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Exhibit 10.2
 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of September
21, 2006, by and between ZONE MINING LIMITED, a Nevada corporation, along with
its wholly-owned subsidiary, ZM ACQUISITION CORP., a Delaware corporation
(hereinafter referred to as the “Company”), and each purchaser identified on the
signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”).
 
WITNESSETH:
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to an exemption from registration contained in Section 4(2) of the
Securities Act of 1933, as amended (the “Securities Act”) and Rule 506
promulgated thereunder, the Company desires to issue and sell to Purchasers, and
Purchasers desire to purchase from the Company, securities of the Company as
more fully described in this Agreement.
 
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and Purchasers agree as
follows:
 
ARTICLE I.
DEFINITIONS
 
1.1  Definitions. In addition to the terms defined elsewhere in this Agreement:
(a) capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Debenture(s) (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:
 
“Action” shall have the meaning ascribed to such term in Section 3.1(i).
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as Purchaser will be deemed to be an Affiliate of such Purchaser.
 
“Business Day” means any day except Saturday, Sunday and any day which shall be
a federal legal holiday in the United States or a day on which banking
institutions in the State of Texas are authorized or required by law or other
government action to close.

“Change of Control Transaction” means the occurrence after the date hereof of
any of (i) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership (as
described in Rule 13d-3 of the Exchange Act) of capital stock of the Company, by
contract or otherwise) of in excess of 40% of the voting securities of the
Company, or (ii) a replacement at one time or within a one year period of more
than one-half of the members of the Company’s board of directors which is not
approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), or (iii) the execution by the Company of an
agreement to which the Company is a party or by which it is bound, providing for
any of the events set forth above in (i) or (ii). Notwithstanding the foregoing,
neither (a) a Qualifying Transaction occurring simultaneously with the DIA
Transaction nor (b) the DIA Transaction shall constitute a “Change of Control
Transaction for purposes of the Transaction Documents.
 
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“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
 
“Closing Date” means the Business Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived. There May be multiple Closing Dates.
 
“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the common stock of Zone Mining, par value $.00001 per
share, and any securities into which such common stock shall hereinafter have
been reclassified into.
 
“Common Stock Equivalents” means any securities of the Company which would
entitle the holder thereof to acquire at any time Common Stock, including
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
 
“Company” means Zone Mining Limited, a Nevada corporation, and ZM Acquisition
Corp., a Delaware corporation, and such reference herein shall, when referring
to any obligation of the Company shall impose a joint and several obligation on
each such entity.
 
“Debentures” mean the 12% Senior Secured Convertible Debentures, in the form of
Exhibit A.
 
“Disclosure Schedules” shall have the meaning ascribed to such term in Section
3.1 hereof.
 
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“DIA” shall mean Driveitaway, Inc., a Delaware corporation.
 
“DIA Security Agreement” means the Security Agreement, dated as of the date
hereof, between DIA and the Purchasers, in the form of Exhibit “G” attached
hereto.
 
“DIA Transaction” shall mean the merger if DIA with ZM Acquisition substantially
on the terms set forth in Schedule 1.1 hereto.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers, consultants or directors of the Company pursuant to any
stock or option plan currently in place as of the date hereof or adopted in
accordance with the terms of the DIA Transaction which has been duly adopted by
the Board of Directors, (b) securities upon the exercise of or conversion of any
securities issued hereunder, convertible securities, options or warrants issued
and outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the number of
such underlying shares in connection therewith, (c) securities issued pursuant
to acquisitions or strategic transactions, provided any such issuance shall only
be to a Person (or the equity owners of such Person) which is, itself or through
its subsidiaries, an operating company in a business synergistic with the
business of the Company and in which the Company receives benefits in addition
to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to
an entity whose primary business is investing in securities, (d) shares of
Common Stock or Common Stock Equivalents issued in connection with the DIA
Transaction, and (e) shares of Common Stock or Common Stock Equivalents issued
in connection with the first Qualifying Transaction occurring after the date of
this Agreement.
 
“Fully Diluted Basis” shall mean all Common Stock or Common Stock Equivalents of
the Company including the exercise or conversion of all rights, options,
derivative and convertible securities and further including the conversion
(whether convertible or not) of all other common or preferred stock equivalents
outstanding or required to be issued by the Company.
 
“Fundamental Transaction” shall mean (A) the Company effects any merger or
consolidation of the Company with or into another Person, (B) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (D) the Company effects any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property.
Notwithstanding the foregoing, the DIA Transaction shall not constitute a
“Fundamental Transaction” for purposes of the Transaction Documents.
 
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“GAAP” shall mean United States generally accepted accounting principles,
consistently applied.
 
“Intellectual Property” shall have the meaning ascribed to such term in Section
3.1(n).
 
“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).
 
“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right, or other restriction.
 
“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b) hereof.
 
“Material Permits” shall have the meaning ascribed to such term in Section
3.1(l).
 
“Maximum Rate” shall have the meaning ascribed to such term in Section 6.15.
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“Public Offering Date” means the date on which the Company receives gross
proceeds equal to at least $3,000,000 from a public offering of the Common Stock
or Common Stock Equivalents which will be traded in the normal course on a
Trading Market.
 
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.
 
“Qualifying Transaction” shall mean an equity financing wherein the Company
receives gross proceeds equal to at least $1,000,000 from the sale of Common
Stock or Common Stock Equivalents.

“Registrable Securities” means (i) all Underlying Shares (exercised and
unexercised); (ii) any securities issued or transferred to a Purchaser in
connection with or arising out of any Transaction Document; and (iii) any
securities issued or issuable upon any stock split, dividend or other
distribution recapitalization or similar event with respect to the foregoing.

“Registration Statement” means a registration statement covering the sale or
resale of the Registrable Securities.
 
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“Required Minimum” means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable upon
exercise of the Warrant or conversion of the Debenture, ignoring any exercise
limits set forth therein.
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“SBA” shall have the meaning ascribed to such term in Section 5.1.
 
“SBA Documents” shall have the meaning ascribed to such term in Section 5.1(b).
 
“SBIC” shall have the meaning ascribed to such term in Section 5.1.
 
“SBIC Act” shall have the meaning ascribed to such term in Section 5.1(a).
 
“Securities” means the Debenture, the Warrant, and the Underlying Shares.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Security Agreement” means the Security Agreement, dated as of the date hereof,
between the Company and the Purchasers, in the form of Exhibit B attached
hereto.
 
“Security Documents” shall mean the Security Agreement and any other documents
and filing required thereunder in order to grant Purchasers a first priority
security interest in all of the assets of the Company.
 
“Subordination Agreement” shall mean Subordination Agreements in the form of
Exhibit H attached hereto from each holder of a note or other indebtedness from
DIA.
 
“Subsequent Financing” shall mean any cash financing by the Company or any of
its Subsidiaries of Common Stock or Common Stock Equivalents.
 
“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Debentures and Warrants purchased hereunder as specified on the
Purchasers Signature Page in the corresponding column next to such Purchaser’s
name under the heading “Subscription Amount”, in United States Dollars in
immediately available funds.
 
