MERIDIAN USA HOLDINGS, INC.
SERIES A CONVERTIBLE NOTE DUE 2010
NO. 1 $8,000,000
Meridian USA Holdings, Inc., a Florida corporation (hereinafter called
the "Corporation," which term includes any successors), for value received,
hereby promises to pay to U.S. Bancorp Investments, Inc., or registered assigns,
the principal sum of EIGHT MILLION DOLLARS ($8,000,000) on June 16, 2010.
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION
1. Interest.
(a) General. Meridian USA Holdings, Inc., a Florida corporation
(hereinafter called the "Corporation," which term includes any successors),
promises to pay interest on the principal amount of this Note at the rate of
5.0% per annum. To the extent it is lawful, the Corporation promises to pay
interest on any interest payment due but unpaid on such principal amount at a
rate of 5.0% per annum compounded quarterly.
The Corporation will pay interest quarterly on March 15, June 15,
September 15 and December 15 of each year (each, an "Interest Payment Date"),
commencing September 15, 2000. Interest on the Note will accrue from the most
recent date to which interest has been paid or, if no interest has been paid on
the Securities, from June 16, 2000 to and including the earliest of (i) the date
on which this Note is converted into Series II Preferred Stock in accordance
with Section 6, or (ii) the date on which this Note is redeemed in accordance
with Section 5.
Accrued and unpaid interest from June 16, 2000 shall be paid in
cash concurrently with the consummation of (i) a public offering of equity
securities by the Corporation (other than equity securities registered pursuant
to registration statements on Form S-4 or S-8 or any successor or similar
forms), or (ii) a Designated Event.
This Note shall entitle the holder thereof to receive interest
prior and in preference to any dividend with respect to all shares of preferred
stock and Common Stock. No dividend shall be paid on any series of preferred
stock or the Common Stock unless and until all accrued and unpaid interest from
the Purchase Date provided for in this Section 1(a) shall have been paid or all
Notes shall have been redeemed or converted in accordance with Sections 5 or 6,
respectively. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Special Interest. After all accrued and unpaid interest on this
Note shall have been paid in cash as provided for in Section 1(a) and all
preferential dividends on all series of Preferred Stock shall have been paid or
declared and a sum sufficient for the payment thereof set apart, then the
Corporation may (when, as and if declared by the Board) declare and distribute
in such year dividends on the Common Stock; provided, however, that from and
after such time as the holders of the Common Stock have received dividends on
the Common Stock in an amount equal on a per share basis to the per annum
interest paid pursuant to Section 1(a) (determined on an as-converted basis), no
subsequent dividend on the shares of Common Stock shall be declared or paid
unless and until interest of an equal amount per share is concurrently paid to
the holders of the Notes (determined on an as-converted basis).
(c) Termination. The Corporation's obligation to pay interest, including
accrued and unpaid interest, with respect to this Note shall be extinguished on
the Conversion Effective Date or the Redemption Date.
2. Method of Payment.
The Corporation shall pay interest on the Notes (except defaulted interest)
to the Persons who are the registered Holders at the close of business on the
Record Date immediately preceding the Interest Payment Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The
Corporation shall pay principal and interest in cash or, at the Corporation's
election, such accrued interest may be added to the principal amount of this
Note and shall accrue interest thereafter.
3. Paying Agent and Registrar.
Initially, the Corporation will act as Paying Agent and Registrar. The
Corporation may change the Paying Agent, Registrar or co-Registrar without
notice to the Holders. The Corporation or any of its Subsidiaries may, subject
to certain exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Liquidation Payments.
(a) Special Liquidation Payment. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
the holders of this Note shall be entitled to receive, prior to any distribution
of any of the assets of the Corporation to the holders of any series of
preferred stock and the holders of Common Stock by reason of their ownership
thereof, cash in an amount per $1,000 in principal amount of this Note equal to
the sum of (i) $1,000.00 (the "Original Issue Price"), and (ii) an amount equal
to all accrued but unpaid interest, if any, in respect of such principal amount
(the "Accrued Interest" and together with the Original Issue Price, the "Special
Liquidation Payment"). If upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Notes shall be insufficient to
permit the payment to such holders of the full aforesaid amounts, then the
entire assets and funds of the Corporation available for distribution shall be
distributed ratably among the holders of the Notes.
