Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of January 30,
2006, by and among InfoSonics Corporation, a Maryland corporation with
headquarters located at 5880 Pacific Center Blvd., San Diego, CA 92121 (the
“Company”), and the investors listed on the Schedule of Investors attached
hereto as Exhibit A (individually, an “Investor” and collectively, the
“Investors”).

 

BACKGROUND

 

A.                                   The Company and each Investor is executing
and delivering this Agreement in reliance upon the exemption from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended (the “1933
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

 

B.                                     Each Investor, severally and not jointly,
wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate number of shares of the
Common Stock, par value $.001 per share, of the Company (the “Common Stock”),
set forth opposite such Investor’s name in column two (2) on the Schedule of
Investors in Exhibit A (which aggregate amount for all Investors together shall
be 1,100,000 shares of Common Stock and shall collectively be referred to herein
as the “Common Shares”) and (ii) warrants, in substantially the form attached
hereto as Exhibit F (the “Warrants”) to acquire up to that number of additional
shares of Common Stock set forth opposite such Investor’s name in column three
(3) on the Schedule of Investors (the shares of Common Stock issuable upon
exercise of or otherwise pursuant to the Warrants, collectively, the “Warrant
Shares”).  The minimum aggregate dollar amount of securities to be sold in this
placement is $10,000,000.

 

C.                                     The Common Shares, the Warrants and the
Warrant Shares issued pursuant to this Agreement are collectively are referred
to herein as the “Securities”.

 

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 the Investors agree
as follows:

 

ARTICLE I
DEFINITIONS

 

1.1                                 DEFINITIONS.  IN ADDITION TO THE TERMS
DEFINED ELSEWHERE IN THIS AGREEMENT, THE FOLLOWING TERMS HAVE THE MEANINGS
INDICATED:

 

“Advice” has the meaning set forth in Section 6.5.

 

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“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.

 

“Agent” has the meaning set forth in Section 3.1(l).

 

“Agreement” has the meaning set forth in the Preamble.

 

“Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.

 

“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.

 

“Closing Date” means the date and time of the Closing and shall be 10:00 a.m.,
New York City Time, on the later of: a) [TWO DAYS AFTER THE AGREEMENT DATE],
2006; or b) two business days following the date of the approval of the listing
of the Shares and Warrant Shares by the Trading Market (or such other date and
time as is mutually agreed to by the Company and each Investor).

 

“Closing Price” means, for any date, the closing price per share of the Common
Stock for such date (or the nearest preceding date) on the primary Eligible
Market or exchange or quotation system on which the Common Stock is then listed
or quoted.

 

“Company” has the meaning set forth in the Preamble.

 

“Company Counsel” means Patton Boggs LLP, counsel to the Company.

 

“Common Shares” means an aggregate of 1,100,000 shares of Common Stock, which
are being sold to the Investors at the Closing.

 

“Common Stock” means the common stock of the Company, par value $0.001 per
share.

 

“Contingent Obligation” has the meaning set forth in Section 3.1(aa).

 

“Disclosure Materials” has the meaning set forth in Section 3.1(g).

 

“Effective Date” means the date that the Registration Statement is first
declared effective by the SEC.

 

“Effectiveness Period” has the meaning set forth in Section 6.1(b).

 

“8-K Filing” has the meaning set forth in Section 4.5.

 

“Eligible Market” means any of the New York Stock Exchange, the American Stock
Exchange, The Nasdaq National Market or The Nasdaq Capital Market.

 

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“Environmental Laws” has the meaning set forth in Section 3.1(dd).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Investors” means SG Cowen & Co., LLC and its Affiliates.

 

“Filing Date” means 30 days after the Closing Date.

 

“GAAP” has the meaning set forth in Section 3.1(g).

 

“Hazardous Materials” has the meaning set forth in Section 3.1(dd).

 

“Indebtedness” has the meaning set forth in Section 3.1(aa).

 

“Indemnified Party” has the meaning set forth in Section 6.4(c).

 

“Indemnifying Party” has the meaning set forth in Section 6.4(c).

 

“Insolvent” has the meaning set forth in Section 3.1(h).

 

“Intellectual Property Rights” has the meaning set forth in Section 3.1(t).

 

“Investor” has the meaning set forth in the Preamble.

 

“Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.

 

“Lock-up Agreements” has the meaning set forth in Section 4.7.

 

“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation and reasonable attorneys’
fees.

 

“Material Adverse Effect” has the meaning set forth in Section 3.1(b).

 

“Material Permits” has the meaning set forth in Section 3.1(v).

 

“Minimum Amount” means the aggregate dollar amount of $10,000,000.

 

“Person” means any individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, or
joint stock company.

 

“Prior Registration Statement” has the meaning set forth in Section 6.6.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, or a partial proceeding, such as a deposition),
whether commenced or threatened in writing.

 

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“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.

 

“Purchase Price” has the meaning set forth in Section 2.3.

 

“Registrable Securities” means the Common Shares and the Warrant Shares issued
or issuable pursuant to the Transaction Documents, together with any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.

 

“Registration Statement” means each registration statement required to be filed
under Article VI, 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.

 

“Regulation D” has the meaning set forth in the Preamble.

 

“Related Person” has the meaning set forth in Section 4.6.

 

“Repurchase Notice” has the meaning set forth in Section 6.1.

 

“Repurchase Price” has the meaning set forth in Section 6.1.

 

“Required Effectiveness Date” means 90 days after the Closing Date, or if the
SEC reviews the Registration Statement, 120 days after the Closing Date.

 

“Rule 144,” “Rule 415,” and “Rule 424” mean Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the SEC 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 SEC having substantially the same effect as such Rule.

 

“SEC” means the Securities and Exchange Commission.

 

“SEC Reports” has the meaning set forth in Section 3.1(g).

 

“Securities” has the meaning set forth in the Preamble.

 

“Securities Act” has the meaning set forth in the Preamble.

 

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“Shares” means shares of the Company’s Common Stock.

 

“Short Sales” has the meaning set forth in Section 3.2(h).

 

“Subsidiary” means any direct or indirect subsidiary of the Company.

 

“Trading Day” means (a) any day on which the Common Stock is listed or quoted
and traded on its primary Trading Market, (b) if the Common Stock is not then
listed or quoted and traded on any Eligible Market, then a day on which trading
occurs on The Nasdaq National Market (or any successor thereto), or (c) if
trading ceases to occur on The Nasdaq National Market (or any successor
thereto), any Business Day.

 

“Trading Market” means The American Stock Exchange 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 schedules and exhibits
attached hereto, the Warrants and the Transfer Agent Instructions.

 

“Transfer Agent” means Computershare Trust Co., Inc. or any successor transfer
agent for the Company.

 

“Transfer Agent Instructions” means, with respect to the Company, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit E, executed by
the Company and delivered to and acknowledged in writing by the Transfer Agent.

 

“Warrants” has the meaning set forth in the Preamble.

 

“Warrant Shares” has the meaning set forth in the Preamble.

 

ARTICLE II
PURCHASE AND SALE

 

2.1                                 CLOSING.  SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THIS AGREEMENT, AT THE CLOSING, THE COMPANY SHALL CAUSE
TO BE SOLD TO EACH INVESTOR, AND EACH INVESTOR SHALL, SEVERALLY AND NOT JOINTLY,
PURCHASE FROM THE COMPANY, SUCH NUMBER OF COMMON SHARES AND WARRANTS SET FORTH
OPPOSITE SUCH INVESTOR’S NAME ON EXHIBIT A.  THE DATE AND TIME OF THE CLOSING
SHALL BE 10:00 A.M., NEW YORK CITY TIME, ON THE CLOSING DATE.  THE CLOSING SHALL
TAKE PLACE AT THE OFFICES OF THE COMPANY’S COUNSEL.

 

2.2                                 CLOSING DELIVERIES.

 

(A)                                  AT THE CLOSING, THE COMPANY SHALL DELIVER
OR CAUSE TO BE DELIVERED TO EACH INVESTOR THE FOLLOWING:

 

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(I)                                     ONE OR MORE STOCK CERTIFICATES,
REGISTERED IN THE NAME OF SUCH INVESTOR, FREE AND CLEAR OF ALL RESTRICTIVE AND
OTHER LEGENDS (EXCEPT AS EXPRESSLY PROVIDED IN SECTION 4.1(B) HEREOF),
EVIDENCING SUCH NUMBER OF COMMON SHARES SET FORTH OPPOSITE SUCH INVESTOR’S NAME
ON EXHIBIT A HERETO.

 

(II)                                  A WARRANT, ISSUED IN THE NAME OF SUCH
INVESTOR, PURSUANT TO WHICH SUCH INVESTOR SHALL HAVE THE RIGHT TO ACQUIRE SUCH
NUMBER OF WARRANT SHARES SET FORTH OPPOSITE SUCH INVESTOR’S NAME ON EXHIBIT A
HERETO.

 

(III)                               A LEGAL OPINION OF COMPANY COUNSEL, IN THE
FORM OF EXHIBIT C, EXECUTED BY SUCH COUNSEL AND DELIVERED TO THE INVESTORS;

 

(IV)                              DULY EXECUTED TRANSFER AGENT INSTRUCTIONS
ACKNOWLEDGED BY THE COMPANY’S TRANSFER AGENT; AND

 

(v)                                 the Lock-up Agreements.

 

(B)                                 AT THE CLOSING, EACH INVESTOR SHALL DELIVER
OR CAUSE TO BE DELIVERED TO THE COMPANY THE PURCHASE PRICE FOR THE COMMON SHARES
AND THE WARRANTS BEING PURCHASED HEREUNDER BY THAT INVESTOR IN UNITED STATES
DOLLARS AND IN IMMEDIATELY AVAILABLE FUNDS, BY WIRE TRANSFER TO AN ACCOUNT
DESIGNATED IN WRITING TO SUCH INVESTOR BY THE COMPANY FOR SUCH PURPOSE.

 

2.3                                 PURCHASE PRICE.  THE PURCHASE PRICE TO BE
PAID BY THE INVESTORS FOR THE SECURITIES IS ALSO SET FORTH IN EXHIBIT A ATTACHED
HERETO.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES

 

3.1                                 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.  THE COMPANY HEREBY REPRESENTS AND WARRANTS TO THE INVESTORS AS FOLLOWS
(WHICH REPRESENTATIONS AND WARRANTIES SHALL BE DEEMED TO APPLY, WHERE
APPROPRIATE, TO EACH SUBSIDIARY OF THE COMPANY):

 

(A)                                  SUBSIDIARIES.  THE COMPANY HAS NO DIRECT OR
INDIRECT SUBSIDIARIES OTHER THAN THOSE LISTED IN SCHEDULE 3.1(A) HERETO.  EXCEPT
AS DISCLOSED IN SCHEDULE 3.1(A) HERETO, THE COMPANY OWNS, DIRECTLY OR
INDIRECTLY, ALL OF THE CAPITAL STOCK OR COMPARABLE EQUITY INTERESTS OF EACH
SUBSIDIARY FREE AND CLEAR OF ANY LIEN AND ALL THE ISSUED AND OUTSTANDING SHARES
OF CAPITAL STOCK OR COMPARABLE EQUITY INTEREST 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 ORGANIZED, VALIDLY EXISTING AND
IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS INCORPORATION OR
ORGANIZATION (AS APPLICABLE), WITH THE REQUISITE LEGAL 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

 

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SUBSIDIARIES IS DULY QUALIFIED TO DO 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) HAVE OR RESULT
IN A MATERIAL ADVERSE EFFECT ON THE RESULTS OF OPERATIONS, ASSETS, BUSINESS OR
FINANCIAL CONDITION OF THE COMPANY AND THE SUBSIDIARIES, TAKEN AS A WHOLE ON A
CONSOLIDATED BASIS, OR (II) MATERIALLY AND ADVERSELY IMPAIR THE COMPANY’S
ABILITY TO PERFORM ITS OBLIGATIONS UNDER ANY OF THE TRANSACTION DOCUMENTS
(EITHER OF (I) OR (II), A “MATERIAL ADVERSE EFFECT”).

 

(C)                                  AUTHORIZATION; ENFORCEMENT.  THE COMPANY
HAS THE REQUISITE CORPORATE AUTHORITY TO ENTER INTO AND TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED BY EACH OF THE TRANSACTION DOCUMENTS TO WHICH IT IS A
PARTY AND OTHERWISE TO CARRY OUT ITS OBLIGATIONS HEREUNDER AND THEREUNDER.  THE
EXECUTION AND DELIVERY OF EACH OF THE TRANSACTION DOCUMENTS TO WHICH IT IS A
PARTY BY THE COMPANY AND THE CONSUMMATION BY IT OF THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY 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 OF THE TRANSACTION DOCUMENTS TO
WHICH IT IS A PARTY HAS BEEN (OR UPON DELIVERY WILL BE) DULY EXECUTED BY THE
COMPANY AND 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, EXCEPT AS MAY BE LIMITED BY
(I) APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION OR OTHER LAWS OF GENERAL
APPLICATION RELATING TO OR AFFECTING THE ENFORCEMENT OF CREDITORS RIGHTS
GENERALLY, AND (II) THE EFFECT OF RULES OF LAW GOVERNING THE AVAILABILITY OF
SPECIFIC PERFORMANCE AND OTHER EQUITABLE REMEDIES.

 

(D)                                 NO CONFLICTS.  THE EXECUTION, DELIVERY AND
PERFORMANCE OF THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY 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, (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, EXCEPT TO THE EXTENT THAT SUCH CONFLICT,
DEFAULT, TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION RIGHT WOULD NOT
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT, 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 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, INCLUDING ALL APPLICABLE
TRADING MARKETS), OR BY WHICH ANY PROPERTY OR ASSET OF THE COMPANY OR A
SUBSIDIARY IS BOUND OR AFFECTED, EXCEPT TO THE EXTENT THAT SUCH VIOLATION WOULD
NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

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(E)                                  THE SECURITIES.  THE SECURITIES (INCLUDING
THE WARRANT SHARES) 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 AND WILL NOT BE
SUBJECT TO PREEMPTIVE OR SIMILAR RIGHTS OF STOCKHOLDERS.  THE COMPANY HAS
RESERVED FROM ITS DULY AUTHORIZED CAPITAL STOCK THE MAXIMUM NUMBER OF SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS.