 “Subsidiary” means any corporation or limited liability company of which at
least 50% of the outstanding securities having ordinary voting powers for the
election of Board of Directors (or similar governing body) are at the time owned
by the Company. As used herein, the term “Company” shall be deemed to include
all of the Company’s Subsidiaries, if any.
 
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“Trading Market” means, as applicable, the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market, the OTC Bulletin Board or the “Pink Sheets”
published by the Pink Sheets LLC.
 
“Transaction Documents” means this Agreement, the Debentures, the Security
Agreement, the DIA Security Agreement, the Warrants and any other documents or
agreements executed in connection with the transactions contemplated hereunder.
 
“Trident” means Trident Growth Fund, L.P., a Delaware limited partnership.
 
“Underlying Shares” means the shares of Common Stock issuable upon exercise of
the Warrants or conversion of the Debenture, or any other shares of Common Stock
acquired by Purchasers hereby.
 
“Zone Mining” means Zone Mining Limited, a Nevada Corporation.
 
“Variable Rate Transaction” shall mean a transaction in which the Company issues
or sells any Common Stock Equivalents (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 debt or equity securities, (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such debt or equity security 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, or (C) whereby the number of
underlying shares of Common Stock to be received upon exercise, conversion, or
exchange thereof, is variable in any respect in which the number of such
underlying shares could be increased. Notwithstanding the foregoing, the
presence in a Common Stock Equivalent of customary anti-dilution adjustments
which adjust a fixed conversion or exercise price or the number of shares of
Common Stock issuable thereunder based upon (a) the price at which Common Stock
is subsequently sold or issuable by the Company, (b) stock splits, combinations,
stock dividends, recapitalizations, and/or (c) Fundamental Transactions shall
not, in and of itself, result in the transaction in which the Common Stock
Equivalent is issued being a Variable Rate Transaction so long as the terms
thereof are no more favorable to the recipient than to the Purchaser.
 
“Warrants” means the Common Stock Purchase Warrants, in the form of Exhibit C
delivered to each Purchaser at the Closing in accordance with Section 2.2
hereof, which Warrants shall be exercisable immediately and be exercisable until
the close of business on the fifth anniversary following the Initial Exercise
Date (as defined in the Warrant). The Company and Purchasers agree that the
value of the Warrants, in the aggregate, as of the date hereof is less than
$1,000.
 
“ZM Acquisition” means ZM Acquisition Corp., a Delaware corporation.
 
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ARTICLE II.
PURCHASE AND SALE
 
2.1  Closing. On the Closing Date, upon the terms and subject to the conditions
set forth herein, concurrent with the execution and delivery of this Agreement
by the parties hereto, the Company agrees to sell, and Purchasers agree to
purchase the Debentures and Warrants for an aggregate amount of ONE MILLION
DOLLARS ($1,000,000) (the “Aggregate Subscription Amount”). On the Closing Date,
Purchasers shall deliver to the Company via wire transfer of immediately
available funds the sum of $800,000 (less all expenses due hereunder), and the
Company shall deliver to Purchasers the Debentures, the Warrants, and the other
items set forth in Section 2.2 issuable at the Closing. On the date on which the
balance of the Aggregate Subscription Amount is funded, the Company shall
promptly pay to the order of each Purchaser a Closing Fee of 4% and an
Application Fee of 1% of the Subscription Amount actually funded by each such
Purchaser, such amounts to be offset from the funding of the balance of the
Aggregate Subscription Amount described below. Upon satisfaction of the
conditions set forth in Section 2.2, the Closing shall occur at the offices of
Trident, or such other location as the parties shall mutually agree. The balance
of the Aggregate Subscription Amount in the amount of $200,000 shall be
delivered to the Company via wire transfer of immediately available funds within
five (5) Business Days following the date on which Purchasers have sufficient
liquidity to advance such funds (less the above described fees).
 
2.2  Deliveries
 

a)  
On the Closing Date, the Company shall execute and deliver or cause to be
delivered to Purchasers the following, each fully executed by the appropriate
authorized officer or officers of the Company or DIA, as applicable:

 
(i) this Agreement (along with all Disclosure Schedules);
 
(ii) the Debentures;
 
(iii) the Warrants;
 
(iv) the Security Agreement and the DIA Security Agreement along with all
Security Documents;
 
(v) SBA Form 480 (Size Status Declaration), SBA Form 652 (Assurance of
Compliance) and SBA Form 1031 (Portfolio Finance Report), Parts A and B, in the
forms of Exhibit D, Exhibit E and Exhibit F, respectively, attached hereto;
 
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(vi) Approval by the Board of Directors of the Company, done in conformance with
all applicable law and the Bylaws of the Company, certified by the Secretary of
the Company as of the Closing Date, approving or otherwise ratifying the
transactions contemplated by this Agreement, and approving the form of this
Agreement and the Transaction Documents, and authorizing execution, delivery,
and performance thereof;

(vii) Approval by the Board of Directors of the DIA, done in conformance with
all applicable law and the Bylaws of DIA, certified by the Secretary of DIA as
of the Closing Date, approving or otherwise ratifying the transactions
contemplated by this Agreement, and approving the form of the DIA Security
Agreement, and authorizing execution, delivery, and performance thereof;

(viii) A copy of the Articles of Incorporation of the Company, as amended to
date, certified by an official of the Company’s jurisdiction of formation or
incorporation and further certified by the Secretary of the Company not to have
been altered or amended since certification by such official; a Certificate of
Good Standing dated within 30 days of the date first written above from the
Secretary of State of the Company’s jurisdiction of formation or incorporation;
and a copy of the Bylaws of the Company, certified as true and correct by the
Secretary of the Company; and

(ix) Such other instruments, documents or items as Purchasers may reasonably
request.
 
 

b)  
On the Closing Date, each Purchaser shall deliver or cause to be delivered to
the Company the following:

 
(i) this Agreement duly executed by each Purchaser;
 
(ii) the sum of $800,000 (less the fees and expenses payable pursuant to Section
6.1) by wire transfer to the account as specified in writing by the Company; and
 
(iii) the Security Agreement and the DIA Security Agreement, duly executed by
each Purchaser.
 
2.3  Closing Conditions.
 

a)  
The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:

 
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(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Purchasers contained herein;
 
(ii) all obligations, covenants and agreements of Purchasers required to be
performed at or prior to the Closing Date shall have been performed; and
 
(iii) the delivery by Purchasers of the items set forth in Section 2.2(b) of
this Agreement.
 

b)  
The obligations of Purchasers hereunder in connection with the Closing are
subject to the following conditions being met:

 
(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;
 
(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;
 
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
 
(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
 
(v) the Company shall have executed a definitive merger agreement with DIA for
the DIA Transaction upon terms and conditions acceptable to Purchasers in their
sole discretion.
 