(b) Distributions after Special Liquidation Payment. Upon the completion of
the distribution required by Section 4(a) and any preferential distribution to
the Series I Preferred Stock, Series II Preferred Stock or any other series of
preferred stock, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed ratably among the holders of
the Notes, Series II Preferred Stock and the holders of the Common Stock
according to the number of shares of Common Stock (1) then held, with respect to
holders of the Common Stock, and (2) into which the then outstanding Notes and
shares of Series II Preferred Stock are then convertible, with respect to
holders of the Notes and Series II Preferred Stock.
5. Redemption.
(a) Mandatory Redemption.
If there remains outstanding any Note on or after the occurrence of a
Designated Event (such date, the "Redemption Trigger Date"), each of the holders
of the then outstanding Notes shall have the right to require the Corporation to
redeem all or any of such holder's Notes in accordance with this Section 5 for
cash in an amount per share equal to the Redemption Price, such right being
referred to as the "Redemption Right".
The Corporation shall give each holder of record of Notes written
notice of such impending transaction not later than twenty (20) days prior to
the stockholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 5, and the
Corporation shall thereafter give such holders prompt notice of any material
change. The transaction shall in no event take place sooner than twenty (20)
days after the Corporation has given the first notice provided for herein or
sooner than fifteen (15) days after the Corporation has given notice of any
material change provided for herein; provided, however, that such periods may be
shortened upon the written consent of the Majority Noteholders.
Within ten (10) days after the Redemption Trigger Date, the
Corporation shall notify all holders of Notes that the Redemption Right may be
exercised, and each holder of Notes shall have the right, exercisable by
delivery of a Redemption Notice to the Corporation within thirty (30) days after
receipt of such notice from the Corporation, to request that all or a portion of
such holder's Notes be redeemed on the Redemption Date. The Corporation shall
be obligated to redeem the total principal amount of Notes requested to be
redeemed in accordance herewith on the Redemption Date.
In the event that the Corporation does not have sufficient funds
available for redemption of the Notes in accordance with this Section 5(a), the
Corporation shall forthwith either:
(A) cause such closing to be postponed until such time as the
requirements of this Section 5(a) may be complied with; or
(B) cancel such transaction, in which event the rights, preferences
and privileges of the holders of the Notes shall revert to and be the same as
such rights, preferences and privileges existing immediately prior to the date
of the first notice referred to in Section 5(a).
(b) Procedure. Each holder of Notes shall surrender the certificate or
certificates representing such Notes to the Corporation, duly endorsed, at the
office of the Corporation or any Paying Agent or Registrar for the Notes, and on
the Redemption Date the full Redemption Price for such Notes so surrendered
shall be payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof.
(c) Reissuance of Certificate. In case less than all of the principal
amount of Notes represented by any certificate is redeemed in any installment, a
new certificate representing the unredeemed principal amount of such of Note
will be issued to the holder thereof without cost to such holder promptly after
surrender of the certificate representing the redeemed principal amount of such
Note.
(d) Termination. The rights of the Corporation and the holders of the
Notes under this Section 5 shall terminate and be of no effect upon the
conversion of all Notes into shares of Series II Preferred Stock.
6. Conversion. The holders of the Notes shall have conversion rights
as follows (the "Conversion Rights"):
(a) Mandatory Conversion. Each $1,000 principal amount of Notes shall
be automatically converted on June 16, 2001 at the office of the Corporation or
any Paying Agent or Registrar for the Notes, into such number of fully paid and
nonassessable shares of Series II Preferred Stock as is determined by dividing
(x) the Special Liquidation Payment by (y) the Conversion Price, as adjusted
from time to time in accordance with Sections 6(e), (f), (g), (h) and (i), in
effect on the date the certificate is surrendered for conversion.
(b) Right to Convert at the Option of the Holder. Each $1,000
principal amount of Notes shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such Note at the
office of the Corporation or any Paying Agent or Registrar for the Notes, into
such number of fully paid and nonassessable shares of Series II Preferred
Stock as is determined by dividing (x) the Special Liquidation Payment by (y)
the Conversion Price, as adjusted from time to time in accordance with Sections
6(e), (f), (g),(h) and (i), in effect on the date the certificate is
surrendered for conversion; provided that notwithstanding any right of
conversion of Notes provided for in this Section 6(b), provided that the
Holder is a bank holding company or an Affiliate of a bank holding company, and
has the authority to hold Series II Preferred Stock pursuant to Section
1843(k)(H) of the Bank Holding Company Act of 1956, as amended (the "BHCA")
The occurrence of a Designated Event or the existence of a Redemption Right
shall in no way limit the ability of a holder to convert Notes into shares
of Series II Preferred Stock.
