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
British Columbia, Canada
December 16, 2005
$47,600
FOR VALUE
RECEIVED, LUNA TECHNOLOGIES INTERNATIONAL, INC., a Delaware
corporation (hereinafter called the
"Borrower"), hereby promises to pay to the
order of AJW PARTNERS, LLC or registered
assigns (the "Holder") the sum of
$47,600, on December 16, 2008 (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 December 16, 2005
(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
$0.2125 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
December 16, 2005, 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 December 16, 2005 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
2
<PAGE>
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) at
the Borrower's option, accrued and
unpaid interest, if any, on such principal
amount at the interest rates provided
in this Note to the Conversion Date,
provided, however, that the Company shall
have the right to pay any or all interest
in cash plus (3) at the Borrower's
option, 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
16, 2005, 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.
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 (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 ("Reporting Service")
mutually acceptable to Borrower and
Holder 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 50.0%. The "Fixed
Conversion Price" shall mean $.22.
(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
3
<PAGE>
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. Subject to Stockholder Approval (as such term
is
defined in Section 4(n) of the Securities
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
4
<PAGE>
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).
1.4 Method
of Conversion.
5
<PAGE>
(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) business 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
7
<PAGE>
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.
8
<PAGE>
(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 oth