 
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
 
3.1  Representations and Warranties of the Company. Except as set forth under
the corresponding section of the disclosure schedules delivered to Purchasers
concurrently herewith (the “Disclosure Schedules”) which Disclosure Schedules
shall be deemed a part hereof, the Company hereby makes the representations and
warranties set forth below to Purchasers:
 
a) Subsidiaries. Except as set forth in Schedule 3.1(a), the Company does not
have any Subsidiaries.
 
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b) Organization and Qualification. The Company is an entity duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company is not in violation or default of any of the provisions of its
certificate or articles of incorporation, bylaws, or other organizational or
charter documents. The Company is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in (i) a material adverse effect on the legality, validity or enforceability of
any Transaction Documents, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the Company,
or (iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction
Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no
Proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.
 
c) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company.
Each of the Transaction Documents has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
 
d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the other
transactions contemplated thereby do not and will not: (i) conflict with or
violate any provision of the Company’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company debt or otherwise) or other understanding to
which the Company is a party or by which any property or asset of the Company is
bound or affected, or (iii) conflict with or result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations), or by which any property or
asset of the Company is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not have or reasonably be expected to result in a
Material Adverse Effect.
 
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e) Filings, Consents and Approvals. Other than as set forth on Schedule 3.1(e)
and except for filing of a Form D and/or state “blue sky” securities filings,
the Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of the
Transaction Documents.
 
f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents. The Underlying Shares, when issued in
accordance with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by the Company
or any third party. The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of a number of Underlying
Shares at least equal to the Required Minimum on the date hereof. The Company
has not, and to the knowledge of the Company, no Affiliate of the Company has
sold, offered for sale or solicited offers to buy or otherwise negotiated in
respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of the
Securities to Purchasers.
 
g) Capitalization. The capitalization of the Company is as described in Schedule
3.1(g). The Company has not issued any capital stock other than as set forth on
Schedule 3.1(g). No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities or as set forth on Schedule 3.1(g), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of the Company’s capital stock, or
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to issue additional shares of its capital stock, or
securities or rights convertible or exchangeable into shares of its capital
stock. The issuance and sale of the Securities will not obligate the Company to
issue shares of Common Stock or other securities to any Person (other than
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale of the Securities. Except as disclosed in Schedule 3.1(g),
there are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company’s
stockholders. A complete list of stockholders of the Company that are officers,
directors and individuals holding 5% or more of the outstanding Common Stock is
included in Schedule 3.1(g).
 
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h)  SEC Documents. If the Company is subject to the reporting provisions of the
Exchange Act, the Company has filed all required reports, schedules, forms,
statements and other documents with the Commission. (the “SEC Documents”). As of
their respective dates, the SEC Documents complied in all material respects with
requirements of the Securities Act or the Exchange Act, as the case may be and
the rules and regulations of the Commission promulgated thereunder applicable to
such SEC Documents, and none of the SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
that information contained in any SEC Document has been revised or superseded by
a later filed SEC Document. The financial statements of the Company included in
the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements as permitted by Form 10-Q or Form
10-QSB) applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operation and cash flows for the
period then ending in accordance with GAAP (subject, in the case of the
unaudited statements, to normal year end audit adjustments). Except as set forth
in the filed SEC Documents, neither the Company nor any Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a consolidated balance sheet
of the Company and its consolidated subsidiaries or in the notes thereto and
which could reasonably be expected to have a Material Adverse Effect.
 
i) Litigation. Other than as set forth on Schedule 3.1(i), there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to
the knowledge of the Company, threatened against or affecting the Company, or
any of its respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) which (i) adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any director or officer thereof, is or
has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or any current or former director or officer of the Company.
 
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j) Labor Relations. No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company which
could reasonably be expected to result in a Material Adverse Effect.
 
k) Compliance. The Company (i) is not in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company), nor has the Company
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is not in
violation of any order of any court, arbitrator or governmental body, or (iii)
is not or has not been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business except in each case as could not
reasonably be expected to have a Material Adverse Effect.
 
l) Regulatory Permits. The Company possesses all certificates, authorizations
and permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct its business as described in
Schedule 3.1(l), except where the failure to possess such permits could not have
or reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and the Company has not received any notice of Proceedings relating
to the revocation or modification of any Material Permit.
 
m) Title to Assets. Except as set forth on Schedule 3.1(m), the Company has good
and marketable title in (or licenses or rights to use) all personal property
that is material to the business of the Company, in each case free and clear of
all Liens. The Company does not own any real property. Any real property and
facilities held under lease by the Company are held by it under valid,
subsisting and enforceable leases of which the Company is in compliance. The
Company has not granted, and no third party has obtained in any manner, other
than as contemplated by the Transaction Documents, any security interest in the
assets of the Company. Schedule 3.1(m) sets forth and details which, if any, of
such assets are owned by any Subsidiary.
 
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n) Intellectual Property.
 
(i) Schedule 3.1(n) contains a list of the Company’s Intellectual Property.  For
purposes hereof, “Intellectual Property” means any or all of the following and
all rights and goodwill, arising out of or associated therewith:  (A) all United
States, international, and foreign patents and applications therefor (including
provisional applications) and all reissues, reexaminations, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof; (B)
all inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know-how, technology, technical data and
customer lists, and all documentation relating to any of the foregoing
throughout the world; (C) all international, U.S. and foreign registered
trademarks, trade names, service marks, logos, slogans, and designs,
applications to register trademarks, trade names, service marks, logos, slogans,
and designs, intent-to-use applications, or other registrations or applications
related to trademarks, service marks, common law trademarks, trade names,
service marks, logos, slogans, and designs and all associated goodwill
associated with all of the foregoing; (D) all copyrights, copyright
registrations and applications therefor, and all other rights corresponding
thereto throughout the world; (E) all industrial designs and any registrations
and applications therefor throughout the world; (F) all URL’s, domain names,
trade names, logos, slogans, designs, common law trademarks and service marks,
trademark and service mark registrations and applications therefor throughout
the world; (G) all databases and data collections and all rights therein
throughout the world; (H) all moral and economic rights of authors and
inventors, however denominated, throughout the world; (I) any other intellectual
property that is the subject of an application, certificate, filing,
registration or other document issued, filed with, or recorded with any federal,
state, local or foreign government or other public body; and (J) any similar or
equivalent rights to any of the foregoing anywhere in the world. For purposes
hereof, “Company Intellectual Property” means any Company Intellectual Property
owned or licensed by the Company, and “Company Registered Intellectual Property”
means any items of Intellectual Property described in subsections (A), (C) or
(D) of this paragraph.
 
(ii) No Company Intellectual Property or product or service of the Company’s
business related to the Company Intellectual Property is subject to any
Proceeding or outstanding decree, order, judgment, agreement or stipulation
restricting in any manner the use, transfer or licensing thereof by the Company,
or which may affect the validity, use or enforceability of such Company
Intellectual Property. Each item of Company Registered Intellectual Property is
valid and subsisting. All necessary registration, maintenance and renewal fees
currently due in connection with the Company Registered Intellectual Property
have been made and all necessary documents, recordations and certifications in
connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purpose of
maintaining such Company Registered Intellectual Property.
 
