Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
     This Securities Purchase Agreement is entered into and dated as of
October 10, 2006 (this “Agreement”), by and among ProLink Holdings Corp., a
Delaware corporation (the “Company”), and each of the purchasers identified on
the signature pages hereto (each, a “Purchaser” and collectively, the
“Purchasers”).
     WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, certain securities of the Company pursuant
to the terms set forth herein.
     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser,
severally and not jointly, agree as follows:
ARTICLE I.
DEFINITIONS
     1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the meanings set forth in this
Section 1.1:
          “Affiliate” means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
          “Bankruptcy Event” means any of the following events: (a) the Company
or any Subsidiary commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Subsidiary thereof; (b) there is commenced against the Company or
any Subsidiary any such case or proceeding that is not dismissed within 60 days
after commencement; (c) the Company or any Subsidiary is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Subsidiary suffers any appointment
of any custodian or the like for it or any substantial part of its property that
is not discharged or stayed within 60 days; (e) the Company or any Subsidiary
makes a general assignment for the benefit of creditors; (f) the Company or any
Subsidiary fails to pay, or states that it is unable to pay or is unable to pay,
its debts generally as they become due; (g) the Company or any Subsidiary calls
a meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Company or any Subsidiary, by any act or
failure to act, expressly indicates its

 

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consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.
          “Business Day” means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
          “Change of Control” means the occurrence of any of the following in
one or a series of related transactions: (i) an acquisition after the date
hereof by an individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) under the Exchange Act) of more than one-third of the voting
rights or equity interests in the Company; (ii) a replacement of more than
one-third of the members of the Company’s board of directors that is not
approved by those individuals who are members of the board of directors on the
date hereof (or other directors previously approved by such individuals);
(iii) a merger or consolidation of the Company or any Subsidiary or a sale of
more than one-third of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company’s securities prior to the first such transaction continue
to hold at least two-thirds of the voting rights and equity interests in of the
surviving entity or acquirer of such assets; (iv) a recapitalization,
reorganization or other transaction involving the Company or any Subsidiary that
constitutes or results in a transfer of more than one-third of the voting rights
or equity interests in the Company; (v) consummation of a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Exchange Act with respect to the
Company, or (vi) the execution by the Company or its controlling shareholders of
an agreement providing for or reasonably likely to result in any of the
foregoing events.
          “Closing” means the closing of the purchase and sale of the Securities
pursuant to Section 2.1.
          “Closing Date” means the date of the Closing.
          “Closing Price” means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then listed or
quoted on an Eligible Market or any other national securities exchange, the
closing bid price per share of the Common Stock for such date (or the nearest
preceding date) on the primary Eligible Market or exchange on which the Common
Stock is then listed or quoted; (b) if prices for the Common Stock are then
quoted on the OTC Bulletin Board, the closing bid price per share of the Common
Stock for such date (or the nearest preceding date) so quoted; (c) if prices for
the Common Stock are then reported in the “Pink Sheets” published by the
National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent closing bid
price per share of the Common Stock so reported; or (d) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by a majority in interest of the Purchasers.
          “Commission” means the Securities and Exchange Commission.
          “Common Stock” means the common stock of the Company, par value
$0.0001 per share, and any securities into which such common stock may hereafter
be reclassified.

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          “Common Stock Equivalents” means, collectively, Options and
Convertible Securities.
          “Company Counsel” means Fennemore Craig, P.C., counsel to the Company.
          “Contemplated Financing” means the contemplated private placement of
equity and derivative securities of the Company currently being discussed with
investors with Merriman Curhan Ford, as the placement agent, with a minimum
placement of $10 million of such securities.
          “Convertible Securities” means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common Stock.
          “Deposit Account Control Agreement” means the Deposit Account Control
Agreement dated as of the Closing Date, among the Iroquois Master Fund, Ltd., as
agent, the Company and M&I Bank substantially in the form of Exhibit H.
          “Effective Date” means the date that the Registration Statement is
first declared effective by the Commission.
          “Eligible Institutional Lender” means (a) Comerica Bank or any of its
affiliates, (b) a commercial bank having total assets in excess of
$5,000,000,000 or any affiliate or subsidiary thereof, (c) a savings and loan
association or savings bank organized under the laws of the United States or any
State thereof having a net worth, determined in accordance with GAAP, in excess
of $250,000,000, or (d) any other creditworthy and reputable entity that is
regularly engaged in the business of lending and is acceptable to holders of
50.1% of the aggregate outstanding principal amount of the Notes.
          “Eligible Market” means any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market, the Nasdaq Capital Market
and the OTC Bulletin Board.
          “Exchange Act” means the Securities Exchange Act of 1934, as amended.
          “Excluded Stock” means the issuance of Common Stock (A) upon exercise
or conversion of any options or other securities described in Schedule 3.1(g)
(provided that such exercise or conversion occurs in accordance with the terms
thereof, without amendment or modification, and that the applicable exercise or
conversion price or ratio is described in such schedule); or (B) in connection
with any issuance of shares or grant of options to employees, officers,
directors or consultants of the Company pursuant to any stock option plan or
employee benefit plan described in Schedule 3.1(g) or hereafter adopted by the
Company and approved by its shareholders or in respect of the issuance of Common
Stock upon exercise of any such options, (C) pursuant to a bona fide firm
commitment underwritten public offering with a nationally recognized underwriter
(excluding any equity lines) in an aggregate offering amount greater than
$20,000,000, or (D) in connection with a bona fide joint venture, strategic
partnership, or strategic alliance the primary purpose of which is not to raise
cash.

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          “Filing Date” means the 120th day following the Closing Date with
respect to the initial Registration Statement required to be filed hereunder,
and, with respect to any additional Registration Statements that may be required
pursuant to Section 6.1(f), the 15th day following the date on which the Company
first knows, or reasonably should have known, that such additional Registration
Statement is required under such Section.
          “Losses” means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of preparation
of legal action and reasonable attorneys’ fees.
          “Notes” means the Senior Secured Notes due April 11, 2007 with an
aggregate principal face amount of $4,5000,000 issued by the Company to the
Purchasers hereunder in the form of Exhibit A hereto.
          “Options” means any rights, warrants or options to subscribe, directly
or indirectly for or purchase Common Stock or Convertible Securities.
          “Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
          “Post-Effective Amendment” means a post-effective amendment to the
Registration Statement.
          “Post-Effective Amendment Filing Deadline” means the 10th Trading Day
after the Registration Statement cease to be effective pursuant to applicable
securities laws due to the passage of time or the occurrence of an event
requiring the Company to file a Post-Effective Amendment.
          “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
          “Prospectus” means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus including post effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
          “Purchaser Counsel” means Malhotra & Associates LLP, counsel to
Iroquois Master Fund, Ltd.
          “Registrable Securities” means any Underlying Shares issued or
issuable pursuant to the Transaction Documents, together with any securities
issued or issuable upon any