(c) Right to Convert at the Option of the Corporation. Each $1,000
principal amount of Notes shall be convertible, at the option of the
Corporation, at any time after the date of issuance of such Note, at the office
of the Corporation or any Paying Agent or Registrar for the Notes, into such
number of fully paid and nonassessable shares of Series II Preferred Stock as
is determined by dividing (x) the Special Liquidation Payment by (y) the
Conversion Price, as adjusted from time to time in accordance with Sections
6(e), (f), (g), (h) and (i), in effect on the date the certificate is
surrendered for conversion; provided that the Holder is a bank holding company
or an Affiliate of a bank holding company, and has the authority to hold
Series II Preferred Stock pursuant to Section 1843(k)(H) of the BHCA. Mechanics
of Conversion. Before any holder of Notes shall be entitled to convert the
same into shares of Series II Preferred Stock, such holder shall surrender
the certificate or certificates therefor, duly endorsed, at the office of
the Corporation or of any Paying Agent or Registrar for the Notes, and shall
give written notice to the Corporation at its principal corporate office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Series II Preferred Stock
are to be issued. The Corporation shall, as soon as practicable thereafter,
but in no event later than three (3) business days thereafter, issue and
deliver at such office to such holder of Notes, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of
Series II Preferred Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the Notes to be
converted (except as otherwise provided in the immediately following sentence),
and the person or persons entitled to receive the shares of Series II Preferred
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Series II Preferred Stock as of such
date. If the conversion is (i) in connection with an underwritten offering of
securities registered pursuant to the Securities Act, or (ii) in anticipation of
a Designated Event, such conversion may, at the option of any holder tendering
Notes for conversion, be conditioned upon the closing with the underwriters of
the sale of securities pursuant to such offering or the consummation of such
Designated Event, as the case may be, in which event the person(s) entitled to
receive the Series II Preferred Stock upon conversion of the Notes shall not be
deemed to have converted such Notes until the closing of such sale of securities
or consummation of such Designated Event.
(d) Conversion Price Adjustments of Notes for Certain Dilutive Issuances,
Splits and Combinations. The Conversion Price of the Notes shall be subject to
adjustment from time to time as follows:
(i) In the event the Corporation should at any time or from time to
time after the Purchase Date fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Series II Preferred Stock or the
determination of holders of Series II Preferred Stock entitled to receive a
dividend or other distribution payable in additional shares of Series II
Preferred Stock or Common Stock Equivalents without payment of any consideration
by such holder for the additional shares of Series II Preferred Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise of Series II Preferred Stock), then, as of
such record date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Conversion Price shall be
appropriately decreased so that the number of shares of Series II Preferred
Stock issuable on conversion of each Note shall be increased in proportion to
such increase in the aggregate number of shares of Series II Preferred Stock
outstanding and issuable with respect to such Common Stock Equivalents.
(ii) If the number of shares of Series II Preferred Stock outstanding at any
time after the Purchase Date is decreased by a combination of the outstanding
shares of Series II Preferred Stock, then, following the record date of such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Series II Preferred Stock issuable on conversion of each
share of such series shall be decreased in proportion to such decrease in
outstanding shares.
(e) Conversion Price Adjustments for Sale of Shares Below Conversion
Price.
(i) If at any time or from time to time after the Purchase Date
hereof, the Corporation issues or sells, or is deemed by the express provisions
of this Section 6(f) to have issued or sold, Additional Shares of Series II
Preferred Stock (as defined in clause (v) below)), other than upon a
subdivision or combination of, or as a dividend or other distribution on,
the Series II Preferred Stock as provided in Section 6(e), for an Effective
Price less than the then existing Conversion Price, then the Conversion
Price shall independently be reduced, as of the opening of business on the
date of such issue or sale, to the price determined by multiplying the
then existing Conversion Price by a fraction (A) the numerator of which
shall be (1) the number of shares of Series II Preferred Stock outstanding
immediately preceding the date of such issue or sale, plus (2) the number
of shares of Series II Preferred Stock that the aggregate consideration
received (or by the express provisions hereof deemed to have been received) by
the Corporation for the total number of Additional Shares of Series II
Preferred Stock so issued would purchase at the applicable existing Conversion
Price, and (B) the denominator of which shall be the number of shares of
Series II Preferred Stock outstanding at the close of business on the date
of such issue after giving effect to such issue of Additional Shares of
Series II Preferred Stock.
