AMENDED AND RESTATED STANDBY EQUITY DISTRIBUTION AGREEMENT

 

EXHIBIT 10.1

 

                              AMENDED AND RESTATED

 

                      STANDBY EQUITY DISTRIBUTION AGREEMENT

 

     THIS   AMENDED AND   RESTATED   STANDBY   EQUITY   DISTRIBUTION   AGREEMENT   (the

"Agreement")   dated as of October 24, 2005 is between CORNELL CAPITAL   PARTNERS,

LP, a Delaware   limited   partnership   (the   "Investor"),   and POSEIDIS,   INC., a

Florida corporation (the "Company").

 

     WHEREAS,   on August 26, 2005,   the parties hereto entered into the original

Standby Equity   Distribution   Agreement.   The parties desire that this Agreement

amend and restate the original Standby Equity Distribution Agreement

 

     WHEREAS,   the   parties   desire   that,   upon the   terms and   subject   to the

conditions   contained herein,   the Company shall issue and sell to the Investor,

from time to time as provided   herein,   and the Investor shall purchase from the

Company up to Eight Million Dollars   ($8,000,000) of the Company's common stock,

par value $0.0001 per share (the "Common Stock"); and

 

      WHEREAS,   such   investments will be made in reliance upon the provisions of

Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and the

regulations   promulgated   thereunder (the   "Securities   Act"),   and or upon such

other exemption from the registration   requirements of the Securities Act as may

be available with respect to any or all of the investments to be made hereunder.

 

     WHEREAS,   the Company has engaged   Newbridge   Securities   Corporation   (the

"Placement   Agent"),   to act as   the   Company's   exclusive   placement   agent   in

connection with the sale of the Company's Common Stock to the Investor hereunder

pursuant to the Placement Agent Agreement dated August 26, 2005 by and among the

Company, the Placement Agent and the Investor (the "Placement Agent Agreement").

 

     NOW, THEREFORE, the parties hereto agree as follows:

 

                                   ARTICLE I.

                               Certain Definitions

 

     Section   1.1.   "Advance"   shall mean the portion of the   Commitment   Amount

requested by the Company in the Advance Notice.

 

     Section 1.2.   "Advance   Date" shall mean the first (1st)   Trading Day after

expiration of the applicable Pricing Period for each Advance.

 

                                        1

 

<PAGE>

 

 

 

     Section 1.3.   "Advance   Notice" shall mean a written   notice in the form of

Exhibit A attached hereto to the Investor   executed by an officer of the Company

and   setting   forth   the   Advance   amount   that the   Company   requests   from the

Investor.

 

     Section   1.4.   "Advance   Notice   Date"   shall   mean each   date the   Company

delivers (in accordance   with Section 2.2(b) of this   Agreement) to the Investor

an Advance   Notice   requiring   the   Investor   to advance   funds to the   Company,

subject to the terms of this   Agreement.   No Advance   Notice   Date shall be less

than five (5) Trading Days after the prior Advance Notice Date.

 

     Section 1.5. "Bid Price" shall mean, on any date, the closing bid price (as

reported by Bloomberg   L.P.) of the Common Stock on the   Principal   Market or if

the Common Stock is not traded on a Principal   Market,   the highest reported bid

price   for the   Common   Stock,   as   furnished   by the   National   Association   of

Securities Dealers, Inc.

 

     Section   1.6.   "Closing"   shall mean one of the   closings of a purchase and

sale of Common Stock pursuant to Section 2.3.

 

     Section 1.7.   "Commitment   Amount" shall mean the aggregate amount of up to

Eight Million Dollars   ($8,000,000)   which the Investor has agreed to provide to

the Company in order to purchase   the   Company's   Common   Stock   pursuant to the

terms and conditions of this Agreement.

 

     Section 1.8.   "Commitment   Period" shall mean the period   commencing on the

earlier to occur of (i) the   Effective   Date,   or (ii) such   earlier date as the

Company and the   Investor   may   mutually   agree in writing,   and expiring on the

earliest to occur of (x) the date on which the Investor   shall have made payment

of Advances   pursuant to this Agreement in the aggregate amount of Eight Million

Dollars   ($8,000,000),   (y) the date this   Agreement is   terminated   pursuant to

Section   2.4,   or (z) the date   occurring   twenty-four   (24)   months   after   the

Effective Date.

