Document:

ex102-phunwareseriesa202

   NEITHER  THE  ISSUANCE  AND  SALE  OF  THE  SECURITIES  REPRESENTED  BY  THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE ARE CONVERTIBLE  HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR  APPLICABLE  STATE  SECURITIES  LAWS.  THE  SECURITIES  MAY  NOT  BE  OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE  OF  (A)  AN  EFFECTIVE  REGISTRATION  STATEMENT  FOR  THE  SECURITIES  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED,  OR  (B)  AN  OPINION  OF  COUNSEL  TO  THE  HOLDER  (IF  REQUESTED  BY  THE  COMPANY),  IN  A  FORM  REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT  REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD  PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING  THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH  A  BONA  FIDE  MARGIN  ACCOUNT  OR  OTHER  LOAN  OR  FINANCING  ARRANGEMENT  SECURED  BY  THE  SECURITIES.  ANY  TRANSFEREE  OF  THIS  NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING  SECTIONS 3(c)(iii) AND 20(a) HEREOF.  THE PRINCIPAL AMOUNT REPRESENTED  BY  THIS  NOTE  AND,  ACCORDINGLY,  THE  SECURITIES  ISSUABLE  UPON  CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE  FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.   THIS  NOTE  HAS  BEEN  ISSUED  WITH  ORIGINAL  ISSUE  DISCOUNT  (“OID”).   PURSUANT  TO  TREASURY  REGULATION  §1.1275-3(b)(1),        MATT  AUNE,     A  REPRESENTATIVE  OF  THE  COMPANY  HEREOF  WILL,  BEGINNING  TEN  DAYS  AFTER THE ISSUANCE DATE OF THIS NOTE, PROMPTLY MAKE AVAILABLE TO  THE HOLDER UPON REQUEST THE INFORMATION DESCRIBED IN TREASURY  REGULATION §1.1275-3(b)(1)(i).  MATT AUNE MAY BE REACHED AT TELEPHONE  NUMBER (512) 693-4199.                                 PHUNWARE, INC.                          SERIES A SENIOR CONVERTIBLE NOTE   Issuance Date:  July __, 2020 (the “Issuance Date”) Original Principal Amount: U.S. $4,320,000          FOR VALUE RECEIVED, Phunware, Inc., a Delaware corporation (the “Company”),  hereby promises to pay to the order of Alto Opportunity Master Fund, SPC – Segregated Master  Portfolio B or its registered assigns (“Holder”) the amount set forth above as the Original Principal  Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise,  the “Principal”) when due, whether upon the Maturity Date, on any Installment Date with respect  to  the  Installment  Amount  due  on  such  Installment  Date  (each  as  defined  below), or  upon  acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to  pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate (as defined  below) from the date set forth above as the Issuance Date (the “Issuance Date”) until the same  becomes due and payable, whether upon the Maturity Date, on any Installment Date with respect  to the  Installment  Amount  due  on  such  Installment  Date, or  upon  acceleration,  conversion,  redemption or otherwise (in each case in accordance with the terms hereof).  This Series A Senior   Error! Unknown document property name. 

 

   Convertible  Note  (including  all  Senior Convertible  Notes  issued  in  exchange,  transfer  or  replacement hereof, this “Note”) is one of an issue of Senior Convertible Notes issued pursuant to  the Securities Purchase Agreement, dated as of July 14, 2020 (the “Subscription Date”), by and  among the Company and the investors (the “Buyers”) referred to therein, as amended from time  to time (collectively, the “Notes”, and such other Series A Senior Convertible Notes and Series B  Senior  Secured  Convertible  Notes issued  pursuant  to  the  Securities  Purchase  Agreement,  collectively, the “Other Notes”).  Certain capitalized terms used herein are defined in Section 33.         1.    PAYMENTS OF PRINCIPAL.  On each Installment Date, the Company shall pay  to  the  Holder  an  amount  equal  to  the  Installment  Amount  due  on  such  Installment  Date  in  accordance with Section 8. On the Maturity Date, the Company shall pay to the Holder an amount  in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid  Late  Charges  (as  defined  in  Section 26(c))  on  such Principal  and  Interest.   Other  than  as  specifically permitted by this Note, the Company may not prepay any portion of the outstanding  Principal, accrued and unpaid Interest, Make-Whole Amount or accrued and unpaid Late Charges  on Principal, Interest and Make-Whole Amount, if any.  Notwithstanding anything herein to the  contrary, with respect to any conversion or redemption hereunder, as applicable, the Company  shall convert or redeem, as applicable, First, all accrued and unpaid  Interest and Make-Whole  Amount, if any, hereunder and under any other Series A Notes held by such Holder, Second, all  accrued and unpaid Late Charges on any Principal, Interest and Make-Whole Amount, if any,  hereunder and under any other Series A Notes held by such Holder, Third, all other amounts (other  than Principal) outstanding under any other Series A Notes held by such Holder and, Fourth, all  Principal outstanding hereunder and under any other Series A Notes held by such Holder, in each  case, allocated pro rata among this Note and such other Series A Notes held by such Holder.         2.    INTEREST; INTEREST RATE.                 (a)   Interest on this Note shall commence accruing on the Issuance Date and        shall be computed on the basis of a 360-day year and twelve 30-day months and shall be        payable in arrears on each Interest Date (and if unpaid on an Interest Date, shall compound        on such Interest Date) and shall be payable in accordance with the terms of this Note.         Interest  shall  be  paid  (i)  on  each  Interest  Date  occurring  on  an  Installment  Date  in        accordance  with  Section 8 as  part  of  the  applicable  Installment  Amount  due  on  the        applicable  Installment  Date  and  (ii)  with  respect  to  each  other  Interest  Date,  on  such        Interest Date in cash.               (b)   Prior to the payment of Interest on an Interest Date, Interest on this Note        shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the        Conversion Amount on each Conversion Date in accordance with Section 3(b)(i) or upon        any  redemption  in  accordance  with  Section 13 or  any  required  payment  upon any        Bankruptcy Event of Default.  From and after the occurrence and during the continuance        of  any  Event  of  Default,  the  Interest  Rate  shall  automatically  be  increased  to  eighteen        percent (18.0%) per annum (the “Default Rate”).  In the event that such Event of Default        is  subsequently  cured  (and  no  other  Event  of  Default  then  exists, including,  without        limitation,  for  the  Company’s  failure  to  pay  such  Interest  at  the  Default  Rate  on  the        applicable Interest Date), the adjustment referred to in the preceding sentence shall cease        to be effective as of the calendar day immediately following the date of such cure; provided                                        2  Error! Unknown document property name. 

 

         that the Interest as calculated and unpaid at such increased rate during the continuance of        such Event of Default shall continue to apply to the extent relating to the days after the        occurrence of such Event of Default through and including the date of such cure of such        Event of Default.         3.    CONVERSION OF NOTES.  At any time after the Issuance Date, this Note shall  be convertible into validly  issued, fully paid  and non-assessable shares  of Common Stock (as  defined below), on the terms and conditions set forth in this Section 3.               (a)   Conversion Right.  Subject to the provisions of Section 3(d), at any time or        times on or after the Issuance Date, the Holder shall be entitled to convert any portion of        the outstanding and unpaid Conversion Amount (as defined below) into validly issued,        fully paid and non-assessable shares of Common Stock in accordance with Section 3(c), at        the Conversion Rate (as defined below).  The Company shall not issue any fraction of a        share of Common Stock upon any conversion.  If the issuance would result in the issuance        of a fraction of a share of Common Stock, the Company shall round such fraction of a share        of Common Stock up to the nearest whole share.  The Company shall pay any and all        transfer,  stamp,  issuance  and  similar  taxes,  costs  and  expenses  (including,  without        limitation, fees and expenses of the transfer agent of the Company (the “Transfer Agent”))        that may be payable with respect to the issuance and delivery of Common Stock upon        conversion of any Conversion Amount.               (b)   Conversion Rate. The number of shares of Common Stock issuable upon        conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by        dividing  (x)  such Conversion Amount  by  (y)  the  Conversion  Price  (the “Conversion        Rate”).                     (i)   “Conversion Amount” means  the  sum  of  (w) the portion  of  the           Principal  to  be  converted,  redeemed  or  otherwise  with  respect  to  which  this           determination is being made, (x) all accrued and unpaid Interest with respect to such           portion of the Principal amount, (y) the Make-Whole Amount, if any, and (z) accrued           and unpaid Late Charges with respect to such portion of such Principal, such Interest,           if any, and such Make-Whole Amount, if any.                     (ii)  “Conversion Price” means, as of any Conversion Date or other date           of determination, $3.00, subject to adjustment as provided herein.               (c)   Mechanics of Conversion.                     (i)   Optional  Conversion.  To  convert  any Conversion Amount  into           shares of Common Stock on any date (a “Conversion Date”), the Holder shall deliver           (whether via facsimile, electronic mail or otherwise), for receipt on or prior to 11:59           p.m., New York time, on such date, a copy of an executed notice of conversion in the           form  attached  hereto  as Exhibit  I (the “Conversion  Notice”)  to  the  Company.   If           required by Section 3(c)(iii), within two (2) Trading Days following a conversion of           this Note as aforesaid, the Holder shall surrender this Note to a nationally recognized           overnight  delivery  service  for  delivery  to  the  Company  (or  an  indemnification                                         3  Error! Unknown document property name. 

 

            undertaking  with  respect to  this  Note in  the case of its  loss, theft  or destruction as           contemplated by Section 20(b)).  On or before the first (1st) Trading Day following the           date of receipt of a Conversion Notice, the Company shall transmit by facsimile or           electronic mail an acknowledgment of confirmation and representation as to whether           such shares of Common Stock may then be resold pursuant to Rule 144 or an effective           and available registration statement, in the form attached hereto as Exhibit II, of receipt           of such Conversion Notice to the Holder and the Transfer Agent which confirmation           shall constitute an instruction to the Transfer Agent to process such Conversion Notice           in  accordance  with  the  terms  herein.   On  or  before  the  second  (2nd)  Trading  Day           following the date on which the Company has received a Conversion Notice (or such           earlier  date  as  required  pursuant  to  the  1934  Act  or other  applicable  law,  rule  or           regulation for the settlement of a trade initiated on the applicable Conversion Date of           such  shares  of  Common  Stock  issuable  pursuant  to  such  Conversion  Notice)  (the           “Share Delivery Deadline”), the Company shall (1) provided that the Transfer Agent           is  participating  in The  Depository  Trust  Company’s  (“DTC”) Fast  Automated           Securities Transfer Program, credit such aggregate number of shares of Common Stock           to which the Holder shall be entitled pursuant to such conversion to the Holder’s or its           designee’s  balance account  with  DTC through its  Deposit/Withdrawal  at Custodian           system or (2) if the Transfer Agent is not participating in the DTC Fast Automated           Securities Transfer Program,  upon the request  of the Holder, issue and deliver (via           reputable overnight courier) to the address as specified in the Conversion Notice, a           certificate, registered in the name of the Holder or its designee, for the number of shares           of Common Stock to which the Holder shall be entitled pursuant to such conversion.            If this Note is physically surrendered for conversion pursuant to Section 3(c)(iii) and           the  outstanding  Principal  of  this  Note  is  greater  than  the  Principal  portion  of  the           Conversion Amount being converted, then the Company shall as soon as practicable           and in no event later than two (2) Business Days after receipt of this Note and at its           own  expense,  issue  and  deliver  to  the  Holder  (or  its  designee)  a  new Note  (in           accordance with Section 20(d)) representing the outstanding Principal not converted.            The Person or Persons entitled to receive the shares of Common Stock issuable upon a           conversion of this Note shall be treated for all purposes as the record holder or holders           of such shares of Common Stock on the Conversion Date.  In the event of a partial           conversion  of  this  Note  pursuant  hereto, the  Principal  amount  converted  shall  be           deducted from the Installment Amount(s) relating to the Installment Date(s) as set forth           in  the applicable  Conversion  Notice.  Notwithstanding  anything  to  the  contrary           contained in this Note or the Registration Rights Agreement, after the effective date of           the Registration Statement (as defined in the Registration Rights Agreement) and prior           to the Holder’s receipt of the notice of a Grace Period (as defined in the Registration           Rights Agreement), the Company shall cause the Transfer Agent to deliver unlegended           shares of Common Stock to the Holder (or its designee) in connection with any sale of           Registrable Securities (as defined in the Registration Rights Agreement) with respect           to which the Holder has entered into a contract for sale, and delivered a copy of the           prospectus  included  as  part  of  the  particular  Registration  Statement  to  the  extent           applicable, and for which the Holder has not yet settled.                     (ii)  Company’s Failure to Timely Convert.  If the Company shall fail,           for any reason or for no reason, on or prior to the applicable Share Delivery Deadline,                                        4  Error! Unknown document property name. 

 

            either  (I)  if  the  Transfer  Agent  is  not  participating  in  the  DTC  Fast  Automated           Securities  Transfer  Program,  to  issue  and  deliver  to  the  Holder  (or  its  designee)  a           certificate for the number of shares of Common Stock to which the Holder is entitled           and register such shares of Common Stock on the Company’s share register or, if the           Transfer  Agent  is  participating  in  the  DTC  Fast  Automated  Securities  Transfer           Program, to credit the balance account of the Holder or the Holder’s designee with           DTC for such number of shares of Common Stock to which the Holder is entitled upon           the Holder’s conversion of this Note (as the case may be) or (II) if the Registration           Statement covering the resale of the shares of Common Stock that are the subject of           the Conversion Notice (the “Unavailable Conversion Shares”) is not available for the           resale of such Unavailable Conversion Shares and the Company fails to promptly, but           in no event later than as required pursuant to the Registration Rights Agreement (x) so           notify the Holder and (y) deliver the shares of Common Stock electronically without           any restrictive legend by crediting such aggregate number of shares of Common Stock           to  which  the  Holder  is  entitled  pursuant  to  such  conversion  to  the  Holder’s  or  its           designee’s balance account with DTC through its Deposit/Withdrawal At Custodian           system  (the  event  described  in  the  immediately  foregoing  clause  (II)  is  hereinafter           referred as a “Notice Failure” and together with the event described in clause (I) above,           a “Conversion Failure”), then, in addition to all other remedies available to the Holder,           (1) the Company shall pay in cash to the Holder on each day after such Share Delivery           Deadline that the issuance of such shares of Common Stock is not timely effected an           amount equal to 1% of the product of (A) the sum of the number of shares of Common           Stock not issued to the Holder on or prior to the Share Delivery Deadline and to which           the  Holder  is  entitled,  multiplied  by  (B)  any  trading  price  of  the  Common  Stock           selected by the Holder in writing as in effect at any time during the period beginning           on  the  applicable  Conversion  Date  and  ending  on  the  applicable  Share  Delivery           Deadline  and  (2)  the  Holder,  upon  written  notice  to  the  Company,  may  void  its           Conversion Notice with respect to, and retain or have returned (as the case may be) any           portion of this Note that has not been converted pursuant to such Conversion Notice,           provided  that  the  voiding  of  a  Conversion  Notice  shall  not  affect  the  Company’s           obligations to make any payments which have accrued prior to the date of such notice           pursuant to this Section 3(c)(ii) or otherwise.  In addition to the foregoing, if on or prior           to the Share Delivery Deadline either (A) if the Transfer Agent is not participating in           the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue           and  deliver  to  the  Holder  (or  its  designee)  a  certificate  and  register  such  shares  of           Common  Stock  on  the  Company’s  share  register  or,  if  the  Transfer  Agent  is           participating in the DTC Fast Automated Securities Transfer Program, the Transfer           Agent shall fail to credit the balance account of the Holder or the Holder’s designee           with DTC for the number of shares of Common Stock to which the Holder is entitled           upon  the  Holder’s  conversion  hereunder  or  pursuant  to  the  Company’s  obligation           pursuant to clause (II) below or (B) a Notice Failure occurs, and if on or after such           Share  Delivery  Deadline  the  Holder  purchases  (in  an  open  market  transaction  or           otherwise) shares of Common Stock corresponding to all or any portion of the number           of shares of Common Stock issuable upon such conversion that the Holder is entitled           to receive from the Company and has not received from the Company in connection           with such Conversion Failure or Notice Failure, as applicable (a “Buy-In”), then, in                                         5  Error! Unknown document property name. 

 

            addition to all other remedies available to the Holder, the Company shall, within two           (2) Business Days after receipt of the Holder’s request and in the Holder’s discretion,           either: (I) pay cash to the Holder in an amount equal to the Holder’s total purchase price           (including brokerage commissions and other out-of-pocket expenses, if any) for the           shares  of Common Stock so  purchased (including, without limitation,  by any other           Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the           Company’s obligation to so issue and deliver such certificate (and to issue such shares           of  Common  Stock)  or  credit  the  balance  account  of  such  Holder  or  such  Holder’s           designee, as applicable, with DTC for the number of shares of Common Stock to which           the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and           to  issue  such  shares  of  Common  Stock)  shall  terminate,  or  (II)  promptly  honor  its           obligation to so issue and deliver to the Holder a certificate or certificates representing           such shares of Common Stock or credit the balance account of such Holder or such           Holder’s designee, as applicable, with DTC for the number of shares of Common Stock           to which the Holder is entitled upon the Holder’s conversion hereunder (as the case           may be) and pay cash to the Holder in an amount equal to the excess (if any) of the           Buy-In  Price  over  the  product  of  (x)  such  number  of  shares  of  Common  Stock           multiplied by (y) the lowest Closing Sale Price of the Common Stock on any Trading           Day during the period commencing on the date of the applicable Conversion Notice           and ending on the date of such issuance and payment under this clause (II) (the “Buy-          In Payment Amount”).  Nothing shall limit the Holder’s right to pursue any other           remedies available to it hereunder, at law or in equity, including, without limitation, a           decree of specific performance and/or injunctive relief with respect to the Company’s           failure  to  timely  deliver  certificates  representing  shares  of  Common  Stock  (or  to           electronically deliver such shares of Common Stock) upon the conversion of this Note           as required pursuant to the terms hereof.                     (iii) Registration; Book-Entry.  The Company shall maintain a register           (the “Register”) for the recordation of the names and addresses of the holders of each           Note and the principal amount of the Notes held by such holders  (the “Registered           Notes”).  The entries in the Register shall be conclusive and binding for all purposes           absent  manifest  error.   The Company  and the holders  of the Notes shall  treat  each           Person whose name is recorded in the Register as the owner of a Note for all purposes           (including, without limitation, the right to receive payments of Principal Interest and           Make-Whole Amount hereunder) notwithstanding notice to the contrary.  A Registered           Note may be assigned, transferred or sold in whole or in part only by registration of           such assignment or sale on the Register.  Upon its receipt of a written request to assign,           transfer or sell all or part of any Registered Note by the holder thereof, the Company           shall record the information contained therein in the Register and issue one or more           new Registered Notes in the same aggregate principal amount as the principal amount           of the surrendered Registered Note to the designated assignee or transferee pursuant to           Section 20, provided that if the Company does not so record an assignment, transfer or           sale (as the case may be) of all or part of any Registered Note within two (2) Business           Days of such a request, then the Register shall be automatically deemed updated to           reflect  such  assignment,  transfer  or  sale  (as  the  case  may  be).  Notwithstanding           anything to the contrary set forth in this Section 3, following conversion of any portion           of this Note in accordance with the terms hereof, the Holder shall not be required to                                        6  Error! Unknown document property name. 

 

            physically surrender this Note to the Company unless (A) the full Conversion Amount           represented by this Note is being converted (in which event this Note shall be delivered           to the Company following conversion thereof as contemplated by Section 3(c)(i)) or           (B) the Holder has provided the Company with prior written notice (which notice may           be included in a Conversion Notice) requesting reissuance of this Note upon physical           surrender of this Note.  The Holder and the Company shall maintain records showing           the Principal, Interest, Make-Whole Amount and Late Charges converted and/or paid           (as the case may be) and the dates of such and/or payments (as the case may be) or shall           use such other method, reasonably satisfactory to the Holder and the Company, so as           not to require physical surrender of this Note upon conversion.  If the Company does           not update the Register to record such Principal, Interest, Make-Whole Amount and           Late  Charges  converted  and/or  paid  (as  the  case  may  be)  and  the  dates  of  such           conversions, and/or payments (as the case may be) within two (2) Business Days of           such occurrence, then the Register shall be automatically deemed updated to reflect           such occurrence.                     (iv)  Pro  Rata  Conversion;  Disputes.  In  the  event  that  the  Company           receives  a  Conversion  Notice  from  more  than  one  holder  of  Notes  for  the  same           Conversion Date and the Company can convert some, but not all, of such portions of           the Notes submitted for conversion, the Company, subject to Section 3(d), shall convert           from each holder of Notes electing to have Notes converted on such date a pro rata           amount of such holder’s portion of its Notes submitted for conversion based on the           principal  amount  of Notes  submitted  for  conversion  on  such  date  by  such  holder           relative to the aggregate principal amount of all Notes submitted for conversion on such           date.  In the event of a dispute as to the number of shares of Common Stock issuable to           the Holder in connection with a conversion of this Note, the Company shall issue to the           Holder the number of shares of Common Stock not in dispute and resolve such dispute           in accordance with Section 25.               (d)   Limitations on Conversions.                       (i)   Beneficial Ownership.  The Company shall not effect the conversion           of any portion  of this  Note, and the Holder shall not  have the right  to  convert any           portion of this Note pursuant to the terms and conditions of this Note and any such           conversion shall be null and void and treated as if never made, to the extent that after           giving effect to such conversion, the Holder together with the other Attribution Parties           collectively would beneficially own in excess of 4.99% (the “Maximum Percentage”)           of the shares of Common Stock outstanding immediately after giving effect to such           conversion.  For purposes of the foregoing sentence, the aggregate number of shares of           Common Stock beneficially owned by the Holder and the other Attribution Parties shall           include  the  number  of  shares  of  Common  Stock  held  by  the  Holder  and  all  other           Attribution  Parties  plus  the  number  of  shares  of  Common  Stock  issuable  upon           conversion of this Note with respect to which the determination of such sentence is           being made, but shall exclude shares of Common Stock which would be issuable upon           (A) conversion of the remaining, nonconverted portion of this Note beneficially owned           by the Holder or any of the other Attribution Parties and (B) exercise or conversion of           the  unexercised  or  nonconverted  portion  of  any  other  securities  of  the  Company                                        7  Error! Unknown document property name. 

 

            (including, without limitation, any convertible notes or convertible preferred stock or           warrants, including, without limitation, the Warrants) beneficially owned by the Holder           or  any  other  Attribution  Party  subject  to  a  limitation  on  conversion  or  exercise           analogous  to  the  limitation  contained  in  this  Section 3(d)(i).  For  purposes  of  this           Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section           13(d) of the 1934 Act.  For purposes of determining the number of outstanding shares           of Common Stock the Holder may acquire upon the conversion of this Note without           exceeding the Maximum Percentage, the Holder may rely on the number of outstanding           shares of Common Stock as reflected in (x) the Company’s most recent Annual Report           on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other           public filing with the SEC, as the case may be, (y) a more recent public announcement           by the Company or (z) any other written notice by the Company or the Transfer Agent,           if any, setting forth the number of shares of Common Stock outstanding (the “Reported           Outstanding Share Number”).  If the Company receives a Conversion Notice from           the Holder at a time when the actual number of outstanding shares of Common Stock           is less than the Reported Outstanding Share Number, the Company shall notify the           Holder in writing of the number of shares of Common Stock then outstanding and, to           the extent that such Conversion Notice would otherwise cause the Holder’s beneficial           ownership,  as  determined  pursuant  to  this  Section 3(d)(i),  to  exceed  the  Maximum           Percentage, the Holder must notify the Company of a reduced number of shares of           Common Stock to be purchased pursuant to such Conversion Notice.  For any reason           at any time, upon the written or oral request of the Holder, the Company shall within           one (1) Business Day confirm orally and in writing or by electronic mail to the Holder           the number of shares of Common Stock then outstanding.  In any case, the number of           outstanding  shares  of Common Stock shall be determined after giving effect  to  the           conversion or exercise of securities of the Company, including this Note, by the Holder           and any other Attribution Party since the date as of which the Reported Outstanding           Share Number was reported.  In the event that the issuance of shares of Common Stock           to  the  Holder  upon  conversion  of  this  Note  results  in  the  Holder  and  the  other           Attribution Parties being deemed to beneficially own, in the aggregate, more than the           Maximum  Percentage  of  the  number  of  outstanding  shares  of  Common  Stock  (as           determined under Section 13(d) of the 1934 Act), the number of shares so issued by           which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership           exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void           and shall be cancelled ab initio, and the Holder shall not have the power to vote or to           transfer the Excess Shares.  Upon delivery of a written notice to the Company, the           Holder may from time to time increase (with such increase not effective until the sixty-          first (61st) day after delivery of such notice) or decrease the Maximum Percentage to           any other percentage not in excess of 9.99% as specified in such notice; provided that           (i) any such increase in the Maximum Percentage will not be effective until the sixty-          first (61st) day after such notice is delivered to the Company and (ii) any such increase           or decrease will apply only to the Holder and the other Attribution Parties and not to           any other holder of Notes that is not an Attribution Party of the Holder.  For purposes           of clarity, the shares of Common Stock issuable pursuant to the terms of this Note in           excess of the Maximum Percentage shall not be deemed to be beneficially owned by           the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1)                                         8  Error! Unknown document property name. 

 

            of the 1934 Act.  No prior inability to convert this Note pursuant to this paragraph shall           have any effect on the applicability of the provisions of this paragraph with respect to           any subsequent determination of convertibility.  The provisions of this paragraph shall           be construed and implemented in a manner otherwise than in strict conformity with the           terms of this Section 3(d)(i) to the extent necessary to correct this paragraph (or any           portion of this paragraph) which may be defective or inconsistent with the intended           beneficial ownership limitation contained in this Section 3(d)(i) or to make changes or           supplements  necessary  or  desirable  to  properly  give  effect  to  such  limitation.   The           limitation contained in this paragraph may not be waived and shall apply to a successor           holder of this Note.                      (ii)  Principal  Market  Regulation.  The  Company  shall  not  issue  any           shares of Common Stock upon conversion of this Note or otherwise pursuant to the           terms of this Note (taken together with the issuance of such shares upon the exercise of           the  Warrants) if  the  issuance  of  such  shares  of  Common Stock  would  exceed  the           aggregate number of shares of Common Stock which the Company may issue upon           conversion of the Notes or otherwise pursuant to the terms of this Note or the Warrants           (as the case may be) without breaching the Company’s obligations under the rules or           regulations of the Principal Market (the number of shares which may be issued without           violating such rules and regulations, including rules related to the aggregate of offerings           under  NASDAQ  Listing  Rule  5635(d),  the  “Exchange  Cap”),  except that  such           limitation shall not apply in the event that the Company (A) obtains the approval of its           stockholders as required by the applicable rules of the Principal Market for issuances           of shares of Common Stock in excess of such amount or (B) obtains a written opinion           from outside counsel to the Company that such approval is not required, which opinion           shall be reasonably satisfactory to the Holder.  Until such approval or such written           opinion is  obtained, no Buyer shall be issued in the aggregate, upon  conversion or           exercise (as the case may be) of any Notes or any of the Warrants or otherwise pursuant           to the terms of the Notes or the Warrants, shares of Common Stock in an amount greater           than the product of (i) the Exchange Cap as of the Issuance Date multiplied by (ii) the           quotient of (A) the aggregate original principal amount of Notes issued to such Buyer           pursuant to the Securities Purchase Agreement on the Closing Date (as defined in the           Securities Purchase Agreement) divided by (B) the aggregate original principal amount           of all Notes issued to the Buyers pursuant to the Securities Purchase Agreement on the           Closing Date (with respect to each Buyer, the “Exchange Cap Allocation”).  In the           event that any Buyer shall sell or otherwise transfer any of such Buyer’s Notes, the           transferee  shall  be  allocated  a  pro  rata  portion  of  such  Buyer’s  Exchange  Cap           Allocation with respect to such portion of such Notes so transferred, and the restrictions           of the prior sentence shall apply to such transferee with respect to the portion of the           Exchange  Cap  Allocation  so  allocated  to  such  transferee.  Upon  conversion  and           exercise in full of a holder’s Notes and Warrants, the difference (if any) between such           holder’s Exchange Cap Allocation and the number of shares of Common Stock actually           issued to such holder upon such holder’s conversion in full of such Notes and such           holder’s exercise in full of such Warrants shall be allocated, to the respective Exchange           Cap Allocations of the remaining holders of Notes and related Warrants on a pro rata           basis in proportion to the shares of Common Stock underlying the Notes and related           Warrants then held by each such holder of Notes and related Warrants.  At any time                                        9  Error! Unknown document property name. 

 

            after  the earlier  to  occur  of  (x)  the  Stockholder  Approval  Date  (as  defined in  the           Securities Purchase Agreement) and (y) the Stockholder Meeting Deadline (as defined           in the Securities Purchase Agreement in the event that the Company is prohibited from           issuing shares of Common Stock pursuant to this Section 3(d)(i) (the “Exchange Cap           Shares”), the Company shall pay cash in exchange for the cancellation of such portion           of this Note convertible into such Exchange Cap Shares at a price equal to the sum of           (i) the product of (x) such number of Exchange Cap Shares and (y) the greatest Closing           Sale Price of the Common Stock on any Trading Day during the period commencing           on the date the Holder delivers the applicable Conversion Notice with respect to such           Exchange Cap Shares to the Company and ending on the date of such issuance and           payment under this Section 3(d)(i) and (ii) to the extent of any Buy-In related thereto,           any  Buy-In  Payment  Amount,  any  brokerage  commissions  and  other  out-of-pocket           expenses,  if  any,  of  the  Holder  incurred  in  connection  therewith (collectively,  the           “Exchange Cap Share Cancellation Amount”).               (e)   Right of Alternate Conversion.                     (i)   Alternate Conversion Upon an Event of Default.  Subject to Section              3(d), at any time at any time after the occurrence of an Event of Default or the              Market Capitalization Threshold Condition (regardless of whether such Event of              Default or  Market  Capitalization  Threshold  Condition has  been  cured  or  if  the              Holder has delivered an Event of Default Redemption Notice to the Company), the              Holder may, at the Holder’s option, convert (each, an “Alternate Conversion”,              and the date of such Alternate Conversion, each, an “Alternate Conversion Date”)              all, or any part of, the Conversion Amount (such portion of the Conversion Amount              subject to such Alternate Conversion, each, an “Alternate Conversion Amount”)              into shares of Common Stock at the Alternate Conversion Price.                     (ii)  Mechanics of Alternate Conversion.  On any Alternate Conversion              Date,  the Holder  may  voluntarily  convert  any  Alternate Conversion Amount              pursuant to Section 3(c) (with “Alternate Conversion Price” replacing “Conversion              Price” for all purposes hereunder with respect to such Alternate Conversion and              with “Redemption  Premium of the Conversion Amount” replacing “Conversion              Amount” in clause (x) of the definition of Conversion Rate above with respect to              such  Alternate  Conversion)  by  designating  in  the  Conversion  Notice  delivered              pursuant  to  this  Section 3(e) of  this  Note  that  the  Holder  is  electing  to  use  the              Alternate Conversion Price for such conversion; provided that in the event of the              Conversion Floor Price  Condition,  on or prior to  Share Delivery Deadline with              respect to such Alternate Conversion, the Company shall also deliver to the Holder              the applicable Alternate Conversion Floor Amount.  Notwithstanding anything to              the contrary in this Section 3(e), but subject to Section 3(d), until the Company              delivers shares of Common Stock representing the applicable Alternate Conversion              Amount to the Holder, such Alternate Conversion Amount may be converted by              the Holder into shares of Common Stock pursuant to Section 3(c) without regard to              this Section 3(e).                                         10  Error! Unknown document property name. 

 

         4.    RIGHTS UPON EVENT OF DEFAULT.               (a)   Event of Default.  Each of the following events shall constitute an “Event        of  Default” and  each  of  the  events  in  clauses (x), (xi) and (xii) shall  constitute  a        “Bankruptcy Event of Default”:                     (i)   the failure of the applicable Registration Statement (as defined in           the Registration Rights Agreement) to be filed with the SEC on or prior to the date that           is  five (5)  days  after  the  applicable  Filing  Deadline  (as  defined  in  the  Registration           Rights Agreement) or the failure of the applicable Registration Statement to be declared           effective by the SEC on or prior to the date that is five (5) days after the applicable           Effectiveness Deadline (as defined in the Registration Rights Agreement);                      (ii)  while  the  applicable  Registration  Statement  is  required  to  be           maintained effective pursuant to the terms of the Registration Rights Agreement, the           effectiveness of the applicable Registration Statement lapses for any reason (including,           without limitation, the issuance of a stop order) or such Registration Statement (or the           prospectus contained therein) is unavailable to any holder of Registrable Securities (as           defined  in  the  Registration  Rights  Agreement)  for  sale  of  all  of  such  holder’s           Registrable  Securities  in  accordance  with  the  terms  of  the  Registration  Rights           Agreement,  and  such  lapse  or  unavailability  continues  for  a  period  of  five  (5)           consecutive days or for more than an aggregate of ten (10) days in any 365-day period           (excluding  days  during  an  Allowable  Grace  Period  (as  defined  in  the  Registration           Rights Agreement));                     (iii) at any time from and after [    ]1 (excluding days during an Allowable           Grace  Period),  the Company  fails  to have an  effective shelf registration  statement,           which, as of such time of determination, has an available dollar offering amount of           securities then issuable by the Company thereunder (as reduced by any limitations on           any such issuances by any law, rule or regulations applicable thereto, whether pursuant           to the 1933 Act, the Principal Market or otherwise, including, without limitation, the           “baby shelf rules” set forth in Instruction I.B.6(a) to Form S-3 of the 1933 Act) (the           “Available Shelf Capacity”) of no less than 125% of the Unrestricted Note Amount           as of such time of determination;                     (iv)  the suspension from trading or the failure of the Common Stock to           be  trading  or  listed  (as  applicable)  on  an  Eligible  Market  for  a  period  of  five  (5)           consecutive Trading Days;                     (v)   the  Company’s  (A)  failure  to  cure  a  Conversion  Failure or  a           Delivery Failure (as defined in the Warrants) by delivery of the required number of           shares of Common Stock within five (5) Trading Days after the applicable Conversion           Date or exercise date (as the case may be) or (B) notice, written or oral, to any holder           of the Notes or Warrants, including, without limitation, by way of public announcement           or through any of its agents, at any time, of its intention not to comply, as required,                            1 Insert 90th calendar day after the Issuance Date                                        11  Error! Unknown document property name. 

 

            with  a  request  for  conversion  of  any  Notes  into  shares  of  Common  Stock  that  is           requested in accordance with the provisions of the Notes, other than pursuant to Section           3(d),  or  a  request  for  exercise  of  any  Warrants  for shares  of  Common  Stock in           accordance with the provisions of the Warrants;                     (vi)  except  to  the  extent  the  Company  is  in  compliance  with  Section           12(b) below, at any time following the tenth (10th) consecutive day that the Holder’s           Authorized Share Allocation (as defined in Section 12(a) below) is less than (A) the           number of shares of Common Stock that the Holder would be entitled to receive upon           a  conversion  of  the  full Conversion Amount  of  this  Note  (without  regard  to  any           limitations on conversion set forth in Section 3(d) or otherwise), and (B) the number of           shares of Common Stock that the Holder would be entitled to receive upon exercise in           full of the Holder’s Warrants (without regard to any limitations on exercise set forth in           the Warrants);                     (vii) the Company’s or any Subsidiary’s failure to pay to the Holder any           amount of Principal, Interest, Make-Whole Amount, Late Charges or other amounts           when and as due under this Note (including, without limitation, the Company’s or any           Subsidiary’s failure to pay any redemption payments or amounts hereunder) or any           other Transaction Document (as defined in the Securities Purchase Agreement) or any           other agreement, document, certificate or other instrument delivered in connection with           the transactions contemplated hereby and thereby, except, in the case of a failure to pay           any Installment Redemption Price, Interest, Make-Whole Amount and Late Charges           when and as due, in which case only if such failure remains uncured for a period of at           least ten (10) calendar days;                     (viii) the  Company  fails  to  remove  any  restrictive  legend  on  any           certificate or any shares of Common Stock issued to the Holder upon conversion or           exercise (as the case may be) of any Securities (as defined in the Securities Purchase           Agreement)  acquired  by  the  Holder  under  the  Securities  Purchase  Agreement           (including this Note) as and when required by such Securities or the Securities Purchase           Agreement, unless otherwise then prohibited by applicable federal securities laws, and           any such failure remains uncured for at least five (5) days;                     (ix)  the occurrence of any default under, redemption of or acceleration           prior to maturity of at least an aggregate of $250,000 of Indebtedness (as defined in the           Securities Purchase Agreement) of the Company or any of its Subsidiaries, other than           with respect to any Other Notes;                     (x)   bankruptcy, insolvency,  reorganization or liquidation  proceedings           or  other  proceedings  for  the  relief  of  debtors  shall  be  instituted  by  or  against  the           Company or any Subsidiary and, if instituted against the Company or any Subsidiary           by a third party, shall not be dismissed within thirty (30) days of their initiation;                     (xi)  the  commencement  by  the  Company  or  any  Subsidiary  of  a           voluntary case or proceeding under any applicable federal, state or foreign bankruptcy,           insolvency, reorganization or other similar law or of any other case or proceeding to be                                         12  Error! Unknown document property name. 

 

            adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order,           judgment or other similar document in respect of the Company or any Subsidiary in an           involuntary  case  or  proceeding  under  any  applicable  federal,  state  or  foreign           bankruptcy, insolvency, reorganization or other similar law or to the commencement           of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a           petition  or  answer  or  consent  seeking  reorganization  or  relief  under  any  applicable           federal, state or foreign law, or the consent by it to the filing of such petition or to the           appointment  of  or  taking  possession  by  a  custodian, receiver,  liquidator,  assignee,           trustee, sequestrator or other similar official of the Company or any Subsidiary or of           any substantial part of its property, or the making by it of an assignment for the benefit           of creditors, or the execution of a composition of debts, or the occurrence of any other           similar federal,  state or  foreign  proceeding,  or the admission by it in  writing  of its           inability to pay its debts generally as they become due, the taking of corporate action           by the Company or any Subsidiary in furtherance of any such action or the taking of           any action by any Person to commence a Uniform Commercial Code foreclosure sale           or any other similar action under federal, state or foreign law;                     (xii) the entry by a court of (i) a decree, order, judgment or other similar           document in respect of the Company or any Subsidiary of a voluntary or involuntary           case  or  proceeding  under  any  applicable  federal,  state  or  foreign  bankruptcy,           insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other           similar document adjudging the Company or any Subsidiary as bankrupt or insolvent,           or  approving  as  properly  filed  a  petition  seeking  liquidation,  reorganization,           arrangement,  adjustment  or  composition  of  or  in  respect  of  the  Company  or  any           Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order,           judgment  or  other  similar  document  appointing  a  custodian,  receiver,  liquidator,           assignee,  trustee,  sequestrator  or  other  similar  official  of  the  Company  or  any           Subsidiary or of any substantial  part of its  property, or ordering the winding  up or           liquidation of its affairs, and the continuance of any such decree, order, judgment or           other  similar  document  or  any  such  other  decree,  order,  judgment  or  other  similar           document unstayed and in effect for a period of thirty (30) consecutive days;                     (xiii) a  final  judgment  or  judgments  for  the  payment  of  money           aggregating in excess of $250,000 are rendered against the Company and/or any of its           Subsidiaries  and  which  judgments  are  not,  within  thirty  (30)  days  after  the  entry           thereof, bonded, discharged, settled or stayed pending appeal, or are not discharged           within  thirty  (30)  days  after  the expiration  of  such  stay;  provided,  however,  any           judgment which is covered by insurance or an indemnity from a credit worthy party           shall not be included in calculating the $250,000 amount set forth above so long as the           Company  provides  the  Holder  a  written statement  from  such  insurer  or  indemnity           provider (which written statement shall be reasonably satisfactory to the Holder) to the           effect that such judgment is covered by insurance or an indemnity and the Company or           such Subsidiary (as the case may be) will receive the proceeds of such insurance or           indemnity within thirty (30) days of the issuance of such judgment;                     (xiv) the  Company  and/or  any  Subsidiary,  individually  or  in  the           aggregate, either (i) fails to pay, when due, or within any applicable grace period, any                                        13  Error! Unknown document property name. 

 

            payment with respect to any Indebtedness in excess of $250,000 due to any third party           (other than, with respect to unsecured Indebtedness only, payments contested by the           Company  and/or  such  Subsidiary  (as  the  case  may  be)  in  good  faith  by  proper           proceedings and with respect to which adequate reserves have been set aside for the           payment thereof in accordance with GAAP) or is otherwise in breach or violation of           any agreement for monies owed or owing in an amount in excess of $250,000, which           breach or violation permits the other party thereto to declare a default or otherwise           accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or           event that would, with or without the passage of time or the giving of notice, result in           a  default  or  event  of  default  under  any  agreement  binding  the  Company  or  any           Subsidiary,  which  default  or  event  of  default  would  or  is  likely  to  have  a  material           adverse effect on the business, assets, operations (including results thereof), liabilities,           properties, condition (including financial condition) or prospects of the Company or           any of its Subsidiaries, individually or in the aggregate;                     (xv)  other than as specifically set forth in another clause of this Section           4(a), the Company or any Subsidiary breaches any representation or warranty, or any           covenant or other term or condition of any Transaction Document, except, in the case           of a breach of a covenant or other term or condition that is curable, only if such breach           remains uncured for a period of two (2) consecutive Trading Days;                     (xvi) a  false  or  inaccurate  certification  (including  a  false  or  inaccurate           deemed certification), to the best knowledge of the Company, that either (A) the Equity           Conditions are satisfied, (B) there has been no Equity Conditions Failure, or (C) as to           whether any Event of Default has occurred;                     (xvii) any  breach  or  failure  in  any  respect  by  the  Company  or  any           Subsidiary to comply with any provision of Section 15 of this Note;                     (xviii) if (x) Alan Knitowski’s employment as chief executive officer of the           Company or (y) Randall Crowder’s employment as the chief operating officer of the           Company, in each case is terminated by the Company for any reason other than such           person’s death, disability or willful misconduct;                     (xix) any Material Adverse Effect (as defined in the Securities Purchase           Agreement) occurs; or                     (xx)   any Event of Default (as defined in the Other Notes or in the March           Notes) occurs with respect to any Other Notes or the March Notes.               (b)   Notice of an Event of Default; Redemption Right.  Upon the occurrence of        an Event of Default with respect to this Note or any Other Note, the Company shall within        one (1) Business Day deliver written notice thereof via facsimile or electronic mail and        overnight courier (with next day delivery specified) (an “Event of Default Notice”) to the        Holder.  At any time after the earlier of the Holder’s receipt of an Event of Default Notice        and the Holder becoming aware of an Event of Default (such earlier date, the “Event of        Default  Right  Commencement  Date”)  and  ending  (such  ending  date,  the “Event  of                                         14  Error! Unknown document property name. 

