THIS NOTE AND THE SHARES OF COMMON
STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED,
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM,
SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF
MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
LAWS.
DATALOGIC INTERNATIONAL,
INC.
10% Secured Convertible Promissory
Note
due October-_, 2008
No. N_________
$___________
Dated: October__, 2006
For value received, Datalogic
International, Inc., a Delaware corporation (the "Maker"), hereby
promises to pay to the order of _______________________ (together
with its successors, representatives, and permitted assigns, the
"Holder"), in accordance with the terms hereinafter provided, the
principal amount of ________________________ ($______________).
Interest on the principal amount of this Note shall
accrue at a rate of ten percent (10%) per annum from the date of
issuance of this Note until paid or converted in full.
Interest shall be computed on the basis of a 360-day year
applied to actual days elapsed. Notwithstanding the
foregoing, from and after the occurrence of an Event of Default (as
defined below), interest on the Note shall accrue at a rate of
eighteen percent (18%) per annum. The rate of interest
payable under the Note from time to time shall in no event exceed
the maximum rate, if any, permissible under applicable
law.
All payments under or pursuant to this
Note shall be made in United States Dollars in immediately
available funds, or by the issuance of registered shares of the
Company’s Common Stock, as provided herein, to the Holder at
the address of the Holder first set forth above or at such other
place as the Holder may designate from time to time in writing to
the Maker or by wire transfer of funds to the Holder's account,
instructions for which are attached hereto as Exhibit A .
The outstanding principal balance of this Note, together with
all accrued and unpaid interest shall be due and payable, if not
previously paid, on October __, 2008 (the " Maturity Date ")
or at such earlier time as provided herein. This Note is one
of a series of 10% secured convertible notes issued under the
Purchase Agreement (collectively, the
“Notes”).
ARTICLE I
Section 1.1
Purchase Agreement.
This Note has been
executed and delivered pursuant to the Note and Warrant Purchase
Agreement dated as of October__, 2006 (the "Purchase
Agreement”) by and among the Maker and the purchasers listed
therein. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth for such terms in the
Purchase Agreement, unless otherwise indicated.
Section 1.2
Payment of Principal and
Interest .
(a)
Commencing on February 15, 2007 [the
fifteenth day of the fourth month following the Issuance Date (as
defined in Section 2.1(b))] and continuing thereafter on the
fifteenth day of each month (a “ Scheduled Payment
Date ”), the Maker shall pay an amount to the Holder
equal to 4.77 percent of the original principal amount of this Note
(the “ Principal Installment Amount ”) plus
accrued interest (the “Interest Installment Amount”) in
cash prior to the Effective Date (as defined in the Registration
Rights Agreement ); provided , however , if on any
Scheduled Payment Date, before or after the Effective Date, the
outstanding principal amount of this Note is less than the
Principal Installment Amount, then the Maker shall pay to the
Holder such lesser amount plus the Interest Installment Amount.
On and after the Effective Date, the Maker may pay such
Principal Installment Amount and Interest Installment Amount (i) in
cash or (ii) registered shares of the Maker’s common stock,
par value $.001 per share (the “ Common Stock ”)
provided there is an effective registration statement covering the
Common Stock to be so issued. Notwithstanding the foregoing,
any Principal Installment Amounts made in cash after the Effective
Date shall be made in the amount of 110% of the Principal
Installment Amount plus (ii) 100% of the Interest Installment
Amount. If the Maker pays the Principal Installment Amount and/or
the Interest Installment Amount in cash such amount shall be wired
in immediately available funds on the Scheduled Payment Date;
provided , however , that if the Holder has delivered
a Conversion Notice to the Maker or delivers a Conversion Notice
prior to the Scheduled Payment Date, the Holder shall indicate in
such Conversion Notice whether the principal amount of this Note to
be so converted shall be applied against the final Principal
Installment Amount and Interest Installment Amount or some other
Principal Installment Amount and Interest Installment Amount.
