AMENDED AND RESTATED CONVERTIBLE NOTE

 

<PAGE>

 

                                                                     EXHIBIT 4.3

 

NEITHER THIS SECURITY NOR THE ISSUANCE TO THE HOLDER OF THE SECURITIES INTO

WHICH THIS SECURITY IS CONVERTIBLE OR WHICH ARE ISSUABLE UPON REDEMPTION OF THIS

SECURITY HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN

RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,

AS AMENDED (THE "1933 ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT

PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT

TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE

REGISTRATION REQUIREMENTS OF THE 1933 ACT.

 

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THIS NOTE IN THE EVENT OF A

PARTIAL CONVERSION OR REDEMPTION. AS A RESULT, FOLLOWING ANY CONVERSION OR

REDEMPTION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT

REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT STATED ON THE

FACE OF THIS NOTE.

 

                               AMENDED AND RESTATED

                         CONVERTIBLE NOTE DUE 2005-2008

 

                                       OF

 

                                 ZIX CORPORATION

 

NO. __                                                             $10,000,000.00

DATED _______ ___, 2005                                        NEW YORK, NEW YORK

 

            FOR VALUE RECEIVED, ZIX CORPORATION, a Texas corporation (the

"Company"), hereby promises to pay to or upon the order of [NAME OF REGISTERED

HOLDER], or its registered assigns or successors-in-interest (the "Holder"), the

principal sum of Ten Million Dollars ($10,000,000.00), in installments on the

Installment Maturity Dates and on the Final Maturity Date, and to pay interest

thereon at the Applicable Rate from the date hereof on the Interest Payment

Dates until the same becomes due and payable, whether at maturity or upon

acceleration or by redemption or repurchase in accordance with the terms hereof,

or otherwise. Interest on this Note shall be computed on the basis of a 360-day

year of 30-day months and actual days elapsed. Unless otherwise determined by

the Holder or required by applicable law, payments will be applied

 

<PAGE>

 

first to any unpaid collection costs, then to unpaid interest and fees and any

remaining amount to unpaid principal.

 

            All payments of principal of and interest on this Note shall be made

in lawful money of the United States of America or, as required by Section 2(d)

and subject to the provisions of this Note, principal of this Note shall be

redeemed through issuance of shares of Common Stock in accordance with Section

2(c), and interest payable on the Interest Payment Dates may be paid in whole or

in part in fully paid and nonassessable shares of Common Stock. All cash

payments by the Company shall be made by wire transfer of immediately available

funds to such account as the Holder may from time to time designate by written

notice in accordance with the provisions of this Note. This Note may not be

prepaid in whole or in part except as specifically provided herein. Whenever any

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

not a Business Day (as defined below), 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 that 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 in determining the amount

of interest due on such date.

 

            The obligations of the Company under this Note shall rank in right

of payment on parity with all other unsubordinated obligations of the Company

for indebtedness for borrowed money or the purchase price of property. This Note

is issued pursuant to the Purchase Agreement and the Holder of this Note and

this Note are subject to the terms and entitled to the benefits of the Purchase

Agreement. Payment and performance of the Company's obligations under this Note

and the other Transaction Documents is secured pursuant to the Security

Agreement.

 

            This Note amends and restates a Convertible Note due 2005-2008

issued on the Issuance Date pursuant to the Purchase Agreement. This Note is one

of a duly authorized issue of the Company's Amended and Restated Convertible

Notes due 2005-2008 limited to an aggregate principal amount of $20,000,000

(excluding Amended and Restated Convertible Notes due 2005-2008 issued in

replacement of lost, stolen, destroyed or mutilated notes or issued on transfer

of such notes).

 

            The following terms and conditions shall apply to this Note:

 

            SECTION 1. DEFINITIONS.

 

            (a) Capitalized terms used herein and not otherwise defined herein

shall have the meanings set forth in the Purchase Agreement.

 

            (b) All the agreements or instruments herein defined shall mean

 

                                       -2-

<PAGE>

 

such agreements or instruments as the same may from time to time be supplemented

or amended or the terms thereof waived or modified to the extent permitted by,

and in accordance with, the terms thereof and of this Note.

 

            (c) For purposes hereof the following terms shall have the meanings

ascribed to them below:

 

            "Acquisition Transaction" means a transaction in which the Company

acquires another business or its tangible or intangible assets.

 

            "Affiliate" means, with respect to any Person, any other Person that

directly, or indirectly through one or more intermediaries, controls, is

controlled by or is under common control with the subject Person. For purposes

of this definition, "control" (including, with correlative meaning, the terms

"controlled by" and "under common control with"), as used with respect to any

Person, shall mean the possession, directly or indirectly, of the power to

direct or cause the direction of the management and policies of such Person,

whether through the ownership of voting securities or by contract or otherwise.

 

            "Aggregation Party" means a person whose beneficial ownership of

Common Stock would be aggregated with the beneficial ownership of Common Stock

by the Holder for purposes of determining whether a "group" exists or for

purposes of determining the Holder's beneficial ownership of Common Stock for

purposes of Section 13(d) of the 1934 Act and Regulation 13D-G thereunder.

 

            "Allocated Redemption Percentage" means with respect to a particular

Share Redemption the product obtained by multiplying 20 percent by a fraction,

of which the numerator is the original principal amount of the principal

installment of this Note that is being redeemed in such Share Redemption, as

identified in the applicable Share Redemption Notice, and the denominator is the

aggregate original principal amount of the principal installments of this Note

and the Other Note being redeemed in, or contemporaneously with, such Share

Redemption, as identified in the applicable Share Redemption Notice and the

applicable notice given to the holder of the Other Note; provided however, that

if all of the outstanding principal amount of such installment of principal of

this Note is being redeemed in such Share Redemption, as identified in the

applicable Share Redemption Notice, and less than all of the outstanding

principal amount of such principal installment of the Other Note is being

redeemed contemporaneously with such Share Redemption, as identified in the

applicable notice given to the holder of the Other Note, then the Allocated

Redemption Percentage of this Note shall be the product obtained by multiplying

20 percent by a fraction, of which the numerator is the principal amount of such

installment of this Note being redeemed in such Share Redemption, as identified

in the applicable Share Redemption Notice, and the denominator is the aggregate

principal amount of such principal installments of

 

                                       -3-

<PAGE>

 

this Note and the Other Note being redeemed in or contemporaneously with such

Share Redemption, as identified in the applicable Share Redemption Notice and

the applicable notice given to the holder of the Other Note (and the Allocated

Redemption Percentage shall be analogously determined if less than all of such

principal installment of this Note and all of such principal installment of the

Other Note are being redeemed contemporaneously with such Share Redemption, as

so identified in such notices).

 

            "AMEX" means the American Stock Exchange, Inc.

 

            "Applicable Rate" means for each Interest Period a rate per annum

equal to LIBOR for such Interest Period, plus three percent (or such lesser rate

as shall be the highest rate permitted by applicable law) or, if an Event of

Default shall occur, then so long as any Event of Default shall continue, the

Default Rate.

 

            "Board of Directors" means the Board of Directors of the Company.

 

            "Board Resolution" means a copy of a resolution certified by the

Secretary or an Assistant Secretary of the Company to have been duly adopted by

the Board of Directors, or duly authorized committee thereof (to the extent

permitted by applicable law), and to be in full force and effect on the date of

such certification, and delivered to the Holder.

 

            "Business Day" means any day other than a Saturday, Sunday or a day

on which commercial banks in The City of New York, New York or Dallas, Texas are

authorized or required by law or executive order to remain closed.

 

            "Cash and Cash Equivalents Balances" of any Person on any date shall

be determined on an unconsolidated basis from such Person's books maintained in

accordance with Generally Accepted Accounting Principles, and means, without

duplication, the sum of (1) the cash held by such Person on such date and

available for use by such Person on such date, (2) all assets which would, on a

balance sheet of such Person prepared as of such date in accordance with

Generally Accepted Accounting Principles, be classified as cash equivalents;

provided, however, that (x) for purposes of computing the Cash and Cash

Equivalents Balances as of any date, no amount shall be included as cash or a

cash equivalent if such amount is subject to any lien, charge, equity or

encumbrance in favor of any other Person or is subject to any agreement,

arrangement or understanding by the Company with any other Person to maintain

the amount thereof or which restricts the use thereof by the Company (in any

such case, other than as provided in Section 3(m) of this Note and the Other

Note and other than the lien and security interest in favor of the Collateral

Agent arising under the Security Agreement) and (y) cash and cash equivalents

described in the preceding clauses (1) and (2) that are held at any time as

Collateral under the Security Agreement and in which the Collateral Agent has a

 

                                       -4-

<PAGE>

 

perfected first priority security interest and which are not subject to any

lien, charge, equity or encumbrance in favor of any other Person shall be

included in determining the amount of Cash and Cash Equivalents Balances at such

time.

 

            "Closing Date" shall have the meaning provided in the Purchase

Agreement.

 

            "Collateral Agent" means Law Offices of Brian W Pusch, as collateral

agent pursuant to the Security Agreement, and from time to time its duly

appointed and acting successor or successors.

 

            "Common Stock" means the Common Stock, $0.01 par value, or any

shares of capital stock of the Company into which such shares shall be changed

or reclassified after the Closing Date.

 

            "Common Stock Equivalent" means any warrant, option, subscription or

purchase right with respect to shares of Common Stock, any security convertible

into, exchangeable for, or otherwise entitling the holder thereof to acquire,

shares of Common Stock or any warrant, option, subscription or purchase right

with respect to any such convertible, exchangeable or other security.

 

            "Company Certificate" means a certificate of the Company signed by

an Officer.

 

            "Company Conversion Date" means the conversion date set forth in the

Company Conversion Notice and selected by the Company in accordance with Section

6(d)(2).

 

            "Company Conversion Notice" means a Company Conversion Notice in the

form attached hereto as EXHIBIT F.

