CALLABLE SECURED CONVERTIBLE NOTE

 

                                                        

Exhibit 4.25

 

 

 

 

 

      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

 

Del Mar, California

December 17, 2004                                                         $532,000

 

FOR VALUE RECEIVED, PACIFICAP ENTERTAINMENT HOLDINGS, 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 Five

Hundred   Thirty-Two   Thousand   Dollars   ($532,000),   on   December   17, 2007 (the

"Maturity Date"),   and to pay interest on the unpaid principal balance hereof at

the rate of ten   percent   (10%) per annum from   December   17,   2004 (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 December 31, 2004.   All payments due hereunder (to

the extent not converted   into common stock,   $.001 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 remain closed.   Each   capitalized   term used herein,   and not otherwise

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

Purchase   Agreement,   dated   December 17, 2004,   pursuant to which this Note was

originally issued (the "Purchase Agreement").

 

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     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   stockholders   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 that

certain Intellectual Property Security Agreement by and between the Borrower and

the Holder, each dated December 17, 2004.

 

         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 4.9% 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   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

 

 

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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   December   17,   2004,   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

60.0%. The "Fixed Conversion Price" shall mean $.02.

 

          (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

 

 

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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 Stockholder   Approval,   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 (2) 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 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

 

 

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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).

 

     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.

 

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<PAGE>

          (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 two (2)

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

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

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

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

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

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

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

restrictive legend).

 

          (e)   Obligation of Borrower to Deliver   Common Stock.   Upon receipt by

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

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

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

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

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

 

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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.

 

     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

 

 

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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   provid