AMENDED AND RESTATED CALLABLE SECURED CONVERTIBLE NOTE

 

 

                                                                    Exhibit 10.5

 

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED

         UNDER   THE   SECURITIES   ACT   OF   1933,   AS   AMENDED   (THE   "ACT").   THE

         SECURITIES   MAY NOT BE SOLD,   TRANSFERRED OR ASSIGNED IN THE ABSENCE OF

         AN EFFECTIVE   REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,

         OR AN OPINION OF COUNSEL IN FORM,   SUBSTANCE   AND SCOPE   CUSTOMARY   FOR

         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT

         REQUIRED   UNDER   SAID   ACT OR   UNLESS   SOLD   PURSUANT   TO   RULE   144 OR

         REGULATION S UNDER SAID ACT.

 

 

             AMENDED AND RESTATED CALLABLE SECURED CONVERTIBLE NOTE

 

 

December 9, 2005                                              $_________________

 

                  FOR VALUE   RECEIVED,   EPICUS   COMMUNICATIONS   GROUP,   INC.,   a

Florida corporation (hereinafter called the "BORROWER"),   hereby promises to pay

to the order of _______________________ or registered assigns (the "HOLDER") the

sum of _________________________ Dollars ($___________), payable $_________ (the

"MONTHLY   AMOUNT")   on the first day of each   month   commencing   on June 9, 2006

(each, a "REPAYMENT   DATE") with any unpaid principal balance due on December 9,

2008 (the "MATURITY DATE"),   and to pay interest on the unpaid principal balance

hereof at the rate of nine   percent   (9%) (the   "INTEREST   RATE") per annum from

December   9, 2005 (the "ISSUE   DATE")   until the same   becomes due and   payable,

whether   at   maturity   or   upon   acceleration   or by   prepayment   or   otherwise;

provided,   however,   that on the last business day of each month after the Issue

Date (each,   a   "DETERMINATION   DATE"),   if the Average   Daily Price (as defined

herein) of the common   stock,   $.001 par value per share,   of the Borrower   (the

"COMMON STOCK") for each day of the month ending on the applicable Determination

Date exceeds one hundred   twenty five percent (125%) of the Initial Market Price

(as defined   herein),   the Interest Rate for such month shall   automatically   be

reduced to zero percent (0.0%). Any amount of principal or interest on this Note

which is not paid when due shall bear   interest   at the rate of fifteen   percent

(15%)   per annum   from the due date   thereof   until   the same is paid   ("DEFAULT

INTEREST").   Interest   shall   commence   accruing   on the   Issue   Date,   shall be

computed on the basis of a 365-day   year and the actual   number of days   elapsed

and shall be payable   monthly in arrears.   All   payments due   hereunder   (to the

extent not   converted   into Common Stock in   accordance   with the terms   hereof)

shall be made in lawful   money of the United   States of   America.   All   payments

shall be made at such address as the Holder shall hereafter give to the Borrower

by written notice made in accordance with the provisions of this Note.   Whenever

any amount expressed to be due by the terms of this Note is due on any day which

is not a business day, the same shall instead be due on the next   succeeding day

which is a business day and, in the case of any   interest   payment date which is

not the date on which this Note is paid in full,   the   extension of the due date

thereof shall not be taken into account for purposes of   determining   the amount

of interest   due on such date.   As used in this Note,   the term   "business   day"

shall mean any day other than a   Saturday,   Sunday or a day on which   commercial

banks in the city of New York,   New York are   authorized   or   required by law or

executive order to remain closed.   Each   capitalized   term used herein,   and not

otherwise   defined,   shall have the   meaning   ascribed   thereto in that   certain

Securities   Purchase   Agreement,   dated December 7, 2005, pursuant to which this

Note was originally issued (the "PURCHASE AGREEMENT").

<PAGE>

 

                  This   Note   is   free   from   all   taxes,    liens,    claims   and

encumbrances   with   respect   to the issue   thereof   and shall not be   subject to

preemptive   rights or other similar rights of   shareholders   of the Borrower and

will not impose personal   liability upon the holder thereof.   The obligations of

the   Borrower   under   this   Note   shall   be   secured   by that   certain   Security

Agreement, dated December 7, 2005, by and among the Borrower, the Holder and the

other parties thereto (the "SECURITY AGREEMENT").