(ii) For the purpose of making any adjustment required under this
Section 6(f), the consideration received by the Corporation for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
at the gross amount of cash received by the Corporation before deducting any
expenses payable by the Corporation and any underwriting or similar
commissions, compensation, or concessions paid or allowed by the Corporation
in connection with such issue or sale, (B) to the extent it consists of
property, be computed as determined in good faith by the Board and the
Majority Noteholders, and (C) if Additional Shares of Series II Preferred Stock,
Convertible Securities or rights or options to purchase either Additional Shares
of Series II Preferred Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Corporation for
a consideration that covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by
the Board to be allocable to such Additional Shares of Series II Preferred
Stock,Convertible Securities or rights or options, as the case may be.
(iii) For the purpose of the adjustment required under this Section 6(f),
if the Corporation issues or sells any Options to purchase Series II Preferred
Stock or any Convertible Securities and if the Effective Price of the Additional
Shares of Series II Preferred Stock underlying such Options or Convertible
Securities is less than the Conversion Price then in effect, the Corporation
shall be deemed to have issued at the time of the issuance of such Options or
Convertible Securities the maximum number of Additional Shares of Series II
Preferred Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Corporation for the
issuance of such Options or Convertible Securities, plus, in the case of such
Options, the minimum amount of consideration, if any, payable to the Corporation
upon the exercise of such Options, plus, in the case of Convertible Securities,
the minimum amounts of consideration, if any, payable to the Corporation (other
than by cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the conversion thereof. No further adjustment of the
Conversion Price, adjusted upon the issuance of such Options or Convertible
Securities, shall be made as a result of the actual issuance of Additional
Shares of Series II Preferred Stock on the exercise of any such Options or the
conversion of any such Convertible Securities. If the purchase price provided
for in any Option or the additional consideration (if any) payable upon the
issue, conversion or exchange of any Convertible Securities or the rate at which
any Convertible Securities are convertible into or exchangeable for Series II
Preferred Stock changes at any time, the Conversion Price in effect at the time
of such change shall be adjusted immediately to the Conversion Price that would
have been in effect at such time had such Option or Convertible Security
originally provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued or
sold. For purposes of this Section 6(f), if the terms of any Option or
Convertible Security that was outstanding as of the Purchase Date are changed in
the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Series II Preferred Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change; provided,however, that no such change shall at any
time cause the Conversion Price thereunder to be increased. If any such Options
issued after the Purchase Date or the conversion privilege represented by any
such Convertible Securities issued after the Purchase Date shall expire without
having been exercised, the Conversion Price, adjusted upon the issuance of such
Options or Convertible Securities issued after the Purchase Date shall be
readjusted to the Conversion Price that would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Series II
Preferred Stock so issued were the Additional Shares of Series II Preferred
Stock, if any, actually issued or sold on the exercise of such Options or rights
of conversion of such Convertible Securities, and such Additional Shares of
Series II Preferred Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise, plus the consideration,
if any, actually received by the Corporation for the granting of all such
Options, whether or not exercised, plus the consideration received for issuing
or selling the Convertible Securities actually converted, plus the
consideration, if any, actually received by the Corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities.