 

            "Company Notice" means a Company Notice in the form attached as

EXHIBIT C.

 

            "Computed Price" means, with respect to a particular Trading Day in

the Share Redemption Computation Period for a particular Share Redemption, 90

percent of the VWAP of the Common Stock for such Trading Day.

 

            "Conversion Date" means the date on which a Conversion Notice is

given in accordance with Section 6(b)(1).

 

            "Conversion Delay Payments" shall have the meaning provided in

Section 6(b)(5)(C).

 

                                       -5-

<PAGE>

 

            "Conversion Notice" means a duly executed Notice of Conversion of

Amended and Restated Convertible Note due 2005-2008 substantially in the form of

EXHIBIT A to this Note.

 

            "Conversion Price" means $6.00, subject to adjustment as provided in

Section 6(c).

 

            "Current Market Price" shall mean the arithmetic average of the

daily Market Prices per share of Common Stock for the ten consecutive Trading

Days immediately prior to the date in question; provided, however, that

 

            (1) if the "ex" date (as hereinafter defined) for any event (other

      than the issuance or distribution requiring such computation) that

      requires an adjustment to the Conversion Price pursuant to Section

      6(c)(1), (2), (3), (4), (5), (6), or (7), occurs during such ten

      consecutive Trading Days, the Market Price for each Trading Day prior to

      the "ex" date for such other event shall be adjusted by multiplying such

      Market Price by the same fraction by which the Conversion Price is so

      required to be adjusted as a result of such other event,

 

            (2) if the "ex" date for any event (other than the issuance or

      distribution requiring such computation) that requires an adjustment to

      the Conversion Price pursuant to Section 6(c)(1), (2), (3), (4), (5), (6),

      or (7), occurs on or after the "ex" date for the issuance or distribution

      requiring such computation and prior to the day in question, the Market

      Price for each Trading Day on and after the "ex" date for such other event

      shall be adjusted by multiplying such Market Price by the reciprocal of

      the fraction by which the Conversion Price is so required to be adjusted

      as a result of such other event, and

 

            (3) if the "ex" date for the issuance or distribution requiring such

      computation is prior to the day in question, after taking into account any

      adjustment required pursuant to clause (1) or (2) of this proviso, the

      Market Price for each Trading Day on or after such "ex" date shall be

      adjusted by adding thereto the amount of any cash and the fair market

      value (as determined by the Board of Directors in a manner consistent with

      any determination of such value for purposes of Section 6(c)(4) or (6),

      whose determination shall be conclusive and described in a Board

      Resolution) of the evidences of indebtedness, shares of capital stock or

      assets being distributed applicable to one share of Common Stock as of the

      close of business on the day before such "ex" date.

 

For purposes of any computation under Section 6(c)(4), the Current Market Price

of the Common Stock on any date shall be deemed to be the arithmetic average of

the daily Market Prices per share of Common Stock for such day and the next two

 

                                      -6-

<PAGE>

 

succeeding Trading Days; provided, however, that if the "ex" date for any event

(other than the Tender Offer requiring such computation) that requires an

adjustment to the Conversion Price pursuant to Section 6(c)(1), (2), (3), (4),

(5), (6), or (7), occurs on or after the Expiration Time for the Tender Offer

requiring such computation and prior to the day in question, the Market Price

for each Trading Day on and after the "ex" date for such other event shall be

adjusted by multiplying such Market Price by the reciprocal of the fraction by

which the Conversion Price is so required to be adjusted as a result of such

other event. For purposes of this paragraph and the definition of the term

"VWAP", the term "ex" date, (1) when used with respect to any issuance or

distribution, means the first date on which the Common Stock trades, regular

way, on the relevant exchange or in the relevant market from which the Market

Price was obtained without the right to receive such issuance or distribution,

(2) when used with respect to any subdivision or combination of shares of Common

Stock, means the first date on which the Common Stock trades, regular way, on

such exchange or in such market after the time at which such subdivision or

combination becomes effective, and (3) when used with respect to any Tender

Offer means the first date on which the Common Stock trades, regular way, on

such exchange or in such market after the Expiration Time of such Tender Offer.

Notwithstanding the foregoing, whenever successive adjustments to the Conversion

Price are called for pursuant to Section 6(c), such adjustments shall be made to

the Current Market Price as may be necessary or appropriate to effectuate the

intent of Section 6(c) and to avoid unjust or inequitable results as determined

in good faith by the Board of Directors.

 

            "Default Rate" means 16 percent per annum (or such lesser rate as

shall be the highest rate permitted by applicable law).

 

            "DTC" means The Depository Trust Company.

 

            "DWAC" means DTC's Deposit Withdrawal Agent Commission system.

 

            "Effective Date" means the date on which a Registration Statement

covering all the Underlying Shares and other Registrable Securities (as defined

in the Registration Rights Agreement) is first declared effective by the SEC.

 

            "Eligible Bank" means a corporation organized or existing under the

laws of the United States or any other state, having combined capital and

surplus of at least $250 million and subject to supervision by federal or state

authority and which has a branch located in New York, New York.

 

            "Event of Default" shall have the meaning provided in Section 4(a).

 

            "Exchange Act" means the Securities Exchange Act of 1934, as

amended.

 

                                      -7-

<PAGE>

 

            "Excluded Shares" means securities or rights to acquire securities

that entitle the holder or owner to acquire shares of Common Stock and that have

limitations on the holder's or owner's right to convert, exercise or purchase

similar to the limitations in Section 6(h).

 

            "Extended Company Conversion Date" means with respect to any portion

of this Note to which Section 6(d)(3)(A) applies, the date that is 30 Trading

Days after the latest date on which the Restricted Ownership Percentage no

longer restricts the Holder's right to convert the remaining Inconvertible

Portion, but in no event later than the date that is 90 days after the Final

Maturity Date.

 

            "Expiration Time" shall have the meaning provided in Section

6(c)(6).

 

            "FAST" means DTC's Fast Automated Securities Transfer program.

 

            "Final Maturity Date" means November 2, 2008.

 

            "Fundamental Change" means

 

            (a) Any consolidation or merger of the Company or any material

      Subsidiary with or into another entity (other than a merger or

      consolidation of a Subsidiary into the Company or a wholly-owned

      Subsidiary) where the stockholders of the Company immediately prior to

      such transaction do not collectively own at least 51% of the outstanding

      voting securities of the surviving corporation of such consolidation or

      merger immediately following such transaction;

 

            (b) The sale of (i) all or substantially all of the assets of the

      Company and the Subsidiaries in a single transaction or a series of

      transactions or (ii) one or more Subsidiaries or the assets of one or more

      Subsidiaries which sale individually or in the aggregate is material to

      the Company and the subsidiaries taken as a whole, in the case of the

      preceding clause (ii) other than any such sale or sales which individually

      or in the aggregate could not reasonably be expected to have a material

      adverse effect on (i) the business, properties, operations, condition

      (financial or other), results of operation or financial prospects of the

      Company and the Subsidiaries, taken as a whole, (ii) the validity or

      enforceability of, or the ability of the Company to perform its

      obligations under, the Transaction Documents; (iii) the rights and

      remedies of the Holder under the terms of the Transaction Documents; or

      (iv) the Collateral or the first priority perfected security interest in

      the Collateral granted to the Collateral Agent pursuant to the Security

      Agreement;

 

                                       -8-

<PAGE>

 

            (c) The occurrence of any transaction or event in connection with

      which all or substantially all the Common Stock shall be exchanged for,

      converted into, acquired for or constitute the right to receive

      consideration (whether by means of an exchange offer, liquidation, tender

      offer, consolidation, merger, combination, reclassification,

      recapitalization or otherwise) which is not all or substantially all

      capital stock which is (or will, upon consummation of or immediately

      following such transaction or event, will be) listed on a registered

      national securities exchange or approved for quotation on Nasdaq or any

      similar United States system of automated dissemination of transaction

      reporting of securities prices; or

 

            (d) The acquisition by a Person or entity or group of Persons or

      entities acting in concert as a partnership, limited partnership,

      syndicate or group (as that term is defined for purposes of Section 13(d)

      of the 1934 Act and Regulation 13D-G thereunder), as a result of a tender

      or exchange offer, open market purchases, privately negotiated purchases

      or otherwise, of beneficial ownership of securities of the Company

      representing 50% or more of the combined voting power of the outstanding

      voting securities of the Company ordinarily (and apart from rights

      accruing in special circumstances) having the right to vote in the

      election of directors.

 

             "Holder Notice" means a Holder Notice in the form attached as

EXHIBIT D.

 

            "Inconvertible Portion" shall have the meaning provided in Section

6(d)(3).

 

            "Indebtedness" means, when used with respect to any Person, without

duplication:

 

            (1) all indebtedness, obligations and other liabilities (contingent

      or otherwise) of such Person for borrowed money (including obligations of

      such Person in respect of overdrafts, foreign exchange contracts, currency

      exchange agreements, currency purchase or similar agreements, Interest

      Rate Protection Agreements, and any loans or advances from banks, whether

      or not evidenced by notes or similar instruments) or evidenced by bonds,

      debentures, notes or other instruments for the payment of money, or

      incurred in connection with the acquisition of any property, services or

      assets (whether or not the recourse of the lender is to the whole of the

      assets of such Person or to only a portion thereof), other than any

      account payable or other accrued current liability or obligation to trade

      creditors incurred in the ordinary course of business in connection with

      the obtaining of materials or services;

 

            (2) all reimbursement obligations and other liabilities (contingent

 

                                      -9-

<PAGE>

 

      or otherwise) of such Person with respect to letters of credit, bank

      guarantees, bankers' acceptances, surety bonds, performance bonds or other

       guaranty of contractual performance;

 

            (3) all obligations and liabilities (contingent or otherwise) in

      respect of (a) leases of such Person required, in conformity with

      generally accepted accounting principles, to be accounted for as

      capitalized lease obligations on the balance sheet of such Person and (b)

      any lease or related documents (including a purchase agreement) in

      connection with the lease of real property which provides that such Person

      is contractually obligated to purchase or cause a third party to purchase

      the leased property and thereby guarantee a minimum residual value of the

      leased property to the landlord and the obligations of such Person under

      such lease or related document to purchase or to cause a third party to

      purchase the leased property;

 

            (4) all direct or indirect guaranties or similar agreements by such

      Person in respect of, and obligations or liabilities (contingent or

      otherwise) of such Person to purchase or otherwise acquire or otherwise

      assure a creditor against loss in respect of, indebtedness, obligations or

      liabilities of another Person of the kind described in clauses (1) through

      (3);

 

            (5) any indebtedness or other obligations described in clauses (1)

      through (4) secured by any mortgage, pledge, lien or other encumbrance

      existing on property which is owned or held by such Person, regardless of

      whether the indebtedness or other obligation secured thereby shall be

      payable by or shall have been assumed by such Person; and

 

            (6) any and all deferrals, renewals, extensions and refundings of,

      or amendments, modifications or supplements to, any indebtedness,

      obligation or liability of the kind described in clauses (1) through (5).

