(II) THE COMPANY IS
UNABLE TO PAY ITS DEBTS AND LIABILITIES, SUBORDINATED, CONTINGENT OR OTHERWISE,
AS SUCH DEBTS AND LIABILITIES BECOME ABSOLUTE AND MATURED, (III) THE COMPANY
INTENDS TO INCUR, PRIOR TO APRIL 30, 2008, OR BELIEVES THAT IT WILL INCUR, PRIOR
TO APRIL 30, 2008, DEBTS THAT WOULD BE BEYOND ITS ABILITY TO PAY AS SUCH DEBTS
MATURE OR (IV) THE COMPANY HAS UNREASONABLY SMALL CAPITAL WITH WHICH TO CONDUCT
THE BUSINESS IN WHICH IT IS ENGAGED AS SUCH BUSINESS IS NOW CONDUCTED AND IS
PROPOSED TO BE CONDUCTED.
EXCEPT AS DISCLOSED IN SCHEDULE 3(G), SINCE JUNE 30,
2005, THE COMPANY HAS NOT DECLARED OR PAID ANY DIVIDENDS OR SOLD ANY ASSETS
OUTSIDE OF THE ORDINARY COURSE OF BUSINESS, INDIVIDUALLY OR IN THE AGGREGATE, IN
EXCESS OF $250,000.
EXCEPT AS DISCLOSED IN SCHEDULE 3(G), SINCE JUNE 30, 2005,
THE COMPANY HAS NOT HAD ANY CAPITAL EXPENDITURES OUTSIDE THE ORDINARY COURSE OF
ITS BUSINESS IN EXCESS OF $250,000.
13
H.
ABSENCE OF LITIGATION.
EXCEPT AS SET FORTH ON SCHEDULE 3(H) AND
EXCEPT FOR ACTIONS OR LITIGATION BROUGHT BY PERSONS (OTHER THAN ANY GOVERNMENTAL
ENTITY) IN WHICH THE ONLY CLAIM MADE WAS FOR MONEY DAMAGES AND NEITHER THE
AMOUNT CLAIMED NOR THE AGGREGATE PAYMENTS MADE EXCEEDED $50,000 AND NO OTHER
REMEDY OR RELIEF WAS PROVIDED, (I) THERE IS NO, NOR DURING THE PAST FIVE YEARS
HAS THERE BEEN ANY, ACTION, SUIT, PROCEEDING, CLAIM, INQUIRY, COMPLAINT,
DISPUTE, ARBITRATION OR INVESTIGATION (EACH, A "CLAIM") BEFORE OR BY ANY COURT,
PUBLIC BOARD, GOVERNMENT AGENCY, SELF-REGULATORY ORGANIZATION OR BODY PENDING
OR, TO THE KNOWLEDGE OF THE COMPANY, THREATENED AGAINST OR AFFECTING THE
COMPANY, THE COMMON STOCK OR ANY OF THE COMPANY'S SUBSIDIARIES OR ANY OF THE
COMPANY'S OR ITS SUBSIDIARIES' OFFICERS OR DIRECTORS IN THEIR CAPACITIES AS
SUCH, AND (II) TO THE KNOWLEDGE OF THE COMPANY, NONE OF THE DIRECTORS OR
OFFICERS OF THE COMPANY HAS BEEN INVOLVED AS A PLAINTIFF, DEFENDANT OR
THIRD-PARTY WITNESS IN SECURITIES-RELATED LITIGATION DURING THE PAST FIVE
YEARS.
NONE OF THE MATTERS DESCRIBED IN SCHEDULE 3(H), REGARDLESS OF THEIR
OUTCOME, WILL HAVE A MATERIAL ADVERSE EFFECT.
I.
ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF NOTES AND
WARRANTS.
THE COMPANY ACKNOWLEDGES AND AGREES THAT EACH PURCHASER IS ACTING
SOLELY IN THE CAPACITY OF AN ARM'S LENGTH PURCHASER WITH RESPECT TO THE COMPANY
IN CONNECTION WITH THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY.
THE COMPANY FURTHER ACKNOWLEDGES THAT EACH PURCHASER IS NOT
ACTING AS A FINANCIAL ADVISOR OR FIDUCIARY OF THE COMPANY (OR IN ANY SIMILAR
CAPACITY) WITH RESPECT TO THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, AND ANY ADVICE GIVEN BY ANY PURCHASER OR ANY OF
THEIR RESPECTIVE REPRESENTATIVES OR AGENTS IN CONNECTION WITH THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY IS MERELY
INCIDENTAL TO SUCH PURCHASER'S PURCHASE OF THE SECURITIES.
THE COMPANY FURTHER
REPRESENTS TO EACH PURCHASER THAT THE COMPANY'S DECISION TO ENTER INTO THE
TRANSACTION DOCUMENTS HAS BEEN BASED SOLELY ON THE INDEPENDENT EVALUATION BY THE
COMPANY AND ITS REPRESENTATIVES.
J.