FORTH ON SCHEDULE 1 ATTACHED
HERETO, AND EACH SUCH NOTEHOLDER SEVERALLY AGREES THAT IT WILL TENDER TO THE
COMPANY, ON THE CLOSING DATE, FOR CANCELLATION AND RETIREMENT NOTES IN THE
AGGREGATE PRINCIPAL AMOUNT SET FORTH OPPOSITE SUCH NOTEHOLDER'S NAME ON
SCHEDULE 1 ATTACHED HERETO, IN EXCHANGE FOR (I) PAYMENT IN CASH OF THE SUM OF
(A) 100% OF THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF SUCH NOTES BEING
PREPAID AND (B) ANY ACCRUED AND UNPAID INTEREST ON SUCH PREPAID PRINCIPAL AMOUNT
THROUGH AND UNTIL THE CLOSING DATE, AND (II) WARRANTS TO PURCHASE A NUMBER OF
SHARES OF COMMON STOCK EQUAL TO (X) THE AGGREGATE PRINCIPAL AMOUNT OF SUCH NOTES
BEING PREPAID, MULTIPLIED BY (Y) 0.2056033, SUCH WARRANTS TO HAVE AN INITIAL
EXERCISE PRICE OF $1.85 (SUBJECT TO ADJUSTMENT AS PROVIDED IN THE WARRANT
AGREEMENT); PROVIDED, HOWEVER, (I) IN THE EVENT THAT THE CONVERSION PRICE PER
SHARE OF ANY CONVERTIBLE NOTES ISSUED IN CONNECTION WITH THE NEW EXCHANGE OR A
NEW FINANCING IS LOWER THAN $1.85, THE INITIAL EXERCISE PRICE FOR SUCH WARRANTS
SHALL INSTEAD BE EQUAL TO SUCH LOWER CONVERSION PRICE, AND (II) IN THE EVENT
THAT ANY CONVERTIBLE NOTES ISSUED IN CONNECTION WITH THE NEW FINANCING OR NEW
EXCHANGE ARE CONVERTIBLE FOR ANY PROPERTY OTHER THAN SHARES OF COMMON STOCK OR
FOR ANY PROPERTY IN ADDITION TO SHARES OF
4
COMMON STOCK, AT THE ELECTION OF THE MAJORITY NOTEHOLDERS, THE WARRANTS SHALL BE
EXERCISABLE FOR SUCH OTHER OR ADDITIONAL PROPERTY IN ADDITION TO ANY SHARES OF
COMMON STOCK INTO WHICH SUCH NOTES ARE CONVERTIBLE AND THE INITIAL EXERCISE
PRICE OF THE WARRANTS SHALL BE EQUAL TO THE CONVERSION PRICE OF SUCH NOTES.
WITHOUT LIMITING THE FOREGING, IN THE EVENT THAT AS PART OF A NEW FINANCING THE
COMPANY RAISES MORE THAN $10,000,000 FROM THE ISSUANCE OF SHARES OF COMMON STOCK
OR SHARES OF PREFERRED STOCK CONVERTIBLE INTO SHARES OF COMMON STOCK
OR ISSUES
IN A NEW FINANCING ANY SUCH SHARES OF CAPITAL STOCK AT A PURCHASE PRICE OF LESS
THAN $1.40 PER SHARE OF COMMON STOCK (ASSUMING THE CONVERSION OF ANY SHARES OF
PREFERRED STOCK INTO SHARES OF COMMON STOCK AND TAKING INTO ACCOUNT IN
DETERMINING THE PURCHASE PRICE OF SUCH SHARES OF COMMON STOCK, THE VALUE OF ANY
ADDITIONAL PROPERTY ISSUED OR DELIVERED TOGETHER THEREWITH AS PART OF A UNIT),
THE INITIAL EXERCISE PRICE OF SUCH WARRANTS SHALL BE EQUAL TO THE EXERCISE PRICE
THAT SUCH WARRANTS WOULD HAVE HAD IN THE EVENT THAT SUCH WARRANTS WERE ISSUED
IMMEDIATELY PRIOR TO THE ISSUANCE OF SUCH SHARES IN THE NEW FINANCING AT AN
INITIAL EXERCISE PRICE OF $1.85, AND SUCH EXERCISE PRICE WERE IMMEDIATELY
ADJUSTED PURSUANT TO THE TERMS OF SECTION 7.4 OF THE WARRANT AGREEMENT, ASSUMING
FOR PURPOSES OF THIS SINGLE ADJUSTMENT ONLY, THAT THE FAIR MARKET VALUE (AS
DEFINED IN THE WARRANT AGREEMENT) OF A SHARE OF COMMON STOCK IS $1.85.
2.2.
ISSUANCE OF WARRANTS UPON FAILURE TO
REPURCHASE NOTES.
IN THE EVENT THAT THE NEW EXCHANGE IS CONSUMMATED AND THE
COMPANY DOES NOT REPURCHASE ALL OF