Exhibit 10.26
 
Execution Version
 
SECURITIES PURCHASE AGREEMENT
 
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of November 23,
2011, is by and among IceWEB, Inc., a Delaware corporation (the “Company”), and
the investors listed on the Schedule of Buyers attached hereto (individually, a
“Buyer” and collectively, the “Buyers”).

RECITALS

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 the issuance of senior convertible notes
in the aggregate original principal amount of $2,012,500, in the form attached
hereto as Exhibit A (the “Notes”), which Notes shall be convertible into shares
of the Company’s common stock, $0.001 par value per share (the “Common Stock”)
(as converted, collectively, the “Conversion Shares”), in accordance with the
terms of the Notes.

C.           Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) the aggregate original
principal amount of the Notes set forth opposite such Buyer’s name in column (3)
on the Schedule of Buyers, (ii) a warrant to initially acquire up to the
aggregate number of shares of Common Stock set forth opposite such Buyer’s name
in column (4) on the Schedule of Buyers, in the form attached hereto as Exhibit
D (individually, a “Series O Warrant” and, collectively, the “Series O
Warrants”) (as exercised, collectively, the “Series O Warrant Shares”), (iii) a
warrant to initially acquire up to the aggregate number of shares of Common
Stock set forth opposite such Buyer’s name in column (5) on the Schedule of
Buyers, in the form attached hereto as Exhibit E (individually, a “Series P
Warrant” and, collectively, the “Series P Warrants”) (as exercised,
collectively, the “Series P Warrant Shares”), and (iv) a warrant to initially
acquire up to the aggregate number of shares of Common Stock set forth opposite
such Buyer’s name in column (6) on the Schedule of Buyers, in the form attached
hereto as Exhibit F (individually, a “Series Q Warrant” and, collectively, the
“Series Q Warrants”) (as exercised, collectively, the “Series Q Warrant
Shares”). The Series O Warrants, the Series P Warrants and the Series Q Warrants
are collectively referred to herein as the “Warrants.” The Series O Warrant
Shares, the Series P Warrant Shares, and the Series Q Warrant Shares are
collectively referred to herein as the “Warrant Shares.”

D.           At the Closing (as defined below), the parties hereto shall execute
and deliver a Registration Rights Agreement, in the form attached hereto as
Exhibit B (the “Registration Rights Agreement”), pursuant to which the Company
has agreed 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.

 
 

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E.           The Notes, the Guaranties (as defined below), and the Warrants are
collectively referred to herein as the “Initial Securities.” The Notes, the
Conversion Shares, the Guaranties (as defined below), the Warrants, and the
Warrant Shares are collectively referred to herein as the “Securities.”
 
F.           Each of its Subsidiaries (as defined below) will execute a
guaranty, in the form set forth in Exhibit C, in favor of each Buyer
(collectively, the “Guaranties”) pursuant to which each of them will guarantee
the obligations of the Company under the Transaction Documents (as defined
below).
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each Buyer hereby
agree as follows:
 
1.
PURCHASE AND SALE OF INITIAL SECURITIES.

 
(a)           Initial Securities. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 7 and 8 below, the Company shall issue and sell
to each Buyer, and each Buyer severally, but not jointly, shall purchase from
the Company on the Closing Date (as defined below), (i) a Note in the original
principal amount as is set forth opposite such Buyer’s name in column (3) on the
Schedule of Buyers,  (ii) a Series O Warrant to initially acquire up to the
aggregate number of Series O Warrant Shares as is set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers, (iii) a Series P Warrant
to initially acquire up to the aggregate number of Series P Warrant Shares as is
set forth opposite such Buyer’s name in column (5) on the Schedule of Buyers,
and (iv) a Series Q Warrant to initially acquire up to the aggregate number of
Series Q Warrant Shares as is set forth opposite such Buyer’s name in column (6)
on the Schedule of Buyers.
 
(b)           Purchase Price.  The aggregate purchase price for the Initial
Securities to be purchased by each Buyer (the “Purchase Price”) shall be the
amount set forth opposite such Buyer’s name in column (7) on the Schedule of
Buyers.
 
(c)           Closing. The closing (the “Closing”) of the purchase of the
Initial Securities by the Buyers shall occur at the offices of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz Levin”), 666 Third Avenue, New
York, NY 10017. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York time, on the first (1st) Business Day on which the
conditions to the Closing set forth in Sections 7 and 8 below are satisfied or
waived (or such later date as is mutually agreed to by the Company and each
Buyer). As used herein “Business Day” means any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are
authorized or required by law to remain closed.

 
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(d)           Payment of Purchase Price on Closing Date; Delivery of Initial
Securities. On the Closing Date, (i) each Buyer shall pay its respective
Purchase Price to the Company for the respective Initial Securities to be issued
and sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company’s written wire instructions (less the
amounts withheld pursuant to Section 5(g)) and (ii) the Company shall deliver to
each Buyer (A) a Note (in such amount as is set forth opposite such Buyer’s name
in column (3) on the Schedule of Buyers), (B) a Series O Warrant pursuant to
which such Buyer shall have the right to initially acquire up to the aggregate
number of Series O Warrant Shares as is set forth opposite such Buyer’s name in
column (4) on the Schedule of Buyers, (C) a Series P Warrant pursuant to which
such Buyer shall have the right to initially acquire up to the aggregate number
of Series P Warrant Shares as is set forth opposite such Buyer’s name in column
(5) on the Schedule of Buyers, and (D) a Series Q Warrant pursuant to which such
Buyer shall have the right to initially acquire up to the aggregate number of
Series Q Warrant Shares as is set forth opposite such Buyer’s name in columns
(6) on the Schedule of Buyers.
 
2.
[RESERVED.]

 
3.
BUYER’S REPRESENTATIONS AND WARRANTIES.

 
Each Buyer, severally and not jointly, represents and warrants to the Company
with respect to only itself that:
 
(a)           Organization; Authority. Such Buyer is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents to which
it is a party and otherwise to carry out its obligations hereunder and
thereunder.
 
(b)           No Public Sale or Distribution. Such Buyer is acquiring the
Securities for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof in violation of
applicable securities laws, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, by making the representations herein,
such Buyer does not agree, or make any representation or warranty, 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. Such Buyer does not
presently have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities in violation of applicable securities
laws.
 
(c)           Accredited Investor Status.  Such Buyer is an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D.
 
(d)           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.

 
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(e)           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. 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.
 
(f)           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.
 
(g)           Transfer or Resale. Such Buyer understands that except as provided
in the Registration Rights Agreement and Section 5(h) hereof: (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 (if requested by the Company) an opinion of counsel to
such Buyer, in a form reasonably acceptable to the Company, 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 (or a successor rule thereto) (collectively, “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 below) 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 promulgated 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. If a Buyer or any subsequent holder of the Securities
proposes to transfer the Securities held by such Person pursuant to Rule 144,
the Company shall provide necessary opinions to its transfer agent, if
requested, provided that such Buyer or such subsequent holder, as the case may
be, provides the necessary representations as requested by the Company’s
counsel.
 
(h)           Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of such Buyer and constitutes 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 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 consummation by such Buyer of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of such Buyer, (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.

 
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(j)           Certain Trading Activities. Such Buyer has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Buyer, engaged in any transactions in the securities of
the Company (including, without limitation, any Short Sales (as defined below)
involving the Company’s securities) during the period commencing as of the time
that such Buyer first executed a term sheet regarding the specific investment in
the Company contemplated by this Agreement and ending immediately prior to the
execution of this Agreement by such Buyer (it being understood and agreed that
for all purposes of this Agreement, and without implication that the contrary
would otherwise be true, neither transactions nor purchases nor sales shall
include the location and/or reservation of borrowable shares of Common Stock).
“Short Sales” means all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Securities Exchange Act of 1934, as amended (the “1934
Act”).
 
4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 
Except as set forth in the disclosure schedules referenced below (the
“Disclosure Schedules”), which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation, warranty or otherwise made herein
to the extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company represents and warrants to each of the Buyers
that:
 
(a)           Organization and Qualification. Each of the Company and each of
its Subsidiaries are entities duly organized and validly existing and 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 and as presently proposed to be conducted.
Each of the Company and each of 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, individually or in the aggregate,
have a Material Adverse Effect. “Material Adverse Effect” means any material
adverse effect on (i) the business, properties, assets, liabilities, operations
(including results thereof), condition (financial or otherwise) or prospects of
the Company or any Subsidiary, either individually or taken as a whole, (ii) the
transactions contemplated hereby or in any of the other Transaction Documents or
(iii) the authority or ability of the Company or any of its Subsidiaries to
perform any of their respective obligations under any of the Transaction
Documents (as defined below). Other than the Persons (as defined below) set
forth on Schedule 4(a), the Company has no Subsidiaries. “Subsidiaries” means
any Person in which the Company, directly or indirectly, (I) owns any of the
outstanding capital stock or holds any equity or similar interest of such Person
or (II) controls or operates all or any part of the business, operations or
administration of such Person, and each of the foregoing, is individually
referred to herein as a “Subsidiary.”