 

     Section 1.9.   "Common   Stock" shall mean the Company's   common   stock,   par

value $0.0001 per share.

 

     Section   1.10.   "Condition   Satisfaction   Date"   shall have the meaning set

forth in Section 7.2.

 

     Section 1.11.   "Damages"   shall mean any loss,   claim,   damage,   liability,

costs and expenses (including,   without limitation,   reasonable   attorney's fees

and disbursements and costs and expenses of expert witnesses and investigation).

 

     Section 1.12.   "Effective   Date" shall mean the date on which the SEC first

declares   effective   a   Registration   Statement   registering   the   resale of the

Registrable Securities as set forth in Section 7.2(a).

 

     Section 1.13. Intentionally Omitted.

 

                                        2

 

<PAGE>

 

 

 

     Section   1.14.   "Exchange   Act" shall mean the   Securities   Exchange Act of

1934, as amended, and the rules and regulations promulgated thereunder.

 

     Section   1.15.    "Material    Adverse   Effect"   shall   mean   any   condition,

circumstance, or situation that would prohibit or otherwise materially interfere

with the ability of the Company to enter into and perform any of its obligations

under this   Agreement   or the   Registration   Rights   Agreement   in any   material

respect.

 

     Section 1.16. "Market Price" shall mean the lowest closing Bid Price of the

Common Stock during the Pricing Period.

 

     Section 1.17.   "Maximum   Advance   Amount"   shall be Three Hundred   Thousand

Dollars ($300,000) per Advance Notice.

 

     Section   1.18.   "NASD" shall mean the National   Association   of   Securities

Dealers, Inc.

 

     Section   1.19.   "Person"   shall   mean   an   individual,   a   corporation,    a

partnership, an association, a trust or other entity or organization,   including

a government or political subdivision or an agency or instrumentality thereof.

 

      Section    1.20.    "Placement    Agent"   shall   mean    Newbridge    Securities

Corporation, a registered broker-dealer.

 

     Section 1.21.   "Pricing Period" shall mean the five (5) consecutive Trading

Days after the Advance Notice Date.

 

     Section 1.22. "Principal Market" shall mean the Nasdaq National Market, the

Nasdaq SmallCap Market,   the American Stock Exchange,   the OTC Bulletin Board or

the New York Stock   Exchange,   whichever   is at the time the   principal   trading

exchange or market for the Common Stock.

 

     Section 1.23.   "Purchase Price" shall be set at ninety six percent (96%) of

the Market Price during the Pricing Period.

 

     Section   1.24.   "Registrable   Securities"   shall   mean the shares of Common

Stock to be issued hereunder (i) in respect of which the Registration   Statement

has not been declared   effective by the SEC, (ii) which have not been sold under

circumstances   meeting   all of the   applicable   conditions   of Rule   144 (or any

similar   provision then in force) under the Securities Act ("Rule 144") or (iii)

which have not been otherwise   transferred to a holder who may trade such shares

without   restriction   under the Securities   Act, and the Company has delivered a

new certificate or other evidence of ownership for such securities not bearing a

restrictive legend.

 

     Section 1.25.   "Registration   Rights Agreement" shall mean the Registration

Rights Agreement dated August 26, 2005, regarding the filing of the Registration

Statement for the resale of the Registrable Securities, entered into between the

Company and the Investor.

 

     Section 1.26.   "Registration Statement" shall mean a registration statement

on Form   S-1 or   SB-2   (if use of such   form is then   available   to the   Company

pursuant to the rules of the SEC

 

                                         3

 

<PAGE>

 

 

 

and,   if not,   on such other form   promulgated   by the SEC for which the Company

then   qualifies and which counsel for the Company   shall deem   appropriate,   and

which form shall be available for the resale of the Registrable Securities to be

registered   thereunder in accordance   with the   provisions of this Agreement and

the Registration Rights Agreement, and in accordance with the intended method of

distribution   of such   securities),   for the   registration   of the resale by the

Investor of the Registrable Securities under the Securities Act.

 

     Section   1.27.   "Regulation   D" shall   have the   meaning   set   forth in the

recitals of this Agreement.

