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.
REMOTE DYNAMICS, INC.
Series B Subordinated Secured Convertible Promissory Note
due December 4, 2009
No. CN-B-06-__
$___________
Dated: December 4, 2006
For value
received, Remote Dynamics, Inc., a Delaware corporation (the
"Maker"), hereby promises to pay to the order of
_______________________
(together with its successors, representatives, and permitted
assigns, the
"Holder"), in accordance with the terms hereinafter provided, the
principal
amount of ________________________ ($______________). Concurrently
with the
issuance of this Note, the Maker is issuing separate series B
subordinated
secured convertible promissory notes (the "Other Notes") to
separate purchasers
(the "Other Holders") pursuant to the Purchase Agreement (as
defined in Section
1.1 hereof).
All
payments under or pursuant to this Note shall be made in United
States
Dollars in immediately available funds 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 shall be due and payable
on December
4, 2009 (the "Maturity Date") or at such earlier time as provided
herein.
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
November 30,
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.
Section 1.2
Payment of Principal.
<PAGE>
(a)
Commencing on August 1, 2007, and continuing thereafter on the
first
business day of each three-month period or on such other date
specified by the
Holder as provided in the penultimate sentence of this Section
1.2(a) (a
"Principal Payment Date"), the Maker shall pay an amount to the
Holder equal to
one-ninth (1/9th) of the original principal amount of this Note
(the "Principal
Installment Amount"); provided, however, if on any Principal
Payment 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.
The Maker may
pay such Principal Installment Amount in cash or registered shares
of the
Maker's common stock, par value $.01 per share (the "Common
Stock"). If the
Maker elects to pay the Principal Installment Amount in cash such
amount shall
be wired in immediately available funds on the Principal Payment
Date; provided,
however, that if the Holder has delivered a Conversion Notice to
the Maker or
delivers a Conversion Notice prior to the Principal 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 or some other Principal Installment Amount. The Maker shall
provide
irrevocable written notice to the Holder of the form of payment of
the Principal
Installment Amount at least ten (10) days prior to the first
business day of
each quarter for which a Principal Installment Amount is required
to be made by
the Maker. Notwithstanding the terms of this Section 1.2(a) to the
contrary, if
the Maker provides notice to the Holder pursuant to the immediately
preceding
sentence that the Maker elects to pay the Principal Installment
Amount in
registered shares of Common Stock, the Holder shall respond to such
notice in
writing (the "Holder Notice") at least three (3) Trading Days prior
to the date
in which the Holder elects to receive its Principal Installment
Amount in
registered shares of Common Stock, as specified by the Holder in
the Holder
Notice. In addition, the Holder may elect to defer any Principal
Installment
Amount to a later Principal Payment Date.
(b) If the
Maker elects to pay the Principal 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
greater of (i)
$0.02, subject to adjustment as provided in Section 3.6 hereof, and
(ii) an
amount equal to the Principal Installment Amount divided by ninety
percent (90%)
of the average of the VWAP (as defined in Section 1.2(c) hereof)
for the ten
(10) Trading Days immediately preceding the Principal Payment Date;
provided,
however, that if the Holder has delivered a Conversion Notice to
the Maker or
delivers a Conversion Notice prior to the Principal 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 or some other Principal Installment Amount. Notwithstanding
the foregoing
to the contrary, the Maker may elect to pay the Principal
Installment Amount in
registered shares of Common Stock on any Principal Payment Date
only if (A) the
registration statement providing for the resale of the shares of
Common Stock
issuable upon conversion of this Note (the "Registration
Statement") is
effective and has been effective, without lapse or suspension of
any kind, for a
period of twenty (20) consecutive calendar days, (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) the Maker is in material compliance with the terms
and conditions
of this Note and the other Transaction Documents and no Event of
Default exists
and is continuing, and (D) the issuance of shares of Common Stock
on the
Principal Payment Date does not violate the provisions of Section
3.4 hereof.
2
<PAGE>
(c) The
term "VWAP" means, for any date, (i) the daily volume weighted
average price of the Common Stock for such date on the OTC Bulletin
Board as
reported by Bloomberg Financial L.P. (based on a Trading Day from
9:30 a.m.
Eastern Time to 4:02 p.m. Eastern Time); (ii) if the Common Stock
is not then
listed or quoted on the OTC Bulletin Board and if prices for the
Common Stock
are then reported in the "Pink Sheets" published by the Pink
Sheets, LLC (or a
similar organization or agency succeeding to its functions of
reporting prices),
the most recent bid price per share of the Common Stock so
reported; or (iii) in
all other cases, the fair market value of a share of Common Stock
as determined
by an independent appraiser selected in good faith by the Holder
and reasonably
acceptable to the Maker.
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 November
30, 2006 by
and among the Maker, on the one hand, and the Holder and the Other
Holders, on
the other hand.
Section
1.4 Subordination. All payments due under this Note shall be
subordinated and made junior, in all respects to the payment in
full of all
principal, all interest accrued thereon and all other amounts due
on any
indebtedness outstanding under that certain Purchase Agreement
dated as of
February 23, 2006 among the Maker and the purchasers named therein
and the
Security Agreement dated as of February 23, 2006 among the Maker
and the secured
parties named therein.
Section
1.5 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
1.6 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
1.7 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 on a
Principal Payment Date and such default is not fully cured within
one (1)
business day after the occurrence thereof; or
3
<PAGE>
(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"); 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 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 five (5)
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 five (5) 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 Other Notes, 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 five
(5) 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, the
Other Notes 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 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
4
<PAGE>
(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 three
(3) business days of the date such payments are due; or
(n) the
occurrence of an Event of Default under the Other Notes, the
OID
Notes or any promissory notes issued by the Maker pursuant to the
Share Exchange
Transaction (as defined in the Purchase Agreement).
