exv10w1






Exhibit 10.1




Form of 8% Convertible Note



THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”). THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF
COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.




CONVERTIBLE NOTE




Boca Raton, Florida




			
	 	 	 
	                    , 2009
	 	$)00,000






          FOR VALUE RECEIVED, VICOR TECHNOLOGIES, INC., a Delaware Corporation (hereinafter called the
“Borrower”), hereby promises to pay to the order of                                          or registered assigns (the
“Holder”) the sum of $000,000, on                     , 2011 (the “Maturity Date”), and to pay interest on the
unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum
from                     , 2009 (the “Issue Date”) until the same becomes due and payable, whether at maturity
or upon acceleration or by prepayment or otherwise. Any amount of principal or interest on this
Note which is not paid when due shall bear interest at the rate of fifteen percent (15%) per annum
from the due date thereof until the same is paid (“Default Interest”). Interest shall commence
accruing on the Issue Date, shall be computed on the basis of a 365-day year and the actual number
of days elapsed and at the Borrower’s option, shall be payable quarterly in cash. All payments due
hereunder (to the extent not converted into common stock, $.0001 par value per share (the “Common
Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of
America. All payments shall be made at such address as the Holder shall hereafter give to the
Borrower by written notice made in accordance with the provisions of this Note. 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 payment date which is not the date on which this Note is paid in full, the
extension of the due date thereof shall not be taken into account for purposes of determining the
amount of interest due on such date. As used in this Note, the term “business day” shall mean any
day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain closed. Each capitalized term
used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain
Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally
issued (the “Purchase Agreement”).




     This Note is free from all taxes, liens, claims and encumbrances with respect to the issue
thereof and shall not be subject to preemptive rights or other similar rights of shareholders of
the Borrower and will not impose personal liability upon the holder thereof.



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     The following terms shall apply to this Note:



ARTICLE I. CONVERSION RIGHTS




          1.1 Conversion Right.




               (a) The Holder shall have the right from time to time, and at any time on or prior to the
earlier of (i) the Maturity Date and (ii) the date of payment of (y) the Default Amount (as defined
in Article III) pursuant to Section 1.6(a) or Article III, or (z) any payments pursuant to Section
1.7, each in respect of the remaining outstanding principal amount of this Note, to convert all or
any part of the outstanding and unpaid principal amount of this Note and accrued interest into
fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue
Date, or any shares of capital stock or other securities of the Borrower into which such Common
Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”)
determined as provided herein (a “Conversion”); provided, however, that in no event
shall the Holder be entitled to convert any portion of this Note in excess of that portion of this
Note upon conversion of which the sum of: (1) the number of shares of Common Stock beneficially
owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised
or unconverted portion of any other security of the Borrower subject to a limitation on conversion
or exercise analogous to the limitations contained herein), and (2) the number of shares of Common
Stock issuable upon the conversion of the portion of this Note with respect to which the
determination of this proviso is being made, would result in beneficial ownership by the Holder and
its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations
13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The number of shares
of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the
Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date
specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of
Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below;
provided that the Notice of Conversion is submitted by facsimile (or by other means resulting in,
or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York
time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with
respect to any conversion of this Note, the sum of: (1) the principal amount of this Note to be
converted in such conversion, plus (2) at the Borrower’s option, accrued and unpaid
interest, if any, on such principal amount at the interest rates provided in this Note to the
Conversion Date, provided, however, that the Company shall have the right to pay any or all
interest in cash, plus (3) at the Borrower’s option, Default Interest, if any, on the
amounts referred to in the immediately preceding clauses (1) and/or (2). The term “Determination
Date” means the last business day of each month after the Issue Date.



