Exhibit 10.3

 

[FORM OF SENIOR SECURED CONVERTIBLE NOTE]

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR
APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT (II) UNLESS SOLD OR TRANSFERS TO A “QUALIFIED INSTITUTIONAL
BUYER” WITHIN THE MEANING OF RULE 144A UNDER THE 1933 ACT OR TO AN “ACCREDITED
INVESTOR” AS THAT TERM IS DEFINED IN RULE 501(A) OF REGULATION D OR (III) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.  ANY
TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF.  THE HOLDER OF THIS NOTE AGREES
TO THE TERMS AND PROVISIONS SET FORTH IN SECTION 4(q) OF THE SECURITIES PURCHASE
AGREEMENT REGARDING THE COLLATERAL AGENT (AS DEFINED IN THE SECURITIES PURCHASE
AGREEMENT).  THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE
SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET
FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

 

ANSWERS CORPORATION

 

SENIOR SECURED CONVERTIBLE NOTE

 

Issuance Date: [•]

Original Principal Amount: U.S. $[•]

 

FOR VALUE RECEIVED, ANSWERS CORPORATION, a Delaware corporation (the “Company”),
hereby promises to pay to INTERLACHEN CONVERTIBLE INVESTMENTS LIMITED or
registered assigns (the “Holder”) the amount set out above as the Original
Principal Amount (as reduced pursuant to the terms hereof pursuant to
redemption, conversion or otherwise, the “Principal”) when due, whether upon the
Maturity Date (as defined below), acceleration, redemption or otherwise (in each
case in accordance with the terms hereof) and to pay interest (“Interest”) on
any outstanding Principal at a rate per annum equal to the Interest Rate (as
defined below) from the date set out above as the Issuance Date (the “Issuance
Date”) until the same becomes due and payable, whether upon an Interest Date (as
defined below), the Maturity Date, acceleration, conversion, redemption or
otherwise (in each case in accordance with the terms hereof).  This Senior
Secured Convertible Note (including all Senior

 

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Secured Convertible Notes issued in exchange, transfer or replacement hereof,
this “Note”) is one of an issue of Senior Secured Convertible Notes issued
pursuant to the Securities Purchase Agreement on the Closing Date (collectively,
the “Notes” and such other Senior Secured Convertible Notes, the “Other
Notes”).  Certain capitalized terms used herein are defined in Section 30.

 

(1)           MATURITY.  ON THE MATURITY DATE, THE COMPANY SHALL PAY TO THE
HOLDER AN AMOUNT IN CASH REPRESENTING ALL OUTSTANDING PRINCIPAL, ACCRUED AND
UNPAID INTEREST AND ACCRUED AND UNPAID LATE CHARGES, IF ANY, ON SUCH PRINCIPAL
AND INTEREST.  THE “MATURITY DATE” SHALL BE DECEMBER 31, 2010, AS MAY BE
EXTENDED AT THE OPTION OF THE HOLDER (I) IN THE EVENT THAT, AND FOR SO LONG AS,
AN EVENT OF DEFAULT (AS DEFINED IN SECTION 4(A)) SHALL HAVE OCCURRED AND BE
CONTINUING ON THE MATURITY DATE (AS MAY BE EXTENDED PURSUANT TO THIS SECTION 1)
OR ANY EVENT SHALL HAVE OCCURRED AND BE CONTINUING ON THE MATURITY DATE (AS MAY
BE EXTENDED PURSUANT TO THIS SECTION 1) THAT WITH THE PASSAGE OF TIME AND THE
FAILURE TO CURE WOULD RESULT IN AN EVENT OF DEFAULT, AND (II) THROUGH THE DATE
THAT IS TEN (10) BUSINESS DAYS AFTER THE CONSUMMATION OF A CHANGE OF CONTROL IN
THE EVENT THAT A CHANGE OF CONTROL IS PUBLICLY ANNOUNCED OR A CHANGE OF CONTROL
NOTICE (AS DEFINED IN SECTION 5(B)) IS DELIVERED PRIOR TO THE MATURITY DATE.

 

(2)           INTEREST; INTEREST RATE.  (A) INTEREST ON THIS NOTE SHALL COMMENCE
ACCRUING ON THE ISSUANCE DATE AND SHALL BE COMPUTED ON THE BASIS OF ACTUAL
NUMBER OF DAYS ELAPSED OVER A 360-DAY YEAR AND SHALL BE PAYABLE IN ARREARS FOR
EACH CALENDAR QUARTER ON JANUARY 15, APRIL 15, JULY 15 AND OCTOBER 15 OF EACH
YEAR (EACH, AN “INTEREST DATE”) WITH THE FIRST INTEREST DATE BEING APRIL 15,
2008.  INTEREST SHALL BE PAYABLE ON EACH INTEREST DATE, TO THE RECORD HOLDER OF
THIS NOTE ON THE APPLICABLE INTEREST DATE IN CASH.

 

(B)           PRIOR TO THE PAYMENT OF INTEREST ON AN INTEREST DATE, INTEREST ON
THIS NOTE SHALL ACCRUE AT THE INTEREST RATE AND BE PAYABLE BY WAY OF INCLUSION
OF THE INTEREST IN THE CONVERSION AMOUNT ON EACH CONVERSION DATE IN ACCORDANCE
WITH SECTION 3(B)(I).  FROM AND AFTER THE OCCURRENCE AND DURING THE CONTINUANCE
OF AN EVENT OF DEFAULT, THE INTEREST RATE THEN IN EFFECT SHALL BE INCREASED BY
SEVEN PERCENT (7.0%) BUT IN NO EVENT SHALL THE INTEREST RATE EXCEED TWENTY-FOUR
PERCENT (24%).  IN THE EVENT THAT SUCH EVENT OF DEFAULT IS SUBSEQUENTLY CURED,
THE ADJUSTMENT REFERRED TO IN THE PRECEDING SENTENCE SHALL CEASE TO BE EFFECTIVE
AS OF THE DATE OF SUCH CURE; PROVIDED THAT THE INTEREST AS CALCULATED AND UNPAID
AT SUCH INCREASED RATE DURING THE CONTINUANCE OF SUCH EVENT OF DEFAULT SHALL
CONTINUE TO APPLY TO THE EXTENT RELATING TO THE DAYS AFTER THE OCCURRENCE OF
SUCH EVENT OF DEFAULT THROUGH AND INCLUDING THE DATE OF CURE OF SUCH EVENT OF
DEFAULT.

 

(3)           CONVERSION OF NOTES.  THIS NOTE SHALL BE CONVERTIBLE INTO SHARES
OF THE COMPANY’S COMMON STOCK, PAR VALUE $0.001 PER SHARE (THE “COMMON STOCK”),
ON THE TERMS AND CONDITIONS SET FORTH IN THIS SECTION 3.

 

(A)                                  CONVERSION RIGHT.  SUBJECT TO THE
PROVISIONS OF SECTION 3(D), AT ANY TIME OR TIMES ON OR AFTER THE ISSUANCE DATE,
THE HOLDER SHALL BE ENTITLED TO CONVERT ANY PORTION OF THE OUTSTANDING AND
UNPAID CONVERSION AMOUNT (AS DEFINED BELOW) INTO FULLY PAID AND NONASSESSABLE
SHARES OF COMMON STOCK IN ACCORDANCE WITH SECTION 3(C), AT THE CONVERSION RATE
(AS DEFINED BELOW).  THE COMPANY SHALL NOT ISSUE ANY FRACTION OF A SHARE OF
COMMON STOCK UPON ANY CONVERSION.  IF THE ISSUANCE WOULD RESULT IN THE ISSUANCE
OF A FRACTION OF A SHARE OF COMMON

 

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STOCK, THE COMPANY SHALL ROUND SUCH FRACTION OF A SHARE OF COMMON STOCK UP TO
THE NEAREST WHOLE SHARE.  THE COMPANY SHALL PAY ANY AND ALL TRANSFER, STAMP AND
SIMILAR TAXES THAT MAY BE PAYABLE WITH RESPECT TO THE ISSUANCE AND DELIVERY OF
COMMON STOCK UPON CONVERSION OF ANY CONVERSION AMOUNT.

 

(B)           CONVERSION RATE.  THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION OF ANY CONVERSION AMOUNT PURSUANT TO SECTION 3(A) SHALL BE
DETERMINED BY DIVIDING (X) SUCH CONVERSION AMOUNT BY (Y) THE CONVERSION PRICE
(THE “CONVERSION RATE”).

 

(I)                                     “CONVERSION AMOUNT” MEANS THE SUM OF
(A) THE PORTION OF THE PRINCIPAL TO BE CONVERTED, REDEEMED OR OTHERWISE WITH
RESPECT TO WHICH THIS DETERMINATION IS BEING MADE, (B) ACCRUED AND UNPAID
INTEREST WITH RESPECT TO SUCH PRINCIPAL AND (C) ACCRUED AND UNPAID LATE CHARGES
WITH RESPECT TO SUCH PRINCIPAL AND INTEREST.

 

(II)                                  “CONVERSION PRICE” MEANS, AS OF ANY
CONVERSION DATE (AS DEFINED BELOW) OR OTHER DATE OF DETERMINATION, $[•](1),
SUBJECT TO ADJUSTMENT AS PROVIDED HEREIN.

 

(C)           MECHANICS OF CONVERSION.

 

(I)                                     OPTIONAL CONVERSION.  TO CONVERT ANY
CONVERSION AMOUNT INTO SHARES OF COMMON STOCK ON ANY DATE (A “CONVERSION DATE”),
THE HOLDER SHALL (A) TRANSMIT BY FACSIMILE (OR OTHERWISE DELIVER), FOR RECEIPT
ON OR PRIOR TO 11:59 P.M., NEW YORK TIME, ON SUCH DATE, A COPY OF AN EXECUTED
NOTICE OF CONVERSION IN THE FORM ATTACHED HERETO AS EXHIBIT I (THE “CONVERSION
NOTICE”) TO THE COMPANY AND (B) IF REQUIRED BY SECTION 3(C)(III), SURRENDER THIS
NOTE TO A COMMON CARRIER FOR DELIVERY TO THE COMPANY AS SOON AS PRACTICABLE ON
OR FOLLOWING SUCH DATE (OR AN INDEMNIFICATION UNDERTAKING WITH RESPECT TO THIS
NOTE IN THE CASE OF ITS LOSS, THEFT OR DESTRUCTION).  ON OR BEFORE THE FIRST
(1ST) TRADING DAY FOLLOWING THE DATE OF RECEIPT OF A CONVERSION NOTICE, THE
COMPANY SHALL TRANSMIT BY FACSIMILE A CONFIRMATION OF RECEIPT OF SUCH CONVERSION
NOTICE TO THE HOLDER AND THE COMPANY’S TRANSFER AGENT (THE “TRANSFER AGENT”). 
ON OR BEFORE THE THIRD (3RD)  TRADING DAY FOLLOWING THE DATE OF RECEIPT OF A
CONVERSION NOTICE (THE “SHARE DELIVERY DATE”), THE COMPANY SHALL (X) PROVIDED
THAT THE TRANSFER AGENT IS PARTICIPATING IN THE DEPOSITORY TRUST COMPANY’S
(“DTC”) FAST AUTOMATED SECURITIES TRANSFER PROGRAM, CREDIT SUCH AGGREGATE NUMBER
OF SHARES OF COMMON STOCK TO WHICH THE HOLDER SHALL BE ENTITLED TO THE HOLDER’S
OR ITS DESIGNEE’S BALANCE ACCOUNT WITH DTC THROUGH ITS DEPOSIT WITHDRAWAL AGENT
COMMISSION SYSTEM OR (Y) IF THE TRANSFER AGENT IS NOT PARTICIPATING IN

 

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(1)                                  IF THIS IS A FOLLOW-ON NOTE (AS DEFINED IN
THE SECURITIES PURCHASE AGREEMENT):   INSERT NUMBER EQUAL TO THE LESSER OF
(I) $9.00 AND (II) 110% OF THE ISSUE PRICE PER SHARE OF COMMON STOCK IN THE
FOLLOW-ON OFFERING (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT).

 

IF THIS IS A TERMINATION NOTE (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT):
INSERT NUMBER EQUAL TO THE LESSER OF (I) $9.00 AND (II) 110% OF THE ARITHMETIC
AVERAGE OF THE WEIGHTED AVERAGE PRICE OF THE COMMON STOCK FOR THE TEN
(10) TRADING DAYS COMMENCING ON THE TRADING DAY IMMEDIATELY FOLLOWING THE
ANNOUNCEMENT OF THE LEXICO TERMINATION (AS DEFINED IN THE SECURITIES PURCHASE
AGREEMENT).

 

3

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THE DTC FAST AUTOMATED SECURITIES TRANSFER PROGRAM, ISSUE AND DELIVER TO THE
ADDRESS AS SPECIFIED IN THE CONVERSION NOTICE, A CERTIFICATE, 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.  IF THIS NOTE IS PHYSICALLY SURRENDERED FOR
CONVERSION AS REQUIRED BY SECTION 3(C)(III) AND THE OUTSTANDING PRINCIPAL OF
THIS NOTE IS GREATER THAN THE PRINCIPAL PORTION OF THE CONVERSION AMOUNT BEING
CONVERTED, THEN THE COMPANY SHALL AS SOON AS PRACTICABLE AND IN NO EVENT LATER
THAN THREE (3) TRADING DAYS AFTER RECEIPT OF THIS NOTE AND AT ITS OWN EXPENSE,
ISSUE AND DELIVER TO THE HOLDER A NEW NOTE (IN ACCORDANCE WITH SECTION 18(D))
REPRESENTING THE OUTSTANDING PRINCIPAL NOT CONVERTED.  THE PERSON OR PERSONS
ENTITLED TO RECEIVE THE SHARES OF COMMON STOCK ISSUABLE UPON A CONVERSION OF
THIS NOTE SHALL BE TREATED FOR ALL PURPOSES AS THE RECORD HOLDER OR HOLDERS OF
SUCH SHARES OF COMMON STOCK ON THE CONVERSION DATE.

 

(II)                                  COMPANY’S FAILURE TO TIMELY CONVERT.  IF
THE COMPANY SHALL FAIL TO ISSUE A CERTIFICATE TO THE HOLDER OR CREDIT THE
HOLDER’S BALANCE ACCOUNT WITH DTC, AS APPLICABLE, FOR THE NUMBER OF SHARES OF
COMMON STOCK TO WHICH THE HOLDER IS ENTITLED UPON CONVERSION OF ANY CONVERSION
AMOUNT ON OR PRIOR TO THE DATE WHICH IS THREE (3) TRADING DAYS AFTER THE
CONVERSION DATE (A “CONVERSION FAILURE”), THEN (A) THE COMPANY SHALL PAY DAMAGES
TO THE HOLDER FOR EACH TRADING DAY OF SUCH CONVERSION FAILURE IN AN AMOUNT EQUAL
TO ONE AND ONE-HALF PERCENT (1.5%) OF THE PRODUCT OF (1) THE SUM OF THE NUMBER
OF SHARES OF COMMON STOCK NOT ISSUED TO THE HOLDER ON OR PRIOR TO THE SHARE
DELIVERY DATE AND TO WHICH THE HOLDER IS ENTITLED, AND (2) THE CLOSING SALE
PRICE OF THE COMMON STOCK ON THE SHARE DELIVERY DATE AND (B) THE HOLDER, UPON
WRITTEN NOTICE TO THE COMPANY, MAY VOID ITS CONVERSION NOTICE WITH RESPECT TO,
AND RETAIN OR HAVE RETURNED, AS THE CASE MAY BE, ANY PORTION OF THIS NOTE THAT
HAS NOT BEEN CONVERTED PURSUANT TO SUCH CONVERSION NOTICE; PROVIDED THAT THE
VOIDING OF A CONVERSION NOTICE SHALL NOT AFFECT THE COMPANY’S OBLIGATIONS TO
MAKE ANY PAYMENTS WHICH HAVE ACCRUED PRIOR TO THE DATE OF SUCH NOTICE PURSUANT
TO THIS SECTION 3(C)(II) OR OTHERWISE.  IN ADDITION TO THE FOREGOING, IF WITHIN
THREE (3) TRADING DAYS AFTER THE COMPANY’S RECEIPT OF THE FACSIMILE COPY OF A
CONVERSION NOTICE THE COMPANY SHALL FAIL TO ISSUE AND DELIVER A CERTIFICATE TO
THE HOLDER OR CREDIT THE HOLDER’S BALANCE ACCOUNT WITH DTC FOR THE NUMBER OF
SHARES OF COMMON STOCK TO WHICH THE HOLDER IS ENTITLED UPON SUCH HOLDER’S
CONVERSION OF ANY CONVERSION AMOUNT OR ON ANY DATE OF THE COMPANY’S OBLIGATION
TO DELIVER SHARES OF COMMON STOCK AS CONTEMPLATED PURSUANT TO CLAUSE (Y) BELOW,
AND IF ON OR AFTER SUCH TRADING DAY THE HOLDER PURCHASES (IN AN OPEN MARKET
TRANSACTION OR OTHERWISE) COMMON STOCK TO DELIVER IN SATISFACTION OF A SALE BY
THE HOLDER OF COMMON STOCK ISSUABLE UPON SUCH CONVERSION THAT THE HOLDER
ANTICIPATED RECEIVING FROM THE COMPANY (A “BUY-IN”), THEN THE COMPANY SHALL,
WITHIN THREE (3) TRADING DAYS AFTER THE HOLDER’S REQUEST AND IN THE HOLDER’S
DISCRETION, EITHER (X) PAY CASH TO THE HOLDER IN AN AMOUNT EQUAL TO THE HOLDER’S
TOTAL PURCHASE PRICE (INCLUDING BROKERAGE COMMISSIONS AND OTHER OUT OF POCKET
EXPENSES, IF ANY) FOR THE SHARES OF COMMON STOCK SO PURCHASED (THE “BUY-IN
PRICE”), AT WHICH POINT THE COMPANY’S OBLIGATION TO DELIVER SUCH CERTIFICATE
(AND TO ISSUE SUCH COMMON STOCK) SHALL TERMINATE, OR (Y) PROMPTLY HONOR ITS
OBLIGATION TO DELIVER TO THE HOLDER A CERTIFICATE OR CERTIFICATES REPRESENTING
SUCH COMMON STOCK AND PAY CASH TO THE HOLDER IN AN AMOUNT EQUAL TO THE EXCESS
(IF ANY) OF THE BUY-IN PRICE OVER THE PRODUCT OF (I) SUCH NUMBER OF SHARES OF
COMMON STOCK, TIMES (II) THE CLOSING BID PRICE ON THE CONVERSION DATE.

 

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(III)          REGISTRATION; BOOK-ENTRY.  THE COMPANY SHALL MAINTAIN A REGISTER
(THE “REGISTER”) FOR THE RECORDATION OF THE NAMES AND ADDRESSES OF THE HOLDERS
OF EACH NOTE AND THE PRINCIPAL AMOUNT OF THE NOTES HELD BY SUCH HOLDERS (THE
“REGISTERED NOTES”).  THE ENTRIES IN THE REGISTER SHALL BE CONCLUSIVE AND
BINDING FOR ALL PURPOSES ABSENT MANIFEST ERROR.  THE COMPANY AND THE HOLDERS OF
THE NOTES SHALL TREAT EACH PERSON WHOSE NAME IS RECORDED IN THE REGISTER AS THE
OWNER OF A NOTE FOR ALL PURPOSES, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO
RECEIVE PAYMENTS OF PRINCIPAL AND INTEREST HEREUNDER, NOTWITHSTANDING NOTICE TO
THE CONTRARY.  A REGISTERED NOTE MAY BE ASSIGNED OR SOLD IN WHOLE OR IN PART
ONLY BY REGISTRATION OF SUCH ASSIGNMENT OR SALE ON THE REGISTER.  UPON ITS
RECEIPT OF A REQUEST TO ASSIGN OR SELL ALL OR PART OF ANY REGISTERED NOTE BY A
HOLDER, THE COMPANY SHALL RECORD THE INFORMATION CONTAINED THEREIN IN THE
REGISTER AND ISSUE ONE OR MORE NEW REGISTERED NOTES IN THE SAME AGGREGATE
PRINCIPAL AMOUNT AS THE PRINCIPAL AMOUNT OF THE SURRENDERED REGISTERED NOTE TO
THE DESIGNATED ASSIGNEE OR TRANSFEREE PURSUANT TO SECTION 18.  NOTWITHSTANDING
ANYTHING TO THE CONTRARY SET FORTH HEREIN, UPON CONVERSION OF ANY PORTION OF
THIS NOTE IN ACCORDANCE WITH THE TERMS HEREOF, THE HOLDER SHALL NOT BE REQUIRED
TO PHYSICALLY SURRENDER THIS NOTE TO THE COMPANY UNLESS (A) THE FULL PRINCIPAL
AMOUNT REPRESENTED BY THIS NOTE IS BEING CONVERTED OR (B) THE HOLDER HAS
PROVIDED THE COMPANY WITH PRIOR WRITTEN NOTICE (WHICH NOTICE MAY BE INCLUDED IN
A CONVERSION NOTICE) REQUESTING REISSUANCE OF THIS NOTE UPON PHYSICAL SURRENDER
OF THIS NOTE.  THE HOLDER AND THE COMPANY SHALL MAINTAIN RECORDS SHOWING THE
PRINCIPAL, INTEREST AND LATE CHARGES, IF ANY, CONVERTED AND THE DATES OF SUCH
CONVERSIONS OR SHALL USE SUCH OTHER METHOD, REASONABLY SATISFACTORY TO THE
HOLDER AND THE COMPANY, SO AS NOT TO REQUIRE PHYSICAL SURRENDER OF THIS NOTE
UPON CONVERSION.

 

(IV)          PRO RATA CONVERSION; DISPUTES.  IN THE EVENT THAT THE COMPANY
RECEIVES A CONVERSION NOTICE FROM MORE THAN ONE HOLDER OF NOTES FOR THE SAME
CONVERSION DATE AND THE COMPANY CAN CONVERT SOME, BUT NOT ALL, OF SUCH PORTIONS
OF THE NOTES SUBMITTED FOR CONVERSION, THE COMPANY, SUBJECT TO SECTION 3(D),
SHALL CONVERT FROM EACH HOLDER OF NOTES ELECTING TO HAVE NOTES CONVERTED ON SUCH
DATE A PRO RATA AMOUNT OF SUCH HOLDER’S PORTION OF ITS NOTES SUBMITTED FOR
CONVERSION BASED ON THE PRINCIPAL AMOUNT OF NOTES SUBMITTED FOR CONVERSION ON
SUCH DATE BY SUCH HOLDER RELATIVE TO THE AGGREGATE PRINCIPAL AMOUNT OF ALL NOTES
SUBMITTED FOR CONVERSION ON SUCH DATE.  IN THE EVENT OF A DISPUTE AS TO THE
NUMBER OF SHARES OF COMMON STOCK ISSUABLE TO THE HOLDER IN CONNECTION WITH A
CONVERSION OF THIS NOTE, THE COMPANY SHALL ISSUE TO THE HOLDER THE NUMBER OF
SHARES OF COMMON STOCK NOT IN DISPUTE AND RESOLVE SUCH DISPUTE IN ACCORDANCE
WITH SECTION 24.

 

(V)           MANDATORY CONVERSION.