 

            "Installment Maturity Dates" mean November 2, 2005, November 2, 2006

and November 2, 2007.

 

            "Interest Payment Date" means each February 1, May 1, August 1 and

November 1, commencing on the first such date after the Issuance Date, and the

Final Maturity Date.

 

            "Interest Payment Shares" means the shares of Common Stock issuable

in payment of interest on this Note in accordance with Section 2(a).

 

             "Interest Period" means with respect to any outstanding principal of

this Note,

 

                                      -10-

<PAGE>

 

            (1) initially the period commencing on the Issuance Date and ending

      on the date that is six months thereafter; and

 

            (2) thereafter each period commencing on the last day of the next

      preceding Interest Period and ending six months thereafter;

 

provided that, all of the foregoing provisions relating to Interest Periods are

subject to the limitation that any Interest Period for any installment of

principal that would otherwise extend beyond the Installment Maturity Date or

the Final Maturity Date, as the case may be, for such installment shall end on

such Installment Maturity Date or the Final Maturity Date, as the case may be.

 

            "Interest Rate Protection Agreement" means, with respect to any

Person, any interest rate swap agreement, interest rate cap or collar agreement

or other financial agreement or arrangement designed to protect such Person

against fluctuations in interest rates, as in effect from time to time.

 

            "Interest Share Price" means for any Interest Payment Date an amount

equal to 90 percent of the arithmetic average of the daily VWAPs of the Common

Stock for all of the Trading Days during the period of ten consecutive Trading

Days ending on and including the Trading Day immediately preceding such Interest

Payment Date.

 

            "Issuance Date" means the "Closing Date" as defined in the Purchase

Agreement.

 

            "LIBOR" means, with respect to each Interest Period, the six month

London Interbank Offered Rate at 11:00 a.m., London time, on the date that is

two London banking days before the first day of such Interest Period, as

reported by Bloomberg Financial L.P., using the BBAM function and the Official

BBA LIBOR quote shown thereby.

 

            "Majority Holders" means at any time, the holders of two-thirds of

the aggregate outstanding principal amount of this Note and the Other Note.

 

             "Market Price" with respect to any security on any day shall mean

the closing bid price of such security on such day on the Nasdaq, the NYSE or

the AMEX, as applicable, or, if such security is not listed or admitted to

trading on the Nasdaq, the NYSE or the AMEX, on the principal national

securities exchange or quotation system on which such security is quoted or

listed or admitted to trading, in any such case as reported by Bloomberg, L.P.

(or if such source ceases to be available, comparable source selected by the

Majority Holders and acceptable to the Company in its reasonable judgment) or,

if not quoted or listed or admitted to trading on any national securities

exchange or quotation system, the average of the

 

                                      -11-

<PAGE>

 

closing bid and asked prices of such security on the over-the-counter market on

the day in question, as reported by the National Quotation Bureau, Incorporated,

or a similar generally accepted reporting service, or if not so available, in

such manner as furnished by any NYSE member firm selected from time to time by

the Board of Directors for that purpose, or a price determined in good faith by

the Board of Directors, whose determination shall be conclusive and described in

a Board Resolution.

 

             "Maximum Share Amount Deficiency" shall have the meaning provided in

the Purchase Agreement.

 

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

 

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

 

             "Nasdaq" means the Nasdaq National Market.

 

            "Newly Issued Shares" shall have the meaning provided in Section

6(c)(7)(A).

 

            "Note" means this instrument as originally executed, or if later

amended or supplemented in accordance with its terms, then as so amended or

supplemented.

 

            "NYSE" means the New York Stock Exchange, Inc.

 

            "Officer" means the Chairman of the Board, the Chief Executive

Officer, the President or the Chief Financial Officer of the Company.

 

            "Optional Redemption Consideration" means (1) an amount in cash

equal to the sum of (A) an amount equal to 105 percent of the principal amount

of this Note that is outstanding on the applicable Optional Redemption Date plus

(B) accrued and unpaid interest on such principal amount to the applicable

Optional Redemption Date plus (C) accrued and unpaid interest, if any, at the

Default Rate on the amount referred to in the immediately preceding clause (B)

to the applicable Optional Redemption Date and (2) a Redemption Warrant that

initially (I) entitles the holder thereof to purchase a number of shares of

Common Stock equal to 70 percent of the quotient obtained by dividing (x) the

principal amount of this Note outstanding immediately prior to redemption of

this Note on the applicable Optional Redemption Date by (y) the Conversion Price

in effect immediately prior to redemption of this Note on the applicable

Optional Redemption Date and (II) has a Purchase Price (as defined in the

Redemption Warrant) equal to the Conversion Price in effect immediately prior to

redemption of this Note on the applicable Optional Redemption Date, subject to

adjustment as provided in the Redemption

 

                                      -12-

<PAGE>

 

Warrant.

 

             "Optional Redemption Date" means, with respect to a particular

redemption of this Note or a portion hereof under Section 2(b), the Business

Day, selected by the Company in accordance with Section 2(b), on which this Note

or such portion hereof is to be redeemed pursuant to Section 2(b).

 

            "Optional Redemption Notice" means an Optional Redemption Notice in

the form attached hereto as EXHIBIT B.

 

            "Optional Redemption Period" means the period that commences on the

date that is ten Trading Days after the Effective Date and ends on the Final

Maturity Date.

 

            "Other Note" means the Amended and Restated Convertible Note due

2005-2008 issued by the Company upon amendment and restatement of the Company's

Convertible Note due 2005-2008 originally issued pursuant to the Other Purchase

Agreement, and any or all such instruments issued upon transfer or split-up

thereof.

 

            "Other Purchase Agreement" means the Purchase Agreement, dated as of

November 1, 2004, by and between the Company and the original holder of the

Other Note or its predecessor instrument.

 

            "Other Redemption Warrants" means any Common Stock Purchase Warrants

issuable or issued by the Company upon optional redemption of the Other Note

pursuant to Section 2(b) thereof.

 

            "Permitted Indebtedness" means:

 

            (1) Indebtedness outstanding on the Issuance Date prior to issuance

      of this Note and reflected in the Company's financial statements included

      in the SEC Filings;

 

             (2) Indebtedness evidenced by this Note and the Other Note;

 

            (3) Indebtedness outstanding on, or incurred after, the Issuance

      Date in an aggregate amount not to exceed $5 million at any one time

      outstanding so long as (A) such Indebtedness (x) is incurred for the

      purpose of acquiring equipment owned or used or to be owned or used by the

      Company or any Subsidiary (or for the purpose of acquiring the capital

      stock or similar equity interests of a Subsidiary that is formed for the

      limited purpose of owning same and does not own or hold any other material

      assets) and does not exceed the purchase price of the equipment, capital

      stock or other equity

 

                                      -13-

<PAGE>

 

      interest so acquired plus reasonable transaction expenses and (y) if

      secured, is secured solely by the interest of the Company or one of its

      Subsidiaries in the equipment so acquired and rights related thereto or

      (B) is the reimbursement obligations and other liabilities (contingent or

      otherwise) of the Company or any Subsidiary with respect to letters of

      credit issued in lieu of cash security deposits for leases of real

      property or equipment used by the Company or any Subsidiary, or commercial

      or standby letters of credit issued in the ordinary course of the business

      of the Company and its Subsidiaries (the amount of which shall for this

      purpose be deemed to be the maximum reimbursement obligations and other

      liabilities (contingent or otherwise) with respect to such letters of

      credit, whether or not a drawing thereunder has been made);

 

            (4) Indebtedness incurred after the Issuance Date that is unsecured

      and that is subordinated as to payment to the Indebtedness evidenced by

      this Note and the Other Note on terms that have been approved in writing

      by the Majority Holders before the incurrence of such Indebtedness;

 

            (5) endorsements for collection or deposit in the ordinary course of

      business; and

 

            (6) in the case of any Subsidiary, Indebtedness owed by such

      Subsidiary to the Company.

 

            "Person" means any natural person, corporation, partnership, limited

liability company, trust, incorporated organization, unincorporated association

or similar entity or any government, governmental agency or political

subdivision.

 

            "Principal Market" means at any time Nasdaq or such other U.S.

market or exchange which is the principal market on which the Common Stock is

then listed for trading.

 

            "Purchase Agreement" means the Purchase Agreement, dated as of

November 1, 2004, by and between the Company and the original holder of this

Note or its predecessor instrument, pursuant to which this Note, or its

predecessor instrument was originally issued, as amended by the Purchase

Agreement Amendment.

 

            "Purchase Agreement Amendment" means Amendment No. 1 to Purchase

Agreement, dated as of April___ , 2005, by and between the Company and the

original holder of the Convertible Promissory Note due 2005-2008 that was

amended and restated by this Note or this Note's predecessor instrument.

