EX-10.5
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,
OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS
NOT
REQUIRED UNDER
SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
REGULATION S UNDER SAID ACT.
CALLABLE SECURED CONVERTIBLE NOTE
Clinton Township, Michigan
September 15, 2006
$[_______]
FOR VALUE RECEIVED, MIDNIGHT HOLDINGS GROUP, INC., a Delaware
corporation
(hereinafter called the "BORROWER"), hereby promises to pay to the
order of
[______________] or
registered
assigns (the "HOLDER") the sum of
$[_______], on
September 15, 2009 (the "MATURITY DATE"), and to pay interest
on
the unpaid principal
balance hereof at the
rate of ten percent (10%) per annum
from September
15, 2006 (the "ISSUE DATE") until the same becomes due and
payable, whether at maturity or upon acceleration or by prepayment
or otherwise.
Any amount of
principal or interest on this Note which is not paid
when due
shall bear interest at the rate of fifteen percent (15%) per annum from the
due
date thereof
until the same is paid ("DEFAULT INTEREST"). Interest shall
commence accruing on the issue date, shall be computed on the basis
of a 365-day
year and the actual
number of days elapsed
and shall be payable,
quarterly on
March 31, June 30,
September 30 and
December 31 of each year beginning on the
last day of the first full quarter after Issue Date. All payments due hereunder
(to the extent not converted into common stock, $.00005 par value per share,
of
the Borrower (the "COMMON STOCK") in accordance with the
terms hereof) shall be
made in lawful money of the United States of America. All payments
shall be made
at such address as the
Holder shall hereafter
give to the Borrower
by written
notice made in accordance with the provisions of this Note.
Whenever any
amount
expressed to be due by
the terms of this Note
is due on any day which is not a
business day, the same shall instead be due on the next
succeeding day which
is
a business day and, in
the case of any
interest payment date
which is not the
date on which this Note is paid in full, the extension of the due date
thereof
shall not be taken
into account
for purposes of determining the amount of
interest due on such date. As used in this Note, the term "business day" shall
mean any day other than a Saturday, Sunday or a day on which
commercial banks in
the city of New York,
New York are
authorized or required
by law or executive
order to
<PAGE>
remain closed. Each
capitalized term used
herein, and not
otherwise defined,
shall have the meaning
ascribed thereto in
that certain
Securities
Purchase
Agreement, dated
September 15, 2006, pursuant to which this Note was originally
issued (the "PURCHASE AGREEMENT").
This Note is free from all taxes, liens, claims and encumbrances with
respect to the issue
thereof and shall not be subject to preemptive rights or
other similar
rights of shareholders of the Borrower and will not impose
personal liability
upon the holder
thereof. The obligations of the Borrower
under this Note
shall be secured by
that certain
Security Agreement by and
between the Borrower and the Holder of even date herewith.
The following terms shall apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 CONVERSION
RIGHT. The Holder shall have the right from
time to time, and at
any time on or prior to the earlier of (i) the Maturity
Date and (ii) the date of payment of the Default Amount (as defined in Article
III) pursuant to Section 1.6(a) or Article III, the Optional
Prepayment
Amount
(as defined in Section 5.1) or (iii) any payments pursuant to Section 1.7, each
in respect of the remaining outstanding principal amount of this
Note to convert
all or any part of the outstanding and unpaid principal amount of
this Note into
fully paid and
non-assessable shares
of Common Stock,
as such Common Stock
exists on the Issue Date, or any shares of capital stock or other
securities of
the Borrower
into which such Common Stock shall hereafter be changed or
reclassified at the
conversion price (the
"CONVERSION
PRICE") determined as
provided herein (a "CONVERSION"); PROVIDED, HOWEVER, that in no
event shall the
Holder be entitled to convert any portion of this Note in excess of
that portion
of this Note upon
conversion
of which the sum of
(1) the number of
shares of
Common Stock
beneficially owned by
the Holder and its
affiliates (other
than
shares of Common
Stock which may be deemed beneficially owned through the
ownership of the
unconverted
portion of the Notes or the unexercised or
unconverted portion of
any other security of the Borrower (including, without
limitation, the
warrants issued by the Borrower pursuant to the Purchase
Agreement) subject to
a limitation on
conversion or exercise
analogous to the
limitations contained
