Exhibit 10.1

SECURITIES PURCHASE
AGREEMENT

Dated as of September 12, 2003

among

SOCKET COMMUNICATIONS, INC.

and

THE PURCHASERS LISTED ON EXHIBIT A

 

 

 

 

 

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TABLE OF CONTENTS
 
Page
ARTICLE I Purchase and Sale of Common Stock and Warrants
1
 
Section 1.1
Purchase and Sale of Common Stock and Warrants
1
 
Section 1.2
Purchase Price and Closing
1
 
Section 1.3
Delivery
2
 
Section 1.4
Warrant Shares
2
ARTICLE II Representations and Warranties
2
 
Section 2.1
Representations and Warranties of the Company
2
 
Section 2.2
Representations and Warranties of the Purchasers
13
ARTICLE III Covenants
15
 
Section 3.1
Securities Compliance
15
 
Section 3.2
Registration and Listing
15
 
Section 3.3
Compliance with Laws
15
 
Section 3.4
Keeping of Records and Books of Account
15
 
Section 3.5
Other Agreements
16
 
Section 3.6
Disclosure of Transactions and Other Material Information
16
 
Section 3.7
Delivery of Share Certificates
16
 
Section 3.8
Preemptive Rights
16
 
Section 3.9
Antidilution.
18
ARTICLE IV Conditions
21
 
Section 4.1
Conditions Precedent to the Obligation of the Company to Close and to Sell the
Shares and Warrants
21
 
Section 4.2
Conditions Precedent to the Obligation of the Purchasers to Close and to
Purchase the Shares and Warrants
22
ARTICLE V Certificate Legend
23
 
Section 5.1
Legend
23
ARTICLE VI Termination
25
 
Section 6.1
Termination
25
 
Section 6.2
Effect of Termination
25
ARTICLE VII Indemnification
25
 
Section 7.1
General Indemnity
25
 
Section 7.2
Indemnification Procedure
26
ARTICLE VIII Miscellaneous
27
 
Section 8.1
Fees and Expenses
27
 
Section 8.2
Specific Enforcement; Consent to Jurisdiction
27
 
Section 8.3
Entire Agreement; Amendment
28
 
Section 8.4
Notices
28
 
Section 8.5
Waivers
29
 
Section 8.6
Headings
29
 
Section 8.7
Successors and Assigns
29
 
Section 8.8
No Third Party Beneficiaries
29
 
Section 8.9
Governing Law
29
 
Section 8.10
Survival
29
 
Section 8.11
Counterparts
29
 
Section 8.12
Publicity
30
 
Section 8.13
Severability
30
 
Section 8.14
Further Assurances
30
 
Section 8.15
Independent Nature of Purchasers' Obligations and Rights
30
 
Section 8.16
Limitation on Number of Shares of Common Stock Issued Pursuant to this Agreement
30

 

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SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of September 12,
2003, by and among Socket Communications, Inc., a Delaware corporation (the
"Company"), and the entities listed on Exhibit A hereto (each, a "Purchaser" and
collectively, the "Purchasers"), for the purchase and sale by the Purchasers of
shares of the Company's Common Stock, par value $0.001 per share (the "Common
Stock"), and warrants to purchase shares of Common Stock.

> The parties hereto agree as follows:

ARTICLE I

Purchase and Sale of Common Stock and Warrants

Section 1.1 Purchase and Sale of Common Stock and Warrants. Upon the following
terms and conditions, the Company shall issue and sell to the Purchasers, and
each Purchaser shall, severally but not jointly, purchase from the Company that
number of shares of Common Stock (the "Shares") and warrants to purchase that
number of shares of Common Stock equal to 30% of the number of Shares to be
purchased by such Purchaser, in substantially the form attached hereto as
Exhibit B (the "Warrants"), in each case, set forth opposite such Purchaser's
name on Exhibit A hereto at a price per Share and related Warrants equal to
$2.37 (the "Per Share Purchase Price"), for an aggregate purchase price to the
Company from all Purchasers of $126,202.36 (the "Purchase Price"). The Company
and the Purchasers are executing and delivering this Agreement in accordance
with and in reliance upon the exemption from securities registration afforded by
Section 4(2) of the U.S. Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), including Regulation
D ("Regulation D"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.

Section 1.2 Purchase Price and Closing. The Company agrees to issue and sell to
the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase the number of
Shares and Warrants set forth opposite their respective names on Exhibit A. The
closing of the purchase and sale of the Shares and Warrants (the "Closing") to
be acquired by the Purchasers from the Company under this Agreement shall take
place at the offices of the Company located at 37400 Central Court, Newark,
California 94560 at 2:00 p.m., Pacific Time (i) on or before September 12, 2003,
provided, that all of the conditions set forth in Article IV hereof and
applicable to the Closing shall have been fulfilled or waived in accordance
herewith, or (ii) at such other time and place or on such date as the Purchasers
and the Company may agree upon (such date is hereinafter referred to as the
"Closing Date"). The entire Purchase Price shall be paid by the Purchasers in
cash, by wire transfer of readily available funds, to the following account:

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Wilson Sonsini Goodrich & Rosati Trust Account
Bank of America
ABA # 121000358
Account # 14843-00544
Reference: Socket Communications, Inc. /15820-047

Section 1.3 Delivery. At the Closing, the Company shall issue to each Purchaser
(a) certificate(s) representing the Shares in such number as is set forth
opposite such Purchaser's name on Exhibit A hereto, and (b) such number of
Warrants to purchase shares of Common Stock as is set forth opposite such
Purchaser's name on Exhibit A hereto. The Warrants shall be exercisable for five
(5) years from the date of issuance and shall have an exercise price per share
of Common Stock equal to 115% of the Per Share Purchase Price.

Section 1.4 Warrant Shares. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a number of its authorized but unissued
shares of Common Stock equal to the aggregate number of shares of Common Stock
necessary to effect the exercise of the Warrants so long as the Warrants are
outstanding. Any shares of Common Stock issuable upon exercise of the Warrants
(and such shares when issued) are herein referred to as the "Warrant Shares".
The Shares, the Warrants and the Warrant Shares are sometimes collectively
referred to herein as the "Securities".

ARTICLE II

Representations and Warranties

Section 2.1 Representations and Warranties of the Company. In order to induce
the Purchasers to enter into this Agreement and to purchase the Shares and the
Warrants, except as set forth in the Schedules attached to this Agreement, the
Company hereby makes the following representations and warranties to the
Purchasers:

(a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
The Company does not have any Subsidiaries (as defined in Section 2.1(g)) or own
securities of any kind in any other entity, except as set forth on Schedule
2.1(g) hereto. The Company and each such Subsidiary are duly qualified as
foreign corporations to do business and are in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
such entities make such qualification necessary, except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified will not
have a Material Adverse Effect. For the purposes of this Agreement, "Material
Adverse Effect" means any adverse effect on the business, operations, properties
or financial condition of the Company or its Subsidiaries or which is likely to
materially hinder the performance by the Company of its obligations hereunder
and under the other Transaction Documents (as defined in Section 2.1(b) hereof).

