWER:     MANNKIND CORPORATION
    By:  

  /s/ Steven Binder                                                                     

      Name:   Steven Binder                                                 
      Title:   Chief Financial Officer                                                   
LENDER:     BRUCE FUND, INC.
    By:  

  /s/ R. Jeffrey Bruce                                                             

      Name:   R. Jeffrey Bruce                                                 
      Title:   Vice President                                                 

 

[Signature Page to Promissory Note (December Deferred Payment)]


Exhibit A

PRINCIPAL SCHEDULE

 

Date

   Repayment    Principal Balance
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     

 

[Ex. A – Page 1]

EX-4.6

Exhibit 4.6

EXECUTION VERSION

THE SECURITY REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT, OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER SECTION 4(A)(7) OF THE SECURITIES ACT OR APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(A)(1) AND A HALF” SALE. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED (BUT NOT TRANSFERRED) IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING SECURED BY THE SECURITIES. PRIOR TO THE REGISTRATION OF ANY TRANSFER PURSUANT TO AN EXEMPTION FROM REGISTRATION OTHER THAN RULE 144, BORROWER RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

THIS INSTRUMENT AND THE INDEBTEDNESS, RIGHTS AND OBLIGATIONS EVIDENCED HEREBY AND ANY LIENS OR OTHER SECURITY INTERESTS SECURING SUCH RIGHTS AND OBLIGATIONS ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT (AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME, THE “SUBORDINATION AGREEMENT”) OF EVEN DATE HEREWITH, BY AND AMONG THE SUBORDINATING CREDITORS IDENTIFIED THEREIN AND MIDCAP FINANCIAL TRUST IN ITS CAPACITY AS AGENT FOR CERTAIN LENDERS (TOGETHER WITH ITS SUCCESSORS AND ASSIGNS, “SENIOR CREDITOR AGENT”), TO CERTAIN INDEBTEDNESS, RIGHTS, AND OBLIGATIONS OF MANNKIND CORPORATION AND MANNKIND LLC TO SENIOR CREDITOR AGENT AND SENIOR LENDERS (AS DEFINED THEREIN) AND LIENS AND SECURITY INTERESTS OF SENIOR CREDITOR AGENT SECURING THE SAME ALL AS DESCRIBED IN THE SUBORDINATION AGREEMENT; AND EACH HOLDER AND TRANSFEREE OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

CONVERTIBLE PROMISSORY NOTE

 

$35,000,000    Issue Date: August 6, 2019
   Westlake Village, California

THIS PROMISSORY NOTE (this “Note”), dated as of August 6, 2019, is issued pursuant to the certain Exchange Agreement, dated as of August 5, 2019, by and between MANNKIND CORPORATION, a Delaware corporation (“Borrower”), and THE MANN GROUP LLC ( “Lender”).

FOR VALUE RECEIVED, Borrower hereby promises to pay to Lender, in lawful money of the United States of America and in immediately available funds, the principal sum of up to Thirty-Five Million Dollars ($35,000,000), which amount represents the outstanding principal amount of this Note as of the date hereof, together with all PIK Interest (as defined below) added thereto and accrued and unpaid interest thereon, each due and payable on the dates and in the manner set forth below.

1. Principal Repayment. The outstanding principal amount of this Note together with all accrued and unpaid interest thereon shall be due and payable on November 3, 2024 (the “Maturity Date”).

2. Interest Rate. Borrower further promises to pay interest on the outstanding principal amount of this Note from the date thereof until payment in full, which interest shall be payable at a rate equal to 7.0% per annum.


Interest shall be due and payable quarterly in arrears on the first day of each calendar quarter commencing with October 1, 2019; provided that if such date is not a Business Day, interest shall be payable on the Business Day immediately succeeding such date (each such date, an “Interest Payment Date”). Interest shall be payable in kind by adding the amount thereof to the principal amount of this Note (such interest, “PIK Interest”); provided that with respect to interest accruing from and after January 1, 2021, Borrower may, at its option, elect to, pay any such interest on any such Interest Payment Date in validly issued, fully paid and non-assessable shares of Common Stock (as defined below) (“Interest Shares”) so long as each of the Equity Conditions (as defined below) are satisfied on each day during the Equity Conditions Measuring Period (as defined below) applicable to such Interest Payment Date.

If Borrower intends to issue Interest Shares, Borrower shall deliver a written notice (including via e-mail) to Lender on or prior to the fifth Trading Day (as defined below) prior to the applicable Interest Payment Date (such notice, an “Interest Share Notice”), electing to pay all or any portion of the accrued but unpaid and uncapitalized interest payable on such Interest Payment Date in Interest Shares, which notice shall be irrevocable and shall specify the amount of interest to be paid in Interest Shares, together with an Officer’s Certificate (as defined below) certifying that the Equity Conditions with respect to such payment in Interest Shares will have been met as of the applicable Interest Payment Date. Notwithstanding anything herein to the contrary, if the Equity Conditions fail to have been met as of the applicable Interest Payment Date, the applicable interest shall be payable by adding the amount thereof to the principal amount of this Note. Any interest to be paid in Interest Shares on an Interest Payment Date shall be paid in a number of validly issued, fully paid and non-assessable shares of Common Stock equal to the quotient of (1) the amount of the accrued but unpaid and uncapitalized interest payable on such Interest Payment Date less any such payment payable by adding such amount to the principal amount of this Note, divided by (2) the Last Reported Sale Price (as defined below) on the Trading Day immediately prior to the applicable payment date. If the issuance of Interest Shares would result in the issuance of a fraction of a share of Common Stock, Borrower shall round such fraction of a share of Common Stock to the nearest whole share (with 0.5 being rounded up).

Equity Conditions means, with respect to the payment of interest in Interest Shares:

(i)     either (1) all of the Interest Shares (in the case of a payment of interest in Interest Shares) held by a non-Affiliate of Borrower shall be eligible for sale without the need for registration under any applicable federal or state securities laws or (2) a shelf registration statement registering the resale of such Interest Shares has been filed by Borrower and been declared effective by the Commission or is automatically effective and is available for use, and Borrower expects such shelf registration statement to remain effective and available for use from the applicable Interest Payment Date until thirty (30) days following the applicable Interest Payment Date;

(ii)     during the applicable Equity Conditions Measuring Period, the Common Stock is listed or traded on an Eligible Market (as defined below) and shall not have been suspended from trading on such Eligible Market (other than suspensions of not more than two Trading Days and occurring prior to the applicable date of determination due to business announcements by Borrower) nor shall delisting or suspension by such Eligible Market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such Eligible Market;

(iii)     any applicable Interest Shares may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or trading;

(vi)     any applicable Interest Shares shall be duly authorized and will be validly issued, fully paid and non-assessable upon issuance in accordance with the terms of this Note;

(v)    the issuance of the applicable Interest Shares shall not cause Lender (together with Lender‘s Affiliates) to beneficially own in excess of the Maximum Percentage (as defined below) of the Common Stock outstanding immediately after giving effect to the issuance of such Interest Shares (after giving effect to the limitations specified in Section 8.7 and any analogous limitations on conversion or exercise contained in any other securities of Borrower held by Lender or Lender‘s Affiliates); and

(vi)     no Event of Default shall have occurred and be continuing.

 

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Equity Conditions Measuring Period means the period (x) commencing on the Interest Notice Date with respect to such payment is delivered to Lender and (y) ending on the applicable Interest Payment Date.

Interest Notice Date” means a date on which Borrower delivers an Interest Share Notice.

3. Place of Payment. All amounts payable hereunder shall be payable in lawful money of the United States of America at the office of Lender, 12744 San Fernando Road, Sylmar, CA 91342, unless another place of payment shall be specified in writing by Lender.

4. Application of Payments; Prepayment.

4.1 Payment on this Note shall be applied first to accrued interest, and thereafter to the outstanding principal balance hereof, unless otherwise consented to by Lender at or prior to the time of such payment.

4.2 This Note may be prepaid in whole or in part without penalty or premium. Any partial prepayment made pursuant to this Section 4.2 shall be applied to interest first and then to principal. At the time of any prepayment of principal hereunder, Borrower shall also pay all accrued, unpaid and uncapitalized interest on the amount prepaid through the date of prepayment.

5. Principal Amount. As of the date hereof, the principal amount of this Note is Thirty-Five Million Dollars ($35,000,000). At the time of the addition of any PIK Interest, prepayment or conversion of this Note, Lender shall make or cause to be made, an appropriate notation on Exhibit A attached hereto reflecting the amount of such PIK Interest, prepayment or conversion. The outstanding amount of this Note set forth on such Exhibit A shall be prima facie evidence of the principal amount thereof outstanding, but the failure to record, or any error in so recording, shall not limit or otherwise affect the obligations of Borrower to make payments of principal of or interest on this Note when due.

6. Representations and Warranties. Borrower hereby represents and warrants to Lender as follows:

6.1 Borrower has the requisite power and authority to enter into this Note and to consummate the transactions contemplated hereby. The execution and delivery of this Note by Borrower and the consummation by Borrower of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Borrower. This Note has been duly executed and delivered by Borrower and constitutes the legal, valid and binding agreement of Borrower enforceable against Borrower in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) equitable principles of general applicability relating to the availability of specific performance, injunctive relief or other equitable remedies.

6.2 No consent, approval, authorization, order, license, registration or qualification of or with any Governmental Entity is required for the execution and delivery by Borrower of this Note or the transactions contemplated hereby, except such consents, approvals, authorizations, orders, licenses, registrations or qualifications as have been obtained, or which, if not obtained, would not, individually or in the aggregate, have a material adverse effect on the ability of Borrower to perform its obligations hereunder or consummate the transactions contemplated hereby on a timely basis. As used in this Note, the term “Governmental Entity” means any agency, bureau, commission, authority, department, official, political subdivision, tribunal or other instrumentality of any government, whether (i) regulatory, administrative or otherwise (including, without limitation, a self-regulatory organization or stock exchange); (ii) federal, state or local; or (iii) domestic or foreign.

6.3 The execution and delivery by Borrower of this Note, the performance by Borrower of its obligations hereunder, and the consummation by Borrower of the transactions contemplated hereby, will not conflict with or result in a breach or violation of (i) any of the terms or provisions of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower or any of its subsidiaries is a party or by which Borrower or any of its subsidiaries is bound or to which any of their property or assets is subject or (ii) any applicable law or statute or any order, rule or regulation of any Governmental Entity having jurisdiction over Borrower or any of its subsidiaries or any of their respective properties, except for in the case of either clause (i) or (ii) such conflicts, breaches or

 

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violations that would not prevent or delay the consummation of the transactions contemplated by this Note or that would not be reasonably expected to have a material adverse effect on Borrower, nor will any such action result in any violation of the provisions of the organizational documents of Borrower.

6.4 All of the shares of Common Stock issuable upon conversion of this Note (the “Conversion Shares”), are duly authorized and, when issued in accordance with the terms of this Note, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, taxes, adverse claims, and will not be issued in violation of, or subject to, any preemptive or similar rights of any Person. Borrower has reserved sufficient shares of Common Stock from its duly authorized capital stock for issuance upon conversion of this Note.

6.5 All of the Interest Shares, when issued in accordance with the terms of this Note, will be duly authorized and duly and validly issued, fully paid and nonassessable, free and clear of all liens, taxes, adverse claims, and will not be issued in violation of, or subject to, any preemptive or similar rights of any Person.

6.6 Borrower has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). None of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Borrower is not in violation of the requirements of the NASDAQ Stock Market (“NASDAQ”) and has no knowledge of any facts or circumstances which could reasonably be expected to lead to delisting or suspension of the Common Stock in the foreseeable future.

6.7 No brokerage or finder’s fees or commissions are or will be payable by Borrower or any of its Affiliates or representatives to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Note. Lender shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 6.7 that may be payable by Borrower or any of its Affiliates or representatives in connection with the transactions contemplated by this Note.

6.8 Assuming the accuracy of the representations and warranties of Lender contained in Section 7 hereof, the offer and issuance of this Note, the issuance of the Interest Shares or the issuance of the Conversion Shares by Borrower pursuant hereto will be exempt from the registration requirements of the Securities Act (and such issuances will be or have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws). The transactions contemplated hereby, including the issuance and sale of the Interest Shares or Conversion Shares under this Note, do not contravene or require stockholder approval pursuant to, the rules and regulations of NASDAQ.