 
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(b)           Authorization; Enforcement; Validity. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents and to issue the Securities
in accordance with the terms hereof and thereof. Each Subsidiary has the
requisite power and authority to enter into and perform its obligations under
the Transaction Documents to which it is a party. The execution and delivery of
this Agreement and the other Transaction Documents by the Company and its
Subsidiaries, and the consummation by the Company and its Subsidiaries of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Initial Securities, the reservation for issuance and issuance of
the Conversion Shares issuable upon conversion of the Notes and the issuance of
the Warrants and the reservation for issuance and issuance of the Warrant Shares
issuable upon exercise of the Warrants) have been duly authorized by the
Company’s board of directors and each of its Subsidiaries’ board of directors or
other governing body, as applicable, and (other than the filing with the SEC of
one or more Registration Statements in accordance with the requirements of the
Registration Rights Agreement, a Form D with the SEC and any other filings as
may be required by any state securities agencies) no further filing, consent or
authorization is required by the Company, its Subsidiaries, their respective
boards of directors or their stockholders or other governing body.  This
Agreement has been, and the other Transaction Documents will be prior to the
Closing, duly executed and delivered by the Company, and each constitutes the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with its 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 and except as rights to indemnification and to contribution may be
limited by federal or state securities law (collectively, the “Enforceability
Exceptions”). Prior to the Closing, the Transaction Documents to which each
Subsidiary is a party will be duly executed and delivered by each such
Subsidiary, and shall constitute the legal, valid and binding obligations of
each such Subsidiary, enforceable against each such Subsidiary in accordance
with their respective terms, except as such enforceability may be limited by the
Enforceability Exceptions. “Transaction Documents” means, collectively, this
Agreement, the Notes, the Warrants, the Guaranties, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined below) and
each of the other agreements and instruments entered into or delivered by any of
the parties hereto or any of the Subsidiaries in connection with the
transactions contemplated hereby and thereby, as may be amended from time to
time.
 
(c)           Issuance of Notes, Guaranties, and Warrants. The Notes and
Warrants have been duly authorized by the Company, and, when duly executed and
delivered in accordance with their respective terms by each of the parties
thereto, will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by the Enforceability Exceptions.
The Guaranties have been duly authorized by each Subsidiary and, when duly
executed and delivered in accordance with their terms and the terms of the other
Transaction Documents by each of the parties thereto, will constitute a valid
and legally binding agreement of each Subsidiary, enforceable against each
Subsidiary in accordance with their terms, except as such enforceability may be
limited by the Enforceability Exceptions.

 
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(d)           Issuance of the Conversion Shares and Warrant Shares. As of the
Closing, the Company shall have reserved from its duly authorized capital stock
not less than 133% of the sum of (i) the maximum number of Conversion Shares
issuable upon conversion of the Notes (assuming for purposes hereof that the
Notes are convertible at the initial Conversion Price (as defined in the Notes)
and without taking into account any limitations on the conversion of the Notes
set forth therein) and (ii) the maximum number of Warrant Shares issuable upon
exercise of the Warrants (assuming that all Warrants are exercised and without
taking into account any limitations on exercise of the Warrants set forth
therein). Upon conversion in accordance with the Notes or exercise in accordance
with the Warrants (as the case may be), the Conversion Shares and the Warrant
Shares, respectively, when issued, will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock.
 
(e)           Exemption from 1933 Act. Subject to the accuracy of the
representations and warranties of the Buyers in this Agreement, the offer and
issuance by the Company of the Securities is exempt from registration under the
1933 Act.
 
(f)           No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and its Subsidiaries and the consummation
by the Company and its Subsidiaries of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Initial Securities,
the reservation for issuance and issuance of the Conversion Shares issuable upon
conversion of the Notes and the issuance of the Warrants and the reservation for
issuance and issuance of the Warrant Shares issuable upon exercise of the
Warrants) will not (i) result in a violation of the Certificate of Incorporation
(as defined below) (including, without limitation, any certificate of
designation contained therein) or other organizational documents of the Company
or any of its Subsidiaries, any capital stock of the Company or any of its
Subsidiaries or Bylaws (as defined below) of the Company or any of its
Subsidiaries, (ii) result in the adjustment of the exercise, conversion or
exchange price and/or ratio in respect of any securities of the Company or any
of its Subsidiaries, result in any such securities exercisable, convertible or
exchangeable for a greater number of underlying securities, or require the
approval or the receipt of waivers from any holders of any instrument or class
of securities or counterparties to any agreement or understanding to which the
Company or any Subsidiary is a party, (iii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, give to others any rights of termination, amendment,
acceleration or cancellation of, any indenture, agreement, note, lease,
mortgage, deed or other instrument to which the Company or any of its
Subsidiaries is a party, or (iv) result in a violation of any law, rule,
regulation, order, judgment or decree (including, without limitation, foreign,
federal and state securities laws and regulations and the rules and regulations
of the Over-the-Counter Bulletin Board of the Financial Industry Regulatory
Authority, Inc. (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 except, in the case of clause (ii), (iii) or
(iv) above, to the extent such violations that would not reasonably be expected
to have a Material Adverse Effect.

 
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(g)           No Violation. Neither the Company nor any of its Subsidiaries is
(i) in violation of its charter or by-laws or similar organizational documents;
(ii) in default, and no event has occurred that, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance of
any term, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or to which any of the property or assets of the Company
or any of its Subsidiaries is subject; or (iii) in violation of any law, rule,
regulation, order, judgment or decree (including, without limitation, foreign,
federal and state securities laws and regulations and the rules and regulations
of 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 except, in the case of clause (ii) or (iii) above, to the
extent such violations that would not reasonably be expected to have a Material
Adverse Effect.
 
(h)           Consents.  Neither the Company nor any Subsidiary is required to
obtain any consent from, authorization or order of, or make any filing or
registration with (other than the filing with the SEC of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, a Form D with the SEC and any other filings as may be required
by any state securities agencies), any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its respective obligations under, or
contemplated by, the Transaction Documents, in each case, in accordance with the
terms hereof or thereof.  All consents, authorizations, orders, filings and
registrations which the Company or any Subsidiary is required to obtain have
been obtained or effected, and neither the Company nor any of its Subsidiaries
are aware of any facts or circumstances which might prevent the Company or any
Subsidiary from obtaining or effecting any of the registration, application or
filings contemplated by the Transaction Documents. The Company is not in
violation of the requirements of the Principal Market and has no knowledge of
any facts or circumstances which could reasonably lead to delisting or
suspension of quotation of the Common Stock on the Principal Market in the
foreseeable future.
 
(i)           Acknowledgment Regarding Buyer’s Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that no 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 and
each Subsidiary’s decision to enter into the Transaction Documents to which it
is a party has been based solely on the independent evaluation by the Company,
each Subsidiary and their respective representatives.
 
(j)           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. Other than Rodman &
Renshaw, LLC (the “Placement Agent”), neither the Company nor any of its
Subsidiaries has engaged any placement agent or other agent in connection with
the offer or sale of the Securities.

 
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(k)           No Integrated Offering. None of the Company, its Subsidiaries or
any of their affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance of any of the Securities under the 1933 Act, whether through
integration with prior offerings or otherwise, or cause this offering of the
Securities to require approval of stockholders of the Company under 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 for quotation.
None of the Company, its Subsidiaries, their affiliates nor any Person acting on
their behalf will take any action or steps that would require registration of
the issuance of any of the Securities under the 1933 Act or cause the offering
of any of the Securities to be integrated with other offerings of securities of
the Company.
 
(l)           Dilutive Effect. The Company understands and acknowledges that the
number of Conversion Shares and Warrant Shares will increase in certain
circumstances. The Company further acknowledges that its obligation to issue the
Conversion Shares upon conversion of the Notes and the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement, the Notes and the
Warrants is absolute and unconditional, regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
 
(m)         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, interested stockholder,
business combination, poison pill (including, without limitation, any
distribution under a rights agreement) or other similar anti-takeover provision
under the Certificate of Incorporation, Bylaws or other organizational documents
or the laws of the jurisdiction of its incorporation or otherwise 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 and its board of directors have taken all necessary action, if any, in
order to render inapplicable any stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of shares of Common Stock or a
change in control of the Company or any of its Subsidiaries.

 
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(n)           SEC Documents; Financial Statements. During the two (2) years
prior to the date hereof, other than as disclosed in Schedule 4(n), the Company
has timely 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 each 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 in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as in effect as of the
time of filing. 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 which will not be
material, either individually or in the aggregate). No other information
provided by or on behalf of the Company to any of the Buyers which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary, in order to make the statements
therein not misleading, in light of the circumstances under which they are or
were made.
 
(o)           Absence of Certain Changes. Since the date of the Company’s most
recent unaudited financial statements contained in a Form 10-Q, there has been
no material adverse change and no material adverse development in the business,
assets, liabilities, properties, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any of its
Subsidiaries. Since the date of the Company’s most recent unaudited financial
statements contained in a Form 10-Q, neither the Company nor any of its
Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, outside of the ordinary course of business or
(iii) made any material capital expenditures, individually or in the aggregate.
Neither the Company nor any of its Subsidiaries has taken any steps to seek
protection pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, receivership, liquidation or winding up, nor does the Company or
any Subsidiary have any knowledge or reason to believe that any of their
respective 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 and its Subsidiaries, individually and on a consolidated basis,
are 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). “Insolvent” means, (I) with respect to the Company and its Subsidiaries,
on a consolidated basis, (i) the present fair saleable value of the Company’s
and its Subsidiaries’ assets is less than the amount required to pay the
Company’s and its Subsidiaries’ total Indebtedness (as defined below), (ii) the
Company and its Subsidiaries are unable to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (iii) the Company and its Subsidiaries intend to incur
or believe that they will incur debts that would be beyond their ability to pay
as such debts mature; and (II) with respect to the Company and each Subsidiary,
individually, (i) the present fair saleable value of the Company’s or such
Subsidiary’s (as the case may be) assets is less than the amount required to pay
its respective total Indebtedness, (ii) the Company or such Subsidiary (as the
case may be) is unable to pay its respective debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured or (iii) the Company or such Subsidiary (as the case may
be) intends to incur or believes that it will incur debts that would be beyond
its respective ability to pay as such debts mature. Neither the Company nor any
of its Subsidiaries has engaged in any business or in any transaction, and is
not about to engage in any business or in any transaction, for which the
Company’s or such Subsidiary’s remaining assets constitute unreasonably small
capital.

 
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(p)           No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is
reasonably expected to occur or exist with respect to the Company, any of its
Subsidiaries or any of their respective businesses, properties, liabilities,
prospects, operations (including results thereof) or condition (financial or
otherwise), that (i) 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 and
which has not been publicly announced or (ii) could reasonably likely have a
Material Adverse Effect.
 
