BY THE COMPANY, AND (III) SUCH OTHER INFORMATION
AS MAY BE REASONABLY REQUESTED TO PERMIT THE BUYERS TO SELL SUCH SECURITIES
PURSUANT TO RULE 144 WITHOUT REGISTRATION IF RULE 144 IS AVAILABLE; AND
(IV)
DURING THE REGISTRATION PERIOD THE COMPANY SHALL NOT TERMINATE ITS
STATUS AS AN ISSUER REQUIRED TO FILE REPORTS UNDER THE EXCHANGE ACT EVEN IF THE
EXCHANGE ACT OR THE RULES AND REGULATIONS THEREUNDER WOULD OTHERWISE PERMIT SUCH
TERMINATION.
(D)
USE OF PROCEEDS.
THE COMPANY WILL USE THE PROCEEDS FROM THE SALE
OF THE NOTES FOR THE BUILD UP ON INVENTORY, CAPITAL EXPENDITURES AND WORKING
CAPITAL PURPOSES.
(E)
RESERVATION OF SHARES.
ON THE DATE HEREOF, THE COMPANY SHALL
RESERVE FOR ISSUANCE TO THE BUYERS 13,000,000 SHARES OF COMMON STOCK FOR
ISSUANCE UPON EXERCISE OF THE WARRANTS (COLLECTIVELY, THE "SHARE RESERVE").
THE
COMPANY REPRESENTS THAT IT HAS SUFFICIENT AUTHORIZED AND UNISSUED SHARES OF
COMMON STOCK AVAILABLE TO CREATE THE SHARE RESERVE AFTER CONSIDERING ALL OTHER
COMMITMENTS THAT MAY REQUIRE THE ISSUANCE OF COMMON STOCK.
THE COMPANY SHALL
TAKE ALL ACTION REASONABLY NECESSARY TO AT ALL TIMES HAVE AUTHORIZED, AND
RESERVED FOR THE PURPOSE OF ISSUANCE, SUCH NUMBER OF SHARES OF COMMON STOCK AS
SHALL BE NECESSARY TO EFFECT THE FULL EXERCISE OF THE WARRANTS.
IF AT ANY TIME
THE SHARE RESERVE IS INSUFFICIENT TO EFFECT THE FULL EXERCISE OF THE WARRANTS,
THE COMPANY SHALL INCREASE THE SHARE RESERVE ACCORDINGLY.
IF THE COMPANY DOES
NOT HAVE SUFFICIENT AUTHORIZED AND UNISSUED SHARES OF COMMON STOCK AVAILABLE TO
INCREASE THE SHARE RESERVE, THE COMPANY SHALL CALL AND HOLD A SPECIAL MEETING OF
THE SHAREHOLDERS WITHIN THIRTY (30) DAYS OF SUCH OCCURRENCE, FOR THE SOLE
PURPOSE OF INCREASING THE NUMBER OF SHARES AUTHORIZED.
THE COMPANY'S MANAGEMENT
SHALL RECOMMEND TO THE SHAREHOLDERS TO VOTE IN FAVOR OF INCREASING THE NUMBER OF
SHARES OF COMMON STOCK AUTHORIZED.
MANAGEMENT SHALL ALSO VOTE ALL OF ITS SHARES
IN FAVOR OF INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
(F)
LISTINGS OR QUOTATION.
THE COMPANY'S COMMON STOCK SHALL BE
LISTED OR QUOTED FOR TRADING ON ANY OF (A) THE AMERICAN STOCK EXCHANGE, (B) NEW
YORK STOCK EXCHANGE, (C) THE NASDAQ GLOBAL MARKET, (D) THE NASDAQ CAPITAL
MARKET, OR (E) THE NASDAQ OTC BULLETIN BOARD (WHICH DOES NOT INCLUDE THE PINK
SHEETS LLC) ("OTCBB") (EACH, A "PRIMARY MARKET").
THE COMPANY SHALL PROMPTLY
SECURE THE LISTING OF ALL OF THE REGISTRABLE SECURITIES (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT) UPON EACH NATIONAL SECURITIES EXCHANGE AND
AUTOMATED QUOTATION SYSTEM, IF ANY, UPON WHICH THE COMMON STOCK IS THEN LISTED
(SUBJECT TO OFFICIAL NOTICE OF ISSUANCE) AND SHALL MAINTAIN SUCH LISTING OF ALL
REGISTRABLE SECURITIES FROM TIME TO TIME ISSUABLE UNDER THE TERMS OF THE
TRANSACTION DOCUMENTS.
(G)
FEES AND EXPENSES.
(I)
THE COMPANY SHALL PAY ALL OF ITS COSTS AND EXPENSES INCURRED BY
IT CONNECTION WITH THE NEGOTIATION, INVESTIGATION, PREPARATION, EXECUTION AND
DELIVERY OF THE TRANSACTION DOCUMENTS.
(II)
THE COMPANY SHALL PLACE INTO ESCROW $100,000 (THE "MONITORING
FEES") UPON THE FIRST CLOSING, DIRECTLY FROM THE PROCEEDS OF THE