 

                  The following terms shall apply to this Note:

 

                                   ARTICLE I.

                           CONVERSION REPAYMENT OPTION

 

                   1.1 PAYMENT OF MONTHLY AMOUNT IN CASH OR COMMON STOCK. Subject

to the terms hereof,   the Borrower shall have the option to remit payment of the

Monthly Amount on each Repayment Date either in cash or in registered   shares of

Common Stock,   or a combination of both.   Each month by the fifth (5th) business

day prior to each Repayment Date (the "NOTICE DATE"), the Borrower shall deliver

to Holder a written notice in the form of Exhibit B attached   hereto electing to

convert the Monthly   Amount payable on the next Repayment Date in either cash or

registered   shares of Common Stock, or a combination of both (each, a "REPAYMENT

ELECTION   Notice").   If a   Repayment   Election   Notice is not   delivered   by the

Borrower on or before the applicable   Notice Date for such Repayment   Date, then

the Borrower   shall pay the Monthly   Amount due on such   Repayment Date in cash.

Any portion of the Monthly   Amount   paid in cash on a Repayment   Date,   shall be

paid to the Holder an amount equal to the portion of the Monthly   Amount due and

owing to Holder on the Repayment Dale. If the Borrower converts all or a portion

of the Monthly Amount in registered   shares of Common Stock,   the number of such

shares to be issued by the Borrower to the Holder on such   Repayment   Date shall

be the number determined by dividing (x) the portion of the Monthly Amount to be

paid in shares of Common Stock, by (y) the then applicable Conversion Price.

 

                  1.2 CREDIT AGAINST   MONTHLY AMOUNT.   Any amounts   converted by

the Borrower   pursuant to Section 2.1 shall be deemed to constitute   payments of

outstanding   principal   applying to Monthly Amounts for the remaining   Repayment

Dates in chronological order.

 

                                       2

<PAGE>

 

                                    ARTICLE II.

                               CONVERSION RIGHTS

 

                  2.1   CONVERSION   RIGHT.   If the average of the   Average   Daily

Prices (as defined in Section 2.2(a)) for the preceding five (5) trading days is

greater than the Initial Market Price (as defined in Section 2.2(a)), the Holder

shall   have the   right   from   time to   time,   and at any time on or prior to the

earlier of (i) the   Maturity   Date and (ii) the date of   payment of the   Default

Amount (as defined in Article IV) pursuant to Section   2.6(a) or Article IV, the

Optional   Prepayment   Amount (as defined in Section 6.1 or any payments pursuant

to Section 2.7, each in respect of the remaining outstanding principal amount of

this Note to convert all or any part of the outstanding principal amount of this

Note into fully paid and   non-assessable   shares of Common Stock, as such Common

Stock   exists   on the   Issue   Date,   or any   shares   of   capital   stock or other

securities   of the   Borrower   into which such Common   Stock shall   hereafter   be

changed   or   reclassified   at the   conversion   price   (the   "CONVERSION   PRICE")

determined as provided herein (a "Conversion");   PROVIDED,   HOWEVER,   that if an

Event of Default   shall have occurred and be   continuing,   the Holder shall have

the right to convert all or any part of the outstanding principal amount of this

Note into fully paid and   non-assessable   shares of Common   Stock at any time at

the   Conversion   Price;   PROVIDED,   FURTHER that in no event shall the Holder be

entitled to convert   any portion of this Note in excess of that   portion of this

Note   upon   conversion   of which   the sum of (1) the   number of shares of Common

Stock   beneficially owned by the Holder and its affiliates (other than shares of

Common Stock which may be deemed beneficially owned through the ownership of the

unconverted   portion of the Notes or the   unexercised or unconverted   portion of

any other security of the Borrower (including,   without limitation, the warrants

issued   by   the   Borrower   pursuant   to the   Purchase   Agreement)   subject   to a

limitation   on   conversion or exercise   analogous to the   limitations   contained

herein)   and (2) the   number   of   shares   of   Common   Stock   issuable   upon   the

conversion   of the portion of this Note with respect to which the   determination

of this   proviso is being made,   would   result in   beneficial   ownership   by the

Holder and its affiliates of more than 4.9% of the outstanding   shares of Common