The Maker shall provide irrevocable written notice (via
email) to the Holder of the form of payment of the Principal
Installment Amount and Interest Installment Amount at least twenty
(20) days prior to the first day of each month for which a
Principal Installment Amount is required to be made by the
Maker.
(b)
If the Maker elects to pay the Principal
Installment Amount and/or Interest Installment Amount in registered
shares of Common Stock, the number of registered shares of Common
Stock to be issued to the Holder shall be an amount equal to the
Principal Installment Amount and/or Interest Installment Amount at
the Default Conversion Price. All payments of principal
and interest will be made in shares of Common Stock after the
Effective Date unless, not less than five (5) days prior to the
Scheduled Payment Date, the Maker gives notice via email
transmission to the Holder of its election to make such payments in
cash. The foregoing election and notice shall not
-2-
prevent Holder from exercising its
conversion rights during the notice period and on the relevant
Scheduled Payment Date. Such conversions, if any, shall not reduce
the amount of the Principal Installment Amount or Interest
Installment Amount due on the relevant Scheduled Payment Date;
provided however, that in no event shall the Maker’s cash
payment ever exceed the principal balance plus accrued interest
then due on the relevant Scheduled Payment Date.
Section 1.3
Security Agreement
. The obligations of the Maker
hereunder are secured by a continuing security interest in certain
assets of the Maker pursuant to the terms of a security agreement
dated as of October__, 2006 by and among the Maker, on the one
hand, and the Holder and the Other Holders, on the other hand.
Section 1.4
Payment on Non-Business
Days . Whenever any
payment to be made shall be due on a Saturday, Sunday or a public
holiday under the laws of the State of New York, such payment may
be due on the next succeeding business day.
Section 1.5
Transfer . This Note may be transferred or sold, subject
to the provisions of Section 4.8 of this Note, or pledged,
hypothecated or otherwise granted as security by the
Holder.
Section 1.6
Replacement . Upon receipt of a duly executed, notarized
and unsecured written statement from the Holder with respect to the
loss, theft or destruction of this Note (or any replacement hereof)
and a standard indemnity, or, in the case of a mutilation of this
Note, upon surrender and cancellation of such Note, the Maker shall
issue a new Note, of like tenor and amount, in lieu of such lost,
stolen, destroyed or mutilated Note.
ARTICLE II
EVENTS OF DEFAULT;
REMEDIES
Section 2.1
Events of Default
. The occurrence of any of the
following events shall be an " Event of Default " under this
Note:
(a)
the Maker shall fail to make the
Principal Installment Amount or Interest Installment Amount on a
Scheduled Payment Date and such default is not fully cured within
five (5) business days after the occurrence thereof; or
(b)
the failure of the Registration Statement
to be declared effective by the Securities and Exchange Commission
on or prior to the date which is one hundred eighty (180) days
after the date of the initial issuance of this Note (the “
Issuance Date ”) notwithstanding any provision to the
contrary in the Registration Rights Agreement between Maker and
Holder; or
(c)
the suspension from listing, without
subsequent listing on any one of, or the failure of the Common
Stock to be listed on at least one of the OTC Bulletin Board, the
American Stock Exchange, the Nasdaq Global Market, the Nasdaq
Capital
-3-
Market or The New York Stock Exchange,
Inc. for a period of five (5) consecutive Trading Days;
or
(d)
the Maker's notice to the Holder,
including by way of public announcement, at any time, of its
inability to comply (including for any of the reasons described in
Section 3.8(a) hereof) or its intention not to comply with proper
requests for conversion of this Note into shares of Common Stock;
or
(e)
the Maker shall fail to (i) timely
deliver the shares of Common Stock upon conversion of the Note,
(ii) file the Registration Statement in accordance with the terms
of the Registration Rights Agreement or (iii) make the payment of
any fees and/or liquidated damages under this Note, the Purchase
Agreement or the Registration Rights Agreement, which failure in
the case of items (i) and (iii) of this Section 2.1(e) is not
remedied within ten (10) business days after the incurrence
thereof; or
(f)
while the Registration Statement is
required to be maintained effective pursuant to the terms of the
Registration Rights Agreement, the effectiveness of the
Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to the