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(b) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the Registration Rights
Agreement in substantially the form attached hereto as Exhibit D (the
"Registration Rights Agreement"), the Warrants, and the other agreements and
documents contemplated hereby and thereby which are executed by the Company or
to which the Company is party (all of the foregoing agreements and documents are
collectively referred to herein as the "Transaction Documents"), and to issue
and sell the Shares and the Warrants in accordance with the terms hereof. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate action, and, except as
set forth in Schedule 2.1(b), no further consent or authorization of the
Company, its Board of Directors or its stockholders is required. This Agreement
has been duly executed and delivered by the Company. The other Transaction
Documents will have been duly executed and delivered by the Company at the
Closing. Each of the Transaction Documents constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor's rights and remedies or
by other equitable principles of general application.

(c) Capitalization. The authorized capital stock of the Company and the shares
thereof currently issued and outstanding as of September 4, 2003 are set forth
on Schedule 2.1(c) hereto. All of the outstanding shares of the Company's Common
Stock and any other security of the Company have been duly and validly
authorized. Except as set forth on Schedule 2.1(c) hereto, no shares of Common
Stock or any other security of the Company are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth on Schedule 2.1(c) hereto, there are
no contracts, commitments, understandings, or arrangements by which the Company
is or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities or
as provided on Schedule 2.1(c) hereto, the Company is not a party to or bound by
any agreement or understanding granting registration or anti-dilution rights to
any person with respect to any of its equity or debt securities. Except as set
forth on Schedule 2.1(c), the Company is not a party to, and it has no knowledge
of, any agreement or understanding restricting the voting or transfer of any
shares of the capital stock of the Company. Except as set forth on Schedule
2.1(c) hereto, the offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable federal and state securities laws, and no holder of such
securities has a right of rescission or claim for damages with respect thereto
which could have a Material Adverse Effect. The Company has furnished or made
available to the Purchasers true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof (the "Certificate"), and the
Company's Bylaws as in effect on the date hereof (the "Bylaws").

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(d) Issuance of Securities. The Shares and the Warrants to be issued at the
Closing have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and nonassessable and free and clear
of all liens, encumbrances and rights of refusal of any kind and the holders
shall be entitled to all rights accorded to a holder of Common Stock; provided,
however, that the Securities may be subject to restriction or transfer under
state and federal securities laws. When the Warrant Shares are issued and paid
for in accordance with the terms of this Agreement and as set forth in the
Warrants, such shares will be duly authorized by all necessary corporate action
and validly issued and outstanding, fully paid and nonassessable, free and clear
of all liens, encumbrances and rights of refusal of any kind and the holders
shall be entitled to all rights accorded to a holder of Common Stock; provided,
however, that the Securities may be subject to restriction or transfer under
state and federal securities laws.

(e) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) violate any provision of
the Certificate or Bylaws or any Subsidiary's comparable charter documents, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries' respective properties
or assets are bound, (iii) create or impose a lien, mortgage, pledge, security
interest, charge or other encumbrance ("Encumbrances") of any nature on any
property or asset of the Company or any of its Subsidiaries under any agreement
or any commitment to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound or by which any of
their respective properties or assets are bound, or (iv) result in a violation
of any federal, state or local statute, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or any of its Subsidiaries or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected, except, in all
cases other than violations pursuant to clauses (i) or (iv) (with respect to
federal and state securities laws) above, for such conflicts, defaults,
terminations, amendments, acceleration, cancellations, violations, and
Encumbrances as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its Subsidiaries is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in the
aggregate do not have a Material Adverse Effect. Neither the Company nor any of
its Subsidiaries is required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents or issue and sell the Shares, the Warrants or the Warrant Shares in
accordance with the terms hereof or thereof (other than any filings which may be
required to be made by the Company with the Securities and Exchange Commission
(the "Commission"), the NASD and/or the Pacific Exchange prior to or subsequent
to the Closing, or state securities administrators subsequent to the Closing, or
any registration statement which may be filed pursuant hereto or thereto).

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(f) Commission Documents; Financial Statements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, except as disclosed on Schedule 2.1(f)
hereto, the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the Commission pursuant to
the reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d) of the Exchange Act since January 1, 2001
(all of the foregoing, including filings incorporated by reference therein,
being referred to herein as the "Commission Documents"). Neither the Company nor
any authorized agent acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that the Company believes
constitutes material, non-public information, and the Company shall not at any
time hereafter provide any of the Purchasers with any such information unless
such Purchaser shall have provided advance written consent thereto. The Company
understands and confirms that the Purchasers will rely on the foregoing
representation and covenant in effecting transactions in securities of the
Company. At the time of its filing, the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2003 (the "Form 10-Q") complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and the Form 10-Q did not
contain 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. At the time of its filing, the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2002 (the "Form 10-K") complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and, at the time of its
filing, the Form 10-K did not contain 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. As of their respective dates, the financial
statements of the Company included in the Form 10-Q and Form 10-K complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).

(g) Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and
showing the percentage of each person's ownership of the outstanding stock or
other interests of such Subsidiary. For the purposes of this Agreement,
"Subsidiary" shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting
power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any Subsidiary for the purchase
or acquisition of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence except as set forth on Schedule 2.1(g) hereto. Neither
the Company nor any Subsidiary is party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of any Subsidiary.

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(h) No Material Adverse Change. Since March 31, 2003, the Company has not
experienced or suffered any Material Adverse Effect, except as disclosed on
Schedule 2.1(h) hereto.

(i) No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i) hereto,
neither the Company nor any of its Subsidiaries has any liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise), other than those set
forth on the balance sheets included in the Form 10-Q and Form 10-K or incurred
in the ordinary course of the Company's or its Subsidiaries' respective
businesses since March 31, 2003, and those liabilities, obligations, claims or
losses which, individually or in the aggregate, do not have a Material Adverse
Effect on the Company or its Subsidiaries.

(j) No Undisclosed Events or Circumstances. Since March 31, 2003, except as
disclosed on Schedule 2.1(j) hereto, no event or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.

(k) Indebtedness. Except as disclosed on Schedule 2.1(k), neither the Company
nor any Subsidiary is in material default with respect to any Indebtedness. For
purposes of this Agreement: (x) "Indebtedness" of any person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of business), (C)
all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with GAAP, consistently applied for the periods
covered thereby, is classified as a capital lease, (G) all indebtedness referred
to in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Encumbrance upon or in any property or assets (including accounts and
contract rights) owned by any person, even though the person which owns such
assets or property has not assumed or become liable for the payment of such
indebtedness, and (H) all Contingent Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses (A) through (G) above;
and (y) "Contingent Obligation" means, as to any person, any direct or indirect
liability, contingent or otherwise, of that person with respect to any
indebtedness, lease, dividend or other obligation of another person if the
primary purpose or intent of the person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto in excess of
$100,000 due under leases required to be capitalized in accordance with GAAP.

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(l) Title to Assets. Each of the Company and the Subsidiaries has good and
marketable title to all of its real and personal property, free and clear of any
Encumbrances of any nature whatsoever, except for those indicated on Schedule
2.1(l) hereto and except for those Encumbrances that, individually or in the
aggregate, do not have a Material Adverse Effect. Each of the Company and each
Subsidiary is in compliance with all the material terms of each lease to which
it is a party or is otherwise bound.

(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against or involving the
Company, any Subsidiary or any of their respective properties or assets, which
individually or in the aggregate, would have a Material Adverse Effect. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
Subsidiary or, to the knowledge of the Company, any officers or directors of the
Company or any Subsidiary in their capacities as such, which individually, or in
the aggregate, would have a Material Adverse Effect.