(q)           Conduct of Business; Regulatory Permits; No Violations. Neither
the Company nor any of its Subsidiaries is in violation of any term of or in
default under its Certificate of Incorporation, any certificate of designation,
preferences or rights of any other outstanding series of preferred stock of the
Company or any of its Subsidiaries or Bylaws or their organizational charter,
certificate of formation 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 any of its Subsidiaries (including, without
limitation, foreign, federal and state securities laws and regulations and the
rules and regulations of the Principal Market), and neither the Company nor any
of its Subsidiaries will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, have a Material Adverse Effect. The Company
and each of 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.
 
(r)           Foreign Corrupt Practices.  Neither the Company nor any of its
Subsidiaries nor 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.
 
(s)           Sarbanes-Oxley Act. The Company and each Subsidiary is in
compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002
and all applicable rules and regulations promulgated by the SEC thereunder.

 
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(t)           Transactions With Affiliates. Except as disclosed in Schedule
4(t), none of the officers, directors, employees or affiliates of the Company or
any of its Subsidiaries 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, employee or affiliate or, to the
knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other Person in which any such officer, director, employee
or affiliate has a substantial interest or is an employee, officer, director,
trustee or partner.
 
(u)           Equity Capitalization.  As of the date hereof, the authorized
capital stock of the Company consists of (i) 1,000,000,000 shares of Common
Stock, of which, 158,121,566 shares are issued and outstanding and 15,623,425
shares are reserved for issuance pursuant to Convertible Securities (as defined
below) (other than the Notes and the Warrants) and (ii) 10,000,000 shares of
preferred stock, of which, 626,667 have been designated as Series B Preferred
Stock and are issued and outstanding. 162,500 shares of Common Stock are held in
treasury. All of such outstanding shares are duly authorized and have been, or
upon issuance will be, validly issued and are fully paid and non-assessable.
25,912,911 shares of the Company’s issued and outstanding Common Stock on the
date hereof are owned by Persons who are “affiliates” (as defined in Rule 405 of
the 1933 Act and calculated based on the assumption that only officers,
directors and holders of at least 10% of the Company’s issued and outstanding
Common Stock are “affiliates” without conceding that any such Persons are
“affiliates” for purposes of federal securities laws) of the Company or any of
its Subsidiaries. Except as disclosed in Schedule 4(u), (i) none of the
Company’s or any Subsidiary’s capital stock is subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company or any Subsidiary; (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 amounts 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)
neither the Company nor any Subsidiary has any stock appreciation rights,
restricted stock units or “phantom stock” plans or agreements or any similar
plan or agreement; and (ix) neither the Company nor any of its Subsidiaries have
any liabilities or obligations required to be disclosed in the SEC Documents
which are 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 could 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.

 
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(v)           Indebtedness and Other Contracts. Neither the Company nor any of
its Subsidiaries (i) except as disclosed in Schedule 4(v), 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 could reasonably be
expected to 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. (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, or guarantees thereof, 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, any other
entity and a government or any department or agency thereof.

 
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(w)           Absence of Litigation. Except as disclosed in Schedule 4(w), 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 or its Subsidiaries’ officers or directors which is outside
of the ordinary course of business or individually or in the aggregate material
to the Company or any of its Subsidiaries. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company, any of its Subsidiaries or any
current or former director or officer of the Company or any of its Subsidiaries.
The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the 1933
Act or the 1934 Act.
 
(x)           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 be unable to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
 
(y)           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 believes that its and its Subsidiaries’ relations
with their respective employees are good. No executive officer (as defined in
Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company
or any of its Subsidiaries 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 or other key employee of the Company or any of its
Subsidiaries 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 or other key employee (as the case may be) does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing
matters.  The Company and its Subsidiaries are in compliance with all federal,
state, local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 
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(z)           Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property, and have 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 or 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 or any of its Subsidiaries.
 
(aa)         Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, original works, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights and all applications and registrations therefor (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now conducted and
as presently proposed to be conducted.  None of the Company’s or its
Subsidiaries’ Intellectual Property Rights have expired, terminated or been
abandoned, or are expected to expire, terminate or be abandoned, within three
years from the date of this Agreement.  The Company has no knowledge of any
infringement by the Company or any of its Subsidiaries of Intellectual Property
Rights of others.  There is no claim, action or proceeding being made or
brought, or to the knowledge of the Company or any of its Subsidiaries, being
threatened, against the Company or any of its Subsidiaries regarding their
Intellectual Property Rights.  The Company is not aware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings. The Company and each of its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights.
 
(bb)        Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with all Environmental Laws (as defined below), (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. “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.
 
(cc)         Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law and subject to such limitations disclosed in Schedule 4(cc)) to receive
dividends and distributions on, all capital securities of its Subsidiaries as
owned by the Company or such Subsidiary.

 
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(dd)        Tax Status. The Company and each of its Subsidiaries (i) has timely
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 timely 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 and its Subsidiaries know of no basis for any such claim.  The Company
is not operated in such a manner as to qualify as a passive foreign investment
company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986,
as amended.
 
(ee)         Internal Accounting and Disclosure Controls. The Company and each
of its Subsidiaries maintains internal control over financial reporting (as such
term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles, including 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 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-15(e) 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 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. Neither the Company nor any of its
Subsidiaries has received any notice or correspondence from any accountant or
other Person relating to any potential material weakness or significant
deficiency in any part of the internal controls over financial reporting of the
Company or any of its Subsidiaries.
 
(ff)          Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of its
Subsidiaries and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.
 
(gg)        Investment Company Status. The Company is not, and upon consummation
of the sale of the Securities will not be, an “investment company,” an affiliate
of 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.

 
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(hh)        Acknowledgement Regarding Buyers’ Trading Activity. It is understood
and acknowledged by the Company that (i) following the public disclosure of the
transactions contemplated by the Transaction Documents in accordance with the
terms thereof, none of the Buyers have been asked by the Company or any of its
Subsidiaries to agree, nor has any Buyer agreed with the Company or any of its
Subsidiaries, to desist from effecting any transactions in or with respect to
(including, without limitation, purchasing or selling, long and/or short) any
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold any of the Securities for any specified term; (ii) any
Buyer, and counterparties in “derivative” transactions to which any such Buyer
is a party, directly or indirectly, presently may have a “short” position in the
Common Stock which was established prior to such Buyer’s knowledge of the
transactions contemplated by the Transaction Documents; and (iii) each Buyer
shall not be deemed to have any affiliation with or control over any arm’s
length counterparty in any “derivative” transaction. The Company further
understands and acknowledges that following the public disclosure of the
transactions contemplated by the Transaction Documents pursuant to the 8-K
Filing (as defined below) 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
and/or number of Conversion Shares or Warrant Shares deliverable with respect to
the Securities are being determined and 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 or any
other Transaction Document or any of the documents executed in connection
herewith or therewith.
 
(ii)           Manipulation of Price. Neither the Company nor any of its
Subsidiaries has, and, to the knowledge of the Company, no Person acting on
their behalf has, directly or indirectly, (i) taken any action designed to cause
or to result in the stabilization or manipulation of the price of any security
of the Company or any of its Subsidiaries to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities (other than the Placement
Agent), or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company or any of its
Subsidiaries.
 
(jj)           Registration Eligibility.  The Company is eligible to register
the Registrable Securities for resale by the Buyers using Form S-3 or other
applicable registration form promulgated under the 1933 Act.
 
(kk)         Transfer Taxes. On each Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the issuance, 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.
 
(ll)           Shell Company Status. The Company is not, and has never been, an
issuer identified in, or subject to, Rule 144(i).

 
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(mm)      Public Utility Holding Act.  None of the Company nor any of its
Subsidiaries is a “holding company,” or an “affiliate” of a “holding company,”
as such terms are defined in the Public Utility Holding Act of 2005.
 
(nn)        Federal Power Act.  None of the Company nor any of its Subsidiaries
is subject to regulation as a “public utility” under the Federal Power Act, as
amended.
 
(oo)        No Additional Agreements. The Company does not have any agreement or
understanding with any Buyer with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.
 
(pp)        Real Property. Each of the Company and its Subsidiaries holds good
title to all real property, leases in real property, or other interests in real
property owned or held by the Company or any of its Subsidiaries (the “Real
Property”) owned by the Company or any of its Subsidiaries (as applicable). The
Real Property is free and clear of all mortgages, defects, claims, liens,
pledges, charges, taxes, rights of first refusal, encumbrances, security
interests and other encumbrances (collectively “Encumbrances”) and is not
subject to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except for (a) liens for current
taxes not yet due, and (b) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property subject thereto.
 
(qq)        Fixtures and Equipment. Each of the Company and its Subsidiaries (as
applicable) has good title to, or a valid leasehold interest in, the tangible
personal property, equipment, improvements, fixtures, and other personal
property and appurtenances that are used by the Company or its Subsidiary in
connection with the conduct of its business (the “Fixtures and Equipment”). The
Fixtures and Equipment are structurally sound, are in good operating condition
and repair, are adequate for the uses to which they are being put, are not in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs and are sufficient for the conduct of the Company’s and/or its
Subsidiaries’ businesses (as applicable) in the manner as conducted prior to the
Closing. Each of the Company and its Subsidiaries owns all of its Fixtures and
Equipment free and clear of all Encumbrances except for (a) liens for current
taxes not yet due, and (b) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property subject thereto.
 
(rr)          Illegal or Unauthorized Payments; Political
Contributions.  Neither the Company nor any of its Subsidiaries nor, to the best
of the Company’s knowledge (after reasonable inquiry of its officers and
directors), any of the officers, directors, employees, agents or other
representatives of the Company or any of its Subsidiaries or any other business
entity or enterprise with which the Company or any Subsidiary is or has been
affiliated or associated, has, directly or indirectly, made or authorized any
payment, contribution or gift of money, property, or services, whether or not in
contravention of applicable law, (a) as a kickback or bribe to any Person or (b)
to any political organization, or the holder of or any aspirant to any elective
or appointive public office except for personal political contributions not
involving the direct or indirect use of funds of the Company or any of its
Subsidiaries.