 

(A)                              GENERAL.  IF AT ANY TIME FROM AND AFTER THE
FIRST ANNIVERSARY OF THE CLOSING DATE (THE “MANDATORY CONVERSION ELIGIBILITY
DATE”), (1) THE ARITHMETIC AVERAGE OF THE WEIGHTED AVERAGE PRICE OF THE COMMON
STOCK FOR A PERIOD OF AT LEAST THIRTY (30) CONSECUTIVE TRADING DAYS FOLLOWING
THE MANDATORY CONVERSION ELIGIBILITY DATE (THE “MANDATORY CONVERSION MEASURING
PERIOD”) EQUALS OR EXCEEDS 175% OF THE CONVERSION PRICE ON THE ISSUANCE DATE
(SUBJECT TO APPROPRIATE ADJUSTMENTS FOR ANY STOCK DIVIDEND, STOCK SPLIT, STOCK
COMBINATION, RECLASSIFICATION OR SIMILAR TRANSACTION AFTER THE SUBSCRIPTION
DATE)

 

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(THE “PRICING CONDITION”), (2) THE ARITHMETIC AVERAGE OF THE DOLLAR TRADING
VOLUME (AS REPORTED ON BLOOMBERG) OF THE COMMON STOCK ON THE PRINCIPAL MARKET IS
AT LEAST $1,000,000 PER TRADING DAY (THE “VOLUME CONDITION”) DURING SUCH
MANDATORY CONVERSION MEASURING PERIOD, AND (3) THERE IS NOT THEN AN EQUITY
CONDITIONS FAILURE, THE COMPANY SHALL HAVE THE RIGHT TO REQUIRE THE HOLDER TO
CONVERT ALL OR ANY PORTION OF THE CONVERSION AMOUNT THEN REMAINING UNDER THIS
NOTE, IN EACH CASE AS DESIGNATED IN THE MANDATORY CONVERSION NOTICE (AS DEFINED
BELOW) INTO FULLY PAID, VALIDLY ISSUED AND NONASSESSABLE SHARES OF COMMON STOCK
IN ACCORDANCE WITH SECTION 3(C) HEREOF AT THE CONVERSION RATE AS OF THE
MANDATORY CONVERSION DATE (AS DEFINED BELOW) (A “MANDATORY CONVERSION”);
PROVIDED, THAT THE COMPANY SHALL NOT EXERCISE ITS RIGHT OF MANDATORY CONVERSION
HEREUNDER MORE THAN ONE (1) TIME IN ANY CONSECUTIVE SIX (6) MONTH PERIOD; AND
PROVIDED FURTHER, THAT THE AGGREGATE CONVERSION AMOUNT SUBJECT TO THE MANDATORY
CONVERSION FOR ALL NOTES PURSUANT TO ANY ONE MANDATORY CONVERSION NOTICE SHALL
BE AT LEAST $5,000,000.  THE COMPANY MAY EXERCISE ITS RIGHT TO REQUIRE
CONVERSION UNDER THIS SECTION 3(C)(V) BY DELIVERING WITHIN NOT MORE THAN TWO
(2) TRADING DAYS FOLLOWING THE END OF SUCH MANDATORY CONVERSION MEASURING PERIOD
A WRITTEN NOTICE THEREOF BY FACSIMILE AND OVERNIGHT COURIER TO ALL, BUT NOT LESS
THAN ALL, OF THE HOLDERS OF NOTES AND THE TRANSFER AGENT (THE “MANDATORY
CONVERSION NOTICE” AND THE DATE ALL OF THE HOLDERS RECEIVED SUCH NOTICE BY
FACSIMILE IS REFERRED TO AS THE “MANDATORY CONVERSION NOTICE DATE”).  THE
MANDATORY CONVERSION NOTICE SHALL BE IRREVOCABLE.  THE MANDATORY CONVERSION
NOTICE SHALL (X) STATE (I) THE TRADING DAY SELECTED FOR THE MANDATORY
CONVERSION, WHICH TRADING DAY SHALL BE NO SOONER THAN TWENTY (20) TRADING DAYS
NOR LATER THAN SIXTY (60) TRADING DAYS FOLLOWING THE MANDATORY CONVERSION NOTICE
DATE (THE “MANDATORY CONVERSION DATE”), (II) THE AGGREGATE CONVERSION AMOUNT OF
THE NOTES SUBJECT TO MANDATORY CONVERSION FROM THE HOLDER AND ALL OF THE HOLDERS
OF THE NOTES PURSUANT TO THIS SECTION 3(C)(V) (AND ANALOGOUS PROVISIONS UNDER
THE OTHER NOTES), (III) THE NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED TO THE
HOLDER ON THE MANDATORY CONVERSION DATE, AND (Y) CERTIFY THAT THERE HAS BEEN NO
EQUITY CONDITIONS FAILURE AND (Z) CERTIFY THAT EACH OF (I) THE PRICING CONDITION
AND (II) THE VOLUME CONDITION HAS BEEN MET ON EACH DAY OF THE MANDATORY
CONVERSION MEASURING PERIOD.  IF THE EQUITY CONDITIONS, VOLUME CONDITION AND
PRICING CONDITION WERE SATISFIED AS OF THE MANDATORY CONVERSION NOTICE DATE BUT
IF ANY EQUITY CONDITION, VOLUME CONDITION OR PRICING CONDITION IS NO LONGER
SATISFIED AT ANY TIME ON EACH DATE PRIOR TO AND INCLUDING THE MANDATORY
CONVERSION DATE, THE MANDATORY CONVERSION NOTICE SHALL BE NULL AND VOID.

 

(B)                                PRO RATA CONVERSION REQUIREMENT.  IF THE
COMPANY ELECTS TO CAUSE A CONVERSION OF ANY CONVERSION AMOUNT OF THIS NOTE
PURSUANT TO SECTION 3(C)(V)(A), THEN IT MUST SIMULTANEOUSLY TAKE THE SAME ACTION
IN THE SAME PROPORTION WITH RESPECT TO THE OTHER NOTES.  IF THE COMPANY ELECTS A
MANDATORY CONVERSION OF THIS NOTE PURSUANT TO SECTION 3(C)(V)(A) (OR SIMILAR
PROVISIONS UNDER THE OTHER NOTES) WITH RESPECT TO LESS THAN ALL OF THE
CONVERSION AMOUNTS OF THE NOTES THEN OUTSTANDING, THEN THE COMPANY SHALL REQUIRE
CONVERSION OF A CONVERSION AMOUNT FROM EACH OF THE HOLDERS OF THE NOTES EQUAL TO
THE PRODUCT OF (1) THE AGGREGATE CONVERSION AMOUNT OF NOTES WHICH THE COMPANY
HAS ELECTED TO

 

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CAUSE TO BE CONVERTED PURSUANT TO SECTION 3(C)(V)(A), MULTIPLIED BY (2) THE
FRACTION, THE NUMERATOR OF WHICH IS THE SUM OF THE AGGREGATE ORIGINAL PRINCIPAL
AMOUNT OF THE NOTES PURCHASED BY SUCH HOLDER OF OUTSTANDING NOTES AND THE
DENOMINATOR OF WHICH IS THE SUM OF THE AGGREGATE ORIGINAL PRINCIPAL AMOUNT OF
THE NOTES PURCHASED BY ALL HOLDERS HOLDING OUTSTANDING NOTES (SUCH FRACTION WITH
RESPECT TO EACH HOLDER IS REFERRED TO AS ITS “CONVERSION ALLOCATION PERCENTAGE,”
AND SUCH AMOUNT WITH RESPECT TO EACH HOLDER IS REFERRED TO AS ITS “PRO RATA
CONVERSION AMOUNT”); PROVIDED, HOWEVER, THAT IN THE EVENT THAT ANY HOLDER’S PRO
RATA CONVERSION AMOUNT EXCEEDS THE OUTSTANDING PRINCIPAL AMOUNT OF SUCH HOLDER’S
NOTE, THEN SUCH EXCESS PRO RATA CONVERSION AMOUNT SHALL BE ALLOCATED AMONGST THE
REMAINING HOLDERS OF NOTES IN ACCORDANCE WITH THE FOREGOING FORMULA.  IN THE
EVENT THAT THE INITIAL HOLDER OF ANY NOTES SHALL SELL OR OTHERWISE TRANSFER ANY
OF SUCH HOLDER’S NOTES, THE TRANSFEREE SHALL BE ALLOCATED A PRO RATA PORTION OF
SUCH HOLDER’S CONVERSION ALLOCATION PERCENTAGE AND THE PRO RATA CONVERSION
AMOUNT.

 

(D)           LIMITATIONS ON CONVERSIONS.

 

(I)                                     BENEFICIAL OWNERSHIP.  THE COMPANY SHALL
NOT EFFECT ANY CONVERSION OF THIS NOTE, AND THE HOLDER OF THIS NOTE SHALL NOT
HAVE THE RIGHT TO CONVERT ANY PORTION OF THIS NOTE PURSUANT TO SECTION 3(A), TO
THE EXTENT THAT AFTER GIVING EFFECT TO SUCH CONVERSION, THE HOLDER (TOGETHER
WITH THE HOLDER’S AFFILIATES) WOULD BENEFICIALLY OWN IN EXCESS OF 9.99% (THE
“MAXIMUM PERCENTAGE”) OF THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
IMMEDIATELY AFTER GIVING EFFECT TO SUCH CONVERSION.  FOR PURPOSES OF THE
FOREGOING SENTENCE, THE NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY OWNED BY
THE HOLDER AND ITS AFFILIATES SHALL INCLUDE THE NUMBER OF SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE WITH RESPECT TO WHICH THE DETERMINATION OF
SUCH SENTENCE IS BEING MADE, BUT SHALL EXCLUDE THE NUMBER OF SHARES OF COMMON
STOCK WHICH WOULD BE ISSUABLE UPON (A) CONVERSION OF THE REMAINING, NONCONVERTED
PORTION OF THIS NOTE BENEFICIALLY OWNED BY THE HOLDER OR ANY OF ITS AFFILIATES
AND (B) EXERCISE OR CONVERSION OF THE UNEXERCISED OR NONCONVERTED PORTION OF ANY
OTHER SECURITIES OF THE COMPANY (INCLUDING, WITHOUT LIMITATION, ANY OTHER NOTES)
SUBJECT TO A LIMITATION ON CONVERSION OR EXERCISE ANALOGOUS TO THE LIMITATION
CONTAINED HEREIN BENEFICIALLY OWNED BY THE HOLDER OR ANY OF ITS AFFILIATES. 
EXCEPT AS SET FORTH IN THE PRECEDING SENTENCE, FOR PURPOSES OF THIS
SECTION 3(D)(I), BENEFICIAL OWNERSHIP SHALL BE CALCULATED IN ACCORDANCE WITH
SECTION 13(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE
ACT”).  FOR PURPOSES OF THIS SECTION 3(D)(I), IN DETERMINING THE NUMBER OF
OUTSTANDING SHARES OF COMMON STOCK, THE HOLDER MAY RELY ON THE NUMBER OF
OUTSTANDING SHARES OF COMMON STOCK AS REFLECTED IN (1) THE COMPANY’S MOST RECENT
FORM 10-K, FORM 10-Q, FORM 8-K OR OTHER PUBLIC FILING WITH THE SEC, AS THE CASE
MAY BE, (2) A MORE RECENT PUBLIC ANNOUNCEMENT BY THE COMPANY OR (3) ANY OTHER
NOTICE BY THE COMPANY OR THE TRANSFER AGENT SETTING FORTH THE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING.  FOR ANY REASON AT ANY TIME, UPON THE WRITTEN OR
ORAL REQUEST OF THE HOLDER, THE COMPANY SHALL WITHIN ONE (1) BUSINESS DAY
CONFIRM ORALLY AND IN WRITING TO THE HOLDER THE NUMBER OF SHARES OF COMMON STOCK
THEN OUTSTANDING.  IN ANY CASE, THE NUMBER OF OUTSTANDING SHARES OF COMMON STOCK
SHALL BE DETERMINED AFTER GIVING EFFECT TO THE CONVERSION OR EXERCISE OF
SECURITIES OF THE COMPANY, INCLUDING THIS NOTE, BY THE HOLDER OR ITS AFFILIATES
SINCE THE DATE AS OF WHICH SUCH NUMBER

 

7

--------------------------------------------------------------------------------

 

OF OUTSTANDING SHARES OF COMMON STOCK WAS REPORTED.  BY WRITTEN NOTICE TO THE
COMPANY, THE HOLDER MAY INCREASE OR DECREASE THE MAXIMUM PERCENTAGE TO ANY OTHER
PERCENTAGE NOT IN EXCESS OF 9.99% SPECIFIED IN SUCH NOTICE; PROVIDED THAT
(X) ANY SUCH INCREASE WILL NOT BE EFFECTIVE UNTIL THE SIXTY-FIRST (61ST) DAY
AFTER SUCH NOTICE IS DELIVERED TO THE COMPANY, AND (Y) ANY SUCH INCREASE OR
DECREASE WILL APPLY ONLY TO THE HOLDER AND NOT TO ANY OTHER HOLDER OF NOTES.

 

(II)                                  MARKET REGULATION.  THE COMPANY SHALL NOT
BE OBLIGATED TO ISSUE ANY SHARES OF COMMON STOCK UPON CONVERSION OF THIS NOTE IF
THE ISSUANCE OF SUCH SHARES OF COMMON STOCK WOULD EXCEED THE AGGREGATE NUMBER OF
SHARES OF COMMON STOCK WHICH THE COMPANY MAY ISSUE UPON CONVERSION OF THE NOTES
WITHOUT BREACHING THE COMPANY’S OBLIGATIONS UNDER THE RULES OR REGULATIONS OF
THE PRINCIPAL MARKET (THE “EXCHANGE CAP”), EXCEPT THAT SUCH LIMITATION SHALL NOT
APPLY IN THE EVENT THAT THE COMPANY (A) OBTAINS THE APPROVAL OF ITS STOCKHOLDERS
AS REQUIRED BY THE APPLICABLE RULES OF SUCH PRINCIPAL MARKET FOR ISSUANCES OF
COMMON STOCK IN EXCESS OF SUCH AMOUNT OR (B) OBTAINS A WRITTEN OPINION FROM
OUTSIDE COUNSEL TO THE COMPANY THAT SUCH APPROVAL IS NOT REQUIRED, WHICH OPINION
SHALL BE REASONABLY SATISFACTORY TO THE REQUIRED HOLDERS.  UNTIL SUCH APPROVAL
OR WRITTEN OPINION IS OBTAINED, NO PURCHASER OF THE NOTES PURSUANT TO THE
SECURITIES PURCHASE AGREEMENT (THE “PURCHASERS”) SHALL BE ISSUED IN THE
AGGREGATE, UPON CONVERSION OF NOTES, SHARES OF COMMON STOCK IN AN AMOUNT GREATER
THAN THE PRODUCT OF THE EXCHANGE CAP MULTIPLIED BY A FRACTION, THE NUMERATOR OF
WHICH IS THE PRINCIPAL AMOUNT OF NOTES ISSUED TO A PURCHASER PURSUANT TO THE
SECURITIES PURCHASE AGREEMENT ON THE CLOSING DATE AND THE DENOMINATOR OF WHICH
IS THE AGGREGATE PRINCIPAL AMOUNT OF ALL NOTES ISSUED TO THE PURCHASERS PURSUANT
TO THE SECURITIES PURCHASE AGREEMENT ON THE CLOSING DATE (WITH RESPECT TO EACH
PURCHASER, THE “EXCHANGE CAP ALLOCATION”).  IN THE EVENT THAT ANY PURCHASER
SHALL SELL OR OTHERWISE TRANSFER ANY OF SUCH PURCHASER’S NOTES, THE TRANSFEREE
SHALL BE ALLOCATED A PRO RATA PORTION OF SUCH PURCHASER’S EXCHANGE CAP
ALLOCATION, AND THE RESTRICTIONS OF THE PRIOR SENTENCE SHALL APPLY TO SUCH
TRANSFEREE WITH RESPECT TO THE PORTION OF THE EXCHANGE CAP ALLOCATION ALLOCATED
TO SUCH TRANSFEREE.  IN THE EVENT THAT ANY HOLDER OF NOTES SHALL CONVERT ALL OF
SUCH HOLDER’S NOTES INTO A NUMBER OF SHARES OF COMMON STOCK WHICH, IN THE
AGGREGATE, IS LESS THAN SUCH HOLDER’S EXCHANGE CAP ALLOCATION, THEN THE
DIFFERENCE BETWEEN SUCH HOLDER’S EXCHANGE CAP ALLOCATION AND THE NUMBER OF
SHARES OF COMMON STOCK ACTUALLY ISSUED TO SUCH HOLDER SHALL BE ALLOCATED TO THE
RESPECTIVE EXCHANGE CAP ALLOCATIONS OF THE REMAINING HOLDERS OF NOTES ON A PRO
RATA BASIS IN PROPORTION TO THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES THEN
HELD BY EACH SUCH HOLDER.

 

(III)                               AUTHORIZED SHARES.  UNLESS STOCKHOLDER
APPROVAL (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT) HAS BEEN OBTAINED,
THE COMPANY SHALL NOT BE OBLIGATED TO ISSUE ANY SHARES OF COMMON STOCK UPON
CONVERSION OF THIS NOTE IF THE ISSUANCE OF SUCH SHARES OF COMMON STOCK WOULD
EXCEED THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR SUCH
ISSUANCE; PROVIDED, THAT THE COMPANY NOTIFIES THE HOLDER IN WRITING OF THE
CONFIRMED AUTHORIZED CAPITAL (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT)
DELIVERED PURSUANT TO THE SECURITIES PURCHASE AGREEMENT ON THE CLOSING DATE.

 

8

--------------------------------------------------------------------------------

 

(4)           RIGHTS UPON EVENT OF DEFAULT.

 

(A)           EVENT OF DEFAULT.  EACH OF THE FOLLOWING EVENTS SHALL CONSTITUTE
AN “EVENT OF DEFAULT”:

 

(I)                                     THE COMPANY’S (A) FAILURE TO CURE A
CONVERSION FAILURE BY DELIVERY OF THE REQUIRED NUMBER OF SHARES OF COMMON STOCK
WITHIN FIFTEEN (15) TRADING DAYS AFTER THE APPLICABLE CONVERSION DATE OR
(B) NOTICE, WRITTEN OR ORAL, TO ANY HOLDER OF THE NOTES, INCLUDING BY WAY OF
PUBLIC ANNOUNCEMENT OR THROUGH ANY OF ITS AGENTS, AT ANY TIME, OF ITS INTENTION
NOT TO COMPLY WITH A REQUEST FOR CONVERSION OF ANY NOTES INTO SHARES OF COMMON
STOCK THAT IS TENDERED IN ACCORDANCE WITH THE PROVISIONS OF THE NOTES, OTHER
THAN PURSUANT TO SECTION 3(D);

 

(II)                                  THE COMPANY’S FAILURE TO PAY TO THE HOLDER
ANY AMOUNT OF PRINCIPAL, INTEREST, LATE CHARGES OR OTHER AMOUNTS WHEN AND AS DUE
UNDER THIS NOTE (INCLUDING, WITHOUT LIMITATION, THE COMPANY’S FAILURE TO PAY ANY
REDEMPTION AMOUNTS HEREUNDER) OR ANY OTHER TRANSACTION DOCUMENT (AS DEFINED IN
THE SECURITIES PURCHASE AGREEMENT) OR ANY OTHER AGREEMENT, DOCUMENT, CERTIFICATE
OR OTHER INSTRUMENT DELIVERED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY TO WHICH THE HOLDER IS A PARTY, EXCEPT, IN THE CASE OF A
FAILURE TO PAY INTEREST AND/OR LATE CHARGES WHEN AND AS DUE, IN WHICH CASE ONLY
IF SUCH FAILURE CONTINUES FOR A PERIOD OF AT LEAST FIVE (5) BUSINESS DAYS;

 

(III)                               ANY DEFAULT UNDER, REDEMPTION OF OR
ACCELERATION PRIOR TO MATURITY OF ANY INDEBTEDNESS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES (AS DEFINED IN SECTION 3(A) OF THE SECURITIES PURCHASE AGREEMENT)
OTHER THAN WITH RESPECT TO ANY OTHER NOTES;

 

(IV)                              THE COMPANY OR ANY OF ITS SUBSIDIARIES,
PURSUANT TO OR WITHIN THE MEANING OF TITLE 11, U.S. CODE, OR ANY SIMILAR
FEDERAL, FOREIGN OR STATE LAW FOR THE RELIEF OF DEBTORS (COLLECTIVELY,
“BANKRUPTCY LAW”), (A) COMMENCES A VOLUNTARY CASE, (B) CONSENTS TO THE ENTRY OF
AN ORDER FOR RELIEF AGAINST IT IN AN INVOLUNTARY CASE, (C) CONSENTS TO THE
APPOINTMENT OF A RECEIVER, TRUSTEE, ASSIGNEE, LIQUIDATOR OR SIMILAR OFFICIAL (A
“CUSTODIAN”), (D) MAKES A GENERAL ASSIGNMENT FOR THE BENEFIT OF ITS CREDITORS OR
(E) ADMITS IN WRITING THAT IT IS GENERALLY UNABLE TO PAY ITS DEBTS AS THEY
BECOME DUE;

 

(V)                                 A COURT OF COMPETENT JURISDICTION ENTERS AN
ORDER OR DECREE UNDER ANY BANKRUPTCY LAW THAT (A) IS FOR RELIEF AGAINST THE
COMPANY OR ANY OF ITS SUBSIDIARIES IN AN INVOLUNTARY CASE, (B) APPOINTS A
CUSTODIAN OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR (C) ORDERS THE
LIQUIDATION OF THE COMPANY OR ANY OF ITS SUBSIDIARIES;

 

(VI)                              A FINAL JUDGMENT OR JUDGMENTS FOR THE PAYMENT
OF MONEY AGGREGATING IN EXCESS OF $250,000 ARE RENDERED AGAINST THE COMPANY OR
ANY OF ITS SUBSIDIARIES AND WHICH JUDGMENTS ARE NOT, WITHIN SIXTY (60) DAYS
AFTER THE ENTRY THEREOF, BONDED, DISCHARGED OR STAYED PENDING APPEAL, OR ARE NOT
DISCHARGED WITHIN SIXTY (60) DAYS AFTER THE EXPIRATION OF SUCH STAY; PROVIDED,
HOWEVER, THAT ANY JUDGMENT WHICH IS COVERED BY INSURANCE OR AN INDEMNITY FROM A
CREDIT WORTHY PARTY SHALL NOT BE INCLUDED IN

 

9

--------------------------------------------------------------------------------

 

CALCULATING THE $250,000 AMOUNT SET FORTH ABOVE SO LONG AS THE COMPANY PROVIDES
THE HOLDER A WRITTEN STATEMENT FROM SUCH INSURER OR INDEMNITY PROVIDER (WHICH
WRITTEN STATEMENT SHALL BE REASONABLY SATISFACTORY TO THE HOLDER) TO THE EFFECT
THAT SUCH JUDGMENT IS COVERED BY INSURANCE OR AN INDEMNITY AND THE COMPANY WILL
RECEIVE THE PROCEEDS OF SUCH INSURANCE OR INDEMNITY WITHIN THIRTY (30) DAYS OF
THE ISSUANCE OF SUCH JUDGMENT;

 

(VII)                           OTHER THAN AS SPECIFICALLY SET FORTH IN ANOTHER
CLAUSE OF THIS SECTION 4(A), THE COMPANY BREACHES ANY REPRESENTATION, WARRANTY,
COVENANT OR OTHER TERM OR CONDITION OF ANY TRANSACTION DOCUMENT, EXCEPT, IN THE
CASE OF A BREACH OF A COVENANT OR OTHER TERM OR CONDITION OF ANY TRANSACTION
DOCUMENT WHICH IS CURABLE, ONLY IF SUCH BREACH CONTINUES FOR A PERIOD OF AT
LEAST TEN (10) CONSECUTIVE BUSINESS DAYS;

 

(VIII)                        ANY BREACH OR FAILURE IN ANY RESPECT TO COMPLY
WITH EITHER OF SECTIONS 8 OR 14 OF THIS NOTE;

 

(IX)                                THE COMPANY OR ANY SUBSIDIARY SHALL FAIL TO
PERFORM OR COMPLY WITH ANY COVENANT OR AGREEMENT CONTAINED IN ANY SECURITY
AGREEMENT TO WHICH IT IS A PARTY OR ANY PLEDGE AGREEMENT TO WHICH IT IS A PARTY;

 

(X)                                   ANY MATERIAL PROVISION OF ANY SECURITY
DOCUMENT (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT, AS DETERMINED BY THE
COLLATERAL AGENT, SHALL AT ANY TIME FOR ANY REASON (OTHER THAN PURSUANT TO THE
EXPRESS TERMS THEREOF) CEASE TO BE VALID AND BINDING ON OR ENFORCEABLE AGAINST
THE COMPANY OR ANY SUBSIDIARY INTENDED TO BE A PARTY THERETO, OR THE VALIDITY OR
ENFORCEABILITY THEREOF SHALL BE CONTESTED BY ANY PARTY THERETO, OR A PROCEEDING
SHALL BE COMMENCED BY THE COMPANY OR ANY SUBSIDIARY OR ANY GOVERNMENTAL
AUTHORITY HAVING JURISDICTION OVER ANY OF THEM, SEEKING TO ESTABLISH THE
INVALIDITY OR UNENFORCEABILITY THEREOF, OR THE COMPANY OR ANY SUBSIDIARY SHALL
DENY IN WRITING THAT IT HAS ANY LIABILITY OR OBLIGATION PURPORTED TO BE CREATED
UNDER ANY SECURITY DOCUMENT;

 

(XI)                                ANY SECURITY DOCUMENT, AFTER DELIVERY
THEREOF PURSUANT HERETO, SHALL FOR ANY REASON FAIL OR CEASE TO CREATE A VALID
AND PERFECTED AND, EXCEPT TO THE EXTENT PERMITTED BY THE TERMS HEREOF OR
THEREOF, FIRST PRIORITY LIEN IN FAVOR OF THE COLLATERAL AGENT FOR THE BENEFIT OF
THE HOLDERS OF THE NOTES ON ANY COLLATERAL (AS DEFINED IN THE SECURITY
DOCUMENTS) PURPORTED TO BE COVERED THEREBY;

 

(XII)                             ANY MATERIAL DAMAGE TO, OR LOSS, THEFT OR
DESTRUCTION OF, ANY COLLATERAL, WHETHER OR NOT INSURED, OR ANY STRIKE, LOCKOUT,
LABOR DISPUTE, EMBARGO, CONDEMNATION, ACT OF GOD OR PUBLIC ENEMY, OR OTHER
CASUALTY WHICH CAUSES, FOR MORE THAN FIFTEEN (15) CONSECUTIVE DAYS, THE
CESSATION OR SUBSTANTIAL CURTAILMENT OF REVENUE PRODUCING ACTIVITIES AT ANY
FACILITY OF THE COMPANY OR ANY SUBSIDIARY, IF ANY SUCH EVENT OR CIRCUMSTANCE
COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT (AS DEFINED IN
THE SECURITIES PURCHASE AGREEMENT); OR

 

(XIII)                          ANY EVENT OF DEFAULT (AS DEFINED IN THE OTHER
NOTES) OCCURS WITH RESPECT TO ANY OTHER NOTES.