(n) Compliance with Law. The business of the Company and the Subsidiaries has
been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as
set forth in the Commission Documents or on Schedule 2.1(n) hereto or except as
such noncompliance therewith, individually or in the aggregate, would not have a
Material Adverse Effect. The Company and each of its Subsidiaries have all
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its business as now
being conducted by it unless the failure to possess such franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.

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(o) Taxes. Except as set forth on Schedule 2.1(o) hereto, the Company and each
of the Subsidiaries has accurately prepared and filed all federal, state and
other tax returns required by law to be filed by it, has paid or made provisions
for the payment of all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the financial statements of
the Company and the Subsidiaries for all current taxes and other charges to
which the Company or any Subsidiary is subject and which are not currently due
and payable. Except as disclosed on Schedule 2.1(o) hereto, none of the federal
income tax returns of the Company or any Subsidiary have been audited by the
Internal Revenue Service. The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against the Company or
any Subsidiary for any period.

(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the Company has
not employed any broker or finder or incurred any liability for any brokerage or
investment banking fees, commissions, finders' structuring fees, financial
advisory fees or other similar fees in connection with the Transaction
Documents.

(q) Disclosure. To the best of the Company's knowledge, neither this Agreement,
the Schedules hereto nor any other Transaction Document contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made herein or therein, in the light of the circumstances
under which they were made herein or therein, not misleading.

(r) Intellectual Property. Except as disclosed on Schedule 2.1(r), the Company
and each of the Subsidiaries owns or possesses all the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses and other
proprietary rights and processes (collectively, the "Proprietary Rights") which
are necessary for the conduct of their respective businesses as now conducted
without any known infringement on the rights of others. As of the date of this
Agreement, neither the Company nor any of its Subsidiaries has received any
written notice that any Proprietary Rights have been declared unenforceable or
otherwise invalid by any court or governmental agency. As of the date of this
Agreement, there is, to the knowledge of the Company, no material existing
infringement, misuse or misappropriation of any Proprietary Rights by others.
From March 31, 2003 to the date of this Agreement, except as disclosed on
Schedule 2.1(r), neither the Company nor any of its Subsidiaries has received
any written notice alleging that the operation of the business of the Company or
any of its Subsidiaries infringes in any material respect upon the intellectual
property rights of others.

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(s) Environmental Compliance. The Company and each of its Subsidiaries have
obtained all material approvals, material authorizations, material certificates,
material consents, material licenses, material orders and material permits or
other similar material authorizations of all governmental authorities, or from
any other person, that are required under any Environmental Laws. "Environmental
Laws" shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth on Schedule 2.1(s) hereto, the Company has all necessary governmental
approvals required under all Environmental Laws and used in its business or in
the business of any of its Subsidiaries, except for such instances as would not
individually or in the aggregate have a Material Adverse Effect. The Company and
each of its Subsidiaries are also in compliance with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws. Except for such instances as
would not individually or in the aggregate have a Material Adverse Effect, there
are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate any Environmental Law or that may give rise to any Environmental
Liabilities. "Environmental Liabilities" means all liabilities of a person
(whether such liabilities are owed by such person to governmental authorities,
third parties or otherwise) whether currently in existence or arising hereafter
which arise under or relate to any Environmental Law.

(t) Books and Records; Internal Accounting Controls. The Company and its
Subsidiaries have kept books and records of account in which full, true and
correct entries have been made of all dealings or transactions in relation to
its business and affairs in accordance with GAAP. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, 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 actions are taken with respect to any
differences.

(u) Material Agreements. Except for the Transaction Documents or as set forth on
Schedule 2.1(u) hereto, or those that are included as exhibits to filings with
the Commission, neither the Company nor any Subsidiary is a party to any written
or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
(collectively, "Material Agreements") if the Company or any Subsidiary were
registering securities under the Securities Act. The Company and each of its
Subsidiaries has in all material respects performed all the obligations required
to be performed by them to date under the Material Agreements, have received no
notice of default and, to the best of the Company's knowledge, are not in
default under any Material Agreement now in effect, the default under which
could cause a Material Adverse Effect. No written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement of the Company or of any
Subsidiary limits the payment of dividends on its Common Stock.

9

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(v) Transactions with Affiliates. Except as set forth in the Company's filings
with the Commission, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions between (a) the Company or any Subsidiary, on the one hand, and (b)
on the other hand, any officer, employee or director of the Company, or any of
its Subsidiaries, or any person owning more than 10% of the capital stock of the
Company or any Subsidiary, or any member of the immediate family of such
officer, employee, director or stockholder or any corporation or other entity
controlled by such officer, employee, director or stockholder, other than loans,
leases, agreements, contracts, royalty agreements, management contracts or
arrangements or other continuing transactions (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of the Company or any of its Subsidiaries, or (iii) for other standard employee
benefits made generally available to all employees.

(w) Securities Act of 1933 and State Securities Laws. Assuming the accuracy of
the representations and warranties of the Purchasers contained in this
Agreement, the Company has complied and will comply with all applicable federal
and state securities laws in connection with the offer, issuance and sale of the
Shares, the Warrants and the Warrant Shares hereunder. Neither the Company nor
anyone acting on its behalf, directly or indirectly, has or will sell, offer to
sell or solicit offers to buy any of the Securities, or similar securities to,
or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person, or has taken or
will take any action so as to bring the issuance and sale of any of the
Securities under the registration provisions of the Securities Act and
applicable state securities laws. Neither the Company nor any of its affiliates,
nor any person acting on the Company's behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) in connection with the offer or sale of any of the
Securities.

(x) Governmental Approvals. Except as set forth on Schedule 2.1(x) hereto, and
except for the filing of any notice prior or subsequent to the Closing that may
be required under applicable state and/or federal securities laws (which if
required, shall be filed on a timely basis), no authorization, consent,
approval, license, exemption of, filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality
located in the United States is or will be necessary for, or in connection with,
the issuance or delivery of the Shares and the Warrants, or for the performance
by the Company of its obligations under the Transaction Documents.

(y) Employees. Neither the Company nor any Subsidiary has any collective
bargaining arrangements or agreements with any of its employees. Except as set
forth in the Company's filings with the Commission or on Schedule 2.1(y) hereto,
neither the Company nor any Subsidiary has any employment contract,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive covenant, relating to
the right of any officer to be employed or engaged by the Company or any such
Subsidiary. Since March 31, 2003, no officer or key employee of the Company or
any Subsidiary whose termination, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, has terminated or, to
the knowledge of the Company, has any present intention of terminating his or
her employment with the Company or any Subsidiary.