 

         Default  Right  Expiration  Date”,  and  each  such  period,  an “Event  of  Default        Redemption Right Period”) on the twentieth (20th) Trading Day after the later of (x) the        date such Event of Default is cured and (y) the Holder’s receipt of an Event of Default        Notice that includes (I) a reasonable description of the applicable Event of Default, (II) a        certification as to whether, in the opinion of the Company, such Event of Default is capable        of being  cured and, if applicable, a reasonable  description of any existing  plans of the        Company to cure such Event of Default and (III) a certification as to the date the Event of        Default occurred and, if cured on or prior to the date of such Event of Default Notice, the        applicable Event of Default Right Expiration Date, the Holder may require the Company        to redeem (regardless of whether such Event of Default has been cured on or prior to the        Event of Default Right Expiration Date) all or any portion of this Note by delivering written        notice thereof (each, an “Event of Default Redemption Notice”, and the date thereof,        each, an “Event of Default Redemption Notice Date’) to the Company, which Event of        Default Redemption Notice shall indicate the portion of this Note the Holder is electing to        redeem.  Each portion of this Note subject to redemption by the Company pursuant to this        Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the        product of (A) the Conversion Amount to be redeemed multiplied by (B) the Redemption        Premium  and  (ii)  the  product  of  (X)  the quotient  of  (I)  the  Conversion  Amount  to  be        redeemed,  divided  by  (II)  the  Alternate  Conversion  Price at  such  time  as  the  Holder        delivers an Event of Default Redemption Notice (or, if a Dilutive Issuance occurs during        the period commencing on, and including, such Event of Default Redemption Notice Date        through, and including such Event of Default Redemption Date (as defined below), the        date  of  such  Dilutive  Issuance) multiplied  by  (Y)  the  product  of  (1)  the  Redemption        Premium multiplied by (2) the greatest Closing Sale Price of the Common Stock on any        Trading Day during the period commencing on the date immediately preceding such Event        of Default and ending on the date the Company makes the entire payment required to be        made under this Section 4(b) (the “Event of Default Redemption Price”).  Redemptions        required by this Section 4(b) shall be made in accordance with the provisions of Section        13.  To the extent redemptions required by this Section 4(b) are deemed or determined by        a court of competent jurisdiction to be prepayments of this Note by the Company, such        redemptions shall be deemed to be voluntary prepayments.  Notwithstanding anything to        the contrary in this Section 4(b), but subject to Section 3(d), until the Event of Default        Redemption  Price  (together  with  any  Late  Charges  thereon)  is satisfied in  full,  the        Conversion Amount submitted for redemption under this Section 4(b) (together with any        Late Charges thereon) may be converted, in whole or in part, by the Holder into Common        Stock pursuant to the terms of this Note.  In the event of a partial redemption of this Note        pursuant hereto, the Principal amount redeemed shall be deducted from the Installment        Amount(s) relating to the applicable Installment Date(s) as set forth in the Event of Default        Redemption Notice.  In the event of the Company’s redemption of any portion of this Note        under this Section 4(b), the Holder’s damages would be uncertain and difficult to estimate        because of the parties’ inability to predict future interest rates and the uncertainty of the        availability of a suitable substitute investment opportunity for the Holder.  Accordingly,        any redemption premium due under this Section 4(b) is intended by the parties to be, and        shall  be  deemed,  a  reasonable  estimate  of  the  Holder’s  actual  loss  of  its  investment        opportunity and not as  a penalty.  Any redemption upon an Event of Default shall not        constitute an election of remedies by the Holder, and all other rights and remedies of the                                         15  Error! Unknown document property name. 

 

         Holder shall be preserved.               (c)   Mandatory  Redemption  upon   Bankruptcy  Event  of  Default.         Notwithstanding anything to the contrary herein, and notwithstanding any conversion that        is then required or in process, upon any Bankruptcy Event of Default, whether occurring        prior to or following the Maturity Date, the Company shall immediately pay to the Holder        an amount in cash representing (i) all outstanding Principal, accrued and unpaid Interest,        the Make-Whole Amount and accrued and unpaid Late Charges on such Principal, Interest        and Make-Whole Amount, multiplied by (ii) the Redemption Premium, in addition to any        and all other amounts due hereunder, without the requirement for any notice or demand or        other action by the Holder or any other person or entity; provided that the Holder may, in        its  sole  discretion,  waive  such  right  to  receive  payment  upon  a  Bankruptcy  Event  of        Default, in whole or in part, and any such waiver shall not affect any other rights of the        Holder  hereunder,  including  any  other  rights  in  respect  of  such  Bankruptcy  Event  of        Default,  any  right  to  conversion,  and  any  right  to  payment  of  the  Event  of  Default        Redemption Price or any other Redemption Price, as applicable.                 5.    RIGHTS UPON FUNDAMENTAL TRANSACTION.               (a)   Assumption.  The Company shall not enter into or be party to a Fundamental        Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the        Company under this Note and the other Transaction Documents in accordance with the        provisions  of  this Section 5(a) pursuant  to  written  agreements in  form  and  substance        satisfactory  to  the  Holder  and  approved  by  the  Holder  prior  to  such  Fundamental        Transaction, including agreements to deliver to each holder of Notes in exchange for such        Notes a security of the Successor Entity evidenced by a written instrument substantially        similar in form and substance to the Notes, including, without limitation, having a principal        amount and interest rate equal to the principal amounts then outstanding and the interest        rates of the Notes, respectively, held by such holder, having similar conversion rights as        the Notes and having similar ranking and security to the Notes, and satisfactory to the        Holder and  (ii) the  Successor  Entity  (including  its  Parent  Entity) is  a  publicly  traded        corporation whose common stock is quoted on or listed for trading on an Eligible Market.         Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed        to, and be substituted for (so that from and after the date of such Fundamental Transaction,        the  provisions  of  this  Note  and  the  other  Transaction  Documents  referring  to  the        “Company” shall refer instead to the Successor Entity), and may exercise every right and        power of the Company and shall assume all of the obligations of the Company under this        Note and the other Transaction Documents with the same effect as if such Successor Entity        had  been  named  as  the  Company  herein.  Upon  consummation  of  a  Fundamental        Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall        be issued upon conversion or redemption of this Note at any time after the consummation        of  such  Fundamental  Transaction,  in  lieu  of  the  shares  of  Common  Stock (or  other        securities, cash, assets or other property (except such items still issuable under Sections 6        and 17, which shall continue to be receivable thereafter)) issuable upon the conversion or        redemption of the Notes prior to such Fundamental Transaction, such shares of the publicly        traded common stock (or their equivalent) of the Successor Entity (including its Parent        Entity) which the Holder would have been entitled to receive upon the happening of such                                        16  Error! Unknown document property name. 

 

         Fundamental  Transaction  had  this  Note  been  converted  immediately  prior  to  such        Fundamental  Transaction (without  regard  to  any  limitations  on  the  conversion  of  this        Note), as adjusted in accordance with the provisions of this Note.  Notwithstanding the        foregoing, the Holder may elect, at its sole option, by delivery of written notice to the        Company to waive this Section 5(a) to permit the Fundamental Transaction without the        assumption of this Note.  The provisions of this Section 5 shall apply similarly and equally        to  successive  Fundamental  Transactions  and  shall  be  applied  without  regard  to  any        limitations on the conversion of this Note.               (b)   Notice of a Change of Control; Redemption Right.  No sooner than twenty        (20) Trading Days nor later than ten (10) Trading Days prior to the consummation of a        Change  of  Control  (the “Change  of  Control  Date”),  but  not  prior  to  the  public        announcement of such Change of Control, the Company shall deliver written notice thereof        via facsimile or electronic mail and overnight courier to the Holder (a “Change of Control        Notice”).  At any time during the period beginning after the Holder’s receipt of a Change        of Control Notice or the Holder becoming aware of a Change of Control if a Change of        Control Notice is not delivered to the Holder in accordance with the immediately preceding        sentence (as applicable) and ending on the later of twenty (20) Trading Days after (A) the        date of consummation of such Change of Control or (B) the date of receipt of such Change        of Control Notice or (C) the date of the announcement of such Change of Control, the        Holder may require the Company to redeem all or any portion of this Note by delivering        written notice thereof (each, a “Change of Control Redemption Notice”, and the date        thereof, each a “Change of Control Redemption Notice Date”) to the Company, which        Change of Control Redemption Notice shall indicate the Conversion Amount the Holder        is  electing to  redeem.  The portion  of this  Note subject  to  redemption  pursuant  to  this        Section 5(b) shall be redeemed by the Company in cash at a price equal to the greatest of        (i) the product of (w) the Change of Control Redemption Premium multiplied by (y) the        Conversion Amount being  redeemed, (ii)  the  product  of  (x)  the  Change  of  Control        Redemption Premium multiplied by (y) the product of (A) the Conversion Amount being        redeemed multiplied by (B) the quotient determined by dividing (I) the greatest Closing        Sale  Price  of  the  shares  of  Common  Stock  during  the  period  beginning  on  the  date        immediately  preceding  the  earlier  to  occur  of  (1)  the  consummation  of  the  applicable        Change of Control and (2) the public announcement of such Change of Control and ending        on  the  date  the  Holder  delivers  the  Change  of  Control  Redemption  Notice by  (II)  the        Alternate Conversion Price then in effect (or, if a Dilutive Issuance occurs during the period        commencing on, and including, such Change of Control Redemption Notice Date through,        and including such Change of Control Redemption Date (as defined below), the date of        such Dilutive Issuance) and (iii) the product of (y) the Change of Control Redemption        Premium multiplied by (z) the product of (A) the Conversion Amount being redeemed        multiplied by (B) the quotient of (I) the aggregate cash consideration and the aggregate        cash value of any non-cash consideration per share of Common Stock to be paid to the        holders of the shares of Common Stock upon consummation of such Change of Control        (any such non-cash consideration constituting publicly-traded securities shall be valued at        the highest of the Closing Sale Price of such securities as of the Trading Day immediately        prior  to  the  consummation  of  such  Change  of  Control,  the  Closing  Sale  Price  of  such        securities on the Trading Day immediately following the public announcement of such        proposed Change of Control and the Closing Sale Price of such securities on the Trading                                        17  Error! Unknown document property name. 

 

         Day immediately prior to the public announcement of such proposed Change of Control)        divided by (II) the Conversion Price then in effect (the “Change of Control Redemption        Price”).  Redemptions required by this Section 5(b) shall be made in accordance with the        provisions of Section 13 and shall have priority to payments to stockholders in connection        with such Change of Control.  To the extent redemptions required by this Section 5(b) are        deemed or determined by a court of competent jurisdiction to be prepayments of this Note        by  the  Company,  such  redemptions  shall  be  deemed  to  be  voluntary  prepayments.         Notwithstanding anything to the contrary in this Section 5(b), but subject to Section 3(d),        until the Change of Control Redemption Price (together with any Late Charges thereon) is        paid  in  full,  the Conversion Amount  submitted for  redemption  under  this  Section 5(b)        (together with any Late Charges thereon) may be converted, in whole or in part, by the        Holder into Common Stock pursuant to Section 3.  In the event of a partial redemption of        this Note pursuant hereto, (x) the Principal amount redeemed shall be deducted from the        Installment  Amount(s)  relating  to  the  applicable  Installment  Date(s)  as  set  forth  in  the        Change of Control Redemption Notice.  In the event of the Company’s redemption of any        portion of this Note under this Section 5(b), the Holder’s damages would be uncertain and        difficult to estimate because of the parties’ inability to predict future interest rates and the        uncertainty of the availability of a suitable substitute investment opportunity for the Holder.         Accordingly,  any  redemption  premium  due  under  this  Section 5(b) is  intended  by  the        parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its        investment opportunity and not as a penalty.         6.    RIGHTS  UPON  ISSUANCE  OF  PURCHASE  RIGHTS  AND  OTHER  CORPORATE EVENTS.               (a)   Purchase  Rights.  In  addition  to  any  adjustments  pursuant  to  Section 7        below,  if  at  any  time  the  Company  grants,  issues  or  sells  any  Options,  Convertible        Securities or rights to purchase stock, warrants, securities or other property pro rata to all        or substantially all of the record holders of any class of Common Stock (the “Purchase        Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such        Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if        the Holder had held the number of shares of Common Stock acquirable upon complete        conversion of this Note (without taking into account any limitations or restrictions on the        convertibility of this Note and assuming for such purpose that the Note was converted at        the Alternate Conversion Price as of the applicable record date) immediately prior to the        date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or,        if no such record is taken, the date as of which the record holders of shares of Common        Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided,        however, that to the extent that the Holder’s right to participate in any such Purchase Right        would  result  in  the  Holder  and  the  other  Attribution  Parties  exceeding  the  Maximum        Percentage, then the Holder shall not be entitled to participate in such Purchase Right to        the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of        such  shares  of  Common  Stock  as  a  result  of  such  Purchase  Right  (and  beneficial        ownership) to the extent of any such excess) and such Purchase Right to such extent shall        be held in abeyance up to ninety (90) Trading Days, provided that such period shall be        tolled during any period of time in which Equity Conditions Failure shall have occurred        and be continuing (and, if such Purchase Right has an expiration date, maturity date or                                        18  Error! Unknown document property name. 

 

         other  similar  provision,  such  term  shall  be  extended  by  such  number  of  days  held  in        abeyance, if applicable) for the benefit of the Holder until such time or times during such        extended period, as its right thereto would not result in the Holder and the other Attribution        Parties exceeding the Maximum Percentage, at which time or times the Holder shall be        granted such right (and any Purchase Right granted, issued or sold on such initial Purchase        Right  or  on  any subsequent  Purchase  Right  held  similarly  in  abeyance  (and,  if  such        Purchase Right has an expiration date, maturity date or other similar provision, such term        shall be extended by such number of days held in abeyance, if applicable)) to the same        extent as if there had been no such limitation). The Holder shall be deemed to have waived        the right to receive any such Purchase Rights that remain held in abeyance at the end of        such abeyance period if not granted prior to such time.               (b)   Other Corporate Events.  In addition to and not in substitution for any other        rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to        which holders of shares of Common Stock are entitled to receive securities or other assets        with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the        Company shall make appropriate provision to ensure that the Holder will thereafter have        the right to receive upon a conversion of this Note, at the Holder’s option  (i) in addition to        the shares of Common Stock receivable upon such conversion, such securities or other        assets to which the Holder would have been entitled with respect to such shares of Common        Stock had such shares of Common Stock been held by the Holder upon the consummation        of such Corporate Event (without taking into account any limitations or restrictions on the        convertibility  of  this  Note)  or  (ii)  in  lieu  of  the  shares  of  Common  Stock  otherwise        receivable upon such conversion, such securities or other assets received by the holders of        shares of Common Stock in connection with the consummation of such Corporate Event        in such amounts as the Holder would have been entitled to receive had this Note initially        been issued with conversion rights for the form of such consideration (as opposed to shares        of Common Stock) at  a conversion rate for such consideration commensurate with  the        Conversion Rate.  Provision made pursuant to the preceding sentence shall be in a form        and  substance  satisfactory  to  the  Holder.  The  provisions  of  this  Section 6 shall  apply        similarly and equally to successive Corporate Events and shall be applied without regard        to any limitations on the conversion or redemption of this Note.               7.    RIGHTS UPON ISSUANCE OF OTHER SECURITIES.               (a)   Adjustment of Conversion Price upon Issuance of Common Stock.  If and        whenever on or after the Subscription Date the Company grants, issues or sells (or enters        into any agreement to grant, issue or sell), or in accordance with this Section 7(a) is deemed        to have granted, issued or sold, any shares of Common Stock (including the issuance or        sale of shares of Common Stock owned or held by or for the account of the Company, but        excluding any Excluded Securities issued or sold or deemed to have been issued or sold)        for a consideration per share (the “New Issuance Price”) less than a price equal to the        Conversion Price in effect immediately prior to such issuance or sale or deemed issuance        or  sale  (such  Conversion  Price  then  in  effect  is  referred  to  herein  as  the “Applicable        Price”) (the foregoing a “Basic Dilutive Issuance”), then, immediately after such Dilutive        Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the        New  Issuance  Price.  For  all  purposes  of  the  foregoing  (including,  without  limitation,                                        19  Error! Unknown document property name. 

 

         determining the adjusted Conversion Price and the New Issuance Price under this Section        7(a)), the following shall be applicable:                     (i)   Issuance of Options.  If the Company in any manner grants, issues           or sells (or enters into any agreement to grant, issue or sell) any Options and the lowest           price per share for which one share of Common Stock is at any time issuable upon the           exercise  of  any  such  Option  or  upon  conversion,  exercise  or  exchange  of  any           Convertible Securities issuable upon exercise of any such Option or otherwise pursuant           to the terms thereof is less than the Applicable Price, then such share of Common Stock           shall be deemed to be outstanding and to have been issued and sold by the Company at           the time of the granting, issuance or sale of such Option for such price per share.  For           purposes of this Section 7(a)(i), the “lowest price per share for which one share of           Common Stock is at any time issuable upon the exercise of any such Option or upon           conversion, exercise or exchange of any Convertible Securities issuable upon exercise           of any such Option or otherwise pursuant to the terms thereof” shall be equal to (1) the           lower  of  (x)  the  sum  of  the  lowest  amounts  of  consideration  (if  any)  received  or           receivable by the Company with respect to any one share of Common Stock upon the           granting,  issuance or  sale  of  such  Option,  upon  exercise  of  such  Option  and  upon           conversion, exercise or exchange of any Convertible Security issuable upon exercise           of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise           price set forth in such Option for which one share of Common Stock is issuable (or           may become issuable assuming all possible market conditions) upon the exercise of           any  such  Options  or  upon  conversion,  exercise  or  exchange  of  any  Convertible           Securities issuable upon exercise of any such Option or otherwise pursuant to the terms           thereof, minus (2) the sum of all amounts paid or payable to the holder of such Option           (or  any  other  Person)  with  respect  to  any  one  share  of  Common  Stock  upon  the           granting,  issuance or  sale  of  such  Option,  upon  exercise  of  such  Option  and  upon           conversion, exercise or exchange of any Convertible Security issuable upon exercise           of such Option or otherwise pursuant to the terms thereof plus the value of any other           consideration consisting of cash, debt forgiveness, assets or any other property received           or  receivable  by,  or  benefit  conferred  on,  the  holder  of  such  Option  (or  any  other           Person).  Except as contemplated below, no further adjustment of the Conversion Price           shall be made upon the actual issuance of such share of Common Stock or of such           Convertible Securities upon the exercise of such Options or otherwise pursuant to the           terms  thereof  or  upon  the  actual  issuance  of such  shares  of  Common  Stock  upon           conversion, exercise or exchange of such Convertible Securities.                       (ii)  Issuance of Convertible Securities.  If the Company in any manner           issues or sells (or enters into any agreement to issue or sell) any Convertible Securities           and the lowest price per share for which one share of Common Stock is at any time           issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the           terms thereof is less than the Applicable Price, then such share of Common Stock shall           be deemed to be outstanding and to have been issued and sold by the Company at the           time of the issuance or sale of such Convertible Securities for such price per share.  For           the purposes of this Section 7(a)(ii), the “lowest price per share for which one share of           Common Stock is at any time issuable (or may become issuable assuming all possible           market  conditions)  upon  the  conversion,  exercise  or  exchange  thereof  or  otherwise                                        20  Error! Unknown document property name. 

 

            pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest           amounts of consideration (if any) received or receivable by the Company with respect           to one share of Common Stock upon the issuance or sale of the Convertible Security           and upon conversion, exercise or exchange of such Convertible Security or otherwise           pursuant  to  the  terms  thereof  and  (y)  the  lowest  conversion  price  set  forth  in  such           Convertible  Security  for  which  one  share  of  Common  Stock  is  issuable  upon           conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof           minus (2) the sum of all amounts paid or payable to the holder of such Convertible           Security (or any other Person) with respect to any one share of Common Stock upon           the  issuance  or  sale  of  such  Convertible  Security  plus  the  value  of  any  other           consideration received or receivable consisting of cash, debt forgiveness, assets or other           property by, or benefit conferred on, the holder of such Convertible Security (or any           other Person).  Except as contemplated below, no further adjustment of the Conversion           Price shall be made upon the actual issuance of such shares of Common Stock upon           conversion, exercise or exchange of such Convertible Securities or otherwise pursuant           to the terms thereof, and if any such issuance or sale of such Convertible Securities is           made upon exercise of any Options for which adjustment of the Conversion Price has           been  or  is  to  be  made  pursuant  to  other  provisions  of  this  Section 7(a),  except  as           contemplated below, no further adjustment of the Conversion Price shall be made by           reason of such issuance or sale.                     (iii) Change in Option Price or Rate of Conversion.  If the purchase or           exercise price provided for in any Options, the additional consideration, if any, payable           upon the issue, conversion, exercise or exchange of any Convertible Securities, or the           rate  at  which  any  Convertible  Securities  are  convertible  into  or  exercisable  or           exchangeable for shares of Common Stock increases or decreases at any time (other           than proportional changes in conversion or exercise prices, as applicable, in connection           with an event referred to in Section 7(b) below), the Conversion Price in effect at the           time of such increase or decrease shall be adjusted to the Conversion Price which would           have been in effect at such time had such Options or Convertible Securities provided           for such increased or decreased purchase price, additional consideration or increased           or decreased conversion rate (as the case may be) at the time initially granted, issued           or sold.  For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible           Security that was outstanding as of the Subscription Date are increased or decreased in           the  manner  described  in  the  immediately  preceding  sentence,  then  such  Option  or           Convertible Security and the shares of Common Stock deemed issuable upon exercise,           conversion or exchange thereof shall be deemed to have been issued as of the date of           such increase or decrease.  No adjustment pursuant to this Section 7(a) shall be made           if such adjustment would result in an increase of the Conversion Price then in effect.                     (iv)  Calculation  of  Consideration  Received.  If  any  Option  and/or           Convertible Security and/or Adjustment Right is issued in connection with the issuance           or  sale  or  deemed  issuance  or  sale  of  any  other  securities  of  the  Company  (as           determined  by  the  Holder,  the “Primary  Security”,  and  such  Option  and/or           Convertible Security and/or Adjustment Right, the “Secondary Securities”), together           comprising one integrated transaction (or one or more transactions if such issuances or           sales or deemed issuances or sales of securities of the Company either (A) have at least                                        21  Error! Unknown document property name. 

 

            one investor or purchaser in common, (B) are consummated in reasonable proximity to           each  other  and/or  (C)  are  consummated  under  the  same  plan  of  financing), the           aggregate  consideration  per  share  of  Common  Stock  with  respect  to  such  Primary           Security shall be deemed to be equal to the difference of (x) the lowest price per share           for which one share of Common Stock was issued (or was deemed to be issued pursuant           to Section 7(a)(i) or 7(a)(ii) above, as applicable) in such integrated transaction solely           with  respect  to  such  Primary  Security,  minus  (y)  with  respect  to  such  Secondary           Securities, the sum of (I) the Black Scholes Consideration Value of each such Option,           if any, (II) the fair market value (as determined by the Holder in good faith) or the           Black Scholes Consideration Value, as applicable, of such Adjustment Right, if any,           and  (III)  the  fair  market value  (as  determined  by  the  Holder)  of  such  Convertible           Security, if any, in each case, as determined on a per share basis in accordance with           this  Section 7(a)(iv).  If  any  shares  of  Common  Stock,  Options  or  Convertible           Securities  are  issued  or  sold  or  deemed  to  have  been  issued  or  sold  for  cash,  the           consideration received therefor (for the purpose of determining the consideration paid           for such Common Stock, Option or Convertible Security, but not for the purpose of the           calculation of the Black Scholes Consideration Value) will be deemed to be the net           amount of consideration received by the Company therefor.  If any shares of Common           Stock, Options or Convertible Securities are issued or sold for a consideration other           than cash, the amount of such consideration received by the Company (for the purpose           of determining the consideration paid for such Common Stock, Option or Convertible           Security, but not for the purpose of the calculation of the Black Scholes Consideration           Value) will be the fair value of such consideration, except where such consideration           consists  of  publicly  traded  securities,  in  which  case  the  amount  of  consideration           received  by  the  Company  for  such  securities  will  be  the  arithmetic  average  of  the           VWAPs of such security for each of the five (5) Trading Days immediately preceding           the date of receipt.  If any shares of Common Stock, Options or Convertible Securities           are issued to the owners of the non-surviving entity in connection with any merger in           which the Company is the surviving entity, the amount of consideration therefor (for           the purpose of determining the consideration paid for such Common Stock, Option or           Convertible Security, but not for the purpose of the calculation of the Black Scholes           Consideration Value) will be deemed to be the fair value of such portion of the net           assets  and  business  of  the  non-surviving  entity  as  is  attributable  to  such  shares  of           Common Stock, Options or Convertible Securities (as the case may be).  The fair value           of any consideration other than cash or publicly traded securities will be determined           jointly by the Company and the Holder.  If such parties are unable to reach agreement           within  ten  (10)  days  after the  occurrence  of  an  event  requiring  valuation  (the           “Valuation Event”), the fair value of such consideration will be determined within five           (5)  Trading  Days  after  the  tenth  (10th)  day  following  such  Valuation  Event  by  an           independent, reputable appraiser jointly selected by the Company and the Holder.  The           determination  of  such  appraiser  shall  be  final  and  binding  upon  all  parties  absent           manifest  error  and  the  fees  and  expenses  of such  appraiser  shall  be  borne  by  the           Company.                     (v)   Record Date.  If the Company takes a record of the holders of shares           of Common Stock for the purpose of entitling them (A) to receive a dividend or other           distribution payable in shares of Common Stock, Options or in Convertible Securities                                        22  Error! Unknown document property name. 

 

            or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible           Securities, then such record date will be deemed to be the date of the issuance or sale           of  the  shares  of  Common  Stock  deemed  to  have  been  issued or  sold  upon  the           declaration of such dividend or the making of such other distribution or the date of the           granting of such right of subscription or purchase (as the case may be).               (b)   Adjustment  of  Conversion  Price  upon  Subdivision  or  Combination  of        Common Stock.  Without limiting any provision of Section 6, Section 17 or Section 7(a),        if the Company at any time on or after the Subscription Date subdivides (by any stock split,        stock  dividend,  stock  combination,  recapitalization  or other  similar  transaction)  one  or        more classes of its outstanding shares of Common Stock into a greater number of shares,        the  Conversion  Price  in  effect  immediately  prior  to  such  subdivision  will  be        proportionately  reduced.   Without  limiting  any  provision of Section 6,  Section 17 or        Section 7(a), if the Company at any time on or after the Subscription Date combines (by        any  stock  split,  stock  dividend,  stock  combination,  recapitalization  or  other  similar        transaction) one or more classes of its outstanding shares of Common Stock into a smaller        number of shares, the Conversion Price in effect immediately prior to such combination        will  be  proportionately  increased.   Any  adjustment  pursuant  to  this  Section 7(b) shall        become effective immediately after the effective date of such subdivision or combination.         If any event requiring an adjustment under this Section 7(b) occurs during the period that        a Conversion Price is calculated hereunder, then the calculation of such Conversion Price        shall be adjusted appropriately to reflect such event.               (c)   Holder’s  Right  of  Adjusted  Conversion  Price upon  Variable  Price        Securities; Permitted Settlement Transactions.                       (i)   Adjustment upon Variable Price Transactions.  In addition to and              not in limitation of the other provisions of this Section 7, if the Company in any              manner issues or sells or enters into any agreement to issue or sell, any Common              Stock, Options or Convertible Securities) other than in any Permitted Variable Rate              Transactions  (as  defined  in  the  Securities  Purchase  Agreement) (any  such              securities, “Variable  Price  Securities”), after  the  Subscription  Date  that  are              issuable  pursuant  to  such  agreement  or  convertible  into  or  exchangeable  or              exercisable for shares of Common Stock at a price which varies or may vary with              the market price of the shares of Common Stock, including by way of one or more              reset(s) to a fixed price, but exclusive of such formulations reflecting customary              anti-dilution provisions (such as share splits, share combinations, share dividends              and similar transactions) (each of the formulations for such variable price being              herein referred to as, the “Variable Price”), the Company shall provide written              notice thereof via facsimile and overnight courier to the Holder on the date of such              agreement and the issuance of such Convertible Securities or Options.  From and              after the date the Company enters into such agreement or issues any such Variable              Price Securities, the Holder shall have the right, but not the obligation, in its sole              discretion to substitute the Variable Price for the Conversion Price upon conversion              of this Note by designating in the Conversion Notice delivered upon any conversion              of this Note that solely for purposes of such conversion the Holder is relying on the              Variable Price  rather  than the  Conversion  Price  then  in  effect.   The  Holder’s                                        23  Error! Unknown document property name. 

 

               election to rely on a Variable Price for a particular conversion of this Note shall not              obligate the Holder to rely on a Variable Price for any future conversion of this              Note.                           (ii)  Adjustments upon Permitted Settlement Transactions.  If the              Company engages in any Permitted Settlement Transaction that would be a Basic              Dilutive  Issuance pursuant  to  Section 7(a),  but  for  the  fact  that  such Permitted              Settlement Transaction is an Excluded Security (each, a “PST Dilutive Issuance”,              and together with each Basic Dilutive Issuance, each a “Dilutive Issuance”), then,              immediately  after the  time  of  consummation  of such  Permitted  Settlement              Transaction, the Holder shall thereafter have the right to convert all, or any part, of              such portion of the Conversion Amount of this Note equal to the aggregate fair              market value of the securities issued in such Permitted Settlement Transaction (as              determined in accordance with Section 7(a)(iv) above) at the New Issuance Price              of such Permitted Settlement Transaction (as determined pursuant to Section 7(a)              above as if such Permitted Settlement Transaction was not an Excluded Security              thereunder) (each, a “PST Issuance Price”).               (d)   Other Events.  In the event that the Company (or any Subsidiary) shall take        any action to which the provisions hereof are not strictly applicable, or, if applicable, would        not  operate  to  protect  the  Holder  from  dilution  or  if  any  event  occurs  of  the  type        contemplated by the provisions of this Section 7 but not expressly provided for by such        provisions  (including,  without  limitation,  the  granting  of  stock  appreciation  rights,        phantom stock rights or other rights with equity features), then the Company’s board of        directors shall in good faith determine and implement an appropriate adjustment in the        Conversion Price so as to protect the rights of the Holder, provided that no such adjustment        pursuant to this Section 7(d) will increase the Conversion Price as otherwise determined        pursuant  to  this  Section 7(d),  provided  further  that  if  the  Holder  does  not  accept  such        adjustments as appropriately protecting its interests hereunder against such dilution, then        the  Company’s  board  of  directors  and  the  Holder  shall  agree,  in  good  faith,  upon  an        independent investment bank of nationally recognized standing to make such appropriate        adjustments,  whose  determination  shall  be  final  and  binding  absent  manifest  error  and        whose fees and expenses shall be borne by the Company.               (e)   Calculations.   All  calculations  under  this  Section 7 shall  be  made  by        rounding to the nearest cent or the nearest 1/100th of a share, as applicable.  The number of        shares of Common Stock outstanding at any given time shall not include shares owned or        held by or for the account of the Company, and the disposition of any such shares shall be        considered an issue or sale of Common Stock.               (f)   Voluntary Adjustment by Company.  Subject to the rules and regulations of        the Principal Market, the Company may at any time during the term of this Note, with the        prior  written  consent  of  the  Required  Holders (as  defined  in  the  Securities  Purchase        Agreement), reduce the then current Conversion Price of each of the Notes to any amount        and for any period of time deemed appropriate by the board of directors of the Company.                                          24  Error! Unknown document property name. 

 

               8.    INSTALLMENT REDEMPTION.                     (a)   General.  On each applicable Installment Date, the Company shall        pay to the Holder of this Note the applicable Installment Amount due on such date by        redeeming (each, an “Installment Redemption”) such Installment Amount in cash on such        Installment  Date  by  wire  transfer  to  the  Holder  of  immediately  available  funds  in  an        amount  equal  to 107%  of the  applicable  Installment  Amount  (the “Installment        Redemption Price”).  Notwithstanding anything to the contrary in this Section 8(a), but        subject to Section 3(d), until the Installment Redemption Price (together with any Late        Charges thereon) is paid in full, the Installment Amount (together with any Late Charges        thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant        to Section 3. In the event the Holder elects to convert all or any portion of the Installment        Amount prior to the applicable Installment Date as set forth in the immediately preceding        sentence, the Installment Redemption Amount so converted shall be deducted from the        Installment  Amounts  relating  to  the  applicable  Installment  Date(s)  as  set  forth  in  the        applicable Conversion Notice.  Redemptions required by this Section 8(a) shall be made in        accordance with the provisions of Section 13.                      (b) Deferred  Installment  Amount.   Notwithstanding  any  provision  of        Section 8(a) to the contrary, the Holder may, at its option and in its sole discretion, deliver        a written notice to the Company no later than the Trading Day immediately prior to the        applicable  Installment Date  electing  to  have  the  payment  of  all  or  any  portion  of  an        Installment Amount payable on such Installment Date deferred (such amount deferred, the        “Deferral  Amount”,  and  such  deferral,  each  a “Deferral”) until  any  subsequent        Installment Date selected by the Holder (as applicable, the “New Installment Date” with        respect  to  such  applicable  Deferral  Amount),  in  its  sole  discretion,  in  which  case,  the        Deferral  Amount  shall  be  added  to,  and  become  part  of,  such  subsequent  Installment        Amount and (i) if such Deferral is made at the request of the Company, such Deferral        Amount shall continue to accrue Interest hereunder or (ii) if such Deferral is not made at        the request of the Company, unless an Event of Default has occurred and is continuing (in        which case, such Deferral Amount shall accrue interest at the Default Rate), such Deferral        Amount  shall  not  continue  to  accrue  Interest  hereunder.  Any  notice  delivered  by  the        Holder pursuant to this Section 8(b) shall set forth (i) the Deferral Amount, (ii) whether the        Company has requested such Deferral and (iii) the applicable New Installment Date with        respect to such Deferral Amount.                       (c)   Acceleration of Installment Amounts.                             (i)   General.  Notwithstanding any provision of this Section 8 to              the contrary, at any time after a Deferral, the Holder may, by delivery of written              notice to the Company (each, an “Acceleration Notice”, and the date thereof, each              an  “Acceleration Notice Date”),  require  the  Company  to  redeem (each,  an              “Acceleration”) all,  or  any  part,  of  such  Deferral  Amount as  specified  in  such              Acceleration Notice (each, an “Acceleration Amount”) in cash at a redemption              price equal to 107% of such Deferral Amount (including, without limitation, any              Interest, Make-Whole Amount and/or Late Charges, as applicable, that may have                                         25  Error! Unknown document property name. 

 

               accrued thereon from and after the time of such Deferral hereunder, if any) (each,              an “Acceleration Redemption Price”).                           (ii)  Mechanics.  Each Acceleration Notice shall specify (x) such              applicable  Acceleration Amount,  (y) such applicable  Acceleration  Redemption              Price  with  respect  to  such  Acceleration  Amount  and  (z) the  date  of  such              Acceleration (each, an “Acceleration Redemption Date”), which shall be the fifth              (5th)  Trading  Day  after  the  applicable Acceleration  Notice  Date.   Redemptions              required by this Section 8(c) shall be made in accordance with the provisions of              Section 13.  Notwithstanding anything to the contrary in this Section 8(c) shall, but              subject  to  Section 3(d),  until  the  Holder  receives  the Acceleration Redemption              Price,  the Acceleration Amount  may  be  converted,  in  whole  or  in  part,  by  the              Holder into Common Stock pursuant to Section 3, and any such conversion shall              reduce  the Acceleration Amount  in  the  manner  set  forth  by  the  Holder  in  the              applicable Conversion Notice.         9.    SUBSEQUENT PLACEMENT OPTIONAL REDEMPTION               (a)   General.  With respect to any given Subsequent Placement (as defined in        the  Securities  Purchase  Agreement)  (including,  without  limitation,  any  ATM/EOL        Transaction (as defined in the Securities Purchase Agreement), but excluding any other        Excluded  Securities)(each,  an  “Eligible  Subsequent  Placement”),  from  and after  the        earlier of  (x) the  date  the  Holder  becomes  aware  of  the  occurrence  of such  Eligible        Subsequent Placement (the “Holder Notice Date”) and (y) the later of (A) the fifth (5th)        Trading Day after the Company has delivered written notice to the Holder of the occurrence        (or  potential  occurrence)  of such  Eligible Subsequent  Placement  (each,  a  “Company        Subsequent  Placement  Notice”)  and  (B) the time  of consummation  of  such  Eligible        Subsequent Placement, the Holder shall have the right, in its sole discretion, to require that        the  Company  redeem  (each  an  “Optional  Redemption”)  all,  or  any  portion,  of  the        Conversion  Amount under  this  Note not  in  excess  of  (together  with  any  Optional        Redemption Amount (as defined in the applicable other Note of the Holder) of any other        Notes of the Holder) the Holder’s Holder Pro Rata Amount of 40% of the gross proceeds        (less any reasonable placement agent, underwriter and/or legal fees and expenses) of such        Eligible Subsequent Placement (each, an “Eligible Optional Redemption Amount”) by        delivering written notice thereof (each, an “Optional Redemption Notice”, and the date        thereof, each an “Optional Redemption Notice Date”) to the Company.  Notwithstanding        the foregoing, (I) if such Eligible Subsequent Placement is an ATM/EOL Transaction, the        Company shall not be required to deliver more than one Company Subsequent Placement        Notice in  any ten (10) Trading  Day period and (II) if the Holder is  participating  in  an        Eligible Subsequent Placement, upon the written request of the Holder, the Company shall        apply  all,  or  any  part,  as  set  forth  in  such  written  request,  of  any  amounts  that  would        otherwise be payable to the Holder in such Optional Redemption, on a dollar-for-dollar        basis, against the purchase price of the securities to be purchased by the Holder in such        Eligible Subsequent Placement.               (b)   Mechanics.  The Optional Redemption Notice shall indicate that all, or such        applicable  portion,  as  set  forth  in  the  applicable  Optional  Redemption  Notice,  of  the                                        26  Error! Unknown document property name. 

 

         Eligible  Optional  Redemption  Amount  the  Holder  is  electing  to  have  redeemed  (the        “Optional  Redemption  Amount”)  and  the  date  of  such  Optional  Redemption  (the        “Optional Redemption Date”), which shall be the later of (x) the fifth (5th) Trading Day        after  the  date  of  the  applicable  Optional  Redemption  Notice  and  (y)  the  date  of  the        consummation of such Eligible Subsequent Placement.  The portion of this Note subject to        redemption pursuant to this Section 9 shall be redeemed by the Company in cash at a price        equal to 107% of the greater of (i) Optional Redemption Amount and (ii) the product of        (X)  the quotient  of  (I)  the  Optional  Redemption  Amount  divided  by  (II)  the  Alternate        Conversion Price as in effect at such time as the Holder delivers an Optional Redemption        Notice (or, if a Dilutive Issuance occurs during the period commencing on, and including,        such Optional Redemption Notice Date through, and including such Optional Redemption        Date, the date of such Dilutive Issuance) multiplied by (Y) the greatest Closing Sale Price        of the Common Stock on any Trading Day during the period commencing on the date        immediately preceding the occurrence of such Eligible Subsequent Placement and ending        on the  later  of  (x)  the  fifth  (5th)  Trading  Day  after  the  date  of  the  applicable  Optional        Redemption  Notice and  (y) the date of the consummation of such Eligible Subsequent        Placement (the “Optional Redemption Price”).  Redemptions required by this Section 9        shall be made in accordance with the provisions of Section 13.  Notwithstanding anything        to the contrary in this Section 9, but subject to Section 3(d), until the Holder receives the        Optional Redemption Price, the Optional Redemption Amount may be converted, in whole        or  in  part,  by  the  Holder  into  Common  Stock  pursuant  to  Section 3,  and  any  such        conversion shall reduce the Optional Redemption Amount in the manner set forth by the        Holder in the applicable Conversion Notice.               10.   REDEMPTIONS AT THE COMPANY’S ELECTION.                     (a)   Company Optional Redemption.  At any time after date hereof, the        Company shall have the right to redeem all, but not less than all, of the Conversion Amount        then remaining under this Note (the “Company Optional Redemption Amount”) on the        Company  Optional  Redemption  Date  (each  as  defined  below)  (a “Company  Optional        Redemption”).  The portion of this Note subject to redemption pursuant to this Section        10(a) shall  be  redeemed  by  the  Company  in  cash  at  a  price  (the “Company  Optional        Redemption Price”) equal to 107% of the greater of (i) the Conversion Amount being        redeemed as of the Company Optional Redemption Date and (ii) the product of (1) the        quotient of (I) the Company Optional Redemption Amount divided by (II) the Alternate        Conversion Price as in effect at such Company Optional Redemption Notice Date (or, if a        Dilutive Issuance occurs during the period commencing on, and including, such Company        Optional  Redemption  Notice  Date  through,  and  including  such  Company  Optional        Redemption Date, the date of such Dilutive Issuance) multiplied by (2) the greatest Closing        Sale Price of the Common Stock on any Trading Day during the period commencing on        the  date  immediately  preceding  such  Company  Optional  Redemption  Notice  Date  and        ending on the Trading Day immediately prior to the date the Company makes the entire        payment required to be made under this Section 10(a).  The Company may exercise its        right to require redemption under this Section 10(a) by delivering a written notice thereof        by facsimile or electronic mail and overnight courier to all, but not less than all, of the        holders of Notes (the “Company Optional Redemption Notice” and the date all of the        holders  of  Notes  received  such  notice  is  referred  to  as  the “Company  Optional                                        27  Error! Unknown document property name. 

 

         Redemption  Notice  Date”).   The  Company  may  deliver  only  one  Company  Optional        Redemption Notice hereunder and such Company Optional Redemption Notice shall be        irrevocable.  The Company Optional Redemption Notice shall (x) state the date on which        the Company Optional Redemption shall occur (the “Company Optional Redemption        Date”) which date shall not be less than ten (10) calendar days nor more than thirty (30)        calendar days following the Company Optional Redemption Notice Date, and (y) state the        aggregate Conversion Amount of the Notes which is being redeemed in such Company        Optional Redemption from the Holder and all of the other holders of the Notes pursuant to        this Section 10(a) (and  analogous  provisions  under  the  Other  Notes)  on  the  Company        Optional Redemption Date.  Notwithstanding anything herein to the contrary, at any time        prior to the date the Company Optional Redemption Price is paid, in full, the Company        Optional Redemption Amount may be converted, in whole or in part, by the Holder into        shares of Common Stock pursuant to Section 3.  All Conversion Amounts converted by        the Holder after the Company Optional Redemption Notice Date shall reduce the Company        Optional  Redemption  Amount  of  this  Note  required  to  be  redeemed  on  the  Company        Optional Redemption Date.  Redemptions made pursuant to this Section 10(a) shall be        made in accordance with Section 12.  In the event of the Company’s redemption of any        portion of this Note under this Section 10, the Holder’s damages would be uncertain and        difficult to estimate because of the parties’ inability to predict future interest rates and the        uncertainty of the availability of a suitable substitute investment opportunity for the Holder.         Accordingly, any redemption premium due under this Section 10 is intended by the parties        to  be,  and  shall  be  deemed,  a  reasonable  estimate  of  the  Holder’s  actual  loss  of  its        investment opportunity and not as a penalty.  For the avoidance of doubt, the Company        shall have no right to effect a Company Optional Redemption if any Event of Default has        occurred  and  continuing  (regardless  of  whether  the  Holder  has  delivered  an  Event  of        Default Redemption Notice to the Company or if such Event of Default has been cured        thereafter) but any Event of Default shall have no effect upon the Holder’s right to convert        this Note in its discretion.                       (b)   Pro Rata Redemption Requirement.  If the Company elects to cause        a  Company  Optional  Redemption  of  this  Note  pursuant  to  Section 10(a), then  it  must        simultaneously take the same action with respect to all of the Other Notes.         11.   NONCIRCUMVENTION.  The Company hereby covenants and agrees  that the  Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities  Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any  reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue  or  sale  of  securities,  or  any  other  voluntary  action,  avoid  or  seek  to  avoid  the  observance  or  performance of any of the terms of this Note, and will at all times in good faith carry out all of the  provisions of this Note and take all action as may be required to protect the rights of the Holder of  this Note.  Without limiting the generality of the foregoing or any other provision of this Note or  the other Transaction Documents, the Company (a) shall not increase the par value of any shares  of Common Stock receivable upon conversion of this Note above the Conversion Price then in  effect,  and (b) shall take all such actions  as  may be necessary or appropriate in  order that the  Company may validly and legally issue fully paid and nonassessable shares of Common Stock  upon the conversion of this Note.  Notwithstanding anything herein to the contrary, if after the  sixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to convert                                        28  Error! Unknown document property name. 