(iv) For the purpose of the adjustment required under this Section 6(f), if
the Corporation issues or sells any Options for the purchase of Convertible
Securities and if the Effective Price of the Additional Shares of Series II
Preferred Stock underlying such Convertible Securities is less than the
Conversion Price in effect, the Corporation shall be deemed to have issued at
the time of the issuance of such Options the maximum number of Additional Shares
of Series II Preferred Stock issuable upon conversion of the total amount of
Convertible Securities covered by such Options and to have received as
consideration for the issuance of such Additional Shares of Series II Preferred
Stock an amount equal to the amount of consideration, if any, received by the
Corporation for the issuance of such Options, plus the minimum amounts of
consideration, if any, payable to the Corporation upon the exercise of such
Options and plus the minimum amount of consideration, if any, payable to the
Corporation (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion of such Convertible
Securities. No further adjustment of the Conversion Price, adjusted upon the
issuance of such Options, shall be made as a result of the actual issuance of
the Convertible Securities upon the exercise of such Options or upon the actual
issuance of Additional Shares of Series II Preferred Stock upon the conversion
of such Convertible Securities. If the purchase price provided for in any
Option or the additional consideration (if any) payable upon the issue,
conversion or exchange of any Convertible Securities or the rate at which any
Convertible Securities are convertible into or exchangeable for Series II
Preferred Stock changes at any time, the Conversion Price in effect at the time
of such change shall be adjusted immediately to the Conversion Price that would
have been in effect at such time had such option or Convertible Security
originally provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted, issued or
sold. For purposes of this Section 6(f), if the terms of any Option or
Convertible Security that was outstanding as of the Purchase Date are changed in
the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Series II Preferred Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change; provided that no such change shall at any time cause
the Conversion Price thereunder to be increased. The provisions of clause (iii)
above for the readjustment of the Conversion Price upon the expiration of
Options or the rights of conversion of Convertible Securities shall apply, the
necessary changes having been made, to the Options and Convertible Securities
referred to in this subpart (iv).
(v) "Additional Shares of Series II Preferred Stock" shall mean all shares
of Series II Preferred Stock issued by the Corporation after the Purchase Date ,
whether or not subsequently reacquired or retired by the Corporation.
(vi) The "Effective Price" of Additional Shares of Series II Preferred Stock
shall mean the quotient determined by dividing the total number of Additional
Shares of Series II Preferred Stock issued or sold, or deemed to have been
issued or sold by the Corporation under this Section 6(f), into the aggregate
consideration received, or deemed to have been received by the Corporation for
such issue under this Section 6(f), for such Additional Shares of Series II
Preferred Stock.
(f) Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in Section 6(f), then, in each such case for
the purpose of this Section 6(g), the holders of the Notes shall be entitled to
a share of any such distribution in accordance with Section 1 as though they
were the holders of the number of shares of Common Stock into which the Notes
and the shares of Series II Preferred Stock are convertible as of the record
date fixed for the determination of the holders of Series II Preferred Stock
entitled to receive such distribution.
(g) Recapitalizations. If any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 6 or
Section 4) provision shall be made so that the holders of the Notes and the
Series II Preferred Stock shall thereafter be entitled to receive upon
conversion of the Notes and the Series II Preferred Stock the number of shares
of stock or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 6 with
respect to the rights of the holders of the Notes and the Series II Preferred
Stock after the recapitalization to the end that the provisions of this Section
6 (including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Notes and the Series II Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(h) No Impairment. The Corporation will not, by amendment of the
Certificate or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Notes and the Series II Preferred Stock against impairment.
(i) Certificate as to Adjustments.
(i) Within fifteen (15) days following the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Notes a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Notes, furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustment and readjustment, (B) the Conversion Price at
the time in effect, and (C) the number of shares of Series II Preferred Stock
and the amount, if any, of other property that at the time would be received
upon the conversion of the Notes.
(j) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Notes, at least fifteen (15) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
(k) Reservation of Stock Issuable Upon Conversion. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Series II Preferred Stock and Common Stock, solely for the purpose of
effecting the conversion of the Notes and the Series II Preferred Stock, such
number of its shares of Series II Preferred Stock and Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding Notes and
shares of Series II Preferred Stock; provided that, if at any time the number of
authorized but unissued shares of Series II Preferred Stock or Common Stock
shall not be sufficient to effect the conversion of all then outstanding Notes
or shares of Series II Preferred Stock, in addition to such other remedies as
shall be available to the holder of such Notes or Series II Preferred Stock, as
the case may be, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Series II Preferred Stock or Common Stock, as the case may be, to such
number of shares as shall be sufficient for such purposes, including, without
limitation, engaging in its best efforts to obtain the requisite stockholder
approval of any necessary amendment to the Certificate; and provided, further
that if at any time after the first anniversary of the Purchase Date (i) the
number of authorized but unissued shares of Series II Preferred Stock shall not
be sufficient to effect the conversion of all then outstanding shares of Notes,
(ii) the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all than authorized shares of Series II
Preferred Stock, or (iii) the Corporation fails for any other reason to honor
the request of a holder of Notes or Series II Preferred Stock to convert Notes
into shares of Series II Preferred Stock pursuant to Section 6 or to convert
shares of Series II Preferred Stock into shares of Common Stock pursuant to the
terms of the Series II Preferred Stock, in addition to such other remedies as
shall be available to the holder of such Notes or Series II Preferred Stock, the
Corporation shall pay to the holder of such Notes or Series II Preferred Stock
liquidated damages in cash in an amount equal to three percent (3%) of the then
current Special Liquidation Payment for each thirty (30) day period or portion
thereof that such condition continues.