10

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(z) Absence of Certain Developments. Except as set forth in the Commission
Documents or on Schedule 2.1(z) hereto, since March 31, 2003, neither the
Company nor any Subsidiary has:

> (i) issued any stock, bonds or other corporate securities or any rights,
> options or warrants with respect thereto, other than to officers, directors
> and employees in the ordinary course of business consistent with past
> practice;
> 
> 
> (ii) borrowed any amount or incurred or become subject to any liabilities
> (absolute or contingent) except current liabilities incurred in the ordinary
> course of business which are comparable in nature and amount to the current
> liabilities incurred in the ordinary course of business during the comparable
> portion of its prior fiscal year, as adjusted to reflect the current nature
> and volume of the Company's or such Subsidiary's business;
> 
> 
> (iii) paid any obligation or liability (absolute or contingent), other than
> current obligations or liabilities paid in the ordinary course of business;
> 
> 
> (iv) declared or made any payment or distribution of cash or other property to
> stockholders with respect to its stock, or purchased or redeemed, or made any
> agreements so to purchase or redeem, any shares of its capital stock;
> 
> 
> (v) sold, assigned or transferred any other tangible assets, or canceled any
> debts or claims, except in the ordinary course of business;
> 
> 
> (vi) sold, assigned or transferred any patent rights, trademarks, trade names,
> copyrights, trade secrets or other intangible assets or intellectual property
> rights, or disclosed any proprietary confidential information to any person
> except in the ordinary course of business or to the Purchasers or their
> representatives;
> 
> 
> (vii) suffered any substantial losses or waived any rights of material value,
> whether or not in the ordinary course of business, or had any customer cancel
> an order(s) for any material amount of prospective business;
> 
> 
> (viii) made any changes in employee compensation except in the ordinary course
> of business and consistent with past practices;
> 
> 
> (ix) made capital expenditures or commitments therefor that aggregate in
> excess of $100,000;
> 
> 
> (x) entered into any other transaction other than in the ordinary course of
> business, or entered into any other material transaction, whether or not in
> the ordinary course of business;
> 
> 
> (xi) made charitable contributions or pledges in excess of $25,000;

11

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> (xii) suffered any damage, destruction or casualty loss, the effect of which
> would have a Material Adverse Effect;
> 
> 
> (xiii) experienced any material problems with ten or more employees, as a
> group, or two or more officers, as a group, in connection with the terms and
> conditions of their employment;
> 
> 
> (xiv) effected any two or more events of the foregoing kind which in the
> aggregate would cause a Material Adverse Effect; or
> 
> 
> (xv) entered into an agreement, written or otherwise, to take any of the
> foregoing (i) through (xiv).

(aa) Use of Proceeds. Except as set forth on Schedule 2.1(aa), the proceeds from
the sale of the Shares and the Warrants will be used by the Company for working
capital purposes and, except as set forth on Schedule 2.1(aa), shall not be used
to repay any outstanding Indebtedness or any loans to any officer, director or
stockholder of the Company (other than reimbursement for reasonable expenses
incurred on behalf of the Company or any of its Subsidiaries).

(bb) Investment Company Act Status. The Company is not, and as a result of and
immediately upon Closing will not be, an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.

(cc) ERISA. No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan by the Company or any of its Subsidiaries
which is or would cause a Material Adverse Effect. With respect to the Company
and its Subsidiaries, the execution and delivery of this Agreement and the issue
and sale of the Shares and the Warrants by the Company to any Purchaser will not
involve any transaction which is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code of 1986, as amended (the "Code"); provided
that, if any Purchaser, or any person or entity that owns a beneficial interest
in any Purchaser, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a "party in
interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 2.1(cc), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any Subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any Subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.

(dd) Delisting Notification. The Company has not received a delisting
notification from the NASDAQ Stock Market or the Pacific Exchange that has not
been rescinded, and, to its knowledge, there are no existing facts or
circumstances that could reasonably give rise to the delisting of the Common
Stock from the NASDAQ Stock Market or the Pacific Exchange.

12

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(ee) Sarbanes-Oxley Act. The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof, except
where such noncompliance would not have, individually or in the aggregate, a
Material Adverse Effect.

(ff) Termination on Change of Control. Each stock option that the Company has
issued to any of its officers, directors or employees as incentive compensation
or otherwise as an employment benefit and each stock purchase warrant
outstanding on the date of this Agreement that the Company has issued to any
person will terminate and expire on any Change of Control (as such term is
defined in the Warrants) (unless any such stock option or warrant is assumed by
the surviving entity in the Change of Control).

Section 2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:

(a) Organization and Standing of the Purchasers. If such Purchaser is an entity,
such Purchaser is a corporation, limited liability company or partnership duly
incorporated or organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization.

(b) Authorization and Power. Such Purchaser has the requisite power and
authority to enter into and perform the Transaction Documents and to purchase
the Shares and Warrants being sold to it hereunder. The execution, delivery and
performance of the Transaction Documents by such Purchaser and the consummation
by it of the transactions contemplated hereby have been duly authorized by all
necessary corporate or partnership action, and no further consent or
authorization of such Purchaser or its Board of Directors, stockholders, or
partners, as the case may be, is required. This Agreement has been duly
authorized, executed and delivered by such Purchaser. The other Transaction
Documents constitute, or shall constitute when executed and delivered, valid and
binding obligations of such Purchaser enforceable against such Purchaser in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.

(c) Acquisition for Investment. Such Purchaser is purchasing the Securities
solely for its own account and not with a view to or for sale in connection with
the distribution thereof. Such Purchaser does not have a present intention to
sell any of the Securities, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Securities to or
through any person or entity; provided, however, that by making the
representations herein and subject to Section 2.2(e) below, such Purchaser does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to pledge any of the Securities for margin purposes
and/or to dispose of any of the Securities at any time in accordance with
federal and state securities laws applicable to such disposition or pursuant to
an effective Registration Statement (as such term is defined in the Registration
Rights Agreement). Such Purchaser acknowledges that it (i) has such knowledge
and experience in financial and business matters such that such Purchaser is
capable of evaluating the merits and risks of its investment in the Company,
(ii) is able to bear the financial risks associated with an investment in the
Securities, and (iii) has been given full access to such records of the Company
and the Subsidiaries and to the officers of the Company and the Subsidiaries as
it has deemed necessary or appropriate to conduct its due diligence
investigation.

13

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(d) Rule 144. Such Purchaser understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act or
an exemption from registration is available. Such Purchaser acknowledges that it
is familiar with Rule 144 of the rules and regulations of the Commission, as
amended, promulgated pursuant to the Securities Act ("Rule 144"), and that such
Purchaser has been advised that Rule 144 permits resales only under certain
circumstances. Such Purchaser understands that to the extent that Rule 144 is
not available, such Purchaser will be unable to sell any Securities without
either registration under the Securities Act or the existence of another
exemption from such registration requirement.

(e) General. Such Purchaser understands that the Securities are being offered
and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Securities. Such Purchaser understands that no United
States federal or state agency or any government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.

(f) Opportunities for Additional Information. Such Purchaser acknowledges that
such Purchaser has had the opportunity to ask questions of and receive answers
from, or obtain additional information from, the executive officers of the
Company concerning the financial and other affairs of the Company, and to the
extent deemed necessary in light of such Purchaser's personal knowledge of the
Company's affairs, such Purchaser has asked such questions and received answers
to the full satisfaction of such Purchaser, and such Purchaser desires to invest
in the Company.

(g) No General Solicitation. Such Purchaser acknowledges that the Securities
were not offered to such Purchaser by means of any form of general or public
solicitation or general advertising, or publicly disseminated advertisements or
sales literature, including (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media, or
broadcast over television or radio, or (ii) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of communications.

(h) Accredited Investor. Such Purchaser is an accredited investor (as defined in
Rule 501 of Regulation D), and such Purchaser has such experience in business
and financial matters that it is capable of evaluating the merits and risks of
an investment in the Securities. Such Purchaser acknowledges that an investment
in the Securities is speculative and involves a high degree of risk.

14

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(i) Short Sales. Between August 8, 2003 and the Closing, such Purchaser has not
caused, advised, asked or assisted any person or entity to engage in "short
sales" of the Company's Common Stock.

ARTICLE III

Covenants

The Company covenants with each Purchaser as follows, which covenants are for
the benefit of each Purchaser and their respective permitted assignees.