6.9 Neither Borrower, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, has made or will make any offers or sales of any security, or has solicited or will solicit any offers to buy any security, under circumstances that would cause the offering and issuance of the Interest Shares or Conversion Shares to be integrated with prior offerings by Borrower (i) for purposes of the Securities Act and which would require the registration of any such securities under the Securities Act, or (ii) for purposes of any applicable stockholder approval provisions of NASDAQ and which would require stockholder approval for the issuance of any Interest Shares or Conversion Shares.

7. Representation and Warranties of Lender. Lender hereby represents and warrants to Borrower as follows:

7.1 Lender has full right, power and authority to enter into this Note and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Note.

7.2 Lender understands that nothing in this Note or any other materials presented to Lender in connection with this Note or the issuance of the Conversion Shares or any Interest Shares constitutes legal, tax or investment advice. Lender has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with this Note and the issuance of the Conversion Shares or any Interest Shares.

 

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7.3 Lender understands that this Note, the Interest Shares and any Conversion Shares (collectively, the “Securities”) have not been registered under the Securities Act. Lender also understands that the Securities are being offered and issued pursuant to an exemption from registration contained in the Securities Act based in part upon Lender’s representations contained in this Note.

7.4 Lender has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to Borrower so that it is capable of evaluating the merits and risks of the Securities and has the capacity to protect its own interests. Lender must bear the economic risk of the Securities indefinitely (subject to Borrower’s payment obligations under this Note) unless the Securities are registered pursuant to the Securities Act, or an exemption from registration is available. Lender understands that Borrower has no present intention of registering any of the Securities. Lender also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Lender to transfer all or any portion of any of the Securities under the circumstances, in the amounts or at the times Lender might propose.

7.5 Lender is acquiring the Securities for Lender’s own account for investment only, and not with a view towards their distribution.

7.6 Lender has the capacity to protect its own interests in connection with the transactions contemplated in this Note.

7.7 Lender is an accredited investor within the meaning of Regulation D under the Securities Act.

8. Conversion.

8.1 Conversion. Subject to and upon compliance with the provisions of this Section 8, Lender shall have the right, at Lender’s option, to convert all or any portion of this Note at any time and from time to time prior to the close of business on the Business Day immediately preceding the Maturity Date at an initial conversion rate of 400 shares of Common Stock (subject to adjustment as provided in this Section 8, the “Conversion Rate”) per $1,000 principal amount of this Note (subject to, and in accordance with, the settlement provisions of Section 8.2, the “Conversion Obligation”). Any accrued and unpaid interest on this Note may also be converted at Lender’s option into Common Stock on the same terms as the principal of this Note.

8.2 Conversion Procedure; Settlement Upon Conversion.

(a)    Upon conversion of all or part of the principal amount of this Note and/or any accrued and unpaid interest thereon, Borrower shall satisfy its Conversion Obligation by delivering to Lender a number of shares of Common Stock equal to the quotient of (i) (x) the Conversion Rate, multiplied by (y) the principal amount of this Note being converted and/or, accrued and unpaid interest thereon being converted, divided by (ii) $1,000, by the fifth (5th) Business Day immediately following the relevant Conversion Date.

(b)    Before Lender shall be entitled to convert this Note as set forth above, Lender shall complete, manually sign and deliver an irrevocable notice to Borrower as set forth in Exhibit B hereto (or a facsimile, PDF or other electronic transmission thereof) (a “Notice of Conversion”) at Borrower’s address set forth on Exhibit B hereto, and state in writing therein the principal amount of this Note and/or accrued and unpaid interest thereon to be converted.

(c)    This Note shall be deemed to have been converted immediately prior to the close of business on the date (the “Conversion Date”) that Lender has complied with the requirements set forth in subsection (b) above or, if accrued and unpaid interest is being converted at or prior to the applicable interest payment date, such interest payment date. Borrower shall issue or cause to be issued, and deliver (if applicable) to Lender, the full number of shares of Common Stock to which Lender shall be entitled in satisfaction of Borrower’s Conversion Obligation within five (5) days following the Conversion Date.

 

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(d)    If Lender submits all or part of this Note and/or accrued and unpaid interest thereon for conversion from time to time, Borrower shall pay any documentary, stamp or similar issue or transfer tax due on the issue of the shares of Common Stock upon conversion.

(e)    Except as provided in Section 8.3, no adjustment shall be made for dividends on any shares of Common Stock issued upon the conversion of this Note and/or accrued and unpaid interest thereon as provided in this Section 8.

(f)    Lender shall be treated as a stockholder of record as of the close of business on the relevant Conversion Date. Upon a conversion of principal of this Note, Lender shall no longer be deemed to be the holder of this Note with respect to that principal amount of this Note surrendered for conversion.

(g)    Borrower shall not issue any fractional share of Common Stock upon conversion of the principal of this Note, and/or any accrued and unpaid interest thereon, and shall instead round any fractional share that is greater than 0.5 up to one whole share of Common Stock and round any fractional share that is 0.5 and below down to zero.

(h)    Upon the conversion of principal of this Note, Borrower shall make a notation on Exhibit A of this Note as to the reduction in the principal amount represented thereby.

8.3.     Adjustment of Conversion Rate. The Conversion Rate shall be adjusted from time to time by Borrower as follows:

(a)    If Borrower issues shares of Common Stock as a dividend or distribution on shares of Common Stock, or if Borrower effects a share split or a share combination (i.e., a reverse stock split), the Conversion Rate will be adjusted based on the following formula:

 

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  where,   
CR0   =    the Conversion Rate in effect immediately prior to the close of business on the Record Date of such dividend or distribution, or immediately prior to the open of business on the Effective Date of such share split or share combination, as applicable;
CR’   =    the Conversion Rate in effect immediately after the close of business on such Record Date or immediately after the open of business on such Effective Date, as applicable;
OS0   =    the number of shares of Common Stock outstanding immediately prior to the close of business on such Record Date or immediately prior to the open of business on such Effective Date, as applicable; and
OS’   =    the number of shares of Common Stock outstanding immediately after giving effect to such dividend, distribution, share split or share combination.

Any adjustment made under this Section 8.3(a) shall become effective immediately after the close of business on the Record Date for such dividend or distribution, or immediately after the open of business on the Effective Date for such share split or share combination, as applicable. If any dividend or distribution of the type described in this Section 8.3(a) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

(b)    If Borrower issues to all or substantially all holders of the Common Stock any rights, options or warrants (other than pursuant to a stockholder rights plan) entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or purchase shares of the Common Stock at a

 

6


price per share that is less than the average of the Last Reported Sale Prices of the Common Stock for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of such issuance, the Conversion Rate shall be increased based on the following formula:

 

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  where,   
CR0   =    the Conversion Rate in effect immediately prior to the close of business on the Record Date for such issuance;
CR’   =    the Conversion Rate in effect immediately after the close of business on such Record Date;
OS0   =    the number of shares of Common Stock outstanding immediately prior to the close of business on such Record Date;
X   =    the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and
Y   =    the number of shares of Common Stock equal to the aggregate price payable to exercise such rights, options or warrants, divided by the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of the issuance of such rights, options or warrants.

Any increase made under this Section 8.3(b) shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the close of business on the Record Date for such issuance. To the extent that such rights, options or warrants are not exercised prior to their expiration or shares of Common Stock are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such rights, options or warrants are not so issued or if no such rights, options or warrants are exercised prior to the expiration, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect if such Record Date for such issuance had not occurred.

For purposes of this Section 8.3(b), in determining whether any rights, options or warrants entitle Lender to subscribe for or purchase shares of Common Stock at less than such average of the Last Reported Sale Prices of the Common Stock for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement for such issuance, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received by Borrower for such rights, options or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by Borrower in good faith.

(c)    If Borrower distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of Borrower or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders of the Common Stock, excluding (i) dividends, distributions or issuances as to which an adjustment was effected pursuant to Section 8.3(a) or Section 8.3(b), (ii) dividends or distributions paid exclusively in cash as to which the provisions set forth in Section 8.3(d) shall apply, (iii) dividends or distributions that constitute Reference Property following an event pursuant to Section 8.6(f) and (iv) Spin-Offs as to which the provisions set forth below in this Section 8.3(c) shall apply (any of such shares of Capital Stock, evidences of

 

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indebtedness, other assets or property or rights, options or warrants to acquire Capital Stock or other securities, the “Distributed Property”), then the Conversion Rate shall be increased based on the following formula:

 

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  where,   
CR0   =    the Conversion Rate in effect immediately prior to the close of business on the Record Date for such distribution;
CR’   =    the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0   =    the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and
FMV   =    the fair market value (as determined by Borrower in good faith) of the Distributed Property with respect to each outstanding share of the Common Stock on the Record Date for such distribution.

Any increase made under the portion of this Section 8.3(c) above shall become effective immediately after the close of business on the Record Date for such distribution. If such distribution is not so paid or made, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect if such distribution had not been declared. Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, Lender shall receive, in respect of each $1,000 principal amount and/or accrued and unpaid interest thereof, at the same time and upon the same terms as holders of the Common Stock receive the Distributed Property, the amount and kind of Distributed Property Lender would have received if Lender owned a number of shares of Common Stock equal to the Conversion Rate in effect on the Record Date for the distribution. If the Board of Directors determines the “FMV” (as defined above) of any distribution for purposes of this Section 8.3(c) by reference to the actual or when-issued trading market for any securities, it shall in doing so consider the prices in such market over the same period used in computing the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution.

With respect to an adjustment pursuant to this Section 8.3(c) where there has been a payment of a dividend or other distribution on the Common Stock of shares of Capital Stock of any class or series, or similar equity interest, of or relating to any of Borrower’s Subsidiaries or other business units, that are, or, when issued, will be, listed or admitted for trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the following formula:

 

LOGO

 

  where,   
CR0   =    the Conversion Rate in effect immediately prior to the end of the Valuation Period;
CR’   =    the Conversion Rate in effect immediately after the end of the Valuation Period;
FMV0   =    the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of the Common Stock applicable to one share of Common Stock (determined by reference to the definition of Last Reported Sale Price as set forth in Section 8.6 as if references therein to Common Stock were to such Capital Stock or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date of the Spin-Off (the “Valuation Period”); and
MP0   =    the average of the Last Reported Sale Prices of the Common Stock over the Valuation Period.

 

8


The increase to the Conversion Rate under the preceding paragraph shall occur at the close of business on the last Trading Day of the Valuation Period; provided that in respect of any conversion of this Note, if the relevant Conversion Date occurs during the Valuation Period, references to “10” in the preceding paragraph shall be deemed to be replaced with such lesser number of Trading Days as have elapsed between the Ex-Dividend Date of such Spin-Off and the Conversion Date in determining the Conversion Rate. If any dividend or distribution that constitutes a Spin-Off is declared but not so paid or made, the Conversion Rate shall be immediately decreased, effective as of the date the Board of Directors determines not to pay or make such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared or announced.

(d)    If Borrower makes any cash dividend or distribution to all or substantially all holders of the Common Stock, the Conversion Rate shall be adjusted based on the following formula:

 

LOGO

 

  where,   
CR0   =    the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend or distribution;
CR’   =    the Conversion Rate in effect immediately after the close of business on the Record Date for such dividend or distribution;
SP0   =    the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution; and
C   =    the amount in cash per share Borrower distributes to all or substantially all holders of the Common Stock.

Any increase pursuant to this Section 8.3(d) shall become effective immediately after the close of business on the Record Date for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall be decreased, effective as of the date the Board of Directors determines not to make or pay such dividend or distribution, to be the Conversion Rate that would then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, Lender shall receive, for each $1,000 principal amount and/or accrued and unpaid interest of this Note converted (or portion thereof), at the same time and upon the same terms as holders of shares of the Common Stock, the amount of cash that Lender would have received if Lender owned a number of shares of Common Stock equal to the Conversion Rate on the Record Date for such cash dividend or distribution.

(e)    If Borrower or any of its subsidiaries make a payment in respect of a tender or exchange offer for the Common Stock (other than odd-lot tender offers), to the extent that the cash and value of any other consideration included in the payment per share of Common Stock exceeds the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer the Conversion Rate shall be increased based on the following formula.