Holder for sale of the Registrable Securities (as defined in the
Registration Rights Agreement) in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability
continues for a period of ten (10) consecutive Trading Days,
provided that the Maker has not exercised its rights
pursuant to Section 3(n) of the Registration Rights Agreement
(which exercise is not an Event of Default hereunder);
or
(g)
default shall be made in the performance
or observance of (i) any material covenant, condition or agreement
contained in this Note (other than as set forth in clause (f) of
this Section 2.1) and such default is not fully cured within ten
(10) business days after the Maker receives notice from the
Holder of the occurrence thereof or (ii) any material covenant,
condition or agreement contained in the Purchase Agreement, the
Registration Rights Agreement or any other Transaction Document
which is not covered by any other provisions of this Section 2.1
and such default is not fully cured within ten (10) business days
after the Maker receives notice from the Holder of the
occurrence thereof; or
(h)
any material representation or warranty
made by the Maker herein or in the Purchase Agreement, the
Registration Rights Agreement, or any other Transaction Document
shall prove to have been false or incorrect or breached in a
material respect on the date as of which made; or
(i)
the Maker shall (A) default in any
payment of any amount or amounts of principal of or interest on any
Indebtedness (other than the Indebtedness hereunder) the aggregate
principal amount of which Indebtedness is in excess of $100,000 or
(B) default in the observance or performance of any other agreement
or condition relating to any Indebtedness in excess of $100,000 or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is
to
-4-
cause, or to permit the holder or holders
or beneficiary or beneficiaries of such Indebtedness to cause with
the giving of notice if required, such Indebtedness to become due
prior to its stated maturity; or
(j)
the Maker shall (i) apply for or consent
to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its property or assets, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a
voluntary case under the United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any
jurisdiction (foreign or domestic), (iv) file a petition seeking to
take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of
creditors' rights generally which is not dismissed within 30 days,
(v) acquiesce in writing to any petition filed against it in an
involuntary case under United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any
jurisdiction (foreign or domestic) which is not dismissed within 60
days, (vi) issue a notice of bankruptcy or winding down of its
operations or issue a press release regarding same, or (vii) take
any action under the laws of any jurisdiction (foreign or domestic)
analogous to any of the foregoing; or
(k)
a proceeding or case shall be commenced
in respect of the Maker, without its application or consent, in any
court of competent jurisdiction, seeking (i) the liquidation,
reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets in connection with the liquidation
or dissolution of the Maker or (iii) similar relief in respect of
it under any law providing for the relief of debtors, and such
proceeding or case described in clause (i), (ii) or (iii) shall
continue undismissed, or unstayed and in effect, for a period of
thirty (30) days or any order for relief shall be entered in an
involuntary case under United States Bankruptcy Code (as now or
hereafter in effect) or under the comparable laws of any
jurisdiction (foreign or domestic) against the Maker or action
under the laws of any jurisdiction (foreign or domestic) analogous
to any of the foregoing shall be taken with respect to the Maker
and shall continue undismissed, or unstayed and in effect for a
period of thirty (30) days; or
(l)
the failure of the Maker to instruct its
transfer agent to remove any legends from shares of Common Stock
eligible to be sold under Rule 144 of the Securities Act and issue
such unlegended certificates to the Holder within three (3)
business days of the Holder’s request so long as the Holder
has complied with Section 5.1 of the Purchase Agreement;
or
(m)
the failure of the Maker to pay any
amounts due to the Holder herein or in the Purchase Agreement or
the Registration Rights Agreement within five (5) business days of
the date such payments are due; or
(n)
the failure of the Maker to obtain
Stockholder Approval to increase the authorized shares of Common
Stock or effect a split of the Common Stock in accordance with the
Purchase Agreement on or before March 31, 2007.
