exv10w1



 






Exhibit
10.1




SECURITIES PURCHASE AGREEMENT




by and among




IMMEDIATEK, INC.




ZACH BAIR,




PAUL MARIN




and




RADICAL HOLDINGS LP




Dated
as of January 24, 2006






 









 









TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE I. THE SECURITIES
	 	 	2	 
	 
	 	 	 	 
	Section 1.01 Issuance, Sale and Delivery of the Series A Shares at the Closing
	 	 	2	 
	Section 1.02 Closing
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	2	 
	 
	 	 	 	 
	Section 2.01 Organization, Qualifications and Corporate
Power
	 	 	2	 
	Section 2.02 Authorization; No Conflict; No
Violation
	 	 	3	 
	Section 2.03 Consents and
Approvals
	 	 	4	 
	Section 2.04
Validity
	 	 	4	 
	Section 2.05 Authorized Capital
Stock
	 	 	4	 
	Section 2.06 Reports and Financial
Statements
	 	 	5	 
	Section 2.07 Disclosure Controls and
Procedures
	 	 	6	 
	Section 2.08 No Undisclosed Liabilities
	 	 	7	 
	Section 2.09 Events Subsequent to the Balance Sheet Date
	 	 	7	 
	Section 2.10 Litigation; Compliance with Law
	 	 	9	 
	Section 2.11 Proprietary Information
	 	 	10	 
	Section 2.12 Intellectual Property
	 	 	11	 
	Section 2.13 Real Property
	 	 	13	 
	Section 2.14 Assets
	 	 	13	 
	Section 2.15 Insurance
	 	 	14	 
	Section 2.16 Taxes
	 	 	14	 
	Section 2.17 Agreements
	 	 	15	 
	Section 2.18 Loans and Advances
	 	 	17	 
	Section 2.19 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons
	 	 	18	 
	Section 2.20 Significant Customers and Suppliers
	 	 	18	 
	Section 2.21 Offerings
	 	 	18	 
	Section 2.22 Brokers; Financial Advisors
	 	 	18	 
	Section 2.23 Transactions With Affiliates
	 	 	19	 
	Section 2.24 Employees
	 	 	19	 
	Section 2.25 Environmental and Safety Laws
	 	 	20	 
	Section 2.26 Employee Benefits
	 	 	20	 
	Section 2.27 Foreign Corrupt Practices Act
	 	 	21	 
	Section 2.28 Illegal or Unauthorized Payments; Political Contributions
	 	 	21	 
	Section 2.29 Pending Changes
	 	 	21	 
	Section 2.30 Investment Company Act
	 	 	21	 
	Section 2.31 Product Liability
	 	 	21	 
	Section 2.32 Registration Rights
	 	 	22	 
	Section 2.33 Books and Records
	 	 	22	 
	Section 2.34 Disclosure
	 	 	22	 
	 
	 	 	 	 
	ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
	 	 	22	 
	 
	 	 	 	 
	Section 3.01 Representations and Warranties of the Purchaser
	 	 	22	 
	Section 3.02 Legend
	 	 	23	 






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	ARTICLE IV. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER AND THE COMPANY
	 	 	24	 
	 
	 	 	 	 
	Section 4.01 Conditions to the Purchaser’s Obligations at the Closing
	 	 	24	 
	Section 4.02 Conditions to the Company’s Obligations at the Closing
	 	 	27	 
	 
	 	 	 	 
	ARTICLE V. COVENANTS OF THE COMPANY
	 	 	28	 
	 
	 	 	 	 
	Section 5.01 Preparation and Mailing of Information Statement
	 	 	28	 
	Section 5.02 Filing of Restated Articles; Effecting Reverse Split
	 	 	28	 
	Section 5.03 Authorization of Series A Preferred Stock
	 	 	29	 
	Section 5.04 Current Report on Form 8-K
	 	 	29	 
	Section 5.05 Waiver of Preemptive Rights Violations
	 	 	29	 
	Section 5.06 Agreements With Debtholders and Other Securityholders
	 	 	29	 
	Section 5.07 Reserve for Preferred Stock Conversion Shares
	 	 	29	 
	Section 5.08 Corporate Existence
	 	 	30	 
	Section 5.09 Preservation of Property and Assets
	 	 	30	 
	Section 5.10 Insurance
	 	 	30	 
	Section 5.11 Inspection, Consultation and Advice
	 	 	30	 
	Section 5.12 Restrictive Agreements Prohibited
	 	 	31	 
	Section 5.13 Transactions with Affiliates
	 	 	31	 
	Section 5.14 Use of Proceeds
	 	 	31	 
	Section 5.15 Non-Disclosure, Non-Solicitation and Proprietary Information and Inventions Agreement
	 	 	31	 
	Section 5.16 Payment of Taxes; Trade Debt
	 	 	31	 
	Section 5.17 Internal Accounting Controls
	 	 	32	 
	Section 5.18 Other Items
	 	 	32	 
	Section 5.19 Indemnity
	 	 	32	 
	Section 5.20 Compliance with Laws
	 	 	33	 
	Section 5.21 Keeping of Records and Books of Account
	 	 	33	 
	Section 5.22 Publicity
	 	 	33	 
	Section 5.23 Operations
	 	 	33	 
	Section 5.24 Negative Covenants
	 	 	33	 
	Section 5.25 Board; Resignations of Directors and Officers
	 	 	34	 
	 
