Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of January 15, 2008,
by and among Answers Corporation, a Delaware corporation, with headquarters
located at 237 West 35th Street, Suite 1101, New York, NY 10001 
(the “Company”), and the investors listed on the Schedule of Buyers attached
hereto (individually, a “Buyer” and collectively, the “Buyers”).

 

WHEREAS:

 

A.         The Company and each Buyer is executing and delivering this Agreement
in reliance upon the exemption from securities 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.          The Company has authorized a new series of senior secured
convertible notes of the Company, issuable by the Company following the
Follow-On Offering (a “Follow-On Issuance”) or upon a Notes Termination Event
(as defined below), which notes shall be convertible into shares (as converted,
the “Conversion Shares”) of the Company’s common stock, par value $0.001 per
share (the “Common Stock”), in accordance with the terms of the Notes (as
defined below).

 

C.          (i) In connection with a Follow-On Issuance, if any, each Buyer
wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, that aggregate principal amount of the
notes, in substantially the form attached hereto as Exhibit A (the “Follow-On
Notes”), set forth opposite such Buyer’s name in column

 

(3) on the Schedule of Buyers attached hereto (which aggregate amount for all
Buyers shall be $8,500,000) and (ii) in connection with a Notes Termination
Event, the Company may wish to issue in accordance with Section 8 hereof, that
principal amount of notes (the “Termination Notes” and together with the
Follow-On Notes, the “Notes”), in substantially the form attached hereto as
Exhibit A, set forth opposite such Buyer’s name in Column (4) on the Schedule of
Buyers.

 

D.         Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit B (the “Registration Rights
Agreement”), pursuant to which the Company has agreed, subject to the issuance
of the Follow-On Notes or the Termination Notes on the Closing Date, to provide
certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement) under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.

 

E.          The Notes and the Conversion Shares, collectively, are referred to
herein as the “Securities”.

 

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F.          The Notes will be senior obligations and will rank senior in right
of payment to all existing and future indebtedness of the Company, other than
Permitted Senior Indebtedness (as defined in the Notes) and will be secured by a
first priority perfected security interest, in all of the assets of the Company
and the stock, equity interests and assets of each of the Company’s
subsidiaries, as evidenced by a pledge and security agreement, in the form
attached hereto as Exhibit C (as amended or modified from time to time in
accordance with its terms, the “Pledge and Security Agreement”, and, together
with any ancillary documents related thereto, collectively the “Security
Documents”).

 

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

 

1.          PURCHASE AND SALE OF NOTES.

 

(A)        PURCHASE OF NOTES.  SUBJECT TO THE SATISFACTION (OR WAIVER) OF THE
CONDITIONS SET FORTH IN SECTIONS 6 AND 7 BELOW, IF APPLICABLE, AND IN CONNECTION
WITH THE NOTES TERMINATION EVENT UNDER SECTION 8 BELOW, THE COMPANY SHALL ISSUE
AND SELL TO EACH BUYER, AND EACH BUYER, WITH RESPECT TO THE FOLLOW-ON NOTES
ONLY, SEVERALLY, BUT NOT JOINTLY, AGREES TO PURCHASE FROM THE COMPANY ON THE
CLOSING DATE (AS DEFINED BELOW), A PRINCIPAL AMOUNT OF NOTES AS IS SET FORTH
OPPOSITE SUCH BUYER’S NAME IN COLUMN (3) OR IN COLUMN (4) ON THE SCHEDULE OF
BUYERS, AS APPLICABLE (THE “CLOSING”).

 

(B)        CLOSING.  THE DATE AND TIME OF THE CLOSING (THE “CLOSING DATE”) SHALL
BE 10:00 A.M., NEW YORK CITY TIME, TWO BUSINESS DAYS (OR SUCH LATER DATE AS IS
MUTUALLY AGREED TO BY THE COMPANY AND EACH BUYER) AFTER NOTIFICATION OF
SATISFACTION (OR WAIVER) OF THE CONDITIONS TO THE CLOSING SET FORTH IN SECTIONS
6 AND 7 BELOW AT THE OFFICES OF SCHULTE ROTH & ZABEL LLP, 919 THIRD AVENUE, NEW
YORK, NEW YORK 10022.  AS USED HEREIN, “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.

 

(C)        PURCHASE PRICE.  THE AGGREGATE PURCHASE PRICE FOR THE FOLLOW-ON NOTES
TO BE PURCHASED BY EACH SUCH BUYER AT THE CLOSING (THE “PURCHASE PRICE”) SHALL
BE THE AMOUNT SET FORTH OPPOSITE EACH BUYER’S NAME IN COLUMN (5) OF THE SCHEDULE
OF BUYERS.  EACH BUYER SHALL PAY $1,000 FOR EACH $1,000 OF PRINCIPAL AMOUNT OF
FOLLOW-ON NOTES TO BE PURCHASED BY SUCH BUYER AT THE CLOSING.

 

(D)        FORM OF PAYMENT.  ON THE CLOSING DATE, (I) EACH BUYER SHALL PAY ITS
PURCHASE PRICE TO THE COMPANY FOR THE FOLLOW-ON NOTES TO BE ISSUED AND SOLD TO
SUCH BUYER AT THE CLOSING, IF ANY, BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE
FUNDS IN ACCORDANCE WITH THE COMPANY’S WRITTEN WIRE INSTRUCTIONS AND (II) THE
COMPANY SHALL DELIVER TO EACH BUYER THE NOTES (ALLOCATED IN THE PRINCIPAL
AMOUNTS AS SUCH BUYER SHALL REQUEST) WHICH SUCH BUYER IS THEN PURCHASING OR
RECEIVING HEREUNDER, DULY EXECUTED ON BEHALF OF THE COMPANY AND REGISTERED IN
THE NAME OF SUCH BUYER OR ITS DESIGNEE.

 

2.             BUYER’S REPRESENTATIONS AND WARRANTIES.  EACH BUYER, SEVERALLY
AND NOT JOINTLY, REPRESENTS AND WARRANTS WITH RESPECT TO ONLY ITSELF THAT:

 

(A)        NO PUBLIC SALE OR DISTRIBUTION.  SUCH BUYER IS (I) ACQUIRING THE
NOTES AND (II) UPON CONVERSION OF THE NOTES WILL ACQUIRE THE CONVERSION SHARES
ISSUABLE UPON CONVERSION OF

 

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the Notes, 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 or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer 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 1933 Act and pursuant to the
applicable terms of the Transaction Documents (as defined in Section 3(b)). 
Such Buyer is acquiring the Securities hereunder in the ordinary course of its
business.  Such Buyer does not presently have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities.

 

(B)        ACCREDITED INVESTOR STATUS.  SUCH BUYER IS AN “ACCREDITED INVESTOR”
AS THAT TERM IS DEFINED IN RULE 501(A) OF REGULATION D.

 

(C)        RELIANCE ON EXEMPTIONS.  SUCH BUYER UNDERSTANDS THAT THE SECURITIES
ARE BEING OFFERED AND SOLD TO IT IN RELIANCE ON SPECIFIC EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF UNITED STATES FEDERAL AND STATE SECURITIES LAWS AND
THAT THE COMPANY IS RELYING IN PART UPON THE TRUTH AND ACCURACY OF, AND SUCH
BUYER’S COMPLIANCE WITH, THE REPRESENTATIONS, WARRANTIES, AGREEMENTS,
ACKNOWLEDGMENTS AND UNDERSTANDINGS OF SUCH BUYER SET FORTH HEREIN IN ORDER TO
DETERMINE THE AVAILABILITY OF SUCH EXEMPTIONS AND THE ELIGIBILITY OF SUCH BUYER
TO ACQUIRE THE SECURITIES.

 

(D)        INFORMATION.  SUCH BUYER AND ITS ADVISORS, IF ANY, HAVE BEEN
FURNISHED WITH ALL MATERIALS RELATING TO THE BUSINESS, FINANCES AND OPERATIONS
OF THE COMPANY AND MATERIALS RELATING TO THE OFFER AND SALE OF THE SECURITIES
WHICH HAVE BEEN REQUESTED BY SUCH BUYER.  SUCH BUYER AND ITS ADVISORS, IF ANY,
HAVE BEEN AFFORDED THE OPPORTUNITY TO ASK QUESTIONS OF THE COMPANY.  NEITHER
SUCH INQUIRIES NOR ANY OTHER DUE DILIGENCE INVESTIGATIONS CONDUCTED BY SUCH
BUYER OR ITS ADVISORS, IF ANY, OR ITS REPRESENTATIVES SHALL MODIFY, AMEND OR
AFFECT SUCH BUYER’S RIGHT TO RELY ON THE COMPANY’S REPRESENTATIONS AND
WARRANTIES CONTAINED HEREIN.  SUCH BUYER UNDERSTANDS THAT ITS INVESTMENT IN THE
SECURITIES INVOLVES A HIGH DEGREE OF RISK.  SUCH BUYER HAS SOUGHT SUCH
ACCOUNTING, LEGAL AND TAX ADVICE AS IT HAS CONSIDERED NECESSARY TO MAKE AN
INFORMED INVESTMENT DECISION WITH RESPECT TO ITS ACQUISITION OF THE SECURITIES.

 

(E)        NO GOVERNMENTAL REVIEW.  SUCH BUYER 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.

 

(F)         TRANSFER OR RESALE.  SUCH BUYER UNDERSTANDS THAT EXCEPT AS PROVIDED
IN THE REGISTRATION RIGHTS AGREEMENT: (I) THE SECURITIES HAVE NOT BEEN AND ARE
NOT BEING REGISTERED UNDER THE 1933 ACT OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED UNLESS (A) SUBSEQUENTLY
REGISTERED THEREUNDER, (B) SUCH BUYER SHALL HAVE DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, TO THE EFFECT THAT SUCH
SECURITIES TO BE SOLD, ASSIGNED OR TRANSFERRED MAY BE SOLD, ASSIGNED OR
TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION, OR (C) SUCH BUYER
PROVIDES THE COMPANY WITH REASONABLE ASSURANCE THAT SUCH SECURITIES CAN BE SOLD,
ASSIGNED OR TRANSFERRED PURSUANT TO RULE 144 OR RULE 144A PROMULGATED UNDER THE
1933 ACT, AS AMENDED, (OR A SUCCESSOR RULE THERETO) (COLLECTIVELY,

 

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“Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of the Securities under circumstances in which the
seller (or the Person (as defined in Section 3(s)) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other Person is under any obligation to register the Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder.  The Securities may be pledged in connection with a
bona fide margin account or other loan or financing arrangement secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).

 

(G)        LEGENDS.  SUCH BUYER UNDERSTANDS THAT THE CERTIFICATES OR OTHER
INSTRUMENTS REPRESENTING THE NOTES AND, UNTIL SUCH TIME AS THE RESALE OF THE
CONVERSION SHARES HAVE BEEN REGISTERED UNDER THE 1933 ACT AS CONTEMPLATED BY THE
REGISTRATION RIGHTS AGREEMENT, THE STOCK CERTIFICATES REPRESENTING THE
CONVERSION SHARES, EXCEPT AS SET FORTH BELOW, SHALL BEAR ANY LEGEND AS REQUIRED
BY THE “BLUE SKY” LAWS OF ANY STATE AND A RESTRICTIVE LEGEND IN SUBSTANTIALLY
THE FOLLOWING FORM (AND A STOP-TRANSFER ORDER MAY BE PLACED AGAINST TRANSFER OF
SUCH STOCK CERTIFICATES):

 

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.  [ANY
TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF.  THE HOLDER OF THIS NOTE AGREES
TO THE TERMS AND PROVISIONS SET FORTH IN SECTION 4(q) OF THE SECURITIES PURCHASE
AGREEMENT REGARDING THE COLLATERAL AGENT (AS DEFINED IN THE SECURITIES PURCHASE
AGREEMENT).  THE PRINCIPAL

 

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AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.]

 

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped by electronic delivery at the applicable balance account at DTC (as
defined below), unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the Company with reasonable assurance that the Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A.

 

(H)        VALIDITY; ENFORCEMENT.  THIS AGREEMENT AND THE REGISTRATION RIGHTS
AGREEMENT AND THE SECURITY DOCUMENTS TO WHICH SUCH BUYER IS A PARTY HAVE BEEN
DULY AND VALIDLY AUTHORIZED, EXECUTED AND DELIVERED ON BEHALF OF SUCH BUYER AND
SHALL CONSTITUTE THE LEGAL, VALID AND BINDING OBLIGATIONS OF SUCH BUYER
ENFORCEABLE AGAINST SUCH BUYER IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT
AS SUCH ENFORCEABILITY MAY BE LIMITED BY GENERAL PRINCIPLES OF EQUITY OR TO
APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM, LIQUIDATION AND
OTHER SIMILAR LAWS RELATING TO, OR AFFECTING GENERALLY, THE ENFORCEMENT OF
APPLICABLE CREDITORS’ RIGHTS AND REMEDIES.

 

(I)         NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH BUYER
OF THIS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT AND THE SECURITY
DOCUMENTS TO WHICH SUCH BUYER IS A PARTY AND THE CONSUMMATION BY SUCH BUYER OF
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY WILL NOT (I) RESULT IN A
VIOLATION OF THE ORGANIZATIONAL DOCUMENTS OF SUCH BUYER 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 BUYER 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 BUYER, EXCEPT IN THE CASE OF CLAUSES
(II) AND (III) ABOVE, FOR SUCH CONFLICTS, DEFAULTS, RIGHTS OR VIOLATIONS WHICH
WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT ON THE ABILITY OF SUCH BUYER TO PERFORM ITS OBLIGATIONS
HEREUNDER.

 

(J)         RESIDENCY.  SUCH BUYER IS A RESIDENT OF THAT JURISDICTION SPECIFIED
BELOW ITS ADDRESS ON THE SCHEDULE OF BUYERS.

 

3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company hereby represents and warrants to each of the Buyers as of the date
hereof and as of the Closing Date as set forth below.  Except as otherwise
indicated, for purposes of this Agreement, Lexico Publishing Group LLC and its
subsidiaries (taken together, “Lexico”) shall be deemed to be a subsidiary of
the Company, as if the acquisition of Lexico (the “Lexico Acquisition”) had been
consummated as of the date hereof.

 

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(A)        ORGANIZATION AND QUALIFICATION.  EACH OF THE COMPANY AND ITS
“SUBSIDIARIES” (WHICH FOR PURPOSES OF THIS AGREEMENT MEANS ANY ENTITY IN WHICH
THE COMPANY, DIRECTLY OR INDIRECTLY, OWNS ANY OF THE CAPITAL STOCK OR HOLDS AN
EQUITY OR SIMILAR INTEREST) ARE ENTITIES DULY ORGANIZED AND VALIDLY EXISTING IN
GOOD STANDING UNDER THE LAWS OF THE JURISDICTION IN WHICH THEY ARE FORMED, AND
HAVE THE REQUISITE POWER AND AUTHORIZATION TO OWN THEIR PROPERTIES AND TO CARRY
ON THEIR BUSINESS AS NOW BEING CONDUCTED.  EACH OF THE COMPANY AND ITS
SUBSIDIARIES IS DULY QUALIFIED AS A FOREIGN ENTITY TO DO BUSINESS AND IS IN GOOD
STANDING IN EVERY JURISDICTION IN WHICH ITS OWNERSHIP OF PROPERTY OR THE NATURE
OF THE BUSINESS CONDUCTED BY IT MAKES SUCH QUALIFICATION NECESSARY, EXCEPT TO
THE EXTENT THAT THE FAILURE TO BE SO QUALIFIED OR BE IN GOOD STANDING WOULD NOT
HAVE A MATERIAL ADVERSE EFFECT.  AS USED IN THIS AGREEMENT, “MATERIAL ADVERSE
EFFECT” MEANS ANY MATERIAL ADVERSE EFFECT ON THE BUSINESS, PROPERTIES, ASSETS,
OPERATIONS, RESULTS OF OPERATIONS OR CONDITION (FINANCIAL OR OTHERWISE) OF THE
COMPANY AND ITS SUBSIDIARIES, TAKEN AS A WHOLE, OR ON THE TRANSACTIONS
CONTEMPLATED HEREBY AND THE OTHER TRANSACTION DOCUMENTS OR BY THE AGREEMENTS AND
INSTRUMENTS TO BE ENTERED INTO IN CONNECTION HEREWITH OR THEREWITH, OR ON THE
AUTHORITY OR ABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS UNDER THE
TRANSACTION DOCUMENTS (AS DEFINED BELOW).  THE COMPANY HAS NO SUBSIDIARIES
EXCEPT AS SET FORTH ON SCHEDULE 3(A).

 

(B)        AUTHORIZATION; ENFORCEMENT; VALIDITY.  THE COMPANY HAS THE REQUISITE
CORPORATE POWER AND AUTHORITY TO ENTER INTO AND PERFORM ITS OBLIGATIONS UNDER
THIS AGREEMENT, THE NOTES, THE REGISTRATION RIGHTS AGREEMENT, THE SECURITY
DOCUMENTS, THE IRREVOCABLE TRANSFER AGENT INSTRUCTIONS (AS DEFINED IN
SECTION 5(B)) AND EACH OF THE OTHER AGREEMENTS ENTERED INTO BY THE PARTIES
HERETO IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
(COLLECTIVELY, THE “TRANSACTION DOCUMENTS”) AND UNDER ANY APPLICABLE LAWS,
INCLUDING WITHOUT LIMITATION, THE RULES AND REGULATIONS OF THE PRINCIPAL MARKET
(AS DEFINED BELOW) AND TO ISSUE THE SECURITIES IN ACCORDANCE WITH THE TERMS
HEREOF AND THEREOF, EXCEPT AS DISCLOSED IN SCHEDULE 3(B).  THE EXECUTION AND
DELIVERY OF THE TRANSACTION DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY THE
COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, INCLUDING, WITHOUT
LIMITATION, THE ISSUANCE OF THE NOTES, THE RESERVATION FOR ISSUANCE AND THE
ISSUANCE OF THE CONVERSION SHARES ISSUABLE UPON CONVERSION OF THE NOTES AND THE
GRANTING OF A SECURITY INTEREST IN THE COLLATERAL (AS DEFINED IN THE SECURITY
DOCUMENTS) HAVE BEEN DULY AUTHORIZED BY THE COMPANY’S BOARD OF DIRECTORS AND
(OTHER THAN (I) THE FILING OF APPROPRIATE UCC FINANCING STATEMENTS WITH THE
APPROPRIATE STATES AND OTHER AUTHORITIES PURSUANT TO THE PLEDGE AND SECURITY
AGREEMENT, AND (II) THE FILING WITH THE SEC OF ONE OR MORE REGISTRATION
STATEMENTS IN ACCORDANCE WITH THE REQUIREMENTS OF THE REGISTRATION RIGHTS
AGREEMENT) NO FURTHER FILING, CONSENT, OR AUTHORIZATION IS REQUIRED BY THE
COMPANY, ITS BOARD OF DIRECTORS OR ITS STOCKHOLDERS, EXCEPT AS DISCLOSED IN
SCHEDULE 3(B).  THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS OF EVEN DATE
HEREWITH HAVE BEEN DULY EXECUTED AND DELIVERED BY THE COMPANY, AND CONSTITUTE
THE LEGAL, VALID AND BINDING OBLIGATIONS OF THE COMPANY, ENFORCEABLE AGAINST THE
COMPANY IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT AS SUCH ENFORCEABILITY
MAY BE LIMITED BY GENERAL PRINCIPLES OF EQUITY OR APPLICABLE BANKRUPTCY,
INSOLVENCY, REORGANIZATION, MORATORIUM, LIQUIDATION OR SIMILAR LAWS RELATING TO,
OR AFFECTING GENERALLY, THE ENFORCEMENT OF APPLICABLE CREDITORS’ RIGHTS AND
REMEDIES.