Stock.   For   purposes   of the   proviso to the   immediately   preceding   sentence,

beneficial ownership shall be determined in accordance with Section 13(d) of the

Securities   Exchange Act of 1934, as amended,   and Regulations 13D-G thereunder,

except as otherwise provided in clause (1) of such proviso. The number of shares

of   Common   Stock to be   issued   upon   each   conversion   of this   Note   shall be

determined   by   dividing   the   Conversion   Amount   (as   defined   below)   by   the

applicable   Conversion   Price then in effect on the date specified in the notice

of   conversion,   in the form   attached   hereto   as   Exhibit   A (the   "NOTICE   OF

CONVERSION"), delivered to the Borrower by the Holder in accordance with Section

2.4 below;   provided that the Notice of Conversion is submitted by facsimile (or

by other means resulting in, or reasonably expected to result in, notice) to the

Borrower   before 6:00 p.m., New York, New York time on such conversion date (the

"CONVERSION   DATE").   The term   "CONVERSION   AMOUNT" means,   with respect to any

conversion of this Note, the sum of (1) the principal   amount of this Note to be

converted in such   conversion PLUS (2) accrued and unpaid   interest,   if any, on

such   principal   amount   at the   interest   rates   provided   in this   Note to the

Conversion Date PLUS (3) Default Interest, if any, on the amounts referred to in

the   immediately   preceding   clauses   (1)   and/or   (2) PLUS (4) at the   Holder's

option,   any amounts   owed to the Holder   pursuant   to   Sections   2.3 and 2.4(g)

hereof   or   pursuant   to   Section   2(c)   of   that   certain   Registration   Rights

Agreement, dated as of December 7, 2005, executed in connection with the initial

issuance   of this   Note and the   other   Notes   issued   on the   Issue   Date   (the

"REGISTRATION RIGHTS Agreement").

 

                                        3

<PAGE>

 

                  2.2 CONVERSION PRICE.

 

                  (A)   CALCULATION OF CONVERSION   PRICE.   The   Conversion   Price

shall be equal to sixty   percent   (60%) of the Initial   Market Price (as defined

herein) (subject, in each case, to equitable adjustments for stock splits, stock

dividends   or   rights   offerings   by the   Borrower   relating   to the   Borrower's

securities or the   securities of any   subsidiary of the Borrower,   combinations,

recapitalization,   reclassifications,   extraordinary   distributions   and similar

events);   provided however,   that if an Event of Default shall have occurred and

be continuing,   the   Conversion   Price shall be equal to the lesser of (i) sixty

percent (60%) of the Initial Market Price or (ii) the Variable Conversion Price.

The "INITIAL   MARKET PRICE" shall mean $2.20.   The "VARIABLE   CONVERSION   PRICE"

shall mean the   Applicable   Percentage   (as defined   herein)   multiplied   by the

Market   Price (as   defined   herein).   "MARKET   PRICE"   means the   average of the

Average   Daily Prices (as defined   herein) for the Common Stock for the five (5)

days   prior to the date   the   Conversion   Notice   is sent by the   Holder   to the

Borrower via facsimile (the "CONVERSION DATE"). "AVERAGE DAILY PRICE" means, for

any security as of any date, the price based on the VWAP.   "VWAP" shall mean the

daily volume weighted average price of the Common Stock on the principal trading

market for such security as reported by Bloomberg, L.P. using the VWAP function.

If the Average Daily Price cannot be   calculated   for such security on such date

in the manner provided   above,   the Average Daily Price shall be the fair market

value as mutually   determined   by the   Borrower and the holders of a majority in

interest of the Notes being   converted for which the   calculation of the Average

Daily Price is   required   in order to   determine   the   Conversion   Price of such

Notes.   "TRADING DAY" shall mean any day on which the Common Stock is traded for

any   period on the   OTCBB,   or on the   principal   securities   exchange   or other

securities   market on which the Common Stock is then being   traded.   "APPLICABLE

PERCENTAGE" shall mean 25.0%.

 

                  (B)     CONVERSION     PRICE    DURING     MAJOR     ANNOUNCEMENTS.