 
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(ss)         Money Laundering. The Company and its Subsidiaries are in
compliance with, and have not previously violated, the USA Patriot Act of 2001
and all other applicable U.S. and non-U.S. anti-money laundering laws and
regulations, including, without limitation, the laws, regulations and Executive
Orders and sanctions programs administered by the U.S. Office of Foreign Assets
Control, including, without limitation, (i) Executive Order 13224 of September
23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079
(2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.
 
(tt)          Ranking of Notes. Except as disclosed in Schedule 4(tt), no
Indebtedness of the Company will be senior to, or pari passu with, the Notes in
right of payment, whether with respect to payment or redemptions, interest,
damages, upon liquidation or dissolution or otherwise.
 
(uu)        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, non-public information concerning the Company or any of its
Subsidiaries, other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. 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 and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries 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 are 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, liabilities, prospects, operations (including results thereof) or
conditions (financial or otherwise), which, under applicable law, rule or
regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly disclosed. The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.
 
(vv)        Material Agreements. All indentures, agreements, notes, leases,
mortgages, deeds or other instruments to which the Company or any Subsidiary is
a party or by which the Company or any Subsidiary is bound or affected that
would be required to be filed as an exhibit to the SEC Documents or which is
otherwise material to the Company or any Subsidiary are listed in Schedule 4(vv)
(collectively, the “Material Agreements”).
 
(ww)       Parties to Financing Agreement.  The Company represents and warrants
that all Persons that are a party to the Financing Agreement (as defined below),
other than Sand Hill (as defined below), the Company and its Subsidiaries listed
on Schedule 4(a), are no longer in existence (such other persons, the “Other
Financing Agreement Parties”). The Company represents and warrants that the
Other Financing Agreement Parties have not made any borrowings under the
Financing Agreement and the Company agrees to prevent the Other Financing
Agreement Parties from making any borrowings under the Financing Agreement.

 
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5.
COVENANTS.

 
(a)           Best Efforts. Each Buyer shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Section 7 of
this Agreement. The Company shall use its best efforts to timely satisfy each of
the conditions to be satisfied by it as provided in Section 8 of this Agreement.
 
(b)           Form D and Blue Sky.  The Company shall 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. Without limiting
any other obligation of the Company under this Agreement, the Company shall
timely make all filings and reports relating to the offer and sale of the
Securities required under all applicable securities laws (including, without
limitation, all applicable federal securities laws and all applicable “Blue Sky”
laws), and the Company shall comply with all applicable federal, foreign, state
and local laws, statutes, rules, regulations and the like relating to the
offering and sale of the Securities to the Buyers.
 
(c)           Reporting Status. From the date of this Agreement until the
earlier to occur of (i) the date on which the Buyers shall have sold all of the
Registrable Securities or (ii) the five (5) year anniversary of the date of this
Agreement (such period is referred to herein as 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 no longer require or otherwise permit such
termination.
 
(d)           Use of Proceeds. The Company shall use the proceeds from the sale
of the Securities solely for working capital, sales and marketing, and research
and development.

(e)           Financial Information. The Company agrees to send the following to
each Investor (as defined in the Registration Rights Agreement) during the
Reporting Period unless the following are filed with the SEC through EDGAR and
are available to the public through the EDGAR system, (i) within one (1)
Business Day after the filing thereof with the SEC, a copy of its Annual Reports
on Form 10-K and Quarterly Reports on Form 10-Q, 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 copies of all press releases issued by the Company or any of
its Subsidiaries 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.

 
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(f)           Listing or Quotation.  The Company shall promptly secure the
listing or designation for quotation (as the case may be) of all of the
Registrable Securities upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed or
designated for quotation (as the case may be) (subject to official notice of
issuance) (but in no event later than the Closing Date) and shall maintain such
listing or designation for quotation (as the case may be) of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents on such national securities exchange or automated quotation system.
The Company shall maintain the Common Stock’s listing or designation for
quotation (as the case may be) on the Principal Market, The New York Stock
Exchange, the NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global
Market or the Nasdaq Capital Market (each, an “Eligible Market”). Neither the
Company nor any of its Subsidiaries shall take any action which could be
reasonably expected to result in the delisting or suspension of the Common Stock
on an Eligible Market. The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section 5(f).
 
(g)           Fees.  The Company shall reimburse Iroquois Master Fund Ltd.
(“Iroquois”) or its designee(s) for all costs and expenses incurred by it or its
affiliates in connection with the transactions contemplated by the Transaction
Documents (including, without limitation, all legal fees and disbursements in
connection therewith, structuring, documentation and implementation of the
transactions contemplated by the Transaction Documents and due diligence and
regulatory filings in connection therewith) in a non-accountable amount equal to
$60,000, which amount shall be withheld by Iroquois from its Purchase Price at
the Closing or paid by the Company on demand by Iroquois if Iroquois terminates
its obligations under this Agreement in accordance with Section 9 (as the case
may be), less $30,000 which was previously advanced to Iroquois by the Company.
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 payable to the Placement Agent, who is
the Company’s sole placement agent in connection with the transactions
contemplated by this Agreement). The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorneys’ 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. Notwithstanding anything to the contrary
contained in this Agreement, the Company acknowledges and agrees that the
Securities may be pledged by a Buyer 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 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. 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 a Buyer.

 
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(i)           Disclosure of Transactions and Other Material Information. The
Company shall, on or before 8:30 a.m., New York time, on the first (1st)
Business Day after the date of this Agreement, file a Current Report on Form 8-K
describing all the material terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and attaching all the
material Transaction Documents (including, without limitation, this Agreement
(and all exhibits and schedules to this Agreement, other than the Disclosure
Schedules), the form of Guaranties, the form of the Notes, the form of the
Warrants and the form of the Registration Rights Agreement) (including all
attachments, the “8-K Filing”). From and after the issuance of the 8-K Filing,
the Company shall have disclosed all material, non-public information (if any)
delivered to any of the Buyers by the Company or any of its Subsidiaries, or any
of their respective officers, directors, employees or agents in connection with
the transactions contemplated by the Transaction Documents. The Company shall
not, and the Company shall cause each of its Subsidiaries and each of its and
their respective officers, directors, employees and agents not to, provide any
Buyer with any material, non-public information regarding the Company or any of
its Subsidiaries from and after the issuance of the 8-K Filing without the
express prior written consent of such Buyer. In the event of a breach of any of
the foregoing covenants or any of the covenants contained in Section 5(o) by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents (as determined in the reasonable good faith
judgment of such Buyer), in addition to any other remedy provided herein or in
the Transaction Documents, such Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, non-public information without the prior approval by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Buyer shall have any liability to the
Company, any of 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, 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 the applicable Buyer, the Company shall not (and shall
cause each of its Subsidiaries and affiliates to not) disclose the name of such
Buyer in any filing (other than the 8-K Filing), announcement, release or
otherwise. Notwithstanding anything contained in this Agreement to the contrary
and without implication that the contrary would otherwise be true, the Company
expressly acknowledges and agrees that no Buyer has had, and no Buyer shall have
(unless expressly agreed to by a particular Buyer after the date hereof in a
written definitive and binding agreement executed by the Company and such
particular Buyer (it being understood and agreed that no Buyer may bind any
other Buyer with respect thereto)), any duty of confidentiality with respect to,
or a duty not to trade on the basis of, any information regarding the Company or
any of its Subsidiaries.
 
(j)           Additional Registration Statements. Until the Applicable Date (as
defined below) and at any time thereafter while any Registration Statement is
not effective or any prospectus contained therein is not available for use, the
Company shall not file a registration statement under the 1933 Act relating to
securities that are not the Registrable Securities. “Applicable Date” means the
first date on which the resale by the Buyers of all Registrable Securities is
covered by one or more effective Registration Statements (as defined in the
Registration Rights Agreement) (and each prospectus contained therein is
available for use on such date).