 

(F)                                    CAPITALIZATION.  THE AGGREGATE NUMBER OF
SHARES AND TYPE OF ALL AUTHORIZED, ISSUED AND OUTSTANDING CLASSES OF 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(F) HERETO.  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.  EXCEPT
AS DISCLOSED IN SCHEDULE 3.1(F) HERETO, THE COMPANY HAS NOT ISSUED ANY OTHER
OPTIONS, WARRANTS, SCRIPT RIGHTS TO SUBSCRIBE TO, CALLS OR COMMITMENTS OF ANY
CHARACTER WHATSOEVER RELATING TO, OR SECURITIES, RIGHTS OR OBLIGATIONS
CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE FOR, OR ENTERED INTO ANY
AGREEMENT GIVING ANY PERSON ANY RIGHT TO SUBSCRIBE FOR OR ACQUIRE, ANY SHARES OF
COMMON STOCK, OR SECURITIES OR RIGHTS CONVERTIBLE OR EXCHANGEABLE INTO SHARES OF
COMMON STOCK.  EXCEPT AS SET FORTH ON SCHEDULE 3.1(F) HERETO, AND EXCEPT FOR
CUSTOMARY ADJUSTMENTS AS A RESULT OF STOCK DIVIDENDS, STOCK SPLITS, COMBINATIONS
OF SHARES, REORGANIZATIONS, RECAPITALIZATIONS, RECLASSIFICATIONS OR OTHER
SIMILAR EVENTS, THERE ARE NO ANTI-DILUTION OR PRICE ADJUSTMENT PROVISIONS
CONTAINED IN ANY SECURITY ISSUED BY THE COMPANY (OR IN ANY AGREEMENT PROVIDING
RIGHTS TO SECURITY HOLDERS) AND THE ISSUANCE 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 INVESTORS) AND WILL NOT RESULT IN A RIGHT OF ANY HOLDER
OF SECURITIES TO ADJUST THE EXERCISE, CONVERSION, EXCHANGE OR RESET PRICE UNDER
SUCH SECURITIES.  TO THE KNOWLEDGE OF THE COMPANY, EXCEPT AS SPECIFICALLY
DISCLOSED IN THE SEC REPORTS OR IN SCHEDULE 3.1(F) HERETO, 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 FOR SUCH PURPOSES ANY LIMITATION ON THE
NUMBER OF SHARES OF COMMON STOCK THAT MAY BE OWNED AT ANY SINGLE TIME.

 

(G)                                 SEC REPORTS; FINANCIAL STATEMENTS.  EXCEPT
AS SET FORTH ON SCHEDULE 3.1(G), THE COMPANY HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY IT UNDER THE EXCHANGE ACT, INCLUDING PURSUANT TO SECTION 13(A) OR
15(D) THEREOF, FOR THE ENTIRE PERIOD DURING WHICH IT HAS BEEN REQUIRED TO FILE
SUCH REPORTS (THE FOREGOING MATERIALS (TOGETHER WITH ANY MATERIALS FILED BY THE
COMPANY UNDER THE EXCHANGE ACT, WHETHER OR NOT REQUIRED) BEING COLLECTIVELY
REFERRED TO HEREIN AS THE “SEC REPORTS” AND, TOGETHER WITH THIS AGREEMENT AND
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 MADE
AVAILABLE TO THE INVESTORS OR THEIR RESPECTIVE REPRESENTATIVES TRUE, CORRECT AND
COMPLETE COPIES OF THE SEC DOCUMENTS NOT AVAILABLE ON THE EDGAR SYSTEM.  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 SEC 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

 

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REQUIRED TO BE STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS
THEREIN, IN THE 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 SEC WITH RESPECT THERETO AS IN EFFECT AT THE TIME
OF FILING.  SUCH FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE WITH
UNITED STATES 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 CONSOLIDATED 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, 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, TO THE EXTENT SUCH
AGREEMENTS ARE REQUIRED TO BE INCLUDED OR IDENTIFIED PURSUANT TO THE RULES AND
REGULATIONS OF THE SEC.

 

(H)                                 ABSENCE OF OTHER OCCURRENCES.  SINCE THE
DATE OF THE LATEST AUDITED FINANCIAL STATEMENTS INCLUDED WITHIN THE SEC REPORTS,
EXCEPT AS SPECIFICALLY DISCLOSED IN THE SEC REPORTS OR IN
SCHEDULE 3.1(H) HERETO, (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 MATERIAL
LIABILITIES 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 SEC, (III) THE COMPANY
HAS NOT ALTERED ITS METHOD OF ACCOUNTING OR CHANGED ITS AUDITORS, EXCEPT AS
DISCLOSED IN ITS SEC REPORTS, (IV) THE COMPANY HAS NOT DECLARED OR MADE ANY
DIVIDEND OR DISTRIBUTION OF CASH OR OTHER PROPERTY TO ITS STOCKHOLDERS, IN THEIR
CAPACITIES AS SUCH, OR PURCHASED, REDEEMED OR MADE ANY AGREEMENTS TO PURCHASE OR
REDEEM ANY SHARES OF ITS CAPITAL STOCK (EXCEPT FOR REPURCHASES BY THE COMPANY OF
SHARES OF CAPITAL STOCK HELD BY EMPLOYEES, OFFICERS, DIRECTORS, OR CONSULTANTS
PURSUANT TO AN OPTION OF THE COMPANY TO REPURCHASE SUCH SHARES UPON THE
TERMINATION OF EMPLOYMENT OR SERVICES), AND (V) THE COMPANY HAS NOT ISSUED ANY
EQUITY SECURITIES TO ANY OFFICER, DIRECTOR OR AFFILIATE, EXCEPT PURSUANT TO
EXISTING COMPANY STOCK-BASED PLANS.  THE COMPANY HAS NOT TAKEN ANY STEPS TO SEEK
PROTECTION PURSUANT TO ANY BANKRUPTCY LAW NOR DOES THE COMPANY HAVE ANY
KNOWLEDGE OR REASON TO BELIEVE THAT ITS CREDITORS INTEND TO INITIATE INVOLUNTARY
BANKRUPTCY PROCEEDINGS OR ANY ACTUAL KNOWLEDGE OF ANY FACT WHICH WOULD
REASONABLY LEAD A CREDITOR TO DO SO.  THE COMPANY IS NOT AS OF THE DATE HEREOF,
AND AFTER GIVING EFFECT TO THE TRANSACTIONS CONTEMPLATED HEREBY TO OCCUR AT THE
APPLICABLE CLOSING, WILL NOT BE INSOLVENT (AS DEFINED BELOW).  FOR PURPOSES OF
THIS SECTION 3.1(H), “INSOLVENT” MEANS (I) THE PRESENT FAIR SALEABLE VALUE OF
THE COMPANY’S ASSETS IS LESS THAN THE AMOUNT REQUIRED TO PAY THE COMPANY’S TOTAL
INDEBTEDNESS (AS DEFINED IN SECTION 3.1(AA)), (II) THE COMPANY IS UNABLE TO PAY
ITS DEBTS AND LIABILITIES, SUBORDINATED, CONTINGENT OR OTHERWISE, AS SUCH DEBTS
AND LIABILITIES BECOME ABSOLUTE AND MATURED, (III) THE COMPANY INTENDS TO INCUR
OR BELIEVES THAT IT WILL INCUR DEBTS THAT WOULD BE BEYOND ITS ABILITY TO PAY AS
SUCH DEBTS MATURE OR (IV) THE COMPANY HAS UNREASONABLY SMALL CAPITAL WITH WHICH
TO CONDUCT THE BUSINESS IN WHICH IT IS ENGAGED AS SUCH BUSINESS IS NOW CONDUCTED
AND IS PROPOSED TO BE CONDUCTED.

 

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(I)                                     ABSENCE OF LITIGATION.  EXCEPT AS
DISCLOSED IN THE SEC REPORTS, THERE IS NO ACTION, SUIT, CLAIM, OR PROCEEDING,
OR, TO THE COMPANY’S KNOWLEDGE, INQUIRY OR INVESTIGATION, BEFORE OR BY ANY
COURT, PUBLIC BOARD, GOVERNMENT AGENCY, SELF-REGULATORY ORGANIZATION OR BODY
PENDING OR, TO THE KNOWLEDGE OF THE COMPANY, THREATENED AGAINST OR AFFECTING THE
COMPANY OR ANY OF ITS SUBSIDIARIES THAT COULD, INDIVIDUALLY OR IN THE AGGREGATE,
HAVE A MATERIAL ADVERSE EFFECT.

 

(J)                                     COMPLIANCE.  EXCEPT AS DESCRIBED IN
SCHEDULE 3.1(J), NEITHER THE COMPANY NOR ANY SUBSIDIARY, EXCEPT IN EACH CASE AS
WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE OR
RESULT IN A MATERIAL ADVERSE EFFECT, (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 WRITTEN 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.

 

(K)                                  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 THAT DO NOT,
INDIVIDUALLY OR IN THE AGGREGATE, HAVE OR RESULT IN A MATERIAL ADVERSE EFFECT. 
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 MATERIAL COMPLIANCE.

 

(L)                                     NO GENERAL SOLICITATION; PLACEMENT
AGENT’S FEES.  NEITHER THE COMPANY, NOR ANY OF ITS AFFILIATES, NOR ANY PERSON
ACTING ON ITS OR THEIR BEHALF, HAS ENGAGED IN ANY FORM OF GENERAL SOLICITATION
OR GENERAL ADVERTISING (WITHIN THE MEANING OF REGULATION D) IN CONNECTION WITH
THE OFFER OR SALE OF THE SECURITIES.  THE COMPANY SHALL BE RESPONSIBLE FOR THE
PAYMENT OF ANY PLACEMENT AGENT’S FEES, FINANCIAL ADVISORY FEES, OR BROKERS’
COMMISSION (OTHER THAN FOR PERSONS ENGAGED BY ANY INVESTOR OR ITS INVESTMENT
ADVISOR) RELATING TO OR ARISING OUT OF THE ISSUANCE OF THE SECURITIES PURSUANT
TO THIS AGREEMENT.  THE COMPANY SHALL PAY, AND HOLD EACH INVESTOR HARMLESS
AGAINST, ANY LIABILITY, LOSS OR EXPENSE (INCLUDING, WITHOUT LIMITATION,
REASONABLE ATTORNEYS’ FEES AND OUT-OF-POCKET EXPENSES) ARISING IN CONNECTION
WITH ANY SUCH CLAIM FOR FEES ARISING OUT OF THE ISSUANCE OF THE SECURITIES
PURSUANT TO THIS AGREEMENT.  THE COMPANY ACKNOWLEDGES THAT SG COWEN & CO., LLC
HAS BEEN ENGAGED AS LEAD PLACEMENT AGENT (THE “AGENT”) AND THAT MONTGOMERY &
CO., LLC WILL SERVE AS CO-AGENT IN CONNECTION WITH THE SALE OF THE SECURITIES. 
THE COMPANY HAS NOT ENGAGED ANY OTHER PLACEMENT AGENT OR OTHER AGENT IN
CONNECTION WITH THE SALE OF THE SECURITIES.

 

(M)                               PRIVATE PLACEMENT.  NEITHER THE COMPANY NOR
ANY OF ITS AFFILIATES NOR, 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

 

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REGULATION D UNDER THE SECURITIES ACT IN CONNECTION WITH THE OFFER AND SALE BY
THE COMPANY 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 APPLICABLE LAW, REGULATION OR
STOCKHOLDER APPROVAL PROVISIONS, INCLUDING, WITHOUT LIMITATION, UNDER THE
RULES AND REGULATIONS OF ANY TRADING MARKET.  THE COMPANY IS NOT REQUIRED TO BE
REGISTERED AS, AND IS NOT AN AFFILIATE OF, AN “INVESTMENT COMPANY” WITHIN THE
MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED.  THE COMPANY IS NOT
REQUIRED TO BE REGISTERED AS, A UNITED STATES REAL PROPERTY HOLDING CORPORATION
WITHIN THE MEANING OF THE FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT OF 1980.

 

(N)                                 FORM S-3 ELIGIBILITY.  THE COMPANY IS
ELIGIBLE TO REGISTER THE COMMON SHARES AND THE WARRANT SHARES FOR RESALE BY THE
INVESTORS USING FORM S-3 PROMULGATED UNDER THE SECURITIES ACT.

 

(O)                                 LISTING AND MAINTENANCE REQUIREMENTS. 
EXCEPT AS DESCRIBED IN SCHEDULE 3.1(O), THE COMPANY HAS NOT, IN THE TWELVE
MONTHS PRECEDING THE DATE HEREOF, RECEIVED NOTICE (WRITTEN OR ORAL) FROM ANY
TRADING 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 TRADING MARKET.  THE COMPANY IS IN COMPLIANCE WITH ALL SUCH
LISTING AND MAINTENANCE REQUIREMENTS.

 

(P)                                 REGISTRATION RIGHTS.  EXCEPT AS DESCRIBED IN
SECTION 6.6, 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 SEC OR ANY OTHER GOVERNMENTAL AUTHORITY THAT
HAVE NOT BEEN SATISFIED OR WAIVED.

