|
Exhibit 99.2
THIS SENIOR CONVERTIBLE NOTE (THIS "NOTE")
AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND
MAY NOT BE OFFERED FOR SALE OR SOLD UNLESS A REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE
EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE. THIS NOTE AND THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF (I) MAY
BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN
LOAN OR OTHER FINANCING SECURED BY SUCH SECURITIES OR (II) MAY BE
TRANSFERRED OR ASSIGNED TO AN AFFILIATE OF THE HOLDER HEREOF
WITHOUT THE NECESSITY OF AN OPINION OF COUNSEL OR THE CONSENT OF
THE ISSUER HEREOF.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER HEREOF IN
ORDER TO EFFECT A PARTIAL PAYMENT, REDEMPTION OR CONVERSION HEREOF.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE
LESS THAN THE PRINCIPAL AMOUNT SHOWN BELOW.
ZAP
8% SENIOR CONVERTIBLE NOTE
$[___________]
Issue Date: December 5, 2006
FOR VALUE RECEIVED, ZAP,
a California corporation (the "
Company "), hereby promises to pay to the order of
[GEMINI MASTER FUND, LTD.] or its permitted successors or assigns
(the " Holder ") the sum of
[__________________________] DOLLARS ($[_____________]) in same day
funds, on or before the two (2) year anniversary of the Issue Date
(the " Maturity Date "). The Holder may convert
principal of and interest accrued on this Note into shares ("
Conversion Shares ") of the Company’s common
stock, no par value (the " Common Stock "), on the
terms set forth herein.
Except as specifically provided by the terms of Section
6 , and the Scheduled Principal Payments contemplated in
Section 2(a) , the Company shall not have the right
to prepay any principal of this Note.
The Company has issued this Note pursuant to a Securities
Purchase Agreement, dated as of December 5, 2006 (the "
Securities Purchase Agreement "). The Notes issued
by the Company
pursuant to the Securities Purchase Agreement, including this
Note, are collectively referred to herein as the "
Notes ".
The following terms shall apply to this Note:
1. DEFINITIONS .
" Business Day " means any day other than a
Saturday, a Sunday or a day on which the Principal Market is closed
or on which banks in the City of New York are required or
authorized by law to be closed.
" Change of Control " means the existence or
occurrence of any of the following: (a) the sale, conveyance or
disposition of all or substantially all of the assets of the
Company; (b) the effectuation of a transaction or series of
transactions in which more than fifty percent (50%) of the voting
power of the Company is disposed of; (c) the consolidation, merger
or other business combination of the Company with or into any other
entity, immediately following which the prior stockholders of the
Company fail to own, directly or indirectly, at least fifty percent
(50%) of the surviving entity; (d) a transaction or series of
transactions in which any Person or group acquires more than fifty
percent (50%) of the voting equity of the Company; or (e) the
Continuing Directors do not at any time constitute at least a
majority of the Board of Directors of the Company.
" Continuing Director " means, at any date, a
member of the Company’s Board of Directors (i) who was a
member of such board on the date of the Securities Purchase
Agreement or (ii) who was nominated or elected by at least a
majority of the directors who were Continuing Directors at the time
of such nomination or election or whose election to the
Company’s Board of Directors was recommended or endorsed by
at least a majority of the directors who were Continuing Directors
at the time of such nomination or election or such lesser number
comprising a majority of a nominating committee if authority for
such nominations or elections has been delegated to a nominating
committee whose authority and composition have been approved by at
least a majority of the directors who were Continuing Directors at
the time such committee was formed.
" Conversion " has the meaning set forth in
Section 3(a) of this Note.
" Conversion Date " has the meaning set forth in
Section 3(b) of this Note.
" Conversion Default " has the meaning set forth
in Section 3(e) of this Note.
" Conversion Notice " has the meaning set forth
in Section 3(b) of this Note.
" Conversion Price " means, as of any date, one
dollar ($1.00), subject to adjustment as provided herein.
" Convertible Securities "
means any stock or securities (other than
Options) of the Company convertible into or exercisable or
exchangeable for Common Stock .
" Current Price " means, as of a particular
date, the average of the daily VWAP for each of the five (5)
consecutive Trading Days occurring immediately prior to (but not
including) such date.