	 	 	 	 
	ARTICLE VI. TERMINATION
	 	 	34	 
	 
	 	 	 	 
	Section 6.01 Termination
	 	 	34	 
	Section 6.02 Manner of Exercise
	 	 	35	 
	Section 6.03 Effect of Termination
	 	 	35	 
	 
	 	 	 	 
	ARTICLE VII. MISCELLANEOUS
	 	 	36	 
	 
	 	 	 	 
	Section 7.01 Survival of Agreements
	 	 	36	 
	Section 7.02 Entire Agreement
	 	 	36	 
	Section 7.03 Assignment; Binding Effect
	 	 	36	 
	Section 7.04 Notices
	 	 	36	 
	Section 7.05 Specific Performance; Remedies
	 	 	38	 
	Section 7.06 Submission to Jurisdiction; Waiver of Jury Trial
	 	 	39	 






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	Section 7.07 Headings
	 	 	39	 
	Section 7.08 Governing Law
	 	 	39	 
	Section 7.09 Amendments
	 	 	40	 
	Section 7.10 Extensions; Waivers
	 	 	40	 
	Section 7.11 Severability
	 	 	40	 
	Section 7.12 Counterparts; Effectiveness
	 	 	40	 
	Section 7.13 Construction
	 	 	40	 
	Section 7.14 Attorneys’ Fees
	 	 	41	 
	Section 7.15 Brokerage
	 	 	41	 
	Section 7.16 Adjustments for Stock Splits, Etc
	 	 	41	 
	Section 7.17 Aggregation of Stock
	 	 	41	 
	Section 7.18 No-Shop Clause
	 	 	41	 
	Section 7.19 Certain Defined Terms
	 	 	42	 
	Section 7.20 Obligations of Controlling Stockholders
	 	 	43	 
	Section 7.21 Incorporation of Exhibits, Annexes and Schedules
	 	 	44	 






INDEX TO DISCLOSURE SCHEDULES




	 	 	 
	SCHEDULE 2.01(b)
	 	Subsidiaries
	SCHEDULE 2.05(a)
	 	Outstanding Capital Stock
	SCHEDULE 2.08
	 	Liabilities
	SCHEDULE 2.09
	 	Events Subsequent to the Balance Sheet Date
	SCHEDULE 2.10
	 	Litigation
	SCHEDULE 2.12(a)
	 	Authorization to Intellectual Property
	SCHEDULE 2.12(c)
	 	List of Intellectual Property
	SCHEDULE 2.12(d)
	 	Agreements Concerning Intellectual Property
	SCHEDULE 2.12(g)
	 	Intellectual Property Assignments
	SCHEDULE 2.13(b)
	 	Real Property
	SCHEDULE 2.14
	 	Assets
	SCHEDULE 2.15
	 	Insurance
	SCHEDULE 2.16
	 	Taxes
	SCHEDULE 2.17
	 	Agreements
	SCHEDULE 2.23
	 	Transaction with Affiliates
	SCHEDULE 2.24(b)
	 	List of Employees
	SCHEDULE 2.24(e)
	 	List of Employment Agreements
	SCHEDULE 2.26
	 	Employee Benefits
	SCHEDULE 2.32
	 	Registration Rights
	SCHEDULE 5.06
	 	Continuing Warrants and Options
	SCHEDULE 5.14
	 	Use of Proceeds
	SCHEDULE 5.18
	 	Other Items






 iii





 









 