 
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(k)           Additional Issuance of Securities. The Company agrees that for the
period commencing on the date hereof and ending on the date immediately
following the thirty (30) Trading Day (as defined in the Series O Warrants)
anniversary of the Applicable Date (provided that such period shall be extended
by the number of days during such period and any extension thereof contemplated
by this proviso on which the Registration Statement is not effective or any
prospectus contained therein is not available for use) (the “Restricted
Period”), neither the Company nor any of its Subsidiaries shall directly or
indirectly issue, offer, sell, grant any option or right to purchase, or
otherwise dispose of (or announce any issuance, offer, sale, grant of any option
or right to purchase or other disposition of) any equity security or any
equity-linked or related security (including, without limitation, any “equity
security” (as that term is defined under Rule 405 promulgated under the 1933
Act), any Convertible Securities, any debt, any preferred stock or any purchase
rights) (any such issuance, offer, sale, grant, disposition or announcement
(whether occurring during the Restricted Period or at any time thereafter) is
referred to as a “Subsequent Placement”).  Notwithstanding the foregoing, this
Section 5(k) shall not apply in respect of the issuance of (A) shares of Common
Stock or standard options to purchase Common Stock to directors, officers or
employees of the Company in their capacity as such pursuant to an Approved Share
Plan (as defined below), provided that (1) all such issuances (taking into
account the shares of Common Stock issuable upon exercise of such options) after
the date hereof pursuant to this clause (A) and clause (G) do not, in the
aggregate, exceed more than 2,000,000 shares of Common Stock (adjusted for stock
splits, stock combinations and other similar transactions occurring after the
date of this Agreement) and (2) the exercise price of any such options is not
lowered, none of such options are amended to increase the number of shares
issuable thereunder and none of the terms or conditions of any such options are
otherwise materially changed in any manner that adversely affects any of the
Buyers; (B) shares of Common Stock issued upon the conversion or exercise of
Convertible Securities (other than standard options to purchase Common Stock
issued pursuant to an Approved Share Plan that are covered by clause (A) above)
issued prior to the date hereof, provided that the conversion or exercise (as
the case may be) of any such Convertible Security is made solely pursuant to the
conversion or exercise (as the case may be) provisions of such Convertible
Security that were in effect on the date immediately prior to the date of this
Agreement, the conversion or exercise price of any such Convertible Securities
(other than standard options to purchase Common Stock issued pursuant to an
Approved Share Plan that are covered by clause (A) above) is not lowered
(whether via amendment or through the operation of the terms of such Convertible
Security or any agreement relating thereto, including anti-dilution provisions),
none of such Convertible Securities are (other than standard options to purchase
Common Stock issued pursuant to an Approved Share Plan that are covered by
clause (A) above) (nor is any provision of any such Convertible Securities)
amended or waived in any manner (whether by the Company or the holder thereof)
to increase the number of shares issuable thereunder or decrease the conversion
or exercise price thereof and none of the terms or conditions of any such
Convertible Securities (other than standard options to purchase Common Stock
issued pursuant to an Approved Share Plan that are covered by clause (A) above)
are otherwise materially changed or waived (whether by the Company or the holder
thereof) in any manner that adversely affects any of the Buyers; (C) the Notes;
(D) the Conversion Shares; (E) the Warrants; (F) the Warrant Shares; and (G)
shares of Common Stock or Convertible Securities to consultants and service
providers in the ordinary course of business, provided that (1) all such
issuances (taking into account the shares of Common Stock issuable upon exercise
of such options) after the date hereof pursuant to clause (A) and this clause
(G) do not, in the aggregate, exceed more than 2,000,000 shares of Common Stock
(adjusted for stock splits, stock combinations and other similar transactions
occurring after the date of this Agreement) and (2) the conversion, exercise or
exchange price of any such Convertible Securities is not lowered, none of such
Convertible Securities are amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such Convertible
Securities are otherwise materially changed in any manner that adversely affects
any of the Buyers (each of the foregoing in clauses (A) through (G),
collectively the “Excluded Securities”). Furthermore, notwithstanding the
foregoing, this Section 5(k) shall not apply in respect of the issuance of
securities in connection with a Permitted Issuance. “Approved Share Plan” means
any employee benefit plan which has been approved by the board of directors of
the Company prior to or subsequent to the date hereof pursuant to which shares
of Common Stock and standard options to purchase Common Stock may be issued to
any employee, officer or director for services provided to the Company in their
capacity as such. “Convertible Securities” means any capital stock or other
security of the Company or any of its Subsidiaries that is at any time and under
any circumstances directly or indirectly convertible into, exercisable or
exchangeable for, or which otherwise entitles the holder thereof to acquire, any
capital stock or other security of the Company (including, without limitation,
Common Stock) or any of its Subsidiaries. “Permitted Issuance” shall mean a
transaction to be completed on or prior to December 31, 2011, pursuant to which
the Company will issue units at a price of $0.12 per unit, with each unit
consisting of one share of Common Stock and one warrant to purchase a share of
Common Stock (but no other securities) at an exercise price of $0.15 per share,
to certain non-institutional investors, pursuant to the exemption provided under
Section 4(2) of the 1933 Act, for consideration consisting solely of cash, and
which aggregate purchase price shall not exceed $2,000,000.

 
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(l)           Reservation of Shares. So long as any of the Notes or Warrants
remain outstanding or unexpired and unexercised, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than 133% of (i) the maximum number of Conversion Shares
issuable upon conversion of the Notes (assuming for purposes hereof that the
Notes are convertible at the initial Conversion Price (as defined in the Notes)
and without taking into account any limitations on the conversion of the Notes
set forth therein) and (ii) the maximum number of Warrant Shares issuable upon
exercise of the Warrants (assuming that all Warrants are exercised and without
taking into account any limitations on the exercise of the Warrants set forth
therein).
 
(m)           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.

 
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(n)           Variable Rate Transaction. Until none of the Notes and Warrants
remain outstanding or unexpired and unexercised, the Company and each Subsidiary
shall be prohibited from effecting or entering into an agreement to effect any
Subsequent Placement involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company or any Subsidiary (i)
issues or sells any Convertible Securities either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of, or quotations for, the shares of Common Stock at any time
after the initial issuance of such Convertible Securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such Convertible Securities or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock, other than
pursuant to a customary “weighted average” anti-dilution provision or (ii)
enters into any agreement (including, without limitation, an “equity line of
credit” or an “at the market offering”) whereby the Company or any Subsidiary
may sell securities at a future determined price (other than standard and
customary “preemptive” or “participation” rights). Each Buyer shall be entitled
to obtain injunctive relief against the Company and its Subsidiaries to preclude
any such issuance, which remedy shall be in addition to any right to collect
damages.
 
(o)           Participation Right. From the date hereof through the one year
anniversary of the Closing Date, neither the Company nor any of its Subsidiaries
shall, directly or indirectly, effect any Subsequent Placement unless the
Company shall have first complied with this Section 5(o). The Company
acknowledges and agrees that the right set forth in this Section 5(o) is a right
granted by the Company, separately, to each Buyer.
 
(i)           At least five (5) Trading Days prior to any proposed or intended
Subsequent Placement, the Company shall deliver to each Buyer a written notice
of its proposal or intention to effect a Subsequent Placement (each such notice,
a “Pre-Notice”), which Pre-Notice shall not contain any information (including,
without limitation, material, non-public information) other than: (i) a
statement that the Company proposes or intends to effect a Subsequent Placement,
(ii) a statement that the statement in clause (i) above does not constitute
material, non-public information and (iii) a statement informing such Buyer that
it is entitled to receive an Offer Notice (as defined below) with respect to
such Subsequent Placement upon its written request. Upon the written request of
a Buyer within three (3) Trading Days after the Company’s delivery to such Buyer
of such Pre-Notice, and only upon a written request by such Buyer, the Company
shall promptly, but no later than one (1) Trading Day after such request,
deliver to such Buyer an irrevocable written notice (the “Offer Notice”) of any
proposed or intended issuance or sale or exchange (the “Offer”) of the
securities being offered (the “Offered Securities”) in a Subsequent Placement,
which Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued, sold or
exchanged, and the number or amount of the Offered Securities to be issued, sold
or exchanged, (y) identify the Persons (if known) to which or with which the
Offered Securities are to be offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with such Buyer in accordance with the terms of
the Offer 100% of the Offered Securities, provided that the number of Offered
Securities which such Buyer shall have the right to subscribe for under this
Section 5(o) shall be (a) based on such Buyer’s pro rata portion of the
aggregate original principal amount of the Notes purchased hereunder by all
Buyers (the “Basic Amount”), and (b) with respect to each Buyer that elects to
purchase its Basic Amount, any additional portion of the Offered Securities
attributable to the Basic Amounts of other Buyers as such Buyer shall indicate
it will purchase or acquire should the other Buyers subscribe for less than
their Basic Amounts (the “Undersubscription Amount”).

 
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(ii)           To accept an Offer, in whole or in part, such Buyer must deliver
a written notice to the Company prior to the end of the fifth (5th) Business Day
after such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting
forth the portion of such Buyer’s Basic Amount that such Buyer elects to
purchase and, if such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then such Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the “Available
Undersubscription Amount”), such Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts (but in no event shall it be greater than such Buyer’s specified
Undersubscription Amount), subject to rounding by the Company to the extent it
deems reasonably necessary. Notwithstanding the foregoing, if the Company
desires to modify or amend the terms and conditions of the Offer prior to the
expiration of the Offer Period, the Company may deliver to each Buyer a new
Offer Notice and the Offer Period shall expire on the fifth (5th) Business Day
after such Buyer’s receipt of such new Offer Notice.

(iii)           The Company shall have ten (10) days from the expiration of the
Offer Period above (i) to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by a
Buyer (the “Refused Securities”) pursuant to a definitive agreement(s) (the
“Subsequent Placement Agreement”), but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
more favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Offer Notice and (ii) to publicly announce
(a) the execution of such Subsequent Placement Agreement, and (b) either (x) the
consummation of the transactions contemplated by such Subsequent Placement
Agreement or (y) the termination of such Subsequent Placement Agreement, which
shall be filed with the SEC on a Current Report on Form 8-K with such Subsequent
Placement Agreement and any documents contemplated therein filed as exhibits
thereto.

(iv)           In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 5(o)(iii) above), then such Buyer may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to purchase pursuant
to Section 5(o)(iii) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to this Section 5(o) prior to such reduction) and
(ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the number or amount
of Offered Securities specified in its Notice of Acceptance, the Company may not
issue, sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Buyers in accordance with Section 5(o)(i) above.

 
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(v)           Upon the closing of the issuance, sale or exchange of all or less
than all of the Refused Securities, such Buyer shall acquire from the Company,
and the Company shall issue to such Buyer, the number or amount of Offered
Securities specified in its Notice of Acceptance. The purchase by such Buyer of
any Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and such Buyer of a separate purchase agreement relating
to such Offered Securities reasonably satisfactory in form and substance to such
Buyer and its counsel.

(vi)           Any Offered Securities not acquired by a Buyer or other Persons
in accordance with this Section 5(o) may not be issued, sold or exchanged until
they are again offered to such Buyer under the procedures specified in this
Agreement.

(vii)           The Company and each Buyer agree that if any Buyer elects to
participate in the Offer, neither the Subsequent Placement Agreement with
respect to such Offer nor any other transaction documents related thereto
(collectively, the “Subsequent Placement Documents”) shall include any term or
provision whereby such Buyer shall be required to agree to any restrictions on
trading as to any securities of the Company or be required to consent to any
amendment to or termination of, or grant any waiver or release or the like under
or in connection with, any agreement previously entered into with the Company or
any instrument received from the Company.