-2-
" Default Interest Rate " means the lower of
twelve (12%) and the maximum rate permitted by applicable law or by
the applicable rules or regulations of any governmental agency or
of any stock exchange or other self-regulatory organization having
jurisdiction over the Company or the trading of its securities.
" Delivery Date " has the meaning set forth in
Section 3(d) of this Note.
" Determination Date " has the meaning set forth
in Section 4(c) of this Note.
" Dispute Procedure " has the meaning set forth
in Section 3(b) of this Note.
" Distribution, " " Distribution
Date " and " Distribution Notice " have
the respective meanings set forth in Section 4(c)
of this Note.
" Equity Conditions " means each of the
following:
(i) the Registration Statement shall have been declared
effective, not be the subject of any stop order, be available to
the Holder, and cover the number of Registrable Securities required
by the Registration Rights Agreement;
(ii) the Reserved Amount must be equal to or greater than
the number of shares of Common Stock that the Company is required
to reserve by the Securities Purchase Agreement;
(iii) trading in the Common Stock shall not have been
suspended on the Principal Market;
(iv) the shares of Common Stock that the Holder would
beneficially own, after giving effect to the contemplated issuance
of Company securities for which these Equity Conditions must be
satisfied, shall not exceed the limitation set forth in
Section 3(f) (unless such limitation has been
waived by the Holder in accordance with Section
3(f) ; and
(v) an Event of Default, or an event that with the passage
of time or giving of notice, or both, would constitute an Event of
Default, has not occurred and is not continuing.
" Event of Default " means the occurrence of any
of the following events:
(i) a Liquidation Event occurs or is publicly
announced;
(ii) the Company fails to make any payment of principal or
interest on this Note in full as and when such payment is due, and
such payment remains unpaid for five (5) Business Days following
written notice thereof from the Holder;
(iii) other than a breach described in clause
(ii) above, the Company breaches or provides notice of its
intent to breach any material term or condition of this Note,
the
-3-
Securities Purchase Agreement, the Warrant or the Registration
Rights Agreement (including, without limitation, the occurrence of
a Conversion Default, an Exercise Default (as defined in the
Warrants) or a Registration Default (as defined in the Registration
Rights Agreement); and such breach continues for a period of five
(5) Business Days following written notice thereof from the
Holder;
(iv) any representation or warranty made by the Company in
this Note, the Securities Purchase Agreement, the Warrant or the
Registration Rights Agreement was inaccurate or misleading in any
material respect as of the date such representation or warranty was
made; or
(v) a default occurs or is declared, or any amounts are
accelerated, under or with respect to any instrument that evidences
Debt of the Company or any of its Subsidiaries in a principal
amount exceeding $25,000.
" Excluded Securities " means (i) securities
purchased under the Securities Purchase Agreement; (ii) securities
issued upon conversion or exercise of the Notes, the Warrants, or
any other options, warrants or convertible securities outstanding
as of the Issue Date and disclosed on Schedule 3.5 of the
Securities Purchase Agreement; (iii) shares of Common Stock
issuable or issued to employees from time to time upon the exercise
of options, in such case granted or to be granted in the discretion
of the Board of Directors pursuant to one or more employee stock
option plans or restricted stock plans in effect as of the Issue
Date or adopted after the Issue Date by the independent members of
the Board of Directors; (iv) shares of Common Stock issued in
connection with any stock split, stock dividend or recapitalization
of the Company; (v) shares of Common Stock issued in exchange for
services, in leasing transactions, or for purchase of assets, in
each case, negotiated on an arms’ length basis and charged at
a reasonable market rates; and (vi) securities issued in connection
with a merger or a consolidation involving the Company or a
Subsidiary or the acquisition of the capital stock or the assets of
any Person, provided in each case that the transaction is
approved by the written consent of the Investors holding at least a
majority of the principal amount of the Notes then outstanding,
such consent not to be unreasonably withheld.
" Floor Price " means, as of any date, the
lesser of (i) $0.75 (as appropriately
adjusted for any stock dividend, stock split, reverse stock split
or other similar transaction) and (ii) the Conversion Price in
effect as of such date.
" Forced Conversion " has the meaning set forth
in Section 7(a) of this Note.
" Forced Conversion Date " has the meaning set
forth in Section 7(b) of this Note.
" Forced Conversion Period " has the meaning set
forth in Section 7(a) of this Note.