 

LOGO

 

  where,   
CR0   =    the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;

 

9


CR’   =    the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
AC   =    the aggregate value of all cash and any other consideration (as determined by Borrower in good faith) paid or payable for shares of Common Stock purchased in such tender or exchange offer;
OS0   =    the number of shares of Common Stock outstanding immediately prior to the date such tender or exchange offer expires (prior to giving effect to the purchase of all shares of Common Stock accepted for purchase or exchange in such tender or exchange offer);
OS’   =    the number of shares of Common Stock outstanding immediately after the date such tender or exchange offer expires (after giving effect to the purchase of all shares of Common Stock accepted for purchase or exchange in such tender or exchange offer); and
SP’   =    the average of the Last Reported Sale Prices of the Common Stock over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires.

The increase to the Conversion Rate under this Section 8.3(e) shall occur at the close of business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires; provided that in respect of any conversion of this Note, if the relevant Conversion Date occurs during the 10 Trading Days immediately following, and including, the Trading Day next succeeding the expiration date of any tender or exchange offer, references to “10” or “10th” in the preceding paragraph shall be deemed replaced with such lesser number of Trading Days as have elapsed between the date that such tender or exchange offer expires and the Conversion Date in determining the Conversion Rate.

If Borrower is obligated to purchase Common Stock pursuant to any such tender or exchange offer described in this Section 8.3(e) but is permanently prevented by applicable law from effecting any such purchase or all such purchases are rescinded, the applicable Conversion Rate shall be readjusted to be the Conversion Rate that would then be in effect if such tender or exchange offer had not been made or had been made only in respect of the purchases that have been effected.

(f)    Except as provided in this Section 8, Borrower shall not adjust the Conversion Rate for the issuance of shares of Common Stock or any securities convertible into or exchangeable for shares of Common Stock or the right to purchase shares of Common Stock or such convertible or exchangeable securities.

(g)    In addition to those adjustments required by clauses (a), (b), (c), (d) and (e) of this Section 8.3, and to the extent permitted by applicable law and subject to the applicable rules and/or listing standards of any exchange on which any of Borrower’s securities are then listed and The Nasdaq Stock Market, Borrower from time to time may increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in Borrower’s best interest. In addition, to the extent permitted by applicable law and subject to the applicable rules and/or listing standards of any exchange on which any of Borrower’s securities are then listed and The Nasdaq Stock Market, Borrower may (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of the Common Stock or rights to purchase the Common Stock in connection with a dividend or distribution of shares of Common Stock (or rights to acquire shares of Common Stock) or similar event. Whenever the Conversion Rate is increased pursuant to either of the preceding two sentences, Borrower shall deliver to Lender a notice of the increase at least 15 days prior to the date the increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and the period during which it will be in effect.

 

10


(h)    Notwithstanding anything to the contrary in this Section 8, the Conversion Rate shall not be adjusted:

(i)    upon the issuance of Common Stock at a price below the Conversion Price or otherwise, other than any such issuance described in Section 8.3(a), Section 8.3(b) or Section 8.3(c);

(ii)    upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on Borrower’s securities and the investment of additional optional amounts in shares of Common Stock under any plan;

(iii)    upon the issuance of any shares of Common Stock or options or rights to acquire shares of Common Stock pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by Borrower or any of Borrower’s subsidiaries;

(iv)    upon the issuance of any shares of Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of the date the Note was first issued;

(v)    for a third-party tender offer by any party other than a tender offer by one or more of Borrower’s subsidiaries as described in Section 8.3(e);

(vi)    upon the repurchase of any shares of Common Stock pursuant to an open market share purchase program or other buy-back transaction, including structured or derivative transactions such as accelerated share repurchase transactions or similar forward derivatives, or other buy-back transaction, that is not a tender or exchange offer of the kind described in Section 8.3(e) above;

(vii)    solely for a change in the par value of the Common Stock; or

(viii)    for accrued and unpaid interest, if any.

Further, if the application of the foregoing formulas in Section 8.3 would result in a decrease in the Conversion Rate, no adjustment to the Conversion Rate will be made (except on account of a reverse stock split).

(i)    All calculations and other determinations under this Section 8 shall be made by Borrower and shall be made to the nearest one-ten thousandth (1/10,000th) of a share. No adjustment in the Conversion Rate shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Rate as last adjusted; provided, however, that any adjustments which would be required to be made but for this Section 8.3(i) shall be carried forward and taken into account in any subsequent adjustment and any carry forward amount shall be paid to the holder of this Note upon conversion regardless of the 1% threshold. All calculations under this Section 8 shall be made to the nearest cent or to the nearest one-hundredth of a share.

(j)    For purposes of this Section 8.3, the number of shares of Common Stock at any time outstanding shall not include shares of Common Stock held in the treasury of Borrower so long as Borrower does not pay any dividend or make any distribution on shares of Common Stock held in the treasury of Borrower, but shall include shares of Common Stock issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock.

8.4 Adjustments of Prices. Whenever any provision of this Note requires Borrower to calculate the Last Reported Sale Prices over a span of multiple days, the Board of Directors shall make appropriate adjustments to each to account for any adjustment to the Conversion Rate that becomes effective, or any event requiring an adjustment to the Conversion Rate where the Ex-Dividend Date, Record Date, Effective Date or expiration date, as the case may be, of the event occurs, at any time during the period when the Last Reported Sale Prices are to be calculated.

For the avoidance of doubt, the adjustments made pursuant to the foregoing paragraph shall be made, solely to the extent the Board of Directors determines that any such adjustment is necessary, without duplication of any adjustment made pursuant to the provisions set forth under Section 8.3.

8.5 Shares to Be Fully Paid. Borrower shall reserve, free from preemptive rights, out of its authorized but unissued shares or shares held in treasury, a sufficient number of shares of Common Stock to provide for the conversion of this Note in full.

 

11


8.6 Certain Covenants.

(a)     Borrower covenants that all shares of Common Stock issued upon conversion of this Note will be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive or similar rights and free of any taxes, liens or adverse claims.

(b)    Borrower covenants that, if any shares of Common Stock to be provided for the purpose of conversion of this Note hereunder require registration with or approval of any Governmental Entity under any federal or state law before such shares of Common Stock may be validly issued upon conversion, Borrower will, to the extent then permitted by the rules and interpretations of the U.S. Securities and Exchange Commission or any applicable state laws, secure such registration or approval, as the case may be.

(c)    Borrower further covenants that if at any time the Common Stock shall be listed on any national securities exchange or automated quotation system Borrower will list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, any Common Stock issuable upon conversion of this Note.

(d)    Whenever the Conversion Rate or conversion privilege is required to be adjusted pursuant to the provisions of this Note, Borrower shall promptly mail to the holder a notice of the adjustment and a certificate signed by an officer of Borrower (“Officer’s Certificate”) briefly stating the facts requiring the adjustment, the adjusted Conversion Rate and the manner of computing it. Failure to mail such notice or any defect therein shall not affect the validity of any such adjustment. Unless and until the holder of this Note shall receive an Officer’s Certificate setting forth an adjustment of the Conversion Rate, such holder may assume without inquiry that the Conversion Rate has not been adjusted and that the last Conversion Rate of which it has knowledge remains in effect.

(e)    If any of the following events occur:

(i) any recapitalization, reclassification or change of the outstanding shares of Common Stock (other than a change resulting from a subdivision or combination),

(2) any consolidation, merger, or combination involving Borrower with another corporation,

(3) any sale, conveyance or lease to any other corporation of all or substantially all of the property and assets of Borrower, or

(4) any statutory share exchange,

in each case as a result of which holders of Common Stock shall be entitled to receive stock, other securities or other property or assets (including cash or any combination thereof) (the “Reference Property”) with respect to or in exchange for such Common Stock, the holder of this Note will be entitled thereafter to convert the Note into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) which they would have owned or been entitled to receive upon such transaction had such notes been converted into Common Stock immediately prior to such transaction. In the event holders of Common Stock have the opportunity to elect the form of consideration to be received in such transaction, the reference property will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such election. Borrower shall notify the holder of this Note of the weighted average as soon as practicable after such determination is made. None of the foregoing provisions shall affect the right of the holder of this Note to convert this Note into shares of Common Stock prior to the effective date of such transaction. The above provisions of this Section 8.6(f) shall similarly apply to successive recapitalizations, reclassifications, mergers, consolidations, statutory share exchanges, combinations, sales and conveyances. If this Section 8.6(f) applies to any event or occurrence, Section 8.3 hereof shall not apply. Borrower shall not become a party to any such transaction unless its terms are consistent with the foregoing. None of the foregoing provisions shall affect the right of the holder of this Note to convert this Note as set forth in Section 8 prior to the effective time of such transaction.

8.7 Conversion Limitation. Anything to the contrary notwithstanding, Borrower shall not effect the conversion of this Note and Lender shall not have the right to convert this Note, to the extent that after giving effect to such conversion, Lender (together with Lender’s Affiliates) would beneficially own in excess of 9.99% (the

 

12


Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by Lender and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which the determination of such sentence is being made (i.e., the particular conversion requested by Lender at such time), but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unconverted portion of this Note beneficially owned by Lender and its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of Borrower beneficially owned by Lender and its Affiliates (including, without limitation, any other convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph and for purposes of the definition of Equity Conditions, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Note, in determining the number of outstanding shares of Common Stock, Lender may rely on the number of outstanding shares of Common Stock as reflected in (x) Borrower’s most recent Form 10-Q or Form 10-K, as the case may be, filed with the U.S. Securities and Exchange Commission on the date thereof, (y) a more recent public announcement by Borrower or (z) any other notice by Borrower or its transfer agent setting forth the number of shares of Common Stock outstanding. By written notice to Borrower, Lender may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 19.99% specified in such notice; provided that any such increase will not be effective until the sixty-fifth (65th) day after such notice is delivered to Borrower. The provisions of this paragraph shall be construed and 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 beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation and comply with any rules of the Nasdaq Stock Market.

8.8 Definitions. For purposes of this Note, the following terms shall have the following meanings:

Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. As used in this definition of “Affiliate,” the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or partnership or other ownership interest, by contract, or otherwise.

Board of Directors” means the board of directors of Borrower or a committee of such board duly authorized to act for it hereunder.

Business Day” means, with respect to this Note, any day other than a Saturday, a Sunday or a day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.

Capital Stock” means, with respect to Borrower, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by Borrower, but, for the avoidance of doubt, excluding any debt securities convertible into or exchangeable for any securities otherwise constituting Capital Stock pursuant to this definition.

close of business” means 5:00 p.m. (New York City time).

Commission” means the U.S. Securities and Exchange Commission.

Common Stock” means the common stock of Borrower, par value $0.01 per share.

Effective Date” means the first date on which shares of the Common Stock trade on the applicable exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as applicable.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

13


Ex-Dividend Date” means the first date on which shares of the Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance, dividend or distribution in question, from Borrower or, if applicable, from the seller of Common Stock on such exchange or market (in the form of due bills or otherwise) as determined by such exchange or market.

Last Reported Sale Price” of the Common Stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock is traded (each, an “Eligible Market”). If the Common Stock is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last Reported Sale Price” shall be the last quoted bid price for the Common Stock in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If the Common Stock is not so quoted, the “Last Reported Sale Price” shall be the average of the mid-point of the last bid and ask prices for the Common Stock on the relevant date from each of at least three nationally recognized independent investment banking firms selected by Borrower for this purpose.

open of business” means 9:00 a.m. (New York City time).

Person” or “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, or any other entity.

Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Common Stock (or other applicable security) have the right to receive any cash, securities or other property or in which the Common Stock (or such other security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of the Common Stock (or such other security) entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors, by statute, by contract or otherwise).

Reference Property” has the meaning set forth in Section 8.6(f).

Securities Act” means the Securities Act of 1933, as amended.

Spin-Off” has the meaning set forth in Section 8.3(c).