 

            "QIB" means a "qualified institutional buyer" as defined in Rule

144A.

 

                                      -14-

<PAGE>

 

            "Record Date" shall mean, with respect to any dividend, distribution

or other transaction or event in which the holders of Common Stock have the

right to receive any cash, securities or other property or in which the Common

Stock (or other applicable security) is exchanged for or converted into any

combination of cash, securities or other property, the date fixed for

determination of stockholders entitled to receive such cash, securities or other

property (whether such date is fixed by the Board of Directors or by statute,

contract or otherwise).

 

            "Redemption Delay Payments" shall have the meaning provided in

Section 2(c)(6)(C).

 

            "Redemption Warrant" means any Common Stock Purchase Warrant in the

form attached as EXHIBIT E issuable or issued as part of the Optional Redemption

Consideration.

 

            "Registration Statement" shall have the meaning set forth in the

Registration Rights Agreement.

 

             "Repurchase Event" means the occurrence of any one or more of the

following events:

 

            (a) For any period of five consecutive Trading Days following the

      date hereof there shall be no reported sale price of the Common Stock on

      any of Nasdaq, the NYSE or the AMEX;

 

            (b) The Common Stock ceases to be listed for trading on Nasdaq, the

      NYSE or the AMEX for a period of five consecutive Trading Days;

 

            (c) Any Fundamental Change;

 

            (d) The adoption of any amendment to the Company's Articles of

      Incorporation (other than any certificate designating a series of

      preferred stock of the Company) which materially and adversely affects the

      rights of the Holder or the taking of any other action by the Company

      which materially and adversely affects the rights of the Holder in respect

      of the Holder's interest in the Common Stock in a different and more

      adverse manner than it affects the rights of holders of Common Stock

      generally;

 

            (e) The inability of the Holder or holders of any Other Note for 30

      Trading Days (whether or not consecutive) during any period of 365

      consecutive days occurring on or after the SEC Effective Date to sell

      shares of Common Stock issued or issuable upon conversion of this Note or

      the Other Note or exercise of the Warrants or issued as Interest Payment

 

                                      -15-

<PAGE>

 

      Shares pursuant to the Registration Statement (1) by reason of the

      requirements of the 1933 Act, the 1934 Act or any of the rules or

      regulations under either thereof or (2) due to the Registration Statement

      containing any untrue statement of material fact or omitting to state a

      material fact required to be stated therein or necessary to make the

      statements therein not misleading or other failure of the Registration

      Statement to comply with the rules and regulations of the SEC, excluding

      any such inability to sell that results from an untrue statement of a

      material fact in such Registration Statement or Prospectus or omission to

      state a material fact required to be stated in such Registration Statement

      or Prospectus in order to make the statements therein not misleading,

      which misstatement or omission was made by the Holder in written

      information it furnished to the Company specifically for inclusion in such

      Registration Statement or Prospectus which such information was

      substantially relied upon by the Company in preparation of the

      Registration Statement or Prospectus or any amendment or supplement

      thereto, unless the Company shall have failed timely to amend or

      supplement such Registration Statement or Prospectus after the Holder

      shall have corrected such misstatement or omission; or

 

            (f) The Registration Statement required by Section 2(a)(i) of the

      Registration Rights Agreement is not declared effective by the SEC within

      95 days (or 125 days if the SEC staff determines to review such

      Registration Statement) following the Closing Date, or the Registration

      Statement required by Section 2(a)(ii) of the Registration Rights

      Agreement is not declared effective by the SEC within 95 days (or 125 days

      if the SEC staff determines to review such Registration Statement)

      following demand of the Holder pursuant to the Registration Rights

      Agreement.

 

            "Repurchase Price" means with respect to any repurchase pursuant to

Section 5 an amount in cash equal to the greater of (1) the sum of (A) the

outstanding principal amount of this Note that the Holder has elected to be

repurchased plus (B) accrued and unpaid interest on such principal amount to the

date of such repurchase plus (C) accrued and unpaid interest, if any, at the

Default Rate on the amount referred to in the immediately preceding clause (B)

to the date of such repurchase and (2) the product obtained by multiplying (A)

the Current Market Price on the date the Repurchase Event occurs, the date the

Company gives the Company Notice to the Holder, the date the Holder gives the

Holder Notice to the Company or the applicable repurchase date pursuant to

Section 5, whichever such Current Market Price is the highest, times (B) the

number of shares of Common Stock which would be issuable upon conversion of the

principal amount of this Note (and interest thereon as provided in Section 6(a))

to be repurchased by reason of the occurrence of such Repurchase Event

(determined without regard to any limitation on conversion contained in Section

6) if such conversion were made on the date for which, pursuant to the

immediately preceding clause (A), the

 

                                      -16-

<PAGE>

 

Current Market Price is used for the computation of the Repurchase Price

pursuant to this clause (2).

 

            "Required Cash Amount" means for any date the amount set forth below

with respect to such date:

 

<TABLE>

<CAPTION>

                DATE                             AMOUNT

                ----                            ------

<S>                             <C>         <C>

Issuance Date through November 2, 2007     $10,000,000.00

thereafter                                 $ 5,000,000.00

</TABLE>

 

; provided, however, that the reduction shown in the foregoing table shall occur

only if all installments of principal due on or before the date of such

scheduled reduction have been paid and all installments of principal required by

Section 2(d) to be redeemed on or before the date of such scheduled reduction

have been redeemed in accordance with Section 2(d); provided further, however,

that if the Company redeems in full in accordance with Section 2(d)(2) the

installments of principal of this Note scheduled to be due on November 2, 2005

and November 2, 2008 on or before the respective redemption dates therefor

specified in Section 2(d)(2), then thereafter through November 2, 2006 the

Required Cash Amount shall be $9,000,000.00, subject to the next succeeding

proviso, and, if the Company also pays in accordance with Section 2(d)(1) the

full amount of the installment of principal due on November 2, 2006 then

thereafter the Required Cash Amount shall be $5,000,000.00; and provided

further, however, that if the Company redeems in full in accordance with Section

2(d)(2) the installments of principal of this Note scheduled to be due on

November 2, 2005 and November 2, 2008 on or before the respective redemption

dates therefor specified in Section 2(d)(2), and thereafter the Holder or the

holder of the Other Note requires the Company to redeem all or any portion of

this Note in accordance with Section 6.16(b)(2) of the Purchase Agreement or the

Other Purchase Agreement, as the case may be, then to the extent any such

redemption reduces the aggregate outstanding principal amount of this Note and

the Other Note to an amount less than $9,000,000.00, then immediately following

such redemption the Required Cash Amount shall be reduced to the aggregate

outstanding principal amount of this Note and the Other Note immediately after

such redemption.

 

            "Restricted Ownership Percentage" shall have the meaning provided in

Section 6(h).

 

            "Rule 144A" means Rule 144A as promulgated under the 1933 Act or any

successor rule thereto.

 

            "SEC" means the U.S. Securities and Exchange Commission.

 

                                      -17-

<PAGE>

 

            "SEC Filings" shall have the meaning provided in the Purchase

Agreement.

 

            "Security Agreement" means the Security Agreement, dated as of

November 2, 2004, by and between the Company and the Collateral Agent.

 

            "Share Interest Payment Limitation" means, with respect to any

Interest Payment Date, a number of Interest Payment Shares equal to 50% of the

aggregate number of shares of Common Stock traded on the Principal Market on all

of the Trading Days during the period from and including the date that is 29

Trading Days prior to such Interest Payment Date to and including the date that

is 20 Trading Days prior to such Interest Payment Date (as reported by

Bloomberg, L.P. or if such source ceases to be available, a comparable source

selected by the Majority Holders at the request of the Company and acceptable to

the Company in its reasonable judgment), equitably adjusted for stock splits,

stock dividends and similar events that are reflected in the trading market for

the Common Stock during such period, unless the Majority Holders consent in

writing to a higher number of shares with respect to any particular Interest

Payment Date.

 

            "Share Interest Payment Option" shall have the meaning provided in

Section 2(a)(1).

 

            "Share Redemption" means a redemption of this Note or a portion

hereof pursuant to Section 2(c).

 

            "Share Redemption Computation Period" means, with respect to a

particular Share Redemption, the period of 15 consecutive Trading Days ending on

and including the Trading Day immediately preceding the applicable Share

Redemption Date for such Share Redemption.

 

             "Share Redemption Daily Amount" means, with respect to a particular

Trading Day in the Share Redemption Computation Period for a particular Share

Redemption, the lesser of following amounts:

 

            (1) an amount equal to one-fifteenth of the Share Redemption Price

      stated in the applicable Share Redemption Notice for such Share

      Redemption, and

 

            (2) the Share Redemption Daily Limitation for such Trading Day.

 

            "Share Redemption Daily Limitation" means, with respect to a

particular Trading Day in the Share Redemption Computation Period for a

particular Share Redemption, the sum of (x) 105 percent of the product obtained

by multiplying (A) the product obtained by multiplying (i) the Allocated

Redemption

 

                                       -18-

<PAGE>

 

Percentage for such Share Redemption times (ii) the number of shares of Common

Stock traded on such Trading Day, as reported by Bloomberg Financial, L.P.,

based on a Trading Day from 9:30 a.m., Eastern Time, to 4:00 p.m., Eastern Time,

using the AQR Function for such Trading Day times (B) the Computed Price , plus

(y) accrued and unpaid interest on an amount equal to 100 percent of the product

of the amount in clause (A) in the immediately preceding clause (x) times the

amount in clause (B) in the immediately preceding clause (x) to the applicable

Share Redemption Date, computed as if the amount on which such interest were

being calculated were principal of this Note to be redeemed on the applicable

Share Redemption Date plus (z) accrued and unpaid interest, if any, computed at

the Default Rate on the amount specified in the immediately preceding clause

(y).