 

(C)        ISSUANCE OF SECURITIES.  THE ISSUANCE OF THE NOTES IS DULY AUTHORIZED
AND IS FREE FROM ALL TAXES, LIENS AND CHARGES WITH RESPECT TO THE ISSUE
THEREOF.  AS OF THE CLOSING AND EXCEPT AS DISCLOSED IN SCHEDULE 3(B), THE
COMPANY SHALL HAVE RESERVED ALL OF ITS DULY AUTHORIZED

 

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and unissued capital stock for the issuance of the shares of Common Stock
issuable upon conversion of the Notes (without taking into account any
limitations on the conversion of the Notes set forth in the Notes) and from and
after the Stockholder Approval (as defined below), the Company shall have
reserved from its duly authorized capital stock not less than 130% of the
maximum number of shares of Common Stock issuable upon conversion of the Notes
(without taking into account any limitations on the conversion of the Notes set
forth in the Notes).  Except as disclosed in Schedule 3(b), upon conversion or
payment in accordance with the Notes, the Conversion Shares will be validly
issued, fully paid and nonassessable and free from all preemptive or similar
rights, taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock.  The
offer and issuance by the Company of the Securities is exempt from registration
under the 1933 Act.

 

(D)        NO CONFLICTS.  EXCEPT AS DISCLOSED IN SCHEDULE 3(B), THE EXECUTION,
DELIVERY AND PERFORMANCE OF THE TRANSACTION DOCUMENTS BY THE COMPANY AND THE
CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
(INCLUDING, WITHOUT LIMITATION, THE ISSUANCE OF THE NOTES, THE GRANTING OF A
SECURITY INTEREST IN THE COLLATERAL AND RESERVATION FOR ISSUANCE AND ISSUANCE OF
THE CONVERSION SHARES) WILL NOT (I) RESULT IN A VIOLATION OF ANY CERTIFICATE OF
INCORPORATION, CERTIFICATE OF FORMATION, ANY CERTIFICATE OF DESIGNATIONS OR
OTHER CONSTITUENT DOCUMENTS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, ANY
CAPITAL STOCK OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR THE BYLAWS OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES OR (II) CONFLICT WITH, OR CONSTITUTE A
DEFAULT (OR AN EVENT WHICH WITH NOTICE OR LAPSE OF TIME OR BOTH WOULD BECOME A
DEFAULT) IN ANY RESPECT UNDER, OR GIVE TO OTHERS ANY RIGHTS OF TERMINATION,
AMENDMENT, ACCELERATION OR CANCELLATION OF, ANY CONTRACT, AGREEMENT, INDENTURE
OR INSTRUMENT TO WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS A PARTY, OR
(III) RESULT IN A VIOLATION OF ANY LAW, RULE, REGULATION, ORDER, JUDGMENT OR
DECREE (INCLUDING FOREIGN, FEDERAL AND STATE SECURITIES LAWS AND REGULATIONS AND
THE RULES AND REGULATIONS OF THE NASDAQ GLOBAL MARKET (THE “PRINCIPAL MARKET”))
APPLICABLE TO THE COMPANY OR ANY OF ITS SUBSIDIARIES OR BY WHICH ANY PROPERTY OR
ASSET OF THE COMPANY OR ANY OF ITS SUBSIDIARIES IS BOUND OR AFFECTED.

 

(E)        CONSENTS.  NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS
REQUIRED TO OBTAIN ANY CONSENT, AUTHORIZATION OR ORDER OF, OR MAKE ANY FILING OR
REGISTRATION WITH, ANY COURT, GOVERNMENTAL AGENCY OR ANY REGULATORY OR
SELF-REGULATORY AGENCY OR ANY OTHER PERSON, INCLUDING WITHOUT LIMITATION, THE
PRINCIPAL MARKET, IN ORDER FOR IT TO EXECUTE, DELIVER OR PERFORM ANY OF ITS
OBLIGATIONS UNDER OR CONTEMPLATED BY THE TRANSACTION DOCUMENTS, IN EACH CASE IN
ACCORDANCE WITH THE TERMS HEREOF OR THEREOF, EXCEPT FOR APPLICABLE STATE
SECURITIES LAWS AND FILINGS.  ALL CONSENTS, AUTHORIZATIONS, ORDERS, FILINGS AND
REGISTRATIONS WHICH THE COMPANY IS REQUIRED TO OBTAIN PURSUANT TO THE PRECEDING
SENTENCE HAVE BEEN OBTAINED OR EFFECTED ON OR PRIOR TO THE CLOSING DATE, AND THE
COMPANY AND ITS SUBSIDIARIES ARE UNAWARE OF ANY FACTS OR CIRCUMSTANCES WHICH
MIGHT PREVENT THE COMPANY FROM OBTAINING OR EFFECTING ANY OF THE REGISTRATION,
APPLICATION OR FILINGS PURSUANT TO THE PRECEDING SENTENCE.  THE COMPANY IS NOT
AND, AFTER GIVING EFFECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, WILL NOT BE IN
VIOLATION OF THE LISTING REQUIREMENTS OF THE PRINCIPAL MARKET AND HAS NO
KNOWLEDGE OF ANY FACTS WHICH WOULD REASONABLY LEAD TO DELISTING OR SUSPENSION OF
THE COMMON STOCK IN THE FORESEEABLE FUTURE.

 

(F)         ACKNOWLEDGMENT REGARDING BUYER’S PURCHASE OF SECURITIES.  THE
COMPANY ACKNOWLEDGES AND AGREES THAT EACH BUYER IS ACTING SOLELY IN THE CAPACITY
OF ARM’S LENGTH PURCHASER WITH RESPECT TO THE TRANSACTION DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED

 

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hereby and thereby and that no Buyer is or, after giving effect to the
transactions contemplated hereby, will be (i) an officer or director of the
Company, (ii) an “affiliate” of the Company or any of its Subsidiaries (as
defined in Rule 144) or (iii) to the knowledge of the Company, a “beneficial
owner” of more than 10% of the shares of Common Stock (as defined for purposes
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “1934
Act”)).  The Company further acknowledges that no Buyer is acting as a financial
advisor or fiduciary of the Company or any of its Subsidiaries (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer’s purchase of the Securities.  The Company further represents to each
Buyer that the Company’s decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.

 

(G)        NO GENERAL SOLICITATION; PLACEMENT AGENT’S FEES.  NEITHER THE
COMPANY, NOR ANY OF ITS SUBSIDIARIES OR 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’ COMMISSIONS (OTHER
THAN FOR PERSONS ENGAGED BY ANY BUYER OR ITS INVESTMENT ADVISOR) RELATING TO OR
ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY.  THE COMPANY SHALL PAY, AND
HOLD EACH BUYER HARMLESS AGAINST, ANY LIABILITY, LOSS OR EXPENSE (INCLUDING,
WITHOUT LIMITATION, ATTORNEY’S FEES AND OUT-OF-POCKET EXPENSES) ARISING IN
CONNECTION WITH ANY SUCH CLAIM.  THE COMPANY ACKNOWLEDGES THAT IT HAS ENGAGED
THOMAS WEISEL PARTNERS LLC AND CANACCORD ADAMS AS PLACEMENT AGENTS (THE
“PLACEMENT AGENTS”) IN CONNECTION WITH THE SALE OF THE SECURITIES.  OTHER THAN
THE PLACEMENT AGENTS, THE COMPANY HAS NOT ENGAGED ANY PLACEMENT AGENT OR OTHER
AGENT IN CONNECTION WITH THE SALE OF THE SECURITIES.

 

(H)        NO INTEGRATED OFFERING.  NONE OF THE COMPANY, ITS SUBSIDIARIES, ANY
OF THEIR AFFILIATES, AND ANY PERSON ACTING ON THEIR BEHALF HAS, DIRECTLY OR
INDIRECTLY, MADE, OR WILL PRIOR TO CLOSING MAKE, ANY OFFERS OR SALES OF ANY
SECURITY OR SOLICITED, OR WILL PRIOR TO CLOSING SOLICIT, ANY OFFERS TO BUY ANY
SECURITY, UNDER CIRCUMSTANCES THAT WOULD REQUIRE REGISTRATION OF ANY OF THE
SECURITIES UNDER THE 1933 ACT OR CAUSE THIS OFFERING OF THE SECURITIES TO BE
INTEGRATED WITH PRIOR OFFERINGS BY THE COMPANY FOR PURPOSES OF THE 1933 ACT OR
ANY APPLICABLE STOCKHOLDER APPROVAL PROVISIONS, INCLUDING, WITHOUT LIMITATION,
UNDER THE RULES AND REGULATIONS OF ANY EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON
WHICH ANY OF THE SECURITIES OF THE COMPANY ARE LISTED OR DESIGNATED.  NONE OF
THE COMPANY, ITS SUBSIDIARIES, THEIR AFFILIATES AND ANY PERSON ACTING ON THEIR
BEHALF WILL TAKE ANY ACTION OR STEPS REFERRED TO IN THE PRECEDING SENTENCE THAT
WOULD REQUIRE REGISTRATION OF ANY OF THE SECURITIES UNDER THE 1933 ACT OR CAUSE
THE OFFERING OF THE SECURITIES TO BE INTEGRATED WITH OTHER OFFERINGS, INCLUDING,
FOR THE AVOIDANCE OF DOUBT, THE FOLLOW-ON OFFERING.

 

(I)         DILUTIVE EFFECT.  THE COMPANY UNDERSTANDS AND ACKNOWLEDGES THAT THE
NUMBER OF CONVERSION SHARES ISSUABLE UPON CONVERSION OF THE NOTES WILL INCREASE
IN CERTAIN CIRCUMSTANCES.  THE COMPANY FURTHER ACKNOWLEDGES THAT ITS OBLIGATION
TO ISSUE CONVERSION SHARES UPON CONVERSION OF THE NOTES IN ACCORDANCE WITH THIS
AGREEMENT AND THE NOTES IS

 

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absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.

 

(J)         APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT.  THE COMPANY
AND ITS BOARD OF DIRECTORS HAVE TAKEN ALL NECESSARY ACTION, IF ANY, IN ORDER TO
RENDER INAPPLICABLE ANY CONTROL SHARE ACQUISITION, BUSINESS COMBINATION, POISON
PILL (INCLUDING ANY DISTRIBUTION UNDER A RIGHTS AGREEMENT) OR OTHER SIMILAR
ANTI-TAKEOVER PROVISION UNDER THE CERTIFICATE OF INCORPORATION OR THE LAWS OF
THE JURISDICTION OF ITS FORMATION WHICH IS OR COULD BECOME APPLICABLE TO ANY
BUYER AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, THE COMPANY’S ISSUANCE OF THE SECURITIES AND ANY BUYER’S
OWNERSHIP OF THE SECURITIES.  THE COMPANY HAS NOT ADOPTED A STOCKHOLDER RIGHTS
PLAN OR SIMILAR ARRANGEMENT RELATING TO ACCUMULATIONS OF BENEFICIAL OWNERSHIP OF
COMMON STOCK OR A CHANGE IN CONTROL OF THE COMPANY.

 

(K)        SEC DOCUMENTS; FINANCIAL STATEMENTS.  EXCEPT AS DISCLOSED IN SCHEDULE
3 (K), DURING THE TWO (2) YEARS PRIOR TO THE DATE HEREOF, THE COMPANY HAS FILED
ALL REPORTS, SCHEDULES, FORMS, STATEMENTS AND OTHER DOCUMENTS REQUIRED TO BE
FILED BY IT WITH THE SEC PURSUANT TO THE REPORTING REQUIREMENTS OF THE 1934 ACT
(ALL OF THE FOREGOING FILED PRIOR TO THE DATE HEREOF AND ALL EXHIBITS INCLUDED
THEREIN AND FINANCIAL STATEMENTS, NOTES AND SCHEDULES THERETO AND DOCUMENTS
INCORPORATED BY REFERENCE THEREIN BEING HEREINAFTER REFERRED TO AS THE “SEC
DOCUMENTS”).  THE COMPANY HAS DELIVERED TO THE BUYERS 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 DOCUMENTS
COMPLIED IN ALL MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE 1934 ACT AND THE
RULES AND REGULATIONS OF THE SEC PROMULGATED THEREUNDER APPLICABLE TO THE SEC
DOCUMENTS, AND NONE OF THE SEC DOCUMENTS, AT THE TIME THEY WERE FILED WITH THE
SEC, CONTAINED ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITTED TO STATE A
MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE
STATEMENTS THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING.  AS OF THEIR RESPECTIVE DATES, THE FINANCIAL STATEMENTS OF
THE COMPANY INCLUDED IN THE SEC DOCUMENTS COMPLIED AS TO FORM IN ALL MATERIAL
RESPECTS WITH APPLICABLE ACCOUNTING REQUIREMENTS AND THE PUBLISHED RULES AND
REGULATIONS OF THE SEC WITH RESPECT THERETO.  SUCH FINANCIAL STATEMENTS HAVE
BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
CONSISTENTLY APPLIED, DURING THE PERIODS INVOLVED (EXCEPT (I) AS MAY BE
OTHERWISE INDICATED IN SUCH FINANCIAL STATEMENTS OR THE NOTES THERETO, OR
(II) IN THE CASE OF UNAUDITED INTERIM STATEMENTS, TO THE EXTENT THEY MAY EXCLUDE
FOOTNOTES OR MAY BE CONDENSED OR SUMMARY STATEMENTS) AND FAIRLY PRESENT IN ALL
MATERIAL RESPECTS THE FINANCIAL POSITION OF THE COMPANY AS OF THE DATES THEREOF
AND THE RESULTS OF ITS OPERATIONS AND CASH FLOWS FOR THE PERIODS THEN ENDED
(SUBJECT, IN THE CASE OF UNAUDITED STATEMENTS, TO NORMAL YEAR-END AUDIT
ADJUSTMENTS).  NO OTHER INFORMATION PROVIDED BY OR ON BEHALF OF THE COMPANY TO
THE BUYERS WHICH IS NOT INCLUDED IN THE SEC DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, INFORMATION REFERRED TO IN SECTION 2(D) OF THIS AGREEMENT, CONTAINS
ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS TO STATE ANY MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF THE
CIRCUMSTANCE UNDER WHICH THEY ARE OR WERE MADE, NOT MISLEADING.

 

(L)         ABSENCE OF CERTAIN CHANGES.  EXCEPT AS DISCLOSED IN SCHEDULE 3,
SINCE DECEMBER 31, 2006, THERE HAS BEEN NO MATERIAL ADVERSE CHANGE AND NO
MATERIAL ADVERSE DEVELOPMENT IN THE BUSINESS, PROPERTIES, OPERATIONS, CONDITION
(FINANCIAL OR OTHERWISE), OR RESULTS OF OPERATIONS OF THE COMPANY OR ITS
SUBSIDIARIES.  EXCEPT AS DISCLOSED IN SCHEDULE 3, SINCE DECEMBER 31, 2006, THE
COMPANY HAS NOT (I) DECLARED OR PAID ANY DIVIDENDS, (II) SOLD ANY ASSETS,

 

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individually or in the aggregate, in excess of $250,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $500,000.  Neither the Company nor any of its
Subsidiaries has 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 Closing, will not be Insolvent
(as defined below).  For purposes of this Section 3(l), “Insolvent” means, with
respect to any Person (as defined in Section 3(s), (i) the present fair saleable
value of such Person’s assets is less than the amount required to pay such
Person’s total Indebtedness (as defined in Section 3(s)), (ii) such Person 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) such Person 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.

 

(M)       NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES.  NO
EVENT, LIABILITY, DEVELOPMENT OR CIRCUMSTANCE HAS OCCURRED OR EXISTS, OR IS
CONTEMPLATED TO OCCUR WITH RESPECT TO THE COMPANY, ITS SUBSIDIARIES OR THEIR
RESPECTIVE BUSINESS, PROPERTIES, OPERATIONS OR FINANCIAL CONDITION, THAT WOULD
BE REQUIRED TO BE DISCLOSED BY THE COMPANY UNDER APPLICABLE SECURITIES LAWS ON A
REGISTRATION STATEMENT ON FORM S-1 FILED WITH THE SEC RELATING TO AN ISSUANCE
AND SALE BY THE COMPANY OF ITS COMMON STOCK WHERE THE FILING OF SUCH FORM S-1 IS
REQUIRED AND WHICH HAS NOT BEEN PUBLICLY ANNOUNCED.

 

(N)        CONDUCT OF BUSINESS; REGULATORY PERMITS.  NEITHER THE COMPANY NOR ITS
SUBSIDIARIES IS IN VIOLATION OF ANY TERM OF OR IN DEFAULT UNDER ANY CERTIFICATE
OF DESIGNATIONS OF ANY OUTSTANDING SERIES OF PREFERRED STOCK OF THE COMPANY, ITS
CERTIFICATE OF INCORPORATION OR BYLAWS OR THEIR ORGANIZATIONAL CHARTER OR
CERTIFICATE OF INCORPORATION OR BYLAWS, RESPECTIVELY.  NEITHER THE COMPANY NOR
ANY OF ITS SUBSIDIARIES IS IN VIOLATION OF ANY JUDGMENT, DECREE OR ORDER OR ANY
STATUTE, ORDINANCE, RULE OR REGULATION APPLICABLE TO THE COMPANY OR ITS
SUBSIDIARIES, AND NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES WILL CONDUCT
ITS BUSINESS IN VIOLATION OF ANY OF THE FOREGOING, EXCEPT FOR POSSIBLE
VIOLATIONS WHICH WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL
ADVERSE EFFECT.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE COMPANY
IS NOT IN VIOLATION OF ANY OF THE RULES, REGULATIONS OR REQUIREMENTS OF THE
PRINCIPAL MARKET AND HAS NO KNOWLEDGE OF ANY FACTS OR CIRCUMSTANCES WHICH WOULD
REASONABLY LEAD TO DELISTING OR SUSPENSION OF THE COMMON STOCK BY THE PRINCIPAL
MARKET IN THE FORESEEABLE FUTURE.  DURING THE TWO YEARS PRIOR TO THE DATE
HEREOF, THE COMMON STOCK HAS BEEN DESIGNATED FOR QUOTATION ON THE PRINCIPAL
MARKET.  DURING THE TWO YEARS PRIOR TO THE DATE HEREOF, (I) TRADING IN THE
COMMON STOCK HAS NOT BEEN SUSPENDED BY THE SEC OR THE PRINCIPAL MARKET AND
(II) THE COMPANY HAS RECEIVED NO COMMUNICATION, WRITTEN OR ORAL, FROM THE SEC OR
THE PRINCIPAL MARKET REGARDING THE SUSPENSION OR DELISTING OF THE COMMON STOCK
FROM THE PRINCIPAL MARKET.  THE COMPANY AND ITS SUBSIDIARIES POSSESS ALL
CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY THE APPROPRIATE REGULATORY
AUTHORITIES NECESSARY TO CONDUCT THEIR RESPECTIVE BUSINESSES, EXCEPT WHERE THE
FAILURE TO POSSESS SUCH CERTIFICATES, AUTHORIZATIONS OR PERMITS WOULD NOT HAVE,
INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT, AND NEITHER THE
COMPANY NOR ANY SUCH SUBSIDIARY HAS

 

--------------------------------------------------------------------------------

 

received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

 

(O)        FOREIGN CORRUPT PRACTICES.  NEITHER THE COMPANY, NOR ANY OF ITS
SUBSIDIARIES, NOR TO ITS KNOWLEDGE 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 OR ANY OF ITS
SUBSIDIARIES (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.

