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Exhibit 4.1
THIS NOTE AND THE SHARES
OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN
THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER
THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF MAY BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
SUCH STATE SECURITIES LAWS.
AMBIENT CORPORATION
Secured Convertible Promissory
Note
due July 31, 2010
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No. CN-07-01
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$7,500,000
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Dated: July 31, 2007
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For value received, Ambient Corporation, a Delaware
corporation (the " Maker " or the " Company "),
hereby promises to pay to the order of Vicis Capital Master Fund
(together with its successors, representatives, and permitted
assigns, the " Holder "), in accordance with the terms
hereinafter provided, the principal amount of Seven Million Five
Hundred Thousand Dollars ($7,500,000.00), together with
interest thereon. In addition to this Note, the Maker may be
issuing separate secured convertible promissory notes (the “
Other Notes ”) to separate purchasers (the “
Other Holders ”) pursuant to securities purchase
agreements substantially similar to the Purchase Agreement (as
defined in Section 1.1 hereof). This Note and the Other
Notes are sometimes referred to as the “ Notes
”.
All payments under or pursuant to this Note shall
be made, without setoff or counterclaim and without any withholding
or deduction whatsoever, in United States Dollars in
immediately available funds to the Holder at the address of the
Holder first set forth above or at such other place as the Holder
may designate from time to time in writing to the Maker or by wire
transfer of funds to the Holder's account, instructions for which
are attached hereto as Exhibit A . The outstanding
principal balance of this Note shall be due and payable on July 31,
2010 (the " Maturity Date ") or at such earlier time as
provided herein. Notwithstanding anything herein to the
contrary, this Note may not be prepaid in whole or part, except
with the written consent of the Holder.
ARTICLE I
Section 1.1
Purchase Agreement . This Note has
been executed and delivered pursuant to the Securities Purchase
Agreement dated as of July 31, 2007 (the " Purchase
Agreement ”) by and among the Maker and the purchasers
listed therein. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms
in the Purchase Agreement.
Section 1.2
Interest .
(a)
Beginning on the date that is one (1) year
following the issuance date of this Note (the “ Issuance
Date ”), the outstanding principal balance of this Note
shall bear interest, in arrears, at a rate per annum equal to eight
percent (8%), payable quarterly commencing on September 30, 2008
and on the first business day of each following three-period at the
option of the Maker in (A) cash or (B) shares of the Maker’s
common stock, $0.001 par value per share (the “ Common
Stock ”) that are eligible for public resale by the
Holder under an effective registration statement covering such
shares. The Maker shall provide irrevocable written notice to
the Holder of the form of interest payment at least ten (10) days
prior to an interest payment date. If no such notice is
provided at least ten (10) days prior to an interest payment date,
the Maker must make the interest payment in cash. In
addition, the Maker must make interest payments in cash if it is
unable to make interest payments in shares of Common Stock that are
eligible for public resale by the Holder under an effective
registration statement covering such shares. The
number of shares of Common Stock to be issued as
payment of accrued and unpaid interest shall be determined by
dividing (i) the total amount of accrued and unpaid interest to be
converted into Common Stock by (ii) ninety percent (90%) of the
average of the VWAP (as defined below) for the ten (10) Trading
Days immediately preceding the interest payment date (the “
Average VWAP ”); provided , however ,
the Maker shall not be permitted to issue registered shares of
Common Stock as interest payments in the event that (A) the Average
VWAP is less than $0.15 or (B) the average daily trading volume for
the thirty (30) Trading Days immediately preceding the interest
payment date equals at least two hundred percent (200%) of the
number of shares of Common Stock that would be issued to the Holder
as an interest payment. Interest shall be computed on the
basis of a 360-day year of twelve (12) 30-day months and shall
accrue commencing on the Issuance Date. Furthermore, upon the
occurrence of an Event of Default (as defined in Section 2.1
hereof), then to the extent permitted by law, the Maker will pay
interest to the Holder, payable on demand, on the outstanding
principal balance of the Note from the date of the Event of Default
until such Event of Default is cured at the rate of the lesser of
fifteen percent (15%) and the maximum applicable legal rate per
annum.