(iii) The Company owns and has good and exclusive title to, or has licenses (any
Intellectual Property subject to any license to be identified as such in
Schedule 3.1(n)) (sufficient for the conduct of the Company’s business as
currently conducted) to use each item of the Company’s Intellectual Property
free and clear of any Lien; and the Company is the exclusive owner or exclusive
licensee of all trademarks and service marks, trade names and domain names used
in connection with and material to the operation or conduct of the Company’s
business, including the sale of any products or the provision of any services by
same, free and clear of all Liens. The Company Intellectual Property, other than
future improvements, derivations, and additions to be made by the Company or on
behalf of the Company, constitutes all of the Intellectual Property used or
contemplated for use in connection with the Company’s current business and in
the performance of any contract, proposal or letter of intent in connection with
same.
 
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(iv) To the extent that any Company Intellectual Property has been developed or
created by a third party for the Company, the Company has a written agreement
with such third party with respect thereto and the Company thereby either
(A) has obtained ownership of and is the exclusive owner of, or (B) has obtained
a license (sufficient for the conduct of the Company’s business as currently
conducted) to all of such third party’s Intellectual Property in such work,
material or invention by operation of law or by valid assignment, to the fullest
extent it is legally possible to do so, each such agreement being listed on
Schedule 3.1(n).
 
(v) The operation of the Company’s business as it is currently conducted,
including the Company’s design, development, marketing and sale of the products
or services of the Company (including with respect to products currently under
development) has not, does not and will not infringe or misappropriate in any
manner the Intellectual Property of any third party or, to the knowledge of the
Company, constitute unfair competition or trade practices under the laws of any
jurisdiction.
 
(vi) The Company has no knowledge, and has not received written notice or any
other overt threats from any third party, that the operation of the Company’s
business as it is currently conducted, or any act, product or service of the
Company’s business, infringes or misappropriates the Intellectual Property of
any third party or constitutes unfair competition or trade practices under the
laws of any jurisdiction. The Company’s Intellectual Property is not the subject
of any third party communications relating to validity or enforceability, cease
and desist orders, demand letters, warnings or prior settlement agreements.  The
Company’s Intellectual Property is not currently the subject of any pending or
threatened re-examinations, oppositions, interferences, or infringement actions.
 
(vii) To the knowledge of the Company, no Person has or is infringing or
misappropriating any Company Intellectual Property.
 
(viii) The Company has taken reasonable steps to protect the rights of the
Company in the confidential information and trade secrets of the Company used in
the Company’s business or any trade secrets or confidential information of third
parties used in same, and, without limiting the foregoing, the Company has
enforced a policy requiring each employee and contractor to execute a
proprietary information/confidentiality agreement, and except under
confidentiality obligations or in the context of the attorney-client
relationship, there has not been any disclosure by the Company of any such trade
secrets or confidential information.
 
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o) Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company is engaged, including
directors and officers insurance at least equal to the aggregate principal
amount of the Debenture. To the best of Company’s knowledge, such insurance
contracts and policies are accurate and complete. The Company has no reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.
 
p) Transactions With Affiliates and Employees. None of the officers or directors
of the Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the Company.
 
q) Internal Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
 
r) Certain Fees. Other than as set forth on Schedule 3.1(r), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
 
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s) Private Placement. Assuming the accuracy of Purchasers’ representations and
warranties set forth in Section 3.2, no registration under the Securities Act is
required for the offer and sale of the Securities by the Company to Purchasers
as contemplated hereby.
 
t) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
 
u) Registration Rights. Other than as set forth on Schedule 3.1(u), no Person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
 
v) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to
Purchasers as a result of Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation as a result of the Company’s issuance of the
Securities and the Purchasers’ ownership of the Securities.
 
w) Disclosure. Except for information provided to the Purchasers by the Company
with respect to the DIA Transaction or the Qualifying Transaction, the Company
confirms that neither it nor any other Person acting on its behalf has provided
Purchasers or their agents or counsel with any information that constitutes or
might constitute material, nonpublic information except for such information
that will be publicly disclosed in documents filed with the Commission. The
Company understands and confirms that Purchasers will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All written statements provided to Purchasers regarding the Company,
its business and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement, furnished by or on behalf of the Company with
respect to the representations and warranties made herein are true and correct
with respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
 
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x) No Integrated Offering. Assuming the accuracy of Purchasers’ representations
and warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or 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 cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable shareholder approval provisions.
 
y) Solvency. Based on the financial condition of the Company as of the Closing
Date after giving effect to the receipt by the Company of the proceeds from the
sale of the Securities hereunder, (i) the Company’s fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect of
the Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
 
z) Tax Status.   Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company has filed all necessary federal, state and foreign income
and franchise tax returns and has paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of a tax deficiency which has been
asserted or threatened against the Company.
 
aa) No General Solicitation. Neither the Company nor any person acting on behalf
of the Company has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the Securities for
sale only to Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.
 
bb) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended
 
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cc) Indebtedness. Other than as set forth on Schedule 3.1(cc), as of the Closing
Date, the Company has no indebtedness.
 
dd) No Disagreements with Accountants and Lawyers. There are no disagreements of
any kind presently existing, or reasonably anticipated by the Company to arise,
between the accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to its
accountants and lawyers.
 
ee) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that Purchasers are acting solely in the capacity of
arm’s length purchasers with respect to the Transaction Documents and the
transactions contemplated hereby as they relate to the Company. The Company
further acknowledges that Purchasers are not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by
Purchasers or any of their respective representatives or agents to the Company
in connection with this Agreement and the transactions contemplated hereby is
merely incidental to the Purchasers’ purchase of the Securities.
 
ff) Material Liabilities. The sole outstanding material liabilities of the
Company are set forth on Schedule 3.1(ff) .

gg) Material Agreements. Except for those agreements set forth on Schedule
3.1(gg) hereof, there are no other material agreements to which the Company is a
party.

hh) Board of Directors. The Board of Directors of the Company consists of those
persons set forth on Schedule 3.1(hh).
 
ii) Financial Statements. Other than as set forth on Schedule 3.1(ii), there are
no audited financial statements of the Company.
 
3.2  Representations and Warranties of Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:
 
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(a)  Organization; Authority. Such Purchaser (if not an individual) is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations thereunder.
The execution, delivery and performance by Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of Purchaser. Each of the Transaction
Documents to which it is a party has been duly executed by Purchaser, and when
delivered by Purchaser in accordance with the terms hereof, will constitute the
valid and legally binding obligation of Purchaser, enforceable against it in
accordance with its terms, except (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.
 
(b)  Purchaser Representation. Purchaser understands that the Securities are
“restricted securities” and have not been registered or qualified, as the case
may be, under the Securities Act or any applicable state securities law by
reason of a specific exemption from the registration or qualification provisions
of the Securities Act or any applicable state securities laws, the availability
of which depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of Purchaser’s representations as expressed
herein. Purchaser represents that it is acquiring the Securities for investment
as principal for its own account and not with a view to or for distribution or
resale of such Securities or any part thereof, has no present intention of
distributing any of such Securities and has no arrangement or understanding with
any other persons regarding the distribution of such Securities (this
representation and warranty not limiting Purchaser’s right to sell the
Securities pursuant to a Registration Statement or otherwise in compliance with
applicable federal and state securities laws). Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Purchaser does not
have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.
 