 

(P)        SARBANES-OXLEY ACT.  THE COMPANY IS IN COMPLIANCE WITH ANY AND ALL
APPLICABLE REQUIREMENTS OF THE SARBANES-OXLEY ACT OF 2002 THAT ARE EFFECTIVE AS
OF THE DATE HEREOF, AND ANY AND ALL APPLICABLE RULES AND REGULATIONS PROMULGATED
BY THE SEC THEREUNDER THAT ARE EFFECTIVE AS OF THE DATE HEREOF.

 

(Q)        TRANSACTIONS WITH AFFILIATES.  EXCEPT AS SET FORTH ON SCHEDULE 3,
NONE OF THE OFFICERS, DIRECTORS OR EMPLOYEES OF THE COMPANY IS PRESENTLY A PARTY
TO ANY TRANSACTION 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 KNOWLEDGE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, 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.

 

(R)         EQUITY CAPITALIZATION.  AS OF THE DATE HEREOF (WITHOUT GIVING EFFECT
TO THE LEXICO ACQUISITION), THE AUTHORIZED CAPITAL STOCK OF THE COMPANY CONSISTS
OF (I) 30,000,000 SHARES OF COMMON STOCK, OF WHICH AS OF THE DATE HEREOF,
7,859,890 ARE ISSUED AND OUTSTANDING, 2,291,779 SHARES ARE RESERVED FOR ISSUANCE
PURSUANT TO THE COMPANY’S STOCK OPTION AND PURCHASE PLANS AND 1,157,763 SHARES
ARE RESERVED FOR ISSUANCE PURSUANT TO SECURITIES (OTHER THAN THE AFOREMENTIONED
OPTIONS, AND THE NOTES) EXERCISABLE OR EXCHANGEABLE FOR, OR CONVERTIBLE INTO,
SHARES OF COMMON STOCK AND (II) 1,000,000 SHARES OF PREFERRED STOCK, PAR VALUE
$0.01 PER SHARE, OF WHICH AS OF THE DATE HEREOF, NONE ARE ISSUED AND
OUTSTANDING.  AS OF THE CLOSING DATE, AFTER GIVING EFFECT TO THE LEXICO
ACQUISITION AND ASSUMING SUCH PUBLIC OFFERING PRICE IN THE FOLLOW-ON OFFERING AS
IS SET FORTH ON EXHIBIT D, THE AUTHORIZED CAPITAL STOCK OF THE COMPANY SHALL
CONSIST OF (I) 30,000,000 SHARES OF COMMON STOCK, OF WHICH, 20,393,308 SHALL BE
ISSUED AND OUTSTANDING, 2,291,779 SHARES SHALL BE RESERVED FOR ISSUANCE PURSUANT
TO THE COMPANY’S STOCK OPTION AND PURCHASE PLANS AND 1,157,763 SHARES SHALL BE
RESERVED FOR ISSUANCE PURSUANT TO SECURITIES (OTHER THAN THE AFOREMENTIONED
OPTIONS, AND THE NOTES) EXERCISABLE OR EXCHANGEABLE FOR, OR CONVERTIBLE INTO,
SHARES OF COMMON STOCK AND (II) 1,000,000 SHARES OF PREFERRED STOCK, PAR VALUE
$0.01 PER SHARE, OF WHICH, NONE SHALL BE ISSUED AND OUTSTANDING.  ALL OF SUCH
OUTSTANDING SHARES HAVE BEEN, OR UPON ISSUANCE WILL BE, VALIDLY ISSUED AND ARE
FULLY PAID AND NONASSESSABLE.  EXCEPT AS DISCLOSED IN SCHEDULE 3: (I) NONE OF
THE COMPANY’S CAPITAL STOCK IS SUBJECT TO PREEMPTIVE RIGHTS

 

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or any other similar rights or any liens or encumbrances suffered or permitted
by the Company; (ii) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, or exercisable or exchangeable for,
any capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries; (iii) there are no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its Subsidiaries; (v) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except pursuant to the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or “phantom stock” plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents but not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company’s or
its Subsidiaries’ respective businesses and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.  The Company has
furnished to the Buyers true, correct and complete copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the date hereof
(the “Certificate of Incorporation”), and the Company’s Bylaws, as amended and
as in effect on the date hereof (the “Bylaws”), and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common Stock and
the material rights of the holders thereof in respect thereto.

 

(S)        INDEBTEDNESS AND OTHER CONTRACTS.  EXCEPT AS DISCLOSED IN SCHEDULE
3(1), NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES (I) (WITHOUT GIVING EFFECT
TO THE LEXICO ACQUISITION) HAS ANY OUTSTANDING INDEBTEDNESS (AS DEFINED BELOW),
(II) IS A PARTY TO ANY CONTRACT, AGREEMENT OR INSTRUMENT, THE VIOLATION OF
WHICH, OR DEFAULT UNDER WHICH, BY THE OTHER PARTY(IES) TO SUCH CONTRACT,
AGREEMENT OR INSTRUMENT WOULD RESULT IN A MATERIAL ADVERSE EFFECT, (III) 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 (IV) IS A 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) PROVIDES A DETAILED DESCRIPTION OF THE MATERIAL TERMS OF ANY SUCH
OUTSTANDING INDEBTEDNESS.  EXCEPT AS DISCLOSED IN SCHEDULE 3(S)(2), AS OF THE
CLOSING DATE, AFTER GIVING EFFECT TO THE LEXICO ACQUISITION AND BASED ON SUCH
ASSUMPTIONS AS ARE SET FORTH ON EXHIBIT D, NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES SHALL HAVE ANY OUTSTANDING INDEBTEDNESS NOT SET FORTH ON SCHEDULE
3(S)(1).

 

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A true and correct copy of the Lexico Agreement (as defined below) is attached
hereto as Schedule 3(3).  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, including (without limitation) “capital leases” in
accordance with generally accepted accounting principles (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.

 

(T)         ABSENCE OF LITIGATION.  THERE IS NO ACTION, SUIT, PROCEEDING,
INQUIRY OR INVESTIGATION BEFORE OR BY THE PRINCIPAL MARKET, 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, THE COMMON STOCK OR ANY OF THE COMPANY’S SUBSIDIARIES OR
ANY OF THE COMPANY’S OR ITS SUBSIDIARIES’ OFFICERS OR DIRECTORS IN THEIR
CAPACITIES AS SUCH, EXCEPT AS SET FORTH IN SCHEDULE 3(T).

 

(U)        INSURANCE.  THE COMPANY AND EACH OF ITS SUBSIDIARIES ARE INSURED BY
INSURERS OF RECOGNIZED FINANCIAL RESPONSIBILITY AGAINST SUCH LOSSES AND RISKS
AND IN SUCH AMOUNTS AS MANAGEMENT OF THE COMPANY BELIEVES TO BE PRUDENT AND
CUSTOMARY IN THE BUSINESSES IN WHICH THE COMPANY AND ITS SUBSIDIARIES ARE
ENGAGED.  NEITHER THE COMPANY NOR ANY SUCH SUBSIDIARY HAS BEEN REFUSED ANY
INSURANCE COVERAGE SOUGHT OR APPLIED FOR AND NEITHER THE COMPANY NOR ANY SUCH
SUBSIDIARY HAS ANY REASON TO BELIEVE THAT IT WILL NOT BE ABLE TO RENEW ITS
EXISTING INSURANCE COVERAGE AS AND WHEN SUCH COVERAGE EXPIRES OR TO OBTAIN
SIMILAR COVERAGE FROM SIMILAR INSURERS

 

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as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.

 

(V)        EMPLOYEE RELATIONS.    NEITHER THE 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.  NO EXECUTIVE OFFICER OF THE COMPANY OR
ANY OF ITS SUBSIDIARIES, TO THE KNOWLEDGE OF THE COMPANY, IS, OR IS NOW EXPECTED
TO BE, 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 OF ITS SUBSIDIARIES TO ANY LIABILITY WITH RESPECT TO
ANY OF THE FOREGOING MATTERS.

 

(I)              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.

 

(W)       TITLE.  THE COMPANY AND ITS SUBSIDIARIES HAVE GOOD AND MARKETABLE
TITLE IN FEE SIMPLE TO ALL REAL PROPERTY AND GOOD AND MARKETABLE TITLE TO ALL
PERSONAL PROPERTY OWNED BY THEM WHICH IS MATERIAL TO THE BUSINESS OF THE COMPANY
AND ITS SUBSIDIARIES, IN EACH CASE FREE AND CLEAR OF ALL LIENS, ENCUMBRANCES AND
DEFECTS EXCEPT SUCH AS DO NOT MATERIALLY AFFECT THE VALUE OF SUCH PROPERTY AND
DO NOT INTERFERE WITH THE USE MADE AND PROPOSED TO BE MADE OF SUCH PROPERTY BY
THE COMPANY AND ANY OF ITS SUBSIDIARIES.   ANY REAL PROPERTY AND FACILITIES HELD
UNDER LEASE BY THE COMPANY AND ANY OF ITS SUBSIDIARIES ARE HELD BY THEM UNDER
VALID, SUBSISTING AND ENFORCEABLE LEASES WITH SUCH EXCEPTIONS AS ARE NOT
MATERIAL AND DO NOT INTERFERE WITH THE USE MADE AND PROPOSED TO BE MADE OF SUCH
PROPERTY AND BUILDINGS BY THE COMPANY AND ITS SUBSIDIARIES.

 

(X)         INTELLECTUAL PROPERTY AND INTERNET PRACTICES.

 

(I)                 FOR PURPOSES OF THIS SECTION 3(X), THE FOLLOWING DEFINITIONS
SHALL APPLY.

 

(1)           “INTELLECTUAL PROPERTY” MEANS ANY AND ALL STATUTORY OR COMMON LAW
WORLDWIDE INDUSTRIAL AND INTELLECTUAL PROPERTY RIGHTS AND ALL RIGHTS ASSOCIATED
THEREWITH, INCLUDING ALL PATENTS AND APPLICATIONS THEREFOR AND ALL REISSUES,
DIVISIONS, RENEWALS, EXTENSIONS, PROVISIONALS, CONTINUATIONS AND
CONTINUATIONS-IN-PART THEREOF, ALL INVENTIONS (WHETHER PATENTABLE OR NOT),
INVENTION DISCLOSURES, IMPROVEMENTS, TRADE SECRETS, PROPRIETARY INFORMATION,
KNOW HOW, TECHNOLOGY, TECHNICAL DATA, PROPRIETARY PROCESSES AND FORMULAE,
ALGORITHMS, SPECIFICATIONS, CUSTOMER LISTS AND SUPPLIER LISTS, ALL INDUSTRIAL
DESIGNS AND ANY REGISTRATIONS AND APPLICATIONS THEREFOR, ALL TRADEMARKS, TRADE
NAMES, TRADE DRESS, LOGOS, AND SERVICE NAMES AND MARKS (IN EACH CASE WHETHER OR
NOT REGISTERED) AND REGISTRATIONS AND APPLICATIONS THEREFOR AND THE RIGHT TO
FILE APPLICATIONS FOR

 

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the registration thereof, Internet domain names, Internet and World Wide Web
URLs or addresses, all copyrights (whether or not registered), registrations and
applications therefor and the right to file applications for registration
thereof, and all other rights corresponding thereto, all computer software,
including all source code, object code, firmware, development tools, files,
records, documentation, screen displays, layouts, and data, test methodologies,
emulation and simulation tools and reports, all databases and data collections
and all rights therein, all publicity and privacy rights, and all moral and
economic rights of authors and inventors, however denominated, and any similar
or equivalent rights to any of the foregoing, arising under the laws of the
United States of America, any state thereof, or any other country or province,
and all tangible embodiments of the foregoing (in whatever form).

 

(2)           “COMPANY IP RIGHTS” MEANS ANY AND ALL INTELLECTUAL PROPERTY USED
IN THE CONDUCT OF THE BUSINESS OF THE COMPANY AS CURRENTLY CONDUCTED OR AS
CURRENTLY PROPOSED TO BE CONDUCTED BY THE COMPANY, INCLUDING, WITHOUT
LIMITATION, INTELLECTUAL PROPERTY CURRENTLY UNDER DEVELOPMENT BY OR FOR THE
COMPANY (WHETHER OR NOT IN COLLABORATION WITH ANOTHER PERSON).

 

(3)           “COMPANY-OWNED IP RIGHTS” MEANS COMPANY IP RIGHTS THAT ARE OWNED
OR ARE PURPORTEDLY OWNED BY OR EXCLUSIVELY LICENSED TO THE COMPANY, INCLUDING,
BUT NOT LIMITED TO, COMPANY REGISTERED INTELLECTUAL PROPERTY.

 

(4)           “COMPANY REGISTERED INTELLECTUAL PROPERTY” MEANS ALL UNITED
STATES, INTERNATIONAL AND FOREIGN: (A) PATENTS AND PATENT APPLICATIONS
(INCLUDING PROVISIONAL APPLICATIONS ALL REISSUES, DIVISIONS, RENEWALS,
EXTENSIONS, CONTINUATIONS AND CONTINUATIONS-IN-PART THEREOF); (B) REGISTERED
TRADEMARKS AND SERVICE MARKS, APPLICATIONS TO REGISTER TRADEMARKS AND SERVICE
MARKS, INTENT-TO-USE APPLICATIONS, AND OTHER REGISTRATIONS AND APPLICATIONS
RELATED TO TRADEMARKS OR SERVICE MARKS; (C) REGISTERED INTERNET DOMAIN NAMES AND
INTERNET AND WORLD WIDE WEB URLS OR ADDRESSES; (D) REGISTERED COPYRIGHTS AND
APPLICATIONS FOR COPYRIGHT REGISTRATION; AND (E) ANY OTHER INTELLECTUAL PROPERTY
THAT IS THE SUBJECT OF AN APPLICATION, CERTIFICATE, FILING, REGISTRATION OR
OTHER DOCUMENT ISSUED, FILED WITH, OR RECORDED BY ANY GOVERNMENTAL AUTHORITY
OWNED BY, REGISTERED OR FILED IN THE NAME OF, THE COMPANY.

 

(II)             THE COMPANY (X) OWNS AND HAS INDEPENDENTLY DEVELOPED OR
ACQUIRED, OR (Y) HAS THE VALID RIGHT OR LICENSE TO ALL COMPANY IP RIGHTS AND HAS
NOT TRANSFERRED OWNERSHIP OF ANY INTELLECTUAL PROPERTY THAT IS OR WAS A COMPANY
IP RIGHT OR COMPANY-OWNED IP RIGHTS TO ANY THIRD PARTY. THE COMPANY IP RIGHTS
ARE SUFFICIENT FOR THE CONDUCT OF THE BUSINESS OF THE COMPANY AS CURRENTLY
CONDUCTED AND AS CURRENTLY PROPOSED TO BE CONDUCTED BY THE COMPANY.

 

(III)            THE COMPANY OWNS AND HAS GOOD AND EXCLUSIVE TITLE TO EACH ITEM
OF COMPANY-OWNED IP RIGHTS AND EACH ITEM OF COMPANY REGISTERED INTELLECTUAL
PROPERTY, FREE AND CLEAR OF ANY ENCUMBRANCES. THE RIGHT, LICENSE AND INTEREST OF
THE COMPANY IN AND TO ALL INTELLECTUAL PROPERTY OWNED BY A THIRD PARTY LICENSED
BY THE COMPANY FROM A THIRD PARTY ARE FREE AND CLEAR OF ALL ENCUMBRANCES
(EXCLUDING RESTRICTIONS CONTAINED IN THE APPLICABLE LICENSE AGREEMENTS WITH SUCH
THIRD PARTIES) AND NONE OF THE COMPANY OR ANY COMPANY-OWNED IP RIGHTS

 

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IS SUBJECT TO ANY PROCEEDINGS OR AGREEMENT RESTRICTING IN ANY MANNER THE USE OR
ENFORCEABILITY OF ANY COMPANY-OWNED IP RIGHTS.

 

(IV)            NEITHER THE EXECUTION AND DELIVERY OR EFFECTIVENESS OF THIS
AGREEMENT NOR THE PERFORMANCE OF THE COMPANY’S OBLIGATIONS UNDER THIS AGREEMENT
WILL CAUSE THE (A) FORFEITURE OR TERMINATION OF, OR GIVE RISE TO A RIGHT OF
FORFEITURE OR TERMINATION OF ANY COMPANY-OWNED IP RIGHT, OR IMPAIR THE RIGHT OF
THE COMPANY OR THE BUYERS TO USE, POSSESS, SELL OR LICENSE ANY COMPANY-OWNED IP
RIGHT OR PORTION THEREOF OR (B) BREACH OF ANY CONTRACT GOVERNING ANY COMPANY IP
RIGHTS (THE “COMPANY IP RIGHTS AGREEMENTS”) AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT WILL NOT RESULT IN THE MODIFICATION,
CANCELLATION, TERMINATION, SUSPENSION OF, OR ACCELERATION OF ANY PAYMENTS WITH
RESPECT TO THE COMPANY IP RIGHTS AGREEMENTS, OR GIVE ANY PERSON OTHER THAN THE
COMPANY THAT IS PARTY TO ANY COMPANY IP RIGHTS AGREEMENT THE RIGHT TO DO ANY OF
THE FOREGOING. AFTER THE CLOSING, ALL COMPANY-OWNED IP RIGHTS WILL BE FULLY
TRANSFERABLE, ALIENABLE OR LICENSABLE BY THE BUYERS WITHOUT RESTRICTION AND
WITHOUT PAYMENT OF ANY KIND TO ANY THIRD PARTY. EXCEPT AS SET FORTH IN SCHEDULE
3(X)(IV), NONE OF THE COMPANY-OWNED IP RIGHTS HAVE EXPIRED OR TERMINATED, OR ARE
EXPECTED TO EXPIRE OR TERMINATION, WITHIN THREE YEARS FROM THE DATE OF THIS
AGREEMENT.

 

(V)             SCHEDULE 3(X)(V) LISTS ALL COMPANY REGISTERED INTELLECTUAL
PROPERTY INCLUDING THE JURISDICTIONS IN WHICH EACH SUCH ITEM OF INTELLECTUAL
PROPERTY HAS BEEN ISSUED OR REGISTERED (INCLUDING, WITHOUT LIMITATION, THE
“WHOIS” LOOKUP WITH RESPECT TO DOMAIN NAMES) OR IN WHICH ANY APPLICATION FOR
SUCH ISSUANCE AND REGISTRATION HAS BEEN FILED, OR IN WHICH ANY OTHER FILING OR
RECORDATION HAS BEEN MADE, TOGETHER WITH THE CURRENT OWNER OF RECORD THEREOF. 
ALL COMPANY-OWNED IP RIGHTS ARE SUBSISTING, ALL REGISTRATION, MAINTENANCE AND
RENEWAL FEES CURRENTLY DUE AS OF THE DATE HEREOF IN CONNECTION WITH SUCH COMPANY
REGISTERED INTELLECTUAL PROPERTY HAVE BEEN PAID AND ALL DOCUMENTS, RECORDATIONS
AND CERTIFICATES IN CONNECTION WITH SUCH COMPANY REGISTERED INTELLECTUAL
PROPERTY CURRENTLY REQUIRED TO BE FILED HAVE BEEN FILED WITH THE RELEVANT
JURISDICTION OR AUTHORITY.

