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
Fort Lauderdale, Florida
September 28, 2006
$150,000
FOR VALUE
RECEIVED, SBD INTERNATIONAL INC., a Nevada corporation
(hereinafter called the "Borrower"), hereby promises to pay to the
order of AJW
Qualified Partners, LLC or registered assigns (the "Holder") the
sum of
$150,000, on September 27, 2009 (the "Maturity Date"), and to pay
interest on
the unpaid principal balance hereof at the rate of eight percent
(8%) (the
"Interest Rate") per annum from September 28, 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 provided that no interest shall be due and
payable for any
month in which the Trading Price (as such term is defined below) is
greater than
$.10 for each Trading Day (as such term is defined below) of the
month. All
payments due hereunder (to the extent not converted into common
stock, $.0001
par value per share (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 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 28, 2006, pursuant
to which this
Note was originally issued (the "Purchase Agreement").
<PAGE>
This Note
is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or
other similar rights of shareholders of the Borrower and will not
impose
personal liability upon the holder thereof. The obligations of the
Borrower
under this Note shall be secured by that certain Security Agreement
and
Intellectual Property Security Agreement, each dated September 28,
2006 by and
between the Borrower and the Holder.
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 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 4.99% of the outstanding
shares of Common
Stock and provided further that the Holder shall not be entitled to
convert any
portion of this Note during any month immediately succeeding a
Determination
Date on which the Borrower exercises its prepayment option pursuant
to Section
5.2 of this Note. 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 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 28, 2006, executed in connection
with the
initial issuance of this Note and the other Notes issued on the
Issue Date (the
"Registration Rights Agreement"). The term "Determination Date"
means the last
business day of each month after the Issue Date.
2
<PAGE>
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
60.0%. The "Fixed Conversion Price" shall mean $.06.
3
<PAGE>
(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 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. 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.
4
<PAGE>
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 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 Holder elects to take such payment in cash, cash
payment shall be made to Holder by the fifth (5th) day of the month
following
the month in which it has accrued; and
(b) In the event Holder elects to take such payment in Common
Stock,
the Holder may convert such payment amount into Common Stock at the
Conversion
Price (as in effect at the time of conversion) at any time after
the fifth day
of the month following the month in which it has accrued in
accordance with the
terms of this Article I (so long as there is then a sufficient
number of
authorized shares of Common Stock).
The
Holder's election shall be made in writing to the Borrower at any
time
prior to 6:00 p.m., New York, New York time, on the third day of
the month
following the month in which Conversion Default payments have
accrued. If no
election is made, the Holder shall be deemed to have elected to
receive cash.
Nothing herein shall limit the Holder's right to pursue actual
damages (to the
extent in excess of the Conversion Default Payments) for the
Borrower's failure
to maintain a sufficient number of authorized shares of Common
Stock, and each
holder shall have the right to pursue all remedies available at law
or in equity
(including degree of specific performance and/or injunctive
relief).
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 three (3)
business days after such receipt (and, solely in the case of
conversion of the
entire unpaid principal amount hereof, surrender of this Note)
(such third
business day being hereinafter referred to as the "Deadline") in
accordance with
the terms hereof and the Purchase Agreement (including, without
limitation, in
accordance with the requirements of Section 2(g) of the Purchase
Agreement that
certificates for shares of Common Stock issued on or after the
effective date of
the Registration Statement upon conversion of this Note shall not
bear any
restrictive legend).
6
<PAGE>
(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.
1.6 Effect
of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the
Holder, the sale, conveyance or disposition of all or substantially
all of the
assets of the Borrower, the effectuation by the Borrower of a
transaction or
series of related transactions in which more than 50% of the voting
power of the
Borrower is disposed of, or the consolidation, merger or other
business
combination of the Borrower with or into any other Person (as
defined below) or
Persons when the Borrower is not the survivor shall either: (i) be
deemed to be
an Event of Default (as defined in Article III) pursuant to which
the Borrower
shall be required to pay to the Holder upon the consummation of and
as a
condition to such transaction an amount equal to the Default Amount
(as defined
in Article III) or (ii) be treated pursuant to Section 1.6(b)
hereof. "Person"
shall mean any individual, corporation, limited liability company,
partnership,
association, trust or other entity or
