AUGUST 15, 2005,
AND (B) 5,000,000 SHARES OF PREFERRED STOCK, PAR VALUE $.001 PER SHARE, 500,000
OF WHICH SHARES ARE DESIGNATED SERIES A JUNIOR PARTICIPATING PREFERRED STOCK,
PAR VALUE $.001 PER SHARE, NONE OF WHICH IS ISSUED AND OUTSTANDING.
ALL OF SUCH
OUTSTANDING SHARES OF CAPITAL STOCK ARE, OR UPON ISSUANCE WILL BE, DULY
AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE.
NO SHARES OF CAPITAL
STOCK OF THE COMPANY, INCLUDING THE SECURITIES ISSUABLE PURSUANT TO THIS
AGREEMENT, ARE SUBJECT TO PREEMPTIVE RIGHTS OR ANY OTHER SIMILAR RIGHTS OF THE
STOCKHOLDERS OF THE COMPANY OR ANY LIENS OR ENCUMBRANCES IMPOSED THROUGH THE
ACTIONS OR FAILURE TO ACT OF THE COMPANY.
EXCEPT AS DISCLOSED IN THIS SECTION
3.3 AND EXCEPT FOR THE TRANSACTIONS CONTEMPLATED HEREBY, (I) THERE ARE NO
OUTSTANDING OPTIONS, WARRANTS, SCRIP,
4
RIGHTS TO SUBSCRIBE FOR, PUTS, CALLS, RIGHTS OF FIRST REFUSAL OR PREEMPTIVE OR
OTHER SIMILAR RIGHTS, AGREEMENTS, UNDERSTANDINGS, CLAIMS OR OTHER COMMITMENTS OR
RIGHTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR SECURITIES OR RIGHTS DIRECTLY
OR INDIRECTLY CONVERTIBLE INTO, EXERCISABLE FOR, OR EXCHANGEABLE FOR ANY SHARES
OF CAPITAL STOCK OF THE COMPANY, OR ARRANGEMENTS BY WHICH THE COMPANY IS OR MAY
BECOME BOUND TO ISSUE ADDITIONAL SHARES OF CAPITAL STOCK OF THE COMPANY; (II)
THERE ARE NO AGREEMENTS OR ARRANGEMENTS (OTHER THAN THE REGISTRATION RIGHTS
AGREEMENT, THE SEPARATE REGISTRATION RIGHTS AGREEMENTS ENTERED INTO ON JUNE 15,
2001, JANUARY 18, 2002, JULY 28, 2003, MAY 7, 2004 AND AUGUST 15, 2005 AND THE
PURCHASE WARRANTS DATED JUNE 15, 2001) UNDER WHICH THE COMPANY IS OBLIGATED TO
REGISTER THE SALE OF ANY OF ITS SECURITIES UNDER THE SECURITIES ACT AND (III)
THERE ARE NO ANTI-DILUTION OR PRICE ADJUSTMENT PROVISIONS CONTAINED IN ANY
SECURITY ISSUED BY THE COMPANY (OR IN ANY AGREEMENT PROVIDING RIGHTS TO SECURITY
HOLDERS) THAT WILL BE TRIGGERED BY THE ISSUANCE OF THE SECURITIES (OTHER THAN
THE EXERCISE PRICE ADJUSTMENTS PURSUANT TO THE WARRANTS TO PURCHASE AN AGGREGATE
OF 385,800 SHARES OF COMMON STOCK, ISSUED BY THE COMPANY ON JANUARY 18, 2002 AND
THE CONTINGENT OBLIGATION TO ISSUE ADDITIONAL WARRANTS TO PURCHASE AN AGGREGATE
OF 2,325,936 SHARES PURSUANT TO THE SECURITIES PURCHASE AGREEMENT DATED AUGUST
15, 2005).
THE COMPANY HAS FURNISHED TO INVESTOR TRUE AND CORRECT COPIES OF THE
COMPANY'S CERTIFICATE OF INCORPORATION, AS AMENDED, AS IN EFFECT ON THE DATE
HEREOF, THE COMPANY'S BYLAWS AS IN EFFECT ON THE DATE HEREOF AND THE TERMS OF
ALL SECURITIES CONVERTIBLE INTO OR EXERCISABLE FOR COMMON STOCK OF THE COMPANY
AND THE MATERIAL RIGHTS OF THE HOLDERS THEREOF IN RESPECT THERETO.
3.4
ISSUANCE OF SECURITIES.
THE SECURITIES ARE DULY AUTHORIZED AND,
UPON ISSUANCE IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT, WILL BE VALIDLY
ISSUED, FULLY PAID AND NON-ASSESSABLE, FREE FROM ALL TAXES, LIENS, CLAIMS,
ENCUMBRANCES AND CHARGES WITH RESPECT TO THE ISSUE THEREOF, WILL NOT BE SUBJECT
TO PREEMPTIVE RIGHTS OR OTHER SIMILAR RIGHTS OF STOCKHOLDERS OF THE COMPANY, AND
WILL NOT IMPOSE PERSONAL LIABILITY ON THE HOLDERS THEREOF.
THE COMPANY HAS
RESERVED A SUFFICIENT NUMBER OF SHARES