(b)
The term “VWAP” means, for any date,
(i) the daily volume weighted average price of the Common Stock for
such date on the OTC Bulletin Board as reported by Bloomberg
Financial L.P. (based on a trading day from 9:30 a.m. Eastern Time
to 4:02 p.m. Eastern Time); (ii) if the Common Stock is not
then listed or quoted on the OTC Bulletin Board and if prices for
the Common Stock are then reported in the “Pink Sheets”
published by the Pink Sheets, LLC (or a similar organization or
agency succeeding to its functions of reporting prices), the most
recent bid price per share of the Common Stock so reported; or
(iii) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in
good faith by the Holder and reasonably acceptable to the
Maker.
Section 1.3
Security Agreement . The
obligations of the Maker hereunder are secured by a continuing
security interest in all of the assets of the Maker pursuant to
the terms of a security agreement dated as of July 31, 2007 by
and among the Maker, on the one hand, and the Holder and the
Other Holders, on the other hand.
Section 1.4
Payment on Non-Business Days .
Whenever any payment to be made shall be due on a
Saturday, Sunday or a public holiday under the laws of the State
of New York, such payment may be due on the next succeeding
business day and such next succeeding day shall be included in
the calculation of the amount of accrued interest payable on
such date.
Section 1.5
Transfer . This Note may be
transferred or sold, subject to the provisions of Section 4.8 of
this Note, or pledged, hypothecated or otherwise granted as
security by the Holder.
Section 1.6
Replacement . Upon receipt of a
duly executed, notarized and unsecured written statement from
the Holder with respect to the loss, theft or destruction of
this Note (or any replacement hereof) and a standard indemnity,
or, in the case of a mutilation of this Note, upon surrender and
cancellation of such Note, the Maker shall issue a new Note, of
like tenor and amount, in lieu of such lost, stolen, destroyed
or mutilated Note.
ARTICLE II
EVENTS OF DEFAULT; REMEDIES
Section 2.1
Events of Default .
(a)
The occurrence of any of the following events shall
be an "Event of Default" under this Note:
(i)
the Maker shall fail to make any principal or
interest payments on the date such payments are due, whether at
maturity or at a date fixed for prepayment or by acceleration or
otherwise, and such default is not fully cured within two (2)
business days after the Holder delivers written notice to the
Maker of the occurrence thereof; or
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(ii)
the failure of the registration statement (the
“ Registration Statement ”) providing for the
resale of shares of the Maker’s common stock, $0.001 par
value per share (the “ Common Stock ”)
issuable upon conversion of this Note to be declared effective
by the Securities and Exchange Commission on or prior to the
date which is two hundred seventy (270) days after the Issuance
Date, subject to the provisions of the Registration Rights
Agreement, including, without limitation, Section 2(b) thereof;
or
(iii)
the suspension from listing, without subsequent
listing on any one of, or the failure of the Common Stock to be
listed or quoted on at least one of the OTC Bulletin Board, the
American Stock Exchange, the Nasdaq Global Market, the Nasdaq
Capital Market or The New York Stock Exchange, Inc. for a period
of ten (10) consecutive Trading Days; or
(iv)
the Maker's notice to the Holder, including by
way of public announcement, at any time, of its inability to
comply (including for any of the reasons described in Section
3.8(a) hereof) or its intention not to comply with proper
requests for conversion of this Note into shares of Common
Stock; or
(v)
the Maker shall fail to (i) timely deliver the
shares of Common Stock upon conversion of the Note by the second
Trading Day after the required Delivery Date or otherwise in
accordance with the provisions of the Transaction Documents,
(ii) file the Registration Statement in accordance with the
terms of the Registration Rights Agreement or (iii) make the
payment of any fees and/or liquidated damages under this Note,
the Purchase Agreement or the Registration Rights Agreement,
which failure in the case of items (i) and (iii) of this Section
is not remedied within ten (10) Trading Days after the
incurrence thereof and, solely with respect to item (iii) above,
ten (10) Trading Days after the Holder delivers written notice
to the Maker of the incurrence thereof; or
(vi)
while the Registration Statement is required to
be maintained effective pursuant to the terms of the
Registration Rights Agreement, the effectiveness of the
Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to
the Holder for sale of the Registrable Securities (as defined in