 

(Q)                                 APPLICATION OF TAKEOVER PROTECTIONS.  EXCEPT
AS DESCRIBED IN SCHEDULE 3.1(Q), THERE IS NO CONTROL SHARE ACQUISITION, BUSINESS
COMBINATION, POISON PILL (INCLUDING ANY DISTRIBUTION UNDER A RIGHTS AGREEMENT)
OR OTHER SIMILAR ANTI-TAKEOVER PROVISION UNDER THE COMPANY’S CHARTER DOCUMENTS
OR THE LAWS OF ITS STATE OF INCORPORATION THAT IS OR COULD BECOME APPLICABLE TO
ANY OF THE INVESTORS AS A RESULT OF THE INVESTORS AND THE COMPANY FULFILLING
THEIR OBLIGATIONS OR EXERCISING THEIR RIGHTS UNDER THE TRANSACTION DOCUMENTS,
INCLUDING, WITHOUT LIMITATION, AS A RESULT OF THE COMPANY’S ISSUANCE OF THE
SECURITIES AND THE INVESTORS’ OWNERSHIP OF THE SECURITIES.

 

(R)                                    DISCLOSURE.  THE COMPANY CONFIRMS THAT
NEITHER IT NOR ANY OFFICERS, DIRECTORS OR AFFILIATES, HAS PROVIDED ANY OF THE
INVESTORS (OTHER THAN EXCLUDED INVESTORS AND OTHER THAN ONE INVESTOR THAT
EXECUTED A NON-DISCLOSURE AND NON-TRADING AGREEMENT THAT CONTINUES UNTIL THE
COMPANY HAS FILED ITS FORM 10-Q FOR THE QUARTER ENDING MARCH 31, 2006) OR THEIR
AGENTS OR COUNSEL WITH ANY INFORMATION THAT CONSTITUTES OR MIGHT CONSTITUTE
MATERIAL, NONPUBLIC INFORMATION (OTHER THAN THE EXISTENCE AND TERMS OF THE
ISSUANCE OF SECURITIES, AS CONTEMPLATED BY THIS AGREEMENT).  THE COMPANY
UNDERSTANDS AND CONFIRMS THAT EACH OF THE INVESTORS WILL RELY ON THE FOREGOING
REPRESENTATIONS IN EFFECTING TRANSACTIONS IN SECURITIES OF THE COMPANY (OTHER
THAN EXCLUDED INVESTORS).  ALL DISCLOSURE PROVIDED BY THE COMPANY TO THE
INVESTORS REGARDING THE COMPANY, ITS BUSINESS AND THE TRANSACTIONS CONTEMPLATED
HEREBY, INCLUDING THE SCHEDULES TO THIS AGREEMENT, FURNISHED BY OR ON THE BEHALF
OF THE COMPANY ARE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AND DO NOT

 

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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 THE LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.  TO THE COMPANY’S
KNOWLEDGE, 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, 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 INVESTOR (OTHER THAN EXCLUDED INVESTORS) MAKES
OR HAS MADE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY OTHER THAN THOSE SPECIFICALLY SET FORTH IN THE TRANSACTION
DOCUMENTS.

 

(S)                                  ACKNOWLEDGMENT REGARDING INVESTORS’
PURCHASE OF SECURITIES.  BASED UPON THE ASSUMPTION THAT THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT ARE CONSUMMATED IN ALL MATERIAL RESPECTS IN
CONFORMITY WITH THE TRANSACTION DOCUMENTS, THE COMPANY ACKNOWLEDGES AND AGREES
THAT EACH OF THE INVESTORS (OTHER THAN EXCLUDED INVESTORS) IS ACTING SOLELY IN
THE CAPACITY OF AN ARM’S LENGTH PURCHASER WITH RESPECT TO THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.  THE COMPANY
FURTHER ACKNOWLEDGES THAT NO INVESTOR (OTHER THAN EXCLUDED INVESTORS) IS ACTING
AS A FINANCIAL ADVISOR OR FIDUCIARY OF THE COMPANY (OR IN ANY SIMILAR CAPACITY)
WITH RESPECT TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THAT
ANY ADVICE GIVEN BY ANY INVESTOR (OTHER THAN EXCLUDED INVESTORS) OR ANY OF THEIR
RESPECTIVE REPRESENTATIVES OR AGENTS IN CONNECTION WITH THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY IS MERELY
INCIDENTAL TO THE INVESTORS’ PURCHASE OF THE SECURITIES.  THE COMPANY FURTHER
REPRESENTS TO EACH INVESTOR THAT THE COMPANY’S DECISION TO ENTER INTO THIS
AGREEMENT HAS BEEN BASED SOLELY ON THE INDEPENDENT EVALUATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY BY THE COMPANY AND ITS REPRESENTATIVES.

 

(T)                                    PATENTS AND TRADEMARKS.  THE COMPANY AND
ITS SUBSIDIARIES OWN, OR POSSESS ADEQUATE RIGHTS OR LICENSES TO USE, ALL
TRADEMARKS, TRADE NAMES, SERVICE MARKS, SERVICE MARK REGISTRATIONS, SERVICE
NAMES, PATENTS, PATENT RIGHTS, COPYRIGHTS, INVENTIONS, LICENSES, APPROVALS,
GOVERNMENTAL AUTHORIZATIONS, TRADE SECRETS AND OTHER INTELLECTUAL PROPERTY
RIGHTS (“INTELLECTUAL PROPERTY RIGHTS”) NECESSARY TO CONDUCT THEIR RESPECTIVE
BUSINESSES NOW CONDUCTED.  EXCEPT AS SET FORTH IN SCHEDULE 3.1(T), NONE OF THE
COMPANY’S INTELLECTUAL PROPERTY RIGHTS HAVE EXPIRED OR TERMINATED, OR ARE
EXPECTED TO EXPIRE OR TERMINATE, WITHIN THREE YEARS FROM THE DATE OF THIS
AGREEMENT.  THE COMPANY DOES NOT HAVE ANY KNOWLEDGE OF ANY INFRINGEMENT BY THE
COMPANY OR ITS SUBSIDIARIES OF INTELLECTUAL PROPERTY RIGHTS OF OTHERS.  THERE IS
NO CLAIM, ACTION OR PROCEEDING BEING MADE OR BROUGHT, OR TO THE KNOWLEDGE OF THE
COMPANY, BEING THREATENED, AGAINST THE COMPANY OR ITS SUBSIDIARIES REGARDING ITS
INTELLECTUAL PROPERTY RIGHTS.

 

(U)                                 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 AND LOCATION IN WHICH THE COMPANY AND THE SUBSIDIARIES ARE ENGAGED.

 

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(V)                                 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 DOES NOT, INDIVIDUALLY OR IN THE
AGGREGATE, HAVE OR RESULT IN A MATERIAL ADVERSE EFFECT (“MATERIAL PERMITS”), AND
NEITHER THE COMPANY NOR ANY SUBSIDIARY HAS RECEIVED ANY WRITTEN NOTICE OF
PROCEEDINGS RELATING TO THE REVOCATION OR MODIFICATION OF ANY MATERIAL PERMIT.

 

(W)                               TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. 
EXCEPT AS SET FORTH OR INCORPORATED BY REFERENCE IN THE COMPANY’S SEC REPORTS,
NONE OF THE OFFICERS, DIRECTORS OR EMPLOYEES OF THE COMPANY IS PRESENTLY A PARTY
TO ANY TRANSACTION THAT WOULD BE REQUIRED TO BE REPORTED ON FORM 10-K WITH THE
COMPANY OR ANY OF ITS SUBSIDIARIES (OTHER THAN FOR ORDINARY COURSE SERVICES AS
EMPLOYEES, OFFICERS OR 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 SUCH OFFICER, DIRECTOR OR EMPLOYEE OR, TO THE COMPANY’S KNOWLEDGE
, ANY CORPORATION, PARTNERSHIP, TRUST OR OTHER ENTITY IN WHICH ANY SUCH OFFICER,
DIRECTOR, OR EMPLOYEE HAS A SUBSTANTIAL INTEREST OR IS AN OFFICER, DIRECTOR,
TRUSTEE OR PARTNER.

 

(X)                                   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 CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES 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.

 

(Y)                                 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 SEC THEREUNDER, EXCEPT WHERE
SUCH NONCOMPLIANCE WOULD NOT HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL
ADVERSE EFFECT.

 

(Z)                                   FOREIGN CORRUPT PRACTICES.  NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES NOR, TO THE KNOWLEDGE OF THE COMPANY, ANY
DIRECTOR, OFFICER, AGENT, EMPLOYEE OR OTHER PERSON ACTING ON BEHALF OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES HAS, IN THE COURSE OF ITS ACTIONS FOR, OR ON
BEHALF OF, THE COMPANY (I) USED ANY CORPORATE FUNDS FOR ANY UNLAWFUL
CONTRIBUTION, GIFT, ENTERTAINMENT OR OTHER UNLAWFUL EXPENSES RELATING TO
POLITICAL ACTIVITY; (II) MADE ANY DIRECT OR INDIRECT UNLAWFUL PAYMENT TO ANY
FOREIGN OR DOMESTIC GOVERNMENT OFFICIAL OR EMPLOYEE FROM CORPORATE FUNDS;
(III) VIOLATED OR IS IN VIOLATION OF ANY PROVISION OF THE U.S. FOREIGN CORRUPT
PRACTICES ACT OF 1977, AS AMENDED; OR (IV) MADE ANY UNLAWFUL BRIBE, REBATE,
PAYOFF, INFLUENCE PAYMENT, KICKBACK OR OTHER UNLAWFUL PAYMENT TO ANY FOREIGN OR
DOMESTIC GOVERNMENT OFFICIAL OR EMPLOYEE.

 

(AA)                            INDEBTEDNESS.  EXCEPT AS DISCLOSED IN
SCHEDULE 3.1(AA) OR IN THE COMPANY’S FINANCIAL STATEMENTS AND NOTES THERETO,
NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES (I) HAS ANY OUTSTANDING
INDEBTEDNESS (AS DEFINED BELOW), (II) IS IN VIOLATION OF ANY TERM OF OR IN
DEFAULT UNDER ANY CONTRACT, AGREEMENT OR INSTRUMENT RELATING TO ANY
INDEBTEDNESS, EXCEPT WHERE SUCH VIOLATIONS AND DEFAULTS WOULD NOT RESULT,
INDIVIDUALLY OR IN THE AGGREGATE, IN A MATERIAL ADVERSE EFFECT, OR (III) IS A

 

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PARTY TO ANY CONTRACT, AGREEMENT OR INSTRUMENT RELATING TO ANY INDEBTEDNESS, THE
PERFORMANCE OF WHICH, IN THE JUDGMENT OF THE COMPANY’S OFFICERS, HAS OR IS
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.  SCHEDULE 3.1(AA) PROVIDES A
DETAILED DESCRIPTION OF THE MATERIAL TERMS OF ANY SUCH OUTSTANDING
INDEBTEDNESS.  FOR PURPOSES OF THIS AGREEMENT:  (X) “INDEBTEDNESS” OF ANY PERSON
MEANS, WITHOUT DUPLICATION (A) ALL INDEBTEDNESS FOR BORROWED MONEY, (B) ALL
OBLIGATIONS ISSUED, UNDERTAKEN OR ASSUMED AS THE DEFERRED PURCHASE PRICE OF
PROPERTY OR SERVICES (OTHER THAN TRADE PAYABLES ENTERED INTO IN THE ORDINARY
COURSE OF BUSINESS), (C) ALL REIMBURSEMENT OR PAYMENT OBLIGATIONS WITH RESPECT
TO LETTERS OF CREDIT, SURETY BONDS AND OTHER SIMILAR INSTRUMENTS, (D) ALL
OBLIGATIONS EVIDENCED BY NOTES, BONDS, DEBENTURES OR SIMILAR INSTRUMENTS,
INCLUDING OBLIGATIONS SO EVIDENCED INCURRED IN CONNECTION WITH THE ACQUISITION
OF PROPERTY, ASSETS OR BUSINESSES, (E) ALL INDEBTEDNESS CREATED OR ARISING UNDER
ANY CONDITIONAL SALE OR OTHER TITLE RETENTION AGREEMENT, OR INCURRED AS
FINANCING, IN EITHER CASE WITH RESPECT TO ANY PROPERTY OR ASSETS ACQUIRED WITH
THE PROCEEDS OF SUCH INDEBTEDNESS (EVEN THOUGH THE RIGHTS AND REMEDIES OF THE
SELLER OR BANK UNDER SUCH AGREEMENT IN THE EVENT OF DEFAULT ARE LIMITED TO
REPOSSESSION OR SALE OF SUCH PROPERTY), (F) ALL MONETARY OBLIGATIONS UNDER ANY
LEASING OR SIMILAR ARRANGEMENT WHICH, IN CONNECTION WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED FOR THE PERIODS COVERED THEREBY, IS
CLASSIFIED AS A CAPITAL LEASE, (G) ALL INDEBTEDNESS REFERRED TO IN CLAUSES
(A) THROUGH (F) ABOVE SECURED BY (OR FOR WHICH THE HOLDER OF SUCH INDEBTEDNESS
HAS AN EXISTING RIGHT, CONTINGENT OR OTHERWISE, TO BE SECURED BY) ANY MORTGAGE,
LIEN, PLEDGE, CHARGE, SECURITY INTEREST OR OTHER ENCUMBRANCE UPON OR IN ANY
PROPERTY OR ASSETS (INCLUDING ACCOUNTS AND CONTRACT RIGHTS) OWNED BY ANY PERSON,
EVEN THOUGH THE PERSON WHICH OWNS SUCH ASSETS OR PROPERTY HAS NOT ASSUMED OR
BECOME LIABLE FOR THE PAYMENT OF SUCH INDEBTEDNESS, AND (H) ALL CONTINGENT
OBLIGATIONS IN RESPECT OF INDEBTEDNESS OR OBLIGATIONS OF OTHERS OF THE KINDS
REFERRED TO IN CLAUSES (A) THROUGH (G) ABOVE; (Y) “CONTINGENT OBLIGATION” MEANS,
AS TO ANY PERSON, ANY DIRECT OR INDIRECT LIABILITY, CONTINGENT OR OTHERWISE, OF
THAT PERSON WITH RESPECT TO ANY INDEBTEDNESS, LEASE, DIVIDEND OR OTHER
OBLIGATION OF ANOTHER PERSON IF THE PRIMARY PURPOSE OR INTENT OF THE PERSON
INCURRING SUCH LIABILITY, OR THE PRIMARY EFFECT THEREOF, IS TO PROVIDE ASSURANCE
TO THE OBLIGEE OF SUCH LIABILITY THAT SUCH LIABILITY WILL BE PAID OR DISCHARGED,
OR THAT ANY AGREEMENTS RELATING THERETO WILL BE COMPLIED WITH, OR THAT THE
HOLDERS OF SUCH LIABILITY WILL BE PROTECTED (IN WHOLE OR IN PART) AGAINST LOSS
WITH RESPECT THERETO; AND (Z) “PERSON” MEANS AN INDIVIDUAL, A LIMITED LIABILITY
COMPANY, A PARTNERSHIP, A JOINT VENTURE, A CORPORATION, A TRUST, AN
UNINCORPORATED ORGANIZATION AND A GOVERNMENT OR ANY DEPARTMENT OR AGENCY
THEREOF.

