Exhibit 10.1

 

EXECUTION COPY

 

EBIX, INC.

 

SECURED CONVERTIBLE NOTE
PURCHASE AGREEMENT

 

July 11, 2008

 

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SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT

 

THIS SECURED CONVERTIBLE NOTE PURCHASE AGREEMENT (the “Agreement”) is made
effective as of July 11, 2008, by and between Ebix, Inc., a Delaware corporation
(the “Company”), and Whitebox VSC Ltd., a limited partnership organized under
the laws of the British Virgin Islands (the “Investor”), with respect to the
following recitals.

 

RECITALS

 

A.            The Company desires to issue and sell and the Investor desires to
purchase secured convertible promissory notes in substantially the form attached
to this Agreement as Exhibit A (collectively, the “Notes”), which shall be
convertible on the terms stated therein into common stock, par value $.10 per
share (the “Common Stock”), of the Company; and

 

B.            As a further inducement for Investor to purchase the Notes, the
Company desires to provide a security interest in all assets of the Company as
collateral to further secure the performance of the Company’s obligations under
the Notes, as set forth in that certain Security Agreement to be entered into
between the Company and the Investor within thirty (30) days after the date
hereof (the “Security Agreement”).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the respective representations, warranties,
covenants and agreements contained herein, and for other valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1  Specific Definitions.  As used in this Agreement, the following
terms shall have the meanings set forth or as referenced below:

 

“Action” shall have the meaning ascribed to such term in Section 4.10.

 

“Affiliate” of a specified person (natural or juridical) means a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, that person, as such terms are
used in and construed under Rule 405 under the Securities Act.  With respect to
the Investor, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as the Investor will be
deemed to be an Affiliate of the Investor.

 

“Agreement” means this Agreement and all Exhibits and Schedules hereto.

 

“Closing” shall have the meaning ascribed to such term in Section 3.1.

 

“Closing Date” shall have the meaning ascribed to such term in Section 3.1.

 

“Code” shall have the meaning ascribed to such term in Section 4.35.

 

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“Common Stock” means the Company’s common stock, par value $0.10 per share.

 

“Conversion Price” means the conversion price in effect on any given date, which
initially shall be equal to $84.00, but which shall be subject to adjustment as
described herein and in the Note.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

“Conversion Shares” or “Shares” means the shares of Common Stock issued or
issuable upon conversion of any of the Convertible Note.

 

“Convertible Note” or “Note” means the promissory note, in the form attached
hereto as Exhibit A, to be issued by the Company to the Investor.

 

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.

 

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

 

“Environmental Laws or Regulations” means any federal, state or local statute,
law, ordinance or regulation that relates to or deals with hazardous substances,
human health or the environment, and all regulations promulgated by a regulatory
body pursuant to any of the foregoing statutes, laws, regulations, or
ordinances.

 

“ERISA” shall have the meaning ascribed to such term in Section 4.35.

 

“Evaluation Date” shall have the meaning ascribed to such term in Section 4.18.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended to
date.

 

“Exempt Issuance” means (a) the vesting of shares of Common Stock or options to
employees, officers, consultants or directors of the Company pursuant to the
Company’s 1996 Stock Option Plan, as amended (provided that any such vesting
shall not exceed 10% of the Company’s outstanding shares and/or options, in the
aggregate, in any twelve-month period), (b) the issuance of securities upon the
exercise or exchange of or conversion of any securities issued pursuant to the
Purchase Agreement and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise, exchange or conversion price of such securities, and (c) the
issuance of securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors of the

 

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Company, provided any such issuance shall only be to a person which is, itself
or through its subsidiaries, an operating company in a business synergistic with
or complementary to the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities.

 

“Financial Statements” means the Company’s audited financial statements as of
and for the year ended December 31, 2007 and unaudited quarterly financial
statements of the Company for the quarter ended March 31, 2008.

 

“GAAP” shall have the meaning ascribed to such term in Section 4.8.

 

“Guaranty” means that certain Guaranty to be entered into by and among the
Company and certain of its Affiliates in favor of the Investor within thirty
(30) days after the Closing Date.

 

“Indemnifiable Losses” shall have the meaning ascribed to such term in
Section 9.1.

 

“Intellectual Property” means (i) all proprietary rights, privileges and
priorities provided under U.S., state and foreign law relating to U.S. and
foreign patents and patent applications, trademarks, service marks and
registrations thereof and applications therefor, copyrights and copyright
registrations and applications, mask works and registrations thereof, know-how,
and trade secrets; (ii) proprietary inventions, discoveries, ideas, technology,
data, information, and processes; (iii) proprietary drawings, designs, licenses,
computer programs and software, and technical information including but not
limited to proprietary information embodied in material specifications,
processing instructions, equipment specifications, product specifications,
confidential data, electronic files, research notebooks, invention disclosures,
research and development reports and the like related thereto; and (iv) all
amendments, modifications, and improvements to any of the foregoing.

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 4.15.

 

“Knowledge” means actual knowledge of a fact or the knowledge which such person
could reasonably be expected to have based on reasonable inquiry.  The knowledge
of an entity shall include the knowledge of the individuals who are executive
officers of such entity at the time in question.

 

“Legend Removal Date” shall have the meaning ascribed to such term in
Section 6.10(c).

 

“Liens” means liens, mortgages, charges, security interests, claims, voting
trusts, pledges, encumbrances, options, assessments, restrictions, or
third-party or spousal interests of any nature.

 

“Mandatory Conversion Notice” shall have the meaning ascribed to such term in
Section 2.2(b).

 

“Mandatory Conversion Notice Date” shall have the meaning ascribed to such term
in Section 2.2(b).

 

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“Material Adverse Effect” means any effect that may be materially adverse to
(a) the business, operations, results of operations, prospects, assets
(including intangible assets), liabilities or condition (financial or otherwise)
of the Company and its Affiliates, taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement or any of the
Transaction Documents or any other agreement or instrument to be entered into in
connection with this Agreement.

 

“Material Permits” shall have the meaning ascribed to such term in Section 4.13.

 

“Note” shall have the meaning ascribed to such term in Section 2.1.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Plan” or “Plans” shall have the meaning ascribed to such term in Section 4.35.

 

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

 

“Product Liability” means any liability, claim or expense, including but not
limited to attorneys’ fees and medical expenses, arising in whole or in part out
of a breach of any express or implied product warranty by the Company, strict
liability in tort, negligent manufacture of product, negligent provision of
services, product recall, or any other allegation of liability arising from the
design, testing, manufacture, packaging, labeling (including instructions for
use), or sale of products.

 

“Prospectus” shall have the meaning ascribed to such term in Section 9.1.

 

“Purchase Price” shall have the meaning ascribed to such term in Section 2.1.

 

“Purchased Securities” means the Convertible Note and the Conversion Shares.

 

“Registration Statement” means a registration statement meeting the requirements
set forth in Section 6.12 below and covering the resale by the Investor of the
Conversion Shares.  The term “Registration Statement” shall include any
preliminary or final prospectus, exhibit, supplement or amendment included in or
relating to such Registration Statement.

 

“Required Approvals” shall have the meaning ascribed to such term in
Section 4.5.

 

“Required Minimum” means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Conversion Shares issuable upon
exercise or conversion in full of all Notes, ignoring any conversion or exercise
limits set forth therein.

 

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“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Securities Act,
as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.

 

“Schedule of Exceptions” shall have the meaning ascribed to such term in
Article 4.

 

“SEC” means the United States Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 4.8.

 

“Securities Act” means the United States Securities Act of 1933, as amended, and
all regulations promulgated thereunder.

 

“Security Agreement” means the security agreement to be entered into by and
between the Company and the Investor within thirty (30) days after the Closing
Date.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 4.1
and shall, where applicable, include any subsidiary of the Company formed or
acquired after the date hereof.

 

“Threshold Period” shall have the meaning ascribed to such term in
Section 2.2(b).

 

“Trading Day” means a day on which the Nasdaq Stock Market (or such other
Trading Market on which the Company’s Common Stock is then traded) is open for
trading.

 

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American
Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

 

“Transaction Documents” means the Notes, the Security Agreement, the Guaranty,
the Security Agreement, any Intercreditor Agreement as may be required to be
delivered hereunder and such other documents, instruments and agreements
executed in connection with the consummation of the transactions contemplated
hereby.

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted for trading as reported by Bloomberg L.P.
(based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time); (b)  if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
quoted for trading on the

 

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OTC Bulletin Board and if prices for the Common Stock are then reported in the
“Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Company.

 

Section 1.2  Definitional Provisions.

 

(A)   THE WORDS “HEREOF,” “HEREIN,” AND “HEREUNDER” AND WORDS OF SIMILAR IMPORT,
WHEN USED IN THIS AGREEMENT, SHALL REFER TO THIS AGREEMENT AS A WHOLE AND NOT TO
ANY PARTICULAR PROVISIONS OF THIS AGREEMENT.

 

(B)   THE TERMS DEFINED IN THE SINGULAR SHALL HAVE A COMPARABLE MEANING WHEN
USED IN THE PLURAL, AND VICE VERSA.  TERMS REFERRING TO A MASCULINE GENDER SHALL
BE DEEMED TO REFER TO THE FEMININE OR NEUTER GENDERS, AS APPLICABLE.

 

(C)   REFERENCES TO AN “EXHIBIT” OR TO A “SCHEDULE” ARE, UNLESS OTHERWISE
SPECIFIED, TO ONE OF THE EXHIBITS OR SCHEDULES ATTACHED TO OR REFERENCED IN THIS
AGREEMENT, AND REFERENCES TO AN “ARTICLE” OR A “SECTION” ARE, UNLESS OTHERWISE
SPECIFIED, TO ONE OF THE ARTICLES OR SECTIONS OF THIS AGREEMENT.

 

(D)   THE TERM “PERSON” INCLUDES ANY INDIVIDUAL, PARTNERSHIP, JOINT VENTURE,
CORPORATION, LIMITED LIABILITY COMPANY, TRUST, ENTITY, UNINCORPORATED
ORGANIZATION OR GOVERNMENT OR ANY DEPARTMENT OR AGENCY THEREOF.

 

(E)   THE TERM “DOLLARS” OR “$” SHALL REFER TO THE CURRENCY OF THE UNITED STATES
OF AMERICA.

 

(F)    ALL REFERENCES TO TIME SHALL REFER TO MINNEAPOLIS, MINNESOTA TIME.

 

ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE NOTES

 

Section 2.1  Purchase and Sale of Notes.  Subject to the terms and conditions of
this Agreement, the Investor agrees to purchase at the Closing, and the Company
agrees to sell and issue to the Investor at the Closing, a Note, in
substantially the form attached hereto as Exhibit A, in the original principal
amount of $15,000,000 (the “Note”), at a purchase price equal to 100% of the
principal amount thereof (the “Purchase Price”).  The Note will be secured
pursuant to the Security Agreement.

 

Section 2.2  Note Conversion.

 

(A)           OPTIONAL CONVERSION.  THE INVESTOR MAY, AT ITS OPTION, PURCHASE
SHARES OF THE COMPANY’S COMMON STOCK BY CONVERTING AMOUNTS OUTSTANDING UNDER THE
NOTE OR, IF APPLICABLE, THE ADDITIONAL NOTE AND THE SUBSEQUENT NOTE, AT THE
APPLICABLE CONVERSION PRICE AS PROVIDED THEREIN (IN EACH CASE, A “NOTE
CONVERSION CLOSING”).  AT EACH NOTE CONVERSION CLOSING, THE COMPANY SHALL ISSUE
CERTIFICATES REPRESENTING ANY SHARES

 

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PURCHASED UNDER THIS SECTION 2.2 IN A FORM ACCEPTABLE TO THE INVESTOR AND
INVESTOR’S COUNSEL, AND THE INVESTOR SHALL PAY THE CONVERSION PRICE OF $84.00
PER SHARE (SUBJECT TO ADJUSTMENT AS PROVIDED THEREIN) FOR SUCH SHARES BY
SURRENDERING THE APPLICABLE NOTE(S) TO THE COMPANY.

 

(B)           MANDATORY CONVERSION.  NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, IF AFTER THE CLOSING DATE, (I) THE AVERAGE PRICE OF THE COMPANY’S
COMMON STOCK ON THE TRADING MARKET EXCEEDS $168.00 PER SHARE (SUBJECT TO
ADJUSTMENT FOR STOCK SPLITS, DIVIDENDS AND OTHER APPROPRIATE ADJUSTMENTS) FOR
ANY 30 CONSECUTIVE TRADING DAYS (THE “THRESHOLD PERIOD”), THE COMPANY SHALL HAVE
THE OPTION, WITHIN TWO (2) TRADING DAYS AFTER THE END OF ANY SUCH THRESHOLD
PERIOD, DELIVER A WRITTEN NOTICE TO THE INVESTOR (A “MANDATORY CONVERSION
NOTICE” AND THE DATE OF SUCH NOTICE, THE “MANDATORY CONVERSION NOTICE DATE”) TO
CAUSE THE INVESTOR TO SURRENDER THE NOTE AND SEEK IMMEDIATE CONVERSION OF THE
REMAINING AMOUNTS DUE UNDER THE NOTE ON SUCH MANDATORY CONVERSION NOTICE DATE
INTO THE COMPANY’S COMMON STOCK AT THE CONVERSION PRICE OF $84.00 PER SHARE
(SUBJECT TO ADJUSTMENT AS PROVIDED UNDER THE NOTE).

 

Section 2.3  Use of Proceeds.  The Company shall use the cash proceeds of the
sale of the Notes (a) for the Company’s strategic acquisition and working
capital needs and (b) to pay any legal fees and expenses incurred in connection
with the drafting, negotiation, due diligence and execution of this Agreement
and the other Transaction Documents (including those documents delivered in
connection with the issuance of the Note and the Conversion Shares to the
Investor on the Closing Date) (which, in the case of counsel to Investors, shall
be limited to $30,000 in accordance with the terms set forth in Section 11.7
below).

 

ARTICLE III
THE CLOSING

 

Section 3.1  Closing.  The purchase and sale of the Notes shall take place at
the offices of the Company, at 10:00 a.m., on July 11, 2008, or such other time
as may be designated by the Company in writing (the “Closing”).  At the Closing,
the Company shall deliver to the Investor the Note that the Investor is
purchasing against delivery to the Company by the Investor of a check or wire
transfer in the amount of $15,000,000.00 payable to the Company’s order (or by
wire of funds in such amount to the Company’s designated bank account).

 

Section 3.2  Closing Deliveries.