 

(VI)            NONE OF THE COMPANY IP RIGHTS AGREEMENTS GRANTS ANY THIRD PARTY
EXCLUSIVE RIGHTS TO OR UNDER ANY COMPANY IP RIGHTS OR GRANTS ANY THIRD PARTY THE
RIGHT TO SUBLICENSE ANY COMPANY IP RIGHTS AND TO THE KNOWLEDGE OF THE COMPANY,
THERE IS NO UNAUTHORIZED USE, INFRINGEMENT OR MISAPPROPRIATION OF ANY
COMPANY-OWNED IP RIGHTS, BY ANY THIRD PARTY AND THE COMPANY IS UNAWARE OF ANY
FACTS OR CIRCUMSTANCES WHICH MIGHT GIVE RISE TO ANY OF THE FOREGOING
INFRINGEMENTS OR CLAIMS. EXCEPT AS SET FORTH ON SCHEDULE 3(X)(VI), THE COMPANY
HAS NOT, WITHIN THE LAST 3 YEARS, BROUGHT ANY ACTION, SUIT OR PROCEEDING FOR
INFRINGEMENT OR MISAPPROPRIATION OF ANY INTELLECTUAL PROPERTY OR BREACH OF ANY
COMPANY IP RIGHTS AGREEMENT.

 

(VII)           THE COMPANY HAS NOT BEEN SUED IN ANY SUIT, ACTION OR PROCEEDING
(OR RECEIVED ANY WRITTEN NOTICE OR, TO THE KNOWLEDGE OF THE COMPANY, THREAT)
WHICH INVOLVES A CLAIM OF INFRINGEMENT OR MISAPPROPRIATION OF ANY INTELLECTUAL
PROPERTY RIGHT OF ANY THIRD PARTY, EXCEPT FOR ROUTINE NOTICES OF CONTENT
INFRINGEMENT UNDER THE DIGITAL MILLENNIUM COPYRIGHT ACT, OR WHICH CONTESTS THE
VALIDITY, OWNERSHIP OR RIGHT OF THE COMPANY TO EXERCISE ANY INTELLECTUAL
PROPERTY RIGHT AND THE COMPANY IS UNAWARE OF ANY FACTS OR CIRCUMSTANCES WHICH
MIGHT GIVE RISE TO ANY OF THE FOREGOING ACTIONS OR PROCEEDINGS.

 

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(VIII)          THE COMPANY HAS SECURED FROM ALL THIRD PARTIES, UNENCUMBERED AND
UNRESTRICTED EXCLUSIVE OWNERSHIP OF ALL SUCH THIRD PARTY’S INTELLECTUAL PROPERTY
IN ANY COMPANY-OWNED IP RIGHTS THAT THE COMPANY DOES NOT ALREADY OWN BY
OPERATION OF LAW AND SUCH THIRD PARTY HAS NOT RETAINED ANY RIGHTS OR LICENSES
WITH RESPECT THERETO, INCLUDING WITHOUT LIMITATION, RECEIPT OF ALL PROPRIETARY
INFORMATION AND INVENTION DISCLOSURE AND ASSIGNMENT AGREEMENTS FROM ANY SUCH
THIRD PARTY.

 

(IX)             THE COMPANY HAS TAKEN ALL COMMERCIALLY REASONABLE STEPS TO
PROTECT AND PRESERVE THE CONFIDENTIALITY OF ALL CONFIDENTIAL OR NONPUBLIC
INFORMATION INCLUDED IN THE COMPANY IP RIGHTS (“CONFIDENTIAL INFORMATION”). ALL
USE, DISCLOSURE OR APPROPRIATION OF CONFIDENTIAL INFORMATION OWNED BY THE
COMPANY TO A THIRD PARTY HAS BEEN PURSUANT TO THE TERMS OF A WRITTEN CONTRACT
BETWEEN THE COMPANY AND SUCH THIRD PARTY. ALL USE, DISCLOSURE OR APPROPRIATION
OF CONFIDENTIAL INFORMATION BY THE COMPANY NOT OWNED BY THE COMPANY HAS BEEN
PURSUANT TO THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE OWNER
OF SUCH CONFIDENTIAL INFORMATION, OR IS OTHERWISE LAWFUL.

 

(X)              SCHEDULE 3(X)(X) LISTS ALL SOFTWARE OR OTHER MATERIAL THAT IS
DISTRIBUTED AS “FREE SOFTWARE”, “OPEN SOURCE SOFTWARE” OR UNDER A SIMILAR
LICENSING OR DISTRIBUTION TERMS (INCLUDING BUT NOT LIMITED TO THE GNU GENERAL
PUBLIC LICENSE GPL), GNU LESSER GENERAL PUBLIC LICENSE (LGPL), MOZILLA PUBLIC
LICENSE (MPL), BSD LICENSES, THE ARTISTIC LICENSE, THE NETSCAPE PUBLIC LICENSE,
THE SUN COMMUNITY SOURCE LICENSE (SCSL) THE SUN INDUSTRY STANDARDS LICENSE
(SISL) AND THE APACHE LICENSE) (“OPEN SOURCE MATERIALS”) USED BY THE COMPANY IN
ANY WAY. THE COMPANY IS IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF ALL
LICENSES FOR THE OPEN SOURCE MATERIALS.

 

(XI)             FOR ALL SOFTWARE USED BY THE COMPANY IN PROVIDING SERVICES, OR
IN DEVELOPING OR MAKING AVAILABLE ANY OF THE COMPANY’S PRODUCTS, THE COMPANY HAS
IMPLEMENTED ANY AND ALL SECURITY PATCHES OR UPGRADES THAT ARE GENERALLY
AVAILABLE FOR THAT SOFTWARE.

 

(XII)            THE COMPANY HAS IMPLEMENTED AND MAINTAINS A COMPREHENSIVE
SECURITY PLAN WHICH (I) IDENTIFIES INTERNAL AND EXTERNAL RISKS TO THE SECURITY
OF THE CONFIDENTIAL INFORMATION, INCLUDING PERSONALLY IDENTIFIABLE INFORMATION;
(II) IMPLEMENTS, MONITORS AND IMPROVES ADEQUATE AND EFFECTIVE ADMINISTRATIVE,
ELECTRONIC AND PHYSICAL SAFEGUARDS TO CONTROL THOSE RISKS; AND (III) MAINTAINS
NOTIFICATION PROCEDURES IN COMPLIANCE WITH APPLICABLE LAWS OR REGULATIONS IN THE
CASE OF ANY BREACH OF SECURITY COMPROMISING UNENCRYPTED DATA CONTAINING
PERSONALLY IDENTIFIABLE INFORMATION. THE COMPANY HAS NOT EXPERIENCED ANY BREACH
OF SECURITY OR OTHERWISE UNAUTHORIZED ACCESS BY THIRD PARTIES TO THE
CONFIDENTIAL INFORMATION, INCLUDING PERSONALLY IDENTIFIABLE INFORMATION IN THE
COMPANY’S POSSESSION, CUSTODY OR CONTROL, OR TO ANY COMPANY PRODUCT.

 

(XIII)           THE COMPANY HAS COMPLIED WITH ALL APPLICABLE LAWS AND
REGULATIONS AND THEIR RESPECTIVE INTERNAL AND PUBLIC PRIVACY POLICIES RELATING
TO THE USE, COLLECTION, STORAGE, DISCLOSURE AND TRANSFER OF ANY PERSONALLY
IDENTIFIABLE INFORMATION COLLECTED BY THE COMPANY OR BY THIRD PARTIES HAVING
AUTHORIZED ACCESS TO THE RECORDS OF THE COMPANY. THE EXECUTION, DELIVERY AND
PERFORMANCE OF THIS AGREEMENT, WILL COMPLY WITH ALL APPLICABLE LAWS AND
REGULATIONS RELATING TO PRIVACY AND WITH THE COMPANY’S PRIVACY POLICIES. THE
COMPANY HAS NOT

 

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received a complaint regarding the Company’s collection, use or disclosure of
personally identifiable information.

 

(Y)        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 COULD 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.

 

(Z)         SUBSIDIARY RIGHTS.  EXCEPT AS SET FORTH IN SCHEDULE 3 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.

 

(AA)      INVESTMENT COMPANY STATUS.  THE COMPANY IS NOT, AND UPON CONSUMMATION
OF THE SALE OF THE SECURITIES WILL NOT BE, AN “INVESTMENT COMPANY,” A COMPANY
CONTROLLED BY AN “INVESTMENT COMPANY” OR AN “AFFILIATED PERSON” OF, OR
“PROMOTER” OR “PRINCIPAL UNDERWRITER” FOR, AN “INVESTMENT COMPANY” AS SUCH TERMS
ARE DEFINED IN THE INVESTMENT COMPANY ACT OF  1940, AS AMENDED.

 

(BB)      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.

 

(CC)      INTERNAL ACCOUNTING AND DISCLOSURE CONTROLS.  THE COMPANY AND EACH OF
ITS 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
AND LIABILITY ACCOUNTABILITY, (III) ACCESS TO ASSETS OR INCURRENCE OF
LIABILITIES IS PERMITTED ONLY IN

 

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accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets and liabilities is compared with the existing
assets and liabilities at reasonable intervals and appropriate action is taken
with respect to any difference.  The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-14 under the 1934 Act) that are
effective in ensuring that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC, including, without limitation, controls and
procedures designed in to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure.  During the twelve months prior to the date hereof neither the
Company nor any of its Subsidiaries have received any notice or correspondence
from any accountant relating to any material weakness in any part of the system
of internal accounting controls of the Company or any of its Subsidiaries

 

(DD)      OFF BALANCE SHEET ARRANGEMENTS.  THERE IS NO TRANSACTION, ARRANGEMENT,
OR OTHER RELATIONSHIP BETWEEN THE COMPANY AND AN UNCONSOLIDATED OR OTHER OFF
BALANCE SHEET ENTITY THAT IS REQUIRED TO BE DISCLOSED BY THE COMPANY IN ITS
EXCHANGE ACT FILINGS AND IS NOT SO DISCLOSED OR THAT OTHERWISE WOULD BE
REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT.

 

(EE)      RANKING OF NOTES.  EXCEPT AS SET FORTH ON SCHEDULE 3 NO INDEBTEDNESS
OF THE COMPANY IS SENIOR TO OR RANKS PARI PASSU WITH THE NOTES IN RIGHT OF
PAYMENT, WHETHER WITH RESPECT OF PAYMENT OF REDEMPTIONS, INTEREST, DAMAGES OR
UPON LIQUIDATION OR DISSOLUTION OR OTHERWISE.

 

(FF)        FORM S-3 ELIGIBILITY.  THE COMPANY IS ELIGIBLE TO REGISTER THE
CONVERSION SHARES FOR RESALE BY THE BUYERS USING FORM S-3 PROMULGATED UNDER THE
1933 ACT.

 

(GG)      TRANSFER TAXES.  ON THE CLOSING DATE, ALL STOCK TRANSFER OR OTHER
TAXES (OTHER THAN INCOME OR SIMILAR TAXES) WHICH ARE REQUIRED TO BE PAID IN
CONNECTION WITH THE SALE AND TRANSFER OF THE SECURITIES TO BE SOLD TO EACH BUYER
HEREUNDER WILL BE, OR WILL HAVE BEEN, FULLY PAID OR PROVIDED FOR BY THE COMPANY,
AND ALL LAWS IMPOSING SUCH TAXES WILL BE OR WILL HAVE BEEN COMPLIED WITH.

 

(HH)      MANIPULATION OF PRICE.  THE COMPANY HAS NOT, AND TO ITS KNOWLEDGE NO
ONE ACTING ON ITS BEHALF HAS, (I) TAKEN, DIRECTLY OR INDIRECTLY, ANY ACTION
DESIGNED TO CAUSE OR TO RESULT IN THE STABILIZATION OR MANIPULATION OF THE PRICE
OF ANY SECURITY OF THE COMPANY TO FACILITATE THE SALE OR RESALE OF ANY OF THE
SECURITIES, (II) OTHER THAN THE PLACEMENT AGENTS, SOLD, BID FOR, PURCHASED, OR
PAID ANY COMPENSATION FOR SOLICITING PURCHASES OF, ANY OF THE SECURITIES, OR
(III) OTHER THAN THE PLACEMENT AGENTS, PAID OR AGREED TO PAY TO ANY PERSON ANY
COMPENSATION FOR SOLICITING ANOTHER TO PURCHASE ANY OTHER SECURITIES OF THE
COMPANY.

 

(II)        ACKNOWLEDGEMENT REGARDING BUYERS’ TRADING ACTIVITY.  IT IS
UNDERSTOOD AND ACKNOWLEDGED BY THE COMPANY THAT (I) NONE OF THE BUYERS HAVE BEEN
ASKED TO AGREE, NOR HAS ANY BUYER AGREED, TO DESIST FROM PURCHASING OR SELLING,
LONG AND/OR SHORT, SECURITIES OF THE COMPANY, OR “DERIVATIVE” SECURITIES BASED
ON SECURITIES ISSUED BY THE COMPANY OR TO HOLD THE

 

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Securities for any specified term; (ii) any Buyer, and counter parties in
“derivative” transactions to which any such Buyer is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, and
(iii) each Buyer shall not be deemed to have any affiliation with or control
over any arm’s length counter-party in any “derivative” transaction.  The
Company further understands and acknowledges that one or more Buyers may engage
in hedging and/or trading activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value of the Conversion Shares are being determined and (b) such
hedging and/or trading activities, if any, can reduce the value of the existing
stockholders’ equity interest in the Company both at and after the time the
hedging and/or trading activities are being conducted.  The Company acknowledges
that such aforementioned hedging and/or trading activities do not constitute a
breach of this Agreement, the Notes or any of the documents executed in
connection herewith.

 

(JJ)        U.S. REAL PROPERTY HOLDING CORPORATION.  THE COMPANY IS NOT, HAS
NEVER BEEN, NOR WHILE ANY SECURITIES ARE OUTSTANDING, WILL EVER BECOME, A U.S.
REAL PROPERTY HOLDING CORPORATION WITHIN THE MEANING OF SECTION 897 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE COMPANY SHALL SO CERTIFY UPON
BUYER’S REQUEST.

 

(KK)      BANK HOLDING COMPANY ACT.  NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES IS SUBJECT TO THE BANK HOLDING COMPANY ACT OF 1956, AS AMENDED (THE
“BHCA”) AND TO REGULATION BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE
SYSTEM (THE “FEDERAL RESERVE”).  NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES
OR AFFILIATES OWNS OR CONTROLS, DIRECTLY OR INDIRECTLY, FIVE PERCENT (5%) OR
MORE OF THE OUTSTANDING SHARES OF ANY CLASS OF VOTING SECURITIES OR TWENTY-FIVE
(25%) OR MORE OF THE TOTAL EQUITY OF A BANK OR ANY EQUITY THAT IS SUBJECT TO THE
BHCA AND TO REGULATION BY THE FEDERAL RESERVE.  NEITHER THE COMPANY NOR ANY OF
ITS SUBSIDIARIES OR AFFILIATES EXERCISES A CONTROLLING INFLUENCE OVER THE
MANAGEMENT OR POLICIES OF A BANK OR ANY ENTITY THAT IS SUBJECT TO THE BHCA AND
TO REGULATION BY THE FEDERAL RESERVE.

 

(LL)        DISCLOSURE.  THE COMPANY CONFIRMS THAT NEITHER IT NOR ANY OTHER
PERSON ACTING ON ITS BEHALF HAS PROVIDED ANY OF THE BUYERS OR THEIR AGENTS OR
COUNSEL WITH ANY INFORMATION THAT CONSTITUTES OR COULD REASONABLY BE EXPECTED TO
CONSTITUTE MATERIAL, NONPUBLIC INFORMATION.  THE COMPANY UNDERSTANDS AND
CONFIRMS THAT EACH OF THE BUYERS WILL RELY ON THE FOREGOING REPRESENTATIONS IN
EFFECTING TRANSACTIONS IN SECURITIES OF THE COMPANY.  ALL DISCLOSURE PROVIDED TO
THE BUYERS REGARDING THE COMPANY, OR ANY OF ITS SUBSIDIARIES, THEIR BUSINESS AND
THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE SCHEDULES TO THIS AGREEMENT,
FURNISHED BY OR ON BEHALF OF THE COMPANY IS TRUE AND CORRECT AND DOES NOT
CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY MATERIAL
FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS MADE THEREIN, IN THE LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.  EACH PRESS RELEASE
ISSUED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES DURING THE TWELVE (12) MONTHS
PRECEDING THE DATE OF THIS AGREEMENT DID NOT AT THE TIME OF RELEASE CONTAIN ANY
UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO
BE STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN THE
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.  NO EVENT
OR CIRCUMSTANCE HAS OCCURRED OR INFORMATION EXISTS WITH RESPECT TO THE COMPANY
OR ANY OF ITS SUBSIDIARIES OR ITS OR THEIR BUSINESS, PROPERTIES, PROSPECTS,
OPERATIONS OR FINANCIAL CONDITIONS, WHICH, UNDER APPLICABLE LAW, RULE OR
REGULATION, REQUIRES PUBLIC DISCLOSURE OR ANNOUNCEMENT BY THE COMPANY BUT WHICH
HAS NOT BEEN SO PUBLICLY ANNOUNCED OR DISCLOSED.

 

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4.                                       COVENANTS.

 

(A)                                  BEST EFFORTS.  EACH PARTY SHALL USE ITS
BEST EFFORTS TIMELY TO SATISFY EACH OF THE CONDITIONS TO BE SATISFIED BY IT AS
PROVIDED IN SECTIONS 6 AND 7 OF THIS AGREEMENT.

 

(B)                                 FORM D AND BLUE SKY.  THE COMPANY AGREES TO
FILE A FORM D WITH RESPECT TO THE SECURITIES AS REQUIRED UNDER REGULATION D AND
TO PROVIDE A COPY THEREOF TO EACH BUYER PROMPTLY AFTER SUCH FILING.  THE COMPANY
SHALL, ON OR BEFORE THE CLOSING DATE, TAKE SUCH ACTION AS THE COMPANY SHALL
REASONABLY DETERMINE IS NECESSARY IN ORDER TO OBTAIN AN EXEMPTION FOR OR TO
QUALIFY THE SECURITIES FOR SALE TO THE BUYERS AT THE CLOSING PURSUANT TO THIS
AGREEMENT UNDER APPLICABLE SECURITIES OR “BLUE SKY” LAWS OF THE STATES OF THE
UNITED STATES (OR TO OBTAIN AN EXEMPTION FROM SUCH QUALIFICATION), AND SHALL
PROVIDE EVIDENCE OF ANY SUCH ACTION SO TAKEN TO THE BUYERS ON OR PRIOR TO THE
CLOSING DATE.  THE COMPANY SHALL MAKE ALL FILINGS AND REPORTS RELATING TO THE
OFFER AND SALE OF THE SECURITIES REQUIRED UNDER APPLICABLE SECURITIES OR “BLUE
SKY” LAWS OF THE STATES OF THE UNITED STATES FOLLOWING THE CLOSING DATE.

 

(C)                                  REPORTING STATUS.  UNTIL THE DATE ON WHICH
THE INVESTORS (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) SHALL HAVE SOLD
ALL THE CONVERSION SHARES AND NONE OF THE NOTES IS OUTSTANDING (THE “REPORTING
PERIOD”), THE COMPANY SHALL TIMELY FILE ALL REPORTS REQUIRED TO BE FILED WITH
THE SEC PURSUANT TO THE 1934 ACT, AND THE COMPANY SHALL NOT TERMINATE ITS STATUS
AS AN ISSUER REQUIRED TO FILE REPORTS UNDER THE 1934 ACT EVEN IF THE 1934 ACT OR
THE RULES AND REGULATIONS THEREUNDER WOULD PERMIT SUCH TERMINATION.