Trading Day” means a day on which (i) trading in the Common Stock (or other security for which a closing sale price must be determined) generally occurs on The Nasdaq Stock Market or, if the Common Stock (or such other security) is not then listed on The Nasdaq Stock Market, on the principal other U.S. national or regional securities exchange on which the Common Stock (or such other security) is then listed or, if the Common Stock (or such other security) is not then listed on a U.S. national or regional securities exchange, on the principal other market on which the Common Stock (or such other security) is then traded and (ii) a Last Reported Sale Price for the Common Stock (or such other security) is available on such securities exchange or market; provided that if the Common Stock (or such other security) is not so listed or traded, “Trading Day” means a Business Day.

9. Default. Each of the following events shall be an “Event of Default” hereunder:

(a)     Borrower fails to pay timely any of the principal amount due under this Note or any accrued interest or other amounts due under this Note on the date the same becomes due and payable or within five (5) Business Days thereafter;

(b)     Borrower files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing;

(c)     An involuntary petition is filed against Borrower (unless such petition is dismissed or discharged within sixty (60) days) under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of Borrower;

 

14


(d)     Any representation or warranty made herein or in any other document delivered in connection herewith shall be incorrect or misleading in any material respect when made or deemed made (except where any such representation or warranty by the terms thereof is subject to a materiality standard, in which case such representation or warranty shall be incorrect or misleading in any respect); or

(e)    Borrower fails to deliver when due all shares of Common Stock deliverable upon conversion of all or any portion of this Note and/or accrued and unpaid interest thereon pursuant to Section 8, which failure continues for 10 days.

Upon the occurrence of an Event of Default hereunder, all unpaid principal, accrued interest and other amounts owing hereunder shall, at the option of Lender, and, in the case of an Event of Default pursuant to (b) or (c) above, automatically, be immediately due, payable and collectible by Lender pursuant to applicable law, the commitment of Lender to lend shall, at the option of Lender, and in the case of an Event of Default pursuant to (b) or (c) above, automatically, terminate, and the interest rate applicable to outstanding principal amount of this Note while an Event of Default has occurred and is continuing shall increase to 12% per annum, or the maximum rate permissible by law as defined above, whichever is less.

10. Waiver. Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses.

The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the full extent permitted by law.

11. Governing Law. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction. Borrower consents to in personam jurisdiction of the courts in the State of New York sitting in New York County and of the United States District Court of the Southern District of New York for any legal action or proceeding with respect to this Note. Borrower, by execution and delivery of this Note, hereby irrevocably accepts in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.

12. Successors and Assigns. This Note shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns; provided that Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of Lender. Lender may assign to one or more other persons all or a portion of its rights (but not its obligations) under this Note.

13. Integration. This Note reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement or instrument, oral or written, before or after the date hereof.

14. Amendments, Modification, Etc. No amendment, modification or waiver of any provision of this Note, and no consent to any departure by Lender or Borrower and their assigns therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

15. No Waiver. No failure on the part of Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Note preclude any other or further exercise thereof or the exercise of any other right. The rights of Lender under this Note against Borrower are not conditional or contingent on any attempt by Lender to exercise any of its rights under this Note against Borrower or any other person.

16. Expenses. Borrower agrees to reimburse, periodically and upon request, and at the date of effectiveness of this Note or upon termination of this Note, (i) Lender’s reasonable expenses, including the reasonable fees and disbursements of Lender’s attorneys, arising in connection with the preparation, negotiation, execution, delivery,

 

15


amendment and administration of this Note and related transactions and (ii) Lender’s expenses, including the fees and disbursements of Lender’s attorneys, in connection with the enforcement of this Note or the protection of Lender’s rights under this Note.

17. Indemnity. Borrower shall indemnify, defend and hold harmless Lender and its agents and attorneys (collectively, the “Indemnitees”) from and against (i) any and all transfer taxes, documentary taxes, assessments or charges made by any Governmental Entity by reason of the execution and delivery of this Note or the extension of credit represented hereby, and (ii) any and all liabilities, losses, damages, penalties, judgments, claims, costs and expenses of any kind or nature whatsoever (including reasonable attorneys’ fees, and disbursements in connection with any actual or threatened investigative, administrative or judicial proceeding, whether or not such Indemnitee shall be designated a party thereto) that may be imposed on, incurred by or asserted against such Indemnitee, in any manner relating to or arising out of this Note, the extension of credit represented hereby or the use or intended use of the proceeds thereof; provided that no Indemnitee shall have the right to be indemnified or held harmless hereunder for its own gross negligence or willful misconduct, as determined by a final judgment of a court of competent jurisdiction.

18. Seniority. Amounts due under this Note are unsecured and shall be subordinated in accordance with the Subordination Agreement.

[Signature Pages Follow]

 

16


BORROWER:   MANNKIND CORPORATION
  By:  

  /s/ Steven Binder

    Name: Steven Binder
    Title:   Chief Financial Officer
LENDER:   THE MANN GROUP LLC
  By:  

  /s/ Michael S. Dreyer                                                                      

    Name: Michael S. Dreyer
    Title:   President

 

[Signature Page to Amended and Restated Promissory Note]


Exhibit A

PRINCIPAL SCHEDULE

 

Date

   Borrowing/PIK Interest      Repayment/Conversion      Principal Balance  

8/6/2019

     35,000,000        —          35,000,000  

 

18


Exhibit B

[FORM OF NOTICE OF CONVERSION]

To: MannKind Corporation

30930 Russell Ranch Road

Suite 301

Westlake Village, CA 91362

Attn: [                    ]

The Mann Group LLC hereby exercises the option to convert this Note, or the portion hereof below designated, into shares of Common Stock in accordance with the terms of this Note, and directs that any shares of Common Stock issuable and deliverable upon such conversion and any portion of this Note representing any unconverted principal amount hereof, be issued and delivered to The Mann Group LLC. Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in this Note.

Dated:                     

 

Principal amount to be converted:

  $            

Accrued and unpaid interest to be converted:

  $            

 

By: THE MANN GROUP LLC
By:  

                    

Name:  
Title:  

 

19

EX-4.7

Exhibit 4.7

EXECUTION VERSION

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULE 144 UNDER SAID ACT, OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER SECTION 4(A)(7) OF THE SECURITIES ACT OR APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(A)(1) AND A HALF” SALE. NOTWITHSTANDING THE FOREGOING, THE SECURITY MAY BE PLEDGED (BUT NOT TRANSFERRED) IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING SECURED BY THE SECURITY. PRIOR TO THE REGISTRATION OF ANY TRANSFER PURSUANT TO AN EXEMPTION FROM REGISTRATION OTHER THAN RULE 144, BORROWER RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

THIS INSTRUMENT AND THE INDEBTEDNESS, RIGHTS AND OBLIGATIONS EVIDENCED HEREBY AND ANY LIENS OR OTHER SECURITY INTERESTS SECURING SUCH RIGHTS AND OBLIGATIONS ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT (AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME, THE “SUBORDINATION AGREEMENT”) DATED AS OF EVEN DATE HEREWITH, , BY AND AMONG THE SUBORDINATING CREDITORS IDENTIFIED THEREIN AND MIDCAP FINANCIAL TRUST IN ITS CAPACITY AS AGENT FOR CERTAIN LENDERS (TOGETHER WITH ITS SUCCESSORS AND ASSIGNS, “SENIOR CREDITOR AGENT”), TO CERTAIN INDEBTEDNESS, RIGHTS, AND OBLIGATIONS OF MANNKIND CORPORATION AND MANNKIND LLC TO SENIOR CREDITOR AGENT AND SENIOR LENDERS (AS DEFINED THEREIN) AND LIENS AND SECURITY INTERESTS OF SENIOR CREDITOR AGENT SECURING THE SAME ALL AS DESCRIBED IN THE SUBORDINATION AGREEMENT; AND EACH HOLDER AND TRANSFEREE OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

PROMISSORY NOTE

 

$35,050,750    Issue Date: August 6, 2019
   Westlake Village, California

THIS PROMISSORY NOTE (this “Note”), dated as of August 6, 2019, is issued pursuant to the certain Exchange Agreement, dated as of August 5, 2019, by and between MANNKIND CORPORATION, a Delaware corporation (“Borrower”), and THE MANN GROUP LLC ( “Lender”).

FOR VALUE RECEIVED, Borrower hereby promises to pay to Lender, in lawful money of the United States of America and in immediately available funds, the principal sum of up to Thirty-Five Million, Fifty Thousand Seven Hundred Fifty Dollars ($35,050,750), which amount represents the outstanding principal amount of this Note as of the date hereof, together with all PIK Interest (as defined below) added thereto and accrued and unpaid interest thereon, each due and payable on the dates and in the manner set forth below.

1. Principal Repayment. The outstanding principal amount of this Note, together with all accrued and unpaid interest thereon, shall be due and payable on the earlier of (i) November 3, 2024, and (ii) the 90th day after the repayment in full, and termination and discharge of all obligations (other than contingent indemnity obligations) under the Designated Senior Debt (as defined below); provided that if such date is not a Business Day, the outstanding principal amount of this Note, together with all accrued and unpaid interest thereon, shall be payable on the Business Day immediately succeeding such date (the “Maturity Date”).


2. Interest Rate. Borrower further promises to pay interest on the outstanding principal amount of this Note from the date thereof until payment in full, which interest shall be payable at a rate equal to 7.0% per annum. Interest shall be due and payable quarterly in arrears on the first day of each calendar quarter commencing with October 1, 2019; provided that if such date is not a Business Day, interest shall be payable on the Business Day immediately succeeding such date (each such date, an “Interest Payment Date”). Interest shall be payable in kind by adding the amount thereof to the principal amount of this Note (such interest, “PIK Interest”); provided that with respect to interest accruing from and after January 1, 2021, Borrower may, at its option, elect to, pay any such interest on any such Interest Payment Date in validly issued, fully paid and non-assessable shares of Common Stock (as defined below) (“Interest Shares”) so long as each of the Equity Conditions (as defined below) are satisfied on each day during the Equity Conditions Measuring Period (as defined below) applicable to such Interest Payment Date.

If Borrower intends to issue Interest Shares, Borrower shall deliver a written notice (including via e-mail) to Lender on or prior to the fifth Trading Day (as defined below) prior to the applicable Interest Payment Date (such notice, an “Interest Share Notice”), electing to pay all or any portion of the accrued but unpaid and uncapitalized interest payable on such Interest Payment Date in Interest Shares, which notice shall be irrevocable and shall specify the amount of interest to be paid in Interest Shares, together with an officer’s certificate certifying that the Equity Conditions with respect to such payment in Interest Shares will have been met as of the applicable Interest Payment Date. Notwithstanding anything herein to the contrary, if the Equity Conditions fail to have been met as of the applicable Interest Payment Date, the applicable interest shall be payable by adding the amount thereof to the principal amount of this Note. Any interest to be paid in Interest Shares on an Interest Payment Date shall be paid in a number of validly issued, fully paid and non-assessable shares of Common Stock equal to the quotient of (1) the amount of the accrued but unpaid and uncapitalized interest payable on such Interest Payment Date less any such payment payable by adding such amount to the principal amount of this Note, divided by (2) the Last Reported Sale Price (as defined below) on the Trading Day immediately prior to the applicable payment date. If the issuance of Interest Shares would result in the issuance of a fraction of a share of Common Stock, Borrower shall round such fraction of a share of Common Stock to the nearest whole share (with 0.5 being rounded up).

All amounts payable in cash hereunder shall be payable in lawful money of the United States of America at the office of Lender, 12744 San Fernando Road, Sylmar, CA 91342, unless another place of payment shall be specified in writing by Lender.

4. Application of Payments; Prepayment.

4.1 Payment on this Note shall be applied first to accrued interest, and thereafter to the outstanding principal balance hereof, unless otherwise consented to by Lender at or prior to the time of such payment.

4.2 This Note may be prepaid in whole or in part without penalty or premium. Any partial prepayment made pursuant to this Section 4.2 shall be applied to interest first and then to principal. At the time of any prepayment of principal hereunder, Borrower shall also pay all accrued, unpaid and uncapitalized interest on the amount prepaid through the date of prepayment.

5. Principal Amount. As of the date hereof, the principal amount of this Note is Thirty-Five Million, Fifty Thousand Seven Hundred Fifty Dollars ($35,050,750). At the time of the addition of any PIK Interest or prepayment of this Note, Lender shall make or cause to be made, an appropriate notation on Exhibit A attached hereto reflecting the amount of such PIK Interest or prepayment. The outstanding amount of this Note set forth on such Exhibit A shall be prima facie evidence of the principal amount thereof outstanding, but the failure to record, or any error in so recording, shall not limit or otherwise affect the obligations of Borrower to make payments of principal of or interest on this Note when due.