-5-
Section 2.2
Remedies Upon An Event of Default;
Redemption .
(a)
If an Event of Default shall have
occurred and shall be continuing, the Holder of this Note, in
addition to any other remedies available to it, may at any time at
its option, (a) pursuant to Section 3.7(a) hereof, declare the
entire unpaid principal balance and accrued interest of this Note
due and payable, and thereupon, the same shall be accelerated and
so due and payable, without presentment, demand, protest, or
notice, all of which are hereby expressly unconditionally and
irrevocably waived by the Maker; provided, however, that upon the
occurrence of an Event of Default described in (i) Sections 2.1 (j)
or (k), the outstanding principal balance hereunder shall be
automatically due and payable and (ii) Sections 2.1 (b)-(i), the
Holder may demand the prepayment of this Note pursuant to Section
3.7 hereof, (b) demand that the principal amount of this Note plus
accrued interest then outstanding shall be converted into shares of
Common Stock at the Default Conversion Price, or (c) exercise or
otherwise enforce any one or more of the Holder's rights, powers,
privileges, remedies and interests under this Note, the Purchase
Agreement, the Registration Rights Agreement, the Security
Agreement or applicable law. Upon the occurrence of an Event
of Default, the Maker will pay interest to the Holder, payable on
demand, on the outstanding principal balance of the Note from the
date of the Event of the Default until such Event of Default is
cured at the rate equal to the lesser of eighteen percent (18%) and
the maximum applicable legal rate per annum. No course of
delay on the part of the Holder shall operate as a waiver thereof
or otherwise prejudice the right of the Holder. No remedy
conferred hereby shall be exclusive of any other remedy referred to
herein or now or hereafter available at law, in equity, by statute
or otherwise.
(b)
If an Event of Default shall have
occurred and shall be continuing, the Holder of this Note, in
addition to any other remedies available to it, may at any time at
its option demand redemption of all or a portion of the outstanding
principal balance plus accrued interest, payable in cash or Common
Stock at Holder’s option, equal to the greater of (i) 110% of
the then outstanding principal balance plus accrued interest on the
Note, or (ii) an amount equal to the number of shares of Common
Stock that would have been issued on conversion (x) at the lowest
applicable Conversion Price during the period from the date (the
“Redemption Notice Date”) the Holder sends its notice
of redemption (the “Redemption Notice”) to the Maker,
multiplied by (y) the highest Closing Bid Price of the Common
Stock during such period. The Redemption Notice shall be sent
via email transmission and shall specify a date for the redemption
(the “Redemption Date”) that shall be not less than 3
Trading Days following the Redemption Notice Date. The term "
Closing Bid Price " shall mean, on any particular date (i)
the last trading price per share of the Common Stock on such date
on the OTC Bulletin Board or another registered national stock
exchange on which the Common Stock is then listed, or if there is
no such price on such date, then the last trading price on such
exchange or quotation system on the date nearest preceding such
date, or (ii) if the Common Stock is not listed then on the OTC
Bulletin Board or any registered national stock exchange, the last
trading price for a share of Common Stock in the over-the-counter
market, as reported by the OTC Bulletin Board or in the National
Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close
of
-6-
business on such date, or (iii) if the
Common Stock is not then reported by the OTC Bulletin Board or the
National Quotation Bureau Incorporated (or similar organization or
agency succeeding to its functions of reporting prices), then the
average of the "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the Holder, or (iv) if the
Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by the Holder and reasonably
acceptable to the Maker.
ARTICLE III
CONVERSION; ANTIDILUTION; PREPAYMENT
Section 3.1
Conversion Option
.
