SECURITIES ACT WITHIN THE LIMITATION OF THE
EXEMPTIONS PROVIDED BY RULE 144.
4.3.
ACKNOWLEDGMENT OF DILUTION.
THE BORROWER
ACKNOWLEDGES THAT THE ISSUANCE OF THE SECURITIES (INCLUDING THE UNDERLYING
SHARES) WILL RESULT IN DILUTION OF THE OUTSTANDING SHARES OF COMMON STOCK, WHICH
DILUTION MAY BE SUBSTANTIAL. THE BORROWER FURTHER ACKNOWLEDGES THAT ITS
OBLIGATIONS UNDER THE TRANSACTION DOCUMENTS, INCLUDING WITHOUT LIMITATION ITS
OBLIGATION TO ISSUE THE SECURITIES (INCLUDING THE UNDERLYING SHARES) PURSUANT TO
THE TRANSACTION DOCUMENTS, ARE UNCONDITIONAL AND ABSOLUTE AND NOT SUBJECT TO ANY
RIGHT OF SET OFF, COUNTERCLAIM, DELAY OR REDUCTION, REGARDLESS OF THE EFFECT OF
ANY SUCH DILUTION OR ANY CLAIM THAT THE BORROWER MAY HAVE AGAINST THE LENDER.
4.4.
RESERVATION OF SHARES.
THE BORROWER SHALL
MAINTAIN A RESERVE FROM ITS DULY AUTHORIZED SHARES OF COMMON STOCK TO COMPLY
WITH ITS CONVERSION AND EXERCISE OBLIGATIONS UNDER THE DEBENTURES AND WARRANT
PURSUANT TO THE TRANSACTION DOCUMENTS.
IF ON ANY DATE THE BORROWER WOULD BE, IF
NOTICE OF EXERCISE OR CONVERSION WERE TO BE DELIVERED ON SUCH DATE, PRECLUDED
FROM ISSUING THE NUMBER OF UNDERLYING SHARES, AS THE CASE MAY BE, ISSUABLE UPON
EXERCISE IN FULL OF ALL OF THE WARRANT AND ISSUABLE UPON CONVERSION IN FULL OF
THE DEBENTURES DUE
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TO THE UNAVAILABILITY OF A SUFFICIENT NUMBER OF AUTHORIZED BUT UNISSUED OR
RESERVED SHARES OF COMMON STOCK, THEN UPON LENDER'S REQUEST THE BOARD OF
DIRECTORS OF THE BORROWER SHALL PROMPTLY PREPARE AND MAIL TO THE STOCKHOLDERS OF
THE BORROWER PROXY MATERIALS OR OTHER APPLICABLE MATERIALS REQUESTING
AUTHORIZATION TO AMEND THE BORROWER'S CERTIFICATE OF INCORPORATION OR OTHER
ORGANIZATIONAL DOCUMENT TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK WHICH
THE BORROWER IS AUTHORIZED TO ISSUE SO AS TO PROVIDE ENOUGH SHARES FOR ISSUANCE
OF THE UNDERLYING SHARES.
IN CONNECTION THEREWITH, THE BOARD OF DIRECTORS SHALL
(A) ADOPT PROPER RESOLUTIONS AUTHORIZING SUCH INCREASE, (B) RECOMMEND TO AND
OTHERWISE USE ITS BEST EFFORTS TO PROMPTLY AND DULY OBTAIN STOCKHOLDER APPROVAL
TO CARRY OUT SUCH RESOLUTIONS AND (C) FILE AN APPROPRIATE AMENDMENT TO THE
BORROWER'S CERTIFICATE OF INCORPORATION OR OTHER ORGANIZATIONAL DOCUMENT TO
EVIDENCE SUCH INCREASE.
4.5.
CONVERSION AND EXERCISE PROCEDURES.
THE
FORM OF EXERCISE NOTICE INCLUDED IN THE WARRANT AND THE FORM OF CONVERSION
NOTICE INCLUDED IN THE DEBENTURES SET FORTH THE TOTALITY OF THE PROCEDURES
REQUIRED BY THE LENDER IN ORDER TO EXERCISE THE WARRANT OR CONVERT THE
DEBENTURES. NO ADDITIONAL LEGAL OPINION OR OTHER INFORMATION OR INSTRUCTIONS
SHALL BE NECESSARY TO ENABLE THE LENDER TO EXERCISE ITS WARRANT OR CONVERT THEIR
DEBENTURE. THE BORROWER SHALL HONOR EXERCISE OF THE WARRANT AND CONVERSION OF
THE DEBENTURE AND SHALL DELIVER UNDERLYING SHARES IN ACCORDANCE WITH THE TERMS,
CONDITIONS AND TIME PERIODS SET FORTH IN THE TRANSACTION DOCUMENTS.
4.6.
INDEMNIFICATION OF LENDER.
IN ADDITION TO THE
INDEMNITY PROVIDED IN THE REGISTRATION RIGHTS AGREEMENT, THE BORROWER WILL
INDEMNIFY AND HOLD THE LENDER HARMLESS FROM ANY AND ALL LOSSES, LIABILITIES,
OBLIGATIONS, CLAIMS, CONTINGENCIES, DAMAGES, COSTS AND EXPENSES, INCLUDING ALL
JUDGMENTS, AMOUNTS PAID IN SETTLEMENTS, COURT COSTS AND REASONABLE ATTORNEYS'
FEES AND COSTS OF INVESTIGATION