 

(D)                                 USE OF PROCEEDS.  THE COMPANY WILL USE THE
PROCEEDS FROM THE SALE OF THE FOLLOW-ON NOTES AND THE FOLLOW-ON OFFERING (AS
DEFINED BELOW) TO FINANCE THE LEXICO ACQUISITION AND ANY REMAINDER THEREAFTER
FOR GENERAL CORPORATE AND FOR WORKING CAPITAL PURPOSES AND NOT FOR (I) THE
REPAYMENT OF ANY OUTSTANDING INDEBTEDNESS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (II) THE REDEMPTION OR REPURCHASE OF ANY OF ITS OR ITS
SUBSIDIARIES’ EQUITY SECURITIES OR (III) THE SETTLEMENT OF ANY CLAIMS, ACTIONS
OR PROCEEDINGS AGAINST THE COMPANY OR ANY OF ITS SUBSIDIARIES.

 

(E)                                  FINANCIAL INFORMATION.  THE COMPANY AGREES
TO SEND THE FOLLOWING TO EACH INVESTOR (AS DEFINED IN THE REGISTRATION RIGHTS
AGREEMENT) DURING THE REPORTING PERIOD (I) UNLESS THE FOLLOWING ARE FILED WITH
THE SEC THROUGH EDGAR AND ARE AVAILABLE TO THE PUBLIC THROUGH THE EDGAR SYSTEM,
WITHIN ONE (1) BUSINESS DAY AFTER THE FILING THEREOF WITH THE SEC, A COPY OF ITS
ANNUAL REPORTS AND QUARTERLY REPORTS ON FORM 10-K, 10-KSB, 10-Q OR 10-QSB, ANY
INTERIM REPORTS OR ANY CONSOLIDATED BALANCE SHEETS, INCOME STATEMENTS,
STOCKHOLDERS’ EQUITY STATEMENTS AND/OR CASH FLOW STATEMENTS FOR ANY PERIOD OTHER
THAN ANNUAL, ANY CURRENT REPORTS ON FORM 8-K AND ANY REGISTRATION STATEMENTS
(OTHER THAN ON FORM S-8) OR AMENDMENTS FILED PURSUANT TO THE 1933 ACT, (II) ON
THE SAME DAY AS THE RELEASE THEREOF, FACSIMILE OR E-MAILED COPIES OF ALL PRESS
RELEASES ISSUED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES UNLESS SUCH PRESS
RELEASE IS AVAILABLE ON A NATIONAL INTERNET OR PRINT MEDIA OUTLET ON THE DATE OF
RELEASE, AND (III) COPIES OF ANY NOTICES AND OTHER INFORMATION MADE AVAILABLE OR
GIVEN TO THE STOCKHOLDERS OF THE COMPANY GENERALLY, CONTEMPORANEOUSLY WITH THE
MAKING AVAILABLE OR GIVING THEREOF TO THE STOCKHOLDERS.

 

(F)                                    LISTING.  THE COMPANY SHALL PROMPTLY
SECURE THE LISTING OF ALL OF THE REGISTRABLE SECURITIES (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT) UPON EACH NATIONAL

 

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SECURITIES EXCHANGE AND AUTOMATED QUOTATION SYSTEM, IF ANY, UPON WHICH THE
COMMON STOCK IS THEN LISTED (SUBJECT TO OFFICIAL NOTICE OF ISSUANCE) AND SHALL
MAINTAIN SUCH LISTING OF ALL REGISTRABLE SECURITIES FROM TIME TO TIME ISSUABLE
UNDER THE TERMS OF THE TRANSACTION DOCUMENTS.  THE COMPANY SHALL MAINTAIN THE
COMMON STOCKS’ AUTHORIZATION FOR QUOTATION ON THE PRINCIPAL MARKET.  NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES SHALL TAKE ANY ACTION WHICH WOULD BE
REASONABLY EXPECTED TO RESULT IN THE DELISTING OR SUSPENSION OF THE COMMON STOCK
ON THE PRINCIPAL MARKET.  THE COMPANY SHALL PAY ALL FEES AND EXPENSES IN
CONNECTION WITH SATISFYING ITS OBLIGATIONS UNDER THIS SECTION 4(F).

 

(G)                                 FEES.  THE COMPANY SHALL REIMBURSE
INTERLACHEN CONVERTIBLE INVESTMENTS LIMITED (A BUYER) (“INTERLACHEN”) OR ITS
DESIGNEE(S) (IN ADDITION TO ANY OTHER EXPENSE AMOUNTS PAID TO ANY BUYER PRIOR TO
THE DATE OF THIS AGREEMENT) FOR ITS COSTS AND EXPENSES INCURRED IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS (INCLUDING,
WITHOUT LIMITATION, LEGAL FEES AND DISBURSEMENTS IN CONNECTION THEREWITH,
NEGOTIATION, PREPARATION AND EXECUTION OF THE TRANSACTION DOCUMENTS AND DUE
DILIGENCE IN CONNECTION THEREWITH) UP TO A MAXIMUM AMOUNT OF $75,000 (THE
“EXPENSE CAP”), WHICH AMOUNT, IN THE EVENT OF ISSUANCE OF FOLLOW-ON NOTES, MAY
BE WITHHELD BY SUCH BUYER FROM ITS PURCHASE PRICE AT THE CLOSING. 
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT, THE EXPENSE CAP SHALL NOT APPLY
TO ANY EXPENSES INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION,
EXECUTION AND DELIVERY OF SECURITY, INTERCREDITOR AND SUBORDINATION DOCUMENTS
RELATING TO ANY LEXICO INDEBTEDNESS (AS DEFINED IN THE NOTES) AND ANY LIENS
GRANTED TO THE BUYERS IN CONNECTION WITH SUCH LEXICO INDEBTEDNESS WHICH AMOUNTS
THE COMPANY SHALL BE RESPONSIBLE FOR SHALL NOT EXCEED $50,000. THE COMPANY SHALL
BE RESPONSIBLE FOR THE PAYMENT OF ANY PLACEMENT AGENT’S FEES, FINANCIAL ADVISORY
FEES, OR BROKER’S COMMISSIONS (OTHER THAN FOR PERSONS ENGAGED BY ANY BUYER)
RELATING TO OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING,
WITHOUT LIMITATION, ANY FEES OR COMMISSIONS PAYABLE TO THE PLACEMENT AGENTS. 
THE COMPANY SHALL PAY, AND HOLD EACH BUYER HARMLESS AGAINST, ANY LIABILITY, LOSS
OR EXPENSE (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEY’S FEES AND
OUT-OF-POCKET EXPENSES) ARISING IN CONNECTION WITH ANY CLAIM RELATING TO ANY
SUCH PAYMENT.  EXCEPT AS OTHERWISE SET FORTH IN THE TRANSACTION DOCUMENTS, EACH
PARTY TO THIS AGREEMENT SHALL BEAR ITS OWN EXPENSES IN CONNECTION WITH THE SALE
OF THE SECURITIES TO THE BUYERS.

 

(H)                                 PLEDGE OF SECURITIES.  THE COMPANY
ACKNOWLEDGES AND AGREES THAT THE SECURITIES MAY BE PLEDGED BY AN INVESTOR (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) IN CONNECTION WITH A BONA FIDE
MARGIN AGREEMENT OR OTHER LOAN OR FINANCING ARRANGEMENT THAT IS SECURED BY THE
SECURITIES.  THE PLEDGE OF SECURITIES SHALL NOT BE DEEMED TO BE A TRANSFER, SALE
OR ASSIGNMENT OF THE SECURITIES HEREUNDER, AND NO INVESTOR EFFECTING A PLEDGE OF
SECURITIES SHALL BE REQUIRED TO PROVIDE THE COMPANY WITH ANY NOTICE THEREOF OR
OTHERWISE MAKE ANY DELIVERY TO THE COMPANY PURSUANT TO THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT, INCLUDING, WITHOUT LIMITATION, SECTION 2(F) HEREOF;
PROVIDED THAT AN INVESTOR AND ITS PLEDGEE SHALL BE REQUIRED TO COMPLY WITH THE
PROVISIONS OF SECTION 2(F) HEREOF IN ORDER TO EFFECT A SALE, TRANSFER OR
ASSIGNMENT OF SECURITIES TO SUCH PLEDGEE.  THE COMPANY HEREBY AGREES TO EXECUTE
AND DELIVER SUCH DOCUMENTATION AS A PLEDGEE OF THE SECURITIES MAY REASONABLY
REQUEST IN CONNECTION WITH A PLEDGE OF THE SECURITIES TO SUCH PLEDGEE BY AN
INVESTOR OR SUCH OTHER DOCUMENTATION AS MAY BE REASONABLY REQUESTED BY ANY BUYER
EFFECTING A PLEDGE OF SECURITIES IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING AGREEMENT AS CONTEMPLATED UNDER SECTION 2(F) OR ANY
FINANCIAL AGENT OF SUCH BUYER.

 

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(I)                                           DISCLOSURE OF TRANSACTIONS AND
OTHER MATERIAL INFORMATION.  ON OR BEFORE 8:30 A.M., NEW YORK CITY TIME, ON THE
FIRST BUSINESS DAY FOLLOWING THE CLOSING DATE OR A TERMINATION EVENT, THE
COMPANY SHALL ISSUE A PRESS RELEASE AND FILE A CURRENT REPORT ON FORM 8-K
DESCRIBING THE TERMS OF THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION
DOCUMENTS, INCLUDING WITHOUT LIMITATION THE TERMS OF THE CLOSING OR A
TERMINATION EVENT, AS APPLICABLE, IN THE FORM REQUIRED BY THE 1934 ACT AND
ATTACHING THE MATERIAL TRANSACTION DOCUMENTS (INCLUDING, WITHOUT LIMITATION,
THIS AGREEMENT, ANY DOCUMENTS PREVIOUSLY UNFILED AS TO THE LEXICO AGREEMENT (AS
DEFINED BELOW), THE FORM OF THE NOTES AND THE FORM OF THE REGISTRATION RIGHTS
AGREEMENT AND THE FORM OF SECURITY DOCUMENTS AS EXHIBITS TO SUCH FILING)
(INCLUDING ALL ATTACHMENTS, THE “8-K FILING”).  FROM AND AFTER THE FILING OF THE
8-K FILING WITH THE SEC, NO BUYER SHALL BE IN POSSESSION OF ANY MATERIAL,
NONPUBLIC INFORMATION RECEIVED FROM THE COMPANY, ANY OF ITS SUBSIDIARIES OR ANY
OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS, THAT IS NOT
DISCLOSED IN THE 8-K FILING.  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 BUYER WITH ANY MATERIAL, NONPUBLIC INFORMATION
REGARDING THE COMPANY OR ANY OF ITS SUBSIDIARIES FROM AND AFTER THE FILING OF
THE 8-K FILING WITH THE SEC WITHOUT THE EXPRESS WRITTEN CONSENT OF SUCH BUYER. 
IF A BUYER HAS, OR BELIEVES IT HAS, RECEIVED ANY SUCH MATERIAL, NONPUBLIC
INFORMATION REGARDING THE COMPANY OR ANY OF ITS SUBSIDIARIES, IT SHALL PROVIDE
THE COMPANY WITH WRITTEN NOTICE THEREOF.  THE COMPANY SHALL, WITHIN TWO
(2) TRADING DAYS (AS DEFINED IN THE NOTES) OF RECEIPT OF SUCH NOTICE, MAKE
PUBLIC DISCLOSURE OF SUCH MATERIAL, NONPUBLIC INFORMATION.  IN THE EVENT OF A
BREACH OF THE FOREGOING COVENANT BY THE COMPANY, ANY OF ITS SUBSIDIARIES, OR ANY
OF ITS OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, IN
ADDITION TO ANY OTHER REMEDY PROVIDED HEREIN OR IN THE TRANSACTION DOCUMENTS, A
BUYER SHALL HAVE THE RIGHT TO MAKE A PUBLIC DISCLOSURE, IN THE FORM OF A PRESS
RELEASE, PUBLIC ADVERTISEMENT OR OTHERWISE, OF SUCH MATERIAL, NONPUBLIC
INFORMATION WITHOUT THE PRIOR APPROVAL BY THE COMPANY, ITS SUBSIDIARIES, OR ANY
OF ITS OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS.  NO BUYER
SHALL HAVE ANY LIABILITY TO THE COMPANY, ITS SUBSIDIARIES, OR ANY OF ITS OR
THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS OR AGENTS FOR ANY
SUCH DISCLOSURE.  SUBJECT TO THE FOREGOING, NEITHER THE COMPANY, ITS
SUBSIDIARIES NOR ANY BUYER SHALL ISSUE ANY PRESS RELEASES OR ANY OTHER PUBLIC
STATEMENTS WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY; PROVIDED,
HOWEVER, THAT THE COMPANY SHALL BE ENTITLED, WITHOUT THE PRIOR APPROVAL OF ANY
BUYER, TO MAKE ANY PRESS RELEASE OR OTHER PUBLIC DISCLOSURE WITH RESPECT TO SUCH
TRANSACTIONS (I) IN SUBSTANTIAL CONFORMITY WITH THE 8-K FILING AND
CONTEMPORANEOUSLY THEREWITH AND (II) AS IS REQUIRED BY APPLICABLE LAW AND
REGULATIONS (PROVIDED THAT IN THE CASE OF CLAUSE (I) EACH BUYER SHALL BE
CONSULTED BY THE COMPANY IN CONNECTION WITH ANY SUCH PRESS RELEASE OR OTHER
PUBLIC DISCLOSURE PRIOR TO ITS RELEASE).  WITHOUT THE PRIOR WRITTEN CONSENT OF
ANY APPLICABLE BUYER, NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES OR
AFFILIATES SHALL DISCLOSE THE NAME OF SUCH BUYER IN ANY FILING, ANNOUNCEMENT,
RELEASE OR OTHERWISE.

 

(I)                                     RESTRICTION ON REDEMPTION AND CASH
DIVIDENDS.  SO LONG AS ANY NOTES ARE OUTSTANDING, THE COMPANY SHALL NOT,
DIRECTLY OR INDIRECTLY, REDEEM, OR DECLARE OR PAY ANY CASH DIVIDEND OR
DISTRIBUTION ON, THE COMMON STOCK WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF
THE HOLDERS OF NOTES REPRESENTING NOT LESS THAN A MAJORITY OF THE AGGREGATE
PRINCIPAL AMOUNT OF THE THEN OUTSTANDING NOTES.

 

(J)                                     STOCKHOLDER APPROVAL.  THE COMPANY SHALL
PROVIDE EACH STOCKHOLDER ENTITLED TO VOTE AT A SPECIAL OR ANNUAL MEETING OF
STOCKHOLDERS OF THE COMPANY (THE “STOCKHOLDER MEETING”), WHICH INITIALLY SHALL
BE PROMPTLY CALLED AND HELD AS SOON AS PRACTICABLE, BUT NO LATER

 

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THAN MAY 30, 2008 (THE “STOCKHOLDER APPROVAL DEADLINE”), A PROXY STATEMENT,
SUBSTANTIALLY IN THE FORM WHICH HAS BEEN PREVIOUSLY REVIEWED BY THE BUYERS,
SOLICITING EACH SUCH STOCKHOLDER’S AFFIRMATIVE VOTE AT THE STOCKHOLDER MEETING
FOR APPROVAL OF RESOLUTIONS (THE “RESOLUTIONS”) PROVIDING FOR THE INCREASE IN
THE AUTHORIZED COMMON STOCK FROM 30,000,000 SHARES TO A NUMBER OF SHARES THAT IS
NOT LESS THAN 100,000,000 SHARES (SUCH AFFIRMATIVE APPROVAL BEING REFERRED TO
HEREIN AS THE “STOCKHOLDER APPROVAL” AND THE DATE SUCH APPROVAL IS OBTAINED, THE
“STOCKHOLDER APPROVAL DATE”), AND THE COMPANY SHALL CAUSE THE BOARD OF DIRECTORS
OF THE COMPANY TO RECOMMEND TO ITS STOCKHOLDERS THAT THEY APPROVE THE
RESOLUTIONS AND USE ITS BEST EFFORTS TO SOLICIT THE STOCKHOLDERS’ APPROVAL OF
THE RESOLUTIONS; PROVIDED, HOWEVER, THAT THE STOCKHOLDER APPROVAL DEADLINE SHALL
MEAN JUNE 30, 2008 IF THE SEC HAS PROVIDED WRITTEN COMMENTS TO THE PROXY
STATEMENT.  THE COMPANY SHALL BE OBLIGATED TO SEEK TO OBTAIN THE STOCKHOLDER
APPROVAL BY THE STOCKHOLDER APPROVAL DEADLINE.  IF, DESPITE THE COMPANY’S
REASONABLE BEST EFFORTS THE STOCKHOLDER APPROVAL IS NOT OBTAINED ON OR PRIOR TO
THE STOCKHOLDER APPROVAL DEADLINE, THE COMPANY SHALL CAUSE AN ADDITIONAL
STOCKHOLDER MEETING TO BE HELD EACH SIX MONTH PERIOD THEREAFTER UNTIL SUCH
STOCKHOLDER APPROVAL IS OBTAINED.

 

(K)                                  ADDITIONAL NOTES; VARIABLE SECURITIES;
DILUTIVE ISSUANCES.  SO LONG AS ANY BUYER BENEFICIALLY OWNS ANY SECURITIES, THE
COMPANY WILL NOT ISSUE ANY NOTES OTHER THAN TO THE BUYERS AS CONTEMPLATED HEREBY
AND THE COMPANY SHALL NOT ISSUE ANY OTHER SECURITIES THAT WOULD CAUSE A BREACH
OR DEFAULT UNDER THE NOTES.  FOR SO LONG AS ANY NOTES REMAIN OUTSTANDING, THE
COMPANY SHALL NOT, IN ANY MANNER, ISSUE OR SELL ANY RIGHTS, WARRANTS OR OPTIONS
TO SUBSCRIBE FOR OR PURCHASE COMMON STOCK OR DIRECTLY OR INDIRECTLY CONVERTIBLE
INTO OR EXCHANGEABLE OR EXERCISABLE FOR COMMON STOCK AT A PRICE WHICH VARIES OR
MAY VARY WITH THE MARKET PRICE OF THE COMMON STOCK, INCLUDING BY WAY OF ONE OR
MORE RESET(S) TO ANY FIXED PRICE UNLESS THE CONVERSION, EXCHANGE OR EXERCISE
PRICE OF ANY SUCH SECURITY CANNOT BE LESS THAN THE THEN APPLICABLE CONVERSION
PRICE (AS DEFINED IN THE NOTES) WITH RESPECT TO THE COMMON STOCK INTO WHICH ANY
NOTE IS CONVERTIBLE.  FOR SO LONG AS ANY NOTES REMAIN OUTSTANDING, THE COMPANY
SHALL NOT, IN ANY MANNER, ENTER INTO OR AFFECT ANY DILUTIVE ISSUANCE (AS DEFINED
IN THE NOTES) IF THE EFFECT OF SUCH DILUTIVE ISSUANCE IS TO CAUSE THE COMPANY TO
BE REQUIRED TO ISSUE UPON CONVERSION OF ANY NOTE ANY SHARES OF COMMON STOCK IN
EXCESS OF THAT NUMBER OF SHARES OF COMMON STOCK WHICH THE COMPANY MAY ISSUE UPON
CONVERSION OF THE NOTES WITHOUT BREACHING THE COMPANY’S OBLIGATIONS UNDER THE
RULES OR REGULATIONS OF THE PRINCIPAL MARKET OR ANY APPLICABLE ELIGIBLE MARKET
(AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT).