(a)
At any time on or after the Issuance
Date, this Note shall be convertible (in whole or in part), at the
option of the Holder (the "Conversion Option"), into such number of
fully paid and non-assessable shares of Common Stock (the
"Conversion Rate") as is determined by dividing (x) that portion of
the outstanding principal balance under this Note and accrued
interest as of such date that the Holder elects to convert by (y)
the lowest applicable Conversion Price (as defined in Section
3.2(a) hereof) then in effect on the date on which the Holder faxes
a notice of conversion (the "Conversion Notice"), duly executed, to
the Maker (facsimile (949) 260-0130, Attn.: Chief Executive
Officer) (the “Voluntary Conversion Date”), provided,
however, that the Conversion Price shall be subject to adjustment
as described in Section 3.6 below. The Holder shall deliver
this Note to the Maker at the address designated in the Purchase
Agreement at such time that this Note is fully converted.
With respect to partial conversions of this Note, the Maker
shall keep written records of the amount of this Note converted as
of each Conversion Date.
(b)
On the Mandatory Conversion Date (as
defined below), the Maker may cause all or a portion of the
principal amount of this Note and interest to convert into a number
of fully paid and nonassessable shares of Common Stock at the
Conversion Price in effect on the Mandatory Conversion Date by
providing written notice (“Mandatory Conversion
Notice”) of such Mandatory Conversion Date. As used
herein, a " Mandatory Conversion Date " shall be a date
following the effective date of the Registration Statement in which
the Closing Bid Price exceeds $0.20 (as the same may be adjusted as
set forth in this Note and in the Purchase Agreement) for a period
of ten (10) consecutive Trading Days and the average daily
trading volume for such ten (10) consecutive Trading Day
period exceeds 200,000 shares of Common Stock (the
“Measurement Period”); provided , that
(A) the Registration Statement is effective and has been effective,
without lapse or suspension of any kind, for a period of thirty
(30) consecutive calendar days immediately preceding the Mandatory
Conversion Date, (B) trading in the Common Stock shall not have
been suspended by the Securities and Exchange Commission or the OTC
Bulletin Board (or other exchange or market on which the Common
Stock is trading), (C) no Event of Default exists and is
continuing,
-7-
(D) the issuance of shares of Common
Stock on the Mandatory Conversion Date pursuant to such mandatory
conversion does not violate the provisions of Section 3.4 hereof,
and (E) the Maker is not in possession of any material non-public
information. Notwithstanding the foregoing to the contrary,
the Mandatory Conversion Date shall be extended for as long as a
Triggering Event (as defined in Section 3.7(f) hereof) shall have
occurred and be continuing. The Mandatory Conversion Date and
the Voluntary Conversion Date collectively are referred to in this
Note as the " Conversion Date ." The Mandatory
Conversion Notice shall be given by Maker via email transmission to
the Holder, and shall be given not less than ten (10) and not more
than thirty (30) Trading Days prior to the date specified as the
Mandatory Conversion Date. The Mandatory Conversion Notice
shall be made by Maker within 5 (five) Trading Days after the last
day of the Measurement Period. The Mandatory Conversion right
of Maker is subject in all circumstances to the limitations
provided by Section 3.4 of the Note. In the event that the
provisions of Section 3.4 would prevent the Mandatory Conversion of
the portion of the Note specified for conversion in the Mandatory
Conversion Notice, then interest shall cease to accrue on that
portion of the Mandatory Conversion amount specified in the
Mandatory Conversion Notice as of the Mandatory Conversion Date.
In addition, should the provisions of Section 3.4 prevent
conversion of all amounts specified in the Mandatory Conversion
Notice, such conversion may be effected at a later date when such
conversion will not violate the provisions of Section
3.4.
Section 3.2
Conversion Price
.