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stock split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing.
          “Registration Statement” means the initial registration statement
required to be filed under Article VI and any additional registration statements
contemplated by Section 6.1(f), including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
          “Required Effectiveness Date” means (i) with respect to the initial
Registration Statement required to be filed hereunder, the 180th day following
the Closing Date, and (ii) with respect to any additional Registration
Statements that may be required pursuant to Section 6.1(f), the 60th day
following the date on which the Company first knows, or reasonably should have
known, that such additional Registration Statement is required under such
Section.
          “Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and
Rule 424, respectively, promulgated by the Commission pursuant to the Securities
Act, as such Rules may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
          “Securities” means the Notes, the Warrants and the Underlying Shares
issued or issuable (as applicable) to the applicable Purchaser pursuant to the
Transaction Documents.
          “Securities Act” means the Securities Act of 1933, as amended.
          “Security Agreement” means the Security Agreement dated as of the
Closing Date, among the Company, Iroquois Master Fund, Ltd., as agent, and the
Purchasers substantially in the form of Exhibit E.
          “Senior Debt” means the obligations of the Company pursuant to that
certain Loan and Security Agreement dated as of June 30, 2006 by and between the
Company and Comerica Bank (the “Comerica Loan”) and the Promissory Note dated as
of an even date therewith evidencing the debt of the Company with respect to the
Comerica Loan and, subject to Section 4.10(b), the proposed replacement term
loan for such Comerica Loan that does not exceed $2,500,000 and the revolving
credit facility the aggregate amount of which does not exceed $3,000,000;
provided, however, that the Company shall not borrow or request any funding
under the revolving credit facility without the prior written consent of holders
of 50.1% of the aggregate outstanding principal amount of the Notes.
          “Subordination Agreement” means the Subordination and Standstill
Agreement dated as of the Closing Date, among the Purchasers, the Company and
Comerica Bank substantially in the form of Exhibit G.
          “Subsidiary” means any subsidiary of the Company that is required to
be listed on Schedule 3.1(a).

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          “Trading Day” means (a) any day on which the Common Stock is listed or
quoted and traded on its primary Trading Market, or (b) if the Common Stock is
not then listed or quoted and traded on any Trading Market, then any Business
Day.
          “Trading Market” means the OTC Bulletin Board or any other Eligible
Market or any national securities exchange, market or trading or quotation
facility on which the Common Stock is then listed or quoted.
          “Transaction Documents” means this Agreement, the Notes, the Deposit
Account Control Agreement, the Subordination Agreement, the Warrant, the
Security Agreement, the Transfer Agent Instructions and any other documents or
agreements executed or delivered in connection with the transactions
contemplated hereby.
          “Transfer Agent Instructions” means the Company’s transfer agent
instructions in the form of Exhibit C.
          “Underlying Shares” means the shares of Common Stock issuable (i) upon
exercise of the Warrants, (ii) upon payment of interest in Conversion Shares
pursuant to the Notes, and (iii) in satisfaction of any other obligation of the
Company to issue shares of Common Stock pursuant to the Transaction Documents,
and in each case, any securities issued or issuable in exchange for or in
respect of such securities.
          “VWAP” means on any particular Trading Day or for any particular
period the volume weighted average trading price per share of Common Stock on
such date or for such period on an Eligible Market as reported by Bloomberg
Financial Markets, or any successor performing similar functions; provided,
however, that during any period the VWAP is being determined, the VWAP shall be
subject to adjustment from time to time for stock splits, stock dividends,
combinations and similar events as applicable.
          “Warrants” mean, collectively, the Common Stock warrants issued and
sold under this Agreement, in the form of Exhibit B.
ARTICLE II.
PURCHASE AND SALE
     2.1 Closing. The Closing Date shall be 10:00 a.m., New York City time, on
the date hereof (or such later date as is mutually agreed to by the Company and
each Purchaser) after notification of satisfaction (or waiver) of the conditions
to the Closing set forth in Article V. Subject to the terms and conditions set
forth in this Agreement, at the Closing, the Company shall issue and sell to
each Purchaser, and each Purchaser shall, severally and not jointly, purchase
from the Company, the Notes and the Warrants for the purchase price set forth on
Schedule A hereto under the heading “Purchase Price”. The Closing shall take
place at the offices of Purchaser Counsel or at such other location or time as
the parties may agree.
2.2 Closing Deliveries.

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          (a) At the Closing, the Company shall deliver or cause to be delivered
to each Purchaser the following:
               (i) a Note, registered in the name of such Purchaser, in the
principal amount indicated on Schedule A hereto under the heading “Note
Principal Amount”;
               (ii) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire such number of
Underlying Shares indicated on Schedule A hereto under the heading “Warrant
Shares”.
               (iii) the legal opinion of Company Counsel, in the form of
Exhibit D, executed by such counsel and delivered to the Purchasers;
               (iv) the Security Agreement executed by the parties thereto;
               (v) the Subordination Agreement executed by the parties thereto;
               (vi) the Deposit Account Control Agreement executed by the
parties thereto;
               (vii) copies of the Uniform Commercial Code financing statements
and other documents or agreements required by the Security Agreement with
respect to the security granted thereby, and evidence of the filing of such
financing statement, documents or agreements;
               (viii) duly executed Transfer Agent Instructions acknowledged by
the Company’s transfer agent; and
               (ix) any other document reasonably requested by the Purchasers or
Purchaser Counsel.
          (b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company (i) the purchase price indicated below such Purchaser’s
name on the signature page of this Agreement under the heading “Purchase Price”,
in United States dollars and in immediately available funds, by wire transfer to
an account designated in writing by the Company for such purpose, and (ii) the
Security Agreement and the Subordination Agreement executed by such Purchaser.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
     3.1 Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to the Purchasers:
          (a) Subsidiaries. The Company does not directly or indirectly control
or own any interest in any other corporation, partnership, joint venture or
other business association or entity (a “Subsidiary”), other than those listed
in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the Company owns,
directly or indirectly, all of the capital stock or comparable

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equity interests of each Subsidiary free and clear of any lien, charge, claim,
security interest, encumbrance, right of first refusal or other restriction
(collectively, “Liens”), and all the issued and outstanding shares of capital
stock or comparable equity interests of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.
          (b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate,
(i) adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in 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) adversely impair the
Company’s ability to perform fully on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).
          (c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereunder and thereunder have been duly authorized by
all necessary action on the part of the Company and no further consent or action
is required by the Company, its Board of Directors or its stockholders. Each
Transaction Document has been (or upon delivery will be) duly executed by the
Company is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its certificate or articles of
incorporation, by laws or other organizational or charter documents.
          (d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that 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 (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is

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subject (including federal and state securities laws and regulations and the
rules and regulations of any self-regulatory organization to which the Company
or its securities are subject), or by which any property or asset of the Company
or a Subsidiary is bound or affected; except in each case as, individually or in
the aggregate, do not have or are not reasonably be expected to result in a
Material Adverse Effect.
          (e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of a Form 8-K Current Report,
(ii) the filing with the Commission of the Registration Statement, (iii) the
application(s) to each Trading Market for the listing of the Underlying Shares
for trading thereon, (iv) the notification to the Trading Market of the change
in the number of shares outstanding, and (v) applicable Blue Sky filings
(collectively, the “Required Approvals”).
          (f) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the Transaction Documents, will
be duly and validly issued, fully paid and nonassessable, free and clear of all
Liens (other than restrictions under applicable securities laws), and shall not
be subject to preemptive rights or similar rights of shareholders. The
Securities are issued in compliance with applicable securities laws, rules and
regulations. The Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable under the Transaction
Documents.
          (g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(g). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws. No securities of the Company are entitled
to preemptive or similar rights, and no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities and except as disclosed in
Schedule 3.1(g), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. The issue and sale of the Securities will not obligate the Company
to issue shares of Common Stock or other securities to any Person (other than
the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities. To the knowledge of the Company, except as specifically
disclosed in Schedule 3.1(g), no Person or group of related Persons beneficially
owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the
right to acquire, by agreement with or by obligation binding upon the Company,
beneficial ownership of in excess of 5% of the outstanding Common Stock,
ignoring