 

(L)                                     CORPORATE EXISTENCE.  SO LONG AS ANY
BUYER BENEFICIALLY OWNS ANY SECURITIES, THE COMPANY SHALL NOT BE PARTY TO ANY
FUNDAMENTAL TRANSACTION (AS DEFINED IN THE NOTES) UNLESS THE COMPANY IS IN
COMPLIANCE WITH THE APPLICABLE PROVISIONS GOVERNING FUNDAMENTAL TRANSACTIONS SET
FORTH IN THE NOTES.

 

(M)                               RESERVATION OF SHARES.  SO LONG AS ANY BUYER
OWNS ANY SECURITIES, THE COMPANY SHALL TAKE ALL ACTION NECESSARY TO RESERVE
(I) AT ALL TIMES FROM THE CLOSING DATE UNTIL THE STOCKHOLDER APPROVAL DATE, ALL
OF ITS DULY AUTHORIZED AND UNISSUED CAPITAL STOCK, TO THE EXTENT AVAILABLE AFTER
TAKING INTO ACCOUNT RESERVATION OF SHARES OF COMMON STOCK (I) UNDERLYING THE
OUTSTANDING OPTIONS SET FORTH ON SCHEDULE (M)(I) AND (II) SUBJECT TO THE COMPANY
STOCK PLANS SET FORTH ON SCHEDULE (M)(II), FOR THE ISSUANCE OF THE SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES (WITHOUT TAKING INTO ACCOUNT
ANY LIMITATIONS ON THE CONVERSION OF THE NOTES SET FORTH IN THE NOTES) (THE
“CONFIRMED AUTHORIZED CAPITAL”) AND (II) FROM AND AFTER THE

 

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STOCKHOLDER APPROVAL DATE, TO HAVE RESERVED FROM ITS DULY AUTHORIZED CAPITAL
STOCK NOT LESS THAN 130% OF THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THE NOTES (WITHOUT TAKING INTO ACCOUNT ANY
LIMITATIONS ON THE CONVERSION OF THE NOTES SET FORTH IN THE NOTES) ISSUED AT THE
CLOSING.

 

(N)                                 CONDUCT OF BUSINESS.  THE BUSINESS OF THE
COMPANY AND ITS SUBSIDIARIES SHALL NOT BE CONDUCTED IN VIOLATION OF ANY LAW,
ORDINANCE OR REGULATION OF ANY GOVERNMENTAL ENTITY, EXCEPT WHERE SUCH VIOLATIONS
WOULD NOT RESULT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, IN A MATERIAL ADVERSE
EFFECT.

 

(O)                                 ADDITIONAL ISSUANCES OF SECURITIES.

 

(I)                               FOR PURPOSES OF THIS SECTION 4(O), THE
FOLLOWING DEFINITIONS SHALL APPLY.

 

(1)                                  “CONVERTIBLE SECURITIES” MEANS ANY STOCK OR
SECURITIES (OTHER THAN OPTIONS) CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE
FOR SHARES OF COMMON STOCK.

 

(2)                                  “OPTIONS” MEANS ANY RIGHTS, WARRANTS OR
OPTIONS TO SUBSCRIBE FOR OR PURCHASE SHARES OF COMMON STOCK OR CONVERTIBLE
SECURITIES.

 

(3)                                  “COMMON STOCK EQUIVALENTS” MEANS,
COLLECTIVELY, OPTIONS AND CONVERTIBLE SECURITIES.

 

(II)                                        FROM THE CLOSING DATE UNTIL THE DATE
THIRTY (30) TRADING DAYS AFTER THE DATE WHEN ALL REGISTRABLE SECURITIES (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) HAVE BEEN REGISTERED (THE “TRIGGER
DATE”), THE COMPANY WILL NOT, DIRECTLY OR INDIRECTLY, FILE ANY REGISTRATION
STATEMENT WITH THE SEC OTHER THAN THE REGISTRATION STATEMENT (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT).  FROM THE DATE HEREOF UNTIL THE TRIGGER DATE,
THE COMPANY WILL NOT, (I) DIRECTLY OR INDIRECTLY, OFFER, SELL, GRANT ANY OPTION
TO PURCHASE, OR OTHERWISE DISPOSE OF (OR ANNOUNCE ANY OFFER, SALE, GRANT OR ANY
OPTION TO PURCHASE OR OTHER DISPOSITION OF) ANY OF ITS OR ITS SUBSIDIARIES’
EQUITY OR EQUITY EQUIVALENT SECURITIES, INCLUDING WITHOUT LIMITATION ANY DEBT,
PREFERRED STOCK OR OTHER INSTRUMENT OR SECURITY THAT IS, AT ANY TIME DURING ITS
LIFE AND UNDER ANY CIRCUMSTANCES, CONVERTIBLE INTO OR EXCHANGEABLE OR
EXERCISABLE FOR SHARES OF COMMON STOCK OR COMMON STOCK EQUIVALENTS OR (II) BE
PARTY TO ANY SOLICITATIONS, NEGOTIATIONS OR DISCUSSIONS WITH REGARD TO THE
FOREGOING.

 

(III)                                     THE RESTRICTIONS CONTAINED IN
SUBSECTION (II) OF THIS SECTION 4(O) SHALL NOT APPLY IN CONNECTION WITH THE
ISSUANCE OF ANY EXCLUDED SECURITIES (AS DEFINED IN THE NOTES).

 

(P)                                 STOCK APPROVAL DATE LISTING.  NOT MORE THAN
45 DAYS AFTER THE STOCKHOLDER APPROVAL DATE, NOT LESS THAN THE MAXIMUM NUMBER OF
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES (WITHOUT TAKING
INTO ACCOUNT ANY LIMITATIONS ON THE CONVERSION OF THE NOTES SET FORTH IN THE
NOTES) SHALL BE DESIGNATED FOR QUOTATION OR LISTED ON THE PRINCIPAL MARKET.

 

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(Q)                                 COLLATERAL AGENT.

 

(I)                                     EACH BUYER HEREBY (A) APPOINTS
INTERLACHEN AS THE COLLATERAL AGENT HEREUNDER AND UNDER THE OTHER SECURITY
DOCUMENTS (IN SUCH CAPACITY, THE “COLLATERAL AGENT”), AND (B) AUTHORIZES THE
COLLATERAL AGENT (AND ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS) TO TAKE
SUCH ACTION ON SUCH BUYER’S BEHALF IN ACCORDANCE WITH THE TERMS HEREOF AND
THEREOF.  THE COLLATERAL AGENT SHALL NOT HAVE, BY REASON HEREOF OR ANY OF THE
OTHER SECURITY DOCUMENTS, A FIDUCIARY RELATIONSHIP IN RESPECT OF ANY BUYER. 
NEITHER THE COLLATERAL AGENT NOR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS SHALL HAVE ANY LIABILITY TO ANY BUYER FOR ANY ACTION TAKEN OR OMITTED TO
BE TAKEN IN CONNECTION HEREOF OR ANY OTHER SECURITY DOCUMENT EXCEPT TO THE
EXTENT CAUSED BY ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AND EACH BUYER
AGREES TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS THE COLLATERAL AGENT AND
ALL OF ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS (COLLECTIVELY, THE
“COLLATERAL AGENT INDEMNITEES”) FROM AND AGAINST ANY LOSSES, DAMAGES,
LIABILITIES, OBLIGATIONS, PENALTIES, ACTIONS, JUDGMENTS, SUITS, FEES, COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES, COSTS AND
EXPENSES) INCURRED BY SUCH COLLATERAL AGENT INDEMNITEE, WHETHER DIRECT, INDIRECT
OR CONSEQUENTIAL, ARISING FROM OR IN CONNECTION WITH THE PERFORMANCE BY SUCH
COLLATERAL AGENT INDEMNITEE OF THE DUTIES AND OBLIGATIONS OF COLLATERAL AGENT
PURSUANT HERETO OR ANY OF THE SECURITY DOCUMENTS.  THE COLLATERAL AGENT SHALL
NOT BE REQUIRED TO EXERCISE ANY DISCRETION OR TAKE ANY ACTION, BUT SHALL BE
REQUIRED TO ACT OR TO REFRAIN FROM ACTING (AND SHALL BE FULLY PROTECTED IN SO
ACTING OR REFRAINING FROM ACTING) UPON THE INSTRUCTIONS OF THE HOLDERS OF AT
LEAST A MAJORITY IN PRINCIPAL AMOUNT OF THE FOLLOW-ON OR TERMINATION NOTES, AS
APPLICABLE, THEN OUTSTANDING, AND SUCH INSTRUCTIONS SHALL BE BINDING UPON ALL
HOLDERS OF SUCH NOTES; PROVIDED, HOWEVER, THAT THE COLLATERAL AGENT SHALL NOT BE
REQUIRED TO TAKE ANY ACTION WHICH, IN THE REASONABLE OPINION OF THE COLLAERAL
AGENT, EXPOSES THE COLLATERAL AGENT TO LIABILITY OR WHICH IS CONTRARY TO THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR APPLICABLE LAW.

 

(II)                                  THE COLLATERAL AGENT SHALL BE ENTITLED TO
RELY UPON ANY WRITTEN NOTICES, STATEMENTS, CERTIFICATES, ORDERS OR OTHER
DOCUMENTS OR ANY TELEPHONE MESSAGE BELIEVED BY IT IN GOOD FAITH TO BE GENUINE
AND CORRECT AND TO HAVE BEEN SIGNED, SENT OR MADE BY THE PROPER PERSON, AND WITH
RESPECT TO ALL MATTERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS AND ITS DUTIES HEREUNDER OR THEREUNDER, UPON ADVICE OF
COUNSEL SELECTED BY IT.

 

(III)                               THE COLLATERAL AGENT MAY RESIGN FROM THE
PERFORMANCE OF ALL ITS FUNCTIONS AND DUTIES HEREUNDER AND UNDER THE NOTES AND
THE SECURITY DOCUMENTS AT ANY TIME BY GIVING AT LEAST TEN (10) BUSINESS DAYS
PRIOR WRITTEN NOTICE TO THE COMPANY AND EACH HOLDER OF THE NOTES.  SUCH
RESIGNATION SHALL TAKE EFFECT UPON THE ACCEPTANCE BY A SUCCESSOR COLLATERAL
AGENT OF APPOINTMENT AS PROVIDED BELOW.  UPON ANY SUCH NOTICE OF RESIGNATION,
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING PRINCIPAL UNDER THE FOLLOW-ON OR
TERMINATION NOTES, AS APPLICABLE, SHALL APPOINT A SUCCESSOR COLLATERAL AGENT. 
UPON THE ACCEPTANCE OF THE APPOINTMENT AS COLLATERAL AGENT, SUCH SUCCESSOR
COLLATERAL AGENT SHALL SUCCEED TO AND BECOME VESTED WITH ALL THE RIGHTS, POWERS,
PRIVILEGES AND DUTIES OF THE RETIRING COLLATERAL AGENT, AND THE RETIRING
COLLATERAL AGENT SHALL BE DISCHARGED FROM ITS DUTIES AND OBLIGATIONS UNDER THIS
AGREEMENT, THE NOTES AND THE OTHER SECURITY DOCUMENTS.  AFTER ANY COLLATERAL
AGENT’S RESIGNATION HEREUNDER , THE PROVISIONS OF THIS SECTION 4(Q) SHALL INURE
TO ITS BENEFIT.  IF A SUCCESSOR COLLATERAL AGENT SHALL NOT HAVE BEEN SO
APPOINTED WITHIN SAID TEN (10) BUSINESS DAY PERIOD, THE RETIRING COLLATERAL
AGENT SHALL THEN

 

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APPOINT A SUCCESSOR COLLATERAL AGENT WHO SHALL SERVE UNTIL SUCH TIME, IF ANY, AS
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING PRINCIPAL UNDER THE FOLLOW-ON OR
TERMINATION NOTES, AS APPLICABLE, APPOINT A SUCCESSOR COLLATERAL AGENT AS
PROVIDED ABOVE.

 

5.                                       REGISTER; TRANSFER AGENT INSTRUCTIONS.

 

(A)                                  REGISTER.  THE COMPANY SHALL MAINTAIN AT
ITS PRINCIPAL EXECUTIVE OFFICES (OR SUCH OTHER OFFICE OR AGENCY OF THE COMPANY
AS IT MAY DESIGNATE BY NOTICE TO EACH HOLDER OF SECURITIES), A REGISTER FOR THE
NOTES IN WHICH THE COMPANY SHALL RECORD THE NAME AND ADDRESS OF THE PERSON IN
WHOSE NAME THE NOTES HAVE BEEN ISSUED (INCLUDING THE NAME AND ADDRESS OF EACH
TRANSFEREE), THE PRINCIPAL AMOUNT OF NOTES HELD BY SUCH PERSON AND THE NUMBER OF
CONVERSION SHARES ISSUABLE UPON CONVERSION OF THE NOTES.  THE COMPANY SHALL KEEP
THE REGISTER OPEN AND AVAILABLE AT ALL TIMES DURING BUSINESS HOURS FOR
INSPECTION OF ANY BUYER OR ITS LEGAL REPRESENTATIVES.

 

(B)                                 TRANSFER AGENT INSTRUCTIONS.  THE COMPANY
SHALL ISSUE IRREVOCABLE INSTRUCTIONS TO ITS TRANSFER AGENT, AND ANY SUBSEQUENT
TRANSFER AGENT, TO ISSUE CERTIFICATES OR CREDIT SHARES TO THE APPLICABLE BALANCE
ACCOUNTS AT THE DEPOSITORY TRUST COMPANY (“DTC”), REGISTERED IN THE NAME OF EACH
BUYER OR ITS RESPECTIVE NOMINEE(S), FOR THE CONVERSION SHARES ISSUED AT THE
CLOSING OR UPON CONVERSION OF THE NOTES IN SUCH AMOUNTS AS SPECIFIED IN SUCH
AMOUNTS AS SPECIFIED FROM TIME TO TIME BY EACH BUYER TO THE COMPANY UPON
CONVERSION OF THE NOTES IN THE FORM OF EXHIBIT E (THE “IRREVOCABLE TRANSFER
AGENT INSTRUCTIONS”).  THE COMPANY WARRANTS THAT NO INSTRUCTION OTHER THAN THE
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS REFERRED TO IN THIS SECTION 5(B), AND
STOP TRANSFER INSTRUCTIONS TO GIVE EFFECT TO SECTION 2(G) HEREOF, WILL BE GIVEN
BY THE COMPANY TO ITS TRANSFER AGENT, AND THAT THE SECURITIES SHALL OTHERWISE BE
FREELY TRANSFERABLE ON THE BOOKS AND RECORDS OF THE COMPANY AS AND TO THE EXTENT
PROVIDED IN THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.  IF A BUYER
EFFECTS A SALE, ASSIGNMENT OR TRANSFER OF THE SECURITIES IN ACCORDANCE WITH
SECTION 2(F), THE COMPANY SHALL PERMIT THE TRANSFER AND SHALL PROMPTLY INSTRUCT
ITS TRANSFER AGENT TO ISSUE ONE OR MORE CERTIFICATES OR CREDIT SHARES TO THE
APPLICABLE BALANCE ACCOUNTS AT DTC IN SUCH NAME AND IN SUCH DENOMINATIONS AS
SPECIFIED BY SUCH BUYER TO EFFECT SUCH SALE, TRANSFER OR ASSIGNMENT.  IN THE
EVENT THAT SUCH SALE, ASSIGNMENT OR TRANSFER INVOLVES CONVERSION SHARES SOLD,
ASSIGNED OR TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
PURSUANT TO RULE 144, THE TRANSFER AGENT SHALL ISSUE SUCH SECURITIES TO THE
BUYER, ASSIGNEE OR TRANSFEREE, AS THE CASE MAY BE, WITHOUT ANY RESTRICTIVE
LEGEND.  THE COMPANY ACKNOWLEDGES THAT A BREACH BY IT OF ITS OBLIGATIONS
HEREUNDER WILL CAUSE IRREPARABLE HARM TO A BUYER.  ACCORDINGLY, THE COMPANY
ACKNOWLEDGES THAT THE REMEDY AT LAW FOR A BREACH OF ITS OBLIGATIONS UNDER THIS
SECTION 5(B) WILL BE INADEQUATE AND AGREES, IN THE EVENT OF A BREACH OR
THREATENED BREACH BY THE COMPANY OF THE PROVISIONS OF THIS SECTION 5(B), THAT A
BUYER SHALL BE ENTITLED, IN ADDITION TO ALL OTHER AVAILABLE REMEDIES, TO AN
ORDER AND/OR INJUNCTION RESTRAINING ANY BREACH AND REQUIRING IMMEDIATE ISSUANCE
AND TRANSFER, WITHOUT THE NECESSITY OF SHOWING ECONOMIC LOSS AND WITHOUT ANY
BOND OR OTHER SECURITY BEING REQUIRED.

 

6.                                       CLOSING CONDITIONS OF THE COMPANY.

 

The obligation of the Company hereunder to issue and sell the Notes to each
Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Company’s sole benefit and may

 

--------------------------------------------------------------------------------

 

be waived by the Company at any time in its sole discretion by providing each
Buyer with prior written notice thereof:

 

(I)                                           SUCH BUYER SHALL HAVE EXECUTED
EACH OF THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY AND DELIVERED THE SAME
TO THE COMPANY.

 

(II)                                        SUCH BUYER AND EACH OTHER BUYER
SHALL HAVE DELIVERED TO THE COMPANY THE PURCHASE PRICE (LESS, IN THE CASE OF
INTERLACHEN, THE AMOUNTS WITHHELD PURSUANT TO SECTION 4(G)) FOR THE NOTES BEING
PURCHASED BY SUCH BUYER AT THE CLOSING BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE
FUNDS PURSUANT TO THE WIRE INSTRUCTIONS PROVIDED BY THE COMPANY.

 

(III)                                     THE REPRESENTATIONS AND WARRANTIES OF
SUCH BUYER SHALL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AS OF THE DATE
WHEN MADE AND AS OF THE CLOSING DATE AS THOUGH MADE AT THAT TIME (EXCEPT FOR
REPRESENTATIONS AND WARRANTIES THAT SPEAK AS OF A SPECIFIC DATE), AND SUCH BUYER
SHALL HAVE PERFORMED, SATISFIED AND COMPLIED IN ALL MATERIAL RESPECTS WITH THE
COVENANTS, AGREEMENTS AND CONDITIONS REQUIRED BY THIS AGREEMENT TO BE PERFORMED,
SATISFIED OR COMPLIED WITH BY SUCH BUYER AT OR PRIOR TO THE CLOSING DATE.

 

7.                                       CLOSING CONDITIONS OF THE BUYERS.

 

The obligations of each Buyer under this Agreement are subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer’s sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:

 

(I)                                           THE COMPANY SHALL HAVE DULY
EXECUTED AND DELIVERED TO SUCH BUYER (A) EACH OF THE TRANSACTION DOCUMENTS AND
(B) THE NOTES (IN SUCH PRINCIPAL AMOUNTS AS SUCH BUYER SHALL REQUEST IN AN
AGGREGATE AMOUNT UP TO $8,500,000) BEING ISSUED TO SUCH BUYER AT THE CLOSING
PURSUANT TO THIS AGREEMENT AND EACH OF THE TRANSACTION DOCUMENTS AND THE NOTES
SHALL CONTINUE TO BE IN FULL FORCE AND EFFECT.

