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 TRANSFERRED TO A “QUALIFIED INSTITUTIONAL BUYER” WITHIN THE MEANING OF
RULE 144A UNDER THE 1933 ACT 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(p) 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.


 


MAUI LAND & PINEAPPLE COMPANY, INC.


 


SENIOR SECURED
CONVERTIBLE NOTE


 


	
  Issuance Date: July 28, 2008

  	
   

  	
  Original Principal Amount: $[·]

  



 


FOR VALUE RECEIVED,
Maui Land & Pineapple Company, Inc., a Hawaii corporation (the “Company”), hereby promises to pay to
                       or registered assigns (“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
the applicable 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) or 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 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 (as defined below) 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 29.


 

















 


(1)                                  PAYMENTS
OF PRINCIPAL.  On the Maturity Date, (a) 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 and (b) the Holder shall surrender
this Note to the Holder’s counsel for delivery to the Company upon receipt of
all payments required under this Note. 
The “Maturity  Date” shall be July 15, 2013, 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 that shall have occurred and be continuing
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 up to twenty-five (25)
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.  Other than as specifically permitted by this
Note, the Company may not prepay any portion of the outstanding Principal,
accrued and unpaid Interest or accrued and unpaid Late Charges on Principal and
Interest, if any.


 


(2)                                  INTEREST;
INTEREST RATE.  Interest on this Note
shall commence accruing on the Issuance Date and shall be computed on the basis
of a 360-day year comprised of twelve (12) thirty (30) day months and shall be
payable in arrears on each January 15, April 15, July 15 and October 15
of each year (each, an “Interest Date”) with
the first Interest Date being October 15, 2008.  Interest shall be payable on each Interest
Date, to the record holder of this Note on the applicable Interest Date, in
cash.  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 in
accordance with Section 3(b)(i). 
From and after the occurrence and during the continuance of an Event of
Default, the Interest Rate shall be increased to thirteen percent (13.0%) per
annum.  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, no par value 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 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 to the Holder upon conversion of any Conversion
Amount.


 


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(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, $33.50,
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, (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), and (C) pay any
transfer taxes or other applicable taxes or duties, if any, required in
connection with the issuance of shares of Common Stock in the name of someone
other than the Holder.  On or before the
second (2nd) Trading Day following the date of receipt of a
Conversion Notice, the Company shall transmit by facsimile a confirmation (the “Conversion Confirmation”) of receipt of such Conversion
Notice to the Holder and 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 Company’s transfer agent (the “Transfer
Agent”) is participating in the Depository Trust Company (“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 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.


 


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(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 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. 
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, 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”) or on any date of the Company’s obligation to
deliver shares of Common Stock as contemplated pursuant to clause (B) below,
then the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (A) 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 issue and deliver such certificate
or to 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 shall terminate, or (B) 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 (1) such number of shares
of Common Stock, times (2) the Closing Bid Price on the Conversion Date.


 


(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 or redemption 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 Conversion Amount represented
by this Note is being converted or redeemed or (B) the Holder has provided
the Company with prior written notice (which notice may be included in a


 


4





















 


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 redeemed and the dates of such conversions and redemptions 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
or redemption.


 


(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 23.


 


(v)                                 The
Holder, as such, is not entitled to any rights of a holder of Common Stock
until the Holder has converted this Note into Common Stock, and only to the
extent this Note is deemed to have been converted into Common Stock pursuant to
this Section 3.


 


(vi)                              This
Note shall be deemed to have been converted immediately prior to the close of
business on the Conversion Date, and at such time the rights of the Holder of
this Note as the Holder hereof shall cease (unless the Company defaults on its
obligations in connection with any such conversion) with respect to the portion
of this Note converted on such Conversion Date, and the Person or Persons
entitled to receive the shares of Common Stock issuable upon conversion shall
be deemed to be a stockholder of record on the Conversion Date.


 


(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 (including any
Make-Whole Premium), the Holder (together with the Holder’s affiliates) would
beneficially own in excess of 4.99% (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


 


5





















 


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 “1934 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 (x) 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, (y) a more recent public announcement by the Company or (z) 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 two (2) Business Days 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 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 (i) any such increase will not be effective until the
sixty-first (61st) day after such notice is delivered to the
Company, and (ii) any such increase or decrease will apply only to the
Holder and not to any other holder of Notes. 
The provisions of this paragraph shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this Section 3(d)(i) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended beneficial ownership limitation herein contained
or to make changes or supplements necessary or desirable to properly give
effect to such limitation.


 


(ii)                                  Principal
Market Regulation.  The Company shall
not be obligated to issue any shares of Common Stock upon conversion of this
Note (including Make-Whole Premium Shares, if any) 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 any applicable
Eligible 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 Eligible 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 (each, a “Purchaser” and
collectively the “Purchasers”) shall be issued in the aggregate, upon conversion or
otherwise 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 any 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 all of 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


 


6





















 


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.


 


(e)                                  Mandatory
Conversion.


 


(i)                                     General.  If at any time from and after the two (2) year
anniversary of the Issuance Date (the “Mandatory
Conversion Eligibility Date”), (A) the arithmetic average of
the Weighted Average Price of the Common Stock for any twenty (20)
Trading Days in any thirty (30) consecutive Trading Day period occurring following the
Mandatory Conversion Eligibility Date (the “Mandatory
Conversion Measuring Period”) exceeds 175% of the then applicable
Conversion Price and (B) there is no Equity Conditions Failure on each day during the period commencing on
the Mandatory Conversion Notice Date and ending on the Mandatory Conversion Date (each, as defined
below), 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 (a “Mandatory Conversion”).  The Company may exercise its right to require
conversion under this Section 3(e) by delivering within not more than
three (3) 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 ten (10) 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(e) (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.


 


(ii)                                  Pro
Rata Conversion Requirement.  If the
Company elects to cause a conversion of any Conversion Amount of this Note
pursuant to Section 3(e)(i), 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(e)(i) (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 cause to be converted pursuant to Section 3(e)(i), 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


 


7





















 


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.


 


(f)                                    Private
Company Change of Control.  If at any
time the Holder converts this Note after a Change of Control, unless (i) at
least 90% of the consideration, excluding cash payments for fractional shares,
in such Change of Control consists of shares of capital stock of the Successor
Entity that are listed on, or immediately after the transaction or event will
be listed on, an Eligible Exchange and as a result of such transaction or
transactions the Notes become convertible into or exchangeable or exercisable
for such capital stock of the Successor Entity and the Successor Entity has
assumed the obligations under this Note pursuant to Section 5(a) hereof
or (ii) the Company continues to be the Successor Entity and the Common
Stock continues to be listed on an Eligible Exchange, then the Company shall
pay to the Holder in cash, in lieu of Conversion Shares, in an amount equal to the product of (x) the
applicable number of Conversion Shares and (y) the consideration that the holders
of shares of Common Stock in connection with the consummation of such Change of
Control received for each share of Common Stock.


 


(4)                                  RIGHTS
UPON EVENT OF DEFAULT.