 

(A)   COMPANY DELIVERIES.  ON THE CLOSING DATE, THE COMPANY SHALL DELIVER OR
CAUSE TO BE DELIVERED TO THE INVESTOR THE FOLLOWING:

 

(I)            THIS AGREEMENT DULY EXECUTED BY THE COMPANY; AND

 

(II)           A NOTE REGISTERED IN THE NAME OF THE INVESTOR IN THE PRINCIPAL
AMOUNT OF $15,000,000.

 

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(B)   INVESTOR DELIVERIES.  ON THE CLOSING DATE, THE INVESTOR SHALL DELIVER OR
CAUSE TO BE DELIVERED TO THE COMPANY THE FOLLOWING:

 

(I)            THIS AGREEMENT DULY EXECUTED BY THE INVESTOR; AND

 

(II)           THE PAYMENT OF THE PURCHASE PRICE BY THE INVESTOR, IN THE MANNER
SPECIFIED IN SECTION 3.1 ABOVE.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Attached hereto as Schedule A is the Schedule of Exceptions containing sections
numbered to correspond to the sections of this Article 4 (the “Schedule of
Exceptions”).  Except as specifically set forth in the corresponding section of
such Schedule of Exceptions (or in any other section of the Schedule of
Exceptions so long as the applicability of such disclosure to the particular
representation and warranty which such disclosure is intended to modify is
reasonably apparent), the Company and its Affiliates hereby represents and
warrants to the Investor as follows as of the date hereof and as of the Closing
Date:

 

Section 4.1  Subsidiaries.  All of the direct and indirect subsidiaries (the
“Subsidiaries”) of the Company are set forth on Schedule 4.1.  The Company owns,
directly or indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any Liens, and all of the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.

 

Section 4.2  Organization and Qualification.  The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted.  Neither the Company nor any Subsidiary is in violation
or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.  Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in a Material Adverse Effect, and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

 

Section 4.3  Authorization; Enforcement.  The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, its board of directors or its shareholders in connection therewith
other than in

 

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connection with the Required Approvals (as defined in Section 4.5 below).  Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

Section 4.4  No Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Purchased
Securities and the consummation by the Company of the other transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals (as defined in
Section 4.5 below), conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or any Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse Effect.

 

Section 4.5  Filings, Consents and Approvals.  The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) filings required pursuant to Section 6.14 of this Agreement,
(ii) the filing with the SEC of the Registration Statement,
(iii) application(s) to each applicable Trading Market for the listing of the
Securities for trading thereon in the time and manner required thereby, and
(iv) the filing of Form D with the SEC and such filings as are required to be
made under applicable state securities laws (collectively, the “Required
Approvals”).

 

Section 4.6  Issuance of the Securities.  The Purchased Securities are duly
authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.  The
Conversion Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The

 

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Company has reserved from its duly authorized capital stock the maximum number
of shares of Common Stock issuable pursuant to this Agreement and the other
Transaction Documents.

 

Section 4.7  Capitalization.  The capitalization of the Company is as set forth
on the Schedule of Exceptions, which shall also include the number of shares of
Common Stock owned of record, and, to the knowledge of the Company,
beneficially, by Affiliates of the Company as of the date hereof. The Company
has not issued any capital stock since its most recently filed periodic report
under the Exchange Act, other than the exercise of employee stock options under
the Company’s stock option plans, the issuance of shares of Common Stock to
employees pursuant to the Company’s employee stock purchase plans and pursuant
to the conversion or exercise of Common Stock Equivalents outstanding as of the
date of the most recently filed periodic report under the Exchange Act.  No
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.  Except as set forth on the Schedule of Exceptions or as
a result of the purchase and sale of the Purchased Securities, there are no
outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents.  The issuance and sale of the Purchased Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investor) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase
securities.  No further approval or authorization of any shareholder, the Board
of Directors of the Company or others is required for the issuance and sale of
the Purchased Securities.  There are no stockholder agreements, voting
agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party (other than those contemplated in
connection with the Transaction Documents) or, to the knowledge of the Company,
between or among any of the Company’s shareholders.

 

Section 4.8  SEC Reports; Financial Statements.  The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
(or such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included

 

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in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing.  Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.

 

Section 4.9  Material Changes; Undisclosed Events, Liabilities or Developments. 
Since the date of the latest audited financial statements included within the
SEC Reports, except as specifically disclosed in a subsequent SEC Report filed
prior to the date hereof, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) increasing its revolving line of credit with LaSalle
Bank N.A. to a total of $25,000,000, (B) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(C) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the SEC, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its
shareholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing
Company stock option plans.  The Company does not have pending issues before the
SEC except a question regarding the change of control provision in the previous
convertible note signed with the investor that the investor has retroactively
deleted. .  Except for the issuance of the Purchased Securities contemplated by
this Agreement or as set forth on Schedule 4.9, no event, liability or
development has occurred or exists with respect to the Company or its
Subsidiaries or their respective business, properties, operations or financial
condition, that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made or deemed
made that has not been publicly disclosed at least 1 Trading Day prior to the
date that this representation is made.

 

Section 4.10  Litigation.  There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Purchased Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse Effect.  Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action which has resulted in a final judgment involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the SEC
involving the Company or any current or former director or officer of the
Company.  The SEC has not issued any stop order or other order

 

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suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.

 

Section 4.11  Labor Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a
union that relates to such employee’s relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a
collective bargaining agreement.  No executive officer, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the continued
employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing matters. 
The Company and its Subsidiaries are in compliance with all U.S. federal, state,
local and foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where
the failure to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

Section 4.12  Compliance.  Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business and all such laws that affect the
environment, except in each case as could not have or reasonably be expected to
result in a Material Adverse Effect.

 

Section 4.13  Regulatory Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.

 

Section 4.14  Title to Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens that do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under lease by the
Company and the Subsidiaries are held

 

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by them under valid, subsisting and enforceable leases with which the Company
and the Subsidiaries are in compliance in all material respects.

 

Section 4.15  Patents and Trademarks.  The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the “Intellectual Property Rights”).  Neither the Company
nor any Subsidiary has received a notice (written or otherwise) that any of the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person.  To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.  The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

Section 4.16  Insurance.  The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the aggregate
Subscription Amount.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

 

Section 4.17  Transactions With Affiliates and Employees.  Except as set forth
in the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $100,000 other than for (i) payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company.

 

Section 4.18  Sarbanes-Oxley; Internal Accounting Controls.  The Company is in
material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are applicable to it as of the Closing Date.  The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with

 

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management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms.  The Company’s certifying officers have
evaluated the effectiveness of the Company’s disclosure controls and procedures
as of the end of the period covered by the Company’s most recently filed
periodic report under the Exchange Act (such date, the “Evaluation Date”).  The
Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date.  Since the Evaluation Date, there have been no changes in the
Company’s internal control over financial reporting (as such term is defined in
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.

 

Section 4.19  Certain Fees.  No brokerage or finder’s fees or commissions are or
will be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents.  The Investor shall
have no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by the
Transaction Documents.

 

Section 4.20  Private Placement.  Assuming the accuracy of the Investor
representations and warranties set forth in Article 5, no registration under the
Securities Act is required for the offer and sale of the Purchased Securities by
the Company to the Investor as contemplated hereby. The issuance and sale of the
Purchased Securities hereunder does not contravene the rules and regulations of
the Trading Market.

 

Section 4.21  Investment Company.  The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Securities, will not be or
be an Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act of 1940,
as amended.

 

Section 4.22  Registration Rights.  Other than pursuant to this Agreement, no
Person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company, other than registration
statements which have already been filed and declared effective or that have
been filed and await declaration of effectiveness by the SEC.

 

Section 4.23  Listing and Maintenance Requirements.  The Company’s Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act, nor has the Company received any notification that the SEC is
contemplating terminating such registration.  The Company has not,

 

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in the 12 months preceding the date hereof, received any notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.

 

Section 4.24  Application of Takeover Protections.  The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s articles of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Investor as a result of the Investor and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s
issuance of the Purchased Securities and the Investor’s ownership of the
Purchased Securities.

 

Section 4.25  Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company confirms that neither it nor any other Person acting on its behalf has
provided the Investor or its agents or counsel with any information that it
believes constitutes or might constitute material, non-public information.   The
Company understands and confirms that the Investor will rely on the foregoing
representation in effecting transactions in securities of the Company.  All
disclosure furnished by or on behalf of the Company to the Investor regarding
the Company, its business and the transactions contemplated hereby, including
the SEC Reports and the Disclosure Schedules to this Agreement, is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The
press releases and the SEC Reports filed or disseminated by the Company during
the twelve months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made,
not misleading.  The Company acknowledges and agrees that the Investor is not
making and has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Article 5 below.

 

Section 4.26  No Integrated Offering.  Assuming the accuracy of the Investor’s
representations and warranties set forth in Article 5, neither the Company, nor
any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Purchased Securities to be integrated with prior offerings by
the Company for purposes of (i) the Securities Act which would require the
registration of any such securities under the Securities Act, or (ii) any
applicable shareholder approval provisions of any Trading Market on which any of
the securities of the Company are listed or designated.

 

Section 4.27   Solvency.  Based on the consolidated financial condition of the
Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Purchased Securities hereunder,
(i) the fair saleable value of the Company’s assets

 

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exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be paid.  The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt).  The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date.  All material secured and unsecured
indebtedness of the Company is set forth in the Company’s SEC Reports.

 

Section 4.28  Tax Status.  Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.

 

Section 4.29  No General Solicitation.  Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the Purchased
Securities by any form of general solicitation or general advertising.  The
Company has offered the Securities for sale only to the Investor and, to the
extent applicable, other “accredited investors” within the meaning of Rule 501
under the Securities Act.

 

Section 4.30  Foreign Corrupt Practices.  Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.

 

Section 4.31  No Disagreements with Accountants and Lawyers.  There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the Company which could affect the Company’s ability to
perform any of its obligations under any of the Transaction Documents, and the
Company is current with respect to any fees owed to its accountants and lawyers.

 

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SECTION 4.32  ACKNOWLEDGMENT REGARDING INVESTOR’S PURCHASE OF SECURITIES.  THE
COMPANY ACKNOWLEDGES AND AGREES THAT THE INVESTOR IS ACTING SOLELY IN THE
CAPACITY OF AN ARM’S-LENGTH PURCHASER WITH RESPECT TO THE TRANSACTION DOCUMENTS
AND THE TRANSACTIONS CONTEMPLATED THEREBY.  THE COMPANY FURTHER ACKNOWLEDGES
THAT THE INVESTOR IS NOT ACTING AS A FINANCIAL ADVISOR OR FIDUCIARY OF THE
COMPANY (OR IN ANY SIMILAR CAPACITY) WITH RESPECT TO THE TRANSACTION DOCUMENTS
AND THE TRANSACTIONS CONTEMPLATED THEREBY AND ANY ADVICE GIVEN BY THE INVESTOR
OR ANY OF ITS REPRESENTATIVES OR AGENTS IN CONNECTION WITH THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY IS MERELY INCIDENTAL TO THE
INVESTOR’S PURCHASE OF THE PURCHASED SECURITIES.  THE COMPANY FURTHER REPRESENTS
TO THE INVESTOR THAT THE COMPANY’S DECISION TO ENTER INTO THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS HAS BEEN BASED SOLELY ON THE INDEPENDENT EVALUATION
OF THE TRANSACTIONS CONTEMPLATED HEREBY BY THE COMPANY AND ITS REPRESENTATIVES.

 

SECTION 4.33  REGULATION M COMPLIANCE.  THE COMPANY HAS NOT, AND TO ITS
KNOWLEDGE NO ONE ACTING ON ITS BEHALF HAS, (I) TAKEN, DIRECTLY OR INDIRECTLY,
ANY ACTION DESIGNED TO CAUSE OR TO RESULT IN THE STABILIZATION OR MANIPULATION
OF THE PRICE OF ANY SECURITY OF THE COMPANY TO FACILITATE THE SALE OR RESALE OF
ANY OF THE PURCHASED SECURITIES, (II) SOLD, BID FOR, PURCHASED, OR, PAID ANY
COMPENSATION FOR SOLICITING PURCHASES OF, ANY OF THE PURCHASED SECURITIES, OR
(III) PAID OR AGREED TO PAY TO ANY PERSON ANY COMPENSATION FOR SOLICITING
ANOTHER TO PURCHASE ANY OTHER SECURITIES OF THE COMPANY, OTHER THAN, IN THE CASE
OF CLAUSES (II) AND (III), COMPENSATION PAID TO THE COMPANY’S PLACEMENT AGENT IN
CONNECTION WITH THE PLACEMENT OF THE PURCHASED SECURITIES.

 

SECTION 4.34  FORM S-3 ELIGIBILITY.  THE COMPANY IS PRESENTLY NOT ELIGIBLE TO
REGISTER THE RESALE OF THE SECURITIES FOR RESALE BY THE INVESTOR ON FORM S-3
PROMULGATED UNDER THE SECURITIES ACT TILL AUGUST 2008 AND THEREFORE WILL
REGISTER THE RESALE OF THE SECURITIES FOR RESALE ON FORM S-1 PROMULGATED UNDER
THE SECURITIES ACT.

 

SECTION 4.35  EMPLOYEE BENEFIT PLANS.

 

(A)   EXCEPT AS SET FORTH IN THE SCHEDULE OF EXCEPTIONS, (I) THE COMPANY DOES
NOT MAINTAIN OR CONTRIBUTE TO OR HAVE ANY OBLIGATION TO CONTRIBUTE TO, OR HAVE
ANY DIRECT OR INDIRECT LIABILITY, WHETHER CONTINGENT OR OTHERWISE, WITH RESPECT
TO ANY PLAN, PROGRAM, AGREEMENT, ARRANGEMENT OR COMMITMENT WHICH IS AN
EMPLOYMENT, CONSULTING OR DEFERRED COMPENSATION AGREEMENT, OR AN EXECUTIVE
COMPENSATION, INCENTIVE BONUS OR OTHER BONUS, EMPLOYEE PENSION, PROFIT-SHARING,
SAVINGS, RETIREMENT, STOCK OPTION, STOCK PURCHASE, SEVERANCE PAY, LIFE, HEALTH,
DISABILITY OR ACCIDENT INSURANCE PLAN, OR VACATION, OR OTHER EMPLOYEE BENEFIT
PLAN, PROGRAM, ARRANGEMENT, AGREEMENT OR COMMITMENT, WHETHER OR NOT SUBJECT TO
ERISA (AS DEFINED BELOW) (INCLUDING ANY FUNDING MECHANISM NOW IN EFFECT OR
REQUIRED IN THE FUTURE AS A RESULT OF THE TRANSACTION CONTEMPLATED BY THIS
AGREEMENT OR OTHERWISE), WHETHER ORAL OR WRITTEN (INDIVIDUALLY A “PLAN,” AND
COLLECTIVELY, THE “PLANS”); AND (II) NEITHER THE COMPANY NOR ANY PERSON WHO
WOULD BE CONSIDERED A SINGLE EMPLOYER WITH THE COMPANY PURSUANT TO
SECTION 414(B), (C), (M) OR (O) OF THE CODE (AS DEFINED BELOW) MAINTAINS OR
CONTRIBUTES TO, OR HAS HAD DURING THE PRECEDING SIX YEARS MAINTAINED OR
CONTRIBUTED TO, OR HAS HAD DURING SUCH PERIOD THE OBLIGATION TO MAINTAIN OR
CONTRIBUTE, OR MAY HAVE ANY LIABILITY WITH RESPECT TO, ANY PLAN SUBJECT TO TITLE
IV OF ERISA OR SECTION 412 OF THE CODE OR ANY “MULTIPLE EMPLOYER PLAN” WITHIN
THE MEANING OF THE CODE OR ERISA.  NO PLAN IS (I) A NONQUALIFIED DEFERRED
COMPENSATION RETIREMENT PLAN, CONTRACT

 

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OR ARRANGEMENT; (II) A QUALIFIED DEFINED CONTRIBUTION PLAN (AS DEFINED IN
SECTION 3(34) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
(“ERISA”), OR SECTION 414(I) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE “CODE”)); (III) A QUALIFIED DEFINED BENEFIT PLAN (AS DEFINED IN
SECTION 3(35) OF ERISA OR SECTION 414(J) OF THE CODE); OR (IV) AN EMPLOYEE
WELFARE BENEFIT PLAN (AS DEFINED IN SECTION 3(1) OF ERISA).