the Registration Rights Agreement) in accordance with the terms
of the Registration Rights Agreement, and such lapse or
unavailability continues for a period of ten (10) consecutive
Trading Days, provided that the Maker has not exercised
its rights pursuant to Section 3(n) of the Registration Rights
Agreement; or
(vii)
default shall be made in the performance or
observance of (i) any material covenant, condition or agreement
contained in this Note (other than as set forth in clause (f) of
this Section 2.1) and such default is not fully cured within
five (5) business days after the Holder delivers written notice
to the Maker of the occurrence thereof or (ii) any material
covenant, condition or agreement contained in the Purchase
Agreement, the Other Notes, or Sections 5, 6, 7(c) and 7(d) of
the Registration Rights Agreement and such default is not fully
cured within five (5) business days after the Holder delivers
written notice to the Maker of the occurrence thereof;
or
(viii)
any material representation or warranty made by
the Maker herein or in the Purchase Agreement, the Registration
Rights Agreement, or any other Transaction Document shall prove
to have been false or incorrect or breached in a material
respect on the date as of which made and the Holder delivers
written notice to the Maker of the occurrence thereof; or
(ix)
the Maker shall (A) default in any payment of
any amount or amounts of principal of or interest on any
Indebtedness (other than the Indebtedness hereunder) the
aggregate principal amount of which Indebtedness is in excess of
$500,000 or (B) default in the observance or performance of any
other agreement or condition relating to any such Indebtedness
or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition
is to cause, or to permit the holder or holders or beneficiary
or beneficiaries of such Indebtedness to cause with the giving
of notice if required, such Indebtedness to become due prior to
its stated maturity; or
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(x)
the Maker shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property or assets, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a
voluntary case under the United States Bankruptcy Code (as now
or hereafter in effect) or under the comparable laws of any
jurisdiction (foreign or domestic), (iv) file a petition seeking
to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of
creditors' rights generally, (v) acquiesce in writing to any
petition filed against it in an involuntary case under United
States Bankruptcy Code (as now or hereafter in effect) or under
the comparable laws of any jurisdiction (foreign or domestic),
or admit in writing its inability to pay its debts (vi) issue a
notice of bankruptcy or winding down of its operations or issue
a press release regarding same, or (vii) take any action under
the laws of any jurisdiction (foreign or domestic) analogous to
any of the foregoing; or
(xi)
a proceeding or case shall be commenced in
respect of the Maker, without its application or consent, in any
court of competent jurisdiction, seeking (i) the liquidation,
reorganization, moratorium, dissolution, winding up, or
composition or readjustment of its debts, (ii) the appointment
of a trustee, receiver, custodian, liquidator or the like of it
or of all or any substantial part of its assets in connection
with the liquidation or dissolution of the Maker or (iii)
similar relief in respect of it under any law providing for the
relief of debtors, and such proceeding or case described in
clause (i), (ii) or (iii) shall continue undismissed, or
unstayed and in effect, for a period of sixty (60) days or any
order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or
under the comparable laws of any jurisdiction (foreign or
domestic) against the Maker or action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the
foregoing shall be taken with respect to the Maker and shall
continue undismissed, or unstayed and in effect for a period of
thirty (30) days; or
(xii)
the occurrence of an Event of Default under the
Other Notes; or
(xiii)
if any of the Company or its Subsidiaries shall
default in the observance or performance of any term or
provision of a material agreement to which it is a party or by
which it is bound, which default will have a Material Adverse
Effect and such default is not waived or cured within the
applicable grace period provided for in such agreement; or
(xiv)
if a final judgment which, either alone or
together with other outstanding final judgments against the
Company and its Subsidiaries, exceeds an aggregate of $250,000
shall be rendered against the Company or any Subsidiary and such
judgment shall have continued undischarged or unstayed for
forty-five (45) days after entry thereof.