6. Representations and Warranties. Borrower hereby represents and warrants to Lender as follows:

6.1 Borrower has the requisite power and authority to enter into this Note and to consummate the transactions contemplated hereby. The execution and delivery of this Note by Borrower and the consummation by Borrower of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Borrower. This Note has been duly executed and delivered by Borrower and constitutes the legal, valid and binding agreement of Borrower enforceable against Borrower in accordance with its terms, except as may be

 

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limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) equitable principles of general applicability relating to the availability of specific performance, injunctive relief or other equitable remedies.

6.2 No consent, approval, authorization, order, license, registration or qualification of or with any Governmental Entity is required for the execution and delivery by Borrower of this Note or the transactions contemplated hereby, except such consents, approvals, authorizations, orders, licenses, registrations or qualifications as have been obtained, or which, if not obtained, would not, individually or in the aggregate, have a material adverse effect on the ability of Borrower to perform its obligations hereunder or consummate the transactions contemplated hereby on a timely basis. As used in this Note, the term “Governmental Entity” means any agency, bureau, commission, authority, department, official, political subdivision, tribunal or other instrumentality of any government, whether (i) regulatory, administrative or otherwise (including, without limitation, a self-regulatory organization or stock exchange); (ii) federal, state or local; or (iii) domestic or foreign.

6.3 The execution and delivery by Borrower of this Note, the performance by Borrower of its obligations hereunder, and the consummation by Borrower of the transactions contemplated hereby, will not conflict with or result in a breach or violation of (i) any of the terms or provisions of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower or any of its subsidiaries is a party or by which Borrower or any of its subsidiaries is bound or to which any of their property or assets is subject or (ii) any applicable law or statute or any order, rule or regulation of any Governmental Entity having jurisdiction over Borrower or any of its subsidiaries or any of their respective properties, except for in the case of either clause (i) or (ii) such conflicts, breaches or violations that would not prevent or delay the consummation of the transactions contemplated by this Note or that would not be reasonably expected to have a material adverse effect on Borrower, nor will any such action result in any violation of the provisions of the organizational documents of Borrower.

6.4 All of the Interest Shares, when issued in accordance with the terms of this Note, will be duly authorized and duly and validly issued, fully paid and nonassessable, free and clear of all liens, taxes, adverse claims, and will not be issued in violation of, or subject to, any preemptive or similar rights of any Person.

6.5 Borrower has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). None of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Borrower is not in violation of the requirements of the NASDAQ Stock Market (“NASDAQ”) and has no knowledge of any facts or circumstances which could reasonably be expected to lead to delisting or suspension of the Common Stock in the foreseeable future.

6.6 No brokerage or finder’s fees or commissions are or will be payable by Borrower or any of its Affiliates or representatives to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Note. Lender shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 6.6 that may be payable by Borrower or any of its Affiliates or representatives in connection with the transactions contemplated by this Note.

6.7 Assuming the accuracy of the representations and warranties of Lender contained in Section 7 hereof, the offer and issuance of this Note or the issuance of the Interest Shares by Borrower pursuant hereto will be exempt from the registration requirements of the Securities Act (and such issuances will be or have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws). The transactions contemplated hereby, including the issuance and sale of the Interest Shares under this Note, do not contravene, or require stockholder approval pursuant to, the rules and regulations of NASDAQ.

 

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6.8 Neither Borrower, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, has made or will make any offers or sales of any security, or has solicited or will solicit any offers to buy any security, under circumstances that would cause the offering and issuance of the Interest Shares to be integrated with prior offerings by Borrower for purposes of the Securities Act and which would require the registration of any such securities under the Securities Act.

7. Representation and Warranties of Lender. Lender hereby represents and warrants to Borrower as follows:

7.1 Lender has full right, power and authority to enter into this Note and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Note.

7.2 Lender understands that nothing in this Note or any other materials presented to Lender in connection with this Note or the issuance of any Interest Shares constitutes legal, tax or investment advice. Lender has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with this Note and the issuance of any Interest Shares.

7.3 Lender understands that this Note and any Interest Shares (collectively, the “Securities”) have not been registered under the Securities Act. Lender also understands that the Securities are being offered and issued pursuant to an exemption from registration contained in the Securities Act based in part upon Lender’s representations contained in this Note.

7.4 Lender has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to Borrower so that it is capable of evaluating the merits and risks of the Securities and has the capacity to protect its own interests. Lender must bear the economic risk of the Securities indefinitely (subject to Borrower’s payment obligations under this Note) unless the Securities are registered pursuant to the Securities Act, or an exemption from registration is available. Lender understands that Borrower has no present intention of registering any of the Securities. Lender also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow Lender to transfer all or any portion of any of the Securities under the circumstances, in the amounts or at the times Lender might propose.

7.5 Lender is acquiring the Securities for Lender’s own account for investment only, and not with a view towards their distribution.

7.6 Lender has the capacity to protect its own interests in connection with the transactions contemplated in this Note.

7.7 Lender is an accredited investor within the meaning of Regulation D under the Securities Act.

8. Certain Definitions

For purposes of this Note, the following terms shall have the following meanings:

Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. As used in this definition of “Affiliate,” the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or partnership or other ownership interest, by contract, or otherwise.

Business Day” means, with respect to this Note, any day other than a Saturday, a Sunday or a day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.

 

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Commission” means the U.S. Securities and Exchange Commission.

Common Stock” means the common stock of Borrower, par value $0.01 per share.

Convertible Note” means that certain convertible promissory note, dated as of the date hereof, in an initial principal amount of Thirty-Five Million Dollars ($35,000,000) issued by Borrower to Lender.

Designated Senior Debt” means the principal of, premium, if any, interest on, including any interest accruing after the commencement of any bankruptcy or similar proceeding, whether or not a claim for postpetition interest is allowed as a claim in the proceeding, or termination payment with respect to or in connection with, and all fees, costs, expenses and other amounts accrued or due on or under or in respect of, the term loans made and other obligations incurred under that certain Credit and Security Agreement, dated as of August 6, 2019, among Borrower and MannKind LLC, as borrowers, and MidCap Financial Trust, as agent and the lenders from to time party thereto, as amended, restated, supplemented or otherwise modified from time to time.

Equity Conditions means, with respect to the payment of interest in Interest Shares:

(i)    either (1) all of the Interest Shares (in the case of a payment of interest in Interest Shares) held by a non-Affiliate of Borrower shall be eligible for sale without the need for registration under any applicable federal or state securities laws or (2) a shelf registration statement registering the resale of such Interest Shares has been filed by Borrower and been declared effective by the Commission or is automatically effective and is available for use, and Borrower expects such shelf registration statement to remain effective and available for use from the applicable Interest Payment Date until thirty (30) days following the applicable Interest Payment Date;

(ii)    during the applicable Equity Conditions Measuring Period, the Common Stock is listed or traded on an Eligible Market (as defined below) and shall not have been suspended from trading on such Eligible Market (other than suspensions of not more than two Trading Days and occurring prior to the applicable date of determination due to business announcements by Borrower) nor shall delisting or suspension by such Eligible Market been threatened or pending either (A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements of such Eligible Market;

(iii)    any applicable Interest Shares may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or trading;

(vi)    any applicable Interest Shares shall be duly authorized and will be validly issued, fully paid and non-assessable upon issuance in accordance with the terms of this Note;

(v)    the issuance of the applicable Interest Shares shall not cause Lender (together with Lender‘s Affiliates) to beneficially own in excess of the Maximum Percentage (as defined in the Convertible Note) of the Common Stock outstanding immediately after giving effect to the issuance of such Interest Shares (after giving effect to the limitations specified in Section 8.7 of the Convertible Note and any analogous limitations on conversion or exercise contained in any other securities of Borrower held by Lender or Lender’s Affiliates); and

(vi)    no Event of Default shall have occurred and be continuing.

Equity Conditions Measuring Period means the period (x) commencing on the Interest Notice Date with respect to such payment is delivered to Lender and (y) ending on the applicable Interest Payment Date.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Interest Notice Date” means a date on which Borrower delivers an Interest Share Notice.

Last Reported Sale Price” of the Common Stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock is traded (each, an “Eligible Market”). If the Common Stock is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last Reported Sale Price” shall be the last quoted bid price for the Common Stock in the over-

 

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the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If the Common Stock is not so quoted, the “Last Reported Sale Price” shall be the average of the mid-point of the last bid and ask prices for the Common Stock on the relevant date from each of at least three nationally recognized independent investment banking firms selected by Borrower for this purpose.

Person” or “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any syndicate or group that would be deemed to be a “person” under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, or any other entity.

Securities Act” means the Securities Act of 1933, as amended.

Trading Day” means a day on which (i) trading in the Common Stock (or other security for which a closing sale price must be determined) generally occurs on The Nasdaq Stock Market or, if the Common Stock (or such other security) is not then listed on The Nasdaq Stock Market, on the principal other U.S. national or regional securities exchange on which the Common Stock (or such other security) is then listed or, if the Common Stock (or such other security) is not then listed on a U.S. national or regional securities exchange, on the principal other market on which the Common Stock (or such other security) is then traded and (ii) a Last Reported Sale Price for the Common Stock (or such other security) is available on such securities exchange or market; provided that if the Common Stock (or such other security) is not so listed or traded, “Trading Day” means a Business Day.

9. Default. Each of the following events shall be an “Event of Default” hereunder:

(a)    Borrower fails to pay timely any of the principal amount due under this Note or any accrued interest or other amounts due under this Note on the date the same becomes due and payable or within five (5) Business Days thereafter;

(b)    Borrower files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing;

(c)    An involuntary petition is filed against Borrower (unless such petition is dismissed or discharged within sixty (60) days) under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of Borrower;

(d)    Any representation or warranty made herein or in any other document delivered in connection herewith shall be incorrect or misleading in any material respect when made or deemed made (except where any such representation or warranty by the terms thereof is subject to a materiality standard, in which case such representation or warranty shall be incorrect or misleading in any respect); or

(e)    Borrower fails to deliver when due any Interest Shares hereunder, any “Interest Shares” pursuant to that certain Convertible Promissory Note of even date herewith between Borrower and Lender, or any shares of Common Stock deliverable upon conversion of all or any portion of such Convertible Promissory Note pursuant to Section 8 thereof, in each case which failure continues for 10 days.

Upon the occurrence of an Event of Default hereunder, all unpaid principal, accrued interest and other amounts owing hereunder shall, at the option of Lender, and, in the case of an Event of Default pursuant to (b) or (c) above, automatically, be immediately due, payable and collectible by Lender pursuant to applicable law and the interest rate applicable to outstanding principal amount of this Note while an Event of Default has occurred and is continuing shall increase to 12% per annum, or the maximum rate permissible by law as defined above, whichever is less.

10. Waiver. Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses.

 

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The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the full extent permitted by law.

11. Governing Law. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction. Borrower consents to in personam jurisdiction of the courts in the State of New York sitting in New York County and of the United States District Court of the Southern District of New York for any legal action or proceeding with respect to this Note. Borrower, by execution and delivery of this Note, hereby irrevocably accepts in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.

12. Successors and Assigns. This Note shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns; provided that Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of Lender. Lender may assign to one or more other persons all or a portion of its rights (but not its obligations) under this Note.

13. Integration. This Note reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement or instrument, oral or written, before or after the date hereof.

14. Amendments, Modification, Etc. No amendment, modification or waiver of any provision of this Note, and no consent to any departure by Lender or Borrower and their assigns therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

15. No Waiver. No failure on the part of Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Note preclude any other or further exercise thereof or the exercise of any other right. The rights of Lender under this Note against Borrower are not conditional or contingent on any attempt by Lender to exercise any of its rights under this Note against Borrower or any other person.