(c)  Purchaser Status. At the time Purchaser was offered the Securities, it was,
and at the date hereof it is, and on each date on which it exercises any
Warrants it will be either: (i) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)) of Regulation D promulgated under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.
 
(d)  Experience of Purchasers. Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Purchaser understands that the acquisition of the
Securities hereunder is highly a speculative investment which involves a high
degree of loss of Purchaser’s investment therein. Purchaser is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.
 
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(e)  Certain Fees. Purchaser has not entered into an agreement whereby brokerage
or finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement.
 
The Company acknowledges and agrees that no Purchaser has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2. 
 
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
4.1  Transfer Restrictions.
 
(a)  The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably acceptable to the Company, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act or any applicable state securities laws. As a condition
of transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of a Purchaser under this Agreement.
 
(b)  Purchasers agree to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in substantially the following
form:
 
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
 
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The Company acknowledges and agrees that Purchasers may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, Purchasers may transfer
pledged or secured Securities to the pledgees or secured parties. Such a pledge
or transfer would not be subject to approval of the Company and, so long as the
legend set forth in Section 4.1(b) hereof remains on the certificates evidencing
the Securities (unless the conditions of Section 4.1(c) have been satisfied), no
legal opinion of legal counsel of the pledgee, secured party or pledgor shall be
required in connection therewith. Further, no notice shall be required of such
pledge. At the Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities.
 
(c)  Certificates evidencing Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) while a
Registration Statement covering the resale of such Underlying Shares is
effective under the Securities Act, (ii) following any sale of such Underlying
Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission); provided, however, in
connection with the issuance of the Underlying Shares, Purchasers hereby agrees
to adhere to and abide by all prospectus delivery requirements under the
Securities Act and rules and regulations of the Commission and all applicable
state “blue sky” securities laws and in the event that the registration
statement covering the resale of the Underlying Shares is no longer effective
under the Securities Act and the Underlying Shares are not eligible for sale
under Rule 144(k), to return such certificates to the Company so that the legend
set forth in Section 4.1(b) may be affixed to the certificates evidencing such
shares. The Company shall cause its counsel to issue a legal opinion to the
Company’s transfer agent if so required by the Company’s transfer agent to
effect the removal of the legend hereunder. If all or any portion of a Warrant
is exercised at a time when there is an effective Registration Statement to
cover the resale of the Underlying Shares, or if such shares may be sold under
Rule 144(k) or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations thereof)
then such shares shall be issued free of all legends. The Company agrees that at
such time as such legend is no longer required under this Section 4.1(c), it
will, no later than five Business Days following the delivery by Purchasers to
the Company or the Company’s transfer agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend (such five
Business Day, the “Legend Removal Date”), deliver or cause to be delivered to
Purchasers a certificate (or certificates, as the case may be) representing such
shares that is free from all restrictive and other legends. The Company may not
make any notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this Section.
 
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(d)  In addition to Purchasers’ other available remedies, the Company shall pay
to Purchasers, in cash, as partial liquidated damages and not as a penalty, the
greater of (i) $500 for each Business Day after the Legend Removal Date, the
Warrant Share Delivery Date (as defined in Section 2(e)(ii) of the Warrant), or
other such date the Underlying Shares are to be delivered to the Purchasers, as
the case may be, until such certificate is delivered with an appropriate legend
or without a restrictive legend, as the case may be; and (ii) the difference in
the Market Value of the Underlying Shares (based on the closing bid price of the
Common Stock on the then principal Trading Market on the date such Securities
are submitted to the Company’s transfer agent) on the delivery date and the date
such shares are actually received by the Holder in such form as required herein
and in the Transaction Documents. Nothing herein shall limit a Purchaser’s right
to pursue equitable remedies for the Company’s failure to deliver certificates
representing any Securities as required by the Transaction Documents, including,
without limitation, a decree of specific performance and/or injunctive relief.
 
(e)  Purchasers agree that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company’s reliance that Purchasers will sell any Securities
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom.
 
4.2  Acknowledgment of Dilution. The Company acknowledges that the issuance of
the Underlying Shares may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against Purchasers and regardless of the dilutive effect that such issuance may
have on the ownership of the other stockholders of the Company.
 
4.3  Furnishing of Information. At any time after the date hereof, if the
Company is or becomes subject to the rules, regulations, and/or reporting
requirements of the Exchange Act and as long as any Purchaser owns restricted
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to each such Purchaser and make publicly available in accordance with
Rule 144(c) such information as is required for Purchaser to sell the Underlying
Shares under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell such Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144.
 
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4.4  Integration. The Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to Purchasers or, if then listed or quoted on
a Trading Market, that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market.
 
4.5  Exercise Procedures. The form of Notice of Exercise and Conversion Notice
included in the Warrant and Debenture, respectively, set forth the totality of
the procedures required of Purchasers in order to exercise the respective
Warrants or convert the Debentures. No additional legal opinion or other
information or instructions shall be required of any Purchaser to exercise its
Warrant or convert their Debenture. The Company shall honor exercises of the
Warrant and conversions of the Debenture and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in such
Transaction Documents.
 
4.6  Shareholders Rights Plan. No claim will be made or enforced by the Company
or, to the knowledge of the Company, any other Person that any Purchaser is an
“Acquiring Person” under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and any Purchaser.
 
4.7  Non-Public Information. The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that such Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
 
4.8  Use of Proceeds. Except as set forth in Schedule 4.8, the Company shall use
the net proceeds from the sale of the Securities hereunder for working capital
purposes and not for the satisfaction of any portion of the Company’s debt
(other than payment of trade payables in the ordinary course of the Company’s
business and prior practices), to redeem any Common Stock or Common Stock
Equivalents or to settle any outstanding litigation. Schedule 4.8 shall detail
the Company’s expected use of proceeds received from the sale of the Securities
hereunder.
 
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4.9  Reimbursement. If any Purchaser becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder of the Company (except
as a result of sales, pledges, margin sales or any similar transaction(s) by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser’s acquisition of the Securities under this Agreement, and such
Purchaser is successful in the Proceeding the Company will reimburse Purchaser
for its reasonable legal and other expenses (including the cost of any
investigation preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of such Purchaser who are actually named in
such Action, Proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of Purchaser and
any such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company,
Purchaser and any such Affiliate and any such Person. The Company also agrees
that neither any Purchaser nor any such Affiliates, partners, directors, agents,
employees or controlling persons shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company solely as a
result of acquiring the Securities under this Agreement.
 