          1.2 Conversion Price.




               (a) Calculation of Conversion Price. The Conversion Price shall be the lesser of (i)
the Variable Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (as defined
herein) (subject, in each case, to equitable adjustments for stock splits, stock dividends or
rights offerings by the Borrower relating to the Borrower’s securities or the securities of any
subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary
distributions and similar events). The “Variable Conversion



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Price” shall mean the Applicable Percentage (as defined herein) multiplied by the Market Price
(as defined herein). “Market Price” means the average of the lowest three (3) Trading Prices (as
defined below) for the Common Stock during the ten (10) Trading Day period ending one Trading Day
prior to the date the Conversion Notice is sent by the Holder to the Borrower via facsimile (the
“Conversion Date”). “Trading Price” means, for any security as of any date, the closing bid on the
Over-the-Counter Bulletin Board (the “OTCBB”) or, if not listed on the OTCBB, the closing bid of
such security on the principal securities exchange or trading market where such security is listed
or traded or, if no closing bid of such security is available in any of the foregoing manners, the
average of the closing bid of any market makers for such security that are listed in the “pink
sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such
security on such date in the manner provided above, the Trading Price shall be the fair market
value as mutually determined by the Borrower and the holders of a majority in interest of the Notes
being converted for which the calculation of the Trading Price is required in order to determine
the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is
listed for any period on the OTCBB, or on the principal securities exchange or other securities
market on which the Common Stock is then being traded. “Applicable Percentage” shall mean 75%.
“Fixed Conversion Price” shall mean $1.07 per share



               (b) Conversion Price During Major Announcements. Notwithstanding anything contained
in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that
it intends to consolidate or merge with any other corporation (other than a merger in which the
Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or
transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity
(including the Borrower) publicly announces a tender offer to purchase 50% or more of the
Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in
clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion
Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion
Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which
would have been applicable for a Conversion occurring on the Announcement Date and (y) the
Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a).
For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any
proposed transaction or tender offer (or takeover scheme) for which a public announcement as
contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of
clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or
publicly announces the termination or abandonment of the proposed transaction or tender offer (or
takeover scheme) which caused this Section 1.2(b) to become operative.



          1.3 Authorized Shares. The Borrower covenants that during the period the conversion
right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient
number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the
full conversion of this Note and the other Notes issued pursuant to the Purchase Agreement. The
Borrower is required at all times to have authorized and reserved two times the number of shares
that is actually issuable upon full conversion of the Notes (based on the Conversion Price of the
Notes on the last day of such month (the “Reserved Amount”). The Reserved Amount shall be
increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(h)
of the Purchase Agreement. The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any
securities or make any change to its capital structure which would change the number of shares of
Common Stock into which the Notes shall be convertible at the then current Conversion Price, the
Borrower shall at the same time make proper provision so that thereafter there shall be a
sufficient number of shares of Common




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Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding
Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to
issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that
its issuance of this Note shall constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms and conditions of this Note.




          If, at any time a Holder of this Note submits a Notice of Conversion, and the Borrower does
not have sufficient authorized but unissued shares of Common Stock available to effect such
conversion in accordance with the provisions of this Article I (a “Conversion Default”), subject to
Section 4.8, the Borrower shall issue to the Holder all of the shares of Common Stock which are
then available to effect such conversion. The portion of this Note which the Holder included in
its Conversion Notice and which exceeds the amount which is then convertible into available shares
of Common Stock (the “Excess Amount”) shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the terms hereof until (and at the
Holder’s option at any time after) the date additional shares of Common Stock are authorized by the
Borrower to permit such conversion, at which time the Conversion Price in respect thereof shall be
the lesser of: (i) the Conversion Price on the Conversion Default Date (as defined below) and (ii)
the Conversion Price on the Conversion Date thereafter elected by the Holder in respect thereof.
In addition, the Borrower shall pay to the Holder payments (“Conversion Default Payments”) for a
Conversion Default in the amount of: (x) the sum of (1) the then outstanding principal
amount of this Note plus (2) accrued and unpaid interest on the unpaid principal amount of
this Note through the Authorization Date (as defined below) plus (3) Default Interest, if
any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y) .24,
multiplied by (z) (N/365), where N = the number of days from the day the holder submits a
Notice of Conversion giving rise to a Conversion Default (the “Conversion Default Date”) to the
date (the “Authorization Date”) that the Borrower authorizes a sufficient number of shares of
Common Stock to effect conversion of the full outstanding principal balance of this Note. The
Borrower shall use its best efforts to authorize a sufficient number of shares of Common Stock as
soon as practicable following the earlier of: (i) such time that the Holder notifies the Borrower
or that the Borrower otherwise becomes aware that there are or likely will be insufficient
authorized and unissued shares to allow full conversion thereof and (ii) a Conversion Default. The
Borrower shall send notice to the Holder of the authorization of additional shares of Common Stock,
the Authorization Date and the amount of Holder’s accrued Conversion Default Payments. The accrued
Conversion Default Payments for each calendar month shall be paid in cash or shall be convertible
into Common Stock (at such time as there are sufficient authorized shares of Common Stock) at the
applicable Conversion Price, at the Borrower’s option, as follows:




               (a) In the event Holder elects to take such payment in cash, cash payment shall be made to
Holder by the fifth (5th) day of the month following the month in which it has accrued;
and



               (b) In the event Holder elects to take such payment in Common Stock, the Holder may convert
such payment amount into Common Stock at the Conversion Price (as in effect at the time of
conversion) at any time after the fifth day of the month following the month in which it has
accrued in accordance with the terms of this Article I (so long as there is then a sufficient
number of authorized shares of Common Stock).



          The Holder’s election shall be made in writing to the Borrower at any time prior to 6:00 p.m.,
New York, New York time, on the third day of the month following the month in which Conversion
Default




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payments have accrued. If no election is made, the Holder shall be deemed to have elected to
receive cash. Nothing herein shall limit the Holder’s right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) for the Borrower’s failure to maintain a
sufficient number of authorized shares of Common Stock, and each holder shall have the right to
pursue all remedies available at law or in equity (including degree of specific performance and/or
injunctive relief).




          1.4 Method of Conversion.




               (a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by
the Holder in whole or in part at any time from time to time after the Issue Date, by: (A)
submitting to the Borrower a Notice of Conversion (by facsimile or other reasonable means of
communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and
(B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.



               (b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set
forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall
not be required to physically surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical
surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such
records of the Borrower shall be controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder
may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower,
whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of
like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes)
may request, representing in the aggregate the remaining unpaid principal amount of this Note. The
Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note represented by this Note may be less than the amount
stated on the face hereof.



               (c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or
other securities or property on conversion of this Note in a name other than that of the Holder (or
in street name), and the Borrower shall not be required to issue or deliver any such shares or
other securities or property unless and until the person or persons (other than the Holder or the
custodian in whose street name such shares are to be held for the Holder’s account) requesting the
issuance thereof shall have paid to the Borrower the amount of any such tax or shall have
established to the satisfaction of the Borrower that such tax has been paid.



               (d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the
Holder of a facsimile transmission (or other reasonable means of communication) of a Notice of
Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower
shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3) business days
after such receipt (and, solely in the case of conversion of the entire unpaid principal amount
hereof, surrender of this Note) (such third business day being hereinafter referred to as the
“Deadline”) in accordance with the terms hereof and the Purchase Agreement (including, without
limitation, in accordance with the requirements of Section 2(g) of the Purchase Agreement



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that certificates for shares of Common Stock issued on or after the effective date of the
Registration Statement upon conversion of this Note shall not bear any restrictive legend).



               (e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a
Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock
issuable upon such conversion, the outstanding principal amount and the amount of accrued and
unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower
defaults on its obligations under this Article I, all rights with respect to the portion of this
Note being so converted shall forthwith terminate except the right to receive the Common Stock or
other securities, cash or other assets, as herein provided, on such conversion. If the Holder
shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and
deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the
absence of any action by the Holder to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder
of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other
circumstance which might otherwise limit such obligation of the Borrower to the Holder in
connection with such conversion. The Conversion Date specified in the Notice of Conversion shall
be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00
p.m., New York, New York time, on such date.



               (f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical
certificates representing the Common Stock issuable upon conversion, provided the Borrower’s
transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions
contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause
its transfer agent to electronically transmit the Common Stock issuable upon conversion to the
Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal
Agent Commission (“DWAC”) system.