Section 3.1 Securities Compliance. The Company shall notify the Commission, in
accordance with its rules and regulations, of the transactions contemplated by
any of the Transaction Documents, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the
Purchasers, or their respective subsequent holders.

Section 3.2 Registration and Listing. The Company will use its commercially
reasonable efforts to cause its Common Stock to continue to be registered under
Section 12(b) or 12(g) of the Exchange Act, will comply in all material respects
with its reporting and filing obligations under the Exchange Act, will comply
with all material requirements related to any registration statement filed
pursuant to any Transaction Document, and will not take any action or file any
document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company shall use its
commercially reasonable efforts to continue the quotation of its Common Stock on
the NASDAQ Stock Market or any successor market. The Company will promptly
following the Closing Date file the "Listing Application" for, or in connection
with, the issuance and delivery of the Shares, the Warrants and the Warrant
Shares.

Section 3.3 Compliance with Laws. The Company shall use its commercially
reasonable efforts to comply, and cause each Subsidiary to comply, with all
applicable laws, rules, regulations and orders, the noncompliance with which
could have a Material Adverse Effect.

Section 3.4 Keeping of Records and Books of Account. The Company shall keep and
cause each Subsidiary to keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its Subsidiaries, and
in which, for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.

15

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Section 3.5 Other Agreements. The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability
of the Company or any Subsidiary to perform under any Transaction Document.

Section 3.6 Disclosure of Transactions and Other Material Information. On or
before 5:30 p.m., New York City time, on the second Business Day immediately
following the Closing Date, the Company shall file a Current Report on Form 8-K
with the Commission describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement, the Warrants and the Registration Rights Agreement, and the
schedules hereto and thereto in the form required by the Exchange Act (including
all attachments, the "8-K Filing"). In addition, on or before 8:30 a.m., New
York City time, on the next day immediately following the Closing Date, the
Company shall issue a press release describing the terms of the transactions
contemplated by the Transaction Documents. For purposes of this Agreement, a
"Business Day" means any day except Saturday, Sunday and any day which is a
legal holiday or a day on which banking institutions in the state of California
generally are authorized or required by law or other government actions to
close. From and after the filing of the 8-K Filing with the Commission, no
Purchaser shall be in possession of any material, nonpublic information received
from the Company, any of its Subsidiaries or any of their respective officers,
directors, employees or authorized agents that is not disclosed in the 8-K
Filing. The Company shall not, and shall cause each of its Subsidiaries and its
and each of their respective officers, directors, employees and authorized
agents not to, provide any Purchaser with any material, nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of
the 8-K Filing with the Company without the express written consent of such
Purchaser.

Section 3.7 Delivery of Share Certificates. At Closing or as soon thereafter as
reasonably possible (but in any event no later than two Business Days
immediately following the Closing Date), the Company shall deliver to each
Purchaser certificates representing the Shares (in such denominations as each
Purchaser may request) acquired by such Purchaser at the Closing.

Section 3.8 Preemptive Rights.

(a) Until the first anniversary of the Closing Date and for so long as any
Purchaser or its assigns shall own any Shares (any Purchaser, for such purpose,
an "Eligible Purchaser"), the Company hereby grants to each Eligible Purchaser a
right (the "Preemptive Right") to purchase all or any part of such Eligible
Purchaser's pro rata share of any "New Securities" (as defined in Section
3.8(b)) that the Company may, from time to time, propose to sell and issue
solely for cash. The pro rata share for each Eligible Purchaser, for purposes of
the Preemptive Right, is the ratio of (x) the number of shares of Common Stock
then held by such Eligible Purchaser immediately prior to the issuance of the
New Securities (assuming the full conversion of any Preferred Stock, but not
including any other shares of Common Stock to be acquired by such Eligible
Purchaser or issued to such Eligible Purchaser pursuant to Section 3.9), to (y)
the total number of shares of Common Stock of the Company outstanding
immediately prior to the issuance of the New Securities (after giving effect to
the full conversion of any Preferred Stock, but not including any shares of
Common Stock issuable upon the exercise, conversion or exchange of any other
security or issued to such Eligible Purchaser pursuant to Section 3.9).

16

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(b) For purposes of this Section 3.8, "New Securities" shall mean any Common
Stock or Preferred Stock of the Company, whether or not authorized on the date
hereof, and rights, options or warrants to purchase Common Stock or Preferred
Stock and securities of any type whatsoever that are, or may become, convertible
into Common Stock or Preferred Stock; provided, however, that "New Securities"
does not include the following:

> (i) shares of capital stock of the Company issuable upon conversion or
> exercise of any currently outstanding securities or any Shares, Warrants or
> New Securities issued in accordance with this Agreement (including the Warrant
> Shares);
> 
> 
> (ii) shares or options or warrants for Common Stock granted to officers,
> directors and employees of, and consultants to, the Company pursuant to stock
> option or purchase plans or other compensatory agreements approved by the
> Board of Directors;
> 
> 
> (iii) shares of Common Stock or Preferred Stock issued in connection with any
> pro rata stock split or stock dividend in respect of any series or class of
> capital stock of the Company or recapitalization by the Company;
> 
> 
> (iv) shares of capital stock, or options or warrants to purchase capital
> stock, issued to a strategic investor in connection with a strategic
> commercial agreement as determined by the Board of Directors;
> 
> 
> (v) shares of capital stock, or options or warrants to purchase capital stock,
> issued pursuant to commercial borrowing, secured lending or lease financing
> transaction approved by the Board of Directors;
> 
> 
> (vi) shares of capital stock, or options or warrants to purchase capital
> stock, issued pursuant to the acquisition of another corporation or entity by
> the Company by consolidation, merger, purchase of all or substantially all of
> the assets, or other reorganization in which the Company acquires, in a single
> transaction or series of related transactions, all or substantially all of the
> assets of such other corporation or entity or fifty percent (50%) or more of
> the voting power of such other corporation or entity or fifty percent (50%) or
> more of the equity ownership of such other corporation or entity;
> 
> 
> (vii) shares of capital stock issued in an underwritten public securities
> offering pursuant to a registration statement filed under the Securities Act;
> 
> 
> (viii) shares of capital stock, or options or warrants to purchase capital
> stock, issued to current or prospective customers or suppliers of the Company
> approved by the Board of Directors as compensation or accommodation in lieu of
> other payment, compensation or accommodation to such customer or supplier;

17

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> (ix) shares of capital stock, or warrants to purchase capital stock, issued to
> any person or entity that provides services to the Company as compensation
> therefor pursuant to an agreement approved by the Board of Directors;
> 
> 
> (x) shares of capital stock, or options or warrants to purchase capital stock,
> offered in a transaction where purchase of such securities by any Purchaser
> would cause such transaction to fail to comply with applicable federal or
> state securities laws or would cause an applicable registration or
> qualification exemption to fail to be available to the Company; provided,
> however, that this clause (x) shall apply only to the Purchaser or Purchasers
> who would cause any such failure, and not to any of the other Purchasers;
> 
> 
> (xi) securities issuable upon conversion or exercise of the securities set
> forth in paragraphs (i) - (x) above.