 

(BB)                          EMPLOYEE RELATIONS.  NEITHER COMPANY NOR ANY OF
ITS SUBSIDIARIES IS A PARTY TO ANY COLLECTIVE BARGAINING AGREEMENT OR EMPLOYS
ANY MEMBER OF A UNION.  THE COMPANY AND ITS SUBSIDIARIES BELIEVE THAT THEIR
RELATIONS WITH THEIR EMPLOYEES ARE GOOD.  NO EXECUTIVE OFFICER OF THE COMPANY OR
ANY OF ITS SUBSIDIARIES (AS DEFINED IN RULE 501(F) OF THE 1933 ACT) HAS NOTIFIED
THE COMPANY OR ANY SUCH SUBSIDIARY THAT SUCH OFFICER INTENDS TO LEAVE THE
COMPANY OR ANY SUCH SUBSIDIARY OR OTHERWISE TERMINATE SUCH OFFICER’S EMPLOYMENT
WITH THE COMPANY OR ANY SUCH SUBSIDIARY.  TO THE KNOWLEDGE OF THE COMPANY OR ANY
SUCH SUBSIDIARY, NO EXECUTIVE OFFICER OF THE COMPANY OR ANY OF ITS SUBSIDIARIES
IS IN VIOLATION OF ANY MATERIAL TERM OF ANY EMPLOYMENT CONTRACT,
CONFIDENTIALITY, DISCLOSURE OR PROPRIETARY INFORMATION AGREEMENT,
NON-COMPETITION AGREEMENT, OR ANY OTHER CONTRACT OR AGREEMENT OR ANY RESTRICTIVE
COVENANT, AND THE CONTINUED EMPLOYMENT OF EACH SUCH EXECUTIVE OFFICER DOES NOT
SUBJECT THE COMPANY OR ANY SUCH SUBSIDIARY TO ANY LIABILITY WITH RESPECT TO ANY
OF THE FOREGOING MATTERS.

 

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(CC)                            LABOR MATTERS.  THE COMPANY AND ITS SUBSIDIARIES
ARE IN COMPLIANCE WITH ALL FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND
REGULATIONS RESPECTING LABOR, EMPLOYMENT AND EMPLOYMENT PRACTICES AND BENEFITS,
TERMS AND CONDITIONS OF EMPLOYMENT AND WAGES AND HOURS, EXCEPT WHERE FAILURE TO
BE IN COMPLIANCE WOULD NOT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY
BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

 

(DD)                          ENVIRONMENTAL LAWS.  THE COMPANY AND ITS
SUBSIDIARIES (I) ARE IN COMPLIANCE WITH ANY AND ALL ENVIRONMENTAL LAWS (AS
HEREINAFTER DEFINED), (II) HAVE RECEIVED ALL PERMITS, LICENSES OR OTHER
APPROVALS REQUIRED OF THEM UNDER APPLICABLE ENVIRONMENTAL LAWS TO CONDUCT THEIR
RESPECTIVE BUSINESSES AND (III) ARE IN COMPLIANCE WITH ALL TERMS AND CONDITIONS
OF ANY SUCH PERMIT, LICENSE OR APPROVAL WHERE, IN EACH OF THE FOREGOING CLAUSES
(I), (II) AND (III), THE FAILURE TO SO COMPLY WOULD BE REASONABLY EXPECTED TO
HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.  THE TERM
“ENVIRONMENTAL LAWS” MEANS ALL FEDERAL, STATE, LOCAL OR FOREIGN LAWS RELATING TO
POLLUTION OR PROTECTION OF HUMAN HEALTH OR THE ENVIRONMENT (INCLUDING, WITHOUT
LIMITATION, AMBIENT AIR, SURFACE WATER, GROUNDWATER, LAND SURFACE OR SUBSURFACE
STRATA), INCLUDING, WITHOUT LIMITATION, LAWS RELATING TO EMISSIONS, DISCHARGES,
RELEASES OR THREATENED RELEASES OF CHEMICALS, POLLUTANTS, CONTAMINANTS, OR TOXIC
OR HAZARDOUS SUBSTANCES OR WASTES (COLLECTIVELY, “HAZARDOUS MATERIALS”) INTO THE
ENVIRONMENT, OR OTHERWISE RELATING TO THE MANUFACTURE, PROCESSING, DISTRIBUTION,
USE, TREATMENT, STORAGE, DISPOSAL, TRANSPORT OR HANDLING OF HAZARDOUS MATERIALS,
AS WELL AS ALL AUTHORIZATIONS, CODES, DECREES, DEMANDS OR DEMAND LETTERS,
INJUNCTIONS, JUDGMENTS, LICENSES, NOTICES OR NOTICE LETTERS, ORDERS, PERMITS,
PLANS OR REGULATIONS ISSUED, ENTERED, PROMULGATED OR APPROVED THEREUNDER.

 

(EE)                            SUBSIDIARY RIGHTS.  EXCEPT AS SET FORTH IN
SCHEDULE 3.1(EE), THE COMPANY OR ONE OF ITS SUBSIDIARIES HAS THE UNRESTRICTED
RIGHT TO VOTE, AND (SUBJECT TO LIMITATIONS IMPOSED BY APPLICABLE LAW) TO RECEIVE
DIVIDENDS AND DISTRIBUTIONS ON, ALL CAPITAL SECURITIES OF ITS SUBSIDIARIES AS
OWNED BY THE COMPANY OR SUCH SUBSIDIARY.

 

(FF)                                TAX STATUS.  THE COMPANY AND EACH OF ITS
SUBSIDIARIES (I) HAS MADE OR FILED ALL FOREIGN, FEDERAL 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.

 

3.2                                 REPRESENTATIONS AND WARRANTIES OF THE
INVESTORS.  EACH INVESTOR HEREBY, AS TO ITSELF ONLY AND FOR NO OTHER INVESTOR,
REPRESENTS AND WARRANTS TO THE COMPANY AS FOLLOWS:

 

(A)                                  ORGANIZATION; AUTHORITY.  SUCH INVESTOR IS
AN ENTITY DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS
OF THE JURISDICTION OF ITS ORGANIZATION WITH THE REQUISITE CORPORATE 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 PURCHASE BY SUCH INVESTOR OF THE
SECURITIES HEREUNDER HAS BEEN DULY AUTHORIZED BY

 

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ALL NECESSARY ACTION ON THE PART OF SUCH INVESTOR.  THIS AGREEMENT HAS BEEN DULY
EXECUTED AND DELIVERED BY SUCH INVESTOR AND CONSTITUTES THE VALID AND BINDING
OBLIGATION OF SUCH INVESTOR, ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS
TERMS, EXCEPT AS MAY BE LIMITED BY (I) APPLICABLE BANKRUPTCY, INSOLVENCY,
REORGANIZATION OR OTHER LAWS OF GENERAL APPLICATION RELATING TO OR AFFECTING THE
ENFORCEMENT OF CREDITORS RIGHTS GENERALLY, AND (II) THE EFFECT OF RULES OF LAW
GOVERNING THE AVAILABILITY OF SPECIFIC PERFORMANCE AND OTHER EQUITABLE REMEDIES.

 

(B)                                 NO PUBLIC SALE OR DISTRIBUTION; INVESTMENT
INTENT.  SUCH INVESTOR IS (I) ACQUIRING THE COMMON SHARES AND THE WARRANTS AND
(II) UPON EXERCISE OF THE WARRANTS WILL ACQUIRE THE WARRANT SHARES ISSUABLE UPON
EXERCISE THEREOF, IN THE ORDINARY COURSE OF BUSINESS FOR ITS OWN ACCOUNT AND NOT
WITH A VIEW TOWARDS, OR FOR RESALE IN CONNECTION WITH, THE PUBLIC SALE OR
DISTRIBUTION THEREOF, EXCEPT PURSUANT TO SALES REGISTERED UNDER THE SECURITIES
ACT OR UNDER AN EXEMPTION FROM SUCH REGISTRATION AND IN COMPLIANCE WITH
APPLICABLE FEDERAL AND STATE SECURITIES LAWS, AND SUCH INVESTOR DOES NOT HAVE A
PRESENT ARRANGEMENT TO EFFECT ANY DISTRIBUTION OF THE SECURITIES TO OR THROUGH
ANY PERSON OR ENTITY; PROVIDED, HOWEVER, THAT BY MAKING THE REPRESENTATIONS
HEREIN, SUCH INVESTOR DOES NOT AGREE TO HOLD ANY OF THE SECURITIES FOR ANY
MINIMUM OR OTHER SPECIFIC TERM AND RESERVES THE RIGHT TO DISPOSE OF THE
SECURITIES AT ANY TIME IN ACCORDANCE WITH OR PURSUANT TO A REGISTRATION
STATEMENT OR AN EXEMPTION UNDER THE SECURITIES ACT.

 

(C)                                  INVESTOR STATUS.  AT THE TIME SUCH INVESTOR
WAS OFFERED THE SECURITIES, IT WAS, AND AT THE DATE HEREOF IT IS, AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT.

 

(D)                                 EXPERIENCE OF SUCH INVESTOR.  SUCH INVESTOR,
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
INVESTOR UNDERSTANDS THAT IT MUST BEAR THE ECONOMIC RISK OF THIS INVESTMENT IN
THE SECURITIES INDEFINITELY, AND IS ABLE TO BEAR SUCH RISK AND IS ABLE TO AFFORD
A COMPLETE LOSS OF SUCH INVESTMENT.

 

(E)                                  ACCESS TO INFORMATION.  SUCH INVESTOR
ACKNOWLEDGES THAT IT HAS REVIEWED THE DISCLOSURE MATERIALS AND HAS BEEN
AFFORDED: (I) THE OPPORTUNITY TO ASK SUCH QUESTIONS AS IT HAS DEEMED NECESSARY
OF, AND TO RECEIVE ANSWERS FROM, REPRESENTATIVES OF THE COMPANY CONCERNING THE
TERMS AND CONDITIONS OF THE OFFERING OF THE SECURITIES AND THE MERITS AND RISKS
OF INVESTING IN THE SECURITIES; (II) ACCESS TO INFORMATION (OTHER THAN MATERIAL
NON-PUBLIC INFORMATION) ABOUT THE COMPANY AND THE SUBSIDIARIES AND THEIR
RESPECTIVE FINANCIAL CONDITION, RESULTS OF OPERATIONS, BUSINESS, PROPERTIES,
MANAGEMENT AND PROSPECTS SUFFICIENT TO ENABLE IT TO EVALUATE ITS INVESTMENT; AND
(III) THE OPPORTUNITY TO OBTAIN SUCH ADDITIONAL INFORMATION THAT THE COMPANY
POSSESSES OR CAN ACQUIRE WITHOUT UNREASONABLE EFFORT OR EXPENSE THAT IS
NECESSARY TO MAKE AN INFORMED INVESTMENT DECISION WITH RESPECT TO THE
INVESTMENT.  NEITHER SUCH INQUIRIES NOR ANY OTHER INVESTIGATION CONDUCTED BY OR
ON BEHALF OF SUCH INVESTOR OR ITS REPRESENTATIVES OR COUNSEL SHALL MODIFY, AMEND
OR AFFECT SUCH INVESTOR’S RIGHT TO RELY ON THE TRUTH, ACCURACY AND COMPLETENESS
OF THE DISCLOSURE MATERIALS AND THE COMPANY’S REPRESENTATIONS AND WARRANTIES
CONTAINED IN THE TRANSACTION DOCUMENTS.

 

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(F)                                    NO GOVERNMENTAL REVIEW.  SUCH INVESTOR
UNDERSTANDS THAT NO UNITED STATES FEDERAL OR STATE AGENCY OR ANY OTHER
GOVERNMENT OR GOVERNMENTAL AGENCY HAS PASSED ON OR MADE ANY RECOMMENDATION OR
ENDORSEMENT OF THE SECURITIES OR THE FAIRNESS OR SUITABILITY OF THE INVESTMENT
IN THE SECURITIES NOR HAVE SUCH AUTHORITIES PASSED UPON OR ENDORSED THE MERITS
OF THE OFFERING OF THE SECURITIES.

