FINANCING BASED CONVERSION PRICE. Means the lowest cash purchase price paid for Securities in a Financing. For purposes of computing the lowest cash purchase price paid for Securities in a Financing (other than a Variable Rate Transaction), (a) if the Financing consists of (i) shares of common stock, (ii) securities that are convertible into shares of common stock "Convertible Securities"), (iii) securities exchangeable for shares of common stock ("Exchange
... Securities") or (iv) securities exercisable for shares of common stock ("Warrant Securities"), then, except as otherwise provided below, the Financing Based Conversion Price shall be the lowest of the purchase price for the common stock, the conversion price of the Convertible Securities, the exchange price of the Exchange Securities or the exercise price of the Warrant Securities; -2- (b) if the Financing consists of (i) Warrant Securities and/or (ii) Convertible Securities, Exchange Securities or shares of common stock, then no portion of the gross proceeds in such Financing shall be allocated to the Warrant Securities and the purchase price for the Warrant Securities shall be the exercise price thereof; For example if the Company receives $100 of gross proceeds and issues a unit consisting of (i) Warrant Securities to exercisable for 100 shares of common stock with a conversion price of $1.00 per share and (ii) 100 shares of common stock, then the Financing Based Conversion Price would be equal to $.50. (c) if the Financing consists of (i) Convertible Securities or Exchange Securities and (ii) shares of common stock, then for purposes of determining the Financing Based Conversion Price, the proceeds of the Financing shall be allocated to the Convertible Securities and Exchange Securities and the conversion price and the exchange price shall be appropriately adjusted downward to reflect the issuance of the shares of common stock in the Financing and no portion of the proceeds from the Financing shall be allocable to the shares of common stock. For example if the Company receives $100 of gross proceeds and issues a unit consisting of (i) $100 of Convertible Securities with a conversion price of $1.00 per share and (ii) 100 shares of common stock, then the Financing Based Conversion Price would be equal to $.50.
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