(a)
The term " Conversion Price "
shall mean as of the applicable measurement date, the lowest of (i)
the Fixed Conversion Price, which is $0.02, subject to adjustment
under Section 3.6 hereof for certain capital events; (ii) the
Lowest Fixed Conversion Price (defined below), and (iii) the
Default Conversion Price (defined below). The “Lowest
Fixed Conversion Price” shall mean the lowest new Transaction
Price with respect to any New Transaction (as such terms are
defined in the Purchase Agreement). The “Default
Conversion Price” shall mean the Conversion Price during the
occurrence and continuance of an Event of Default which price shall
equal seventy-five percent (75%) of the VWAP (as defined below) for
the five (5) Trading Days ending on the Trading Day immediately
before the relevant Conversion Date. The “Issue Date
Conversion Shares” shall mean the number of shares of Common
Stock issuable upon conversion of the principal and interest on
this Note applying the applicable Conversion Price as of the
Closing Date. Determination of the “Specified
Conversion Price” (as defined below) is applicable only in
the following circumstances (assuming all other conditions to such
conversion are in effect): (i) if the VWAP (as defined below) is
determined as of the end of a Regular Trading Day, where a
“Regular Trading Day” shall mean the regular trading
hours of any Trading Day during which the principal trading market
for the Common Stock of the Company (“Principal Trading
Market”) shall be open for business (generally such hours
being 9:30 a.m. to 4:00 p.m. eastern time, provided such hours may
vary); and (ii) the Company pays Periodic Amounts (as defined in
the Registration Statement ) in shares of Common Stock. The
“Specified Conversion Price” is the amount equal to
seventy five (75%) of the VWAP for the five (5) Trading Days ending
on the Trading Day immediately before the relevant interest payment
date or the relevant date for computing the Periodic Amount,
as the case may be.
-8-
(b)
Notwithstanding any of the foregoing to
the contrary, if during any period (a " Black-out Period "),
a Holder is unable to trade any Common Stock issued or issuable
upon conversion of this Note immediately due to the postponement of
filing or delay or suspension of effectiveness of the Registration
Statement or because the Maker has otherwise informed such Holder
that an existing prospectus cannot be used at that time in the sale
or transfer of such Common Stock (provided that such postponement,
delay, suspension or fact that the prospectus cannot be used is not
due to factors solely within the control of the Holder of this Note
or due to the Maker exercising its rights under Section 3(n) of the
Registration Rights Agreement), such Holder shall have the option
but not the obligation on any Conversion Date within ten (10)
Trading Days following the expiration of the Black-out Period of
using the Conversion Price applicable on such Conversion Date or
any Conversion Price selected by such Holder that would have been
applicable had such Conversion Date been at any earlier time during
the Black-out Period or within the ten (10) Trading Days
thereafter. In no event shall the Black-out Period have any
effect on the Maturity Date of this Note.
Section 3.3
Mechanics of Conversion
.
(a)
Not later than three (3) Trading Days
after any Conversion Date, the Maker or its designated transfer
agent, as applicable, shall issue and deliver to the Depository
Trust Company (“ DTC ”) account on the
Holder’s behalf via the Deposit Withdrawal Agent Commission
System (“ DWAC ”) as specified in the Conversion
Notice, registered in the name of the Holder or its designee, for
the number of shares of Common Stock to which the Holder shall be
entitled. In the alternative, not later than three (3)
Trading Days after any Conversion Date, the Maker shall deliver to
the applicable Holder by express courier a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 5.1 of the
Purchase Agreement) representing the number of shares of Common
Stock being acquired upon the conversion of this Note (the “
Delivery Date ”). Notwithstanding the foregoing
to the contrary, the Maker or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on the
Holder’s behalf via DWAC (or certificates free of restrictive
legends) if such conversion is in connection with a sale and the
Holder has complied with the applicable prospectus delivery
requirements (as evidenced by documentation furnished to and
reasonably satisfactory to the Maker). If in the case of any
Conversion Notice such certificate or certificates are not
delivered to or as directed by the applicable Holder by the
Delivery Date, the Holder shall be entitled by written notice to
the Maker at any time on or before its receipt of such certificate
or certificates thereafter, to rescind such conversion, in which
event the Maker shall immediately return this Note tendered for
conversion, whereupon the Maker and the Holder shall each be
restored to their respective positions immediately prior to the
delivery of such notice of revocation, except that any amounts
described in Sections 3.3(b) and (c) shall be payable through the
date notice of rescission is given to the Maker.