 

(G)                                 NO CONFLICTS.  THE EXECUTION, DELIVERY AND
PERFORMANCE BY SUCH INVESTOR OF THIS AGREEMENT AND THE CONSUMMATION BY SUCH
INVESTOR OF THE TRANSACTIONS CONTEMPLATED HEREBY WILL NOT (I) RESULT IN A
VIOLATION OF THE ORGANIZATIONAL DOCUMENTS OF SUCH INVESTOR OR (II) CONFLICT
WITH, OR CONSTITUTE A DEFAULT (OR AN EVENT WHICH WITH NOTICE OR LAPSE OF TIME OR
BOTH WOULD BECOME A DEFAULT) UNDER, OR GIVE TO OTHERS ANY RIGHTS OF TERMINATION,
AMENDMENT, ACCELERATION OR CANCELLATION OF, ANY AGREEMENT, INDENTURE OR
INSTRUMENT TO WHICH SUCH INVESTOR IS A PARTY, OR (III) RESULT IN A VIOLATION OF
ANY LAW, RULE, REGULATION, ORDER, JUDGMENT OR DECREE (INCLUDING FEDERAL AND
STATE SECURITIES LAWS) APPLICABLE TO SUCH INVESTOR, EXCEPT IN THE CASE OF
CLAUSES (II) AND (III) ABOVE, FOR SUCH THAT ARE NOT MATERIAL AND DO NOT
OTHERWISE AFFECT THE ABILITY OF SUCH INVESTOR TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

(H)                                 ILLEGAL TRANSACTIONS.  NO INVESTOR DIRECTLY
OR INDIRECTLY, AND NO PERSON ACTING ON BEHALF OF OR PURSUANT TO ANY
UNDERSTANDING WITH SUCH INVESTOR, HAS ENGAGED IN ANY TRANSACTIONS IN THE
SECURITIES OF THE COMPANY (INCLUDING, WITHOUT LIMITATION, ANY SHORT SALES
INVOLVING ANY OF THE COMPANY’S SECURITIES) SINCE THE TIME THAT SUCH INVESTOR WAS
FIRST CONTACTED BY THE COMPANY, THE AGENT OR ANY OTHER PERSON REGARDING AN
INVESTMENT IN THE COMPANY.  SUCH INVESTOR, INDIVIDUALLY, AND ON BEHALF OF
ITSELF, COVENANTS THAT NEITHER IT NOR ANY PERSON ACTING ON ITS BEHALF OR
PURSUANT TO ANY UNDERSTANDING WITH SUCH INVESTOR WILL ENGAGE, DIRECTLY OR
INDIRECTLY, IN ANY TRANSACTIONS IN THE SECURITIES OF THE COMPANY (INCLUDING
SHORT SALES) PRIOR TO THIRTY (30) MINUTES AFTER THE FIRST TRADE IN THE COMPANY’S
COMMON STOCK ON THE AMEX AFTER THE TIME THAT THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT ARE PUBLICLY DISCLOSED.  SUCH INVESTOR FURTHER COVENANTS THAT
FROM AND AFTER THE DATE OF SUCH DISCLOSURE, AND FOR SO LONG AS SUCH INVESTOR
OWNS ANY SECURITIES PURCHASED HEREUNDER, NEITHER IT NOR ANY PERSON ACTING ON
BEHALF OF OR PURSUANT TO ANY UNDERSTANDING WITH SUCH INVESTOR WILL ENGAGE IN ANY
SHORT SALES AT A TIME WHEN IT HAS NO EQUIVALENT OFFSETTING LONG POSITION IN
SHARES OF COMMON STOCK.  FOR PURPOSES OF DETERMINING WHETHER OR NOT SUCH
INVESTOR HAS SUCH AN EQUIVALENT OFFSETTING LONG POSITION, SHARES OF COMMON STOCK
THAT SUCH INVESTOR WOULD OTHERWISE BE ENTITLED TO RECEIVE UPON CONVERSION OR
EXERCISE OF THE COMPANY’S CONVERTIBLE SECURITIES (INCLUDING THE WARRANT HELD BY
SUCH INVESTOR) WILL BE INCLUDED AS IF HELD LONG BY SUCH INVESTOR (REGARDLESS OF
ANY LIMITATION UPON SUCH CONVERSION OR EXERCISE). FOR PURPOSES HEREOF, “SHORT
SALES” INCLUDE, WITHOUT LIMITATION, ALL “SHORT SALES” AS DEFINED IN RULE 200
PROMULGATED BY THE SEC UNDER REGULATION SHO UNDER THE EXCHANGE ACT AND ALL TYPES
OF DIRECT AND INDIRECT STOCK PLEDGES, FORWARD SALE CONTRACTS, OPTIONS, PUTS,
CALLS, SHORT SALES, SWAPS, DERIVATIVES AND SIMILAR ARRANGEMENTS (INCLUDING ON A
TOTAL RETURN BASIS) AND SALES AND OTHER TRANSACTIONS THROUGH NON-U.S.
BROKER-DEALERS OR FOREIGN REGULATED BROKERS.

 

(I)                                     NO LEGAL, TAX OR INVESTMENT ADVICE. 
SUCH INVESTOR UNDERSTANDS THAT NOTHING IN THIS AGREEMENT OR ANY OTHER MATERIALS
PRESENTED BY OR ON BEHALF OF THE COMPANY TO THE INVESTOR IN CONNECTION WITH THE
PURCHASE OF THE SECURITIES CONSTITUTES LEGAL, TAX OR INVESTMENT ADVICE.  SUCH
INVESTOR HAS CONSULTED SUCH LEGAL, TAX AND INVESTMENT ADVISORS AS IT, IN ITS
SOLE DISCRETION, HAS DEEMED

 

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NECESSARY OR APPROPRIATE IN CONNECTION WITH ITS PURCHASE OF THE SECURITIES. 
SUCH INVESTOR UNDERSTANDS THAT THE AGENT HAS ACTED SOLELY AS THE AGENT OF THE
COMPANY IN THIS PLACEMENT OF THE SECURITIES, AND THAT THE AGENT MAKES NO
REPRESENTATION OR WARRANTY WITH REGARD TO THE MERITS OF THIS TRANSACTION OR AS
TO THE ACCURACY OF ANY INFORMATION SUCH INVESTOR MAY HAVE RECEIVED IN CONNECTION
THEREWITH.  SUCH INVESTOR ACKNOWLEDGES THAT HE HAS NOT RELIED ON ANY INFORMATION
OR ADVICE FURNISHED BY OR ON BEHALF OF THE AGENT.

 

(J)                                     COMPENSATION OF PLACEMENT AGENT.  SUCH
INVESTOR IS AWARE THAT, WITH RESPECT TO THE COMMON SHARES BEING SOLD BY THE
COMPANY, THE AGENT IS RECEIVING COMMISSIONS EQUAL TO 6% CASH AND WARRANTS TO
ACQUIRE A NUMBER OF SHARES EQUAL TO 2% OF THE COMMON SHARES AND THE WARRANT
SHARES.

 

ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

 

4.1                                 TRANSFER RESTRICTIONS.

 

(A)                                  THE INVESTORS COVENANT THAT THE SECURITIES
WILL ONLY BE DISPOSED OF PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER,
AND IN COMPLIANCE WITH THE REQUIREMENTS OF, 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 REQUIRES THE TRANSFEROR TO PROVIDE TO THE COMPANY AN
OPINION OF COUNSEL SELECTED 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, EXCEPT TO THE EXTENT THAT THE TRANSFER AGENT REQUESTS SUCH
LEGAL OPINION, ANY TRANSFER OF SECURITIES BY AN INVESTOR TO AN AFFILIATE OF SUCH
INVESTOR, PROVIDED THAT THE TRANSFEREE CERTIFIES TO THE COMPANY THAT IT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT AND
PROVIDED THAT SUCH AFFILIATE DOES NOT REQUEST ANY REMOVAL OF ANY EXISTING
LEGENDS ON ANY CERTIFICATE EVIDENCING THE SECURITIES.

 

(B)                                 THE INVESTORS AGREE TO THE IMPRINTING, SO
LONG AS IS REQUIRED BY THIS SECTION 4.1(B), OF THE FOLLOWING LEGEND ON ANY
CERTIFICATE EVIDENCING SECURITIES:

 

THESE SECURITIES 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”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED 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.

 

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Certificates evidencing Securities shall contain such legend except: (i) after
the Registration Statement is effective; (ii) after the Securities have been
sold pursuant to a Registration Statement that is effective under the Securities
Act covering the resale of such Securities, (iii) following any sale of such
Securities pursuant to Rule 144 if the holder provides the Company with a legal
opinion providing reasonable assurances that the Securities can be sold under
Rule 144, (iv) if the holder provides the Company with a legal opinion providing
reasonable assurances that the Securities are eligible for sale under
Rule 144(k), or (v) if the holder provides the Company with a legal opinion
providing reasonable assurances that the legend is not required under applicable
requirements of the Securities Act (including controlling judicial
interpretations and pronouncements issued by the Staff of the SEC).  The Company
shall cause its counsel to issue the legal opinion included in the Transfer
Agent Instructions to the 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 not later than five Trading Days following
the delivery by an Investor to the Company or the Transfer Agent of a legended
certificate representing such Securities and an opinion of counsel to the extent
required by Section 4.1(a), deliver or cause to be delivered to such Investor 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 the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section.

 

(c)                                  The Company will not object to and shall
permit (except as prohibited by law) an Investor to 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, the Company
will not object to and shall permit (except as prohibited by law) such Investor
to transfer pledged or secured Securities to the pledgees or secured parties. 
Except as required by law, such a pledge or transfer would not be subject to
approval of the Company, no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith, and no notice shall be
required of such pledge.  Each Investor acknowledges that the Company shall not
be responsible for any pledges relating to, or the grant of any security
interest in, any of the Securities or for any agreement, understanding or
arrangement between any Investor and its pledgee or secured party.  At the
appropriate Investor’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. Provided that the Company is in compliance with the terms of this
Section 4.1(c), the Company’s indemnification obligations pursuant to
Section 6.4 shall not extend to any Proceeding or Losses arising out of or
related to this Section 4.1(c).

 

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4.2                                 FURNISHING OF INFORMATION.  AS LONG AS ANY
INVESTOR OWNS SECURITIES, THE COMPANY COVENANTS TO USE ITS COMMERCIALLY
REASONABLE EFFORTS 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.  THE COMPANY FURTHER
COVENANTS THAT IT WILL TAKE SUCH FURTHER ACTION AS ANY HOLDER OF SECURITIES MAY
REASONABLY REQUEST TO SATISFY THE PROVISIONS OF THIS SECTION 4.2.

 

4.3                                 INTEGRATION.  THE COMPANY SHALL NOT, AND
SHALL USE ITS COMMERCIALLY REASONABLY EFFORTS TO ENSURE THAT NO AFFILIATE
THEREOF 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 INVESTORS OR THAT WOULD BE INTEGRATED WITH THE OFFER OR
SALE OF THE SECURITIES FOR PURPOSES OF THE RULES AND REGULATIONS OF ANY TRADING
MARKET.

 

4.4                                 RESERVATION OF SECURITIES.  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 TO ISSUE SUCH SHARES UNDER THE TRANSACTION
DOCUMENTS.  IN THE EVENT THAT AT ANY TIME THE THEN AUTHORIZED SHARES OF COMMON
STOCK ARE INSUFFICIENT FOR THE COMPANY TO SATISFY ITS OBLIGATIONS TO ISSUE SUCH
SHARES UNDER THE TRANSACTION DOCUMENTS, THE COMPANY SHALL PROMPTLY TAKE SUCH
ACTIONS AS MAY BE REQUIRED TO INCREASE THE NUMBER OF AUTHORIZED SHARES.

 

4.5                                 SECURITIES LAWS DISCLOSURE; PUBLICITY.  THE
COMPANY SHALL, ON OR BEFORE 8:30 A.M., NEW YORK TIME, ON THE FIRST TRADING DAY
FOLLOWING EXECUTION OF THIS AGREEMENT, ISSUE A PRESS RELEASE DISCLOSING ALL
MATERIAL TERMS OF THE TRANSACTIONS CONTEMPLATED HEREBY.  NO LATER THAN THE
CLOSING DATE, THE COMPANY SHALL FILE A CURRENT REPORT ON FORM 8-K WITH THE SEC
(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 WARRANTS, IN THE FORM REQUIRED BY THE
EXCHANGE ACT.  THEREAFTER, THE COMPANY SHALL TIMELY FILE ANY FILINGS AND NOTICES
REQUIRED BY THE SEC OR APPLICABLE LAW WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREBY AND PROVIDE COPIES THEREOF TO THE INVESTORS PROMPTLY AFTER
FILING.  THE COMPANY SHALL NOT PUBLICLY DISCLOSE THE NAME OF ANY INVESTOR, OR
INCLUDE THE NAME OF ANY INVESTOR IN ANY PRESS RELEASE WITHOUT THE PRIOR WRITTEN
CONSENT OF SUCH INVESTOR, UNLESS OTHERWISE REQUIRED BY LAW.  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
INVESTOR WITH ANY MATERIAL NONPUBLIC INFORMATION REGARDING THE COMPANY OR ANY OF
ITS SUBSIDIARIES (I) FROM AND AFTER THE ISSUANCE OF THE ABOVE REFERENCED PRESS
RELEASE; AND (II) DURING ANY SUSPENSION OF TRADING AS DESCRIBED IN
SECTION 6.1(E) HERETO, WITHOUT THE EXPRESS WRITTEN CONSENT OF SUCH INVESTOR.

 

4.6                                 USE OF PROCEEDS.  THE COMPANY INTENDS TO USE
THE NET PROCEEDS FROM THE SALE OF THE SECURITIES FOR GENERAL CORPORATE PURPOSES,
INCLUDING INVENTORY PURCHASES, EXPANSION OF ITS DISTRIBUTION BUSINESS TO NEW
PRODUCTS AND NEW GEOGRAPHIC AREAS, AND PAYMENTS, FROM TIME-TO-TIME, ON ITS
REVOLVING BANK LINE OF CREDIT.  THE COMPANY ALSO MAY USE A PORTION OF THE NET
PROCEEDS, CURRENTLY INTENDED FOR GENERAL CORPORATE PURPOSES, TO ACQUIRE OR
INVEST IN TECHNOLOGIES, PRODUCTS OR

 

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SERVICES THAT COMPLEMENT ITS BUSINESS, ALTHOUGH THE COMPANY HAS NO PRESENT PLANS
OR COMMITMENTS AND IS NOT CURRENTLY ENGAGED IN ANY MATERIAL NEGOTIATIONS WITH
RESPECT TO THESE TYPES OF TRANSACTIONS.  PENDING THESE USES, THE COMPANY INTENDS
TO INVEST THE NET PROCEEDS FROM THIS OFFERING IN SHORT-TERM, INTEREST-BEARING,
INVESTMENT-GRADE SECURITIES, OR AS OTHERWISE PURSUANT TO THE COMPANY’S CUSTOMARY
INVESTMENT POLICIES.

