CONDITIONS SET FORTH
HEREIN, EACH PURCHASER HEREBY SUBSCRIBES FOR AND COMMITS TO PURCHASE FROM
ISSUER, AND ISSUER HEREBY RESERVES FOR ISSUANCE AND COMMITS TO ISSUE AND SELL TO
EACH PURCHASER, A NOTE IN THE FACE AMOUNT, AND A WARRANT COVERING THE NUMBER OF
SHARES OF COMMON STOCK, SET FORTH ON SUCH PURCHASER'S SIGNATURE PAGE TO THIS
AGREEMENT, FOR THE SUBSCRIPTION PRICE SET FORTH ON SUCH SIGNATURE PAGE (THE
"SUBSCRIPTION PRICE").
2.2
MINIMUM AND MAXIMUM AMOUNTS.
EACH NOTE AND WARRANT WILL BE ISSUED
AS PART OF A SERIES OF ISSUANCES OF ONE OR MORE NOTES AND WARRANTS FOR (A) A
MINIMUM CUMULATIVE SUBSCRIPTION PRICE FOR ALL PARTICIPATING PURCHASERS OF
$2,000,000, AND (B) A MAXIMUM CUMULATIVE SUBSCRIPTION PRICE FOR ALL PURCHASERS
OF $3,000,000.
2.3
TERMS OF NOTES.
EACH NOTE WILL:
2.3.1
BE SUBSTANTIALLY IN THE FORM ATTACHED HERETO AS
EXHIBIT A;
2.3.2
BE ISSUED IN A FACE AMOUNT EQUAL TO 100% OF THE SUBSCRIPTION PRICE
PAID BY THE PURCHASER;
2.3.3
MATURE, AND BE DUE AND PAYABLE IN FULL, ON THE SECOND ANNIVERSARY OF
THE CLOSING DATE (THE "MATURITY DATE");
2.3.4
BEAR INTEREST AT THE RATE OF 8% PER ANNUM COMPOUNDED ON EACH JULY 15
AND JANUARY 15 DURING WHICH ANY PORTION OF PRINCIPAL OF THE NOTE SHALL REMAIN
OUTSTANDING AND BEAR INTEREST AT THE RATE OF 24% PER ANNUM UPON THE OCCURRENCE
AND DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT;
2.3.5
BE CONVERTIBLE AT ANY TIME AND FROM TIME TO TIME PRIOR TO REPAYMENT,
AT THE OPTION OF THE HOLDER OR, UNDER THE CIRCUMSTANCES DESCRIBED THEREIN, AT
THE OPTION OF ISSUER, INTO THAT NUMBER OF SHARES OF COMMON STOCK EQUAL TO
QUOTIENT OBTAINED BY DIVIDING (A) THE PRINCIPAL AND INTEREST OF THE NOTE BEING
CONVERTED, BY (B) THE CONVERSION PRICE OF THE NOTE, WHICH WILL INITIALLY BE
$0.55 AND BE SUBJECT TO ADJUSTMENT IN CERTAIN CIRCUMSTANCES AS SET FORTH IN THE
NOTE;
2.3.6
ENTITLE THE HOLDER TO HAVE ISSUER REGISTER THE COMMON STOCK ISSUABLE
UPON CONVERSION OF THE NOTE WITH THE SEC UNDER THE SECURITIES ACT PURSUANT TO
THE REGISTRATION RIGHTS AGREEMENT (THE "REGISTRATION RIGHTS AGREEMENT") TO BE
ENTERED INTO AMONG ISSUER, THE PURCHASERS AND THE PLACEMENT AGENT FOR THE
SECURITIES CONTEMPLATED HEREIN, IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS
EXHIBIT B;
2.3.7
BE SECURED, PARI PASSU WITH ALL OTHER NOTES, AS TO REPAYMENT, BY A
SECURITY INTEREST IN ALL OF ISSUER'S ASSETS, INCLUDING ITS INTELLECTUAL PROPERTY
RIGHTS, WHICH SECURITY INTEREST SHALL BE SUBORDINATE TO THE SECURITY INTEREST IN
SUCH ASSETS HELD BY THE BANK, BUT WHICH SECURITY INTEREST SHALL HAVE PRIORITY
WITH RESPECT ANY OTHER PERSON, FIRM OR ENTITY,
PURSUANT TO A SECURITY
AGREEMENT, IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT C-1, TO BE GIVEN
BY ISSUER TO THE COLLATERAL AGENT IN FAVOR OF THE PURCHASERS (THE "SECURITY
AGREEMENT") AND COLLATERAL ASSIGNMENTS OF PATENTS, TRADEMARKS AND COPYRIGHTS, IN
SUBSTANTIALLY THE FORMS ATTACHED HERETO AS EXHIBIT C-2, EXHIBIT C-3 AND
EXHIBIT C-4, RESPECTIVELY (COLLECTIVELY, THE "COLLATERAL ASSIGNMENTS");
3
2.3.8
NOT BE PREPAYABLE BY ISSUER WITHOUT THE WRITTEN CONSENT OF