THAT IT PROVIDES TO MEMBERS OF
THE BOARD OF DIRECTORS, AT THE TIME IT PROVIDES THEM TO SUCH MEMBERS. THE
OBSERVATION RIGHT MAY BE EXERCISED IN PERSON OR VIA TELEPHONE OR VIDEOPHONE
PARTICIPATION. EACH PURCHASER AGREES, ON BEHALF OF ITSELF AND ANY REPRESENTATIVE
EXERCISING THE OBSERVATION RIGHTS SET FORTH HEREIN, THAT SO LONG AS IT SHALL
EXERCISE ITS OBSERVATION RIGHT (I) IT SHALL HOLD IN STRICT CONFIDENCE PURSUANT
TO A CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT (IN FORM AND SUBSTANCE
SATISFACTORY TO EACH PURCHASER) ALL INFORMATION AND MATERIALS THAT IT MAY
RECEIVE OR BE GIVEN ACCESS TO IN CONNECTION WITH MEETINGS OF THE BOARD OF
DIRECTORS AND TO ACT IN A FIDUCIARY MANNER WITH RESPECT TO ALL INFORMATION SO
PROVIDED (PROVIDED THAT THIS SHALL NOT LIMIT ITS ABILITY TO DISCUSS SUCH MATTERS
WITH ITS OFFICERS, DIRECTORS OR LEGAL COUNSEL, AS NECESSARY), AND (II) THE BOARD
OF DIRECTORS MAY WITHHOLD FROM IT CERTAIN INFORMATION OR MATERIAL FURNISHED OR
MADE AVAILABLE TO THE BOARD OF DIRECTORS OR EXCLUDE IT FROM CERTAIN CONFIDENTIAL
"CLOSED SESSIONS" OF THE BOARD OF DIRECTORS IF THE FURNISHING OR AVAILABILITY OF
SUCH INFORMATION OR MATERIAL OR ITS PRESENCE AT SUCH "CLOSED SESSIONS" WOULD
JEOPARDIZE SUCH COMPANY'S ATTORNEY-CLIENT PRIVILEGE OR IF THE BOARD OF DIRECTORS
OTHERWISE REASONABLY SO REQUIRES.
THE BOARD OBSERVATION RIGHTS SET FORTH IN
THIS SECTION SHALL AUTOMATICALLY TERMINATE AND BE OF NO FURTHER FORCE OR EFFECT
UPON THE INDEFEASIBLE PAYMENT IN FULL OF ALL OBLIGATIONS (AS DEFINED IN THE
MASTER SECURITY AGREEMENT).
2.4
ADDITIONAL WARRANTS.
THE COMPANY HEREBY AGREES TO USE ITS
COMMERCIALLY REASONABLE BEST EFFORTS TO (I) OBTAIN THE APPROVAL BY NO LATER THAN
NOVEMBER 30, 2008 OF ITS SHAREHOLDERS TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK OF THE COMPANY SUFFICIENT TO ISSUE NO LESS THAN
146,143,792 ADDITIONAL SHARES OF COMMON STOCK, AND (II) DULY AUTHORIZE AND ISSUE
TO THE PURCHASERS BY NO LATER THAN NOVEMBER 30, 2008, COMMON STOCK PURCHASE
WARRANTS EXERCISABLE INTO AN AGGREGATE OF 146,143,792 SHARES OF COMMON STOCK OF
THE COMPANY, WITH AN EXERCISE PRICE OF $0.01 PER SHARE, IN FORMS AND IN AMOUNTS
(SUBJECT TO THE AGGREGATE SHARE LIMITATION STATED ABOVE) ACCEPTABLE TO SUCH
PURCHASERS AS DETERMINED IN THEIR SOLE DISCRETION.
2.5
COMPLIANCE WITH BUDGET.
THE COMPANY SHALL COMPLY WITH THE TERMS
AND CONDITIONS OF THE BUDGET PROVIDED BY THE COMPANY AND ITS SUBSIDIARIES TO THE
CREDITOR PARTIES AS OF THE DATE HEREOF (THE "BUDGET") IN ALL RESPECTS; PROVIDED,
HOWEVER, THAT (A) A VARIANCE OF LESS THAN TEN (10%) PERCENT WITH RESPECT TO
OPERATING EXPENSES, EXCLUDING NON-CASH SHARE-BASED COMPENSATION AND AMORTIZATION
EXPENSE, SET FORTH IN THE BUDGET SHALL BE PERMITTED ON A MONTHLY BASIS,
(B) DURING THE SECOND HALF OF THE 2008 FISCAL YEAR, A VARIANCE OF LESS THAN
TWENTY-FIVE (25%) PERCENT WITH RESPECT TO ANY OF THE SUMMARY INCOME STATEMENT,
SUMMARY BALANCE SHEET AND SUMMARY CASH FLOW LINE ITEMS, EXCLUDING NON-CASH
SHARE-BASED
25
COMPENSATION AND NON-CASH AMORTIZATION EXPENSE, ON A QUARTERLY BASIS SET FORTH
IN THE BUDGET SHALL BE PERMITTED, (C) DURING THE 2009 FISCAL YEAR AND