 

     Section 1.28. "SEC" shall mean the Securities and Exchange Commission.

 

     Section   1.29.   "Securities   Act" shall have the   meaning   set forth in the

recitals of this Agreement.

 

     Section 1.30.   "SEC   Documents"   shall mean Annual   Reports on Form 10-KSB,

Quarterly   Reports   on   Form   10-QSB,   Current   Reports   on Form   8-K and   Proxy

Statements   of the   Company as   supplemented   to August 26,   2005,   filed by the

Company for a period of at least twelve (12) months immediately preceding August

26, 2005 or the Advance Date, as the case may be, until such time as the Company

no longer has an   obligation   to maintain the   effectiveness   of a   Registration

Statement as set forth in the Registration Rights Agreement.

 

     Section   1.31.   "Trading   Day" shall mean any day during which the New York

Stock Exchange shall be open for business.

 

     Section 1.32.   "VWAP" shall mean the volume   weighted   average price of the

Company's Common Stock as quoted by Bloomberg, LP.

 

                                   ARTICLE II.

                                    Advances

 

         Section 2.1.       Advances.

 

     Upon   the   terms   and   conditions   set   forth   herein   (including,   without

limitation,   the   provisions of Article VII hereof),   the Company may request an

Advance by the   Investor   by the   delivery of an Advance   Notice.   The number of

shares of Common Stock that the Investor shall purchase pursuant to each Advance

shall be determined by dividing the amount of the Advance by the Purchase Price.

No fractional shares shall be issued.   Fractional shares shall be rounded to the

next higher whole number of shares. The aggregate maximum amount of all Advances

that the   Investor   shall be obligated   to make under this   Agreement   shall not

exceed the Commitment Amount.

 

         Section 2.2.       Mechanics.

 

     i. Advance Notice.   At any time during the Commitment   Period,   the Company

may deliver an Advance   Notice to the Investor,   subject to the   conditions   set

forth in   Section   7.2;   provided,   however,   the   amount   for each   Advance   as

designated by the Company in

 

                                        4

 

<PAGE>

 

 

 

the applicable Advance Notice shall not be more than the Maximum Advance Amount.

The aggregate amount of the Advances pursuant to this Agreement shall not exceed

the   Commitment   Amount.   The Company   acknowledges   that the   Investor may sell

shares of the Company's   Common Stock   corresponding   with a particular   Advance

Notice after the Advance   Notice is received by the   Investor.   There shall be a

minimum of five (5) Trading Days between each Advance Notice Date.

 

     ii. Date of Delivery of Advance   Notice.   An Advance Notice shall be deemed

delivered on (i) the Trading Day it is received by facsimile or otherwise by the

Investor if such notice is received   prior to 5:00 pm Eastern   Time, or (ii) the

immediately   succeeding   Trading Day if it is received by facsimile or otherwise

after 5:00 pm Eastern Time on a Trading Day or at any time on a day which is not

a Trading Day. No Advance Notice may be deemed   delivered on a day that is not a

Trading Day.

 

     Section 2.3.   Closings.   On each Advance Date (i) the Company shall deliver

to the Investor shares of the Company's Common Stock, representing the amount of

the Advance   specified   in such Advance   Notice   pursuant to Section 2.1 herein,

registered in the name of the Investor and (ii) upon receipt of such shares, the

Investor shall deliver to the Company the amount of the Advance specified in the

Advance Notice by wire transfer of immediately   available funds. In addition, on

or prior to the Advance Date, each of the Company and the Investor shall deliver

to the other all documents, instruments and writings required to be delivered by

either of them   pursuant to this   Agreement in order to implement and effect the

transactions   contemplated herein. The extent the Company has not paid the fees,

expenses,   and   disbursements   of the   Investor   or   the   Company's   counsel   in

accordance   with   Section   12.4,   the   amount   of   such   fees,    expenses,    and

disbursements may be deducted by the Investor (and shall be paid to the relevant

party)   directly   out of the   proceeds of the Advance   with no   reduction in the

amount of shares of the   Company's   Common Stock to be delivered on such Advance

Date.