 

            "Share Redemption Date" means, with respect to a particular

redemption of this Note or a portion hereof under Section 2(c), the Trading Day

selected by the Company in accordance with Section 2(c), on which this Note or

such portion hereof is to be redeemed pursuant to Section 2(c).

 

            "Share Redemption Notice" means a Share Redemption Notice in the

form attached hereto as EXHIBIT G.

 

            "Share Redemption Period" means the period that commences three

Trading Days after the Company files the Current Report on Form 8-K contemplated

by Section 6.3 of the Purchase Agreement Amendment and ends on December 31,

2005.

 

            "Share Redemption Price" means an amount equal to the sum of (1) 105

percent of the principal amount of this Note that is to be redeemed on the

applicable Share Redemption Date plus (2) accrued and unpaid interest on such

principal amount to the applicable Share Redemption Date plus (3) accrued and

unpaid interest, if any, at the Default Rate on the amount referred to in the

immediately preceding clause (2) to the applicable Share Redemption Date.

 

            "Share Redemption Share Amount" means, with respect to a particular

Share Redemption, an amount determined by computing for each Trading Day in the

Share Redemption Computation Period for such Share Redemption the quotient

obtained by dividing (x) the Share Redemption Daily Amount for such Trading Day

by (y) the Computed Price for such Trading Day and then computing the sum of

such quotients for all of the Trading Days in such Share Redemption Computation

Period.

 

            "Tender Offer" means a tender offer or exchange offer.

 

            "Trading Day" means at any time a day on which the Principal Market

is open for the general trading of securities.

 

                                      -19-

<PAGE>

 

            "Transaction Documents" means this Note, the Other Note, the

Purchase Agreement, the Purchase Agreement Amendment, the Other Purchase

Agreement, the Security Agreement, the Warrants, the Redemption Warrant and the

Other Redemption Warrants.

 

            "Transfer Agent" shall mean the institution acting as transfer agent

for the Common Stock.

 

            "Trigger Event" shall have the meaning provided in Section 6(c)(4).

 

            "Underlying Shares" means the shares of Common Stock issued or

issuable upon conversion of, or in lieu of cash payment of interest on, this

Note in accordance with the terms hereof and the Purchase Agreement.

 

            "VWAP" of any security on any Trading Day or for any period of

Trading Days means the volume-weighted average price of such security on such

Trading Day or for such period of Trading Days on the Principal Market, as

reported by Bloomberg Financial, L.P., based on a Trading Day from 9:30 a.m.,

Eastern Time, to 4:00 p.m., Eastern Time, using the AQR Function, for such

Trading Day or for such period of Trading Days; provided, however, that during

any period that the daily VWAP is being determined or for any period for which

the VWAP is being determined, such VWAP shall be subject to equitable

adjustments from time to time on terms consistent with Section 6(c) and

otherwise reasonably acceptable to the Majority Holders for (i) stock splits,

(ii) stock dividends, (iii) combinations, (iv) capital reorganizations, (v)

issuance to all holders of Common Stock of rights or warrants to purchase shares

of Common Stock, (vi) distribution by the Company to all holders of Common Stock

of evidences of indebtedness of the Company or cash (other than regular

quarterly cash dividends), (vii) Tender Offers by the Company or any Subsidiary

for, or other repurchases of shares of, Common Stock in one or more transactions

which, individually or in the aggregate, result in the purchase of more than ten

percent of the Common Stock outstanding, and (viii) similar events relating to

the Common Stock, in each case which occur, or with respect to which the "ex"

date occurs, during such period.

 

            "Warrants" means Common Stock Purchase Warrants of the Company

issued to the original Holder of this Note or its predecessor instrument

pursuant to the Purchase Agreement and issued to the original holders of the

Other Note or their predecessor instruments pursuant to the Other Purchase

Agreement, as amended pursuant to the Purchase Agreement Amendment and the like

amendments to the Other Purchase Agreement.

 

                                       -20-

<PAGE>

 

            SECTION 2. PAYMENT OF CERTAIN INTEREST IN COMMON STOCK; OPTIONAL

REDEMPTION.

 

            (a) ISSUANCE OF COMMON STOCK IN LIEU OF CASH INTEREST. (1) If the

Company exercises its option to make a payment of interest on this Note wholly

or partly in Common Stock (the "Share Interest Payment Option"), the issuance of

Interest Payment Shares upon such exercise of the Share Interest Payment Option

shall have been authorized by the Board of Directors of the Company.

 

            (2) The Company shall not be permitted to exercise the Share

Interest Payment Option with respect to any payment of interest on this Note if:

 

            (i) on the date the Company notifies the Holder of the Company's

      election to exercise the Share Interest Payment Option or on the date the

      Company is required to deliver the Interest Payment Shares, the number of

      shares of Common Stock authorized, unissued and unreserved for all

      purposes, or held in the Company's treasury, is insufficient to pay the

      portion of such interest to be paid in Common Stock;

 

            (ii) the issuance or delivery of Interest Payment Shares or the

      public resale of such Interest Payment Shares by the Holder would require

      registration or filing with or approval of any governmental authority

      under any law or regulation, and such registration, filing or approval has

      not been effected or obtained by or is not in effect on the date the

      Company notifies the Holder of the Company's election to exercise the

      Share Interest Payment Option or at any time thereafter to and including

      the later of (A) such Interest Payment Date and (B) the date the Company

      delivers such Interest Payment Shares to the Holder, the Registration

      Statement (x) is unavailable for use by the Holder for the resale of the

      Interest Payment Shares or (y) is not expected to be available for such

      use for at least 15 Trading Days after the date the Company delivers such

      Interest Payment Shares to the Holder and in either case in the preceding

      clause (x) or (y) the Interest Payment Shares are ineligible for resale by

      the Holder under Rule 144(k) under the 1933 Act, unless in any such case

      described in this clause (ii) the Holder notifies the Company that it will

      accept such Interest Payment Shares notwithstanding the failure to satisfy

      this clause (ii);

 

            (iii) the outstanding shares of Common Stock are neither (A) listed

      or admitted for trading on a national securities exchange nor (B) quoted

      on the Nasdaq; or the Interest Payment Shares shall not at the time of

      issuance have been authorized for listing, upon official notice of

      issuance, on the Principal Market;

 

             (iv) the Interest Share Price for the Interest Payment Shares is

      less

 

                                      -21-

<PAGE>

 

      than the par value of the Common Stock;

 

            (v) an Event of Default has occurred and is continuing on the date

      the Company makes such election or on the applicable Interest Payment

      Date; or

 

            (vi) on the date the Company notifies the Holder of the Company's

      election to exercise the Share Interest Payment Option or at any time

       thereafter to and including the later of (A) such Interest Payment Date

      and (B) the date the Company delivers such Interest Payment Shares to the

      Holder a Maximum Share Amount Deficiency exists.

 

            (3) (A) The Company may exercise its right to elect the Share

Interest Payment Option with respect to any Interest Payment Date only by giving

notice of such election to the Holder not less than 15 or more than 19 Trading

Days prior to such Interest Payment Date, which notice shall state the

percentage of the interest payable on such Interest Payment Date which is to be

paid in Interest Payment Shares. Time shall be of the essence in the giving of

such notice. The Company shall have the right to elect the Share Interest

Payment Option with respect to this Note only if the Company also elects the

similar option which it has with respect to the Other Note for the interest due

thereon on the date which is such Interest Payment Date and in each such case

pro rata among this Note and the Other Note, based on the amounts of interest

due on such date hereon and thereon. If the Company elects the Share Interest

Payment Option with respect to a particular Interest Payment Date, the Company

shall issue to the Holder in respect of such Interest Payment Date the aggregate

number of whole shares of Common Stock determined by dividing the per share

Interest Share Price of the Common Stock on the applicable Interest Payment Date

into an amount equal to the total amount of lawful money of the United States of

America which the Holder would receive if the aggregate amount of interest due

on this Note which is being paid in Common Stock were being paid in such lawful

money. Notwithstanding any other provision of this Note, in no event may the

Company issue in respect of the interest payable on this Note and the Other Note

on any Interest Payment Date an aggregate number of Interest Payment Shares in

excess of the Share Interest Payment Limitation and any interest on this Note

not paid in Interest Payment Shares due to the Share Interest Payment Limitation

shall be paid in cash.

 

            (B) If the Company elects the Share Interest Payment Option with

respect to an Interest Payment Date, the Interest Payment Shares for such

Interest Payment Date shall become issuable on such Interest Payment Date and

the Company shall deliver, or cause to be delivered, the appropriate number of

shares of Common Stock to the Holder within three Trading Days after the

applicable Interest Payment Date. If in any case the Company shall fail to

deliver or cause to be delivered such number of shares of Common Stock to the

Holder within such

 

                                      -22-

<PAGE>

 

period of three Trading Days, then in addition to any other liabilities the

Company may have hereunder and under applicable law (1) the Company shall pay or

reimburse the Holder on demand for all out-of-pocket expenses, including,

without limitation, reasonable fees and expenses of legal counsel, incurred by

the Holder as a result of such failure, (2) if as a result of such failure the

Holder shall suffer any direct damages or liabilities from such failure

(including, without limitation, margin interest and the cost of purchasing

securities to cover a sale (whether by the Holder or the Holder's securities

broker) or borrowing of shares of Common Stock by the Holder for purposes of

settling any trade involving a sale of shares of Common Stock made by the Holder

during the period beginning on the date the Company notified the Holder of the

Company's election of the Share Interest Payment Option and ending on the date

the Company delivers or causes to be delivered to the Holder the shares of

Common Stock issuable in respect thereof), then the Company shall upon demand of

the Holder pay to the Holder an amount equal to the actual direct, out-of-pocket

damages and liabilities suffered by the Holder by reason thereof which the

Holder documents to the reasonable satisfaction of the Company, and (3) the

Holder may by written notice (which may be given by mail, courier, personal

service or telephone line facsimile transmission) or oral notice (promptly

confirmed in writing), given at any time prior to delivery to the Holder of the

shares of Common Stock issuable in connection with such exercise of the Share

Interest Payment Option, require payment in cash of the interest in respect of

which the Company exercised the Share Interest Payment Option, in which case the

amount of such interest shall be immediately due and payable, with interest

thereon, if any, at the Default Rate from the applicable Interest Payment Date

until paid in full, and the Company shall not be obligated or entitled to issue

such Interest Payment Shares in respect of such Interest Payment Date.