herein) and (2) the number of shares of Common Stock
issuable upon the
conversion of the
portion of this Note with respect to which
the determination
of this proviso is
being made, would
result in beneficial
ownership by the Holder and its affiliates of more than 4.9% of the
outstanding
shares of Common Stock. For purposes of the proviso to the
immediately preceding
sentence, beneficial
ownership shall be determined in accordance
with Section
13(d) of the Securities Exchange Act of 1934, as amended,
and Regulations
13D-G
thereunder, except as
otherwise provided in clause (1) of such
proviso. The
number of shares of Common Stock to be issued upon each
conversion of this
Note
shall be determined by dividing the Conversion Amount (as defined below) by
the
applicable Conversion
Price then in effect
on the date specified in the notice
of conversion,
in the form
attached hereto as Exhibit A (the "NOTICE OF
CONVERSION"), delivered to the Borrower by the Holder in accordance
with Section
1.4 below; provided
that the Notice of Conversion is submitted by facsimile (or
by other means resulting in, or reasonably expected to result in,
notice) to the
Borrower before 6:00
p.m., New York, New York time on such conversion date (the
"CONVERSION DATE").
The term "CONVERSION AMOUNT" means, with respect to any
conversion of this Note, the sum of (1) the principal amount of this Note to be
converted in such
2
<PAGE>
conversion PLUS (2)
accrued and unpaid
interest, if any, on such principal
amount at the interest rates provided in this Note to the
Conversion Date
PLUS
(3) Default Interest,
if any, on the
amounts referred to in the immediately
preceding clauses (1)
and/or (2) PLUS (4) at the Holder's option, any amounts
owed to the Holder
pursuant to Sections
1.3 and 1.4(g)
hereof or pursuant
to
Section 2(c)
of that certain Registration Rights Agreement, dated as of
September 15, 2006,
executed in connection
with the initial
issuance of this
Note and the other
Notes issued on the
Issue Date (the
"REGISTRATION
RIGHTS
AGREEMENT").
1.2 CONVERSION PRICE.
(a) CALCULATION OF CONVERSION PRICE. The Conversion
Price shall be the
lesser of (i) the
Variable Conversion Price (as defined
herein) and (ii) the Fixed Conversion Price (as defined herein)
(subject, in
each case, to equitable adjustments for stock splits,
stock dividends or rights
offerings by
the Borrower relating to the Borrower's securities or the
securities of any
subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The
"VARIABLE CONVERSION
PRICE" shall mean the
Applicable
Percentage (as
defined
herein) multiplied by the Market Price (as defined herein). "MARKET
PRICE" means
the average of the lowest three (3) Trading Prices (as defined below) for the
Common Stock during
the twenty (20)
Trading Day period
ending one Trading Day
prior to the date the
Conversion Notice is
sent by the Holder to the Borrower
via facsimile (the "CONVERSION DATE"). "TRADING PRICE" means, for any
security
as of any date, the
intraday trading
price on the
Over-the-Counter
Bulletin
Board (the "OTCBB")
as reported by a reliable reporting service mutually
acceptable to and
hereafter designated
by Holders of a majority in interest of
the Notes and the Borrower or, if the OTCBB is not the principal
trading market
for such security, the
intraday trading price of such security on the principal
securities exchange or
trading market where
such security is
listed or traded
or, if no intraday
trading price of such
security is
available in any of
the
foregoing manners,
the average of the
intraday trading prices of any market
makers for such
security that are
listed in the "pink
sheets" by the National
Quotation Bureau,
Inc. If the Trading Price cannot be calculated for such
security on such date in the manner provided above, the Trading Price shall be
the fair market value as mutually determined by the Borrower and the
holders of
a majority in interest of the Notes being converted for which the
calculation of
the Trading Price is required in order to determine the Conversion
Price of such
Notes. "TRADING DAY"
shall mean any day on which the Common Stock is traded for
any period on the
OTCBB, or on the principal securities exchange or other
securities market on
which the Common Stock is then being traded. "APPLICABLE
PERCENTAGE" shall mean 25%; provided, however, that the Applicable Percentage
shall be increased to (i) 30% in the event that the Registration Statement (as
defined in the Registration Rights Agreement) is filed on or before
the Filing
Date (as defined in the Registration Rights Agreement) and (ii) 40%
in the event
that the Registration Statement (as defined in the Registration Rights
Agreement) becomes effective on or before the Effectiveness
Deadline (as defined
in the Registration Rights Agreement).