 

   this Note in full for any reason (other than pursuant to restrictions set forth in Section 3(d) hereof),  the  Company  shall  use  its  best  efforts  to  promptly  remedy  such  failure,  including,  without  limitation, obtaining such consents or approvals as necessary to permit such conversion into shares  of Common Stock.         12.   RESERVATION OF AUTHORIZED SHARES.               (a)   Reservation.  So long as any Notes remain outstanding, the Company shall        at all times reserve at least 200% of the number of shares of Common Stock as shall from        time to time be necessary to effect the conversion, including without limitation, Alternate        Conversions of all of the Notes  then outstanding (without regard to any limitations on        conversions and assuming such Notes remain outstanding until the Maturity Date) at the        Alternate  Conversion  Price  then  in  effect (the “Required  Reserve  Amount”).   The        Required Reserve Amount (including, without limitation, each increase in the number of        shares so reserved) shall be allocated pro rata among the holders of the Notes based on the        original principal amount of the Notes held by each holder on the Closing Date or increase        in the number of reserved shares, as the case may be (the “Authorized Share Allocation”).         In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each        transferee  shall  be  allocated  a  pro  rata  portion  of  such  holder’s Authorized Share        Allocation.  Any shares of Common Stock reserved and allocated to any Person which        ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based        on the principal amount of the Notes then held by such holders.               (b)   Insufficient Authorized Shares.  If, notwithstanding Section 12(a), and not        in limitation thereof, at any time while any of the Notes remain outstanding the Company        does not have a sufficient number of authorized and unreserved shares of Common Stock        to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a        number  of  shares  of  Common  Stock  equal  to  the  Required  Reserve  Amount  (an        “Authorized  Share  Failure”),  then  the  Company  shall  immediately  take  all  action        necessary to increase the Company’s authorized shares of Common Stock to an amount        sufficient to allow the Company to reserve the Required Reserve Amount for the Notes        then outstanding.  Without limiting the generality of the foregoing sentence, as soon as        practicable after the date of the occurrence of an Authorized Share Failure, but in no event        later  than  sixty  (60)  days  after  the  occurrence  of  such  Authorized  Share  Failure,  the        Company shall hold a meeting of its stockholders for the approval of an increase in the        number of authorized shares of Common Stock.  In connection with such meeting, the        Company  shall  provide  each  stockholder  with  a  proxy  statement  and  shall  use  its  best        efforts  to  solicit  its  stockholders’ approval  of  such  increase  in  authorized  shares  of        Common Stock and to cause its board of directors to recommend to the stockholders that        they approve such proposal.  In the event that the Company is prohibited from issuing        shares  of  Common  Stock  pursuant  to  the  terms  of  this  Note  due  to  the  failure  by  the        Company to have sufficient shares of Common Stock available out of the authorized but        unissued shares of Common Stock (such unavailable number of shares of Common Stock,        the “Authorized Failure Shares”), in lieu of delivering such Authorized Failure Shares to        the Holder, the Company shall pay cash in exchange for the redemption of such portion of        the Conversion Amount convertible into such Authorized Failure Shares at a price equal to        the sum of (i) the product of (x) such number of Authorized Failure Shares and (y) the                                        29  Error! Unknown document property name. 

 

         greatest Closing Sale Price of the Common Stock on any Trading Day during the period        commencing on the date the Holder delivers the applicable Conversion Notice with respect        to such Authorized Failure Shares to the Company and ending on the date of such issuance        and payment under this Section 12(a); and (ii) to the extent the Holder purchases (in an        open market transaction or otherwise) shares of Common Stock to deliver in satisfaction        of a sale by the Holder of Authorized Failure Shares, any brokerage commissions and other        out-of-pocket expenses, if any, of the Holder incurred in connection therewith.  Nothing        contained in Section 12(a) or this Section 12(b) shall limit any obligations of the Company        under any provision of the Securities Purchase Agreement.         13.   REDEMPTIONS.               (a)   Mechanics.  The Company shall deliver the  applicable Event  of Default        Redemption Price to the Holder in cash within five (5) Business Days after the Company’s        receipt of the Holder’s Event of Default Redemption Notice (each, an “Event of Default        Redemption Date”).  If the Holder has submitted a Change of Control Redemption Notice        in  accordance  with  Section 5(b),  the  Company  shall  deliver  the  applicable  Change  of        Control Redemption Price to the Holder in cash concurrently with the consummation of        such  Change  of  Control  if  such  notice  is  received  prior  to  the  consummation  of  such        Change of Control and within five (5) Business Days after the Company’s receipt of such        notice otherwise (each, a “Change of Control Redemption Date”).  The Company shall        deliver the applicable Installment Redemption Price to the Holder in cash on the applicable        Installment Date.   The  Company  shall  deliver  the  applicable  Acceleration  Redemption        Price to the Holder in cash on the applicable Acceleration Date.  The Company shall deliver        the applicable Optional Redemption Price to the Holder in cash on the applicable Optional        Redemption  Date.  The  Company  shall  deliver  the  applicable  Company  Optional        Redemption Price to the Holder in cash on the applicable Company Optional Redemption        Date.  Notwithstanding anything herein to the contrary, in connection with any redemption        hereunder at a time the Holder is entitled to receive a cash payment under any of the other        Transaction Documents, at the option of the Holder delivered in writing to the Company,        the applicable Redemption Price hereunder shall be increased by the amount of such cash        payment owed to the Holder under such other Transaction Document and, upon payment        in  full  or  conversion  in  accordance  herewith,  shall  satisfy  the  Company’s  payment        obligation under such other Transaction Document.  In the event of a redemption of less        than all of the Conversion Amount of this Note, (x) the Company shall promptly cause to        be  issued  and  delivered  to  the  Holder  a  new  Note  (in  accordance  with  Section 20(d))        representing  the  outstanding  Principal  which  has  not  been  redeemed and  (y)  the        Redemption Price shall be applied against Installment Amounts hereunder in reverse order        (from the Installment Amount due on the last Installment Date hereunder backward by        Installment Dates) unless otherwise specified by the Holder in writing.  In the event that        the Company does not pay the applicable Redemption Price to the Holder within the time        period  required,  at  any  time  thereafter  and  until  the  Company  pays  such  unpaid        Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require        the Company to promptly return to the Holder all or any portion of this Note representing        the Conversion Amount that was submitted for redemption and for which the applicable        Redemption Price (together with any Late Charges thereon) has not been paid.  Upon the        Company’s receipt of such notice, (x) the applicable Redemption Notice shall be null and                                        30  Error! Unknown document property name. 

 

         void with respect to such Conversion Amount, (y) the Company shall immediately return        this Note, or issue a new Note (in accordance with Section 20(d)), to the Holder, and in        each case the principal amount of this Note or such new Note (as the case may be) shall be        increased by an amount equal to the difference between (1) the applicable Redemption        Price (as the case may be, and as adjusted pursuant to this Section 13, if applicable) minus        (2) the Principal portion of the Conversion Amount submitted for redemption and (z) the        Conversion Price of this Note or such new Notes (as the case may be) shall be automatically        adjusted  with  respect  to  each  conversion  effected  thereafter  by  the  Holder  to  the        Conversion Price as in effect on the date on which the applicable Redemption Notice is        voided. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its        rights  following  such  notice  shall  not  affect  the Company’s  obligations  to  make  any        payments of Late Charges which have accrued prior to the date of such notice with respect        to the Conversion Amount subject to such notice.               (b)   Redemption by Other Holders.  Upon the Company’s receipt of notice from        any of the holders of the Other Notes for redemption or repayment as a result of an event        or occurrence substantially similar to the events or occurrences described in Section 4 or        Section 5(b) (each, an “Other Redemption Notice”), the Company shall immediately, but        no later than one (1) Business Day of its receipt thereof, forward to the Holder by facsimile        or electronic mail a copy of such notice.  If the Company receives a Redemption Notice        and one or more Other Redemption Notices, during the seven (7) Business Day period        beginning on and including the date which is two (2) Business Days prior to the Company’s        receipt of the Holder’s applicable Redemption Notice and ending on and including the date        which is two (2) Business Days after the Company’s receipt of the Holder’s applicable        Redemption Notice and the Company is unable to redeem all principal, interest and other        amounts  designated  in  such  Redemption  Notice  and  such  Other  Redemption  Notices        received during such seven (7) Business Day period, then the Company shall redeem a pro        rata amount from each holder of the Notes (including the Holder) based on the principal        amount of the Notes submitted for redemption pursuant to such Redemption Notice and        such Other Redemption Notices received by the Company during such seven (7) Business        Day period.         14.   VOTING RIGHTS.  The Holder shall have no voting rights as the holder of this  Note, except as required by law (including, without limitation, the Delaware General Corporation  Law) and as expressly provided in this Note.         15.   COVENANTS.  Until all of the Notes have been converted, redeemed or otherwise  satisfied in accordance with their terms:               (a)   Rank. All payments due under this Note (a) shall rank pari passu with all        Other  Notes  and  (b)  shall  be  senior  to  all  other  Indebtedness  of  the  Company  and  its        Subsidiaries other than Permitted Indebtedness or Permitted Additional Indebtedness.               (b)   Incurrence of Indebtedness.  The Company shall not, and the Company shall        cause each of its Subsidiaries to not, directly or indirectly, incur or guarantee, assume or        suffer to exist any Indebtedness (other than (i) the Indebtedness evidenced by this Note and        the Other Notes and (ii) other Permitted Indebtedness).                                        31  Error! Unknown document property name. 

 

               (c)   Existence of Liens.  The Company shall not, and the Company shall cause        each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage,        lien, pledge, charge, security interest or other encumbrance upon or in any property or        assets  (including  accounts  and  contract  rights)  owned  by  the  Company  or  any  of  its        Subsidiaries (collectively, “Liens”) other than Permitted Liens.               (d)   Restricted Payments.  The Company shall not, and the Company shall cause        each of its Subsidiaries to not, directly or indirectly, redeem, defease, repurchase, repay or        make any payments in respect of, by the payment of cash or cash equivalents (in whole or        in part, whether by way of open market purchases, tender offers, private transactions or        otherwise), all or any portion of any Indebtedness (other than the Notes or the March Notes)        whether by way of payment in respect of principal of (or premium, if any) or interest on,        such Indebtedness if at the time such payment is due or is otherwise made or, after giving        effect to such payment, (i) an event constituting an Event of Default has occurred and is        continuing or (ii) an event that with the passage of time and without being cured would        constitute an Event of Default has occurred and is continuing.               (e)   Restriction on Redemption and Cash Dividends.  The Company shall not,        and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem,        repurchase or declare or pay any cash dividend or distribution on any of its capital stock.               (f)   Restriction  on  Transfer  of  Assets.  The  Company  shall  not,  and  the        Company  shall  cause  each  of  its  Subsidiaries  to  not,  directly  or  indirectly,  sell,  lease,        license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any assets        or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single        transaction  or  a  series  of  related  transactions,  other  than  (i)  sales,  leases,  licenses,        assignments, transfers, conveyances and other dispositions of such assets or rights by the        Company and its Subsidiaries in the ordinary course of business consistent with its past        practice and (ii) sales of inventory and product in the ordinary course of business.               (g)   Maturity of Indebtedness.  Except as set forth on Schedule 3(s) attached        hereto, the Company shall not, and the Company shall cause each of its Subsidiaries to not,        directly or indirectly, permit any Indebtedness of the Company or any of its Subsidiaries        to mature or accelerate prior to the Maturity Date.               (h)   Change in Nature of Business.  The Company shall not, and the Company        shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line        of business substantially different from those lines of business conducted by or publicly        contemplated  to  be  conducted  by  the  Company  and  each  of  its  Subsidiaries  on  the        Subscription Date or any business substantially related or incidental thereto.  The Company        shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,        modify its or their corporate structure or purpose.               (i)   Preservation of Existence, Etc.  The Company shall maintain and preserve,        and  cause  each  of  its  Subsidiaries  to  maintain  and  preserve,  its  existence,  rights  and        privileges, and become or remain, and cause each of its Subsidiaries to become or remain,        duly  qualified  and  in  good  standing in  each  jurisdiction  in  which  the  character  of  the                                         32  Error! Unknown document property name. 

 

         properties owned or leased by it or in which the transaction of its business makes such        qualification necessary.               (j)   Maintenance of Properties, Etc.  The Company shall maintain and preserve,        and cause each of its Subsidiaries to maintain and preserve, all of its properties which are        necessary  or  useful  in  the  proper  conduct  of  its  business  in  good  working  order  and        condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries        to comply, at all times with the provisions of all leases to which it is a party as lessee or        under  which  it  occupies  property,  so  as  to  prevent  any  loss  or  forfeiture  thereof  or        thereunder.               (k)   Maintenance of Intellectual Property.  The Company will, and will cause        each of its Subsidiaries to, take all action necessary or advisable to maintain all of the        Intellectual  Property  Rights  (as  defined  in  the  Securities  Purchase  Agreement)  of  the        Company and/or any of its Subsidiaries that are necessary or material to the conduct of its        business in full force and effect.               (l)   Maintenance of Insurance.  The Company shall maintain, and cause each of        its Subsidiaries to maintain, insurance with responsible and reputable insurance companies        or associations (including, without limitation, comprehensive general liability, hazard, rent        and  business  interruption  insurance)  with  respect  to  its  properties  (including  all  real        properties leased or owned by it) and business, in such amounts and covering such risks as        is required by any governmental authority having jurisdiction with respect thereto or as is        carried  generally  in  accordance  with  sound  business  practice  by  companies  in  similar        businesses similarly situated.               (m)   Transactions with Affiliates.  The Company shall not, nor shall it permit        any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series        of related transactions (including, without limitation, the purchase, sale, lease, transfer or        exchange of property or assets of any kind or the rendering of services of any kind) with        any affiliate, except transactions in the ordinary course of business in a manner and to an        extent consistent with past practice and necessary or desirable for the prudent operation of        its business, for fair consideration and on terms no less favorable to it or its Subsidiaries        than would be obtainable in a comparable arm’s length transaction with a Person that is not        an affiliate thereof.               (n)   Restricted Issuances.  The Company shall not, directly or indirectly, without        the prior written consent of the holders of a majority in aggregate principal amount of the        Notes then outstanding, (i) issue any Notes (other than as contemplated by the Securities        Purchase Agreement and the Notes) or (ii) issue any other securities that would cause a        breach or default under the Notes or the Warrants.                 (o)   Available Cash Test; Announcement of Operating Results.                       (i)   Available Cash Test.  At any time any Notes remain outstanding, the              Company’s Available Cash as of the last calendar day of each Fiscal Quarter shall              equal or exceed $500,000 (the “Available Cash Test”), provided that a Financial                                         33  Error! Unknown document property name. 

 

               Covenant Failure (as defined below) shall not be an Event of Default hereunder (x)              if the Company cures such Financial Covenant Failure on or prior to the fortieth              (40th) calendar day after the end of such Fiscal Quarter (and no subsequent breach              occurs for a period of at least 180 calendar days), as evidenced by a certification,              executed on behalf of the Company by the Chief Financial Officer of the Company              or (y) if waived by the Holder in writing or email.                     (ii)   Operating Results  Announcement.  Commencing with  the Fiscal              Quarter  ending September 30,  2020,  the  Company  shall  publicly  disclose  and              disseminate (such date, the “Announcement Date”), if the Available Cash Test has              not been satisfied for such Fiscal Quarter or Fiscal Year, as applicable, a statement              to that effect no later than the tenth (10th) day after the end of such Fiscal Quarter              or Fiscal Year, as applicable, and such announcement shall include a statement to              the effect that the Company is (or is not, as applicable) in breach of the Available              Cash  Test  for  such  Fiscal  Quarter  or  Fiscal  Year,  as  applicable.   On  the              Announcement Date, the Company shall also provide to the Holders a certification,              executed on behalf of the Company by the Chief Financial Officer of the Company,              certifying  that  the  Company  satisfied  the  Available  Cash  Tests  for  such  Fiscal              Quarter if that is the case.  If the Company has failed to meet the Available Cash              Test  for  such  Fiscal  Quarter  (a  “Financial  Covenant  Failure”),  the  foregoing              written certification that the Company provides to the Holders shall also state the              Available Cash Test has not been met (a “Financial Covenant Failure Notice”).               Concurrently with the delivery of each Financial Covenant Failure Notice to the              Holders, the Company shall also make publicly available (as part of a Quarterly              Report on Form 10-Q, Annual Report on Form 10-K or on a Current Report on              Form 8-K, or otherwise) the Financial Covenant Failure Notice and the fact that an              Event of Default has occurred under the Notes.               (p)   Independent Investigation.  At the request of the Holder either (x) at any        time when an Event of Default has occurred and is continuing, (y) upon the occurrence of        an event that with the passage of time or giving of notice would constitute an Event of        Default or (z) at any time the Holder reasonably believes an Event of Default may have        occurred or be continuing, the Company shall hire an independent, reputable investment        bank selected by the Company and approved by the Holder to investigate as to whether any        breach of this Note has occurred (the “Independent Investigator”).  If the Independent        Investigator  determines  that  such  breach  of  this  Note  has  occurred,  the  Independent        Investigator shall notify the Company of such breach and the Company shall deliver written        notice to each holder of a Note of such breach.  In connection with such investigation, the        Independent Investigator may, during normal business hours, inspect all contracts, books,        records,  personnel,  offices  and  other  facilities  and  properties  of  the  Company  and  its        Subsidiaries and, to the extent available to the Company after the Company uses reasonable        efforts  to  obtain  them,  the  records  of  its  legal  advisors  and  accountants  (including  the        accountants’ work papers) and any books of account, records, reports and other papers not        contractually required of the Company to be confidential or secret, or subject to attorney-       client  or  other  evidentiary  privilege,  and  the  Independent  Investigator  may  make  such        copies and inspections thereof as the Independent Investigator may reasonably request.         The Company shall furnish the Independent Investigator with such financial and operating                                        34  Error! Unknown document property name. 

 

         data and other information with respect to the business and properties of the Company as        the  Independent  Investigator  may  reasonably  request.   The  Company  shall  permit  the        Independent Investigator to discuss the affairs, finances and accounts of the Company with,        and to make proposals and furnish advice with respect thereto to, the Company’s officers,        directors, key employees and independent public accountants or any of them (and by this        provision  the  Company  authorizes  said  accountants  to  discuss  with  such  Independent        Investigator the finances and affairs of the Company and any Subsidiaries), all at such          16.   [INTENTIONALLY OMITTED]         17.   DISTRIBUTION OF ASSETS.  In addition to any adjustments pursuant to Section  7, if the Company shall declare or make any dividend or other distributions of its assets (or rights  to acquire its assets) to any or all holders of shares of Common Stock, by way of return of capital  or  otherwise  (including  without  limitation,  any  distribution  of  cash,  stock  or  other  securities,  property  or  options  by  way  of  a  dividend,  spin  off,  reclassification,  corporate  rearrangement,  scheme of arrangement or other similar transaction) (the “Distributions”), then the Holder will be  entitled to such Distributions as if the Holder had held the number of shares of Common Stock  acquirable upon complete conversion of this Note (without taking into account any limitations or  restrictions on the convertibility of this Note and assuming for such purpose that the Note was  converted at the Alternate Conversion Price as of the applicable record date) immediately prior to  the date on which a record is taken for such Distribution or, if no such record is taken, the date as  of  which  the  record  holders  of  Common  Stock  are  to  be  determined  for  such  Distributions  (provided, however, that to the extent that the Holder’s right to participate in any such Distribution  would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage,  then  the  Holder  shall  not  be  entitled  to  participate  in  such  Distribution  to  the  extent  of  the  Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common  Stock as a result of such Distribution (and beneficial ownership) to the extent of any such excess)  and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until  such  time  or  times,  if  ever,  as  its  right  thereto  would  not  result  in  the  Holder  and  the  other  Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall  be granted such Distribution (and any Distributions declared or made on such initial Distribution  or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had  been no such limitation).         18.   AMENDING THE TERMS OF THIS NOTE.  Except for Section 3(d), which may  not be amended, modified or waived by the parties hereto, the prior written consent of the Holder  shall be required for any change, waiver or amendment to this Note.         19.   TRANSFER.  This Note and any shares of Common Stock issued upon conversion  of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the  Company, subject only to the provisions of Section 2(g) of the Securities Purchase Agreement.         20.   REISSUANCE OF THIS NOTE.               (a)   Transfer.  If this Note is to be transferred, the Holder shall surrender this        Note to the Company, whereupon the Company will forthwith issue and deliver upon the        order of the Holder a new Note (in accordance with Section 20(d)), registered as the Holder                                         35  Error! Unknown document property name. 

 

         may request, representing the outstanding Principal being transferred by the Holder and, if        less than the entire outstanding Principal is being transferred, a new Note (in accordance        with  Section 20(d))  to  the  Holder  representing  the  outstanding  Principal  not  being        transferred.  The Holder and any assignee, by acceptance of this Note, acknowledge and        agree  that,  by  reason  of  the  provisions  of  Section 3(c)(iii) following  conversion  or        redemption of any portion of this Note, the outstanding Principal represented by this Note        may be less than the Principal stated on the face of this Note.               (b)   Lost, Stolen or Mutilated Note.  Upon receipt by the Company of evidence        reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this        Note (as to which a written certification and the indemnification contemplated below shall        suffice  as  such  evidence),  and,  in  the  case  of  loss,  theft  or  destruction,  of  any        indemnification undertaking by the Holder to the Company in customary and reasonable        form  and,  in  the  case  of  mutilation,  upon  surrender  and  cancellation  of  this  Note,  the        Company shall execute and deliver to the Holder a new Note (in accordance with Section        20(d)) representing the outstanding Principal.               (c)   Note  Exchangeable  for  Different  Denominations.  This  Note  is        exchangeable,  upon  the  surrender  hereof  by  the  Holder  at the  principal  office  of  the        Company, for a new Note or Notes (in accordance with Section 20(d) and in principal        amounts of at least $1,000) representing in the aggregate the outstanding Principal of this        Note, and each such new Note will represent such portion of such outstanding Principal as        is designated by the Holder at the time of such surrender.               (d)   Issuance of New Notes.  Whenever the Company is required to issue a new        Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this        Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining        outstanding (or in the case of a new Note being issued pursuant to Section 20(a) or Section        20(c),  the  Principal  designated  by  the  Holder  which,  when  added  to  the  principal        represented  by  the  other  new  Notes  issued  in  connection  with  such  issuance,  does  not        exceed  the  Principal  remaining  outstanding  under  this  Note  immediately  prior  to  such        issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such        new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same        rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest, the        Make-Whole  Amount and  Late  Charges  on  the Principal, Interest and  Make-Whole        Amount, if any, of this Note, from the Issuance Date.         21.   REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES  AND INJUNCTIVE RELIEF.  The remedies provided in this Note shall be cumulative and in  addition  to  all  other  remedies  available  under  this  Note  and  any  of  the  other  Transaction  Documents at law or in equity (including a decree of specific performance and/or other injunctive  relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages  for any failure by the Company to comply with the terms of this Note.  No failure on the part of  the Holder to exercise, and no delay in exercising, any right, power or remedy hereunder shall  operate as a waiver thereof; nor shall any single or partial exercise by the Holder of any right,  power or remedy preclude any other or further exercise thereof or the exercise of any other right,  power or remedy.  In addition, the exercise of any right or remedy of the Holder at law or equity                                        36  Error! Unknown document property name. 

 

   or under this Note or any of the documents shall not be deemed to be an election of Holder’s rights  or remedies under such documents or at law or equity.  The Company covenants to the Holder that  there  shall  be  no  characterization  concerning  this  instrument  other  than  as  expressly  provided  herein.  Amounts set forth or provided for herein with respect to payments, conversion and the like  (and the computation thereof) shall be the amounts to be received by the Holder and shall not,  except as expressly provided herein, be subject to any other obligation of the Company (or the  performance thereof).  The Company acknowledges that a breach by it of its obligations hereunder  will cause irreparable harm to the Holder and that the remedy at law for any such breach may be  inadequate.  The Company therefore agrees that, in the event of any such breach or threatened  breach,  the  Holder  shall  be  entitled,  in  addition  to  all  other  available  remedies,  to  specific  performance and/or temporary, preliminary and permanent injunctive or other equitable relief from  any  court  of  competent  jurisdiction  in  any  such  case  without  the  necessity  of  proving  actual  damages and without posting a bond or other security.  The Company shall provide all information  and documentation to the Holder that is requested by the Holder to enable the Holder to confirm  the  Company’s  compliance  with  the  terms  and  conditions  of  this  Note  (including,  without  limitation, compliance with Section 7).         22.   PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a)  this Note is placed in the hands of an attorney for collection or enforcement or is collected or  enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due  under  this  Note  or  to  enforce  the  provisions  of  this  Note  or  (b)  there  occurs  any  bankruptcy,  reorganization, receivership of the Company or other proceedings affecting Company creditors’  rights and involving a claim under this Note, then the Company shall pay the costs incurred by the  Holder  for  such  collection,  enforcement  or  action  or  in  connection  with  such  bankruptcy,  reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and  disbursements.  The Company expressly acknowledges and agrees that no amounts due under this  Note shall be affected, or limited, by the fact that the purchase price paid for this Note was less  than the original Principal amount hereof.         23.   CONSTRUCTION; HEADINGS.  This Note shall be deemed to be jointly drafted  by the Company and the initial Holder and shall not be construed against any such Person as the  drafter hereof.  The headings of this Note are for convenience of reference and shall not form part  of, or affect the interpretation of, this Note.  Unless the context clearly indicates otherwise, each  pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural  forms thereof.  The terms “including,” “includes,” “include” and words of like import shall be  construed  broadly  as  if  followed  by  the  words “without  limitation.” The  terms “herein,”  “hereunder,” “hereof” and words of like import refer to this entire Note instead of just the provision  in  which  they are  found.  Unless  expressly  indicated  otherwise,  all  section  references  are  to  sections of this Note.  Terms used in this Note and not otherwise defined herein, but defined in the  other Transaction Documents, shall have the meanings ascribed to such terms on the Closing Date  in such other Transaction Documents unless otherwise consented to in writing by the Holder.         24.   FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of  the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver  thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other  or further exercise thereof or of any other right, power or privilege.  No waiver shall be effective  unless  it  is  in  writing  and signed  by  an  authorized  representative  of  the  waiving  party.                                         37  Error! Unknown document property name. 

 

   Notwithstanding the foregoing, nothing contained in this Section 24 shall permit any waiver of  any provision of Section 3(d).         25.   DISPUTE RESOLUTION.                (a)   Submission to Dispute Resolution.                     (i)   In the case of a dispute relating to a Closing Bid Price, a Closing              Sale Price, a Conversion Price, an Alternate Conversion Price, a Black Scholes              Consideration Value, a PST Issuance Price, a VWAP or a fair market value or the              arithmetic calculation of a Conversion Rate, the Restricted Principal, the Restricted              OID, or the applicable Redemption Price (as the case may be) (including, without              limitation,  a  dispute  relating  to  the  determination  of  any  of  the  foregoing),  the              Company or the Holder (as the case may be) shall submit the dispute to the other              party  via  facsimile  or  electronic  mail  (A)  if  by  the  Company,  within  two  (2)              Business Days after the occurrence of the circumstances giving rise to such dispute              or (B) if by the Holder at any time after the Holder learned of the circumstances              giving rise to such dispute.  If the Holder and the Company are unable to promptly              resolve such dispute relating to such Closing Bid Price, such Closing Sale Price,              such  Conversion  Price, such Alternate  Conversion  Price,  such Black Scholes              Consideration Value, such PST Issuance Price, such VWAP or such fair market              value,  or  the  arithmetic  calculation  of  such  Conversion  Rate,  the  Restricted              Principal, the Restricted OID, or such applicable Redemption Price (as the case              may be), at  any time after the second (2nd) Business Day following such initial              notice by the Company or the Holder (as the case may be) of such dispute to the              Company or the Holder (as the case may be), then the Holder may, at its sole option,              select an independent, reputable investment bank to resolve such dispute.                     (ii)  The Holder and the Company shall each deliver to such investment              bank (A) a copy of the initial dispute submission so delivered in accordance with              the first sentence of this Section 25 and (B) written documentation supporting its              position with respect to such dispute, in each case, no later than 5:00 p.m. (New              York time) by the fifth (5th) Business Day immediately following the date on which              the Holder selected such investment bank (the “Dispute Submission Deadline”)              (the documents referred to in the immediately preceding clauses (A) and (B) are              collectively  referred  to  herein  as  the “Required  Dispute  Documentation”)  (it              being understood and agreed that if either the Holder or the Company fails to so              deliver  all  of  the  Required  Dispute  Documentation  by  the  Dispute  Submission              Deadline,  then  the  party  who  fails  to  so  submit  all  of  the  Required  Dispute              Documentation shall no longer be entitled to (and hereby waives its right to) deliver              or submit any written documentation or other support to such investment bank with              respect to such dispute and such investment bank shall resolve such dispute based              solely  on  the  Required  Dispute  Documentation  that  was  delivered  to  such              investment  bank  prior  to  the  Dispute  Submission  Deadline).   Unless  otherwise              agreed to in writing by both the Company and the Holder or otherwise requested              by such investment bank, neither the Company nor the Holder shall be entitled to              deliver or submit any written documentation or other support to such investment                                        38  Error! Unknown document property name. 

 

               bank  in  connection  with  such  dispute  (other  than  the  Required  Dispute              Documentation).                     (iii) The Company and the Holder shall cause such investment bank to              determine the resolution of such dispute and notify the Company and the Holder of              such resolution no later than ten (10) Business Days immediately following the              Dispute Submission Deadline.  The fees and expenses of such investment bank shall              be borne solely by the Company, and such investment bank’s resolution of such              dispute shall be final and binding upon all parties absent manifest error.               (b)   Miscellaneous.  The Company expressly acknowledges and agrees that (i)        this Section 25 constitutes an agreement to arbitrate between the Company and the Holder        (and constitutes an arbitration agreement) under § 7501, et seq.  of the New York Civil        Practice Law and Rules (“CPLR”) and that the Holder is authorized to apply for an order        to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this        Section 25,  (ii) a  dispute  relating  to  a  Conversion  Price  includes,  without  limitation,        disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stock        occurred  under  Section 7(a),  (B)  the  consideration  per  share  at  which  an  issuance  or        deemed issuance of Common Stock occurred, (C) whether any issuance or sale or deemed        issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of        Excluded Securities (as defined in the Securities Purchase Agreement), (D) whether an        agreement, instrument, security or the like constitutes an Option or Convertible Security        and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Note and each other        applicable Transaction Document shall serve as the basis for the selected investment bank’s        resolution of the applicable dispute, such investment bank shall be entitled (and is hereby        expressly authorized) to make all findings, determinations and the like that such investment        bank determines are required to be made by such investment bank in connection with its        resolution of such dispute and in resolving such dispute such investment bank shall apply        such findings, determinations and the like to the terms of this Note and any other applicable        Transaction Documents, (iv) the Holder (and only the Holder), in its sole discretion, shall        have the right to submit any dispute described in this Section 25 to any state or federal        court  sitting  in  The  City  of  New  York,  Borough  of  Manhattan  in  lieu  of  utilizing  the        procedures set forth in this Section 25 and (v) nothing in this Section 25 shall limit the        Holder from obtaining any injunctive relief or other equitable remedies (including, without        limitation, with respect to any matters described in this Section 25).         26.   NOTICES; CURRENCY; PAYMENTS.               (a)   Notices.  Whenever notice is required to be given under this Note, unless        otherwise provided herein, such notice shall be given in accordance with Section 9(f) of        the Securities Purchase Agreement.  The Company shall provide the Holder with prompt        written notice of all actions taken pursuant to this Note, including in reasonable detail a        description of such action and the reason therefore.  Without limiting the generality of the        foregoing, the Company will give written notice to the Holder (i) immediately upon any        adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the        calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which        the  Company  closes  its  books  or  takes  a  record  (A)  with  respect  to  any  dividend  or                                        39  Error! Unknown document property name. 

 

         distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of        any Options, Convertible Securities or rights to purchase stock, warrants, securities or other        property to holders of shares of Common Stock or (C) for determining rights to vote with        respect to any Fundamental Transaction, dissolution or liquidation, provided in each case        that such information shall be made known to the public prior to or in conjunction with        such notice being provided to the Holder.               (b)   Currency.  All dollar amounts referred to in this Note are in United States        Dollars  (“U.S. Dollars”), and all amounts owing under this  Note shall be paid  in  U.S.        Dollars.  All amounts denominated in other currencies (if any) shall be converted into the        U.S.  Dollar  equivalent  amount  in  accordance  with  the  Exchange  Rate  on  the  date  of        calculation.  “Exchange  Rate” means,  in  relation  to  any  amount  of  currency  to  be        converted  into  U.S.  Dollars  pursuant  to  this  Note,  the  U.S.  Dollar  exchange  rate  as        published in the Wall Street Journal on the relevant date of calculation (it being understood        and agreed that where an amount is calculated with reference to, or over, a period of time,        the date of calculation shall be the final date of such period of time).               (c)   Payments.  Whenever any payment of cash is to be made by the Company        to  any  Person  pursuant  to  this  Note,  unless  otherwise  expressly  set  forth  herein,  such        payment shall be made in lawful money of the United States of America by a certified        check drawn on the account of the Company and sent via overnight courier service to such        Person at such address as previously provided to the Company in writing (which address,        in the case of each of the Buyers, shall initially be as set forth on the Schedule of Buyers        attached  to  the  Securities  Purchase  Agreement),  provided  that  the  Holder  may  elect  to        receive a payment of cash via wire transfer of immediately available funds by providing        the  Company  with  prior  written  notice  setting  out  such  request  and  the  Holder’s  wire        transfer instructions.  Whenever any amount expressed to be due by the terms of this Note        is due on any day which is not a Business Day, the same shall instead be due on the next        succeeding day which is a Business Day. Any amount of Principal or other amounts due        under the Transaction Documents which is not paid when due shall result in a late charge        being incurred and payable by the Company in an amount equal to interest on such amount        at the rate of eighteen percent (18%) per annum from the date such amount was due until        the same is paid in full (“Late Charge”).           27.   CANCELLATION.  After all Principal, accrued Interest, Make-Whole Amount,  Late Charges and other amounts at any time owed on this Note have been satisfied in full, this  Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation  and shall not be reissued.         28.   WAIVER  OF  NOTICE.   To  the  extent  permitted  by  law,  the  Company  hereby  irrevocably  waives demand, notice, presentment, protest  and  all other demands and notices  in  connection with the delivery, acceptance, performance, default or enforcement of this Note and  the Securities Purchase Agreement.         29.   GOVERNING LAW.  This Note shall be construed and enforced in accordance  with, and all questions concerning the construction, validity, interpretation and performance of this  Note shall be governed by, the internal laws of the State of New York, without giving effect to any                                        40  Error! Unknown document property name. 

 

   choice of law or conflict of law provision or rule (whether of the State of New York or any other  jurisdictions) that would cause the application of the laws of any jurisdictions other than the State  of New York. Except as otherwise required by Section 25 above, the Company hereby irrevocably  submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York,  Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or  with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and  agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to  the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient  forum or that the venue of such suit, action or proceeding is improper.  Nothing contained herein  shall be deemed to limit in any way any right to serve process in any manner permitted by law.   Nothing contained herein shall be deemed to limit in any way any right to serve process in any  manner permitted by law.  Nothing contained herein (i) shall be deemed or operate to preclude the  Holder from bringing suit or taking other legal action against the Company in any other jurisdiction  to collect on the Company’s obligations to the Holder, to realize on any collateral or any other  security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder  or (ii) shall limit, or shall be deemed or construed to limit, any provision of Section 25. THE  COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND  AGREES NOT TO REQUEST, A JURY TRIAL  FOR THE ADJUDICATION  OF  ANY  DISPUTE  HEREUNDER  OR  IN  CONNECTION  WITH  OR  ARISING  OUT  OF  THIS  NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.         30.   JUDGMENT CURRENCY.               (a)   If for the purpose of obtaining or enforcing judgment against the Company        in any court in any jurisdiction it becomes necessary to convert into any other currency        (such other currency being hereinafter in this Section 30 referred to as the “Judgment        Currency”) an amount due in U.S. dollars under this Note, the conversion shall be made        at the Exchange Rate prevailing on the Trading Day immediately preceding:                     (i)   the  date actual  payment  of  the  amount  due,  in  the  case  of  any           proceeding in the courts of New York or in the courts of any other jurisdiction that will           give effect to such conversion being made on such date: or                      (ii)  the date on which the foreign court determines, in the case of any           proceeding in the courts of any other jurisdiction (the date as of which such conversion           is  made  pursuant  to  this  Section 30(a)(ii) being  hereinafter referred  to  as  the           “Judgment Conversion Date”).               (b)   If in the case of any proceeding in the court of any jurisdiction referred to        in Section 30(a)(ii) above, there is a change in the Exchange Rate prevailing between the        Judgment  Conversion  Date  and  the  date  of  actual  payment  of  the  amount  due,  the        applicable party shall pay such adjusted amount as may be necessary to ensure that the        amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing        on the date of payment, will produce the amount of US dollars which could have been        purchased with the amount of Judgment Currency stipulated in the judgment or judicial        order at the Exchange Rate prevailing on the Judgment Conversion Date.                                         41  Error! Unknown document property name. 

 

               (c)   Any amount due from the Company under this provision shall be due as a        separate debt and shall not be affected by judgment being obtained for any other amounts        due under or in respect of this Note.         31.   SEVERABILITY.  If any provision of this Note is prohibited by law or otherwise  determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that  would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the  broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of  such provision shall not affect the validity of the remaining provisions of this Note so long as this  Note as so modified continues to express, without material change, the original intentions of the  parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of  the provision(s) in question does not substantially impair the respective expectations or reciprocal  obligations  of  the parties  or  the  practical  realization  of  the  benefits  that  would  otherwise  be  conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the  prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which  comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).         32.   MAXIMUM  PAYMENTS.   Without  limiting  Section  9(d)  of  the  Securities  Purchase Agreement, nothing contained herein shall be deemed to establish or require the payment  of a rate of interest or other charges in excess of the maximum permitted by applicable law.  In the  event that the rate of interest required to be paid or other charges hereunder exceed the maximum  permitted by such law, any payments in excess of such maximum shall be credited against amounts  owed by the Company to the Holder and thus refunded to the Company.         33.   CERTAIN DEFINITIONS.  For purposes of this Note, the following terms shall  have the following meanings:               (a)   “1933 Act” means the Securities Act of 1933, as amended, and the rules        and regulations thereunder.               (b)   “1934 Act” means the Securities Exchange Act of 1934, as amended, and        the rules and regulations thereunder.               (c)   “Adjustment Right” means any right granted with respect to any securities        issued in connection with, or with respect to, any issuance or sale (or deemed issuance or        sale in accordance with Section 7(a)) of shares of Common Stock (other than rights of the        type described in Section 6(a) hereof) that could result in a decrease in the net consideration        received by the Company in connection with, or with respect to, such securities (including,        without limitation, any cash settlement rights, cash adjustment or other similar rights).               (d)   “Affiliate” means, with respect to any Person, any other Person that directly        or indirectly controls, is controlled by, or is under common control with, such Person, it        being understood for purposes of this definition that “control” of a Person means the power        directly or indirectly either to vote 10% or more of the stock having ordinary voting power        for  the  election of  directors  of  such  Person  or  direct  or  cause  the  direction  of  the        management and policies of such Person whether by contract or otherwise.               (e)   “Alternate Conversion Floor Amount” means an amount in cash, to be                                        42  Error! Unknown document property name. 

 

         delivered by wire transfer of immediately available funds pursuant to wire instructions        delivered  to  the  Company  by  the  Holder  in  writing,  equal  to  the  product  obtained  by        multiplying  (A)  the  VWAP  on  the  day  the  Holder  delivers  the  applicable  Conversion        Notice and (B) the difference obtained by subtracting (I) the number of shares of Common        Stock  delivered  (or  to  be  delivered)  to  the  Holder  on  the  applicable  Share  Delivery        Deadline  with  respect  to  such  Alternate  Conversion  from  (II)  the  quotient  obtain  by        dividing (x) the applicable Conversion Amount that the Holder has elected to be the subject        of the applicable Alternate Conversion, by (y) the applicable Alternate Conversion Price        without giving effect to clause (x) of such definition.               (f)   “Alternate  Conversion  Price” means,  with  respect  to  any  Alternate        Conversion that price which shall be the lowest of (i) the applicable Conversion Price as in        effect on the applicable Conversion Date of the applicable Alternate Conversion, and (ii)        the greater of (x) the Floor Price and (y) 85% of the price computed as the lowest VWAP        of the Common Stock during the ten (10) consecutive Trading  Day period ending  and        including the Trading Day immediately preceding the delivery or deemed delivery of the        applicable  Conversion  Notice (such period,  the “Alternate  Conversion  Measuring        Period”).  All such determinations to be appropriately adjusted for any stock dividend,        stock split, stock combination, reclassification or similar transaction that proportionately        decreases or increases the Common Stock during such Alternate Conversion Measuring        Period.               (g)    “Approved Stock Plan” means any employee benefit plan which has been        approved  by  the  board  of  directors  of  the  Company  prior  to  or  subsequent  to  the        Subscription Date pursuant  to  which shares  of Common Stock and standard options  to        purchase Common Stock may be issued to any employee, officer or director for services        provided to the Company in their capacity as such.                (h)   “Attribution  Parties” means,  collectively,  the  following  Persons  and        entities:  (i)  any  investment  vehicle,  including,  any  funds,  feeder  funds  or  managed        accounts, currently, or from time to  time after the  Issuance Date, directly or indirectly        managed  or  advised  by  the  Holder’s  investment  manager  or  any  of  its  Affiliates  or        principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii)        any Person acting or who could be deemed to be acting as a Group together with the Holder        or  any  of  the  foregoing  and  (iv)  any  other  Persons  whose  beneficial  ownership  of the        Company’s Common Stock would or could be aggregated with the Holder’s and the other        Attribution Parties for purposes of Section 13(d) of the 1934 Act.  For clarity, the purpose        of the foregoing is to subject collectively the Holder and all other Attribution Parties to the        Maximum Percentage.                 (i)   “Available  Cash”  means,  with  respect  to  any  date  of  determination,  an        amount equal to the aggregate amount of the Cash of the Company and its Subsidiaries        (excluding for this purpose cash held in restricted accounts or otherwise unavailable for        unrestricted use by the Company or any of its Subsidiaries for any reason) as of such date        of determination held in bank accounts of financial banking institutions in the United States        of America.                                         43  Error! Unknown document property name. 