Notwithstanding the foregoing the Company shall not be liable to the Holder

under clause (2) of the immediately preceding sentence to the extent the failure

of the Company to deliver or to cause to be delivered such shares of Common

Stock results from fire, flood, storm, earthquake, shipwreck, strike, war, acts

of terrorism, crash involving facilities of a common carrier, acts of God, or

any similar event outside the control of the Company (it being understood that

the action or failure to act of the Transfer Agent shall not be deemed an event

outside the control of the Company except to the extent resulting from fire,

flood, storm, earthquake, shipwreck, strike, war, acts of terrorism, crash

involving facilities of a common carrier, acts of God, or any similar event

outside the control of the Transfer Agent or the bankruptcy, liquidation or

reorganization of the Transfer Agent under any bankruptcy, insolvency or other

similar law). The Holder shall notify the Company in writing (or by telephone

conversation, confirmed in writing) as promptly as practicable following the

third Trading Day after such Interest Payment Date if the Holder becomes aware

that shares of Common Stock so issuable have not been received as provided

herein but any failure to give such notice shall not affect the Holder's rights

under this Note or otherwise. If the Company shall have exercised the Share

Interest Payment Option with respect to a particular Interest Payment Date and

either (1) the Company

 

                                      -23-

<PAGE>

 

shall notify the Holder on or after such Interest Payment Date that the Interest

Payment Shares might not be delivered within three Trading Days after such

Interest Payment Date or (2) the Holder learns after the date which is three

Trading Days after such Interest Payment Date that the Holder has not received

such Interest Payment Shares, then, without releasing the Company of its

obligations with respect thereto, from and after the Trading Day next succeeding

the earlier of the events described in the preceding clauses (1) and (2) of this

sentence the Holder shall make reasonable efforts not to sell shares of Common

Stock in anticipation of receipt of such Interest Payment Shares in a manner

which is likely to increase materially the liability of the Company under clause

(2) of the second preceding sentence. No fractional shares of Common Stock shall

be issued in payment of interest on this Note. In lieu thereof, the Company may,

at its option, issue a number of shares of Common Stock which reflects a

rounding up to the next whole number or may pay lawful money of the United

States of America in lieu of issuance of such fractional share.

 

            (4) If the Company elects the Share Interest Payment Option with

respect to a payment of interest on this Note with respect to a particular

Interest Payment Date, the Company shall deliver to the Holder, on or prior to

the date on which Interest Payment Shares for such payment of interest on this

Note are to be received by the Holder, a Company Certificate setting forth (i)

the total amount of the cash interest payment to which the Holder is entitled,

(ii) the portion of such interest payment being made in Interest Payment Shares,

expressed in dollars and as a percentage, (iii) the number of Interest Payment

Shares allocable to such payment, as calculated pursuant to this Section 2(a),

(iv) any rounding adjustment to such number or any payment necessary to be made

pursuant to Section 2(a)(3), (v) a brief statement of the facts requiring such

adjustment, and (vi) a representation and warranty, which, if false or

misleading, shall be an Event of Default under Section 4(a)(5), that none of the

conditions set forth in Section 2(a)(2) has occurred and is existing and that

all of the requirements of this Section 2(a) have been met. Such Company

Certificate shall be conclusive evidence of the correctness of the calculation

of the number of Interest Payment Shares allocable to the payments to which such

Company Certificate relates and of any adjustments to such number made pursuant

to this Section 2(a) in the absence of manifest error. The Interest Payment

Shares shall be duly issued in the name of the Holder or its nominee. On or

before the applicable Interest Payment Date, the Company shall issue, or cause

the Transfer Agent to prepare and issue, the Interest Payment Shares in the name

of the Holder or its nominee before being so delivered by the Company on such

Interest Payment Date.

 

            (5) The Interest Payment Shares, when issued pursuant to and in

compliance with this Section 2(a), shall be, and for all purposes shall be

deemed to be, validly issued, fully paid and nonassessable shares of Common

Stock; the issuance and delivery thereof is in all respects hereby authorized;

and the issuance

 

                                      -24-

<PAGE>

 

thereof, together with lawful money of the United States of America, if any,

paid in lieu of fractional shares of Common Stock, will be, and for all purposes

shall be deemed to be, in full discharge and satisfaction of the Company's

obligation to pay the interest on this Note to which such Interest Payment

Shares relate.

 

            (6) Any amount of interest not paid in Interest Payment Shares shall

be due and payable in cash on the applicable Interest Payment Date.

 

            (b) OPTIONAL AND MANDATORY REDEMPTION. (1) At any time during the

Optional Redemption Period, the Company shall have the right to redeem the

principal installments stated in Section 2(d)(1) to be due on November 2, 2006

and November 2, 2007 in whole or from time to time in part, and on the

respective dates specified in Section 2(d)(2), the Company shall have the

obligation to redeem the then remaining outstanding amounts of the principal

installments stated in Section 2(d)(1) to be due on November 2, 2005 and

November 2, 2008 in full, in each such case by payment of the Optional

Redemption Consideration pursuant to this Section 2(b) on the applicable

Optional Redemption Date, so long as the following conditions precedent are

satisfied:

 

            (A) on the date a particular Optional Redemption Notice is given and

      at all times thereafter to and including the applicable Optional

      Redemption Date, no Event of Default and no event which, with notice or

      passage of time, or both, would become an Event of Default has occurred

       and is continuing (unless, by reason of such redemption, the requirements

      of this clause (A) will be satisfied immediately after the redemption of

      this Note and the Other Note on the applicable Optional Redemption Date

      and the Company shall furnish Company Certificates to the Holder to such

      effect on the date such Optional Redemption Notice is given to the Holder

      and on the applicable Optional Redemption Date);

 

            (B) on the date such Optional Redemption Notice is given and at all

      times thereafter to and including the applicable Optional Redemption Date,

      no Repurchase Event has occurred with respect to which the Holder has the

      right to exercise repurchase rights pursuant to Section 5 or with respect

      to which the Holder has exercised such repurchase rights and the

      Repurchase Price has not been paid to the Holder and no event which, with

      notice or passage of time, or both, would become a Repurchase Event has

      occurred and is continuing;

 

            (C) on the date such Optional Redemption Notice is given and at all

      times thereafter to and including the applicable Optional Redemption Date,

      the Registration Statement shall be effective and available for use by the

       Holder, the holders of the Other Note and the holders of the Warrants for

      the resale of the shares of Common Stock issued and issuable upon

      conversion of

 

                                      -25-

<PAGE>

 

      this Note and the Other Note and issued or issuable upon exercise of the

      Warrants, as the case may be, and is reasonably expected to remain

      effective and available for such use for at least 30 days after the

      applicable Optional Redemption Date, and the Company shall be in

      compliance in all material respects with its obligations under the

      Registration Rights Agreement;

 

            (D) on the date such Optional Redemption Notice is given and at all

      times thereafter to and including the applicable Optional Redemption Date

      one or more registration statements under the 1933 Act covering the resale

      of the shares of Common Stock issuable to the Holder upon exercise of the

      Redemption Warrants issuable to the Holder in payment of a portion of the

      Optional Redemption Consideration on the applicable Optional Redemption

      Date and any Redemption Warrants previously issued to the Holder shall be

      effective under the 1933 Act and available for use by the Holder for the

      resale of such shares of Common Stock and each such registration statement

      shall reasonably be expected to remain available for such use for at least

      30 Trading Days after the applicable Optional Redemption Date;

 

            (E) on the date such Optional Redemption Notice is given, the

      Company has funds available to pay the cash portion of the Optional

      Redemption Consideration payable on the applicable Optional Redemption

      Date;

 

            (F) other than in the case of a redemption required by Section

      2(d)(2) or by Section 6.16(b)(2) of the Purchase Agreement, the Optional

      Redemption Date selected by the Company in accordance with this Section

      2(b) and set forth in such Optional Redemption Notice shall be at least

       365 days after any earlier Optional Redemption Date;

 

            (G) except as otherwise provided in Section 6.16(b)(2) of the

      Purchase Agreement, on the date such Optional Redemption Notice is given

      and at all times thereafter to and including the applicable Optional

      Redemption Date no Maximum Share Amount Deficiency exists (unless, by

      reason of such redemption, the requirements of this clause (G) will be

      satisfied immediately after the redemption of this Note and the Other Note

      on the applicable Optional Redemption Date and the Company shall furnish

      Company Certificates to the Holder to such effect on the date such

      Optional Redemption Notice is given to the Holder and on the applicable

      Optional Redemption Date); and

 

            (H) during the period beginning five days prior to the date the

      Company gives such Optional Redemption Notice and ending on the applicable

      Optional Redemption Date the Company shall not have been engaged in

       discussions or negotiations concerning, or entered in to an

 

                                      -26-

<PAGE>

 

      agreement or received any proposal for, any transaction that might result

      in a Fundamental Change, and the Company shall not enter into any

      agreement or accept any proposal for, any transaction that might result in

      a Fundamental Change for a period of 60 days after the applicable Optional

      Redemption Date.

