COMPANY SHALL PAY LATE PAYMENTS TO THE HOLDER FOR ANY LATE
ISSUANCE OF CONVERSION SHARES IN THE FORM REQUIRED PURSUANT TO THIS ARTICLE II
UPON CONVERSION OF THIS NOTE, IN THE AMOUNT EQUAL TO $500 PER BUSINESS DAY AFTER
THE DELIVERY DATE.
THE COMPANY SHALL MAKE ANY PAYMENTS INCURRED UNDER THIS
SECTION IN IMMEDIATELY AVAILABLE FUNDS UPON DEMAND.
3.5
CONVERSION MECHANICS.
THE NUMBER OF SHARES
OF COMMON STOCK TO BE ISSUED UPON EACH CONVERSION OF THIS NOTE SHALL BE
DETERMINED BY DIVIDING THAT PORTION OF THE PRINCIPAL AND INTEREST AND FEES TO BE
CONVERTED, IF ANY, BY THE THEN APPLICABLE FIXED CONVERSION PRICE.
IN THE EVENT
OF ANY CONVERSIONS OF A PORTION OF THE OUTSTANDING PRINCIPAL AMOUNT PURSUANT TO
THIS ARTICLE III, SUCH CONVERSIONS SHALL BE DEEMED TO CONSTITUTE CONVERSIONS OF
THE OUTSTANDING PRINCIPAL AMOUNT APPLYING TO MONTHLY AMOUNTS FOR THE REMAINING
AMORTIZATION DATES IN CHRONOLOGICAL ORDER.
4
3.6
ADJUSTMENT PROVISIONS.
THE FIXED CONVERSION
PRICE AND NUMBER AND KIND OF SHARES OR OTHER SECURITIES TO BE ISSUED UPON
CONVERSION DETERMINED PURSUANT TO THIS NOTE SHALL BE SUBJECT TO ADJUSTMENT FROM
TIME TO TIME UPON THE OCCURRENCE OF CERTAIN EVENTS DURING THE PERIOD THAT THIS
CONVERSION RIGHT REMAINS OUTSTANDING, AS FOLLOWS:
(A)
RECLASSIFICATION.
IF THE COMPANY AT ANY
TIME SHALL, BY RECLASSIFICATION OR OTHERWISE, CHANGE THE COMMON STOCK INTO THE
SAME OR A DIFFERENT NUMBER OF SECURITIES OF ANY CLASS OR CLASSES, THIS NOTE, AS
TO THE UNPAID PRINCIPAL AMOUNT AND ACCRUED INTEREST THEREON, SHALL THEREAFTER BE
DEEMED TO EVIDENCE THE RIGHT TO PURCHASE AN ADJUSTED NUMBER OF SUCH SECURITIES
AND KIND OF SECURITIES AS WOULD HAVE BEEN ISSUABLE AS THE RESULT OF SUCH CHANGE
WITH RESPECT TO THE COMMON STOCK (I) IMMEDIATELY PRIOR TO OR (II) IMMEDIATELY
AFTER, SUCH RECLASSIFICATION OR OTHER CHANGE AT THE SOLE ELECTION OF THE HOLDER.
(B)
STOCK SPLITS, COMBINATIONS AND DIVIDENDS.
IF THE SHARES OF COMMON STOCK ARE SUBDIVIDED OR COMBINED INTO A GREATER OR
SMALLER NUMBER OF SHARES OF COMMON STOCK, OR IF A DIVIDEND IS PAID ON THE COMMON
STOCK OR ANY PREFERRED STOCK ISSUED BY THE COMPANY IN SHARES OF COMMON STOCK,
THE FIXED CONVERSION PRICE SHALL BE PROPORTIONATELY REDUCED IN CASE OF
SUBDIVISION OF SHARES OR STOCK DIVIDEND OR PROPORTIONATELY INCREASED IN THE CASE
OF COMBINATION OF SHARES, IN EACH SUCH CASE BY THE RATIO WHICH THE TOTAL NUMBER
OF SHARES OF COMMON STOCK OUTSTANDING IMMEDIATELY AFTER SUCH EVENT BEARS TO THE
TOTAL NUMBER OF SHARES OF COMMON STOCK OUTSTANDING IMMEDIATELY PRIOR TO SUCH
EVENT.
3.7
RESERVATION OF SHARES.
DURING THE PERIOD
THE CONVERSION RIGHT EXISTS, THE COMPANY WILL RESERVE FROM ITS AUTHORIZED AND
UNISSUED COMMON STOCK A SUFFICIENT NUMBER OF SHARES TO PROVIDE FOR THE ISSUANCE
OF CONVERSION SHARES UPON THE FULL CONVERSION OF THIS NOTE AND THE WARRANT.
THE
COMPANY REPRESENTS THAT UPON ISSUANCE, THE CONVERSION SHARES WILL BE DULY AND
VALIDLY ISSUED, FULLY PAID AND NON-ASSESSABLE.
THE COMPANY AGREES THAT ITS
ISSUANCE OF THIS NOTE SHALL CONSTITUTE FULL AUTHORITY TO ITS OFFICERS, AGENTS,
AND TRANSFER AGENTS WHO