IS REQUIRED TO BE EFFECTIVE, OR THE HOLDERS
ARE OTHERWISE NOT PERMITTED TO UTILIZE THE PROSPECTUS THEREIN TO RESELL SUCH
REGISTRABLE SECURITIES FOR MORE THAN 30 CONSECUTIVE CALENDAR DAYS OR MORE THAN
AN AGGREGATE OF 40 CALENDAR DAYS DURING ANY 12-MONTH PERIOD (WHICH NEED NOT BE
CONSECUTIVE CALENDAR DAYS) (ANY SUCH FAILURE OR BREACH BEING REFERRED TO AS AN
"EVENT"), THEN IN ADDITION TO ANY OTHER RIGHTS THE HOLDERS OF THE CONVERTIBLE
DEBENTURES MAY HAVE HEREUNDER OR UNDER
3
APPLICABLE LAW, ON EACH SUCH EVENT DATE AND ON EACH MONTHLY ANNIVERSARY OF EACH
SUCH EVENT DATE (IF THE APPLICABLE EVENT SHALL NOT HAVE BEEN CURED BY SUCH DATE)
UNTIL THE APPLICABLE EVENT IS CURED, THE COMPANY SHALL PAY TO EACH HOLDER OF
CONVERTIBLE DEBENTURES, AT THE COMPANY'S OPTION, EITHER AN AMOUNT IN CASH OR
SHARES OF THE COMPANY'S COMMON STOCK, AS PARTIAL LIQUIDATED DAMAGES ("LIQUIDATED
DAMAGES") AND NOT AS A PENALTY, EQUAL TO 1.0% OF THE AGGREGATE PURCHASE PRICE
PAID BY SUCH HOLDER PURSUANT TO THE SECURITIES PURCHASE AGREEMENT FOR ANY
CONVERTIBLE DEBENTURES THEN HELD BY SUCH HOLDER.
THE PARTIES AGREE THAT (1) THE
COMPANY SHALL NOT BE LIABLE FOR LIQUIDATED DAMAGES UNDER THIS AGREEMENT WITH
RESPECT TO ANY WARRANTS OR WARRANT SHARES AND (2) THE MAXIMUM AGGREGATE
LIQUIDATED DAMAGES PAYABLE TO A HOLDER OF CONVERTIBLE DEBENTURES UNDER THIS
AGREEMENT SHALL BE TWELVE PERCENT (12%) OF THE AGGREGATE PURCHASE PRICE PAID BY
SUCH HOLDER PURSUANT TO THE SECURITIES PURCHASE AGREEMENT.
THE PARTIAL
LIQUIDATED DAMAGES PURSUANT TO THE TERMS HEREOF SHALL APPLY ON A DAILY PRO-RATA
BASIS FOR ANY PORTION OF A MONTH PRIOR TO THE CURE OF AN EVENT.
(C)
LIQUIDATED DAMAGES.
THE COMPANY AND THE BUYER HERETO ACKNOWLEDGE
AND AGREE THAT THE SUMS PAYABLE UNDER SUBSECTION 2(B) ABOVE SHALL CONSTITUTE
LIQUIDATED DAMAGES AND NOT PENALTIES AND ARE IN ADDITION TO ALL OTHER RIGHTS OF
THE BUYER, INCLUDING THE RIGHT TO CALL A DEFAULT.
THE PARTIES FURTHER
ACKNOWLEDGE THAT (I) THE AMOUNT OF LOSS OR DAMAGES LIKELY TO BE INCURRED IS
INCAPABLE OR IS DIFFICULT TO PRECISELY ESTIMATE, (II) THE AMOUNTS SPECIFIED IN
SUCH SUBSECTIONS BEAR A REASONABLE RELATIONSHIP TO, AND ARE NOT PLAINLY OR
GROSSLY DISPROPORTIONATE TO, THE PROBABLE LOSS LIKELY TO BE INCURRED IN
CONNECTION WITH ANY FAILURE BY THE COMPANY TO OBTAIN OR MAINTAIN THE
EFFECTIVENESS OF A REGISTRATION STATEMENT, (III) ONE OF THE REASONS FOR THE
COMPANY AND THE BUYER REACHING AN AGREEMENT AS TO SUCH AMOUNTS WAS THE
UNCERTAINTY AND COST OF LITIGATION REGARDING THE QUESTION OF ACTUAL DAMAGES, AND
(IV) THE COMPANY AND THE BUYER ARE SOPHISTICATED BUSINESS PARTIES AND HAVE BEEN
REPRESENTED BY SOPHISTICATED AND ABLE LEGAL COUNSEL AND NEGOTIATED THIS
AGREEMENT AT ARM'S LENGTH.
3.
RELATED OBLIGATIONS.
(A)
THE COMPANY SHALL, NOT LESS THAN THREE (3) TRADING DAYS PRIOR TO
THE FILING OF EACH REGISTRATION STATEMENT AND NOT LESS THAN ONE (1) TRADING DAY
PRIOR TO THE FILING OF ANY RELATED AMENDMENTS AND SUPPLEMENTS TO ALL
REGISTRATION STATEMENTS (EXCEPT FOR ANNUAL REPORTS ON FORM 10-K OR FORM 10-KSB),
FURNISH TO EACH