Common use of Principal Amortization Clause in Contracts

Principal Amortization. The Borrower shall reduce the principal amount of the note by 12.5% per quarter starting December 31, 2005, payable in cash and/or, subject to the conditions in this Section 1.4, Common Stock as described below. (a) If any portion of such principal amortization payment is made in cash, the payment will be at 102% of the principal amortization amount. (b) If any portion of such principal amortization and accrued interest payment is in Common Stock, such principal amortization and accrued interest amount will be converted into that number of shares of Common Stock as determined by dividing such principal amortization and accrued interest amount by an amount equal to 87.5% of the volume weighted average price of the Common Stock as reported by Bloomberg over the five (5) trading days prior to, but not including, the date the principal amortization payment is due. (c) The maximum amount of Common Stock the Company may issue to satisfy any quarterly principal amortization and accrued interest payment shall equal 10% of the total dollar volume of the Common Stock over the ten (10) trading days prior to, but not including, the date the principal amortization payment is due. (d) The Borrower may only elect to pay in Common Stock only if the following conditions are met: (i) the number of authorized but unissued shares of Common Stock is sufficient for such issuance; (ii) the Common Stock is listed or quoted (and is not suspended from trading) on a trading market and such shares of Common Stock are approved for listing on such trading market upon issuance; (iii) such Common Stock is registered for resale under the Registration Statement and the prospectus under such Registration Statement is available for the sale of all Registrable Securities held by the Holder; (iv) such issuance would be permitted in full without violating Section 2.3 herein or the rules or regulations of any trading market on which such Common Stock may be listed or quoted; (v) both immediately before and after giving effect thereto, no default under the Subscription Agreement or this Note shall or would exist; and (vi) the Borrower shall have provided the Holder with written notice of its election to pay all or a portion of such principal amortization and accrued payment (and the amount thereof) in Common Stock not less than seven (7) trading days before the date the principal amortization payment is due. In such event, the Company covenants and agrees that it will honor all Conversion Notices tendered by the Holder until 6:30 p.m. on the sixth (6) day following delivery of such notice by the Company. If the Company does not provide such notice in a timely manner, it shall be considered an election by the Company to pay any such applicable amounts in cash. (e) If the Holder or the Borrower converts any outstanding and unpaid principal portion of this Note into stock prior to any quarterly amortization payment, those conversions will be credited toward the next quarterly principal amortization payment due. Any conversions above the quarterly principal amortization payment due amount will be credited towards future required payments.