(b)
Notwithstanding anything to the contrary contained
herein, after the Company shall have provided the holder with a
Forced Conversion Notice in accordance with the provisions of
Section 3.5 hereof, with respect to the portion of the Note subject
to such notice, the term "Event of Default" shall mean:
(i)
The Company shall default in the payment of
principal or interest on this Note or any other amount due
hereunder, and, in any such instance, the same shall continue
for a period of five (5) Trading Days; or
(ii)
Subject to the terms of the Purchase Agreement,
the Company fails to authorize or to cause its Transfer Agent to
issue shares of Common Stock upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of
this Note (provided, however, that for purposes of this
provision, such failure to cause the Transfer Agent to issue
such shares shall not be deemed to occur until two (2) Trading
Days after the Delivery Date), fails to transfer or to cause its
Transfer Agent to transfer any certificate for shares of Common
Stock issued to the Holder upon conversion of this Note and when
required by this Note or any other Transaction Document, and
such transfer is otherwise lawful, or fails to remove any
restrictive legend on any certificate or fails to cause its
Transfer Agent to remove such restricted legend, in each case
where such removal is lawful, as and when required by this Note,
or any other Transaction Document, and any such failure shall
continue uncured for five (5) Trading Days.
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Section 2.2
Remedies Upon An Event of Default .
If an Event of Default shall have occurred and shall be
continuing, the Holder of this Note may at any time at its
option, (a) declare the entire unpaid principal balance of this
Note, together with all interest accrued hereon, due and
payable, and thereupon, the same shall be accelerated and so due
and payable, without presentment, demand, protest, or notice,
all of which are hereby expressly unconditionally and
irrevocably waived by the Maker; provided ,
however , that upon the occurrence of an Event of Default
described in (i) Sections 2.1 (j) or (k), the outstanding
principal balance and accrued interest hereunder shall be
automatically due and payable and (ii) Sections 2.1 (a)-(i),
(l), (m) and (n), Holder may demand the prepayment of this Note
pursuant to Section 3.7 hereof, (b) demand that the principal
amount of this Note then outstanding shall be converted into
shares of Common Stock at a Conversion Price per share
calculated pursuant to Section 3.1 hereof assuming that the date
that the Event of Default occurs is the Conversion Date (as
defined in Section 3.1 hereof), or (c) exercise or otherwise
enforce any one or more of the Holder's rights, powers,
privileges, remedies and interests under this Note, the Purchase
Agreement, the Registration Rights Agreement or applicable law.
In case of a default in the payment of any principal of or
interest on a Note, the Maker will pay to the Holder such
further amount as shall be sufficient to cover the cost and the
expenses of collection, including, without limitation,
reasonable attorney's fees, expenses and disbursements. No
course of delay on the part of the Holder shall operate as a
waiver thereof or otherwise prejudice the right of the Holder.
No remedy conferred hereby shall be exclusive of any other
remedy referred to herein or now or hereafter available at law,
in equity, by statute or otherwise.
ARTICLE III
CONVERSION; ANTIDILUTION; PREPAYMENT
Section 3.1
Conversion Option .
(a)
At any time on or after the Issuance Date, this
Note shall be convertible (in whole or in part), at the option of
the Holder (the " Conversion Option "), into such number of
fully paid and non-assessable shares of Common Stock as is
determined by dividing (x) the sum of that portion of the
outstanding principal balance under this Note and any acrrued but
unpaid interest thereon as of such date that the Holder elects to
convert by (y) the Conversion Price (as defined in Section 3.2(a)
hereof) then in effect on the date on which the Holder faxes a
notice of conversion (the " Conversion Notice "), duly
executed, to the Maker (facsimile number (617) 663-6191, Attn.:
Chief Executive Officer) (the “ Voluntary Conversion
Date ”), provided, however, that the Conversion Price
shall be subject to adjustment as described in Section 3.6 of this
Note. The Holder shall deliver this Note to the Maker at the
address designated in the Purchase Agreement at such time that this
Note is fully converted. With respect to partial conversions
of this Note, the Maker shall keep written records of the amount of
this Note converted as of each Conversion Date.
Section 3.2
Conversion Price .
(a)
The term " Conversion Price " shall mean
$0.075, subject to adjustment under Section 3.6 hereof.