 

(II)                                        SUCH BUYER SHALL HAVE RECEIVED THE
OPINION OF SICHENZIA ROSS FRIEDMAN FERENCE LLP, THE COMPANY’S OUTSIDE COUNSEL,
SATISFACTORY TO SUCH BUYER IN ITS DISCRETION, DATED AS OF THE CLOSING DATE.

 

(III)                                     THE COMPANY SHALL HAVE DELIVERED TO
SUCH BUYER A COPY OF THE IRREVOCABLE TRANSFER AGENT INSTRUCTIONS, IN THE FORM OF
EXHIBIT E ATTACHED HERETO, WHICH INSTRUCTIONS SHALL HAVE BEEN DELIVERED TO AND
ACKNOWLEDGED IN WRITING BY THE COMPANY’S TRANSFER AGENT.

 

(IV)                                    THE COMPANY SHALL HAVE DELIVERED TO SUCH
BUYER A CERTIFICATE EVIDENCING THE FORMATION AND GOOD STANDING OF THE COMPANY
AND EACH OF ITS SUBSIDIARIES IN SUCH ENTITY’S JURISDICTION OF FORMATION ISSUED
BY THE SECRETARY OF STATE (OR COMPARABLE OFFICE) OF SUCH JURISDICTION, AS OF A
DATE WITHIN 10 DAYS OF THE CLOSING DATE.

 

(V)                                       THE COMPANY SHALL HAVE DELIVERED TO
SUCH BUYER A CERTIFICATE EVIDENCING THE COMPANY’S QUALIFICATION AS A FOREIGN
CORPORATION AND GOOD STANDING ISSUED BY THE SECRETARY OF STATE (OR COMPARABLE
OFFICE) OF EACH JURISDICTION IN WHICH THE COMPANY CONDUCTS

 

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BUSINESS AND WHERE THE FAILURE TO BE SO QUALIFIED OR BE IN GOOD STANDING,
INDIVIDUALLY OR IN THE AGGREGATE, WOULD HAVE A MATERIAL ADVERSE EFFECT, AS OF A
DATE WITHIN 10 DAYS OF THE CLOSING DATE.

 

(VI)                                    THE COMPANY SHALL HAVE DELIVERED TO SUCH
BUYER A CERTIFIED COPY OF THE CERTIFICATE OF INCORPORATION AS CERTIFIED BY THE
SECRETARY OF STATE OF THE STATE (OR COMPARABLE OFFICE OF) DELAWARE WITHIN TEN
(10) DAYS OF THE CLOSING DATE.

 

(VII)                                 THE COMPANY SHALL HAVE DELIVERED TO SUCH
BUYER A CERTIFICATE, EXECUTED BY THE SECRETARY OF THE COMPANY AND DATED AS OF
THE CLOSING DATE, AS TO (I) THE RESOLUTIONS CONSISTENT WITH SECTION 3(B) AS
ADOPTED BY THE COMPANY’S BOARD OF DIRECTORS IN A FORM REASONABLY ACCEPTABLE TO
SUCH BUYER, (II) THE CERTIFICATE OF INCORPORATION AND (III) THE BYLAWS, EACH AS
IN EFFECT AT THE CLOSING, IN THE FORM ATTACHED HERETO AS EXHIBIT F.

 

(VIII)                              THE REPRESENTATIONS AND WARRANTIES OF THE
COMPANY SHALL BE TRUE AND CORRECT AS OF THE DATE WHEN MADE AND AS OF THE CLOSING
DATE AS THOUGH MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND WARRANTIES THAT
SPEAK AS OF A SPECIFIC DATE) AND THE COMPANY SHALL HAVE PERFORMED, SATISFIED AND
COMPLIED IN ALL RESPECTS WITH THE COVENANTS, AGREEMENTS AND CONDITIONS REQUIRED
BY THE TRANSACTION DOCUMENTS TO BE PERFORMED, SATISFIED OR COMPLIED WITH BY THE
COMPANY AT OR PRIOR TO THE CLOSING DATE.  SUCH BUYER SHALL HAVE RECEIVED A
CERTIFICATE, EXECUTED BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY, DATED AS OF
THE CLOSING DATE, TO THE FOREGOING EFFECT AND AS TO SUCH OTHER MATTERS AS MAY BE
REASONABLY REQUESTED BY SUCH BUYER IN THE FORM ATTACHED HERETO AS EXHIBIT G.

 

(IX)                                      WITH RESPECT TO THE FOLLOW-ON ISSUANCE
ONLY, THE COMPANY SHALL HAVE RAISED FUNDS IN AN UNDERWRITTEN OFFERING OF COMMON
STOCK (THE “FOLLOW-ON OFFERING”) (COMBINED WITH THE FUNDS RAISED IN CONNECTION
WITH THE ISSUANCE OF THE FOLLOW-ON NOTES HEREUNDER) SUFFICIENT TO FINANCE THE
CLOSING OF THE ACQUISITION OF LEXICO (THE “LEXICO CLOSING”) ON TERMS AND
CONDITIONS ACCEPTABLE TO SUCH BUYER.

 

(X)                                         WITH RESPECT TO THE FOLLOW-ON
ISSUANCE ONLY, THE LEXICO CLOSING SHALL HAVE BEEN CONSUMMATED BEFORE OR
CONCURRENTLY WITH THE CLOSING ON THE TERMS AND CONDITIONS CONTAINED IN THAT
CERTAIN AMENDED AND RESTATED PURCHASE AGREEMENT, ENTERED INTO ON OR ABOUT THE
DATE HEREOF, BY AND AMONG THE PERSONS LISTED ON SCHEDULE A ATTACHED THERETO,
LEXICO, THE COMPANY, AND BRIAN KARIGER, AS THE SELLERS’ REPRESENTATIVE, AS
AMENDED (THE “LEXICO AGREEMENT”), AND THE LEXICO AGREEMENT SHALL NOT HAVE BEEN
AMENDED OR WAIVED IN ANY MANNER THAT IS MATERIALLY ADVERSE TO THE COMPANY OR THE
BUYER IN THE REASONABLE JUDGMENT OF THE BUYER.

 

(XI)                                      THE COMPANY SHALL HAVE DELIVERED
UPDATED SCHEDULE 3(R) AND SCHEDULE 3(S) AS OF THE CLOSING.

 

(XII)                                   THE COMPANY SHALL HAVE DELIVERED TO SUCH
BUYER A LETTER FROM THE COMPANY’S TRANSFER AGENT CERTIFYING THE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING AS OF A DATE WITHIN FIVE DAYS OF THE CLOSING DATE.

 

(XIII)                                THE DULY AUTHORIZED AND UNISSUED CAPITAL
STOCK OF THE COMPANY THAT SHALL BE RESERVED FROM THE CLOSING DATE FOR THE
ISSUANCE OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES (WITHOUT TAKING
INTO ACCOUNT ANY LIMITATIONS ON THE CONVERSION OF THE NOTES SET FORTH IN THE
NOTES) TO THE EXTENT AVAILABLE AFTER TAKING INTO ACCOUNT RESERVATION OF SHARES

 

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OF COMMON STOCK (I) UNDERLYING THE OUTSTANDING OPTIONS SET FORTH ON SCHEDULE
4(M)(I) AND (II) SUBJECT TO THE COMPANY STOCK PLANS SET FORTH ON SCHEDULE
4(M)(II), SHALL AS OF THE CLOSING DATE (A) BE DESIGNATED FOR QUOTATION OR LISTED
ON THE PRINCIPAL MARKET AND (B) SHALL NOT HAVE BEEN SUSPENDED BY THE SEC OR THE
PRINCIPAL MARKET FROM TRADING ON THE PRINCIPAL MARKET NOR SHALL SUSPENSION BY
THE SEC OR THE PRINCIPAL MARKET HAVE BEEN THREATENED, AS OF THE CLOSING DATE,
EITHER (A) IN WRITING BY THE SEC OR THE PRINCIPAL MARKET OR (B) BY FALLING BELOW
THE MINIMUM LISTING MAINTENANCE REQUIREMENTS OF THE PRINCIPAL MARKET.

 

(XIV)                               THE COMPANY SHALL HAVE OBTAINED ALL
GOVERNMENTAL, REGULATORY OR THIRD PARTY CONSENTS AND APPROVALS, IF ANY,
NECESSARY FOR THE SALE OF THE SECURITIES.

 

(XV)                                  THE COMPANY SHALL HAVE DELIVERED TO SUCH
BUYER SUCH OTHER DOCUMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AS SUCH BUYER OR ITS COUNSEL MAY REASONABLY REQUEST.

 

(XVI)                               THE COMPANY SHALL HAVE DELIVERED TO SUCH
BUYER, UPON ITS REQUEST, SUCH DOCUMENTS SATISFACTORY FOR USE IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT.

 

(XVII)                            THE COMPANY SHALL HAVE PROVIDED UPDATED
VERSIONS OF EACH COMPANY SCHEDULE TO THIS AGREEMENT, WHICH UPDATED COMPANY
SCHEDULES SHALL INCLUDE ALL OF THE INFORMATION REQUIRED TO BE SET FORTH THEREIN
WITH RESPECT TO THE COMPANY AFTER GIVING EFFECT TO THE LEXICO CLOSING, SHALL BE
ACCURATE AS OF THE CLOSING AND SHALL BE SATISFACTORY TO THE BUYERS.

 

(XVIII)                         THE BUYERS SHALL HAVE BEEN GRANTED A FIRST
PRIORITY PERFECTED SECURITY INTEREST IN ANY PROPERTY OR OTHER ASSETS IN WHICH A
SECURITY INTEREST HAS BEEN (OR WILL BE) GRANTED TO SECURE ANY LEXICO
INDEBTEDNESS, AND THE BUYERS SHALL HAVE RECEIVED SUCH SECURITY AGREEMENTS,
ASSIGNMENTS AND OTHER DOCUMENTS, AND THE COMPANY SHALL HAVE MADE SUCH FILINGS
AND TAKEN SUCH OTHER ACTIONS, SATISFACTORY TO SUCH BUYER TO CREATE AND PERFECT
SUCH SECURITY INTEREST AND SUCH SUBORDINATION AGREEMENT IN THE FORM ATTACHED
HERETO AS EXHIBIT H (THE “SUBORDINATION AGREEMENT”).

 

(XIX)                           IN ACCORDANCE WITH THE TERMS OF THE SECURITY
DOCUMENTS, THE COMPANY SHALL HAVE DELIVERED TO THE COLLATERAL AGENT
(I) CERTIFICATES REPRESENTING THE SUBSIDIARIES’ SHARES OF CAPITAL STOCK TO THE
EXTENT SUCH SUBSIDIARY IS A CORPORATION OR OTHERWISE HAS CERTIFICATED CAPITAL
STOCK, ALONG WITH DULY EXECUTED BLANK STOCK POWERS AND (II) APPROPRIATE
FINANCING STATEMENTS ON FORM UCC-1 TO BE DULY FILED IN SUCH OFFICE OR OFFICES AS
MAY BE NECESSARY OR, IN THE OPINION OF THE COLLATERAL AGENT, DESIRABLE TO
PERFECT THE SECURITY INTERESTS PURPORTED TO BE CREATED BY EACH SECURITY
DOCUMENT.

 

(XX)                              WITHIN TWO (2) BUSINESS DAYS PRIOR TO THE
CLOSING, THE COMPANY SHALL HAVE DELIVERED OR CAUSED TO BE DELIVERED TO EACH
BUYER (I) TRUE COPIES OF UCC SEARCH RESULTS, LISTING ALL EFFECTIVE FINANCING
STATEMENTS WHICH NAME AS DEBTOR THE COMPANY OR ANY OF ITS SUBSIDIARIES FILED IN
THE PRIOR FIVE YEARS TO PERFECT AN INTEREST IN ANY ASSETS THEREOF, TOGETHER WITH
COPIES OF SUCH FINANCING STATEMENTS, NONE OF WHICH, EXCEPT AS OTHERWISE AGREED
IN WRITING BY THE BUYERS, SHALL COVER ANY OF THE COLLATERAL (AS DEFINED IN THE
SECURITY DOCUMENTS) AND THE RESULTS OF SEARCHES FOR ANY TAX LIEN AND JUDGMENT
LIEN FILED AGAINST SUCH PERSON OR ITS PROPERTY, WHICH

 

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RESULTS, EXCEPT AS OTHERWISE AGREED TO IN WRITING BY THE BUYERS SHALL NOT SHOW
ANY SUCH LIENS (AS DEFINED IN THE SECURITY DOCUMENTS); AND (II) A PERFECTION
CERTIFICATE, DULY COMPLETED AND EXECUTED BY THE COMPANY AND EACH OF ITS
SUBSIDIARIES, IN FORM AND SUBSTANCE SATISFACTORY TO THE BUYERS.

 

(XXI)                                 THE COMPANY SHALL HAVE EXECUTED AND
DELIVERED TO THE COLLATERAL AGENT MORTGAGE OR OTHER REQUIRED DOCUMENTATION
REASONABLY SATISFACTORY TO THE COLLATERAL AGENT.

 

(XXII)                              EACH OF THE SELLER PARTIES TO THE LEXICO
ACQUISITION SHALL HAVE EXECUTED THE SUBORDINATION AGREEMENT.

 

(XXIII)                           THE COMPANY AND EACH OF THE SELLER PARTIES TO
THE LEXICO ACQUISITION SHALL HAVE EXECUTED THE PLEDGE AND SECURITY AGREEMENT IN
THE FORM ATTACHED HERETO AS EXHIBIT I (THE “LEXICO PLEDGE AND SECURITY
AGREEMENT”).

 

(XXIV)                          THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER
SUCH OTHER USUAL AND CUSTOMARY DOCUMENTS, INSTRUMENTS AND CERTIFICATES AS SUCH
BUYER MAY REASONABLY REQUEST.

 

8.                                       TERMINATION.

 

(a)                                  In the event that (i) the transactions
contemplated by the Lexico Agreement have been terminated, (ii) the Company has
terminated this Agreement pursuant to Section 8(b), (iii) the Closing has not
occurred on or before March 1, 2008 (other than as a result of Buyer’s material
breach of this Agreement) (any of the foregoing in (i)-(iii), a “Notes
Termination Event”), or (iv) the transactions contemplated by the Lexico
Agreement have been consummated but the Closing of the issuance of the Follow-On
Notes to the Buyers has not occurred in connection with therewith (a “Cash
Termination Event,” with any Notes Termination Event or any Cash Termination
Event being a “Termination Event”), each Buyer shall be entitled to a
Termination Fee from the Company.  With respect to each Buyer, the “Termination
Fee” means (i) in the event of a Notes Termination Event, the Termination Notes,
which shall be substantially in the form of the Follow-On Notes and which shall
be in an initial principal amount equal to 5% of the principal amount of the
Follow-On Notes that were to be issued to such Buyer, as is set forth opposite
such Buyer’s name in Column (4) on the Schedule of Buyers (the “Notes
Termination Fee”), and which shall be issued to such Buyer without any
obligation on the part of such Buyer to pay for such Termination Notes, and
(ii) in the event of a Cash Termination Event, a cash amount equal to 4.3% of
the principal amount of the Follow-On Notes that were to be issued to such Buyer
as is set forth opposite such Buyer’s name in Column (3) on the Schedule of
Buyers (the “Cash Termination Fee” and the Notes Termination Fee, each, a
“Termination Fee”).  Any Cash Termination Fee shall be paid no later than two
(2) Business Days after the Termination Event giving rise to such Cash
Termination Fee.  The Termination Notes issued in connection with any Notes
Termination Fee shall be issued at a Closing occurring no later than two
(2) Business Days after the completion of any measurement period for purposes of
determining the conversion price of such Termination Notes, which conversion
price shall be determined as set forth in the Notes.

 

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(B)                                 EACH BUYER SHALL HAVE THE RIGHT TO TERMINATE
THIS AGREEMENT AFTER THE OCCURRENCE OF A TERMINATION EVENT, AND THE COMPANY
SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT AT ANY TIME (WHETHER BEFORE OR
AFTER A TERMINATION EVENT); PROVIDED, HOWEVER, THAT IN THE EVENT OF ANY
TERMINATION OF THIS AGREEMENT (WHETHER BY ANY BUYER OR THE COMPANY) FOR ANY
REASON, THE COMPANY SHALL REMAIN OBLIGATED TO PAY TO THE BUYERS THE APPLICABLE
TERMINATION FEE PURSUANT TO SECTION 8(A) AND TO REIMBURSE THE BUYERS FOR THE
EXPENSES DESCRIBED IN SECTION 4(G).

 

9.                                       MISCELLANEOUS.

 

(A)                                  GOVERNING LAW; JURISDICTION; JURY TRIAL. 
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW
PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTIONS)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTIONS OTHER THAN THE
STATE OF NEW YORK.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE OF 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 TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER
THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF.  NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. 
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

(B)                                 COUNTERPARTS.  THIS AGREEMENT MAY BE
EXECUTED IN TWO OR MORE IDENTICAL COUNTERPARTS, ALL OF WHICH 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; PROVIDED THAT A
FACSIMILE SIGNATURE SHALL BE CONSIDERED DUE EXECUTION AND SHALL BE BINDING UPON
THE SIGNATORY THERETO WITH THE SAME FORCE AND EFFECT AS IF THE SIGNATURE WERE AN
ORIGINAL, NOT A FACSIMILE SIGNATURE.

 

(C)                                  HEADINGS.  THE HEADINGS OF THIS AGREEMENT
ARE FOR CONVENIENCE OF REFERENCE AND SHALL NOT FORM PART OF, OR AFFECT THE
INTERPRETATION OF, THIS AGREEMENT.

 

(D)                                 SEVERABILITY.  IF ANY PROVISION OF THIS
AGREEMENT SHALL BE INVALID OR UNENFORCEABLE IN ANY JURISDICTION, SUCH INVALIDITY
OR UNENFORCEABILITY SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF THE
REMAINDER OF THIS AGREEMENT IN THAT JURISDICTION OR THE VALIDITY OR
ENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT IN ANY OTHER JURISDICTION.