 


(a)                                  Event
of Default.  Each of the following
events shall constitute an “Event of Default”:


 


(i)                                     the failure of the
applicable Registration Statement required to be filed pursuant to the
Registration Rights Agreement to be declared effective by the SEC on or prior
to the date that is sixty (60) days after the applicable Effectiveness Deadline
(as defined in the Registration Rights Agreement), or, while the applicable
Registration Statement is required to be maintained effective pursuant to the
terms of the Registration Rights Agreement, the effectiveness of the applicable
Registration Statement lapses for any reason (including, without limitation,
the issuance of a stop order) or is unavailable to any holder of the Notes for
sale of all of such holder’s Registrable Securities (as defined in the
Registration Rights Agreement) in accordance with the terms of the Registration
Rights Agreement, and such lapse or unavailability continues for a period of
seven (7) consecutive days or for more than an aggregate of twenty-five
(25) days in any 365-day period (other than days during an Allowable Grace
Period (as defined in the Registration Rights Agreement));


 


(ii)                                  the suspension from
trading or failure of the Common Stock to be listed on an Eligible Market for a
period of five (5) consecutive Trading Days or for more than an aggregate
of ten (10) Trading Days in any 365-day period;


 


8





















 


(iii)                               the Company’s (A) failure
to cure a Conversion Failure by delivery of the required number of shares of
Common Stock or Make-Whole Premium Shares within fifteen (15) Business Days
after the applicable Conversion Date or Change of Control Settlement Date, as
the case may be, 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;


 


(iv)                              at any time following the
tenth (10th) consecutive Business Day that the Holder’s Authorized
Share Allocation is less than the number of shares of Common Stock that the
Holder would be entitled to receive upon a conversion of the full Conversion
Amount of this Note (without regard to any limitations on conversion set forth
in Section 3(d) or otherwise);


 


(v)                                 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 payments or 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 Late
Charges when and as due, in which case only if such failure continues for a
period of at least five (5) Business Days;


 


(vi)                              (A) the Company or
any Subsidiary Guarantor (as defined below) or any Significant Subsidiary shall
fail to pay any principal of or interest or premium on any of its Indebtedness
secured by the Collateral (excluding Indebtedness evidenced by this Note or the
Other Notes), to the extent that the aggregate principal amount of all such
Indebtedness exceeds $250,000,
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Indebtedness, or (B) any other default under any agreement or instrument
relating to any such Indebtedness, or any other Indebtedness by the Company or
any of its Subsidiaries for borrowed money in excess of an aggregate principal
amount of $500,000, or any other event, shall occur and shall continue after
the applicable grace period, if any, specified in such agreement or instrument,
if the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of any such Indebtedness or any such Indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), redeemed, purchased or defeased
or an offer to prepay, redeem, purchase or defease such Indebtedness shall be
required to be made, in each case, prior to the stated maturity thereof;


 


(vii)                           the Company or any of its
Subsidiaries party to a Guarantee (as defined in the Securities Purchase
Agreement) (such Subsidiary, a “Subsidiary
Guarantor”) or any Subsidiary
constituting a “ significant subsidiary” under Rule 1-02 of Regulation S-X
(such Subsidiary, a “Significant Subsidiary”),
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;


 


9





















 


(viii)                        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;


 


(ix)                                a final judgment or
judgments for the payment of money aggregating in excess of (A) $100,000 are
rendered against the Company or any of the Subsidiary Guarantors or Significant
Subsidiaries or (B) $50,000 are rendered against any of the officers or
directors of the Company or any of the Subsidiary Guarantors or Significant
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 calculating the amounts set forth above
so long as the Company receives the proceeds of such insurance or indemnity
within sixty (60) days of the issuance of such judgment;


 


(x)                                   the Company breaches
any material warranty, covenant or other term or condition of any Transaction
Document (other than those specified elsewhere in this Section 4(a)),
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 twenty (20) days;


 


(xi)                                if any of the
Transaction Documents shall be cancelled, terminated, revoked or rescinded, in
each case otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of the holders of the
Notes, or any action at law, suit or in equity or other legal proceeding to
cancel, revoke or rescind any of the Transaction Documents or contest the
Collateral Agent’s security interests and liens in any portion of the Collateral
or the priority of the Collateral Agent’s security interests and liens in any
portion of the Collateral contemplated by the Security Documents, shall be
commenced by or on behalf of the Company or any of its Subsidiaries party
thereto, or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of the
Transaction Documents is illegal, invalid or unenforceable in accordance with
the terms thereof;


 


(xii)                             any breach or failure in
any respect to comply with the covenants contained in Section 4(s) of
the Securities Purchase Agreement;


 


(xiii)                          any breach or failure in any
respect to comply with Section 14 of this Note, which breach or failure,
in the case of Sections 14(h), (i) and (j) of this Note, continues
for a period of at least twenty (20) days;


 


10





















 


(xiv)                         the
Company or any Subsidiary Guarantor shall fail to perform or comply with (i) any
material covenant or agreement contained in any Security Agreement to which it
is a party (other than the Collateral Account Agreement) or (ii) any
covenant or agreement contained in the Collateral Account Agreement, which
failure to perform or comply, as the case may be, continues for a period of at
least twenty (20) days;


 


(xv)                            any
provision of any Security Document (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;


 


(xvi)                         any
Security Agreement or any other 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;


 


(xvii)                      any
bank at which any Collateral Account is maintained shall fail to comply with
any material term contained in the Collateral Account Agreement;


 


(xviii)                   any
damage to, or loss, theft or destruction of, any Collateral, whether or not
insured, if any such damage, or loss, theft or destruction could reasonably be
expected to have a Material Adverse Effect (as defined in the Securities
Purchase Agreement); or


 


(xix)                           any
Event of Default (as defined in the Other Notes) occurs with respect to any
Other Notes.


 


(b)                                 Redemption
Right.  Upon the occurrence of an
Event of Default, the Company shall within one (1) Business Day after the
Company is aware of (or should have been aware of) such occurrence, 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 portion of this Note the Holder is
electing to redeem (the “Event of Default
Redemption”).  Each portion of
this Note subject to redemption by the Company pursuant to this Section 4(b) shall
be redeemed by the Company in cash at a price (the “Event of Default Redemption Price”) equal to the greater of (i) the product of (A) the Conversion
Amount to be redeemed and (B) the
Redemption Premium 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 product
of (1) the Redemption Premium and (2) the greatest Closing Sale Price
of the Common Stock during the


 


11





















 


period
beginning on the date immediately preceding such Event of Default and ending on
the date the Holder delivers the Event of Default Redemption Notice.  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 redemption 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, 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 then outstanding and the interest rates of the
Notes held by such holder, having similar conversion rights and having similar
ranking to the Notes.  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 consummation of the
Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion 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 of the Notes prior to such
Fundamental Transaction, such shares of the 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 of this Note.


 


(b)                                 Redemption
Right.  No sooner than fifteen (15)
Trading Days nor later than ten (10) Trading Days prior to the
consummation of a Change of Control, 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 during the period beginning after the Holder’s receipt of a
Change of Control Notice and ending twenty (20) Trading Days after the date of
the consummation of such Change of Control (the “Change of
Control Conversion/Redemption Period”), the Holder may require


 


12





















 


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 100% of the Conversion Amount
being redeemed.  Redemptions required by
this Section 5 shall be made in accordance with the provisions of Section 9
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 Change of Control redemption
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.