 

     Section 2.4.   Termination of Investment.   The obligation of the Investor to

make an   Advance to the   Company   pursuant   to this   Agreement   shall   terminate

permanently   (including   with   respect   to an   Advance   Date   that   has   not yet

occurred)   in the event that (i) there shall occur any stop order or   suspension

of the   effectiveness   of the   Registration   Statement for an aggregate of fifty

(50)   Trading   Days,   other   than due to the acts of the   Investor,   during   the

Commitment   Period,   and (ii) the Company   shall at any time fail   materially to

comply with the   requirements of Article VI and such failure is not cured within

thirty (30) days after receipt of written   notice from the   Investor,   provided,

however,   that   this   termination   provision   shall   not   apply   to   any   period

commencing upon the filing of a   post-effective   amendment to such   Registration

Statement   and ending upon the date on which such post   effective   amendment   is

declared effective by the SEC.

 

     Section 2.5. Agreement to Advance Funds. The Investor agrees to advance the

amount   specified in the Advance   Notice to the Company after the   completion of

each of the   following   conditions   and the other   conditions   set forth in this

Agreement:

 

          (a) the   execution and delivery by the Company,   and the Investor,   of

     this Agreement and the Exhibits hereto;

 

                                        5

 

<PAGE>

 

 

 

          (b) The   Investor   shall   have   received   the   shares of Common   Stock

     applicable to the Advance in accordance with Section 2.3. Such shares shall

     be free of restrictive legends.

 

          (c) the Company's Registration Statement with respect to the resale of

     the Registrable Securities in accordance with the terms of the Registration

     Rights Agreement shall have been declared effective by the SEC;

 

          (d)   the   Company   shall   have   obtained   all   material    permits   and

     qualifications   required by any applicable   state for the offer and sale of

     the Registrable   Securities,   or shall have the   availability of exemptions

     therefrom.   The sale and issuance of the   Registrable   Securities   shall be

     legally   permitted   by all laws and   regulations   to which the   Company   is

     subject;

 

          (e) the   Company   shall   have filed   with the   Commission   in a timely

     manner all reports,   notices and other   documents   required of a "reporting

     company" under the Exchange Act and applicable Commission regulations;

 

          (f) the fees as set forth in Section   12.4 below   shall have been paid

     or can be withheld as provided in Section 2.3; and

 

          (g) the conditions set forth in Section 7.2 shall have been satisfied.

 

          (h)   the    Company    shall    have    provided    to   the    Investor    an

     acknowledgement,    from   the    Company's    independent    certified    public

     accountants as to its ability to provide all consents   required in order to

     file a registration statement in connection with this transaction;

 

          (i) The Company's transfer agent shall be DWAC eligible.

 

     Section 2.6. Lock Up Period. The Company shall obtain from each officer and

director a lock-up   agreement,   as defined below,   in the form annexed hereto as

Schedule 2.6 agreeing to only sell in compliance   with the volume   limitation of

Rule 144.

 

     Section   2.7.   Hardship.   In the event   the   Investor   sells   shares of the

Company's   Common Stock after receipt of an Advance Notice and the Company fails

to perform its   obligations   as mandated in Section   2.3, and   specifically   the

Company   fails to   deliver to the   Investor   on the   Advance   Date the shares of

Common Stock corresponding to the applicable Advance,   the Company   acknowledges

that the Investor shall suffer financial   hardship and therefore shall be liable

for any and all losses,   commissions,   fees, or financial hardship caused to the

Investor.

 

                                  ARTICLE III.

                   Representations and Warranties of Investor

 

     Investor   hereby   represents   and warrants to, and agrees with, the Company

that the   following   are true and   correct as of August 26,   2005 and as of each

Advance Date:

 

     Section   3.1.    Organization   and   Authorization.    The   Investor   is   duly

incorporated   or   organized   and   validly   existing in the   jurisdiction   of its

incorporation or organization and has all

 

                                        6

 

<PAGE>

 

 

 

requisite   power and   authority   to purchase   and hold the   securities   issuable

hereunder.   The   decision   to invest   and the   execution   and   delivery   of this

Agreement by such Investor,   the performance by such Investor of its obligations

hereunder and the consummation by such Investor of the transactions contemplated

hereby have been duly   authorized and requires no other   proceedings on the part

of the Investor.   The undersigned has the right,   power and authority to execute

and   deliver   this   Agreement   and all   other   instruments   (including,   without

limitations, the Registration Rights Agreement), on behalf of the Investor. This

Agreement has been duly executed and delivered by the Investor and, assuming the

execution   and   delivery   hereof and   acceptance   thereof by the   Company,   will

constitute the legal, valid and binding obligations of the Investor, enforceable

against the Investor in accordance with its terms.

