Riverdawg,
I'm assuming that has to do with the lenders' option to accept shares in lieu of payments for the loan defaults.
ARTICLE IIA
CONVERSION; ANTIDILUTION; PREPAYMENT
Section 2A.1 Conversion Option. At any time and from time to time on or after the Amendment Date, the Conversion Amount shall be convertible (in whole or in part, subject to the limitations set forth herein), at the option of the Holder (the “Conversion Option”), into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (x) that portion of the Conversion Amount that the Holder elects to convert by (y) the Conversion Price (as defined in Section 2A.2 hereof) then in effect on the date on which the Holder faxes a notice of conversion (the “Conversion Notice”), duly executed, to the Maker (facsimile number: (530) 677-7626, Attn.: Chief Financial Officer) (the “Conversion Date”), provided, however, that the Conversion Price shall be subject to adjustment as described below. With respect to partial conversions of this Note, the Maker shall keep written records of the amount of this Note converted as of each Conversion Date.
Notwithstanding anything to the contrary contained herein, (i) not more than $800,000 of principal and/or accrued and unpaid interest on this Note shall be convertible pursuant to a conversion under this Section 2A.1 without the Maker’s express written consent (the “Conversion Amount”), (ii) until April 30, 2009, conversions by the Holder hereunder shall be deemed to be conversions of accrued and unpaid interest under this Note, as the same exists and to the extent counsel for the Maker delivers an opinion satisfactory to the Holder as to the free transferability of such conversion shares pursuant to Rule 144; thereafter, any conversion shall be deemed to be a conversion of the principal amount hereunder; and (iii) if no default or Event of Default exists hereunder or under any other indebtedness of the Maker to the Holder, upon the Maker’s written notice to the Holder, the Maker may suspend the convertibility of this Note for so long as no such default or Event of Default exists (provided, that, (i) the Maker shall be obligated to honor all conversion notices delivered prior to such notice from the Maker and (ii) if a default or an Event of Default after such suspension occurs, such suspension shall end and this Note shall thereafter be convertible as set forth herein).
Section 2A.2 Conversion Price. The term “Conversion Price” shall mean $0.145, subject to adjustment under Section 2A.5 hereof.
Section 2A.3 Mechanics of Conversion.