               (g) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting
the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the
parties agree that if delivery of the Common Stock issuable upon conversion of this Note is more
than three (3) business days after the Deadline (other than a failure due to the circumstances
described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall
pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails
to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the
month following the month in which it has accrued or, at the option of the Holder (by written
notice to the Borrower by the first day of the month following the month in which it has accrued),
shall be added to the principal amount of this Note, in which event interest shall accrue thereon
in accordance with the terms of this Note and such additional principal amount shall be convertible
into Common Stock in accordance with the terms of this Note.



          1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of
this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective
registration statement under the Act, or (ii) the Borrower or its transfer agent shall have been
furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary
for opinions of counsel in comparable transactions) to the effect that the shares to be sold or
transferred may be sold or transferred pursuant to an exemption from such registration, or (iii)
such shares are sold or transferred pursuant to Rule 144 under the Act




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(or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as
defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in
accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase
Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal
provisions set forth below), until such time as the shares of Common Stock issuable upon conversion
of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date that can then be
immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note
that has not been so included in an effective registration statement or that has not been sold
pursuant to an effective registration statement or an exemption that permits removal of the legend,
shall bear a legend substantially in the following form, as appropriate:





“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT.”



          The legend set forth above shall be removed and the Borrower shall issue to the Holder a new
certificate therefor free of any transfer legend if: (i) the Borrower or its transfer agent shall
have received an opinion of counsel, in form, substance and scope customary for opinions of counsel
in comparable transactions, to the effect that a public sale or transfer of such Common Stock may
be made without registration under the Act and the shares are so sold or transferred, (ii) such
Holder provides the Borrower or its transfer agent with reasonable assurances that the Common Stock
issuable upon conversion of this Note (to the extent such securities are deemed to have been
acquired on the same date) can be sold pursuant to Rule 144 or (iii) in the case of the Common
Stock issuable upon conversion of this Note, such security is registered for sale by the Holder
under an effective registration statement filed under the Act or otherwise may be sold pursuant to
Rule 144 without any restriction as to the number of securities as of a particular date that can
then be immediately sold.




          1.6 Effect of Certain Events.




               (a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale,
conveyance or disposition of all or substantially all of the assets of the Borrower, the
effectuation by the Borrower of a transaction or series of related transactions in which more than
50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other
business combination of the Borrower with or into any other Person (as defined below) or Persons
when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as
defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon
the consummation of and as a condition to such transaction an amount equal to the Default Amount
(as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall
mean any individual, corporation, limited liability company, partnership, association, trust or
other entity or organization.



               (b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is
issued and outstanding and prior to conversion of all of the Notes, there shall be any merger,
consolidation,



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exchange of shares, recapitalization, reorganization, or other similar event, as a result of
which shares of Common Stock of the Borrower shall be changed into the same or a different number
of shares of another class or classes of stock or securities of the Borrower or another entity, or
in case of any sale or conveyance of all or substantially all of the assets of the Borrower other
than in connection with a plan of complete liquidation of the Borrower, then the Holder of this
Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder
would have been entitled to receive in such transaction had this Note been converted in full
immediately prior to such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect to the rights and
interests of the Holder of this Note to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable
upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion hereof. The
Borrower shall not effect any transaction described in this Section 1.6(b) unless (a) it first
gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least
fifteen (15) days prior written notice) of the record date of the special meeting of shareholders
to approve, or if there is no such record date, the consummation of, such merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar event or sale of assets
(during which time the Holder shall be entitled to convert this Note) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations
of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers or share exchanges.



               (c) Adjustment Due to Distribution. If the Borrower shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a
dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of
capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note
shall be entitled, upon any conversion of this Note after the date of record for determining
shareholders entitled to such Distribution, to receive the amount of such assets which would have
been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion
had such Holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.



               (d) Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued
and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is
deemed to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Fixed Conversion Price in effect on
the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Fixed Conversion Price will be reduced
to the amount of the consideration per share received by the Borrower in such Dilutive Issuance;
provided that only one adjustment will be made for each Dilutive Issuance.