Notwithstanding   anything   contained in Section   2.2(a) to the contrary,   in the

event   the   Borrower   (i)   makes   a   public   announcement   that   it   intends   to

consolidate   or merge with any other   corporation   (other than a merger in which

the Borrower is the surviving or continuing corporation and its capital stock is

unchanged)   or sell or transfer   all or   substantially   all of the assets of the

Borrower or (ii) any person,   group or entity (including the Borrower)   publicly

announces a tender offer to purchase 50% or more of the Borrower's   Common Stock

(or any other   takeover   scheme)   (the date of the   announcement   referred to in

clause (i) or (ii) is hereinafter referred to as the "ANNOUNCEMENT   DATE"), then

the Conversion Price shall,   effective upon the Announcement Date and continuing

through the Adjusted   Conversion Price   Termination Date (as defined below),   be

equal to the lower of (x) the Conversion   Price which would have been applicable

for a Conversion occurring on the Announcement Date and (y) the Conversion Price

that would otherwise be in effect.   From and after the Adjusted Conversion Price

Termination   Date,   the   Conversion   Price shall be   determined   as set forth in

Section 2.2(a).   For purposes hereof,   "ADJUSTED   CONVERSION   PRICE   TERMINATION

DATE" shall mean,   with respect to any proposed   transaction or tender offer (or

takeover scheme) for which a public announcement as contemplated by this Section

2.2(b) has been made,   the date upon which the   Borrower   (in the case of clause

(i) above) or the   person,   group or entity (in the case of clause   (ii)   above)

consummates or publicly announces the termination or abandonment of the proposed

transaction   or tender   offer (or   takeover   scheme)   which   caused this Section

2.2(b) to become operative.

 

                                        4

<PAGE>

 

                  2.3 AUTHORIZED   SHARES. The Borrower covenants that during the

period   the   conversion   right   exists,   the   Borrower   will   reserve   from   its

authorized and unissued   Common Stock a sufficient   number of shares,   free from

preemptive   rights,   to provide for the   issuance of Common   Stock upon the full

conversion   of this Note and the other Notes   issued   pursuant   to the   Purchase

Agreement. The Borrower is required at all times to have authorized and reserved

two times the number of shares that is actually issuable upon full conversion of

the Notes (based on the   Conversion   Price of the Notes or the Exercise Price of

the Warrants in effect from time to time) (the "RESERVED AMOUNT").   The Reserved

Amount shall be increased   from time to time in accordance   with the   Borrower's

obligations   pursuant to Section   4(h) of the Purchase   Agreement.   The Borrower

represents   that upon   issuance,   such shares   will be duly and validly   issued,

fully paid and   non-assessable.   In addition,   if the   Borrower   shall issue any

securities   or make any change to its capital   structure   which would change the

number of shares of Common   Stock into which the Notes shall be   convertible   at

the then current   Conversion   Price,   the   Borrower   shall at the same time make

proper provision so that thereafter there shall be a sufficient number of shares

of Common Stock   authorized   and   reserved,   free from   preemptive   rights,   for

conversion of the outstanding   Notes. The Borrower (i) acknowledges   that it has

irrevocably   instructed its transfer agent to issue   certificates for the Common

Stock   issuable upon   conversion of this Note, and (ii) agrees that its issuance

of this Note shall   constitute full authority to its officers and agents who are

charged with the duty of executing   stock   certificates to execute and issue the

necessary   certificates   for shares of Common Stock in accordance with the terms

and conditions of this Note.

 

                  If,   at any time a Holder   of this   Note   submits   a Notice of

Conversion,   and the Borrower does not have   sufficient   authorized but unissued

shares of Common Stock   available to effect such   conversion in accordance   with

the provisions of this Article II (a "CONVERSION   DEFAULT"),   subject to Section

5.8,   the   Borrower   shall issue to the Holder all of the shares of Common Stock

which are then   available   to effect such   conversion.   The portion of this Note

which the Holder included in its Conversion   Notice and which exceeds the amount

which is then   convertible   into   available   shares of Common Stock (the "EXCESS

AMOUNT") shall,   notwithstanding   anything to the contrary contained herein, not

be convertible   into Common Stock in accordance with the terms hereof until (and

at the Holder's option at any time after) the date   additional   shares of Common

Stock are   authorized by the Borrower to permit such   conversion,   at which time

the   Conversion   Price   in   respect   thereof   shall   be the   lesser   of (i)   the

Conversion Price on the Conversion   Default Date (as defined below) and (ii) the

Conversion   Price on the   Conversion   Date   thereafter   elected by the Holder in

respect   thereof.   In addition,   the Borrower   shall pay to the Holder   payments