 

(B)   TO THE EXTENT REQUIRED (EITHER AS A MATTER OF LAW OR TO OBTAIN THE
INTENDED TAX TREATMENT AND TAX BENEFITS), ALL EMPLOYEE BENEFIT PLANS (AS DEFINED
IN SECTION 3(3) OF ERISA), WHICH THE COMPANY MAINTAINS OR TO WHICH IT
CONTRIBUTES, COMPLY IN ALL MATERIAL RESPECTS WITH THE REQUIREMENTS OF ERISA AND
THE CODE.  WITH RESPECT TO THE PLANS, (I) ALL REQUIRED CONTRIBUTIONS WHICH ARE
DUE HAVE BEEN MADE AND A PROPER ACCRUAL HAS BEEN MADE FOR ALL CONTRIBUTIONS DUE
IN THE CURRENT FISCAL YEAR; (II) THERE HAVE BEEN NO PROHIBITED TRANSACTIONS (AS
DEFINED IN SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE) AND (III) NO EVENT
HAS OCCURRED IN CONNECTION WITH WHICH THE COMPANY OR ANY PLAN COULD BE SUBJECT
TO ANY MATERIAL LIABILITY UNDER ERISA, THE CODE OR OTHERWISE.

 

(C)   THE COMPANY DOES NOT CONTRIBUTE (AND HAS NOT EVER CONTRIBUTED OR HAD ANY
OBLIGATION TO CONTRIBUTE) TO ANY MULTI-EMPLOYER PLAN, AS DEFINED IN
SECTION 3(37) OF ERISA. THE COMPANY HAS NO ACTUAL OR POTENTIAL LIABILITIES UNDER
SECTION 4201 OF ERISA FOR ANY COMPLETE OR PARTIAL WITHDRAWAL FROM A
MULTI-EMPLOYER PLAN.  THE COMPANY HAS NO ACTUAL OR POTENTIAL LIABILITY FOR DEATH
OR MEDICAL BENEFITS AFTER SEPARATION FROM EMPLOYMENT, OTHER THAN (I) DEATH
BENEFITS UNDER THE EMPLOYEE BENEFIT PLANS OR PROGRAMS (WHETHER OR NOT SUBJECT TO
ERISA) SET FORTH IN THE SCHEDULE OF EXCEPTIONS AND (II) HEALTH CARE CONTINUATION
BENEFITS DESCRIBED IN SECTION 4980B OF THE CODE.

 

(D)   TO THE COMPANY’S KNOWLEDGE, NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS,
OFFICERS, EMPLOYEES OR OTHER “FIDUCIARIES,” AS SUCH TERM IS DEFINED IN
SECTION 3(21) OF ERISA, HAS COMMITTED ANY BREACH OF FIDUCIARY RESPONSIBILITY
IMPOSED BY ERISA OR ANY OTHER APPLICABLE LAW WITH RESPECT TO THE PLANS WHICH
WOULD SUBJECT THE COMPANY OR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES TO ANY
LIABILITY UNDER ERISA OR ANY APPLICABLE LAW.

 

(E)   THE COMPANY HAS NOT INCURRED ANY LIABILITY FOR ANY TAX OR CIVIL PENALTY OR
ANY DISQUALIFICATION OF ANY EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
ERISA) IMPOSED BY SECTIONS 4980B AND 4975 OF THE CODE AND PART 6 OF TITLE I AND
SECTION 502(I) OF ERISA.

 

SECTION 4.36  OUTSTANDING BORROWING.  THE COMPANY’S SEC REPORTS SET FORTH ALL
MATERIAL INDEBTEDNESS OF THE COMPANY AS OF THE DATE HEREOF, THE LIENS THAT
RELATE TO SUCH INDEBTEDNESS AND THAT ENCUMBER THE COMPANY’S ASSETS AND THE NAME
OF EACH LENDER THEREOF.  NO HOLDER OF INDEBTEDNESS OF THE COMPANY IS ENTITLED TO
ANY VOTING RIGHTS IN ANY MATTERS VOTED UPON BY THE HOLDERS OF THE COMMON STOCK.

 

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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

 

The Investor represents and warrants to the Company for itself as follows:

 

SECTION 5.1  AUTHORIZATION.  THE INVESTOR HAS FULL POWER AND AUTHORITY TO ENTER
INTO AND PERFORM UNDER THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS.  THIS
AGREEMENT HAS BEEN DULY AUTHORIZED BY ALL NECESSARY ACTION ON THE PART OF THE
INVESTOR, HAS BEEN DULY EXECUTED AND DELIVERED BY EACH THE INVESTOR, AND IS THE
VALID AND BINDING AGREEMENT OF EACH THE INVESTOR AND IS ENFORCEABLE AGAINST EACH
THE INVESTOR IN ACCORDANCE WITH ITS TERMS, EXCEPT AS ENFORCEABILITY MAY BE
LIMITED BY BANKRUPTCY, INSOLVENCY, MORATORIUM, REORGANIZATION OR OTHER SIMILAR
LAWS AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY AND TO JUDICIAL
LIMITATIONS ON THE REMEDY OF SPECIFIC ENFORCEMENT AND OTHER EQUITABLE REMEDIES.

 

SECTION 5.2  PURCHASE ENTIRELY FOR OWN ACCOUNT.  THIS AGREEMENT IS MADE WITH THE
INVESTOR IN RELIANCE UPON THE INVESTOR’S REPRESENTATION TO THE COMPANY, WHICH BY
THE INVESTOR’S EXECUTION OF THIS AGREEMENT THE INVESTOR HEREBY CONFIRMS, THAT
THE PURCHASED SECURITIES WILL BE ACQUIRED FOR INVESTMENT FOR THE INVESTOR’S OWN
ACCOUNT, NOT AS A NOMINEE OR AGENT, AND NOT WITH A VIEW TO THE RESALE OR
DISTRIBUTION OF ANY PART THEREOF, AND THAT THE INVESTOR HAS NO PRESENT INTENTION
OF SELLING, GRANTING ANY PARTICIPATION IN, OR OTHERWISE DISTRIBUTING THE SAME. 
BY EXECUTING THIS AGREEMENT, THE INVESTOR FURTHER REPRESENTS THAT THE INVESTOR
DOES NOT HAVE ANY CONTRACT, UNDERTAKING, AGREEMENT OR ARRANGEMENT WITH ANY
THIRD-PARTY TO SELL, TRANSFER OR GRANT PARTICIPATIONS TO SUCH THIRD-PARTY OR TO
ANY THIRD-PERSON, WITH RESPECT TO ANY OF THE PURCHASED SECURITIES.

 

SECTION 5.3  RELIANCE UPON INVESTOR’S REPRESENTATIONS; RESTRICTIONS ON RESALE. 
THE INVESTOR UNDERSTANDS THAT NONE OF THE NOTES OR CONVERSION SHARES HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS BY REASON OF
THEIR CONTEMPLATED ISSUANCE IN TRANSACTIONS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO SECTION 4(2) THEREOF OR RULE 505
OR 506 PROMULGATED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, AND THAT THE RELIANCE OF THE COMPANY AND OTHERS UPON THESE EXEMPTIONS IS
PREDICATED IN PART UPON THIS REPRESENTATION BY THE INVESTOR.  THE INVESTOR
FURTHER UNDERSTANDS THAT THE NOTES AND THE CONVERSION SHARES MAY NOT BE
TRANSFERRED OR RESOLD WITHOUT (I) REGISTRATION UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (II) AN EXEMPTION FROM THE REQUIREMENTS OF
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.  THE INVESTOR ALSO
UNDERSTANDS THAT ANY CONVERSION SHARES WILL BE ISSUED WITHOUT PRIOR REGISTRATION
THEREOF UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS IN RELIANCE
UPON SECTION 4(2) OF THE SECURITIES ACT AND TRANSACTIONAL EXEMPTIONS FROM
REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS BASED UPON APPROPRIATE
REPRESENTATIONS OF THE INVESTOR.  AS SUCH, THE CONVERSION SHARES WILL BE SUBJECT
TO TRANSFER RESTRICTIONS SIMILAR TO RESTRICTIONS APPLICABLE TO THE CONVERTIBLE
NOTES.  THE INVESTOR UNDERSTANDS (I) THAT AN EXEMPTION FROM SUCH REGISTRATION IS
NOT PRESENTLY AVAILABLE PURSUANT TO RULE 144 PROMULGATED UNDER THE SECURITIES
ACT BY THE SEC AND (II) THAT IN ANY EVENT THE INVESTOR MAY NOT SELL ANY
SECURITIES ACQUIRED HEREUNDER PURSUANT TO RULE 144 PRIOR TO THE EXPIRATION OF A
ONE-YEAR PERIOD (OR SUCH SHORTER PERIOD AS THE SEC MAY HEREAFTER ADOPT) AFTER
THE INVESTOR HAS ACQUIRED SUCH SECURITIES.  THE INVESTOR UNDERSTANDS THAT ANY
SALES PURSUANT TO RULE 144 CAN BE MADE ONLY IN FULL COMPLIANCE WITH THE
PROVISIONS OF RULE 144.

 

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SECTION 5.4  RECEIPT OF INFORMATION.  THE INVESTOR REPRESENTS THAT THE COMPANY
HAS PROVIDED THE INVESTOR AT A REASONABLE TIME PRIOR TO THE EXECUTION OF THIS
AGREEMENT SUFFICIENT OPPORTUNITY TO ASK QUESTIONS AND RECEIVE ANSWERS FROM THE
COMPANY’S MANAGEMENT CONCERNING THE COMPANY’S BUSINESS, MANAGEMENT AND FINANCIAL
AFFAIRS AND THE TERMS AND CONDITIONS OF THE OFFERING OF THE PURCHASED SECURITIES
AND THE CONVERSION SHARES AND TO OBTAIN ANY ADDITIONAL INFORMATION (WHICH THE
COMPANY POSSESSES OR CAN ACQUIRE WITHOUT UNREASONABLE EFFORT OR EXPENSE) AS MAY
BE NECESSARY TO VERIFY THE ACCURACY OF INFORMATION FURNISHED TO THE INVESTOR. 
THE INVESTOR HAS REVIEWED THE REPRESENTATIONS CONCERNING THE COMPANY CONTAINED
IN THIS AGREEMENT.  THE FOREGOING, HOWEVER, DOES NOT LIMIT OR MODIFY THE
REPRESENTATIONS AND WARRANTIES OF THE COMPANY IN THIS AGREEMENT OR THE RIGHT OF
THE INVESTOR TO RELY THEREON.

 

SECTION 5.5  INVESTMENT EXPERIENCE.  THE INVESTOR REPRESENTS THAT IT IS
EXPERIENCED IN EVALUATING AND INVESTING IN SECURITIES OF COMPANIES IN THE
DEVELOPMENT STAGE AND ACKNOWLEDGES THAT IT IS ABLE TO FEND FOR ITSELF, CAN BEAR
THE ECONOMIC RISK OF ITS INVESTMENT, AND HAS SUCH KNOWLEDGE AND EXPERIENCE IN
FINANCIAL OR BUSINESS MATTERS THAT IT IS CAPABLE OF EVALUATING THE MERITS AND
RISKS OF THE INVESTMENT IN THE NOTES AND THE CONVERSION SHARES.  IF OTHER THAN
AN INDIVIDUAL, INVESTOR ALSO REPRESENTS IT HAS NOT BEEN ORGANIZED FOR THE
PURPOSE OF ACQUIRING THE NOTES AND CONVERSION SHARES.

 

SECTION 5.6  ACCREDITED INVESTOR.  THE INVESTOR IS AN “ACCREDITED INVESTOR”
WITHIN THE MEANING OF SEC RULE 501 OF REGULATION D PROMULGATED UNDER THE ACT, AS
PRESENTLY IN EFFECT.

 

SECTION 5.7  LEGENDS.  TO THE EXTENT APPLICABLE, EACH CERTIFICATE OR OTHER
DOCUMENT EVIDENCING ANY OF THE PURCHASED SECURITIES SHALL BE ENDORSED WITH THE
LEGENDS SET FORTH BELOW, AND THE INVESTOR COVENANTS THAT, EXCEPT TO THE EXTENT
SUCH RESTRICTIONS ARE WAIVED BY THE COMPANY, THE INVESTOR SHALL NOT TRANSFER THE
SHARES REPRESENTED BY ANY SUCH CERTIFICATE WITHOUT COMPLYING WITH THE
RESTRICTIONS ON TRANSFER DESCRIBED IN THE LEGENDS ENDORSED ON SUCH CERTIFICATE:

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

The Company shall make a notation regarding the restrictions on transfer of the
Conversion Shares or other Purchased Securities in its books and the Conversion
Shares and other Purchased Securities shall be transferred on the books of the
Company only if transferred or sold pursuant to an effective registration
statement under the Securities Act covering the securities to be transferred or
an opinion of counsel reasonably satisfactory to the Company that such
registration is not required; provided, however, that (i) the Company will not
require opinions of counsel for transactions made pursuant to Rule 144 except in
unusual circumstances and (ii) the

 

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Company will not require opinions of counsel for transfers to affiliated
entities managed by the same manager or managing partner or management company,
or managed by an entity controlling, controlled by or under common control with
such manager, managing partner or management company so long as the transferor
certifies in writing to the Company that the transferor is not receiving any
consideration in connection with the transfer and so long as the transferee will
be subject to the terms of these restrictions to the same extent as if such
transferee were an original Investor hereunder.