(b)
Notwithstanding any of the foregoing to the
contrary, if during any period (a " Black-out Period "), a
Holder is unable to trade any Common Stock issued or issuable upon
conversion of this Note immediately due to the postponement of
filing or delay or suspension of effectiveness of the Registration
Statement or because the Maker has otherwise informed such Holder
that an existing prospectus cannot be used at that time in the sale
or transfer of such Common Stock (provided that such postponement,
delay, suspension or fact that the prospectus cannot be used is not
due to factors solely within the control of the Holder of this Note
or due to the Maker exercising its rights under Section 3(n) of the
Registration Rights Agreement), such Holder shall have the option
but not the obligation on any Conversion Date within ten (10)
Trading Days following the expiration of the Black-out Period of
using the Conversion Price applicable on such Conversion Date or
any Conversion Price selected by such Holder that would have been
applicable had such Conversion Date been at any earlier time during
the Black-out Period or within the ten (10) Trading Days
thereafter. In no event shall the Black-out Period have any
effect on the Maturity Date of this Note.
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Section 3.3
Mechanics of Conversion .
(a)
Not later than three (3) Trading Days after any
Conversion Date (the “ Delivery Date ”), the
Maker or its designated transfer agent, as applicable, shall issue
and deliver to the Depository Trust Company (“ DTC
”) account on the Holder’s behalf via the Deposit
Withdrawal Agent Commission System (“ DWAC ”) as
specified in the Conversion Notice, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to
which the Holder shall be entitled. In the alternative, not
later than the Delivery Date, the Maker shall deliver to the
applicable Holder by express courier a certificate or certificates
which shall be free of restrictive legends and trading restrictions
(other than those required by Section 5.1 of the Purchase
Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of this Note. If in the case of
any Conversion Notice such certificate or certificates are not
delivered to or as directed by the applicable Holder by the
Delivery Date, the Holder shall be entitled by written notice to
the Maker at any time on or before its receipt of such certificate
or certificates thereafter, to rescind such conversion, in which
event the Maker shall immediately return this Note tendered for
conversion, whereupon the Maker and the Holder shall each be
restored to their respective positions immediately prior to the
delivery of such notice of revocation, except that any amounts
described in Sections 3.3(b) and (c) shall be payable through the
date notice of rescission is given to the Maker.
(b)
The Maker understands that a delay in the delivery
of the shares of Common Stock upon conversion of this Note beyond
the Delivery Date could result in economic loss to the Holder.
If the Maker fails to deliver to the Holder such shares via
DWAC or a certificate or certificates pursuant to this Section
hereunder by the Delivery Date, the Maker shall pay to such Holder,
in cash, $10,000 per Trading Day for each Trading Day after the
Delivery Date until such certificate is delivered (which amount
shall be paid as liquidated damages and not as a penalty).
Nothing herein shall limit a Holder's right to pursue actual
damages for the Maker's failure to deliver certificates
representing any Securities as required by the Transaction
Documents, and the Holder shall have the right to pursue all
remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief. Notwithstanding anything to the contrary contained herein,
the Holder shall be entitled to withdraw a Conversion Notice, and
upon such withdrawal the Maker shall only be obligated to pay the
liquidated damages accrued in accordance with this Section 3.3(b)
through the date the Conversion Notice is withdrawn.
(c)
In addition to any other rights available to the
Holder, if the Maker fails to cause its transfer agent to transmit
to the Holder a certificate or certificates representing the shares
of Common Stock issuable upon conversion of this Note on or before
the Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the shares of Common Stock issuable upon conversion of
this Note which the Holder anticipated receiving upon such exercise
(a “ Buy-In” ), then the Maker shall (1) pay in
cash to the Holder the amount by which (x) the Holder’s total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (A) the number of shares of Common Stock issuable
upon conversion of this Note that the Maker was required to deliver
to the Holder in connection with the conversion at issue times (B)
the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder,
either reinstate the portion of the Note and equivalent number of
shares of Common Stock for which such conversion was not honored or
deliver to the Holder the number of shares of Common Stock that
would have been issued had the Maker timely complied with its
conversion and delivery obligations hereunder. For example,
if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause
(1) of the immediately preceding sentence the Maker shall be
required to pay the Holder $1,000. The Holder shall provide the
Maker written notice indicating the amounts payable to the Holder
in respect of the Buy-In, together with applicable confirmations
and other evidence reasonably requested by the Maker. Nothing
herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief with respect to the Maker’s failure to
timely deliver certificates representing shares of Common Stock
upon conversion of this Note as required pursuant to the terms
hereof.
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Section 3.4
Ownership Caps and Certain Conversion
Restrictions .