 

               (j)    “Black Scholes Consideration Value” means the value of the applicable        Option, Convertible Security or Adjustment Right (as the case may be) as of the date of        issuance thereof calculated using the Black Scholes Option Pricing Model obtained from        the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the        Closing Sale Price of the Common Stock on the Trading Day immediately preceding the        public announcement of the execution of definitive documents with respect to the issuance        of such Option, Convertible Security or Adjustment Right (as the case may be), (ii) a risk-       free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining        term of such Option, Convertible Security or Adjustment Right (as the case may be) as of        the date of issuance of such Option, Convertible Security or Adjustment Right (as the case        may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of        100%  and  the  100  day  volatility  obtained  from  the “HVT” function  on  Bloomberg        (determined utilizing a 365 day annualization factor) as of the Trading Day immediately        following the date of issuance of such Option, Convertible Security or Adjustment Right        (as the case may be).               (k)   “Bloomberg” means Bloomberg, L.P.               (l)   “Business Day” means any day other than Saturday, Sunday or other day        on which commercial banks in The City of New York, New York are authorized or required        by law to remain closed; provided, however, for clarification, commercial banks shall not        be deemed to be authorized or required by law to remain closed due to “stay at home”,        “shelter-in-place”, “non-essential employee”  or any other similar orders or restrictions or        the closure of any physical branch locations at the direction of any governmental authority        so long as the electronic funds transfer systems (including for wire transfers) of commercial        banks in The City of New York, New York generally are open for use by customers on        such day.               (m)   “Cash” of the Company and its Subsidiaries on any date shall be determined        from  such  Persons’  books  maintained  in  accordance  with  GAAP,  and  means,  without        duplication, the cash, cash equivalents and Eligible Marketable Securities accrued by the        Company and its wholly owned Subsidiaries on a consolidated basis on such date.               (n)    “Change of Control” means any Fundamental Transaction other than (i)        any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries        with  or  into  any  of  the  foregoing  Persons,  (ii)  any  reorganization,  recapitalization  or        reclassification of the shares of Common Stock in which holders of the Company’s voting        power  immediately  prior  to  such  reorganization,  recapitalization  or  reclassification        continue  after  such  reorganization,  recapitalization  or  reclassification  to  hold  publicly        traded securities and, directly or indirectly, are, in all material respects, the holders of the        voting power of the surviving entity (or entities with the authority or voting power to elect        the members of the board of directors (or their equivalent if other than a corporation) of        such entity or entities) after such reorganization, recapitalization or reclassification, or (iii)        pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction        of incorporation of the Company or any of its Subsidiaries.               (o)   “Change of Control Redemption Premium” means 115%.                                        44  Error! Unknown document property name. 

 

               (p)   “Closing Bid Price” and “Closing Sale Price” means, for any security as        of any date, the last closing bid price and last closing trade price, respectively, for such        security on the Principal Market, as reported by Bloomberg, or, if the Principal Market        begins to operate on an extended hours basis and does not designate the closing bid price        or the closing trade price (as the case may be) then the last bid price or last trade price,        respectively,  of  such  security  prior  to  4:00:00  p.m.,  New  York  time,  as  reported  by        Bloomberg, or, if the Principal Market is not the principal securities exchange or trading        market for such security, the last closing bid price or last trade price, respectively, of such        security on the principal securities exchange or trading market where such security is listed        or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid        price or last trade price, respectively, of such security in the over-the-counter market on        the electronic bulletin board for such security as reported by Bloomberg, or, if no closing        bid price or last trade price, respectively, is reported for such security by Bloomberg, the        average of the bid prices, or the ask prices, respectively, of any market makers for such        security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets        LLC).  If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security        on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing        Sale Price (as the case may be) of such security on such date shall be the fair market value        as mutually determined by the Company and the Holder.  If the Company and the Holder        are unable to agree upon the fair market value of such security, then such dispute shall be        resolved in accordance with the procedures in Section 25. All such determinations shall be        appropriately  adjusted  for  any  stock  splits,  stock  dividends,  stock  combinations,        recapitalizations or other similar transactions during such period.               (q)   “Closing Date” shall have the meaning set forth in the Securities Purchase        Agreement, which date is the date the Company initially issued Notes pursuant to the terms        of the Securities Purchase Agreement.               (r)   “Common  Stock” means  (i)  the  Company’s  shares  of  common  stock,        $0.0001 par value per share, and (ii) any capital stock into which such common stock shall        have been changed or any share capital resulting from a reclassification of such common        stock.               (a)   “Conversion  Floor  Price  Condition”  means  that  the  relevant  Alternate        Conversion Price is being determined based on clause (x) of such definition.               (b)    “Convertible Securities” means any stock or other security (other than        Options) that is at any time and under any circumstances, directly or indirectly, convertible        into, exercisable or exchangeable  for, or which  otherwise entitles  the holder thereof to        acquire, any shares of Common Stock.               (c)    “Eligible  Market” means  The  New  York  Stock  Exchange,  the  NYSE        American,  the  Nasdaq  Capital  Market,  the  Nasdaq  Global  Select  Market,  the  Nasdaq        Global Market or the Principal Market.               (d)   “Eligible  Marketable  Securities” as  of  any  date  means  marketable        securities which would be reflected on a consolidated balance sheet of the Company and                                         45  Error! Unknown document property name. 

 

         its  Subsidiaries  prepared  as  of  such  date  in  accordance  with  GAAP, and  which  are        permitted under the Company’s investment policies as in effect on the Issuance Date or        approved thereafter by the Company’s Board of Directors.               (e)    “Equity  Conditions” means,  with  respect  to an given  date  of        determination:  (i) either  (x)  one  or  more  Registration  Statements  filed  pursuant  to  the        Registration Rights Agreement shall be effective and the prospectus contained therein shall        be available on such applicable date of determination (with, for the avoidance of doubt,        any  shares  of  Common  Stock  previously  sold  pursuant  to  such  prospectus  deemed        unavailable) for the resale of all shares of Common Stock to be issued in connection with        the  event  requiring  this  determination  (or  issuable  upon  conversion  of  the  Conversion        Amount  being  redeemed in  the  event  requiring  this  determination  at  the  Alternate        Conversion Price then in effect (without regard to any limitations on conversion set forth        herein)) (each, a “Required Minimum Securities Amount”), in each case, in accordance        with the terms of the Registration Rights Agreement and there shall not have been during        such period any Grace Periods (as defined in the Registration Rights Agreement) or (y) all        Registrable Securities shall be eligible for sale pursuant to Rule 144 (as  defined in the        Securities  Purchase  Agreement) without  the  need  for  registration  under  any  applicable        federal or state securities laws (in each case, disregarding any limitation on conversion of        the  Notes,  other  issuance  of  securities  with  respect  to  the  Notes and  exercise  of  the        Warrants)  and no  Current  Information  Failure  (as  defined  in  the Registration  Rights        Agreement)  exists  or  is  continuing; (ii)  the  Common  Stock  (including  all Registrable        Securities) is listed or designated for quotation (as applicable) on an Eligible Market and        shall not have been suspended from trading on an Eligible Market (other than suspensions        of not more than two (2) days and occurring prior to the applicable date of determination        due to business announcements by the Company) nor shall delisting or suspension by an        Eligible Market have been threatened (with a reasonable prospect of delisting occurring        after giving effect to all applicable notice, appeal, compliance and hearing periods); (iii)        the Company shall have delivered all shares of Common Stock issuable upon conversion        of this Note on a timely basis as set forth in Section 3 hereof and all other shares of capital        stock required to be delivered by the Company on a timely basis as set forth in the other        Transaction Documents; (iv) any shares of Common Stock to be issued in connection with        the event requiring determination (or issuable upon conversion of the Conversion Amount        being redeemed in the event requiring this determination) may be issued in full without        violating Section 3(d) hereof; (v) any shares of Common Stock to be issued in connection        with  the event  requiring determination (or issuable upon conversion of  the Conversion        Amount  being  redeemed  in  the  event  requiring  this  determination at  the Alternate        Conversion Price then in effect (without regard to any limitations on conversion set forth        herein)) may be issued in full without violating the rules or regulations of the Eligible        Market  on  which  the  Common  Stock  is  then  listed  or  designated  for  quotation  (as        applicable); (vi) no public announcement of a pending, proposed or intended Fundamental        Transaction  shall  have  occurred  which  has  not  been  abandoned,  terminated  or        consummated;  (vii) the  Company  shall  have  no  knowledge  of  any  fact  that  would        reasonably  be  expected  to  cause (1)  any  Registration  Statement  required  to  be  filed        pursuant  to  the  Registration  Rights  Agreement  to  not  be  effective  or  the  prospectus        contained therein to not be available for the resale of the applicable Required Minimum        Securities  Amount  of  Registrable  Securities  in  accordance  with  the  terms  of  the                                        46  Error! Unknown document property name. 

 

         Registration Rights Agreement or (2) any Registrable Securities to not be eligible for sale        pursuant to Rule 144 without the need for registration under any applicable federal or state        securities laws (in each case, disregarding any limitation on conversion of the Notes, other        issuance  of  securities  with  respect  to  the  Notes and  exercise  of  the  Warrants)  and no        Current Information Failure exists or is continuing; (viii) the Holder shall not be in (and no        other  holder  of  Notes  shall  be  in)  possession  of  any  material,  non-public  information        provided to any of them by the Company, any of its Subsidiaries or any of their respective        affiliates,  employees,  officers,  representatives,  agents  or  the  like;  (ix) the  Company        otherwise  shall  have  been  in  compliance  with  each,  and  shall  not  have  breached  any        representation or warranty in any material respect (other than representations or warranties        subject to material adverse effect or materiality, which may not be breached in any respect)        or  any  covenant  or  other  term  or  condition  of  any  Transaction  Document,  including,        without limitation, the Company shall not have failed to timely make any payment pursuant        to any Transaction Document; (x) there shall not have occurred any Volume Failure or        Price Failure as of such applicable date of determination; (xi) on the applicable date of        determination  (A)  no  Authorized  Share  Failure  shall  exist  or  be  continuing  and  the        applicable Required Minimum  Securities Amount  of  shares  of  Common  Stock  are        available  under  the  certificate  of  incorporation  of  the  Company  and  reserved  by  the        Company to be issued pursuant to the Notes and (B) all shares of Common Stock to be        issued  in  connection  with  the  event  requiring  this  determination  (or  issuable  upon        conversion  of  the Conversion Amount  being  redeemed  in  the  event  requiring  this        determination at  the Alternate Conversion  Price  then  in  effect (without regard to  any        limitations on conversion set forth herein)) may be issued in full without resulting in an        Authorized Share Failure; (xii) there shall not have occurred and there shall not exist an        Event  of  Default  or  an  event  that  with  the  passage  of  time  or  giving  of  notice  would        constitute an Event of Default; (xiii) no bone fide dispute shall exist, by and between any        of holder of Notes or Warrants, the Company, the Principal Market (or such applicable        Eligible Market in which the Common Stock of the Company is then principally trading)        and/or FINRA with respect to any term or provision of any Note or any other Transaction        Document (xiv) as of such time of determination, a custodian or prime broker designated        by the Holder at its sole discretion is available to receive such shares of Common Stock        with DTC through its Deposit/Withdrawal at Custodian system and take custody of such        shares of Common Stock, (xv) the Stockholder Approval Date (as defined in the Securities        Purchase Agreement) shall have occurred and (xvi) the shares of Common Stock issuable        pursuant the event requiring the satisfaction of the Equity Conditions (or issuable upon        conversion  of  the  Conversion  Amount  being  redeemed in  the  event  requiring  this        determination  at  the Alternate Conversion  Price  then  in  effect  (without  regard  to  any        limitations on conversion set forth herein)) are duly authorized and listed and eligible for        trading without restriction on an Eligible Market.               (f)   “Equity  Conditions  Failure” means that on  any  day  during  the  period        commencing twenty (20) Trading Days prior to the applicable date of determination, the        Equity Conditions have not been satisfied (or waived in writing by the Holder).               (g)   “Fiscal  Quarter” means  each  of  the  fiscal  quarters  adopted  by  the        Company for financial reporting purposes that correspond to the Company’s fiscal year as        of the date hereof that ends on December 31.                                        47  Error! Unknown document property name. 

 

               (h)   “Fiscal Year” means the fiscal year adopted by the Company for financial        reporting purposes as of the date hereof that ends on December 31.               (i)   “Floor Price” means $0.26.               (j)   “Fundamental Transaction” means (A) that the Company shall, directly        or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related        transactions,  (i) consolidate or merge with  or into (whether or not  the Company is  the        surviving  corporation)  another  Subject  Entity,  or  (ii)  sell,  assign,  transfer,  convey  or        otherwise dispose of all or substantially all of the properties or assets of the Company or        any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or        more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow        the Company to be subject to or have its Common Stock be subject to or party to one or        more Subject Entities making, a purchase, tender or exchange offer that is accepted by the        holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of        the outstanding shares of Common Stock calculated as if any shares of Common Stock        held by all Subject  Entities making or party to,  or Affiliated with any Subject  Entities        making or party to, such purchase, tender or exchange offer were not outstanding; or (z)        such number of shares of Common Stock such that all Subject Entities making or party to,        or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange        offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934        Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a        stock  or  share  purchase  agreement or  other  business  combination  (including,  without        limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one        or more Subject Entities whereby all such Subject Entities, individually or in the aggregate,        acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least        50% of the outstanding shares of Common Stock calculated as if any shares of Common        Stock held by all the Subject Entities making or party to, or Affiliated with any Subject        Entity making or party to, such stock purchase agreement or other business combination        were not outstanding; or (z) such number of shares of Common Stock such that the Subject        Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the        1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize,        recapitalize  or  reclassify  its  Common  Stock,  (B) that  the  Company shall,  directly or        indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related        transactions, allow any Subject Entity individually or the Subject Entities in the aggregate        to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act),        directly or  indirectly,  whether  through  acquisition,  purchase,  assignment,  conveyance,        tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger,        consolidation, business combination, reorganization, recapitalization, spin-off, scheme of        arrangement, reorganization, recapitalization or reclassification or otherwise in any manner        whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented        by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting        power represented by issued and outstanding Common Stock not held by all such Subject        Entities as of the date of this Note calculated as if any shares of Common Stock held by all        such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary        voting power represented by issued and outstanding  shares  of Common Stock or other        equity  securities  of  the  Company  sufficient  to  allow  such  Subject  Entities  to  effect  a                                        48  Error! Unknown document property name. 

 

         statutory  short  form  merger  or  other  transaction  requiring  other stockholders of  the        Company to surrender their shares of Common Stock without approval of the stockholders        of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or        otherwise, in one or more related transactions, the issuance of or the entering into any other        instrument or transaction structured in a manner to circumvent, or that circumvents, the        intent of this definition in which case this definition shall be construed and implemented        in a manner otherwise than in strict conformity with the terms of this definition to the extent        necessary to correct this definition or any portion of this definition which may be defective        or inconsistent with the intended treatment of such instrument or transaction.               (k)    “GAAP” means United States generally accepted accounting principles,        consistently applied.               (l)   “Group” means a “group” as that term is used in Section 13(d) of the 1934        Act and as defined in Rule 13d-5 thereunder.               (m)    “Holder Pro Rata Amount” means a fraction (i) the numerator of which        is the original Principal amount of this Note on the Closing Date and (ii) the denominator        of  which  is  the  aggregate  original  principal  amount  of  all  Notes  issued  to  the  initial        purchasers pursuant to the Securities Purchase Agreement on the Closing Date.               (n)  “Indebtedness” shall  have  the  meaning  ascribed  to  such  term  in  the        Securities Purchase Agreement.               (o)    “Installment  Amount” means  the  sum  of  (A)  (i)  with  respect  to  any        Installment  Date  other  than  the  Maturity  Date,  the  lesser  of  (x) 240,000 and  (y)  the        Principal amount then outstanding under this Note as of such Installment Date, and (ii)        with respect to the Installment Date that is the Maturity Date, the Principal amount then        outstanding  under  this  Note  as  of  such  Installment  Date  (in  each  case,  as  any  such        Installment  Amount  may  be  reduced  pursuant  to  the  terms  of  this  Note,  whether  upon        conversion, redemption or Deferral) and (B) any Deferral Amount deferred pursuant to        Section 8(b) and included in such Installment Amount in accordance therewith, and, in        each case, the sum of any accrued and unpaid Interest and the Make-Whole Amount related        thereto as of such Installment Date under this Note, if any, and accrued and unpaid Late        Charges, if any, under this Note as of such Installment Date.  In the event the Holder shall        sell or otherwise transfer any portion of this Note, the transferee shall be allocated a pro        rata portion of the each unpaid Installment Amount hereunder.               (p)    “Installment Date” means each of (i) the earlier to occur of (x) the last        Trading Day on the calendar month in which the initial Mandatory Prepayment (as defined        in the Investor Note) occurs and (y) July 31, 2020, (ii) thereafter, the last Trading Day of        the calendar month immediately following the previous Installment Date until the Maturity        Date, and (iv) the Maturity Date.               (q)   “Interest Date” means, with respect to any given calendar month, (x) if        prior to the initial Installment Date or after the Maturity Date, the last Trading Day of such        calendar month or (y) if on or after the initial  Installment Date, but on  or prior to  the                                         49  Error! Unknown document property name. 

 

         Maturity Date, such Installment Date, if any, in such calendar month.               (r)   “Interest Rate” means  seven percent (7%) per annum, as may be adjusted        from time to time in accordance with Section 2.               (s)   “Make-Whole Amount” means, as of any given date and as applicable, in        connection with any redemption or other repayment hereunder, an amount equal to the        amount  of  additional  Interest  that  would  accrue  under  this  Note  at  the  Interest  Rate        assuming for calculation purposes that the Principal of this Note as of the Closing Date        remained outstanding through and including the Maturity Date.               (t)   [INTENTIONALLY OMITTED]               (u)   [INTENTIONALLY OMITTED]               (v)   [INTENTIONALLY OMITTED]               (w)   “Market  Capitalization”  means,  as  of  any  date  of  determination,  the        product of (x) the shares of Common Stock outstanding as of such date of determination        and (y) the VWAP of the Common Stock on such date of determination.               (x)   “Market Capitalization Threshold Condition” means, as of any time of        determination,  the  quotient  of  (i)  the  Unrestricted  Note  Amount as  of  such  time  of        determination, divided by (ii) the quotient of (x) the sum of the Market Capitalization for        each Trading Day during the thirty (30) consecutive Trading Day period ending on, and        including, the Trading Day immediately prior to such time of determination, divided by (y)        thirty (30), exceeds ten percent (10%).                (y)    “Maturity Date” shall mean December 31, 2021; provided, however, the        Maturity Date may be extended at the option of the Holder (i) in the event that, and for so        long as, an Event of Default shall have occurred and be continuing or any event shall have        occurred and be continuing that with the passage of time and the failure to cure would        result in an Event of Default or (ii) through the date that is twenty (20) Business Days after        the  consummation  of  a  Fundamental  Transaction  in  the  event  that  a  Fundamental        Transaction is publicly announced or a Change of Control Notice is delivered prior to the        Maturity Date, provided further that if a Holder elects to convert some or all of this Note        pursuant to Section 3 hereof, and the Conversion Amount would be limited pursuant to        Section 3(d) hereunder, the Maturity Date shall automatically be extended until such time        as such provision shall not limit the conversion of this Note.               (z)    “Options” means  any  rights,  warrants  or  options  to  subscribe  for  or        purchase shares of Common Stock or Convertible Securities.               (aa)  “Parent Entity” of a Person means an entity that, directly or indirectly,        controls the applicable Person and whose common stock or equivalent equity security is        quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent        Entity, the Person or Parent Entity with the largest public market capitalization as of the        date of consummation of the Fundamental Transaction.                                        50  Error! Unknown document property name. 

 

               (bb)  “Permitted  Additional  Indebtedness”  means up  to  $5  million  in  the        aggregate of additional Indebtedness.               (cc)  “Permitted Indebtedness” means (i) Indebtedness evidenced by this Note        and the Other Notes, (ii) Indebtedness set forth on Schedule 3(s) to the Securities Purchase        Agreement (other  than  the  PPP  Loan),  as  in  effect  as  of  the  Subscription  Date (the        “Permitted Existing  Indebtedness”),(iii)  Indebtedness  secured  by  Permitted  Liens  or        unsecured but as described in clauses (iv) and (v) of the definition of Permitted Liens, (iv)        if  prior  to  September  30,  2020,  the  PPP  Loan  and  (v) any Permitted  Additional        Indebtedness.               (dd)  “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent        or being contested in good faith by appropriate proceedings for which adequate reserves        have  been  established  in  accordance  with  GAAP,  (ii)  any  statutory  Lien  arising  in  the        ordinary course of business by operation of law with respect to a liability that is not yet due        or  delinquent,  (iii)  any  Lien  created  by  operation  of  law,  such  as  materialmen’s  liens,        mechanics’ liens and other similar liens, arising in the ordinary course of business with        respect to a liability that is not yet due or delinquent or that are being contested in good        faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held        by the Company or any of its Subsidiaries to secure the purchase price of such equipment        or Indebtedness incurred solely for the purpose of financing the acquisition or lease of such        equipment, or (B) existing on such equipment at the time of its acquisition, provided that        the Lien is confined solely to the property so acquired and improvements thereon, and the        proceeds of such equipment, in either case, with respect to Indebtedness in an aggregate        amount not to exceed $50,000, (v) Liens incurred in connection with the extension, renewal        or refinancing of the Indebtedness secured by Liens of the type described in clause (iv)        above, provided that any extension, renewal or replacement Lien shall be limited to the        property encumbered by the existing Lien and the principal amount of the Indebtedness        being extended, renewed or refinanced does not increase, (vi) Liens in favor of customs        and revenue authorities arising as a matter of law to secure payments of custom duties in        connection with the importation of goods, (vii) Liens arising from judgments, decrees or        attachments in circumstances not constituting an Event of Default under Section 4(a)(xiii),        (viii) Liens on Permitted Existing Indebtedness as set forth on Schedule 3(s) attached to        the Securities Purchase Agreement and (ix) Liens with respect to Permitted Additional        Indebtedness.               (ee)   “Person” means an individual, a limited liability company, a partnership,        a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a        government or any department or agency thereof.               (ff)   “PPP  Loan”  means  any  Indebtedness  of  the  Company  undertaken        pursuant  to  the  Paycheck  Protection  Program  under  the  Coronavirus  Aid,  Relief  and        Economic Security Act or any other similar government sponsored loan program, including        specifically, that certain Note in the principal amount of $2,850,336 made by the Company        in favor of JPMorgan Chase, N.A.               (gg)  “Price Failure” means, with respect to a particular date of determination,                                        51  Error! Unknown document property name. 

 

         the  VWAP  of  the  Common  Stock  on  any five  (5) Trading Days (whether  or  not        consecutive) during  the  twenty  (20)  Trading  Day  period ending  on  the  Trading  Day        immediately preceding such date of determination fails to exceed $0.50 (as adjusted for        stock  splits,  stock  dividends,  stock  combinations,  recapitalizations  or  other  similar        transactions  occurring  after  the  Subscription  Date).   All  such  determinations  to  be        appropriately  adjusted  for  any  stock  splits,  stock  dividends,  stock combinations,        recapitalizations or other similar transactions during any such measuring period.               (hh)  “Principal Market” means the Nasdaq Capital Market.               (ii)  “Redemption  Notices” means,  collectively,  the  Event  of  Default        Redemption Notices, the Installment Notices with respect to any Installment Redemption,        the  Acceleration  Notices, the  Company  Optional  Redemption  Notices,  the  Optional        Redemption  Notices and  the  Change  of  Control  Redemption  Notices,  and  each  of  the        foregoing, individually, a “Redemption Notice.”               (jj)  “Redemption  Date” means,  as  applicable, the Event  of  Default        Redemption Date, the Change of Control Redemption Date, the Acceleration Date, the        Optional Redemption Date or Company Optional Redemption Date.               (kk)  “Redemption Premium” means 115%.               (ll)  “Redemption Prices” means, collectively, Event of Default Redemption        Prices, the Change of Control Redemption Prices, the Acceleration Redemption Prices, the        Company  Optional  Redemption  Prices,  the  Optional  Redemption  Prices and  the        Installment Redemption Prices, and each of the foregoing, individually, a “Redemption        Price.”               (mm)  “Registration  Rights  Agreement” means that  certain  registration  rights        agreement, dated as of the Closing Date, by and among the Company and the initial holders        of the Notes relating to, among other things, the registration of the resale of the Common        Stock issuable upon conversion of the Notes or otherwise pursuant to the terms of the Notes        and exercise of the Warrants, as may be amended from time to time.               (nn)  [INTENTIONALLY OMITTED]               (oo)  [INTENTIONALLY OMITTED]               (pp)   “SEC” means the United States Securities and Exchange Commission or        the successor thereto.               (qq)  “Securities Purchase Agreement” means that certain securities purchase        agreement, dated as of the Subscription Date, by and among the Company and the initial        holders of the Notes pursuant to which the Company issued the Notes, as may be amended        from time to time.               (rr)   “Series  A  Notes” shall  have  the  meaning  as  set  forth  in  the  Securities        Purchase Agreement.                                        52  Error! Unknown document property name. 

 

               (ss)  “Series  B  Notes” shall  have  the  meaning  set  forth  as  set  forth  in  the        Securities Purchase Agreement.                (tt)  “Subscription Date” means July 14, 2020.               (uu)  “Subsidiaries” shall  have  the  meaning  as  set  forth  in  the  Securities        Purchase Agreement.               (vv)  “Subject Entity” means any Person, Persons or Group or any Affiliate or        associate of any such Person, Persons or Group.               (ww)   “Successor Entity” means the Person (or, if so elected by the Holder, the        Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the        Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental        Transaction shall have been entered into.               (xx)  “Trading Day” means, as applicable, (x) with respect to all price or trading        volume determinations relating to the Common Stock, any day on which the Common        Stock is traded on the Principal Market, or, if the Principal Market is not the principal        trading  market  for  the  Common  Stock,  then  on  the  principal  securities  exchange  or        securities market on which the Common Stock is then traded, provided that “Trading Day”        shall  not  include  any  day  on  which  the  Common  Stock  is  scheduled  to  trade  on  such        exchange or market for less than 4.5 hours or any day that the Common Stock is suspended        from  trading  during  the  final  hour  of trading  on  such  exchange  or  market  (or  if  such        exchange or market  does  not  designate in  advance the closing time of trading  on such        exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless        such day is otherwise designated as a Trading Day in writing by the Holder or (y) with        respect to all determinations other than price determinations relating to the Common Stock,        any day on which The New York Stock Exchange (or any successor thereto) is open for        trading of securities.               (yy)  [INTENTIONALLY OMITTED]               (zz)  “Unrestricted Note Amount” as of any time of determination, means the        sum of (i) the aggregate Unrestricted Principal (as defined in the Series B Notes) of the        Series B Notes, (ii) the aggregate principal amount of the Series A Notes, (iii) the aggregate        principal amount of the March Notes (as defined in the Securities Purchase Agreement), in        each case, as outstanding as of such time of determination and including any accrued and        unpaid interest, late charges and make-whole amounts, if any, thereon as of such time of        determination.               (aaa) “Volume Failure” means, with respect to a particular date of determination,        the  aggregate  daily  dollar  trading  volume  (as  reported  on  Bloomberg)  of  the  Common        Stock on the Principal Market of any two (2) Trading Days during the twenty (20) Trading        Day period ending on the Trading Day immediately preceding such date of determination        (such period, the “Volume Failure Measuring Period”), is less than $300,000 per such        Trading Day.                                         53  Error! Unknown document property name. 

 

               (bbb) “VWAP”  means,  for  any  security  as  of  any  date,  the  dollar  volume-       weighted  average  price  for  such  security  on  the  Principal  Market  (or,  if  the  Principal        Market is not the principal trading market for such security, then on the principal securities        exchange or securities market on which such security is then traded), during the period        beginning  at  9:30  a.m.,  New  York  time,  and  ending  at  4:00  p.m.,  New  York  time,  as        reported by Bloomberg through its “VAP” function (set to 09:30 start time and 16:00 end        time) or, if the foregoing does not apply, the dollar volume-weighted average price of such        security in the over-the-counter market on the electronic bulletin board for such security        during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New        York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is        reported for such security by Bloomberg for such hours, the average of the highest closing        bid price and the lowest closing ask price of any of the market makers for such security as        reported in the “pink sheets” by OTC Markets Group Inc.  (formerly Pink Sheets LLC).  If        the VWAP cannot be calculated for such security on such date on any of the foregoing        bases, the VWAP of such security on such date shall be the fair market value as mutually        determined by the Company and the Holder.  If the Company and the Holder are unable to        agree upon the fair market value of such security, then such dispute shall be resolved in        accordance  with  the  procedures  in  Section 25.  All  such  determinations  shall  be        appropriately  adjusted  for  any  stock  dividend,  stock  split,  stock  combination,        recapitalization or other similar transaction during such period.               (ccc) “Warrants” has  the  meaning  ascribed  to  such  term  in  the  Securities        Purchase  Agreement,  and  shall  include  all  warrants  issued  in  exchange  therefor  or        replacement thereof.         34.   DISCLOSURE.  Upon delivery by the Company to the Holder (or receipt by the  Company from the Holder) of any notice in accordance with the terms of this Note, unless the  Company has in good faith determined that the matters relating to such notice do not constitute  material, non-public information relating to the Company or any of its Subsidiaries, the Company  shall on or prior to 9:00 am, New York city time on the Business Day immediately following such  notice delivery date, publicly disclose such material, non-public information on a Current Report  on Form 8-K or otherwise.  In the event that the Company believes that a notice contains material,  non-public information relating to the Company or any of its Subsidiaries, the Company so shall  indicate to the Holder explicitly in writing in such notice (or immediately upon receipt of notice  from the Holder, as applicable), and in the absence of any such written indication in such notice  (or notification from the Company immediately upon receipt of notice from the Holder), the Holder  shall be entitled to presume that information contained in the notice does not constitute material,  non-public information relating to the Company or any of its Subsidiaries.  Nothing contained in  this Section 34 shall limit any obligations of the Company, or any rights of the Holder, under  Section 4(i) of the Securities Purchase Agreement.         35.   ABSENCE OF TRADING AND DISCLOSURE RESTRICTIONS.  The Company  acknowledges and agrees that the Holder is not a fiduciary or agent of the Company and that the  Holder shall have no obligation to (a) maintain the confidentiality of any information provided by  the Company or (b) refrain from trading any securities while in possession of such information in  the absence of a written non-disclosure agreement signed by an officer of the Holder that explicitly  provides for such confidentiality and trading restrictions.  In the absence of such an executed,                                        54  Error! Unknown document property name. 

 

   written non-disclosure agreement, the Company acknowledges that the Holder may freely trade in  any  securities  issued  by  the  Company,  may  possess  and  use  any  information  provided  by  the  Company in connection with such trading activity, and may disclose any such information to any  third party.                                [signature page follows]                                          55  Error! Unknown document property name. 

 

           IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of  the Issuance Date set out above.                                              PHUNWARE, INC.                                                                                        By: ________________________________                                                Name:                                               Title:                               Senior Convertible Note - Signature Page  Error! Unknown document property name. 

 

                                     EXHIBIT I                                                                         PHUNWARE, INC.                              CONVERSION NOTICE        Reference  is  made  to  the  Series  A Senior  Convertible  Note  (the “Note”)  issued  to  the  undersigned by Phunware, Inc., a Delaware corporation (the “Company”).  In accordance with  and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as  defined in the Note) of the Note indicated below into shares of Common Stock, $0.0001 par value  per share (the “Common Stock”), of the Company, as of the date specified below.  Capitalized  terms not defined herein shall have the meaning as set forth in the Note.         Date of                  Conversion:            Aggregate   Principal  to  be             converted:            Aggregate  accrued  and  unpaid            Interest,  Make-Whole  Amount and           accrued  and  unpaid  Late  Charges           with  respect  to  such portion of the           Aggregate  Principal  and  such           Aggregate  Interest and  Aggregate           Make-Whole    Amount   to  be           converted:         AGGREGATE CONVERSION                      AMOUNT         TO BE CONVERTED:   Please confirm the following information:         Conversion Price:                  Number  of  shares  of  Common         Stock to be issued (the “Shares”)::                                        Installment Amount(s) to be reduced (and  corresponding  Installment  Date(s))  and  amount of reduction:         If this Conversion Notice is being delivered with respect to an Alternate Conversion,  check here if Holder is electing to use the following Alternate Conversion Price:____________  for [the entire][$_____________ of the] Conversion Amount set forth above to be converted in  accordance herewith    Error! Unknown document property name. 

 

                                                                                         If this Conversion Notice is being delivered as a result of the occurrence of a Permitted  Settlement  Transaction,  check  here  if  Holder  is  electing  to  use  the  following  PST  Issuance  Price:____________ for  [the  entire][$_____________  of  the]  Conversion  Amount  set  forth  above to be converted in accordance herewith   Please issue the Common Stock into which the Note is being converted to Holder, or for its  benefit, as follows:               Check here if requesting delivery as a certificate to the following name and to the              following address:         Issue to:                                                                                             Check here if requesting delivery by Deposit/Withdrawal at Custodian as              follows:          DTC Participant:          DTC Number:              Account                 Number:      Date: _____________ __,                                    Name of Registered Holder    By:                             Name:      Title:           Tax ID:_____________________      Facsimile:___________________   E-mail Address:                      Error! Unknown document property name. 

 

                                     Exhibit II                               ACKNOWLEDGMENT         The Company hereby (a) acknowledges this Conversion Notice, (b) certifies that the above  indicated number of shares of Common Stock [are][are not] eligible to be resold by the Holder  either (i) pursuant to Rule 144 (subject to the Holder’s execution and delivery to the Company of  a customary 144 representation letter) or (ii) an effective and available registration statement and  (c) hereby directs _________________ to issue the above indicated number of shares of Common  Stock in accordance with the Transfer Agent Instructions dated _____________, 20__ from the  Company and acknowledged and agreed to by ________________________.                                              PHUNWARE, INC.                                            By: ________________________________                                                Name:                                               Title:         Error! Unknown document property name.ex103-phunwareseriesb202

   NEITHER  THE  ISSUANCE  AND  SALE  OF  THE  SECURITIES  REPRESENTED  BY  THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE ARE CONVERTIBLE  HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR  APPLICABLE  STATE  SECURITIES  LAWS.  THE  SECURITIES  MAY  NOT  BE  OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE  OF  (A)  AN  EFFECTIVE  REGISTRATION  STATEMENT  FOR  THE  SECURITIES  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED,  OR  (B)  AN  OPINION  OF  COUNSEL  TO  THE  HOLDER  (IF  REQUESTED  BY  THE  COMPANY),  IN  A  FORM  REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT  REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD  PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING  THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH  A  BONA  FIDE  MARGIN  ACCOUNT  OR  OTHER  LOAN  OR  FINANCING  ARRANGEMENT  SECURED  BY  THE  SECURITIES.  ANY  TRANSFEREE  OF  THIS  NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING  SECTIONS 3(c)(iii) AND 20(a) HEREOF.  THE PRINCIPAL AMOUNT REPRESENTED  BY  THIS  NOTE  AND,  ACCORDINGLY,  THE  SECURITIES  ISSUABLE  UPON  CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE  FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.   THIS  NOTE  HAS  BEEN  ISSUED  WITH  ORIGINAL  ISSUE  DISCOUNT  (“OID”).   PURSUANT  TO  TREASURY  REGULATION  §1.1275-3(b)(1),        MATT  AUNE,     A  REPRESENTATIVE  OF  THE  COMPANY  HEREOF  WILL,  BEGINNING  TEN  DAYS  AFTER THE ISSUANCE DATE OF THIS NOTE, PROMPTLY MAKE AVAILABLE TO  THE HOLDER UPON REQUEST THE INFORMATION DESCRIBED IN TREASURY  REGULATION §1.1275-3(b)(1)(i).  MATT AUNE MAY BE REACHED AT TELEPHONE  NUMBER (512) 693-4199.                                 PHUNWARE, INC.                     SERIES B SENIOR SECURED CONVERTIBLE NOTE   Issuance Date:  July __, 2020 (the “Issuance Date”) Original Principal Amount: U.S. $17,280,000          FOR VALUE RECEIVED, Phunware, Inc., a Delaware corporation (the “Company”),  hereby promises to pay to the order of Alto Opportunity Master Fund, SPC – Segregated Master  Portfolio B or its registered assigns (“Holder”) the amount set forth above as the Original Principal  Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise,  the “Principal”) when due, whether upon the Maturity Date, on any Installment Date with respect  to  the  Installment  Amount  due  on  such  Installment  Date  (each  as  defined  below), or  upon  acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to  pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate (as defined  below) from the date set forth above as the Issuance Date (the “Issuance Date”) until the same  becomes due and payable, whether upon the Maturity Date, on any Installment Date with respect  to  the  Installment  Amount  due  on  such  Installment  Date, or  upon  acceleration,  conversion,  redemption or otherwise (in each case in accordance with the terms hereof).  This Series B Senior   Error! Unknown document property name. 

 

   Secured Convertible Note (including all Senior Secured Convertible Notes issued in exchange,  transfer or replacement hereof, this “Note”) is one of an issue of Senior Secured Convertible Notes  issued  pursuant  to  the  Securities  Purchase  Agreement,  dated  as  of July 14,  2020 (the  “Subscription Date”), by and among the Company and the investors (the “Buyers”) referred to  therein, as amended from time to time (collectively, the “Notes”, and such other Series A Senior  Convertible Notes and Series B Senior Secured Convertible Notes issued pursuant to the Securities  Purchase Agreement, collectively, the “Other Notes”).  Certain capitalized terms used herein are  defined in Section 33.         1.    PAYMENTS OF PRINCIPAL.  On each Installment Date, the Company shall pay  to  the  Holder  an  amount  equal  to  the  Installment  Amount  due  on  such  Installment  Date  in  accordance with Section 8. On the Maturity Date, the Company shall pay to the Holder an amount  in cash representing all outstanding Principal, accrued and unpaid Interest and accrued and unpaid  Late  Charges  (as  defined  in  Section 26(c))  on  such Principal  and  Interest.   Other  than  as  specifically permitted by this Note, the Company may not prepay any portion of the outstanding  Principal, accrued and unpaid Interest, Make-Whole Amount or accrued and unpaid Late Charges  on Principal, Interest and Make-Whole Amount, if any.               (a)      Securities Contract.  The Company and the Holder hereby acknowledge        and agree that the Securities Purchase Agreement and the Note Purchase Agreement (as        defined in the Securities Purchase Agreement) each is a “securities contract” as defined in        11 U.S.C. § 741 and that Holder shall have all rights in respect of this Note, the Master        Netting Agreement (as defined in the Securities Purchase Agreement), the Investor Note,        the Securities Purchase Agreement and the Note Purchase Agreement as are set forth in 11        U.S.C. § 555 and 11 U.S.C.  § 362(b)(6), including, without limitation, all rights of credit,        deduction, setoff, offset and/or netting (collectively, “Netting” or “Net”) as are available        under  this  Note,  the  Master  Netting  Agreement and  the  Investor  Note  and  all  Netting        provisions of this Note, the Investor Note and the Master Netting Agreement, including        without limitation the provisions set forth in Section 7 of the Investor Note, are hereby        incorporated in this Note and made a part hereof as if such provisions were set forth herein.               (b)      Investor  Prepayments;  No  Share  Issuance or  Sales until Fully Paid.         Upon the consummation of any Investor Prepayment, the aggregate outstanding Restricted        Principal under this Note shall automatically become Unrestricted Principal hereunder, on        a dollar-for-dollar basis, in an amount equal to the aggregate amount of cash paid in such        Investor Prepayment and any Restricted OID related to such Prepaid Principal shall also        concurrently become Unrestricted Principal at such time.  Notwithstanding anything herein        to  the  contrary,  the  shares  of  Common  Stock  issuable  upon  conversion  of  Restricted        Principal (and related Restricted OID) hereunder shall not be issued by the Company and        may  not  be  sold  by  Holder until  such  portion  of  the  Investor  Note  equivalent  to  the        Restricted  Principal  subject  to  such  conversion (each,  an “Investor  Prepayment        Amount”) has been Fully Paid (as defined below) pursuant to an Investor Prepayment or        otherwise upon maturity of the Investor Note (to the Company or to such other Persons as        directed by the Company in writing) and such Restricted Principal (and related Restricted        OID) becomes Unrestricted Principal in accordance with the preceding sentence.  “Fully        Paid” means, with respect to any applicable Investor Prepayment, that the Holder shall        have either (x) delivered evidence to the Company that the Holder instructed its bank or                                        2  Error! Unknown document property name. 

 

         other financial institution, with respect to an account of the Holder (or an affiliate of the        Holder) containing at least an amount in cash equal to the applicable Investor Prepayment        Amount, to deliver such Investor Prepayment Amount from such account by wire transfer        to the Company in accordance with wire instructions set forth in the Flow of Funds Letter        (as defined in the Securities Purchase Agreement) (unless modified by the Company prior        to the date of such Investor Prepayment by delivery to the Holder of new wire instructions,        duly executed by an executive officer of the Company, on letterhead of the Company), or        (y)  if  the  Company  and  the  Holder  have  accounts  at  the  same bank  or  other financial        institution, by an internal “ledger” transfer by such financial institution of such Investor        Prepayment Amount, in each case, as evidenced by either an e-mail or other written or oral        confirmation by the applicable receiving financial institution that such transfer has been        completed or wire has arrived, in each case, of such Investor Prepayment Amount.               (c)      Prohibited  Transfer  or Severability  Reduction.   Upon  any  Prohibited        Transfer  (as  defined  in  the  Investor  Note)  of,  or  Severability  Event  (as  defined  in  the        Investor Note) under, the Investor Note, (x) the Investor Note shall be deemed paid in full        and shall be null and void, and (y) 75% of the remaining Restricted Principal of this Note        (together  with  any  related  Restricted  OID  with  respect  thereto) shall  be  automatically        cancelled (with the remaining 25% of the Restricted Principal of this Note (together with        any  related  Restricted  OID  with  respect  thereto)automatically  becoming  Unrestricted        Principal hereunder).                 (d)      Netting Event Reduction.  Upon any Netting Event (as defined in the        Investor Note), the Restricted Principal hereunder shall automatically and simultaneously        be reduced, on a dollar-for-dollar basis, by such portion of the aggregate principal of the        Investor Note cancelled pursuant to such Netting Event and the Restricted OID related        thereto  shall  automatically  be  cancelled  concurrently  therewith;  provided,  that  if  any        portion  of  the  Investor  Note subject  to Netting is  applied against  Unpaid  Amounts  (as        defined  in  the Investor  Note)  owed  by  the  Company  to  the  Investor  (other  than the        Conversion Amount of this Note outstanding from time to time) (each, an “Other Unpaid        Amount”), an aggregate amount of Restricted Principal hereunder equal to such Other        Unpaid  Amount, on  a  dollar-for-dollar  basis  (or,  if  less,  all  Restricted  Principal  then        outstanding hereunder) (together with any related Restricted OID with respect thereto),        shall automatically become Unrestricted Principal simultaneously with the consummation        of such Netting Event.               (e)      Single Integrated Transaction.  The Company hereby acknowledges and        agrees that (i) the Netting Events shall be consummated at such times as required hereunder        through any means permissible under applicable law, including without limitation, set-off        and  Netting and  (ii)  the  obligations  of  the  Holder  under  the  Investor  Note  and  the        obligations of the Company under this Note arise in a single integrated transaction and        constitute related and interdependent obligations within such transaction.               (f)      Grant of Security Interest.  The Company hereby grants and pledges to        the Holder a continuing security interest in the Investor Note of the Holder, including any        and all cash, proceeds, funds, credits, rights and other assets therein or arising therefrom,        from time to time, and any additions, dividends, profits and interest in the foregoing and                                        3  Error! Unknown document property name. 