 

10

--------------------------------------------------------------------------------

 

(B)                                 REDEMPTION RIGHT.  UPON THE OCCURRENCE OF AN
EVENT OF DEFAULT WITH RESPECT TO THIS NOTE OR ANY OTHER NOTE, THE COMPANY SHALL
WITHIN ONE (1) BUSINESS DAY DELIVER WRITTEN NOTICE THEREOF VIA FACSIMILE AND
OVERNIGHT COURIER (AN “EVENT OF DEFAULT NOTICE”) TO THE HOLDER.  AT ANY TIME
AFTER THE EARLIER OF THE HOLDER’S RECEIPT OF AN EVENT OF DEFAULT NOTICE AND THE
HOLDER BECOMING AWARE OF AN EVENT OF DEFAULT, THE HOLDER MAY REQUIRE THE COMPANY
TO REDEEM ALL OR ANY PORTION OF THIS NOTE BY DELIVERING WRITTEN NOTICE THEREOF
(THE “EVENT OF DEFAULT REDEMPTION NOTICE”) TO THE COMPANY, WHICH EVENT OF
DEFAULT REDEMPTION NOTICE SHALL INDICATE THE CONVERSION AMOUNT OF THIS NOTE THE
HOLDER IS ELECTING TO REQUIRE THE COMPANY TO REDEEM.  EACH PORTION OF THIS NOTE
SUBJECT TO REDEMPTION BY THE COMPANY PURSUANT TO THIS SECTION 4(B) SHALL BE
REDEEMED BY THE COMPANY AT A PRICE EQUAL TO THE GREATER OF (I) THE CONVERSION
AMOUNT TO BE REDEEMED AND (II) THE PRODUCT OF (A) THE CONVERSION RATE WITH
RESPECT TO SUCH CONVERSION AMOUNT IN EFFECT AT SUCH TIME AS THE HOLDER DELIVERS
AN EVENT OF DEFAULT REDEMPTION NOTICE AND (B) THE GREATER OF (1) THE CLOSING
SALE PRICE OF THE COMMON STOCK ON THE DATE IMMEDIATELY PRECEDING SUCH EVENT OF
DEFAULT, (2) THE CLOSING SALE PRICE OF THE COMMON STOCK ON THE DATE IMMEDIATELY
AFTER SUCH EVENT OF DEFAULT AND (3) THE CLOSING SALE PRICE OF THE COMMON STOCK
ON THE DATE THE HOLDER DELIVERS THE EVENT OF DEFAULT REDEMPTION NOTICE (THE
“EVENT OF DEFAULT REDEMPTION PRICE”).  REDEMPTIONS REQUIRED BY THIS
SECTION 4(B) SHALL BE MADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 12.  TO
THE EXTENT REDEMPTIONS REQUIRED BY THIS SECTION 4(B) ARE DEEMED OR DETERMINED BY
A COURT OF COMPETENT JURISDICTION TO BE PREPAYMENTS OF THE NOTE BY THE COMPANY,
SUCH REDEMPTIONS SHALL BE DEEMED TO BE VOLUNTARY PREPAYMENTS.  THE PARTIES
HERETO AGREE THAT IN THE EVENT OF THE COMPANY’S REDEMPTION OF ANY PORTION OF THE
NOTE UNDER THIS SECTION 4(B), THE HOLDER’S DAMAGES WOULD BE UNCERTAIN AND
DIFFICULT TO ESTIMATE BECAUSE OF THE PARTIES’ INABILITY TO PREDICT FUTURE
INTEREST RATES AND THE UNCERTAINTY OF THE AVAILABILITY OF A SUITABLE SUBSTITUTE
INVESTMENT OPPORTUNITY FOR THE HOLDER.  ACCORDINGLY, ANY PREMIUM DUE UNDER THIS
SECTION 4(B) IS INTENDED BY THE PARTIES TO BE, AND SHALL BE DEEMED, A REASONABLE
ESTIMATE OF THE HOLDER’S ACTUAL LOSS OF ITS INVESTMENT OPPORTUNITY AND NOT AS A
PENALTY.

 

(5)           RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

 

(A)                                  ASSUMPTION.  THE COMPANY SHALL NOT ENTER
INTO OR BE PARTY TO A FUNDAMENTAL TRANSACTION UNLESS THE SUCCESSOR ENTITY
ASSUMES IN WRITING ALL OF THE OBLIGATIONS OF THE COMPANY UNDER THIS NOTE AND THE
OTHER TRANSACTION DOCUMENTS IN ACCORDANCE WITH THE PROVISIONS OF THIS
SECTION 5(A) PURSUANT TO WRITTEN AGREEMENTS IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE REQUIRED HOLDERS AND APPROVED BY THE REQUIRED HOLDERS PRIOR
TO SUCH FUNDAMENTAL TRANSACTION, INCLUDING AGREEMENTS TO DELIVER TO EACH HOLDER
OF NOTES IN EXCHANGE FOR SUCH NOTES A SECURITY OF THE SUCCESSOR ENTITY EVIDENCED
BY A WRITTEN INSTRUMENT SUBSTANTIALLY SIMILAR IN FORM AND SUBSTANCE TO THE
NOTES, INCLUDING, WITHOUT LIMITATION, HAVING A PRINCIPAL AMOUNT AND INTEREST
RATE EQUAL TO THE PRINCIPAL AMOUNTS AND THE INTEREST RATES OF THE NOTES THEN
OUTSTANDING HELD BY SUCH HOLDER, HAVING SIMILAR CONVERSION RIGHTS AND HAVING
SIMILAR RANKING TO THE NOTES, AND SATISFACTORY TO THE REQUIRED HOLDERS.  UPON
THE OCCURRENCE OF ANY FUNDAMENTAL TRANSACTION, THE SUCCESSOR ENTITY SHALL
SUCCEED TO, AND BE SUBSTITUTED FOR (SO THAT FROM AND AFTER THE DATE OF SUCH
FUNDAMENTAL TRANSACTION, THE PROVISIONS OF THIS NOTE REFERRING TO THE “COMPANY”
SHALL REFER INSTEAD TO THE SUCCESSOR ENTITY), AND MAY EXERCISE EVERY RIGHT AND
POWER OF THE COMPANY AND SHALL ASSUME ALL OF THE OBLIGATIONS OF THE COMPANY
UNDER THIS NOTE WITH THE SAME EFFECT AS IF SUCH SUCCESSOR ENTITY HAD BEEN NAMED
AS THE COMPANY HEREIN.  UPON

 

11

--------------------------------------------------------------------------------

 

CONSUMMATION OF THE FUNDAMENTAL TRANSACTION, THE SUCCESSOR ENTITY SHALL DELIVER
TO THE HOLDER CONFIRMATION THAT THERE SHALL BE ISSUED UPON CONVERSION OR
REDEMPTION OF THIS NOTE AT ANY TIME AFTER THE CONSUMMATION OF THE FUNDAMENTAL
TRANSACTION, IN LIEU OF THE SHARES OF THE COMPANY’S COMMON STOCK (OR OTHER
SECURITIES, CASH, ASSETS OR OTHER PROPERTY) ISSUABLE UPON THE CONVERSION OR
REDEMPTION OF THE NOTES PRIOR TO SUCH FUNDAMENTAL TRANSACTION, SUCH SHARES OF
THE PUBLICLY TRADED COMMON STOCK (OR THEIR EQUIVALENT) OF THE SUCCESSOR ENTITY
(INCLUDING ITS PARENT ENTITY), AS ADJUSTED IN ACCORDANCE WITH THE PROVISIONS OF
THIS NOTE.  THE PROVISIONS OF THIS SECTION SHALL APPLY SIMILARLY AND EQUALLY TO
SUCCESSIVE FUNDAMENTAL TRANSACTIONS AND SHALL BE APPLIED WITHOUT REGARD TO ANY
LIMITATIONS ON THE CONVERSION OR REDEMPTION OF THIS NOTE.

 

(B)                                 REDEMPTION RIGHT.  NO SOONER THAN FIFTEEN
(15) DAYS NOR LATER THAN TEN (10) DAYS PRIOR TO THE CONSUMMATION OF A CHANGE OF
CONTROL (THE DATE OF CONSUMMATION, THE “CHANGE OF CONTROL EFFECTIVE DATE”), BUT
NOT PRIOR TO THE PUBLIC ANNOUNCEMENT OF SUCH CHANGE OF CONTROL, THE COMPANY
SHALL DELIVER WRITTEN NOTICE THEREOF VIA FACSIMILE AND OVERNIGHT COURIER TO THE
HOLDER (A “CHANGE OF CONTROL NOTICE”).  AT ANY TIME AND FROM TIME TO TIME DURING
THE PERIOD BEGINNING AFTER THE HOLDER’S RECEIPT OF A CHANGE OF CONTROL NOTICE
AND ENDING TWENTY (20) TRADING DAYS AFTER THE CHANGE OF CONTROL EFFECTIVE DATE,
THE HOLDER MAY REQUIRE THE COMPANY TO REDEEM ALL OR ANY PORTION OF THIS NOTE BY
DELIVERING WRITTEN NOTICE THEREOF (“CHANGE OF CONTROL REDEMPTION NOTICE”) TO THE
COMPANY, WHICH CHANGE OF CONTROL REDEMPTION NOTICE SHALL INDICATE THE CONVERSION
AMOUNT THE HOLDER IS ELECTING TO REQUIRE THE COMPANY TO REDEEM.  THE PORTION OF
THIS NOTE SUBJECT TO REDEMPTION PURSUANT TO THIS SECTION 5(B) SHALL BE REDEEMED
BY THE COMPANY IN CASH AT A PRICE (THE “CHANGE OF CONTROL REDEMPTION PRICE”)
EQUAL TO THE GREATER OF (I) 110% OF THE CONVERSION AMOUNT AND (II) THE
CONVERSION AMOUNT BEING REDEEMED MULTIPLIED BY THE APPLICABLE MAKE-WHOLE
PERCENTAGE (AS DETERMINED PURSUANT TO SECTION 5(D) BELOW).  NOTWITHSTANDING
ANYTHING TO THE CONTRARY IN THIS SECTION 5, BUT SUBJECT TO SECTION 3(D), UNTIL
THE HOLDER RECEIVES THE CHANGE OF CONTROL REDEMPTION PRICE, THE CHANGE OF
CONTROL REDEMPTION PRICE MAY BE CONVERTED, IN WHOLE OR IN PART, AS INDICATED BY
THE HOLDER ON A CHANGE OF CONTROL REDEMPTION NOTICE (THE “CONVERTED PORTION”)
PURSUANT TO SECTION 3(C) HEREOF; PROVIDED, THAT, (A) IF THE CONVERSION DATE IS
PRIOR TO THE CHANGE OF CONTROL EFFECTIVE DATE OR IF THE COMPANY IS THE SUCCESSOR
ENTITY AFTER THE CHANGE OF CONTROL EFFECTIVE DATE, THE CONVERTED PORTION SHALL
BE CONVERTED INTO A NUMBER OF SHARES OF COMMON STOCK DETERMINED BY DIVIDING THE
CONVERTED PORTION BY THE ARITHMETIC AVERAGE OF THE WEIGHTED AVERAGE PRICE OF THE
COMMON STOCK FOR THE TEN (10) TRADING DAYS IMMEDIATELY PRECEDING THE CONVERSION
DATE, AND (B) IF THE CONVERSION DATE IS ON OR AFTER THE CHANGE OF CONTROL
EFFECTIVE DATE AND IF THE COMPANY IS NOT THE SUCCESSOR ENTITY, (X) IF THE SHARES
OF THE COMMON STOCK (OR THEIR EQUIVALENT) OF THE SUCCESSOR ENTITY (INCLUDING ITS
PARENT ENTITY) IS PUBLICLY TRADED, THEN THE CONVERTED PORTION SHALL BE CONVERTED
INTO A NUMBER OF SHARES OF THE PUBLICLY TRADED COMMON STOCK (OR THEIR
EQUIVALENT) OF THE SUCCESSOR ENTITY (INCLUDING ITS PARENT ENTITY) BY DIVIDING
THE CONVERTED PORTION BY THE ARITHMETIC AVERAGE OF THE WEIGHTED AVERAGE PRICE OF
THE COMMON STOCK FOR THE TEN (10) TRADING DAYS IMMEDIATELY FOLLOWING THE LATER
OF (I) THE CHANGE OF CONTROL EFFECTIVE DATE AND (II) THE CONVERSION DATE, OR
(Y) IF THE SHARES OF THE COMMON STOCK (OR THEIR EQUIVALENT) OF THE SUCCESSOR
ENTITY (INCLUDING ITS PARENT ENTITY) IS NOT PUBLICLY TRADED, THEN THE CONVERTED
PORTION SHALL BE CONVERTED INTO SECURITIES OR OTHER ASSETS THAT IS EQUIVALENT IN
FAIR MARKET VALUE, AS REASONABLY DETERMINED BY THE COMPANY AND THE REQUIRED
HOLDERS, TO THE CONVERTED PORTION.  ANY CONVERSIONS REQUIRED BY THIS
SECTION 5(B) SHALL REDUCE THE CHANGE OF CONTROL REDEMPTION PRICE AND SHALL BE
MADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3(C).

 

12

--------------------------------------------------------------------------------

 

(C)           REDEMPTIONS REQUIRED BY THIS SECTION 5 SHALL BE MADE IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 12 AND SHALL HAVE PRIORITY TO PAYMENTS TO
STOCKHOLDERS IN CONNECTION WITH A CHANGE OF CONTROL.  TO THE EXTENT REDEMPTIONS
REQUIRED BY THIS SECTION 5(B) ARE DEEMED OR DETERMINED BY A COURT OF COMPETENT
JURISDICTION TO BE PREPAYMENTS OF THE NOTE BY THE COMPANY, SUCH REDEMPTIONS
SHALL BE DEEMED TO BE VOLUNTARY PREPAYMENTS.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS SECTION 5, BUT SUBJECT TO SECTION 3(D), UNTIL THE CHANGE OF
CONTROL REDEMPTION PRICE (TOGETHER WITH ANY INTEREST THEREON) IS PAID IN FULL,
THE CONVERSION AMOUNT SUBMITTED FOR REDEMPTION UNDER THIS SECTION 5(C) (TOGETHER
WITH ANY INTEREST THEREON) MAY BE CONVERTED, IN WHOLE OR IN PART, BY THE HOLDER
INTO COMMON STOCK PURSUANT TO SECTION 3.  THE PARTIES HERETO AGREE THAT IN THE
EVENT OF THE COMPANY’S REDEMPTION OF ANY PORTION OF THE NOTE UNDER THIS
SECTION 5(B), THE HOLDER’S DAMAGES WOULD BE UNCERTAIN AND DIFFICULT TO ESTIMATE
BECAUSE OF THE PARTIES’ INABILITY TO PREDICT FUTURE INTEREST RATES AND THE
UNCERTAINTY OF THE AVAILABILITY OF A SUITABLE SUBSTITUTE INVESTMENT OPPORTUNITY
FOR THE HOLDER.  ACCORDINGLY, ANY PREMIUM DUE UNDER THIS SECTION 5(B) IS
INTENDED BY THE PARTIES TO BE, AND SHALL BE DEEMED, A REASONABLE ESTIMATE OF THE
HOLDER’S ACTUAL LOSS OF ITS INVESTMENT OPPORTUNITY AND NOT AS A PENALTY.

 

(D)           MAKE-WHOLE PERCENTAGE.

 

(I)                                     THE MAKE-WHOLE PERCENTAGE SHALL BE
DETERMINED USING THE TABLE SET FORTH BELOW AND WILL BE BASED ON THE ARITHMETIC
AVERAGE OF THE WEIGHTED AVERAGE PRICE OF THE COMMON STOCK DURING THE TEN
(10) TRADING DAYS IMMEDIATELY PRECEDING THE CHANGE OF CONTROL EFFECTIVE DATE OR
HOLDER MANDATORY REDEMPTION DATE, AS APPLICABLE (THE “REFERENCE STOCK PRICE”). 
THE REFERENCE STOCK PRICE IS EXPRESSED BELOW AS A PERCENTAGE OF THE CONVERSION
PRICE, AND THE MAKE-WHOLE PERCENTAGE IS EXPRESSED BELOW AS A PERCENTAGE OF THE
CONVERSION AMOUNT OF THE NOTE BEING REDEEMED.

 

Reference Stock

 

Change of Control Effective Date/ Holder Mandatory Redemption Date

 

Price

 

12/31/2007

 

6/30/2008

 

12/31/2008

 

6/30/2009

 

12/31/2009

 

6/30/2010

 

12/30/2010

 

10.0%

 

100.000

 

100.000

 

100.000

 

100.000

 

100.000

 

100.000

 

100.000

 

20.0%

 

100.000

 

100.000

 

100.000

 

100.000

 

100.000

 

100.000

 

100.000

 

30.0%

 

100.350

 

100.115

 

100.000

 

100.000

 

100.000

 

100.000

 

100.000

 

40.0%

 

102.080

 

101.440

 

100.830

 

100.136

 

100.000

 

100.000

 

100.000

 

50.0%

 

104.929

 

103.769

 

102.630

 

101.284

 

100.277

 

100.000

 

100.000

 

60.0%

 

108.683

 

107.046

 

105.349

 

103.384

 

101.496

 

100.004

 

100.000

 

70.0%

 

113.340

 

111.300

 

109.254

 

106.623

 

103.808

 

100.991

 

100.000

 

80.0%

 

118.523

 

116.369

 

113.795

 

110.849

 

107.265

 

103.115

 

100.000

 

90.0%

 

124.295

 

121.859

 

119.297

 

116.034

 

111.947

 

106.722

 

100.000

 

100.0%

 

130.538

 

127.826

 

125.199

 

121.857

 

117.697

 

111.860

 

100.175

 

110.0%

 

137.002

 

133.940

 

131.536

 

128.280

 

124.204

 

118.310

 

110.000

 

120.0%

 

144.101

 

140.626

 

138.125

 

135.133

 

131.352

 

125.827

 

120.000

 

130.0%

 

151.439

 

147.396

 

144.759

 

142.268

 

138.951

 

134.109

 

130.000

 

140.0%

 

158.889

 

154.600

 

151.642

 

149.469

 

146.824

 

142.869

 

140.000

 

150.0%

 

166.815

 

162.168

 

158.370

 

156.880

 

154.772

 

151.908

 

150.000

 

160.0%

 

175.018

 

169.877

 

165.049

 

164.299

 

162.983

 

161.088

 

160.000

 

170.0%

 

183.433

 

178.022

 

172.414

 

171.731

 

171.184

 

170.421

 

170.000

 

175.0%

 

187.802

 

182.242

 

176.180

 

175.842

 

175.575

 

175.198

 

175.000

 

180.0%

 

192.040

 

186.523

 

180.000

 

180.000

 

180.000

 

180.000

 

180.000

 

190.0%

 

200.830

 

195.305

 

190.000

 

190.000

 

190.000

 

190.000

 

190.000

 

200.0%

 

209.810

 

204.335

 

200.000

 

200.000

 

200.000

 

200.000

 

200.000

 

210.0%

 

219.076

 

213.678

 

210.000

 

210.000

 

210.000

 

210.000

 

210.000

 

220.0%

 

228.274

 

223.085

 

220.000

 

220.000

 

220.000

 

220.000

 

220.000

 

230.0%

 

237.661

 

232.618

 

230.000

 

230.000

 

230.000

 

230.000

 

230.000

 

 

13

--------------------------------------------------------------------------------

 

(II)                                  IF THE REFERENCE STOCK PRICE IS BETWEEN
TWO STOCK PRICES ON THE ABOVE TABLE OR THE CHANGE OF CONTROL EFFECTIVE DATE OR
MANDATORY REDEMPTION DATE IS BETWEEN TWO EFFECTIVE DATES ON THE TABLE, THE
MAKE-WHOLE PERCENTAGE WILL BE DETERMINE BY A STRAIGHT-LINE INTERPOLATION BETWEEN
THE MAKE-WHOLE PERCENTAGE SET FORTH FOR SUCH TWO STOCK PRICES AND/OR CHANGE OF
CONTROL EFFECTIVE DATES OR HOLDER MANDATORY REDEMPTION DATES, AS APPLICABLE.

 

(III)                               IF THE REFERENCE STOCK PRICE IS MORE THAN
230% OF THE CONVERSION PRICE, THEN THE MAKE-WHOLE PERCENTAGE SHALL BE THE
GREATER OF (A) THE PERCENTAGE OBTAINED BY DIVIDING THE REFERENCE STOCK PRICE BY
THE CONVERSION PRICE, AND (B) THE MAKE-WHOLE PERCENTAGE LISTED OPPOSITE THE 230%
REFERENCE STOCK PRICE.

 

(6)           RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE
EVENTS.

 

(A)                                  PURCHASE RIGHTS.  IF AT ANY TIME THE
COMPANY GRANTS, ISSUES OR SELLS ANY OPTIONS, CONVERTIBLE SECURITIES OR RIGHTS TO
PURCHASE STOCK, WARRANTS, SECURITIES OR OTHER PROPERTY PRO RATA TO THE RECORD
HOLDERS OF ANY CLASS OF COMMON STOCK (THE “PURCHASE RIGHTS”), THEN THE HOLDER
WILL BE ENTITLED TO ACQUIRE, UPON THE TERMS APPLICABLE TO SUCH PURCHASE RIGHTS,
THE AGGREGATE PURCHASE RIGHTS WHICH THE HOLDER COULD HAVE ACQUIRED IF THE HOLDER
HAD HELD THE NUMBER OF SHARES OF COMMON STOCK ACQUIRABLE UPON COMPLETE
CONVERSION OF THIS NOTE (WITHOUT TAKING INTO ACCOUNT ANY LIMITATIONS OR
RESTRICTIONS ON THE CONVERTIBILITY OF THIS NOTE) IMMEDIATELY BEFORE THE DATE ON
WHICH A RECORD IS TAKEN FOR THE GRANT, ISSUANCE OR SALE OF SUCH PURCHASE RIGHTS,

 

14

--------------------------------------------------------------------------------

 

OR, IF NO SUCH RECORD IS TAKEN, THE DATE AS OF WHICH THE RECORD HOLDERS OF
COMMON STOCK ARE TO BE DETERMINED FOR THE GRANT, ISSUE OR SALE OF SUCH PURCHASE
RIGHTS.

 

(B)           OTHER CORPORATE EVENTS.  IN ADDITION TO AND NOT IN SUBSTITUTION
FOR ANY OTHER RIGHTS HEREUNDER, PRIOR TO THE CONSUMMATION OF ANY FUNDAMENTAL
TRANSACTION PURSUANT TO WHICH HOLDERS OF SHARES OF COMMON STOCK ARE ENTITLED TO
RECEIVE SECURITIES OR OTHER ASSETS WITH RESPECT TO OR IN EXCHANGE FOR SHARES OF
COMMON STOCK (A “CORPORATE EVENT”), THE COMPANY SHALL MAKE APPROPRIATE PROVISION
TO INSURE THAT THE HOLDER WILL THEREAFTER HAVE THE RIGHT TO RECEIVE UPON A
CONVERSION OF THIS NOTE, AT THE HOLDER’S OPTION, (I) IN ADDITION TO THE SHARES
OF COMMON STOCK RECEIVABLE UPON SUCH CONVERSION, SUCH SECURITIES OR OTHER ASSETS
TO WHICH THE HOLDER WOULD HAVE BEEN ENTITLED WITH RESPECT TO SUCH SHARES OF
COMMON STOCK HAD SUCH SHARES OF COMMON STOCK BEEN HELD BY THE HOLDER UPON THE
CONSUMMATION OF SUCH CORPORATE EVENT (WITHOUT TAKING INTO ACCOUNT ANY
LIMITATIONS OR RESTRICTIONS ON THE CONVERTIBILITY OF THIS NOTE) OR (II) IN LIEU
OF THE SHARES OF COMMON STOCK OTHERWISE RECEIVABLE UPON SUCH CONVERSION, SUCH
SECURITIES OR OTHER ASSETS RECEIVED BY THE HOLDERS OF SHARES OF COMMON STOCK IN
CONNECTION WITH THE CONSUMMATION OF SUCH CORPORATE EVENT IN SUCH AMOUNTS AS THE
HOLDER WOULD HAVE BEEN ENTITLED TO RECEIVE HAD THIS NOTE INITIALLY BEEN ISSUED
WITH CONVERSION RIGHTS FOR THE FORM OF SUCH CONSIDERATION (AS OPPOSED TO SHARES
OF COMMON STOCK) AT A CONVERSION RATE FOR SUCH CONSIDERATION COMMENSURATE WITH
THE CONVERSION RATE.  PROVISION MADE PURSUANT TO THE PRECEDING SENTENCE SHALL BE
IN A FORM AND SUBSTANCE SATISFACTORY TO THE REQUIRED HOLDERS.  THE PROVISIONS OF
THIS SECTION SHALL APPLY SIMILARLY AND EQUALLY TO SUCCESSIVE CORPORATE EVENTS
AND SHALL BE APPLIED WITHOUT REGARD TO ANY LIMITATIONS ON THE CONVERSION OR
REDEMPTION OF THIS NOTE.