(l) Notices. Any notice required or permitted by the provisions of this
Section 6 to be given to the holders of Notes shall be in writing, shall be
effective when given, and shall in any event be deemed to be given upon receipt
or, if earlier, (i) three (3) days after deposit with the U.S. postal service or
other applicable postal service, if delivered by first class mail, postage
prepaid, (ii) upon delivery, if delivered by hand, (iii) one (1) business day
after the day of deposit with Federal Express or similar overnight courier,
freight prepaid, if delivered by overnight courier or (iv) one (1) business day
after the day of facsimile transmission, if delivered by facsimile transmission
with copy by first class mail, postage prepaid, and shall be addressed to each
holder of record at such holder's address appearing on the books of the
Corporation.
7. Consent of Noteholders Required. So long as any Notes are
outstanding without first obtaining the approval of the Majority Noteholders,
the Corporation shall not:
(i) amend, alter or repeal the Certificate, Bylaws, or the Series II
Designation, in a manner adverse to the holders of the Notes or Series II
Preferred Stock, including, without limitation, any increase in the total number
of authorized shares of Series II Preferred Stock.
(ii) create, incur, assume or suffer to exist any Indebtedness in
excess of $5,000,000;
(iii) authorize or issue, or obligate itself to issue, any other equity
security, including any other security convertible or exercisable for an equity
security, on parity with or senior to the Series II Preferred Stock in any
respect, including without limitation, as to dividend rights, liquidation
preferences, voting rights, redemption or conversion rights;
(iv) purchase, redeem, or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose) any shares of the Corporation's equity
securities, other than redemptions of shares of Series II Preferred Stock
pursuant to Section 5 of the Series II Designation;
(v) declare or pay any dividend or other distribution, direct or
indirect (or set apart any sum for such purpose) whether in cash, indebtedness
or other assets or securities, upon the Corporation's equity securities
other than a dividend or distribution on the Series II Preferred Stock;
(vi) enter in to an agreement to effect any sale, lease, assignment,
transfer or other conveyance of any material assets of the Corporation, or any
merger, material acquisition, reorganization, or recapitalization involving the
Corporation other than inventory in the ordinary course of business consistent
with past practice;
(vii) enter into a single transaction or series of transactions with
or for the benefit of an Affiliate of the Corporation other than the
employment agreements between the Corporation and each of Messrs. Posner and
Streisfeld as in effect on the Purchase Date;
(viii) enter into a line of business that is unrelated to the food and
beverage business or otherwise substantially change or modify the Corporation's
line of business as it existed on the Purchase Date;
(ix) purchase, lease or otherwise acquire assets (other than
inventory) or make other capital expenditures in a single transaction or
series of transactions over the course of a fiscal year with an aggregate
fair market value in excess of $750,000 in any such fiscal year;
(x) increase the salary, wages or other compensation of any
director,officer, employee or consultant of the Corporation, establish or
modify the salary ranges, guidelines or similar provisions in respect of any
benefit plan, employment-related contract or other employee compensation
arrangement or pay discretionary bonuses or other compensation, other than
(i) any increase in the salary, wages or other compensation of officers,
employees or consultants of the Corporation (other than Messrs. Posner
and Streisfeld and their respective family members) in the ordinary
course of business consistent with past practice, (ii) any increase in
the salary, wages, or other compensation of Messrs. Posner or Streisfeld to
reflect increases in the Consumer Price Index for the Miami metropolitan
area, or (iii) annual bonuses paid pursuant to an annual bonus plan
established by the Board to pay officers or employees of the Corporation
(which may include Messrs. Posner and Streisfeld and their respective
family members) in an aggregate amount not to exceed seven and one-half
percent (7.5%) of EBITDA for such fiscal year;
(xi) make any payments or otherwise provide compensation to any
Affiliates, directors, officers or employees under management, consulting,
advisory, severance, employment or similar agreements or other arrangements