 

         any  replacements  or  substitutions  therefore  (collectively,  the “Collateral”)  to  secure        prompt repayment of any and all amounts outstanding hereunder from time to time and to        secure prompt performance by the Company of each of its covenants and duties under this        Note.  Such  security  interest  constitutes a  valid,  first  priority  security  interest  in  the        Collateral,  and  will  constitute  a  valid,  first  priority  security  interest  in  later-acquired        Collateral.  Notwithstanding any filings undertaken related to the Holder’s rights under the        Delaware Uniform  Commercial  Code,  the  Holder’s  Lien (as  defined  in  Section 15(c)        below) on  the  Collateral  shall  remain  in  effect  for  so  long  as  any  Restricted  Principal        remains outstanding.               (g)      Order  of  Conversion  and/or  Redemption.   Notwithstanding  anything        herein  to  the  contrary,  with  respect  to  any  conversion  or  redemption  hereunder,  as        applicable,  the  Company  shall  convert  or  redeem,  as  applicable, First,  all  accrued  and        unpaid Interest and Make-Whole Amount, if any, hereunder and under any other Series B        Notes held by such Holder, Second, all accrued and unpaid Late Charges on any Principal,        Interest and Make-Whole Amount, if any, hereunder and under any other Series B Notes        held by such Holder, Third, all other amounts outstanding (other than Principal) hereunder        and under any other Series B Notes held by such Holder and, Fourth, all Principal (other        than Restricted Principal or Restricted OID) outstanding hereunder and under any other        Series B Notes held by such Holder, in each case, prior to any conversion or redemption,        as  applicable,  of  any  Restricted  Principal and  Restricted  OID hereunder,  in  each  case,        allocated pro rata among this Note and such other Series B Notes held by such Holder.         2.    INTEREST; INTEREST RATE.                 (a)   Interest on this Note shall commence accruing on the Issuance Date and        shall be computed on the basis of a 360-day year and twelve 30-day months and shall be        payable in arrears on each Interest Date (and if unpaid on an Interest Date, shall compound        on such Interest Date) and shall be payable in accordance with the terms of this Note.         Interest  shall  be  paid  (i)  on  each  Interest  Date  occurring  on  an  Installment  Date  in        accordance  with  Section 8 as  part  of  the  applicable  Installment  Amount  due  on  the        applicable  Installment  Date  and  (ii)  with  respect  to  each  other  Interest  Date,  on  such        Interest Date in cash.               (b)   Prior to the payment of Interest on an Interest Date, Interest on this Note        shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the        Conversion Amount on each Conversion Date in accordance with Section 3(b)(i) or upon        any  redemption  in  accordance  with  Section 13 or  any  required  payment  upon any        Bankruptcy Event of Default.  From and after the occurrence and during the continuance        of  any  Event  of  Default,  the  Interest  Rate  shall  automatically  be  increased  to  eighteen        percent (18.0%) per annum (the “Default Rate”).  In the event that such Event of Default        is  subsequently  cured  (and  no  other  Event  of  Default  then  exists, including,  without        limitation,  for  the  Company’s  failure  to  pay  such  Interest  at  the  Default  Rate  on  the        applicable Interest Date), the adjustment referred to in the preceding sentence shall cease        to be effective as of the calendar day immediately following the date of such cure; provided        that the Interest as calculated and unpaid at such increased rate during the continuance of        such Event of Default shall continue to apply to the extent relating to the days after the                                        4  Error! Unknown document property name. 

 

         occurrence of such Event of Default through and including the date of such cure of such        Event of Default.         3.    CONVERSION OF NOTES.  At any time after the Issuance Date, this Note shall  be convertible into validly  issued, fully paid  and non-assessable shares  of Common Stock (as  defined below), on the terms and conditions set forth in this Section 3.               (a)   Conversion Right.  Subject to the provisions of Section 3(d), at any time or        times on or after the Issuance Date, the Holder shall be entitled to convert any portion of        the outstanding and unpaid Conversion Amount (as defined below) into validly issued,        fully paid and non-assessable shares of Common Stock in accordance with Section 3(c), at        the Conversion Rate (as defined below).  The Company shall not issue any fraction of a        share of Common Stock upon any conversion.  If the issuance would result in the issuance        of a fraction of a share of Common Stock, the Company shall round such fraction of a share        of Common Stock up to the nearest whole share.  The Company shall pay any and all        transfer,  stamp,  issuance  and  similar  taxes,  costs  and  expenses  (including,  without        limitation, fees and expenses of the transfer agent of the Company (the “Transfer Agent”))        that may be payable with respect to the issuance and delivery of Common Stock upon        conversion of any Conversion Amount.               (b)   Conversion Rate. The number of shares of Common Stock issuable upon        conversion of any Conversion Amount pursuant to Section 3(a) shall be determined by        dividing  (x)  such Conversion Amount  by  (y)  the  Conversion  Price  (the “Conversion        Rate”).                     (i)   “Conversion Amount” means  the  sum  of  (w) the portion  of  the           Principal  to  be  converted,  redeemed  or  otherwise  with  respect  to  which  this           determination is being made, (x) all accrued and unpaid Interest with respect to such           portion of the Principal amount, (y) the Make-Whole Amount, if any, and (z) accrued           and unpaid Late Charges with respect to such portion of such Principal, such Interest,           if any, and such Make-Whole Amount, if any.                     (ii)  “Conversion Price” means, as of any Conversion Date or other date           of determination, $3.00, subject to adjustment as provided herein.               (c)   Mechanics of Conversion.                     (i)   Optional  Conversion.  To  convert  any Conversion Amount  into           shares of Common Stock on any date (a “Conversion Date”), the Holder shall deliver           (whether via facsimile, electronic mail or otherwise), for receipt on or prior to 11:59           p.m., New York time, on such date, a copy of an executed notice of conversion in the           form  attached  hereto  as Exhibit  I (the “Conversion  Notice”)  to  the  Company.   If           required by Section 3(c)(iii), within two (2) Trading Days following a conversion of           this Note as aforesaid, the Holder shall surrender this Note to a nationally recognized           overnight  delivery  service  for  delivery  to  the  Company  (or  an  indemnification           undertaking  with  respect to  this  Note in  the case of its  loss, theft  or destruction as           contemplated by Section 20(b)).  On or before the first (1st) Trading Day following the                                         5  Error! Unknown document property name. 

 

            date of receipt of a Conversion Notice, the Company shall transmit by facsimile or           electronic mail an acknowledgment of confirmation and representation as to whether           such shares of Common Stock may then be resold pursuant to Rule 144 or an effective           and available registration statement, in the form attached hereto as Exhibit II, of receipt           of such Conversion Notice to the Holder and the Transfer Agent which confirmation           shall constitute an instruction to the Transfer Agent to process such Conversion Notice           in  accordance  with  the  terms  herein.   On  or  before  the  second  (2nd)  Trading  Day           following the date on which the Company has received a Conversion Notice (or such           earlier  date  as  required  pursuant  to  the  1934  Act  or other  applicable  law,  rule  or           regulation for the settlement of a trade initiated on the applicable Conversion Date of           such  shares  of  Common  Stock  issuable  pursuant  to  such  Conversion  Notice)  (the           “Share Delivery Deadline”), the Company shall (1) provided that the Transfer Agent           is  participating  in The  Depository  Trust  Company’s  (“DTC”) Fast  Automated           Securities Transfer Program, credit such aggregate number of shares of Common Stock           to which the Holder shall be entitled pursuant to such conversion to the Holder’s or its           designee’s  balance account  with  DTC through its  Deposit/Withdrawal  at Custodian           system or (2) if the Transfer Agent is not participating in the DTC Fast Automated           Securities Transfer Program,  upon the request  of the Holder, issue and deliver (via           reputable overnight courier) to the address as specified in the Conversion Notice, a           certificate, registered in the name of the Holder or its designee, for the number of shares           of Common Stock to which the Holder shall be entitled pursuant to such conversion.            If this Note is physically surrendered for conversion pursuant to Section 3(c)(iii) and           the  outstanding  Principal  of  this  Note  is  greater  than  the  Principal  portion  of  the           Conversion Amount being converted, then the Company shall as soon as practicable           and in no event later than two (2) Business Days after receipt of this Note and at its           own  expense,  issue  and  deliver  to  the  Holder  (or  its  designee)  a  new Note  (in           accordance with Section 20(d)) representing the outstanding Principal not converted.            The Person or Persons entitled to receive the shares of Common Stock issuable upon a           conversion of this Note shall be treated for all purposes as the record holder or holders           of such shares of Common Stock on the Conversion Date.  In the event of a partial           conversion of this Note pursuant hereto, (x) the Principal amount converted shall be           deducted from the Installment Amount(s) relating to the Installment Date(s) as set forth           in  the  applicable  Conversion  Notice  and (y)  the  amount  of  Restricted  Principal           converted,  if  any,  shall  be  set  forth  in  the  applicable  Conversion  Notice.            Notwithstanding anything to the contrary contained in this Note or the Registration           Rights Agreement, after the effective date of the Registration Statement (as defined in           the Registration Rights Agreement) and prior to the Holder’s receipt of the notice of a           Grace Period (as defined in the Registration Rights Agreement), the Company shall           cause the Transfer Agent to deliver unlegended shares of Common Stock to the Holder           (or its designee) in connection with any sale of Registrable Securities (as defined in the           Registration Rights Agreement) with respect to which the Holder has entered into a           contract  for  sale,  and  delivered  a  copy  of  the  prospectus  included  as  part  of  the           particular Registration Statement to the extent applicable, and for which the Holder has           not yet settled.                     (ii)  Company’s Failure to Timely Convert.  If the Company shall fail,           for any reason or for no reason, on or prior to the applicable Share Delivery Deadline,                                        6  Error! Unknown document property name. 

 

            either  (I)  if  the  Transfer  Agent  is  not  participating  in  the  DTC  Fast Automated           Securities  Transfer  Program,  to  issue  and  deliver  to  the  Holder  (or  its  designee)  a           certificate for the number of shares of Common Stock to which the Holder is entitled           and register such shares of Common Stock on the Company’s share register or, if the           Transfer  Agent  is  participating  in  the  DTC  Fast  Automated  Securities  Transfer           Program, to credit the balance account of the Holder or the Holder’s designee with           DTC for such number of shares of Common Stock to which the Holder is entitled upon           the Holder’s conversion of this Note (as the case may be) or (II) if the Registration           Statement covering the resale of the shares of Common Stock that are the subject of           the Conversion Notice (the “Unavailable Conversion Shares”) is not available for the           resale of such Unavailable Conversion Shares and the Company fails to promptly, but           in no event later than as required pursuant to the Registration Rights Agreement (x) so           notify the Holder and (y) deliver the shares of Common Stock electronically without           any restrictive legend by crediting such aggregate number of shares of Common Stock           to  which  the  Holder  is  entitled  pursuant  to  such  conversion  to  the  Holder’s  or  its           designee’s balance account with DTC through its Deposit/Withdrawal At Custodian           system  (the  event  described  in  the  immediately  foregoing  clause  (II)  is  hereinafter           referred as a “Notice Failure” and together with the event described in clause (I) above,           a “Conversion Failure”), then, in addition to all other remedies available to the Holder,           (1) the Company shall pay in cash to the Holder on each day after such Share Delivery           Deadline that the issuance of such shares of Common Stock is not timely effected an           amount equal to 1% of the product of (A) the sum of the number of shares of Common           Stock not issued to the Holder on or prior to the Share Delivery Deadline and to which           the  Holder  is  entitled,  multiplied  by  (B)  any  trading  price  of  the  Common  Stock           selected by the Holder in writing as in effect at any time during the period beginning           on  the  applicable  Conversion  Date  and  ending  on  the  applicable  Share  Delivery           Deadline  and  (2)  the  Holder,  upon  written  notice  to  the  Company,  may  void  its           Conversion Notice with respect to, and retain or have returned (as the case may be) any           portion of this Note that has not been converted pursuant to such Conversion Notice,           provided  that  the  voiding  of  a  Conversion  Notice  shall  not  affect  the  Company’s           obligations to make any payments which have accrued prior to the date of such notice           pursuant to this Section 3(c)(ii) or otherwise.  In addition to the foregoing, if on or prior           to the Share Delivery Deadline either (A) if the Transfer Agent is not participating in           the DTC Fast Automated Securities Transfer Program, the Company shall fail to issue           and  deliver  to  the  Holder  (or  its  designee)  a  certificate  and  register  such  shares  of           Common  Stock  on  the  Company’s  share  register  or,  if  the  Transfer  Agent  is           participating in the DTC Fast Automated Securities Transfer Program, the Transfer           Agent shall fail to credit the balance account of the Holder or the Holder’s designee           with DTC for the number of shares of Common Stock to which the Holder is entitled           upon  the  Holder’s  conversion  hereunder  or  pursuant  to  the  Company’s  obligation           pursuant to clause (II) below or (B) a Notice Failure occurs, and if on or after such           Share  Delivery  Deadline  the  Holder  purchases  (in  an  open  market  transaction  or           otherwise) shares of Common Stock corresponding to all or any portion of the number           of shares of Common Stock issuable upon such conversion that the Holder is entitled           to receive from the Company and has not received from the Company in connection           with such Conversion Failure or Notice Failure, as applicable (a “Buy-In”), then, in                                         7  Error! Unknown document property name. 

 

            addition to all other remedies available to the Holder, the Company shall, within two           (2) Business Days after receipt of the Holder’s request and in the Holder’s discretion,           either: (I) pay cash to the Holder in an amount equal to the Holder’s total purchase price           (including brokerage commissions and other out-of-pocket expenses, if any) for the           shares  of Common Stock so  purchased (including, without limitation,  by any other           Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the           Company’s obligation to so issue and deliver such certificate (and to issue such shares           of  Common  Stock)  or  credit  the  balance  account  of  such  Holder  or  such  Holder’s           designee, as applicable, with DTC for the number of shares of Common Stock to which           the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and           to  issue  such  shares  of  Common  Stock)  shall  terminate,  or  (II)  promptly  honor  its           obligation to so issue and deliver to the Holder a certificate or certificates representing           such shares of Common Stock or credit the balance account of such Holder or such           Holder’s designee, as applicable, with DTC for the number of shares of Common Stock           to which the Holder is entitled upon the Holder’s conversion hereunder (as the case           may be) and pay cash to the Holder in an amount equal to the excess (if any) of the           Buy-In  Price  over  the  product  of  (x)  such  number  of  shares  of  Common  Stock           multiplied by (y) the lowest Closing Sale Price of the Common Stock on any Trading           Day during the period commencing on the date of the applicable Conversion Notice           and ending on the date of such issuance and payment under this clause (II) (the “Buy-          In Payment Amount”).  Nothing shall limit the Holder’s right to pursue any other           remedies available to it hereunder, at law or in equity, including, without limitation, a           decree of specific performance and/or injunctive relief with respect to the Company’s           failure  to  timely  deliver  certificates  representing  shares  of  Common  Stock  (or  to           electronically deliver such shares of Common Stock) upon the conversion of this Note           as required pursuant to the terms hereof.                     (iii) Registration; Book-Entry.  The Company shall maintain a register           (the “Register”) for the recordation of the names and addresses of the holders of each           Note and the principal amount of the Notes and Restricted Principal and Restricted           OID, as applicable, held by such holders (the “Registered Notes”).  The entries in the           Register shall be conclusive and binding for all purposes absent manifest error.  The           Company and the holders of the Notes shall treat each Person whose name is recorded           in the Register as the owner of a Note for all purposes (including, without limitation,           the right to receive payments of Principal Interest and Make-Whole Amount hereunder)           notwithstanding notice to the contrary.  A Registered Note may be assigned, transferred           or  sold  in  whole  or  in  part  only  by  registration  of  such  assignment  or  sale  on  the           Register.  Upon its receipt of a written request to assign, transfer or sell all or part of           any Registered Note by the holder thereof, the Company shall record the information           contained therein in the Register and issue one or more new Registered Notes in the           same aggregate principal amount as the principal amount of the surrendered Registered           Note to the designated assignee or transferee pursuant to Section 20, provided that if           the Company does not so record an assignment, transfer or sale (as the case may be) of           all or part of any Registered Note within two (2) Business Days of such a request, then           the Register shall be automatically deemed updated to reflect such assignment, transfer           or sale (as the case may be).  Notwithstanding anything to the contrary set forth in this           Section 3, following  conversion  of any portion  of this  Note in  accordance with  the                                        8  Error! Unknown document property name. 

 

            terms hereof, the Holder shall not be required to physically surrender this Note to the           Company unless (A) the full Conversion Amount represented by this Note is being           converted  (in  which  event  this  Note  shall  be  delivered  to  the  Company  following           conversion thereof as contemplated by Section 3(c)(i)) or (B) the Holder has provided           the Company with prior written notice (which notice may be included in a Conversion           Notice) requesting reissuance of this Note upon physical surrender of this Note.  The           Holder and the Company shall maintain records showing the Principal, Interest, Make-          Whole  Amount and Late  Charges  converted  and/or  paid  (as  the  case  may  be)  or           Restricted Principal and Restricted OID, as applicable, becoming unrestricted and the           dates of such conversions, Investor Prepayments and/or payments (as the case may be)           or shall use such other method, reasonably satisfactory to the Holder and the Company,           so as not to require physical surrender of this Note upon conversion.  If the Company           does not update the Register to record such Principal, Interest, Make-Whole Amount           and Late Charges converted and/or paid (as the case may be) or Restricted Principal           and  Restricted  OID,  as  applicable, becoming  unrestricted and  the  dates  of  such           conversions, Investor Prepayment and/or payments (as the case may be) within two (2)           Business Days of such occurrence, then the Register shall be automatically deemed           updated to reflect such occurrence.                     (iv)  Pro  Rata  Conversion;  Disputes.  In  the  event  that  the  Company           receives  a  Conversion  Notice  from  more  than  one  holder  of  Notes  for  the  same           Conversion Date and the Company can convert some, but not all, of such portions of           the Notes submitted for conversion, the Company, subject to Section 3(d), shall convert           from each holder of Notes electing to have Notes converted on such date a pro rata           amount of such holder’s portion of its Notes submitted for conversion based on the           principal  amount  of  Notes  submitted  for  conversion  on  such  date  by  such  holder           relative to the aggregate principal amount of all Notes submitted for conversion on such           date.  In the event of a dispute as to the number of shares of Common Stock issuable to           the Holder in connection with a conversion of this Note, the Company shall issue to the           Holder the number of shares of Common Stock not in dispute and resolve such dispute           in accordance with Section 25.               (d)   Limitations on Conversions.                       (i)   Beneficial Ownership.  The Company shall not effect the conversion           of any portion  of this  Note, and the Holder shall not  have the right  to  convert any           portion of this Note pursuant to the terms and conditions of this Note and any such           conversion shall be null and void and treated as if never made, to the extent that after           giving effect to such conversion, the Holder together with the other Attribution Parties           collectively would beneficially own in excess of 4.99% (the “Maximum Percentage”)           of the shares of Common Stock outstanding immediately after giving effect to such           conversion.  For purposes of the foregoing sentence, the aggregate number of shares of           Common Stock beneficially owned by the Holder and the other Attribution Parties shall           include  the  number  of  shares  of  Common  Stock  held  by  the  Holder  and  all  other           Attribution  Parties  plus  the  number  of  shares  of  Common  Stock  issuable  upon           conversion of this Note with respect to which the determination of such sentence is           being made, but shall exclude shares of Common Stock which would be issuable upon                                        9  Error! Unknown document property name. 

 

            (A) conversion of the remaining, nonconverted portion of this Note beneficially owned           by the Holder or any of the other Attribution Parties and (B) exercise or conversion of           the  unexercised  or nonconverted  portion  of  any  other  securities  of  the  Company           (including, without limitation, any convertible notes or convertible preferred stock or           warrants, including, without limitation, the Warrants) beneficially owned by the Holder           or  any  other  Attribution  Party  subject  to  a  limitation  on  conversion  or  exercise           analogous  to  the  limitation  contained  in  this  Section 3(d)(i).   For  purposes  of  this           Section 3(d)(i), beneficial ownership shall be calculated in accordance with Section           13(d) of the 1934 Act.  For purposes of determining the number of outstanding shares           of Common Stock the Holder may acquire upon the conversion of this Note without           exceeding the Maximum Percentage, the Holder may rely on the number of outstanding           shares of Common Stock as reflected in (x) the Company’s most recent Annual Report           on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other           public filing with the SEC, as the case may be, (y) a more recent public announcement           by the Company or (z) any other written notice by the Company or the Transfer Agent,           if any, setting forth the number of shares of Common Stock outstanding (the “Reported           Outstanding Share Number”).  If the Company receives a Conversion Notice from           the Holder at a time when the actual number of outstanding shares of Common Stock           is less than the Reported Outstanding Share Number, the Company shall notify the           Holder in writing of the number of shares of Common Stock then outstanding and, to           the extent that such Conversion Notice would otherwise cause the Holder’s beneficial           ownership,  as  determined  pursuant  to  this  Section 3(d)(i),  to  exceed  the  Maximum           Percentage, the Holder must notify the Company of a reduced number of shares of           Common Stock to be purchased pursuant to such Conversion Notice.  For any reason           at any time, upon the written or oral request of the Holder, the Company shall within           one (1) Business Day confirm orally and in writing or by electronic mail to the Holder           the number of shares of Common Stock then outstanding.  In any case, the number of           outstanding  shares  of Common Stock shall be determined after giving effect  to  the           conversion or exercise of securities of the Company, including this Note, by the Holder           and any other Attribution Party since the date as of which the Reported Outstanding           Share Number was reported.  In the event that the issuance of shares of Common Stock           to  the  Holder  upon  conversion  of  this  Note  results  in  the  Holder  and  the  other           Attribution Parties being deemed to beneficially own, in the aggregate, more than the           Maximum  Percentage  of  the  number  of  outstanding  shares  of  Common  Stock  (as           determined under Section 13(d) of the 1934 Act), the number of shares so issued by           which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership           exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void           and shall be cancelled ab initio, and the Holder shall not have the power to vote or to           transfer the Excess Shares.  Upon delivery of a written notice to the Company, the           Holder may from time to time increase (with such increase not effective until the sixty-          first (61st) day after delivery of such notice) or decrease the Maximum Percentage to           any other percentage not in excess of 9.99% as specified in such notice; provided that           (i) any such increase in the Maximum Percentage will not be effective until the sixty-          first (61st) day after such notice is delivered to the Company and (ii) any such increase           or decrease will apply only to the Holder and the other Attribution Parties and not to           any other holder of Notes that is not an Attribution Party of the Holder.  For purposes                                         10  Error! Unknown document property name. 

 

            of clarity, the shares of Common Stock issuable pursuant to the terms of this Note in           excess of the Maximum Percentage shall not be deemed to be beneficially owned by           the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1)           of the 1934 Act.  No prior inability to convert this Note pursuant to this paragraph shall           have any effect on the applicability of the provisions of this paragraph with respect to           any subsequent determination of convertibility.  The provisions of this paragraph shall           be construed and implemented in a manner otherwise than in strict conformity with the           terms of this Section 3(d)(i) to the extent necessary to correct this paragraph (or any           portion of this paragraph) which may be defective or inconsistent with the intended           beneficial ownership limitation contained in this Section 3(d)(i) or to make changes or           supplements  necessary  or  desirable  to  properly  give  effect  to  such  limitation.   The           limitation contained in this paragraph may not be waived and shall apply to a successor           holder of this Note.                      (ii)  Principal  Market  Regulation.  The  Company  shall  not  issue  any           shares of Common Stock upon conversion of this Note or otherwise pursuant to the           terms of this Note (taken together with the issuance of such shares upon the exercise of           the  Warrants) if  the  issuance  of  such  shares  of  Common  Stock  would  exceed  the           aggregate number of shares of Common Stock which the Company may issue upon           conversion of the Notes or otherwise pursuant to the terms of this Note or the Warrants           (as the case may be) without breaching the Company’s obligations under the rules or           regulations of the Principal Market (the number of shares which may be issued without           violating such rules and regulations, including rules related to the aggregate of offerings           under  NASDAQ  Listing  Rule  5635(d),  the  “Exchange  Cap”),  except  that  such           limitation shall not apply in the event that the Company (A) obtains the approval of its           stockholders as required by the applicable rules of the Principal Market for issuances           of shares of Common Stock in excess of such amount or (B) obtains a written opinion           from outside counsel to the Company that such approval is not required, which opinion           shall be reasonably satisfactory to the Holder.  Until such approval or such written           opinion is  obtained, no Buyer shall be issued in the aggregate, upon  conversion or           exercise (as the case may be) of any Notes or any of the Warrants or otherwise pursuant           to the terms of the Notes or the Warrants, shares of Common Stock in an amount greater           than the product of (i) the Exchange Cap as of the Issuance Date multiplied by (ii) the           quotient of (A) the aggregate original principal amount of Notes issued to such Buyer           pursuant to the Securities Purchase Agreement on the Closing Date (as defined in the           Securities Purchase Agreement) divided by (B) the aggregate original principal amount           of all Notes issued to the Buyers pursuant to the Securities Purchase Agreement on the           Closing Date (with respect to each Buyer, the “Exchange Cap Allocation”).  In the           event that any Buyer shall sell or otherwise transfer any of such Buyer’s Notes, the           transferee  shall  be  allocated  a  pro  rata  portion  of  such  Buyer’s  Exchange  Cap           Allocation with respect to such portion of such Notes so transferred, and the restrictions           of the prior sentence shall apply to such transferee with respect to the portion of the           Exchange  Cap  Allocation  so  allocated  to  such  transferee.  Upon  conversion  and           exercise in full of a holder’s Notes and Warrants, the difference (if any) between such           holder’s Exchange Cap Allocation and the number of shares of Common Stock actually           issued to such holder upon such holder’s conversion in full of such Notes and such           holder’s exercise in full of such Warrants shall be allocated, to the respective Exchange                                        11  Error! Unknown document property name. 

 

            Cap Allocations of the remaining holders of Notes and related Warrants on a pro rata           basis in proportion to the shares of Common Stock underlying the Notes and related           Warrants then held by each such holder of Notes and related Warrants.  At any time           after  the earlier  to  occur  of  (x)  the  Stockholder  Approval  Date  (as  defined  in  the           Securities Purchase Agreement) and (y) the Stockholder Meeting Deadline (as defined           in the Securities Purchase Agreement in the event that the Company is prohibited from           issuing shares of Common Stock pursuant to this Section 3(d)(i) (the “Exchange Cap           Shares”), the Company shall pay cash in exchange for the cancellation of such portion           of this Note convertible into such Exchange Cap Shares at a price equal to the sum of           (i) the product of (x) such number of Exchange Cap Shares and (y) the greatest Closing           Sale Price of the Common Stock on any Trading Day during the period commencing           on the date the Holder delivers the applicable Conversion Notice with respect to such           Exchange Cap Shares to the Company and ending on the date of such issuance and           payment under this Section 3(d)(i) and (ii) to the extent of any Buy-In related thereto,           any  Buy-In  Payment  Amount,  any  brokerage  commissions  and  other  out-of-pocket           expenses,  if  any,  of  the  Holder  incurred  in  connection  therewith (collectively,  the           “Exchange Cap Share Cancellation Amount”).               (e)   Right of Alternate Conversion.                     (i)   Alternate Conversion Upon an Event of Default.  Subject to Section              3(d), at any time at any time after the occurrence of an Event of Default or the              Market Capitalization Threshold Condition (regardless of whether such Event of              Default or  Market  Capitalization  Threshold  Condition has  been  cured  or  if  the              Holder has delivered an Event of Default Redemption Notice to the Company), the              Holder may, at the Holder’s option, convert (each, an “Alternate Conversion”,              and the date of such Alternate Conversion, each, an “Alternate Conversion Date”)              all, or any part of, the Conversion Amount (such portion of the Conversion Amount              subject to such Alternate Conversion, each, an “Alternate Conversion Amount”)              into shares of Common Stock at the Alternate Conversion Price.                     (ii)  Mechanics of Alternate Conversion.  On any Alternate Conversion              Date,  the  Holder  may  voluntarily  convert  any  Alternate Conversion Amount              pursuant to Section 3(c) (with “Alternate Conversion Price” replacing “Conversion              Price” for all purposes hereunder with respect to such Alternate Conversion and              with “Redemption  Premium of the Conversion Amount” replacing “Conversion              Amount” in clause (x) of the definition of Conversion Rate above with respect to              such  Alternate  Conversion)  by  designating  in  the  Conversion  Notice  delivered              pursuant  to  this  Section 3(e) of  this  Note  that  the  Holder is  electing  to  use  the              Alternate Conversion Price for such conversion; provided that in the event of the              Conversion Floor Price  Condition,  on or prior to  Share Delivery Deadline with              respect to such Alternate Conversion, the Company shall also deliver to the Holder              the applicable Alternate Conversion Floor Amount.  Notwithstanding anything to              the contrary in this Section 3(e), but subject to Section 3(d), until the Company              delivers shares of Common Stock representing the applicable Alternate Conversion              Amount to the Holder, such Alternate Conversion Amount may be converted by                                         12  Error! Unknown document property name. 

 

               the Holder into shares of Common Stock pursuant to Section 3(c) without regard to              this Section 3(e).         4.    RIGHTS UPON EVENT OF DEFAULT.               (a)   Event of Default.  Each of the following events shall constitute an “Event        of  Default” and  each  of  the  events  in  clauses (x), (xi) and (xii) shall  constitute  a        “Bankruptcy Event of Default”:                     (i)   the failure of the applicable Registration Statement (as defined in           the Registration Rights Agreement) to be filed with the SEC on or prior to the date that           is  five  (5)  days  after  the  applicable  Filing  Deadline  (as  defined  in  the  Registration           Rights Agreement) or the failure of the applicable Registration Statement to be declared           effective by the SEC on or prior to the date that is five (5) days after the applicable           Effectiveness Deadline (as defined in the Registration Rights Agreement);                      (ii)  while  the  applicable  Registration  Statement  is  required  to  be           maintained effective pursuant to the terms of the Registration Rights Agreement, the           effectiveness of the applicable Registration Statement lapses for any reason (including,           without limitation, the issuance of a stop order) or such Registration Statement (or the           prospectus contained therein) is unavailable to any holder of Registrable Securities (as           defined  in  the  Registration  Rights  Agreement)  for  sale  of  all  of  such  holder’s           Registrable  Securities  in  accordance  with  the  terms  of  the  Registration  Rights           Agreement,  and  such  lapse  or  unavailability  continues  for  a  period  of  five  (5)           consecutive days or for more than an aggregate of ten (10) days in any 365-day period           (excluding  days  during  an  Allowable  Grace  Period  (as  defined  in  the  Registration           Rights Agreement));                     (iii) at any time from and after [    ]1 (excluding days during an Allowable           Grace  Period),  the Company  fails  to have  an  effective shelf registration  statement,           which, as of such time of determination, has an available dollar offering amount of           securities then issuable by the Company thereunder (as reduced by any limitations on           any such issuances by any law, rule or regulations applicable thereto, whether pursuant           to the 1933 Act, the Principal Market or otherwise, including, without limitation, the           “baby shelf rules” set forth in Instruction I.B.6(a) to Form S-3 of the 1933 Act) (the           “Available Shelf Capacity”) of no less than 125% of the Unrestricted Note Amount           as of such time of determination;                     (iv)  the suspension from trading or the failure of the Common Stock to           be  trading  or  listed  (as applicable)  on  an  Eligible  Market  for  a  period  of  five  (5)           consecutive Trading Days;                     (v)   the  Company’s  (A)  failure  to  cure  a  Conversion  Failure or  a           Delivery Failure (as defined in the Warrants) by delivery of the required number of           shares of Common Stock within five (5) Trading Days after the applicable Conversion                            1 Insert 90th calendar day after the Issuance Date                                        13  Error! Unknown document property name. 

 

            Date or exercise date (as the case may be) or (B) notice, written or oral, to any holder           of the Notes or Warrants, including, without limitation, by way of public announcement           or through any of its agents, at any time, of its intention not to comply, as required,           with  a  request  for  conversion  of  any  Notes  into  shares  of  Common  Stock  that  is           requested in accordance with the provisions of the Notes, other than pursuant to Section           3(d),  or  a  request  for  exercise  of  any  Warrants  for shares  of  Common  Stock in           accordance with the provisions of the Warrants;                     (vi)  except  to  the  extent  the  Company  is  in  compliance  with  Section           12(b) below, at any time following the tenth (10th) consecutive day that the Holder’s           Authorized Share Allocation (as defined in Section 12(a) below) is less than (A) the           number of shares of Common Stock that the Holder would be entitled to receive upon           a  conversion  of  the  full Conversion Amount  of this  Note  (without  regard  to  any           limitations on conversion set forth in Section 3(d) or otherwise), and (B) the number of           shares of Common Stock that the Holder would be entitled to receive upon exercise in           full of the Holder’s Warrants (without regard to any limitations on exercise set forth in           the Warrants);                     (vii) the Company’s or any Subsidiary’s failure to pay to the Holder any           amount of Principal, Interest, Make-Whole Amount, Late Charges or other amounts           when and as due under this Note (including, without limitation, the Company’s or any           Subsidiary’s failure to pay any redemption payments or amounts hereunder) or any           other Transaction Document (as defined in the Securities Purchase Agreement) or any           other agreement, document, certificate or other instrument delivered in connection with           the transactions contemplated hereby and thereby, except, in the case of a failure to pay           any Installment Redemption Price, Interest, Make-Whole Amount and Late Charges           when and as due, in which case only if such failure remains uncured for a period of at           least ten (10) calendar days;                     (viii) the  Company  fails  to  remove  any  restrictive  legend  on  any           certificate or any shares of Common Stock issued to the Holder upon conversion or           exercise (as the case may be) of any Securities (as defined in the Securities Purchase           Agreement)  acquired  by  the  Holder  under  the  Securities  Purchase  Agreement           (including this Note) as and when required by such Securities or the Securities Purchase           Agreement, unless otherwise then prohibited by applicable federal securities laws, and           any such failure remains uncured for at least five (5) days;                     (ix)  the occurrence of any default under, redemption of or acceleration           prior to maturity of at least an aggregate of $250,000 of Indebtedness (as defined in the           Securities Purchase Agreement) of the Company or any of its Subsidiaries, other than           with respect to any Other Notes;                     (x)   bankruptcy, insolvency,  reorganization or liquidation  proceedings           or  other  proceedings  for  the  relief  of  debtors  shall  be  instituted  by  or  against  the           Company or any Subsidiary and, if instituted against the Company or any Subsidiary           by a third party, shall not be dismissed within thirty (30) days of their initiation;                                         14  Error! Unknown document property name. 

 

                     (xi)  the  commencement  by  the  Company  or  any  Subsidiary  of  a           voluntary case or proceeding under any applicable federal, state or foreign bankruptcy,           insolvency, reorganization or other similar law or of any other case or proceeding to be           adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order,           judgment or other similar document in respect of the Company or any Subsidiary in an           involuntary  case  or  proceeding  under  any  applicable  federal,  state  or  foreign           bankruptcy, insolvency, reorganization or other similar law or to the commencement           of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a           petition  or  answer  or  consent  seeking  reorganization  or  relief  under  any  applicable           federal, state or foreign law, or the consent by it to the filing of such petition or to the           appointment  of  or  taking  possession  by  a  custodian,  receiver,  liquidator,  assignee,           trustee, sequestrator or other similar official of the Company or any Subsidiary or of           any substantial part of its property, or the making by it of an assignment for the benefit           of creditors, or the execution of a composition of debts, or the occurrence of any other           similar federal,  state or  foreign  proceeding,  or the admission by it in  writing  of its           inability to pay its debts generally as they become due, the taking of corporate action           by the Company or any Subsidiary in furtherance of any such action or the taking of           any action by any Person to commence a Uniform Commercial Code foreclosure sale           or any other similar action under federal, state or foreign law;                     (xii) the entry by a court of (i) a decree, order, judgment or other similar           document in respect of the Company or any Subsidiary of a voluntary or involuntary           case  or  proceeding  under  any  applicable  federal,  state  or  foreign  bankruptcy,           insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other           similar document adjudging the Company or any Subsidiary as bankrupt or insolvent,           or  approving  as  properly  filed  a  petition  seeking liquidation,  reorganization,           arrangement,  adjustment  or  composition  of  or  in  respect  of  the  Company  or  any           Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order,           judgment  or  other  similar  document  appointing  a  custodian,  receiver,  liquidator,           assignee,  trustee,  sequestrator  or  other  similar  official  of  the  Company  or  any           Subsidiary or of any substantial  part of its  property, or ordering the winding  up or           liquidation of its affairs, and the continuance of any such decree, order, judgment or           other  similar  document  or  any  such  other  decree,  order,  judgment  or  other  similar           document unstayed and in effect for a period of thirty (30) consecutive days;                     (xiii) a  final  judgment  or  judgments  for  the  payment  of  money           aggregating in excess of $250,000 are rendered against the Company and/or any of its           Subsidiaries  and  which  judgments  are  not,  within  thirty  (30)  days  after  the  entry           thereof, bonded, discharged, settled or stayed pending appeal, or are not discharged           within  thirty  (30)  days  after  the  expiration  of  such  stay;  provided,  however,  any           judgment which is covered by insurance or an indemnity from a credit worthy party           shall not be included in calculating the $250,000 amount set forth above so long as the           Company  provides  the Holder  a  written  statement  from  such  insurer  or  indemnity           provider (which written statement shall be reasonably satisfactory to the Holder) to the           effect that such judgment is covered by insurance or an indemnity and the Company or           such Subsidiary (as the case may be) will receive the proceeds of such insurance or           indemnity within thirty (30) days of the issuance of such judgment;                                        15  Error! Unknown document property name. 

 

                     (xiv) the  Company  and/or  any  Subsidiary,  individually  or  in  the           aggregate, either (i) fails to pay, when due, or within any applicable grace period, any           payment with respect to any Indebtedness in excess of $250,000 due to any third party           (other than, with respect to unsecured Indebtedness only, payments contested by the           Company  and/or  such  Subsidiary  (as  the  case  may  be)  in  good  faith  by  proper           proceedings and with respect to which adequate reserves have been set aside for the           payment thereof in accordance with GAAP) or is otherwise in breach or violation of           any agreement for monies owed or owing in an amount in excess of $250,000, which           breach or violation permits the other party thereto to declare a default or otherwise           accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or           event that would, with or without the passage of time or the giving of notice, result in           a  default  or  event  of  default  under  any  agreement  binding  the  Company  or  any           Subsidiary,  which  default  or  event  of  default  would  or  is  likely  to  have  a  material           adverse effect on the business, assets, operations (including results thereof), liabilities,           properties, condition (including financial condition) or prospects of the Company or           any of its Subsidiaries, individually or in the aggregate;                     (xv)  other than as specifically set forth in another clause of this Section           4(a), the Company or any Subsidiary breaches any representation or warranty, or any           covenant or other term or condition of any Transaction Document, except, in the case           of a breach of a covenant or other term or condition that is curable, only if such breach           remains uncured for a period of two (2) consecutive Trading Days;                     (xvi) a  false  or  inaccurate  certification  (including  a  false  or  inaccurate           deemed certification), to the best knowledge of the Company, that either (A) the Equity           Conditions are satisfied, (B) there has been no Equity Conditions Failure, or (C) as to           whether any Event of Default has occurred;                     (xvii) any  breach  or  failure  in  any  respect  by  the  Company  or  any           Subsidiary to comply with any provision of Section 15 of this Note;                     (xviii) if (x) Alan Knitowski’s employment as chief executive officer of the           Company or (y) Randall Crowder’s employment as the chief operating officer of the           Company, in each case is terminated by the Company for any reason other than such           person’s death, disability or willful misconduct;                     (xix) any Material Adverse Effect (as defined in the Securities Purchase           Agreement) occurs; or                     (xx)   any Event of Default (as defined in the Other Notes or in the March           Notes) occurs with respect to any Other Notes or the March Notes.               (b)   Notice of an Event of Default; Redemption Right.  Upon the occurrence of        an Event of Default with respect to this Note or any Other Note, the Company shall within        one (1) Business Day deliver written notice thereof via facsimile or electronic mail and        overnight courier (with next day delivery specified) (an “Event of Default Notice”) to the        Holder.  At any time after the earlier of the Holder’s receipt of an Event of Default Notice                                         16  Error! Unknown document property name. 

 

         and the Holder becoming aware of an Event of Default (such earlier date, the “Event of        Default  Right  Commencement  Date”)  and ending  (such  ending  date,  the “Event  of        Default  Right  Expiration  Date”,  and  each  such  period,  an “Event  of  Default        Redemption Right Period”) on the twentieth (20th) Trading Day after the later of (x) the        date such Event of Default is cured and (y) the Holder’s receipt of an Event of Default        Notice that includes (I) a reasonable description of the applicable Event of Default, (II) a        certification as to whether, in the opinion of the Company, such Event of Default is capable        of being  cured and, if applicable, a reasonable  description of any existing  plans of the        Company to cure such Event of Default and (III) a certification as to the date the Event of        Default occurred and, if cured on or prior to the date of such Event of Default Notice, the        applicable Event of Default Right Expiration Date, the Holder may require the Company        to redeem (regardless of whether such Event of Default has been cured on or prior to the        Event of Default Right Expiration Date) all or any portion of this Note by delivering written        notice thereof (each, an “Event of Default Redemption Notice”, and the date thereof,        each, an “Event of Default Redemption Notice Date’) to the Company, which Event of        Default Redemption Notice shall indicate the portion of this Note the Holder is electing to        redeem.  Each portion of this Note subject to redemption by the Company pursuant to this        Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i) the        product of (A) the Conversion Amount to be redeemed multiplied by (B) the Redemption        Premium  and  (ii)  the  product  of  (X)  the quotient  of  (I)  the  Conversion  Amount  to  be        redeemed,  divided  by  (II)  the  Alternate  Conversion  Price at  such  time  as  the  Holder        delivers an Event of Default Redemption Notice (or, if a Dilutive Issuance occurs during        the period commencing on, and including, such Event of Default Redemption Notice Date        through, and including such Event of Default Redemption Date (as defined below), the        date  of  such  Dilutive  Issuance) multiplied  by  (Y)  the  product  of  (1)  the  Redemption        Premium multiplied by (2) the greatest Closing Sale Price of the Common Stock on any        Trading Day during the period commencing on the date immediately preceding such Event        of Default and ending on the date the Company makes the entire payment required to be        made under this Section 4(b) (the “Event of Default Redemption Price”) (except, solely        if any Restricted Principal is included in such Conversion Amount subject to redemption        pursuant to the applicable Event of Default Notice (such amount of Restricted Principal,        the “Eligible Event  of  Default  Restricted  Principal”) and  the  Holder  elects  to  effect        Event of Default Netting (as defined in the Investor Note) pursuant to the terms of the        Investor Note, such Event of Default Redemption Price shall be reduced, on a dollar-for-       dollar basis, by such portion of the Eligible Event of Default Restricted Principal subject        to such Event of Default Netting (such amount of Eligible Event of Default Restricted        Principal,  the “Event  of  Default  Restricted  Principal  Amount”) and  such  Event  of        Default Restricted Principal Amount shall be satisfied on such Redemption Date by Event        of  Default  Netting  (as  defined  in  the  Investor  Note)  (solely  if  the  applicable  Event  of        Default does not include a Bankruptcy Event of Default) or automatically satisfied on such        Redemption Date by Event of Default Bankruptcy Netting (as defined in the Investor Note)        (solely  if  the  applicable  Event  of  Default  includes  a  Bankruptcy  Event  of  Default),  as        applicable, with respect thereto).  Redemptions required by this Section 4(b) shall be made        in accordance with the provisions of Section 13.  To the extent redemptions required by        this  Section 4(b) are  deemed  or  determined  by  a  court  of  competent  jurisdiction  to  be        prepayments  of  this  Note  by  the  Company,  such  redemptions  shall  be  deemed  to  be                                         17  Error! Unknown document property name. 