" Forced Conversion Price " means, as of any
date, the lesser of (i) $2.00 (as appropriately adjusted for any
stock dividend, stock split, reverse stock split or other similar
transaction) and (ii) two hundred percent (200%) of the Conversion
Price in effect as of such date.
" Governmental Authority " means any nation or
government, any state, provincial or political subdivision thereof
and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government, including without limitation any stock exchange,
securities market or self-regulatory organization.
-4-
" Interest " and " Interest Payment
Date " have the respective meanings set forth in
Section 2(b)(i) of this Note.
" Interest Stock Option " has the meaning set
forth in Section 2(b)(ii) of this Note.
" Interest Stock Option Delivery Date " has the
meaning set forth in Section 2(b)(v) of this
Note.
" Interest Stock Option Notice " has the meaning
set forth in Section 2(b)(iv) of this Note.
" Issue Date " means the date on which this Note
is issued pursuant to the Securities Purchase Agreement.
" Liquidation Event " means the (i) institution
of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or any Subsidiary of
the Company, or (ii) the dissolution or other winding up of the
Company or any Subsidiary of the Company, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy
proceedings, or (iii) any assignment for the benefit of creditors
or any marshalling of the material assets or material liabilities
of the Company or any Subsidiary of the Company.
" Major Transaction " means a merger,
consolidation, business combination, tender offer, exchange of
shares, recapitalization, reorganization, redemption or other
similar event, as a result of which shares of Common Stock shall be
changed into the same or a different number of shares of the same
or another class or classes of stock or securities or other assets
of the Company or another entity or the Company shall sell all or
substantially all of its assets.
" Mandatory Redemption ," " Mandatory
Redemption Date " and " Mandatory Redemption
Notice " have the respective meanings set forth in
Section 5(a) of this Note.
" Mandatory Redemption Price " means one hundred
and twenty percent (120%) of (A) the unpaid principal amount of
this Note being redeemed plus (B) all accrued and unpaid
Interest (including default interest).
" Optional Redemption ", " Optional
Redemption Date " and " Optional Redemption
Notice " have the respective meanings set forth in
Section 6(a) of this Note.
" Optional Redemption Price " means one hundred
and twenty percent (120%) of (A) the unpaid principal amount of
this Note plus (B) all accrued and unpaid Interest
(including default interest).
" Options " means any rights, warrants or
options to subscribe for, purchase or receive Common Stock or
Convertible Securities.
-5-
" Person " means any individual, corporation,
trust, association, company, partnership, joint venture, limited
liability company, joint stock company, Governmental Authority or
other entity.
" Principal Market " means the principal
exchange, market or quotation system on which the Common Stock is
listed, traded or quoted.
" Principal Payment " has the meaning set forth
in Section 2(a)(i) of this Note.
" Principal Payment Response Notice " and
"Principal Payment Suspension Notice" have the respective meanings
set forth in Section 2(a)(vi) of this Note.
" Principal Payment Share Price " means, as of a
Scheduled Principal Payment Date, the lesser of (i)
ninety percent (90%) of the lowest daily
VWAP for any Trading Day among the ten (10) consecutive Trading
Days occurring immediately prior to (but not including) such
Scheduled Principal Payment Date and (ii) the Conversion Price in
effect as of such Scheduled Principal Payment Date.
" Principal Stock Option " has the meaning set
forth in Section 2(a)(ii) of this Note
" Principal Stock Option Delivery Date " has the
meaning set forth in Section 2(a)(v) of this
Note
" Principal Stock Option Notice " has the
meaning set forth in Section 2(a)(iv) of this
Note
" Purchase Rights " means any options, warrants
or other rights to purchase or subscribe for Common Stock or
Convertible Securities.
" Record Date " has the meaning set forth in
Section 4(c) of this Note.
" Registrable Securities " has the meaning set
forth in the Registration Rights Agreement.
" Registration Rights Agreement " means the
agreement between the Holder and the Company pursuant to which the
Company has agreed to register the resale of the shares of Common
Stock issuable under the Notes and the Warrants.
" Registration Statement " has the meaning set
forth in the Registration Rights Agreement.
" Scheduled Interest Payment Date " means each
April 1, July 1, October 1, and January 1 following the Issue Date,
with the first Scheduled Interest Payment Date occurring on January
1, 2007, provided , that if any of such days in any year
is not a Business Day, then the Scheduled Interest Payment Date
shall be the Business Day immediately following such date.