(c) In the event that the Company proposes to undertake an issuance of New
Securities for cash, it shall give each Eligible Purchaser written notice (the
"Notice") of its intention, describing the type of New Securities, the price,
and the general terms upon which the Company proposes to issue the same. Each
Eligible Purchaser shall have twenty (20) Business Days after receipt of such
notice to agree to purchase all or any portion of its pro rata share of such New
Securities at the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. In the event that any New Securities subject to the Preemptive
Right are not purchased by the Eligible Purchaser within the twenty (20)
Business Day period specified above, the Company shall have ninety (90) days
thereafter to sell (or enter into an agreement pursuant to which the sale of New
Securities that had been subject to the Preemptive Right shall be closed, if at
all, within sixty (60) days from the date of said agreement) the New Securities
with respect to which the rights of the Purchaser were not exercised at a price
and upon terms, including manner of payment, no more favorable to the purchasers
thereof than specified in the Notice. In the event the Company has not sold all
offered New Securities within such ninety (90) day period (or sold and issued
New Securities in accordance with the foregoing within sixty (60) days from the
date of such agreement), the Company shall not thereafter issue or sell any New
Securities, without first complying again with the procedures set forth in this
Section 3.8.

(d) The Preemptive Right is not assignable by any Eligible Purchaser without the
prior written consent of the Company, which consent shall not be unreasonably
withheld, conditioned or delayed.

Section 3.9 Antidilution.

18

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(a) Computation of Adjusted Exercise Price. Except as hereinafter provided, in
case the Company shall at any time during the Antidilution Period issue or sell
any New Securities for a consideration per share less than the Applicable Per
Share Purchase Price (such price, the "New Price" and such New Price shall be
deemed to equal $0.01 in the event such New Securities are issued without
consideration), then upon such issuance or sale, each Purchaser shall receive
without payment of additional consideration to the Company, that number of
shares of Common Stock equal to the excess of (x) a fraction, the numerator or
which is the portion of the Purchase Price paid by such Purchaser and the
denominator of which is the New Price, over (y) the sum of the number of Shares
received by such Purchaser pursuant this Agreement at the Closing pursuant to
Article I and the number of Shares of Common Stock received by such Purchaser
pursuant to prior application of this Section 3.9(a). No fractional shares shall
be issued pursuant to this Section 3.9(a) and the number of shares of Common
Stock to be issued shall be rounded down to the nearest whole share. If a
fractional share interest arises pursuant to this Section 3.9(a), the Company
shall eliminate such fractional share interest by paying the respective
Purchaser an amount equal to the product of the fractional share interest and
the fair market value of a full share of Common Stock. For purposes of this
Section 3.9, the "Antidilution Period" shall mean the period of time between the
date of this Agreement and the date which is 30 days following the effective
date of the Registration Statement. For purposes of this Section 3.9, the
"Applicable Per Share Purchase Price" shall initially equal the Per Share
Purchase Price at the Closing (as set forth in Section 1.1), but shall be
reduced to the New Price in the event New Securities are issued for a
consideration per share less than the Applicable Per Share Purchase Price in
effect at such time of issuance, and the Applicable Per Share Purchase Price
shall also be further adjusted as otherwise provided in this Section 3.9. For
purposes of any computation to be made in accordance with this Section 3.9, the
following provisions shall be applicable:

> (i) In case of the issuance or sale of New Securities for a consideration that
> shall be cash, the amount of the cash consideration, shall be deemed to be the
> amount of cash received by the Company for such shares;
> 
> 
> (ii) In case of the issuance or sale (otherwise than as a dividend or other
> distribution on any stock of the Company) of New Securities for a
> consideration part or all of which shall be other than cash, the amount of the
> consideration therefore other than cash shall be deemed to be the value of
> such consideration as determined in good faith by the Board of Directors of
> the Company;
> 
> 
> (iii) New Securities issuable by way of dividend or other distribution on any
> capital stock of the Company shall be deemed to have been issued immediately
> after the opening of business on the day following the record date for the
> determination of stockholders entitled to receive such dividend or other
> distribution and shall be deemed to have been issued without consideration;
> and
> 
> 
> (iv) The reclassification of securities of the Company other than New
> Securities into securities including New Securities shall be deemed to involve
> the issuance of such New Securities for consideration other than cash
> immediately prior to the close of business on the date fixed for the
> determination of security holders entitled to receive such shares, and the
> value of the consideration allocable to such New Securities shall be
> determined as provided in subsection (b) of this Section 3.9. The number of
> New Securities at any one time outstanding shall include the aggregate number
> of shares issued or issuable (subject to readjustment upon the actual issuance
> thereof) upon the exercise of then outstanding options, rights, warrants and
> upon the conversion or exchange of then outstanding convertible or
> exchangeable securities.

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(b) Convertible Securities. In case the Company shall at any time during the
Antidilution Period issue options, rights or warrants to subscribe for New
Securities, or issue any securities convertible into or exchangeable for New
Securities, for a consideration per share less than the Applicable Per Share
Purchase Price, or without consideration, additional shares will be issued to
the Purchasers in accordance with Section 3.9(a) hereof; provided, that:

> (i) The aggregate maximum number of New Securities, as the case may be,
> issuable under such options, rights or warrants shall be deemed to be issued
> and outstanding at the time such options, rights or warrants were issued, for
> a consideration equal to the minimum purchase price per share provided for in
> such options, rights or warrants at the time of issuance, plus the
> consideration, if any, received by the Company for such options, rights or
> warrants.
> 
> 
> (ii) The aggregate maximum number of New Securities issuable upon conversion
> or exchange of any convertible or exchangeable securities shall be deemed to
> be issued and outstanding at the time of issuance of such securities, and for
> a consideration equal to the consideration received by the Company for such
> securities, plus the minimum consideration, if any, receivable by the Company
> upon the conversion or exchange thereof.
> 
> 
> (iii) If any change shall occur in the price per share provided for in any of
> the options, rights or warrants referred to in subsection (a) of this Section
> 3.9, or in the price per share at which the securities referred to in
> subsection (b) of this Section 3.9 are convertible or exchangeable, such
> options, rights or warrants or conversion or exchange rights, as the case may
> be, shall be deemed to have expired or terminated on the date when such price
> change became effective in respect to shares not theretofore issued pursuant
> to the exercise or conversion or exchange thereof, and the Company shall be
> deemed to have issued upon such date new options, rights or warrants or
> convertible or exchangeable securities at the new price in respect of the
> number of shares issuable upon the exercise of such options, rights or
> warrants or the conversion or exchange of such convertible or exchangeable
> securities.

(c) Subdivision, Stock Dividends or Combinations. In case the Company shall
during the Antidilution Period subdivide the outstanding shares of Common Stock
or shall issue a stock dividend with respect to the Common Stock, the Shares in
effect immediately prior to such subdivision or the issuance of such dividend
shall be proportionately decreased and the Applicable Per Share Purchase Price
and Per Share Purchase Price shall be proportionately increased, and in case the
Company shall at any time combine the outstanding shares of Common Stock, the
Shares in effect immediately prior to such combination shall be proportionately
increased and the Applicable Per Share Purchase Price and Per Share Purchase
Price shall be proportionately decreased, effective at the close of business on
the date of such subdivision, dividend or combination, as the case may be.

(d) No Adjustment in Certain Cases. No additional shares of Common Stock shall
be issued to the Purchasers pursuant to this Section 3.9 if the excess of the
Applicable Per Share Purchase Price over the New Price is less than one cent
($0.01).

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(e) Registration Rights. If any additional shares of Common Stock are issued to
the Purchasers pursuant to this Section 3.9, the Company and the Purchasers
hereby agree to enter into an agreement substantially similar to the
Registration Rights Agreement in respect of such additional shares of Common
Stock.