other than as required by contracts or agreements existing on the Purchase
Date or permitted by Section 7(x) above;
(xii) directly or indirectly, pay or make a commitment to pay any
severance or termination pay to any officer, employee or agent who is
directly or indirectly a stockholder of the Corporation other than as
required by contracts or agreements existing on the Purchase Date;
(xiii) make or permit to remain outstanding any Investments
(other than Permitted Investments) exceeding $50,000 in any fiscal year
other than loans, advances or other extensions of credit in the nature of
deposits with or advance payments to subcontractors and suppliers made in
the ordinary course of business consistent with past practice;
(xiv) make any Investment in an Affiliate, transfer any assets or
property to an Affiliate, merge into or consolidate with or purchase or
acquire assets or property from an Affiliate, guarantee or assume any
Indebtedness or other obligation of an Affiliate, enter into any other
transaction, directly or indirectly, with or for the benefit of an Affiliate,
unless such transaction or series of related transactions are between
the Company and a wholly-owned subsidiary or two wholly-owned subsidiaries
of the Company;
(xv) effect any liquidation, dissolution or winding up of the
Corporation; and
(xvi) authorize or issue, or obligate itself to issue, any equity
security (including options, warrants and other similar rights) other than
pursuant to the Corporation's 1999 Stock Incentive Plan as such plan is in
effect on the Purchase Date and amended thereafter to increase the maximum
aggregate shares included in such plan to not more than 1,000,000 shares
of Common Stock or pursuant to the conversion of the Preferred Stock or the
exercise of warrants or options outstanding on the Purchase Date, or
authorize or issue shares of the Common Stock pursuant to such stock
option/stock issuance plan in an aggregate amount in excess of 1,000,000
shares of Common Stock.
8. Definitions.
"Additional Shares of Series II Preferred Stock" shall have the meaning set
forth in Section 6(d)(v).
"Affiliate" means any other person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Corporation.
"Board" shall mean the Corporation's Board of Directors.
"Certificate" shall mean the Corporation's articles of incorporation, as
from time to time in effect.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the
assets of the Corporation; (ii) any other person or group of related Persons
for purposes of Section 13(d) of the Exchange Act (a "Group") (other than the
Permitted Holders) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing greater than 50% ofthe
aggregate ordinary voting power for the election of directors of the
Corporation; or (iii) during any two-year period the directors who constituted
the Board at the beginning of such period, (together with any new directors
whose election by such Board or whose nomination for election by the
shareholders of the Corporation was approved by a vote of at least a majority
of the directors of the Corporation then still in office who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute
a majority of the Board then in office.
"Common Stock Equivalents" shall mean Options and Convertible Securities.
"Consolidated Net Income" means with respect to any period, the net income of
the Corporation for such period determined on a consolidated basis in accordance
with GAAP, adjusted by excluding, (a) all extraordinary gains (but not losses)
for such period, (b) all gains (but not losses) from sales or other dispositions
of assets out of the ordinary course of business (net of taxes, fees and
expenses relating to the transaction giving rise thereto) for such period, (c)
that portion of such net income derived from or in respect of investments,
except to the extent actually received in cash by the Corporation, and (d) the
net income (or loss) or any other entity combined with the Corporation on a
"pooling of interests" basis attributable to any period prior to the date of
combination.
"Conversion Effective Date" shall mean, with respect to each Note, the
date so elected by the holder of such Note pursuant to Section 6.
"Conversion Price" means initially $1,000 per share of Series II Preferred
Stock; provided, however, that the Conversion Price shall be subject to
adjustment as provided in Section 6.
"Conversion Rights" shall have the meaning set forth in Section 6.
"Convertible Securities" means securities convertible into or exchangeable
for Series II Preferred Stock.
"Corporation" means Meridian USA Holdings, Inc., a Florida corporation.