 


(c)                                  Make-Whole
Premium.  Immediately prior to the
consummation of the Change of Control, the Company shall pay the applicable
Make-Whole Premium to the holders of the Notes who effect a conversion at any
time during the Change of Control Conversion/Redemption Period unless (i) at
least 90% of the consideration, excluding cash payments for fractional shares,
in such Change of Control consists of shares of capital stock of the Successor
Entity that are listed on, or immediately after the transaction or event will
be listed on, an Eligible Exchange and as a result of such transaction or
transactions the Notes become convertible into or exchangeable or exercisable
for such capital stock of the Successor Entity and the Successor Entity has
assumed the obligations under this Note pursuant to Section 5(a) hereof
or (ii) the Company continues to be the Successor Entity and the Common
Stock continues to be listed on an Eligible Exchange.  For any Conversion Notice delivered during
the Change of Control Conversion/Redemption Period, (i) the Make-Whole
Premium (in Make-Whole Premium Shares and/or cash, as applicable) shall be paid
to the Holder immediately prior to the Effective Date if such Conversion Notice
is delivered prior to such Effective Date and (ii) the Make-Whole Premium
shall be paid to the Holder in cash on the third (3rd) Trading Day
following the date of such Conversion Notice if the Conversion Notice is
delivered on or after such Effective Date (each a “Change of
Control Settlement Date”).


 


(i)                                     (A) 
The Make-Whole Premium shall equal an additional number of shares of Common
Stock calculated in accordance with this Section 5(c) (the “Make-Whole Premium Shares”, which
Make-Whole Premium Shares for purposes of the Transaction Documents, shall be
considered Conversion Shares and shall be included within the definition of “Conversion
Shares”).  The Make-Whole Premium will be
in addition to, and not in substitution for, any cash, securities or other
assets otherwise due to the Holder upon conversion as described in this Note.


 


13





















 


(B)                                The “Make-Whole Premium” shall be equal to the Conversion Amount
of the Notes to be converted divided by $1,000 and multiplied by the applicable
number of shares of Common Stock determined by reference to the table below
(the “Make-Whole Premium Table”) and is based
on the Effective Date and the Stock Price.


 


14

















 


	
  Make-Whole Premium

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stock Price

  	
   

  	
  7/31/2008

  	
   

  	
  1/15/2009

  	
   

  	
  7/15/2009

  	
   

  	
  1/15/2010

  	
   

  	
  7/15/2010

  	
   

  	
  1/15/2011

  	
   

  	
  7/15/2011

  	
   

  	
  1/15/2012

  	
   

  	
  7/15/2012

  	
   

  	
  1/15/2013

  	
   

  	
  7/15/2013

  	
   

  
	
  27.00

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  	
  7.186

  	
   

  
	
  29.70

  	
   

  	
  5.853

  	
   

  	
  5.853

  	
   

  	
  5.853

  	
   

  	
  5.853

  	
   

  	
  5.833

  	
   

  	
  5.805

  	
   

  	
  5.684

  	
   

  	
  5.518

  	
   

  	
  5.172

  	
   

  	
  4.550

  	
   

  	
  3.819

  	
   

  
	
  32.40

  	
   

  	
  4.714

  	
   

  	
  4.706

  	
   

  	
  4.673

  	
   

  	
  4.653

  	
   

  	
  4.595

  	
   

  	
  4.518

  	
   

  	
  4.346

  	
   

  	
  4.113

  	
   

  	
  3.674

  	
   

  	
  2.884

  	
   

  	
  1.013

  	
   

  
	
  35.10

  	
   

  	
  3.853

  	
   

  	
  3.822

  	
   

  	
  3.764

  	
   

  	
  3.711

  	
   

  	
  3.632

  	
   

  	
  3.529

  	
   

  	
  3.333

  	
   

  	
  3.075

  	
   

  	
  2.608

  	
   

  	
  1.783

  	
   

  	
  0.000

  	
   

  
	
  37.80

  	
   

  	
  3.163

  	
   

  	
  3.117

  	
   

  	
  3.040

  	
   

  	
  2.962

  	
   

  	
  2.869

  	
   

  	
  2.755

  	
   

  	
  2.554

  	
   

  	
  2.301

  	
   

  	
  1.848

  	
   

  	
  1.081

  	
   

  	
  0.000

  	
   

  
	
  40.50

  	
   

  	
  2.604

  	
   

  	
  2.548

  	
   

  	
  2.459

  	
   

  	
  2.359

  	
   

  	
  2.254

  	
   

  	
  2.139

  	
   

  	
  1.946

  	
   

  	
  1.717

  	
   

  	
  1.304

  	
   

  	
  0.645

  	
   

  	
  0.000

  	
   

  
	
  43.20

  	
   

  	
  2.147

  	
   

  	
  2.086

  	
   

  	
  1.988

  	
   

  	
  1.869

  	
   

  	
  1.750

  	
   

  	
  1.640

  	
   

  	
  1.462

  	
   

  	
  1.269

  	
   

  	
  0.909

  	
   

  	
  0.379

  	
   

  	
  0.000

  	
   

  
	
  45.90

  	
   

  	
  1.770

  	
   

  	
  1.707

  	
   

  	
  1.605

  	
   

  	
  1.470

  	
   

  	
  1.331

  	
   

  	
  1.229

  	
   

  	
  1.070

  	
   

  	
  0.919

  	
   

  	
  0.619

  	
   

  	
  0.216

  	
   

  	
  0.000

  	
   

  
	
  48.60

  	
   

  	
  1.457

  	
   

  	
  1.394

  	
   

  	
  1.291

  	
   

  	
  1.144

  	
   

  	
  0.977

  	
   

  	
  0.886

  	
   

  	
  0.749

  	
   

  	
  0.642

  	
   

  	
  0.402

  	
   

  	
  0.112

  	
   

  	
  0.000

  	
   

  
	
  51.30

  	
   

  	
  1.197

  	
   

  	
  1.136

  	
   

  	
  1.035

  	
   

  	
  0.880

  	
   

  	
  0.677

  	
   

  	
  0.598

  	
   

  	
  0.484

  	
   

  	
  0.420

  	
   

  	
  0.240

  	
   

  	
  0.046

  	
   

  	
  0.000

  	
   

  
	
  54.00

  	
   

  	
  0.979

  	
   

  	
  0.921

  	
   

  	
  0.824

  	
   

  	
  0.667

  	
   

  	
  0.424

  	
   

  	
  0.358

  	
   

  	
  0.268

  	
   

  	
  0.244

  	
   

  	
  0.118

  	
   

  	
  0.007

  	
   

  	
  0.000

  	
   

  
	
  56.70

  	
   

  	
  0.797

  	
   

  	
  0.743

  	
   

  	
  0.651

  	
   

  	
  0.497

  	
   

  	
  0.214

  	
   

  	
  0.169

  	
   

  	
  0.098

  	
   

  	
  0.134

  	
   

  	
  0.068

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  
	
  59.40

  	
   

  	
  0.643

  	
   

  	
  0.594

  	
   

  	
  0.509

  	
   

  	
  0.362

  	
   

  	
  0.037

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  
	
  62.10

  	
   

  	
  0.514

  	
   

  	
  0.470

  	
   

  	
  0.392

  	
   

  	
  0.257

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  
	
  64.80

  	
   

  	
  0.406

  	
   

  	
  0.367

  	
   

  	
  0.297

  	
   

  	
  0.177

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  
	
  67.50

  	
   

  	
  0.315

  	
   

  	
  0.282

  	
   

  	
  0.220

  	
   

  	
  0.115

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  
	
  70.20

  	
   

