"CONVERSION
SCHEDULE"). IF THE HOLDER IS CONVERTING LESS THAN ALL OF THE PRINCIPAL AMOUNT
REPRESENTED BY THIS DEBENTURE, OR IF A CONVERSION HEREUNDER MAY NOT BE EFFECTED
IN FULL DUE TO THE APPLICATION OF SECTION 5(B), THE BORROWER SHALL HONOR SUCH
CONVERSION TO THE EXTENT PERMISSIBLE HEREUNDER AND SHALL PROMPTLY DELIVER TO THE
HOLDER A CONVERSION SCHEDULE INDICATING THE PRINCIPAL AMOUNT WHICH HAS NOT BEEN
CONVERTED.
(B)
CERTAIN CONVERSION RESTRICTIONS.
(I)
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE NUMBER OF
SHARES OF COMMON STOCK THAT MAY BE ACQUIRED BY A HOLDER UPON ANY CONVERSION OF
DEBENTURES (OR OTHERWISE IN RESPECT HEREOF) SHALL BE LIMITED TO THE EXTENT
NECESSARY TO INSURE THAT, FOLLOWING SUCH CONVERSION (OR OTHER ISSUANCE), THE
TOTAL NUMBER OF SHARES OF COMMON STOCK THEN BENEFICIALLY OWNED BY SUCH HOLDER
AND ITS AFFILIATES AND ANY OTHER PERSONS WHOSE BENEFICIAL OWNERSHIP OF COMMON
STOCK WOULD BE AGGREGATED WITH SUCH HOLDER'S FOR PURPOSES OF SECTION 13(D) OF
THE EXCHANGE ACT, DOES NOT EXCEED 9.999% OF THE TOTAL NUMBER OF ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK (INCLUDING FOR SUCH PURPOSE THE SHARES OF
COMMON STOCK ISSUABLE UPON SUCH CONVERSION).
FOR SUCH PURPOSES, BENEFICIAL
OWNERSHIP SHALL BE DETERMINED IN ACCORDANCE WITH SECTION 13(D) OF THE EXCHANGE
ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. THIS PROVISION SHALL
NOT RESTRICT THE NUMBER OF SHARES OF COMMON STOCK WHICH A HOLDER MAY RECEIVE OR
BENEFICIALLY OWN IN ORDER TO DETERMINE THE AMOUNT OF SECURITIES OR OTHER
CONSIDERATION THAT SUCH HOLDER MAY RECEIVE IN THE EVENT OF A MERGER, SALE OR
OTHER BUSINESS COMBINATION OR RECLASSIFICATION INVOLVING THE BORROWER AS
CONTEMPLATED HEREIN.
THIS RESTRICTION MAY NOT BE WAIVED.
(II)
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS DEBENTURE, INCLUDING
WITHOUT LIMITATION ANY ADJUSTMENTS TO THE CONVERSION PRICE PURSUANT TO
SECTION 12(C) BELOW, IF THE BORROWER HAS NOT PREVIOUSLY OBTAINED SHAREHOLDER
APPROVAL (AS DEFINED BELOW), THEN THE BORROWER MAY NOT ISSUE SHARES OF COMMON
STOCK IN EXCESS OF THE ISSUABLE MAXIMUM UPON CONVERSIONS OF THIS DEBENTURE. THE
"ISSUABLE MAXIMUM" MEANS A NUMBER OF SHARES OF COMMON STOCK EQUAL TO 2,714,286.
IF ON ANY CONVERSION DATE: (A) THE AGGREGATE NUMBER OF SHARES OF COMMON STOCK
THAT WOULD THEN BE ISSUABLE UPON CONVERSION IN FULL OF ALL THEN OUTSTANDING
PRINCIPAL AMOUNT OF DEBENTURES WOULD EXCEED THE ISSUABLE MAXIMUM ON SUCH DATE,
AND (B) THE BORROWER SHALL NOT HAVE PREVIOUSLY OBTAINED THE VOTE OF
SHAREHOLDERS, AS MAY BE
6
REQUIRED BY THE APPLICABLE RULES AND REGULATIONS OF THE NASDAQ (OR ANY SUCCESSOR
ENTITY OR ANY OTHER ELIGIBLE MARKET ON WHICH THE COMPANY'S SECURITIES THEN
TRADE), APPLICABLE TO APPROVE THE ISSUANCE OF SHARES OF COMMON STOCK IN EXCESS
OF THE ISSUABLE MAXIMUM PURSUANT TO THE TERMS HEREOF (THE "SHAREHOLDER
APPROVAL"), THEN, THE BORROWER SHALL ISSUE TO THE HOLDER A NUMBER OF SHARES OF
COMMON STOCK EQUAL TO THE ISSUABLE MAXIMUM AND, WITH RESPECT TO THE REMAINDER OF
THE PRINCIPAL AMOUNT OF DEBENTURES THEN HELD BY THE HOLDER FOR WHICH A
CONVERSION WOULD RESULT IN AN ISSUANCE OF SHARES OF