(b)
CONVERSION
PRICE DURING MAJOR ANNOUNCEMENTS.
Notwithstanding
anything contained in
Section 1.2(a) to the
contrary, in the
event the Borrower (i) makes a public announcement that it intends to
consolidate or merge
with any other
corporation (other
than a merger in which
the Borrower is the surviving or continuing corporation and its
capital stock is
unchanged) or sell or
transfer all or
substantially
all of the assets of
the
Borrower or (ii) any person, group or entity (including the
Borrower) publicly
3
<PAGE>
announces a tender offer to purchase 50% or more of the Borrower's
Common Stock
(or any other takeover
scheme) (the date of the announcement referred to in
clause (i) or (ii) is hereinafter referred to as the "ANNOUNCEMENT
DATE"), then
the Conversion Price shall, effective upon the Announcement
Date and continuing
through the Adjusted
Conversion Price
Termination Date (as defined below), be
equal to the lower of (x) the Conversion Price which would have been
applicable
for a Conversion occurring on the Announcement Date and (y) the
Conversion Price
that would otherwise be in effect. From and after the Adjusted
Conversion Price
Termination Date, the
Conversion Price shall be determined as set forth in this
Section 1.2(a). For
purposes hereof,
"ADJUSTED CONVERSION
PRICE TERMINATION
DATE" shall mean, with
respect to any proposed transaction or tender offer
(or
takeover scheme) for which a public announcement as contemplated by
this Section
1.2(b) has been made,
the date upon which the Borrower (in the case of clause
(i) above) or the
person, group or
entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of
the proposed
transaction or tender
offer (or takeover scheme) which caused this Section
1.2(b) to become operative.
1.3 AUTHORIZED
SHARES. Subject to the completion of the
Charter Amendment Actions (as defined in the Purchase Agreement), the Borrower
covenants that during the period the conversion right exists,
the Borrower will
reserve from its
authorized and
unissued Common Stock
a sufficient number
of
shares, free from preemptive rights, to provide for the issuance of
Common Stock
upon the full conversion of this Note and the other Notes issued
pursuant to the
Purchase Agreement. The Borrower is required at all times to have
authorized and
reserved two times the
number of shares that
is actually
issuable upon full
conversion of the
Notes (based on the Conversion Price of the Notes or the
Exercise Price of the
Warrants in effect from time to time) (the "RESERVED
AMOUNT"). The Reserved Amount shall be increased from time to time
in accordance
with the Borrower's obligations pursuant to Section 4(h) of the Purchase
Agreement. The
Borrower represents that upon issuance, such shares will be
duly
and validly issued, fully paid and non-assessable. In addition, if the Borrower
shall issue any
securities or make any
change to its capital
structure which
would change the
number of shares of Common Stock into which the Notes shall be
convertible at the then current Conversion Price, the Borrower
shall at the same
time make proper provision so that thereafter there shall be a
sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Notes. The Borrower (i)
acknowledges that
it
has irrevocably
instructed
its transfer agent to
issue certificates
for the
Common Stock issuable
upon conversion
of this Note,
and (ii) agrees that
its
issuance of this Note shall constitute full authority to its
officers and agents
who are charged with the duty of executing stock certificates to execute and
issue the necessary
certificates for
shares of Common Stock in accordance with
the terms and conditions of this Note.
If, at any time a
Holder of this
Note submits a Notice of
Conversion, and the
Borrower does not have
sufficient authorized
but unissued
shares of Common Stock
available to effect such conversion in accordance
with
the provisions of this
Article I (a "CONVERSION DEFAULT"), subject to Section
4.8, the Borrower shall issue to the Holder all of
the shares of Common Stock
which are then
available to effect
such conversion.