 

(7)           RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

 

(A)           ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK.  IF
AND WHENEVER ON OR AFTER THE SUBSCRIPTION DATE, THE COMPANY ISSUES OR SELLS, OR
IN ACCORDANCE WITH THIS SECTION 7(A) IS DEEMED TO HAVE ISSUED OR SOLD, ANY
SHARES OF COMMON STOCK (INCLUDING THE ISSUANCE OR SALE OF SHARES OF COMMON STOCK
OWNED OR HELD BY OR FOR THE ACCOUNT OF THE COMPANY, BUT EXCLUDING SHARES OF
COMMON STOCK DEEMED TO HAVE BEEN ISSUED OR SOLD BY THE COMPANY IN CONNECTION
WITH ANY EXCLUDED SECURITY) FOR A CONSIDERATION PER SHARE LESS THAN A PRICE (THE
“APPLICABLE PRICE”) EQUAL TO THE CONVERSION PRICE IN EFFECT IMMEDIATELY PRIOR TO
SUCH ISSUE OR SALE (THE FOREGOING A “DILUTIVE ISSUANCE”), THEN IMMEDIATELY AFTER
SUCH DILUTIVE ISSUANCE THE CONVERSION PRICE THEN IN EFFECT SHALL BE REDUCED TO
AN AMOUNT EQUAL TO THE PRODUCT OF (X) THE APPLICABLE PRICE AND (Y) THE QUOTIENT
DETERMINED BY DIVIDING (A) THE SUM OF (I) THE PRODUCT DERIVED BY MULTIPLYING THE
CONVERSION PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH DILUTIVE ISSUANCE AND THE
NUMBER OF SHARES OF COMMON STOCK DEEMED OUTSTANDING IMMEDIATELY PRIOR TO SUCH
DILUTIVE ISSUANCE PLUS (II) THE CONSIDERATION, IF ANY, RECEIVED BY THE COMPANY
UPON SUCH DILUTIVE ISSUANCE, BY (B) THE PRODUCT DERIVED BY MULTIPLYING (I) THE
APPLICABLE PRICE BY (II) THE NUMBER OF SHARES OF COMMON STOCK DEEMED OUTSTANDING
IMMEDIATELY AFTER SUCH DILUTIVE ISSUANCE.  FOR PURPOSES OF DETERMINING THE
ADJUSTED CONVERSION PRICE UNDER THIS SECTION 7(A), THE FOLLOWING SHALL BE
APPLICABLE:

 

(I)                                     ISSUANCE OF OPTIONS.  IF THE COMPANY IN
ANY MANNER GRANTS OR SELLS ANY OPTIONS AND THE LOWEST PRICE PER SHARE FOR WHICH
ONE SHARE OF COMMON STOCK IS ISSUABLE UPON THE EXERCISE OF ANY SUCH OPTION OR
UPON CONVERSION OR EXCHANGE OR EXERCISE OF ANY CONVERTIBLE SECURITIES ISSUABLE
UPON EXERCISE OF SUCH OPTION IS LESS THAN

 

15

--------------------------------------------------------------------------------

 

THE APPLICABLE PRICE, THEN SUCH SHARE OF COMMON STOCK SHALL BE DEEMED TO BE
OUTSTANDING AND TO HAVE BEEN ISSUED AND SOLD BY THE COMPANY AT THE TIME OF THE
GRANTING OR SALE OF SUCH OPTION FOR SUCH PRICE PER SHARE.  FOR PURPOSES OF THIS
SECTION 7(A)(I), THE “LOWEST PRICE PER SHARE FOR WHICH ONE SHARE OF COMMON STOCK
IS ISSUABLE UPON THE EXERCISE OF ANY SUCH OPTION OR UPON CONVERSION OR EXCHANGE
OR EXERCISE OF ANY CONVERTIBLE SECURITIES ISSUABLE UPON EXERCISE OF SUCH OPTION”
SHALL BE EQUAL TO THE SUM OF THE LOWEST AMOUNTS OF CONSIDERATION (IF ANY)
RECEIVED OR RECEIVABLE BY THE COMPANY WITH RESPECT TO ANY ONE SHARE OF COMMON
STOCK UPON GRANTING OR SALE OF THE OPTION, UPON EXERCISE OF THE OPTION AND UPON
CONVERSION OR EXCHANGE OR EXERCISE OF ANY CONVERTIBLE SECURITY ISSUABLE UPON
EXERCISE OF SUCH OPTION.  NO FURTHER ADJUSTMENT OF THE CONVERSION PRICE SHALL BE
MADE UPON THE ACTUAL ISSUANCE OF SUCH SHARE OF COMMON STOCK OR OF SUCH
CONVERTIBLE SECURITIES UPON THE EXERCISE OF SUCH OPTIONS OR UPON THE ACTUAL
ISSUANCE OF SUCH COMMON STOCK UPON CONVERSION OR EXCHANGE OR EXERCISE OF SUCH
CONVERTIBLE SECURITIES.

 

(II)                                  ISSUANCE OF CONVERTIBLE SECURITIES.  IF
THE COMPANY IN ANY MANNER ISSUES OR SELLS ANY CONVERTIBLE SECURITIES AND THE
LOWEST PRICE PER SHARE FOR WHICH ONE SHARE OF COMMON STOCK IS ISSUABLE UPON SUCH
CONVERSION OR EXCHANGE OR EXERCISE THEREOF IS LESS THAN THE APPLICABLE PRICE,
THEN SUCH SHARE OF COMMON STOCK SHALL BE DEEMED TO BE OUTSTANDING AND TO HAVE
BEEN ISSUED AND SOLD BY THE COMPANY AT THE TIME OF THE ISSUANCE OR SALE OF SUCH
CONVERTIBLE SECURITIES FOR SUCH PRICE PER SHARE.  FOR THE PURPOSES OF THIS
SECTION 7(A)(II), THE “LOWEST PRICE PER SHARE FOR WHICH ONE SHARE OF COMMON
STOCK IS ISSUABLE UPON SUCH CONVERSION OR EXCHANGE OR EXERCISE” SHALL BE EQUAL
TO THE SUM OF THE LOWEST AMOUNTS OF CONSIDERATION (IF ANY) RECEIVED OR
RECEIVABLE BY THE COMPANY WITH RESPECT TO ANY ONE SHARE OF COMMON STOCK UPON THE
ISSUANCE OR SALE OF THE CONVERTIBLE SECURITY AND UPON THE CONVERSION OR EXCHANGE
OR EXERCISE OF SUCH CONVERTIBLE SECURITY.  NO FURTHER ADJUSTMENT OF THE
CONVERSION PRICE SHALL BE MADE UPON THE ACTUAL ISSUANCE OF SUCH SHARE OF COMMON
STOCK UPON CONVERSION OR EXCHANGE OR EXERCISE OF SUCH CONVERTIBLE SECURITIES,
AND IF ANY SUCH ISSUE OR SALE OF SUCH CONVERTIBLE SECURITIES IS MADE UPON
EXERCISE OF ANY OPTIONS FOR WHICH ADJUSTMENT OF THE CONVERSION PRICE HAD BEEN OR
ARE TO BE MADE PURSUANT TO OTHER PROVISIONS OF THIS SECTION 7(A), NO FURTHER
ADJUSTMENT OF THE CONVERSION PRICE SHALL BE MADE BY REASON OF SUCH ISSUE OR
SALE.

 

(III)                               CHANGE IN OPTION PRICE OR RATE OF
CONVERSION.  IF THE PURCHASE PRICE PROVIDED FOR IN ANY OPTIONS, THE ADDITIONAL
CONSIDERATION, IF ANY, PAYABLE UPON THE ISSUE, CONVERSION, EXCHANGE OR EXERCISE
OF ANY CONVERTIBLE SECURITIES, OR THE RATE AT WHICH ANY CONVERTIBLE SECURITIES
ARE CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE FOR COMMON STOCK CHANGES AT
ANY TIME, THE CONVERSION PRICE IN EFFECT AT THE TIME OF SUCH CHANGE SHALL BE
ADJUSTED TO THE CONVERSION PRICE WHICH WOULD HAVE BEEN IN EFFECT AT SUCH TIME
HAD SUCH OPTIONS OR CONVERTIBLE SECURITIES PROVIDED FOR SUCH CHANGED PURCHASE
PRICE, ADDITIONAL CONSIDERATION OR CHANGED CONVERSION RATE, AS THE CASE MAY BE,
AT THE TIME INITIALLY GRANTED, ISSUED OR SOLD.  FOR PURPOSES OF THIS
SECTION 7(A)(III), IF THE TERMS OF ANY OPTION OR CONVERTIBLE SECURITY THAT WAS
OUTSTANDING AS OF THE SUBSCRIPTION DATE ARE CHANGED IN THE MANNER DESCRIBED IN
THE IMMEDIATELY PRECEDING SENTENCE, THEN SUCH OPTION OR CONVERTIBLE SECURITY AND
THE COMMON STOCK DEEMED ISSUABLE UPON EXERCISE, CONVERSION OR EXCHANGE THEREOF
SHALL BE DEEMED TO HAVE BEEN ISSUED AS OF THE DATE OF

 

16

--------------------------------------------------------------------------------

 

SUCH CHANGE.  NO ADJUSTMENT SHALL BE MADE IF SUCH ADJUSTMENT WOULD RESULT IN AN
INCREASE OF THE CONVERSION PRICE THEN IN EFFECT.

 

(IV)                              CALCULATION OF CONSIDERATION RECEIVED.  IN
CASE ANY OPTION IS ISSUED IN CONNECTION WITH THE ISSUE OR SALE OF OTHER
SECURITIES OF THE COMPANY, TOGETHER COMPRISING ONE INTEGRATED TRANSACTION IN
WHICH NO SPECIFIC CONSIDERATION IS ALLOCATED TO SUCH OPTIONS BY THE PARTIES
THERETO, (X) THE OPTIONS WILL BE DEEMED TO HAVE BEEN ISSUED FOR A VALUE
DETERMINED BY USE OF THE BLACK SCHOLES OPTION PRICING MODEL (THE “OPTION VALUE”)
AND (Y) THE OTHER SECURITIES ISSUED OR SOLD IN SUCH INTEGRATED TRANSACTION SHALL
BE DEEMED TO HAVE BEEN ISSUED FOR THE DIFFERENCE OF (I) THE AGGREGATE
CONSIDERATION RECEIVED BY THE COMPANY, LESS (II) THE OPTION VALUE.  IF ANY
COMMON STOCK, OPTIONS OR CONVERTIBLE SECURITIES ARE ISSUED OR SOLD OR DEEMED TO
HAVE BEEN ISSUED OR SOLD FOR CASH, THE CONSIDERATION RECEIVED THEREFOR WILL BE
DEEMED TO BE THE NET AMOUNT RECEIVED BY THE COMPANY THEREFOR.  IF ANY COMMON
STOCK, OPTIONS OR CONVERTIBLE SECURITIES ARE ISSUED OR SOLD FOR A CONSIDERATION
OTHER THAN CASH, THE AMOUNT OF THE CONSIDERATION OTHER THAN CASH RECEIVED BY THE
COMPANY WILL BE THE FAIR VALUE OF SUCH CONSIDERATION, EXCEPT WHERE SUCH
CONSIDERATION CONSISTS OF SECURITIES, IN WHICH CASE THE AMOUNT OF CONSIDERATION
RECEIVED BY THE COMPANY WILL BE THE CLOSING SALE PRICE OF SUCH SECURITIES ON THE
DATE OF RECEIPT.  IF ANY COMMON STOCK, OPTIONS OR CONVERTIBLE SECURITIES ARE
ISSUED TO THE OWNERS OF THE NON-SURVIVING ENTITY IN CONNECTION WITH ANY MERGER
IN WHICH THE COMPANY IS THE SURVIVING ENTITY, THE AMOUNT OF CONSIDERATION
THEREFOR WILL BE DEEMED TO BE THE FAIR VALUE OF SUCH PORTION OF THE NET ASSETS
AND BUSINESS OF THE NON-SURVIVING ENTITY AS IS ATTRIBUTABLE TO SUCH COMMON
STOCK, OPTIONS OR CONVERTIBLE SECURITIES, AS THE CASE MAY BE.  THE FAIR VALUE OF
ANY CONSIDERATION OTHER THAN CASH OR SECURITIES WILL BE DETERMINED JOINTLY BY
THE COMPANY AND THE REQUIRED HOLDERS.  IF SUCH PARTIES ARE UNABLE TO REACH
AGREEMENT WITHIN TEN (10) DAYS AFTER THE OCCURRENCE OF AN EVENT REQUIRING
VALUATION (THE “VALUATION EVENT”), THE FAIR VALUE OF SUCH CONSIDERATION WILL BE
DETERMINED WITHIN FIVE (5) BUSINESS DAYS AFTER THE TENTH (10TH) DAY FOLLOWING
THE VALUATION EVENT BY AN INDEPENDENT, REPUTABLE APPRAISER JOINTLY SELECTED BY
THE COMPANY AND THE REQUIRED HOLDERS.  THE DETERMINATION OF SUCH APPRAISER SHALL
BE DEEMED BINDING UPON ALL PARTIES ABSENT MANIFEST ERROR AND THE FEES AND
EXPENSES OF SUCH APPRAISER SHALL BE BORNE BY THE COMPANY.

 

(V)                                 RECORD DATE.  IF THE COMPANY TAKES A RECORD
OF THE HOLDERS OF COMMON STOCK FOR THE PURPOSE OF ENTITLING THEM (A) TO RECEIVE
A DIVIDEND OR OTHER DISTRIBUTION PAYABLE IN COMMON STOCK, OPTIONS OR IN
CONVERTIBLE SECURITIES OR (B) TO SUBSCRIBE FOR OR PURCHASE COMMON STOCK, OPTIONS
OR CONVERTIBLE SECURITIES, THEN SUCH RECORD DATE WILL BE DEEMED TO BE THE DATE
OF THE ISSUE OR SALE OF THE COMMON STOCK DEEMED TO HAVE BEEN ISSUED OR SOLD UPON
THE DECLARATION OF SUCH DIVIDEND OR THE MAKING OF SUCH OTHER DISTRIBUTION OR THE
DATE OF THE GRANTING OF SUCH RIGHT OF SUBSCRIPTION OR PURCHASE, AS THE CASE MAY
BE.

 

(B)           ADJUSTMENT OF CONVERSION PRICE UPON SUBDIVISION OR COMBINATION OF
COMMON STOCK.  IF THE COMPANY AT ANY TIME ON OR AFTER THE SUBSCRIPTION DATE
SUBDIVIDES (BY ANY STOCK DIVIDEND, STOCK SPLIT, RECAPITALIZATION OR OTHERWISE)
ONE OR MORE CLASSES OF ITS OUTSTANDING SHARES OF COMMON STOCK INTO A GREATER
NUMBER OF SHARES, THE CONVERSION PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH
SUBDIVISION WILL BE PROPORTIONATELY REDUCED.  IF THE COMPANY AT

 

17

--------------------------------------------------------------------------------

 

ANY TIME ON OR AFTER THE SUBSCRIPTION DATE COMBINES (BY COMBINATION, REVERSE
STOCK SPLIT OR OTHERWISE) ONE OR MORE CLASSES OF ITS OUTSTANDING SHARES OF
COMMON STOCK INTO A SMALLER NUMBER OF SHARES, THE CONVERSION PRICE IN EFFECT
IMMEDIATELY PRIOR TO SUCH COMBINATION WILL BE PROPORTIONATELY INCREASED.

 

(C)           OTHER EVENTS.  IF ANY EVENT OCCURS OF THE TYPE CONTEMPLATED BY THE
PROVISIONS OF THIS SECTION 7 BUT NOT EXPRESSLY PROVIDED FOR BY SUCH PROVISIONS
(INCLUDING, WITHOUT LIMITATION, THE GRANTING OF STOCK APPRECIATION RIGHTS,
PHANTOM STOCK RIGHTS OR OTHER RIGHTS WITH EQUITY FEATURES), THEN THE COMPANY’S
BOARD OF DIRECTORS WILL MAKE AN APPROPRIATE ADJUSTMENT IN THE CONVERSION PRICE
SO AS TO PROTECT THE RIGHTS OF THE HOLDER UNDER THIS NOTE; PROVIDED THAT NO SUCH
ADJUSTMENT WILL INCREASE THE CONVERSION PRICE AS OTHERWISE DETERMINED PURSUANT
TO THIS SECTION 7.

 

(D)           VOLUNTARY DECREASE.  THE COMPANY MAY AT ANY TIME DURING THE TERM
OF THIS NOTE REDUCE THE THEN CURRENT CONVERSION PRICE TO ANY AMOUNT AND FOR ANY
PERIOD OF TIME DEEMED APPROPRIATE BY THE BOARD OF DIRECTORS.

 

(E)           EXCLUDED SECURITIES.  THE ISSUANCE OF ANY EXCLUDED SECURITIES
SHALL NOT RESULT IN AN ADJUSTMENT TO THE CONVERSION PRICE.

 

(8)           HOLDER’S RIGHT OF MANDATORY REDEMPTION.

 

(A)           GENERAL.

 

(I)                                     IF THE STOCKHOLDER APPROVAL HAS NOT BEEN
OBTAINED PRIOR TO THE TWENTY-FIVE (25) MONTH ANNIVERSARY OF THE CLOSING DATE
(THE “FAILURE DATE”), THEN AT ANY TIME AND FROM TIME TO TIME ON OR AFTER AND
FROM AND AFTER THE FAILURE DATE, THE HOLDER SHALL HAVE THE RIGHT (THE “HOLDER
REDEMPTION RIGHT”), IN ITS SOLE DISCRETION, TO REQUIRE THAT THE COMPANY REDEEM
ALL OR ANY PORTION OF THE NOTE BY DELIVERING WRITTEN NOTICE THEREOF TO THE
COMPANY (A “HOLDER MANDATORY REDEMPTION NOTICE”).

 

(II)                                  [IF ANY LEXICO INDEBTEDNESS (AS HEREAFTER
DEFINED) IS OUTSTANDING, THEN AT ANY TIME AND FROM TIME TO TIME ON OR AFTER AND
FROM AND AFTER THE EARLIER OF (X) THIRTY (30) DAYS PRIOR TO THE STATED MATURITY
OF THE LEXICO INDEBTEDNESS (“LEXICO MATURITY DATE”) AND (Y) RECEIPT OF THE
COMPANY LEXICO NOTICE (AS DEFINED BELOW), UNTIL THE LATER OF (X) THE LEXICO
MATURITY DATE AND (Y) THIRTY (30) DAYS FOLLOWING RECEIPT OF THE LEXICO NOTICE,
THE HOLDER SHALL HAVE THE RIGHT (THE “LEXICO REDEMPTION RIGHT”), IN ITS SOLE
DISCRETION, TO REQUIRE THAT THE COMPANY REDEEM ALL OR ANY PORTION OF THE NOTE BY
DELIVERING WRITTEN NOTICE THEREOF TO THE COMPANY (A “HOLDER LEXICO REDEMPTION
NOTICE,” AND TOGETHER WITH THE HOLDER MANDATORY REDEMPTION NOTICE, A “HOLDER
REDEMPTION NOTICE”).  IF THE HOLDER ELECTS TO EXERCISE ITS LEXICO REDEMPTION
RIGHT HEREUNDER, THE COMPANY SHALL NOT PAY ANY AMOUNTS DUE UNDER THE LEXICO
INDEBTEDNESS UNLESS AND UNTIL THE LEXICO REDEMPTION PRICE (AS DEFINED BELOW) HAS
BEEN PAID TO THE HOLDER.](2)

 

--------------------------------------------------------------------------------

(2)                                  IF THIS IS A TERMINATION NOTE, THIS
PROVISION SHALL BE DELETED.

 

18

--------------------------------------------------------------------------------

 

(III)                               THE COMPANY SHALL DELIVER WRITTEN NOTICE TO
THE HOLDER (A) (THE “COMPANY NOTICE”) NO LATER THAN TWO (2) BUSINESS DAYS
FOLLOWING THE EARLIER OF (X) THE FAILURE DATE AND (Y) RECEIPT OF THE STOCKHOLDER
APPROVAL, STATING EITHER (I) THAT THE HOLDER’S RIGHT OF OPTIONAL REDEMPTION
UNDER THIS SECTION 8(A) IS EFFECTIVE BECAUSE THE STOCKHOLDER APPROVAL WAS NOT
OBTAINED AND THE HOLDER MANDATORY REDEMPTION PRICE (AS DEFINED BELOW) OR (II) IF
THE STOCKHOLDER APPROVAL WAS OBTAINED, THE DATE OF SUCH STOCKHOLDER APPROVAL AND
THAT THE HOLDER’S RIGHT OF OPTIONAL REDEMPTION UNDER THIS SECTION 8(A) IS
THEREFORE NOT EFFECTIVE, [AND (B) (THE “COMPANY LEXICO NOTICE”) NO EARLIER THAN
FORTY-FIVE (45) DAYS AND NO LATER THAN THIRTY (30) DAYS PRIOR TO THE LEXICO
MATURITY DATE, STATING (X) THAT THE HOLDER’S RIGHT OF OPTIONAL REDEMPTION UNDER
THIS SECTION 8(A) IS EFFECTIVE AND THE PERIOD DURING WHICH SUCH REDEMPTION MAY
BE EXERCISED, (Y) THE LEXICO MATURITY DATE AND (Z) THE LEXICO REDEMPTION
PRICE](3).

 

(B)           IN ORDER TO EXERCISE THE HOLDER REDEMPTION RIGHT [OR THE LEXICO
REDEMPTION RIGHT](4), THE HOLDER REDEMPTION NOTICE SHALL INDICATE THE CONVERSION
AMOUNT THE HOLDER IS ELECTING TO HAVE REDEEMED (THE “MANDATORY REDEMPTION
AMOUNT”) ON THE DATE SET FORTH ON THE HOLDER REDEMPTION NOTICE (THE “HOLDER
MANDATORY REDEMPTION DATE”), WHICH DATE SHALL BE (I) IF A HOLDER MANDATORY
REDEMPTION NOTICE, NO EARLIER THAN FIVE (5) BUSINESS DAYS AFTER THE DATE THE
HOLDER HAS DELIVERED THE HOLDER REDEMPTION NOTICE TO THE COMPANY [AND (II) IF A
LEXICO REDEMPTION NOTICE, NO LATER THAN THE LEXICO MATURITY DATE](5).  THE
PORTION OF THIS NOTE SUBJECT TO REDEMPTION (X) PURSUANT TO HOLDER REDEMPTION
RIGHT SHALL BE REDEEMED BY THE COMPANY IN CASH AT A PRICE (THE “HOLDER MANDATORY
REDEMPTION PRICE”) EQUAL TO THE GREATER OF (I) 110% OF THE CONVERSION AMOUNT
BEING REDEEMED AND (II) THE CONVERSION AMOUNT BEING REDEEMED MULTIPLIED BY THE
APPLICABLE MAKE-WHOLE PERCENTAGE, [AND (Y) PURSUANT TO THE LEXICO REDEMPTION
RIGHT SHALL BE REDEEMED BY THE COMPANY IN CASH AT A PRICE (THE “LEXICO
REDEMPTION PRICE” AND TOGETHER WITH THE HOLDER MANDATORY REDEMPTION PRICE, A
“MANDATORY REDEMPTION PRICE”) EQUAL TO THE CONVERSION AMOUNT BEING
REDEEMED](6).  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 8, BUT
SUBJECT TO SECTION 3(D), UNTIL THE HOLDER RECEIVES THE MANDATORY REDEMPTION
PRICE, THE MANDATORY REDEMPTION AMOUNT MAY BE CONVERTED, IN WHOLE OR IN PART, AS
INDICATED BY THE HOLDER ON A HOLDER REDEMPTION NOTICE (THE “CONVERTED AMOUNT”)
INTO A NUMBER OF SHARES OF COMMON STOCK DETERMINED BY DIVIDING THE CONVERTED
AMOUNT BY THE LESSER OF (I) THE CONVERSION PRICE AND (II) THE ARITHMETIC AVERAGE
OF THE TEN (10) TRADING DAYS IMMEDIATELY PRECEDING THE CONVERSION DATE, AND ANY
SUCH CONVERSION SHALL REDUCE THE MANDATORY REDEMPTION AMOUNT.