 

     Section 3.2.   Evaluation   of Risks.   The Investor   has such   knowledge   and

experience in financial tax and business   matters as to be capable of evaluating

the   merits   and risks of,   and   bearing   the   economic   risks   entailed   by, an

investment   in the Company and of protecting   its   interests in connection   with

this   transaction.   It recognizes that its investment in the Company   involves a

high degree of risk.

 

     Section 3.3. No Legal Advice From the   Company.   The Investor   acknowledges

that it had the   opportunity   to   review   this   Agreement   and the   transactions

contemplated   by this Agreement with his or its own legal counsel and investment

and tax   advisors.   The Investor is relying   solely on such counsel and advisors

and   not on any   statements   or   representations   of the   Company   or any of its

representatives   or agents for legal,   tax or investment   advice with respect to

this   investment,   the   transactions   contemplated   by   this   Agreement   or   the

securities laws of any jurisdiction.

 

     Section 3.4. Investment Purpose.   The securities are being purchased by the

Investor for its own account, and for investment   purposes.   The Investor agrees

not to assign or in any way transfer the Investor's   rights to the securities or

any interest   therein and   acknowledges   that the Company will not recognize any

purported   assignment or transfer except in accordance   with applicable   Federal

and state securities laws. No other person has or will have a direct or indirect

beneficial   interest   in the   securities.   The   Investor   agrees   not   to   sell,

hypothecate   or   otherwise    transfer   the   Investor's    securities   unless   the

securities are registered   under Federal and applicable state securities laws or

unless, in the opinion of counsel satisfactory to the Company, an exemption from

such laws is available.

 

     Section 3.5. Accredited Investor.   The Investor is an "Accredited Investor"

as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.

 

     Section 3.6. Information.   The Investor and its advisors (and its counsel),

if any,   have   been   furnished   with all   materials   relating   to the   business,

finances and   operations of the Company and   information   it deemed   material to

making an informed investment decision.   The Investor and its advisors,   if any,

have been   afforded   the   opportunity   to ask   questions   of the Company and its

management.   Neither such   inquiries nor any other due diligence   investigations

conducted by such Investor or its advisors, if any, or its representatives shall

modify,   amend   or   affect   the   Investor's   right   to   rely   on   the   Company's

representations   and   warranties   contained   in   this   Agreement.   The   Investor

understands that its investment   involves a high degree of risk. The Investor is

in a position regarding the Company, which, based upon employment, family

 

                                        7

 

<PAGE>

 

 

 

relationship or economic bargaining power,   enabled and enables such Investor to

obtain information from the Company in order to evaluate the merits and risks of

this investment. The Investor has sought such accounting,   legal and tax advice,

as it has   considered   necessary to make an informed   investment   decision   with

respect to this transaction.

 

     Section   3.7.   Receipt of   Documents.   The   Investor   and its counsel   have

received and read in their entirety: (i) this Agreement and the Exhibits annexed

hereto;   (ii) all due   diligence and other   information   necessary to verify the

accuracy and   completeness   of such   representations,   warranties and covenants;

(iii) the   Company's   Form 10-KSB for the year ended   February 28, 2005 and Form

10-QSB for the period ended May 31, 2005;   and (iv) answers to all questions the

Investor   submitted to the Company   regarding an investment in the Company;   and

the Investor has relied on the   information   contained   therein and has not been

furnished any other documents, literature, memorandum or prospectus.

 

     Section 3.8.   Registration Rights Agreement.   The parties have entered into

the Registration Rights Agreement dated August 26, 2005.

 

     Section 3.9. No General   Solicitation.   Neither the Company, nor any of its

affiliates,   nor any person   acting on its or their   behalf,   has engaged in any

form of general   solicitation   or general   advertising   (within   the   meaning of

Regulation D under the Securities   Act) in connection   with the offer or sale of

the shares of Common Stock offered hereby.