(b)
The Maker understands that a delay in the
delivery of the shares of Common Stock upon conversion of this Note
beyond the Delivery Date could result in economic loss to the
Holder. In addition to any other rights available to the
Holder, if the Maker fails to cause its transfer agent to transmit
to the Holder a certificate or certificates
-9-
representing the Common Stock pursuant to
a conversion on or before the Delivery Date, and if such delivery
is made more than two additional Trading Days after the Delivery
Date (the “Late Date”) the Maker will pay to the
Holder cash compensation as follows per each Ten Thousand Dollars
($10,000) indicated on the Conversion Notice: (i) for each of the
ten Trading Days starting with the Late Date, an amount equal to
One Hundred Dollars ($100); and (ii) for each for each day that is
more than ten Trading Days following the Delivery Date, an amount
equal to Two Hundred Dollars ($200).
(c)
In addition to any other rights available
to the Holder, if the Maker fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing
the shares of Common Stock issuable upon conversion of this Note on
or before the Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by the Holder of the shares of Common Stock issuable upon
conversion of this Note which the Holder anticipated receiving upon
such exercise (a “ Buy-In” ), then the Maker
shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (A) the number of
shares of Common Stock issuable upon conversion of this Note that
the Maker was required to deliver to the Holder in connection with
the conversion at issue times (B) the price at which the sell order
giving rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the portion of the Note
and equivalent number of shares of Common Stock for which such
conversion was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Maker
timely complied with its conversion and delivery obligations
hereunder. For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of shares of Common Stock with
an aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding sentence the
Maker shall be required to pay the Holder $1,000. The Holder shall
provide the Maker written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Maker.
Nothing herein shall limit a Holder’s right to pursue
any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Maker’s failure
to timely deliver certificates representing shares of Common Stock
upon conversion of this Note as required pursuant to the terms
hereof.
Section 3.4
Ownership Cap and Certain Conversion
Restrictions .
Notwithstanding anything to the contrary
set forth in Section 3 of this Note, at no time may the Holder
convert all or a portion of this Note if the number of shares of
Common Stock to be issued pursuant to such conversion would exceed,
when aggregated with all other shares of Common Stock owned by the
Holder at such time (including pursuant to the Warrants), the
number of shares of Common Stock which would result in the Holder
beneficially owning (as determined in accordance with Section 13(d)
of the Exchange Act and the rules thereunder) more
-10-
than 4.99% of all of the Common Stock
outstanding at such time; provided , however , that
upon the Holder providing the Maker with sixty-one (61) days notice
(pursuant to Section 4.1 hereof) (the " Waiver Notice ")
that the Holder would like to waive this Section 3.4 with regard to
any or all shares of Common Stock issuable upon conversion of this
Note, this Section 3.4 will be of no force or effect with regard to
all or a portion of the Note referenced in the Waiver Notice.
Section 3.5
Intentionally
Omitted .
Section 3.6
Adjustment of Fixed
Conversion Price .
(a)
The Fixed Conversion Price shall be
subject to adjustment from time to time as follows:
(i)
Adjustments for Stock Splits and
Combinations . If the
Maker shall at any time or from time to time after the Issuance
Date, effect a stock split of the outstanding Common Stock, the
applicable Conversion Price in effect immediately prior to the
stock split shall be proportionately decreased. If the Maker
shall at any time or from time to time after the Issuance Date,
combine the outstanding shares of Common Stock, the applicable
Conversion Price in