 

(C)           MECHANICS OF HOLDER MANDATORY REDEMPTION.  IF THE HOLDER ELECTS A
HOLDER MANDATORY REDEMPTION [OR LEXICO MANDATORY REDEMPTION](7) IN ACCORDANCE
WITH SECTION 8(A), THEN THE MANDATORY REDEMPTION AMOUNT WHICH IS TO BE PAID TO
THE HOLDER ON THE APPLICABLE HOLDER MANDATORY REDEMPTION DATE SHALL BE REDEEMED
BY THE COMPANY, AND THE COMPANY SHALL PAY TO THE HOLDER ON SUCH HOLDER MANDATORY
REDEMPTION DATE BY WIRE TRANSFER

 

--------------------------------------------------------------------------------

(3)                                  IF THIS IS A TERMINATION NOTE, THIS
PROVISION SHALL BE DELETED.

 

(4)                                  IF THIS IS A TERMINATION NOTE, THIS
PROVISION SHALL BE DELETED.

 

(5)                                  IF THIS IS A TERMINATION NOTE, THIS
PROVISION SHALL BE DELETED.

 

(6)                                  IF THIS IS A TERMINATION NOTE, THIS
PROVISION SHALL BE DELETED.

 

(7)                                  IF THIS IS A TERMINATION NOTE, THIS
PROVISION SHALL BE DELETED.

 

19

--------------------------------------------------------------------------------

 

OF IMMEDIATELY AVAILABLE FUNDS, THE APPLICABLE MANDATORY REDEMPTION PRICE.  IF
THE COMPANY FAILS TO REDEEM THE MANDATORY REDEMPTION AMOUNT ON THE HOLDER
MANDATORY REDEMPTION DATE BY PAYMENT OF THE APPLICABLE MANDATORY REDEMPTION
PRICE ON SUCH DATE, THEN IN ADDITION TO ANY OTHER RIGHTS HEREUNDER, AT THE SOLE
OPTION OF THE HOLDER DESIGNATED IN WRITING TO THE COMPANY (ANY SUCH DESIGNATION
SHALL BE DEEMED A “CONVERSION NOTICE” PURSUANT TO SECTION 3(C) FOR PURPOSES OF
THIS NOTE), THE HOLDER MAY REQUIRE THE COMPANY TO CONVERT ALL OR ANY PART OF THE
MANDATORY REDEMPTION AMOUNT AT 75% OF THE CONVERSION PRICE.  CONVERSIONS
REQUIRED BY THIS SECTION 8(C) SHALL BE MADE IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 3(C).

 

(9)           COMPANY’S RIGHT OF OPTIONAL REDEMPTION. (A) GENERAL.  AT ANY TIME
PRIOR TO THE 30TH DAY FOLLOWING THE CLOSING DATE (THE “COMPANY OPTIONAL
REDEMPTION DEADLINE”), THE COMPANY SHALL HAVE THE RIGHT TO REDEEM ALL OR ANY
PORTION OF THE CONVERSION AMOUNT UNDER THIS NOTE (THE “OPTIONAL REDEMPTION
AMOUNT”) AS DESIGNATED IN THE OPTIONAL REDEMPTION NOTICE ON THE OPTIONAL
REDEMPTION DATE (EACH AS DEFINED BELOW) (AN “OPTIONAL REDEMPTION”).  THE PORTION
OF THIS NOTE SUBJECT TO REDEMPTION PURSUANT TO THIS SECTION 9(A) SHALL BE
REDEEMED BY THE COMPANY IN CASH AT A PRICE (THE “OPTIONAL REDEMPTION PRICE”)
EQUAL TO 105% OF THE CONVERSION AMOUNT BEING REDEEMED.  THE COMPANY MAY EXERCISE
ITS RIGHT TO REQUIRE REDEMPTION UNDER THIS SECTION 9 BY DELIVERING A WRITTEN
NOTICE THEREOF BY FACSIMILE AND OVERNIGHT COURIER TO ALL, BUT NOT LESS THAN ALL,
OF THE HOLDERS OF NOTES (THE “OPTIONAL REDEMPTION NOTICE” AND THE DATE ALL OF
THE HOLDERS RECEIVED SUCH NOTICE IS REFERRED TO AS THE “OPTIONAL REDEMPTION
NOTICE DATE”). EACH OPTIONAL REDEMPTION NOTICE SHALL BE IRREVOCABLE.  THE
OPTIONAL REDEMPTION NOTICE SHALL STATE (1) THE DATE ON WHICH THE OPTIONAL
REDEMPTION SHALL OCCUR (THE “OPTIONAL REDEMPTION DATE”) WHICH DATE SHALL NOT BE
LESS THAN FIVE (5) BUSINESS DAYS FOLLOWING THE OPTIONAL REDEMPTION NOTICE DATE
AND NOT MORE THAN FIVE (5) BUSINESS DAYS FOLLOWING THE COMPANY OPTIONAL
REDEMPTION DEADLINE AND (2) THE AGGREGATE CONVERSION AMOUNT OF THE NOTES WHICH
THE COMPANY HAS ELECTED TO BE SUBJECT TO OPTIONAL REDEMPTION FROM THE HOLDER AND
ALL OF THE OTHER HOLDERS OF THE NOTES PURSUANT TO THIS SECTION 9(A) (AND
ANALOGOUS PROVISIONS UNDER THE OTHER NOTES) ON THE OPTIONAL REDEMPTION DATE. 
THE COMPANY MAY NOT EFFECT MORE THAN ONE (1) OPTIONAL REDEMPTION. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 9, UNTIL THE OPTIONAL
REDEMPTION PRICE IS PAID, IN FULL, THE OPTIONAL REDEMPTION AMOUNT MAY BE
CONVERTED, IN WHOLE OR IN PART, BY THE HOLDERS INTO SHARES OF COMMON STOCK
PURSUANT TO SECTION 3.  ALL CONVERSION AMOUNTS CONVERTED BY THE HOLDER AFTER THE
OPTIONAL REDEMPTION NOTICE DATE SHALL REDUCE THE OPTIONAL REDEMPTION AMOUNT OF
THIS NOTE REQUIRED TO BE REDEEMED ON THE OPTIONAL REDEMPTION DATE.  REDEMPTIONS
MADE PURSUANT TO THIS SECTION 9 SHALL BE MADE IN ACCORDANCE WITH SECTION 12.

 

(B)                                 PRO RATA REDEMPTION REQUIREMENT.  IF THE
COMPANY ELECTS TO CAUSE AN OPTIONAL REDEMPTION PURSUANT TO SECTION 9(A), THEN IT
MUST SIMULTANEOUSLY TAKE THE SAME ACTION IN THE SAME PROPORTION WITH RESPECT TO
THE OTHER NOTES.  IF THE COMPANY ELECTS TO CAUSE AN OPTIONAL REDEMPTION PURSUANT
TO SECTION 9(A) (OR SIMILAR PROVISIONS UNDER THE OTHER NOTES) WITH RESPECT TO
LESS THAN ALL OF THE CONVERSION AMOUNTS OF THE NOTES THEN OUTSTANDING, THEN THE
COMPANY SHALL REQUIRE REDEMPTION OF A CONVERSION AMOUNT FROM EACH OF THE HOLDERS
OF THE NOTES EQUAL TO THE PRODUCT OF (I) THE AGGREGATE CONVERSION AMOUNT OF
NOTES WHICH THE COMPANY HAS ELECTED TO CAUSE TO BE REDEEMED PURSUANT TO
SECTION 9(A), MULTIPLIED BY (II) THE FRACTION, THE NUMERATOR OF WHICH IS THE SUM
OF THE AGGREGATE ORIGINAL PRINCIPAL AMOUNT OF THE NOTES PURCHASED BY SUCH HOLDER
OF OUTSTANDING NOTES AND THE DENOMINATOR OF WHICH IS THE SUM OF THE AGGREGATE
ORIGINAL PRINCIPAL AMOUNT OF THE NOTES PURCHASED BY ALL HOLDERS HOLDING

 

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OUTSTANDING NOTES (SUCH FRACTION WITH RESPECT TO EACH HOLDER IS REFERRED TO AS
ITS “REDEMPTION ALLOCATION PERCENTAGE”, AND SUCH AMOUNT WITH RESPECT TO EACH
HOLDER IS REFERRED TO AS ITS “PRO RATA REDEMPTION AMOUNT”); PROVIDED, HOWEVER
THAT IN THE EVENT THAT ANY HOLDER’S PRO RATA REDEMPTION AMOUNT EXCEEDS THE
OUTSTANDING PRINCIPAL AMOUNT OF SUCH HOLDER’S NOTE, THEN SUCH EXCESS PRO RATA
REDEMPTION AMOUNT SHALL BE ALLOCATED AMONGST THE REMAINING HOLDERS OF NOTES IN
ACCORDANCE WITH THE FOREGOING FORMULA.  IN THE EVENT THAT THE INITIAL HOLDER OF
ANY NOTES SHALL SELL OR OTHERWISE TRANSFER ANY OF SUCH HOLDER’S NOTES, THE
TRANSFEREE SHALL BE ALLOCATED A PRO RATA PORTION OF SUCH HOLDER’S REDEMPTION
ALLOCATION PERCENTAGE AND PRO RATA REDEMPTION AMOUNT.

 

(10)         NONCIRCUMVENTION.  THE COMPANY HEREBY COVENANTS AND AGREES THAT THE
COMPANY WILL NOT, BY AMENDMENT OF ITS CERTIFICATE OF INCORPORATION, BYLAWS OR
THROUGH ANY REORGANIZATION, TRANSFER OF ASSETS, CONSOLIDATION, MERGER, SCHEME OF
ARRANGEMENT, DISSOLUTION, ISSUE OR SALE OF SECURITIES, OR ANY OTHER VOLUNTARY
ACTION, AVOID OR SEEK TO AVOID THE OBSERVANCE OR PERFORMANCE OF ANY OF THE TERMS
OF THIS NOTE, AND WILL AT ALL TIMES IN GOOD FAITH CARRY OUT ALL OF THE
PROVISIONS OF THIS NOTE AND TAKE ALL ACTION AS MAY BE REQUIRED TO PROTECT THE
RIGHTS OF THE HOLDER OF THIS NOTE.

 

(11)         RESERVATION OF AUTHORIZED SHARES.

 

(A)                                  RESERVATION.  INITIALLY, THE COMPANY SHALL
RESERVE OUT OF ITS AUTHORIZED AND UNISSUED COMMON STOCK THE MAXIMUM NUMBER OF
SHARES OF COMMON STOCK AVAILABLE TO THE COMPANY FOR THE CONVERSION OF ALL OF THE
NOTES AS OF THE ISSUANCE DATE.  FROM AND AFTER THE STOCKHOLDER APPROVAL, THE
COMPANY SHALL RESERVE OUT OF ITS AUTHORIZED AND UNISSUED COMMON STOCK A NUMBER
OF SHARES OF COMMON STOCK FOR EACH OF THE NOTES EQUAL TO 130% OF THE CONVERSION
RATE WITH RESPECT TO THE CONVERSION AMOUNT OF EACH SUCH NOTE AS OF THE ISSUANCE
DATE.  FROM AND AFTER THE STOCKHOLDER APPROVAL, SO LONG AS ANY OF THE NOTES ARE
OUTSTANDING, THE COMPANY SHALL TAKE ALL ACTION NECESSARY TO RESERVE AND KEEP
AVAILABLE OUT OF ITS AUTHORIZED AND UNISSUED COMMON STOCK, SOLELY FOR THE
PURPOSE OF EFFECTING THE CONVERSION OF THE NOTES, 130% OF THE NUMBER OF SHARES
OF COMMON STOCK AS SHALL FROM TIME TO TIME BE NECESSARY TO EFFECT THE CONVERSION
OF ALL OF THE NOTES THEN OUTSTANDING; PROVIDED THAT AT NO TIME SHALL THE NUMBER
OF SHARES OF COMMON STOCK SO RESERVED BE LESS THAN THE NUMBER OF SHARES REQUIRED
TO BE RESERVED BY THE PREVIOUS SENTENCE (WITHOUT REGARD TO ANY LIMITATIONS ON
CONVERSIONS) (THE “REQUIRED RESERVE AMOUNT”).  THE INITIAL NUMBER OF SHARES OF
COMMON STOCK RESERVED FOR CONVERSIONS OF THE NOTES AND EACH INCREASE IN THE
NUMBER OF SHARES SO RESERVED SHALL BE ALLOCATED PRO RATA AMONG THE HOLDERS OF
THE NOTES BASED ON THE PRINCIPAL AMOUNT OF THE NOTES HELD BY EACH HOLDER AT THE
CLOSING (AS DEFINED IN THE SECURITIES PURCHASE AGREEMENT) OR INCREASE IN THE
NUMBER OF RESERVED SHARES, AS THE CASE MAY BE (THE “AUTHORIZED SHARE
ALLOCATION”).  IN THE EVENT THAT A HOLDER SHALL SELL OR OTHERWISE TRANSFER ANY
OF SUCH HOLDER’S NOTES, EACH TRANSFEREE SHALL BE ALLOCATED A PRO RATA PORTION OF
SUCH HOLDER’S AUTHORIZED SHARE ALLOCATION.  ANY SHARES OF COMMON STOCK RESERVED
AND ALLOCATED TO ANY PERSON WHICH CEASES TO HOLD ANY NOTES SHALL BE ALLOCATED TO
THE REMAINING HOLDERS OF NOTES, PRO RATA BASED ON THE PRINCIPAL AMOUNT OF THE
NOTES THEN HELD BY SUCH HOLDERS.

 

(B)                                 INSUFFICIENT AUTHORIZED SHARES.  IF AT ANY
TIME WHILE ANY OF THE NOTES REMAIN OUTSTANDING THE COMPANY DOES NOT HAVE A
SUFFICIENT NUMBER OF AUTHORIZED AND UNRESERVED SHARES OF COMMON STOCK TO SATISFY
ITS OBLIGATION TO RESERVE FOR ISSUANCE UPON CONVERSION OF THE NOTES AT LEAST A
NUMBER OF SHARES OF COMMON STOCK EQUAL TO THE REQUIRED

 

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RESERVE AMOUNT (AN “AUTHORIZED SHARE FAILURE”), THEN THE COMPANY SHALL TAKE ALL
ACTION NECESSARY TO INCREASE THE COMPANY’S AUTHORIZED SHARES OF COMMON STOCK TO
AN AMOUNT SUFFICIENT TO ALLOW THE COMPANY TO RESERVE THE REQUIRED RESERVE AMOUNT
FOR THE NOTES THEN OUTSTANDING.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING SENTENCE, AS SOON AS PRACTICABLE AFTER THE DATE OF THE OCCURRENCE OF
AN AUTHORIZED SHARE FAILURE, BUT IN NO EVENT LATER THAN SIXTY (60) DAYS AFTER
THE LATER OF (I) THE STOCKHOLDER APPROVAL DEADLINE AND (II) THE OCCURRENCE OF
SUCH AUTHORIZED SHARE FAILURE, THE COMPANY SHALL HOLD A MEETING OF ITS
STOCKHOLDERS FOR THE APPROVAL OF AN INCREASE IN THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK.  IN CONNECTION WITH SUCH MEETING, THE COMPANY SHALL PROVIDE
EACH STOCKHOLDER WITH A PROXY STATEMENT AND SHALL USE ITS BEST EFFORTS TO
SOLICIT ITS STOCKHOLDERS’ APPROVAL OF SUCH INCREASE IN AUTHORIZED SHARES OF
COMMON STOCK AND TO CAUSE ITS BOARD OF DIRECTORS TO RECOMMEND TO THE
STOCKHOLDERS THAT THEY APPROVE SUCH PROPOSAL.

 

(12)         REDEMPTIONS.

 

(A)                                  MECHANICS.  THE COMPANY SHALL DELIVER THE
APPLICABLE EVENT OF DEFAULT REDEMPTION PRICE TO THE HOLDER WITHIN FIVE
(5) BUSINESS DAYS AFTER THE COMPANY’S RECEIPT OF THE HOLDER’S EVENT OF DEFAULT
REDEMPTION NOTICE.  IF THE HOLDER HAS SUBMITTED A CHANGE OF CONTROL REDEMPTION
NOTICE IN ACCORDANCE WITH SECTION 5(B), THE COMPANY SHALL DELIVER THE APPLICABLE
CHANGE OF CONTROL REDEMPTION PRICE TO THE HOLDER (I) CONCURRENTLY WITH THE
CONSUMMATION OF SUCH CHANGE OF CONTROL IF SUCH NOTICE IS RECEIVED PRIOR TO THE
CONSUMMATION OF SUCH CHANGE OF CONTROL AND (II) WITHIN FIVE (5) BUSINESS DAYS
AFTER THE COMPANY’S RECEIPT OF SUCH NOTICE OTHERWISE.  THE COMPANY SHALL DELIVER
THE APPLICABLE MANDATORY REDEMPTION PRICE ON THE HOLDER MANDATORY REDEMPTION
DATE.  THE COMPANY SHALL DELIVER THE APPLICABLE OPTIONAL REDEMPTION PRICE ON THE
APPLICABLE OPTIONAL REDEMPTION DATE.  IN THE EVENT OF A REDEMPTION OF LESS THAN
ALL OF THE CONVERSION AMOUNT OF THIS NOTE, THE COMPANY SHALL PROMPTLY CAUSE TO
BE ISSUED AND DELIVERED TO THE HOLDER A NEW NOTE (IN ACCORDANCE WITH
SECTION 18(D)) REPRESENTING THE OUTSTANDING PRINCIPAL WHICH HAS NOT BEEN
REDEEMED.  IN THE EVENT THAT THE COMPANY DOES NOT PAY THE APPLICABLE REDEMPTION
PRICE TO THE HOLDER WITHIN THE TIME PERIOD REQUIRED, AT ANY TIME THEREAFTER AND
UNTIL THE COMPANY PAYS SUCH UNPAID REDEMPTION PRICE IN FULL, THE HOLDER SHALL
HAVE THE OPTION, IN LIEU OF REDEMPTION, TO REQUIRE THE COMPANY TO PROMPTLY
RETURN TO THE HOLDER ALL OR ANY PORTION OF THIS NOTE REPRESENTING THE CONVERSION
AMOUNT THAT WAS SUBMITTED FOR REDEMPTION AND FOR WHICH THE APPLICABLE REDEMPTION
PRICE (TOGETHER WITH ANY LATE CHARGES THEREON) HAS NOT BEEN PAID.  UPON THE
COMPANY’S RECEIPT OF SUCH NOTICE, (X) THE APPLICABLE REDEMPTION NOTICE SHALL BE
NULL AND VOID WITH RESPECT TO SUCH CONVERSION AMOUNT, (Y) THE COMPANY SHALL
IMMEDIATELY RETURN THIS NOTE, OR ISSUE A NEW NOTE (IN ACCORDANCE WITH
SECTION 18(D)) TO THE HOLDER REPRESENTING SUCH CONVERSION AMOUNT TO BE REDEEMED
AND (Z) THE CONVERSION PRICE OF THIS NOTE OR SUCH NEW NOTES SHALL BE ADJUSTED TO
THE LESSER OF (A) THE CONVERSION PRICE AS IN EFFECT ON THE DATE ON WHICH THE
APPLICABLE REDEMPTION NOTICE IS VOIDED AND (B) THE LOWEST CLOSING BID PRICE OF
THE COMMON STOCK DURING THE PERIOD BEGINNING ON AND INCLUDING THE DATE ON WHICH
THE APPLICABLE REDEMPTION NOTICE IS DELIVERED TO THE COMPANY AND ENDING ON AND
INCLUDING THE DATE ON WHICH THE APPLICABLE REDEMPTION NOTICE IS VOIDED.  THE
HOLDER’S DELIVERY OF A NOTICE VOIDING A REDEMPTION NOTICE AND EXERCISE OF ITS
RIGHTS FOLLOWING SUCH NOTICE SHALL NOT AFFECT THE COMPANY’S OBLIGATIONS TO MAKE
ANY PAYMENTS OF LATE CHARGES WHICH HAVE ACCRUED PRIOR TO THE DATE OF SUCH NOTICE
WITH RESPECT TO THE CONVERSION AMOUNT SUBJECT TO SUCH NOTICE.

 

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(B)           REDEMPTION BY OTHER HOLDERS.  UPON THE COMPANY’S RECEIPT OF NOTICE
FROM ANY OF THE HOLDERS OF THE OTHER NOTES FOR REDEMPTION OR REPAYMENT AS A
RESULT OF AN EVENT OR OCCURRENCE SUBSTANTIALLY SIMILAR TO THE EVENTS OR
OCCURRENCES DESCRIBED IN SECTION 4(B), SECTION 5(B) OR SECTION 8 (EACH, AN
“OTHER REDEMPTION NOTICE”), THE COMPANY SHALL IMMEDIATELY, BUT NO LATER THAN ONE
(1) BUSINESS DAY OF ITS RECEIPT THEREOF, FORWARD TO THE HOLDER BY FACSIMILE A
COPY OF SUCH NOTICE.  IF THE COMPANY RECEIVES A REDEMPTION NOTICE AND ONE OR
MORE OTHER REDEMPTION NOTICES, DURING THE SEVEN (7) BUSINESS DAY PERIOD
BEGINNING ON AND INCLUDING THE DATE WHICH IS THREE (3) BUSINESS DAYS PRIOR TO
THE COMPANY’S RECEIPT OF THE HOLDER’S REDEMPTION NOTICE AND ENDING ON AND
INCLUDING THE DATE WHICH IS THREE (3) BUSINESS DAYS AFTER THE COMPANY’S RECEIPT
OF THE HOLDER’S REDEMPTION NOTICE AND THE COMPANY IS UNABLE TO REDEEM ALL
PRINCIPAL, INTEREST AND OTHER AMOUNTS DESIGNATED IN SUCH REDEMPTION NOTICE AND
SUCH OTHER REDEMPTION NOTICES RECEIVED DURING SUCH SEVEN (7) BUSINESS DAY
PERIOD, THEN THE COMPANY SHALL REDEEM A PRO RATA AMOUNT FROM EACH HOLDER OF THE
NOTES (INCLUDING THE HOLDER) BASED ON THE PRINCIPAL AMOUNT OF THE NOTES
SUBMITTED FOR REDEMPTION PURSUANT TO SUCH REDEMPTION NOTICE AND SUCH OTHER
REDEMPTION NOTICES RECEIVED BY THE COMPANY DURING SUCH SEVEN BUSINESS DAY
PERIOD.

 

(13)         VOTING RIGHTS.  THE HOLDER SHALL HAVE NO VOTING RIGHTS AS THE
HOLDER OF THIS NOTE, EXCEPT AS REQUIRED BY LAW, INCLUDING, BUT NOT LIMITED TO,
THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE, AND AS EXPRESSLY PROVIDED
IN THIS NOTE.

 

(14)         COVENANTS.

 

(A)           RANK.      ALL PAYMENTS DUE UNDER THIS NOTE (A) SHALL RANK PARI
PASSU WITH ALL OTHER NOTES AND INDEBTEDNESS DESCRIBED UNDER CLAUSE (IV) OF THE
DEFINITION OF PERMITTED INDEBTEDNESS, AND (B) SHALL BE SENIOR TO ALL OTHER
INDEBTEDNESS OF THE COMPANY AND ITS SUBSIDIARIES OTHER THAN PERMITTED SENIOR
INDEBTEDNESS.

 

(B)           INCURRENCE OF INDEBTEDNESS.  THE COMPANY SHALL NOT, AND THE
COMPANY SHALL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, DIRECTLY OR INDIRECTLY,
INCUR OR GUARANTEE, ASSUME OR SUFFER TO EXIST ANY INDEBTEDNESS, OTHER THAN
PERMITTED INDEBTEDNESS.

 

(C)           EXISTENCE OF LIENS.  SO LONG AS THIS NOTE IS OUTSTANDING, THE
COMPANY SHALL NOT, AND THE COMPANY SHALL NOT PERMIT ANY OF ITS SUBSIDIARIES TO,
DIRECTLY OR INDIRECTLY, ALLOW OR SUFFER TO EXIST ANY MORTGAGE, LIEN, PLEDGE,
CHARGE, SECURITY INTEREST OR OTHER ENCUMBRANCE UPON OR IN ANY PROPERTY OR ASSETS
(INCLUDING ACCOUNTS AND CONTRACT RIGHTS) OWNED BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES (COLLECTIVELY, “LIENS”) OTHER THAN PERMITTED LIENS.