 

ARTICLE VI
COVENANTS

 

The Company covenants that for so long as any Notes remain outstanding:

 

SECTION 6.1  FINANCIAL STATEMENTS, REPORTS, ETC.  THE COMPANY SHALL FURNISH TO
THE INVESTOR:

 

(A)   WITHIN NINETY (90) DAYS (OR SUCH SHORTER PERIOD OF TIME AS SHALL BE
REQUIRED BY THE SEC IN CONNECTION WITH THE FILING OF THE COMPANY’S QUARTERLY
REPORTS WITH THE SEC UNDER THE EXCHANGE ACT) AFTER THE END OF EACH FISCAL YEAR
OF THE COMPANY ENDING ON OR AFTER DECEMBER 31, 2008, A BALANCE SHEET OF THE
COMPANY AS OF THE END OF SUCH FISCAL YEAR AND THE RELATED STATEMENTS OF INCOME,
STOCKHOLDERS’ EQUITY AND CASH FLOWS FOR THE FISCAL YEAR THEN ENDED, PREPARED IN
ACCORDANCE WITH GAAP AND CERTIFIED BY A FIRM OF INDEPENDENT PUBLIC ACCOUNTANTS;

 

(B)   WITHIN FORTY-FIVE (45) DAYS (OR SUCH SHORTER PERIOD OF TIME AS SHALL BE
REQUIRED BY THE SEC IN CONNECTION WITH THE FILING OF THE COMPANY’S ANNUAL
REPORTS WITH THE SEC UNDER THE EXCHANGE ACT) AFTER THE END OF EACH FISCAL
QUARTER IN EACH FISCAL YEAR (OTHER THAN THE LAST FISCAL QUARTER IN EACH FISCAL
YEAR) AN UNAUDITED BALANCE SHEET OF THE COMPANY AND THE RELATED UNAUDITED
STATEMENTS OF INCOME, STOCKHOLDERS’ EQUITY AND CASH FLOWS, AND CERTIFIED BY THE
CHIEF FINANCIAL OFFICER OF THE COMPANY, SUCH BALANCE SHEET TO BE AS OF THE END
OF SUCH FISCAL QUARTER AND SUCH STATEMENTS OF INCOME, STOCKHOLDERS’ EQUITY AND
CASH FLOWS TO BE FOR SUCH FISCAL QUARTER AND FOR THE PERIOD FROM THE BEGINNING
OF THE FISCAL YEAR TO THE END OF SUCH FISCAL QUARTER, IN EACH CASE WITH
COMPARATIVE STATEMENTS FOR THE CORRESPONDING PERIOD IN THE PRIOR FISCAL YEAR;

 

(C)   PROMPTLY AFTER RECEIPT BY THE COMPANY OF NOTICE THEREOF, NOTICE OF ALL
ACTIONS, SUITS, CLAIMS, PROCEEDINGS, INVESTIGATIONS AND INQUIRIES THAT COULD
HAVE A MATERIAL ADVERSE EFFECT; AND

 

(D)   PROMPTLY, FROM TIME TO TIME, SUCH OTHER INFORMATION REGARDING THE
BUSINESS, FINANCIAL CONDITION, OPERATIONS, PROPERTY OR AFFAIRS OF THE COMPANY
AND ITS SUBSIDIARIES AS THE INVESTOR MAY REASONABLY REQUEST.

 

SECTION 6.2  INSPECTION, CONSULTATION AND ADVICE.  THE COMPANY SHALL PERMIT THE
INVESTOR AND SUCH PERSONS AS THE INVESTOR MAY DESIGNATE, AT THE INVESTOR’S
EXPENSE, UPON REASONABLE NOTICE AND AT SUCH TIMES AS THE INVESTOR MAY REASONABLY
REQUEST TO VISIT AND INSPECT ANY OF THE PROPERTIES OF THE COMPANY, EXAMINE ITS
BOOKS AND RECORDS (INCLUDING WITHOUT

 

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LIMITATION PRODUCT COMPLAINT HISTORIES AND RELATED INFORMATION) AND TAKE COPIES
AND EXTRACTS THEREFROM, DISCUSS THE AFFAIRS (INCLUDING, WITHOUT LIMITATION,
OPERATIONS AND RELATIONS WITH SUPPLIERS), FINANCES AND ACCOUNTS OF THE COMPANY
WITH ITS OFFICERS, EMPLOYEES AND PUBLIC ACCOUNTANTS (AND THE COMPANY HEREBY
AUTHORIZES SAID ACCOUNTANTS TO DISCUSS WITH THE INVESTOR AND ANY SUCH DESIGNEES
SUCH AFFAIRS, FINANCES AND ACCOUNTS), AND CONSULT WITH THE MANAGEMENT OF THE
COMPANY AS TO SUCH AFFAIRS, FINANCES AND ACCOUNTS OF THE COMPANY AND ITS
SUBSIDIARIES, ALL AT REASONABLE TIMES AND UPON REASONABLE NOTICE.

 

SECTION 6.3  TRANSACTIONS WITH AFFILIATES.  EXCEPT AS SPECIFICALLY DISCLOSED ON
SCHEDULE 6.3 ATTACHED HERETO, THE COMPANY SHALL NOT USE ANY PROCEEDS OF
PURCHASED SECURITIES TO MAKE DISTRIBUTIONS OR LOANS TO ANY SHAREHOLDERS OF THE
COMPANY OR TO REPAY EXISTING INDEBTEDNESS FOR BORROWED MONEY OBLIGATIONS.

 

SECTION 6.4  CONDITIONS TO CLOSING.  THE COMPANY SHALL USE BEST EFFORTS TO CAUSE
THE CONDITIONS SET FORTH IN ARTICLE 8 TO BE SATISFIED WITH RESPECT TO THE
CLOSING AS SOON AS PRACTICABLE.

 

SECTION 6.5  RESERVE FOR SHARES.  THE COMPANY SHALL AT ALL TIMES RESERVE AND
KEEP AVAILABLE SUCH NUMBER OF ITS DULY AUTHORIZED BUT UNISSUED SHARES OF COMMON
STOCK AS IS NECESSARY TO COMPLY WITH THE TERMS OF THIS AGREEMENT AND THE
CONVERTIBLE NOTES AND CONVERSION SHARES.  THE COMPANY SHALL AT ALL TIMES RESERVE
AND KEEP AVAILABLE OUT OF ITS DULY AUTHORIZED BUT UNISSUED SHARES OF COMMON
STOCK SUCH NUMBER OF ITS DULY AUTHORIZED SHARES OF COMMON STOCK AS IS NECESSARY
TO COMPLY WITH THE TERMS OF THIS AGREEMENT, ITS CERTIFICATE OF INCORPORATION AND
THE CONVERSION SHARES.  IF AT ANY TIME THE NUMBER OF SHARES OF AUTHORIZED BUT
UNISSUED COMMON STOCK ARE NOT SUFFICIENT TO COMPLY WITH THE TERMS OF THIS
AGREEMENT, THE CONVERTIBLE NOTES, AND THE CONVERSION SHARES, THE COMPANY WILL
PROMPTLY TAKE SUCH CORPORATE ACTION AS MAY BE NECESSARY TO INCREASE ITS
AUTHORIZED BUT UNISSUED SHARES OF COMMON STOCK TO SUCH NUMBER OF SHARES OF
COMMON STOCK AS ARE SUFFICIENT FOR SUCH PURPOSE.  THE COMPANY WILL OBTAIN ANY
AUTHORIZATION, CONSENT, APPROVAL OR OTHER ACTION BY OR MAKE ANY FILING WITH ANY
COURT OR ADMINISTRATIVE BODY THAT MAY BE REQUIRED UNDER APPLICABLE SECURITIES
LAWS IN CONNECTION WITH THE ISSUANCE OF ANY SHARES ISSUED BY IT IN ORDER TO
COMPLY WITH THE TERMS OF THIS AGREEMENT, THE CONVERTIBLE NOTES, AND THE
CONVERSION SHARES.

 

SECTION 6.6  COMPLIANCE WITH LAW.  THE COMPANY WILL CONDUCT ITS BUSINESS IN
COMPLIANCE WITH ALL APPLICABLE LAWS, RULES AND REGULATIONS OF THE JURISDICTIONS
IN WHICH IT IS CONDUCTING BUSINESS, INCLUDING, WITHOUT LIMITATION, ALL
APPLICABLE LOCAL, STATE AND FEDERAL ENVIRONMENTAL LAWS AND REGULATIONS, THE
FAILURE TO COMPLY WITH WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT.

 

SECTION 6.7  USE OF PROCEEDS.  THE COMPANY SHALL USE THE CASH PROCEEDS OF THE
PURCHASED SECURITIES TO FUND ACQUISITIONS AND FOR THE COMPANY’S WORKING CAPITAL
NEEDS AND SHALL NOT USE SUCH PROCEEDS FOR THE SATISFACTION OF ANY PORTION OF THE
COMPANY’S DEBT (OTHER THAN PAYMENT OF TRADE PAYABLES IN THE ORDINARY COURSE OF
THE COMPANY’S BUSINESS AND PRIOR PRACTICES), OR TO REDEEM ANY COMMON STOCK OR
COMMON STOCK EQUIVALENTS OR TO SETTLE ANY OUTSTANDING LITIGATION.

 

SECTION 6.8  CERTAIN ACTIONS REQUIRING INVESTOR APPROVAL.  THE COMPANY SHALL
NOT, WITHOUT THE WRITTEN CONSENT OF THE INVESTOR, OTHER THAN IN THE ORDINARY
COURSE OF BUSINESS, ISSUE

 

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ANY DEBT SECURITIES THAT ARE SENIOR OR PARI PASSU IN RIGHT OF PAYMENT TO OR WITH
THE CONVERTIBLE NOTES (EXCEPT FOR ANY DEBT SECURITIES THAT ARE OUTSTANDING AS OF
THE DATE HEREOF).

 

SECTION 6.9  DIVIDENDS.  NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES SHALL
PAY DIVIDENDS TO ITS RESPECTIVE STOCKHOLDERS UNLESS SUCH DIVIDEND ON THE NEXT
INTEREST PAYMENT DATE UNDER THE NOTES ON AN AS-IF CONVERTED BASIS.

 

SECTION 6.10  TRANSFER RESTRICTIONS.

 

(A)   THE CONVERSION SHARES MAY ONLY BE DISPOSED OF IN COMPLIANCE WITH STATE AND
FEDERAL SECURITIES LAWS.  IN CONNECTION WITH ANY TRANSFER OF CONVERSION SHARES
OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR RULE 144, TO THE
COMPANY OR TO AN AFFILIATE OF THE INVESTOR OR IN CONNECTION WITH A PLEDGE AS
CONTEMPLATED IN SECTION 6.10(B), THE COMPANY MAY REQUIRE THE TRANSFEROR THEREOF
TO PROVIDE TO THE COMPANY AN OPINION OF COUNSEL SELECTED BY THE TRANSFEROR AND
REASONABLY ACCEPTABLE TO THE COMPANY, THE FORM AND SUBSTANCE OF WHICH OPINION
SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH
TRANSFER DOES NOT REQUIRE REGISTRATION OF SUCH TRANSFERRED CONVERSION SHARES
UNDER THE SECURITIES ACT.  AS A CONDITION OF TRANSFER OF CONVERSION SHARES OTHER
THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR RULE 144, ANY SUCH
TRANSFEREE SHALL AGREE IN WRITING TO BE BOUND BY THE TERMS OF THIS AGREEMENT AND
SHALL HAVE THE RIGHTS OF AN INVESTOR UNDER THIS AGREEMENT.

 

(B)   THE INVESTOR AGREES TO THE IMPRINTING, SO LONG AS IS REQUIRED BY THIS
SECTION 6.10, OF A LEGEND ON ANY OF THE CONVERSION SHARES IN THE FOLLOWING FORM:

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE UPON
[EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that the Investor may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Conversion Shares to a
financial institution that is an “accredited investor” as defined in
Rule 501(a) under the Securities Act and who

 

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agrees to be bound by the provisions of this Agreement and, if required under
the terms of such arrangement, the Investor may transfer pledged or secured
Conversion Shares to the pledgees or secured parties.  Such a pledge or transfer
would not be subject to approval of the Company, and no legal opinion of legal
counsel of the pledgee, secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be required of such pledge.  At the
Investor’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Conversion Shares may reasonably
request in connection with a pledge or transfer of the Conversion Shares,
including, if the Conversion Shares are subject to registration pursuant to
Section 6.12 hereof, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.

 

(C)   CERTIFICATES EVIDENCING THE CONVERSION SHARES SHALL NOT CONTAIN ANY LEGEND
(INCLUDING THE LEGEND SET FORTH IN SECTION 6.10(B) HEREOF): (I) WHILE A
REGISTRATION STATEMENT (INCLUDING THE REGISTRATION STATEMENT) COVERING THE
RESALE OF SUCH SECURITY IS EFFECTIVE UNDER THE SECURITIES ACT, OR (II) FOLLOWING
ANY SALE OF SUCH CONVERSION SHARES PURSUANT TO RULE 144, OR (III) IF SUCH
UNDERLYING SHARES ARE ELIGIBLE FOR SALE UNDER RULE 144(K), OR (IV) IF SUCH
LEGEND IS NOT REQUIRED UNDER APPLICABLE REQUIREMENTS OF THE SECURITIES ACT
(INCLUDING JUDICIAL INTERPRETATIONS AND PRONOUNCEMENTS ISSUED BY THE STAFF OF
THE SEC). THE COMPANY SHALL CAUSE ITS COUNSEL TO ISSUE A LEGAL OPINION TO ITS
TRANSFER AGENT PROMPTLY AFTER THE EFFECTIVE DATE IF REQUIRED BY THE TRANSFER
AGENT TO EFFECT THE REMOVAL OF THE LEGEND HEREUNDER.  IF ALL OR ANY PORTION OF A
NOTE IS CONVERTED OR EXERCISED (AS APPLICABLE) AT A TIME WHEN THERE IS AN
EFFECTIVE REGISTRATION STATEMENT TO COVER THE RESALE OF THE CONVERSION SHARES,
OR IF SUCH CONVERSION SHARES MAY BE SOLD UNDER RULE 144(K) OR IF SUCH LEGEND IS
NOT OTHERWISE REQUIRED UNDER APPLICABLE REQUIREMENTS OF THE SECURITIES ACT
(INCLUDING JUDICIAL INTERPRETATIONS AND PRONOUNCEMENTS ISSUED BY THE STAFF OF
THE SEC), THEN SUCH CONVERSION SHARES SHALL BE ISSUED FREE OF ALL LEGENDS.  THE
COMPANY AGREES THAT FOLLOWING THE EFFECTIVE DATE OR AT SUCH TIME AS SUCH LEGEND
IS NO LONGER REQUIRED UNDER THIS SECTION 6.10(C), IT WILL, NO LATER THAN SEVEN
TRADING DAYS FOLLOWING THE DELIVERY BY THE INVESTOR TO THE COMPANY OR THE
TRANSFER AGENT OF A CERTIFICATE REPRESENTING CONVERSION SHARES, AS APPLICABLE,
ISSUED WITH A RESTRICTIVE LEGEND (SUCH THIRD TRADING DAY, THE “LEGEND REMOVAL
DATE”), DELIVER OR CAUSE TO BE DELIVERED TO THE INVESTOR A CERTIFICATE
REPRESENTING SUCH SHARES THAT IS FREE FROM ALL RESTRICTIVE AND OTHER LEGENDS. 
THE COMPANY MAY NOT MAKE ANY NOTATION ON ITS RECORDS OR GIVE INSTRUCTIONS TO THE
TRANSFER AGENT THAT ENLARGE THE RESTRICTIONS ON TRANSFER SET FORTH IN THIS
SECTION 6.10.  CERTIFICATES FOR CONVERSION SHARES SUBJECT TO LEGEND REMOVAL
HEREUNDER SHALL BE TRANSMITTED BY THE TRANSFER AGENT TO THE INVESTOR BY
CREDITING THE ACCOUNT OF THE INVESTOR’S PRIME BROKER WITH THE DEPOSITORY TRUST
COMPANY SYSTEM.