4.10  Indemnification of Purchasers. Subject to the provisions of this Section
4.10, the Company will indemnify and hold the Purchasers and their respective
directors, officers, managers, shareholders, partners, employees and agents
(each, a “Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation that any such Purchaser Party may suffer or
incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents or (b) any action instituted
against any Purchaser, or any of its Affiliates, by any stockholder of the
Company who is not an Affiliate of Purchaser, with respect to any of the
transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of Purchaser’s representation, warranties or covenants under
the Transaction Documents or any agreements or understandings a Purchaser may
have with any such stockholder or any violations by a Purchaser of state or
federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing. Any Purchaser Party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party. The Company
will not be liable to any Purchaser Party under this Agreement (i) for any
settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by such Purchaser in this Agreement or
in the other Transaction Documents or any agreements or understandings a
Purchaser may have with any stockholder of the Company who is not an Affiliate
of Purchaser or any knowing or intentional violations by a Purchaser of state or
federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance.
 
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4.11  Reservation and Listing of Securities.
 
(a)  The Company shall maintain a reserve from its duly authorized shares of
Common Stock for issuance pursuant to the Transaction Documents in such amount
as may be required to fulfill its obligations in full under the Transaction
Documents.
 
(b)  If, on any date, the number of authorized but unissued (and otherwise
unreserved) shares of Common Stock is less than the Required Minimum on such
date, then the Board of Directors of the Company shall use commercially
reasonable efforts to amend the Company’s certificate or articles of
incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time, as soon as possible and in
any event not later than the 75th day after such date; and
 
(c)  The Company shall, if then applicable: (i) in the time and manner required
by the Trading Market or if the Common Stock is listed on another Trading
Market, promptly prepare and file with such Trading Market an additional shares
listing application covering a number of shares of Common Stock at least equal
to the Required Minimum on the date of such application, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing on the
Trading Market as soon as possible thereafter, (iii) provide to Purchasers
evidence of such listing, and (iv) maintain the listing of such Common Stock on
any date at least equal to the Required Minimum on such date on such Trading
Market.
 
4.12  Future Priced Securities. From the date hereof until the date that less
than 20% in principal amount of the Debentures initially issued are outstanding,
the Company shall be prohibited from effecting or entering into an agreement to
affect any Subsequent Financing involving a Variable Rate Transaction.
 
4.13  Equal Treatment of Purchasers. 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 is also
offered to all of the parties to the Transaction Documents. Further, the Company
shall not make any payment of principal or interest on the Debentures in amounts
which are disproportionate to the respective principal amounts outstanding on
the Debentures at any applicable time. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by the Company
and negotiated separately by each Purchaser, and is intended to treat for the
Company the Debenture holders as a class and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.
 
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4.14  Registration Rights.
 
(a) Piggyback Registrations.

A. At any time after the Closing Date, if the Company proposes to register any
Common Stock for sale solely for cash, either for its own account or for the
account of a stockholder or stockholders (a “Company Registration”), then the
Company shall give Purchasers written notice of its intention to do so and of
the intended method of sale (the “Registration Notice”) not fewer than 30 days
prior to the anticipated filing date of the Registration Statement effecting
such Company Registration. Purchasers may request inclusion of any Registrable
Securities in such Company Registration by delivering to the Company, within 20
days after receipt of the Registration Notice, a written notice (the “Piggyback
Notice”) stating the number of shares of Registrable Securities proposed to be
included and that such shares are to be included in any underwriting only on the
same terms and conditions as the shares of Common Stock otherwise being sold
through underwriters under such Company Registration. The Company shall use its
best efforts to cause all Registrable Securities specified in the Piggyback
Notice to be included in the Company Registration and any related offering, all
to the extent requisite to permit the sale by Purchasers of such Registrable
Securities in accordance with the method of sale applicable to the other shares
of Common Stock included in the Company Registration. If the Company fails to
file the Registrable Securities in such Registration Statement, then, at the
option of Purchasers, for each full day that the Registrable Securities are not
fully registered, Company shall Purchasers, as partial liquidated damages and
not as a penalty, the sum of $1,000 per day until the shares are registered (not
to exceed $150,000 under any circumstances).

B. The Company’s obligation to include Registrable Securities in a Company
Registration pursuant to this Section 4.16(a) shall be subject to the following
limitations:

(i) The Company shall not be obligated to include any Registrable Securities in
a registration statement (I) filed on Form S-4 or Form S-8 or such other similar
successor forms then in effect under the Securities Act, (II) pursuant to which
the Company is offering to exchange its own securities, or (III) relating to
dividend reinvestment plans.

(ii) If the managing underwriter(s), if any, of an offering related to the
Company Registration determines in its reasonable judgment that marketing
factors require a limitation of the number of shares of Common Stock that can be
included in such offering, the managing underwriter(s) may exclude the
appropriate number of shares of Common Stock held by the stockholders of the
Company, including Purchasers, from such registration. If the managing
underwriter(s) determine(s) to exclude from such offering any Registrable
Securities that Purchasers desire to include or any shares of Common Stock that
other Company stockholders with applicable registration rights desire to
include, Purchasers and such other Company stockholders (except for such Person
or Persons, if any, upon whose demand such Company Registration is being made)
shall share pro rata in the portion of such offering available to them (the
“Available Portion”), with Purchasers and each such other Company stockholder
entitled to include in such Company Registration and related offering a number
of shares of Common Stock equal to the product of (I) the Available Portion and
(II) a fraction, the numerator of which is the total number of Registrable
Securities which Purchasers desires to include in such Company Registration (in
the case of Purchasers) or the total number of shares of Common Stock which such
other Company stockholder desires to include in such Company Registration (in
the case of each such other Company stockholder) and the denominator of which is
(x) the total of the number of Registrable Securities which Purchasers desire to
include in such Company Registration plus (y) the total number of shares of
Common Stock that such other Company stockholders desire to include in such
Company Registration.
 
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C. Notwithstanding anything contained herein to the contrary, the Purchasers
agree as follows:
 
(i) At any time when a Registration Statement is effective, upon written notice
from the Company to Purchasers that the Company has determined in good faith
that the sale of restricted stock pursuant to the Registration Statement would
require disclosure of non-public material information, Purchasers shall suspend
sales of restricted stock pursuant to such Registration Statement until such
time as the Company notifies Purchasers that such material information has been
disclosed to the public or has ceased to be material, or that sales pursuant to
such Registration Statement may otherwise be resumed; provided, however, such
restrictions shall not exceed (a) an aggregate of ninety (90) days in any year,
(b) nor more than sixty (60) days during any single period of suspension.
 
(ii) Notwithstanding any other provision of this Agreement, in the event that
the Company undertakes a primary offering of shares of its unissued Common
Stock, which may also include other securities, excluding a primary offering
related to an employee benefit plan (a “Primary Offering”), in which all of the
shares of restricted stock are not included, Purchasers shall not sell,
transfer, make any short sale of, grant any option for the purchase of, or enter
into any hedging or similar transaction with the same economic effect as a sale
of, any Common Stock (or other securities) of the Company held by Purchasers
(except for shares included in the Primary Offering), during the thirty (30)
days prior to the commencement of any such Primary Offering and ending ninety
(90) days after completion of any such Primary Offering, unless the Company, in
the case of a non-underwritten Primary Offering, or the managing underwriter, in
the case of an underwritten Primary Offering, otherwise agrees in writing. The
Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of said ninety (90) day period.
 