(f) Characterization of the Rights in this Section 3.9. The right to receive
additional shares of Common Stock set forth in Section 3.9(a) shall be deemed to
be an option received by the Purchasers at the Closing, and the Per Share
Purchase Price shall be deemed to equal a fraction, (x) the numerator of which
is the Purchase Price and (y) the denominator of which is the sum of the number
of Shares received by the Purchasers at the Closing pursuant to Article I and
the number of shares of Common Stock received by the Purchasers pursuant to the
application of Section 3.9(a).

(g) No Assignment and Termination. No Purchaser shall assign any of its rights
set forth in this Section 3.9 to any third parties without the prior written
consent of the Company, which consent shall not be unreasonably withheld,
conditioned or delayed. The rights of the Purchasers and the obligations of the
Company set forth in this Section 3.9 shall terminate on a Change of Control (as
defined in the Warrants).

ARTICLE IV

Conditions

Section 4.1 Conditions Precedent to the Obligation of the Company to Close and
to Sell the Shares and Warrants. The obligation hereunder of the Company to
close and issue and sell the Shares and the Warrants to the Purchasers on the
Closing Date is subject to the satisfaction or waiver, at or before the Closing,
of the conditions set forth below. These conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion.

(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.

(b) Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing Date.

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.

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(d) Delivery of Transaction Documents. The Transaction Documents to which the
Purchasers are party shall have been duly executed and delivered by the
Purchasers to the Company.

Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Close
and to Purchase the Shares and Warrants. The obligation hereunder of the
Purchasers to purchase the Shares and Warrants and consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver, at or
before the Closing, of the conditions set forth below. These conditions are for
the Purchasers' sole benefit and may be waived by the Purchasers at any time in
their sole discretion.

(a) Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects as of the Closing Date, except for
representations and warranties that speak as of a particular date, which shall
be true and correct in all material respects as of such date.

(b) Performance by the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.

(c) No Suspension, Etc. Trading in the Common Stock shall not have been
suspended by the Commission (except for any suspension of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior to
the Closing), and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported by Bloomberg, or quoted by NASDAQ, nor shall a banking moratorium have
been declared either by the United States or California State authorities, nor
shall there have occurred any national or international calamity or crisis of
such magnitude in its effect on any financial market which, in each case, in the
reasonable judgment of the Purchasers, makes it impracticable or inadvisable to
purchase the Shares.

(d) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits the
consummation of any of the transactions contemplated by this Agreement.

(e) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary, seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.

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(f) Opinion of Counsel, Etc. The Purchasers shall have received an opinion of
counsel to the Company, dated the Closing Date, in the form of Exhibit C hereto.

(g) Warrants and Shares. The Company shall have delivered to the Purchasers
facsimile copies of the executed Warrants (in such denominations as each
Purchaser may request), and shall have made arrangements for delivery of the
certificates representing the Shares (in such denominations as each Purchaser
may request) in accordance with Section 3.7, being acquired by the Purchasers at
the Closing.

(h) Resolutions. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 2.1(b) hereof in a form reasonably
acceptable to the Purchasers (the "Resolutions").

(i) Reservation of Shares. As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the purpose
of effecting the issuance of the Shares and the exercise of the Warrants, a
number of shares of Common Stock equal to the sum of the Shares and the Warrant
Shares issuable upon exercise of the Warrants, assuming the Warrants were
granted on the Closing Date (after giving effect to the Warrants to be issued on
the Closing Date and assuming the Warrants were fully exercisable on such date
regardless of any limitation on the timing or amount of such exercises).

(j) Secretary's Certificate. The Company shall have delivered to the Purchasers
a secretary's certificate, dated as of the Closing Date, as to (i) the
Resolutions, (ii) the Certificate and the Bylaws, each as in effect at the
Closing, and (iii) the authority and incumbency of the officers of the Company
executing the Transaction Documents and any other documents required to be
executed or delivered in connection therewith.

(k) Officer's Certificate. On the Closing Date, the Company shall have delivered
to the Purchasers a certificate of an executive officer of the Company, dated as
of the Closing Date, confirming the accuracy of the Company's representations,
warranties and covenants as of the Closing Date and confirming the compliance by
the Company with the conditions precedent set forth in this Section 4.2 as of
the Closing Date.

(l) Registration Rights Agreement. As of the Closing Date, the parties shall
have entered into the Registration Rights Agreement in the Form of Exhibit D
attached hereto.

(m) Material Adverse Effect. No Material Adverse Effect shall have occurred.

ARTICLE V

Certificate Legend

Section 5.1 Legend.

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(a) Each certificate representing the Shares and the Warrant Shares shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required by applicable state securities or "blue sky"
laws) until the Shares and the Warrants Shares have been covered by an effective
registration statement or may be removed as provided in subsection (c) below:

"THESE SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR IF APPLICABLE, STATE SECURITIES LAWS. THESE SHARES OF
COMMON STOCK MAY NOT BE SOLD, OFFERED FOR SALES, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SHARES OF COMMON STOCK
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO SOCKET COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED."

(b) Each Warrant shall be stamped or otherwise imprinted with a legend
substantially in the following form (in the addition to any legend required by
applicable state securities or "blue sky" laws) until the Warrant has been
covered by an effective registration statement or may be removed as provided in
subsection (c) below:

"THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THIS WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SOCKET COMMUNICATIONS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."

(c) The Company agrees to reissue certificates representing any of the
Securities, without the legend set forth above, if at such time, prior to making
any transfer of any such Securities, such holder thereof shall give written
notice to the Company describing the manner and terms of such transfer and
removal as the Company may reasonably request. Such proposed transfer will not
be effected until: (i) any such Securities are registered under the Securities
Act, or (ii) in connection with a transfer on or after 98 days from the date of
this Agreement, such holder provides the Company with an opinion of counsel, in
generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the Securities
Act and applicable state securities or "blue sky" laws. The Company will use its
commercially reasonable efforts to respond to any such notice from a holder
within three (3) Business Days. In the case of any proposed transfer under this
Section 5.1, the Company shall in no event be required, in connection therewith,
to qualify to do business in any state where it is not then qualified or to take
any action that would subject it to tax or to the general service of process in
any state where it is not then subject. The restrictions on transfer contained
in this Section 5.1 shall be in addition to, and not by way of limitation of,
any other restrictions on transfer contained in any other section of this
Agreement. Notwithstanding the foregoing, the restrictions on transfer contained
in this Section 5.1 shall not limit or prohibit any Purchaser's right to pledge
any of the Securities for margin purposes.

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ARTICLE VI

Termination

Section 6.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date by the mutual written consent of the Company and the
Purchasers. In addition, in the event that the Closing shall not have occurred
on or before one (1) Business Day from the date hereof due to the Company's or
any Purchaser's failure to satisfy the conditions to Closing set forth herein
(and the non-breaching party's failure to waive such unsatisfied conditions),
the non-breaching party shall have the right to terminate this Agreement
immediately upon written notice to the breaching party.

Section 6.2 Effect of Termination. In the event of termination by the Company or
the Purchasers, written notice thereof shall forthwith be given to the other
party and the transactions contemplated by this Agreement shall be terminated
without further action by any party. If this Agreement is terminated as provided
in Section 6.1 herein, this Agreement shall become void and of no further force
and effect, except for Sections 8.1 and 8.2, and Article VII herein. Nothing in
this Section 6.2 shall be deemed to release the Company or any Purchaser from
any liability for any breach under this Agreement, or to impair the rights of
the Company or such Purchaser to compel specific performance by the other party
of its obligations under this Agreement.