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for such purposes any limitation on the number of shares of Common Stock that
may be owned at any single time.
          (h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the “SEC Reports” and, together with the Schedules to this
Agreement, the “Disclosure Materials”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the Purchasers a
copy of all SEC Reports filed within the 10 days preceding the date hereof. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
All material agreements to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject are
included as part of or specifically identified in the SEC Reports.
          (i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed on
Schedule 3.1(i), the SEC Reports or in Schedule 3.1(i), (i) there has been no
event, occurrence or development that, individually or in the aggregate, has had
or that could result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.
          (j) Absence of Litigation. Except as described in Schedule 3.1(j),
there is no action, suit, inquiry, notice of violation, proceeding or, to the
knowledge of the Company investigation pending or threatened against or
affecting the Company, any Subsidiary or any of

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their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
          (k) Employee Matters. Neither the Company nor any of the Subsidiaries
is engaged in any unfair labor practice (as defined in the National Labor
Relations Act); except for matters which would not, individually or in the
aggregate, have a Material Adverse Effect, (i) there is (A) no unfair labor
practice complaint pending or, to the Company’s knowledge after due inquiry,
threatened against the Company or any of the Subsidiaries before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under collective bargaining agreements is pending or threatened, (B) no
strike, labor dispute, slowdown or stoppage pending or, to the Company’s
knowledge, threatened against the Company or any of the Subsidiaries and (C) no
union representation dispute currently existing concerning the employees of the
Company or any of the Subsidiaries, and (ii) to the Company’s knowledge, there
has been no violation of any applicable federal, state, local or foreign law
relating to discrimination in the hiring, promotion or pay of employees, any
applicable wage or hour laws or any applicable provision of the Employee
Retirement Income Security Act of 1974 or the rules and regulations promulgated
thereunder concerning the employees of the Company or any of the Subsidiaries.
          (l) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as does not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
          (m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect (“Material Permits”), and neither the

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Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.
          (n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens identified as Permitted Liens under the Security
Agreement and Liens as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
          (o) Patents and Trademarks. Except as described in Schedule 3.1(o),
the Company and the Subsidiaries have, or have rights to use, all patents,
patent applications, trademarks, trademark applications, service marks, trade
names, copyrights, licenses and other similar rights that are necessary or
material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the “Intellectual Property Rights”). Neither the Company
nor any Subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.
          (p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
          (q) Transactions With Affiliates and Employees. Except as set forth in
Schedule 3.1(q), none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
          (r) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in

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conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
          (s) Solvency. Based on the financial condition of the Company as of
the Closing Date, (i) the Company’s fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company’s assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and
(iii) the current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all amounts
on or in respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt).
          (t) Certain Fees. Except as described in Schedule 3.1(t), no brokerage
or finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Purchasers shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchasers, their employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney’s fees) and
expenses suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
          (u) Private Placement. Neither the Company nor, to the knowledge of
the Company, any Person acting on the Company’s behalf has sold or offered to
sell or solicited any offer to buy the Securities by means of any form of
general solicitation or advertising. Neither the Company nor any of its
Affiliates nor, to the Company’s knowledge, any Person acting on the Company’s
behalf has, directly or indirectly, at any time within the past six months, made
any offer or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability of the
exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Securities as contemplated hereby or
(ii) cause the offering of the Securities pursuant to the Transaction Documents
to be integrated with prior offerings by the Company for purposes of any
stockholder approval provisions under the rules and regulations of any Trading
Market. Assuming the accuracy of the Purchasers representations and warranties
set forth in Section 3.2, no registration under the Securities Act is required
for the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market and no shareholder
approval is required for the Company to fulfill its obligations under the
Transaction Documents. The

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Company is not a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.
          (v) Listing and Maintenance Requirements. The Company has not, since
December 23, 2005, received notice (written or oral) from any Eligible Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Eligible Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
          (w) Registration Rights. Except as described in Schedule 3.1(w), the
Company has not granted or agreed to grant to any Person any rights (including
“piggy back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
          (x) Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar anti
takeover provision under the Company’s Certificate of Incorporation (or similar
charter documents) or the laws of its state of incorporation that is or could
become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.
          (y) Disclosure. Except for the Contemplated Financing, the Company
confirms that neither it nor any other Person acting on its behalf has provided
any of the Purchasers or their agents or counsel with any information that
constitutes or might constitute material, non-public information. The Company
understands and confirms that the Purchasers will rely on the foregoing
representations in effecting transactions in securities of the Company. All
disclosure provided to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company are true and correct and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed. The Company acknowledges and
agrees that no Purchaser makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2.
          (z) No Violation. The issuance and sale of the Securities contemplated
hereby does not conflict with or violate any rules or regulations of the Trading
Market.
          (aa) Acknowledgment Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of

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an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that no Purchaser is
acting as a financial advisor or fiduciary of the Company or any other Purchaser
(or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Purchaser’s
purchase of the Securities. The Company further represents to each Purchaser
that the Company’s decision to enter into this Agreement has been based solely
on the independent evaluation of the Company and its representatives. The
Company further acknowledges that no Purchaser has made any promises or
commitments other than as set forth in this Agreement, including any promises or
commitments for any additional investment by any such Purchaser in the Company.
          (bb) Investment Company. The Company is not, and is not an Affiliate
of, an investment company within the meaning of the Investment Company Act of
1940, as amended.
          (cc) Ranking. Except for the Senior Debt and as set forth on Schedule
3.1(cc), as of the date of this Agreement, no indebtedness of the Company is
senior to, or pari passu with, the Notes in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise.
          (dd) Indebtedness. Except for the Senior Debt and as set forth on
Schedule 3.1(dd) and trade payables arising in the ordinary course of business
not more than sixty (60) days past due, the Company does not have any
indebtedness.
          (ee) Taxes. The Company and each of its Subsidiaries (i) has made or
filed all federal, foreign and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
          (ff) Environmental. The Company and the Subsidiaries and their
properties, assets and operations are in compliance with, and hold all permits,
authorizations and approvals required under, Environmental Laws (as defined
below), except to the extent that failure to so comply or to hold such permits,
authorizations or approvals would not, individually or in the aggregate, have a
Material Adverse Effect; except as set forth on Schedule 3.1(ff), there are no
past or present events, conditions, circumstances, activities, practices,
actions, omissions or plans that could reasonably be expected to give rise to
any material costs or liabilities to the Company or the Subsidiaries under, or
to interfere with or prevent compliance by the Company or the Subsidiaries with,
Environmental Laws; except as would not, individually or in the aggregate, have
a Material Adverse Effect, neither the Company nor any of the Subsidiaries
(i) is the subject of any investigation, (ii) has received any notice or claim,
(iii) is a party to or affected by any pending or threatened action, suit or
proceeding, (iv) is bound by any judgment, decree or order or (v) has entered
into any agreement, in each case relating to any alleged violation of any

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Environmental Law or any actual or alleged release or threatened release or
cleanup at any location of any Hazardous Materials (as defined below) (as used
herein, “Environmental Law” means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, order, decree, judgment, injunction,
permit, license, authorization or other binding requirement or common law
(including any applicable regulations and standards adopted by the International
Maritime Organization) relating to health, safety or the protection, cleanup or
restoration of the environment or natural resources, including those relating to
the distribution, processing, generation, treatment, storage, disposal,
transportation, other handling or release or threatened release of Hazardous
Materials, and “Hazardous Materials” means any material (including, without
limitation, pollutants, contaminants, hazardous or toxic substances or wastes)
that is regulated by or may give rise to liability under any Environmental Law).
          (gg) Sarbanes-Oxley Act. The Company is in compliance with applicable
requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in effect as of the date of
this Agreement, except where such noncompliance could not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect.
     3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company as follows:
          (a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate, limited liability
company or partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of this Agreement have been duly authorized by all
necessary corporate or limited liability company action on the part of such
Purchaser. This Agreement has been duly executed by such Purchaser and, when
delivered by such Purchaser in accordance with terms hereof, will constitute the
valid and legally binding obligation of such Purchaser, enforceable against it
in accordance with its terms.
          (b) Investment Intent. Such Purchaser is acquiring the Securities for
its own account and not with a view to or for distributing or reselling such
Securities or any part thereof, without prejudice, however, to such Purchaser’s
right, subject to the provisions of this Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws. Nothing contained herein shall be deemed a representation or warranty by
such Purchaser to hold Securities for any period of time. Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.
          (c) Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, an (i) “accredited investor”
as defined in Rule 501(a) under the Securities Act or (2) a “qualified
institutional buyer” as defined in Rule 144A under the Securities Act. Such
Purchaser is not a registered broker-dealer under Section 15 of the Exchange
Act.