(a)
Notwithstanding anything to the contrary set forth
in Section 3 of this Note, at no time may the Holder convert all or
a portion of this Note if the number of shares of Common Stock to
be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by the Holder at such
time (including pursuant to the Warrants), the number of shares of
Common Stock which would result in the Holder beneficially owning
(as determined in accordance with Section 13(d) of the Exchange Act
and the rules thereunder) more than 4.99% of all of the Common
Stock outstanding at such time; provided , however ,
that upon the Holder providing the Maker with sixty-one (61) days
notice (pursuant to Section 4.1 hereof) (the " Waiver Notice
") that the Holder would like to waive this Section 3.4(a) with
regard to any or all shares of Common Stock issuable upon
conversion of this Note, this Section 3.4(a) will be of no force or
effect with regard to all or a portion of the Note referenced in
the Waiver Notice. In all circumstances, the delivery by the
Holder of a Conversion Notice shall be deemed to be the
Holder’s representation that such conversion conforms to the
provisions of this Section 3.4(a) and the Maker shall be under no
obligation to verify or ascertain compliance by the Holder with
this provision.
(b)
Notwithstanding anything to the contrary set forth
in Section 3 of this Note, at no time may the Holder convert all or
a portion of this Note if the number of shares of Common Stock to
be issued pursuant to such conversion, when aggregated with all
other shares of Common Stock owned by the Holder at such time,
would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules
thereunder) in excess of 9.99% of the then issued and outstanding
shares of Common Stock outstanding at such time (including pursuant
to the Warrants); provided , however , that upon the
Holder providing the Maker with a Waiver Notice that the Holder
would like to waive Section 3.4(b) of this Note with regard to any
or all shares of Common Stock issuable upon conversion of this
Note, this Section 3.4(b) shall be of no force or effect with
regard to all or a portion of the Note referenced in the Waiver
Notice. In all circumstances, the delivery by the Holder of a
Conversion Notice shall be deemed to be the Holder’s
representation that such conversion conforms to the provisions of
this Section 3.4(b) and the Maker shall be under no obligation to
verify or ascertain compliance by the Holder with this
provision.
Section 3.5
Forced Conversion .
(a)
Notwithstanding anything herein to the contrary, if
after the effective date of the Registration Statement, each of the
VWAPs for any 20 consecutive Trading Days (such period commencing
only after such effective date, such period the " Threshold
Period ")) exceeds $0.375 (subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
original issue date of this note), the Company may, at any time
after the fifth (5 th ) Trading Day after the end of any
such period, deliver a notice to the Holder (a " Forced
Conversion Notice " and the date such notice is received by the
Holder, the " Forced Conversion Notice Date ") to cause the
Holder to immediately convert all or part of the then outstanding
principal amount of this Note at the then current Conversion Price
(a " Forced Conversion "). The Company may only effect a
Forced Conversion Notice if all of the conditions specified in
Subsection (b) below are met through the applicable Threshold
Period until the date of the applicable Forced Conversion and
through and including the date such shares of Common Stock are
issued to the Holder. Any Forced Conversion shall be applied
ratably to all Holders based on their initial purchases of Notes
pursuant to the Purchase Agreement or in the Additional Note and
Warrant Financing.
(b)
The Company may effect a Forced Conversion if at
such time the conditions below are satisfied: (i) there is an
effective Registration Statement covering the resale of the shares
issuable on conversion of this Note or, alternatively, the shares
issuable upon conversion of the Note are subject to the provisions
of Rule 144(k) promulgated under the Securities Act of 1933, as
amended, and (ii) the Common Stock of the Company, including the
Conversion Shares to be issued on the Mandatory Conversion Date,
are eligible for trading on a Trading Market.
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(c)
The provisions of Section 3.4 shall apply on the
date of the Forced Conversion. If, as a result of such provisions,
the entire portion of the Note provided for in the Forced
Conversion Notice is not converted as herein provided, the Company,
without further notice to the Holder, shall be deemed to have
timely given one or more Forced Conversion Notices for the balance
of such portion providing for successive Forced Conversion dates
until such portion of this Note is fully converted or paid in full
(or some combination thereof).
Section 3.6
Adjustment of Conversion Price.
(a)
The Conversion Price shall be subject to adjustment
from time to time as follows:
(i)
Adjustments for Stock Splits and Combinati
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