ARTICLE VII

Indemnification

Section 7.1 General Indemnity. The Company agrees to indemnify and hold harmless
each Purchaser (and its respective directors, officers, employees, affiliates,
agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
each Purchaser or any such person as a result of any inaccuracy in or breach of
the representations or warranties or breach or default in the performance by the
Company of any of the covenants to be performed by the Company herein. The
Purchasers severally but not jointly agree to indemnify and hold harmless the
Company and its directors, officers, employees, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by the Company as result of
any inaccuracy in or breach of the representations or warranties or breach or
default in the performance by the Purchasers of any of the covenants to be
performed by the Purchasers herein; provided, however, that no Purchaser shall
be liable under this Section 7.1 for any amount that exceeds the portion of the
Purchase Price paid by such Purchaser to the Company in connection with such
Purchaser's purchase of Shares and Warrants hereunder.

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Section 7.2 Indemnification Procedure. Any party entitled to indemnification
under this Article VII (an "indemnified party") will give written notice to the
indemnifying party of any matters giving rise to a claim for indemnification;
provided, that the failure of any party entitled to indemnification hereunder to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Article VII except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the indemnified party a
conflict of interest between it and the indemnifying party may exist with
respect to such action, proceeding or claim, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. In the event that the
indemnifying party advises an indemnified party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party's
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VII to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VII shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.

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ARTICLE VIII

Miscellaneous

Section 8.1 Fees and Expenses. Each party shall pay the fees and expenses of its
advisors, 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. In addition, the Company
shall pay all reasonable fees and expenses incurred by the Purchasers in
connection with any amendments, modifications or waivers of this Agreement or
any of the other Transaction Documents or incurred in connection with the
enforcement of this Agreement and any of the other Transaction Documents,
including, without limitation, all reasonable attorneys' fees, disbursements and
expenses.

Section 8.2 Specific Enforcement; Consent to Jurisdiction.

(a) The Company and the Purchasers acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
other Transaction Documents were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Agreement or the other Transaction Documents and to
enforce specifically the terms and provisions hereof or thereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.

(b) The Company and each Purchaser (i) hereby irrevocably submit to the
exclusive jurisdiction of the United States District Court sitting in the
Northern District of Texas and the courts of the state of Texas located in
Dallas County for the purposes of any suit, action or proceeding arising out of
or relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby, and (ii) hereby waive, and agree
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. The Company and each Purchaser consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this Section 8.2 shall affect
or limit any right to serve process in any other manner permitted by law. The
Company and the Purchasers hereby agree that the prevailing party in any suit,
action or proceeding arising out of or relating to the Shares, this Agreement,
the Registration Rights Agreement or the Warrants, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.

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Section 8.3 Entire Agreement; Amendment. This Agreement and the Transaction
Documents contain the entire understanding and agreement of the parties with
respect to the matters covered hereby and, except as specifically set forth
herein or in the other Transaction Documents, neither the Company nor any
Purchaser make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the holders of at least a majority in
interest of the then-outstanding Shares, and no provision hereof may be waived
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought. No such amendment shall be effective
to the extent that it applies to less than all of the holders of the Shares then
outstanding. No consideration shall be offered or paid to any person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents or holders of Shares, as the case may be.

Section 8.4 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon delivery if delivered in person or upon transmission if sent
by facsimile at the address or number designated below (if delivered on a
Business Day during normal business hours where such notice is to be received),
or the first Business Day following such delivery (if delivered other than on a
Business Day during normal business hours where such notice is to be received),
or (b) on the second Business Day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:

If to the Company:

Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Attention: David W. Dunlap
Telecopier: (510) 744-2727
Telephone: (510) 744-2700

with copies (which copies
shall not constitute notice
to the Company) to:

Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Herbert P. Fockler
Telecopier: (650) 493-9300
Telephone: (650) 493-6811

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If to any Purchaser:

At the address of such Purchaser set forth on Exhibit A to this Agreement.

Any party hereto may from time to time change its address for notices by giving
at least ten (10) days written notice of such changed address to the other party
hereto.

Section 8.5 Waivers. No waiver by any party 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 other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right accruing to
it thereafter.

Section 8.6 Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

Section 8.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. After the
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement. Except as
provided herein, the Purchasers may assign the Shares, the Warrants and their
rights under this Agreement and the other Transaction Documents and any other
rights hereto and thereto without the consent of the Company.

Section 8.8 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person (other than indemnified parties, as contemplated by Article
VII).

Section 8.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without giving
effect to the choice of law provisions. This Agreement shall not be interpreted
or construed with any presumption against the party causing this Agreement to be
drafted.

Section 8.10 Survival. The representations and warranties of the Company and the
Purchasers contained in Sections 2.1(o) and 2.1(s) shall survive indefinitely
and those contained in Article II, with the exception of Sections 2.1(o) and
2.1(s), shall survive the execution and delivery hereof and the Closing until
the date two (2) years from the Closing Date, and the agreements and covenants
set forth in Articles I, III, V, VII and VIII of this Agreement shall survive
the execution and delivery hereof and the Closing hereunder.

Section 8.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.

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Section 8.12 Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the names of the Purchasers without the
consent of the Purchasers in accordance with Section 8.3, which consent shall
not be unreasonably withheld or delayed, or unless and until such disclosure is
required by law, rule or applicable regulation, and then only to the extent of
such requirement; provided, however, that the Purchasers acknowledge and agree
that they will be included as selling shareholders in the Registration
Statement.

Section 8.13 Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any
one or more of the provisions or part of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.

Section 8.14 Further Assurances. From and after the date of this Agreement, upon
the request of the Purchasers or the Company, the Company and each Purchaser
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement, the Warrants and the
Registration Rights Agreement.

Section 8.15 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto
or thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser confirms that it has independently
participated in the negotiation of the transactions contemplated hereby with the
advice of its own counsel and advisors. Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.

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Section 8.16 Limitation on Number of Shares of Common Stock Issued Pursuant to
this Agreement. The Company shall not be obligated to issue any New Securities
or additional shares of Common Stock pursuant to Sections 3.8 and 3.9 of this
Agreement if such issuance would cause the Company to exceed that number of
shares of Common Stock which the Company may issue pursuant to this Agreement
and the transactions contemplated herein without breaching the Company's
obligations under the rules and regulations of the Nasdaq National Market
("Nasdaq"), except that such limitation shall not apply in the event that the
Company (a) obtains the approval of its stockholders as required by Nasdaq (or
any successor rule or regulation) for issuances of Common Stock in excess of
such amount, or (b) obtains a written opinion from outside counsel to the
Company that such approval is not required, which opinion shall be reasonably
satisfactory to the Purchasers that hold a majority of the Shares. In the event
the Company is prohibited from issuing New Securities or shares of Common Stock
as a result of the operation of this Section 8.16, the Purchasers shall be
issued pursuant to Sections 3.8 and 3.9 the maximum number of New Securities and
shares of Common Stock that shall not result in a breach of the Company's
obligation under the rules and regulations of the Nasdaq.

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

  SOCKET COMMUNICATIONS, INC.

   

By: _____________________________

 

Name:
Title:

 

 

 

 

 

 

 

[Signatures of Purchasers to follow on next pages.]

 

 

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