 

         voluntary prepayments.  Notwithstanding anything to the contrary in this Section 4(b), but        subject to Section 3(d), until the Event of Default Redemption Price (together with any        Late Charges thereon) is satisfied in full, the Conversion Amount submitted for redemption        under this Section 4(b) (together with any Late Charges thereon) may be converted, in        whole or in part, by the Holder into Common Stock pursuant to the terms of this Note.  In        the event of a partial redemption of this Note pursuant hereto, (x) the Principal amount        redeemed  shall  be  deducted  from  the  Installment  Amount(s)  relating  to  the  applicable        Installment Date(s) as set forth in the Event of Default Redemption Notice and (y) the        amount of Restricted Principal redeemed (and related Restricted OID to be cancelled in        connection  therewith),  if  any,  shall  be  set  forth  in  the  applicable  Event  of  Default        Redemption Notice.  In the event of the Company’s redemption of any portion of this Note        under this Section 4(b), the Holder’s damages would be uncertain and difficult to estimate        because of the parties’ inability to predict future interest rates and the uncertainty of the        availability of a suitable substitute investment opportunity for the Holder.  Accordingly,        any redemption premium due under this Section 4(b) is intended by the parties to be, and        shall  be  deemed,  a  reasonable  estimate of  the  Holder’s  actual  loss  of  its  investment        opportunity and not as  a penalty.  Any redemption upon an Event of Default shall not        constitute an election of remedies by the Holder, and all other rights and remedies of the        Holder shall be preserved.               (c)   Mandatory  Redemption  upon   Bankruptcy  Event  of  Default.         Notwithstanding anything to the contrary herein, and notwithstanding any conversion that        is then required or in process, upon any Bankruptcy Event of Default, whether occurring        prior to or following the Maturity Date, the Company shall immediately pay to the Holder        an amount in cash representing (i) all outstanding Principal, accrued and unpaid Interest,        the Make-Whole Amount and accrued and unpaid Late Charges on such Principal, Interest        and Make-Whole Amount, multiplied by (ii) the Redemption Premium, in addition to any        and all other amounts due hereunder, without the requirement for any notice or demand or        other action by the Holder or any other person or entity, except that any Restricted Principal        then outstanding hereunder shall be satisfied through Bankruptcy Event of Default Netting        (as defined in the Investor Note) (in lieu of such cash payment hereunder and any Restricted        OID in connection therewith shall be automatically cancelled upon such Bankruptcy Event        of  Default  Netting  in  accordance  herewith); provided  that  the  Holder  may,  in  its  sole        discretion, waive such right to receive payment upon a Bankruptcy Event of Default, in        whole  or  in  part,  and  any  such  waiver  shall  not  affect  any  other  rights of  the  Holder        hereunder, including any other rights in respect of such Bankruptcy Event of Default, any        right to conversion, and any right to payment of the Event of Default Redemption Price or        any other Redemption Price, as applicable.                 5.    RIGHTS UPON FUNDAMENTAL TRANSACTION.               (a)   Assumption.  The Company shall not enter into or be party to a Fundamental        Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the        Company under this Note and the other Transaction Documents in accordance with the        provisions  of  this  Section 5(a) pursuant  to  written  agreements in  form  and  substance        satisfactory  to  the  Holder  and  approved  by  the  Holder  prior  to such  Fundamental        Transaction, including agreements to deliver to each holder of Notes in exchange for such                                        18  Error! Unknown document property name. 

 

         Notes a security of the Successor Entity evidenced by a written instrument substantially        similar in form and substance to the Notes, including, without limitation, having a principal        amount and interest rate equal to the principal amounts then outstanding and the interest        rates of the Notes and, if applicable, a restricted principal equal in amount to the Restricted        Principal  then  outstanding hereunder and  a  Restricted  OID  equal  in  amount  to  the        Restricted  OID  then  outstanding  hereunder,  respectively,  held  by  such  holder,  having        similar conversion rights as the Notes and having similar ranking and security to the Notes,        and satisfactory to the Holder and (ii) the Successor Entity (including its Parent Entity) is        a publicly traded corporation whose common stock is quoted on or listed for trading on an        Eligible Market.  Upon  the occurrence of any  Fundamental  Transaction, the Successor        Entity shall succeed to,  and be substituted for (so that from  and after the date of such        Fundamental Transaction, the provisions of this Note and the other Transaction Documents        referring to the “Company” shall refer instead to the Successor Entity), and may exercise        every  right  and  power  of  the  Company  and  shall  assume  all  of  the  obligations  of  the        Company under this Note and the other Transaction Documents with the same effect as if        such Successor Entity had been named as the Company herein.  Upon consummation of a        Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation        that there shall be issued upon conversion or redemption of this Note at any time after the        consummation of such Fundamental Transaction, in lieu of the shares of Common Stock        (or other securities, cash, assets or other property (except such items still issuable under        Sections 6 and 17, which shall continue to be receivable thereafter)) issuable upon the        conversion or redemption of the Notes prior to such Fundamental Transaction, such shares        of the publicly traded common stock (or their equivalent) of the Successor Entity (including        its Parent Entity) which the Holder would have been entitled to receive upon the happening        of such Fundamental Transaction had this Note been converted immediately prior to such        Fundamental Transaction (without  regard  to  any  limitations  on  the  conversion  of  this        Note), as adjusted in accordance with the provisions of this Note.  Notwithstanding the        foregoing, the Holder may elect, at its sole option, by delivery of written notice to the        Company to waive this Section 5(a) to permit the Fundamental Transaction without the        assumption of this Note.  The provisions of this Section 5 shall apply similarly and equally        to  successive  Fundamental  Transactions  and  shall  be  applied  without  regard  to  any        limitations on the conversion of this Note.               (b)   Notice of a Change of Control; Redemption Right.  No sooner than twenty        (20) Trading Days nor later than ten (10) Trading Days prior to the consummation of a        Change  of  Control  (the “Change  of  Control  Date”),  but  not  prior  to  the  public        announcement of such Change of Control, the Company shall deliver written notice thereof        via facsimile or electronic mail and overnight courier to the Holder (a “Change of Control        Notice”).  At any time during the period beginning after the Holder’s receipt of a Change        of Control Notice or the Holder becoming aware of a Change of Control if a Change of        Control Notice is not delivered to the Holder in accordance with the immediately preceding        sentence (as applicable) and ending on the later of twenty (20) Trading Days after (A) the        date of consummation of such Change of Control or (B) the date of receipt of such Change        of Control Notice or (C) the date of the announcement of such Change of Control, the        Holder may require the Company to redeem all or any portion of this Note by delivering        written notice thereof (each, a “Change of Control Redemption Notice”, and the date        thereof, each a “Change of Control Redemption Notice Date”) to the Company, which                                        19  Error! Unknown document property name. 

 

         Change of Control Redemption Notice shall indicate the Conversion Amount the Holder        is  electing  to  redeem.  The portion  of this  Note subject  to  redemption  pursuant  to  this        Section 5(b) shall be redeemed by the Company in cash at a price equal to the greatest of        (i) the product of (w) the Change of Control Redemption Premium multiplied by (y) the        Conversion Amount being  redeemed, (ii)  the  product  of  (x)  the  Change  of  Control        Redemption Premium multiplied by (y) the product of (A) the Conversion Amount being        redeemed multiplied by (B) the quotient determined by dividing (I) the greatest Closing        Sale  Price  of  the  shares  of  Common  Stock  during  the  period  beginning  on  the  date        immediately  preceding  the  earlier  to  occur  of  (1)  the  consummation  of  the  applicable        Change of Control and (2) the public announcement of such Change of Control and ending        on  the  date  the  Holder  delivers  the  Change  of  Control  Redemption  Notice by  (II)  the        Alternate Conversion Price then in effect (or, if a Dilutive Issuance occurs during the period        commencing on, and including, such Change of Control Redemption Notice Date through,        and including such Change of Control Redemption Date (as defined below), the date of        such Dilutive Issuance) and (iii) the product of (y) the Change of Control Redemption        Premium multiplied by (z) the product of (A) the Conversion Amount being redeemed        multiplied by (B) the quotient of (I) the aggregate cash consideration and the aggregate        cash value of any non-cash consideration per share of Common Stock to be paid to the        holders of the shares of Common Stock upon consummation of such Change of Control        (any such non-cash consideration constituting publicly-traded securities shall be valued at        the highest of the Closing Sale Price of such securities as of the Trading Day immediately        prior  to  the  consummation  of  such  Change  of  Control,  the  Closing  Sale  Price  of  such        securities on the Trading Day immediately following the public announcement of such        proposed Change of Control and the Closing Sale Price of such securities on the Trading        Day immediately prior to the public announcement of such proposed Change of Control)        divided by (II) the Conversion Price then in effect (the “Change of Control Redemption        Price”) (except, solely if any Restricted Principal is included in such Conversion Amount        subject to redemption pursuant to the applicable Change of Control Notice (such amount        of Restricted Principal, the “Eligible Change of Control Restricted Principal”) and the        Holder elects to effect Redemption Netting (as defined in the Investor Note) pursuant to        the terms of the Investor Note, such Change of Control Redemption Price shall be reduced,        on a dollar-for-dollar basis, by such portion of the Eligible Change of Control Restricted        Principal subject to such Redemption Netting (such amount of Eligible Change of Control        Restricted Principal, the “Change of Control Restricted Principal Amount”) and such        Change of Control Restricted Principal Amount shall be automatically satisfied on such        Redemption Date by Redemption Netting (as defined in the Investor Note) with respect        thereto).  Redemptions required by this Section 5(b) shall be made in accordance with the        provisions of Section 13 and shall have priority to payments to stockholders in connection        with such Change of Control.  To the extent redemptions required by this Section 5(b) are        deemed or determined by a court of competent jurisdiction to be prepayments of this Note        by  the  Company,  such redemptions  shall  be  deemed  to  be  voluntary  prepayments.         Notwithstanding anything to the contrary in this Section 5(b), but subject to Section 3(d),        until the Change of Control Redemption Price (together with any Late Charges thereon) is        paid  in  full,  the Conversion Amount  submitted for  redemption  under  this  Section 5(b)        (together with any Late Charges thereon) may be converted, in whole or in part, by the        Holder into Common Stock pursuant to Section 3.  In the event of a partial redemption of                                         20  Error! Unknown document property name. 

 

         this Note pursuant hereto, (x) the Principal amount redeemed shall be deducted from the        Installment  Amount(s)  relating  to  the  applicable  Installment  Date(s)  as  set  forth  in  the        Change  of  Control  Redemption  Notice and  (y)  the  amount  of  Restricted  Principal        redeemed, if any, shall be set forth in the applicable Change of Control Redemption Notice.         In the event of the Company’s redemption of any portion of this Note under this Section        5(b), the Holder’s damages would be uncertain and difficult to estimate because of the        parties’ inability to predict future interest rates and the uncertainty of the availability of a        suitable substitute investment opportunity for the Holder.  Accordingly, any redemption        premium due under this Section 5(b) is intended by the parties to be, and shall be deemed,        a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a        penalty.         6.    RIGHTS  UPON  ISSUANCE  OF  PURCHASE  RIGHTS  AND  OTHER  CORPORATE EVENTS.               (a)   Purchase  Rights.  In  addition  to  any  adjustments  pursuant  to  Section 7        below,  if  at  any  time  the  Company  grants,  issues  or  sells  any  Options,  Convertible        Securities or rights to purchase stock, warrants, securities or other property pro rata to all        or substantially all of the record holders of any class of Common Stock (the “Purchase        Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such        Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if        the Holder had held the number of shares of Common Stock acquirable upon complete        conversion of this Note (without taking into account any limitations or restrictions on the        convertibility of this Note and assuming for such purpose that the Note was converted at        the Alternate Conversion Price as of the applicable record date) immediately prior to the        date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or,        if no such record is taken, the date as of which the record holders of shares of Common        Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided,        however, that to the extent that the Holder’s right to participate in any such Purchase Right        would  result  in  the  Holder  and  the  other  Attribution  Parties  exceeding  the  Maximum        Percentage, then the Holder shall not be entitled to participate in such Purchase Right to        the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of        such  shares  of  Common  Stock  as  a  result  of  such  Purchase  Right  (and  beneficial        ownership) to the extent of any such excess) and such Purchase Right to such extent shall        be held in abeyance up to ninety (90) Trading Days, provided that such period shall be        tolled during any period of time in which Equity Conditions Failure shall have occurred        and be continuing (and, if such Purchase Right has an expiration date, maturity date or        other  similar  provision,  such  term  shall  be  extended  by  such  number  of  days  held  in        abeyance, if applicable) for the benefit of the Holder until such time or times during such        extended period, as its right thereto would not result in the Holder and the other Attribution        Parties exceeding the Maximum Percentage, at which time or times the Holder shall be        granted such right (and any Purchase Right granted, issued or sold on such initial Purchase        Right  or  on  any  subsequent  Purchase  Right  held  similarly  in  abeyance  (and,  if  such        Purchase Right has an expiration date, maturity date or other similar provision, such term        shall be extended by such number of days held in abeyance, if applicable)) to the same        extent as if there had been no such limitation). The Holder shall be deemed to have waived        the right to receive any such Purchase Rights that remain held in abeyance at the end of                                        21  Error! Unknown document property name. 

 

         such abeyance period if not granted prior to such time.               (b)   Other Corporate Events.  In addition to and not in substitution for any other        rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to        which holders of shares of Common Stock are entitled to receive securities or other assets        with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the        Company shall make appropriate provision to ensure that the Holder will thereafter have        the right to receive upon a conversion of this Note, at the Holder’s option  (i) in addition to        the shares of Common Stock receivable upon such conversion, such securities or other        assets to which the Holder would have been entitled with respect to such shares of Common        Stock had such shares of Common Stock been held by the Holder upon the consummation        of such Corporate Event (without taking into account any limitations or restrictions on the        convertibility  of  this  Note)  or  (ii)  in  lieu  of  the  shares  of  Common  Stock  otherwise        receivable upon such conversion, such securities or other assets received by the holders of        shares of Common Stock in connection with the consummation of such Corporate Event        in such amounts as the Holder would have been entitled to receive had this Note initially        been issued with conversion rights for the form of such consideration (as opposed to shares        of Common Stock) at  a conversion rate for such consideration commensurate with  the        Conversion Rate.  Provision made pursuant to the preceding sentence shall be in a form        and  substance  satisfactory  to  the  Holder.  The  provisions  of this  Section 6 shall  apply        similarly and equally to successive Corporate Events and shall be applied without regard        to any limitations on the conversion or redemption of this Note.               7.    RIGHTS UPON ISSUANCE OF OTHER SECURITIES.               (a)   Adjustment of Conversion Price upon Issuance of Common Stock.  If and        whenever on or after the Subscription Date the Company grants, issues or sells (or enters        into any agreement to grant, issue or sell), or in accordance with this Section 7(a) is deemed        to have granted, issued or sold, any shares of Common Stock (including the issuance or        sale of shares of Common Stock owned or held by or for the account of the Company, but        excluding any Excluded Securities issued or sold or deemed to have been issued or sold)        for a consideration per share (the “New Issuance Price”) less than a price equal to the        Conversion Price in effect immediately prior to such issuance or sale or deemed issuance        or  sale  (such  Conversion  Price  then  in  effect  is  referred  to  herein  as  the “Applicable        Price”) (the foregoing a “Basic Dilutive Issuance”), then, immediately after such Dilutive        Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the        New  Issuance  Price.  For  all  purposes  of  the  foregoing  (including,  without  limitation,        determining the adjusted Conversion Price and the New Issuance Price under this Section        7(a)), the following shall be applicable:                     (i)   Issuance of Options.  If the Company in any manner grants, issues           or sells (or enters into any agreement to grant, issue or sell) any Options and the lowest           price per share for which one share of Common Stock is at any time issuable upon the           exercise  of  any  such  Option  or  upon  conversion,  exercise  or  exchange  of  any           Convertible Securities issuable upon exercise of any such Option or otherwise pursuant           to the terms thereof is less than the Applicable Price, then such share of Common Stock           shall be deemed to be outstanding and to have been issued and sold by the Company at                                        22  Error! Unknown document property name. 

 

            the time of the granting, issuance or sale of such Option for such price per share.  For           purposes of this Section 7(a)(i), the “lowest price per share for which one share of           Common Stock is at any time issuable upon the exercise of any such Option or upon           conversion, exercise or exchange of any Convertible Securities issuable upon exercise           of any such Option or otherwise pursuant to the terms thereof” shall be equal to (1) the           lower  of  (x)  the  sum  of  the  lowest  amounts  of  consideration  (if  any) received  or           receivable by the Company with respect to any one share of Common Stock upon the           granting,  issuance or  sale  of  such  Option,  upon  exercise  of  such  Option  and  upon           conversion, exercise or exchange of any Convertible Security issuable upon exercise           of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise           price set forth in such Option for which one share of Common Stock is issuable (or           may become issuable assuming all possible market conditions) upon the exercise of           any  such  Options  or  upon  conversion,  exercise  or  exchange  of  any  Convertible           Securities issuable upon exercise of any such Option or otherwise pursuant to the terms           thereof, minus (2) the sum of all amounts paid or payable to the holder of such Option           (or  any  other  Person)  with  respect  to  any  one  share  of  Common  Stock  upon  the           granting,  issuance or  sale  of  such  Option,  upon  exercise  of  such  Option  and  upon           conversion, exercise or exchange of any Convertible Security issuable upon exercise           of such Option or otherwise pursuant to the terms thereof plus the value of any other           consideration consisting of cash, debt forgiveness, assets or any other property received           or  receivable  by,  or  benefit  conferred  on,  the  holder  of  such  Option  (or  any  other           Person).  Except as contemplated below, no further adjustment of the Conversion Price           shall be made upon the actual issuance of such share of Common Stock or of such           Convertible Securities upon the exercise of such Options or otherwise pursuant to the           terms  thereof  or  upon the  actual  issuance  of  such  shares  of  Common  Stock  upon           conversion, exercise or exchange of such Convertible Securities.                       (ii)  Issuance of Convertible Securities.  If the Company in any manner           issues or sells (or enters into any agreement to issue or sell) any Convertible Securities           and the lowest price per share for which one share of Common Stock is at any time           issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the           terms thereof is less than the Applicable Price, then such share of Common Stock shall           be deemed to be outstanding and to have been issued and sold by the Company at the           time of the issuance or sale of such Convertible Securities for such price per share.  For           the purposes of this Section 7(a)(ii), the “lowest price per share for which one share of           Common Stock is at any time issuable (or may become issuable assuming all possible           market  conditions)  upon  the  conversion,  exercise  or  exchange  thereof  or  otherwise           pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest           amounts of consideration (if any) received or receivable by the Company with respect           to one share of Common Stock upon the issuance or sale of the Convertible Security           and upon conversion, exercise or exchange of such Convertible Security or otherwise           pursuant  to  the  terms  thereof  and  (y)  the  lowest  conversion  price  set  forth  in  such           Convertible  Security  for  which  one  share  of  Common  Stock  is  issuable  upon           conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof           minus (2) the sum of all amounts paid or payable to the holder of such Convertible           Security (or any other Person) with respect to any one share of Common Stock upon           the  issuance  or  sale  of  such  Convertible  Security  plus  the  value  of  any  other                                        23  Error! Unknown document property name. 

 

            consideration received or receivable consisting of cash, debt forgiveness, assets or other           property by, or benefit conferred on, the holder of such Convertible Security (or any           other Person).  Except as contemplated below, no further adjustment of the Conversion           Price shall be made upon the actual issuance of such shares of Common Stock upon           conversion, exercise or exchange of such Convertible Securities or otherwise pursuant           to the terms thereof, and if any such issuance or sale of such Convertible Securities is           made upon exercise of any Options for which adjustment of the Conversion Price has           been  or  is  to  be  made  pursuant  to  other  provisions  of  this  Section 7(a),  except  as           contemplated below, no further adjustment of the Conversion Price shall be made by           reason of such issuance or sale.                     (iii) Change in Option Price or Rate of Conversion.  If the purchase or           exercise price provided for in any Options, the additional consideration, if any, payable           upon the issue, conversion, exercise or exchange of any Convertible Securities, or the           rate  at  which  any  Convertible  Securities  are  convertible  into  or  exercisable  or           exchangeable for shares of Common Stock increases or decreases at any time (other           than proportional changes in conversion or exercise prices, as applicable, in connection           with an event referred to in Section 7(b) below), the Conversion Price in effect at the           time of such increase or decrease shall be adjusted to the Conversion Price which would           have been in effect at such time had such Options or Convertible Securities provided           for such increased or decreased purchase price, additional consideration or increased           or decreased conversion rate (as the case may be) at the time initially granted, issued           or sold.  For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible           Security that was outstanding as of the Subscription Date are increased or decreased in           the  manner  described  in  the  immediately  preceding  sentence,  then  such  Option  or           Convertible Security and the shares of Common Stock deemed issuable upon exercise,           conversion or exchange thereof shall be deemed to have been issued as of the date of           such increase or decrease.  No adjustment pursuant to this Section 7(a) shall be made           if such adjustment would result in an increase of the Conversion Price then in effect.                     (iv)  Calculation  of  Consideration  Received.  If  any  Option  and/or           Convertible Security and/or Adjustment Right is issued in connection with the issuance           or  sale  or  deemed  issuance  or  sale  of  any  other  securities  of  the  Company  (as           determined  by  the  Holder,  the “Primary  Security”,  and  such  Option  and/or           Convertible Security and/or Adjustment Right, the “Secondary Securities”), together           comprising one integrated transaction (or one or more transactions if such issuances or           sales or deemed issuances or sales of securities of the Company either (A) have at least           one investor or purchaser in common, (B) are consummated in reasonable proximity to           each  other  and/or  (C)  are  consummated  under  the  same  plan  of  financing), the           aggregate  consideration  per  share  of  Common  Stock  with  respect  to  such  Primary           Security shall be deemed to be equal to the difference of (x) the lowest price per share           for which one share of Common Stock was issued (or was deemed to be issued pursuant           to Section 7(a)(i) or 7(a)(ii) above, as applicable) in such integrated transaction solely           with  respect  to  such  Primary  Security,  minus  (y)  with  respect  to  such  Secondary           Securities, the sum of (I) the Black Scholes Consideration Value of each such Option,           if any, (II) the fair market value (as determined by the Holder in good faith) or the           Black Scholes Consideration Value, as applicable, of such Adjustment Right, if any,                                        24  Error! Unknown document property name. 

 

            and  (III)  the  fair  market  value  (as  determined  by  the  Holder)  of  such  Convertible           Security, if any, in each case, as determined on a per share basis in accordance with           this  Section 7(a)(iv).  If  any  shares  of  Common  Stock,  Options  or  Convertible           Securities  are  issued  or  sold  or  deemed  to  have  been  issued  or  sold for  cash,  the           consideration received therefor (for the purpose of determining the consideration paid           for such Common Stock, Option or Convertible Security, but not for the purpose of the           calculation of the Black Scholes Consideration Value) will be deemed to be the net           amount of consideration received by the Company therefor.  If any shares of Common           Stock, Options or Convertible Securities are issued or sold for a consideration other           than cash, the amount of such consideration received by the Company (for the purpose           of determining the consideration paid for such Common Stock, Option or Convertible           Security, but not for the purpose of the calculation of the Black Scholes Consideration           Value) will be the fair value of such consideration, except where such consideration           consists  of  publicly  traded  securities,  in  which  case  the  amount  of  consideration           received  by  the  Company  for  such  securities  will  be  the  arithmetic  average  of  the           VWAPs of such security for each of the five (5) Trading Days immediately preceding           the date of receipt.  If any shares of Common Stock, Options or Convertible Securities           are issued to the owners of the non-surviving entity in connection with any merger in           which the Company is the surviving entity, the amount of consideration therefor (for           the purpose of determining the consideration paid for such Common Stock, Option or           Convertible Security, but not for the purpose of the calculation of the Black Scholes           Consideration Value) will be deemed to be the fair value of such portion of the net           assets  and  business  of  the  non-surviving  entity  as  is  attributable  to  such  shares  of           Common Stock, Options or Convertible Securities (as the case may be).  The fair value           of any consideration other than cash or publicly traded securities will be determined           jointly by the Company and the Holder.  If such parties are unable to reach agreement           within  ten  (10)  days  after  the  occurrence  of  an  event  requiring  valuation  (the           “Valuation Event”), the fair value of such consideration will be determined within five           (5)  Trading  Days  after  the  tenth  (10th)  day  following  such  Valuation  Event  by  an           independent, reputable appraiser jointly selected by the Company and the Holder.  The           determination  of  such  appraiser  shall  be  final  and  binding  upon  all  parties  absent           manifest  error  and  the  fees  and  expenses  of  such  appraiser  shall  be  borne  by  the           Company.                     (v)   Record Date.  If the Company takes a record of the holders of shares           of Common Stock for the purpose of entitling them (A) to receive a dividend or other           distribution payable in shares of Common Stock, Options or in Convertible Securities           or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible           Securities, then such record date will be deemed to be the date of the issuance or sale           of  the  shares  of  Common  Stock  deemed  to  have  been  issued  or  sold  upon  the           declaration of such dividend or the making of such other distribution or the date of the           granting of such right of subscription or purchase (as the case may be).               (b)   Adjustment  of  Conversion  Price  upon  Subdivision  or  Combination  of        Common Stock.  Without limiting any provision of Section 6, Section 17 or Section 7(a),        if the Company at any time on or after the Subscription Date subdivides (by any stock split,        stock  dividend,  stock  combination,  recapitalization  or  other  similar  transaction)  one  or                                        25  Error! Unknown document property name. 

 

         more classes of its outstanding shares of Common Stock into a greater number of shares,        the  Conversion  Price  in  effect  immediately  prior  to  such  subdivision  will  be        proportionately  reduced.   Without  limiting  any  provision  of Section 6, Section 17 or        Section 7(a), if the Company at any time on or after the Subscription Date combines (by        any  stock  split,  stock  dividend,  stock  combination,  recapitalization  or  other  similar        transaction) one or more classes of its outstanding shares of Common Stock into a smaller        number of shares, the Conversion Price in effect immediately prior to such combination        will  be  proportionately  increased.   Any  adjustment  pursuant  to  this  Section 7(b) shall        become effective immediately after the effective date of such subdivision or combination.         If any event requiring an adjustment under this Section 7(b) occurs during the period that        a Conversion Price is calculated hereunder, then the calculation of such Conversion Price        shall be adjusted appropriately to reflect such event.               (c)   Holder’s  Right  of  Adjusted  Conversion  Price upon  Variable  Price        Securities; Permitted Settlement Transactions.                       (i)   Adjustment upon Variable Price Transactions.  In addition to and              not in limitation of the other provisions of this Section 7, if the Company in any              manner issues or sells or enters into any agreement to issue or sell, any Common              Stock, Options or Convertible Securities) other than in any Permitted Variable Rate              Transactions  (as  defined  in  the  Securities  Purchase  Agreement) (any  such              securities, “Variable  Price  Securities”), after  the  Subscription  Date  that  are              issuable  pursuant  to  such  agreement  or  convertible  into  or  exchangeable  or              exercisable for shares of Common Stock at a price which varies or may vary with              the market price of the shares of Common Stock, including by way of one or more              reset(s) to a fixed price, but exclusive of such formulations reflecting customary              anti-dilution provisions (such as share splits, share combinations, share dividends              and similar transactions) (each of the formulations for such variable price being              herein referred to as, the “Variable Price”), the Company shall provide written              notice thereof via facsimile and overnight courier to the Holder on the date of such              agreement and the issuance of such Convertible Securities or Options.  From and              after the date the Company enters into such agreement or issues any such Variable              Price Securities, the Holder shall have the right, but not the obligation, in its sole              discretion to substitute the Variable Price for the Conversion Price upon conversion              of this Note by designating in the Conversion Notice delivered upon any conversion              of this Note that solely for purposes of such conversion the Holder is relying on the              Variable Price  rather  than  the  Conversion  Price  then  in  effect.   The  Holder’s              election to rely on a Variable Price for a particular conversion of this Note shall not              obligate the Holder to rely on a Variable Price for any future conversion of this              Note.                           (ii)  Adjustments upon Permitted Settlement Transactions.  If the              Company engages in any Permitted Settlement Transaction that would be a Basic              Dilutive  Issuance pursuant  to  Section 7(a),  but  for  the  fact  that  such Permitted              Settlement Transaction is an Excluded Security (each, a “PST Dilutive Issuance”,              and together with each Basic Dilutive Issuance, each a “Dilutive Issuance”), then,              immediately  after the  time  of  consummation  of such  Permitted  Settlement                                        26  Error! Unknown document property name. 

 

               Transaction, the Holder shall thereafter have the right to convert all, or any part, of              such portion of the Conversion Amount of this Note equal to the aggregate fair              market value of the securities issued in such Permitted Settlement Transaction (as              determined in accordance with Section 7(a)(iv) above) at the New Issuance Price              of such Permitted Settlement Transaction (as determined pursuant to Section 7(a)              above as if such Permitted Settlement Transaction was not an Excluded Security              thereunder) (each, a “PST Issuance Price”).               (d)   Other Events.  In the event that the Company (or any Subsidiary) shall take        any action to which the provisions hereof are not strictly applicable, or, if applicable, would        not  operate  to  protect  the  Holder  from  dilution  or  if  any  event  occurs  of  the  type        contemplated by the provisions of this Section 7 but not expressly provided for by such        provisions  (including,  without  limitation,  the  granting  of  stock  appreciation  rights,        phantom stock rights or other rights with equity features), then the Company’s board of        directors shall in good faith determine and implement an appropriate adjustment in the        Conversion Price so as to protect the rights of the Holder, provided that no such adjustment        pursuant to this Section 7(d) will increase the Conversion Price as otherwise determined        pursuant  to  this  Section 7(d),  provided  further  that  if  the  Holder  does  not  accept  such        adjustments as appropriately protecting its interests hereunder against such dilution, then        the  Company’s  board  of  directors  and  the  Holder  shall  agree,  in  good  faith,  upon  an        independent investment bank of nationally recognized standing to make such appropriate        adjustments,  whose  determination  shall  be  final  and  binding  absent  manifest  error  and        whose fees and expenses shall be borne by the Company.               (e)   Calculations.   All  calculations  under this  Section 7 shall  be  made  by        rounding to the nearest cent or the nearest 1/100th of a share, as applicable.  The number of        shares of Common Stock outstanding at any given time shall not include shares owned or        held by or for the account of the Company, and the disposition of any such shares shall be        considered an issue or sale of Common Stock.               (f)   Voluntary Adjustment by Company.  Subject to the rules and regulations of        the Principal Market, the Company may at any time during the term of this Note, with the        prior  written  consent  of  the  Required  Holders (as  defined  in  the  Securities  Purchase        Agreement), reduce the then current Conversion Price of each of the Notes to any amount        and for any period of time deemed appropriate by the board of directors of the Company.               8.    INSTALLMENT REDEMPTION; AUTOMATIC REDEMPTION OF  RESTRICTED PRINCIPAL AT AUTOMATIC REDEMPTION TIME.                     (a)   General.  On each applicable Installment Date, the Company shall        pay to the Holder of this Note the applicable Installment Amount due on such date by        redeeming (each, an “Installment Redemption”) such Installment Amount in cash on such        Installment  Date  by  wire  transfer  to  the  Holder  of  immediately  available  funds  in  an        amount  equal  to 107%  of the  applicable  Installment  Amount  (the “Installment        Redemption Price”).  Notwithstanding anything to the contrary in this Section 8(a), but        subject to Section 3(d), until the Installment Redemption Price (together with any Late        Charges thereon) is paid in full, the Installment Amount (together with any Late Charges                                        27  Error! Unknown document property name. 

 

         thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant        to Section 3. In the event the Holder elects to convert all or any portion of the Installment        Amount prior to the applicable Installment Date as set forth in the immediately preceding        sentence, the Installment Redemption Amount so converted shall be deducted from the        Installment  Amounts  relating  to  the  applicable  Installment  Date(s)  as  set  forth  in  the        applicable Conversion Notice.  Redemptions required by this Section 8(a) shall be made in        accordance with the provisions of Section 13.                      (b) Deferred  Installment  Amount.   Notwithstanding  any  provision  of        Section 8(a) to the contrary, the Holder may, at its option and in its sole discretion, deliver        a written notice to the Company no later than the Trading Day immediately prior to the        applicable  Installment  Date  electing  to  have  the  payment  of  all  or  any  portion  of  an        Installment Amount payable on such Installment Date deferred (such amount deferred, the        “Deferral  Amount”,  and  such  deferral,  each  a “Deferral”) until  any  subsequent        Installment Date selected by the Holder (as applicable, the “New Installment Date” with        respect  to  such  applicable  Deferral  Amount),  in  its  sole  discretion,  in  which  case,  the        Deferral  Amount  shall  be  added  to,  and  become  part  of,  such  subsequent  Installment        Amount and (i) if such Deferral is made at the request of the Company, such Deferral        Amount shall continue to accrue Interest hereunder or (ii) if such Deferral is not made at        the request of the Company, unless an Event of Default has occurred and is continuing (in        which case, such Deferral Amount shall accrue interest at the Default Rate), such Deferral        Amount  shall  not continue  to  accrue  Interest  hereunder.  Any  notice  delivered  by  the        Holder pursuant to this Section 8(b) shall set forth (i) the Deferral Amount, (ii) whether the        Company has requested such Deferral and (iii) the applicable New Installment Date with        respect to such Deferral Amount.                       (c)   Acceleration of Installment Amounts.                             (i)   General.  Notwithstanding any provision of this Section 8 to              the contrary, at any time after a Deferral, the Holder may, by delivery of written              notice to the Company (each, an “Acceleration Notice”, and the date thereof, each              an  “Acceleration Notice Date”), require  the  Company  to  redeem (each,  an              “Acceleration”) all,  or  any  part,  of  such  Deferral  Amount as  specified  in  such              Acceleration Notice (each, an “Acceleration Amount”) in cash at a redemption              price equal to 107% of such Deferral Amount (including, without limitation, any              Interest, Make-Whole Amount and/or Late Charges, as applicable, that may have              accrued thereon from and after the time of such Deferral hereunder, if any) (except,              solely if any Restricted Principal is included in such Conversion Amount subject to              redemption  pursuant  to  the  applicable  Acceleration  (such  amount  of  Restricted              Principal, the “Eligible Acceleration Restricted Principal”) and the Holder elects              to  effect  Redemption  Netting  pursuant  to  the  terms  of  the  Investor Note,  such              Acceleration Redemption Price (as defined below) shall be reduced, on a dollar-             for-dollar basis, by such portion of the Eligible Acceleration Restricted Principal              subject  to  such  Redemption  Netting  (such  amount  of  Eligible  Acceleration              Restricted Principal, the “Acceleration Restricted Principal Amount”) and such              Acceleration Restricted Principal Amount shall be automatically satisfied on such              Acceleration Date by Redemption Netting with respect thereto) (and any Restricted                                        28  Error! Unknown document property name. 

 

               OID  corresponding  to  such  Restricted  Principal  Amount  satisfied  by  such              Redemption  Netting  shall  be  automatically  cancelled  in  accordance  herewith)              (each, an “Acceleration Redemption Price”).                           (ii)  Mechanics.  Each Acceleration Notice shall specify (x) such              applicable  Acceleration Amount (and  the  aggregate  amount  of  any  Restricted              Principal to be subject to such Acceleration (together with any related Restricted              OID to be cancelled in  connection therewith in  accordance herewith)), (y) such              applicable  Acceleration  Redemption  Price  with respect  to  such  Acceleration              Amount and (z) the date of such Acceleration (each, an “Acceleration Redemption              Date”), which shall be the fifth (5th) Trading Day after the applicable Acceleration              Notice  Date.   Redemptions  required  by this  Section 8(c) shall be  made  in              accordance with the provisions of Section 13.  Notwithstanding anything to the              contrary  in this  Section 8(c) shall,  but  subject  to  Section 3(d),  until  the  Holder              receives  the Acceleration Redemption  Price,  the Acceleration Amount  may  be              converted,  in  whole  or  in  part,  by  the  Holder  into  Common  Stock  pursuant  to              Section 3, and any such conversion shall reduce the Acceleration Amount in the              manner set forth by the Holder in the applicable Conversion Notice.               (d)   Automatic Redemption of Restricted Principal at Automatic Redemption        Time.  Notwithstanding anything to the contrary herein, at 12:01 a.m., New York City time,        on  March  31,  2021 (the  “Automatic  Redemption Time”), the  aggregate  amount  of        Restricted  Principal then  outstanding  hereunder  (collectively, the  “Automatic        Redemption Amount”) shall be mandatorily and automatically redeemed in accordance        with this Section 8(d).  At the Automatic Redemption Time, the Company shall redeem the        Automatic Redemption Amount for a redemption price equal to the aggregate amount of        Restricted Principal then outstanding hereunder (the “Automatic Redemption Price”);        provided, that the satisfaction of the payment of the Automatic Redemption Price shall        occur  at  the  Automatic  Redemption  Time (in  lieu  of  a  cash  payment)  by  Redemption        Netting (as defined in the Investor Note) and any Restricted OID corresponding to such        Automatic  Redemption  Amount  satisfied  by  such  Redemption  Netting  shall  be        automatically cancelled in accordance herewith.         9.    SUBSEQUENT PLACEMENT OPTIONAL REDEMPTION               (a)   General.  With respect to any given Subsequent Placement (as defined in        the  Securities  Purchase  Agreement)  (including,  without  limitation,  any  ATM/EOL        Transaction (as defined in the Securities Purchase Agreement), but excluding any other        Excluded  Securities)(each,  an  “Eligible  Subsequent  Placement”),  from  and after  the        earlier of  (x) the  date  the  Holder  becomes  aware  of  the  occurrence  of such  Eligible        Subsequent Placement (the “Holder Notice Date”) and (y) the later of (A) the fifth (5th)        Trading Day after the Company has delivered written notice to the Holder of the occurrence        (or  potential  occurrence)  of such  Eligible Subsequent  Placement  (each,  a  “Company        Subsequent  Placement  Notice”)  and  (B) the time  of  consummation  of  such  Eligible        Subsequent Placement, the Holder shall have the right, in its sole discretion, to require that        the  Company  redeem  (each  an  “Optional  Redemption”)  all,  or  any  portion,  of the        Conversion Amount under this Note (other than any Conversion Amount with respect to                                        29  Error! Unknown document property name. 

 

         Restricted  Principal  or  Restricted  OID  hereunder) not  in  excess  of  (together  with  any        Optional Redemption Amount (as defined in the applicable other Note of the Holder) of        any other Notes of the Holder) the Holder’s Holder Pro Rata Amount of 40% of the gross        proceeds (less any reasonable placement agent, underwriter and/or legal fees and expenses)        of  such  Eligible  Subsequent  Placement  (each,  an “Eligible  Optional  Redemption        Amount”) by delivering written notice thereof (each, an “Optional Redemption Notice”,        and  the  date  thereof,  each  an  “Optional  Redemption  Notice  Date”)  to  the  Company.         Notwithstanding the foregoing, (I) if such Eligible Subsequent Placement is an ATM/EOL        Transaction,  the  Company  shall  not  be  required  to  deliver  more  than  one  Company        Subsequent Placement Notice in any ten (10) Trading Day period and (II) if the Holder is        participating in an Eligible Subsequent Placement, upon the written request of the Holder,        the Company shall apply all, or any part, as set forth in such written request, of any amounts        that would otherwise be payable to the Holder in such Optional Redemption, on a dollar-       for-dollar basis, against the purchase price of the securities to be purchased by the Holder        in such Eligible Subsequent Placement.               (b)   Mechanics.  The Optional Redemption Notice shall indicate that all, or such        applicable  portion,  as  set  forth  in  the  applicable  Optional  Redemption  Notice,  of  the        Eligible  Optional  Redemption Amount  the  Holder  is  electing  to  have  redeemed  (the        “Optional  Redemption  Amount”)  and  the  date  of  such  Optional  Redemption  (the        “Optional Redemption Date”), which shall be the later of (x) the fifth (5th) Trading Day        after  the  date  of  the  applicable  Optional  Redemption  Notice  and  (y)  the  date  of  the        consummation of such Eligible Subsequent Placement.  The portion of this Note subject to        redemption pursuant to this Section 9 shall be redeemed by the Company in cash at a price        equal to 107% of the greater of (i) Optional Redemption Amount and (ii) the product of        (X)  the quotient  of  (I)  the  Optional  Redemption  Amount  divided  by  (II)  the  Alternate        Conversion Price as in effect at such time as the Holder delivers an Optional Redemption        Notice (or, if a Dilutive Issuance occurs during the period commencing on, and including,        such Optional Redemption Notice Date through, and including such Optional Redemption        Date, the date of such Dilutive Issuance) multiplied by (Y) the greatest Closing Sale Price        of the Common Stock on any Trading Day during the period commencing on the date        immediately preceding the occurrence of such Eligible Subsequent Placement and ending        on the  later  of  (x)  the  fifth  (5th)  Trading  Day  after  the  date  of  the  applicable  Optional        Redemption  Notice and  (y) the date of the consummation of such Eligible Subsequent        Placement (the “Optional Redemption Price”).  Redemptions required by this Section 9        shall be made in accordance with the provisions of Section 13.  Notwithstanding anything        to the contrary in this Section 9, but subject to Section 3(d), until the Holder receives the        Optional Redemption Price, the Optional Redemption Amount may be converted, in whole        or  in  part,  by  the  Holder  into  Common  Stock  pursuant  to  Section 3,  and  any  such        conversion shall reduce the Optional Redemption Amount in the manner set forth by the        Holder in the applicable Conversion Notice.               10.   REDEMPTIONS AT THE COMPANY’S ELECTION.                     (a)   Company Optional Redemption.  At any time after date hereof, the        Company shall have the right to redeem all, but not less than all, of the Conversion Amount        then remaining under this Note (the “Company Optional Redemption Amount”) on the                                        30  Error! Unknown document property name. 