16. Expenses. Borrower agrees to reimburse, periodically and upon request, and at the date of effectiveness of this Note or upon termination of this Note, (i) Lender’s reasonable expenses, including the reasonable fees and disbursements of Lender’s attorneys, arising in connection with the preparation, negotiation, execution, delivery, amendment and administration of this Note and related transactions and (ii) Lender’s expenses, including the fees and disbursements of Lender’s attorneys, in connection with the enforcement of this Note or the protection of Lender’s rights under this Note.

17. Indemnity. Borrower shall indemnify, defend and hold harmless Lender and its agents and attorneys (collectively, the “Indemnitees”) from and against (i) any and all transfer taxes, documentary taxes, assessments or charges made by any Governmental Entity by reason of the execution and delivery of this Note or the extension of credit represented hereby, and (ii) any and all liabilities, losses, damages, penalties, judgments, claims, costs and expenses of any kind or nature whatsoever (including reasonable attorneys’ fees, and disbursements in connection with any actual or threatened investigative, administrative or judicial proceeding, whether or not such Indemnitee shall be designated a party thereto) that may be imposed on, incurred by or asserted against such Indemnitee, in any manner relating to or arising out of this Note, the extension of credit represented hereby or the use or intended use of the proceeds thereof; provided that no Indemnitee shall have the right to be indemnified or held harmless hereunder for its own gross negligence or willful misconduct, as determined by a final judgment of a court of competent jurisdiction.

18. Seniority. Amounts due under this Note shall be subordinated in accordance with the Subordination Agreement.

[Signature Pages Follow]

 

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BORROWER:     MANNKIND CORPORATION
    By:  

  /s/ Steven Binder                    

      Name:   Steven Binder
      Title:   Chief Financial Officer
LENDER:     THE MANN GROUP LLC
    By:  

  /s/ Michael S. Dreyer                    

      Name:   Michael S. Dreyer
      Title:   President

 

[Signature Page to Amended and Restated Promissory Note]


Exhibit A

PRINCIPAL SCHEDULE

 

Date

   Borrowing/PIK Interest      Repayment      Principal Balance  

8/6/2019

     35,050,750        —          35,050,750  

 

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EX-99.1

Exhibit 99.1

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD LIKELY CAUSE COMPETITIVE HARM IF PUBLICLY DISCLOSED.

Execution Version

 

 

 

CREDIT AND SECURITY AGREEMENT

dated as of August 6, 2019

by and among

MANNKIND CORPORATION,

MANNKIND LLC, each as a Borrower

and any additional borrower that hereafter becomes party hereto,

and

MIDCAP FINANCIAL TRUST,

as Agent and as a Lender,

and

THE ADDITIONAL LENDERS

FROM TIME TO TIME PARTY HERETO

 

LOGO

 

 

 

 

Midcap / MannKind / Credit and Security Agreement


CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT (this “Agreement”), dated as of August 6, 2019 (the “Closing Date”) by and among MIDCAP FINANCIAL TRUST, a Delaware statutory trust (“MidCap”), as administrative agent, the Lenders listed on the Credit Facility Schedule attached hereto and otherwise party hereto from time to time (each a “Lender”, and collectively the “Lenders”), MANNKIND CORPORATION, a Delaware corporation (“MannKind”), MANNKIND LLC, a Delaware limited liability company (“MannKind LLC”) and the other entities from time to time party to this Agreement as borrowers (collectively in the singular, “Borrower”), provides the terms on which Lenders agree to lend to Borrower and Borrower shall repay the Lenders. The parties agree as follows:

 

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ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed in accordance with GAAP. Calculations and determinations must be made in accordance with GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Article 15. All other capitalized terms contained in Article 4 and Exhibit A, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. All headings numbered without a decimal point are herein referred to as “Articles,” and all paragraphs numbered with a decimal point (and all subparagraphs or subsections thereof) are herein referred to as “Sections.” All references herein to a merger, transfer, consolidation, amalgamation, assignment, sale or transfer, or analogous term, will be construed to mean also a division of or by a limited liability company, as if it were a merger, transfer, consolidation, amalgamation, assignment, sale or transfer, or similar term, as applicable. Any series of limited liability company shall be considered a separate Person.

 

2.

CREDIT FACILITIES AND TERMS

2.1    Promise to Pay. Borrower hereby unconditionally promises to pay to each Lender in accordance with each Lender’s respective Pro Rata Share of each Credit Facility, the outstanding principal amount of all Credit Extensions made by the Lenders under such Credit Facility and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.

2.2    Credit Facilities. Subject to the terms and conditions hereof, each Lender, severally, but not jointly, agrees to make available to Borrower Credit Extensions in respect of each Credit Facility set forth opposite such Lender’s name on the Credit Facility Schedule, in each case not to exceed such Lender’s commitment as identified on the Credit Facility Schedule (such commitment of each Lender, as it may be amended to reflect assignments made in accordance with this Agreement or terminated or reduced in accordance with this Agreement, its “Applicable Commitment”, and the aggregate of all such commitments of all Lenders, the “Applicable Commitments”).

2.3    Credit Facilities.

(a)    Nature of Credit Facility; Credit Extension Requests. Credit Extensions in respect of a Credit Facility may be requested by Borrower during the Draw Period for such Credit Facility. For any Credit Extension requested under a Credit Facility (other than a Credit Extension on the Closing Date), Agent must receive the completed Credit Extension Form by 12:00 noon (New York time) ten (10) Business Days prior to the date the Credit Extension is to be funded (other than the Credit Extension made on the Closing Date). To the extent any Credit Facility proceeds are repaid for any reason, whether voluntarily or involuntarily (including repayments from insurance or condemnation proceeds), Agent and the Lenders shall have no obligation to re-advance such sums to Borrower.

(b)    Principal Payments. Principal payable on account of a Credit Facility shall be payable by Borrower to Agent, for the account of the applicable Lenders in accordance with their respective Pro Rata Shares,

 

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immediately upon the earliest of (i) the date(s) set forth in the Amortization Schedule for such Credit Facility, or (ii) the Maturity Date. Except as this Agreement may specifically provide otherwise, all prepayments of Credit Extensions under the Credit Facilities shall be applied by Agent to the applicable Credit Facility in inverse order of maturity. The monthly payments required under the Amortization Schedule shall continue in the same amount (for so long as the applicable Credit Facility shall remain outstanding) notwithstanding any partial prepayment, whether mandatory or optional, of the applicable Credit Facility.

(c)    Mandatory Prepayment. If a Credit Facility is accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Agent, for payment to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Credit Facility and all other Obligations, plus accrued and unpaid interest thereon, (ii) any fees payable under the Fee Letters by reason of such prepayment, (iii) the Applicable Prepayment Fee as specified in the Credit Facility Schedule for the Credit Facility being prepaid, and (iv) all other sums that shall have become due and payable, including Protective Advances. Additionally, at the election of Agent, Borrower shall prepay the Credit Facilities (to be allocated pro rata among the outstanding Credit Extensions under all Credit Facilities) in the following amounts: (A) within five (5) Business Days after the date on which any Credit Party (or Agent as loss payee or assignee) receives any casualty proceeds in excess of One Hundred and Fifty Thousand Dollars ($150,000) for property (including real property), in respect of assets upon which Agent has been granted a Lien, an amount equal to one hundred percent (100%) of such proceeds (net of out-of-pocket expenses and, in the case of personal property, repayment of any permitted purchase money debt encumbering the personal property that suffered such casualty), or such lesser portion of such proceeds as Agent shall elect to apply to the Obligations; and (B) within five (5) Business Days of receipt by any Credit Party of the proceeds of any asset disposition of personal property not made in the Ordinary Course of Business (other than transfers permitted by Section 7.1) an amount equal to one hundred percent (100%) of the net cash proceeds of such asset disposition (net of out-of-pocket expenses and repayment of any permitted purchase money debt encumbering such asset), or such lesser portion as Agent shall elect to apply to the Obligations. Notwithstanding the foregoing, (a) so long as no Default or Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to $5,000,000 in the aggregate with respect to any property loss or series of related property losses toward the replacement or repair of destroyed or damaged property; provided that (I) without limiting the foregoing, any such proceeds of a casualty policy received in connection with the Owned Real Property shall be applied toward replacement and repair of destroyed or damaged property solely to the extent permitted by the Mortgage (including any applicable dollar caps set forth therein), and (II) any such replaced or repaired property (x) shall be of greater, equal, or like value as the replaced or repaired Collateral and (y) shall be deemed Collateral in which Agent and the Lenders have been granted a first priority security interest, and (b) after the occurrence and during the continuance of a Default or Event of Default, all proceeds payable under such casualty policy shall, at the option of Agent, be payable to Agent, for the ratable benefit of the Lenders, on account of the Obligations.

(d)    Permitted Prepayment. Except as provided below, Borrower shall have no right to prepay the Credit Extensions made in respect of a Credit Facility. For the applicable Credit Facility as specified in the Credit Facility Schedule therefor, Borrower shall have the option to prepay the Prepayable Amount (as defined below) of such Credit Facility advanced by the Lenders under this Agreement, provided Borrower (i) provides irrevocable written notice to Agent and each Lender of its election to prepay the Prepayable Amount at least ten (10) Business Days prior to such prepayment, and (ii) pays to Agent, for payment to each applicable Lender in accordance with its respective Pro Rata Share, on the date of such prepayment, an amount equal to the sum of (A) the Prepayable Amount, plus accrued interest thereon, (B) any fees payable under the Fee Letters by reason of such prepayment, (C) the Applicable Prepayment Fee as specified in the Credit Facility Schedule for the Credit Facility being prepaid, and (D) all Protective Advances. The term “Prepayable Amount” means the lesser of (x) all of the Credit Extensions and all other Obligations under all Credit Facilities and (y) a portion of the Credit Extensions and related Obligations in amounts of no less than $1,000,000 of principal being prepaid. Notwithstanding the foregoing, the Applicable Prepayment Fee shall be deemed to be zero (0) for prepayments required to be made pursuant to Section 2.3(c)(A) from proceeds as a result of a casualty or condemnation of all or any portion of the Owned Real Property.

 

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2.4    Reserved.

2.5    Reserved.

2.6    Interest and Payments; Administration.

(a)    Interest; Computation of Interest. Each Credit Extension shall bear interest on the outstanding principal amount thereof from the date when made until paid in full at a rate per annum equal to the Applicable Interest Rate. Each Lender may, upon the failure of Borrower to pay any fees or interest as required herein, capitalize such interest and fees and begin to accrue interest thereon until paid in full, which such interest shall be at a rate per annum equal to the Applicable Interest Rate unless and until the Default Rate shall otherwise apply. All other Obligations shall bear interest on the outstanding amount thereof from the date they first become payable by Borrower under the Financing Documents until paid in full at a rate per annum equal to the Applicable Interest Rate unless and until the Default Rate shall otherwise apply. Interest on the Credit Extensions and all fees payable under the Financing Documents shall be computed on the basis of a three hundred sixty (360) day year and the actual number of days elapsed in the period during which such interest accrues. In computing interest on any Credit Extension or other advance, the date of the making of such Credit Extension or advance shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension or advance is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension or advance. As of each Applicable Interest Rate Determination Date, Agent shall determine (which determination shall, absent manifest error in calculation, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Credit Extensions.

(b)    Default Rate. Upon the election of Agent following the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is two hundred basis points (2.00%) above the rate that is otherwise applicable thereto (the “Default Rate”). Payment or acceptance of the increased interest rate provided in this subsection is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Agent or the Lenders.