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          (d) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
          (e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
          (f) Nature of the Investment. Such Purchaser understands the nature of
this investment, is fully aware and familiar with the business operations of the
Company, and is able to evaluate the merits and risks of an investment in the
Securities.
          (g) Disclosure. Such Purchaser has been given the opportunity to ask
questions about the Company and has been granted access to all information,
financial and otherwise, with respect to the Company which has been requested,
has examined such information, and is satisfied with respect to the same.
          (h) Advice. Such Purchaser has been encouraged to rely upon the advice
of his, her or its legal counsel and accountants or other financial advisors
with respect to the tax and other considerations relating to the investment in
the Securities and, in determining to invest in the Securities, has relied
solely upon (i) the advice of its legal counsel and accountants or other
financial advisors with respect to the tax, economic and other consequences
involved and (ii) such Purchaser’s own, independent evaluation of the business,
operations and prospects of the Company and the merits and risks of the
investment in the Securities.
          (i) Nature of Investment. Such Purchaser has been advised and
understands that this investment is, by its nature, very speculative.
          (j) Approval by the Commission. Such Purchaser understands that no
federal or state agency, including the Commission or the securities regulatory
agency of any state, has approved or disapproved the Securities, passed upon or
endorsed the merits of the Securities, or made any finding or determination as
to the fairness of the Securities.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
          (a) The Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel selected

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by the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, any transfer of
Securities by a Purchaser to an Affiliate of such Purchaser, provided that the
transferee certifies to the Company that it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act.
          (b) The Purchasers agree to the imprinting, except as otherwise
permitted by Section 4.1(c), the following legend on any certificate evidencing
Securities:

    [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

          (c) Certificates evidencing Securities shall not be required to
contain the legend set forth in Section 4.1(b) or any other legend (i) while a
Registration Statement covering the resale of such Securities is effective under
the Securities Act, or (ii) following any sale of such Securities pursuant to
Rule 144, or (iii) if such Securities are eligible for sale under Rule 144(k),
or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). The Company shall cause its counsel to issue the
legal opinion included in the Transfer Agent Instructions to the Company’s
transfer agent on the Effective Date. Following the Effective Date or at such
earlier time as a legend is no longer required for certain Securities, the
Company will no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company’s transfer agent of a legended
certificate representing such Securities, deliver or cause to be delivered to
such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in Section 4.1(b). For so long as any
Purchaser owns Securities, the Company will not effect or publicly announce its
intention to effect any exchange, recapitalization or other

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transaction that effectively requires or rewards physical delivery of
certificates evidencing the Common Stock.
          (d) The Company acknowledges and agrees that a Purchaser may from time
to time pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser’s expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder.
     4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities (including the Underlying Shares) will result in dilution of
the outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including without limitation its obligation to
issue the Securities (including the Underlying Shares) pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of the effect of
any such dilution or any claim that the Company may have against any Purchaser.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
it is understood and agreed by the Company (i) that none of the Purchasers have
been asked to agree, nor has any Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term; (ii) that future open market or other transactions by
any Purchaser, including short sales, and specifically including, without
limitation, short sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) that any
Purchaser, and counter parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) that each Purchaser shall not be deemed
to have any affiliation with or control over any arm’s length counter-party in
any “derivative” transaction.
     4.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with paragraph (c) of Rule 144 such information
as is required for the Purchasers to sell the Securities under Rule 144. The
Company further covenants that it will take such further action as any holder of
Securities may reasonably request to satisfy the provisions of Rule 144
applicable to the issuer of securities relating to transactions for the sale of
securities pursuant to Rule 144.

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     4.4 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
     4.5 Reservation and Listing of Securities.
          (a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents in
such amount as may be required to fulfill its obligations in full under the
Transaction Documents.
          (b) The Company shall (i) in the time and manner required by each
Trading Market, prepare and file with such Trading Market an additional shares
listing application covering all of the shares of Common Stock issued or
issuable under the Transaction Documents, (ii) take all steps necessary to cause
such shares of Common Stock to be approved for listing on each Trading Market as
soon as possible thereafter, (iii) provide to the Purchasers evidence of such
listing, and (iv) maintain the listing of such Common Stock on each such Trading
Market or another Eligible Market.
          (c) In the case of a breach by the Company of Section 4.5(a), in
addition to the other remedies available to the Purchasers, the Purchasers shall
have the right to require the Company to either: (i) use its best efforts to
obtain the required shareholder approval necessary to permit the issuance of
such shares of Common Stock as soon as is possible, but in any event not later
than the 60th day after such notice, or (ii) within five Trading Days after
delivery of a written notice, pay cash to such Purchaser, as liquidated damages
and not as a penalty, in an amount equal to the number of shares of Common Stock
not issuable by the Company times 115% of the arithmetic average of the VWAP for
each of the five Trading Days immediately prior to the date of such notice or,
if greater, the five Trading Days immediately prior to the date of payment (the
“Cash Amount”). If the exercising Purchaser elects the first option under the
preceding sentence and the Company fails to obtain the required shareholder
approval on or prior to the 60th day after such notice, then within three
Trading Days after such 60th day, the Company shall pay the Cash Amount to such
Purchaser, as liquidated damages and not as penalty.
     4.6 Subsequent Placements.
          (a) Except for the Contemplated Financing, from the date hereof until
30 Trading Days following the Effective Date, the Company will not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition of) any of its or the Subsidiaries’ equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for Common Stock
or Common Stock Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a “Subsequent Placement”).

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                    (b) From and after the date hereof and for so long as the
Notes are outstanding, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with this
Section 4.6(b), it being understood and agreed that this Section 4.6(b) shall
apply to the Contemplated Financing.
               (i) The Company shall deliver to each Purchaser a written notice
(the “Offer”) of any proposed or intended issuance or sale or exchange of the
securities being offered (the “Offered Securities”) in a Subsequent Placement,
which Offer shall (w) identify and describe the Offered Securities, (x) describe
the price and other terms upon which they are to be issued, sold or exchanged,
and the number or amount of the Offered Securities to be issued, sold or
exchanged, (y) identify the Persons or entities to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with each Purchaser a portion of the Offered
Securities in an amount equal to twice such Purchaser’s initial aggregate
principal investment amount in the Notes purchased hereunder (the “Basic
Amount”), and (B) with respect to each Purchaser that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to
the Basic Amounts of other Purchasers as such Purchaser shall indicate it will
purchase or acquire should the other Purchasers subscribe for less than their
Basic Amounts (the “Undersubscription Amount”).
               (ii) To accept an Offer, in whole or in part, a Purchaser must
deliver a written notice to the Company prior to the end of the 7 Trading Day
period of the Offer, setting forth the portion of the Purchaser’s Basic Amount
that such Purchaser elects to purchase and, if such Purchaser shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that
such Purchaser elects to purchase (in either case, the “Notice of Acceptance”).
If the Basic Amounts subscribed for by all Purchasers are less than the total of
all of the Basic Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, that if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), each Purchaser who has subscribed for any Undersubscription Amount
shall be entitled to purchase on that portion of the Available Undersubscription
Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of
all Purchasers that have subscribed for Undersubscription Amounts, subject to
rounding by the Board of Directors to the extent its deems reasonably necessary.
               (iii) The Company shall have 5 Trading Days from the expiration
of the period set forth in Section 4.6(b)(ii) above to issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of Acceptance
has not been given by the Purchasers (the “Refused Securities”), but only to the
offerees described in the Offer and only upon terms and conditions (including,
without limitation, unit prices and interest rates) that are not more favorable
to the acquiring Person or Persons or less favorable to the Company than those
set forth in the Offer.