 

(D)   IN ADDITION TO THE INVESTOR’S OTHER AVAILABLE REMEDIES, THE COMPANY SHALL
PAY TO THE INVESTOR, IN CASH, AS LIQUIDATED DAMAGES AND NOT AS A PENALTY, FOR
EACH $100 OF CONVERSION SHARES (BASED ON THE VWAP OF THE COMMON STOCK ON THE
DATE SUCH CONVERSION SHARES ARE SUBMITTED TO THE TRANSFER AGENT) DELIVERED FOR
REMOVAL OF THE RESTRICTIVE LEGEND AND SUBJECT TO SECTION 6.10(C), $10 PER
TRADING DAY (INCREASING TO $20 PER TRADING DAY 5 TRADING DAYS AFTER SUCH DAMAGES
HAVE BEGUN TO ACCRUE) FOR EACH TRADING DAY AFTER THE SECOND TRADING DAY
FOLLOWING THE LEGEND REMOVAL DATE UNTIL

 

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SUCH CERTIFICATE IS DELIVERED WITHOUT A LEGEND.  NOTHING HEREIN SHALL LIMIT THE
INVESTOR’S RIGHT TO PURSUE ACTUAL DAMAGES FOR THE COMPANY’S FAILURE TO DELIVER
CERTIFICATES REPRESENTING ANY CONVERSION SHARES AS REQUIRED BY THE TRANSACTION
DOCUMENTS, AND THE INVESTOR SHALL HAVE THE RIGHT TO PURSUE ALL REMEDIES
AVAILABLE TO IT AT LAW OR IN EQUITY INCLUDING, WITHOUT LIMITATION, A DECREE OF
SPECIFIC PERFORMANCE AND/OR INJUNCTIVE RELIEF.

 

(E)   THE INVESTOR AGREES THAT THE REMOVAL OF THE RESTRICTIVE LEGEND FROM
CERTIFICATES REPRESENTING CONVERSION SHARES AS SET FORTH IN THIS SECTION 6.10 IS
PREDICATED UPON THE COMPANY’S RELIANCE THAT THE INVESTOR WILL SELL ANY
CONVERSION SHARES PURSUANT TO EITHER THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, INCLUDING ANY APPLICABLE PROSPECTUS DELIVERY REQUIREMENTS, OR AN
EXEMPTION THEREFROM, AND THAT IF CONVERSION SHARES ARE SOLD PURSUANT TO A
REGISTRATION STATEMENT, THEY WILL BE SOLD IN COMPLIANCE WITH THE PLAN OF
DISTRIBUTION SET FORTH THEREIN.

 

SECTION 6.11  SECURITIES LAW DISCLOSURE; PUBLICITY.  THE COMPANY SHALL, BY
12:00 P.M. (NEW YORK CITY TIME) ON THE FOURTH TRADING DAY FOLLOWING THE DATE
HEREOF (OR SUCH SHORTER TIME PERIOD AS SHALL BE REQUIRED BY FORM 8-K OR
OTHERWISE AGREED TO BY THE PARTIES), ISSUE A CURRENT REPORT ON FORM 8-K
DISCLOSING THE MATERIAL TERMS OF THE TRANSACTIONS CONTEMPLATED HEREBY AND
ATTACHING THE TRANSACTION DOCUMENTS AS EXHIBITS THERETO.  THE COMPANY AND THE
INVESTOR SHALL CONSULT WITH EACH OTHER IN ISSUING ANY OTHER PRESS RELEASES WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND NEITHER THE COMPANY NOR THE
INVESTOR SHALL ISSUE ANY SUCH PRESS RELEASE OR OTHERWISE MAKE ANY SUCH PUBLIC
STATEMENT WITHOUT THE PRIOR CONSENT OF THE COMPANY, WITH RESPECT TO ANY PRESS
RELEASE OF THE INVESTOR, OR WITHOUT THE PRIOR CONSENT OF THE INVESTOR, WITH
RESPECT TO ANY PRESS RELEASE OF THE COMPANY, WHICH CONSENT SHALL NOT
UNREASONABLY BE WITHHELD OR DELAYED, EXCEPT IF SUCH DISCLOSURE IS REQUIRED BY
LAW, IN WHICH CASE THE DISCLOSING PARTY SHALL PROMPTLY PROVIDE THE OTHER PARTY
WITH PRIOR NOTICE OF SUCH PUBLIC STATEMENT OR COMMUNICATION.  NOTWITHSTANDING
THE FOREGOING, THE COMPANY SHALL NOT INCLUDE THE NAME OF THE INVESTOR IN ANY
FILING WITH THE SEC OR ANY REGULATORY AGENCY OR TRADING MARKET, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE INVESTOR, EXCEPT (I) AS REQUIRED BY FEDERAL
SECURITIES LAW IN CONNECTION WITH (A) ANY REGISTRATION STATEMENT CONTEMPLATED BY
SECTION 6.12 HEREOF AND (B) THE FILING OF FINAL TRANSACTION DOCUMENTS (INCLUDING
SIGNATURE PAGES THERETO) WITH THE SEC AND (II) TO THE EXTENT SUCH DISCLOSURE IS
REQUIRED BY LAW OR TRADING MARKET REGULATIONS, IN WHICH CASE THE COMPANY SHALL
PROVIDE THE INVESTOR WITH PRIOR NOTICE OF SUCH DISCLOSURE PERMITTED UNDER THIS
CLAUSE (II).

 

SECTION 6.12  REGISTRATION OF SHARES.  THE COMPANY SHALL:

 

(A)           FILE IN A TIMELY MANNER A FORM D RELATING TO THE SALE OF THE
SHARES UNDER THIS AGREEMENT, PURSUANT TO REGULATION D UNDER THE SECURITIES ACT
AND TO PROVIDE A COPY THEREOF, PROMPTLY UPON REQUEST OF THE INVESTOR;

 

(B)           AS SOON AS PRACTICABLE AFTER THE CLOSING DATE, THE COMPANY WILL
USE ITS BEST EFFORTS TO PREPARE AND FILE WITH THE SEC WITHIN NINETY (90) DAYS
FOLLOWING THE CLOSING DATE A REGISTRATION STATEMENT ON FORM S-3 (OR, IF THE
COMPANY IS INELIGIBLE TO USE FORM S-3, THEN ON SUCH OTHER FORM AS IS AVAILABLE
FOR SUCH REGISTRATION) REGISTERING UNDER THE SECURITIES ACT THE SALE OF THE
SHARES BY THE INVESTOR FROM TIME TO TIME ON THE FACILITIES OF ANY NATIONAL
SECURITIES EXCHANGE ON WHICH THE COMMON STOCK IS TRADED OR IN PRIVATELY
NEGOTIATED TRANSACTIONS (THE “REGISTRATION STATEMENT”);

 

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(C)           USE ITS REASONABLE BEST EFFORTS TO CAUSE THE SEC TO NOTIFY THE
COMPANY OF THE SEC’S WILLINGNESS TO DECLARE THE REGISTRATION STATEMENT EFFECTIVE
ON OR BEFORE 180 DAYS AFTER THE CLOSING DATE;

 

(D)           CAUSE THE SHARES TO BE DULY LISTED FOR TRADING ON THE NASDAQ
GLOBAL MARKET CONCURRENTLY WITH THE EFFECTIVENESS OF THE REGISTRATION STATEMENT;

 

(E)           IN THE EVENT THAT THE SEC REQUIRES THE COMPANY TO IDENTIFY THE
INVESTOR AS AN “UNDERWRITER” IN THE REGISTRATION STATEMENT, COOPERATE WITH THE
INVESTOR IN ALLOWING THE INVESTOR TO CONDUCT CUSTOMARY “UNDERWRITER’S DUE
DILIGENCE” WITH RESPECT TO THE COMPANY AND SATISFY ITS OBLIGATIONS IN RESPECT
THEREOF.  IN ADDITION, AT THE INVESTOR’S REQUEST, THE COMPANY WILL FURNISH TO
THE INVESTOR, ON THE DATE OF THE EFFECTIVENESS OF THE REGISTRATION STATEMENT AND
THEREAFTER NO MORE OFTEN THAN ON A QUARTERLY BASIS, (I) A LETTER, DATED SUCH
DATE, FROM THE COMPANY’S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO
UNDERWRITERS IN AN UNDERWRITTEN PUBLIC OFFERING, ADDRESSED TO SUCH INVESTOR, AND
(II) AN OPINION, DATED AS OF SUCH DATE, OF COUNSEL REPRESENTING THE COMPANY FOR
PURPOSES OF SUCH REGISTRATION STATEMENT, IN FORM, SCOPE AND SUBSTANCE AS IS
CUSTOMARILY GIVEN IN AN UNDERWRITTEN PUBLIC OFFERING, INCLUDING A STANDARD
“RULE 10B-5” OPINION FOR SUCH OFFERING, ADDRESSED TO SUCH INVESTOR;

 

(F)            NOTIFY INVESTOR PROMPTLY UPON THE REGISTRATION STATEMENT, AND ANY
POST-EFFECTIVE AMENDMENT THERETO, BEING DECLARED EFFECTIVE BY THE SEC;

 

(G)           PREPARE AND FILE WITH THE SEC SUCH AMENDMENTS AND SUPPLEMENTS TO
THE REGISTRATION STATEMENT AND THE PROSPECTUS CONTAINED IN SUCH REGISTRATION
STATEMENT AND TAKE SUCH OTHER ACTION, IF ANY, AS MAY BE NECESSARY TO KEEP THE
REGISTRATION STATEMENT EFFECTIVE UNTIL THE EARLIER OF (I) THE DATE ON WHICH THE
SHARES MAY BE RESOLD BY THE INVESTOR WITHOUT REGISTRATION AND WITHOUT REGARD TO
ANY VOLUME LIMITATIONS BY REASON OF RULE 144(K) UNDER THE SECURITIES ACT OR ANY
OTHER RULE OF SIMILAR EFFECT, (II) ALL OF THE SHARES HAVE BEEN SOLD PURSUANT TO
THE REGISTRATION STATEMENT OR RULE 144 UNDER THE SECURITIES ACT OR ANY OTHER
RULE OF SIMILAR EFFECT, OR (III) THE SECOND ANNIVERSARY OF THE CLOSING DATE;

 

(H)           PROMPTLY FURNISH TO THE INVESTOR WITH RESPECT TO THE SHARES
REGISTERED UNDER THE REGISTRATION STATEMENT SUCH REASONABLE NUMBER OF COPIES OF
THE PROSPECTUS, INCLUDING ANY SUPPLEMENTS TO OR AMENDMENTS OF THE PROSPECTUS, IN
ORDER TO FACILITATE THE PUBLIC SALE OR OTHER DISPOSITION OF ALL OR ANY OF THE
SHARES BY THE INVESTOR;

 

(I)            DURING THE PERIOD WHEN COPIES OF THE PROSPECTUS ARE REQUIRED TO
BE DELIVERED UNDER THE SECURITIES ACT OR THE EXCHANGE ACT, FILE ALL DOCUMENTS
REQUIRED TO BE FILED WITH THE SEC PURSUANT TO SECTION 13, 14 OR 15 OF THE
EXCHANGE ACT WITHIN THE TIME PERIODS REQUIRED BY THE EXCHANGE ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER;

 

(J)            FILE DOCUMENTS REQUIRED OF THE COMPANY FOR CUSTOMARY BLUE SKY
CLEARANCE IN ALL STATES REQUIRING BLUE SKY CLEARANCE AND PROVIDE EVIDENCE OF
SUCH FILINGS PROMPTLY UPON REQUEST OF THE INVESTOR; PROVIDED, HOWEVER, THAT THE
COMPANY SHALL NOT BE REQUIRED

 

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TO QUALIFY TO DO BUSINESS OR CONSENT TO SERVICE OF PROCESS IN ANY JURISDICTION
IN WHICH IT IS NOT NOW SO QUALIFIED OR HAS NOT SO CONSENTED; AND

 

(K)           PASS ALL EXPENSES IN CONNECTION WITH THE PROCEDURES IN PARAGRAPHS
(A) THROUGH (I) OF THIS SECTION 6.12 AND THE REGISTRATION OF THE SHARES PURSUANT
TO THE REGISTRATION STATEMENT TO THE INVESTOR, BY PROVIDING DETAILED RECEIPTS
FOR THE EXPENSES INCURRED.

 

SECTION 6.13  RESERVATION AND LISTING OF SHARES.

 

(A)   THE COMPANY SHALL MAINTAIN A RESERVE FROM ITS DULY AUTHORIZED SHARES OF
COMMON STOCK FOR ISSUANCE PURSUANT TO THE TRANSACTION DOCUMENTS IN SUCH AMOUNT
AS MAY BE REQUIRED TO FULFILL ITS OBLIGATIONS IN FULL UNDER THE TRANSACTION
DOCUMENTS.