  	
  0.240

  	
   

  	
  0.211

  	
   

  	
  0.157

  	
   

  	
  0.069

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  
	
  72.90

  	
   

  	
  0.177

  	
   

  	
  0.153

  	
   

  	
  0.106

  	
   

  	
  0.034

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  
	
  75.60

  	
   

  	
  0.125

  	
   

  	
  0.105

  	
   

  	
  0.066

  	
   

  	
  0.011

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  
	
  78.30

  	
   

  	
  0.083

  	
   

  	
  0.067

  	
   

  	
  0.034

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  
	
  81.00

  	
   

  	
  0.050

  	
   

  	
  0.036

  	
   

  	
  0.011

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  	
  0.000

  	
   

  



 


15
















 


(C)                                The exact Stock Price
and Effective Date may not be set forth on the Make-Whole Premium Table, in
which case, if the Stock Price is between two Stock Prices on the Make-Whole
Premium Table or the Effective Date is between two Effective Dates on the Make-Whole
Premium Table, the Make-Whole Premium shall be determined by straight-line
interpolation between Make-Whole Premium amounts set forth for the higher and
lower Stock Prices and the two Effective Dates, as applicable, based on a
365-day year (or a 366-day year if the Effective Date occurs in a leap
year).  The Stock Prices set forth in the
column headers are subject to adjustment pursuant to Section 5(c)(iii).


 


(1)                            If the Stock Price is less
than to $27.00 (subject to adjustment pursuant to Section 5(c)(iii), the “Stock Price Threshold”), the Make-Whole Premium shall be
equal to zero shares of Common Stock.


 


(2)                            If the Stock Price is
greater than $81.00 (subject to adjustment pursuant to Section 5(c)(iii),
the “Stock Price Cap”), the Make-Whole
Premium shall be equal to zero shares of Common Stock.


 


(3)                            “Stock Price”
means the price paid per share of Common Stock in the transaction constituting
the Change of Control, determined as follows: 
(i) if holders of Common Stock receive only cash in the transaction
constituting the Change of Control, the Stock Price shall equal the cash amount
paid per share of Common Stock; and (ii) in all other cases, the Stock
Price shall equal the arithmetic average of the Closing Sale Price of a share
of Common Stock over the five (5) Trading Day period ending on the Trading
Day immediately preceding the Effective Date; and “Effective
Date” means the date that a Change of Control becomes effective.


 


(ii)                                  The
Company shall pay the Make-Whole Premium solely in shares of Common Stock
(other than cash paid in lieu of fractional shares) or in the same form of
consideration into which all or substantially all of the shares of Common Stock
have been converted or exchanged in connection with the Change of Control.  If holders of the Common Stock receive or
have the right to receive more than one form of consideration in connection
with such Change of Control, then, for purposes of the foregoing, the forms of
consideration in which the Make-Whole Premium shall be paid shall be in proportion
to the different forms of consideration paid to holders of Common Stock in
connection with such Change of Control.


 


(iii)                               Whenever
the Conversion Price shall be adjusted from time to time by the Company
pursuant to Section 7, the Stock Price Threshold and the Stock Price Cap
shall be adjusted and each of the Stock Prices set forth in the Make-Whole
Premium Table shall be adjusted.  The
adjusted Stock Price Threshold, Stock Price Cap and Stock Prices set forth in
the Make-Whole Premium Table shall equal the Stock Price Threshold, the Stock
Price Cap and such Stock Prices, as the case may be, immediately prior to such
adjustment multiplied by a fraction, the numerator of which is the Conversion
Price as so adjusted and the denominator of which is the Conversion Price
immediately prior to the adjustment giving rise to such adjustment.  Each of the share amounts set forth in the
body of the Make-Whole Premium Table shall also be adjusted in the same manner
and at the same time.


 


16





















 


(iv)                              Notwithstanding the foregoing, if the Change
of Control Notice is received prior to the Effective Date and the Make-Whole
Premium Shares required to be delivered hereunder would result in either the
Holder beneficially owning (A) in excess of such Holder’s FIRPTA Cap
immediately after giving effect to such Make-Whole Premium Shares on an as
converted basis (without regard for any limitations of conversion set forth in
the Notes) or (B) the Exchange Cap Allocation , then in lieu of the
Make-Whole Premium Shares required under this Section 5, the number of
Make-Whole Premium Conversion Shares will be reduced to a number of shares of
Common Stock equal to the difference between the aggregate number of shares of
Common Stock issuable in connection with the Change of Control and the Holder’s
FIRPTA Cap or the Exchange Cap Allocation, as applicable, and the Company shall
pay the Holder no later than five (5) Business Days following the
Conversion Date an amount in cash equal to the product of (x) the Closing
Bid Price of the Common Stock on such Conversion Date and (y) the number
of shares of Common Stock in excess of the Holder’s FIRPTA Cap or Exchange Cap
Allocation, as applicable, that would have otherwise been issuable without regard
to such limitation and any other limitations on conversion set forth in such
Note.


 


(v)                                 Notwithstanding the foregoing, if the Change
of Control Notice is received on or after the Effective Date, then in lieu of
the Make-Whole Premium Shares required under this Section 5, the Company
shall pay the Holder no later than three (3) Business Days following the
Conversion Date an amount in cash equal to the product of (x) the
applicable number of Make-Whole Premium Shares and (y) the consideration
that the holders of shares of Common Stock in connection with the
consummation of such Change of Control received for each share of Common Stock.


 


(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, 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


 


17





















 


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 reasonably 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 Securities) 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 or deemed issuance 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 in effect immediately prior to such Dilutive Issuance 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 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.


 


18





















 


(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 increases
or decreases at any time, the Conversion Price in effect at the time of such
increase or decrease 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 increased or decreased 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 increased or decreased 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 such increase or
decrease.  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, 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


 


19





















 


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
publicly traded 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 publicly traded 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.


 


(b)                                 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.


 


(c)                                  Voluntary
Adjustment By Company. 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 of the
Company.


 


(d)                                 Automatic
Adjustment.  On the eighteen (18)
month anniversary of the Issuance Date (the “Adjustment
Date”), if 115% of the Closing Bid Price as of the applicable
Adjustment Date is less than the existing Conversion Price, the then current
Conversion Price hereunder shall be reset to 115% of the Closing Bid Price  as of such Adjustment Date; provided, however, that in no
event shall the adjusted Conversion Price be higher than the then existing
Conversion Price; and provided further, however, that in no event shall the
adjusted Conversion Price be lower than $30.00 (as adjusted for any stock
dividend, stock split, stock combination, reclassification or similar
transaction after the Subscription Date).


 


(e)                                  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 split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in


 


20





















 


effect
immediately prior to such subdivision will be proportionately reduced.  If the Company at 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.


 


(f)                                    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.


 


(g)                                 Cash Payment. 
Notwithstanding the foregoing, if an adjustment is required under this Section 7
that, after giving effect to such adjustment, would result in either  the Holder beneficially owning in excess of (i) the
Holder’s FIRPTA Cap on an as converted basis (without regard for any
limitations of conversion set forth in the Notes) or (ii) the Exchange Cap
Allocation, then in lieu of the full adjustment required under this Section 7,
the Conversion Price shall be reduced to such Conversion Price that would
result in such Note being convertible into such number of shares of Common
Stock equal to the Holder’s FIRPTA Cap or the Exchange Cap Allocation, as
applicable, (without regard to any limitations on conversion set forth in this
Note) and the Company shall pay the Holder an amount in cash no later than five
(5) Business Days following the Conversion Date in an amount equal to the
product of (x) the Closing Bid Price on such Conversion Date and (y) the
number of shares of Common Stock in excess of the Holder’s FIRPTA Cap or
Exchange Cap Allocation, as applicable, that would have otherwise been issuable
without regard to such limitation and any other limitations on conversion set
forth in such Note.


