COMPANY STATUS.
THE COMPANY IS NOT, AND UPON
CONSUMMATION OF THE SALE OF THE SECURITIES WILL NOT BE, AN "INVESTMENT COMPANY,"
A COMPANY CONTROLLED BY AN "INVESTMENT COMPANY" OR AN "AFFILIATED PERSON" OF, OR
"PROMOTER" OR "PRINCIPAL UNDERWRITER" FOR, AN "INVESTMENT COMPANY" AS SUCH TERMS
ARE DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED.
4.
COVENANTS.
(A)
BEST EFFORTS.
EACH PARTY SHALL USE ITS BEST EFFORTS TIMELY TO
SATISFY EACH OF THE CONDITIONS TO BE SATISFIED BY IT AS PROVIDED IN SECTIONS 6
AND 7 OF THIS AGREEMENT.
(B)
FORM D AND BLUE SKY.
THE COMPANY AGREES TO FILE A FORM D WITH
RESPECT TO THE SECURITIES AS REQUIRED UNDER REGULATION D AND TO PROVIDE A COPY
THEREOF TO EACH BUYER PROMPTLY AFTER SUCH FILING.
THE COMPANY SHALL, ON OR
BEFORE THE CLOSING DATE, TAKE SUCH ACTION AS THE COMPANY SHALL REASONABLY
DETERMINE IS NECESSARY IN ORDER TO OBTAIN AN EXEMPTION FOR OR TO QUALIFY THE
SECURITIES FOR SALE TO THE BUYERS AT THE CLOSING PURSUANT TO THIS AGREEMENT
UNDER APPLICABLE SECURITIES OR "BLUE SKY" LAWS OF THE STATES OF THE UNITED
STATES (OR TO OBTAIN AN
15
EXEMPTION FROM SUCH QUALIFICATION), AND SHALL PROVIDE EVIDENCE OF ANY SUCH
ACTION SO TAKEN TO THE BUYERS ON OR PRIOR TO THE CLOSING DATE.
THE COMPANY
SHALL MAKE ALL FILINGS AND REPORTS RELATING TO THE OFFER AND SALE OF THE
SECURITIES REQUIRED UNDER APPLICABLE SECURITIES OR "BLUE SKY" LAWS OF THE STATES
OF THE UNITED STATES FOLLOWING THE CLOSING DATE.
(C)
REPORTING STATUS.
UNTIL THE DATE ON WHICH THE INVESTORS (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) SHALL HAVE SOLD ALL THE CONVERSION
SHARES AND WARRANT SHARES AND NONE OF THE PREFERRED SHARES OR WARRANTS ARE
OUTSTANDING (THE "REPORTING PERIOD"), THE COMPANY SHALL FILE TIMELY REPORTS
REQUIRED TO BE FILED WITH THE SEC PURSUANT TO THE 1934 ACT, AND THE COMPANY
SHALL NOT TERMINATE ITS STATUS AS AN ISSUER REQUIRED TO FILE REPORTS UNDER THE
1934 ACT EVEN IF THE 1934 ACT OR THE RULES AND REGULATIONS THEREUNDER WOULD
OTHERWISE PERMIT SUCH TERMINATION.
(D)
USE OF PROCEEDS.
THE COMPANY WILL USE $2,157,630 OF THE PROCEEDS
FROM THE SALE OF THE SECURITIES TO REPAY CERTAIN INDEBTEDNESS TO LAURUS AT
CLOSING AS CONTEMPLATED PURSUANT TO SECTION 1(C)(II) ABOVE.
THE BALANCE OF THE
PROCEEDS FROM THE SALE OF THE SECURITIES SHALL BE FOR WORKING CAPITAL AND
GENERAL CORPORATE PURPOSES AND NOT FOR THE REDEMPTION OR REPURCHASE OF ANY OF
ITS EQUITY SECURITIES EXCEPT IN CONNECTION WITH A PERMITTED PROHA TRANSACTION
(AS SUCH TERM IS DEFINED IN THE CERTIFICATE OF DESIGNATIONS).
(E)
FINANCIAL INFORMATION.
THE COMPANY AGREES TO SEND THE FOLLOWING
TO EACH BUYER DURING THE REPORTING PERIOD (I) UNLESS THE FOLLOWING ARE FILED
WITH THE SEC THROUGH EDGAR AND ARE AVAILABLE TO THE PUBLIC THROUGH THE EDGAR
SYSTEM, WITHIN ONE (1) BUSINESS DAY AFTER THE FILING THEREOF WITH THE SEC, A
COPY OF ITS ANNUAL REPORTS ON FORM 10-K, ITS QUARTERLY REPORTS ON FORM 10-Q, ANY
CURRENT REPORTS ON FORM 8-K AND