(viii)           Notwithstanding anything to the contrary in this Section 5(o)
and unless otherwise agreed to by such Buyer, the Company shall either confirm
in writing to such Buyer that the transaction with respect to the Subsequent
Placement has been abandoned or shall publicly disclose its intention to issue
the Offered Securities, in either case, in such a manner such that such Buyer
will not be in possession of any material, non-public information, by the fifth
(5th) Business Day following delivery of the Offer Notice. If by such fifth
(5th) Business Day, no public disclosure regarding a transaction with respect to
the Offered Securities has been made, and no notice regarding the abandonment of
such transaction has been received by such Buyer, such transaction shall be
deemed to have been abandoned and such Buyer shall not be in possession of any
material, non-public information with respect to the Company or any of its
Subsidiaries. Should the Company decide to pursue such transaction with respect
to the Offered Securities, the Company shall provide such Buyer with another
Offer Notice in accordance with, and subject to, the terms of this Section 5(o)
and such Buyer will again have the right of participation set forth in this
Section 5(o). The Company shall not be permitted to deliver more than one Offer
Notice to such Buyer in any sixty (60) day period, except as expressly
contemplated by the last sentence of Section 5(o)(ii).

 
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(ix)           The restrictions contained in this Section 5(o) shall not apply
in connection with the issuance of any Excluded Securities or any Permitted
Issuance. The Company shall not circumvent the provisions of this Section 5(o)
by providing terms or conditions to one Buyer that are not provided to all
Buyers.
 
(p)           Passive Foreign Investment Company. The Company shall conduct its
business in such a manner as will ensure that the Company will not be deemed to
constitute a passive foreign investment company within the meaning of Section
1297 of the U.S. Internal Revenue Code of 1986, as amended.
 
(q)           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, any securities of the
Company without the prior express written consent of the Buyers.
 
(r)           Corporate Existence. For so long as any of the Notes or Warrants
remain outstanding or unexpired and unexercised, 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 and the Warrants.
 
(s)           Issuance of Equity Other Than for Cash. For so long as any of the
Notes or Warrants remain outstanding or unexpired and unexercised, the Company
shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, issue shares of capital stock of the Company or any Subsidiary or
securities convertible or exercisable into or exchangeable for shares of capital
stock of the Company or any Subsidiary (collectively, “Equity Securities”),
except (i) in a transaction where all such shares of capital stock are issued
solely for cash or (ii) the issuance of shares of Common Stock or standard
options to purchase Common Stock to directors, officers, employees, consultants
or service providers of the Company in their capacities as such pursuant to an
Approved Share Plan (which clause (ii) shall be subject to the limitations of
Section 5(k) during the relevant period set forth thereunder). For the avoidance
of doubt, so long as any of the Notes or Warrants remain outstanding or
unexpired and unexercised, the Company shall not, and the Company shall cause
each of its Subsidiaries to not, directly or indirectly, issue shares of such
capital stock in exchange for the satisfaction or cancellation, in whole or in
part, of any other securities or instruments, or any receivables, claims,
judgments or other liabilities of the Company or any Subsidiary.
 
(t)           Extension of Factoring Agreement. The Company shall amend, and
shall cause the other parties thereto to amend, the Financing Agreement, dated
December 19, 2005, as amended as of the date hereof (as amended as of the
Closing Date, and without taking into account any subsequent amendments, the
“Financing Agreement”), between the Company, certain Subsidiaries and former
Subsidiaries of the Company, and Sand Hill Finance, LLC (“Sand Hill”), in order
to (i) extend the maturity or due date of any obligations under the Financing
Agreement to a date that is no less than 91 days after all obligations under the
Note have been satisfied in accordance with the terms of the Note, (ii) consent
to and waive any and all rights Sand Hill may have under the Financing Agreement
that may restrict or prevent the Company and its Subsidiaries from entering into
the Transaction Documents and consummating the transactions contemplated
thereby, (iii) permit the Company to make payments to Sand Hill of up to $25,000
per month to be applied to the outstanding amounts under the Financing
Agreement, including accrued interest, and (iv) require Sand Hill to forbear on
any existing and future remedies it may have under the Financing Agreement other
than in respect of an event of default resulting from a violation of the
Company’s obligation under clause (iii) above (such amendments, the “Financing
Agreement Amendments”).

 
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(u)           Waivers from Holders of Series B Preferred Stock. The Company
shall receive a consent and waiver from the holders of the Series B Preferred
Stock in order to permit the Company and its Subsidiaries to enter into the
Transaction Documents and consummate any and all transactions contemplated
thereby (such waivers, the “Series B Waivers”).
 
6.
REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

 
(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 and the Warrants
in which the Company shall record the name and address of the Person in whose
name the Notes and the Warrants have been issued (including the name and address
of each transferee), the principal amount of the Notes held by such Person, the
number of Conversion Shares issuable upon conversion of the Notes and the number
of Warrant Shares issuable upon exercise of the Warrants held by such Person.
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 in a form
acceptable to each of the Buyers (the “Irrevocable Transfer Agent Instructions”)
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 and the Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or the exercise of the Warrants (as the case may be).
The Company represents and warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 6(b), will
be given by the Company to its transfer agent with respect to the Securities,
and that the Securities shall otherwise be freely transferable on the books and
records of the Company, as applicable, 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 3(g), 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 or Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or in compliance
with Rule 144, the transfer agent shall issue such shares to such Buyer,
assignee or transferee (as the case may be) without any restrictive legend in
accordance with Section 6(d) below. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to each Buyer.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 6(b) will be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this
Section 6(b), that each 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. The Company
shall cause its counsel to issue the legal opinion referred to in the
Irrevocable Transfer Agent Instructions to the Company’s transfer agent on each
Effective Date (as defined in the Registration Rights Agreement). If a Buyer or
any subsequent holder of the Securities proposes to transfer the Securities held
by such Person pursuant to Rule 144, the Company shall provide necessary
opinions to its transfer agent, if requested, provided that such Buyer or such
subsequent holder, as the case may be, provides the necessary representations as
requested by the Company’s counsel. Any fees (with respect to the transfer
agent, counsel to the Company or otherwise) associated with the issuance of such
opinion or the removal of any legends on any of the Securities shall be borne by
the Company.

 
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(c)           Legends. Each Buyer understands that the Securities have been
issued (or will be issued in the case of the Conversion Shares and the Warrant
Shares) pursuant to an exemption from registration or qualification under the
1933 Act and applicable state securities laws, and except as set forth in
Section 6(d) below, the Securities 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] [EXERCISABLE]
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 TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY
ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD OR ELIGIBLE TO BE 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.

 
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(d)           Removal of Legends. Certificates evidencing Securities shall not
be required to contain the legend set forth in Section 6(c) above or any other
legend (i) while a registration statement (including a Registration Statement)
covering the resale of such Securities is effective under the 1933 Act, (ii)
following any sale of such Securities pursuant to Rule 144 (assuming the
transferor is not an affiliate of the Company), (iii) if such Securities are
eligible to be sold, assigned or transferred under Rule 144 (provided that a
Buyer provides the Company with reasonable assurances that such Securities are
eligible for sale, assignment or transfer under Rule 144 which shall not include
an opinion of counsel), (iv) in connection with a sale, assignment or other
transfer (other than under Rule 144), provided that such Buyer provides the
Company with an opinion of counsel to such Buyer, 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 (v) if such legend is not required under applicable requirements of the 1933
Act (including, without limitation, controlling judicial interpretations and
pronouncements issued by the SEC). If a legend is not required pursuant to the
foregoing, the Company shall no later than two (2) Trading Days following the
delivery by a Buyer to the Company or the transfer agent (with notice to the
Company) of a legended certificate representing such Securities (endorsed or
with stock powers attached, signatures guaranteed, and otherwise in form
necessary to affect the reissuance and/or transfer, if applicable), together
with any other deliveries from such Buyer as may be required above in this
Section 6(d), as directed by such Buyer, either: (A) provided that the Company’s
transfer agent is participating in the DTC Fast Automated Securities Transfer
Program and such Securities are Conversion Shares or Warrant Shares, credit the
aggregate number of shares of Common Stock to which such Buyer shall be entitled
to such Buyer’s or its designee’s balance account with DTC through its
Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is
not participating in the DTC Fast Automated Securities Transfer Program, issue
and deliver (via reputable overnight courier) to such Buyer, a certificate
representing such Securities that is free from all restrictive and other
legends, registered in the name of such Buyer or its designee (the date by which
such credit is so required to be made to the balance account of such Buyer’s or
such Buyer’s nominee with DTC or such certificate is required to be delivered to
such Buyer pursuant to the foregoing is referred to herein as the “Required
Delivery Date”).
 
(e)           Failure to Timely Deliver; Buy-In. If the Company fails to (i)
issue and deliver (or cause to be delivered) to a Buyer by the Required Delivery
Date a certificate representing the Securities so delivered to the Company by
such Buyer that is free from all restrictive and other legends or (ii) credit
the balance account of such Buyer’s or such Buyer’s nominee with DTC for such
number of Conversion Shares or Warrant Shares so delivered to the Company, then,
in addition to all other remedies available to such Buyer, the Company shall pay
in cash to such Buyer on each Trading Day after the Required Delivery Date that
the issuance or credit of such shares is not timely effected an amount equal to
1% of the product of (A) the number of shares of Common Stock not so delivered
or credited (as the case may be) to such Buyer or such Buyer’s nominee
multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the Required Delivery Date. In addition to the foregoing,
if the Company fails to so properly deliver such unlegended certificates or so
properly credit the balance account of such Buyer’s or such Buyer’s nominee with
DTC by the Required Delivery Date, and if on or after the Required Delivery Date
such Buyer (or any other Person in respect, or on behalf, of such Buyer)
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Buyer of all or any portion of the
number of shares of Common Stock, or a sale of a number of shares of Common
Stock equal to all or any portion of the number of shares of Common Stock, that
such Buyer so anticipated receiving from the Company without any restrictive
legend, then, in addition to all other remedies available to such Buyer, the
Company shall, within three (3) Trading Days after such Buyer’s request and in
such Buyer’s sole discretion, either (i) pay cash to such Buyer in an amount
equal to such Buyer’s total purchase price (including brokerage commissions and
other out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (including brokerage commissions and other out-of-pocket expenses, if
any) (the “Buy-In Price”), at which point the Company’s obligation to so deliver
such certificate or credit such Buyer’s balance account shall terminate and such
shares shall be cancelled, or (ii) promptly honor its obligation to so deliver
to such Buyer a certificate or certificates or credit such Buyer’s DTC account
representing such number of shares of Common Stock that would have been so
delivered if the Company timely complied with its obligations hereunder and pay
cash to such Buyer in an amount equal to the excess (if any) of the Buy-In Price
over the product of (A) such number of shares of Conversion Shares or Warrant
Shares (as the case may be) that the Company was required to deliver to such
Buyer by the Required Delivery Date multiplied by (B) the lowest Closing Sale
Price (as defined in the Series O Warrants) of the Common Stock on any Trading
Day during the period commencing on the date of the delivery by such Buyer to
the Company of the applicable Conversion Shares or Warrant Shares (as the case
may be) and ending on the date of such delivery and payment under this clause
(ii).