 

4.7                                 MANAGEMENT LOCK-UP AGREEMENTS.  THE COMPANY
SHALL, ON OR BEFORE THE CLOSING, ENTER INTO LEGALLY BINDING AND ENFORCEABLE
AGREEMENTS (COLLECTIVELY, THE “LOCK-UP AGREEMENTS”) WITH ITS CHIEF EXECUTIVE
OFFICER, ITS CHIEF FINANCIAL OFFICER, AND ITS EXECUTIVE VICE PRESIDENT,
RESPECTIVELY, PURSUANT TO WHICH THESE PERSONS WILL AGREE NOT TO, DIRECTLY OR
INDIRECTLY, OFFER TO SELL, SELL, GRANT ANY OPTION FOR THE SALE OF, ASSIGN,
TRANSFER, PLEDGE, HYPOTHECATE, DISTRIBUTE OR OTHERWISE ENCUMBER OR DISPOSE OF
ANY SHARES OF COMMON STOCK OR SECURITIES CONVERTIBLE INTO, EXERCISABLE OR
EXCHANGEABLE FOR OR EVIDENCING ANY RIGHT TO PURCHASE OR SUBSCRIBE FOR ANY SHARES
OF COMMON STOCK (EITHER PURSUANT TO RULE 144 OF THE RULES AND REGULATIONS OR
OTHERWISE) OR DISPOSE OF ANY BENEFICIAL INTEREST THEREIN UNTIL THE EFFECTIVE
DATE WITHOUT THE PRIOR WRITTEN CONSENT OF THE AGENT.

 

4.8.  Additional Registrations.  The Company agrees that it will not register
the issuance or resale of any shares of Common Stock or securities convertible
into, exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock, except for the registration of the
resale of the securities eligible to be covered by the Prior Registration
Statement (as more fully described in Section 6.6) until 60 days following the
Effective Date.

 

ARTICLE V
CONDITIONS

 

5.1                                 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
THE INVESTORS.  THE OBLIGATION OF EACH INVESTOR TO ACQUIRE SECURITIES AT THE
CLOSING IS SUBJECT TO THE SATISFACTION OR WAIVER BY SUCH INVESTOR, 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; AND

 

(B)                                 PERFORMANCE.  THE COMPANY AND EACH OTHER
INVESTOR 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)                                  AMEX APPROVAL.  THE TRADING MARKET SHALL
HAVE APPROVED THE LISTING OF THE SECURITIES.

 

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5.2                                 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
THE COMPANY.  THE OBLIGATION OF THE COMPANY TO SELL THE 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 INVESTORS 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; AND

 

(B)                                 PERFORMANCE.  THE INVESTORS 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 INVESTORS AT OR PRIOR TO THAT RESPECTIVE
CLOSING.

 

(C)                                  AMEX APPROVAL.  THE TRADING MARKET SHALL
HAVE APPROVED THE LISTING OF THE SECURITIES.

 

(d)                                 Minimum Offering Amount.  The Minimum Amount
of the Securities has been sold.

 

ARTICLE VI
REGISTRATION RIGHTS

 

6.1                                 REGISTRATION STATEMENT.

 

(A)                                  AS PROMPTLY AS POSSIBLE, AND IN ANY EVENT
ON OR PRIOR TO THE FILING DATE, THE COMPANY SHALL PREPARE AND FILE WITH THE SEC
A REGISTRATION STATEMENT COVERING THE RESALE OF ALL REGISTRABLE SECURITIES SOLD
AT THE CLOSING FOR AN OFFERING TO BE MADE ON A CONTINUOUS BASIS PURSUANT TO
RULE 415.  THE REGISTRATION STATEMENT SHALL BE ON FORM S-3 (EXCEPT IF THE
COMPANY IS NOT THEN ELIGIBLE TO REGISTER FOR RESALE THE REGISTRABLE SECURITIES
ON FORM S-3, IN WHICH CASE SUCH REGISTRATION SHALL BE ON ANOTHER APPROPRIATE
FORM IN ACCORDANCE WITH THE SECURITIES ACT AND THE EXCHANGE ACT) AND SHALL
CONTAIN (EXCEPT IF THE INVESTORS STATE THAT SUCH WORDING IS INACCURATE OR IF THE
SEC REQUESTS OTHERWISE) THE “PLAN OF DISTRIBUTION” ATTACHED HERETO AS EXHIBIT D.

 

(B)                                 THE COMPANY SHALL USE ITS COMMERCIALLY
REASONABLE EFFORTS TO CAUSE THE REGISTRATION STATEMENT TO BE DECLARED EFFECTIVE
BY THE SEC AS PROMPTLY AS POSSIBLE AFTER THE FILING THEREOF, AND SHALL USE ITS
COMMERCIALLY REASONABLE EFFORTS TO KEEP THE REGISTRATION STATEMENT CONTINUOUSLY
EFFECTIVE UNDER THE SECURITIES ACT UNTIL THE EARLIER OF THE DATE THAT ALL
REGISTRABLE SECURITIES COVERED BY SUCH REGISTRATION STATEMENT HAVE BEEN SOLD OR
CAN BE SOLD PUBLICLY UNDER RULE 144(K) (THE “EFFECTIVENESS PERIOD”).

 

(C)                                  THE COMPANY SHALL NOTIFY INVESTORS PROMPTLY
(AND IN ANY EVENT WITHIN TWO TRADING DAYS) AFTER RECEIVING NOTIFICATION FROM THE
SEC THAT THE REGISTRATION STATEMENT HAS BEEN DECLARED EFFECTIVE.

 

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(D)                                 SHOULD AN EVENT (AS DEFINED BELOW) OCCUR,
THEN UPON THE OCCURRENCE OF SUCH EVENT, AND ON EVERY MONTHLY ANNIVERSARY THEREOF
UNTIL THE APPLICABLE EVENT IS CURED, AS PARTIAL RELIEF FOR THE DAMAGES SUFFERED
THEREFROM BY THE INVESTORS (WHICH REMEDY SHALL NOT BE EXCLUSIVE OF ANY OTHER
REMEDIES AVAILABLE UNDER THIS AGREEMENT, AT LAW OR IN EQUITY), THE COMPANY SHALL
PAY TO EACH INVESTOR AN AMOUNT IN CASH, AS LIQUIDATED DAMAGES AND NOT AS A
PENALTY, EQUAL TO ONE PERCENT OF (I) THE NUMBER OF SECURITIES HELD BY SUCH
INVESTOR AS OF THE DATE OF SUCH EVENT, MULTIPLIED BY (II) THE PURCHASE PRICE
PAID BY SUCH INVESTOR FOR SUCH SECURITIES THEN HELD.  THE PAYMENTS TO WHICH AN
INVESTOR SHALL BE ENTITLED PURSUANT TO THIS SECTION 6.1(D) ARE REFERRED TO
HEREIN AS “EVENT PAYMENTS.”   ANY EVENT PAYMENTS PAYABLE PURSUANT TO THE TERMS
HEREOF SHALL APPLY ON A PRO RATED BASIS FOR ANY PORTION OF A MONTH PRIOR TO THE
CURE OF AN EVENT.  IN THE EVENT THE COMPANY FAILS TO MAKE EVENT PAYMENTS IN A
TIMELY MANNER, SUCH EVENT PAYMENTS SHALL BEAR INTEREST AT THE RATE OF 1.0% PER
MONTH (PRORATED FOR PARTIAL MONTHS) UNTIL PAID IN FULL.  ALL PRO RATED
CALCULATIONS MADE PURSUANT TO THIS PARAGRAPH SHALL BE BASED UPON THE ACTUAL
NUMBER OF DAYS IN SUCH PRO RATED MONTH.

 

For such purposes, each of the following shall constitute an “Event”:

 

(I)                                     THE REGISTRATION STATEMENT IS NOT FILED
ON OR PRIOR TO THE FILING DATE OR IS NOT DECLARED EFFECTIVE ON OR PRIOR TO THE
REQUIRED EFFECTIVENESS DATE; PROVIDED, HOWEVER, THAT FOR THE PURPOSES OF THE
EVENT PAYMENT UNDER THIS SECTION 6.1(D) ONLY, THE COMPANY SHALL HAVE AN
ADDITIONAL 30 DAYS TO CURE THE FAILURE TO DECLARE THE REGISTRATION STATEMENT
EFFECTIVE ON OR PRIOR TO THE REQUIRED EFFECTIVENESS DATE BEFORE SUCH EVENT
PAYMENT IS DUE TO THE INVESTORS UNDER THIS SECTION 6.1(D);

 

(II)                                  EXCEPT (A) AS PROVIDED FOR IN
SECTION 6.1(E), (B) IF THE COMPANY IS INVOLVED IN A “RULE 13E-3 TRANSACTION” AS
DEFINED IN RULE 13E-3 UNDER THE EXCHANGE ACT, OR (C) IN THE EVENT OF A MERGER OR
CONSOLIDATION OF THE COMPANY OR A SALE OF MORE THAN ONE-HALF 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 50% OF THE VOTING
RIGHTS AND EQUITY INTERESTS OF THE SURVIVING ENTITY OR ACQUIRER (CLAUSES (B) AND
(C), COLLECTIVELY, THE “EXCLUDED EVENTS”), AFTER THE EFFECTIVE DATE, AN INVESTOR
IS NOT PERMITTED TO SELL REGISTRABLE SECURITIES UNDER THE REGISTRATION STATEMENT
(OR A SUBSEQUENT REGISTRATION STATEMENT FILED IN REPLACEMENT THEREOF) FOR ANY
REASON (OTHER THAN THE FAULT OF SUCH INVESTOR) FOR THREE OR MORE CONSECUTIVE
TRADING DAYS;

 

(III)                               EXCEPT AS A RESULT OF THE EXCLUDED EVENTS,
THE COMMON STOCK IS NOT LISTED OR QUOTED, OR IS SUSPENDED FROM TRADING, ON AN
ELIGIBLE MARKET FOR A PERIOD OF THREE CONSECUTIVE TRADING DAYS DURING THE
EFFECTIVENESS PERIOD;

 

(IV)                              THE COMPANY FAILS FOR ANY REASON TO DELIVER A
CERTIFICATE EVIDENCING ANY SECURITIES TO AN INVESTOR WITHIN TEN TRADING DAYS
AFTER DELIVERY OF SUCH CERTIFICATE IS REQUIRED PURSUANT TO ANY TRANSACTION
DOCUMENT OR THE EXERCISE RIGHTS OF THE INVESTORS PURSUANT TO THE WARRANTS ARE
OTHERWISE SUSPENDED FOR ANY REASON;

 

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(V)                                 THE COMPANY FAILS TO HAVE AVAILABLE A
SUFFICIENT NUMBER OF AUTHORIZED BUT UNISSUED AND OTHERWISE UNRESERVED SHARES OF
COMMON STOCK AVAILABLE TO ISSUE WARRANT SHARES UPON ANY EXERCISE OF THE WARRANTS
WITHIN THREE TRADING DAYS AFTER BECOMING AWARE OF SUCH FACT OR, EXCEPT AS A
RESULT OF THE EXCLUDED EVENTS, DURING THE EFFECTIVENESS PERIOD, ANY SHARES OR
WARRANT SHARES ARE NOT LISTED ON AN ELIGIBLE MARKET; OR

 

(vi)                              the Company fails to submit to the SEC a
request for acceleration of the effectiveness of the Registration Statement
within three Trading Dates of the date that the SEC notifies the Company that,
in connection with the Registration Statement, the SEC will not undertake to
review, and/or provide comments on, the Registration Statement or any of the
Company’s periodic reports filed under the Securities Exchange Act of 1934 or
any other matters.

 

(E)                                  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT
TO THE CONTRARY, AFTER 60 CONSECUTIVE TRADING DAYS OF CONTINUOUS EFFECTIVENESS
OF THE INITIAL REGISTRATION STATEMENT FILED AND DECLARED EFFECTIVE PURSUANT TO
THIS AGREEMENT, THE COMPANY MAY, BY WRITTEN NOTICE TO THE INVESTORS, SUSPEND
SALES UNDER A REGISTRATION STATEMENT AFTER THE EFFECTIVE DATE THEREOF AND/OR
REQUIRE THAT THE INVESTORS IMMEDIATELY CEASE THE SALE OF SHARES OF COMMON STOCK
PURSUANT THERETO AND/OR DEFER THE FILING OF ANY SUBSEQUENT REGISTRATION
STATEMENT IF THE COMPANY IS ENGAGED IN A MATERIAL MERGER, ACQUISITION OR SALE
AND THE BOARD OF DIRECTORS DETERMINES IN GOOD FAITH, BY APPROPRIATE RESOLUTIONS,
THAT, AS A RESULT OF SUCH ACTIVITY, (A) IT WOULD BE MATERIALLY DETRIMENTAL TO
THE COMPANY (OTHER THAN AS RELATING SOLELY TO THE PRICE OF THE COMMON STOCK) TO
MAINTAIN A REGISTRATION STATEMENT AT SUCH TIME OR (B) IT IS IN THE BEST
INTERESTS OF THE COMPANY TO SUSPEND SALES UNDER SUCH REGISTRATION AT SUCH TIME. 
UPON RECEIPT OF SUCH NOTICE, EACH INVESTOR SHALL IMMEDIATELY DISCONTINUE ANY
SALES OF REGISTRABLE SECURITIES PURSUANT TO SUCH REGISTRATION UNTIL SUCH
INVESTOR HAS RECEIVED COPIES OF A SUPPLEMENTED OR AMENDED PROSPECTUS OR UNTIL
SUCH INVESTOR IS ADVISED IN WRITING BY THE COMPANY THAT THE THEN-CURRENT
PROSPECTUS MAY BE USED AND HAS RECEIVED COPIES OF ANY ADDITIONAL OR SUPPLEMENTAL
FILINGS THAT ARE INCORPORATED OR DEEMED INCORPORATED BY REFERENCE IN SUCH
PROSPECTUS.  IN NO EVENT, HOWEVER, SHALL THIS RIGHT BE EXERCISED TO SUSPEND
SALES BEYOND THE PERIOD DURING WHICH (IN THE GOOD FAITH DETERMINATION OF THE
COMPANY’S BOARD OF DIRECTORS) THE FAILURE TO REQUIRE SUCH SUSPENSION WOULD BE
MATERIALLY DETRIMENTAL TO THE COMPANY.  THE COMPANY’S RIGHTS UNDER THIS
SECTION 6(E) MAY BE EXERCISED FOR A PERIOD OF NO MORE THAN 20 DAYS AT A TIME AND
NOT MORE THAN THREE TIMES IN ANY TWELVE-MONTH PERIOD, WITHOUT SUCH SUSPENSION
BEING CONSIDERED AS PART OF AN EVENT PAYMENT DETERMINATION.  IMMEDIATELY AFTER
THE END OF ANY SUSPENSION PERIOD UNDER THIS SECTION 6(E), THE COMPANY SHALL TAKE
ALL NECESSARY ACTIONS (INCLUDING FILING ANY REQUIRED SUPPLEMENTAL PROSPECTUS) TO
RESTORE THE EFFECTIVENESS OF THE APPLICABLE REGISTRATION STATEMENT AND THE
ABILITY OF THE INVESTORS TO PUBLICLY RESELL THEIR REGISTRABLE SECURITIES
PURSUANT TO SUCH EFFECTIVE REGISTRATION STATEMENT.