(c)    Payments Generally. Except as otherwise provided in this Agreement, including pursuant to Section 2.6(c), or as otherwise directed by Agent, all payments in respect of the Obligations shall be made to Agent for the account of the applicable Lenders in accordance with their Pro Rata Share. Payments of principal and interest in respect of each Credit Facility shall be made to each applicable Lender identified on the applicable Credit Facility Schedule. All Obligations are payable upon demand of Agent in the absence of any other due date specified herein. All fees payable under the Financing Documents shall be deemed non-refundable as of the date paid. Any payment required to be made to Agent or a Lender (and any servicer or trustee on behalf of a securitization vehicle designated by either) under this Agreement may be made by debit or automated clearing house payment initiated by Agent or such Lender (or any servicer designated or trustee on behalf of a securitization vehicle on behalf of either) from any of Borrower’s deposit accounts, including the Designated Funding Account, and Borrower hereby authorizes Agent and each Lender (or any servicer or trustee on behalf of a securitization vehicle designated on behalf of either) to debit any such accounts for any amounts Borrower owes hereunder when due. Without limiting the foregoing, Borrower shall tender to Agent and the Lenders any authorization forms as Agent or any Lender may require to implement such debit or automated clearing house payment. These debits or automated clearing house payments shall not constitute a set-off. Payments of principal and/or interest received after 12:00 noon New York time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by Borrower under any Financing Document shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds. The balance of the Obligations, as recorded in Agent’s books and records at any time, shall be conclusive and binding evidence of the amounts due and owing to Agent and the Lenders by each Borrower absent manifest error; provided, however, that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower’s duty to pay all amounts owing hereunder or under any Financing Document. Agent shall endeavor to provide Borrower with a monthly statement regarding the Credit Extensions (but neither Agent nor any Lender shall have any liability if Agent shall fail to provide any such statement). Unless Borrower notifies Agent of any objection to any such statement (specifically describing the basis for such objection) within ninety (90) days after the date of receipt thereof, it shall be deemed final, binding and conclusive upon Borrower in all respects as to all matters reflected therein.

 

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(d)    Interest Payments; Maturity Date. Commencing on the first (1st) Payment Date following the funding of a Credit Extension, and continuing on the Payment Date of each successive month thereafter through and including the Maturity Date, Borrower shall make monthly payments of interest, in arrears, calculated as set forth in this Section 2.6. All unpaid principal and accrued interest is due and payable in full on the Maturity Date or any earlier date specified herein. If the Obligations are not paid in full on or before the Maturity Date, all interest thereafter accruing shall be payable immediately upon accrual.

(e)    Fees. Borrower shall pay, as and when due and payable under the terms of the Fee Letters, to Agent and each Lender, as applicable, for their own accounts and not for the benefit of any other Lenders, the fees set forth in the Fee Letters.

(f)    Protective Advances. Borrower shall pay to Agent for the account of the Lenders all Protective Advances (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement and the other Financing Documents) when due under any Financing Document (and in the absence of any other due date specified herein, such Protective Advances shall be due upon demand).

(g)    Maximum Lawful Rate. In no event shall the interest charged hereunder with respect to the Obligations exceed the maximum amount permitted under the Laws of the State of New York. Notwithstanding anything to the contrary in any Financing Document, if at any time the rate of interest payable hereunder (the “Stated Rate”) would exceed the highest rate of interest permitted under any applicable Law to be charged (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, Borrower shall, to the extent permitted by Law, continue to pay interest at the Maximum Lawful Rate until such time as the total interest received is equal to the total interest which would have been received had the Stated Rate been (but for the operation of this provision) the interest rate payable. Thereafter, the interest rate payable shall be the Stated Rate unless and until the Stated Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply. In no event shall the total interest received by any Lender exceed the amount which it could lawfully have received, had the interest been calculated for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the prior sentence, any Lender has received interest hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the reduction of the principal balance of such Lender’s Credit Extensions or to other amounts (other than interest) payable hereunder, and if no such Credit Extensions or other amounts are then outstanding, such excess or part thereof remaining shall be paid to Borrower. In computing interest payable with reference to the Maximum Lawful Rate applicable to any Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.

(h)    Taxes; Additional Costs.

(i)    Any and all payments by or on account of any obligation of Borrower hereunder shall be made without deduction or withholding for any Taxes, except as required by applicable law. For purposes of this Section 2.6(h), the term “applicable law” shall include FATCA. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.6(h)) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

 

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(ii)    Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of Agent timely reimburse it for the payment of, any Other Taxes.

(iii)    Borrower shall indemnify each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.6(h)) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrower by a Lender (with a copy to Agent), or by Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(iv)    Each Lender shall severally indemnify Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that Borrower has not already indemnified Agent for such Indemnified Taxes and without limiting the obligation of Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 13.1(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by Agent in connection with this Agreement or any Obligation, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by Agent shall be conclusive absent manifest error. Each Lender hereby authorizes Agent to set off and apply any and all amounts at any time owing to such Lender pursuant to this Agreement or otherwise payable by Agent to the Lender from any other source against any amount due to Agent under this paragraph (iv).

(v)    As soon as practicable after any payment of Taxes by Borrower to a Governmental Authority pursuant to this Section 2.6(h), Borrower shall deliver to Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Agent.

(vi)    Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made in connection with this Agreement or any Obligation shall deliver to Borrower and Agent, at the time or times prescribed by applicable Law or reasonably requested by Borrower or Agent, such properly completed and executed documentation reasonably requested by Borrower or Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by Borrower or Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by Borrower or Agent as will enable Borrower or Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two (2) sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.6(h)(vii)(A), (vii)(B) and (vii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(vii)    Without limiting the generality of the foregoing,

(A)    any Lender that is a U.S. Person shall deliver to Borrower and Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

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(B)    any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower and Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Agent), whichever of the following is applicable:

(1)    in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under this Agreement or any Financing Document, executed copies of IRS Form W-8BEN-E or W-8BEN, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under this Agreement or any other Financing Document, IRS Form W-8BEN-E or W-8BEN, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2)    executed copies of IRS Form W-8ECI;

(3)    in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the IRC, (x) executed copies of IRS Form W-8BEN-E or W-8BEN, as applicable and (y) a certification to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the IRC, a “10 percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the IRC, or a “controlled foreign corporation” related to Borrower as described in Section 881(c)(3)(C) of the IRC, together with such Other Tax Certification as Borrower or Agent may reasonably request from time to time; or

(4)    to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E or W-8BEN, as applicable, IRS Form W-9, and/or such Other Tax Certification from each beneficial owner as Borrower or Agent may reasonably request, as applicable; provided that if the Foreign Lender is a partnership and one (1) or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide such Other Tax Certification as may be reasonably required by Borrower or Agent on behalf of each such direct and indirect partner;

(C)    any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower and Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Agent), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such Other Tax Certification as may be prescribed by applicable law to permit Borrower or Agent to determine the withholding or deduction required to be made; and

(D)    if a payment made to Agent or a Lender under any Financing Document would be subject to U.S. federal withholding Tax imposed by FATCA if Agent or such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the IRC, as applicable), Agent or such Lender shall deliver to Borrower and Agent on or prior to the date on which Agent or such Lender becomes an Agent or Lender under this Agreement, at the time or times prescribed by law and at such time or times reasonably requested by Borrower or Agent, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the IRC) and such Other Tax Certification reasonably requested by Borrower or Agent as may be necessary for Borrower and Agent to comply with their obligations under FATCA and to determine that Agent or such Lender has complied with Agent or such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Agent and each Lender agrees that if any form or certification it previously delivered pursuant to this Section 2.6(h)(vi), (vii) or (viii) expires or becomes obsolete or inaccurate in any respect, it shall promptly update such form or certification or promptly notify Borrower and Agent, if applicable, in writing of its legal inability to do so.

(viii)    On or prior to the date Agent becomes a party to this Agreement, Agent shall, in the event that Agent is a U.S. Person, deliver an IRS Form W-9 to Borrower, and in the event Agent is not a U.S. Person, deliver to Borrower the appropriate IRS Form W-8 certifying Agent’s exemption, if any, from U.S. withholding Taxes with respect to amounts payable under this Agreement.

 

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(ix)    If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.6(h) (including by the payment of additional amounts pursuant to this Section 2.6(h)), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all reasonable and documented out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(x)    If any Lender shall determine in its commercially reasonable judgment that the adoption or taking effect of, or any change in, any applicable Law regarding capital adequacy, in each instance, after the Closing Date, or any change after the Closing Date in the interpretation, administration or application thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation, administration or application thereof, or the compliance by any Lender or any Person controlling such Lender with any request, guideline or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency adopted or otherwise taking effect after the Closing Date, has or would have the effect of reducing the rate of return on such Lender’s or such controlling Person’s capital as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such controlling Person could have achieved but for such adoption, taking effect, change, interpretation, administration, application or compliance (taking into consideration such Lender’s or such controlling Person’s policies with respect to capital adequacy) then from time to time, upon written demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to Agent), Borrower shall promptly pay to such Lender such additional amount as will compensate such Lender or such controlling Person for such reduction; provided, however, that notwithstanding anything in this Agreement to the contrary, (A) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (B) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in applicable Law”, regardless of the date enacted, adopted or issued.

(xi)    If any Lender requires compensation under this subsection (h), or requires any Borrower to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to this subsection (h), then, upon the written request of Borrower, such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Credit Extensions hereunder or to assign its rights and obligations hereunder (subject to the terms of this Agreement) to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (A) would eliminate or materially reduce amounts payable pursuant to any such subsection, as the case may be, in the future, and (B) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be materially disadvantageous to such Lender (as determined in its sole good faith discretion). Borrower hereby agrees to pay all reasonable and documented out-of-pocket costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

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(xii)    Each party’s obligations under this Section 2.6(h) shall survive the resignation or replacement of Agent or any assignment of rights by, or the replacement of, a Lender, and the repayment, satisfaction or discharge of all Obligations hereunder.

(i)    Administrative Fees and Charges.

(i)    Borrower shall pay to Agent, for its own account and not for the benefit of any other Lenders, all reasonable and documented fees and expenses in connection with audits and inspections of the books and records of the Credit Parties, audits, valuations or appraisals of the Collateral, audits of Borrower’s compliance with applicable Laws and such other matters as Agent shall deem appropriate, which shall be due and payable on the first (1st) Business Day of the month following the date of issuance by Agent of a written request for payment thereof to any Borrower.

(ii)    If payments of principal or interest due on the Obligations, or any other amounts due hereunder or under the other Financing Documents, are not timely made and remain overdue for a period of five (5) Business Days, Borrower, without notice or demand by Agent, promptly shall pay to Agent, for its own account and not for the benefit of any other Lenders, as additional compensation to Agent in administering the Obligations, an amount equal to five percent (5.0%) of each delinquent payment.

2.7    Secured Promissory Notes. At the election of any Lender made as to each Credit Facility for which it has made Credit Extensions, each Credit Facility shall be evidenced by one (1) or more secured promissory notes in form and substance reasonably satisfactory to Agent and the Lenders (each a “Secured Promissory Note”). Upon receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor.

 

3.

CONDITIONS OF CREDIT EXTENSIONS

3.1    Conditions Precedent to Initial Credit Extension. Each Lender’s obligation to make the initial advance in respect of a Credit Facility is subject to the condition precedent that Agent shall consent to or shall have received, in form and substance satisfactory to Agent, such documents, and completion of such other matters, as Agent may reasonably deem necessary or appropriate, including, without limitation, all items listed on the Closing Deliveries Schedule attached hereto.

3.2    Conditions Precedent to all Credit Extensions. The obligation of each Lender to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

(a)    satisfaction of all Applicable Funding Conditions for the applicable Credit Extension as set forth in the Credit Facility Schedule, if any, in each case each in form and substance satisfactory to Agent and each Lender;

(b)    timely receipt by Agent and each Lender of an executed Credit Extension Form in the form attached hereto;

(c)    

(i)    for Credit Extensions made on the Closing Date, the representations and warranties in Article 5 and elsewhere in the Financing Documents shall be true, correct and complete in all material respects on the Closing Date; provided, however, that those representations and warranties expressly referring to a specific date shall be true, correct and complete in all material respects as of such date; and

(ii)    for Credit Extensions made after the Closing Date, if any, the representations and warranties in Article 5 and elsewhere in the Financing Documents shall be true, correct and complete in all material respects on the date of the Credit Extension Form and on the Funding Date of each Credit Extension;

 

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provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Article 5 and elsewhere in the Financing Documents remain true, accurate and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;

(d)    no Default or Event of Default shall have occurred and be continuing or result from the Credit Extension;

(e)    Agent shall be satisfied with the results of any searches conducted under Section 3.5;

(f)    receipt by Agent of such evidence as Agent shall reasonably request to confirm that the deliveries made in Section 3.1 remain current, accurate and in full force and effect, or if not, updates thereto, each in form and substance reasonably satisfactory to Agent;

(g)    as determined in such Lender’s sole but reasonable discretion, there has not been any Material Adverse Change or any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Agent; and

(h)    with respect to each Credit Extension, each Lender (or its designated Affiliate) shall have received the Warrants (or additional Warrants, as the case may be) to purchase common stock of MannKind equal to three and one quarter of one percent (3.25%) of the total principal amount of the Credit Extensions divided by the Exercise Price, which Warrants for Credit Extensions made after the Closing Date shall be in form and substance substantially similar to the Warrants issued on the Closing Date and otherwise reasonably acceptable to each Lender.