-6-
" Scheduled Principal Payment Date " means the
first day of each calendar month, with the first Scheduled
Principal Payment Date occurring on June 1, 2007, provided
, that if any of such days in any year is not a Business Day, then
the Scheduled Principal Payment Date shall be the Business Day
immediately following such date.
" Trading Day " means a Business Day on which
shares of Common Stock are purchased and sold on the Principal
Market.
" Transaction Documents " means (i) the
Securities Purchase Agreement, (ii) the Notes, (iii) the Warrants,
(iv) the Registration Rights Agreement, and (v) all other
agreements, documents and other instruments executed and delivered
by or on behalf of the Company and any of its officers at the
Closing.
" VWAP " on a Trading Day means the volume
weighted average price of the Common Stock for such Trading Day on
the Principal Market as reported by Bloomberg Financial Markets or,
if Bloomberg Financial Markets is not then reporting such prices,
by a comparable reporting service of national reputation selected
by the Holders and reasonably satisfactory to the Company. If VWAP
cannot be calculated for the Common Stock on such Trading Day on
the foregoing bases, then the Company shall submit such calculation
to an independent investment banking firm of national reputation
reasonably acceptable to the Investors, and shall cause such
investment banking firm to perform such determination and notify
the Company and the Investors of the results of determination no
later than two (2) Business Days from the time such calculation was
submitted to it by the Company. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, reverse
stock split or other similar transaction during such period.
" Warrants " means the warrants issued pursuant
to the Securities Purchase Agreement.
All definitions contained in this Note are equally applicable to
the singular and plural forms of the terms defined. The words
"hereof", "herein" and "hereunder" and words of similar import
refer to this Note as a whole and not to any particular provision
of this Note. Any capitalized term used but not defined herein has
the meaning specified in the Securities Purchase Agreement.
2. PAYMENT OF PRINCIPAL AND INTEREST .
(a) Principal .
(i) Schedule and Amount of Payments . Subject to
Section 2(a)(vi) , the Company shall pay to the
Holder, in cash, on each Scheduled Principal Payment Date, an
amount of principal equal to the lesser of (x) 8.333% of the
original principal amount of this Note and (y) the then total
remaining unpaid principal of this Note (each, a " Principal
Payment ").
(ii) Payment of Principal . The Company shall make
each Principal Payment in cash by wire transfer of immediately
available funds; provided, however, that, subject to the
satisfaction of all of the Equity Conditions as specified in
Section 2(a)(iii) , the Company may elect to pay
all or a portion of a Principal Payment due on a Scheduled
Principal Payment Date in shares of Common Stock
-7-
(the " Principal Stock Option "). A Principal
Payment that is not paid as and when due in accordance with this
Section 2(a) shall bear interest until paid at the
Default Interest Rate.
(iii) Conditions to Principal Payment in Common
Stock . The Company shall be entitled to exercise the Principal
Stock Option with respect to a Scheduled Principal Payment Date
only if, on the Principal Stock Option Delivery Date for such
Scheduled Principal Payment Date and on each of the ten (10)
Trading Days immediately preceding such date, all of the Equity
Conditions are satisfied in full. In the event that any of the
Equity Conditions are not satisfied as of the applicable Principal
Stock Option Delivery Date and each such Trading Day (and
regardless of whether the Company has delivered a Principal Stock
Option Notice), the Company shall not be permitted to exercise the
Principal Stock Option and must pay the entire Principal Payment
due on such Scheduled Principal Payment Date in cash by wire
transfer of immediately available funds on such Scheduled Principal
Payment Date, and such amounts due but not paid on such Scheduled
Principal Payment Date shall accrue interest at the Default
Interest Rate until paid in full. Notwithstanding the foregoing, in
no event shall the Company be permitted to exercise the Principal
Stock Option to the extent that, upon receipt of the shares of
Common Stock deliverable thereby, the Holder would beneficially own
more than 4.99% of the number of shares of Common Stock then
outstanding.