 

         Company  Optional  Redemption  Date  (each  as  defined  below)  (a “Company  Optional        Redemption”).  The portion of this Note subject to redemption pursuant to this Section        10(a) shall  be  redeemed  by  the  Company  in  cash  at  a  price  (the “Company  Optional        Redemption Price”) equal to 107% of the greater of (i) the Conversion Amount being        redeemed as of the Company Optional Redemption Date and (ii) the product of (1) the        quotient of (I) the Company Optional Redemption Amount divided by (II) the Alternate        Conversion Price as in effect at such Company Optional Redemption Notice Date (or, if a        Dilutive Issuance occurs during the period commencing on, and including, such Company        Optional  Redemption  Notice  Date  through,  and  including  such  Company  Optional        Redemption Date, the date of such Dilutive Issuance) multiplied by (2) the greatest Closing        Sale Price of the Common Stock on any Trading Day during the period commencing on        the  date  immediately  preceding  such  Company  Optional  Redemption  Notice  Date  and        ending on the Trading Day immediately prior to the date the Company makes the entire        payment required to be made under this Section 10(a) (except, solely if any Restricted        Principal is included in such Conversion Amount subject to redemption pursuant to the        applicable  Company  Optional  Redemption  (such  amount  of  Restricted  Principal,  the        “Eligible Company Optional Redemption Restricted Principal”) and the Holder elects        to effect Redemption Netting pursuant to the terms of the Investor Note, such Company        Optional Redemption Price shall be reduced, on a dollar-for-dollar basis, by such portion        of  the  Eligible  Company  Optional  Redemption  Restricted  Principal  subject  to  such        Redemption Netting (such amount of Eligible Company Optional Redemption Restricted        Principal, the “Optional Redemption Restricted Principal Amount”) and such Company        Optional Redemption Restricted Principal Amount shall be automatically satisfied on such        Redemption  Date by Redemption Netting  with  respect  thereto  and  any  Restricted OID        corresponding to such Optional Redemption Restricted Principal Amount satisfied by such        Redemption  Netting  shall  be  automatically  cancelled  in  accordance  herewith).   The        Company  may  exercise  its  right  to  require  redemption  under  this Section 10(a) by        delivering a written notice thereof by facsimile or electronic mail and overnight courier to        all, but not less than all, of the holders of Notes (the “Company Optional Redemption        Notice” and the date all of the holders of Notes received such notice is referred to as the        “Company Optional Redemption Notice Date”).  The Company may deliver only one        Company  Optional  Redemption  Notice  hereunder  and  such  Company  Optional        Redemption Notice shall be irrevocable.  The Company Optional Redemption Notice shall        (x) state the date on which the Company Optional Redemption shall occur (the “Company        Optional Redemption Date”) which date shall not be less than ten (10) calendar days nor        more than thirty (30) calendar days following the Company Optional Redemption Notice        Date, and (y) state the aggregate Conversion Amount of the Notes which is being redeemed        in such Company Optional Redemption from the Holder and all of the other holders of the        Notes pursuant to this Section 10(a) (and analogous provisions under the Other Notes) on        the Company Optional Redemption Date.  Notwithstanding anything herein to the contrary,        at any time prior to the date the Company Optional Redemption Price is paid, in full, the        Company Optional Redemption Amount may be converted, in whole or in part, by the        Holder into shares of Common Stock pursuant to Section 3.  All Conversion Amounts        converted by the Holder after the Company Optional Redemption Notice Date shall reduce        the Company Optional Redemption Amount of this Note required to be redeemed on the        Company Optional Redemption Date.  Redemptions made pursuant to this Section 10(a)                                         31  Error! Unknown document property name. 

 

         shall be made in accordance with Section 12.  In the event of the Company’s redemption        of any portion of this Note under this Section 10, the Holder’s damages would be uncertain        and difficult to estimate because of the parties’ inability to predict future interest rates and        the uncertainty of the availability of a suitable substitute investment opportunity for the        Holder.  Accordingly, any redemption premium due under this Section 10 is intended by        the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of        its investment opportunity and not as a penalty.  For the avoidance of doubt, the Company        shall have no right to effect a Company Optional Redemption if any Event of Default has        occurred  and  continuing  (regardless  of  whether  the  Holder  has  delivered  an  Event  of        Default Redemption Notice to the Company or if such Event of Default has been cured        thereafter) but any Event of Default shall have no effect upon the Holder’s right to convert        this Note in its discretion.                       (b)   Pro Rata Redemption Requirement.  If the Company elects to cause        a  Company  Optional  Redemption  of  this  Note  pursuant  to  Section 10(a), then  it  must        simultaneously take the same action with respect to all of the Other Notes.         11.   NONCIRCUMVENTION.  The Company hereby covenants and agrees  that the  Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities  Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any  reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue  or  sale  of  securities,  or  any  other  voluntary  action,  avoid  or  seek  to  avoid  the  observance  or  performance of any of the terms of this Note, and will at all times in good faith carry out all of the  provisions of this Note and take all action as may be required to protect the rights of the Holder of  this Note.  Without limiting the generality of the foregoing or any other provision of this Note or  the other Transaction Documents, the Company (a) shall not increase the par value of any shares  of Common Stock receivable upon conversion of this Note above the Conversion Price then in  effect,  and (b) shall take all such actions  as  may be necessary or appropriate in  order that the  Company may validly and legally issue fully paid and nonassessable shares of Common Stock  upon the conversion of this Note.  Notwithstanding anything herein to the contrary, if after the  sixty (60) calendar day anniversary of the Issuance Date, the Holder is not permitted to convert  this Note in full for any reason (other than pursuant to restrictions set forth in Section 3(d) hereof),  the  Company  shall  use  its  best efforts  to  promptly  remedy  such  failure,  including,  without  limitation, obtaining such consents or approvals as necessary to permit such conversion into shares  of Common Stock.         12.   RESERVATION OF AUTHORIZED SHARES.               (a)   Reservation.  So long as any Notes remain outstanding, the Company shall        at all times reserve at least 200% of the number of shares of Common Stock as shall from        time to time be necessary to effect the conversion, including without limitation, Alternate        Conversions of all of the Notes  then outstanding (without regard to any limitations on        conversions and assuming such Notes remain outstanding until the Maturity Date) at the        Alternate  Conversion  Price  then  in  effect (the “Required  Reserve  Amount”).   The        Required Reserve Amount (including, without limitation, each increase in the number of        shares so reserved) shall be allocated pro rata among the holders of the Notes based on the        original principal amount of the Notes held by each holder on the Closing Date or increase                                        32  Error! Unknown document property name. 

 

         in the number of reserved shares, as the case may be (the “Authorized Share Allocation”).         In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each        transferee  shall  be  allocated  a  pro  rata  portion  of  such  holder’s Authorized Share        Allocation.  Any shares of Common Stock reserved and allocated to any Person which        ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based        on the principal amount of the Notes then held by such holders.               (b)   Insufficient Authorized Shares.  If, notwithstanding Section 12(a), and not        in limitation thereof, at any time while any of the Notes remain outstanding the Company        does not have a sufficient number of authorized and unreserved shares of Common Stock        to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a        number  of  shares  of  Common  Stock  equal  to  the  Required  Reserve  Amount  (an        “Authorized  Share  Failure”),  then  the  Company  shall  immediately  take  all  action        necessary to increase the Company’s authorized shares of Common Stock to an amount        sufficient to allow the Company to reserve the Required Reserve Amount for the Notes        then outstanding.  Without limiting the generality of the foregoing sentence, as soon as        practicable after the date of the occurrence of an Authorized Share Failure, but in no event        later  than  sixty  (60)  days  after  the  occurrence  of  such  Authorized  Share  Failure,  the        Company shall hold a meeting of its stockholders for the approval of an increase in the        number of authorized shares of Common Stock.  In connection with such meeting, the        Company  shall  provide  each  stockholder  with  a  proxy  statement  and  shall  use  its  best        efforts  to  solicit  its  stockholders’ approval  of  such  increase  in  authorized  shares  of        Common Stock and to cause its board of directors to recommend to the stockholders that        they approve such proposal.  In the event that the Company is prohibited from issuing        shares  of  Common  Stock  pursuant  to  the  terms  of  this  Note  due  to  the  failure  by  the        Company to have sufficient shares of Common Stock available out of the authorized but        unissued shares of Common Stock (such unavailable number of shares of Common Stock,        the “Authorized Failure Shares”), in lieu of delivering such Authorized Failure Shares to        the Holder, the Company shall pay cash in exchange for the redemption of such portion of        the Conversion Amount convertible into such Authorized Failure Shares at a price equal to        the sum of (i) the product of (x) such number of Authorized Failure Shares and (y) the        greatest Closing Sale Price of the Common Stock on any Trading Day during the period        commencing on the date the Holder delivers the applicable Conversion Notice with respect        to such Authorized Failure Shares to the Company and ending on the date of such issuance        and payment under this Section 12(a); and (ii) to the extent the Holder purchases (in an        open market transaction or otherwise) shares of Common Stock to deliver in satisfaction        of a sale by the Holder of Authorized Failure Shares, any brokerage commissions and other        out-of-pocket expenses, if any, of the Holder incurred in connection therewith.  Nothing        contained in Section 12(a) or this Section 12(b) shall limit any obligations of the Company        under any provision of the Securities Purchase Agreement.         13.   REDEMPTIONS.               (a)   Mechanics.  The Company shall deliver the  applicable Event  of Default        Redemption Price to the Holder in cash within five (5) Business Days after the Company’s        receipt of the Holder’s Event of Default Redemption Notice (each, an “Event of Default        Redemption Date”).  If the Holder has submitted a Change of Control Redemption Notice                                        33  Error! Unknown document property name. 

 

         in  accordance  with  Section 5(b),  the  Company  shall  deliver  the  applicable  Change  of        Control Redemption Price to the Holder in cash concurrently with the consummation of        such  Change  of  Control  if  such  notice  is  received  prior  to  the  consummation  of  such        Change of Control and within five (5) Business Days after the Company’s receipt of such        notice otherwise (each, a “Change of Control Redemption Date”).  The Company shall        deliver the applicable Installment Redemption Price to the Holder in cash on the applicable        Installment Date.   The  Company  shall  deliver  the  applicable  Acceleration  Redemption        Price to the Holder in cash on the applicable Acceleration Date.  The Company shall deliver        the applicable Optional Redemption Price to the Holder in cash on the applicable Optional        Redemption  Date.  The  Company  shall  deliver  the  applicable  Company  Optional        Redemption Price to the Holder in cash on the applicable Company Optional Redemption        Date.  Notwithstanding anything herein to the contrary, in connection with any redemption        hereunder at a time the Holder is entitled to receive a cash payment under any of the other        Transaction Documents, at the option of the Holder delivered in writing to the Company,        the applicable Redemption Price hereunder shall be increased by the amount of such cash        payment owed to the Holder under such other Transaction Document and, upon payment        in  full  or  conversion  in  accordance  herewith,  shall  satisfy  the  Company’s  payment        obligation under such other Transaction Document.  In the event of a redemption of less        than all of the Conversion Amount of this Note, (x) the Company shall promptly cause to        be  issued  and  delivered  to  the  Holder  a  new  Note  (in  accordance  with  Section 20(d))        representing  the  outstanding  Principal  which  has  not  been  redeemed and  (y)  the        Redemption Price shall be applied against Installment Amounts hereunder in reverse order        (from the Installment Amount due on the last Installment Date hereunder backward by        Installment Dates) unless otherwise specified by the Holder in writing.  In the event that        the Company does not pay the applicable Redemption Price to the Holder within the time        period  required,  at  any  time  thereafter  and  until  the  Company  pays  such  unpaid        Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require        the Company to promptly return to the Holder all or any portion of this Note representing        the Conversion Amount that was submitted for redemption and for which the applicable        Redemption  Price  (together  with any  Late  Charges  thereon)  has  not  been  paid.         Notwithstanding the foregoing, if any Restricted Principal is included in such Conversion        Amount  subject  to  redemption  pursuant  to  the  applicable  Redemption  Notice (or  as        otherwise required pursuant to Section 4(c) and/or 8(d), as applicable) (such amount of        Restricted Principal, the “Eligible Redemption Restricted Principal”) and the Holder        elects  to  effect  Redemption  Netting  pursuant  to  the  terms  of  the  Investor  Note (or  the        Holder is otherwise required to effect Redemption Netting pursuant to Section 4(c) and/or        8(d), as applicable), such Redemption Price shall be reduced, on a dollar-for-dollar basis,        by  such portion  of  the Eligible Redemption  Restricted  Principal subject  to  redemption        pursuant  to  the  applicable  Redemption  Notice  (such  amount  of Eligible  Redemption        Restricted  Principal,  the “Redemption Restricted  Principal  Amount”) and  such        Redemption Restricted Principal Amount shall be automatically satisfied on the applicable        Redemption Date by either Redemption Netting (if such redemption is pursuant to Section        5(b),  Section 8(d) or  Section Error!  Reference  source  not  found. above),  Event  of        Default  Netting  (if  such  redemption  is  pursuant  to  Section 3(e) without  regard  to  the        occurrence of any Bankruptcy Event of Default) or Bankruptcy Event of Default Netting        (if such redemption is pursuant to Section 3(e) as a result of the occurrence of a Bankruptcy                                         34  Error! Unknown document property name. 

 

         Event of Default) and, in each case, any Restricted OID corresponding to such Redemption        Restricted Principal Amount satisfied in such redemption shall be automatically cancelled        in accordance herewith).  Upon the Company’s receipt of such notice, (x) the applicable        Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the        Company shall immediately return this  Note, or issue a new Note (in accordance with        Section 20(d)), to the Holder, and in each case the principal amount of this Note or such        new Note (as the case may be) shall be increased by an amount equal to the difference        between (1) the applicable Redemption Price (as the case may be, and as adjusted pursuant        to this Section 13, if applicable) minus (2) the Principal portion of the Conversion Amount        submitted for redemption and (z) the Conversion Price of this Note or such new Notes (as        the case may be) shall be automatically adjusted with respect to each conversion effected        thereafter by the Holder to  the Conversion Price as  in  effect  on the date on which the        applicable  Redemption  Notice  is  voided. The  Holder’s  delivery  of  a  notice  voiding  a        Redemption Notice and exercise of its rights following such notice shall not affect the        Company’s obligations to make any payments of Late Charges which have accrued prior        to the date of such notice with respect to the Conversion Amount subject to such notice.               (b)   Redemption by Other Holders.  Upon the Company’s receipt of notice from        any of the holders of the Other Notes for redemption or repayment as a result of an event        or occurrence substantially similar to the events or occurrences described in Section 4 or        Section 5(b) (each, an “Other Redemption Notice”), the Company shall immediately, but        no later than one (1) Business Day of its receipt thereof, forward to the Holder by facsimile        or electronic mail a copy of such notice.  If the Company receives a Redemption Notice        and one or more Other Redemption Notices, during the seven (7) Business Day period        beginning on and including the date which is two (2) Business Days prior to the Company’s        receipt of the Holder’s applicable Redemption Notice and ending on and including the date        which is two (2) Business Days after the Company’s receipt of the Holder’s applicable        Redemption Notice and the Company is unable to redeem all principal, interest and other        amounts  designated  in  such  Redemption  Notice  and  such  Other  Redemption  Notices        received during such seven (7) Business Day period, then the Company shall redeem a pro        rata amount from each holder of the Notes (including the Holder) based on the principal        amount of the Notes submitted for redemption pursuant to such Redemption Notice and        such Other Redemption Notices received by the Company during such seven (7) Business        Day period.         14.   VOTING RIGHTS.  The Holder shall have no voting rights as the holder of this  Note, except as required by law (including, without limitation, the Delaware General Corporation  Law) and as expressly provided in this Note.         15.   COVENANTS.  Until all of the Notes have been converted, redeemed or otherwise  satisfied in accordance with their terms:               (a)   Rank. All payments due under this Note (a) shall rank pari passu with all        Other  Notes  and  (b)  shall  be  senior  to  all  other  Indebtedness  of  the  Company  and  its        Subsidiaries other than Permitted Indebtedness or Permitted Additional Indebtedness.               (b)   Incurrence of Indebtedness.  The Company shall not, and the Company shall                                        35  Error! Unknown document property name. 

 

         cause each of its Subsidiaries to not, directly or indirectly, incur or guarantee, assume or        suffer to exist any Indebtedness (other than (i) the Indebtedness evidenced by this Note and        the Other Notes and (ii) other Permitted Indebtedness).               (c)   Existence of Liens.  The Company shall not, and the Company shall cause        each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage,        lien, pledge, charge, security interest or other encumbrance upon or in any property or        assets  (including  accounts  and  contract  rights)  owned  by  the  Company  or  any  of  its        Subsidiaries (collectively, “Liens”) other than Permitted Liens.               (d)   Restricted Payments.  The Company shall not, and the Company shall cause        each of its Subsidiaries to not, directly or indirectly, redeem, defease, repurchase, repay or        make any payments in respect of, by the payment of cash or cash equivalents (in whole or        in part, whether by way of open market purchases, tender offers, private transactions or        otherwise), all or any portion of any Indebtedness (other than the Notes or the March Notes)        whether by way of payment in respect of principal of (or premium, if any) or interest on,        such Indebtedness if at the time such payment is due or is otherwise made or, after giving        effect to such payment, (i) an event constituting an Event of Default has occurred and is        continuing or (ii) an event that with the passage of time and without being cured would        constitute an Event of Default has occurred and is continuing.               (e)   Restriction on Redemption and Cash Dividends.  The Company shall not,        and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem,        repurchase or declare or pay any cash dividend or distribution on any of its capital stock.               (f)   Restriction  on  Transfer  of  Assets.  The  Company  shall  not,  and  the        Company  shall  cause  each  of  its  Subsidiaries  to  not,  directly  or  indirectly,  sell,  lease,        license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any assets        or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single        transaction  or  a  series  of  related  transactions,  other  than  (i)  sales,  leases,  licenses,        assignments, transfers, conveyances and other dispositions of such assets or rights by the        Company and its Subsidiaries in the ordinary course of business consistent with its past        practice and (ii) sales of inventory and product in the ordinary course of business.               (g)   Maturity of Indebtedness.  Except as set forth on Schedule 3(s) attached        hereto, the Company shall not, and the Company shall cause each of its Subsidiaries to not,        directly or indirectly, permit any Indebtedness of the Company or any of its Subsidiaries        to mature or accelerate prior to the Maturity Date.               (h)   Change in Nature of Business.  The Company shall not, and the Company        shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line        of business substantially different from those lines of business conducted by or publicly        contemplated  to  be  conducted  by  the  Company  and  each  of  its  Subsidiaries  on  the        Subscription Date or any business substantially related or incidental thereto.  The Company        shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,        modify its or their corporate structure or purpose.                                         36  Error! Unknown document property name. 

 

               (i)   Preservation of Existence, Etc.  The Company shall maintain and preserve,        and  cause  each  of  its  Subsidiaries  to  maintain  and  preserve,  its  existence,  rights  and        privileges, and become or remain, and cause each of its Subsidiaries to become or remain,        duly  qualified  and  in  good  standing  in  each  jurisdiction  in  which  the  character  of  the        properties owned or leased by it or in which the transaction of its business makes such        qualification necessary.               (j)   Maintenance of Properties, Etc.  The Company shall maintain and preserve,        and cause each of its Subsidiaries to maintain and preserve, all of its properties which are        necessary  or  useful  in  the  proper  conduct  of  its  business  in  good  working order  and        condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries        to comply, at all times with the provisions of all leases to which it is a party as lessee or        under  which  it  occupies  property,  so  as  to  prevent  any  loss or  forfeiture  thereof  or        thereunder.               (k)   Maintenance of Intellectual Property.  The Company will, and will cause        each of its Subsidiaries to, take all action necessary or advisable to maintain all of the        Intellectual  Property  Rights  (as  defined  in  the  Securities  Purchase  Agreement)  of  the        Company and/or any of its Subsidiaries that are necessary or material to the conduct of its        business in full force and effect.               (l)   Maintenance of Insurance.  The Company shall maintain, and cause each of        its Subsidiaries to maintain, insurance with responsible and reputable insurance companies        or associations (including, without limitation, comprehensive general liability, hazard, rent        and  business  interruption  insurance)  with  respect  to  its  properties  (including  all  real        properties leased or owned by it) and business, in such amounts and covering such risks as        is required by any governmental authority having jurisdiction with respect thereto or as is        carried  generally  in  accordance  with  sound  business  practice by  companies  in  similar        businesses similarly situated.               (m)   Transactions with Affiliates.  The Company shall not, nor shall it permit        any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series        of related transactions (including, without limitation, the purchase, sale, lease, transfer or        exchange of property or assets of any kind or the rendering of services of any kind) with        any affiliate, except transactions in the ordinary course of business in a manner and to an        extent consistent with past practice and necessary or desirable for the prudent operation of        its business, for fair consideration and on terms no less favorable to it or its Subsidiaries        than would be obtainable in a comparable arm’s length transaction with a Person that is not        an affiliate thereof.               (n)   Restricted Issuances.  The Company shall not, directly or indirectly, without        the prior written consent of the holders of a majority in aggregate principal amount of the        Notes then outstanding, (i) issue any Notes (other than as contemplated by the Securities        Purchase Agreement and the Notes) or (ii) issue any other securities that would cause a        breach or default under the Notes or the Warrants.                 (o)   Available Cash Test; Announcement of Operating Results.                                           37  Error! Unknown document property name. 

 

                     (i)   Available Cash Test.  At any time any Notes remain outstanding, the              Company’s Available Cash as of the last calendar day of each Fiscal Quarter shall              equal or exceed $500,000 (the “Available Cash Test”), provided that a Financial              Covenant Failure (as defined below) shall not be an Event of Default hereunder (x)              if the Company cures such Financial Covenant Failure on or prior to the fortieth              (40th) calendar day after the end of such Fiscal Quarter (and no subsequent breach              occurs for a period of at least 180 calendar days), as evidenced by a certification,              executed on behalf of the Company by the Chief Financial Officer of the Company              or (y) if waived by the Holder in writing or email.                     (ii)   Operating Results  Announcement.  Commencing with  the Fiscal              Quarter  ending September 30,  2020,  the  Company  shall  publicly  disclose  and              disseminate (such date, the “Announcement Date”), if the Available Cash Test has              not been satisfied for such Fiscal Quarter or Fiscal Year, as applicable, a statement              to that effect no later than the tenth (10th) day after the end of such Fiscal Quarter              or Fiscal Year, as applicable, and such announcement shall include a statement to              the effect that the Company is (or is not, as applicable) in breach of the Available              Cash  Test  for  such  Fiscal  Quarter  or  Fiscal  Year,  as  applicable.   On  the              Announcement Date, the Company shall also provide to the Holders a certification,              executed on behalf of the Company by the Chief Financial Officer of the Company,              certifying  that  the  Company  satisfied  the  Available  Cash  Tests  for  such  Fiscal              Quarter if that is the case.  If the Company has failed to meet the Available Cash              Test  for  such  Fiscal  Quarter  (a  “Financial  Covenant  Failure”),  the  foregoing              written certification that the Company provides to the Holders shall also state the              Available Cash Test has not been met (a “Financial Covenant Failure Notice”).               Concurrently with the delivery of each Financial Covenant Failure Notice to the              Holders, the Company shall also make publicly available (as part of a Quarterly              Report on Form 10-Q, Annual Report on Form 10-K or on a Current Report on              Form 8-K, or otherwise) the Financial Covenant Failure Notice and the fact that an              Event of Default has occurred under the Notes.               (p)   Independent Investigation.  At the request of the Holder either (x) at any        time when an Event of Default has occurred and is continuing, (y) upon the occurrence of        an event that with the passage of time or giving of notice would constitute an Event of        Default or (z) at any time the Holder reasonably believes an Event of Default may have        occurred or be continuing, the Company shall hire an independent, reputable investment        bank selected by the Company and approved by the Holder to investigate as to whether any        breach of this Note has occurred (the “Independent Investigator”).  If the Independent        Investigator  determines  that  such  breach  of  this  Note  has  occurred,  the  Independent        Investigator shall notify the Company of such breach and the Company shall deliver written        notice to each holder of a Note of such breach.  In connection with such investigation, the        Independent Investigator may, during normal business hours, inspect all contracts, books,        records,  personnel,  offices  and  other  facilities  and  properties  of  the  Company  and  its        Subsidiaries and, to the extent available to the Company after the Company uses reasonable        efforts  to  obtain  them,  the  records  of  its  legal  advisors  and  accountants  (including  the        accountants’ work papers) and any books of account, records, reports and other papers not        contractually required of the Company to be confidential or secret, or subject to attorney-                                       38  Error! Unknown document property name. 

 

         client  or  other  evidentiary  privilege,  and  the  Independent  Investigator  may  make  such        copies and inspections thereof as the Independent Investigator may reasonably request.         The Company shall furnish the Independent Investigator with such financial and operating        data and other information with respect to the business and properties of the Company as        the  Independent  Investigator  may  reasonably  request.   The  Company  shall  permit  the        Independent Investigator to discuss the affairs, finances and accounts of the Company with,        and to make proposals and furnish advice with respect thereto to, the Company’s officers,        directors, key employees and independent public accountants or any of them (and by this        provision  the  Company  authorizes  said  accountants  to  discuss  with  such  Independent        Investigator the finances and affairs of the Company and any Subsidiaries), all at such        reasonable times, upon reasonable notice, and as often as may be reasonably requested.         16.   SECURITY.   This  Note is secured to  the  extent and in  the manner set  forth in  Section 1(f) of this Note.         17.   DISTRIBUTION OF ASSETS.  In addition to any adjustments pursuant to Section  7, if the Company shall declare or make any dividend or other distributions of its assets (or rights  to acquire its assets) to any or all holders of shares of Common Stock, by way of return of capital  or  otherwise  (including  without  limitation,  any  distribution  of  cash,  stock  or  other  securities,  property  or  options  by  way  of  a  dividend,  spin  off,  reclassification,  corporate  rearrangement,  scheme of arrangement or other similar transaction) (the “Distributions”), then the Holder will be  entitled to such Distributions as if the Holder had held the number of shares of Common Stock  acquirable upon complete conversion of this Note (without taking into account any limitations or  restrictions on the convertibility of this Note and assuming for such purpose that the Note was  converted at the Alternate Conversion Price as of the applicable record date) immediately prior to  the date on which a record is taken for such Distribution or, if no such record is taken, the date as  of  which  the  record  holders  of  Common  Stock  are to  be  determined  for  such  Distributions  (provided, however, that to the extent that the Holder’s right to participate in any such Distribution  would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage,  then  the  Holder  shall  not  be  entitled  to  participate  in  such  Distribution  to  the  extent  of  the  Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common  Stock as a result of such Distribution (and beneficial ownership) to the extent of any such excess)  and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until  such  time  or  times,  if  ever,  as  its  right  thereto  would  not  result  in  the  Holder  and  the  other  Attribution Parties exceeding the Maximum Percentage, at which time or times the Holder shall  be granted such Distribution (and any Distributions declared or made on such initial Distribution  or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had  been no such limitation).         18.   AMENDING THE TERMS OF THIS NOTE.  Except for Section 3(d), which may  not be amended, modified or waived by the parties hereto, the prior written consent of the Holder  shall be required for any change, waiver or amendment to this Note.         19.   TRANSFER.  This Note and any shares of Common Stock issued upon conversion  of this Note may be offered, sold, assigned or transferred by the Holder without the consent of the  Company, subject only to the provisions of Section 2(g) of the Securities Purchase Agreement.                                         39  Error! Unknown document property name. 

 

         20.   REISSUANCE OF THIS NOTE.               (a)   Transfer.  If this Note is to be transferred, the Holder shall surrender this        Note to the Company, whereupon the Company will forthwith issue and deliver upon the        order of the Holder a new Note (in accordance with Section 20(d)), registered as the Holder        may request, representing the outstanding Principal being transferred by the Holder and, if        less than the entire outstanding Principal is being transferred, a new Note (in accordance        with  Section 20(d))  to  the  Holder  representing  the  outstanding  Principal  not  being        transferred.  The Holder and any assignee, by acceptance of this Note, acknowledge and        agree  that,  by  reason  of  the  provisions  of  Section 3(c)(iii) following  conversion  or        redemption of any portion of this Note, the outstanding Principal represented by this Note        may be less than the Principal stated on the face of this Note.               (b)   Lost, Stolen or Mutilated Note.  Upon receipt by the Company of evidence        reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this        Note (as to which a written certification and the indemnification contemplated below shall        suffice  as  such  evidence),  and,  in  the  case  of  loss,  theft  or  destruction,  of  any        indemnification undertaking by the Holder to the Company in customary and reasonable        form  and,  in  the  case  of  mutilation,  upon  surrender  and  cancellation  of  this  Note,  the        Company shall execute and deliver to the Holder a new Note (in accordance with Section        20(d)) representing the outstanding Principal.               (c)   Note  Exchangeable  for  Different  Denominations.  This  Note  is        exchangeable,  upon  the  surrender  hereof  by  the  Holder  at  the  principal  office  of  the        Company, for a new Note or Notes (in accordance with Section 20(d) and in principal        amounts of at least $1,000) representing in the aggregate the outstanding Principal of this        Note, and each such new Note will represent such portion of such outstanding Principal as        is designated by the Holder at the time of such surrender.               (d)   Issuance of New Notes.  Whenever the Company is required to issue a new        Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this        Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining        outstanding (or in the case of a new Note being issued pursuant to Section 20(a) or Section        20(c),  the  Principal  designated  by  the  Holder  which,  when  added  to  the  principal        represented  by  the  other  new  Notes  issued  in  connection  with  such  issuance,  does  not        exceed  the  Principal  remaining outstanding  under  this  Note  immediately  prior  to  such        issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such        new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same        rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest, the        Make-Whole  Amount and  Late  Charges  on  the Principal, Interest and  Make-Whole        Amount, if any, of this Note, from the Issuance Date.         21.   REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES  AND INJUNCTIVE RELIEF.  The remedies provided in this Note shall be cumulative and in  addition  to  all  other  remedies  available  under  this  Note  and  any  of  the  other  Transaction  Documents at law or in equity (including a decree of specific performance and/or other injunctive  relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages                                        40  Error! Unknown document property name. 

 

   for any failure by the Company to comply with the terms of this Note.  No failure on the part of  the Holder to exercise, and no delay in exercising, any right, power or remedy hereunder shall  operate as a waiver thereof; nor shall any single or partial exercise by the Holder of any right,  power or remedy preclude any other or further exercise thereof or the exercise of any other right,  power or remedy.  In addition, the exercise of any right or remedy of the Holder at law or equity  or under this Note or any of the documents shall not be deemed to be an election of Holder’s rights  or remedies under such documents or at law or equity.  The Company covenants to the Holder that  there  shall  be  no  characterization  concerning  this  instrument  other  than  as  expressly  provided  herein.  Amounts set forth or provided for herein with respect to payments, conversion and the like  (and the computation thereof) shall be the amounts to be received by the Holder and shall not,  except as expressly provided herein, be subject to any other obligation of the Company (or the  performance thereof).  The Company acknowledges that a breach by it of its obligations hereunder  will cause irreparable harm to the Holder and that the remedy at law for any such breach may be  inadequate.  The Company therefore agrees that, in the event of any such breach or threatened  breach,  the  Holder  shall  be  entitled,  in  addition  to  all  other  available  remedies,  to  specific  performance and/or temporary, preliminary and permanent injunctive or other equitable relief from  any  court  of  competent  jurisdiction  in  any  such  case  without  the  necessity  of  proving  actual  damages and without posting a bond or other security.  The Company shall provide all information  and documentation to the Holder that is requested by the Holder to enable the Holder to confirm  the  Company’s  compliance  with  the  terms  and  conditions  of  this  Note  (including,  without  limitation, compliance with Section 7).         22.   PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a)  this Note is placed in the hands of an attorney for collection or enforcement or is collected or  enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due  under  this  Note  or  to  enforce  the  provisions  of  this  Note  or  (b)  there  occurs  any  bankruptcy,  reorganization, receivership of the Company or other proceedings affecting Company creditors’  rights and involving a claim under this Note, then the Company shall pay the costs incurred by the  Holder  for  such  collection,  enforcement  or  action  or  in  connection  with  such  bankruptcy,  reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and  disbursements.  The Company expressly acknowledges and agrees that no amounts due under this  Note shall be affected, or limited, by the fact that the purchase price paid for this Note was less  than the original Principal amount hereof.         23.   CONSTRUCTION; HEADINGS.  This Note shall be deemed to be jointly drafted  by the Company and the initial Holder and shall not be construed against any such Person as the  drafter hereof.  The headings of this Note are for convenience of reference and shall not form part  of, or affect the interpretation of, this Note.  Unless the context clearly indicates otherwise, each  pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural  forms thereof.  The terms “including,” “includes,” “include” and words of like import shall be  construed  broadly  as  if  followed  by  the  words “without  limitation.” The  terms “herein,”  “hereunder,” “hereof” and words of like import refer to this entire Note instead of just the provision  in  which  they  are  found.  Unless  expressly  indicated  otherwise,  all  section  references  are  to  sections of this Note.  Terms used in this Note and not otherwise defined herein, but defined in the  other Transaction Documents, shall have the meanings ascribed to such terms on the Closing Date  in such other Transaction Documents unless otherwise consented to in writing by the Holder.                                         41  Error! Unknown document property name. 

 

         24.   FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the part of  the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver  thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other  or further exercise thereof or of any other right, power or privilege.  No waiver shall be effective  unless  it  is  in  writing  and  signed  by  an  authorized  representative  of  the  waiving  party.   Notwithstanding the foregoing, nothing contained in this Section 24 shall permit any waiver of  any provision of Section 3(d).         25.   DISPUTE RESOLUTION.                (a)   Submission to Dispute Resolution.                     (i)   In the case of a dispute relating to a Closing Bid Price, a Closing              Sale Price, a Conversion Price, an Alternate Conversion Price, a Black Scholes              Consideration Value, a PST Issuance Price, a VWAP or a fair market value or the              arithmetic calculation of a Conversion Rate, the Restricted Principal, the Restricted              OID, or the applicable Redemption Price (as the case may be) (including, without              limitation,  a  dispute  relating  to  the  determination  of  any  of  the  foregoing),  the              Company or the Holder (as the case may be) shall submit the dispute to the other              party  via  facsimile  or  electronic  mail  (A)  if  by  the  Company,  within  two  (2)              Business Days after the occurrence of the circumstances giving rise to such dispute              or (B) if by the Holder at any time after the Holder learned of the circumstances              giving rise to such dispute.  If the Holder and the Company are unable to promptly              resolve such dispute relating to such Closing Bid Price, such Closing Sale Price,              such  Conversion  Price, such Alternate  Conversion Price,  such Black Scholes              Consideration Value, such PST Issuance Price, such VWAP or such fair market              value,  or  the  arithmetic  calculation  of  such  Conversion  Rate,  the  Restricted              Principal, the Restricted OID, or such applicable Redemption Price (as the case              may be), at  any time after the second (2nd) Business Day following such initial              notice by the Company or the Holder (as the case may be) of such dispute to the              Company or the Holder (as the case may be), then the Holder may, at its sole option,              select an independent, reputable investment bank to resolve such dispute.                     (ii)  The Holder and the Company shall each deliver to such investment              bank (A) a copy of the initial dispute submission so delivered in accordance with              the first sentence of this Section 25 and (B) written documentation supporting its              position with respect to such dispute, in each case, no later than 5:00 p.m. (New              York time) by the fifth (5th) Business Day immediately following the date on which              the Holder selected such investment bank (the “Dispute Submission Deadline”)              (the documents referred to in the immediately preceding clauses (A) and (B) are              collectively  referred  to  herein  as  the “Required  Dispute  Documentation”)  (it              being understood and agreed that if either the Holder or the Company fails to so              deliver  all  of  the  Required  Dispute  Documentation  by  the  Dispute  Submission              Deadline,  then  the  party  who  fails  to  so  submit  all  of  the  Required  Dispute              Documentation shall no longer be entitled to (and hereby waives its right to) deliver              or submit any written documentation or other support to such investment bank with              respect to such dispute and such investment bank shall resolve such dispute based                                        42  Error! Unknown document property name. 

 

               solely  on  the  Required  Dispute  Documentation  that  was  delivered  to  such              investment  bank  prior  to  the  Dispute  Submission  Deadline).   Unless  otherwise              agreed to in writing by both the Company and the Holder or otherwise requested              by such investment bank, neither the Company nor the Holder shall be entitled to              deliver or submit any written documentation or other support to such investment              bank  in  connection  with  such  dispute  (other  than  the  Required  Dispute              Documentation).                     (iii) The Company and the Holder shall cause such investment bank to              determine the resolution of such dispute and notify the Company and the Holder of              such resolution no later than ten (10) Business Days immediately following the              Dispute Submission Deadline.  The fees and expenses of such investment bank shall              be borne solely by the Company, and such investment bank’s resolution of such              dispute shall be final and binding upon all parties absent manifest error.               (b)   Miscellaneous.  The Company expressly acknowledges and agrees that (i)        this Section 25 constitutes an agreement to arbitrate between the Company and the Holder        (and constitutes an arbitration agreement) under § 7501, et seq.  of the New York Civil        Practice Law and Rules (“CPLR”) and that the Holder is authorized to apply for an order        to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this        Section 25,  (ii) a  dispute  relating  to  a  Conversion  Price  includes,  without  limitation,        disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stock        occurred  under  Section 7(a),  (B)  the  consideration  per  share  at  which  an  issuance  or        deemed issuance of Common Stock occurred, (C) whether any issuance or sale or deemed        issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of        Excluded Securities (as defined in the Securities Purchase Agreement), (D) whether an        agreement, instrument, security or the like constitutes an Option or Convertible Security        and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Note and each other        applicable Transaction Document shall serve as the basis for the selected investment bank’s        resolution of the applicable dispute, such investment bank shall be entitled (and is hereby        expressly authorized) to make all findings, determinations and the like that such investment        bank determines are required to be made by such investment bank in connection with its        resolution of such dispute and in resolving such dispute such investment bank shall apply        such findings, determinations and the like to the terms of this Note and any other applicable        Transaction Documents, (iv) the Holder (and only the Holder), in its sole discretion, shall        have the right to submit any dispute described in this Section 25 to any state or federal        court  sitting  in  The  City  of  New  York,  Borough  of  Manhattan  in  lieu  of  utilizing  the        procedures set forth in this Section 25 and (v) nothing in this Section 25 shall limit the        Holder from obtaining any injunctive relief or other equitable remedies (including, without        limitation, with respect to any matters described in this Section 25).         26.   NOTICES; CURRENCY; PAYMENTS.               (a)   Notices.  Whenever notice is required to be given under this Note, unless        otherwise provided herein, such notice shall be given in accordance with Section 9(f) of        the Securities Purchase Agreement.  The Company shall provide the Holder with prompt        written notice of all actions taken pursuant to this Note, including in reasonable detail a                                        43  Error! Unknown document property name. 

 

         description of such action and the reason therefore.  Without limiting the generality of the        foregoing, the Company will give written notice to the Holder (i) immediately upon any        adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the        calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which        the  Company  closes  its  books  or  takes  a  record  (A)  with  respect  to  any  dividend  or        distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of        any Options, Convertible Securities or rights to purchase stock, warrants, securities or other        property to holders of shares of Common Stock or (C) for determining rights to vote with        respect to any Fundamental Transaction, dissolution or liquidation, provided in each case        that such information shall be made known to the public prior to or in conjunction with        such notice being provided to the Holder.               (b)   Currency.  All dollar amounts referred to in this Note are in United States        Dollars  (“U.S. Dollars”), and all amounts owing under this  Note shall be paid  in  U.S.        Dollars.  All amounts denominated in other currencies (if any) shall be converted into the        U.S.  Dollar  equivalent  amount  in  accordance  with  the  Exchange  Rate  on  the  date  of        calculation.  “Exchange  Rate” means,  in  relation  to  any  amount  of  currency  to  be        converted  into  U.S.  Dollars  pursuant  to  this  Note,  the  U.S.  Dollar  exchange  rate  as        published in the Wall Street Journal on the relevant date of calculation (it being understood        and agreed that where an amount is calculated with reference to, or over, a period of time,        the date of calculation shall be the final date of such period of time).               (c)   Payments.  Whenever any payment of cash is to be made by the Company        to  any  Person  pursuant  to  this  Note,  unless  otherwise  expressly  set  forth  herein,  such        payment shall be made in lawful money of the United States of America by a certified        check drawn on the account of the Company and sent via overnight courier service to such        Person at such address as previously provided to the Company in writing (which address,        in the case of each of the Buyers, shall initially be as set forth on the Schedule of Buyers        attached  to  the  Securities  Purchase Agreement),  provided  that  the  Holder  may  elect  to        receive a payment of cash via wire transfer of immediately available funds by providing        the  Company  with  prior  written  notice  setting  out  such  request  and  the  Holder’s  wire        transfer instructions.  Whenever any amount expressed to be due by the terms of this Note        is due on any day which is not a Business Day, the same shall instead be due on the next        succeeding day which is a Business Day. Any amount of Principal or other amounts due        under the Transaction Documents which is not paid when due shall result in a late charge        being incurred and payable by the Company in an amount equal to interest on such amount        at the rate of eighteen percent (18%) per annum from the date such amount was due until        the same is paid in full (“Late Charge”).           27.   CANCELLATION.  After all Principal, accrued Interest, Make-Whole Amount,  Late Charges and other amounts at any time owed on this Note have been satisfied in full, this  Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation  and shall not be reissued.         28.   WAIVER  OF  NOTICE.   To  the  extent  permitted  by  law,  the  Company  hereby  irrevocably  waives demand, notice, presentment, protest  and  all other demands and notices  in  connection with the delivery, acceptance, performance, default or enforcement of this Note and                                        44  Error! Unknown document property name. 

 

   the Securities Purchase Agreement.         29.   GOVERNING LAW.  This Note shall be construed and enforced in accordance  with, and all questions concerning the construction, validity, interpretation and performance of this  Note shall be governed by, the internal laws of the State of New York, without giving effect to any  choice of law or conflict of law provision or rule (whether of the State of New York or any other  jurisdictions) that would cause the application of the laws of any jurisdictions other than the State  of New York. Except as otherwise required by Section 25 above, the Company hereby irrevocably  submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York,  Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or  with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and  agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to  the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient  forum or that the venue of such suit, action or proceeding is improper.  Nothing contained herein  shall be deemed to limit in any way any right to serve process in any manner permitted by law.   Nothing contained herein shall be deemed to limit in any way any right to serve process in any  manner permitted by law.  Nothing contained herein (i) shall be deemed or operate to preclude the  Holder from bringing suit or taking other legal action against the Company in any other jurisdiction  to collect on the Company’s obligations to the Holder, to realize on any collateral or any other  security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder  or (ii) shall limit, or shall be deemed or construed to limit, any provision of Section 25. THE  COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND  AGREES NOT TO REQUEST, A JURY TRIAL  FOR THE ADJUDICATION  OF  ANY  DISPUTE  HEREUNDER  OR  IN  CONNECTION  WITH  OR  ARISING  OUT  OF  THIS  NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.         30.   JUDGMENT CURRENCY.               (a)   If for the purpose of obtaining or enforcing judgment against the Company        in any court in any jurisdiction it becomes necessary to convert into any other currency        (such other currency being hereinafter in this Section 30 referred to as the “Judgment        Currency”) an amount due in U.S. dollars under this Note, the conversion shall be made        at the Exchange Rate prevailing on the Trading Day immediately preceding:                     (i)   the  date  actual  payment  of  the  amount  due,  in  the  case  of  any           proceeding in the courts of New York or in the courts of any other jurisdiction that will           give effect to such conversion being made on such date: or                      (ii)  the date on which the foreign court determines, in the case of any           proceeding in the courts of any other jurisdiction (the date as of which such conversion           is  made  pursuant  to  this  Section 30(a)(ii) being  hereinafter  referred  to  as  the           “Judgment Conversion Date”).               (b)   If in the case of any proceeding in the court of any jurisdiction referred to        in Section 30(a)(ii) above, there is a change in the Exchange Rate prevailing between the        Judgment  Conversion  Date  and  the  date  of  actual  payment  of  the  amount  due,  the        applicable party shall pay such adjusted amount as may be necessary to ensure that the                                         45  Error! Unknown document property name. 

