$0.00001 PAR VALUE
PER SHARE, OF WHICH NO SHARES ARE ISSUED AND OUTSTANDING; NO SHARES ARE RESERVED
FOR ISSUANCE PURSUANT TO THE COMPANY'S STOCK OPTION PLANS, NO SHARES ARE
RESERVED FOR ISSUANCE PURSUANT TO SECURITIES (OTHER THAN THE NOTE) EXERCISABLE
FOR, OR CONVERTIBLE INTO OR EXCHANGEABLE FOR SHARES OF COMMON STOCK AND
4,000,000 SHARES ARE RESERVED FOR ISSUANCE
5
UPON CONVERSION OF THE NOTE.
ALL OF SUCH OUTSTANDING SHARES OF CAPITAL STOCK
ARE, OR UPON ISSUANCE WILL BE, DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND
NON-ASSESSABLE.
NO SHARES OF CAPITAL STOCK OF THE COMPANY ARE SUBJECT TO
PREEMPTIVE RIGHTS OR ANY OTHER SIMILAR RIGHTS OF THE SHAREHOLDERS OF THE COMPANY
OR ANY LIENS OR ENCUMBRANCES IMPOSED THROUGH THE ACTIONS OR FAILURE TO ACT OF
THE COMPANY.
AS OF THE EFFECTIVE DATE OF THIS AGREEMENT, (I) THERE ARE NO
OUTSTANDING OPTIONS, WARRANTS, SCRIP, RIGHTS TO SUBSCRIBE FOR, PUTS, CALLS,
RIGHTS OF FIRST REFUSAL, AGREEMENTS, UNDERSTANDINGS, CLAIMS OR OTHER COMMITMENTS
OR RIGHTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR SECURITIES OR RIGHTS
CONVERTIBLE INTO OR EXCHANGEABLE FOR ANY SHARES OF CAPITAL STOCK OF THE COMPANY
OR ANY OF ITS SUBSIDIARIES, OR ARRANGEMENTS BY WHICH THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS OR MAY BECOME BOUND TO ISSUE ADDITIONAL SHARES OF CAPITAL STOCK
OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, (II) OTHER THAN AS DISCLOSED ON
SCHEDULE 3(C)(II) THERE ARE NO AGREEMENTS OR ARRANGEMENTS UNDER WHICH THE
COMPANY OR ANY OF ITS SUBSIDIARIES IS OBLIGATED TO REGISTER THE SALE OF ANY OF
ITS OR THEIR SECURITIES UNDER THE 1933 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 NOTE OR THE CONVERSION SHARES.
THE COMPANY HAS
FURNISHED TO THE BUYER TRUE AND CORRECT COPIES OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AS IN EFFECT ON THE DATE HEREOF ("CERTIFICATE OF INCORPORATION"),
THE COMPANY'S BY-LAWS, AS IN EFFECT ON THE DATE HEREOF (THE "BY-LAWS"), 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.
THE
COMPANY SHALL PROVIDE THE BUYER WITH A WRITTEN UPDATE OF THIS REPRESENTATION
SIGNED BY THE COMPANY'S CHIEF EXECUTIVE ON BEHALF OF THE COMPANY AS OF THE
CLOSING DATE.
D.
ISSUANCE OF SHARES.
THE CONVERSION SHARES ARE DULY
AUTHORIZED AND RESERVED FOR ISSUANCE AND, UPON CONVERSION OF THE NOTE IN
ACCORDANCE WITH ITS RESPECTIVE TERMS, WILL BE VALIDLY ISSUED, FULLY PAID AND
NON-ASSESSABLE, AND FREE FROM ALL TAXES, LIENS, CLAIMS AND ENCUMBRANCES WITH
RESPECT TO THE ISSUE THEREOF AND SHALL NOT BE SUBJECT TO PREEMPTIVE RIGHTS OR
OTHER SIMILAR RIGHTS OF SHAREHOLDERS OF THE COMPANY AND WILL NOT IMPOSE PERSONAL
LIABILITY UPON THE HOLDER THEREOF.
E.
ACKNOWLEDGMENT OF DILUTION.
THE COMPANY UNDERSTANDS AND
ACKNOWLEDGES THE POTENTIALLY DILUTIVE EFFECT TO THE COMMON STOCK UPON THE
ISSUANCE OF THE CONVERSION SHARES UPON CONVERSION OF THE