 

In order to exercise its right of redemption under this Section 2(b) the Company

shall give the particular Optional Redemption Notice to the Holder not less than

20 Trading Days or more than 40 Trading Days prior to the applicable Optional

Redemption Date, stating that: (1) the Company is exercising its right to redeem

this Note in accordance with this Section 2(b); (2) the principal amount of this

Note to be redeemed; (3) the amount of the cash portion of the Optional

Redemption Consideration payable on such Optional Redemption Date (assuming no

conversion of this Note from the date the Company gives such Optional Redemption

Notice to the applicable Optional Redemption Date); (4) the number of shares of

Common Stock and the purchase price therefor to be contained in the Redemption

Warrant included in such Optional Redemption Consideration (assuming no

conversion of this Note from the date the Company gives such Optional Redemption

Notice to the applicable Optional Redemption Date); (5) the Optional Redemption

Date; and (6) that all of the conditions of this Section 2(b) entitling the

Company to call this Note for redemption have been met. On the Optional

Redemption Date (or such later date as the Holder surrenders this Note to the

Company) the Company shall (x) pay to or upon the order of the Holder, by wire

transfer of immediately available funds to such account as shall be specified

for such purpose by the Holder at least one Business Day prior to the applicable

Optional Redemption Date, an amount equal to the cash portion of the Optional

Redemption Consideration and (y) issue and deliver to the Holder the portion of

such Optional Redemption Consideration consisting of the Redemption Warrant,

which will be deemed for all purposes to have been issued to the Holder on the

applicable Optional Redemption Date, unless the Company shall have failed to pay

the amount specified in the immediately preceding clause (x) when due.

 

            (2) The Company shall not be entitled to give an Optional Redemption

Notice or to redeem any portion of this Note with respect to which the Holder

has given a Conversion Notice on or prior to the date the Company gives such

Optional Redemption Notice. Notwithstanding the giving of a particular Optional

Redemption Notice, the Holder shall be entitled to convert all or any portion of

this Note, in accordance with the terms of this Note, by giving a Conversion

Notice at any time on or prior to the later of (1) the date which is one Trading

Day prior to the applicable Optional Redemption Date and (2) if the Company

fails to pay and deliver to the Holder, or deposit in accordance with Section

7(k), the Optional Redemption Consideration payable on the applicable Optional

Redemption Date on or before the applicable Optional Redemption Date, the date

on which the Company pays and delivers to the Holder, or deposits in

 

                                      -27-

<PAGE>

 

accordance with Section 7(k), such Optional Redemption Consideration. If after

giving effect to any such conversion of this Note that occurs after the date the

Company gives a particular Optional Redemption Notice to the Holder, the

principal amount of this Note remaining outstanding is less than the amount

thereof to be redeemed as stated in the applicable Optional Redemption Notice,

then the Optional Redemption Consideration set forth in the Optional Redemption

Notice shall be adjusted to reflect the reduced outstanding principal amount of

this Note and related accrued interest (and interest, if any, thereon at the

Default Rate) on the applicable Optional Redemption Date resulting from any such

conversions of this Note after the Company gives such Optional Redemption Notice

to the Holder. Any redemption of this Note pursuant to this Section 2(b), other

than a redemption required by Section 2(d)(2), shall be applied to the

installments of principal outstanding on the applicable Optional Redemption Date

first to the principal installment stated in Section 2(d)(1) to be due on

November 2, 2007, second to the principal installment stated in Section 2(d)(1)

to be due on November 2, 2006 and thereafter to the remaining principal

installments in the inverse order of their maturity stated in Section 2(d)(1),

and any redemption of this Note pursuant to this Section 2(b) that is required

by Section 2(d)(2) shall be applied to the installment of principal outstanding

on the applicable Optional Redemption Date that is required by Section 2(d)(2)

to be redeemed under this Section 2(b) on such Optional Redemption Date.

 

            (3) In order that the Company shall not discriminate among the

Holder and the holders of the Other Note, the Company agrees that each

redemption of this Note pursuant to this Section 2(b) shall be made at the same

time as a redemption by the Company of the Other Note and that such redemption

shall be made pro rata based on the principal amounts of this Note and the Other

Note outstanding on the date the Company gives the particular Optional

Redemption Notice. In order that the Company not discriminate among the Holder

and the holders of the Other Note, the Company agrees that it shall not redeem

any of the Other Note pursuant to the provisions thereof similar to this Section

2(b) or repurchase or otherwise acquire any of the Other Note (other than a

mandatory redemption pursuant to provisions of the Other Note comparable to

Section 5 or as provided in Sections 6.2 and 6.16 of the Purchase Agreement and

the Other Purchase Agreement) unless the Company offers simultaneously to

redeem, repurchase or otherwise acquire a pro rata portion (based on outstanding

principal amount) of this Note for cash at the same unit price as the Other Note

or Other Note.

 

            (c) SHARE REDEMPTION. (1) During the Share Redemption Period, the

Company shall, as provided in Sections 2(d)(2) and 2(d)(3), redeem the principal

installments of this Note due on November 2, 2005 and November 2, 2008 in whole

or from time to time in part, in each such case by issuing the number of shares

of Common Stock to the Holder determined as provided in Section 2(c)(2), so long

as

 

                                      -28-

<PAGE>

 

the following conditions precedent are satisfied:

 

            (A) on the date a particular Share Redemption Notice is given and at

      all times thereafter to and including the applicable Share Redemption

      Date, no Event of Default and no event which, with notice or passage of

      time, or both, would become an Event of Default has occurred and is

      continuing (unless, by reason of such redemption, the requirements of this

      clause (A) will be satisfied immediately after the redemption of this Note

      and the Other Note on the applicable Share Redemption Date and the Company

      shall furnish Company Certificates to the Holder to such effect on the

      date such Share Redemption Notice is given to the Holder and on the

       applicable Share Redemption Date);

 

            (B) on the date such Share Redemption Notice is given and at all

      times thereafter to and including the applicable Share Redemption Date, no

      Repurchase Event has occurred with respect to which the Holder has the

      right to exercise repurchase rights pursuant to Section 5 or with respect

      to which the Holder has exercised such repurchase rights and the

      Repurchase Price has not been paid to the Holder and no event which, with

      notice or passage of time, or both, would become a Repurchase Event has

      occurred and is continuing;

 

            (C) on the date such Share Redemption Notice is given and at all

      times thereafter to and including the applicable Share Redemption Date,

      the Registration Statement shall be effective and available for use by the

      Holder, the holders of the Other Note and the holders of the Warrants for

      the resale of the shares of Common Stock issued and issuable upon such

      Share Redemption and issued or issuable upon conversion of this Note and

      the Other Note and issued or issuable upon exercise of the Warrants, as

      the case may be, and is reasonably expected to remain effective and

      available for such use for at least 30 days after the applicable Share

      Redemption Date, and the Company shall be in compliance in all material

      respects with its obligations under the Registration Rights Agreement;

 

            (D) on the date such Share Redemption Notice is given, the Company

      has authorized and unissued shares of Common Stock not reserved for any

      purpose other than Share Redemption of this Note in an amount sufficient

      to satisfy the applicable Share Redemption Price by issuance of shares of

      Common Stock;

 

            (E) the Share Redemption Date selected by the Company in accordance

      with this Section 2(c) and set forth in such Share Redemption Notice shall

      be at least 24 Trading Days after any earlier Share Redemption Date;

 

                                      -29-

<PAGE>

 

            (F) the Company shall have complied with Section 3(o) with respect

      to all Share Redemptions occurring prior to the giving of such Share

      Redemption Notice;

 

            (G) on the date such Share Redemption Notice is given and at all

      times thereafter to and including the applicable Share Redemption Date no

      Maximum Share Amount Deficiency exists and no Maximum Share Amount

      Deficiency would result from such Share Redemption or the contemporaneous

      redemption of the Other Note pursuant to Section 2(c) thereof;

 

            (H) during the period beginning five days prior to the date the

      Company gives such Share Redemption Notice and ending on the applicable

       Share Redemption Date the Company shall not have been engaged in

      discussions or negotiations concerning, or entered in to an agreement or

      received any proposal for, any transaction that might result in a

      Fundamental Change, and the Company shall not enter into any agreement or

      accept any proposal for, any transaction that might result in a

      Fundamental Change for a period of 60 days after the applicable Share

      Redemption Date; and

 

            (I) the Computed Price for such Share Redemption is not less than

      the par value of the Common Stock.

 

In order to exercise its right of redemption under this Section 2(c) the Company

shall give the particular Share Redemption Notice to the Holder not less than 17

Trading Days or more than 19 Trading Days prior to the applicable Share

Redemption Date, stating: (1) that the Company is exercising its right to redeem

this Note in accordance with this Section 2(c), (2) the principal amount of this

Note to be redeemed (assuming no conversion of this Note from the date the

Company gives such Share Redemption Notice to the applicable Share Redemption

Date and that the Share Redemption Share Amount for such Share Redemption will

be computed based on the entire such principal amount), (3) the amount of the

Share Redemption Price payable on such Share Redemption Date (assuming no

conversion of this Note from the date the Company gives such Share Redemption

Notice to the applicable Share Redemption Date and that the Share Redemption

Share Amount for such Share Redemption will be computed based on the entire

principal amount included such Share Redemption Price), (4) the principal

installment to which such Share Redemption shall be applied, (5) the applicable

Share Redemption Date and (6) that all of the conditions of this Section 2(c)

entitling the Company to call this Note for redemption have been met. As

promptly as practicable, but in no event later than three Trading Days, after

the applicable Share Redemption Date, the Company shall issue and shall deliver

to the Holder or the Holder's designee the number of full shares of Common Stock

issuable upon such Share Redemption of

 

                                      -30-

<PAGE>

 

this Note or portion hereof in accordance with the provisions of this Section

2(c) and deliver a check or cash in respect of any fractional interest in

respect of a share of Common Stock arising upon such redemption, as provided in

Section 2(c)(7). In lieu of delivering physical certificates for the shares of

Common Stock issuable upon any such redemption of this Note, provided the

Transfer Agent is participating in FAST, upon request of the Holder, the Company

shall use commercially reasonable efforts to cause the Transfer Agent

electronically to transmit such shares of Common Stock issuable upon redemption

to the Holder (or its designee), by crediting the account of the Holder's (or

such designee's) broker or other participant with DTC through DWAC (provided

that the same time periods herein as for stock certificates shall apply). The

Holder shall have the right, exercisable by notice given to the Company from

time to time after the Company gives a Share Redemption Notice for a particular

Share Redemption, to require the Company to deliver to the Holder a portion of

the shares of Common Stock issuable in connection with a particular Share

Redemption in advance of the date that is three Trading Days after the

applicable Share Redemption Date, in which case the shares so requested shall be

delivered within three Trading Days after the Holder gives such notice to the

Company. The aggregate number of shares of Common Stock required to be so

delivered in advance of a particular Share Redemption Date may not exceed the

sum for the elapsed Trading Days in the applicable Share Redemption Computation

Period of quotient obtained by dividing (1) the Share Redemption Daily Amount

for each such Trading Day by (2) the Computed Price for such Trading Day.