("CONVERSION   DEFAULT   PAYMENTS") for a Conversion   Default in the amount of (x)

the SUM OF (1) the then   outstanding   principal   amount   of this   Note   PLUS (2)

accrued and unpaid interest on the unpaid   principal amount of this Note through

the Authorization Date (as defined below) PLUS (3) Default Interest,   if any, on

the   amounts   referred   to in clauses   (1) and/or   (2),   MULTIPLIED   BY (y) .24,

MULTIPLIED BY (z) (N/365),   where N = the number of days from the day the holder

submits   a   Notice   of   Conversion   giving   rise to a   Conversion   Default   (the

"CONVERSION   DEFAULT   DATE") to the date   (the   "AUTHORIZATION   DATE")   that the

Borrower   authorizes   a   sufficient   number of shares of Common   Stock to effect

conversion of the full outstanding   principal balance of this Note. The Borrower

shall use its best efforts to authorize a sufficient   number of shares of Common

Stock as soon as   practicable   following   the   earlier of (i) such time that the

Holder notifies the Borrower or that the Borrower   otherwise   becomes aware that

there are or likely will be insufficient authorized and unissued shares to allow

full conversion thereof and (ii) a Conversion   Default.   The Borrower shall send

notice to the Holder of the   authorization of additional shares of Common Stock,

the   Authorization   Date and the amount of Holder's accrued   Conversion   Default

Payments.   The accrued Conversion Default Payments for each calendar month shall

be paid in cash or shall be convertible into Common Stock (at such time as there

are sufficient   authorized shares of Common Stock) at the applicable   Conversion

Price, at the Borrower's option, as follows:

 

                                       5

<PAGE>

 

                  (A) In the event   Holder   elects to take such payment in cash,

cash   payment   shall be made to   Holder   by the   fifth   (5th)   day of the   month

following the month in which it has accrued; and

 

                  (B) In the event Holder   elects to take such payment in Common

Stock,   the Holder may convert   such   payment   amount   into Common   Stock at the

Conversion   Price (as in effect at the time of conversion) at any time after the

fifth day of the month following the month in which it has accrued in accordance

with the terms of this Article II (so long as there is then a sufficient   number

of authorized shares of Common Stock).

 

                  The Holder's election shall be made in writing to the Borrower

at any time prior to 6:00 p.m., New York, New York time, on the third day of the

month following the month in which Conversion Default payments have accrued.   If

no election is made, the Holder shall be deemed to have elected to receive cash.

Nothing   herein shall limit the Holder's   right to pursue actual damages (to the

extent in excess of the Conversion   Default Payments) for the Borrower's failure

to maintain a sufficient   number of authorized   shares of Common Stock, and each

holder shall have the right to pursue all remedies available at law or in equity

(including degree of specific performance and/or injunctive relief).

 

                  2.4 METHOD OF CONVERSION.

 

                  (A) MECHANICS OF CONVERSION. Subject to Section 2.1, this Note

may be converted by the Holder in whole or in part at any time from time to time

after the Issue Date,   by (A)   submitting to the Borrower a Notice of Conversion

(by   facsimile or other   reasonable   means of   communication   dispatched   on the

Conversion   Date prior to 6:00 p.m., New York, New York time) and (B) subject to

Section 2.4(b), surrendering this Note at the principal office of the Borrower.

 

                  (B)   SURRENDER   OF   NOTE   UPON    CONVERSION.    Notwithstanding

anything to the   contrary   set forth   herein,   upon   conversion   of this Note in

accordance with the terms hereof, the Holder shall not be required to physically

surrender this Note to the Borrower unless the entire unpaid principal amount of

this Note is so converted.   The Holder and the Borrower shall   maintain   records

showing the principal   amount so converted and the dates of such   conversions or

shall use such   other   method,   reasonably   satisfactory   to the   Holder and the

Borrower,   so as not to require   physical   surrender of this Note upon each such

conversion.   In the event of any   dispute or   discrepancy,   such   records of the

Borrower   shall be   controlling   and   determinative   in the   absence of manifest

error.   Notwithstanding the foregoing,   if any portion of this Note is converted

as   aforesaid,   the Holder may not   transfer   this Note unless the Holder   first

physically   surrenders   this Note to the   Borrower,   whereupon the Borrower will

forthwith   issue and   deliver   upon the   order of the   Holder a new Note of like

tenor,   registered as the Holder (upon   payment by the Holder of any   applicable

transfer taxes) may request,   representing in the aggregate the remaining unpaid

principal   amount of this Note.   The Holder and any   assignee,   by acceptance of

this Note,   acknowledge   and agree   that,   by reason of the   provisions   of this

paragraph,   following   conversion   of a portion   of this   Note,   the   unpaid and

unconverted   principal   amount of this Note represented by this Note may be less

than the amount stated on the face hereof.