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(b) Provisions Applying to All Registrations Under Section 4.14.
 
(i) Selection of Underwriter. Any Company Registration and related offering
shall be managed by the Company; the Company shall have the power to select the
managing underwriter(s) for such offering, and shall in consultation with the
managing underwriter(s) have the power to determine the offering price, the
underwriting discounts and commissions, the terms of the underwriting agreement
and, the timing of the registration and related offering. To the extent that
Purchasers participate in a Company Registration and related offering,
Purchasers shall enter into, and sell its Registrable Securities only pursuant
to, the underwriting arranged by the Company, and shall either commit to attend
the closing of the offering and take such other actions as may be reasonably
necessary to effect Purchasers’ participation in the offering and to provide any
assurances reasonably requested by the Company and the managing underwriter(s)
in that regard, or shall deliver to the Company in custody certificates
representing all Registrable Securities to be included in the registration and
shall execute and deliver to the Company a custody agreement and a power of
attorney, each in form and substance appropriate for the purpose of effecting
Purchasers’ participation in the Company Registration and related offering and
otherwise reasonably satisfactory to the Company. If Purchasers disapprove of
the features of the Company Registration and related offering, Purchasers or
such individual Purchaser, as the case may be, may withdraw therefrom (in whole
or part) by written notice to the Company and the managing underwriter(s)
delivered no later than ten days prior to the effectiveness of the applicable
registration statement and the Registrable Securities of Purchasers shall
thereupon be withdrawn from such registration.

(ii) The Company shall furnish Purchasers such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by it that are
included in such registration;

(iii) Whenever required to include Registrable Securities in any registration or
to effect the registration of any Registrable Securities pursuant to this
Agreement, the Company shall, as expeditiously as reasonably possible, prepare
and file with the Commission a registration statement with respect to such
Registrable Securities and use all commercially reasonable efforts to cause such
registration statement to become effective, and use all commercially reasonable
efforts to keep such registration statement effective until the earliest of (a)
the date as of which all such Registrable Securities have been distributed by
Purchasers, (b) the date as of which all of the Registrable Securities covered
by such registration statement may be sold without restriction pursuant to Rule
144(k)(or any successor thereto) promulgated by the Commission under the
Securities Act, and (c) two years after the Closing Date. In addition, the
Company shall use all commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Purchasers, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify as a broker-dealer in
any states or jurisdictions or to do business or to file a general consent to
service of process in any of such states or jurisdictions.
 
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(iv) All expenses, other than underwriting discounts and commissions incurred in
connection the registrations contemplated herein, including, without limitation,
all registration, filing and qualification fees, printers’ and accounting fees,
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for each selling Purchaser, shall be borne by the
Company.
 
(c) Subject to the terms and conditions of this Agreement and the other
Transaction Documents, the right to cause the Company to register Registrable
Securities pursuant to this Agreement may be assigned by each Purchaser to any
transferee or assignee of such securities; provided that said transferee or
assignee is a transferee or assignee of at least five percent (5%) of the such
Purchaser’s Registrable Securities.
 
4.15  Qualifying Transaction. Within ninety (90) days following the date of the
Debenture, the Company shall close a Qualifying Transaction.
 
4.16  Subordination Agreements. Concurrent with or prior to the execution of
this Agreement, the Company and DIA shall execute and deliver to Purchaser a
Subordination Agreement in the form attached hereto as Exhibit H-1 with respect
to all present and future indebtedness of DIA to the Company, and concurrent
with or prior to the closing of the DIA Transaction, each holder of a note or
other indebtedness from DIA shall execute and deliver to Purchaser a
Subordination Agreement in the form attached hereto as Exhibit H-2 with respect
to such indebtedness.
 
ARTICLE V.
SMALL BUSINESS INVESTMENT COMPANY
 
5.1  Small Business Investment Company Provisions. The Company acknowledges that
Trident is a small business investment company (“SBIC”) licensed by the United
States Small Business Administration (the “SBA”), and makes the following
representations, warranties and covenants to Trident for so long as the
Debentures held by Trident are outstanding:
 
(a)  Small Business Concern. The Company represents and warrants that it, taken
together with its “affiliates” (as that term is defined in 13 C.F.R. §121.103),
is a “Small Business Concern” within the meaning of 15 U.S.C. §662(5), that is
Section 103(5) of the Small Business Investment Act of 1958, as amended (the
“SBIC Act”), and the regulations thereunder, including 13 C.F.R. §107, and meets
the applicable size eligibility criteria set forth in 13 C.F.R. §121.301(c)(1)
or the industry standard covering the industry in which the Company is primarily
engaged as set forth in 13 C.F.R. §121.301(c)(2). Neither the Company nor any of
its Subsidiaries presently engages in any activities for which a small business
investment company is prohibited from providing funds by the SBIC Act, including
13 C.F.R. §107.
 
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(b)  Small Business Administration Documentation. On or before the Closing Date,
Trident shall have received SBA Form 480 (Size Status Declaration) and SBA Form
652 (Assurance of Compliance) which have been completed and executed by the
Company, and SBA Form 1031 (Portfolio Finance Report), Parts A and B of which
have been completed by the Company (the “SBA Documents”).
 
(c)  Inspection. The Company will permit Trident or its representatives, at the
Company’s expense, and examiners of the SBA to visit and inspect the properties
and assets of the Company, to examine its books of account and records, and to
discuss the Company’s affairs, finances and accounts with the Company’s
officers, senior management and accountants, all at such reasonable times as may
be requested by Trident or the SBA.
 
(d)  Informational Covenant. Within sixty (60) calendar days after the end of
the Company’s fiscal year, the Company will furnish or cause to be furnished to
Trident information required by the SBA concerning the economic impact of
Trident’s investment, for (or as of the end of) each fiscal year, including but
not limited to: (i) board minutes, (ii) information concerning full-time
equivalent employees, (iii) federal, state and local income taxes paid, (iv)
gross revenue, (v) source of revenue growth, (vi) after-tax profit and loss, and
(vii) and federal, state and local income tax withholding. Such information
shall be forwarded by the Company on a form provided by Trident. The Company
also will furnish or cause to be furnished to Trident such other information
regarding the business, affairs and condition of the Company as Trident may from
time to time reasonably request.
 
(e)  Use of Proceeds. The Company will deliver to Trident from time to time
promptly following Trident’s request, a written report, certified as correct by
an officer, verifying the purposes and amounts for which proceeds from the
Debenture have been disbursed. The Company will supply to Trident such
additional information and documents as it may reasonably request with respect
to the Company’s use of proceeds, and will permit Trident to have access to any
and all the Company’s records and information and personnel as Trident deems
necessary to verify how such proceeds have been or are being used, and to assure
that the proceeds have been used for the purposes specified on Schedule 4.9.
 