 

(D)           RESTRICTED PAYMENTS.  THE COMPANY SHALL NOT, AND THE COMPANY SHALL
NOT PERMIT ANY OF ITS SUBSIDIARIES TO, DIRECTLY OR INDIRECTLY, REDEEM, DEFEASE,
REPURCHASE, REPAY OR MAKE ANY PAYMENTS IN RESPECT OF, BY THE PAYMENT OF CASH OR
CASH EQUIVALENTS (IN WHOLE OR IN PART, WHETHER BY WAY OF OPEN MARKET PURCHASES,
TENDER OFFERS, PRIVATE TRANSACTIONS OR OTHERWISE), ALL OR ANY PORTION OF ANY
INDEBTEDNESS, OTHER THAN (I) SCHEDULED PAYMENTS OF INTEREST ON PERMITTED
INDEBTEDNESS, [(II) THE REPAYMENT OF ANY PRINCIPAL AND INTEREST OF THE LEXICO
INDEBTEDNESS ON OR AFTER THE LEXICO MATURITY DATE, PROVIDED, THAT THE COMPANY
HAS COMPLIED WITH THE TERMS OF SECTION 8(A)(II) HEREOF, OR (III) NOTWITHSTANDING
THE PROVISIONS SET FORTH IN CLAUSE (II) HEREOF, THE REPAYMENT OF ANY PRINCIPAL
AND INTEREST OF THE LEXICO INDEBTEDNESS WITH ANY

 

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GREENSHOE PROCEEDS OR THE PLACEMENT OF ANY GREENSHOE PROCEEDS INTO AN ESCROW
ACCOUNT (AND THE RELEASE FROM SUCH ESCROW) FOR THE BENEFIT OF THE SELLER PARTIES
TO THE LEXICO AGREEMENT, PROVIDED, THAT ANY GREENSHOE PROCEEDS SO PLACED INTO
ESCROW (AND THEREAFTER RELEASED) REDUCE THE LEXICO INDEBTEDNESS ON A DOLLAR FOR
DOLLAR BASIS](8).

 

(E)           RESTRICTION ON REDEMPTION AND CASH DIVIDENDS.  UNTIL ALL OF THE
NOTES HAVE BEEN CONVERTED, REDEEMED OR OTHERWISE SATISFIED IN ACCORDANCE WITH
THEIR TERMS, THE COMPANY SHALL NOT, DIRECTLY OR INDIRECTLY, REDEEM, REPURCHASE
OR DECLARE OR PAY ANY CASH DIVIDEND OR DISTRIBUTION ON ITS CAPITAL STOCK WITHOUT
THE PRIOR EXPRESS WRITTEN CONSENT OF THE REQUIRED HOLDERS.

 

(F)            TRANSACTIONS WITH AFFILIATES.  THE COMPANY SHALL NOT, NOR SHALL
IT PERMIT ANY OF ITS SUBSIDIARIES TO, ENTER INTO, RENEW, EXTEND OR BE A PARTY
TO, ANY TRANSACTION OR SERIES OF RELATED TRANSACTIONS (INCLUDING, WITHOUT
LIMITATION, THE PURCHASE, SALE, LEASE, TRANSFER OR EXCHANGE OF PROPERTY OR
ASSETS OF ANY KIND OR THE RENDERING OF SERVICES OF ANY KIND) WITH ANY AFFILIATE,
EXCEPT IN THE ORDINARY COURSE OF BUSINESS IN A MANNER AND TO AN EXTENT
CONSISTENT WITH PAST PRACTICE AND NECESSARY OR DESIRABLE FOR THE PRUDENT
OPERATION OF ITS BUSINESS, FOR FAIR CONSIDERATION AND ON TERMS NO LESS FAVORABLE
TO IT OR ITS SUBSIDIARIES THAN WOULD BE OBTAINABLE IN A COMPARABLE ARM’S LENGTH
TRANSACTION WITH A PERSON THAT IS NOT AN AFFILIATE THEREOF.

 

(G)           CHANGE IN NATURE OF BUSINESS.  THE COMPANY SHALL NOT MAKE, OR
PERMIT ANY OF ITS SUBSIDIARIES TO MAKE, ANY CHANGE IN THE NATURE OF ITS BUSINESS
AS DESCRIBED IN THE COMPANY’S MOST RECENT ANNUAL REPORT FILED ON FORM 10-K WITH
THE SEC.  THE COMPANY SHALL NOT MODIFY ITS CORPORATE STRUCTURE OR PURPOSE.

 

(H)           PRESERVATION OF EXISTENCE, ETC.  THE COMPANY SHALL MAINTAIN AND
PRESERVE, AND CAUSE EACH OF ITS SUBSIDIARIES TO MAINTAIN AND PRESERVE, ITS
EXISTENCE, RIGHTS AND PRIVILEGES, AND BECOME OR REMAIN, AND CAUSE EACH OF ITS
SUBSIDIARIES TO BECOME OR REMAIN, DULY QUALIFIED AND IN GOOD STANDING IN EACH
JURISDICTION IN WHICH THE CHARACTER OF THE PROPERTIES OWNED OR LEASED BY IT OR
IN WHICH THE TRANSACTION OF ITS BUSINESS MAKES SUCH QUALIFICATION NECESSARY.

 

(I)            MAINTENANCE OF PROPERTIES, ETC.  THE COMPANY SHALL MAINTAIN AND
PRESERVE, AND CAUSE EACH OF ITS SUBSIDIARIES TO MAINTAIN AND PRESERVE, ALL OF
ITS PROPERTIES WHICH ARE NECESSARY OR USEFUL IN THE PROPER CONDUCT OF ITS
BUSINESS IN GOOD WORKING ORDER AND CONDITION, ORDINARY WEAR AND TEAR EXCEPTED,
AND COMPLY, AND CAUSE EACH OF ITS SUBSIDIARIES TO COMPLY, AT ALL TIMES WITH THE
PROVISIONS OF ALL LEASES TO WHICH IT IS A PARTY AS LESSEE OR UNDER WHICH IT
OCCUPIES PROPERTY, SO AS TO PREVENT ANY LOSS OR FORFEITURE THEREOF OR
THEREUNDER.

 

(15)         PARTICIPATION.  THE HOLDER, AS THE HOLDER OF THIS NOTE, SHALL BE
ENTITLED TO RECEIVE SUCH DIVIDENDS PAID AND DISTRIBUTIONS MADE TO THE HOLDERS OF
COMMON STOCK TO THE SAME EXTENT AS IF THE HOLDER HAD CONVERTED THIS NOTE INTO
COMMON STOCK (WITHOUT REGARD TO ANY LIMITATIONS ON CONVERSION HEREIN OR
ELSEWHERE) AND HAD HELD SUCH SHARES OF COMMON STOCK ON THE RECORD DATE FOR SUCH
DIVIDENDS AND DISTRIBUTIONS.  PAYMENTS UNDER THE PRECEDING SENTENCE SHALL BE
MADE CONCURRENTLY WITH THE DIVIDEND OR DISTRIBUTION TO THE HOLDERS OF COMMON
STOCK.

 

--------------------------------------------------------------------------------

(8)           IF THIS IS A TERMINATION NOTE, THIS PROVISION SHALL BE DELETED.

 

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(16)         VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES.  THE AFFIRMATIVE VOTE
AT A MEETING DULY CALLED FOR SUCH PURPOSE OR THE WRITTEN CONSENT WITHOUT A
MEETING OF THE REQUIRED HOLDERS SHALL BE REQUIRED FOR ANY CHANGE OR AMENDMENT TO
THIS NOTE OR THE OTHER NOTES.  NO CONSIDERATION SHALL BE OFFERED OR PAID TO ANY
HOLDER OF NOTES TO AMEND OR CONSENT TO A WAIVER OR MODIFICATION OF THE NOTES
UNLESS THE SAME CONSIDERATION ALSO IS OFFERED TO ALL OF THE HOLDERS OF NOTES.

 

(17)         TRANSFER.  THIS NOTE AND ANY SHARES OF COMMON STOCK ISSUED UPON
CONVERSION OF THIS NOTE MAY BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED BY THE
HOLDER WITHOUT THE CONSENT OF THE COMPANY, SUBJECT ONLY TO THE PROVISIONS OF
SECTION 2(F) OF THE SECURITIES PURCHASE AGREEMENT.

 

(18)         REISSUANCE OF THIS NOTE.

 

(A)           TRANSFER.  IF THIS NOTE IS TO BE TRANSFERRED, THE HOLDER SHALL
SURRENDER THIS NOTE TO THE COMPANY, WHEREUPON THE COMPANY WILL FORTHWITH ISSUE
AND DELIVER UPON THE ORDER OF THE HOLDER A NEW NOTE (IN ACCORDANCE WITH
SECTION 18(D)), REGISTERED AS THE HOLDER MAY REQUEST, REPRESENTING THE
OUTSTANDING PRINCIPAL BEING TRANSFERRED BY THE HOLDER AND, IF LESS THEN THE
ENTIRE OUTSTANDING PRINCIPAL IS BEING TRANSFERRED, A NEW NOTE (IN ACCORDANCE
WITH SECTION 18(D)) TO THE HOLDER REPRESENTING THE OUTSTANDING PRINCIPAL NOT
BEING TRANSFERRED.  THE HOLDER AND ANY ASSIGNEE, BY ACCEPTANCE OF THIS NOTE,
ACKNOWLEDGE AND AGREE THAT, (I) BY REASON OF THE PROVISIONS OF
SECTION 3(C)(III) FOLLOWING CONVERSION OR REDEMPTION OF ANY PORTION OF THIS
NOTE, THE OUTSTANDING PRINCIPAL REPRESENTED BY THIS NOTE MAY BE LESS THAN THE
PRINCIPAL STATED ON THE FACE OF THIS NOTE AND (II) IT WILL BE BOUND BY THE
APPOINTMENT OF THE COLLATERAL AGENT (AS DEFINED IN THE SECURITIES PURCHASE
AGREEMENT) AND COLLATERAL AGENCY PROVISIONS REGARDING SUCH APPOINTMENT AS SET
FORTH IN SECTION 4(Q) OF THE SECURITIES PURCHASE AGREEMENT.

 

(B)           LOST, STOLEN OR MUTILATED NOTE.  UPON RECEIPT BY THE COMPANY OF
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY OF THE LOSS, THEFT, DESTRUCTION
OR MUTILATION OF THIS NOTE, AND, IN THE CASE OF LOSS, THEFT OR DESTRUCTION, OF
ANY INDEMNIFICATION UNDERTAKING BY THE HOLDER TO THE COMPANY IN CUSTOMARY FORM
AND, IN THE CASE OF MUTILATION, UPON SURRENDER AND CANCELLATION OF THIS NOTE,
THE COMPANY SHALL EXECUTE AND DELIVER TO THE HOLDER A NEW NOTE (IN ACCORDANCE
WITH SECTION 18(D)) REPRESENTING THE OUTSTANDING PRINCIPAL.

 

(C)           NOTE EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.  THIS NOTE IS
EXCHANGEABLE, UPON THE SURRENDER HEREOF BY THE HOLDER AT THE PRINCIPAL OFFICE OF
THE COMPANY, FOR A NEW NOTE OR NOTES (IN ACCORDANCE WITH SECTION 18(D) AND IN
PRINCIPAL AMOUNTS OF AT LEAST $100,000) REPRESENTING IN THE AGGREGATE THE
OUTSTANDING PRINCIPAL OF THIS NOTE, AND EACH SUCH NEW NOTE WILL REPRESENT SUCH
PORTION OF SUCH OUTSTANDING PRINCIPAL AS IS DESIGNATED BY THE HOLDER AT THE TIME
OF SUCH SURRENDER.

 

(D)           ISSUANCE OF NEW NOTES.  WHENEVER THE COMPANY IS REQUIRED TO ISSUE
A NEW NOTE PURSUANT TO THE TERMS OF THIS NOTE, SUCH NEW NOTE (I) SHALL BE OF
LIKE TENOR WITH THIS NOTE, (II) SHALL REPRESENT, AS INDICATED ON THE FACE OF
SUCH NEW NOTE, THE PRINCIPAL REMAINING OUTSTANDING (OR IN THE CASE OF A NEW NOTE
BEING ISSUED PURSUANT TO SECTION 18(A) OR SECTION 18(C), THE PRINCIPAL
DESIGNATED BY THE HOLDER WHICH, WHEN ADDED TO THE PRINCIPAL REPRESENTED BY THE
OTHER NEW NOTES ISSUED IN CONNECTION WITH SUCH ISSUANCE, DOES NOT EXCEED THE
PRINCIPAL

 

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REMAINING OUTSTANDING UNDER THIS NOTE IMMEDIATELY PRIOR TO SUCH ISSUANCE OF NEW
NOTES), (III) SHALL HAVE AN ISSUANCE DATE, AS INDICATED ON THE FACE OF SUCH NEW
NOTE, WHICH IS THE SAME AS THE ISSUANCE DATE OF THIS NOTE, (IV) SHALL HAVE THE
SAME RIGHTS AND CONDITIONS AS THIS NOTE, AND (V) SHALL REPRESENT ACCRUED AND
UNPAID INTEREST AND LATE CHARGES, IF ANY, ON THE PRINCIPAL AND INTEREST OF THIS
NOTE, FROM THE ISSUANCE DATE.

 

(19)         REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF.  THE REMEDIES PROVIDED IN THIS NOTE SHALL BE CUMULATIVE AND
IN ADDITION TO ALL OTHER REMEDIES AVAILABLE UNDER THIS NOTE AND ANY OF THE OTHER
TRANSACTION DOCUMENTS AT LAW OR IN EQUITY (INCLUDING A DECREE OF SPECIFIC
PERFORMANCE AND/OR OTHER INJUNCTIVE RELIEF), AND NOTHING HEREIN SHALL LIMIT THE
HOLDER’S RIGHT TO PURSUE ACTUAL AND CONSEQUENTIAL DAMAGES FOR ANY FAILURE BY THE
COMPANY TO COMPLY WITH THE TERMS OF THIS NOTE.  AMOUNTS SET FORTH OR PROVIDED
FOR HEREIN WITH RESPECT TO PAYMENTS, CONVERSION AND THE LIKE (AND THE
COMPUTATION THEREOF) SHALL BE THE AMOUNTS TO BE RECEIVED BY THE HOLDER AND SHALL
NOT, EXCEPT AS EXPRESSLY PROVIDED HEREIN, BE SUBJECT TO ANY OTHER OBLIGATION OF
THE COMPANY (OR THE PERFORMANCE THEREOF).  THE COMPANY ACKNOWLEDGES THAT A
BREACH BY IT OF ITS OBLIGATIONS HEREUNDER WILL CAUSE IRREPARABLE HARM TO THE
HOLDER AND THAT THE REMEDY AT LAW FOR ANY SUCH BREACH MAY BE INADEQUATE.  THE
COMPANY THEREFORE AGREES THAT, IN THE EVENT OF ANY SUCH BREACH OR THREATENED
BREACH, THE HOLDER SHALL BE ENTITLED, IN ADDITION TO ALL OTHER AVAILABLE
REMEDIES, TO AN INJUNCTION RESTRAINING ANY BREACH, WITHOUT THE NECESSITY OF
SHOWING ECONOMIC LOSS AND WITHOUT ANY BOND OR OTHER SECURITY BEING REQUIRED.

 

(20)         SECURITY.  THIS NOTE AND THE OTHER NOTES ARE SECURED TO THE EXTENT
AND IN THE MANNER SET FORTH IN THE SECURITY DOCUMENTS.

 

(21)         PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  IF (A) THIS
NOTE IS PLACED IN THE HANDS OF AN ATTORNEY FOR COLLECTION OR ENFORCEMENT OR IS
COLLECTED OR ENFORCED THROUGH ANY LEGAL PROCEEDING OR THE HOLDER OTHERWISE TAKES
ACTION TO COLLECT AMOUNTS DUE UNDER THIS NOTE OR TO ENFORCE THE PROVISIONS OF
THIS NOTE OR (B) THERE OCCURS ANY BANKRUPTCY, REORGANIZATION, RECEIVERSHIP OF
THE COMPANY OR OTHER PROCEEDINGS AFFECTING COMPANY CREDITORS’ RIGHTS AND
INVOLVING A CLAIM UNDER THIS NOTE, THEN THE COMPANY SHALL PAY THE COSTS INCURRED
BY THE HOLDER FOR SUCH COLLECTION, ENFORCEMENT OR ACTION OR IN CONNECTION WITH
SUCH BANKRUPTCY, REORGANIZATION, RECEIVERSHIP OR OTHER PROCEEDING, INCLUDING,
BUT NOT LIMITED TO, ATTORNEYS’ FEES AND DISBURSEMENTS.

 

(22)         CONSTRUCTION; HEADINGS.  THIS NOTE SHALL BE DEEMED TO BE JOINTLY
DRAFTED BY THE COMPANY AND ALL THE PURCHASERS AND SHALL NOT BE CONSTRUED AGAINST
ANY PERSON AS THE DRAFTER HEREOF.  THE HEADINGS OF THIS NOTE ARE FOR CONVENIENCE
OF REFERENCE AND SHALL NOT FORM PART OF, OR AFFECT THE INTERPRETATION OF, THIS
NOTE.

 

(23)         FAILURE OR INDULGENCE NOT WAIVER.  NO FAILURE OR DELAY ON THE PART
OF THE HOLDER IN THE EXERCISE OF ANY POWER, RIGHT OR PRIVILEGE HEREUNDER SHALL
OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY
SUCH POWER, RIGHT OR PRIVILEGE PRECLUDE OTHER OR FURTHER EXERCISE THEREOF OR OF
ANY OTHER RIGHT, POWER OR PRIVILEGE.

 

(24)         DISPUTE RESOLUTION.  IN THE CASE OF A DISPUTE AS TO THE
DETERMINATION OF THE CLOSING BID PRICE, THE CLOSING SALE PRICE OR THE WEIGHTED
AVERAGE PRICE OR THE ARITHMETIC

 

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CALCULATION OF THE CONVERSION RATE, THE CONVERSION PRICE OR ANY REDEMPTION
PRICE, THE COMPANY SHALL SUBMIT THE DISPUTED DETERMINATIONS OR ARITHMETIC
CALCULATIONS VIA FACSIMILE WITHIN ONE (1) BUSINESS DAY OF RECEIPT, OR DEEMED
RECEIPT, OF THE CONVERSION NOTICE OR REDEMPTION NOTICE OR OTHER EVENT GIVING
RISE TO SUCH DISPUTE, AS THE CASE MAY BE, TO THE HOLDER.  IF THE HOLDER AND THE
COMPANY ARE UNABLE TO AGREE UPON SUCH DETERMINATION OR CALCULATION WITHIN ONE
(1) BUSINESS DAY OF SUCH DISPUTED DETERMINATION OR ARITHMETIC CALCULATION BEING
SUBMITTED TO THE HOLDER, THEN THE COMPANY SHALL, WITHIN ONE (1) BUSINESS DAY
SUBMIT VIA FACSIMILE (A) THE DISPUTED DETERMINATION OF THE CLOSING BID PRICE,
THE CLOSING SALE PRICE OR THE WEIGHTED AVERAGE PRICE TO AN INDEPENDENT,
REPUTABLE INVESTMENT BANK SELECTED BY THE COMPANY AND APPROVED BY THE HOLDER OR
(B) THE DISPUTED ARITHMETIC CALCULATION OF THE CONVERSION RATE, CONVERSION PRICE
OR ANY REDEMPTION PRICE TO THE COMPANY’S INDEPENDENT, OUTSIDE ACCOUNTANT.  THE
COMPANY, AT THE COMPANY’S EXPENSE, SHALL CAUSE THE INVESTMENT BANK OR THE
ACCOUNTANT, AS THE CASE MAY BE, TO PERFORM THE DETERMINATIONS OR CALCULATIONS
AND NOTIFY THE COMPANY AND THE HOLDER OF THE RESULTS NO LATER THAN FIVE
(5) BUSINESS DAYS FROM THE TIME IT RECEIVES THE DISPUTED DETERMINATIONS OR
CALCULATIONS.  SUCH INVESTMENT BANK’S OR ACCOUNTANT’S DETERMINATION OR
CALCULATION, AS THE CASE MAY BE, SHALL BE BINDING UPON ALL PARTIES ABSENT
DEMONSTRABLE ERROR.

 

(25)         NOTICES; PAYMENTS.

 

(A)           NOTICES.  WHENEVER NOTICE IS REQUIRED TO BE GIVEN UNDER THIS NOTE,
UNLESS OTHERWISE PROVIDED HEREIN, SUCH NOTICE SHALL BE GIVEN IN ACCORDANCE WITH
SECTION 9(F) OF THE SECURITIES PURCHASE AGREEMENT.  THE COMPANY SHALL PROVIDE
THE HOLDER WITH PROMPT WRITTEN NOTICE OF ALL ACTIONS TAKEN PURSUANT TO THIS
NOTE, INCLUDING IN REASONABLE DETAIL A DESCRIPTION OF SUCH ACTION AND THE REASON
THEREFORE.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE COMPANY WILL
GIVE WRITTEN NOTICE TO THE HOLDER (I) IMMEDIATELY UPON ANY ADJUSTMENT OF THE
CONVERSION PRICE, SETTING FORTH IN REASONABLE DETAIL, AND CERTIFYING, THE
CALCULATION OF SUCH ADJUSTMENT AND (II) AT LEAST TWENTY (20) DAYS PRIOR TO THE
DATE ON WHICH THE COMPANY CLOSES ITS BOOKS OR TAKES A RECORD (A) WITH RESPECT TO
ANY DIVIDEND OR DISTRIBUTION UPON THE COMMON STOCK, (B) WITH RESPECT TO ANY PRO
RATA SUBSCRIPTION OFFER TO HOLDERS OF COMMON STOCK OR (C) FOR DETERMINING RIGHTS
TO VOTE WITH RESPECT TO ANY FUNDAMENTAL TRANSACTION, DISSOLUTION OR LIQUIDATION,
PROVIDED IN EACH CASE THAT SUCH INFORMATION SHALL BE MADE KNOWN TO THE PUBLIC
PRIOR TO OR IN CONJUNCTION WITH SUCH NOTICE BEING PROVIDED TO THE HOLDER.

 

(B)           PAYMENTS.  WHENEVER ANY PAYMENT OF CASH IS TO BE MADE BY THE
COMPANY TO ANY PERSON PURSUANT TO THIS NOTE, SUCH PAYMENT SHALL BE MADE IN
LAWFUL MONEY OF THE UNITED STATES OF AMERICA BY A CHECK DRAWN ON THE ACCOUNT OF
THE COMPANY AND SENT VIA OVERNIGHT COURIER SERVICE TO SUCH PERSON AT SUCH
ADDRESS AS PREVIOUSLY PROVIDED TO THE COMPANY IN WRITING (WHICH ADDRESS, IN THE
CASE OF EACH OF THE PURCHASERS, SHALL INITIALLY BE AS SET FORTH ON THE SCHEDULE
OF BUYERS ATTACHED TO THE SECURITIES PURCHASE AGREEMENT); PROVIDED THAT THE
HOLDER MAY ELECT TO RECEIVE A PAYMENT OF CASH VIA WIRE TRANSFER OF IMMEDIATELY
AVAILABLE FUNDS BY PROVIDING THE COMPANY WITH PRIOR WRITTEN NOTICE SETTING OUT
SUCH REQUEST AND THE HOLDER’S WIRE TRANSFER INSTRUCTIONS.  WHENEVER ANY AMOUNT
EXPRESSED TO BE DUE BY THE TERMS OF THIS NOTE IS DUE ON ANY DAY WHICH IS NOT A
BUSINESS DAY, THE SAME SHALL INSTEAD BE DUE ON THE NEXT SUCCEEDING DAY WHICH IS
A BUSINESS DAY AND, IN THE CASE OF ANY INTEREST DATE WHICH IS NOT THE DATE ON
WHICH THIS NOTE IS PAID IN FULL, THE EXTENSION OF THE DUE DATE THEREOF SHALL NOT
BE TAKEN INTO ACCOUNT FOR PURPOSES OF DETERMINING THE AMOUNT OF INTEREST DUE ON
SUCH DATE.  ANY AMOUNT OF PRINCIPAL OR OTHER AMOUNTS DUE UNDER THE TRANSACTION
DOCUMENTS WHICH IS NOT PAID WHEN DUE SHALL RESULT IN A

 

27

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LATE CHARGE BEING INCURRED AND PAYABLE BY THE COMPANY IN AN AMOUNT EQUAL TO
INTEREST ON SUCH AMOUNT AT THE RATE OF EIGHTEEN PERCENT (18%) PER ANNUM FROM THE
DATE SUCH AMOUNT WAS DUE UNTIL THE SAME IS PAID IN FULL (“LATE CHARGE”).

 

(26)         CANCELLATION.  AFTER ALL PRINCIPAL, ACCRUED INTEREST AND OTHER
AMOUNTS AT ANY TIME OWED ON THIS NOTE HAVE BEEN PAID IN FULL, THIS NOTE SHALL
AUTOMATICALLY BE DEEMED CANCELED, SHALL BE SURRENDERED TO THE COMPANY FOR
CANCELLATION AND SHALL NOT BE REISSUED.

 

(27)         WAIVER OF NOTICE.  TO THE EXTENT PERMITTED BY LAW, THE COMPANY
HEREBY WAIVES DEMAND, NOTICE, PROTEST AND ALL OTHER DEMANDS AND NOTICES IN
CONNECTION WITH THE DELIVERY, ACCEPTANCE, PERFORMANCE, DEFAULT OR ENFORCEMENT OF
THIS NOTE AND THE SECURITIES PURCHASE AGREEMENT.