 


(8)                                  SECURITY.  This Note and the Other Notes are secured to
the extent and in the manner set forth in the Security Documents (as defined in
the Securities Purchase Agreement).


 


(9)                                  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 in accordance with the terms hereof.


 


(10)                            RESERVATION
OF AUTHORIZED SHARES.


 


(a)                                  Reservation.  The Company shall initially reserve out of
its authorized and unissued Common Stock a number of shares of Common Stock for
each of the Notes equal to 120% of the Conversion Rate with respect to the
Conversion Amount of each such Note as of the Issuance  Date. 
So long as any of the Notes are outstanding, the Company


 


21





















 


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, 120% 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 Reserve Amount
(an “Authorized
Share Failure”), then
the Company shall immediately 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 seventy-five (75) days
after 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.


 


(11)                            HOLDER
REDEMPTION RIGHT.


 


(a)                                  Holder’s
Right of Optional Redemption.  On the
three (3) year anniversary of the Issuance Date (the “Redemption
Trigger Date”), the Holder shall have the right (a “Holder Optional Redemption”), in its sole discretion, to
require that the Company redeem all or any portion of the Conversion Amount of
this Note (the “Holder Redemption Amount”) by delivering written notice thereof to
the Company on or prior to the later of (i) the Redemption Trigger Date
and (ii) the tenth (10th) Business Day following the Redemption
Trigger Notice Date (as defined below) (such notice, a “Holder Optional Redemption Notice” and the
date the Holder delivers such notice, the “Holder
Optional Redemption Notice Date). 
The Company shall deliver a written notice to each holder of Notes (the “Redemption Trigger Notice” and the date all holders receive
the Redemption Trigger Notice, the “Redemption Trigger Notice
Date”) no sooner than twenty (20) Business Days prior to the
Redemption Trigger Date and no later than ten (10) Business Days prior to
the Redemption Trigger Date to


 


22





















 


each of the holders of the
Notes notifying the holders of the Redemption Trigger Date and the holders’
rights under this Section 11.  The
Company shall redeem any Holder Redemption Amounts within five (5) Business
Days of the Holder Optional Redemption Notice Date (the “Holder
Optional Redemption Date”) in cash
at a price equal to 100% of the applicable Holder Redemption Amount (the “Holder Optional Redemption Price”).  Redemptions made pursuant to this Section 11
shall be made in accordance with Section 12.  No later than one (1) Trading Day
following any Holder Optional Redemption Date, the Company shall file a Current
Report on Form 8-K describing the terms of the applicable Holder Optional
Redemption.


 


(b)                                 Redemption
Under the Letter of Credit.  If at
any time a Holder has drawn down on its Letter of Credit pursuant to Section 14(k) of
this Note and has received the amount drawn down from the Letter of Credit Bank
(the “Draw Down Amount”), then on the third
(3rd) Business Day following the receipt of such amount, such amount
will be applied to reduce such Holder’s Principal Amount in an amount equal to
the Draw Down Amount.


 


(c)                                  Redemptions
Generally.  Any redemptions made
pursuant to this Section 11 shall be made in accordance with Section 12.  To the extent redemptions required by this Section 11
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 11, 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 redemption premium due under this Section 11 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.


 


(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 (the “Event of Default Redemption Date”).  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
concurrently with the consummation of such Change of Control if such notice is
received prior to the consummation of such Change of Control and within five (5) Business
Days after the Company’s receipt of such notice otherwise.  The
Company shall deliver the applicable Holder Optional Redemption Price on the
applicable Holder 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


 


23





















 


Redemption
Notice shall be null and void with respect to such Conversion Amount, (y) the
Company shall immediately return or reinstate this Note, or issue a new Note
(in accordance with Section 18(d)) to the Holder representing such
Conversion Amount 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.


 


(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 11(a) (each, an “Other Redemption Notice”), the Company shall immediately, but no later than two (2) Business
Days 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 Hawaii Business Corporation Act and as expressly
provided in this Note.


 


(14)                            COVENANTS.  So long as this Note is outstanding:


 


(a)                                  Rank.                  All payments due
under this Note (i) shall rank pari
passu with all Other Notes and Permitted Secured Indebtedness and (ii) shall
be senior to all other Indebtedness of the Company and its Subsidiaries secured
by the Collateral.


 


(b)                                 Existence
of Liens.  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 Collateral owned by the
Company or any of its Subsidiaries (collectively, “Liens”)
other than Permitted Liens.


 


24





















 


(c)                                  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 Permitted
Secured Indebtedness, this Note and the Other Notes), whether by way of payment
in respect of principal of (or premium, if any) or interest on such
Indebtedness, if at the time such payment is due or is otherwise made or, after
giving effect to such payment, an event constituting, or that with the passage
of time and without being cured would constitute, an Event of Default has
occurred and is continuing.


 


(d)                                 Restriction
on Redemption and Cash Dividends. 
Without the prior express written consent of the Required Holders, the Company
shall not, directly or indirectly, redeem, repurchase or declare or pay any
cash dividend or distribution on its capital stock until the earlier of (i) all
of the Notes having been converted, redeemed or otherwise satisfied in
accordance with their terms and (ii) the Collateral Agent has released all
Liens pursuant to Section 14(k) hereof.


 


(e)                                  Creation
of New Collateral Subsidiaries.  So
long as the obligations of the Company under this Note are outstanding, if the
Company shall create or acquire any Subsidiary that holds or will hold any
Collateral (such Subsidiary, the “Collateral Subsidiary”),
simultaneous with the creation or acquisition of such Subsidiary, the Company
shall (i) promptly cause such Collateral Subsidiary to become a guarantor
by executing a guaranty in favor of the Holder in form and substance reasonably
acceptable to the Company, the Collateral Subsidiary and the Holder, (ii) promptly
cause such Collateral Subsidiary to become a grantor under the Security
Agreement by executing a joinder to the Security Agreement in form and
substance reasonably acceptable to the Company, the Collateral Subsidiary and
the Holder, (iii) promptly cause such Subsidiary to duly execute and/or
deliver such opinions of counsel and other documents, in form and substance
reasonable acceptable to the Holder, as the Holder shall reasonably request
with respect thereto.


 


(f)                                    Change
in Collateral; Collateral Records. 
The Company shall (i)  give the Collateral Agent (as defined in the
Securities Purchase Agreement) not less than thirty (30) days’ prior
written notice of any change in the location of any Collateral (as defined in
the Security Documents (as defined in the Securities Purchase Agreement)),
other than to locations set forth on Schedule 14(h) hereto and with
respect to which the Collateral Agent has filed financing statements and
otherwise fully perfected its Liens thereon, (ii) advise the Collateral
Agent promptly, in sufficient detail, of any material adverse change relating
to the type, quantity or quality of the Collateral or the Lien granted thereon
and (iii) execute and deliver, and cause each of its Subsidiaries to
execute and deliver, to the Collateral Agent for the benefit of the Holder and
holders of the Other Notes from time to time, solely for the Collateral Agent’s
convenience in maintaining a record of Collateral, such written statements and
schedules as the Collateral Agent may reasonably require, designating,
identifying or describing the Collateral. 
If at any time the Company sells, leases, transfers, conveys or
otherwise disposes any of the Collateral (other than dispositions in the
ordinary course of business of obsolete equipment), the Company shall provide
written notice to the Holder of such disposition and details thereof no later
than three (3) Business Days following such disposition.