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               (iv) In the event the Company shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 4.6(b)(iii) above), then each Purchaser may, at its sole
option and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that the Purchaser
elected to purchase pursuant to Section 4.6(b)(ii) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Purchasers pursuant to
Section 4.6(c)(ii) above prior to such reduction) and (ii) the denominator of
which shall be the original amount of the Offered Securities. In the event that
any Purchaser so elects to reduce the number or amount of Offered Securities
specified in its Notice of Acceptance, the Company may not issue, sell or
exchange more than the reduced number or amount of the Offered Securities unless
and until such securities have again been offered to the Purchasers in
accordance with Section 4.6(b)(i) above.
               (v) Upon the closing of the issuance, sale or exchange of all or
less than all of the Refused Securities, the Purchasers shall acquire from the
Company, and the Company shall issue to the Purchasers, the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 4.6(b)(iv) above if the Purchasers have so elected, upon the terms
and conditions specified in the Offer. The purchase by the Purchasers of any
Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Purchasers of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Purchasers and their respective counsel. Notwithstanding anything to the
contrary contained in this Agreement, if the Company does not consummate the
closing of the issuance, sale or exchange of all or less than all of the Refused
Securities within 7 Trading Days of the expiration of the period set forth in
Section 4.6(b)(ii), the Company shall issue to the Purchasers the number or
amount of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 4.6(b)(iv) above if the Purchasers have so elected, upon the
terms and conditions specified in the Offer.
               (vi) Any Offered Securities not acquired by the Purchasers or
other Persons in accordance with Section 4.6(b)(iii) above may not be issued,
sold or exchanged until they are again offered to the Purchasers under the
procedures specified in this Agreement.
               (vii) Notwithstanding anything to the contrary in this
Section 4.6 and unless otherwise agreed to by the Purchasers, the Company shall
either confirm in writing to the Purchasers that the transaction with respect to
the Subsequent Placement has been abandoned or shall publicly disclose its
intention to issue the Offered Securities, in either case in such a manner such
that the Purchasers will not be in possession of material non-public
information, by the tenth (10th) Business Day following delivery of the Offer
Notice. If by the tenth (10th) following delivery of the Offer Notice no public
disclosure regarding a transaction with respect to the Offered Securities has
been made, and no notice regarding the abandonment of such transaction has been
received by the Purchasers, such transaction shall be deemed to have been
abandoned and the Purchasers

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shall not be deemed to be in possession of any material, non-public information
with respect to the Company. Should the Company decide to pursue such
transaction with respect to the Offered Securities, the Company shall provide
each Purchaser with another Offer Notice and each Purchaser will again have the
right of participation set forth in this Section 4.6. The Company shall not be
permitted to deliver more than four such Offer Notices to the Buyers in any
12 month period.
               (c) The restrictions contained in paragraph (b) of this
Section 4.6 shall not apply to Excluded Stock.
             4.7 Exercise Procedures. The form of Exercise Notice included in
the Warrants set forth the totality of the procedures required by the Purchasers
in order to exercise the Warrants. No additional legal opinion or other
information or instructions shall be necessary to enable the Purchasers to
exercise their Warrants. The Company shall honor exercises of the Warrants and
shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.
             4.8 Securities Laws Disclosure; Publicity. On or before 8:30 a.m.,
New York time, on October 9, 2006, the Company shall issue a press release
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. Within two Business Day of the date of this Agreement, the
Company shall file a Current Report on Form 8-K with the Commission (the “8-K
Filing”) describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement and the form of Notes and Warrants, in the form required by
the Exchange Act. Thereafter, the Company shall timely file any filings and
notices required by the Commission or applicable law with respect to the
transactions contemplated hereby and provide copies thereof to the Purchasers
promptly after filing. Except with respect to the 8-K Filing and the press
release referenced above (a copy of which will be provided to Purchaser Counsel
for its review as early as practicable prior to its filing), the Company shall,
at least two Trading Days prior to the filing or dissemination of any disclosure
required by this paragraph, provide a copy thereof to the Purchasers for their
review. The Company and the Purchasers shall consult with each other in issuing
any press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement, filing
or other communication without the prior consent of the other, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing or
other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure.
Except for the Contemplated Financing, the Company shall not, and shall cause
each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents not to, provide any Purchaser with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the 8-K Filing without the express written consent of such
Purchaser. In the event of

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a breach of the foregoing covenant by the Company, any of its Subsidiaries, or
any of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents, a
Purchaser shall have the right to require the Company to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material nonpublic information. No Purchaser shall have any liability to
the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure. Subject to
the foregoing, neither the Company nor any Purchaser shall issue any press
releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Purchaser, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) Purchaser Counsel shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release). Each press
release disseminated during the 12 months prior to the Closing Date did not at
the time of release contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
     4.9 Use of Proceeds. The net proceeds shall be used for working capital
purposes and not for the satisfaction of any portion of the Company’s debt
(other than payment of trade payables and accrued expenses in the ordinary
course of the Company’s business and prior practices), to redeem any Company
equity or equity-equivalent securities or to settle any outstanding litigation.
In no event shall the net proceeds be used to repay the amounts due under the
Letter Factoring Agreement with FOC Financial L.P.
     4.10 Indebtedness.
          (a) At any time after the date of this Agreement, other than the
Senior Debt and any permitted replacement or refinancing of the Senior Debt,
neither the Company nor any Subsidiary of the Company shall incur any
indebtedness, liability or obligation that is senior to, or pari passu with, the
Notes in right of payment, whether with respect to interest or upon liquidation
or dissolution, or otherwise; provided, however, that notwithstanding the
foregoing, the Company may, in the ordinary course of business, incur
indebtedness secured by purchase money security interests (which will be senior
only as to the underlying assets covered thereby) and indebtedness under capital
lease obligations (which will be senior only as to the underlying assets covered
thereby).
          (b) Notwithstanding anything to the contrary, the Company shall be
permitted to amend, modify, replace or refinance the Senior Debt with a new term
note with an Eligible Institutional Lender in an amount not exceeding $2,500,000
and enter into a revolving credit facility with an Eligible Institutional Lender
not exceeding $3,000,000; provided however, that (i) the maturity date of any
new term note shall be after the maturity date of the Notes and (ii) the Company
shall not borrow or request any funding under the revolving credit facility
without the prior written consent of holders of 50.1% of the aggregate
outstanding principal amount of the Notes.