A "Designated Event" means (i) the acquisition of the Corporation by another
entity (including, without limitation, any reorganization, merger or
consolidation, but excluding any merger effected exclusively for the purpose of
changing the domicile of the Corporation), (ii) a sale, lease, exchange or other
transfer of all or substantially all of the assets of the Corporation, (iii) a
sale of all or substantially all of the outstanding equity securities of the
Corporation (whether pursuant to a merger, consolidation, recapitalization,
share purchase or otherwise), or (iv) any other transaction or series of related
transactions resulting in a Change of Control of the Corporation.
"EBITDA" means the sum of, without duplication, (i) Consolidated Net Income for
such period, plus (ii) consolidated interest expense for such period, determined
in accordance with GAAP, plus (iii) all cash dividend payments on any series of
preferred stock or Series II Preferred Stock of the Corporation for such period,
determined in accordance with GAAP, plus (iv) provision for taxes based on
income or profits for such period, determined in accordance with GAAP, plus (v)
consolidated depreciation, amortization and other non-cash charges of the
Corporation and its subsidiaries required to be reflected as expenses on the
books and records of the Corporation for such period, determined in accordance
with GAAP, minus (vi) cash payments made in such period with respect to any
recurring non-cash charges previously added back pursuant to clause (iv).
"Effective Price" shall have the meaning set forth in Section 6(d)(vi).
"GAAP" means generally accepted accounting principles consistently applied.
"Indebtedness" means all liabilities, contingent, fixed or otherwise, (a) for
borrowed money, (b) evidenced by bonds, notes, debentures or similar instruments
or representing the deferred portion of the purchase price of any property, (c)
secured by a lien, encumbrance or security interest upon property owned by the
Corporation or its subsidiaries, or (d) relating to a capitalized lease
obligation.
"Investment" means all investments in any Person (including Affiliates) in
the form of direct or indirect loans (including guarantees of Indebtedness or
other obligations),advances, capital contributions, transfers of assets outside
the ordinary course of business consistent with past practice, purchases or
other acquisitions for consideration of Indebtedness, equity interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"Majority Noteholders" means holders of more than 50% of the outstanding
Notes.
"Notes" means the Series A Convertible Notes of the Corporation due 2010.
"Options" means any grant, issue or sale by the Corporation of any warrants,
options or other rights to subscribe for or to purchase Series II Preferred
Stock or Convertible Securities.
"Original Issue Price" shall have the meaning set forth in Section 4(a).
"Permitted Holders" means Alan Posner, Mark Streisfeld and their respective
Affiliates.
"Permitted Investments" means (a) U.S. dollar denominated time deposits or
certificates of deposit or (b) interests in regulated money market mutual funds
which invest solely in (i) securities issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) or (ii) assets described in clause (a) above.
"Preferred Stock" means the Series I Preferred Stock and the Series II
Preferred Stock.
"Purchase Agreement" means that certain Securities Purchase Agreement
dated as of June 16, 2000, by and among the Corporation and those certain
purchasers signatory thereto.
"Purchase Date" means June 16, 2000.
"Redemption Date" means the date 45 days after the date of any Redemption
Notice.
"Redemption Notice" means a written notice by one or more holders of Notes to
the Corporation stating their intention to exercise the Redemption Right and the
principal amount of each such holder's Notes to be redeemed.
"Redemption Price" means the per share Special Liquidation Payment
calculated as of the Redemption Date.
"Redemption Right" shall have the meaning set forth in Section 5.
"Redemption Trigger Date" shall have the meaning set forth in Section 5.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission thereunder, or
any similar United States federal statute.
"Securityholders Agreement" means that certain Securityholders Agreement
dated as of June 16, 2000, by and among the Corporation, certain holders of
Series II Preferred Stock signatory thereto, certain holders of Series I
Preferred Stock signatory thereto, and each purchaser of Notes pursuant
to the Purchase Agreement.
"Series I Preferred Stock" means the Series I Convertible Preferred
Stock, $1.00 par value per share, of the Corporation.
"Series II Preferred Stock" means the Series II Convertible
Preferred Stock,$.01 par value per share, of the Corporation.
"Special Liquidation Payment" shall have the meaning set forth in
Section 4(a).
IN WITNESS WHEREOF, the Corporation has caused this Instrument to be duly
executed.
MERIDIAN USA HOLDINGS, INC.
/s/ Mark Streisfeld
------------------------
Mark Streisfeld
President
Attest:
/s/ Alan Posner
-------------------
Alan Posner
Secretary