 

6.2                                 REGISTRATION PROCEDURES.  IN CONNECTION WITH
THE COMPANY’S REGISTRATION OBLIGATIONS HEREUNDER, THE COMPANY SHALL:

 

(A)                                  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), FURNISH TO THE
INVESTORS 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 INVESTORS.  THE COMPANY SHALL REFLECT IN EACH
SUCH DOCUMENT WHEN SO FILED WITH THE SEC SUCH COMMENTS CONCERNING THE INVESTORS
AS THE INVESTORS MAY REASONABLY AND PROMPTLY PROPOSE.

 

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(B)                                 (I) SUBJECT TO SECTION 6.1(D) PREPARE AND
FILE WITH THE SEC SUCH AMENDMENTS, INCLUDING POST-EFFECTIVE AMENDMENTS, TO EACH
REGISTRATION STATEMENT AND THE PROSPECTUS USED IN CONNECTION THEREWITH AS MAY BE
NECESSARY TO KEEP EACH REGISTRATION STATEMENT CONTINUOUSLY EFFECTIVE, AS TO THE
APPLICABLE REGISTRABLE SECURITIES FOR THE EFFECTIVENESS PERIOD AND PREPARE AND
FILE WITH THE SEC 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, TO ANY COMMENTS
RECEIVED FROM THE SEC WITH RESPECT TO THE REGISTRATION STATEMENT OR ANY
AMENDMENT THERETO; 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
INVESTORS THEREOF SET FORTH IN THE REGISTRATION STATEMENT AS SO AMENDED OR IN
SUCH PROSPECTUS AS SO SUPPLEMENTED.

 

(C)                                  TO THE EXTENT THE NOTIFICATION DOES NOT
INCLUDE MATERIAL NON-PUBLIC INFORMATION OR WOULD NOT OTHERWISE RESULT IN A
VIOLATION OF REGULATION FD, NOTIFY EACH INVESTOR AS PROMPTLY AS REASONABLY
POSSIBLE, AND (IF REQUESTED BY THAT INVESTOR CONFIRM SUCH NOTICE IN WRITING NO
LATER THAN TWO TRADING DAYS THEREAFTER, OF ANY OF THE FOLLOWING EVENTS: (I) THE
SEC NOTIFIES THE COMPANY WHETHER THERE WILL BE A “REVIEW” OF ANY REGISTRATION
STATEMENT; (II) THE SEC COMMENTS IN WRITING ON ANY REGISTRATION STATEMENT;
(III) ANY REGISTRATION STATEMENT OR ANY POST-EFFECTIVE AMENDMENT IS DECLARED
EFFECTIVE; (IV) THE SEC 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 SEC 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
IN ANY REGISTRATION STATEMENT BECOME INELIGIBLE FOR INCLUSION THEREIN OR ANY
REGISTRATION STATEMENT OR PROSPECTUS OR OTHER DOCUMENT CONTAINS ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR OMITS 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 REASONABLE 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)                                  IF REQUESTED BY AN INVESTOR, PROVIDE SUCH
INVESTOR AT LEAST ONE CONFORMED COPY OF EACH REGISTRATION STATEMENT AND EACH
AMENDMENT THERETO, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES, 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 SEC, AT THE SOLE EXPENSE OF THE INVESTOR.

 

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(F)                                    PROMPTLY DELIVER TO EACH INVESTOR 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 AT
THE SOLE EXPENSE OF THE RESPECTIVE INVESTOR. THE COMPANY HEREBY CONSENTS TO THE
USE OF SUCH PROSPECTUS AND EACH AMENDMENT OR SUPPLEMENT THERETO BY EACH OF THE
SELLING INVESTORS IN CONNECTION WITH THE OFFERING AND SALE OF THE REGISTRABLE
SECURITIES COVERED BY SUCH PROSPECTUS AND ANY AMENDMENT OR SUPPLEMENT THERETO TO
THE EXTENT PERMITTED BY FEDERAL AND STATE SECURITIES LAWS AND REGULATIONS.

 

(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 EACH
INVESTOR EVIDENCE OF SUCH LISTING; AND (IV) EXCEPT AS A RESULT OF THE EXCLUDED
EVENTS, DURING THE EFFECTIVENESS PERIOD, MAINTAIN THE LISTING OF SUCH
REGISTRABLE SECURITIES ON EACH SUCH TRADING MARKET OR ANOTHER ELIGIBLE MARKET.

 

(H)                                 PRIOR TO ANY PUBLIC OFFERING OF REGISTRABLE
SECURITIES, USE ITS REASONABLE BEST EFFORTS TO REGISTER OR QUALIFY OR COOPERATE
WITH THE SELLING INVESTORS 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 INVESTOR REQUESTS IN WRITING, TO
KEEP EACH SUCH REGISTRATION OR QUALIFICATION (OR EXEMPTION THEREFROM) EFFECTIVE
FOR SO LONG AS REQUIRED, BUT NOT TO EXCEED THE DURATION OF THE EFFECTIVENESS
PERIOD, AND TO DO ANY AND ALL OTHER ACTS OR THINGS REASONABLY NECESSARY OR
ADVISABLE TO ENABLE THE DISPOSITION IN SUCH JURISDICTIONS OF THE REGISTRABLE
SECURITIES COVERED BY A REGISTRATION STATEMENT; PROVIDED, HOWEVER, THAT THE
COMPANY SHALL NOT BE OBLIGATED TO FILE ANY GENERAL CONSENT TO SERVICE OF PROCESS
OR TO QUALIFY AS A FOREIGN CORPORATION OR AS A DEALER IN SECURITIES IN ANY
JURISDICTION IN WHICH IT IS NOT SO QUALIFIED OR TO SUBJECT ITSELF TO TAXATION IN
RESPECT OF DOING BUSINESS IN ANY JURISDICTION IN WHICH IT IS NOT OTHERWISE SO
SUBJECT.

 

(I)                                     COOPERATE WITH THE INVESTORS 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 AND UNDER LAW, OF ALL RESTRICTIVE LEGENDS, AND TO
ENABLE SUCH REGISTRABLE SECURITIES TO BE IN SUCH DENOMINATIONS AND REGISTERED IN
SUCH NAMES AS ANY SUCH INVESTORS MAY REASONABLY 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.

 

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(K)                                  COOPERATE WITH ANY REASONABLE DUE DILIGENCE
INVESTIGATION UNDERTAKEN BY THE INVESTORS IN CONNECTION WITH THE SALE OF
REGISTRABLE SECURITIES, INCLUDING, WITHOUT LIMITATION, BY MAKING AVAILABLE
DOCUMENTS AND INFORMATION; PROVIDED THAT THE COMPANY WILL NOT DELIVER OR MAKE
AVAILABLE TO ANY INVESTOR MATERIAL, NONPUBLIC INFORMATION UNLESS SUCH INVESTOR
SPECIFICALLY REQUESTS IN ADVANCE TO RECEIVE MATERIAL, NONPUBLIC INFORMATION IN
WRITING.

 

(L)                                     COMPLY WITH ALL RULES AND REGULATIONS OF
THE SEC APPLICABLE TO THE REGISTRATION OF THE SECURITIES.

 

6.3                                 REGISTRATION EXPENSES.  THE COMPANY SHALL
PAY ALL FEES AND EXPENSES INCIDENT TO THE PERFORMANCE OF OR COMPLIANCE WITH
ARTICLE VI OF 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 SEC, OF 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) EXCEPT AS LIMITED BY SECTION 6.2(E), (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 INVESTOR, THE OFFICERS, DIRECTORS, PARTNERS, MEMBERS, AGENTS
AND EMPLOYEES OF EACH OF THEM, EACH PERSON WHO CONTROLS ANY SUCH INVESTOR
(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 (I) ANY MISREPRESENTATION OR BREACH OF ANY REPRESENTATION OR
WARRANTY MADE BY THE COMPANY IN THE TRANSACTION DOCUMENTS OR ANY OTHER
CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY, (II) ANY
BREACH OF ANY COVENANT, AGREEMENT OR OBLIGATION OF THE COMPANY CONTAINED IN THE
TRANSACTION DOCUMENTS OR ANY OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT
CONTEMPLATED HEREBY OR THEREBY, (III) ANY CAUSE OF ACTION, SUIT OR CLAIM BROUGHT
OR MADE AGAINST SUCH INDEMNIFIED PARTY (AS DEFINED IN SECTION 6.4(C) BELOW) BY A
THIRD PARTY (INCLUDING FOR THESE PURPOSES A DERIVATIVE ACTION BROUGHT ON BEHALF
OF THE COMPANY), ARISING OUT OF OR RESULTING FROM (X) EXECUTION, DELIVERY,
PERFORMANCE OR ENFORCEMENT OF THE TRANSACTION DOCUMENTS OR ANY OTHER
CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY, (Y) 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 (Z) THE
STATUS OF INDEMNIFIED PARTY AS HOLDER OF THE SECURITIES OR (IV) ANY UNTRUE OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT CONTAINED IN THE REGISTRATION
STATEMENT, ANY PROSPECTUS OR ANY FORM OF COMPANY PROSPECTUS OR IN ANY AMENDMENT
OR SUPPLEMENT THERETO OR IN ANY COMPANY 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

 

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CIRCUMSTANCES UNDER WHICH THEY WERE MADE) NOT MISLEADING, EXCEPT TO THE EXTENT,
BUT ONLY TO THE EXTENT, THAT (A) SUCH UNTRUE STATEMENTS, ALLEGED UNTRUE
STATEMENTS, OMISSIONS OR ALLEGED OMISSIONS ARE BASED UPON INFORMATION REGARDING
SUCH INVESTOR FURNISHED IN WRITING TO THE COMPANY BY SUCH INVESTOR FOR USE
THEREIN, OR TO THE EXTENT THAT SUCH INFORMATION RELATES TO SUCH INVESTOR OR SUCH
INVESTOR’S PROPOSED METHOD OF DISTRIBUTION OF REGISTRABLE SECURITIES, OR (B) IN
THE CASE OF AN OCCURRENCE OF AN EVENT OF THE TYPE SPECIFIED IN
SECTION 6.2(C)(V)-(VII), THE USE BY SUCH INVESTOR OF AN OUTDATED OR DEFECTIVE
PROSPECTUS AFTER THE COMPANY HAS NOTIFIED SUCH INVESTOR IN WRITING THAT THE
PROSPECTUS IS OUTDATED OR DEFECTIVE AND PRIOR TO THE RECEIPT BY SUCH INVESTOR OF
THE ADVICE CONTEMPLATED IN SECTION 6.5.

 

(B)                                 INDEMNIFICATION BY INVESTORS.  EACH INVESTOR
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 ARISING 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 OUT OF OR
RELATING TO 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, BUT ONLY TO THE EXTENT THAT SUCH UNTRUE
STATEMENT OR OMISSION IS CONTAINED IN ANY INFORMATION SO FURNISHED BY SUCH
INVESTOR 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 UPON INFORMATION REGARDING SUCH INVESTOR FURNISHED TO THE
COMPANY BY SUCH INVESTOR EXPRESSLY FOR USE THEREIN, OR TO THE EXTENT THAT SUCH
INFORMATION RELATES TO SUCH INVESTOR OR SUCH INVESTOR’S PROPOSED METHOD OF
DISTRIBUTION OF REGISTRABLE SECURITIES AND WAS REVIEWED AND EXPRESSLY APPROVED
BY SUCH INVESTOR 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 INVESTOR OF AN OUTDATED OR DEFECTIVE
PROSPECTUS AFTER THE COMPANY HAS NOTIFIED SUCH INVESTOR IN WRITING THAT THE
PROSPECTUS IS OUTDATED OR DEFECTIVE AND PRIOR TO THE RECEIPT BY SUCH INVESTOR OF
THE ADVICE CONTEMPLATED IN SECTION 6.5.  IN NO EVENT SHALL THE LIABILITY OF ANY
SELLING INVESTOR HEREUNDER BE GREATER IN AMOUNT THAN THE DOLLAR AMOUNT OF THE
NET PROCEEDS RECEIVED BY SUCH INVESTOR 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.

 

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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).  It
being understood, however, that the Indemnifying Party shall not, in connection
with any one such Proceeding be liable for the fees and expenses of more than
one separate firm of attorneys at any time for all Indemnified Parties, which
firm shall be appointed by a majority of the Indemnified Parties.  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 reasonable 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 20 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 that such Indemnified Party is not entitled to indemnification
hereunder).