 

(28)         GOVERNING LAW; JURISDICTION; JURY.  THIS NOTE SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS NOTE SHALL BE GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTIONS) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTIONS OTHER THAN THE STATE OF NEW YORK.  THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER.  NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN
ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.  THE COMPANY
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS
BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO
SUCH PARTY AT THE ADDRESS AS PROVIDED IN SECTION 25 HEREOF AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF.  NOTHING CONTAINED HEREIN SHALL BE DEEMED OR OPERATE TO PRECLUDE THE
HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION AGAINST THE COMPANY IN
ANY OTHER JURISDICTION TO COLLECT ON THE COMPANY’S OBLIGATIONS TO THE HOLDER, TO
REALIZE ON ANY COLLATERAL OR ANY OTHER SECURITY FOR SUCH OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT RULING IN FAVOR OF THE HOLDER.  THE COMPANY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(29)         SEVERABILITY. IF ANY PROVISION OF THIS NOTE IS PROHIBITED BY LAW OR
OTHERWISE DETERMINED TO BE INVALID OR UNENFORCEABLE BY A COURT OF COMPETENT
JURISDICTION, THE PROVISION THAT WOULD OTHERWISE BE PROHIBITED, INVALID OR
UNENFORCEABLE SHALL BE DEEMED AMENDED TO APPLY TO THE BROADEST EXTENT THAT IT
WOULD BE VALID AND ENFORCEABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF SUCH
PROVISION SHALL NOT AFFECT THE VALIDITY OF THE REMAINING PROVISIONS OF THIS NOTE
SO LONG AS THIS NOTE AS SO MODIFIED CONTINUES TO EXPRESS, WITHOUT MATERIAL
CHANGE, THE ORIGINAL INTENTIONS OF THE PARTIES AS TO THE SUBJECT MATTER HEREOF
AND THE PROHIBITED NATURE, INVALIDITY OR UNENFORCEABILITY OF THE PROVISION(S) IN
QUESTION DOES NOT SUBSTANTIALLY IMPAIR THE

 

28

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RESPECTIVE EXPECTATIONS OR RECIPROCAL OBLIGATIONS OF THE PARTIES OR THE
PRACTICAL REALIZATION OF THE BENEFITS THAT WOULD OTHERWISE BE CONFERRED UPON THE
PARTIES.  THE PARTIES WILL ENDEAVOR IN GOOD FAITH NEGOTIATIONS TO REPLACE THE
PROHIBITED, INVALID OR UNENFORCEABLE PROVISION(S) WITH A VALID PROVISION(S), THE
EFFECT OF WHICH COMES AS CLOSE AS POSSIBLE TO THAT OF THE PROHIBITED, INVALID OR
UNENFORCEABLE PROVISION(S).

 

(30)         CERTAIN DEFINITIONS.  FOR PURPOSES OF THIS NOTE, THE FOLLOWING
TERMS SHALL HAVE THE FOLLOWING MEANINGS:

 

(A)           “APPROVED STOCK PLAN” MEANS ANY EMPLOYEE BENEFIT PLAN WHICH HAS
BEEN APPROVED BY THE BOARD OF DIRECTORS OF THE COMPANY, PURSUANT TO WHICH THE
COMPANY’S SECURITIES MAY BE ISSUED TO ANY EMPLOYEE, CONSULTANT, OFFICER OR
DIRECTOR FOR SERVICES PROVIDED TO THE COMPANY.

 

(B)           “BLOOMBERG” MEANS BLOOMBERG FINANCIAL MARKETS.

 

(C)           “BUSINESS DAY” MEANS ANY DAY OTHER THAN SATURDAY, SUNDAY OR OTHER
DAY ON WHICH COMMERCIAL BANKS IN THE CITY OF NEW YORK ARE AUTHORIZED OR REQUIRED
BY LAW TO REMAIN CLOSED.

 

(D)           “CALENDAR QUARTER” MEANS EACH OF: THE PERIOD BEGINNING ON AND
INCLUDING JANUARY 1 AND ENDING ON AND INCLUDING MARCH 31; THE PERIOD BEGINNING
ON AND INCLUDING APRIL 1 AND ENDING ON AND INCLUDING JUNE 30; THE PERIOD
BEGINNING ON AND INCLUDING JULY 1 AND ENDING ON AND INCLUDING SEPTEMBER 30; AND
THE PERIOD BEGINNING ON AND INCLUDING OCTOBER 1 AND ENDING ON AND INCLUDING
DECEMBER 31.

 

(E)           “CHANGE OF CONTROL” MEANS ANY FUNDAMENTAL TRANSACTION OTHER THAN
(I) ANY REORGANIZATION, RECAPITALIZATION OR RECLASSIFICATION OF THE COMMON STOCK
IN WHICH HOLDERS OF THE COMPANY’S VOTING POWER IMMEDIATELY PRIOR TO SUCH
REORGANIZATION, RECAPITALIZATION OR RECLASSIFICATION CONTINUE AFTER SUCH
REORGANIZATION, RECAPITALIZATION OR RECLASSIFICATION TO HOLD PUBLICLY TRADED
SECURITIES AND, DIRECTLY OR INDIRECTLY, THE VOTING POWER OF THE SURVIVING ENTITY
OR ENTITIES NECESSARY TO ELECT A MAJORITY OF THE MEMBERS OF THE BOARD OF
DIRECTORS (OR THEIR EQUIVALENT IF OTHER THAN A CORPORATION) OF SUCH ENTITY OR
ENTITIES, OR (II) PURSUANT TO A MIGRATORY MERGER EFFECTED SOLELY FOR THE PURPOSE
OF CHANGING THE JURISDICTION OF INCORPORATION OF THE COMPANY.

 

(F)            “CLOSING BID PRICE” AND “CLOSING SALE PRICE” MEANS, FOR ANY
SECURITY AS OF ANY DATE, THE LAST CLOSING BID PRICE AND LAST CLOSING TRADE
PRICE, RESPECTIVELY, FOR SUCH SECURITY ON THE PRINCIPAL MARKET, AS REPORTED BY
BLOOMBERG, OR, IF THE PRINCIPAL MARKET BEGINS TO OPERATE ON AN EXTENDED HOURS
BASIS AND DOES NOT DESIGNATE THE CLOSING BID PRICE OR THE CLOSING TRADE PRICE,
AS THE CASE MAY BE, THEN THE LAST BID PRICE OR LAST TRADE PRICE, RESPECTIVELY,
OF SUCH SECURITY PRIOR TO 4:00:00 P.M., NEW YORK TIME, AS REPORTED BY BLOOMBERG,
OR, IF THE PRINCIPAL MARKET IS NOT THE PRINCIPAL SECURITIES EXCHANGE OR TRADING
MARKET FOR SUCH SECURITY, THE LAST CLOSING BID PRICE OR LAST TRADE PRICE,
RESPECTIVELY, OF SUCH SECURITY ON THE PRINCIPAL SECURITIES EXCHANGE OR TRADING
MARKET WHERE SUCH SECURITY IS LISTED OR TRADED AS REPORTED BY BLOOMBERG, OR IF
THE FOREGOING DO NOT APPLY, THE LAST CLOSING BID PRICE OR LAST TRADE PRICE,
RESPECTIVELY, OF SUCH SECURITY IN THE OVER-THE-COUNTER MARKET ON THE ELECTRONIC
BULLETIN BOARD FOR SUCH SECURITY AS

 

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REPORTED BY BLOOMBERG, OR, IF NO CLOSING BID PRICE OR LAST TRADE PRICE,
RESPECTIVELY, IS REPORTED FOR SUCH SECURITY BY BLOOMBERG, THE AVERAGE OF THE BID
PRICES, OR THE ASK PRICES, RESPECTIVELY, OF ANY MARKET MAKERS FOR SUCH SECURITY
AS REPORTED IN THE “PINK SHEETS” BY PINK SHEETS LLC (FORMERLY THE NATIONAL
QUOTATION BUREAU, INC.).  IF THE CLOSING BID PRICE OR THE CLOSING SALE PRICE
CANNOT BE CALCULATED FOR A SECURITY ON A PARTICULAR DATE ON ANY OF THE FOREGOING
BASES, THE CLOSING BID PRICE OR THE CLOSING SALE PRICE, AS THE CASE MAY BE, OF
SUCH SECURITY ON SUCH DATE SHALL BE THE FAIR MARKET VALUE AS MUTUALLY DETERMINED
BY THE COMPANY AND THE HOLDER.  IF THE COMPANY AND THE HOLDER ARE UNABLE TO
AGREE UPON THE FAIR MARKET VALUE OF SUCH SECURITY, THEN SUCH DISPUTE SHALL BE
RESOLVED PURSUANT TO SECTION 24.  ALL SUCH DETERMINATIONS TO BE APPROPRIATELY
ADJUSTED FOR ANY STOCK DIVIDEND, STOCK SPLIT, STOCK COMBINATION,
RECLASSIFICATION OR SIMILAR TRANSACTION DURING THE APPLICABLE CALCULATION
PERIOD.

 

(G)           “CLOSING DATE” SHALL HAVE THE MEANING SET FORTH IN THE SECURITIES
PURCHASE AGREEMENT, WHICH DATE IS THE DATE THE COMPANY INITIALLY ISSUED NOTES
PURSUANT TO THE TERMS OF THE SECURITIES PURCHASE AGREEMENT.

 

(H)           “COMMON STOCK DEEMED OUTSTANDING” MEANS, AT ANY GIVEN TIME, THE
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AT SUCH TIME, PLUS THE NUMBER OF
SHARES OF COMMON STOCK DEEMED TO BE OUTSTANDING PURSUANT TO SECTIONS 7(A)(I) AND
7(A)(II) HEREOF REGARDLESS OF WHETHER THE OPTIONS OR CONVERTIBLE SECURITIES ARE
ACTUALLY EXERCISABLE AT SUCH TIME, BUT EXCLUDING ANY COMMON STOCK OWNED OR HELD
BY OR FOR THE ACCOUNT OF THE COMPANY OR ISSUABLE UPON CONVERSION OF THE NOTES.

 

(I)            “CONTINGENT OBLIGATION” MEANS, AS TO ANY PERSON, ANY DIRECT OR
INDIRECT LIABILITY, CONTINGENT OR OTHERWISE, OF THAT PERSON WITH RESPECT TO ANY
INDEBTEDNESS, LEASE, DIVIDEND OR OTHER OBLIGATION OF ANOTHER PERSON IF THE
PRIMARY PURPOSE OR INTENT OF THE PERSON INCURRING SUCH LIABILITY, OR THE PRIMARY
EFFECT THEREOF, IS TO PROVIDE ASSURANCE TO THE OBLIGEE OF SUCH LIABILITY THAT
SUCH LIABILITY WILL BE PAID OR DISCHARGED, OR THAT ANY AGREEMENTS RELATING
THERETO WILL BE COMPLIED WITH, OR THAT THE HOLDERS OF SUCH LIABILITY WILL BE
PROTECTED (IN WHOLE OR IN PART) AGAINST LOSS WITH RESPECT THERETO.

 

(J)            “CONVERTIBLE SECURITIES” MEANS ANY STOCK OR SECURITIES (OTHER
THAN OPTIONS) DIRECTLY OR INDIRECTLY CONVERTIBLE INTO OR EXERCISABLE OR
EXCHANGEABLE FOR COMMON STOCK.

 

(K)           “ELIGIBLE MARKET” MEANS THE PRINCIPAL MARKET, THE NEW YORK STOCK
EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, THE NASDAQ GLOBAL SELECT MARKET, OR
THE NASDAQ CAPITAL MARKET.

 

(L)            “EQUITY CONDITIONS” MEANS THAT EACH OF THE FOLLOWING CONDITIONS
IS SATISFIED:  (I) ON EACH DAY DURING THE PERIOD BEGINNING SIX (6) MONTH PRIOR
TO THE APPLICABLE DATE OF DETERMINATION AND ENDING ON AND INCLUDING THE
APPLICABLE DATE OF DETERMINATION (THE “EQUITY CONDITIONS MEASURING PERIOD”),
EITHER (X) THE REGISTRATION STATEMENT FILED PURSUANT TO THE REGISTRATION RIGHTS
AGREEMENT SHALL BE EFFECTIVE AND AVAILABLE FOR THE RESALE OF ALL REMAINING
REGISTRABLE SECURITIES IN ACCORDANCE WITH THE TERMS OF THE REGISTRATION RIGHTS
AGREEMENT AND THERE SHALL NOT HAVE BEEN ANY GRACE PERIODS (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT) OR (Y) ALL SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THE NOTES SHALL BE ELIGIBLE FOR SALE

 

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WITHOUT RESTRICTION AND WITHOUT THE NEED FOR REGISTRATION UNDER ANY APPLICABLE
FEDERAL OR STATE SECURITIES LAWS; (II) ON EACH DAY DURING THE EQUITY CONDITIONS
MEASURING PERIOD, THE COMMON STOCK IS DESIGNATED FOR QUOTATION ON THE PRINCIPAL
MARKET OR ANY OTHER ELIGIBLE MARKET AND SHALL NOT HAVE BEEN SUSPENDED FROM
TRADING ON SUCH EXCHANGE OR MARKET (OTHER THAN SUSPENSIONS OF NOT MORE THAN TWO
(2) DAYS AND OCCURRING PRIOR TO THE APPLICABLE DATE OF DETERMINATION DUE TO
BUSINESS ANNOUNCEMENTS BY THE COMPANY) NOR SHALL DELISTING OR SUSPENSION BY SUCH
EXCHANGE OR MARKET BEEN THREATENED OR PENDING EITHER (A) IN WRITING BY SUCH
EXCHANGE OR MARKET OR (B) BY FALLING BELOW THE THEN EFFECTIVE MINIMUM LISTING
MAINTENANCE REQUIREMENTS OF SUCH EXCHANGE OR MARKET; (III) DURING THE EQUITY
CONDITIONS MEASURING PERIOD, THE COMPANY SHALL HAVE DELIVERED SHARES OF COMMON
STOCK UPON CONVERSION OF THE NOTES TO THE HOLDERS ON A TIMELY BASIS AS SET FORTH
IN SECTION 3(C)(II) HEREOF (AND ANALOGOUS PROVISIONS UNDER THE OTHER NOTES);
(IV) ANY APPLICABLE SHARES OF COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE
EVENT REQUIRING DETERMINATION MAY BE ISSUED IN FULL WITHOUT VIOLATING
SECTION 3(D) HEREOF AND THE RULES OR REGULATIONS OF THE PRINCIPAL MARKET OR ANY
APPLICABLE ELIGIBLE MARKET; (V) THE COMPANY SHALL NOT HAVE FAILED TO TIMELY MAKE
ANY PAYMENTS WITHIN FIVE (5) BUSINESS DAYS OF WHEN SUCH PAYMENT IS DUE PURSUANT
TO ANY TRANSACTION DOCUMENT; (VI) DURING THE EQUITY CONDITIONS MEASURING PERIOD,
THERE SHALL NOT HAVE OCCURRED EITHER (A) THE PUBLIC ANNOUNCEMENT OF A PENDING,
PROPOSED OR INTENDED FUNDAMENTAL TRANSACTION WHICH HAS NOT BEEN ABANDONED,
TERMINATED OR CONSUMMATED, OR (B) AN EVENT OF DEFAULT OR (C) AN EVENT THAT WITH
THE PASSAGE OF TIME OR GIVING OF NOTICE WOULD CONSTITUTE AN EVENT OF DEFAULT;
(VII) THE COMPANY SHALL HAVE NO KNOWLEDGE OF ANY FACT THAT WOULD CAUSE (X) THE
REGISTRATION STATEMENTS REQUIRED PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT
NOT TO BE EFFECTIVE AND AVAILABLE FOR THE RESALE OF ALL REMAINING REGISTRABLE
SECURITIES IN ACCORDANCE WITH THE TERMS OF THE REGISTRATION RIGHTS AGREEMENT OR
(Y) ANY SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES NOT TO BE
ELIGIBLE FOR SALE WITHOUT RESTRICTION PURSUANT TO RULE 144(K) AND ANY APPLICABLE
STATE SECURITIES LAWS, (VIII) THE COMPANY OTHERWISE SHALL HAVE BEEN IN
COMPLIANCE WITH AND SHALL NOT HAVE BREACHED ANY PROVISION, COVENANT,
REPRESENTATION OR WARRANTY OF ANY TRANSACTION DOCUMENT; AND (IX) THE COMPANY
SHALL HAVE OBTAINED THE STOCKHOLDER APPROVAL ON OR BEFORE THE APPLICABLE
STOCKHOLDER APPROVAL DEADLINE.

 

(M)          “EQUITY CONDITIONS FAILURE” MEANS THAT ON ANY DAY DURING THE PERIOD
COMMENCING TEN (10) TRADING DAYS PRIOR TO THE APPLICABLE MANDATORY CONVERSION
NOTICE DATE THROUGH THE APPLICABLE MANDATORY CONVERSION DATE, THE EQUITY
CONDITIONS HAVE NOT BEEN SATISFIED (OR WAIVED IN WRITING BY THE HOLDER).

 

(N)           “EXCLUDED SECURITIES” MEANS ANY COMMON STOCK ISSUED OR ISSUABLE:
(I) IN CONNECTION WITH ANY APPROVED STOCK PLAN; (II) UPON CONVERSION OF THE
NOTES; (III) PURSUANT TO THE FOLLOW-ON OFFERING (AS DEFINED IN THE SECURITIES
PURCHASE AGREEMENT) OR ANY GREENSHOE THEREON PURSUANT TO CUSTOMARY TERMS AND
CONDITIONS, WITH AN ISSUE PRICE PER SHARE OF COMMON STOCK THAT IS NO LESS THAN
THE ISSUE PRICE PER SHARE OF COMMON STOCK IN THE FOLLOW-ON OFFERING, AND WHICH
CLOSES WITHIN 30 DAYS OF THE FOLLOW-ON OFFERING (THE “GREENSHOE”); AND (IV) UPON
EXERCISE OF ANY OPTIONS WHICH ARE OUTSTANDING ON THE DAY IMMEDIATELY PRECEDING
THE SUBSCRIPTION DATE, PROVIDED THAT THE TERMS OF SUCH OPTIONS ARE NOT AMENDED,
MODIFIED OR CHANGED ON OR AFTER THE SUBSCRIPTION DATE; AND PROVIDED FURTHER THAT
THE EXPIRATION OR RELEASE OF THE HOLDER OF SUCH OPTIONS FROM ANY LOCK-UP
AGREEMENTS SHALL NOT BE DEEMED TO BE AN AMENDMENT, MODIFICATION OR CHANGE
THEREOF.

 

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(O)           “FUNDAMENTAL TRANSACTION” MEANS THAT THE COMPANY SHALL, DIRECTLY
OR INDIRECTLY, IN ONE OR MORE RELATED TRANSACTIONS, (I) CONSOLIDATE OR MERGE
WITH OR INTO (WHETHER OR NOT THE COMPANY IS THE SURVIVING CORPORATION) ANOTHER
PERSON OR PERSONS, OR (II) SELL, ASSIGN, TRANSFER, CONVEY OR OTHERWISE DISPOSE
OF ALL OR SUBSTANTIALLY ALL OF THE PROPERTIES OR ASSETS OF THE COMPANY TO
ANOTHER PERSON, OR (III) ALLOW ANOTHER PERSON TO MAKE A PURCHASE, TENDER OR
EXCHANGE OFFER THAT IS ACCEPTED BY THE HOLDERS OF MORE THAN 50% OF THE
OUTSTANDING SHARES OF VOTING STOCK (NOT INCLUDING ANY SHARES OF VOTING STOCK
HELD BY THE PERSON OR PERSONS MAKING OR PARTY TO, OR ASSOCIATED OR AFFILIATED
WITH THE PERSONS MAKING OR PARTY TO, SUCH PURCHASE, TENDER OR EXCHANGE OFFER),
OR (IV) CONSUMMATE A STOCK PURCHASE AGREEMENT OR OTHER BUSINESS COMBINATION
(INCLUDING, WITHOUT LIMITATION, A REORGANIZATION, RECAPITALIZATION, SPIN-OFF OR
SCHEME OF ARRANGEMENT) WITH ANOTHER PERSON WHEREBY SUCH OTHER PERSON ACQUIRES
MORE THAN THE 50% OF THE OUTSTANDING SHARES OF VOTING STOCK (NOT INCLUDING ANY
SHARES OF VOTING STOCK HELD BY THE OTHER PERSON OR OTHER PERSONS MAKING OR PARTY
TO, OR ASSOCIATED OR AFFILIATED WITH THE OTHER PERSONS MAKING OR PARTY TO, SUCH
STOCK PURCHASE AGREEMENT OR OTHER BUSINESS COMBINATION), OR (V) REORGANIZE,
RECAPITALIZE OR RECLASSIFY ITS COMMON STOCK OR (VI) ANY “PERSON” OR “GROUP” (AS
THESE TERMS ARE USED FOR PURPOSES OF SECTIONS 13(D) AND 14(D) OF THE EXCHANGE
ACT) IS OR SHALL BECOME THE “BENEFICIAL OWNER” (AS DEFINED IN RULE 13D-3 UNDER
THE EXCHANGE ACT), DIRECTLY OR INDIRECTLY, OF 50% OF THE AGGREGATE VOTING STOCK
OF THE COMPANY.

 

(P)           “GAAP” MEANS UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, CONSISTENTLY APPLIED.

 

(Q)           “GREENSHOE PROCEEDS” MEANS THE NET PROCEEDS TO THE COMPANY FROM
THE GREENSHOE.

 

(R)            “HOLDER PRO RATA AMOUNT” MEANS A FRACTION (I) THE NUMERATOR OF
WHICH IS THE PRINCIPAL AMOUNT OF THIS NOTE ON THE CLOSING DATE AND (II) THE
DENOMINATOR OF WHICH IS THE AGGREGATE PRINCIPAL AMOUNT OF ALL NOTES ISSUED TO
THE INITIAL PURCHASERS PURSUANT TO THE SECURITIES PURCHASE AGREEMENT ON THE
CLOSING DATE.

 

(S)           “INDEBTEDNESS” OF ANY PERSON MEANS, WITHOUT DUPLICATION (I) ALL
INDEBTEDNESS FOR BORROWED MONEY, (II) ALL OBLIGATIONS ISSUED, UNDERTAKEN OR
ASSUMED AS THE DEFERRED PURCHASE PRICE OF PROPERTY OR SERVICES, INCLUDING
(WITHOUT LIMITATION) “CAPITAL LEASES” IN ACCORDANCE WITH GAAP (OTHER THAN TRADE
PAYABLES ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS), (III) ALL
REIMBURSEMENT OR PAYMENT OBLIGATIONS WITH RESPECT TO LETTERS OF CREDIT, SURETY
BONDS AND OTHER SIMILAR INSTRUMENTS, (IV) ALL OBLIGATIONS EVIDENCED BY NOTES,
BONDS, DEBENTURES OR SIMILAR INSTRUMENTS, INCLUDING OBLIGATIONS SO EVIDENCED
INCURRED IN CONNECTION WITH THE ACQUISITION OF PROPERTY, ASSETS OR BUSINESSES,
(V) ALL INDEBTEDNESS CREATED OR ARISING UNDER ANY CONDITIONAL SALE OR OTHER
TITLE RETENTION AGREEMENT, OR INCURRED AS FINANCING, IN EITHER CASE WITH RESPECT
TO ANY PROPERTY OR ASSETS ACQUIRED WITH THE PROCEEDS OF SUCH INDEBTEDNESS (EVEN
THOUGH THE RIGHTS AND REMEDIES OF THE SELLER OR BANK UNDER SUCH AGREEMENT IN THE
EVENT OF DEFAULT ARE LIMITED TO REPOSSESSION OR SALE OF SUCH PROPERTY), (VI) ALL
MONETARY OBLIGATIONS UNDER ANY LEASING OR SIMILAR ARRANGEMENT WHICH, IN
CONNECTION WITH GAAP, CONSISTENTLY APPLIED FOR THE PERIODS COVERED THEREBY, IS
CLASSIFIED AS A CAPITAL LEASE, (VII) ALL INDEBTEDNESS REFERRED TO IN CLAUSES
(I) THROUGH (VI) ABOVE SECURED BY (OR FOR WHICH THE HOLDER OF SUCH INDEBTEDNESS
HAS AN EXISTING RIGHT, CONTINGENT OR OTHERWISE, TO BE SECURED BY) ANY MORTGAGE,
LIEN, PLEDGE, CHARGE, SECURITY INTEREST OR OTHER ENCUMBRANCE UPON OR IN ANY
PROPERTY OR ASSETS (INCLUDING ACCOUNTS AND CONTRACT

 

32

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RIGHTS) OWNED BY ANY PERSON, EVEN THOUGH THE PERSON WHICH OWNS SUCH ASSETS OR
PROPERTY HAS NOT ASSUMED OR BECOME LIABLE FOR THE PAYMENT OF SUCH INDEBTEDNESS,
AND (VIII) ALL CONTINGENT OBLIGATIONS IN RESPECT OF INDEBTEDNESS OR OBLIGATIONS
OF OTHERS OF THE KINDS REFERRED TO IN CLAUSES (I) THROUGH (VII) ABOVE.

