BE MADE TO THE NEAREST CENT OR TO THE NEAREST ONE-HUNDREDTH OF
A SHARE, AS THE CASE MAY BE.
4.5
CONVERSION PROCEDURE.
(A)
OPTIONAL CONVERSION. TO EXERCISE THE RIGHT
TO CONVERT THIS NOTE INTO COMMON STOCK, THE HOLDER SHALL (I) PROVIDE THE COMPANY
WITH A TEN-DAY ADVANCE WRITTEN NOTICE OF CONVERSION SPECIFYING THE DATE AND
AMOUNT OF SUCH CONVERSION AND THE NAME IN WHICH THE SHARES SHALL BE ISSUED (IF
THE NAME IS OTHER THAN THAT OF HOLDER), (II) SURRENDER THIS NOTE TO THE COMPANY;
(III) FURNISH ANY APPROPRIATE ENDORSEMENTS AND DOCUMENTS REASONABLY REQUESTED BY
THE COMPANY, AND (IV) PAY ANY DOCUMENTARY, STAMP, TRANSFER OR SIMILAR TAX IF
REQUIRED.
(B)
AUTOMATIC CONVERSION. IF THIS NOTE IS TO BE
CONVERTED AUTOMATICALLY PURSUANT TO SECTION 4.4 ABOVE, WRITTEN NOTICE MUST BE
DELIVERED TO THE HOLDER AT THE ADDRESS LAST SHOWN ON THE RECORDS OF THE COMPANY
AT LEAST FIFTEEN (15) DAYS PRIOR TO THE CLOSING OF THE QUALIFIED OFFERING
(I) NOTIFYING THE HOLDER OF THE CONVERSION; (II) SPECIFYING THE PRINCIPAL AMOUNT
OF THE NOTE CONVERTED, AND THE AMOUNT OF ACCRUED AND UNPAID INTEREST; AND
(C) CALLING UPON THE HOLDER TO (A) RETURN AN ACKNOWLEDGEMENT TO THE COMPANY
WITHIN TEN (10) DAYS AFTER RECEIPT OF THE NOTICE SPECIFYING WHETHER THE HOLDER
ELECTS TO RECEIVE SHARES OR CASH FOR THE ACCRUED INTEREST AND (B) SURRENDER THIS
NOTE TO THE COMPANY IN EXCHANGE FOR SHARES AND CASH, IF ANY, IN THE MANNER AND
AT THE PLACE DESIGNATED BY THE COMPANY.
(C)
DELIVERY OF SHARES AND CASH. AS PROMPTLY AS
PRACTICABLE AFTER THE COMPANY'S RECEIPT OF THE WRITTEN NOTICE OF CONVERSION OR
ACKNOWLEDGEMENT OF AUTOMATIC CONVERSION, THE COMPANY SHALL DELIVER TO THE HOLDER
CERTIFICATES, WHETHER PAPER OR ELECTRONIC, REPRESENTING THE NUMBER OF FULLY PAID
AND NONASSESSABLE SHARES INTO WHICH THIS NOTE, OR SUCH PART THEREOF, MAY BE
CONVERTED, AND CASH, IF ANY, FOR THE ACCRUED INTEREST DUE AND PAYABLE.
THEREUPON, THE RIGHTS OF THE HOLDER AS A NOTEHOLDER SHALL CEASE AND THIS NOTE
SHALL BE DEEMED SATISFIED AND DISCHARGED.
4.6
FRACTIONAL SHARES. IN LIEU OF ISSUING ANY FRACTIONAL SHARES UPON
CONVERSION, THE COMPANY INSTEAD SHALL DELIVER AN AMOUNT OF CASH EQUAL TO SUCH
FRACTION MULTIPLIED BY THE CONVERSION PRICE THEN IN EFFECT.
B-3
5.
SECURITY INTEREST. IN ORDER TO SECURE THE PAYMENT AND
PERFORMANCE OF THE OBLIGATIONS HEREUNDER AND TO PROVIDE THE HOLDER WITH A
PREFERENCE UPON LIQUIDATION OF THE COMPANY, THE COMPANY HEREBY GRANTS TO THE
HOLDERS A SECURITY INTEREST (HEREIN CALLED THE "SECURITY INTEREST") IN AND TO
THE FOLLOWING PROPERTY (HEREINAFTER COLLECTIVELY REFERRED TO AS THE
"COLLATERAL"):
All assets of the Company, including without limitation any and all furniture,
fixtures, machinery, equipment, inventory, accounts, vehicles, prepaid
insurance, supplies, patents, patent rights, copyrights, trademarks, trade
names, goodwill, royalty rights, franchise rights, chattel paper, license
rights, documents, instruments, general intangibles, payment intangibles,
investment property and any and all other goods, now owned or hereafter acquired
by the Company and wherever located, together with all substitutions and
replacements for and products and proceeds of any of