 

     Section 3.10. Not an Affiliate. The Investor is not an officer, director or

a person   that   directly,   or   indirectly   through   one or more   intermediaries,

controls or is controlled by, or is under common control with the Company or any

"Affiliate"   of the   Company   (as   that   term   is   defined   in   Rule   405 of the

Securities Act).

 

     Section 3.11.   Trading   Activities.   The Investor's trading activities with

respect to the Company's Common Stock shall be in compliance with all applicable

federal   and state   securities   laws,   rules and   regulations   and the rules and

regulations   of the   Principal   Market on which the   Company's   Common   Stock is

listed or traded.   Neither the   Investor   nor its   affiliates   has an open short

position in the Common Stock of the Company,   the Investor   agrees that it shall

not, and that it will cause its   affiliates not to, engage in any short sales of

or hedging   transactions   with respect to the Common   Stock,   provided   that the

Company   acknowledges   and agrees   that upon   receipt   of an Advance   Notice the

Investor has the right to sell the shares to be issued to the Investor   pursuant

to the Advance Notice during the applicable Pricing Period.

 

                                   ARTICLE IV.

                  Representations and Warranties of the Company

 

     Except as stated below, on the disclosure   schedules   attached hereto or in

the SEC   Documents   (as defined   herein),   the   Company   hereby   represents   and

warrants to, and   covenants   with,   the Investor that the following are true and

correct as of August 26, 2005:

 

     Section   4.1.    Organization   and    Qualification.    The   Company   is   duly

incorporated   or   organized   and   validly   existing in the   jurisdiction   of its

incorporation or organization   and has all requisite   corporate power to own its

properties and to carry on its business as now being

 

                                        8

 

<PAGE>

 

 

 

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 a Material   Adverse   Effect on the Company and its

subsidiaries taken as a whole.

 

     Section 4.2. Authorization, Enforcement, Compliance with Other Instruments.

(i) The Company has the   requisite   corporate   power and authority to enter into

and perform this Agreement,   the Registration   Rights   Agreement,   the Placement

Agent Agreement and any related agreements,   in accordance with the terms hereof

and thereof, (ii) the execution and delivery of this Agreement, the Registration

Rights   Agreement,   the Placement Agent Agreement and any related   agreements by

the Company and the consummation by it of the transactions   contemplated   hereby

and thereby,   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) this Agreement,   the Registration   Rights

Agreement,   the Placement Agent   Agreement and any related   agreements have been

duly   executed   and   delivered   by   the   Company,    (iv)   this   Agreement,    the

Registration   Rights   Agreement,   the Placement Agent Agreement and assuming the

execution   and delivery   thereof and   acceptance by the Investor and any related

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 laws

relating to, or affecting   generally,   the enforcement of creditors'   rights and

remedies.

 

     Section 4.3.   Capitalization.   As of August 26, 2005, the 65,995,800 shares

of Common   Stock and no shares of   Preferred   Stock are issued and   outstanding.

Except as disclosed in the SEC Documents,   no shares of Common Stock are subject

to preemptive   rights or any other similar   rights or any liens or   encumbrances

suffered or permitted by the Company.   Except as disclosed in the SEC   Documents

or   on   the   Disclosure   Schedule,   as of   August   26,2005,   (i)   there   are   no

outstanding   options,    warrants,   scrip,   rights   to   subscribe   to,   calls   or

commitments   of any   character   whatsoever   relating to, or securities or rights

convertible   into,   any   shares of   capital   stock of the   Company or any of its

subsidiaries, or contracts, commitments, understandings 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 or

options,   warrants,   scrip,   rights to subscribe to, calls or commitments of any

character   whatsoever relating to, or securities or rights convertible into, any

shares of capital   stock of the Company or any of its   subsidiaries,   (ii) there

are no outstanding debt securities   (iii) there are no outstanding   registration

statements   other   than   on   Form   S-8   and   (iv)   there   are no   agreements   or

arrangements   under which the Company or any of its subsidiaries is obligated to

register the sale of any of their   securities   under the   Securities Act (except

pursuant to the   Registration   Rights   Agreement).   There are no   securities   or

instruments   containing    anti-dilution   or   similar   provisions   that   will   be

triggered by this Agreement or any related   agreement or the consummation of the

transactions   described   herein or therein.   The Company   has   furnished   to the

Investor or made available through the SEC's website at http://www.sec.gov, true

and correct copies of the Company's Certificate of Incorporation, as amended and

as in effect on August 26, 2005 (the   "Certificate of   Incorporation"),   and the

Company's By-laws, as in effect on August 26, 2005 (the "By-laws"),

 

                                        9

 

<PAGE>

 

 

 

and the terms of all securities convertible into or exercisable for Common Stock

and the material rights of the holders thereof in respect thereto.

