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
CONVERTIBLE DEBENTURES, THE WARRANTS, THE SECURITY DOCUMENTS, THE REGISTRATION
RIGHTS AGREEMENT, THE IRREVOCABLE TRANSFER AGENT INSTRUCTIONS, AND EACH OF THE
OTHER AGREEMENTS ENTERED INTO BY THE PARTIES HERETO IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (COLLECTIVELY THE "TRANSACTION
DOCUMENTS") AND TO ISSUE THE SECURITIES IN ACCORDANCE WITH THE TERMS HEREOF AND
THEREOF, (II) THE EXECUTION AND DELIVERY OF THE TRANSACTION DOCUMENTS 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 DOCUMENTS HAVE BEEN DULY EXECUTED AND
DELIVERED BY THE COMPANY, (IV) THE TRANSACTION DOCUMENTS 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
7
APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM, LIQUIDATION OR
SIMILAR LAWS RELATING TO, OR AFFECTING GENERALLY, THE ENFORCEMENT OF CREDITORS'
RIGHTS AND REMEDIES.
THE AUTHORIZED OFFICER OF THE COMPANY EXECUTING THE
TRANSACTION DOCUMENTS KNOWS OF NO REASON WHY THE COMPANY CANNOT FILE THE
REGISTRATION STATEMENT AS REQUIRED UNDER THE REGISTRATION RIGHTS AGREEMENT OR
PERFORM ANY OF THE COMPANY'S OTHER OBLIGATIONS UNDER THE TRANSACTION DOCUMENTS.
(D)
CAPITALIZATION.
THE AUTHORIZED CAPITAL
STOCK OF THE COMPANY CONSISTS OF 60,000,000 SHARES OF COMMON STOCK AND 5,000,000
SHARES OF PREFERRED STOCK, PAR VALUE $0.01 ("PREFERRED STOCK") OF WHICH
17,473,694 SHARES OF COMMON STOCK AND ZERO SHARES OF PREFERRED STOCK ARE ISSUED
AND OUTSTANDING.
ALL OF THE OUTSTANDING SHARES OF CAPITAL STOCK OF THE COMPANY
ARE VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE, HAVE BEEN ISSUED IN COMPLIANCE
WITH ALL FEDERAL