               The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in
any manner issues or grants any warrants, rights or options (not including employee stock option
plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such
warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter
referred to as “Options”) and



28









 







the price per share for which Common Stock is issuable upon the exercise of such Options is
less than the Fixed Conversion Price then in effect, then the Fixed Conversion Price shall be equal
to such price per share. For purposes of the preceding sentence, the “price per share for which
Common Stock is issuable upon the exercise of such Options” is determined by dividing: (i) the
total amount, if any, received or receivable by the Borrower as consideration for the issuance or
granting of all such Options, plus the minimum aggregate amount of additional consideration, if
any, payable to the Borrower upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number
of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion
of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be
made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon exercise of such Options.



               Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if
the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of Options), and the price
per share for which Common Stock is issuable upon such conversion or exchange is less than the
Fixed Conversion Price then in effect, then the Fixed Conversion Price shall be equal to such price
per share. For the purposes of the preceding sentence, the “price per share for which Common Stock
is issuable upon such conversion or exchange” is determined by dividing: (i) the total amount, if
any, received or receivable by the Borrower as consideration for the issuance or sale of all such
Convertible Securities, plus the minimum aggregate amount of additional consideration, if any,
payable to the Borrower upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment to the Fixed Conversion Price will be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities.



               (e) Purchase Rights. If, at any time when any Notes are issued and outstanding, the
Borrower issues any convertible securities or rights to purchase stock, warrants, securities or
other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock,
then the Holder of this Note will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder
had held the number of shares of Common Stock acquirable upon complete conversion of this Note
(without regard to any limitations on conversion contained herein) 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.



               (f) Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of
the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its
expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the
Holder of a certificate setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written
request at any time of the Holder, furnish to such Holder a like certificate setting forth: (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of the Note.



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          1.7 Trading Market Limitations. Unless permitted by the applicable rules and
regulations of the principal securities market on which the Common Stock is then listed or traded,
in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the
other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of
Common Stock that the Borrower can issue pursuant to any rule of the principal United States
securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which
shall be 19.99% of the total shares outstanding on the Closing Date (as defined in the Purchase
Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common Stock occurring
after the date hereof. Once the Maximum Share Amount has been issued (the date of which is
hereinafter referred to as the “Maximum Conversion Date”), if the Borrower fails to eliminate any
prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over the Borrower or any
of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the
Maximum Share Amount (a “Trading Market Prepayment Event”), in lieu of any further right to convert
this Note, and in full satisfaction of the Borrower’s obligations under this Note, the Borrower
shall pay to the Holder, within fifteen (15) business days of the Maximum Conversion Date (the
“Trading Market Prepayment Date”), an amount equal to 120% times the sum of: (a)
the then outstanding principal amount of this Note immediately following the Maximum Conversion
Date, plus (b) accrued and unpaid interest on the unpaid principal amount of this Note to
the Trading Market Prepayment Date, plus (c) Default Interest, if any, on the amounts
referred to in clause (a) and/or (b) above, plus (d) any optional amounts that may be added
thereto at the Maximum Conversion Date by the Holder in accordance with the terms hereof (the then
outstanding principal amount of this Note immediately following the Maximum Conversion Date,
plus the amounts referred to in clauses (b), (c) and (d) above shall collectively be
referred to as the “Remaining Convertible Amount”). With respect to each Holder of Notes, the
Maximum Share Amount shall refer to such Holder’s pro rata share thereof determined
in accordance with Section 4.8 below. In the event that the sum of: (x) the aggregate number of
shares of Common Stock issued upon conversion of this Note and the other Notes issued pursuant to
the Purchase Agreement plus (y) the aggregate number of shares of Common Stock that remain
issuable upon conversion of this Note and the other Notes issued pursuant to the Purchase
Agreement, represents at least one hundred percent (100%) of the Maximum Share Amount (the
“Triggering Event”), the Borrower will use its best efforts to seek and obtain Shareholder Approval
(or obtain such other relief as will allow conversions hereunder in excess of the Maximum Share
Amount) as soon as practicable following the Triggering Event and before the Maximum Conversion
Date. As used herein, “Shareholder Approval” means approval by the shareholders of the Borrower to
authorize the issuance of the full number of shares of Common Stock which would be issuable upon
full conversion of the then outstanding Notes but for the Maximum Share Amount.