 

                                       6

<PAGE>

 

                  (C) PAYMENT OF TAXES.   The   Borrower   shall not be required to

pay any tax which may be   payable in respect   of any   transfer   involved   in the

issue and delivery of shares of Common Stock or other   securities or property on

conversion   of this Note in a name   other   than that of the Holder (or in street

name),   and the   Borrower   shall not be   required   to issue or deliver   any such

shares or other   securities   or property   unless and until the person or persons

(other than the Holder or the   custodian in whose street name such shares are to

be held for the Holder's   account)   requesting   the issuance   thereof shall have

paid to the Borrower the amount of any such tax or shall have established to the

satisfaction of the Borrower that such tax has been paid.

 

                  (D) DELIVERY OF COMMON STOCK UPON CONVERSION.   Upon receipt by

the Borrower from the Holder of a facsimile   transmission   (or other   reasonable

means of communication)   of a Notice of Conversion   meeting the requirements for

conversion as provided in this Section 2.4, the Borrower shall issue and deliver

or   cause   to be   issued   and   delivered   to or upon   the   order   of the   Holder

certificates   for the Common Stock issuable upon such conversion   within two (2)

business days after such receipt   (and,   solely in the case of conversion of the

entire   unpaid   principal   amount   hereof,   surrender of this Note) (such second

business day being hereinafter referred to as the "DEADLINE") in accordance with

the terms hereof and the Purchase Agreement (including,   without limitation,   in

accordance with the requirements of Section 2(g) of the Purchase   Agreement that

certificates for shares of Common Stock issued on or after the effective date of

the   Registration   Statement   upon   conversion   of this Note   shall not bear any

restrictive legend).

 

                  (E)   OBLIGATION   OF BORROWER   TO DELIVER   COMMON   STOCK.   Upon

receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to

be the holder of record of the Common Stock issuable upon such   conversion,   the

outstanding   principal   amount and the amount of accrued and unpaid   interest on

this Note shall be reduced to reflect such conversion,   and, unless the Borrower

defaults on its   obligations   under this   Article II, all rights with respect to

the portion of this Note being so converted shall forthwith terminate except the

right to receive the Common Stock or other securities,   cash or other assets, as

herein provided, on such conversion.   If the Holder shall have given a Notice of

Conversion as provided   herein,   the Borrower's   obligation to issue and deliver

the   certificates   for   Common   Stock   shall   be   absolute   and    unconditional,

irrespective of the absence of any action by the Holder to enforce the same, any

waiver or consent with   respect to any   provision   thereof,   the recovery of any

judgment   against any person or any action to enforce   the same,   any failure or

delay in the   enforcement of any other   obligation of the Borrower to the holder

of record, or any setoff, counterclaim,   recoupment,   limitation or termination,

or any breach or alleged breach by the Holder of any obligation to the Borrower,

and   irrespective   of any other   circumstance   which might   otherwise limit such

obligation of the Borrower to the Holder in connection with such conversion. The

Conversion   Date   specified in the Notice of Conversion   shall be the Conversion

Date so long as the Notice of Conversion is received by the Borrower before 6:00

p.m., New York, New York time, on such date.

 

                                        7

<PAGE>

 

                  (F) DELIVERY OF COMMON STOCK BY ELECTRONIC   TRANSFER.   In lieu

of delivering physical certificates   representing the Common Stock issuable upon

conversion,   provided the   Borrower's   transfer   agent is   participating   in the

Depository   Trust Company ("DTC") Fast Automated   Securities   Transfer   ("FAST")

program,   upon   request   of the Holder and its   compliance   with the   provisions

contained in Section 2.1 and in this   Section   2.4,   the Borrower   shall use its

best efforts to cause its transfer agent to   electronically   transmit the Common

Stock   issuable   upon   conversion   to the   Holder by   crediting   the   account of

Holder's Prime Broker with DTC through its Deposit   Withdrawal   Agent Commission

("DWAC") system.