 

            (2) The number of shares of Common Stock issuable by the Company in

respect of each Share Redemption shall be the Share Redemption Share Amount for

such Share Redemption. Notwithstanding the principal amount of this Note to be

redeemed as stated in the Share Redemption Notice for a particular Share

Redemption, the principal amount actually redeemed shall be the sum, for all of

the Trading Days in the Share Redemption Computation Period for such Share

Redemption, of (x) the principal amount of this Note included in the amount

specified in clause (1) of the definition of Share Redemption Daily Amount for

each Trading Day in such Share Redemption Computation Period for which the Share

Redemption Daily Amount for such Trading Day is computed under clause (1) of

such definition, or (y) the product obtained by multiplying (i) the amount set

forth in subclause (A) of the definition of Share Redemption Daily Limitation

times (ii) the amount set forth in subclause (B) of the definition of Share

Redemption Daily Limitation for each Trading Day in such Share Redemption

Computation Period for which the Share Redemption Daily Amount for such Trading

Day is computed under clause (2) of such definition.

 

            (3) The Company shall not be entitled to give a Share Redemption

Notice or to redeem any portion of this Note with respect to which the Holder

has given a Conversion Notice on or prior to the date the Company gives such

Share Redemption Notice. Notwithstanding the giving of a particular Share

Redemption

 

                                      -31-

<PAGE>

 

Notice, the Holder shall be entitled to convert all or any portion of this Note,

in accordance with the terms of this Note, to be redeemed by reason of the

giving of such Share Redemption Notice by giving a Conversion Notice at any time

on or prior to the later of (1) the date which is one Trading Day prior to the

applicable Share Redemption Date and (2) if the Company fails to issue or

deliver to the Holder the shares of Common Stock issuable in satisfaction of

such Share Redemption Price on or before the due date therefor, the date on

which the Company issues and delivers to the Holder such shares of Common Stock.

If after giving effect to any such conversion of this Note that occurs after the

date the Company gives a particular Share Redemption Notice to the Holder, the

principal amount of a particular principal installment of this Note remaining

outstanding is less than the amount thereof to be redeemed as stated in the

applicable Share Redemption Notice, then the Share Redemption Share Amount for

such Share Redemption shall be reduced form what it otherwise would be to

reflect the reduced outstanding principal amount of this Note and related

accrued interest (and interest, if any, thereon at the Default Rate) on the

applicable Share Redemption Date resulting from any such conversions of this

Note after the Company gives such Share Redemption Notice to the Holder. Such

reduction of the Share Redemption Share amount shall be made by reducing the

Share Redemption Daily Amounts used to calculate the Share Redemption Share

Amount for such Share Redemption in the inverse of their chronological order to

the extent necessary to reduce the principal amount reflected in such Share

Redemption Share Amount by the principal amount so converted. Any redemption of

this Note pursuant to this Section 2(c) that is required by Section 2(d)(2)

shall be applied to the installments of principal outstanding on the applicable

Share Redemption Date first to the principal installment stated by Section

2(d)(1) to be due on November 2, 2005 and then to the principal installment

stated by Section 2(d)(1) to be due on November 2, 2008.

 

            (4) Each redemption of this Note (or portion hereof) pursuant to

this Section 2(c) shall be deemed to have been effected on the applicable Share

Redemption Date, and the person in whose name any certificate or certificates

for shares of Common Stock shall be issuable upon such redemption shall be

deemed to have become on such Share Redemption Date the holder of record of the

shares represented thereby; provided, however, that if a Share Redemption Date

is a date on which the stock transfer books of the Company shall be closed such

redemption shall constitute the person in whose name the certificates are to be

issued as the record holder thereof for all purposes on the next succeeding day

on which such stock transfer books are open. Upon redemption of this Note or any

portion hereof pursuant to this Section 2(c), the accrued and unpaid interest on

this Note (or portion hereof) so redeemed to (but excluding) the applicable

Share Redemption Date shall be deemed to be paid to the Holder of this Note

through receipt of such number of shares of Common Stock issued upon redemption

of this Note or portion hereof as shall have an aggregate Current Market Price

on the Trading Day

 

                                       -32-

<PAGE>

 

immediately preceding such Share Redemption Date equal to the amount of such

accrued and unpaid interest.

 

            (5) The Company shall not be required to pay any tax which may be

payable in respect of any transfer involved in the issuance and delivery of

shares of Common Stock or other securities or property on redemption of this

Note pursuant to this Section 2(c) in a name other than that of the Holder, and

the Company shall not be required to issue or deliver any such shares or other

securities or property unless and until the person or persons requesting the

issuance thereof shall have paid to the Company the amount of any such tax or

shall have established to the satisfaction of the Company that such tax has been

paid. The Holder shall be responsible for the amount of any income or

withholding tax payable in connection with any such redemption of this Note.

 

            (6) (A) If the Company shall have given a Share Redemption Notice in

accordance with the terms of this Note, the Company's obligation to issue and

deliver the shares of Common Stock upon such redemption on the terms and subject

to the conditions of this Note shall be absolute and unconditional, irrespective

of any action or inaction by the Holder to enforce the same, any waiver or

consent with respect to any provision hereof, 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 Company to the Holder, or any

setoff, counterclaim, recoupment, limitation or termination, or any breach or

alleged breach by the Holder or any other person of any obligation to the

Company or any violation or alleged violation of law by the Holder or any other

Person, and irrespective of any other circumstance which might otherwise limit

such obligation of the Company to the Holder in connection with such redemption;

provided, however, that nothing herein shall limit or prejudice the right of the

Company to pursue any such claim in any other manner permitted by applicable

law.

 

            (B) If in any case the Company shall fail to issue and deliver the

shares of Common Stock to the Holder in connection with a particular redemption

of this Note within three Trading Days after the due date therefor, in addition

to any other liabilities the Company may have hereunder and under applicable law

(i) the Company shall pay or reimburse the Holder on demand for all

out-of-pocket expenses, including, without limitation, reasonable fees and

expenses of legal counsel, incurred by the Holder as a result of such failure

and (ii) if as a result of such failure the Holder shall suffer any direct

damages or liabilities from such failure (including, without limitation, margin

interest and the cost of purchasing securities to cover a sale (whether by the

Holder or the Holder's securities broker) or borrowing of shares of Common Stock

by the Holder for purposes of settling any trade involving a sale of shares of

Common Stock made by the Holder during the period beginning on the Issuance Date

and ending on the date the Company delivers or causes to be delivered to the

Holder such shares of Common Stock), then

 

                                      -33-

<PAGE>

 

the Company shall upon demand of the Holder pay to the Holder an amount equal to

the actual direct, out-of-pocket damages and liabilities suffered by the Holder

by reason thereof which the Holder documents to the reasonable satisfaction of

the Company. Notwithstanding the foregoing, the Company shall not be liable to

the Holder under clause (ii) of the immediately preceding sentence to the extent

the failure of the Company to deliver or to cause to be delivered such shares of

Common Stock results from fire, flood, storm, earthquake, shipwreck, strike,

war, acts of terrorism, crash involving facilities of a common carrier, acts of

God, or any similar event outside the control of the Company (it being

understood that the action or failure to act of the Transfer Agent shall not be

deemed an event outside the control of the Company except to the extent

resulting from fire, flood, storm, earthquake, shipwreck, strike, war, acts of

terrorism, crash involving facilities of a common carrier, acts of God, or any

similar event outside the control of the Transfer Agent or the bankruptcy,

liquidation or reorganization of the Transfer Agent under any bankruptcy,

insolvency or other similar law). In the case of the Company's failure to issue

and deliver or cause to be delivered the shares of Common Stock to the Holder

within three Trading Days of the due date therefor, the amount payable by the

Company pursuant to this clause (B) of Section 2(c)(6) with respect to such

conversion shall be reduced by the amount of Redemption Delay Payments

previously paid by the Company to the Holder with respect to such redemption.

The Holder shall notify the Company in writing (or by telephone conversation,

confirmed in writing) as promptly as practicable following the third Trading Day

after the applicable Share Redemption Date if the Holder becomes aware that such

shares of Common Stock so issuable have not been received as provided herein,

but any failure so to give such notice shall not affect the Holder's rights

under this Note or otherwise. If the Holder learns after the date which is three

Trading Days after the due date for delivery of shares of Common Stock under

this Section 2(c) that the Holder has not received such shares of Common Stock,

then, without releasing the Company of its obligations with respect thereto,

from and after the Trading Day next succeeding the date the Holder so learns of

such failure of delivery, the Holder shall make reasonable efforts not to sell

shares of Common Stock in anticipation of receipt of such shares of Common Stock

in a manner which is likely to increase materially the liability of the Company

under clause (ii) of the first sentence of this clause (B) of Section 2(c)(6).

 

            (C) If the Company fails to deliver or cause to be delivered to the

Holder such shares of Common Stock pursuant to this Section 2(c) (free of any

restrictions on transfer or legends except to the extent permitted under Section

6.11