 

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(E)                                  ENTIRE AGREEMENT; AMENDMENTS.  THIS
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS SUPERSEDE ALL OTHER PRIOR ORAL OR
WRITTEN AGREEMENTS BETWEEN THE BUYERS, THE COMPANY, THEIR AFFILIATES AND PERSONS
ACTING ON THEIR BEHALF WITH RESPECT TO THE MATTERS DISCUSSED HEREIN, AND THIS
AGREEMENT, THE OTHER TRANSACTION DOCUMENTS AND THE INSTRUMENTS REFERENCED HEREIN
AND THEREIN CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE
MATTERS COVERED HEREIN AND THEREIN AND, EXCEPT AS SPECIFICALLY SET FORTH HEREIN
OR THEREIN, NEITHER THE COMPANY NOR ANY BUYER MAKES ANY REPRESENTATION,
WARRANTY, COVENANT OR UNDERTAKING WITH RESPECT TO SUCH MATTERS.  NO PROVISION OF
THIS AGREEMENT MAY BE AMENDED OTHER THAN BY AN INSTRUMENT IN WRITING SIGNED BY
THE COMPANY AND THE HOLDERS OF AT LEAST A MAJORITY OF THE AGGREGATE NUMBER OF
REGISTRABLE SECURITIES ISSUED AND ISSUABLE HEREUNDER AND UNDER THE NOTES, AND
ANY AMENDMENT TO THIS AGREEMENT MADE IN CONFORMITY WITH THE PROVISIONS OF THIS
SECTION 9(E) SHALL BE BINDING ON ALL BUYERS AND HOLDERS OF SECURITIES, AS
APPLICABLE.  NO PROVISION HEREOF MAY BE WAIVED OTHER THAN BY AN INSTRUMENT IN
WRITING SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT IS SOUGHT.  NO SUCH
AMENDMENT SHALL BE EFFECTIVE TO THE EXTENT THAT IT APPLIES TO LESS THAN ALL OF
THE HOLDERS OF THE APPLICABLE SECURITIES THEN OUTSTANDING.  NO CONSIDERATION
SHALL BE OFFERED OR PAID TO ANY PERSON TO AMEND OR CONSENT TO A WAIVER OR
MODIFICATION OF ANY PROVISION OF ANY OF THE TRANSACTION DOCUMENTS UNLESS THE
SAME CONSIDERATION ALSO IS OFFERED TO ALL OF THE PARTIES TO THE TRANSACTION
DOCUMENTS OR HOLDERS OF NOTES, AS THE CASE MAY BE.  THE COMPANY HAS NOT,
DIRECTLY OR INDIRECTLY, MADE ANY AGREEMENTS WITH ANY BUYERS RELATING TO THE
TERMS OR CONDITIONS OF THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION
DOCUMENTS EXCEPT AS SET FORTH IN THE TRANSACTION DOCUMENTS.  WITHOUT LIMITING
THE FOREGOING, THE COMPANY CONFIRMS THAT, EXCEPT AS SET FORTH IN THIS AGREEMENT,
NO BUYER HAS MADE ANY COMMITMENT OR PROMISE OR HAS ANY OTHER OBLIGATION TO
PROVIDE ANY FINANCING TO THE COMPANY OR OTHERWISE.

 

(F)                                    NOTICES.  ANY NOTICES, CONSENTS, WAIVERS
OR OTHER COMMUNICATIONS REQUIRED OR PERMITTED TO BE GIVEN UNDER THE TERMS OF
THIS AGREEMENT MUST BE IN WRITING AND WILL BE DEEMED TO HAVE BEEN DELIVERED: 
(I) UPON RECEIPT, WHEN DELIVERED PERSONALLY; (II) UPON RECEIPT, WHEN SENT BY
FACSIMILE (PROVIDED CONFIRMATION OF TRANSMISSION IS MECHANICALLY OR
ELECTRONICALLY GENERATED AND KEPT ON FILE BY THE SENDING PARTY); OR (III) ONE
BUSINESS DAY AFTER DEPOSIT WITH AN OVERNIGHT COURIER SERVICE, IN EACH CASE
PROPERLY ADDRESSED TO THE PARTY TO RECEIVE THE SAME.  THE ADDRESSES AND
FACSIMILE NUMBERS FOR SUCH COMMUNICATIONS SHALL BE:

 

 

If to the Company:

 

 

 

 

 

Answers Corporation

 

237 West 35th Street, Suite 1101

 

New York, NY 10001

 

Telephone:

(646) (502-4777)

 

Facsimile:

(646) (304-1826)

 

Attention:

Caleb A Chill, General Counsel

 

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With a copy to:

 

 

 

 

 

Sichenzia Ross Friedman Ference LLP

 

61 Broadway, 32nd Floor

 

New York, NY 10006

 

Telephone:

(212) (930-9700)

 

Facsimile:

(212) (930-9725)

 

Attention:

Jeffrey J. Fessler, Esq.

 

 

If to the Transfer Agent:

 

 

 

 

American Stock Transfer & Trust company

 

6201 15th Avenue

 

Brooklyn, NY 11219

 

Telephone:

(718) 921-8261

 

Facsimile:

(718) 921-8337

 

Attention:

Donna Ansbro

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the Schedule
of Buyers,

 

 

with a copy (for informational purposes only) to:

 

 

 

 

Schulte Roth & Zabel LLP

 

919 Third Avenue

 

New York, New York  10022

 

Telephone:

(212) 756-2000

 

Facsimile:

(212) 593-5955

 

Attention:

Eleazer N. Klein, Esq.

 

or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change. 
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or
(C) provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

 

(G)                                 SUCCESSORS AND ASSIGNS.  THIS AGREEMENT
SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS, INCLUDING ANY PURCHASERS OF THE NOTES.  THE
COMPANY SHALL NOT ASSIGN THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER
WITHOUT THE PRIOR WRITTEN CONSENT OF EACH OF THE HOLDERS OF REGISTRABLE
SECURITIES ISSUED AND ISSUABLE HEREUNDER, INCLUDING BY WAY OF A FUNDAMENTAL
TRANSACTION (UNLESS THE COMPANY IS IN COMPLIANCE WITH THE APPLICABLE PROVISIONS
GOVERNING FUNDAMENTAL TRANSACTIONS SET FORTH IN THE NOTES).  A BUYER MAY ASSIGN
SOME OR ALL OF ITS RIGHTS HEREUNDER TO ANY ACCREDITED

 

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INVESTOR WITH THE CONSENT OF THE COMPANY, SUCH CONSENT NOT TO BE UNREASONABLY
WITHHELD OR DELAYED.

 

(H)                                 NO THIRD PARTY BENEFICIARIES.  THIS
AGREEMENT IS INTENDED FOR THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE
PERMITTED SUCCESSORS AND ASSIGNS, AND IS NOT FOR THE BENEFIT OF, NOR MAY ANY
PROVISION HEREOF BE ENFORCED BY, ANY OTHER PERSON.

 

(I)                                     SURVIVAL.  UNLESS THIS AGREEMENT IS
TERMINATED UNDER SECTION 8, THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE BUYERS CONTAINED IN SECTIONS 2 AND 3, AND THE AGREEMENTS AND COVENANTS
SET FORTH IN SECTIONS 4, 5 AND 9 SHALL SURVIVE THE CLOSING.  EACH BUYER SHALL BE
RESPONSIBLE ONLY FOR ITS OWN REPRESENTATIONS, WARRANTIES, AGREEMENTS AND
COVENANTS HEREUNDER.

 

(J)                                     FURTHER ASSURANCES.  EACH PARTY SHALL DO
AND PERFORM, OR CAUSE TO BE DONE AND PERFORMED, ALL SUCH FURTHER ACTS AND
THINGS, AND SHALL EXECUTE AND DELIVER ALL SUCH OTHER AGREEMENTS, CERTIFICATES,
INSTRUMENTS AND DOCUMENTS, AS ANY OTHER PARTY MAY REASONABLY REQUEST IN ORDER TO
CARRY OUT THE INTENT AND ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(K)                                  INDEMNIFICATION.  IN CONSIDERATION OF EACH
BUYER’S EXECUTION AND DELIVERY OF THE TRANSACTION DOCUMENTS AND ACQUIRING THE
SECURITIES THEREUNDER AND IN ADDITION TO ALL OF THE COMPANY’S OTHER OBLIGATIONS
UNDER THE TRANSACTION DOCUMENTS, THE COMPANY SHALL DEFEND, PROTECT, INDEMNIFY
AND HOLD HARMLESS EACH BUYER AND EACH OTHER HOLDER OF THE SECURITIES AND ALL OF
THEIR STOCKHOLDERS, PARTNERS, MEMBERS, OFFICERS, DIRECTORS, EMPLOYEES AND DIRECT
OR INDIRECT INVESTORS AND ANY OF THE FOREGOING PERSONS’ AGENTS OR OTHER
REPRESENTATIVES (INCLUDING, WITHOUT LIMITATION, THOSE RETAINED IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT) (COLLECTIVELY, THE
“INDEMNITEES”) FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS,
CLAIMS, LOSSES, COSTS, PENALTIES, FEES, LIABILITIES AND DAMAGES, AND EXPENSES IN
CONNECTION THEREWITH (IRRESPECTIVE OF WHETHER ANY SUCH INDEMNITEE IS A PARTY TO
THE ACTION FOR WHICH INDEMNIFICATION HEREUNDER IS SOUGHT), AND INCLUDING
REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS (THE “INDEMNIFIED LIABILITIES”),
INCURRED BY ANY INDEMNITEE AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO
(A) ANY MISREPRESENTATION OR BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY
THE COMPANY AS OF THE CLOSING DATE IN THE TRANSACTION DOCUMENTS OR ANY OTHER
CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY, (B) 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 OR (C) ANY CAUSE OF ACTION, SUIT OR CLAIM BROUGHT
OR MADE AGAINST SUCH INDEMNITEE BY A THIRD PARTY (INCLUDING FOR THESE PURPOSES A
DERIVATIVE ACTION BROUGHT ON BEHALF OF THE COMPANY) AND ARISING OUT OF OR
RESULTING FROM (I) THE EXECUTION, DELIVERY, PERFORMANCE OR ENFORCEMENT OF THE
TRANSACTION DOCUMENTS OR ANY OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT
CONTEMPLATED HEREBY OR THEREBY, (II) ANY TRANSACTION FINANCED OR TO BE FINANCED
IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, WITH THE PROCEEDS OF THE ISSUANCE
OF THE SECURITIES, (III) ANY DISCLOSURE MADE BY SUCH BUYER PURSUANT TO
SECTION 4(I), OR (IV) THE STATUS OF SUCH BUYER OR HOLDER OF THE SECURITIES AS AN
INVESTOR IN THE COMPANY PURSUANT TO THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENTS.  TO THE EXTENT THAT THE FOREGOING UNDERTAKING BY THE
COMPANY MAY BE UNENFORCEABLE FOR ANY REASON, THE COMPANY SHALL MAKE THE MAXIMUM
CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED
LIABILITIES THAT IS PERMISSIBLE UNDER APPLICABLE LAW.  EXCEPT AS OTHERWISE SET
FORTH HEREIN, THE

 

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MECHANICS AND PROCEDURES WITH RESPECT TO THE RIGHTS AND OBLIGATIONS UNDER THIS
SECTION 9(K) SHALL BE THE SAME AS THOSE SET FORTH IN SECTION 6 OF THE
REGISTRATION RIGHTS AGREEMENT.

 

(L)                                     NO STRICT CONSTRUCTION.  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.

 

(M)                               REMEDIES.  EACH BUYER AND EACH HOLDER OF THE
SECURITIES SHALL HAVE ALL RIGHTS AND REMEDIES SET FORTH IN THE TRANSACTION
DOCUMENTS AND ALL RIGHTS AND REMEDIES WHICH SUCH HOLDERS HAVE BEEN GRANTED AT
ANY TIME UNDER ANY OTHER AGREEMENT OR CONTRACT AND ALL OF THE RIGHTS WHICH SUCH
HOLDERS HAVE UNDER ANY LAW.  ANY PERSON HAVING ANY RIGHTS UNDER ANY PROVISION OF
THIS AGREEMENT SHALL BE ENTITLED TO ENFORCE SUCH RIGHTS SPECIFICALLY (WITHOUT
POSTING A BOND OR OTHER SECURITY), TO RECOVER DAMAGES BY REASON OF ANY BREACH OF
ANY PROVISION OF THIS AGREEMENT AND TO EXERCISE ALL OTHER RIGHTS GRANTED BY
LAW.  FURTHERMORE, THE COMPANY RECOGNIZES THAT IN THE EVENT THAT IT FAILS TO
PERFORM, OBSERVE, OR DISCHARGE ANY OR ALL OF ITS OBLIGATIONS UNDER THE
TRANSACTION DOCUMENTS, ANY REMEDY AT LAW MAY PROVE TO BE INADEQUATE RELIEF TO
THE BUYERS.  THE COMPANY THEREFORE AGREES THAT THE BUYERS SHALL BE ENTITLED TO
SEEK TEMPORARY AND PERMANENT INJUNCTIVE RELIEF IN ANY SUCH CASE WITHOUT THE
NECESSITY OF PROVING ACTUAL DAMAGES AND WITHOUT POSTING A BOND OR OTHER
SECURITY.

 

(N)                                 RESCISSION AND WITHDRAWAL RIGHT. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN (AND WITHOUT LIMITING ANY
SIMILAR PROVISIONS OF) THE TRANSACTION DOCUMENTS, WHENEVER ANY BUYER EXERCISES A
RIGHT, ELECTION, DEMAND OR OPTION UNDER A TRANSACTION DOCUMENT AND THE COMPANY
DOES NOT TIMELY PERFORM ITS RELATED OBLIGATIONS WITHIN THE PERIODS THEREIN
PROVIDED, THEN SUCH BUYER MAY RESCIND OR WITHDRAW, IN ITS SOLE DISCRETION FROM
TIME TO TIME UPON WRITTEN NOTICE TO THE COMPANY, ANY RELEVANT NOTICE, DEMAND OR
ELECTION IN WHOLE OR IN PART WITHOUT PREJUDICE TO ITS FUTURE ACTIONS AND RIGHTS.

 

(O)                                 PAYMENT SET ASIDE.  TO THE EXTENT THAT THE
COMPANY MAKES A PAYMENT OR PAYMENTS TO THE BUYERS HEREUNDER OR PURSUANT TO ANY
OF THE OTHER TRANSACTION DOCUMENTS OR THE BUYERS ENFORCE OR EXERCISE THEIR
RIGHTS HEREUNDER OR THEREUNDER, AND SUCH PAYMENT OR PAYMENTS OR THE PROCEEDS OF
SUCH ENFORCEMENT OR EXERCISE OR ANY PART THEREOF ARE SUBSEQUENTLY INVALIDATED,
DECLARED TO BE FRAUDULENT OR PREFERENTIAL, SET ASIDE, RECOVERED FROM, DISGORGED
BY OR ARE REQUIRED TO BE REFUNDED, REPAID OR OTHERWISE RESTORED TO THE COMPANY,
A TRUSTEE, RECEIVER OR ANY OTHER PERSON UNDER ANY LAW (INCLUDING, WITHOUT
LIMITATION, ANY BANKRUPTCY LAW, FOREIGN, 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.

 

(P)                                 INDEPENDENT NATURE OF BUYERS’ OBLIGATIONS
AND RIGHTS.  THE OBLIGATIONS OF EACH BUYER UNDER ANY TRANSACTION DOCUMENT ARE
SEVERAL AND NOT JOINT WITH THE OBLIGATIONS OF ANY OTHER BUYER, AND NO BUYER
SHALL BE RESPONSIBLE IN ANY WAY FOR THE PERFORMANCE OF THE OBLIGATIONS OF ANY
OTHER BUYER UNDER ANY TRANSACTION DOCUMENT.  NOTHING CONTAINED HEREIN OR IN ANY
OTHER TRANSACTION DOCUMENT, AND NO ACTION TAKEN BY ANY BUYER PURSUANT HERETO OR
THERETO, SHALL BE DEEMED TO CONSTITUTE THE BUYERS AS, AND THE COMPANY
ACKNOWLEDGES THAT THE BUYERS DO NOT SO CONSTITUTE, A PARTNERSHIP, AN
ASSOCIATION, A JOINT VENTURE OR ANY OTHER KIND OF ENTITY, OR CREATE A

 

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PRESUMPTION THAT THE BUYERS ARE IN ANY WAY ACTING IN CONCERT OR AS A GROUP, AND
THE COMPANY WILL NOT ASSERT ANY SUCH CLAIM WITH RESPECT TO SUCH OBLIGATIONS OR
THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS AND THE COMPANY
ACKNOWLEDGES THAT THE BUYERS ARE NOT ACTING IN CONCERT OR AS A GROUP WITH
RESPECT TO SUCH OBLIGATIONS OR THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION
DOCUMENTS.  THE COMPANY ACKNOWLEDGES AND EACH BUYER CONFIRMS THAT IT HAS
INDEPENDENTLY PARTICIPATED IN THE NEGOTIATION OF THE TRANSACTION CONTEMPLATED
HEREBY WITH THE ADVICE OF ITS OWN COUNSEL AND ADVISORS.  EACH BUYER SHALL BE
ENTITLED TO INDEPENDENTLY PROTECT AND ENFORCE ITS RIGHTS, INCLUDING, WITHOUT
LIMITATION, THE RIGHTS ARISING OUT OF THIS AGREEMENT OR OUT OF ANY OTHER
TRANSACTION DOCUMENTS, AND IT SHALL NOT BE NECESSARY FOR ANY OTHER BUYER TO BE
JOINED AS AN ADDITIONAL PARTY IN ANY PROCEEDING FOR SUCH PURPOSE.

 

[Signature Page Follows]

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

 

 

COMPANY:

 

 

 

ANSWERS CORPORATION

 

 

 

 

 

 

 

By:

/s/ Robert S. Rosenschein

 

 

 

Name:

Robert S. Rosenschein

 

 

Title:

CEO

 

 

 

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

 

 

BUYERS:

 

 

 

INTERLACHEN CONVERTIBLE

 

INVESTMENTS LIMITED

 

 

 

 

 

 

 

By:

/s/ Gregg T. Colburn

 

 

 

Name:

Gregg T. Colburn

 

 

Title

Authorized Signatory

 

 

 

 

--------------------------------------------------------------------------------

 

SCHEDULE OF BUYERS

 

 

 

 

 

 

 

(4)

 

 

 

 

(1)
Buyer

 

(2)
Address and
Facsimile Number

 

(3)
Aggregate
Principal
Amount of
Follow-On Notes

 

Aggregate
Principal
Amount of
Termination
Notes

 

(5)
Purchase Price of
Follow-On Notes

 

(4)
Legal Representative’s
Address and Facsimile
Number

 

 

 

 

 

 

 

 

 

 

 

Interlachen Convertible
Investments Limited

 

c/o Interlachen Capital Group LP
800 Nicollet Mall, Suite 2500
Minneapolis, MN 55402-2034
Attention: Gregg T. Colburn
and Legal Department
Facsimile: (612) 659-4457
Telephone: (612) 659-4407
Residency: Cayman
Islands

 

 

 

 

 

 

 

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Eleazer Klein, Esq.
Facsimile: (212) 593-5955
Telephone: (212) 756-2376

 

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EXHIBITS

 

Exhibit A

 

Form of Follow-On Notes

Exhibit B

 

Form of Registration Rights Agreement

Exhibit C

 

Pledge and Security Agreement for Buyers

Exhibit D

 

Pro Forma Assumptions

Exhibit E

 

Form of Irrevocable Transfer Agent Instructions

Exhibit F

 

Form of Secretary’s Certificate

Exhibit G

 

Form of Officer’s Certificate

Exhibit H

 

Subordination Agreement

Exhibit I

 

Lexico Pledge and Security Agreement

 

SCHEDULES

 

Schedule 3(a)

 

Subsidiaries

Schedule 3(b)

 

Authorization; Enforcement; Validity

Schedule 3(k)

 

SEC Documents

Schedule 3(l)

 

Absence of Certain Changes

Schedule 3(q)

 

Transactions with Affiliates

Schedule 3(r)

 

Equity Capitalization

Schedule 3(s)(1)

 

Indebtedness and Other Contracts

Schedule 3(s)(2)

 

Closing Indebtedness

Schedule 3(s)(3)

 

Lexico Agreement

Schedule 3(t)

 

Absence of Litigation

Schedule 3(x)(iv)

 

Terminated Company-Owned IP Rights

Schedule 3(x)(v)

 

Company Registered Intellectual Property

Schedule 3(x)(vi)

 

Company Intellectual Property Action

Schedule 3(x)(x)

 

Open Source Materials

Schedule 3(z)

 

Subsidiary Rights

Schedule 3(ee)

 

Ranking of Notes

Schedule 4(m)(i)

 

Options

Schedule 4(m)(ii)

 

Stock Plans

 

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