 

(T)            “INTEREST RATE” MEANS FOR ANY PERIOD, A RATE PER ANNUM EQUAL TO
(I) INITIALLY, EIGHT PERCENT (8.0%), (II) IF STOCKHOLDER APPROVAL HAS NOT BEEN
OBTAINED BY THE STOCKHOLDER APPROVAL DEADLINE, TWELVE PERCENT (12.0%), WHICH
SHALL BE INCREASED BY AN ADDITIONAL TWO PERCENT (2.0%) ON EACH TWO (2) MONTH
ANNIVERSARY OF THE STOCKHOLDER APPROVAL DEADLINE UNTIL STOCKHOLDER APPROVAL HAS
BEEN OBTAINED BY THE COMPANY, PROVIDED, THAT IN NO EVENT WILL THE INTEREST RATE
DETERMINED UNDER THIS CLAUSE (II) BE GREATER THAN TWENTY-FOUR PERCENT (24.0%)
AND (III) IF THE INTEREST RATE CONDITIONS ARE SATISFIED, SEVEN PERCENT (7.0%),
EACH OF THE FOREGOING CLAUSES SUBJECT TO FURTHER ADJUSTMENT AS SET FORTH IN
SECTION 2.

 

(U)           “INTEREST RATE CONDITIONS” MEANS THAT (I) STOCKHOLDER APPROVAL HAS
BEEN OBTAINED AND (II) ALL OF THE REGISTRABLE SECURITIES (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT) ARE REGISTERED FOR RESALE IN ACCORDANCE WITH THE
TERMS OF THE REGISTRATION RIGHTS AGREEMENT (AND SUCH REGISTRATION HAS NOT BEEN
SUSPENDED OR TERMINATED).

 

(V)           “LEAD INVESTOR” MEANS INTERLACHEN CONVERTIBLE INVESTMENTS LIMITED
OR SUCH OTHER PERSON AS IT MAY DESIGNATE.

 

(W)          “OPTIONS” MEANS ANY RIGHTS, WARRANTS OR OPTIONS TO SUBSCRIBE FOR OR
PURCHASE SHARES OF COMMON STOCK OR CONVERTIBLE SECURITIES.

 

(X)            “PARENT ENTITY” OF A PERSON MEANS AN ENTITY THAT, DIRECTLY OR
INDIRECTLY, CONTROLS THE APPLICABLE PERSON AND WHOSE COMMON STOCK OR EQUIVALENT
EQUITY SECURITY IS QUOTED OR LISTED ON AN ELIGIBLE MARKET, OR, IF THERE IS MORE
THAN ONE SUCH PERSON OR PARENT ENTITY, THE PERSON OR PARENT ENTITY WITH THE
LARGEST PUBLIC MARKET CAPITALIZATION AS OF THE DATE OF CONSUMMATION OF THE
FUNDAMENTAL TRANSACTION.

 

(Y)           “PERMITTED INDEBTEDNESS” MEANS (I) THE INDEBTEDNESS EVIDENCED BY
THIS NOTE AND THE OTHER NOTES, (II) PERMITTED SENIOR INDEBTEDNESS,
(III) UNSECURED INDEBTEDNESS INCURRED BY THE COMPANY THAT IS MADE EXPRESSLY
SUBORDINATE IN RIGHT OF PAYMENT TO THE INDEBTEDNESS EVIDENCED BY THIS NOTE, AS
REFLECTED IN A WRITTEN AGREEMENT ACCEPTABLE TO THE REQUIRED HOLDERS IN THEIR
SOLE DISCRETION AND APPROVED BY SUCH REQUIRED HOLDERS IN WRITING, AND WHICH
INDEBTEDNESS DOES NOT PROVIDE AT ANY TIME FOR (1) THE PAYMENT, PREPAYMENT,
REPAYMENT, REPURCHASE OR DEFEASANCE, DIRECTLY OR INDIRECTLY, OF ANY PRINCIPAL OR
PREMIUM, IF ANY, THEREON UNTIL NINETY-ONE (91) DAYS AFTER THE MATURITY DATE OR
LATER AND (2) TOTAL INTEREST AND FEES AT A RATE IN EXCESS OF SEVEN PERCENT
(7.0%) PER ANNUM, (IV) UNSECURED INDEBTEDNESS TO TRADE CREDITORS INCURRED IN THE
ORDINARY COURSE OF BUSINESS, CONSISTENT WITH PAST PRACTICE AND NOT OUTSTANDING
FOR MORE THAN 120 DAYS AFTER THE DATE SUCH PAYABLE WAS CREATED, (V) INDEBTEDNESS
IN WHICH THE PROCEEDS THEREOF ARE USED TO REDEEM THE NOTES IN FULL PURSUANT TO
THE TERMS HEREOF, (VI) INDEBTEDNESS WHICH BEARS INTEREST (PAYABLE AT MATURITY)
NO GREATER THAN SEVEN PERCENT (7.0%) PER ANNUM INCURRED BY THE COMPANY WHICH
INDEBTEDNESS DOES NOT PROVIDE AT ANY TIME FOR THE PAYMENT, PREPAYMENT,
REPAYMENT, REPURCHASE OR DEFEASANCE, DIRECTLY OR INDIRECTLY, OF ANY PRINCIPAL OR
PREMIUM, IF ANY, THEREON UNTIL TWO (2) YEARS AFTER THE CLOSING DATE OR LATER AND
MADE

 

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IN FAVOR OF THE SELLERS PURSUANT TO THE LEXICO AGREEMENT (AS DEFINED IN THE
SECURITIES PURCHASE AGREEMENT) (SUCH INDEBTEDNESS, THE “LEXICO INDEBTEDNESS”)
NOT TO EXCEED $10,000,000 PLUS INTEREST IN THE AGGREGATE THAT IS MADE EXPRESSLY
SUBORDINATE IN RIGHT OF PAYMENT TO THE INDEBTEDNESS EVIDENCED BY THIS NOTE, AS
REFLECTED IN THE SUBORDINATION AGREEMENT (AS DEFINED IN THE SECURITIES PURCHASE
AGREEMENT),](9) AND (VI) EXTENSIONS, REFINANCINGS AND RENEWALS OF ANY ITEMS OF
PERMITTED INDEBTEDNESS, PROVIDED THAT THE PRINCIPAL AMOUNT IS NOT INCREASED, THE
MATURITY DATE IS NOT ANY EARLIER THAN THE ORIGINAL MATURITY DATE AND THE TERMS
ARE NOT MODIFIED TO IMPOSE MORE BURDENSOME TERMS UPON THE COMPANY OR ITS
SUBSIDIARY, AS THE CASE MAY BE.

 

(Z)            “PERMITTED LIENS” MEANS (I) ANY LIEN FOR TAXES NOT YET DUE OR
DELINQUENT OR BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS FOR WHICH
ADEQUATE RESERVES HAVE BEEN ESTABLISHED IN ACCORDANCE WITH GAAP, (II) ANY
STATUTORY LIEN ARISING IN THE ORDINARY COURSE OF BUSINESS BY OPERATION OF LAW
WITH RESPECT TO A LIABILITY THAT IS NOT YET DUE OR DELINQUENT, (III) ANY LIEN
CREATED BY OPERATION OF LAW, SUCH AS MATERIALMEN’S LIENS, MECHANICS’ LIENS AND
OTHER SIMILAR LIENS, ARISING IN THE ORDINARY COURSE OF BUSINESS WITH RESPECT TO
A LIABILITY THAT IS NOT YET DUE OR DELINQUENT OR THAT ARE BEING CONTESTED IN
GOOD FAITH BY APPROPRIATE PROCEEDINGS, (IV) LIENS (A) UPON OR IN ANY EQUIPMENT
ACQUIRED OR HELD BY THE COMPANY OR ANY OF ITS SUBSIDIARIES TO SECURE THE
PURCHASE PRICE OF SUCH EQUIPMENT OR INDEBTEDNESS INCURRED SOLELY FOR THE PURPOSE
OF FINANCING THE ACQUISITION OR LEASE OF SUCH EQUIPMENT, OR (B) EXISTING ON SUCH
EQUIPMENT AT THE TIME OF ITS ACQUISITION, PROVIDED THAT THE LIEN IS CONFINED
SOLELY TO THE PROPERTY SO ACQUIRED AND IMPROVEMENTS THEREON, AND THE PROCEEDS OF
SUCH EQUIPMENT, (V) LIENS INCURRED IN CONNECTION WITH THE EXTENSION, RENEWAL OR
REFINANCING OF THE INDEBTEDNESS SECURED BY LIENS OF THE TYPE DESCRIBED IN
CLAUSES (I) AND (IV) ABOVE, PROVIDED THAT ANY EXTENSION, RENEWAL OR REPLACEMENT
LIEN SHALL BE LIMITED TO THE PROPERTY ENCUMBERED BY THE EXISTING LIEN AND THE
PRINCIPAL AMOUNT OF THE INDEBTEDNESS BEING EXTENDED, RENEWED OR REFINANCED DOES
NOT INCREASE, (VI) LEASES OR SUBLEASES AND LICENSES AND SUBLICENSES GRANTED TO
OTHERS IN THE ORDINARY COURSE OF THE COMPANY’S BUSINESS, NOT INTERFERING IN ANY
MATERIAL RESPECT WITH THE BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES TAKEN AS
A WHOLE, (VII) LIENS IN FAVOR OF CUSTOMS AND REVENUE AUTHORITIES ARISING AS A
MATTER OF LAW TO SECURE PAYMENTS OF CUSTOM DUTIES IN CONNECTION WITH THE
IMPORTATION OF GOODS, (VIII) LIENS ARISING FROM JUDGMENTS, DECREES OR
ATTACHMENTS IN CIRCUMSTANCES NOT CONSTITUTING AN EVENT OF DEFAULT UNDER
SECTION 4(A)(IX), (IX) [LIENS SECURING THE LEXICO INDEBTEDNESS (SUCH LIENS, THE
“LEXICO LIENS”); PROVIDED HOWEVER, THAT THE COMPANY HAS PROVIDED THE HOLDER WITH
A FIRST PRIORITY LIEN ON THE SAME ASSETS SECURING THE LEXICO LIENS AND THE
LEXICO LIENS ARE MADE EXPRESSLY SUBORDINATE TO THE LIENS GRANTED TO THE HOLDER,
AS REFLECTED IN A WRITTEN AGREEMENT ACCEPTABLE TO THE REQUIRED HOLDERS IN THEIR
SOLE DISCRETION AND APPROVED BY SUCH REQUIRED HOLDERS IN WRITING,](10) ,
(X) LIENS SECURING PERMITTED SENIOR INDEBTEDNESS, (XI) THE LIENS IN FAVOR OF
UBANK LTD. ON MONEY DEPOSITED IN A BANK ACCOUNT DISCLOSED TO THE HOLDER HELD IN
THE NAME OF GURUNET ISRAEL LTD., PROVIDED THAT SUCH LIENS ARE NOT ON ASSETS WITH
A VALUE EXCEEDING $350,000 IN THE AGGREGATE.

 

(AA)         “PERMITTED SENIOR INDEBTEDNESS” MEANS THE PRINCIPAL OF (AND
PREMIUM, IF ANY), INTEREST ON, AND ALL FEES AND OTHER AMOUNTS (INCLUDING,
WITHOUT LIMITATION, ANY REASONABLE OUT-OF-POCKET COSTS, ENFORCEMENT EXPENSES
(INCLUDING REASONABLE OUT-OF-POCKET LEGAL

 

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(9)           If this is a Termination Note, this provision shall be deleted.

 

(10)         If this is a Termination Note, this provision shall be deleted.

 

 

34

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FEES AND DISBURSEMENTS), COLLATERAL PROTECTION EXPENSES AND OTHER REIMBURSEMENT
OR INDEMNITY OBLIGATIONS RELATING THERETO) PAYABLE BY COMPANY AND/OR ITS
SUBSIDIARIES UNDER OR IN CONNECTION WITH ANY INVENTORY AND RECEIVABLES CREDIT
FACILITY BASED ON A CUSTOMARY BORROWING BASE ENTERED INTO BY THE COMPANY AND/OR
ITS SUBSIDIARIES WITH ONE OR MORE FINANCIAL INSTITUTIONS (AND ON TERMS AND
CONDITIONS) TO FUND THE WORKING CAPITAL NEEDS OF THE COMPANY AND ITS
SUBSIDIARIES, IN FORM AND SUBSTANCE SATISFACTORY TO THE REQUIRED HOLDERS;
PROVIDED, HOWEVER, THAT THE AGGREGATE OUTSTANDING AMOUNT OF SUCH INDEBTEDNESS
PERMITTED HEREUNDER (TAKING INTO ACCOUNT THE MAXIMUM AMOUNTS WHICH MAY BE
ADVANCED UNDER THE LOAN DOCUMENTS EVIDENCING SUCH PERMITTED SENIOR INDEBTEDNESS)
DOES NOT AT ANY TIME EXCEED (I) FIVE MILLION DOLLARS ($5,000,000) PRIOR TO
DECEMBER 31, 2009 AND (II) TEN MILLION DOLLARS ($10,000,000) THEREAFTER.

 

(BB)         “PERSON” MEANS AN INDIVIDUAL, A LIMITED LIABILITY COMPANY, A
PARTNERSHIP, A JOINT VENTURE, A CORPORATION, A TRUST, AN UNINCORPORATED
ORGANIZATION, ANY OTHER ENTITY AND A GOVERNMENT OR ANY DEPARTMENT OR AGENCY
THEREOF.

 

(CC)         “PRINCIPAL MARKET” MEANS THE NASDAQ GLOBAL MARKET.

 

(DD)         “REDEMPTION NOTICES” MEANS, COLLECTIVELY, THE EVENT OF DEFAULT
REDEMPTION NOTICES, THE CHANGE OF CONTROL REDEMPTION NOTICES, THE COMPANY
NOTICES, THE OPTIONAL REDEMPTION NOTICES, EACH OF THE FOREGOING, INDIVIDUALLY, A
REDEMPTION NOTICE.

 

(EE)         “REDEMPTION PRICES” MEANS, COLLECTIVELY, THE EVENT OF DEFAULT
REDEMPTION PRICE, CHANGE OF CONTROL REDEMPTION PRICE, AND THE HOLDER MANDATORY
REDEMPTION PRICE, [THE LEXICO MANDATORY REDEMPTION PRICE,](11) AND THE OPTIONAL
REDEMPTION PRICE, EACH OF THE FOREGOING, INDIVIDUALLY, A REDEMPTION PRICE.

 

(FF)           “REGISTRATION RIGHTS AGREEMENT” MEANS THAT CERTAIN REGISTRATION
RIGHTS AGREEMENT DATED AS OF THE SUBSCRIPTION DATE BY AND AMONG THE COMPANY AND
THE INITIAL HOLDERS OF THE NOTES RELATING TO, AMONG OTHER THINGS, THE
REGISTRATION OF THE RESALE OF THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE
NOTES.

 

(GG)         “REQUIRED HOLDERS” MEANS (I) THE LEAD INVESTOR AND (II) OTHER
HOLDERS OF NOTES REPRESENTING IN THE AGGREGATE WITH THE LEAD INVESTOR’S NOTES AT
LEAST A MAJORITY OF THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES THEN
OUTSTANDING.

 

(HH)         “SEC” MEANS THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

(II)           “SECURITIES PURCHASE AGREEMENT” MEANS THAT CERTAIN SECURITIES
PURCHASE AGREEMENT DATED AS OF THE SUBSCRIPTION DATE BY AND AMONG THE COMPANY
AND THE INITIAL HOLDERS OF THE NOTES PURSUANT TO WHICH THE COMPANY ISSUED THE
NOTES.

 

(JJ)           “SUBSCRIPTION DATE” MEANS JANUARY [•] 2008.

 

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(11)         If this is a Termination Note, this provision shall be deleted.

 

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(KK)         “SUBSIDIARY” MEANS ANY ENTITY IN WHICH THE COMPANY, DIRECTLY OR
INDIRECTLY, OWNS ANY OF THE CAPITAL STOCK OR HOLDS AN EQUITY OR SIMILAR
INTEREST.

 

(LL)           “SUCCESSOR ENTITY” MEANS THE PERSON, WHICH MAY BE THE COMPANY,
FORMED BY, RESULTING FROM OR SURVIVING ANY FUNDAMENTAL TRANSACTION OR THE PERSON
WITH WHICH SUCH FUNDAMENTAL TRANSACTION SHALL HAVE BEEN MADE, PROVIDED THAT IF
SUCH PERSON IS NOT A PUBLICLY TRADED ENTITY WHOSE COMMON STOCK OR EQUIVALENT
EQUITY SECURITY IS QUOTED OR LISTED FOR TRADING ON AN ELIGIBLE MARKET, SUCCESSOR
ENTITY SHALL MEAN SUCH PERSON’S PARENT ENTITY.

 

(MM)       “TRADING DAY” MEANS ANY DAY ON WHICH THE COMMON STOCK IS TRADED ON
THE PRINCIPAL MARKET, OR, IF THE PRINCIPAL MARKET IS NOT THE PRINCIPAL TRADING
MARKET FOR THE COMMON STOCK, THEN ON THE PRINCIPAL SECURITIES EXCHANGE OR
SECURITIES MARKET ON WHICH THE COMMON STOCK IS THEN TRADED; PROVIDED THAT
“TRADING DAY” SHALL NOT INCLUDE ANY DAY ON WHICH THE COMMON STOCK IS SCHEDULED
TO TRADE ON SUCH EXCHANGE OR MARKET FOR LESS THAN 4.5 HOURS OR ANY DAY THAT THE
COMMON STOCK IS SUSPENDED FROM TRADING DURING THE FINAL HOUR OF TRADING ON SUCH
EXCHANGE OR MARKET (OR IF SUCH EXCHANGE OR MARKET DOES NOT DESIGNATE IN ADVANCE
THE CLOSING TIME OF TRADING ON SUCH EXCHANGE OR MARKET, THEN DURING THE HOUR
ENDING AT 4:00:00 P.M., NEW YORK TIME).

 

(NN)         “VOTING STOCK” OF A PERSON MEANS CAPITAL STOCK OF SUCH PERSON OF
THE CLASS OR CLASSES PURSUANT TO WHICH THE HOLDERS THEREOF HAVE THE GENERAL
VOTING POWER TO ELECT, OR THE GENERAL POWER TO APPOINT, AT LEAST A MAJORITY OF
THE BOARD OF DIRECTORS, MANAGERS OR TRUSTEES OF SUCH PERSON (IRRESPECTIVE OF
WHETHER OR NOT AT THE TIME CAPITAL STOCK OF ANY OTHER CLASS OR CLASSES SHALL
HAVE OR MIGHT HAVE VOTING POWER BY REASON OF THE HAPPENING OF ANY CONTINGENCY).

 

(OO)         “WEIGHTED AVERAGE PRICE” MEANS, FOR ANY SECURITY AS OF ANY DATE,
THE DOLLAR VOLUME-WEIGHTED AVERAGE PRICE FOR SUCH SECURITY ON THE PRINCIPAL
MARKET DURING THE PERIOD BEGINNING AT 9:30:01 A.M., NEW YORK TIME (OR SUCH OTHER
TIME AS THE PRINCIPAL MARKET PUBLICLY ANNOUNCES IS THE OFFICIAL OPEN OF
TRADING), AND ENDING AT 4:00:00 P.M., NEW YORK TIME (OR SUCH OTHER TIME AS THE
PRINCIPAL MARKET PUBLICLY ANNOUNCES IS THE OFFICIAL CLOSE OF TRADING) AS
REPORTED BY BLOOMBERG THROUGH ITS “VOLUME AT PRICE” FUNCTIONS, OR, IF THE
FOREGOING DOES NOT APPLY, THE DOLLAR VOLUME-WEIGHTED AVERAGE PRICE OF SUCH
SECURITY IN THE OVER-THE-COUNTER MARKET ON THE ELECTRONIC BULLETIN BOARD FOR
SUCH SECURITY DURING THE PERIOD BEGINNING AT 9:30:01 A.M., NEW YORK TIME (OR
SUCH OTHER TIME AS SUCH MARKET PUBLICLY ANNOUNCES IS THE OFFICIAL OPEN OF
TRADING), AND ENDING AT 4:00:00 P.M., NEW YORK TIME (OR SUCH OTHER TIME AS SUCH
MARKET PUBLICLY ANNOUNCES IS THE OFFICIAL CLOSE OF TRADING) AS REPORTED BY
BLOOMBERG, OR, IF NO DOLLAR VOLUME-WEIGHTED AVERAGE PRICE IS REPORTED FOR SUCH
SECURITY BY BLOOMBERG FOR SUCH HOURS, THE AVERAGE OF THE HIGHEST CLOSING BID
PRICE AND THE LOWEST CLOSING ASK PRICE OF ANY OF THE MARKET MAKERS FOR SUCH
SECURITY AS REPORTED IN THE “PINK SHEETS” BY PINK SHEETS LLC (FORMERLY THE
NATIONAL QUOTATION BUREAU, INC.).  IF THE WEIGHTED AVERAGE PRICE CANNOT BE
CALCULATED FOR A SECURITY ON A PARTICULAR DATE ON ANY OF THE FOREGOING BASES,
THE WEIGHTED AVERAGE PRICE OF SUCH SECURITY ON SUCH DATE SHALL BE THE FAIR
MARKET VALUE AS MUTUALLY DETERMINED BY THE COMPANY AND THE HOLDER.  IF THE
COMPANY AND THE HOLDER ARE UNABLE TO AGREE UPON THE FAIR MARKET VALUE OF SUCH
SECURITY, THEN SUCH DISPUTE SHALL BE RESOLVED PURSUANT TO SECTION 24.  ALL SUCH
DETERMINATIONS TO BE APPROPRIATELY ADJUSTED FOR ANY STOCK DIVIDEND, STOCK SPLIT,
STOCK COMBINATION, RECLASSIFICATION OR SIMILAR TRANSACTION DURING THE APPLICABLE
CALCULATION PERIOD.

 

36

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(31)       DISCLOSURE. UPON RECEIPT OR DELIVERY BY THE COMPANY OF ANY NOTICE IN
ACCORDANCE WITH THE TERMS OF THIS NOTE, UNLESS THE COMPANY HAS IN GOOD FAITH
DETERMINED THAT THE MATTERS RELATING TO SUCH NOTICE DO NOT CONSTITUTE MATERIAL,
NONPUBLIC INFORMATION RELATING TO THE COMPANY OR ITS SUBSIDIARIES, THE COMPANY
SHALL WITHIN ONE (1) BUSINESS DAY AFTER ANY SUCH RECEIPT OR DELIVERY PUBLICLY
DISCLOSE SUCH MATERIAL, NONPUBLIC INFORMATION ON A CURRENT REPORT ON FORM 8-K OR
OTHERWISE.  IN THE EVENT THAT THE COMPANY BELIEVES THAT A NOTICE CONTAINS
MATERIAL, NONPUBLIC INFORMATION RELATING TO THE COMPANY OR ITS SUBSIDIARIES, THE
COMPANY SO SHALL INDICATE TO SUCH HOLDER CONTEMPORANEOUSLY WITH DELIVERY OF SUCH
NOTICE, AND IN THE ABSENCE OF ANY SUCH INDICATION, THE HOLDER SHALL BE ALLOWED
TO PRESUME THAT ALL MATTERS RELATING TO SUCH NOTICE DO NOT CONSTITUTE MATERIAL,
NONPUBLIC INFORMATION RELATING TO THE COMPANY OR ITS SUBSIDIARIES.

 

[Signature Page Follows]

 

37

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the Issuance Date set out above.

 

 

ANSWERS CORPORATION

 

 

 

By:

 

 

 

Name:

 

Title:

 

 

[Signature Page to Senior Secured Convertible Note]

 

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EXHIBIT I

ANSWERS CORPORATION

CONVERSION NOTICE

 

Reference is made to the Senior Secured Convertible Note (the “Note”) issued to
the undersigned by Answers Corporation (the “Company”).  In accordance with and
pursuant to the Note, the undersigned hereby elects to convert the Conversion
Amount (as defined in the Note) of the Note indicated below into shares of
Common Stock par value $0.001 per share (the “Common Stock”) of the Company, as
of the date specified below.

 

Date of Conversion:

 

Aggregate Conversion Amount to be converted:

 

Please confirm the following information:

 

Conversion Price:

 

Number of shares of Common Stock to be issued:

 

Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:

 

Issue to:

 

 

Facsimile Number:

 

Authorization:

 

 

By:

 

 

 

Title:

 

 

 

Dated:

 

 

Account Number:                     

  (if electronic book entry
transfer)                                            

 

Transaction Code Number:

  (if electronic book entry
transfer)                                            

 

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ACKNOWLEDGMENT

 

The Company hereby acknowledges this Conversion Notice and hereby directs
American Stock Transfer & Trust Company to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated
[·] from the Company and acknowledged and agreed to by American Stock Transfer &
Trust Company.

 

 

ANSWERS CORPORATION

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

Title:

 

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