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(f)  Activities and Proceeds.
 
(i)  Neither the Company nor any of its Affiliates will engage in any activities
or use directly or indirectly the proceeds from the Debenture for any purpose
for which a SBIC is prohibited from providing funds by the SBIC Act, including
13 C.F.R. §107.
 
(ii)  Without obtaining the prior written approval of Trident the Company will
not change, within one (1) year of the Closing Date, the Company’s business
activity from that described on Schedule 5.1(f) to a business activity which a
SBIC is prohibited from providing funds by the SBIC Act. The Company agrees that
any such changes in its business activity without such prior written consent of
Trident will constitute a material breach of the obligations of the Company
under the Transaction Documents (an “Activity Event of Default”).
 
ARTICLE VI.
MISCELLANEOUS
 
6.1  Fees and Expenses. At the closing, the Company shall reimburse Trident for
Purchasers’ legal fees and expenses up to the amount of $10,000. Except as
expressly set forth above and in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement and the other Transaction Documents. The Company shall pay all
transfer agent fees, stamp taxes and other taxes and duties levied in connection
with the issuance of any Securities.
 
6.1  Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
 
6.2  Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto prior to 5:30 p.m. (Dallas, Texas
time) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Business Day or later than 5:30 p.m. (Dallas, Texas time) on any
Business Day, (c) the second Business Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.
 
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6.3  Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Purchasers holding a majority of the Underlying Shares or, in
the case of a waiver, by the party against whom enforcement of any such waiver
is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either party
to exercise any right hereunder in any manner impair the exercise of any such
right.
 
6.4  Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
 
6.5  Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Each Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to such Purchaser.
 
6.6  No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.9.
 
6.7  Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Texas, without regard to the principles of conflicts of law thereof, except to
the extent that the General Corporation Law of the State of Nevada (excluding
any provisions thereof relating to conflict of laws) governs the affairs and
operation of the Company. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of Dallas, Texas. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of Dallas, Texas for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper or inconvenient venue for such proceeding. THE PARTIES
HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY. If either party shall commence an
action or proceeding to enforce any provisions of the Transaction Documents,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
 
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6.8  Survival. The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities until the later of the
satisfaction or complete conversion of the Debenture.
 
6.9  Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
 
6.10  Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
 
6.11  Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever a Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, in the case of a
rescission of an exercise of a Warrant, such Purchaser shall be required to
return any shares of Common Stock subject to any such rescinded exercise notice.
 
6.12  Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
 
6.13  Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, Purchasers and the
Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
 
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6.14  Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Documents or a Purchaser
enforces or exercises its rights 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, 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.
 
6.15  Usury. To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will resist any
and all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
claim, action or proceeding that may be brought by Purchasers in order to
enforce any right or remedy under any Transaction Documents. Notwithstanding any
provision to the contrary contained in any Transaction Documents, it is
expressly agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law or regulation (the
“Maximum Rate”), and, without limiting the foregoing, in no event shall any rate
of interest or default interest, or both of them, when aggregated with any other
sums in the nature of interest that the Company may be obligated to pay under
the Transaction Documents exceed such Maximum Rate. It is agreed that if the
maximum contract rate of interest allowed by law or regulation and applicable to
the Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law or regulation will be the Maximum Rate applicable to
the Transaction Documents from the effective date forward, unless such
application is precluded by applicable law or regulation. If under any
circumstances whatsoever, interest in excess of the Maximum Rate is paid by the
Company to Purchasers with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by Purchasers to the unpaid principal
balance of any such indebtedness or be refunded to the Company, the manner of
handling such excess to be at Purchasers’ election.
 
6.16  Liquidated Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
 
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6.17  Confidentiality. Purchasers acknowledge that information concerning the
DIA Transaction, the Qualifying Transaction and other matters that are the
subject matter of this Agreement and which have been specifically designated as
such by the Company may constitute material non-public information under United
States federal securities laws, and that United States federal securities laws
prohibit any person who has received material non-public information relating to
the Company from purchasing or selling securities of the Company, or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell securities
of the Company. Accordingly, until such time as any such non-public information
has been adequately disseminated to the public, Purchasers shall not directly or
indirectly, make any statements, public announcements or release to trade
publications or the press with respect to the subject matter of this Agreement,
purchase or sell any securities of the Company or communicate such information
to any other person; subject, however, (i) to the right of Purchasers to
exercise rights under the Transaction Documents, (ii) disclosures required by
applicable law or the SBA, and (iii) disclosures required pursuant to any
judicial proceeding or court order.
 
 
(Signature Page Follows)
 

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Exhibit 10.2

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
 
COMPANY
 
ZONE MINING LIMITED
 
By: /s/ Stephen P. Harrington                
Name: Stephen P. Harrington
Title: President
 
 
 
 
ZM ACQUISTION CORP.
 
By: /s/ Stephen P. Harrington                
Name: Stephen P. Harrington                
Title: President                        
 
 
Address for Notice and Delivery:
 
111 Presidential Blvd.
Suite 165
Bala Cynwyd, PA 19004
Telephone: (610) 771-0680
Facsimile: (___) ___-____
Attn: Stephen P. Harrington
 
 
 

 
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Exhibit 10.2

PURCHASER SIGNATURE PAGE

 PURCHASERS:  SUBSCRIPTION AMOUNT:          TRIDENT GROWTH FUND, L.P.
 $1,000,000

      
By: TRIDENT MANAGEMENT, LLC, its
GENERAL PARTNER

 
By: /s/ Scotty Cook                
Name: Scotty Cook                
Title: Authorized Member

Address for Notice and Delivery

700 Gemini
Houston, TX 77058
Telephone: (281) 488-8484
Facsimile: (281) 488-5353
Attn: Larry St. Martin
 
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Exhibit 10.2
 
 
ATTACHMENTS
 
Exhibit A
Form of Debenture
Exhibit B
Form of Security Agreement
Exhibit C
Form of Warrant
Exhibit D
SBA Form 480
Exhibit E
SBA Form 652
Exhibit F
SBA Form 1031
Exhibit G
Form of DIA Security Agreement
Exhibit H
Subordination Agreement
       
Schedule 1.1
Terms of DIA Transaction
Schedule 3.1(a)
Subsidiaries
Schedule 3.1(e)
Filings, Consents and Approvals
Schedule 3.1(g)
Capitalization
Schedule 3.1(i)
Litigation
Schedule 3.1(l)
Regulatory Permits
Schedule 3.1(m)
Title to Assets (Outstanding liens)
Schedule 3.1(n)
Intellectual Property
Schedule 3.1(r)
Certain Fees (Broker Fees)
Schedule 3.1(u)
Registration Rights
Schedule 3.1(cc)
Indebtedness
Schedule 3.1(ff)
Material Liabilities
Schedule 3.1(gg)
Material Agreements
Schedule 3.1(hh)
Board of Directors
Schedule 3.1(ii)
Financial Statements
Schedule 4.8
Use of Proceeds
Schedule 5.1(f)
Business Activity

 
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Exhibit 10.2
 
 
DISCLOSURE SCHEDULE

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