The portion of this
Note
which the Holder included in its Conversion Notice and which exceeds the
amount
which is then
convertible into
available shares of Common Stock (the
"EXCESS
AMOUNT") shall,
notwithstanding
anything to the contrary contained herein, not
be convertible into
Common
4
<PAGE>
Stock in accordance
with the terms hereof until (and at the Holder's option at
any time after) the date additional shares of Common Stock are
authorized by the
Borrower to permit
such conversion, at which time the Conversion Price in
respect thereof
shall be the lesser of (i) the Conversion Price on the
Conversion Default
Date (as defined below) and (ii) the Conversion Price on the
Conversion Date
thereafter
elected by the Holder in respect thereof. In
addition, the Borrower
shall pay to the Holder payments ("CONVERSION DEFAULT
PAYMENTS") for a Conversion Default in the amount of (x) the SUM OF
(1) the then
outstanding principal
amount of this Note
PLUS (2) accrued and unpaid interest
on the unpaid principal amount of this Note through the
Authorization
Date (as
defined below) PLUS (3) Default Interest, if any, on the amounts referred to
in
clauses (1) and/or (2), MULTIPLIED BY (y) .24, MULTIPLIED BY (z)
(N/365), where
N = the number of days
from the day the holder submits a Notice of Conversion
giving rise to a Conversion Default (the "CONVERSION DEFAULT DATE") to the date
(the "AUTHORIZATION
DATE") that the
Borrower authorizes a sufficient number of
shares of Common Stock to effect conversion of the full
outstanding
principal
balance of this Note.
The Borrower
shall use its best
efforts to authorize
a
sufficient number of shares of Common Stock as soon as practicable
following the
earlier of (i) such
time that the Holder
notifies the Borrower or that the
Borrower otherwise
becomes aware that
there are or likely will be insufficient
authorized and
unissued shares to allow full conversion thereof and (ii) a
Conversion Default.
The Borrower shall send notice to the Holder of the
authorization of additional shares of Common Stock, the
Authorization
Date and
the amount
of Holder's accrued Conversion Default Payments. The accrued
Conversion Default
Payments for each
calendar month shall be paid in cash or
shall be convertible
into Common
Stock (at such time as
there are
sufficient
authorized shares of
Common Stock) at the applicable Conversion Price, at the
Borrower's option, as follows:
(a) In the event
the Borrower elects to make such
payment in cash, cash
payment shall be made to Holder by the fifth (5th) day of
the month following the month in which it has accrued; and
(b) In the event
the Borrower elects to make such
payment in Common Stock, the Holder may convert such
payment amount into Common
Stock at the
Conversion Price (as
in effect at the time of conversion) at any
time after
the fifth day of the month following the month in which it has
accrued in accordance with the terms of this Article I (so long as
there is then
a sufficient number of authorized shares of Common Stock).
The Borrower's election shall be made in writing to the Holder
at any time prior to 6:00 p.m., New York, New York time, on the
third day of the
month following the month in which Conversion Default payments have
accrued. If
no election
is made, the Borrower shall be deemed to have
elected to remit
Common Stock.
Nothing herein shall limit the Holder's
right to pursue
actual
damages (to the extent in excess of the Conversion Default Payments) for the
Borrower's failure to
maintain a
sufficient
number of authorized shares of
Common Stock,
and each holder shall have the right to pursue
all remedies
available at law or in equity (including degree of specific
performance
and/or
injunctive relief).
5
<PAGE>
1.4 METHOD OF CONVERSION.
(a) MECHANICS OF CONVERSION. Subject to Section 1.1,
this Note may be
converted by the
Holder in whole or in
part at any time from
time to time after the Issue Date, by (A) submitting to the
Borrower a Notice of
Conversion (by facsimile or other reasonable means of communication
dispatched
on the Conversion
Date prior to 6:00 p.m., New York, New York time) and (B)
subject to Section 1.4(b), surrendering this Note at the principal
office of the
Borrower.
(b)
SURRENDER
OF NOTE
UPON
CONVERSION.