 

(B)   THE COMPANY SHALL, IF APPLICABLE: (I) IN THE TIME AND MANNER REQUIRED BY
THE PRINCIPAL TRADING MARKET, PREPARE AND FILE WITH SUCH TRADING MARKET AN
ADDITIONAL SHARES LISTING APPLICATION COVERING A NUMBER OF SHARES OF COMMON
STOCK AT LEAST EQUAL TO THE REQUIRED MINIMUM ON THE DATE OF SUCH APPLICATION,
(II) TAKE ALL STEPS NECESSARY TO CAUSE SUCH SHARES OF COMMON STOCK TO BE
APPROVED FOR LISTING ON SUCH TRADING MARKET AS SOON AS POSSIBLE THEREAFTER,
(III) PROVIDE TO THE INVESTOR EVIDENCE OF SUCH LISTING, AND (IV) MAINTAIN THE
LISTING OF SUCH COMMON STOCK ON ANY DATE AT LEAST EQUAL TO THE REQUIRED MINIMUM
ON SUCH DATE ON SUCH TRADING MARKET OR ANOTHER TRADING MARKET; PROVIDED THAT
SUCH LISTING SHALL INCLUDE ANY ADDITIONAL SHARES THAT MAY BE ISSUABLE UNDER THE
NOTE AS A RESULT OF ANY ADJUSTMENTS TO THE CONVERSION PRICE THAT WOULD AFFECT
THE NUMBER OF CONVERSION SHARES ISSUABLE TO THE INVESTOR.

 

ARTICLE VII
CONDITIONS TO OBLIGATION OF THE COMPANY

 

The obligation of the Company to sell Purchased Securities to the Investor at
the Closing is subject to the satisfaction, on or before the Closing, of the
conditions set forth in this Article 7.

 

SECTION 7.1  REPRESENTATIONS AND WARRANTIES.  THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN ARTICLE 5 SHALL BE TRUE, COMPLETE AND CORRECT AS OF THE DATE HEREOF
AND, AS OF THE CLOSING DATE AS THOUGH SUCH REPRESENTATIONS AND WARRANTIES HAD
BEEN MADE ON AND AS OF SUCH DATE.

 

SECTION 7.2  PERFORMANCE.  THE INVESTOR SHALL HAVE PERFORMED AND COMPLIED IN ALL
MATERIAL RESPECTS WITH ALL AGREEMENTS CONTAINED HEREIN, AND IN THE AGREEMENTS,
DOCUMENTS AND INSTRUMENTS CONTEMPLATED HEREBY WHICH ARE REQUIRED TO BE PERFORMED
OR COMPLIED WITH BY THEM PRIOR TO OR AT THE DATE OF THE CLOSING.

 

SECTION 7.3  REQUIRED CONSENTS.  THE COMPANY SHALL HAVE OBTAINED THE WRITTEN
CONSENT OR APPROVAL OF EACH PERSON WHOSE CONSENT OR APPROVAL IS REQUIRED IN
CONNECTION WITH THIS AGREEMENT.

 

SECTION 7.4  LITIGATION.  NO SUIT, ACTION OR OTHER PROCEEDING SHALL BE PENDING
OR, TO THE KNOWLEDGE OF COMPANY, THREATENED BY ANY THIRD PARTY OR BY OR BEFORE
ANY COURT OR GOVERNMENTAL

 

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AGENCY IN WHICH IT IS SOUGHT TO RESTRAIN OR PROHIBIT OR TO OBTAIN DAMAGES OR
OTHER RELIEF IN CONNECTION WITH THIS AGREEMENT OR THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY, AND NO INVESTIGATION THAT MIGHT RESULT IN ANY
SUCH SUIT, ACTION OR OTHER PROCEEDING SHALL BE PENDING OR, TO THE KNOWLEDGE OF
THE COMPANY, THREATENED.

 

SECTION 7.5  LEGISLATION.  NO STATUTE, RULE, REGULATION, ORDER, OR
INTERPRETATION SHALL HAVE BEEN ENACTED, ENTERED OR DEEMED APPLICABLE BY ANY
DOMESTIC OR FOREIGN GOVERNMENT OR GOVERNMENTAL OR ADMINISTRATIVE AGENCY OR COURT
WHICH WOULD MAKE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT ILLEGAL.

 

ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF INVESTOR

 

The obligation of the Investor to purchase the Purchased Securities at the
Closing is subject to the satisfaction, on or before the Closing, of the
conditions set forth in this Article 7.

 

SECTION 8.1  REPRESENTATIONS AND WARRANTIES.  THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN ARTICLE 4 SHALL BE TRUE, COMPLETE AND CORRECT AS OF THE DATE HEREOF
AND, AS OF THE CLOSING DATE (AS THOUGH SUCH REPRESENTATIONS AND WARRANTIES HAD
BEEN MADE ON AND AS OF SUCH DATE), AND THE CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER OF THE COMPANY SHALL HAVE CERTIFIED TO SUCH EFFECT TO THE
INVESTOR IN WRITING.

 

SECTION 8.2  PERFORMANCE.  THE COMPANY SHALL HAVE PERFORMED AND COMPLIED IN ALL
MATERIAL RESPECTS WITH ALL AGREEMENTS CONTAINED HEREIN, AND IN THE AGREEMENTS,
DOCUMENTS AND INSTRUMENTS CONTEMPLATED HEREBY WHICH ARE REQUIRED TO BE PERFORMED
OR COMPLIED WITH BY IT PRIOR TO OR AT THE DATE OF THE CLOSING, AND THE CHIEF
EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER OF THE COMPANY SHALL HAVE
CERTIFIED TO THE INVESTOR IN WRITING TO SUCH EFFECT AND TO THE FURTHER EFFECT
THAT ALL OF THE CONDITIONS SET FORTH IN THIS ARTICLE 8 HAVE BEEN SATISFIED.

 

SECTION 8.3  ALL PROCEEDINGS TO BE SATISFACTORY.  ALL CORPORATE AND OTHER
PROCEEDINGS TO BE TAKEN BY THE COMPANY IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY AND ALL DOCUMENTS INCIDENT THERETO SHALL BE REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE TO THE INVESTOR AND THEIR COUNSEL, AND THE
INVESTOR AND THEIR COUNSEL SHALL HAVE RECEIVED ALL SUCH COUNTERPART ORIGINALS OR
CERTIFIED OR OTHER COPIES OF SUCH DOCUMENTS AS THEY REASONABLY MAY REQUEST.

 

SECTION 8.4  SUPPORTING DOCUMENTS.

 

(A)   THE INVESTOR AND THEIR COUNSEL SHALL HAVE RECEIVED COPIES OF THE FOLLOWING
DOCUMENTS:

 

(I)            A CERTIFICATE OF THE SECRETARY OF STATE OF THE STATE OF
INCORPORATION OF THE COMPANY DATED AS OF A DATE WITHIN THREE DAYS PRIOR TO THE
CLOSING DATE AS TO THE CORPORATE EXISTENCE OF THE COMPANY AND LISTING ALL
DOCUMENTS OF THE COMPANY ON FILE WITH SUCH SECRETARY OF STATE;

 

(II)           A CERTIFICATE OF THE SECRETARY OF THE COMPANY DATED THE CLOSING
DATE AND CERTIFYING:  (A) THE COMPANY’S AND EACH AFFILIATE’S THEN-CURRENT
CERTIFICATE OF INCORPORATION AND BYLAWS; (B) THAT ATTACHED THERETO IS A TRUE AND

 

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COMPLETE COPY OF ANY APPLICABLE RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF
THE COMPANY AUTHORIZING THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS
AGREEMENT AND THE TRANSACTION DOCUMENTS, AND THE ISSUANCE, SALE AND DELIVERY OF
THE PURCHASED SECURITIES AND THE CONVERSION SHARES, AND THAT ALL SUCH
RESOLUTIONS ARE IN FULL FORCE AND EFFECT AND ARE ALL THE RESOLUTIONS ADOPTED IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE
TRANSACTION DOCUMENTS; AND (C) TO THE INCUMBENCY AND SPECIMEN SIGNATURE OF EACH
OFFICER OF THE COMPANY AND ITS AFFILIATES EXECUTING THIS AGREEMENT, THE
TRANSACTION DOCUMENTS, AND ANY CERTIFICATE OR INSTRUMENT FURNISHED PURSUANT
HERETO, AND A CERTIFICATION BY ANOTHER OFFICER OF THE COMPANY AS TO THE
INCUMBENCY AND SIGNATURE OF THE OFFICER SIGNING THE CERTIFICATE REFERRED TO IN
THIS SUBSECTION (II); AND

 

(III)          SUCH ADDITIONAL SUPPORTING DOCUMENTS AND OTHER INFORMATION WITH
RESPECT TO THE OPERATIONS AND AFFAIRS OF THE COMPANY AS ANY INVESTOR OR THE
INVESTOR’S COUNSEL REASONABLY MAY REQUEST.

 

SECTION 8.5  REQUIRED CONSENTS.  THE COMPANY SHALL HAVE OBTAINED THE WRITTEN
CONSENT OR APPROVAL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
INVESTOR, OF EACH PERSON WHOSE CONSENT OR APPROVAL IS REQUIRED IN CONNECTION
WITH THIS AGREEMENT.

 

SECTION 8.6  LITIGATION.  NO SUIT, ACTION OR OTHER PROCEEDING SHALL BE PENDING
OR, TO THE KNOWLEDGE OF THE COMPANY, THREATENED BY ANY THIRD PARTY OR BY OR
BEFORE ANY COURT OR GOVERNMENTAL AGENCY IN WHICH IT IS SOUGHT TO RESTRAIN OR
PROHIBIT OR TO OBTAIN DAMAGES OR OTHER RELIEF IN CONNECTION WITH THIS AGREEMENT
OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND NO
INVESTIGATION THAT MIGHT RESULT IN ANY SUCH SUIT, ACTION OR OTHER PROCEEDING
SHALL BE PENDING OR, TO THE KNOWLEDGE OF COMPANY, THREATENED.

 

SECTION 8.7  LEGISLATION.  NO STATUTE, RULE, REGULATION, ORDER, OR
INTERPRETATION SHALL HAVE BEEN ENACTED, ENTERED OR DEEMED APPLICABLE BY ANY
DOMESTIC OR FOREIGN GOVERNMENT OR GOVERNMENTAL OR ADMINISTRATIVE AGENCY OR COURT
WHICH WOULD MAKE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT ILLEGAL.

 

SECTION 8.8  NO MATERIAL ADVERSE CHANGES.  SINCE THE DATE OF THIS AGREEMENT, NO
EVENTS SHALL HAVE OCCURRED OR CIRCUMSTANCES ARISEN WHICH ARE REASONABLY
EXPECTED, INDIVIDUALLY OR IN THE AGGREGATE, TO HAVE OR RESULT IN A MATERIAL
ADVERSE EFFECT UPON THE COMPANY.  THE COMPANY SHALL FULLY COOPERATE AS
REASONABLY REQUESTED BY THE INVESTOR TO ENABLE THE INVESTOR TO DETERMINE THAT
THIS CONDITION HAS BEEN SATISFIED.

 

SECTION 8.9  LIENS.  THERE SHALL EXIST AS OF THE CLOSING NO LIENS, OTHER THAN
PERMITTED LIENS, ON ANY ASSETS OR PROPERTIES OF THE COMPANY.

 

SECTION 8.10  TRANSACTION DOCUMENTS; ADDITIONAL AGREEMENTS.

 

(A)   EXCEPT AS SPECIFIED IN SECTIONS 8.10(B)-(D) BELOW, THE COMPANY AND THE
INVESTOR SHALL HAVE EXECUTED AND DELIVERED EACH OF THE TRANSACTION DOCUMENTS TO
WHICH IT

 

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IS A PARTY.  EACH SUCH DOCUMENT OR AGREEMENT SHALL CONSTITUTE THE VALID AND
BINDING OBLIGATION OF SUCH PARTY, ENFORCEABLE AGAINST SUCH PARTY IN ACCORDANCE
WITH ITS TERMS.

 

(B)   THE COMPANY AND THE INVESTOR SHALL HAVE EXECUTED AND DELIVERED THE
SECURITY AGREEMENT NOT LATER THAN THIRTY (30) DAYS AFTER THE CLOSING DATE, AND
SUCH AGREEMENT OR ARRANGEMENT SHALL CONSTITUTE THE VALID AND BINDING OBLIGATION
OF THE PARTIES THERETO ENFORCEABLE IN ACCORDANCE WITH ITS TERMS.

 

(C)   THE COMPANY AND CERTAIN OF ITS SUBSIDIARIES OR AFFILIATES AND THE INVESTOR
SHALL HAVE EXECUTED AND DELIVERED THE GUARANTY NOT LATER THAN THIRTY (30) DAYS
AFTER THE CLOSING DATE, AND SUCH AGREEMENT OR ARRANGEMENT SHALL CONSTITUTE THE
VALID AND BINDING OBLIGATION OF THE PARTIES THERETO ENFORCEABLE IN ACCORDANCE
WITH ITS TERMS.

 

(D)   IF REQUIRED IN CONNECTION WITH THE COMPANY’S EXISTING LINE OF CREDIT
FACILITY, THE COMPANY, THE INVESTOR AND LASALLE BANK SHALL HAVE ENTERED INTO AN
INTERCREDITOR AGREEMENT OR OTHER ARRANGEMENT NOT LATER THAN THIRTY (30) DAYS
AFTER THE CLOSING DATE, AND ANY SUCH AGREEMENT OR ARRANGEMENT SHALL CONSTITUTE
THE VALID AND BINDING OBLIGATION OF THE PARTIES THERETO ENFORCEABLE IN
ACCORDANCE WITH ITS TERMS.

 

Any failure to deliver the documents in the time periods set forth in this
Section 8.10 shall constitute a default under the Note.

 

SECTION 8.11  PRIOR PREEMPTIVE RIGHTS.  ALL OF THE COMPANY’S OBLIGATIONS
REGARDING PREEMPTIVE OR FIRST REFUSAL RIGHTS WITH RESPECT TO THE ISSUANCE OF ITS
SECURITIES SHALL HAVE BEEN TERMINATED IN THEIR ENTIRETY OR DULY WAIVED PURSUANT
TO A WRITTEN INSTRUMENT IN FORM AND CONTENT SATISFACTORY TO THE INVESTOR AND THE
INVESTOR’S COUNSEL WITH RESPECT TO (A) THE ISSUANCE OF THE PURCHASED SECURITIES
AND (B) THE ISSUANCE OF THE CONVERSION SHARES.

 

SECTION 8.12  NO DEFAULT.  SINCE THE DATE HEREOF, NO DEFAULT (OR EVENT WHICH,
WITH THE PASSAGE OF TIME AND/OR THE GIVING OF NOTICE, WOULD CONSTITUTE A
DEFAULT) OF THE COMPANY SHALL HAVE OCCURRED UNDER THIS AGREEMENT OR ANY OF THE
TRANSACTION DOCUMENTS.