          1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i)
the shares covered thereby (other than the shares, if any, which cannot be issued because their
issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share
Amount) shall be deemed converted into shares of Common Stock, and (ii) the Holder’s rights as a
Holder of such converted portion of this Note shall cease and terminate, excepting only the right
to receive certificates for such shares of Common Stock and to any remedies provided herein or
otherwise available at law or in equity to such Holder because of a failure by the Borrower to
comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business day after the
expiration of the Deadline with respect to a conversion of any portion of this Note for any reason,
then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so
notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to
such unconverted portions of this Note




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and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or,
if the Note has not been surrendered, adjust its records to reflect that such portion of this Note
has not been converted. In all cases, the Holder shall retain all of its rights and remedies
(including, without limitation, (i) the right to receive Conversion Default Payments pursuant to
Section 1.3 to the extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this
Note.




ARTICLE II. CERTAIN COVENANTS




          2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not without the Holder’s written consent: (a) pay, declare or
set apart for such payment, any dividend or other distribution (whether in cash, property or other
securities) on shares of capital stock other than dividends on shares of Common Stock solely in the
form of additional shares of Common Stock, or (b) directly or indirectly or through any subsidiary
make any other payment or distribution in respect of its capital stock except for distributions
pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s
disinterested directors.




          2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the Holder’s written consent redeem,
repurchase or otherwise acquire (whether for cash or in exchange for property or other securities
or otherwise) in any one transaction or series of related transactions any shares of capital stock
of the Borrower or any warrants, rights or options to purchase or acquire any such shares.




          2.3 Borrowings. Except for debt financing from shareholders of Borrower (determined
as of the Issue Date) that is subordinated to this Note, so long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the Holder’s written consent, create,
incur, assume or suffer to exist any liability for borrowed money, except (a) borrowings in
existence or committed on the date hereof and of which the Borrower has informed Holder in writing
prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in
the ordinary course of business, or (c) borrowings, the proceeds of which shall be used to repay
this Note.




          2.4 Sale of Assets. So long as the Borrower shall have any obligation under this
Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise
dispose of any significant portion of its assets outside the ordinary course of business. Any
consent to the disposition of any assets may be conditioned on a specified use of the proceeds of
disposition. However, with the Holder’s prior written consent which shall not be unreasonably
withheld, Borrower can sell substantially all of its assets if (i) the Note is paid in accordance
with its terms in such transaction or (ii) the acquirer assumes the obligations hereunder and is a
publicly traded corporation whose common stock is listed or traded on the OTCBB, Nasdaq, Nasdaq
Small Cap, NYSE or AMEX.




          2.5 Advances and Loans. So long as the Borrower shall have any obligation under this
Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make
advances to any person, firm, joint venture or corporation, including, without limitation,
officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits
or advances: (a) in existence or committed on




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the date hereof and which the Borrower has informed Holder in writing prior to the date
hereof, (b) made in the ordinary course of business, or (c) not in excess of $50,000.




          2.6 Contingent Liabilities. So long as the Borrower shall have any obligation under
this Note, the Borrower shall not, without the Holder’s written consent, which shall not be
unreasonably withheld, assume, guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any person, firm, partnership, joint venture or corporation,
except by the endorsement of negotiable instruments for deposit or collection and except
assumptions, guarantees, endorsements and contingencies: (a) in existence or committed on the date
hereof and which the Borrower has informed Holder in writing prior to the date hereof, and (b)
similar transactions in the ordinary course of business.