 

         amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing        on the date of payment, will produce the amount of US dollars which could have been        purchased with the amount of Judgment Currency stipulated in the judgment or judicial        order at the Exchange Rate prevailing on the Judgment Conversion Date.               (c)   Any amount due from the Company under this provision shall be due as a        separate debt and shall not be affected by judgment being obtained for any other amounts        due under or in respect of this Note.         31.   SEVERABILITY.  If any provision of this Note is prohibited by law or otherwise  determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that  would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the  broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of  such provision shall not affect the validity of the remaining provisions of this Note so long as this  Note as so modified continues to express, without material change, the original intentions of the  parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of  the provision(s) in question does not substantially impair the respective expectations or reciprocal  obligations  of  the  parties  or  the  practical  realization  of  the  benefits  that  would  otherwise  be  conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the  prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which  comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).         32.   MAXIMUM  PAYMENTS.   Without  limiting  Section  9(d)  of  the  Securities  Purchase Agreement, nothing contained herein shall be deemed to establish or require the payment  of a rate of interest or other charges in excess of the maximum permitted by applicable law.  In the  event that the rate of interest required to be paid or other charges hereunder exceed the maximum  permitted by such law, any payments in excess of such maximum shall be credited against amounts  owed by the Company to the Holder and thus refunded to the Company.         33.   CERTAIN DEFINITIONS.  For purposes of this Note, the following terms shall  have the following meanings:               (a)   “1933 Act” means the Securities Act of 1933, as amended, and the rules        and regulations thereunder.               (b)   “1934 Act” means the Securities Exchange Act of 1934, as amended, and        the rules and regulations thereunder.               (c)   “Adjustment Right” means any right granted with respect to any securities        issued in connection with, or with respect to, any issuance or sale (or deemed issuance or        sale in accordance with Section 7(a)) of shares of Common Stock (other than rights of the        type described in Section 6(a) hereof) that could result in a decrease in the net consideration        received by the Company in connection with, or with respect to, such securities (including,        without limitation, any cash settlement rights, cash adjustment or other similar rights).               (d)   “Affiliate” means, with respect to any Person, any other Person that directly        or indirectly controls, is controlled by, or is under common control with, such Person, it        being understood for purposes of this definition that “control” of a Person means the power                                        46  Error! Unknown document property name. 

 

         directly or indirectly either to vote 10% or more of the stock having ordinary voting power        for  the  election  of  directors  of  such  Person  or  direct  or  cause  the  direction  of  the        management and policies of such Person whether by contract or otherwise.               (e)   “Alternate Conversion Floor Amount” means an amount in cash, to be        delivered by wire transfer of immediately available funds pursuant to wire instructions        delivered  to  the  Company  by  the  Holder  in  writing,  equal  to  the  product  obtained  by        multiplying  (A)  the  VWAP  on  the  day  the  Holder  delivers  the  applicable  Conversion        Notice and (B) the difference obtained by subtracting (I) the number of shares of Common        Stock  delivered  (or  to  be  delivered)  to  the  Holder  on  the  applicable  Share  Delivery        Deadline  with  respect  to  such  Alternate  Conversion  from  (II)  the  quotient  obtain  by        dividing (x) the applicable Conversion Amount that the Holder has elected to be the subject        of the applicable Alternate Conversion, by (y) the applicable Alternate Conversion Price        without giving effect to clause (x) of such definition.               (f)   “Alternate  Conversion  Price” means,  with  respect  to  any  Alternate        Conversion that price which shall be the lowest of (i) the applicable Conversion Price as in        effect on the applicable Conversion Date of the applicable Alternate Conversion, and (ii)        the greater of (x) the Floor Price and (y) 85% of the price computed as the lowest VWAP        of the Common Stock during the ten (10) consecutive Trading  Day period ending  and        including the Trading Day immediately preceding the delivery or deemed delivery of the        applicable  Conversion  Notice (such  period,  the “Alternate  Conversion  Measuring        Period”).  All such determinations to be appropriately adjusted for any stock dividend,        stock split, stock combination, reclassification or similar transaction that proportionately        decreases or increases the Common Stock during such Alternate Conversion Measuring        Period.               (g)    “Approved Stock Plan” means any employee benefit plan which has been        approved  by  the  board  of  directors  of  the  Company  prior  to  or  subsequent  to  the        Subscription Date pursuant  to  which shares  of Common Stock and standard options  to        purchase Common Stock may be issued to any employee, officer or director for services        provided to the Company in their capacity as such.                (h)   “Attribution  Parties” means,  collectively,  the  following  Persons  and        entities:  (i)  any  investment  vehicle,  including,  any  funds,  feeder  funds  or  managed        accounts, currently, or from time to  time after the  Issuance Date, directly or indirectly        managed  or  advised  by  the  Holder’s  investment  manager  or  any  of  its  Affiliates  or        principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii)        any Person acting or who could be deemed to be acting as a Group together with the Holder        or  any  of  the  foregoing  and  (iv)  any  other  Persons  whose  beneficial  ownership  of  the        Company’s Common Stock would or could be aggregated with the Holder’s and the other        Attribution Parties for purposes of Section 13(d) of the 1934 Act.  For clarity, the purpose        of the foregoing is to subject collectively the Holder and all other Attribution Parties to the        Maximum Percentage.                 (i)   “Available  Cash”  means,  with  respect  to any  date  of  determination,  an        amount equal to the aggregate amount of the Cash of the Company and its Subsidiaries                                        47  Error! Unknown document property name. 

 

         (excluding for this purpose cash held in restricted accounts or otherwise unavailable for        unrestricted use by the Company or any of its Subsidiaries for any reason) as of such date        of determination held in bank accounts of financial banking institutions in the United States        of America.               (j)    “Black Scholes Consideration Value” means the value of the applicable        Option, Convertible Security or Adjustment Right (as the case may be) as of the date of        issuance thereof calculated using the Black Scholes Option Pricing Model obtained from        the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the        Closing Sale Price of the Common Stock on the Trading Day immediately preceding the        public announcement of the execution of definitive documents with respect to the issuance        of such Option, Convertible Security or Adjustment Right (as the case may be), (ii) a risk-       free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining        term of such Option, Convertible Security or Adjustment Right (as the case may be) as of        the date of issuance of such Option, Convertible Security or Adjustment Right (as the case        may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of        100%  and  the  100  day  volatility  obtained  from  the “HVT” function  on  Bloomberg        (determined utilizing a 365 day annualization factor) as of the Trading Day immediately        following the date of issuance of such Option, Convertible Security or Adjustment Right        (as the case may be).               (k)   “Bloomberg” means Bloomberg, L.P.               (l)   “Business Day” means any day other than Saturday, Sunday or other day        on which commercial banks in The City of New York, New York are authorized or required        by law to remain closed; provided, however, for clarification, commercial banks shall not        be deemed to be authorized or required by law to remain closed due to “stay at home”,        “shelter-in-place”, “non-essential employee”  or any other similar orders or restrictions or        the closure of any physical branch locations at the direction of any governmental authority        so long as the electronic funds transfer systems (including for wire transfers) of commercial        banks in The City of New York, New York generally are open for use by customers on        such day.               (m)   “Cash” of the Company and its Subsidiaries on any date shall be determined        from  such  Persons’  books  maintained  in  accordance  with  GAAP,  and  means,  without        duplication, the cash, cash equivalents and Eligible Marketable Securities accrued by the        Company and its wholly owned Subsidiaries on a consolidated basis on such date.               (n)    “Change of Control” means any Fundamental Transaction other than (i)        any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries        with  or  into  any  of  the  foregoing  Persons,  (ii)  any  reorganization,  recapitalization  or        reclassification of the shares of Common Stock in which holders of the Company’s voting        power  immediately  prior  to  such  reorganization,  recapitalization  or  reclassification        continue  after  such  reorganization,  recapitalization  or  reclassification  to  hold  publicly        traded securities and, directly or indirectly, are, in all material respects, the holders of the        voting power of the surviving entity (or entities with the authority or voting power to elect        the members of the board of directors (or their equivalent if other than a corporation) of                                        48  Error! Unknown document property name. 

 

         such entity or entities) after such reorganization, recapitalization or reclassification, or (iii)        pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction        of incorporation of the Company or any of its Subsidiaries.               (o)   “Change of Control Redemption Premium” means 115%.               (p)   “Closing Bid Price” and “Closing Sale Price” means, for any security as        of any date, the last closing bid price and last closing trade price, respectively, for such        security on the Principal Market, as reported by Bloomberg, or, if the Principal Market        begins to operate on an extended hours basis and does not designate the closing bid price        or the closing trade price (as the case may be) then the last bid price or last trade price,        respectively,  of  such  security  prior  to  4:00:00  p.m.,  New  York  time,  as  reported  by        Bloomberg, or, if the Principal Market is not the principal securities exchange or trading        market for such security, the last closing bid price or last trade price, respectively, of such        security on the principal securities exchange or trading market where such security is listed        or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid        price or last trade price, respectively, of such security in the over-the-counter market on        the electronic bulletin board for such security as reported by Bloomberg, or, if no closing        bid price or last trade price, respectively, is reported for such security by Bloomberg, the        average of the bid prices, or the ask prices, respectively, of any market makers for such        security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets        LLC).  If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security        on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing        Sale Price (as the case may be) of such security on such date shall be the fair market value        as mutually determined by the Company and the Holder.  If the Company and the Holder        are unable to agree upon the fair market value of such security, then such dispute shall be        resolved in accordance with the procedures in Section 25. All such determinations shall be        appropriately  adjusted  for  any  stock  splits,  stock  dividends,  stock  combinations,        recapitalizations or other similar transactions during such period.               (q)   “Closing Date” shall have the meaning set forth in the Securities Purchase        Agreement, which date is the date the Company initially issued Notes pursuant to the terms        of the Securities Purchase Agreement.               (r)   “Common  Stock” means  (i)  the  Company’s  shares  of  common  stock,        $0.0001 par value per share, and (ii) any capital stock into which such common stock shall        have been changed or any share capital resulting from a reclassification of such common        stock.               (a)   “Conversion  Floor  Price  Condition”  means  that  the  relevant  Alternate        Conversion Price is being determined based on clause (x) of such definition.               (b)    “Convertible Securities” means any stock or other security (other than        Options) that is at any time and under any circumstances, directly or indirectly, convertible        into, exercisable or exchangeable  for, or which  otherwise entitles  the holder thereof to        acquire, any shares of Common Stock.                                         49  Error! Unknown document property name. 

 

               (c)    “Eligible  Market” means  The  New  York  Stock  Exchange,  the  NYSE        American,  the  Nasdaq  Capital  Market,  the  Nasdaq  Global  Select  Market,  the  Nasdaq        Global Market or the Principal Market.               (d)   “Eligible  Marketable  Securities”  as  of  any  date  means  marketable        securities which would be reflected on a consolidated balance sheet of the Company and        its  Subsidiaries  prepared  as  of  such  date  in  accordance  with  GAAP, and  which  are        permitted under the Company’s investment policies as in effect on the Issuance Date or        approved thereafter by the Company’s Board of Directors.               (e)    “Equity  Conditions” means,  with  respect  to an given  date  of        determination:  (i) either  (x)  one  or  more  Registration  Statements  filed  pursuant  to  the        Registration Rights Agreement shall be effective and the prospectus contained therein shall        be available on such applicable date of determination (with, for the avoidance of doubt,        any  shares  of  Common  Stock  previously  sold  pursuant  to  such  prospectus  deemed        unavailable) for the resale of all shares of Common Stock to be issued in connection with        the  event  requiring  this  determination  (or  issuable  upon  conversion  of  the  Conversion        Amount  being  redeemed or  amount  of  Restricted  Principal subject to  an Investor        Prepayment (and  related  Restricted  OID), as  applicable,  in  the  event  requiring  this        determination  at  the  Alternate  Conversion Price  then  in  effect (without  regard  to  any        limitations  on  conversion  set  forth  herein)) (each,  a “Required  Minimum Securities        Amount”),  in  each  case,  in  accordance  with  the  terms  of  the  Registration  Rights        Agreement and there shall not have been during such period any Grace Periods (as defined        in the Registration Rights Agreement) or (y) all Registrable Securities shall be eligible for        sale pursuant to Rule 144 (as defined in the Securities Purchase Agreement) without the        need for registration under any applicable federal or state securities laws (in each case,        disregarding any limitation on conversion of the Notes, other issuance of securities with        respect to the Notes and exercise of the Warrants) and no Current Information Failure (as        defined in the Registration Rights Agreement) exists or is continuing; (ii) the Common        Stock  (including  all Registrable Securities)  is  listed  or  designated  for  quotation  (as        applicable) on an Eligible Market and shall not have been suspended from trading on an        Eligible Market (other than suspensions of not more than two (2) days and occurring prior        to the applicable date of determination due to business announcements by the Company)        nor  shall  delisting  or  suspension  by  an  Eligible  Market  have  been  threatened  (with  a        reasonable  prospect  of  delisting  occurring  after  giving  effect  to  all  applicable  notice,        appeal, compliance and hearing periods); (iii) the Company shall have delivered all shares        of Common Stock issuable upon conversion of this Note on a timely basis as set forth in        Section 3 hereof  and  all  other  shares  of  capital  stock  required  to  be  delivered  by  the        Company on a timely basis as set forth in the other Transaction Documents; (iv) any shares        of Common Stock to be issued in connection with the event requiring determination (or        issuable upon conversion of the Conversion Amount being redeemed in the event requiring        this determination) may be issued in full without violating Section 3(d) hereof; (v) any        shares of Common Stock to be issued in connection with the event requiring determination        (or issuable upon conversion of the Conversion Amount  being  redeemed or amount of        Restricted Principal subject to an Investor Prepayment (and related Restricted OID), as        applicable, in the event requiring this determination at the Alternate Conversion Price then        in effect (without regard to any limitations on conversion set forth herein)) may be issued                                        50  Error! Unknown document property name. 

 

         in  full  without  violating  the  rules  or  regulations  of  the  Eligible  Market  on  which  the        Common Stock is then listed or designated for quotation (as applicable); (vi) no public        announcement of a pending,  proposed or intended Fundamental  Transaction shall have        occurred which has not been abandoned, terminated or consummated; (vii) the Company        shall have no knowledge of any fact that would reasonably be expected to cause (1) any        Registration Statement required to be filed pursuant to the Registration Rights Agreement        to not be effective or the prospectus contained therein to not be available for the resale of        the  applicable  Required  Minimum  Securities  Amount  of  Registrable  Securities  in        accordance with the terms of the Registration Rights Agreement or (2) any Registrable        Securities to not be eligible for sale pursuant to Rule 144 without the need for registration        under  any  applicable  federal  or  state  securities  laws  (in  each  case,  disregarding  any        limitation on conversion of the Notes, other issuance of securities with respect to the Notes        and exercise of the Warrants) and no Current Information Failure exists or is continuing;        (viii) the Holder shall not be in (and no other holder of Notes shall be in) possession of any        material,  non-public  information  provided  to  any  of  them  by  the  Company,  any  of  its        Subsidiaries  or  any  of  their  respective  affiliates,  employees,  officers,  representatives,        agents or the like; (ix) the Company otherwise shall have been in compliance with each,        and shall not have breached any representation or warranty in any material respect (other        than representations or warranties subject to material adverse effect or materiality, which        may not be breached in any respect) or any covenant or other term or condition of any        Transaction Document, including, without limitation, the Company shall not have failed to        timely make any payment pursuant to any Transaction Document; (x) there shall not have        occurred any Volume Failure or Price Failure as of such applicable date of determination;        (xi) on the applicable date of determination (A) no Authorized Share Failure shall exist or        be  continuing  and  the applicable Required Minimum  Securities Amount  of  shares  of        Common Stock are available under the certificate of incorporation of the Company and        reserved by the Company to be issued pursuant to the Notes and (B) all shares of Common        Stock to be issued in connection with the event requiring this determination (or issuable        upon  conversion  of  the Conversion Amount  being  redeemed or  amount  of  Restricted        Principal subject to an Investor Prepayment (and related Restricted OID), as applicable, in        the  event  requiring  this  determination at  the Alternate Conversion  Price  then  in  effect        (without regard to any limitations on conversion set forth herein)) may be issued in full        without resulting in an Authorized Share Failure; (xii) there shall not have occurred and        there shall not exist an Event of Default or an event that with the passage of time or giving        of notice would constitute an Event of Default; (xiii) no bone fide dispute shall exist, by        and between any of holder of Notes or Warrants, the Company, the Principal Market (or        such applicable  Eligible  Market  in  which  the  Common  Stock  of  the  Company  is then        principally trading) and/or FINRA with respect to any term or provision of any Note or any        other Transaction Document (xiv) as of such time of determination, a custodian or prime        broker designated by the Holder at its sole discretion is available to receive such shares of        Common Stock with DTC through its Deposit/Withdrawal at Custodian system and take        custody of such shares of Common Stock, (xv) the Stockholder Approval Date (as defined        in the Securities Purchase Agreement) shall have occurred and (xvi) the shares of Common        Stock issuable pursuant the event requiring the satisfaction of the Equity Conditions (or        issuable  upon  conversion  of  the  Conversion  Amount  being  redeemed or  amount  of        Restricted Principal subject to an Investor Prepayment (and related Restricted OID), as                                         51  Error! Unknown document property name. 

 

         applicable, in the event requiring this determination at the Alternate Conversion Price then        in  effect  (without  regard  to  any  limitations  on  conversion  set  forth  herein)) are  duly        authorized and listed and eligible for trading without restriction on an Eligible Market.               (f)   “Equity  Conditions  Failure” means that on  any  day  during  the  period        commencing twenty (20) Trading Days prior to the applicable date of determination, the        Equity Conditions have not been satisfied (or waived in writing by the Holder).               (g)   “Fiscal  Quarter” means  each  of  the  fiscal  quarters  adopted  by  the        Company for financial reporting purposes that correspond to the Company’s fiscal year as        of the date hereof that ends on December 31.               (h)   “Fiscal Year” means the fiscal year adopted by the Company for financial        reporting purposes as of the date hereof that ends on December 31.               (i)   “Floor Price” means $0.26.               (j)   “Fundamental Transaction” means (A) that the Company shall, directly        or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related        transactions,  (i) consolidate or merge with  or into (whether or not  the Company is  the        surviving  corporation)  another  Subject  Entity,  or  (ii)  sell,  assign,  transfer,  convey  or        otherwise dispose of all or substantially all of the properties or assets of the Company or        any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or        more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow        the Company to be subject to or have its Common Stock be subject to or party to one or        more Subject Entities making, a purchase, tender or exchange offer that is accepted by the        holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of        the outstanding shares of Common Stock calculated as if any shares of Common Stock        held  by all Subject  Entities making or party to,  or Affiliated with any Subject  Entities        making or party to, such purchase, tender or exchange offer were not outstanding; or (z)        such number of shares of Common Stock such that all Subject Entities making or party to,        or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange        offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934        Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a        stock  or  share  purchase  agreement or  other  business  combination  (including,  without        limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one        or more Subject Entities whereby all such Subject Entities, individually or in the aggregate,        acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least        50% of the outstanding shares of Common Stock calculated as if any shares of Common        Stock held by all the Subject Entities making or party to, or Affiliated with any Subject        Entity making or party to, such stock purchase agreement or other business combination        were not outstanding; or (z) such number of shares of Common Stock such that the Subject        Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the        1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize,        recapitalize  or  reclassify  its  Common  Stock,  (B) that  the  Company shall,  directly or        indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related        transactions, allow any Subject Entity individually or the Subject Entities in the aggregate                                        52  Error! Unknown document property name. 

 

         to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act),        directly  or  indirectly,  whether  through  acquisition,  purchase,  assignment,  conveyance,        tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger,        consolidation, business combination, reorganization, recapitalization, spin-off, scheme of        arrangement, reorganization, recapitalization or reclassification or otherwise in any manner        whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented        by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting        power represented by issued and outstanding Common Stock not held by all such Subject        Entities as of the date of this Note calculated as if any shares of Common Stock held by all        such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary        voting power represented by issued and outstanding  shares  of Common Stock or other        equity  securities  of  the  Company  sufficient  to  allow  such  Subject  Entities  to  effect  a        statutory  short  form  merger  or  other  transaction  requiring  other stockholders of  the        Company to surrender their shares of Common Stock without approval of the stockholders        of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or        otherwise, in one or more related transactions, the issuance of or the entering into any other        instrument or transaction structured in a manner to circumvent, or that circumvents, the        intent of this definition in which case this definition shall be construed and implemented        in a manner otherwise than in strict conformity with the terms of this definition to the extent        necessary to correct this definition or any portion of this definition which may be defective        or inconsistent with the intended treatment of such instrument or transaction.               (k)    “GAAP” means United States generally accepted accounting principles,        consistently applied.               (l)   “Group” means a “group” as that term is used in Section 13(d) of the 1934        Act and as defined in Rule 13d-5 thereunder.               (m)    “Holder Pro Rata Amount” means a fraction (i) the numerator of which        is the original Principal amount of this Note on the Closing Date and (ii) the denominator        of  which  is  the  aggregate  original  principal  amount  of  all  Notes  issued  to  the  initial        purchasers pursuant to the Securities Purchase Agreement on the Closing Date.               (n)  “Indebtedness” shall  have  the  meaning  ascribed  to  such  term  in  the        Securities Purchase Agreement.               (o)    “Installment  Amount” means  the  sum  of  (A)  (i)  with  respect  to  any        Installment  Date  other  than  the  Maturity  Date,  the  lesser  of  (x) the  quotient  of  (I)  the        Unrestricted Principal outstanding under this Note as of the Issuance Date, divided by (II)        the aggregate number of Installment Dates remaining hereunder (as determined as of such        date of determination assuming no Deferrals, Accelerations, redemptions or conversions        hereunder at any time thereafter and prior to the Maturity Date) (the “Base Installment        Amount”);  provided,  that  upon  each  Installment Prepayment,  such  Base  Installment        Amount shall increase by the quotient of (A) the Restricted Principal and related Restricted        OID that becomes Unrestricted Principal in connection with such applicable Installment        Prepayment, divided by (B) the aggregate number of Installment Dates then remaining        hereunder  (as  determined  as  of  such  date  of  determination  assuming  no  Deferrals,                                        53  Error! Unknown document property name. 

 

         Accelerations, redemptions or conversions hereunder at any time thereafter and prior to the        Maturity Date), and (y) the Principal amount then outstanding under this Note (other than        Restricted Principal and Restricted OID hereunder) as of such Installment Date, and (ii)        with respect to the Installment Date that is the Maturity Date, the Principal amount then        outstanding  under  this  Note as  of  such  Installment  Date  (in  each  case,  as  any  such        Installment  Amount  may  be  reduced  pursuant  to  the  terms  of  this  Note,  whether  upon        conversion, redemption or Deferral) and (B) any Deferral Amount deferred pursuant to        Section 8(b) and included in such Installment Amount in accordance therewith, and, in        each case, the sum of any accrued and unpaid Interest and the Make-Whole Amount related        thereto as of such Installment Date under this Note, if any, and accrued and unpaid Late        Charges, if any, under this Note as of such Installment Date.  In the event the Holder shall        sell or otherwise transfer any portion of this Note, the transferee shall be allocated a pro        rata portion of the each unpaid Installment Amount hereunder.               (p)    “Installment Date” means each of (i) the earlier to occur of (x) the last        Trading Day on the calendar month in which the initial Mandatory Prepayment (as defined        in the Investor Note) occurs and (y) July 31, 2020, (ii) thereafter, the last Trading Day of        the calendar month immediately following the previous Installment Date until the Maturity        Date, and (iv) the Maturity Date.               (q)   “Interest Date” means, with respect to any given calendar month, (x) if        prior to the initial Installment Date or after the Maturity Date, the last Trading Day of such        calendar month or (y) if on or after the initial  Installment Date, but on  or prior to  the        Maturity Date, such Installment Date, if any, in such calendar month.               (r)   “Interest Rate” means (I)  with  respect  to  Restricted  Principal  and        Restricted OID hereunder, 3% per annum and (II) with respect to Unrestricted Principal        (or  other  than  amounts outstanding  hereunder,  other  than  Restricted  Principal  and        Restricted OID), seven percent (7%) per annum, in each case as may be adjusted from time        to time in accordance with Section 2.               (s)   “Make-Whole Amount” means, as of any given date and as applicable, in        connection with any redemption or other repayment hereunder, an amount equal to the        amount  of  additional  Interest  that  would  accrue  under  this  Note  at  the  Interest  Rate        assuming for calculation purposes that the Principal of this Note as of the Closing Date        remained outstanding through and including the Maturity Date.               (t)   “Investor Note” means that certain promissory note of the Holder issued to        the  Company  at  the  Closing  Date,  pursuant  to  the Note Purchase  Agreement,  with  an        aggregate  principal  amount  outstanding  equal  to  the  Restricted  Principal  outstanding        hereunder and secured by a cash amount set forth in a bank account of the Holder (or its        affiliates) at least equal to the Restricted Principal outstanding hereunder.               (u)   “Investor Notes” means those certain promissory notes of the holders of        Series B Notes (including the Investor Note) issued to the Company at the Closing Date,        pursuant to the Note Purchase Agreement.                                         54  Error! Unknown document property name. 

 

               (v)   “Investor Prepayment” means any Prepayment (as defined in the Investor        Note) of the Investor Note.               (w)   “Market  Capitalization”  means,  as  of  any  date  of  determination,  the        product of (x) the shares of Common Stock outstanding as of such date of determination        and (y) the VWAP of the Common Stock on such date of determination.               (x)   “Market Capitalization Threshold Condition” means, as of any time of        determination,  the  quotient  of  (i)  the  Unrestricted  Note  Amount as  of  such  time  of        determination, divided by (ii) the quotient of (x) the sum of the Market Capitalization for        each Trading Day during the thirty (30) consecutive Trading Day period ending on, and        including, the Trading Day immediately prior to such time of determination, divided by (y)        thirty (30), exceeds ten percent (10%).                (y)    “Maturity Date” shall mean December 31, 2021 (except, with respect to        any  Restricted  Principal  hereunder  as  of  the  Issuance  Date  that  subsequently  becomes        Unrestricted Principal hereunder upon the occurrence of an Investor Prepayment (each, a        “Prepaid Amount”), but solely with respect to such Prepaid Amount and not any other        amount of Unrestricted Principal hereunder, the eighteen month anniversary of the date of        the applicable Investor  Prepayment  with respect  to  such  Prepaid  Amount);  provided,        however, the Maturity Date may be extended at the option of the Holder (i) in the event        that, and for so long as, an Event of Default shall have occurred and be continuing or any        event shall have occurred and be continuing that with the passage of time and the failure        to cure would result in an Event of Default or (ii) through the date that is twenty (20)        Business Days after the consummation of a Fundamental Transaction in the event that a        Fundamental Transaction is publicly announced or a Change of Control Notice is delivered        prior to the Maturity Date, provided further that if a Holder elects to convert some or all of        this  Note  pursuant  to  Section 3 hereof,  and  the Conversion Amount  would  be  limited        pursuant to Section 3(d) hereunder, the Maturity Date shall automatically be extended until        such time as such provision shall not limit the conversion of this Note.               (z)    “Options” means  any  rights,  warrants  or  options  to  subscribe  for  or        purchase shares of Common Stock or Convertible Securities.               (aa)  “Parent Entity” of a Person means an entity that, directly or indirectly,        controls the applicable Person and whose common stock or equivalent equity security is        quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent        Entity, the Person or Parent Entity with the largest public market capitalization as of the        date of consummation of the Fundamental Transaction.               (bb)  “Permitted  Additional  Indebtedness”  means up  to  $5  million  in  the        aggregate of additional Indebtedness.               (cc)  “Permitted Indebtedness” means (i) Indebtedness evidenced by this Note        and the Other Notes, (ii) Indebtedness set forth on Schedule 3(s) to the Securities Purchase        Agreement (other  than  the  PPP  Loan),  as  in  effect  as  of  the  Subscription  Date (the        “Permitted Existing  Indebtedness”),(iii)  Indebtedness  secured  by  Permitted  Liens  or                                         55  Error! Unknown document property name. 

 

         unsecured but as described in clauses (iv) and (v) of the definition of Permitted Liens, (iv)        if  prior  to  September  30,  2020,  the  PPP  Loan  and  (v) any Permitted  Additional        Indebtedness.               (dd)  “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent        or being contested in good faith by appropriate proceedings for which adequate reserves        have  been  established  in  accordance  with  GAAP,  (ii)  any  statutory  Lien  arising  in  the        ordinary course of business by operation of law with respect to a liability that is not yet due        or  delinquent,  (iii)  any  Lien  created  by  operation  of  law,  such  as  materialmen’s  liens,        mechanics’ liens and other similar liens, arising in the ordinary course of business with        respect to a liability that is not yet due or delinquent or that are being contested in good        faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held        by the Company or any of its Subsidiaries to secure the purchase price of such equipment        or Indebtedness incurred solely for the purpose of financing the acquisition or lease of such        equipment, or (B) existing on such equipment at the time of its acquisition, provided that        the Lien is confined solely to the property so acquired and improvements thereon, and the        proceeds of such equipment, in either case, with respect to Indebtedness in an aggregate        amount not to exceed $50,000, (v) Liens incurred in connection with the extension, renewal        or refinancing of the Indebtedness secured by Liens of the type described in clause (iv)        above, provided that any extension, renewal or replacement Lien shall be limited to the        property encumbered by the existing Lien and the principal amount of the Indebtedness        being extended, renewed or refinanced does not increase, (vi) Liens in favor of customs        and revenue authorities arising as a matter of law to secure payments of custom duties in        connection with the importation of goods, (vii) Liens arising from judgments, decrees or        attachments in circumstances not constituting an Event of Default under Section 4(a)(xiii),        (viii) Liens on Permitted Existing Indebtedness as set forth on Schedule 3(s) attached to        the Securities Purchase Agreement and (ix) Liens with respect to Permitted Additional        Indebtedness.               (ee)   “Person” means an individual, a limited liability company, a partnership,        a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a        government or any department or agency thereof.               (ff)   “PPP  Loan”  means  any  Indebtedness  of  the  Company  undertaken        pursuant  to  the  Paycheck  Protection  Program  under  the  Coronavirus  Aid,  Relief  and        Economic Security Act or any other similar government sponsored loan program, including        specifically, that certain Note in the principal amount of $2,850,336 made by the Company        in favor of JPMorgan Chase, N.A.               (gg)  “Price Failure” means, with respect to a particular date of determination,        the  VWAP  of  the  Common  Stock  on  any five  (5) Trading Days (whether  or  not        consecutive) during  the  twenty  (20)  Trading  Day  period  ending  on  the  Trading  Day        immediately preceding such date of determination fails to exceed $0.50 (as adjusted for        stock  splits,  stock  dividends,  stock  combinations,  recapitalizations  or  other  similar        transactions  occurring  after  the  Subscription  Date).   All  such  determinations  to  be        appropriately  adjusted  for  any  stock  splits,  stock  dividends,  stock  combinations,        recapitalizations or other similar transactions during any such measuring period.                                        56  Error! Unknown document property name. 

 

               (hh)  “Principal Market” means the Nasdaq Capital Market.               (ii)  “Redemption  Notices” means,  collectively,  the  Event  of  Default        Redemption Notices, the Installment Notices with respect to any Installment Redemption,        the  Acceleration  Notices, the  Company  Optional  Redemption  Notices,  the  Optional        Redemption  Notices and  the  Change  of  Control  Redemption  Notices,  and  each  of  the        foregoing, individually, a “Redemption Notice.”               (jj)  “Redemption  Date” means,  as  applicable, the Event  of  Default        Redemption Date, the Change of Control Redemption Date, the Acceleration Date, the        Optional Redemption Date or Company Optional Redemption Date.               (kk)  “Redemption Premium” means 115%.               (ll)  “Redemption Prices” means, collectively, Event of Default Redemption        Prices, the Change of Control Redemption Prices, the Acceleration Redemption Prices, the        Company  Optional  Redemption  Prices,  the  Optional  Redemption  Prices and  the        Installment Redemption Prices, and each of the foregoing, individually, a “Redemption        Price.”               (mm)  “Registration  Rights  Agreement” means that  certain  registration  rights        agreement, dated as of the Closing Date, by and among the Company and the initial holders        of the Notes relating to, among other things, the registration of the resale of the Common        Stock issuable upon conversion of the Notes or otherwise pursuant to the terms of the Notes        and exercise of the Warrants, as may be amended from time to time.               (nn)  “Restricted OID”  means  the  original  issue  discount  of $1,280,000        (approximately $0.07407 per each $1.00 of Restricted Principal hereunder) included in the        Principal hereunder as of the initial Issuance Date, subject to reduction as provided herein,        including, without limitation, pursuant to Investor Prepayments and/or Netting Events (as        defined in the Investor Note), as applicable.               (oo)  “Restricted Principal” means, initially $16,000,000, subject to reduction        as provided herein, including, without limitation, pursuant to Investor Prepayments and/or        Netting Events, as applicable.               (pp)   “SEC” means the United States Securities and Exchange Commission or        the successor thereto.               (qq)  “Securities Purchase Agreement” means that certain securities purchase        agreement, dated as of the Subscription Date, by and among the Company and the initial        holders of the Notes pursuant to which the Company issued the Notes, as may be amended        from time to time.               (rr)   “Series  A  Notes” shall have  the  meaning  as  set  forth  in  the  Securities        Purchase Agreement.               (ss)  “Series  B  Notes” shall  have  the  meaning  set  forth  as  set  forth  in  the                                        57  Error! Unknown document property name. 

 

         Securities Purchase Agreement.                (tt)  “Subscription Date” means July 14, 2020.               (uu)  “Subsidiaries” shall  have  the  meaning  as set  forth  in  the  Securities        Purchase Agreement.               (vv)  “Subject Entity” means any Person, Persons or Group or any Affiliate or        associate of any such Person, Persons or Group.               (ww)   “Successor Entity” means the Person (or, if so elected by the Holder, the        Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the        Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental        Transaction shall have been entered into.               (xx)  “Trading Day” means, as applicable, (x) with respect to all price or trading        volume determinations relating to the Common Stock, any day on which the Common        Stock is traded on the Principal Market, or, if the Principal Market is not the principal        trading  market  for  the  Common  Stock,  then  on  the  principal securities  exchange  or        securities market on which the Common Stock is then traded, provided that “Trading Day”        shall  not  include  any  day  on  which  the  Common  Stock  is  scheduled  to  trade  on  such        exchange or market for less than 4.5 hours or any day that the Common Stock is suspended        from  trading  during  the  final  hour  of  trading  on  such  exchange  or  market  (or  if  such        exchange or market  does  not  designate in  advance the closing time of trading  on such        exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless        such day is otherwise designated as a Trading Day in writing by the Holder or (y) with        respect to all determinations other than price determinations relating to the Common Stock,        any day on which The New York Stock Exchange (or any successor thereto) is open for        trading of securities.               (yy)  “Unrestricted Principal” means any Principal outstanding under this Note        that is not Restricted Principal or Restricted OID outstanding under this Note.               (zz)  “Unrestricted Note Amount” as of any time of determination, means the        sum of (i) the aggregate Unrestricted Principal (as defined in the Series B Notes) of the        Series B Notes, (ii) the aggregate principal amount of the Series A Notes, (iii) the aggregate        principal amount of the March Notes (as defined in the Securities Purchase Agreement), in        each case, as outstanding as of such time of determination and including any accrued and        unpaid interest, late charges and make-whole amounts, if any, thereon as of such time of        determination.               (aaa) “Volume Failure” means, with respect to a particular date of determination,        the  aggregate  daily  dollar  trading  volume  (as  reported  on  Bloomberg)  of  the  Common        Stock on the Principal Market of any two (2) Trading Days during the twenty (20) Trading        Day period ending on the Trading Day immediately preceding such date of determination        (such period, the “Volume Failure Measuring Period”), is less than $300,000 per such        Trading Day.                                         58  Error! Unknown document property name. 

 

               (bbb) “VWAP”  means,  for  any  security  as  of  any  date,  the  dollar  volume-       weighted  average  price  for  such  security  on  the  Principal  Market  (or,  if  the  Principal        Market is not the principal trading market for such security, then on the principal securities        exchange or securities market on which such security is then traded), during the period        beginning  at  9:30  a.m.,  New  York  time,  and  ending  at  4:00  p.m.,  New  York  time,  as        reported by Bloomberg through its “VAP” function (set to 09:30 start time and 16:00 end        time) or, if the foregoing does not apply, the dollar volume-weighted average price of such        security in the over-the-counter market on the electronic bulletin board for such security        during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New        York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is        reported for such security by Bloomberg for such hours, the average of the highest closing        bid price and the lowest closing ask price of any of the market makers for such security as        reported in the “pink sheets” by OTC Markets Group Inc.  (formerly Pink Sheets LLC).  If        the VWAP cannot be calculated for such security on such date on any of the foregoing        bases, the VWAP of such security on such date shall be the fair market value as mutually        determined by the Company and the Holder.  If the Company and the Holder are unable to        agree upon the fair market value of such security, then such dispute shall be resolved in        accordance  with  the  procedures  in  Section 25.  All  such  determinations  shall  be        appropriately  adjusted  for  any  stock  dividend,  stock  split,  stock  combination,        recapitalization or other similar transaction during such period.               (ccc) “Warrants” has  the  meaning  ascribed  to  such  term  in  the  Securities        Purchase  Agreement,  and  shall  include  all  warrants  issued  in  exchange  therefor  or        replacement thereof.         34.   DISCLOSURE.  Upon delivery by the Company to the Holder (or receipt by the  Company from the Holder) of any notice in accordance with the terms of this Note, unless the  Company has in good faith determined that the matters relating to such notice do not constitute  material, non-public information relating to the Company or any of its Subsidiaries, the Company  shall on or prior to 9:00 am, New York city time on the Business Day immediately following such  notice delivery date, publicly disclose such material, non-public information on a Current Report  on Form 8-K or otherwise.  In the event that the Company believes that a notice contains material,  non-public information relating to the Company or any of its Subsidiaries, the Company so shall  indicate to the Holder explicitly in writing in such notice (or immediately upon receipt of notice  from the Holder, as applicable), and in the absence of any such written indication in such notice  (or notification from the Company immediately upon receipt of notice from the Holder), the Holder  shall be entitled to presume that information contained in the notice does not constitute material,  non-public information relating to the Company or any of its Subsidiaries.  Nothing contained in  this Section 34 shall limit any obligations of the Company, or any rights of the Holder, under  Section 4(i) of the Securities Purchase Agreement.         35.   ABSENCE OF TRADING AND DISCLOSURE RESTRICTIONS.  The Company  acknowledges and agrees that the Holder is not a fiduciary or agent of the Company and that the  Holder shall have no obligation to (a) maintain the confidentiality of any information provided by  the Company or (b) refrain from trading any securities while in possession of such information in  the absence of a written non-disclosure agreement signed by an officer of the Holder that explicitly  provides for such confidentiality and trading restrictions.  In the absence of such an executed,                                        59  Error! Unknown document property name. 

 

   written non-disclosure agreement, the Company acknowledges that the Holder may freely trade in  any  securities  issued  by  the  Company,  may  possess and  use  any  information  provided  by  the  Company in connection with such trading activity, and may disclose any such information to any  third party.                                [signature page follows]                                          60  Error! Unknown document property name. 

 

           IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of  the Issuance Date set out above.                                              PHUNWARE, INC.                                                                                        By: ________________________________                                                Name:                                               Title:                               Senior Convertible Note - Signature Page  Error! Unknown document property name. 

 

                                     EXHIBIT I                                                                         PHUNWARE, INC.                              CONVERSION NOTICE        Reference is made to the Series B Senior Secured Convertible Note (the “Note”) issued to  the undersigned by Phunware, Inc., a Delaware corporation (the “Company”).  In accordance with  and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as  defined in the Note) of the Note indicated below into shares of Common Stock, $0.0001 par value  per share (the “Common Stock”), of the Company, as of the date specified below.  Capitalized  terms not defined herein shall have the meaning as set forth in the Note.         Date of                  Conversion:            Aggregate   Principal  to  be             converted:            Aggregate  accrued  and  unpaid            Interest,  Make-Whole  Amount and           accrued  and  unpaid  Late  Charges           with  respect  to  such portion of the           Aggregate  Principal  and  such           Aggregate  Interest and  Aggregate           Make-Whole    Amount   to  be           converted:         AGGREGATE CONVERSION                      AMOUNT         TO BE CONVERTED:   Please confirm the following information:         Conversion Price:                  Number  of  shares  of  Common         Stock to be issued (the “Shares”)::                                        Installment Amount(s) to be reduced (and  corresponding  Installment  Date(s))  and  amount of reduction:         Check here if all or any portion of the aggregate Principal being converted includes any  Restricted Principal and/or Restricted OID (which shall become Unrestricted Principal upon an  Investor Prepayment of $______________ in connection herewith):     Please specify the amount Restricted Principal being converted:__________________   Error! Unknown document property name. 

 

                                                                                   Please specify the amount Restricted OID being converted:__________________         If this Conversion Notice is being delivered with respect to an Alternate Conversion,  check here if Holder is electing to use the following Alternate Conversion Price:____________  for [the entire][$_____________ of the] Conversion Amount set forth above to be converted in  accordance herewith         If this Conversion Notice is being delivered as a result of the occurrence of a Permitted  Settlement  Transaction,  check  here  if  Holder  is  electing  to  use  the  following  PST  Issuance  Price:____________ for  [the  entire][$_____________  of  the]  Conversion  Amount  set  forth  above to be converted in accordance herewith   Please issue the Common Stock into which the Note is being converted to Holder, or for its  benefit, as follows:               Check here if requesting delivery as a certificate to the following name and to the              following address:         Issue to:                                                                                             Check here if requesting delivery by Deposit/Withdrawal at Custodian as              follows:          DTC Participant:          DTC Number:              Account                 Number:      Date: _____________ __,                                    Name of Registered Holder      Error! Unknown document property name. 

 

                                                                                  By:                             Name:      Title:           Tax ID:_____________________      Facsimile:___________________   E-mail Address:                      Error! Unknown document property name. 

 

                                     Exhibit II                               ACKNOWLEDGMENT         The Company hereby (a) acknowledges this Conversion Notice, (b) certifies that the above  indicated number of shares of Common Stock [are][are not] eligible to be resold by the Holder  either (i) pursuant to Rule 144 (subject to the Holder’s execution and delivery to the Company of  a customary 144 representation letter) or (ii) an effective and available registration statement and  (c) hereby directs _________________ to issue the above indicated number of shares of Common  Stock in accordance with the Transfer Agent Instructions dated _____________, 20__ from the  Company and acknowledged and agreed to by ________________________.                                              PHUNWARE, INC.                                            By: ________________________________                                                Name:                                               Title:         Error! Unknown document property name.

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