 


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(g)                                 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 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.


 


(h)                                 Preservation of
Existence, Etc.  The Company
shall maintain and preserve its existence, rights and privileges, and 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.  Other than
with respect to agricultural land and conservation land, the Company shall
maintain and preserve, and cause each Subsidiary Guarantor and each Significant
Subsidiary 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.


 


(j)                                     Maintenance of
Insurance.  The Company
shall maintain, and cause each of its Subsidiaries to maintain, insurance with
responsible and reputable insurance companies or associations (including,
without limitation, comprehensive general liability, hazard, rent and business
interruption insurance) with respect to its properties (including all real
properties leased or owned by it) and business, in such amounts and covering
such risks as is required by any governmental authority having jurisdiction
with respect thereto or as is carried generally in accordance with sound
business practice by companies in similar businesses similarly situated and in
any event in amount, adequacy and scope reasonably satisfactory to the
Collateral Agent.  All policies covering
the Collateral shall be endorsed with a standard non-contributory “mortgagee”
or “secured party” clause in favor of the Collateral Agent and are to contain
such other provisions as the Collateral Agent may reasonably require to the
extent obtainable from the Company’s insurer to fully protect the interest of
the Holder and the holder of the Other Notes in the Collateral and to any
payments to be made under such policies. 
All certificates of insurance are to be delivered to the Collateral Agent
and the policies are to be premium prepaid, with a lender’s loss payable and an
additional insured endorsement in favor of the Collateral Agent and such other
Persons as the Collateral Agent may designate from time to time in the case of
all policies covering the Collateral, and shall provide for not less than 30
days’ prior written notice to the Collateral Agent of the exercise of any right
of cancellation.  If the Company or any
of its Subsidiaries fails to maintain such insurance or the amount, adequacy or
scope of such coverage is not reasonably satisfactory to the Collateral Agent,
the Collateral Agent may arrange for such insurance, but at the Company’s
expense and without any responsibility on the Collateral Agent’s part for
obtaining the insurance, the solvency of the insurance companies, the adequacy
of the coverage, or the collection of claims. 
Upon the occurrence and during the continuance of an Event of Default,
the Collateral Agent shall have the sole right, in the name of the Holder and the
holders of the Other Notes, the Company and its


 


26





















 


Subsidiaries, to file claims
under any insurance policies, to receive, receipt and give acquittance for any
payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.


 


(k)                                  Collateral
Account; Letters of Credit.


 


(i)                                     No later than
five (5) Business Days following the Issuance Date, the Company shall have
opened a blocked account (the “Collateral
Account”), with a commercial banking institution reasonably
satisfactory for the Collateral Account that is a member of the Federal Reserve
System and has a combined capital and surplus and undivided profits of not less
than $250,000,000 (the “Collateral Account
Bank”) and shall have entered into a blocked account agreement (the “Collateral Account Agreement”) in form and
substance reasonably satisfactory to the Collateral Agent no later than thirty
(30) days following the Issuance Date.


 


(ii)                                  (A)  Until
the occurrence of a Defeasance Event, if at any time any assets described in
column (1)(A) of Schedule I hereto (the “Real Property  Collateral”)
shall be sold, leased, transferred, conveyed or otherwise disposed of (such
action, an “Asset Sale”), then the
Company or such Subsidiary Guarantor shall deposit contemporaneously with such
Asset Sale as a condition to the release of any Lien or mortgage required in
such Asset Sale, an amount in cash (the “Asset
Sale Deposit Amount”) equal to the gross proceeds received from such
Asset Sale multiplied by the percentage set forth opposite the description of
such Real Property Collateral in column (2) of Schedule I hereto
(such percentage, the “Real Property
Collateral Percentage”) into the
Collateral Account or, if the Collateral Account has not been created, set
aside in trust for the benefit of the holders of the Notes to be deposited into
the Collateral Account once created.


 


(B)                                Until the occurrence of a
Defeasance Event, if at any time there is an Asset Sale, a dividend,
distribution, incurrence of Indebtedness or other realization of proceeds from
any assets described in column (1)(B) of Schedule I hereto (the “Operating Collateral” and together with the Real Property
Collateral, the “Collateral”), then the Company or
such Subsidiary Guarantor shall, pursuant to a written instruction delivered to
such Operating Collateral, cause the Operating Collateral to deposit an amount
in cash (the “Operating Income Deposit Amount”
and together with the Asset Sale Deposit Amount, the “Proceeds
Deposit Amount”) equal to the gross proceeds distributed multiplied
by the percentage set forth opposite the description of such Operating
Collateral in column (2) of Schedule I hereto (such percentage, the
“Operating Collateral Percentage” and
together with the Real Property Collateral Percentage, the “Collateral Percentage”) into the Collateral Account or, if
the Collateral Account has not been created, set aside in trust for the benefit
of the holders of the Notes to be deposited into the Collateral Account once
created.


 


(iii)                               If at any time
the aggregate cash balance of the Collateral Account (the “Collateral Account Balance”) equals or
exceeds $1,000,000 (a “Letter of Credit Event
Date”), the Company shall, as soon as practicable, but no later than
thirty (30) days after the Letter of Credit Event Date, deliver to each of the
holders of the Notes irrevocable


 


27





















 


transferable letters of
credit (each a “Letter of Credit”, and together
the “Letters of Credit”) issued in
favor of each of the holders of Notes, in the amount of such Holder’s Holder
Pro Rata Amount of the aggregate Collateral Account Balance on the Letter of
Credit Event Date (each a “Holder Letter of
Credit Amount”, and collectively, the “Letter of Credit Amount”) by a commercial banking institution
that is a member of the Federal Reserve System and has a combined capital and
surplus and undivided profits of not less than $250,000,000 (the “Letter
of Credit Bank”) and in form and substance acceptable to the
Required Holders.  Each Letter of Credit,
including any renewals, extensions or replacements referred to below, shall
expire not earlier than 91 days after the Maturity of the Notes (the “LC
Expiration Date”), unless the applicable Letter of Credit shall
have been reduced to zero in accordance with the terms contained in this Section 14(k) prior
to such date.  The Company shall be
entitled to transfer the cash deposited into the Collateral Account to the
Letter of Credit Bank as security for the Letters of Credit.  The Company shall deliver subsequent Letters
of Credit to each of the holders of the Notes pursuant to this Section 14(k)(iii) for
every subsequent $1,000,000 deposited into the Collateral Account pursuant to Section 14(k)(ii) (each
such subsequent event, also a “Letter of
Credit Event Date”).