 

(D)                                 CONTRIBUTION.  IF A CLAIM FOR
INDEMNIFICATION UNDER SECTION 6.4(A) OR (B), OR IS UNAVAILABLE TO AN INDEMNIFIED
PARTY (BY REASON OF PUBLIC POLICY OR OTHERWISE), THEN EACH 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

 

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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 Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Investor from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Investor 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 INVESTOR 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 INVESTOR 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 INVESTOR WILL DISCONTINUE DISPOSITION
OF SUCH REGISTRABLE SECURITIES UNDER THE REGISTRATION STATEMENT UNTIL SUCH
INVESTOR’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.  NEITHER THE
COMPANY NOR ANY OF ITS SECURITY HOLDERS (OTHER THAN THE INVESTORS IN SUCH
CAPACITY PURSUANT HERETO) MAY, WITHOUT THE PRIOR CONSENT OF THE LEAD INVESTOR,
INCLUDE SECURITIES OF THE COMPANY IN THE REGISTRATION STATEMENT OTHER THAN THE
REGISTRABLE SECURITIES, AND THE COMPANY SHALL NOT AFTER THE DATE HEREOF ENTER
INTO ANY AGREEMENT PROVIDING ANY RIGHT INCONSISTENT WITH THIS PARAGRAPH TO ANY
OF ITS SECURITY HOLDERS.  NOTWITHSTANDING THE FOREGOING, ON OR BEFORE
FEBRUARY 3, 2006, THE COMPANY IS OBLIGATED TO FILE A REGISTRATION STATEMENT (THE
“PRIOR REGISTRATION STATEMENT”) COVERING THE RESALE OF SHARES OF COMMON STOCK
UNDERLYING WARRANTS ISSUED TO UNDERWRITERS OF ITS INITIAL PUBLIC OFFERING. 
THERE ARE 100,000 SHARES ELIGIBLE FOR THIS REGISTRATION STATEMENT, AND IT
CURRENTLY APPEARS THAT BETWEEN 45,000 AND 70,000 OF

 

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THESE SHARES WILL PARTICIPATE.  INVESTORS HEREBY CONSENT TO THE PRIOR
REGISTRATION STATEMENT AND AGREE THAT THE COMPANY MAY, IN ITS SOLE DISCRETION,
INCLUDE ALL OR PART OF THE REGISTRABLE SECURITIES IN THE PRIOR REGISTRATION
STATEMENT.  TO THE EXTENT ONLY PART ARE INCLUDED, IT WILL BE DONE PRORATA AMONG
THE INVESTORS IN PROPORTION TO THE NUMBER OF REGISTRABLE SECURITIES HELD BY EACH
INVESTOR.

 

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 SEC 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 INVESTOR
WRITTEN NOTICE OF SUCH DETERMINATION AND IF, WITHIN TEN DAYS AFTER RECEIPT OF
SUCH NOTICE, ANY SUCH INVESTOR SHALL SO REQUEST IN WRITING, THE COMPANY SHALL
INCLUDE IN SUCH REGISTRATION STATEMENT ALL OR ANY PART OF SUCH REGISTRABLE
SECURITIES SUCH INVESTOR REQUESTS TO BE REGISTERED.  NOTWITHSTANDING THE
FOREGOING, IN THE EVENT THAT, IN CONNECTION WITH ANY UNDERWRITTEN PUBLIC
OFFERING, THE MANAGING UNDERWRITER(S) THEREOF SHALL IMPOSE A LIMITATION ON THE
NUMBER OF SHARES OF COMMON STOCK WHICH MAY BE INCLUDED IN THE REGISTRATION
STATEMENT BECAUSE, IN SUCH UNDERWRITER(S)’ JUDGMENT, MARKETING OR OTHER FACTORS
DICTATE SUCH LIMITATION IS NECESSARY TO FACILITATE PUBLIC DISTRIBUTION, THEN THE
COMPANY SHALL BE OBLIGATED TO INCLUDE IN SUCH REGISTRATION STATEMENT ONLY SUCH
LIMITED PORTION OF THE REGISTRABLE SECURITIES WITH RESPECT TO WHICH SUCH
INVESTOR HAS REQUESTED INCLUSION HEREUNDER AS THE UNDERWRITER SHALL PERMIT;
PROVIDED, HOWEVER, THAT (I) THE COMPANY SHALL NOT EXCLUDE ANY REGISTRABLE
SECURITIES UNLESS THE COMPANY HAS FIRST EXCLUDED ALL OUTSTANDING SECURITIES, THE
HOLDERS OF WHICH ARE NOT CONTRACTUALLY ENTITLED TO INCLUSION OF SUCH SECURITIES
IN SUCH REGISTRATION STATEMENT OR ARE NOT CONTRACTUALLY ENTITLED TO PRO RATA
INCLUSION WITH THE REGISTRABLE SECURITIES AND (II) AFTER GIVING EFFECT TO THE
IMMEDIATELY PRECEDING PROVISO, ANY SUCH EXCLUSION OF REGISTRABLE SECURITIES
SHALL BE MADE PRO RATA AMONG THE INVESTORS SEEKING TO INCLUDE REGISTRABLE
SECURITIES AND THE HOLDERS OF OTHER SECURITIES HAVING THE CONTRACTUAL RIGHT TO
INCLUSION OF THEIR SECURITIES IN SUCH REGISTRATION STATEMENT BY REASON OF DEMAND
REGISTRATION RIGHTS, IN PROPORTION TO THE NUMBER OF REGISTRABLE SECURITIES OR
OTHER SECURITIES, AS APPLICABLE, SOUGHT TO BE INCLUDED BY EACH SUCH INVESTOR OR
OTHER HOLDER.

 

ARTICLE VII
MISCELLANEOUS

 

7.1                                 TERMINATION.  THIS AGREEMENT MAY BE
TERMINATED BY THE COMPANY OR ANY INVESTOR, BY WRITTEN NOTICE TO THE OTHER
PARTIES, IF THE CLOSING HAS NOT BEEN CONSUMMATED BY THE THIRD BUSINESS 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.  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,

 

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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 SALE AND ISSUANCE OF THEIR APPLICABLE 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 INVESTORS 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
(A) THE DATE OF TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA
FACSIMILE AT THE FACSIMILE NUMBER SPECIFIED IN THIS SECTION PRIOR TO 6:30 P.M.
(NEW YORK CITY TIME) ON A TRADING DAY, (B) THE NEXT TRADING DAY AFTER THE DATE
OF TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA FACSIMILE AT
THE FACSIMILE NUMBER SPECIFIED IN THIS SECTION ON A DAY THAT IS NOT A TRADING
DAY OR LATER THAN 6:30 P.M. (NEW YORK CITY TIME) ON ANY TRADING DAY, (C) THE
TRADING DAY FOLLOWING THE DATE OF DEPOSIT WITH A NATIONALLY RECOGNIZED OVERNIGHT
COURIER SERVICE, OR (D) UPON ACTUAL RECEIPT BY THE PARTY TO WHOM SUCH NOTICE IS
REQUIRED TO BE GIVEN.  THE ADDRESSES AND FACSIMILE NUMBERS FOR SUCH NOTICES AND
COMMUNICATIONS ARE THOSE SET FORTH ON THE SIGNATURE PAGES HEREOF, OR SUCH OTHER
ADDRESS OR FACSIMILE NUMBER AS MAY BE DESIGNATED IN WRITING HEREAFTER, IN THE
SAME MANNER, BY ANY 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 INVESTORS THAT ACQUIRED AT LEAST 70% OF
THE TOTAL COMMON SHARES ACQUIRED 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 INVESTORS UNDER ARTICLE VI
MAY BE GIVEN BY INVESTORS 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
INVESTORS.

 

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ANY INVESTOR MAY ASSIGN ITS RIGHTS UNDER THIS AGREEMENT TO ANY PERSON TO WHOM
SUCH INVESTOR 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 “INVESTORS.”  NOTWITHSTANDING ANYTHING
TO THE CONTRARY HEREIN, SECURITIES MAY BE ASSIGNED TO ANY PERSON IN 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 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. 
THE CORPORATE LAWS OF THE STATE OF MARYLAND SHALL GOVERN ALL ISSUES CONCERNING
THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS.  ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.  THE COMPANY AND INVESTORS HEREBY IRREVOCABLY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTIONS OF THE STATE AND FEDERAL COURTS
SITTING IN THE CITY OF NEW YORK, NEW YORK, AND THE CITY OF SAN DIEGO,
CALIFORNIA, RESPECTIVELY, FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE
COMPANY OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER.  EACH PARTY 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.  THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.

 

7.10                           SURVIVAL.  THE REPRESENTATIONS AND WARRANTIES,
AGREEMENTS AND COVENANTS CONTAINED HEREIN SHALL SURVIVE THE CLOSING.

 

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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
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) 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 INVESTOR EXERCISES A
RIGHT, ELECTION, DEMAND OR OPTION OWED TO SUCH INVESTOR BY THE COMPANY UNDER A
TRANSACTION DOCUMENT AND THE COMPANY DOES NOT TIMELY PERFORM ITS RELATED
OBLIGATIONS WITHIN THE PERIODS THEREIN PROVIDED, THEN, PRIOR TO THE PERFORMANCE
BY THE COMPANY OF THE COMPANY’S RELATED OBLIGATION, SUCH INVESTOR MAY RESCIND OR
WITHDRAW, IN ITS SOLE DISCRETION FROM TIME TO TIME UPON WRITTEN NOTICE TO SUCH
SELLER, 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 THE EXECUTION
BY THE HOLDER THEREOF OF A CUSTOMARY LOST CERTIFICATE AFFIDAVIT OF THAT FACT AND
AN AGREEMENT TO INDEMNIFY AND HOLD HARMLESS THE COMPANY FOR ANY LOSSES IN
CONNECTION THEREWITH.  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 INVESTORS AND THE COMPANY WILL BE ENTITLED TO SEEK 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 (OTHER THAN
IN CONNECTION WITH ANY ACTION FOR TEMPORARY RESTRAINING ORDER) 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 INVESTOR HEREUNDER OR ANY INVESTOR
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,

 

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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.

 

7.17                           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 ANY TRANSACTION DOCUMENT TO A NUMBER OF
SHARES OR A PRICE PER SHARE SHALL BE AMENDED TO APPROPRIATELY ACCOUNT FOR SUCH
EVENT.

 

7.18                           INDEPENDENT NATURE OF INVESTORS’ OBLIGATIONS AND
RIGHTS.  THE OBLIGATIONS OF EACH INVESTOR UNDER ANY TRANSACTION DOCUMENT ARE
SEVERAL AND NOT JOINT WITH THE OBLIGATIONS OF ANY OTHER INVESTOR, AND NO
INVESTOR SHALL BE RESPONSIBLE IN ANY WAY FOR THE PERFORMANCE OF THE OBLIGATIONS
OF ANY OTHER INVESTOR UNDER ANY TRANSACTION DOCUMENT.  THE DECISION OF EACH
INVESTOR TO PURCHASE SECURITIES PURSUANT TO THIS AGREEMENT HAS BEEN MADE BY SUCH
INVESTOR INDEPENDENTLY OF ANY OTHER INVESTOR 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 INVESTOR OR BY ANY AGENT OR EMPLOYEE OF
ANY OTHER INVESTOR, AND NO INVESTOR OR ANY OF ITS AGENTS OR EMPLOYEES SHALL HAVE
ANY LIABILITY TO ANY OTHER INVESTOR (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 INVESTOR
PURSUANT THERETO, SHALL BE DEEMED TO CONSTITUTE THE INVESTORS AS A PARTNERSHIP,
AN ASSOCIATION, A JOINT VENTURE OR ANY OTHER KIND OF ENTITY, OR CREATE A
PRESUMPTION THAT THE INVESTORS ARE IN ANY WAY ACTING IN CONCERT OR AS A GROUP
WITH RESPECT TO SUCH OBLIGATIONS OR THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENT.  EACH INVESTOR ACKNOWLEDGES THAT NO OTHER INVESTOR HAS
ACTED AS AGENT FOR SUCH INVESTOR IN CONNECTION WITH MAKING ITS INVESTMENT
HEREUNDER AND THAT NO OTHER INVESTOR WILL BE ACTING AS AGENT OF SUCH INVESTOR IN
CONNECTION WITH MONITORING ITS INVESTMENT HEREUNDER.  EACH INVESTOR 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 INVESTOR TO
BE JOINED AS AN ADDITIONAL PARTY IN ANY PROCEEDING FOR SUCH PURPOSE.

 

[SIGNATURE PAGES TO 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.

 

 

 

INFOSONICS CORPORATION

 

 

 

 

 

By:

 

 

 

Name: Joseph Ram

 

Title: President and Chief Executive Officer

 

 

 

 

 

Address for Notice:

 

 

 

5880 Pacific Center Blvd.

 

San Diego, CA 92121

 

 

 

Facsimile No.: (858) 373-1503

 

Telephone No.: (858) 373-1600

 

Attn: Jeff Klausner, CFO

 

 

 

With a copy to:

 

 

 

Alan Talesnick, Esq.

 

Patton Boggs, LLP

 

1660 Lincoln Street, Suite 1900

 

Denver, CO 80264

 

Fax: (303) 894-9239

 

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Investor Signature Page

 

By its execution and delivery of this Investor Signature Page, the undersigned
Investor hereby joins in and agrees to be bound by the terms and conditions of
the Securities Purchase Agreement dated as of January 30, 2006 (the “Purchase
Agreement”) by and among InfoSonics Corporation and the Investors (as defined
therein), including the number of shares of Common Stock and Warrants set forth
below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.

 

 

 

Name of Investor:

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

Telephone No.:

 

 

 

 

Facsimile No.:

 

 

 

 

Number of Shares:

 

 

 

 

Number of Warrants:

 

 

 

 

 

Aggregate Purchase Price: $

 

 

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