Notwithstanding
anything to the contrary set forth herein, upon conversion of
this Note in accordance with the terms hereof, the Holder shall not be
required
to physically
surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the
Borrower shall
maintain records showing the principal amount so converted and the
dates of such
conversions or shall
use such other
method, reasonably satisfactory to the
Holder and the Borrower, so as not to require physical surrender of this Note
upon each such
conversion. In the
event of any dispute
or discrepancy,
such
records of the Borrower shall be controlling and determinative in
the absence of
manifest error.
Notwithstanding the
foregoing, if any
portion of this Note is
converted as aforesaid, the Holder may not transfer this
Note unless the Holder
first physically
surrenders this Note
to the Borrower,
whereupon the Borrower
will forthwith issue and deliver upon the order of the Holder a new
Note of like
tenor, registered as
the Holder (upon
payment by the Holder of any applicable
transfer taxes) may request, representing in the aggregate the
remaining unpaid
principal amount of
this Note. The Holder
and any assignee,
by acceptance of
this Note, acknowledge
and agree that, by reason of the provisions of this
paragraph, following
conversion
of a portion
of this Note, the unpaid and
unconverted principal
amount of this Note
represented by this Note may be less
than the amount stated on the face hereof.
(c) PAYMENT
OF TAXES. The Borrower shall not be
required to pay any tax which may be payable in respect of any
transfer involved
in the issue and
delivery of shares
of Common Stock or other securities or
property on conversion
of this Note in a name other than that of the Holder (or
in street name), and
the Borrower shall not be required to issue or deliver any
such shares or other
securities
or property unless and until the person or
persons (other than the Holder or the custodian in whose street
name such shares
are to be held for the Holder's account) requesting the issuance thereof
shall
have paid to the Borrower the amount of any such tax or
shall have
established
to the satisfaction of the Borrower that such tax has been
paid.
(d) DELIVERY OF COMMON
STOCK UPON CONVERSION.
Upon
receipt by the Borrower from the Holder of a facsimile
transmission
(or other
reasonable means
of communication) of a Notice of Conversion meeting the
requirements for
conversion as provided in this Section 1.4, the Borrower shall
issue and deliver or
cause to be issued and
delivered to or upon
the order of
the Holder
certificates for the
Common Stock
issuable upon such conversion
within five (5)
business days after
such receipt (and,
solely in the case
of
conversion of the entire unpaid principal amount hereof, surrender
of this Note)
(such second business
day being hereinafter
referred to as the
"DEADLINE") in
accordance with the terms hereof and the Purchase Agreement
(including,
without
limitation, in
accordance with the requirements of Section 2(g) of the
Purchase
Agreement that
certificates
for shares of Common
Stock issued on or after the
6
<PAGE>
effective date of the Registration Statement upon conversion of this
Note shall
not bear any restrictive legend).
(e) OBLIGATION OF
BORROWER TO DELIVER
COMMON STOCK.
Upon receipt by the
Borrower of a Notice
of Conversion,
the Holder
shall be
deemed to be the
holder of record of the Common Stock issuable upon such
conversion, the
outstanding
principal amount and the amount of accrued and
unpaid interest on this Note shall be reduced to reflect such
conversion,
and,
unless the Borrower defaults on its obligations under this Article
I, all rights
with respect to the
portion of this Note
being so converted
shall forthwith
terminate except the right to receive the Common Stock or other
securities, cash
or other assets, as
herein provided, on
such conversion.
If the Holder
shall
have given a Notice of Conversion as provided herein, the
Borrower's
obligation
to issue and deliver the certificates for Common Stock shall be absolute
and
unconditional,
irrespective of the
absence of any action by the Holder to
enforce the same, any
waiver or consent with respect to any provision thereof,
the recovery
of any judgment against any person or any action
to enforce the
same, any failure or
delay in the
enforcement of any
other obligation of
the
Borrower to the
holder of record,
or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by
the Holder of any
obligation to the Borrower, and irrespective of any other
circumstance
which
might otherwise
limit such obligation of the Borrower to the Holder in
connection with such conversion. The Conversion Date specified in
the Notice of
Conversion shall be
the Conversion Date so
long as the Notice of Conversion is
received by the
Borrower before 6:00
p.m., New York,
New York time,
on such
date.
(f) DELIVERY OF COMMON STOCK BY ELECTRONIC TRANSFER.