3.3    Method of Borrowing. Each Credit Extension in respect of each Credit Facility shall be in an amount at least equal to the applicable Minimum Credit Extension Amount for such Credit Facility as set forth in the Credit Facility Schedule or such lesser amount as shall remain undisbursed under the Applicable Commitments for such Credit Facility. The date of funding for any requested Credit Extension shall be a Business Day. To obtain a Credit Extension, Borrower shall deliver to Agent a completed Credit Extension Form executed by a Responsible Officer. Agent may rely on any notice given by a person whom Agent reasonably believes is a Responsible Officer or designee thereof. Agent and the Lenders shall have no duty to verify the authenticity of any such notice.

3.4    Funding of Credit Facilities. In Agent’s discretion, Credit Extensions may be funded by Agent on behalf of the Lenders or by the Lenders directly. If Agent elects to fund any Credit Extension on behalf of the Lenders, upon the terms and subject to the conditions set forth in this Agreement, each Lender, severally and not jointly, shall make available to Agent its Pro Rata Share of the requested Credit Extension, in lawful money of the United States of America in immediately available funds, prior to 11:00 a.m. (New York time) on the specified date for the Credit Extension. Agent (or if Agent elects to have each Lender fund its Credit Extensions to Borrower directly, each Lender) shall, unless it shall have determined that one of the conditions set forth in Section 3.1 or 3.2, as applicable, has not been satisfied, by 2:00 p.m. (New York time) on the specified date for the Credit Extension, credit the amounts received by it in like funds to Borrower by wire transfer to the Designated Funding Account (or to the account of Borrower in respect of the Obligations, if the Credit Extension is being made to pay an Obligation of Borrower). A Credit Extension made prior to the satisfaction of any conditions set forth in Section 3.1 or 3.2 shall not constitute a waiver by Agent or the Lenders of Borrower’s obligation to satisfy such conditions, and any such Credit Extension made in the absence of such satisfaction shall be made in each Lender’s discretion.

3.5    Searches. Before the Closing Date, and thereafter (as and when determined by Agent in its reasonable discretion), Agent shall have the right to perform, all at Borrower’s expense, the searches described in

 

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clauses (a), (b), and (c) below against Borrower and any other Credit Party, the results of which are to be consistent with Borrower’s representations and warranties under this Agreement and the reasonably satisfactory results of which shall be a condition precedent to all Credit Extensions requested by Borrower: (a) title investigations, UCC searches and fixture filings searches and the equivalent thereof in any foreign jurisdiction; (b) judgment, pending litigation, federal tax lien, personal property tax lien, and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above; and (c) searches of applicable corporate, limited liability company, partnership and related records to confirm the continued existence, organization and good standing of the applicable Person and the exact legal name under which such Person is organized.

 

4.

CREATION OF SECURITY INTEREST

4.1    Grant of Security Interest. Borrower hereby grants Agent, for the ratable benefit of the Lenders, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Agent, for the ratable benefit of the Lenders, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to Permitted Liens that may have priority by operation of applicable Law or by the terms of a written intercreditor or subordination agreement entered into by Agent.

4.2    Representations and Covenants.

(a)    As of the Closing Date , Borrower has no ownership interest in any Chattel Paper, letter of credit rights, commercial tort claims, Instruments, documents or investment property (other than as disclosed on the Disclosure Schedule to the Disclosure Letter).

(b)    Borrower shall promptly (and in any event within ten (10) days of acquiring any of the following) deliver to Agent all tangible Chattel Paper and all Instruments and documents with an aggregate value in excess of $500,000 owned at any time by any Borrower and constituting part of the Collateral duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent. Borrower shall provide Agent with “control” (as defined in the Code) of all electronic Chattel Paper owned by any Borrower and constituting part of the Collateral by having Agent identified as the assignee on the records pertaining to the single authoritative copy thereof and otherwise complying with the applicable elements of control set forth in the Code. Borrower also shall deliver to Agent all security agreements securing any such Chattel Paper and securing any such Instruments. Borrower will mark conspicuously all such Chattel Paper and all such Instruments and Documents with a legend, in form and substance satisfactory to Agent, indicating that such Chattel Paper and such Instruments and Documents are subject to the security interests and Liens in favor of Agent created pursuant to this Agreement and the Financing Documents.

(c)    Borrower shall promptly (and in any event within ten (10) days of acquiring any of the following) deliver to Agent all letters of credit with an aggregate value in excess of $500,000 on which any Borrower is the beneficiary and which give rise to letter of credit rights owned by such Borrower which constitute part of the Collateral in each case duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent. Borrower shall take any and all actions as may be necessary or desirable, or that Agent may request, from time to time, to cause Agent to obtain exclusive “control” (as defined in the Code) of any such letter of credit rights in a manner acceptable to Agent.

(d)    Borrower shall promptly (and in any event within 10 days) advise Agent upon any Borrower becoming aware that it has any interests in any commercial tort claim with an aggregate value in excess of $500,000 that constitutes part of the Collateral, which such notice shall include descriptions of the events and circumstances giving rise to such commercial tort claim and the dates such events and circumstances occurred, the potential defendants with respect such commercial tort claim and any court proceedings that have been instituted with respect to such commercial tort claims, and Borrower shall, with respect to any such commercial tort claim, execute and deliver to Agent such documents as Agent shall request to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to any such commercial tort claim.

 

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(e)    Except for Inventory or other Collateral in an aggregate amount of One Million Dollars ($1,000,000), no Inventory or other Collateral shall at any time be in the possession or control of any warehouse, consignee, bailee or any of Borrower’s agents or processors without prior written notice to Agent and the receipt by Agent, if Agent has so requested, of warehouse receipts, consignment agreements or bailee lien waivers (as applicable) satisfactory to Agent prior to the commencement of such possession or control. Except for locations where Borrower maintains less than One Million Dollars ($1,000,000) in the aggregate in Inventory or other Collateral, Borrower shall, upon the request of Agent, notify any such warehouse, consignee, bailee, agent or processor of the security interests and Liens in favor of Agent created pursuant to this Agreement and the Financing Documents, instruct such Person to hold all such Collateral for Agent’s account subject to Agent’s instructions and shall, in Agent’s discretion, obtain an Access Agreement or other acknowledgement from such Person that such Person holds the Collateral for Agent’s benefit.

(f)    Upon reasonable request of Agent (after taking into the account the costs and benefits of perfecting its security interests in such property), Borrower shall promptly deliver to Agent any and all certificates of title, applications for title or similar evidence of ownership of all such tangible personal property with an aggregate value in excess of Five Hundred Thousand Dollars ($500,000) and shall cause Agent to be named as lienholder on any such certificate of title or other evidence of ownership. Borrower shall not permit any such tangible personal property to become fixtures to real estate unless such real estate is subject to a Lien in favor of Agent.

(g)    As of the Closing Date and each subsequent date that the representations and warranties under this Agreement are remade, all Deposit Accounts, Securities Accounts, Commodity Accounts or other bank accounts or investment accounts owned by Borrower, together with the purpose of such accounts and the financial institutions at which such accounts reside, are listed on the Disclosure Schedule to the Disclosure Letter.

(h)    Each Borrower hereby authorizes Agent to file without the signature of such Borrower one or more UCC financing statements relating to its Liens on all or any part of the Collateral, which financing statements may list Agent as the “secured party” and such Borrower as the “debtor” and which describe and indicate the collateral covered thereby as all or any part of the Collateral under the Financing Documents (including an indication of the collateral covered by any such financing statement as “all assets” of such Borrower now owned or hereafter acquired), in such jurisdictions as Agent from time to time determines are appropriate, and to file without the signature of such Borrower any continuations of or corrective amendments to any such financing statements, in any such case in order for Agent to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to the Collateral. Each Borrower also ratifies its authorization for Agent to have filed in any jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof. Any financing statement may include a notice that any disposition of the Collateral in contravention of this Agreement, by either Borrower or any other Person, shall be deemed to violate the rights of Agent and the Lenders under the Code.

(i)    As of the Closing Date, no Borrower holds, and, after the Closing Date, Borrower shall promptly notify Agent in writing upon creation or acquisition by any Borrower of, any Collateral which constitutes a claim against any Governmental Authority, including, without limitation, the federal government of the United States or any instrumentality or agency thereof, the assignment of which claim is restricted by any applicable Law, including, without limitation, the federal Assignment of Claims Act and any other comparable Law. Upon the request of Agent, Borrower shall take such steps as may be necessary or desirable, or that Agent may request, to comply with any such applicable Law.

(j)    Borrower shall furnish to Agent from time to time any statements and schedules further identifying or describing the Collateral and any other information, reports or evidence concerning the Collateral as Agent may reasonably request from time to time.

 

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  5.

REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows on the Closing Date, on the date of each Credit Extension, and on such other dates when such representations and warranties under this Agreement are made or deemed to be made:

5.1    Due Organization, Authorization: Power and Authority.

(a)    Each Credit Party and each Subsidiary is duly organized, validly existing and in good standing (if applicable in such entity’s jurisdiction of formation) as a Registered Organization in its respective jurisdiction of formation. Each Credit Party and each Subsidiary has the power to own its assets and is qualified and licensed to do business and is in good standing (if applicable in such jurisdiction) in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a Material Adverse Change. The Financing Documents have been duly authorized, executed and delivered by each Credit Party and constitute legal, valid and binding agreements enforceable in accordance with their terms. The execution, delivery and performance by each Credit Party of each Financing Document executed or to be executed by it is in each case within such Credit Party’s powers.

(b)    The execution, delivery and performance by each Credit Party of the Financing Documents to which it is a party do not (i) conflict with any of such Credit Party’s organizational documents; (ii) contravene, conflict with, constitute a default under or violate any Law in any material respect; (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which such Credit Party or any of its property or assets may be bound or affected; (iv) require any action by, filing, registration, or qualification with, or Required Permit from, any Governmental Authority (except such Required Permits which have already been obtained and are in full force and effect); or (v) constitute a default under or conflict with any Material Agreement. No Credit Party is in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a Material Adverse Change.

5.2    Litigation. Except as disclosed on the Disclosure Schedule to the Disclosure Letter or, after the Closing Date, pursuant to Section 6.7, there are no actions, suits, proceedings or investigations pending or, to the knowledge of the Responsible Officers, threatened in writing by or against any Credit Party which involves the possibility of any judgment or liability of more than One Million Dollars ($1,000,000.00). There are no actions, suits, proceedings or investigations pending or, to the knowledge of the Responsible Officers, threatened in writing by or against any Credit Party that could result in a Material Adverse Change, or which questions the validity of the Financing Documents.

5.3    No Material Deterioration in Financial Condition; Financial Statements. All financial statements for the Credit Parties delivered to Agent or any Lender fairly present, in conformity with GAAP, in all material respects the consolidated financial condition and consolidated results of operations of such Credit Party. There has been no material deterioration in the consolidated financial condition of any Credit Party from the most recent financial statements and projections submitted to Agent. There has been no material adverse deviation from the most recent annual operating plan of Borrower delivered to Agent.

5.4    Solvency. As of any date of determination, the fair salable value of each of (a) MannKind’s and (b) the Credit Parties’ (taken as whole) assets exceeds the fair value of their liabilities on such date. After giving effect to the transactions described in this Agreement, (i) neither MannKind nor the Credit Parties (taken as a whole) is left with unreasonably small capital in relation to their business as presently conducted, and (ii) each of (x) MannKind and (y) the Credit Parties (taken as whole) are able to pay their debts (including trade debts) as they mature.

5.5    Subsidiaries; Investments; Margin Stock. Borrower and its Subsidiaries do not own any stock, partnership interest or other equity securities, except for Permitted Investments. Without limiting the foregoing, Borrower and its Subsidiaries do not own or hold any Margin Stock.

5.6    Tax Returns and Payments; Pension Contributions. Each Credit Party and its Subsidiaries has timely filed all required federal and income tax returns and all other material tax returns and reports, and, except for t