 

                  (G) FAILURE TO DELIVER COMMON STOCK PRIOR TO DEADLINE. Without

in any way   limiting   the Holder's   right to pursue   other   remedies,   including

actual damages and/or   equitable   relief,   the parties agree that if delivery of

the Common Stock   issuable   upon   conversion of this Note is more than three (3)

days after the Deadline (other than a failure due to the circumstances described

in Section 2.3 above,   which   failure   shall be governed   by such   Section)   the

Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the

Deadline that the Borrower fails to deliver such Common Stock.   Such cash amount

shall be paid to Holder by the   fifth   day of the month   following   the month in

which it has accrued   or, at the option of the Holder (by written   notice to the

Borrower   by the   first   day of the   month   following   the month in which it has

accrued),   shall be added to the   principal   amount of this Note, in which event

interest shall accrue thereon in accordance with the terms of this Note and such

additional principal amount shall be convertible into Common Stock in accordance

with the terms of this Note.

 

                  2.5 CONCERNING THE SHARES. The shares of Common Stock issuable

upon   conversion   of this Note may not be sold or   transferred   unless   (i) such

shares are sold pursuant to an effective registration statement under the Act or

(ii) the   Borrower   or its   transfer   agent   shall have been   furnished   with an

opinion   of   counsel   (which   opinion   shall be in   form,   substance   and   scope

customary for opinions of counsel in comparable transactions) to the effect that

the shares to be sold or transferred   may be sold or transferred   pursuant to an

exemption   from such   registration   or (iii) such shares are sold or transferred

pursuant to Rule 144 under the Act (or a successor   rule)   ("RULE   144") or (iv)

such shares are   transferred to an   "affiliate"   (as defined in Rule 144) of the

Borrower who agrees to sell or otherwise   transfer the shares only in accordance

with this   Section   2.5 and who is an   Accredited   Investor   (as   defined in the

Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and

subject   to the   removal   provisions   set forth   below),   until such time as the

shares   of   Common   Stock   issuable   upon   conversion   of this   Note   have   been

registered under the Act as contemplated by the Registration Rights Agreement or

otherwise   may be sold   pursuant to Rule 144 without any   restriction   as to the

number of securities as of a particular date that can then be immediately   sold,

each   certificate   for shares of Common Stock   issuable upon   conversion of this

Note that has not been so included in an   effective   registration   statement   or

that has not been sold   pursuant to an   effective   registration   statement or an

exemption that permits removal of the legend,   shall bear a legend substantially

in the following form, as appropriate:

 

                                       8

<PAGE>

 

         "THE   SECURITIES    REPRESENTED   BY   THIS    CERTIFICATE   HAVE   NOT   BEEN

         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES

         MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE

         REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION

         OF COUNSEL IN FORM,   SUBSTANCE   AND SCOPE   CUSTOMARY   FOR   OPINIONS   OF

         COUNSEL IN COMPARABLE   TRANSACTIONS,   THAT REGISTRATION IS NOT REQUIRED

         UNDER SAID ACT UNLESS SOLD   PURSUANT TO RULE 144 OR   REGULATION S UNDER

         SAID ACT."

 

                  The legend set forth above   shall be removed and the   Borrower

shall issue to the Holder a new certificate therefor free of any transfer legend

if (i) the   Borrower or its   transfer   agent   shall have   received an opinion of

counsel,   in form,   substance   and scope   customary   for   opinions of counsel in

comparable   transactions,   to the effect   that a public sale or transfer of such

Common Stock may be made without   registration   under the Act and the shares are

so sold or   transferred,   (ii) such Holder provides the Borrower or its transfer

agent with reasonable   assurances that the Common Stock issuable upon conversion

of this Note (to the extent such   securities are deemed to have been acquired on

the   same   date)   can be sold   pursuant   to Rule 144 or (iii) in the case of the

Common Stock issuable upon   conversion of this Note, such security is registered

for sale by the Holder under an effective registration statement filed under the

Act or otherwise may be sold pursuant to Rule 144 without any   restriction as to

the number of   securities as of a par