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          (c) The provisions of this Section 4.10 shall terminate and be of no
further force or effect upon the indefeasible repayment in full of the Notes and
all accrued interest thereon and any and all expenses or liabilities relating
thereto.
     4.11 Repayment of Notes. Each of the parties hereto agrees that all
repayments of the Notes (including any accrued interest thereon) by the Company
will be paid pro rata to the holders thereof based upon the principal amount
then outstanding to each of such holders.
     4.12 No Impairment. At all times after the date hereof, the Company will
not take or permit any action, or cause or permit any Subsidiary to take or
permit any action that impairs or adversely affects the rights of the Purchasers
under the Agreement or the Notes.
     4.13 Fundamental Changes.
                  (a) In addition to any other rights provided by law or set
forth herein, from and after the date of this Agreement and for so long as any
Notes remain outstanding, the Company shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of a
majority of the outstanding principal face amount of the Notes:
              (i) purchase, redeem (other than pursuant to equity incentive
agreements with non-officer employees giving the Company the right to repurchase
shares upon the termination of services) or set aside any sums for the purchase
or redemption of, or declare or pay any dividend (including a dividend payable
in stock of the Company) or make any other distribution with respect to, any
shares of capital stock or any other securities that are convertible into or
exercisable for such stock;
              (ii) change the nature of the Company’s business to any business
which is fundamentally distinct and separate from the business currently
conducted by the Company; or
              (iii) cause or permit any Subsidiary of the Company directly or
indirectly to take any actions described in clauses (a) through (b) above, other
than issuing securities to the Company.
                  (b) Except as set forth in Section 4.10(b) above and for the
Contemplated Financing, from the date of this Agreement until the 30th Trading
Day following the Effective Date, the Company shall not without first obtaining
the approval (by vote or written consent, as provided by law) of the holders of
a majority of the outstanding principal face amount of the Notes:
     (i) acquire or merge with any other business entity;
     (ii) sell a substantial portion of assets not in the ordinary course of
business;
     (iii) enter into a transaction that results in or cause a Change of
Control;
     (iv) amend the Company’s charter or by-laws;

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               (v) increase the number of shares issuable pursuant to any stock
option or other equity incentive plan;
               (vi) change the nature of the Company’s business to any business
which is fundamentally distinct and separate from the business currently
conducted by the Company;
               (vii) except as set forth on Schedule 3.1(dd), create, incur,
assume or suffer to exist indebtedness greater than $100,000 in aggregate;
               (viii) except as set forth on Schedule 3.1(dd), create or suffer
to exist any Lien or transfer upon or against any of its property or assets now
owned or hereafter acquired, except for indebtedness less than $100,000 in
aggregate; or
               (ix) cause or permit any Subsidiary of the Company directly or
indirectly to take any actions described in clauses (i) through (viii) above,
other than issuing securities to the Company.
            4.14 Reimbursement. In consideration of each Purchaser’s execution
and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company’s other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Related Persons”) from and against any and all actions, causes of action,
suits, claims and Losses in connection therewith (irrespective of whether any
such Related Person is a party to the action for which indemnification hereunder
is sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by any Related Person as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation contained in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby or (c) any cause of action, suit or claim brought or made against
such Related Person by a third party (including for these purposes a derivative
action brought on behalf of the Company) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities, or
(iii) the status of such Purchaser or holder of the Securities as an investor in
the Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this
Section 4.14 shall be the same as those set forth in Section 6.4(c) below.

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     4.15 Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an “Acquiring Person” under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Underlying Shares under the Transaction Documents or under any other agreement
between the Company and the Purchasers.
     4.16 Seniority. Except for the Senior Debt and as set forth in Schedule
3.1(dd) or as otherwise permitted in Section 4.10 above (the “Existing
Indebtedness”), no indebtedness of the Company is senior to, or pari passu with,
this Notes in right of payment, whether with respect to interest, damages or
upon liquidation or dissolution or otherwise. Other than the Existing
Indebtedness and any renewal, refinancing or replacement thereof pursuant to
Section 4.10(b) that does not exceed the aggregate amount of the Existing
Indebtedness and the borrowing availability under the related credit or loan
agreements on the date hereof, the Company will not, and will not permit any
Subsidiary to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind, that is senior or pari passu in
any respect to the Company’s obligations under the Notes, whether with respect
to interest or upon liquidation or dissolution, or otherwise, other than
indebtedness secured by purchase money security interests (which will be senior
only as to the underlying assets covered thereby) and indebtedness under capital
lease obligations (which will be senior only as to the assets covered thereby);
and the Company will not, and will not permit any subsidiary to, directly or
indirectly, incur any Lien on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom, that is senior or pari passu in any respect to the Company’s
obligations under the Notes, whether with respect to interest or upon
liquidation or dissolution, or otherwise; provided, however, that the Company
may incur any such indebtedness if the proceeds received in respect thereof are
used for repayment of the Notes in full.
     4.17 Delivery of Certificates. In addition to any other rights available to
a Purchaser, if the Company fails to deliver to such Purchaser a certificate
representing Common Stock on the date on which delivery of such certificate is
required by any Transaction Document, and if after such date such Purchaser
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Purchaser of the shares that the
Purchaser anticipated receiving from the Company (a “Buy-In”), then the Company
shall, within three Trading Days after such Purchaser’s request and in such
Purchaser’s discretion, either (i) pay cash to such Purchaser in an amount equal
to such Purchaser’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate (and to issue such
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to such Purchaser a certificate or certificates representing such Common Stock
and pay cash to such Purchaser in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Price on the date of the event giving rise to the
Company’s obligation to deliver such certificate.
     4.18 MFN Provision. If any time following the Closing Date, the Company or
any Subsidiary of the Company offers to issue or issues to any Person any
security of the Company or any Subsidiary of the Company, then the Company shall
offer to each Purchaser the right to exchange all or a portion of the Notes then
held by such Purchaser, plus accrued but unpaid

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interest for such security. Such offer shall be made at the same time and in the
same manner as if such offer is being made to any other potential purchaser of
such security. Each Purchaser shall have 10 Trading Days to review the offer and
determine whether it wants to exchange all or any portion of the Notes for such
new security.
     4.19 Reverse Split. For so long as any Warrants remain outstanding, the
Company shall not effect a reverse stock split of one or more classes of the
Company’s Common Stock.
ARTICLE V.
CONDITIONS
     5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
          (a) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing as though made on and as
of such date;
          (b) Performance. The Company and each other Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Closing;
          (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
          (d) Adverse Changes. Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably would be expected
to have or result in a Material Adverse Effect; and
          (e) No Suspensions of Trading in Common Stock; Listing. Trading in the
Common Stock shall not have been suspended by the Commission or any Trading
Market (except for any suspensions of trading of not more than one Trading Day
solely to permit dissemination of material information regarding the Company) at
any time since the date of execution of this Agreement, and the Common Stock
shall have been at all times since such date listed for trading on an Eligible
Market.
     5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:
          (a) Representations and Warranties. The representations and warranties
of the Purchasers contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date;