(iv) Principal Stock Option Notice . In order to
exercise the Principal Stock Option with respect to a Scheduled
Principal Payment Date, the Company must deliver, on or before the
tenth (10 th ) calendar day
immediately prior to such date, written notice to the Holder
stating that the Company wishes to exercise such option and the
amount of the Principal Payment to be paid in shares of Common
Stock (a " Principal Stock Option Notice "). A
Principal Stock Option Notice, once delivered by the Company, shall
be irrevocable ( provided that if the Company is
prohibited under Section 2(a)(iii) from exercising
the Principal Stock Option contemplated in such Principal Stock
Option Notice; such Principal Stock Option Notice shall be deemed
cancelled). In the event that the Company does not deliver a
Principal Stock Option Notice on or before such tenth day, the
Company will be deemed to have elected to pay all of the Principal
Payment then due in cash.
(v) Delivery of Shares . If the Company has validly
exercised the Principal Stock Option with respect to a Scheduled
Principal Payment Date, the Company must deliver to the Holder, on
or before the fifth (5 th )
Business Day following such Scheduled Principal Payment Date (the "
Principal Stock Option Delivery Date "), a number
of shares of Common Stock equal to (A) the amount of the Principal
Payment for which the Company has elected to pay in Common Stock on
such Scheduled Principal Payment Date divided by (B) the
Principal Payment Share Price as of such Scheduled Principal
Payment Date. The Company must deliver such shares of Common Stock
to the Holder in accordance with the provisions of Section
3(d) of this Note, with the Principal Stock Option
Delivery Date being deemed the Delivery Date for purposes hereof,
and in the event of the Company’s failure to effect such
delivery on the applicable Delivery Date therefor, the Holder shall
have the remedies specified in Section 3(e) of this
Note. If any fractional share would be issuable upon exercise of
the Principal Stock Option, such fractional share shall be
disregarded and the number of shares issuable shall, in the
aggregate, be equal to the nearest whole number of shares.
(vi) Suspension of Principal Payment .
(1) Notwithstanding Section 2(a)(i) , the
obligation of the Company to
-8-
make a Principal Payment on a Scheduled Principal Payment Date
shall be suspended as and to the extent provided in Section
2(a)(vi)(3) if (a) the Company has timely delivered
a Principal Stock Option Notice with respect to such Principal
Payment, (b) the Principal Payment Share Price is less than the
Floor Price as of such Scheduled Principal Payment Date, (c) the
Company provides written notice thereof (the " Principal
Payment Suspension Notice ") to the
Holder prior to 5 p.m., New York City time on such Scheduled
Principal Payment Date, and (d) the Holder fails to provide written
notice (the " Principal Payment Response Notice ")
to the Company within two Business Days of
receiving such Principal Payment Suspension Notice stating that the
Holder is willing to receive such Principal Payment in shares of
Common Stock based on a per share price equal to such Floor Price
(and not the Principal Payment Share Price). If the Company fails
to timely deliver a Principal Payment Suspension Notice with
respect to a Principal Payment, then the Company shall be obligated
to make such Principal Payment in shares of Common Stock at the
applicable Principal Payment Share Price, even if such price is
below the Floor Price.
(2) If the Holder timely delivers a Principal Payment
Response Notice in response to a Principal Payment Suspension
Notice, then the Company shall, in full satisfaction of the
Principal Payment to which such Principal Payment Response Notice
relates, deliver to the Holder, on or before the Principal Stock
Option Delivery Date for such Principal Payment, a number of shares
of Common Stock equal to (A) the amount of such Principal Payment
divided by (B) the Floor Price as of such Scheduled
Principal Payment Date. Notwithstanding the foregoing, if any of
the Equity Conditions are not satisfied (or waived by the Holder)
as of such Principal Stock Option Delivery Date and on each of the
ten (10) Trading Days immediately preceding such date, then the
Company shall not be entitled or permitted to make such Principal
Payment, and such Principal Payment shall be deemed suspended as
and to the extent provided in Section 2(a)(vi)(3) .
The Company must deliver the shares of Common Stock required to be
delivered by it under this Section 2(a)(vi)(2) to
the Holder in accordance with the provisions of Section
3(d) of this Note, with the applicable Principal Stock
Option Delivery Date being deemed the Delivery Date for purposes
hereof, and in the event of the Company’s failure to effect
such delivery on such Principal Stock Option Delivery Date, the
Holder shall have the remedies specified in Section
3(e) of this Note. If any fractional share would be
issuable upon the making of a Principal Payment hereunder, such
fractional share shall be disregarded and the number of shares
issuable shall, in the aggregate, be equal to the nearest whole
number of shares.