 


(iv)                              Upon the
occurrence of an Event of Default Redemption with respect to this Note, on the
Event of Default Redemption Date, the Holder shall be entitled to draw under
such Holder’s Letter of Credit, including any renewals, extensions or
replacements referred to below, an amount equal to the lesser of (A) the
Holder Letter of Credit Amount and (B) such amount then due and payable
under such Holder’s Note.  Upon any other
payment becoming due and payable under the Notes, the Holder to which such
payment is due may issue joint written instructions with the Company to the
Letter of Credit Bank, entitling such Holder to draw under such Holder’s Letter
of Credit, including any renewals, extensions or replacements referred to
below, an amount equal to the payment due or any portion thereof.  In addition to the foregoing, the Holder
shall also be able to draw on the Collateral Account pursuant to the terms of
the Collateral Account Agreement.


 


(v)                                 The Company
shall obtain such renewals, extensions or replacements of the Letters of Credit
as necessary to ensure that the Letters of Credit shall not expire prior to the
LC Expiration Date (unless the Letters of Credit shall have been reduced to
zero in accordance with the terms contained in this Section 14(k) prior
to such date).  If, at any time, the
Company cannot obtain a renewal, extension or replacement of the Letters of
Credit such that the Letters of Credit will expire prior to the LC Expiration
Date (a “Withdrawal Event”), the
Company and the Letter of Credit Bank shall each give the Holders written
notice of the occurrence of a Withdrawal Event at least forty-five (45) days
prior to the then current expiration date of the Letter of Credit.  Following a Withdrawal Event, each Holder
shall be entitled to draw down its Holder Letter of Credit Amount in its
entirety (whether or not an Event of Default shall have occurred or be
continuing under such Holder’s Note).


 


(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.


 


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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, in whole or in part, without the consent of the
Company, subject only to the provisions of Section 2(f) of the
Securities Purchase Agreement, and provided further that no such sale,
assignment or transfer of this Note shall be in an amount less than the lesser
of (a) $500,000 and (b) the Principal amount outstanding under this
Note.


 


(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(p) 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)) 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.


 


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(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 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)                            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, financial advisory fees and attorneys’ fees and disbursements.


 


(21)                            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.


 


(22)                            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.


 


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(23)                            DISPUTE
RESOLUTION.  In the case
of a dispute as to the determination of (a) the Closing Bid Price, the
Closing Sale Price or the Weighted Average Price or (b) the arithmetic
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, the 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.


 


(24)                            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


 


31





















 


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 late charge being incurred and payable
by the Company in an amount equal to interest on such amount at the rate of
fifteen percent (15.0%) per annum from the date such amount was due until the
same is paid in full (“Late Charge”).


 


(25)                            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.


 


(26)                            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.


 


(27)                            GOVERNING LAW; JURISDICTION; JURY TRIAL.  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 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 it set forth on the
signature page hereto and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.  Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.  In the event
that any provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Note. 
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.


 


(28)                            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


 


32





















 


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
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).


 


(29)                            CERTAIN
DEFINITIONS.  For
purposes of this Note, the following terms shall have the following meanings:


 


(a)                                  “Affiliate” of any Person means any other Person controlling,
controlled by, or under common control with such particular Person, where “control”
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities, contract, or otherwise.


 


(b)                                 “Approved Stock Plan” means any
employee benefit plan or agreement which has been or hereafter is approved by
the Board of Directors of the Company, pursuant to which the Company’s
securities may be issued to any consultant, employee, officer or director for
services provided to the Company.


 


(c)                                  “Bloomberg” means Bloomberg Financial Markets.


 


(d)                                 “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.


 


(e)                                  “Change of Control” means any Fundamental
Transaction other than (A) any consolidation, merger, reorganization,
recapitalization or reclassification of the Common Stock, in which holders of
the Company’s voting power immediately prior to such consolidation, merger,
reorganization, recapitalization or reclassification continue after such
consolidation, merger, reorganization, recapitalization or reclassification to
hold 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 (B) 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


 


33





















 


in the over-the-counter market on the
electronic bulletin board for such security as 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 23. 
All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during
the applicable calculation period.


 


(g)                           “Closing Date” shall have the meaning set
forth in the Securities Purchase Agreement which corresponds to the date this
Note and the Other Notes were initially issued 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)                            “Defeasance Amount” means the portion of the outstanding
Principal amount of this Note equal to, initially zero (0) and upon each Letter
of Credit Event Date, shall be increased to the sum of (i) the Holder’s
Pro Rata Portion of the cash amount in the Collateral Account and (ii) Holder
Letter of Credit Amount then outstanding.


 


(l)                               “Defeasance Event” shall be deemed to have occurred when the
sum of (i) the cash amount in the Collateral Account, (ii) the
aggregate Letters of Credit Amount of the Letters of Credit then outstanding
and (iii) any Draw Down Amounts under the Letters of Credit is greater
than or equal to the lesser of (A) the aggregate outstanding amounts due
and owing under all Notes and (B) thirty two million dollars ($32,000,000).


 


34





















 


(m)                         “Eligible Market” means the Principal
Market, the American Stock Exchange, The NASDAQ Global Select Market, The
NASDAQ Global Market or The NASDAQ Capital Market.


 


(n)                                 “Equity Conditions” means that each
of the following conditions is satisfied: 
(i) on each day during the period beginning three (3) months
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 without restriction or limitation,
including without the requirement to be subject to Rule 144(c)(1), 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 one (1) year period ending on and including the date immediately
preceding the applicable date of determination, 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 (A) Section 3(d)(i) hereof, (B) Section 3(d)(ii) and
(C) the rules or regulations of the Principal Market or any
applicable Eligible Market; (v) during the one (1) year period ending
on and including the date immediately preceding the applicable date of
determination 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 pursuant to Rule 144
without restriction or limitation, including without the requirement to be
subject to Rule 144(c)(1), and without the need for registration under any
applicable federal or state securities laws; and (viii) the Company
otherwise shall have been in compliance with and shall not have breached any
material provision, covenant, representation or warranty of any Transaction
Document.


 


35





















 


(o)                           “Equity Conditions Failure” means that (i) 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 or (ii) on any day during the period commencing ten (10) Trading
Days prior to the applicable Interest Notice Date through the applicable
Interest Date, the Equity Conditions have not been satisfied (or waived in
writing by the Holder).


 


(p)                                 “Excluded Securities” means any
Common Stock issued or issuable: (i) in connection with any Approved Stock
Plan; (ii) upon conversion of the Notes; (iii) as Make-Whole Premium
Shares, (iv) in connection with any stock split, stock dividend,
recapitalization or similar transaction by the Company for which adjustment is
made pursuant to Section 7(b); (v) pursuant to a bona fide firm
commitment underwritten public offering with a nationally recognized underwriter
which generates gross proceeds to the Company in excess of $25,000,000 (other
than an “at-the-market offering” as defined in Rule 415(a)(4) under
the 1933 Act and “equity lines”), (vi) upon exercise of any Options or
Convertible Securities which are outstanding on the day immediately preceding
the Subscription Date, provided that the terms of such Options or Convertible
Securities are not amended, modified or changed on or after the Subscription
Date in a manner adverse to the Holder and (vii) in connection with
mergers, acquisitions, strategic business partnerships, joint ventures,
collaborations or similar transactions, in each case with non-affiliated third
parties and otherwise on an arm’s-length basis, the primary purpose of which is
not to raise equity capital, provided  that such issuance is made
at a price equal to or greater than the arithmetic average of the Weighted
Average Price of the Common Stock for the five (5) consecutive Trading Days
immediately prior to the date of such issuance.


