ISSUANCES.
SUBJECT TO THE PROVISIONS OF THIS SECTION 3.7, IF THE BORROWER
SHALL AT ANY TIME PRIOR TO THE CONVERSION OR REPAYMENT IN FULL OF THE PRINCIPAL
AMOUNT ISSUE ANY SHARES OF COMMON STOCK TO A PERSON OTHER THAN THE HOLDER
(OTHERWISE THAN (I) PURSUANT TO SUBSECTIONS A OR B ABOVE; (II) PURSUANT TO
OPTIONS, WARRANTS, OR OTHER OBLIGATIONS TO ISSUE SHARES OUTSTANDING ON THE DATE
HEREOF AS SET FORTH IN THE SCHEDULES TO THE PURCHASE AGREEMENT DATED AS OF THE
DATE HEREOF BETWEEN THE BORROWER AND THE HOLDER, WHICH AGREEMENT IS INCORPORATED
HEREIN BY THIS REFERENCE (THE "PURCHASE AGREEMENT"); OR (III) PURSUANT TO
OPTIONS THAT MAY BE ISSUED UNDER ANY EMPLOYEE INCENTIVE STOCK OPTION AND/OR ANY
QUALIFIED STOCK OPTION PLAN ADOPTED BY THE BORROWER), FOR A CONSIDERATION PER
SHARE (THE "OFFER PRICE") LESS THAN THE FIXED CONVERSION PRICE IN EFFECT AT THE
TIME OF SUCH ISSUANCE, THEN THE FIXED CONVERSION PRICE SHALL BE IMMEDIATELY
RESET TO SUCH LOWER OFFER PRICE. FOR PURPOSES HEREOF, THE ISSUANCE OF ANY
SECURITY OF THE BORROWER CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE FOR
COMMON STOCK SHALL RESULT IN AN ADJUSTMENT TO THE CONVERSION PRICE ONLY UPON THE
CONVERSION, EXERCISE OR EXCHANGE OF SUCH SECURITIES.
D.
COMPUTATION OF CONSIDERATION. FOR PURPOSES OF ANY COMPUTATION RESPECTING
CONSIDERATION RECEIVED PURSUANT TO SUBSECTION C ABOVE, THE FOLLOWING SHALL
APPLY:
5
(A)
IN THE CASE OF THE ISSUANCE OF SHARES OF
COMMON STOCK FOR CASH, THE CONSIDERATION SHALL BE THE AMOUNT OF SUCH CASH,
PROVIDED THAT IN NO CASE SHALL ANY DEDUCTION BE MADE FOR ANY COMMISSIONS,
DISCOUNTS OR OTHER EXPENSES INCURRED BY THE COMPANY FOR ANY UNDERWRITING OF THE
ISSUE OR OTHERWISE IN CONNECTION THEREWITH;
(B)
IN THE CASE OF THE ISSUANCE OF SHARES OF
COMMON STOCK FOR A CONSIDERATION IN WHOLE OR IN PART OTHER THAN CASH, THE
CONSIDERATION OTHER THAN CASH SHALL BE DEEMED TO BE THE FAIR MARKET VALUE
THEREOF AS DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS OF THE COMPANY
(IRRESPECTIVE OF THE ACCOUNTING TREATMENT THEREOF); AND
(C)
IN THE CASE OF THE ISSUANCE OF SECURITIES
CONVERTIBLE INTO OR EXCHANGEABLE FOR SHARES OF COMMON STOCK, THE AGGREGATE
CONSIDERATION RECEIVED THEREFOR SHALL BE DEEMED TO BE THE CONSIDERATION RECEIVED
BY THE COMPANY FOR THE ISSUANCE OF SUCH SECURITIES PLUS THE ADDITIONAL MINIMUM
CONSIDERATION, IF ANY, TO BE RECEIVED BY THE COMPANY UPON THE CONVERSION OR
EXCHANGE THEREOF (THE CONSIDERATION IN EACH CASE TO BE DETERMINED IN THE SAME
MANNER AS PROVIDED IN CLAUSES (A) AND (B) OF THIS SUBSECTION (D)).
3.8
RESERVATION OF SHARES. DURING THE PERIOD THE CONVERSION RIGHT EXISTS, THE
BORROWER WILL RESERVE FROM ITS AUTHORIZED AND UNISSUED COMMON STOCK A SUFFICIENT
NUMBER OF SHARES TO PROVIDE FOR THE ISSUANCE OF COMMON STOCK UPON THE FULL
CONVERSION OF THIS NOTE.
THE BORROWER REPRESENTS THAT UPON ISSUANCE, SUCH
SHARES WILL BE DULY AND VALIDLY ISSUED, FULLY PAID AND NON-ASSESSABLE.
THE
BORROWER AGREES THAT ITS ISSUANCE OF THIS NOTE SHALL CONSTITUTE FULL AUTHORITY
TO ITS OFFICERS, AGENTS, AND TRANSFER AGENTS WHO ARE