ARTICLE III. EVENTS OF DEFAULT




          If any of the following events of default (each, an “Event of Default”) shall occur:




          3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal
hereof or interest thereon when due on this Note, whether at maturity, upon a Trading Market
Prepayment Event pursuant to Section 1.7, upon acceleration or otherwise;




          3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to
the Holder (or announces or threatens that it will not honor its obligation to do so) upon exercise
by the Holder of the conversion rights of the Holder in accordance with the terms of this Note (for
a period of at least ninety (90) days, if such failure is solely as a result of the circumstances
governed by Section 1.3 and the Borrower is using its best efforts to authorize a sufficient number
of shares of Common Stock as soon as practicable), fails to transfer or cause its transfer agent to
transfer (electronically or in certificated form) any certificate for shares of Common Stock issued
to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this
Note, or fails to remove any restrictive legend (or to withdraw any stop transfer instructions in
respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any
announcement, statement or threat that it does not intend to honor the obligations described in
this paragraph) and any such failure shall continue uncured (or any announcement, statement or
threat not to honor its obligations shall not be rescinded in writing) for three (3) days after the
Borrower shall have been notified thereof in writing by the Holder;




          3.3 Breach of Covenants. The Borrower breaches any material covenant or other
material term or condition contained in Sections 1.3, 1.6 or 1.7 of this Note, or Sections 4(c),
4(e), 4(h), 4(i), 4(j) or 5 of the Purchase Agreement and such breach continues for a period of ten
(10) days after written notice thereof to the Borrower from the Holder;




          3.4 Breach of Representations and Warranties. Any representation or warranty of the
Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto
or in connection herewith (including, without limitation, the Purchase Agreement), shall be false
or misleading in any material respect when made and the breach of which has (or with the passage of
time will have) a material adverse effect on the rights of the Holder with respect to this Note or
the Purchase Agreement;




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          3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an
assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business, or such a receiver or
trustee shall otherwise be appointed;




          3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed
against the Borrower or any subsidiary of the Borrower or any of its property or other assets for
more than $250,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20)
days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld;




          3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Borrower or any subsidiary of the Borrower;




          3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the
Common Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq
National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock
Exchange; or




          3.9 Default Under Other Notes. An Event of Default has occurred and is continuing
under any of the other Notes issued pursuant to the Purchase Agreement, then, upon the occurrence
and during the continuation of any Event of Default specified in Section 3.1, 3.2, 3.3, 3.4, 3.6,
3.8 or 3.9, at the option of the Holders of a majority of the aggregate principal amount of the
outstanding Notes issued pursuant to the Purchase Agreement exercisable through the delivery of
written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of
an Event of Default specified in Section 3.5 or 3.7, the Notes shall become immediately due and
payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations
hereunder, an amount equal to the greater of (i) 140% times the sum of (w) the then
outstanding principal amount of this Note plus (x) accrued and unpaid interest on the
unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”)
plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x)
plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the
then outstanding principal amount of this Note to the date of payment plus the amounts
referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii)
the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest
number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default
Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory
Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable
Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific
Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied
by (b) the highest closing bid price for the Common Stock during the period beginning on the
date of first occurrence of the Event of Default and ending one day prior to the Mandatory
Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately
become due and payable, all without demand, presentment or notice, all of which hereby are
expressly waived, together with all costs, including, without limitation, legal fees and expenses,
of collection, and the Holder shall be entitled to exercise all other rights and remedies available
at law or in equity. If the Borrower fails to pay the Default Amount within five (5) business days
of written notice that such amount is due and payable, then the Holder shall have the right at any
time, so long as the Borrower remains in default (and so long and to the extent that there are
sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue,
in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the
Default Amount divided by the Conversion Price then in effect.




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ARTICLE IV. MISCELLANEOUS




          4.1 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 privileges. All rights and remedies
existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise
available.