 

SECTION 8.13  PAYMENT OF FEES.  THE COMPANY SHALL HAVE PAID UP TO $30,000 OF THE
FEES AND EXPENSES OF THE INVESTOR’S LEGAL COUNSEL AS REQUIRED UNDER
SECTION 11.7.

 

ARTICLE IX
INDEMNIFICATION

 

SECTION 9.1  INDEMNIFICATION OF INVESTOR.  THE COMPANY SHALL INDEMNIFY, DEFEND
AND HOLD HARMLESS THE INVESTOR AND ITS RESPECTIVE SUBSIDIARIES, OFFICERS,
DIRECTORS AND OWNERS FROM AND AGAINST AND IN RESPECT OF ANY AND ALL DEMANDS,
CLAIMS, ACTIONS OR CAUSES OF ACTION, ASSESSMENTS, LOSSES, DAMAGES, LIABILITIES,
INTEREST AND PENALTIES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
REASONABLE LEGAL FEES AND DISBURSEMENTS INCURRED IN CONNECTION THEREWITH AND IN
SEEKING INDEMNIFICATION THEREFOR, AND ANY AMOUNTS OR EXPENSES REQUIRED TO BE
PAID OR INCURRED IN CONNECTION WITH ANY ACTION, SUIT, PROCEEDING, CLAIM, APPEAL,
DEMAND, ASSESSMENT OR JUDGMENT) (“INDEMNIFIABLE LOSSES”), RESULTING FROM,
ARISING OUT OF, OR IMPOSED UPON OR INCURRED BY ANY PERSON TO BE INDEMNIFIED
HEREUNDER (I) BY REASON OF ANY BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT
OR AGREEMENT OF THE COMPANY CONTAINED IN THIS AGREEMENT OR ANY AGREEMENT,

 

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CERTIFICATE CONTEMPLATED BY THIS AGREEMENT OR ANY AGREEMENT, CERTIFICATE, OR
DOCUMENT EXECUTED AND DELIVERED BY THE COMPANY PURSUANT HERETO OR IN CONNECTION
WITH ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR (II) ANY
INDEMNIFIABLE LOSSES ARISES UNDER THE SECURITIES ACT, THE EXCHANGE ACT, OR ANY
OTHER FEDERAL OR STATE STATUTORY LAW OR REGULATION, OR AT COMMON LAW OR
OTHERWISE (INCLUDING IN SETTLEMENT OF ANY LITIGATION, IF SUCH SETTLEMENT IS
EFFECTED WITH THE WRITTEN CONSENT OF THE COMPANY), INSOFAR AS SUCH LOSSES,
CLAIMS, DAMAGES, LIABILITIES OR EXPENSES (OR ACTIONS IN RESPECT THEREOF AS
CONTEMPLATED BELOW) ARISE OUT OF OR ARE BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF ANY MATERIAL FACT CONTAINED OR INCORPORATED BY
REFERENCE IN THE REGISTRATION STATEMENT, INCLUDING FINANCIAL STATEMENTS AND
SCHEDULES, AND ALL OTHER DOCUMENTS FILED AS A PART THEREOF, INCLUDING ANY
INFORMATION DEEMED TO BE A PART THEREOF AS OF THE TIME OF EFFECTIVENESS PURSUANT
TO PARAGRAPH (B) OF RULE 430A, OR PURSUANT TO RULE 434, UNDER THE SECURITIES
ACT, OR IN THE PROSPECTUS RELATED THERETO, IN THE FORM FIRST FILED WITH THE SEC
PURSUANT TO RULE 424(B) UNDER THE SECURITIES ACT OR FILED AS PART OF THE
REGISTRATION STATEMENT AT THE TIME OF EFFECTIVENESS IF NO RULE 424(B) FILING IS
REQUIRED (THE “PROSPECTUS”) OR ANY AMENDMENT OR SUPPLEMENT TO THE REGISTRATION
STATEMENT OR PROSPECTUS, OR ARISE OUT OF OR ARE BASED UPON THE OMISSION OR
ALLEGED OMISSION TO STATE IN ANY OF THEM A MATERIAL FACT REQUIRED TO BE STATED
THEREIN OR NECESSARY TO MAKE THE STATEMENTS IN ANY OF THEM, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, AND WILL REIMBURSE THE
INVESTOR FOR REASONABLE LEGAL AND OTHER EXPENSES AS SUCH EXPENSES ARE INCURRED
BY THE INVESTOR OR CONTROLLING PERSON IN CONNECTION WITH INVESTIGATING,
DEFENDING, SETTLING, COMPROMISING OR PAYING ANY SUCH LOSS, CLAIM, DAMAGE,
LIABILITY, EXPENSE OR ACTION; PROVIDED, HOWEVER, THAT THE COMPANY WILL NOT BE
LIABLE IN ANY SUCH CASE TO THE INVESTOR TO THE EXTENT THAT ANY SUCH LOSS, CLAIM,
DAMAGE, LIABILITY OR EXPENSE ARISES OUT OF OR IS BASED UPON (I) AN UNTRUE
STATEMENT OR ALLEGED UNTRUE STATEMENT OR OMISSION OR ALLEGED OMISSION MADE IN
THE REGISTRATION STATEMENT, THE PROSPECTUS OR ANY AMENDMENT OR SUPPLEMENT
THERETO IN RELIANCE UPON AND IN CONFORMITY WITH WRITTEN INFORMATION FURNISHED TO
THE COMPANY BY OR ON BEHALF OF THE INVESTOR EXPRESSLY FOR USE IN THE
REGISTRATION STATEMENT, THE PROSPECTUS OR ANY AMENDMENT OR SUPPLEMENT THERETO,
OR (II) THE FAILURE OF THE APPLICABLE INVESTOR TO COMPLY WITH THE COVENANTS AND
AGREEMENTS CONTAINED IN SECTION 5.2 OF THIS AGREEMENT REGARDING THE RESALE OF
THE SHARES, OR (III) THE INACCURACY OF ANY REPRESENTATIONS AND WARRANTIES MADE
BY THE INVESTOR IN THIS AGREEMENT OR (IV) ANY UNTRUE STATEMENT OR OMISSION OF A
MATERIAL FACT REQUIRED TO MAKE SUCH STATEMENT NOT MISLEADING IN ANY PROSPECTUS
THAT IS CORRECTED IN ANY SUBSEQUENT PROSPECTUS OR SUPPLEMENT THERETO THAT WAS
DELIVERED TO THE INVESTOR A REASONABLE AMOUNT OF TIME BEFORE THE PERTINENT SALE
OR SALES BY THE INVESTOR OR (V) A DIRECT CLAIM AGAINST THE COMPANY BY SUCH
INVESTOR IF SUCH INVESTOR IS A PERSON THAT IS UNDER COMMON CONTROL WITH ANY
INVESTOR (AS OPPOSED TO A THIRD-PARTY CLAIM AGAINST SUCH INVESTOR).

 

SECTION 9.2  INDEMNIFICATION OF THE COMPANY.  THE INVESTOR SHALL INDEMNIFY,
DEFEND AND HOLD HARMLESS THE COMPANY AND EACH OF ITS SUBSIDIARIES, OFFICERS,
DIRECTORS AND STOCKHOLDERS FROM AND AGAINST AND IN RESPECT OF ANY AND ALL
INDEMNIFIABLE LOSSES RESULTING FROM, ARISING OUT OF, OR IMPOSED UPON OR INCURRED
BY ANY PERSON TO BE INDEMNIFIED HEREUNDER BY REASON OF (I) ANY BREACH OF ANY
REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT BY THE INVESTOR CONTAINED IN
THIS AGREEMENT OR ANY AGREEMENT, CERTIFICATE OR DOCUMENT EXECUTED AND DELIVERED
BY THE INVESTOR PURSUANT HERETO OR IN CONNECTION WITH ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, (II) ANY FAILURE ON THE PART OF SUCH INVESTOR TO
COMPLY WITH THE COVENANTS AND AGREEMENTS CONTAINED IN SECTION 5.2 OF THIS
AGREEMENT REGARDING THE RESALE OF THE SHARES OR (III) ANY UNTRUE OR ALLEGED
UNTRUE STATEMENT OF ANY MATERIAL FACT CONTAINED IN THE REGISTRATION STATEMENT,
THE PROSPECTUS, OR ANY AMENDMENT OR SUPPLEMENT THERETO, OR ARISE OUT OF OR ARE
BASED UPON THE

 

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OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT REQUIRED TO BE
STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING, IN
EACH CASE TO THE EXTENT, BUT ONLY TO THE EXTENT, THAT SUCH UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OR OMISSION OR ALLEGED OMISSION WAS MADE IN THE
REGISTRATION STATEMENT, THE PROSPECTUS, OR ANY AMENDMENT OR SUPPLEMENT THERETO,
IN RELIANCE UPON AND IN CONFORMITY WITH WRITTEN INFORMATION FURNISHED TO THE
COMPANY BY OR ON BEHALF OF SUCH INVESTOR EXPRESSLY FOR USE THEREIN AND SUCH
INVESTOR WILL REIMBURSE THE COMPANY, EACH OF ITS DIRECTORS, EACH OF ITS OFFICERS
WHO SIGNED THE REGISTRATION STATEMENT AND EACH CONTROLLING PERSON FOR REASONABLE
LEGAL AND OTHER EXPENSES AS SUCH EXPENSES ARE INCURRED BY THE COMPANY, EACH OF
ITS DIRECTORS, EACH OF ITS OFFICERS WHO SIGNED THE REGISTRATION STATEMENT AND
EACH CONTROLLING PERSON IN CONNECTION WITH INVESTIGATING, DEFENDING, SETTLING,
COMPROMISING OR PAYING ANY SUCH LOSS, CLAIM, DAMAGE, LIABILITY, EXPENSE OR
ACTION; PROVIDED, HOWEVER, THAT THE INVESTOR SHALL NOT BE LIABLE FOR ANY SUCH
UNTRUE OR ALLEGED UNTRUE STATEMENT OR OMISSION OR ALLEGED OMISSION OF WHICH THE
INVESTOR HAS DELIVERED TO THE COMPANY IN WRITING A CORRECTION OF SUCH UNTRUE
STATEMENT OR OMISSION OF A MATERIAL FACT A REASONABLE AMOUNT OF TIME BEFORE THE
OCCURRENCE OF THE TRANSACTION FROM OR UPON WHICH SUCH LOSS, CLAIM, DAMAGE,
LIABILITY OR EXPENSE AROSE OR WAS BASED.

 

SECTION 9.3  THIRD-PARTY CLAIMS.  IF A CLAIM BY A THIRD PARTY IS MADE AGAINST AN
INDEMNIFIED PARTY AND IF THE INDEMNIFIED PARTY INTENDS TO SEEK INDEMNITY WITH
RESPECT THERETO UNDER THIS ARTICLE 9, SUCH INDEMNIFIED PARTY SHALL PROMPTLY
NOTIFY THE INDEMNIFYING PARTY OF SUCH CLAIM; PROVIDED, HOWEVER, THAT FAILURE TO
GIVE TIMELY NOTICE SHALL NOT AFFECT THE RIGHTS OF THE INDEMNIFIED PARTY SO LONG
AS THE FAILURE TO GIVE TIMELY NOTICE DOES NOT ADVERSELY AFFECT THE INDEMNIFYING
PARTY’S ABILITY TO DEFEND SUCH CLAIM AGAINST A THIRD PARTY.  THE INDEMNIFIED
PARTY SHALL NOT SETTLE SUCH CLAIM WITHOUT THE CONSENT OF THE INDEMNIFYING PARTY,
WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED.  IF THE
INDEMNIFYING PARTY ACKNOWLEDGES IN WRITING ITS INDEMNITY OBLIGATIONS FOR
INDEMNIFIABLE LOSSES RESULTING THEREFROM, THE INDEMNIFYING PARTY MAY PARTICIPATE
AT ITS OWN COST AND EXPENSE IN THE SETTLEMENT OR DEFENSE OF ANY CLAIM FOR WHICH
INDEMNIFICATION IS SOUGHT.

 

SECTION 9.4  COOPERATION AS TO INDEMNIFIED LIABILITY.  EACH PARTY HERETO SHALL
COOPERATE FULLY WITH THE OTHER PARTIES WITH RESPECT TO ACCESS TO BOOKS, RECORDS,
OR OTHER DOCUMENTATION WITHIN SUCH PARTY’S CONTROL, IF DEEMED REASONABLY
NECESSARY OR APPROPRIATE BY ANY PARTY IN THE DEFENSE OF ANY CLAIM WHICH MAY GIVE
RISE TO INDEMNIFICATION HEREUNDER.

 

ARTICLE X
TERMINATION AND DEFAULT

 

SECTION 10.1  TERMINATION.  THE OBLIGATION OF THE PARTIES HERETO TO CONSUMMATE
THE REMAINING TRANSACTIONS CONTEMPLATED HEREBY MAY BE TERMINATED AND ABANDONED
AT ANY TIME AT OR BEFORE THE CLOSING IF ANY OF THE FOLLOWING EVENTS OCCURS:

 

(A)   BY AND AT THE WRITTEN OPTION OF THE INVESTOR OR THE COMPANY IF THE CLOSING
SHALL NOT HAVE OCCURRED ON OR BEFORE JULY 17, 2008, PROVIDED THAT THE
TERMINATING PARTY SHALL NOT HAVE BREACHED IN ANY MATERIAL RESPECT ITS
OBLIGATIONS UNDER THIS AGREEMENT IN ANY MANNER THAT SHALL HAVE BEEN THE
PROXIMATE CAUSE OF OR RESULTED IN, THE FAILURE TO COMPLETE THE CLOSING BY SUCH
DATE; OR

 

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(B)   BY INVESTOR IF THERE SHALL HAVE OCCURRED ANY EVENT THAT WOULD CONSTITUTE A
MATERIAL ADVERSE EFFECT FOR THE COMPANY; OR

 

(C)   BY THE MUTUAL WRITTEN CONSENT OF EACH OF THE PARTIES; OR

 

(D)   BY AND AT THE OPTION OF THE INVESTOR OR THE COMPANY IF ANY GOVERNMENTAL
AUTHORITY SHALL HAVE ISSUED AN ORDER, DECREE, OR RULING OR TAKEN ANY OTHER
ACTION RESTRAINING, ENJOINING OR OTHERWISE PROHIBITING IN ANY MATERIAL RESPECTS
THE TRANSACTIONS CONTEMPLATED HEREBY AND SUCH ORDER, DECREE, RULING OR OTHER
ACTION SHALL HAVE BECOME FINAL AND NONAPPEALABLE.

 

SECTION 10.2  EFFECT.