 


(q)                                 “FIRPTA Cap” means, with respect to any Holder, the
percentage indicated on the Holder’s Conversion Notice, which shall be such
Holder’s reasonable estimate of the maximum number of shares of Common Stock
that such Holder may hold without being subject to tax under the Foreign
Investment in Real Property Tax Act of 1980.


 


(r)                              “Fundamental Transaction” means that (i) the
Company shall, directly or
indirectly, in one or more related transactions, (A) consolidate or merge
with or into (whether or not the Company is the surviving corporation) another
Person or Persons, or (B) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (C) 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 (D) 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 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), (E) reorganize,
recapitalize or reclassify its Common Stock or (ii) 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.


 


36




















 


(s)                                  “GAAP” means United States generally
accepted accounting principles, consistently applied.


 


(t)                                    “Holder Pro Rata Amount” means a fraction (i) the
numerator of which is the Original Principal Amount of this Note on the
Issuance Date and (ii) the denominator of which is the aggregate original
principal amount of all Notes issued to the initial purchasers pursuant to the
Securities Purchase Agreement on the Issuance Date.


 


(u)                           “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 and not outstanding for more than 120 days after the date
such payable was created), (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 accordance 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 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.


 


(v)                           “Interest  Rate”
means, (i) with respect to the Non-Defeasance Amount, 5.875% per annum and
(ii) with respect to the Defeasance Amount, the greater of (A) 1.0%
per annum and (B) the applicable rate or rates of interest being earned
under the Collateral Account and Letter of Credit, as applicable, corresponding
to the Defeasance Amount, each subject to adjustment as set forth in Section 2
hereof.


 


(w)                               “Non-Defeasance Amount” means the portion of the Principal
amount of this Note equal to the Principal amount outstanding under this Note
less the Defeasance Amount.


 


(x)                                   “Options” means any rights, warrants or
options to subscribe for or purchase shares of Common Stock or Convertible
Securities.


 


(y)                           “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable
Person.


 


37





















 


(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 (as defined in the Security Documents) 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) Liens securing the Permitted Secured
Indebtedness, (vii) Liens securing the Company’s obligations under the
Notes; (viii) 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, (ix) 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, (x) Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default under Section 4(a)(viii) and
(xi) Liens securing any asset of the Company that is not Collateral.


 


(aa)                            “Permitted Secured 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 fees and disbursements),
collateral protection expenses and other reimbursement or indemnity obligations
relating thereto), payable by the Company and/or its Subsidiaries under or in
connection with (i) the Loan Agreement between the Company, Wells Fargo
Bank, National Association, and each of the financial institutions signatory
thereto, entered into on November 15, 2007 unless and until the mortgage
on the Central Resort described on column (1)(A) of Schedule I hereto has
been obtained and (ii) any future project or construction financing for
the Central Resort described on column (1)(A) of Schedule I hereto.


 


(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 New York Stock Exchange, Inc.


 


(dd)                    “Redemption Notices” means, collectively, any Event of Default
Redemption Notices, any Change of Control Redemption Notices, and Holder
Optional Redemption Notices, each of the foregoing, individually, a Redemption
Notice.


 


38





















 


(ee)                      “Redemption Premium” means (i) in the
case of the Events of Default described in Section 4(a)(i) - (vi) and
(ix) - (xix), 115% or (ii) in the case of the Events of Default
described in Section 4(a)(vii) - (viii), 100%.


 


(ff)                          “Redemption Prices” means, collectively, the
Event of Default Redemption Price, Change of Control Redemption Price and the
Holder Optional Redemption Price, each of the foregoing, individually, a Redemption
Price.


 


(gg)                    “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.


 


(hh)                    “Required Holders” means the holders of Notes representing at
least sixty percent (60%) of the aggregate principal amount of the Notes then
outstanding.


 


(ii)                            “SEC” means the
United States Securities and Exchange Commission.


 


(jj)                            “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.


 


(kk)                      “Subscription Date” means July 27,
2008.


 


(ll)                            “Subsidiary” means any entity in which the Company, directly
or indirectly, owns more than 50% of the capital stock or equity or similar
interest.


 


(mm)                “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.


 


(nn)                    “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).


 


(oo)                    “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).


 


39





















 


(pp)                    “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 23. 
All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during
the applicable calculation period.


 


(30)                      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 shall
indicate to the 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]


 


40

















 


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


 


 


	
   

  	
  MAUI
  LAND & PINEAPPLE COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Robert
  I. Webber

  
	
   

  	
   

  	
  Chief
  Operating Officer, Chief Financial

  
	
   

  	
   

  	
  Officer,
  and Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Adele
  H. Sumida 

  
	
   

  	
   

  	
  Controller
  and Secretary

  
				



 

















 


EXHIBIT I


 


MAUI LAND & PINEAPPLE COMPANY, INC.

CONVERSION NOTICE


 


Reference is made to the
Senior Secured Convertible Note (the “Note”) issued
to the undersigned by Maui Land & Pineapple Company, Inc. (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:

  	
   

  
	
   

  	
   

  
	
  FIRPTA
  Cap:

  	
   

  
				



 


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)

  	
   

  
					



 

















 


ACKNOWLEDGMENT


 


The
Company hereby acknowledges this Conversion Notice and hereby directs BNY
Mellon Shareowner Services LLC to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated July 28,
2008 from the Company and acknowledged and agreed to by BNY Mellon Shareowner
Services LLC.


 


 


	
   

  	
  MAUI
  LAND & PINEAPPLE COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


SCHEDULE I

COLLATERAL; COLLATERAL PERCENTAGE


 


	
  Column (1)(A)

  Real Property Collateral

  	
   

  	
  Column (1)(B)

  Operating Collateral

  	
   

  	
  Column (2)

  Collateral

  Percentage

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Headquarters
  Kahului parcel:

  An approximately 25.139 acre property, the Tax Map Key Number of
  which is (2) 3-7-2-1.

  	
   

  	
   

  	
   

  	
  30%

  
	
  The
  approximately one acre parcel (Lot 1B) upon which the Company’s corporate
  offices are located.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Central
  Resort:  

  	
   

  	
   

  	
   

  	
  0%

  
	
  An
  approximately 45.674 acre parcel which is the site of a planned residential
  condominium and commercial development.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hali’imaile
  property:

  	
   

  	
   

  	
   

  	
  35%

  
	
  Consists
  of two parcels, both unencumbered. The Tax Map Key Numbers are 2-5-3-18
  (approximately 6.1 acres) and (2) 2-5-3-5 (79.79 acres).

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bay Club (aka Merriman’s Restaurant):  

  	
   

  	
   

  	
   

  	
  35%

  
	
  The
  first parcel (approximately 2.461 acres) is the site of a restaurant, which
  is Lot A-1-A, Kapalua Development (Large Lot) Subdivision, the full legal
  description of which is attached. The Tax Map Key Number for this lot is
  (2) 4-2-4-25.

  	
   

  	
   

  	
   

  	
   

  
	
  The
  second parcel (approximately 0.71 acres) is for parking. The legal
  description of the second parcel is “Lot 11 of File Plan 2250”, the Tax Map
  Key Number of which is (2) 4-2-6-11.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Kapalua Bay Holdings
  LLC (a Delaware limited liability company)

  	
   

  	
  10%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  W2005 Kapalua/Gengate
  Hotel Holdings, LLC

  	
   

  	
  50%