          4.2 Notices. Any notice herein required or permitted to be given shall be in writing
and may be personally served or delivered by courier or sent by United States mail and shall be
deemed to have been given upon receipt if personally served (which shall include telephone line
facsimile transmission) or sent by courier or three (3) days after being deposited in the United
States mail, certified, with postage pre-paid and properly addressed, if sent by mail. For the
purposes hereof, the address of the Holder shall be as shown on the records of the Borrower; and
the address of the Borrower shall be 2300 NW Corporate Boulevard, Suite 123, Boca Raton, Florida
33431, facsimile number: 561-995-2449. Both the Holder and the Borrower may change the address for
service by service of written notice to the other as herein provided.




          4.3 Amendments. This Note and any provision hereof may only be amended by an
instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference
thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued
pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented,
then as so amended or supplemented.




          4.4 Assignability. This Note shall be binding upon the Borrower and its successors
and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each
transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933
Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.




          4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower
shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.




          4.6 Governing Law. THIS NOTE SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER
HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND UNITED STATES FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS ENTERED
INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS
MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT
OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY




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SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY
DISPUTE ARISING UNDER THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.




          4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay
an amount in excess of the outstanding principal amount (or the portion thereof required to be paid
at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower
and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this
Note may be difficult to determine and the amount to be so paid by the Borrower represents
stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of
the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Note at a price in excess of the price paid for such shares
pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated
damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a
cash payment without the opportunity to convert this Note into shares of Common Stock.




          4.8 Allocations of Maximum Share Amount and Reserved Amount. The Maximum Share Amount
and Reserved Amount shall be allocated pro rata among the Holders of Notes based on the principal
amount of such Notes issued to each Holder. Each increase to the Maximum Share Amount and Reserved
Amount shall be allocated pro rata among the Holders of Notes based on the principal amount of such
Notes held by each Holder at the time of the increase in the Maximum Share Amount or Reserved
Amount. In the event a Holder shall sell or otherwise transfer any of such Holder’s Notes, each
transferee shall be allocated a pro rata portion of such transferor’s Maximum Share Amount and
Reserved Amount. Any portion of the Maximum Share Amount or Reserved Amount which remains
allocated to any person or entity which does not hold any Notes shall be allocated to the remaining
Holders of Notes, pro rata based on the principal amount of such Notes then held by such Holders.




          4.9 Damages Shares. The shares of Common Stock that may be issuable to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof (“Damages Shares”) shall be treated as Common Stock
issuable upon conversion of this Note for all purposes hereof and shall be subject to all of the
limitations and afforded all of the rights of the other shares of Common Stock issuable hereunder.
For purposes of calculating interest payable on the outstanding principal amount hereof, except as
otherwise provided herein, amounts convertible into Damages Shares (“Damages Amounts”) shall not
bear interest but must be converted prior to the conversion of any outstanding principal amount
hereof, until the outstanding Damages Amounts is zero.




          4.10 Denominations. At the request of the Holder, upon surrender of this Note, the
Borrower shall promptly issue new Notes in the aggregate outstanding principal amount hereof, in
the form hereof, in such denominations of at least $50,000 as the Holder shall request.




          4.11 Purchase Agreement. By its acceptance of this Note, each Holder agrees to be
bound by the applicable terms of the Purchase Agreement.




          4.12 Notice of Corporate Events. Except as otherwise provided below, the Holder of
this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it
converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification
of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information
sent to shareholders). In the




35









 







event of any taking by the Borrower of a record of its shareholders for the purpose of
determining shareholders who are entitled to receive payment of any dividend or other distribution,
any right to subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation, reclassification or recapitalization) any share of any class or any other securities
or property, or to receive any other right, or for the purpose of determining shareholders who are
entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially
all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the
record date specified therein (or thirty (30) days prior to the consummation of the transaction or
event, whichever is earlier), of the date on which any such record is to be taken for the purpose
of such dividend, distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent known at such
time. The Borrower shall make a public announcement of any event requiring notification to the
Holder hereunder substantially simultaneously with the notification to the Holder in accordance
with the terms of this Section 4.12.



          4.13 Remedies. The Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for
a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach
or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be
entitled, in addition to all other available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any
breach of this Note and to enforce specifically the terms and provisions thereof, without the
necessity of showing economic loss and without any bond or other security being required.




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