 
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7.
CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 
(a)           The obligation of the Company hereunder to issue and sell the
applicable Securities 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 and each other Buyer shall have executed each of the
other 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 Iroquois, at the time of the
Closing, the amounts withheld pursuant to Section 5(g)) for the Securities 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 originally made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such 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.
 
8.
CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

 
(a)           The obligation of each Buyer hereunder to purchase the applicable
Securities 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 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:

 
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(i)           The Company and each Subsidiary (as the case may be) shall have
duly executed and delivered to such Buyer each of the Transaction Documents to
which it is a party and the Company shall have duly executed and delivered to
such Buyer the Securities being purchased by such Buyer at the Closing pursuant
to this Agreement (which, in relation to the Closing, shall be (A) the aggregate
original principal amount of the Notes set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers, (B) a Series O Warrant to initially
acquire up to the aggregate number of Series O Warrant Shares as is set forth
opposite such Buyer’s name in column (4) on the Schedule of Buyers, (C) a Series
P Warrant to initially acquire up to the aggregate number of Series P Warrant
Shares as is set forth opposite such Buyer’s name in column (5) on the Schedule
of Buyers, and (D) a Series Q Warrant to initially acquire up to the aggregate
number of Series Q Warrant Shares as is set forth opposite such Buyer’s name in
column (6) on the Schedule of Buyers).
 
(ii)          Such Buyer shall have received the opinion of Schneider Weinberger
LLP, the Company’s counsel, dated as of the Closing Date, in the form and
substance acceptable to such Buyer and addressing such legal matters as such
Buyers may reasonably request.
 
(iii)         The Company shall have delivered to such Buyer a copy of the
Irrevocable Transfer Agent Instructions, in the form and substance acceptable to
such Buyer, 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, qualification and/or good standing of the Company and
each of its Subsidiaries in each such entity’s jurisdiction of formation and
each jurisdiction in which they are qualified (or should be qualified) to do
business, issued by the Secretary of State (or comparable office) of such
jurisdictions, of formation, qualification and/or good standing as of a date
within ten (10) days of the Closing Date.
 
(v)         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
Company’s jurisdiction of incorporation within ten (10) days of the Closing
Date.
 
(vi)        The Company and each Subsidiary shall have delivered to such Buyer
certificates, in the form acceptable to such Buyer, executed by the Secretary of
the Company and each Subsidiary and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 4(b) as adopted by the Company’s and each
Subsidiary’s board of directors in a form reasonably acceptable to such Buyer,
(ii) the Certificate of Incorporation of the Company and the organizational
documents of each Subsidiary and (iii) the Bylaws of the Company and the bylaws
of each Subsidiary, each as in effect at the Closing.
 
(vii)       Each and every representation and warranty of the Company shall be
true and correct as of the date when made and as of the Closing Date as though
originally made at that time (except for representations and warranties that
speak as of a specific date, which shall be true and correct as of such date)
and the Company shall have performed, satisfied and complied in all respects
with the covenants, agreements and conditions required 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
acceptable to such Buyer.

 
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(viii)      The Company shall have delivered to such Buyer a certificate from
the Company’s transfer agent certifying the number of shares of Common Stock
outstanding on the Closing Date immediately prior to the Closing and certain
other matters typically covered by a transfer agent’s certificate.
 
(ix)         The Common Stock (I) shall be designated for quotation or listed on
the Principal Market and (II) shall not have been suspended, as of the Closing
Date, by the SEC or the Principal Market from trading or quotation on the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the Closing Date (except as disclosed in the Disclosure
Schedules delivered in connection with the execution of this Agreement), either
(A) in writing by the SEC or the Principal Market or (B) by falling below the
minimum maintenance requirements, if any, of the Principal Market.
 
(x)          The Company shall have obtained all governmental, regulatory or
third party consents and approvals, if any, necessary for the sale of the
Securities, including without limitation, those required by the Principal
Market, if any.
 
(xi)         No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.
 
(xii)        Since the date of execution of this Agreement, no event or series
of events shall have occurred that reasonably would have or result in a Material
Adverse Effect.
 
(xiii)       The Company shall have obtained approval of the Principal Market to
list or designate for quotation (as the case may be) the Conversion Shares and
the Warrant Shares.
 
(xiv)       On the Closing Date, the Financing Agreement Amendments shall have
been executed and delivered and be in effect on such date.
 
(xv)        On the Closing Date, the Series B Waivers shall have been executed
and delivered, and such Series B Waivers shall be in effect on the Closing Date.
 
(xvi)       The Company and its Subsidiaries shall have delivered to such Buyer
such other documents, instruments or certificates relating to the transactions
contemplated by this Agreement as such Buyer or its counsel may reasonably
request.
 
 
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9.
TERMINATION.

 
In the event that the Closing shall not have occurred with respect to a Buyer
within ten (10) days after the date hereof, then such Buyer shall have the right
to terminate its obligations under this Agreement with respect to itself at any
time on or after the close of business on such date without liability of such
Buyer to any other party; provided, however, (i) the right to terminate this
Agreement under this Section 9 shall not be available to such Buyer if the
failure of the transactions contemplated by this Agreement to have been
consummated by such date is the result of such Buyer’s breach of this Agreement
and (ii) the abandonment of the sale and purchase of the Notes and the Warrants
shall be applicable only to such Buyer providing such written notice, provided
further that no such termination shall affect any obligation of the Company
under this Agreement to reimburse such Buyer for the expenses described in
Section 5(g) above. Nothing contained in this Section 9 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents.

10.
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. 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. Nothing contained herein shall
be deemed or operate to preclude any Buyer from bringing suit or taking other
legal action against the Company in any other jurisdiction to collect on the
Company’s obligations to such Buyer or to enforce a judgment or other court
ruling in favor of such Buyer. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT
MAY HAVE TO, 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. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
signature page were an original thereof.

 
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(c)           Headings; Gender. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Unless the context clearly indicates
otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,”
“includes,” “include” and words of like import shall be construed broadly as if
followed by the words “without limitation.”  The terms “herein,” “hereunder,”
“hereof” and words of like import refer to this entire Agreement instead of just
the provision in which they are found.
 
(d)           Severability. If any provision of this Agreement is prohibited by
law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest extent
that it would be valid and enforceable, and the invalidity or unenforceability
of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s). Notwithstanding anything to the contrary contained
in this Agreement or any other Transaction Document (and without implication
that the following is required or applicable), it is the intention of the
parties that in no event shall amounts and value paid by the Company and/or its
Subsidiaries (as the case may be), or payable to or received by any of the
Buyers, under the Transaction Documents (including without limitation, any
amounts that would be characterized as “interest” under applicable law) exceed
amounts permitted under any applicable law. Accordingly, if any obligation to
pay, payment made to any Buyer, or collection by any Buyer pursuant the
Transaction Documents is finally judicially determined to be contrary to any
such applicable law, such obligation to pay, payment or collection shall be
deemed to have been made by mutual mistake of such Buyer, the Company and its
Subsidiaries and such amount shall be deemed to have been adjusted with
retroactive effect to the maximum amount or rate of interest, as the case may
be, as would not be so prohibited by the applicable law. Such adjustment shall
be effected, to the extent necessary, by reducing or refunding, at the option of
such Buyer, the amount of interest or any other amounts which would constitute
unlawful amounts required to be paid or actually paid to such Buyer under the
Transaction Documents. For greater certainty, to the extent that any interest,
charges, fees, expenses or other amounts required to be paid to or received by
such Buyer under any of the Transaction Documents or related thereto are held to
be within the meaning of “interest” or another applicable term to otherwise be
violative of applicable law, such amounts shall be pro-rated over the period of
time to which they relate.

