RESPECT TO ALL THE HOLDERS BEING $77,554.73.
4.
SECURITY INTEREST.
THE BORROWER AND
HOLDERS HEREBY RECOGNIZE AND REAFFIRM THE RIGHTS AND OBLIGATIONS OF THE PARTIES
WITH RESPECT TO THE NOTES PURSUANT TO SECTION 3 OF THE SUBSCRIPTION AGREEMENT,
THE SECURITY AGREEMENT BETWEEN BORROWER AND HOLDERS DATED NOVEMBER 28, 2005 (THE
"SECURITY AGREEMENT"), AND THE AMENDED AND RESTATED COLLATERAL AGENT AGREEMENT
BETWEEN HOLDERS AND THE COLLATERAL AGENT SPECIFIED THEREIN AND ACKNOWLEDGED BY
BORROWER DATED DECEMBER 5, 2006 (THE "COLLATERAL AGENT AGREEMENT").
5.
CONVERSION PRICE REDUCTION.
(A)
THE CONVERSION PRICE OF THE NOTES IS HEREBY
REDUCED TO $0.80.
THE FIRST SENTENCE OF SECTION 2.1(B) OF THE NOTES IS HEREBY
AMENDED AND RESTATED IN ITS ENTIRETY AS FOLLOWS:
2
"SUBJECT TO ADJUSTMENTS AS PROVIDED IN THIS SECTION 2.1(B) AND
SECTION 2.1(C) HEREOF, THE CONVERSION PRICE PER SHARE SHALL BE $0.80."
(B)
THE ACCEPTANCE BY A HOLDER OF SHARES OF COMMON STOCK OF BORROWER
AS PAYMENT FOR INTEREST UNDER SECTION 1.1 OF THE NOTES, AS AMENDED BY THIS
AMENDMENT, SHALL BE INCLUDED IN THE DEFINITION OF "EXCEPTED ISSUANCES" UNDER
SECTION 12(A) OF THE SUBSCRIPTION AGREEMENT.
THE FIRST SENTENCE OF
SECTION 12(A) OF THE SUBSCRIPTION AGREEMENT IS HEREBY AMENDED BY THE ADDITION OF
THE WORDS ", AND (VII) THE ACCEPTANCE BY A SUBSCRIBER OF SHARES OF COMMON STOCK
OF THE COMPANY AS PAYMENT FOR INTEREST UNDER SECTION 1.1 OF THE NOTES"
IMMEDIATELY BEFORE THE WORDS "(COLLECTIVELY THE FOREGOING ARE "EXCEPTED
ISSUANCES")."
6.
NO PREPAYMENT PREMIUM.
THE WORDS "ONE
HUNDRED AND TWENTY PERCENT (120%)" IN SECTION 2.5 OF THE NOTES ARE HEREBY
DELETED AND REPLACED WITH THE WORDS "ONE HUNDRED PERCENT (100%)".
7.
AVAILABILITY OF RULE 144.
IN THE EVENT
AT ANY TIME AFTER THE DATE OF THIS AMENDMENT, HOLDERS ARE NOT PERMITTED TO
IMMEDIATELY RESELL (I) ANY OF THE COMMON STOCK ISSUABLE UPON CONVERSION OF NOTE
PRINCIPAL OR INTEREST OR (II) ANY COMMON STOCK ISSUABLE UPON EXERCISE OF THE
EXISTING WARRANTS THAT WAS PURCHASED FOR CASH AT LEAST SIX MONTHS BEFORE THE
PROPOSED DATE OF SALE OR PURSUANT TO CASHLESS EXERCISE, WITHOUT ANY RESTRICTIVE
LEGEND OR IF SUCH SALES ARE PERMITTED BUT SUBJECT TO VOLUME LIMITATIONS OR
FURTHER RESTRICTIONS ON RESALE AS A RESULT OF THE UNAVAILABILITY TO HOLDER OF
RULE 144(B)(1)(I) UNDER THE SECURITIES ACT OF 1933 OR ANY SUCCESSOR RULE (A "144
DEFAULT"), FOR ANY REASON EXCEPT FOR HOLDER'S STATUS AS AN AFFILIATE OR "CONTROL
PERSON" OF THE BORROWER OR CHANGE IN CURRENT APPLICABLE SECURITIES LAWS, THEN
THE BORROWER SHALL PAY SUCH HOLDER AS LIQUIDATED DAMAGES AND NOT AS A PENALTY AN
AMOUNT EQUAL TO TWO PERCENT (2%) FOR EACH THIRTY (30) DAYS (OR SUCH LESSER
PRO-RATA AMOUNT FOR ANY PERIOD LESS THAN THIRTY (30) DAYS) THEREAFTER OF THE
PURCHASE PRICE OF SUCH COMMON STOCK OWNED BY THE HOLDER DURING THE PENDENCY OF
THE 144 DEFAULT.
8.
MANDATORY REDEMPTION OF NOTES.
THE
COMPANY HEREBY AGREES TO USE CERTAIN EXPECTED REVENUES FOR THE CASH REDEMPTION
OF THE NOTES AND DEBENTURES (AS DEFINED IN SECTION 16 BELOW) AS FOLLOWS;
PROVIDED, THAT SUCH REVENUES SHALL