CALLABLE SECURED CONVERTIBLE NOTE

 

                                                   

Exhibit 4.23

 

 

 

 

 

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                                                        $630,000

 

          FOR VALUE RECEIVED,   PACIFICAP ENTERTAINMENT HOLDINGS,   INC., a Nevada

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

order of AJW OFFSHORE,   LTD. or registered assigns (the "Holder") the sum of Six

Hundred Thirty Thousand Dollars ($630,000),   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

 

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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").

 

          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

 

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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   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

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

 

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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 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

 

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<PAGE>

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

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,

 

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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

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

 

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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 transf