(3) If the Holder does not timely deliver a Principal
Payment Response Notice to a Principal Payment Suspension Notice
(or, if upon timely delivery by the Holder of a Principal Payment
Response Notice to a Principal Payment Suspension Notice, any of
the Equity Conditions are not satisfied in accordance with
Section 2(a)(vi)(2) ), the Company’s
obligation to make the Principal Payment to which such Principal
Payment Suspension Notice relates shall be suspended until the next
Scheduled Principal Payment Date; in which case, (i) all Principal
Payments previously suspended and not paid plus (2) the
Principal Payment regularly scheduled to be paid on such Scheduled
Principal Payment Date, shall be due and payable in full as of such
Scheduled Principal Payment Date in accordance with, and subject to
the limitations of, this Section 2(a) .
(b) Interest .
-9-
(i) Interest Accrual . This Note shall bear
interest on the unpaid principal amount hereof ("
Interest ") at an annual rate equal to eight
percent (8%), computed on the basis of a 360-day year and
calculated using the actual number of days elapsed since the Issue
Date or the date on which Interest was most recently paid, as the
case may be, and if not timely paid as provided herein, compounded
monthly. The Company shall pay accrued Interest (x) on each
Scheduled Interest Payment Date, (y) on the Maturity Date and (z)
on any date on which the entire principal amount of this Note is
paid in full (whether through conversion or otherwise) (each of the
foregoing clauses (x) , (y) and
(z) being referred to herein as an "
Interest Payment Date ").
(ii) Interest Payments . The Company shall pay
Interest in cash by wire transfer of immediately available funds;
provided, however, that, subject to the satisfaction of
all of the Equity Conditions as specified in Section
2(b)(iii) , the Company may elect to pay all or a portion
of the Interest due on a Scheduled Interest Payment Date in shares
of Common Stock (the " Interest Stock Option ").
Interest that is not paid as and when due in accordance with this
Section 2(b) shall bear interest until paid at the
Default Interest Rate.
(iii) Conditions to Interest Payment in Common
Stock . The Company shall be entitled to exercise the Interest
Stock Option with respect to a Scheduled Interest Payment Date only
if, on the Interest Stock Option Delivery Date for such Scheduled
Interest Payment Date and on each of the ten (10) Trading Days
immediately preceding such date, all of the Equity Conditions are
satisfied in full. In the event that any Equity Conditions is not
satisfied as of the applicable Interest Stock Option Delivery Date
and each such Trading Day (and regardless of whether the Company
has delivered an Interest Stock Option Notice), the Company shall
not be permitted to exercise the Interest Stock Option and must pay
all amounts due on such Scheduled Interest Payment Date in cash by
wire transfer of immediately available funds on such Scheduled
Interest Payment Date, and such amounts due but not paid on such
Scheduled Interest Payment Date shall accrue interest at the
Default Interest Rate until paid in full. Notwithstanding the
foregoing, in no event shall the Company be permitted to exercise
the Interest Stock Option to the extent that, upon receipt of the
shares of Common Stock deliverable thereby, the Holder would
beneficially own more than 4.99% of the number of shares of Common
Stock then outstanding.
(iv) Interest Stock Option Notice . In order to
exercise the Interest Stock Option with respect to a Scheduled
Interest Payment Date, the Company must deliver, on or before the
tenth (10 th ) calendar day
immediately prior to such date, written notice to the Holder
stating that the Company wishes to exercise such option and the
amount of Interest to be paid in shares of Common Stock (an "
Interest Stock Option Notice "). An Interest Stock
Option Notice, once delivered by the Company, shall be irrevocable
( provided that if the Company is prohibited under
Section 2(b)(iii) from exercising the Interest
Stock Option contemplated in such Interest Stock Option Notice,
such Interest Stock Option Notice shall be deemed cancelled). In
the event that the Company does not deliver an Interest Stock
Option Notice on or before such tenth day, the Company will be
deemed to have elected to pay all Interest then due in cash.
(v) Delivery of Shares . If the Company has validly
exercised the Interest Stock Option with respect to a Scheduled
Interest Payment Date, the Company must deliver to the Holder, on
or before the fifth (5 th )
Business Day following such Scheduled Interest Payment Date (the "
Interest Stock Option Delivery
-10-
Date "), a number of shares of Common Stock
equal to (A) the amount of Interest accrued and payable with
respect to this Note as of such Scheduled Interest Payment Date
divided by (B) ninety-five percent
| 