In lieu of delivering
physical certificates representing the Common Stock
issuable upon
conversion,
provided
the Borrower's transfer agent is
participating in the Depository Trust Company ("DTC") Fast
Automated
Securities
Transfer ("FAST")
program, upon request of the Holder and its
compliance with
the provisions
contained in Section 1.1 and in this Section
1.4, the Borrower
shall use its
best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Holder by
crediting
the account of
Holder's Prime
Broker with DTC
through its Deposit
Withdrawal
Agent Commission ("DWAC") system.
(g) FAILURE
TO DELIVER COMMON STOCK PRIOR TO
DEADLINE. Without
in any way
limiting the Holder's right to pursue other
remedies, including
actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of this Note is
more than two (2) days
after the Deadline (other than a failure due to the
circumstances described in Section 1.3 above, which failure shall
be governed by
such Section) the Borrower shall pay to the Holder $2,000 per
day in cash, for
each day beyond the
Deadline that the
Borrower fails to deliver such Common
Stock. Such cash
amount shall be paid to Holder by the
fifth day of the month
following the month in
which it has accrued or, at the option of the Holder (by
written notice to the Borrower by the first day of the month
following the month
in which it has accrued), shall be added to the principal
amount of this
Note,
in which event
interest shall accrue
thereon in accordance
with the terms of
this Note and such additional principal amount shall be
convertible into Common
Stock in accordance with the terms of this Note.
7
<PAGE>
1.5 CONCERNING THE SHARES. The shares of Common Stock issuable
upon conversion
of this Note may not
be sold or transferred
unless (i) such
shares are sold pursuant to an effective registration statement
under the Act or
(ii) the Borrower
or its transfer agent shall have been furnished with an
opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to
the effect that
the shares to be sold or transferred may be sold or transferred
pursuant to an
exemption from such
registration
or (iii) such shares
are sold or transferred
pursuant to Rule 144 under the Act (or a successor rule) ("RULE 144") or (iv)
such shares are
transferred to an
"affiliate" (as
defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in
accordance
with this Section
1.5 and who is an
Accredited
Investor (as defined in the
Purchase Agreement). Except as otherwise provided in the Purchase
Agreement (and
subject to the
removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of this Note have been
registered under the Act as contemplated by the Registration Rights
Agreement or
otherwise may be sold
pursuant to Rule 144
without any
restriction as to
the
number of securities as of a particular date that can then be
immediately sold,
each certificate
for shares of Common
Stock issuable upon
conversion of this
Note that has not been so included in an effective registration statement or
that has not been sold
pursuant to an
effective registration
statement or an
exemption that permits removal of the legend, shall bear a legend
substantially
in the following form, as appropriate:
"THE SECURITIES
REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE
OF AN EFFECTIVE
REGISTRATION STATEMENT
FOR THE SECURITIES
UNDER
SAID ACT, OR AN
OPINION OF COUNSEL IN
FORM, SUBSTANCE
AND SCOPE
CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS,
THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT
TO
RULE 144 OR REGULATION S UNDER SAID ACT."
The legend set forth above shall be removed and the
Borrower
shall issue to the Holder a new certificate therefor free of any
transfer legend
if (i) the Borrower or
its transfer
agent shall have received an opinion of
counsel, in form,
substance and scope customary for opinions of counsel in
comparable
transactions, to the
effect that a public
sale or transfer of such
Common Stock may be made without registration under the Act and the shares
are
so sold or
transferred, (ii) such
Holder provides the Borrower or its transfer
agent with reasonable
assurances that the Common Stock issuable upon conversion
of this Note (to the extent such securities are deemed to have been
acquired on
the same date) can be sold pursuant to Rule 144 or (iii) in the case
of the
Common Stock issuable upon conversion of this Note, such
security is registered
for sale by the Holder under an effective registration statement
filed under the
Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to
the number of
securities as of a particular date that can then be immediately
sold. Nothing in this
Note shall (i) limit the Borrower's obligation under the
Registration Rights Agreement or (ii) affect in any way the
Holder's obligations
to comply with applicable prospectus delivery requirements upon the resale
of
the securities referred to herein.
8
<PAGE>
1.6 EFFECT OF CERTAIN