5
<PAGE>
Section
2.2 Remedies Upon An Event of Default. If an Event of Default
shall have occurred and shall be continuing, the Holder of this
Note may at any
time at its option, (a) pursuant to Section 3.7(a) hereof, declare
the entire
unpaid principal balance 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) and (l)-(n), the Holder may demand the
prepayment of this
Note pursuant to Section 3.7 hereof, (b) demand that the principal
amount of
this Note then outstanding shall be converted into shares of Common
Stock at a
Conversion Price per share calculated pursuant to Sections 3.1 and
3.4 hereof
assuming that the date that the Event of Default occurs is the
Conversion Date
(as defined in Section 3.1 hereof), 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 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 ten percent
(10%) 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.
ARTICLE III
CONVERSION; ANTIDILUTION; PREPAYMENT
Section
3.1 Conversion Option.
(a) At any
time on or after the date that is fifteen (15) months following
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 as of such date that the Holder elects to convert
by (y) the
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 number (972) 301-2263,
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.
6
<PAGE>
(b) On the
Mandatory Conversion Date (as defined below), the Maker may
cause the principal amount of this Note to convert into a number of
fully paid
and nonassessable shares of Common Stock equal to the quotient of
(i) the
principal amount of this Note outstanding on the Mandatory
Conversion Date
divided by (ii) the Conversion Price in effect on the Mandatory
Conversion Date
by providing five (5) business days prior written 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 (as defined in Section 3.1(c) below) exceeds two hundred
fifty percent
(250%) of the Conversion Price for a period of twelve (12)
consecutive Trading
Days and the average daily trading volume for each of such twelve
(12)
consecutive Trading Days exceeds 750,000 shares of Common Stock;
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) the Maker is in material compliance
with the terms
and conditions of this Note and the other Transaction Documents and
no Event of
Default exists and is continuing, (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."
(c) 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 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.
Section
3.2 Conversion Price.
(a) The
term "Conversion Price" shall mean $.016, subject to adjustment
under Sections 3.2(b) and 3.6 hereof.
(b) In the
event that the Maker does not (i) achieve gross revenues equal
to at least $1,750,000 as determined in accordance with GAAP for
the calendar
quarter ended June 30, 2007, or (ii) increase its subscriber units
by a minimum
of 5,000 net additional REDIview subscriber units by June 30, 2007,
or (iii)
achieve positive cash flow based on the Maker's EBITDA (determined
in accordance
with GAAP) by June 30, 2007, or (iv) execute binding agreements for
a minimum of
two (2) new accounts (with each such account ordering in excess of
1,000
REDIview units) by June 30, 2007 or a minimum of one (1) new
account (with such
account ordering in excess of 2,500 REDIview units) by June 30,
2007 (each of
the foregoing events described in subclauses (i) through (iv) shall
be defined
herein as a "Milestone"), then in each such case in which the
Company fails to
achieve any Milestone, the Conversion Price shall be reduced by
fifteen percent
(15%), up to a maximum reduction of sixty percent (60%) in the
event none of the
Milestones is achieved.
7
<PAGE>
(c)
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.
8
<PAGE>
(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. If the Maker fails to deliver to
the Holder such
shares via DWAC or a certificate or certificates pursuant to this
Section
hereunder by the Delivery Date, the Maker shall pay to such Holder,
in cash, an
amount per Trading Day for each Trading Day until such shares are
delivered via
DWAC or certificates are delivered, together with interest on such
amount at a
rate of 10% per annum, accruing until such amount and any accrued
interest
thereon is paid in full, equal to the greater of (A) (i) 1% of the
aggregate
principal amount of the Notes requested to be converted for the
first five (5)
Trading Days after the Delivery Date and (ii) 2% of the aggregate
principal
amount of the Notes requested to be converted for each Trading Day
thereafter
and (B) $2,000 per day (which amount shall be paid as liquidated
damages and not
as a penalty). Nothing herein shall limit a Holder's right to
pursue actual
damages for the Maker's failure to deliver certificates
representing shares of
Common Stock upon conversion within the period specified herein and
such Holder
shall have the right to pursue all remedies available to it at law
or in equity
(including, without limitation, a decree of specific performance
and/or
injunctive relief). Notwithstanding anything to the contrary
contained herein,
the Holder shall be entitled to withdraw a Conversion Notice, and
upon such
withdrawal the Maker shall only be obligated to pay the liquidated
damages
accrued in accordance with this Section 3.3(b) through the date the
Conversion
Notice is withdrawn.
(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.
9
<PAGE>
Section
3.4 Ownership Cap and Certain Conversion Restrictions.
(a)
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 than 4.9% 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(a) with regard to any
or all shares
of Common Stock issuable upon conversion of this Note, this Section
3.4(a) will
be of no force or effect with regard to all or a portion of the
Note referenced
in the Waiver Notice.
(b)
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,
when aggregated with all other shares of Common Stock owned by the
Holder at
such time, would result in the Holder beneficially owning (as
determined in
accordance with Section 13(d) of the Exchange Act and the rules
thereunder) in
excess of 9.9% of the then issued and outstanding shares of Common
Stock
outstanding at such time (including pursuant to the Warrants);
provided,
however, that upon the Holder providing the Maker with a Waiver
Notice that the
Holder would like to waive Section 3.4(b) of this Note with regard
to any or all
shares of Common Stock issuable upon conversion of this Note, this
Section
3.4(b) shall 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 Conversion Price.
(a) The
Conversion Price shall be subject to adjustment from time to
time
as follows:
(i) Adjustments for Stock Splits and Combinati