INDEX TO EXHIBITS




	 	 	 
	EXHIBIT A
	 	Form of Certificate of Designation for Series A Preferred
	EXHIBIT B
	 	Form of Amended and Restated Articles of Incorporation
	EXHIBIT C
	 	Bylaws of ITEK
	EXHIBIT D
	 	Investor’s Rights Agreement
	EXHIBIT E
	 	Form of Escrow Agreement
	EXHIBIT F
	 	Form of Employment Agreement
	EXHIBIT G
	 	Form of Waiver of Preemptive Rights
	EXHIBIT H
	 	Form of Satisfaction Agreement
	EXHIBIT I
	 	Form of Cancellation Agreement






 iv






 









 








SECURITIES PURCHASE AGREEMENT




     This
SECURITIES PURCHASE AGREEMENT (this
“Agreement”), dated as of
January 24, 2006, is
entered into by and among Immediatek, Inc., a Nevada corporation (the “Company”), Radical Holdings
LP, a Texas limited partnership (the “Purchaser”), Paul Marin, an individual residing in the State
of Texas (“Marin”), and Zach Bair, an individual residing in the State of Texas (“Bair,” and
together with Marin, the “Controlling Shareholders”). Certain capitalized terms used herein are
defined in Section 7.19 of this Agreement.



     A. The Company intends to adopt and file a Certificate of Designation, Rights and Preferences
(the “Certificate of Designation”) in the form attached hereto as Exhibit A and
incorporated herein by reference, establishing the Series A Convertible Preferred Stock, par value
$0.001 per share, of the Company (the “Series A Preferred Stock”).



     B. The Company desires to issue and sell to the Purchaser, and the Purchaser desires to
purchase from the Company, 4,392,286 shares of the Series A Preferred Stock (the “Series A Shares”
or the “Shares”) on the terms and subject to the conditions set forth in this Agreement.



     C. The Shares will be convertible into that aggregate number of full shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”), representing at least 95% of the
total voting power of all outstanding shares of capital stock of the Company, including outstanding
Common Stock, subject to adjustment as provided in the Certificate of Designation.



     D. Among other conditions to the consummation of the transactions contemplated by this
Agreement, the Company’s Board of Directors and shareholders are required to adopt, and the Company
intends to file, Amended and Restated Articles of Incorporation (the “Restated Articles”) in the
form attached hereto as Exhibit B and incorporated herein by reference, amending the
Articles of Incorporation to, among other items, authorize its Board of Directors to fix and
determine the voting powers, designations, preferences, limitations, restrictions and relative
rights of the preferred stock of the Company, to delete the article providing for preemptive rights
for holders of the Common Stock of the Company and to delete the provision that specifies that the
principal place of business of the Company shall be in Clark County, Nevada.



     E. Among other conditions to the consummation of the transactions contemplated by this
Agreement, the Company’s Board of Directors and shareholders are required to adopt and approve, and
the Company will cause to occur, a ten-for-one reverse split of the Company’s Common Stock (the
“Reverse Split”).



AGREEMENT




     NOW, THEREFORE, in consideration of the premises, representations, warranties and the mutual
covenants contained in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:



 









 





ARTICLE I.




THE SECURITIES




     Section 1.01 Issuance, Sale and Delivery of the Series A Shares at the Closing. At
the Closing (as defined in Section 1.02 hereof), on the terms and subject to the conditions
of this Agreement, the Company shall issue and sell to the Purchaser, and the Purchaser shall
purchase from the Company, the Series A Shares, at a price of $0.683015632 per share (the “Share
Purchase Price”) for an aggregate purchase price of $3,000,000 (the “Total Purchase Price”), which
the Company and the Purchaser agree to be the fair market value of the Series A Shares as of the
date hereof.



     
Section 1.02 Closing. The Closing shall take place at 10:00 a.m. (local time) at the
offices of Jenkens & Gilchrist, P.C., 1445 Ross Avenue, Suite 3700, Dallas,
Texas 75202, on
February 22, 2006, or at such other location, date and time as may be
agreed upon between the
Company and the Purchaser (such closing being called the “Closing” and such date and time being
called the “Closing Date”). At the Closing, the Company shall issue and deliver to the Purchaser a
duly issued certificate representing the 4,392,286 Series A Shares. As payment in full for the
Series A Shares, on the Closing Date, the Purchaser shall (i) pay $230,000, by wire transfer or
check, to the Company, which amount shall be applied as required by Section 5.14, and (ii)
deposit $2,770,000, by wire transfer or check, in the escrow account established pursuant to the
Escrow Agreement (as defined herein).



ARTICLE II.




REPRESENTATIONS AND WARRANTIES OF THE COMPANY




     The Company and the Controlling Shareholders, severally but not jointly, represent and warrant
to the Purchaser, as of the Closing Date, that except as set forth in the Schedules attached
hereto:



     Section 2.01 Organization, Qualifications and Corporate Power.