 

(A)   UPON TERMINATION OF THIS AGREEMENT, THE INVESTOR’S RIGHTS AND OBLIGATIONS
TO PURCHASE ANY CONVERTIBLE NOTES OR CONVERSION SHARES PURSUANT TO ARTICLE 2
HEREOF SHALL TERMINATE.

 

(B)   TERMINATION OF THIS AGREEMENT BY A PARTY SHALL NOT RELIEVE ANY OTHER PARTY
HERETO OF ANY LIABILITY FOR BREACH OF REPRESENTATION, WARRANTY, COVENANT OR
AGREEMENT BY SUCH OTHER PARTIES INCLUDING LIABILITY FOR MONETARY DAMAGES AND/OR
SPECIFIC PERFORMANCE.

 

ARTICLE XI
OTHER PROVISIONS

 

SECTION 11.1  FURTHER ASSURANCES.  AT SUCH TIME AND FROM TIME TO TIME ON AND
AFTER THE DATE HEREOF UPON REQUEST BY THE INVESTOR, THE COMPANY WILL EXECUTE,
ACKNOWLEDGE AND DELIVER, OR WILL CAUSE TO BE DONE, EXECUTED, ACKNOWLEDGED AND
DELIVERED, ALL SUCH FURTHER ACTS, CERTIFICATES AND ASSURANCES THAT MAY BE
REASONABLY REQUIRED FOR THE BETTER CONVEYING, TRANSFERRING, ASSIGNING,
DELIVERING, ASSURING AND CONFIRMING TO THE INVESTOR, OR TO THE INVESTOR’S
RESPECTIVE SUCCESSORS AND ASSIGNS, ALL OF THE CONVERSION SHARES OR TO OTHERWISE
CARRY OUT THE PURPOSES OF THIS AGREEMENT AND THE AGREEMENTS, DOCUMENTS AND
INSTRUMENTS CONTEMPLATED HEREBY.

 

SECTION 11.2  COMPLETE AGREEMENT.  THE SCHEDULES AND EXHIBITS TO THIS AGREEMENT
SHALL BE CONSTRUED AS AN INTEGRAL PART OF THIS AGREEMENT TO THE SAME EXTENT AS
IF THEY HAD BEEN SET FORTH VERBATIM HEREIN.  THIS AGREEMENT AND THE SCHEDULES
AND EXHIBITS HERETO CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO
WITH RESPECT TO THE SUBJECT MATTERS HEREOF AND THEREOF AND SUPERSEDE ALL PRIOR
AGREEMENTS WHETHER WRITTEN OR ORAL RELATING HERETO.

 

SECTION 11.3  SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.  THE
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS CONTAINED HEREIN SHALL
SURVIVE THE CLOSING AND REMAIN IN FULL FORCE AND EFFECT; PROVIDED, HOWEVER, THAT
THE REPRESENTATIONS AND WARRANTIES SHALL EXPIRE ON THE SECOND ANNIVERSARY OF THE
DATE OF THE CLOSING HEREUNDER.  NO INDEPENDENT INVESTIGATION OF THE COMPANY BY
THE INVESTOR, ITS COUNSEL, OR ANY OF ITS AGENTS OR EMPLOYEES SHALL IN ANY WAY
LIMIT OR RESTRICT THE SCOPE OF THE REPRESENTATIONS AND WARRANTIES MADE BY THE
COMPANY IN THIS AGREEMENT.

 

SECTION 11.4  CONSENT, WAIVER, AMENDMENT, ETC.  THE FAILURE OF ANY PARTY HERETO
TO ENFORCE AT ANY TIME ANY OF THE PROVISIONS OF THIS AGREEMENT SHALL NOT, ABSENT
AN EXPRESS WRITTEN

 

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WAIVER SIGNED BY THE PARTY MAKING SUCH WAIVER SPECIFYING THE PROVISION BEING
WAIVED, BE CONSTRUED TO BE A WAIVER OF ANY SUCH PROVISION, NOR IN ANY WAY TO
AFFECT THE VALIDITY OF THIS AGREEMENT OR ANY PART THEREOF OR THE RIGHT OF THE
PARTY THEREAFTER TO ENFORCE EACH AND EVERY SUCH PROVISION.  NO WAIVER OF ANY
BREACH OF THIS AGREEMENT SHALL BE HELD TO BE A WAIVER OF ANY OTHER OR SUBSEQUENT
BREACH.  EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, IN EACH CASE IN WHICH
APPROVAL OF THE INVESTOR IS REQUIRED BY THE TERMS OF THIS AGREEMENT, SUCH
REQUIREMENT SHALL BE SATISFIED BY A VOTE OR THE WRITTEN CONSENT OF THE
INVESTOR.  WITH THE WRITTEN CONSENT OF THE INVESTOR, THE OBLIGATIONS OF THE
COMPANY UNDER THIS AGREEMENT MAY BE WAIVED (EITHER GENERALLY OR IN A PARTICULAR
INSTANCE AND EITHER RETROACTIVELY OR PROSPECTIVELY), AND WITH THE SAME APPROVAL
THE COMPANY MAY AMEND OR ELIMINATE ANY OF THE PROVISIONS OF THIS AGREEMENT;
PROVIDED, HOWEVER, THAT NO SUCH WAIVER OR AMENDMENT SHALL, WITHOUT THE WRITTEN
CONSENT OF THE HOLDERS OF ALL PURCHASED SECURITIES AT THE TIME OUTSTANDING,
AMEND THIS SECTION 11.4.  WRITTEN NOTICE OF ANY SUCH WAIVER, AMENDMENT, OR
CONSENT SHALL BE GIVEN TO THE RECORD HOLDERS OF THE PURCHASED SECURITIES WHO
HAVE NOT PREVIOUSLY CONSENTED THERETO IN WRITING.  NEITHER THIS AGREEMENT NOR
ANY PROVISION HEREOF MAY BE CHANGED, WAIVED, DISCHARGED OR TERMINATED ORALLY,
BUT ONLY BY A STATEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHICH ENFORCEMENT
OF THE CHANGE, WAIVER, DISCHARGE OR TERMINATION IS SOUGHT, EXCEPT TO THE EXTENT
PROVIDED IN THIS SECTION 11.4.

 

SECTION 11.5  NOTICES.  ALL NOTICES OR OTHER COMMUNICATIONS TO A PARTY REQUIRED
OR PERMITTED HEREUNDER SHALL BE IN WRITING AND SHALL BE DELIVERED PERSONALLY OR
BY FACSIMILE (RECEIPT CONFIRMED ELECTRONICALLY) TO SUCH PARTY (OR, IN THE CASE
OF ANY ENTITY, TO AN EXECUTIVE OFFICER OF SUCH PARTY) OR SHALL BE SENT BY A
REPUTABLE EXPRESS DELIVERY SERVICE OR BY CERTIFIED MAIL, POSTAGE PREPAID WITH
RETURN RECEIPT REQUESTED, ADDRESSED AS FOLLOWS:

 

if to the Investor to:

 

Whitebox VSC Ltd.
Suite 300
3033 Excelsior Boulevard
Minneapolis, MN 55416

Attn:  Dale Willenbring

 

with a copy to:

 

Theodore C. Cadwell, Jr., Esq.
Dorsey & Whitney LLP
50 S. 6th Street
Suite 1500
Minneapolis, MN 55402

 

if to the Company to:

 

Ebix, Inc.
5 Concourse Parkway

Suite 3200
Atlanta, GA 30328
Attn: Robin Raina

 

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with a copy to:

 

Charles Harrell

Carlton Fields, P.A.

1201 West Peachtree Street, Suite 3000

Atlanta, GA 30309

 

Any party may change the above-specified recipient and/or mailing address by
notice to all other parties given in the manner herein prescribed.  All notices
shall be deemed given on the day when actually delivered as provided above (if
delivered personally or by facsimile) or on the day shown on the return receipt
(if delivered by mail or delivery service).

 

SECTION 11.6  PUBLIC ANNOUNCEMENT.  IN THE EVENT ANY PARTY PROPOSES TO ISSUE ANY
PRESS RELEASE OR PUBLIC ANNOUNCEMENT CONCERNING ANY PROVISIONS OF THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY, SUCH PARTY SHALL SO ADVISE THE OTHER
PARTIES HERETO, AND THE PARTIES SHALL THEREAFTER USE THEIR REASONABLE BEST
EFFORTS TO CAUSE A MUTUALLY AGREEABLE RELEASE OR ANNOUNCEMENT TO BE ISSUED.  NO
PARTY WILL PUBLICLY DISCLOSE OR DIVULGE ANY PROVISIONS OF THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY WITHOUT THE OTHER PARTIES’ WRITTEN CONSENT,
EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW (INCLUDING APPLICABLE RULES AND
REGULATIONS OF THE SEC) OR STOCK EXCHANGE REGULATION, AND EXCEPT FOR
COMMUNICATIONS TO EMPLOYEES.

 

SECTION 11.7  EXPENSES.  SUBJECT TO THE FOLLOWING SENTENCE, THE COMPANY AND THE
INVESTOR SHALL EACH PAY THEIR OWN EXPENSES INCIDENT TO THIS AGREEMENT AND THE
PREPARATION FOR, AND CONSUMMATION OF, THE TRANSACTIONS PROVIDED FOR HEREIN. 
WHETHER OR NOT A CLOSING OCCURS, THE COMPANY SHALL REIMBURSE THE INVESTOR FOR UP
TO $30,000 OF ITS LEGAL FEES AND EXPENSES INCURRED IN CONNECTION WITH THE
DRAFTING, NEGOTIATION, DUE DILIGENCE AND EXECUTION OF THIS AGREEMENT AND THE
TRANSACTION DOCUMENTS AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
HEREIN AND THEREIN.  THE COMPANY SHALL ALSO REIMBURSE THE INVESTOR FOR ALL LEGAL
FEES AND EXPENSES INCURRED IN CONNECTION WITH THE DRAFTING, NEGOTIATION AND
EXECUTION OF ANY WAIVERS OR AMENDMENTS TO THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT.

 

SECTION 11.8  GOVERNING LAW.  ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.  EACH PARTY AGREES THAT ALL LEGAL
PROCEEDINGS CONCERNING THE INTERPRETATIONS, ENFORCEMENT AND DEFENSE OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND ANY OTHER TRANSACTION DOCUMENTS
(WHETHER BROUGHT AGAINST A PARTY HERETO OR ITS RESPECTIVE AFFILIATES, DIRECTORS,
OFFICERS, SHAREHOLDERS, EMPLOYEES OR AGENTS) SHALL BE COMMENCED EXCLUSIVELY IN
THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF DELAWARE. EACH PARTY HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS SITTING IN THE STATE OF DELAWARE FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY
OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER OR IS AN INCONVENIENT VENUE FOR SUCH PROCEEDING. IF EITHER PARTY SHALL
COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS OF THE TRANSACTION
DOCUMENTS, THEN THE PREVAILING PARTY IN SUCH ACTION

 

35

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OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS REASONABLE
ATTORNEYS’ FEES AND OTHER COSTS AND EXPENSES INCURRED WITH THE INVESTIGATION,
PREPARATION AND PROSECUTION OF SUCH ACTION OR PROCEEDING.

 

SECTION 11.9  TITLES AND HEADINGS; CONSTRUCTION.  THE TITLES AND HEADINGS TO THE
ARTICLES AND SECTIONS HEREIN ARE INSERTED FOR THE CONVENIENCE OF REFERENCE ONLY
AND ARE NOT INTENDED TO BE A PART OF OR TO AFFECT THE MEANING OR INTERPRETATION
OF THIS AGREEMENT.  THIS AGREEMENT SHALL BE CONSTRUED WITHOUT REGARD TO ANY
PRESUMPTION OR OTHER RULE REQUIRING CONSTRUCTION HEREOF AGAINST THE PARTY
CAUSING THIS AGREEMENT TO BE DRAFTED.

 

SECTION 11.10  BENEFIT.  NOTHING IN THIS AGREEMENT, EXPRESSED OR IMPLIED, IS
INTENDED TO CONFER ON ANY PERSON OTHER THAN THE PARTIES HERETO OR THEIR
RESPECTIVE SUCCESSORS OR ASSIGNS, ANY RIGHTS, REMEDIES, OBLIGATIONS OR
LIABILITIES UNDER OR BY REASON OF THIS AGREEMENT.

 

SECTION 11.11  COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AS ORIGINAL AND ALL OF WHICH
TOGETHER SHALL CONSTITUTE ONE INSTRUMENT.

 

SECTION 11.12  PARTIES IN INTEREST.  ALL REPRESENTATIONS, COVENANTS AND
AGREEMENTS CONTAINED IN THIS AGREEMENT BY OR ON BEHALF OF ANY OF THE PARTIES
HERETO SHALL BIND AND INURE TO THE BENEFIT OF AND BE ENFORCEABLE BY THE
RESPECTIVE SUCCESSORS AND ASSIGNS OF THE PARTIES HERETO, WHETHER SO EXPRESSED OR
NOT, AND, IN PARTICULAR, SHALL INURE TO THE BENEFIT OF AND BE ENFORCEABLE BY THE
HOLDER OR HOLDERS AT THE TIME OF ANY OF THE PURCHASED SECURITIES.

 

SECTION 11.13  SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT IS HELD INVALID
BY A COURT OF COMPETENT JURISDICTION, THE REMAINING PROVISIONS SHALL NONETHELESS
BE ENFORCEABLE ACCORDING TO THEIR TERMS.  FURTHER, IF ANY PROVISION IS HELD TO
BE OVERBROAD AS WRITTEN, SUCH PROVISION SHALL BE DEEMED AMENDED TO NARROW ITS
APPLICATION TO THE EXTENT NECESSARY TO MAKE THE PROVISION ENFORCEABLE ACCORDING
TO APPLICABLE LAW AND SHALL BE ENFORCED AS AMENDED.

 

[SIGNATURE PAGES FOLLOW]

 

36

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IN WITNESS WHEREOF, the undersigned has executed this Agreement to be effective
as of the date first written above.

 

 

EBIX, INC.

a Delaware corporation

 

 

By:

[g194741kg05i001.jpg]

 

 

Name:  Robin Raina

 

 

Title:

 

 

37

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IN WITNESS WHEREOF, the undersigned has executed this Agreement to be effective
as of the date first written above.

 

 

INVESTOR:

 

WHITEBOX VSC LTD.

 

 

 

By:

[g194741kg05i002.jpg]

 

 

Name: Jonathan Wood

 

 

Title: COO

 

 

Address:

Suite 300

 

 

3033 Excelsior Boulevard

 

 

Minneapolis, MN 55415

 

 

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EXHIBIT A

 

FORM OF CONVERTIBLE PROMISSORY NOTE

 

(attached hereto)

 

C-1

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