 

     Section 4.4. No Conflict.   The execution,   delivery and performance of this

Agreement by the Company and the consummation by the Company of the transactions

contemplated   hereby will not (i) result in a violation   of the   Certificate   of

Incorporation,   any certificate of   designations   of any   outstanding   series of

preferred   stock of the Company or By-laws or (ii)   materially   conflict with or

constitute a material default (or an event which with notice or lapse of time or

both would become a default) under, or give to others any rights of termination,

amendment,    acceleration   or   cancellation   of,   any   agreement,   indenture   or

instrument to which the Company or any of its subsidiaries is a party, or result

in a material violation of any law, rule, regulation,   order, judgment or decree

(including   federal and state   securities laws and regulations and the rules and

regulations   of the   Principal   Market   on which   the   Common   Stock is   quoted)

applicable   to the Company or any of its   subsidiaries   or by which any material

property or asset of the Company or any of its subsidiaries is bound or affected

and which would cause a Material Adverse Effect.   Except as disclosed in the SEC

Documents,   neither the Company nor its subsidiaries is in violation of any term

of or in   default   under   its   Articles   of   Incorporation   or By- laws or their

organizational   charter or   by-laws,   respectively,   or any   material   contract,

agreement, mortgage,   indebtedness,   indenture,   instrument, judgment, decree or

order or any   statute,   rule or   regulation   applicable   to the   Company   or its

subsidiaries.   The   business of the Company   and its   subsidiaries   is not being

conducted in material   violation of any material law,   ordinance,   regulation of

any governmental entity.   Except as specifically   contemplated by this Agreement

and as required under the Securities   Act and any   applicable   state   securities

laws, the Company is not required to obtain any consent,   authorization or order

of, or make any filing or registration with, any court or governmental agency in

order for it to   execute,   deliver or perform   any of its   obligations   under or

contemplated   by   this   Agreement   or   the   Registration    Rights   Agreement   in

accordance   with the terms   hereof or   thereof.   All   consents,   authorizations,

orders,   filings   and   registrations   which the Company is required to obtain or

effect on or prior to August 26, 2005   pursuant to the   preceding   sentence have

been   obtained or effected on or prior to August 26,   2005.   The Company and its

subsidiaries   are unaware of any fact or   circumstance   which might give rise to

any of the foregoing.

 

     Section 4.5. SEC Documents;   Financial   Statements.   Since January 1, 2003,

the   Company   has filed all   reports,   schedules,   forms,   statements   and other

documents required to be filed by it with the SEC under of the Exchange Act. The

Company has delivered to the Investor or its representatives,   or made available

through the SEC's website at http://www.sec.gov, true and complete copies of the

SEC Documents.   As of their respective   dates,   the financial   statements of the

Company disclosed in the SEC Documents (the "Financial   Statements") complied as

to form in all material respects with applicable accounting requirements and the

published rules and regulations of the SEC with respect thereto.   Such financial

statements have been prepared in accordance with generally   accepted   accounting

principles, consistently applied, during the periods involved (except (i) as may

be otherwise   indicated in such financial   statements or the notes   thereto,   or

(ii) in the case of unaudited interim statements, to the extent they may exclude

footnotes or may be condensed or summary   statements) and, fairly present in all

material respects the financial   position of the Company as of the dates thereof

and the   results of its   operations   and cash flows for the   periods   then ended

(subject,   in the   case   of   unaudited   statements,   to   normal   year-end   audit

adjustments). No other information provided by or on

 

                                       10

 

<PAGE>

 

 

 

behalf of the Company to the Investor which is not included in the SEC Documents

contains any untrue   statement of a