CAPITAL STOCK OR OTHER EQUITY INTERESTS OF EACH
SUBSIDIARY FREE AND CLEAR OF ANY LIENS, AND ALL THE ISSUED AND OUTSTANDING
SHARES OF CAPITAL STOCK OF EACH SUBSIDIARY ARE VALIDLY ISSUED AND ARE FULLY
PAID, NON-ASSESSABLE AND FREE OF PREEMPTIVE AND SIMILAR RIGHTS TO SUBSCRIBE FOR
OR PURCHASE SECURITIES.
(B)
ORGANIZATION AND QUALIFICATION.
THE COMPANY AND ITS SUBSIDIARIES
ARE CORPORATIONS DULY ORGANIZED AND VALIDLY EXISTING IN GOOD STANDING UNDER THE
LAWS OF THE
JURISDICTION IN WHICH THEY ARE INCORPORATED, AND HAVE THE REQUISITE CORPORATE
POWER TO OWN THEIR PROPERTIES AND TO CARRY ON THEIR BUSINESS AS NOW BEING
CONDUCTED.
EACH OF THE COMPANY AND ITS SUBSIDIARIES IS DULY QUALIFIED AS A
FOREIGN CORPORATION TO DO BUSINESS AND IS IN GOOD STANDING IN EVERY JURISDICTION
IN WHICH THE NATURE OF THE BUSINESS CONDUCTED BY IT MAKES SUCH QUALIFICATION
NECESSARY, EXCEPT TO THE EXTENT THAT THE FAILURE TO BE SO QUALIFIED OR BE IN
GOOD STANDING WOULD NOT HAVE OR REASONABLY BE EXPECTED TO RESULT IN (I) A
MATERIAL ADVERSE EFFECT ON THE LEGALITY, VALIDITY OR ENFORCEABILITY OF ANY
TRANSACTION DOCUMENT, (II) A MATERIAL ADVERSE EFFECT ON THE RESULTS OF
OPERATIONS, ASSETS, BUSINESS OR CONDITION (FINANCIAL OR OTHERWISE) OF THE
COMPANY AND THE SUBSIDIARIES, TAKEN AS A WHOLE, OR (III) A MATERIAL ADVERSE
EFFECT ON THE COMPANY'S ABILITY TO PERFORM IN ANY MATERIAL RESPECT ON A TIMELY
BASIS ITS OBLIGATIONS UNDER ANY TRANSACTION DOCUMENT (ANY OF (I), (II) OR (III),
A "MATERIAL ADVERSE EFFECT") AND NO PROCEEDING HAS BEEN INSTITUTED IN ANY SUCH
JURISDICTION REVOKING, LIMITING OR CURTAILING OR SEEKING TO REVOKE, LIMIT OR
CURTAIL SUCH POWER AND AUTHORITY OR QUALIFICATION.
(C)
AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER INSTRUMENTS.
(I) THE COMPANY HAS THE REQUISITE CORPORATE POWER AND AUTHORITY TO ENTER INTO
AND PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT, THE NOTE, THE STOCK PLEDGE
AGREEMENT, THE IRREVOCABLE TRANSFER AGENT INSTRUCTIONS, THE WARRANT, THE
CONVERTIBLE DEBENTURES, THE DEFAULT WARRANTS, THE SECURITY AGREEMENT, THE
REGISTRATION RIGHTS AGREEMENT, AND EACH OF THE OTHER AGREEMENTS ENTERED INTO BY
THE PARTIES HERETO IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT (COLLECTIVELY THE "TRANSACTION AGREEMENTS") AND TO ISSUE THE
SECURITIES IN ACCORDANCE WITH THE TERMS HEREOF AND THEREOF, (II) THE EXECUTION
AND DELIVERY OF THE TRANSACTION AGREEMENTS BY THE COMPANY AND THE CONSUMMATION
BY IT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, INCLUDING, WITHOUT
LIMITATION, THE ISSUANCE OF THE SECURITIES, THE RESERVATION FOR ISSUANCE AND THE
ISSUANCE OF THE CONVERSION SHARES, AND THE RESERVATION FOR ISSUANCE AND THE
ISSUANCE OF THE WARRANT SHARES, HAVE BEEN DULY AUTHORIZED BY THE COMPANY'S BOARD
OF DIRECTORS AND NO FURTHER CONSENT OR AUTHORIZATION IS REQUIRED BY THE COMPANY,
ITS BOARD OF DIRECTORS OR ITS STOCKHOLDERS, (III) THE TRANSACTION AGREEMENTS
HAVE BEEN DULY EXECUTED AND DELIVERED BY THE COMPANY, (IV) THE TRANSACTION
AGREEMENTS CONSTITUTE THE VALID AND BINDING OBLIGATIONS OF THE COMPANY
ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH THEIR TERMS, EXCEPT AS SUCH
ENFORCEABILITY MAY BE LIMITED BY GENERAL PRINCIPLES OF EQUITY OR APPLICABLE
BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM, LIQUIDATION OR SIMILAR