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          (b) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing; and
          (c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents.
ARTICLE VI.
REGISTRATION RIGHTS
     6.1 Shelf Registration.
          (a) As promptly as possible, and in any event on or prior to the
Filing Date, the Company shall prepare and file with the Commission a “shelf”
Registration Statement covering the resale of all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. If for any
reason the Commission does not permit all of the Registrable Securities to be
included in such Registration Statement, then the Company shall prepare and file
with the Commission a separate Registration Statement with respect to any such
Registrable Securities not included with the initial Registration Statements, as
expeditiously as possible, but in no event later than the date which is 30 days
after the date on which the Commission shall indicate as being the first date
such filing may be made. The Registration Statement shall contain (except if
otherwise directed by the Purchasers) the “Plan of Distribution”, substantially
as attached hereto as Exhibit F. The Company shall (i) register the resale of
the Registrable Securities on an appropriate form in accordance herewith as the
Purchasers may consent and (ii) attempt to register the Registrable Securities
on Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statements then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the Commission.
          (b) The Company shall use its best efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as possible
after the filing thereof, but in any event prior to the Required Effectiveness
Date, and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier of (i) the
fifth anniversary of the Effective Date, (ii) the date when all Registrable
Securities covered by such Registration Statement have been sold publicly, or
(iii) the date on which the Registrable Securities are eligible for sale without
registration pursuant to subparagraph (k) of Rule 144 (the “Effectiveness
Period”). The Company shall notify each Purchaser in writing promptly (and in
any event within one business day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
          (c) As promptly as possible, and in any event no later than the
Post-Effective Amendment Filing Deadline, the Company shall prepare and file
with the Commission a Post-Effective Amendment. The Company shall use its best
efforts to cause the Post-Effective Amendment to be declared effective by the
Commission as promptly as possible after the filing

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thereof, but in any event prior to the 15th Trading Day following the
Post-Effective Amendment Filing Deadline. The Company shall notify each
Purchaser in writing promptly (and in any event within one business day) after
receiving notification from the Commission that the Post-Effective Amendment has
been declared effective.
          (d) If: (i) any Registration Statement is not filed on or prior to the
Filing Date or a Post-Effective Amendment is not filed on or prior to the
Post-Effective Amendment Filing Deadline (if the Company files such Registration
Statement or amendment without affording the Purchasers the opportunity to
review and comment on the same as required by Section 6.2(a) hereof, the Company
shall not be deemed to have satisfied this clause (i)), or (ii) the Company
fails to file with the Commission a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five Trading Days after
the date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that a Registration Statement will not be “reviewed,”
or will not be subject to further review, or (iii) the Company fails to respond
to any comments made by the Commission within 10 days after the receipt of such
comments, or (iv) a Registration Statement filed hereunder is not declared
effective by the Commission by the Required Effectiveness Date or a
Post-Effective Amendment is not declared effective on or prior to the 15th
Trading Day following the Post-Effective Amendment Filing Deadline, or (v) after
a Registration Statement is filed with and declared effective by the Commission,
such Registration Statement ceases to be effective as to all Registrable
Securities to which it is required to relate at any time prior to the expiration
of the Effectiveness Period without being succeeded within 10 Trading Days by an
amendment to such Registration Statement or by a subsequent Registration
Statement filed with and declared effective by the Commission, or (vi) an
amendment to a Registration Statement is not filed by the Company with the
Commission within ten Trading Days after the Commission’s having notified the
Company that such amendment is required in order for such Registration Statement
to be declared effective, or (vii) the Common Stock is not listed or quoted, or
is suspended from trading on it Trading Market for a period of three Trading
Days (which need not be consecutive Trading Days), or (viii) the exercise rights
of the Purchasers pursuant to the Warrants are suspended for any reason (any
such failure or breach being referred to as an “Event,” and for purposes of
clause (i), (iv) or (viii) the date on which such Event occurs, or for purposes
of clause (ii) the date on which such five Trading Day period is exceeded, or
for purposes of clauses (iii), (v) or (vi) the date which such ten Trading
Day-period is exceeded, or for purposes of clause (vii) the date on which such
three Trading Day period is exceeded, being referred to as “Event Date”), then:
(x) on each such Event Date the Company shall pay to each Purchaser an amount in
cash, as partial liquidated damages and not as a penalty, equal to 2% of the
aggregate purchase price paid by such Purchaser pursuant to this Agreement; and
(y) on each monthly anniversary of each such Event Date thereof (if the
applicable Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to each Purchaser an amount in cash, as
partial liquidated damages and not as a penalty, equal to 2% of the aggregate
purchase price paid by such Purchaser pursuant to the Purchase Agreement. Such
payments shall be in partial compensation to the Purchasers and shall not
constitute the Purchaser’s exclusive remedy for such events. If the Company
fails to pay any liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest thereon at a
rate of 18% per annum (or such lesser maximum amount that is permitted to be
paid by applicable law) to the Purchaser, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full.

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          (e) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities.
          (f) If the Company issues to the Purchasers any Common Stock pursuant
to the Transaction Documents that is not included in the initial Registration
Statement, then the Company shall file an additional Registration Statement
covering such number of shares of Common Stock on or prior to the Filing Date
and shall use it best efforts, but in no event later than the Required
Effectiveness Date, to cause such additional Registration Statement to become
effective by the Commission.
     6.2 Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:
          (a) Subject to the Company’s compliance with all applicable
requirements of the Securities Act, the Exchange Act and the regulations
thereto, not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to the Purchaser Counsel
copies of all such documents proposed to be filed, which documents (other than
those incorporated or deemed to be incorporated by reference) will be subject to
the review of such Purchasers and Purchaser Counsel, and (ii) cause its officers
and directors, counsel and independent certified public accountants to respond
to such inquiries as shall be necessary, in the reasonable opinion of respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto to which Purchasers holding
a majority of the Registrable Securities shall reasonably object.
          (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective, subject appropriate blackout
periods required to comply with Securities Laws, as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible, and in any event within ten
days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Purchasers true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement; and
(iv) comply in all material respects with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Purchasers thereof
set forth in the Registration Statement as so amended or in such Prospectus as
so supplemented.

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          (c) Notify the Purchasers of Registrable Securities to be sold and
Purchaser Counsel as promptly as reasonably possible, and (if requested by any
such Person) confirm such notice in writing no later than one Trading Day
thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a “review” of any Registration Statement; (ii) the
Commission comments in writing on any Registration Statement (in which case the
Company shall deliver to each Purchaser a copy of such comments and of all
written responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included or incorporated by reference
in any Registration Statement become ineligible for inclusion or incorporation
therein or any statement made in any Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference is
untrue in any material respect or any revision to a Registration Statement,
Prospectus or other document is required so that it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
          (d) Use its best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
          (e) Furnish to each Purchaser and Purchaser Counsel, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
          (f) Promptly deliver to each Purchaser and Purchaser Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
          (g) (i) In the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter; (iii) provide to the
Purchasers evidence of such listing; and (iv) maintain the listing of such
Registrable Securities on each such Trading Market or another Eligible Market.

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          (h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Purchasers and
Purchaser Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Purchaser requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement.
          (i) Cooperate with the Purchasers to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall
be free, to the extent permitted by this Agreement, of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as any such Purchasers may request.
          (j) Upon the occurrence of any event described in Section 6.2(c)(vii),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
          (k) Cooperate with any due diligence investigation undertaken by the
Purchasers in connection with the sale of Registrable Securities, including,
without limitation, by making available any documents and information; provided
that the Company will not deliver or make available to any Purchaser material,
nonpublic information unless such Purchaser specifically requests in advance to
receive material, nonpublic information in writing.
          (l) Comply with all applicable rules and regulations of the
Commission.
     6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation
(a) all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid
by the Company to the Trading Market.
     6.4 Indemnification.
          (a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Purchaser,
the officers,

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directors, partners, members, agents, brokers (including brokers who offer and
sell Registrable Securities as principal as a result of a pledge or any failure
to perform under a margin call of Common Stock), investment advisors and
employees of each of them, each Person who controls any such Purchaser (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, partners, members, agents and employees of
each such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all Losses, as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (i) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based solely upon information
regarding such Purchaser furnished in writing to the Company by such Purchaser
expressly for use therein, or to the extent that such information relates to
such Purchaser or such Purchaser’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Purchaser expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto or (ii) in
the case of an occurrence of an event of the type specified in
Section 6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing that the
Prospectus is outdated or defective and prior to the receipt by such Purchaser
of the Advice contemplated in Section 6.5.
          (b) Indemnification by Purchasers. Each Purchaser shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice

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contemplated in Section 6.5. In no event shall the liability of any selling
Purchaser hereunder be greater in amount than the dollar amount of the net
proceeds received by such Purchaser upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
“Indemnified Party”), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
          An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
          All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
          (d) Contribution. If a claim for indemnification under Section 6.4(a)
or (b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each

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Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 6.4(c), any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
          The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
          The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
     6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in
Sections 6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition
of such Registrable Securities under the Registration Statement until such
Purchaser’s receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 6.2(j), or until it is advised in
writing (the “Advice”) by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
     6.6 No Piggyback on Registrations. Except as set forth on Schedule 3.1(w)
neither the Company nor any of its security holders (other than the Purchasers
in such capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the

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Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
     6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII.
MISCELLANEOUS
     7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).
     7.2 Fees and Expenses. At the Closing, the Company shall pay to Iroquois
Master Fund, Ltd. an aggregate of $45,000 for their legal fees and expenses
incurred in connection with the preparation and negotiation of this Agreement,
of which amount $10,000 has been previously paid by the Company. In lieu of the
foregoing remaining payment, Iroquois Master Fund, Ltd. may retain such amount
at the Closing. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
any Securities.
     7.3 Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
     7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via

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facsimile at the facsimile number specified in this Section prior to 6:30 p.m.
(New York City time) on a Trading Day, (ii) the Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Trading Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:

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  If to the Company:   ProLink Holdings Corp.
410 S. Benson Lane
Chandler, Arizona 85224
Attn: Dave M. Gomez, Esq.
Fax No.: 480.785.7446
 
       
 
  With a copy to:   With a copy to:
 
      Fennemore Craig, P.C.
3003 North Central Ave., Ste. 2600
Phoenix, Arizona 85012
Attn: Sarah A. Strunk
Fax No.: 602.916.5527
 
       
 
  If to the Purchasers:   To the address set forth under such Purchaser’s name
on the signature pages attached hereto.

     or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
     7.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and holders collectively holding 51% of the aggregate principal
amount outstanding under the Notes or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI and
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
     7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
     7.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Subject to restrictions
contained herein and in the other Transaction Documents, any Purchaser may
assign its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the “Purchasers.” Notwithstanding anything to the contrary
herein, Securities may be assigned to any Person in

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connection with a bona fide margin account or other loan or financing
arrangement secured by such Securities.
     7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.14 and each Indemnified Party is an intended third
party beneficiary of Section 6.4 and (in each case) may enforce the provisions
of such Sections directly against the parties with obligations thereunder.
     7.9 Governing Law; Venue; Waiver of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by any
of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York, Borough of Manhattan. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of this
Agreement), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or any
of the Transaction Documents or the transactions contemplated hereby or thereby.
If either party shall commence an action or proceeding to enforce any provisions
of this Agreement or any Transaction Document, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other reasonable costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
     7.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and/or
conversion of the Securities, as applicable.
     7.11 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any

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signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
     7.12 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
     7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
     7.14 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
     7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
     7.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Notes or Warrants or any
Purchaser enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company by a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

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     7.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election.
     7.18 Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. The Company hereby confirms that it understands and agrees
that the Purchasers are not acting as a “group” as that term is used in Section
13(d) of the Exchange Act. Each Purchaser acknowledges that no other Purchaser
has acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser represents that it has been represented by its own separate legal
counsel in its review

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and negotiations of this Agreement and the Transaction Documents and each party
represents and confirms that Malhotra & Associates LLP represents only Iroquois
Master Fund, Ltd. in connection with this Agreement and the other Transaction
Documents.
     7.19 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in this Agreement to a number of shares or a price per share shall be
amended to appropriately account for such event.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]

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     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

              PROLINK HOLDINGS CORP.
 
       
 
  By:   /s/ Lawrence D. Bain
 
      Lawrence D. Bain
 
      President and Chief Executive Officer

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS FOLLOW.]

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Iroquois Master Fund, Ltd.
By:      /s/ Joshua Silverman
Name: Joshua Silverman
Title:  Authorized Signatory
Note Principal Amount: $1,000,000
Address for Notice:
Iroquois Master Fund Ltd.
641 Lexington Avenue, 28th Floor
New York, NY 10022
Facsimile No.:212-207-3452
Telephone No.:212-974-3070
Attn: Joshua Silverman
With a copy to:
Malhotra & Associates LLP
11 Penn Plaza, 5th Floor
New York, New York 10001
Facsimile No.: (212) 504-0863
Telephone No.: (212) 593-2284
Attn: Gary Malhotra, Esq.
[Signature Page to Securities Purchase Agreement]

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Bonanza Master Fund, Ltd.
By:   /s/ Brian Ladin
        Brian Ladin
        Partner
Note Principal Amount: $2,000,000
Address for Notice:
Bonanza Master Fund Ltd.
300 Crescent Court, Ste. 250
Dallas, Texas 75201
Facsimile No.:
Telephone No.:
Attn: Brian Ladin
With a copy to:
Facsimile No.:
Telephone No.:
Attn:
[Signature Page to Securities Purchase Agreement]

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WPG Distressed/Special Situations Overseas, L.P.
By:  /s/ William G. Butterly, III
        William G. Butterly, III
        Senior Managing Director
Note Principal Amount: $400,000
Address for Notice:
WPG Distressed/Special Situations Overseas, L.P.
c/o Robeco USA, L.L.C.
909 Third Avenue, 32nd Floor
New York, NY 10022
Facsimile No.:
Telephone No.:
Attn: William G. Butterly, III
            Senior Managing Director
With a copy to:
Facsimile No.:
Telephone No.:
Attn:
[Signature Page to Securities Purchase Agreement]

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WPG Event-Driven Multi-Strategy Overseas, L.P.
By:  /s/ William G. Butterly, III
        William G. Butterly, III
        Senior Managing Director
Note Principal Amount: $100,000
Address for Notice:
WPG Event-Driven Multi-Strategy Overseas, L.P.
c/o Robeco USA, L.L.C.
909 Third Avenue, 32nd Floor
New York, NY 10022
Facsimile No.:
Telephone No.:
Attn: William G. Butterly, III
        Senior Managing Director
With a copy to:
Facsimile No.:
Telephone No.:
Attn:
[Signature Page to Securities Purchase Agreement]

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Highbridge International LLC
By: Highbridge Capital Management, LLC
By:   /s/ Adam J. Chill
        Adam J. Chill
Note Principal Amount: $500,000
Address for Notice:
c/o Highbridge Capital Management, LLC
9 West 57th Street, 27th Floor
New York, NY 10019
Facsimile No.:
Telephone No.:
Attn: Adam J. Chill
With a copy to:
Facsimile No.:
Telephone No.:
Attn:
[Signature Page to Securities Purchase Agreement]

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Rockmore Investment Master Fund Ltd
By:    /s/ Bruce Bernstein
        Bruce Bernstein
        Managing Member
Note Principal Amount: $500,000
Address for Notice:
Rockmore Investment Master Fund Ltd.
650 5th Avenue, 24th Floor
New York, NY 10019
Facsimile No.: 212.258.2315
Telephone No.: 212.258.2303
Attn: Bruce Bernstein
           Managing Member
With a copy to:
Facsimile No.:
Telephone No.:
Attn:
[Signature Page to Securities Purchase Agreement]

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