 
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(e)           Entire Agreement; Amendments. This Agreement, the other
Transaction Documents, the Disclosure Schedules and the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
supersede all other prior oral or written agreements between the Buyers, the
Company, its Subsidiaries, their affiliates and Persons acting on their behalf
solely with respect to the matters contained herein and therein, and this
Agreement, the other Transaction Documents, the Disclosure Schedules and the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein contain the entire understanding of the parties
solely with respect to the matters covered herein and therein; provided,
however, nothing contained in this Agreement or any other Transaction Document
shall (or shall be deemed to) (i) have any effect on any agreements any Buyer
has entered into with, or any instruments any Buyer has received from, the
Company or any of its Subsidiaries prior to the date hereof with respect to any
prior investment made by such Buyer in the Company or (ii) waive, alter, modify
or amend in any respect any obligations of the Company or any of its
Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in
any agreement entered into prior to the date hereof between or among the Company
and/or any of its Subsidiaries and any Buyer, or any instruments any Buyer
received from the Company and/or any of its Subsidiaries prior to the date
hereof, and all such agreements and instruments shall continue in full force and
effect. 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. For clarification purposes, the Recitals are part of
this Agreement. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the Required Buyers (as defined
below), and any amendment to any provision of this Agreement made in conformity
with the provisions of this Section 10(e) shall be binding on all Buyers and
holders of Securities, as applicable, provided that no such amendment shall be
effective to the extent that it (1) applies to less than all of the holders of
the Securities then outstanding or (2) imposes any obligation or liability on
any Buyer without such Buyer’s prior written consent (which may be granted or
withheld in such Buyer’s sole discretion). No waiver shall be effective unless
it is in writing and signed by an authorized representative of the waiving
party, provided that the Required Buyers may waive any provision of this
Agreement, and any waiver of any provision of this Agreement made in conformity
with the provisions of this Section 10(e) shall be binding on all Buyers and
holders of Securities, as applicable, provided that no such waiver shall be
effective to the extent that it (1) applies to less than all of the holders of
the Securities then outstanding (unless a party gives a waiver as to itself
only) or (2) imposes any obligation or liability on any Buyer without such
Buyer’s prior written consent (which may be granted or withheld in such Buyer’s
sole discretion). 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, all holders of Notes or all holders of
the Warrants (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, any
Subsidiary or otherwise. As a material inducement for each Buyer to enter into
this Agreement, the Company expressly acknowledges and agrees that (i) no due
diligence or other investigation or inquiry conducted by a Buyer, any of its
advisors or any of its representatives shall affect such Buyer’s right to rely
on, or shall modify or qualify in any manner or be an exception to any of, the
Company’s representations and warranties contained in this Agreement or any
other Transaction Document and (ii) unless a provision of this Agreement or any
other Transaction Document is expressly preceded by the phrase “except as
disclosed in the SEC Documents,” nothing contained in any of the SEC Documents
shall affect such Buyer’s right to rely on, or shall modify or qualify in any
manner or be an exception to any of, the Company’s representations and
warranties contained in this Agreement or any other Transaction Document.
“Required Buyers” means each of the following: (i) Buyers having Purchase Prices
in the aggregate that are at least equal to a majority of the aggregate Purchase
Prices for all Buyers and (ii) Iroquois.

 
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(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, if
delivered personally; (ii) when sent, if sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); (iii) when sent, if sent by e-mail (provided
that such sent e-mail is kept on file (whether electronically or otherwise) by
the sending party and the sending party does not receive an automatically
generated message from the recipient’s e-mail server that such e-mail could not
be delivered to such recipient) and (iv) if sent by overnight courier service,
one (1) Business Day after deposit with an overnight courier service with next
day delivery specified, in each case, properly addressed to the party to receive
the same. The addresses, facsimile numbers and e-mail addresses for such
communications shall be:
 
If to the Company:
 
IceWEB, Inc.
22900 Shaw Road, Suite 111
Sterling, VA
Telephone:  (571) 287-2388
Facsimile:  (571) 287-2396
Attention:  Chief Executive Officer

With a copy (for informational purposes only) to:
 
Schneider Weinberger, LLP
2200 Corporate Blvd. N.W., Suite 210
Boca Raton, FL 33431
Telephone:  (561) 362-9595
Facsimile:  (561) 362-9612
Attention:  Jim Schneider

If to the Transfer Agent:
 
Olde Monmouth Stock Transfer Agent
200 Memorial Parkway
Atlantic Highlands, NJ  07716
Telephone:  (732) 872-2727
Facsimile:  (732) 872-2728
Attention:  Matt Troster

If to a Buyer, to its address, facsimile number or e-mail address set forth on
the Schedule of Buyers, with copies to such Buyer’s representatives as set forth
on the Schedule of Buyers,
 
 
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with a copy (for informational purposes only) to:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
666 Third Avenue
New York, NY 10017
Telephone:  (212) 935-3000
Facsimile:  (212) 983-3115

 
Attention: 
Kenneth R. Koch, Esq.

Jeffrey P. Schultz, Esq.
 
or to such other address, facsimile number or e-mail address 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, provided that Mintz Levin shall only be provided copies of notices
sent to Iroquois. 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 and recipient facsimile number 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 (iv) above, respectively. A copy of the e-mail transmission containing the
time, date and recipient e-mail address shall be rebuttable evidence of receipt
by e-mail in accordance with clause (iii) above.
 
(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, as contemplated below, any assignee of any of the Securities. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Required Buyers, including, without
limitation, by way of a Fundamental Transaction (as defined in the Series O
Warrants) (unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Notes and the Warrants). A
Buyer may assign some or all of its rights hereunder in connection with any
transfer of any of its Securities without the consent of the Company, in which
event such assignee shall be deemed to be a Buyer hereunder with respect to such
assigned rights.
 
(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, other than the Indemnitees referred to in Section 10(k).
 
(i)           Survival. The representations, warranties, agreements and
covenants 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.

 
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(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 holder of any 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 or any Subsidiary in any of the
Transaction Documents, (b) any breach of any covenant, agreement or obligation
of the Company or any Subsidiary contained in any of the Transaction Documents
or (c) any cause of action, suit, proceeding 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 or any Subsidiary) or which otherwise
involves such Indemnitee that arises out of or results from (i) the execution,
delivery, performance or enforcement of any of the Transaction Documents, (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 properly made by such Buyer pursuant to Section 5(i),‎5(i) or (iv)
the status of such Buyer or holder of the Securities either as an investor in
the Company pursuant to the transactions contemplated by the Transaction
Documents or as a party to this Agreement (including, without limitation, as a
party in interest or otherwise in any action or proceeding for injunctive or
other equitable relief). To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 10(k) shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.
 
(l)            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. No specific
representation or warranty shall limit the generality or applicability of a more
general representation or warranty. Each and every reference to share prices,
shares of Common Stock and any other numbers in this Agreement that relate to
the Common Stock shall be automatically adjusted for stock splits, stock
combinations and other similar transactions that occur with respect to the
Common Stock after the date of this Agreement.
 
(m)          Remedies.  Each Buyer and each holder of any 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 or any Subsidiary fails to perform,
observe, or discharge any or all of its or such Subsidiary’s (as the case may
be) 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 specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.

 
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(n)           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 or any Subsidiary 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 or such Subsidiary (as the case may be), any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.
 
(o)           Payment Set Aside; Currency. To the extent that the Company makes
a payment or payments to any Buyer hereunder or pursuant to any of the other
Transaction Documents or any of 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. Unless otherwise expressly
indicated, all dollar amounts referred to in this Agreement and the other
Transaction Documents are in United States Dollars (“U.S. Dollars”), and all
amounts owing under this Agreement and all other Transaction Documents shall be
paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall
be converted into the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to
any amount of currency to be converted into U.S. Dollars pursuant to this
Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation.

 
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(p)           Independent Nature of Buyers’ Obligations and Rights.  The
obligations of each Buyer under the Transaction Documents 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 group or entity, or create a presumption that the Buyers are in
any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Transaction Documents or any
matters, and the Company acknowledges that the Buyers are not acting in concert
or as a group, and the Company shall not assert any such claim, with respect to
such obligations or the transactions contemplated by the Transaction Documents.
The decision of each Buyer to purchase Securities pursuant to the Transaction
Documents has been made by such Buyer independently of any other Buyer. Each
Buyer acknowledges that no other Buyer has acted as agent for such Buyer in
connection with such Buyer making its investment hereunder and that no other
Buyer will be acting as agent of such Buyer in connection with monitoring such
Buyer’s investment in the Securities or enforcing its rights under the
Transaction Documents. The Company and each Buyer confirms that each Buyer has
independently participated with the Company and its Subsidiaries 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. The use of a single agreement to effectuate the
purchase and sale of the Securities contemplated hereby was solely in the
control of the Company, not the action or decision of any Buyer, and was done
solely for the convenience of the Company and its Subsidiaries and not because
it was required or requested to do so by any Buyer.  It is expressly understood
and agreed that each provision contained in this Agreement and in each other
Transaction Document is between the Company, each Subsidiary and a Buyer,
solely, and not between the Company, its Subsidiaries and the Buyers
collectively and not between and among the Buyers.
 
[signature pages follow]

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

 
COMPANY:
     
ICEWEB, INC.
     
By:
     
Name:
 
   
Title:
  

 
 

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

 
BUYERS:
 
 
IROQUOIS MASTER FUND LTD.
     
By:  Iroquois Capital Management, L.L.C.
 
Its:  Investment Manager
         
By:
Joshua Silverman, Authorized Signatory

 
 

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

 
OTHER BUYERS:
         
   
     
By:
   
Name:
 
Title:

 
 
 

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SCHEDULE OF BUYERS

 (1)
 
 (2)
 
 (3)
   
 (4)
   
 (5)
   
 (6)
   
 (7)
 
 (8)
                                     
Buyer
 
Address and Facsimile
Number
 
Principal Amount
of Note
   
Number of 
Series O Warrant
Shares
   
Number of 
Series P Warrant
Shares
   
Number of
 Series Q Warrant
Shares
   
Purchase Price
 
Legal Representative’s
Address and Facsimile
Number
                                     
Iroquois Master Fund Ltd.
 
Iroquois Master Fund Ltd.
641 Lexington Avenue, 26th  Floor
New York, New York  10022
Facsimile: (212) 207-3452
  $ 1,322,500       7,779,412       7,779,412       7,779,412     $ 1,150,000  
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
666 Third Avenue
New York, NY 10017
Attention:  Kenneth R. Koch & Jeffrey P. Schultz
Facsimile: (212) 983-3115
Alpha Capital Anstalt
        460,000       2,705,883       2,705,883       2,705,883     $ 400,000  
 
Kingsbrook Opportunities Master Fund LP
        230,000       1,352,941       1,352,941       1,352,941     $ 200,000  
 
Totals:
      $ 2,012,500       11,838,236       11,838,236       11,838,236     $
1,750,000    

 
 
 

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Exhibit A
Form of Notes

 
 

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Exhibit B
Registration Rights Agreement

 
 

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Exhibit C
Guaranties

 
 

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Exhibit D
Series O Warrant

 
 

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Exhibit E
Series P Warrant

 
 

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Exhibit F
Series Q Warrant

 
 

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