          (a) The Company is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Nevada. The Company is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction in which the nature
of the business transacted by it or the character of the properties owned or leased by it requires
such licensing or qualification, except where the failure to be so licensed, qualified or in good
standing would not result in a Material Adverse Change. The Company has full corporate power and
authority to own and hold its properties and to carry on its business as now conducted and as
proposed to be conducted, execute, deliver and perform this Agreement and each of the other
Transaction Documents, to issue, sell and deliver the Shares (subject to the requisite shareholder
approval of the Restated Articles), and to issue and deliver the shares of Common Stock issuable
upon conversion of the Shares (collectively, the “Preferred Stock Conversion Shares”).




2









 








          (b) Except as set forth on Schedule 2.01(b), the Company has no Subsidiaries and the
Company does not (i) own of record or beneficially, directly or indirectly, (A) any shares of
capital stock or securities exercisable or exchangeable for, or convertible into, capital stock of
any other entity or (B) any participating interest in any partnership, joint venture or other
non-corporate business enterprise or (ii) control, directly or indirectly, any other entity. The
Company has no commitments or plans to establish any additional Subsidiaries.




          (c) Each Subsidiary has been duly formed, organized or incorporated, as the case may be, and
is validly existing as a corporation, limited partnership or limited liability company in good
standing under the laws of its respective jurisdiction of formation, organization or incorporation.
Each Subsidiary has been duly qualified or registered to do business and is in good standing as a
foreign corporation, partnership or limited liability company, as the case may be, in each other
jurisdiction in which the ownership or leasing of its properties or the nature or conduct of its
business as now conducted, and as proposed to be conducted, requires such qualification or
registration, except where the failure to do so would not result in a Material Adverse Change.
DiscLive Inc., a Delaware corporation (“DiscLive”), is, and will be as of the Closing Date, a
wholly-owned subsidiary of the Company.




     Section 2.02 Authorization; No Conflict; No Violation.



          (a) The execution and delivery by the Company of this Agreement and each of the other
Transaction Documents and the performance of its obligations hereunder and thereunder; (b) the
filing of the Restated Articles with the Secretary of State of the State of Nevada or such other
appropriate authority or agency in the State of Nevada; (c) the effectuation of the Reverse Split;
(d) the issuance, sale and delivery to the Purchaser of the Shares; and (e) the issuance and
delivery of the Preferred Stock Conversion Shares have been duly authorized by all requisite
corporate action on the part of the Company’s Board of Directors and shareholders (other than items
(b), (c) and (d), which are subject to the requisite shareholder approval of the Restated Articles
and the Reverse Split) and will not (i) result in a violation of the Company’s Articles of
Incorporation, as amended or modified (the “Charter”), or the Company’s Bylaws, as amended or
modified (the “Bylaws”), (ii) result in a violation of any applicable law, rule or regulation, or
any applicable order, injunction, judgment or decree of any court or other agency of government,
except such violations that would not result in a Material Adverse Change, (iii) conflict with,
result in a breach of, or constitute (or, with due notice or lapse of time or both, would
constitute) a default under, or give rise to any right of termination, acceleration or cancellation
under, any indenture, agreement, contract, license, arrangement, understanding, evidence of
indebtedness, note, lease or other instrument to which the Company or any of its properties or
assets is bound, (iv) result in the creation or imposition of any Lien, charge, restriction, claim
or encumbrance of any nature whatsoever upon the Company or any of the Company’s properties or
assets, or (v) require any consent, approval, notification, waiver or other similar action from any
third party (other than the requisite shareholder approval of the Restated Articles and the Reverse
Split). A true, correct and complete copy of the Bylaws is attached as Exhibit C to this
Agreement.




3









 








     Section 2.03 Consents and Approvals. Subject to the accuracy of the Purchaser’s representations
and warranties set forth in Article III hereof, no registration or filing with, or consent
or approval of or other action by, any federal, state or other governmental agency or
instrumentality or any third party is or will be necessary for (a) the Company’s valid execution,
delivery and performance of this Agreement and the other Transaction Documents, (b) the Company’s
issuance, sale and delivery of the Shares, (c) the Company’s issuance and delivery of the Preferred
Stock Conversion Shares upon conversion of the Shares and (d) consummation of the Reverse Split,
other than (x) the Restated Articles and the Certificate of Designation that will be filed with the
Secretary of State of the State of Nevada on or before the Closing Date, (y) those which have
previously been obtained or made, or (z) those which are required to be made under federal or state
securities laws, which will be obtained or made, and will be effective within the time periods
required by law.



     Section 2.04 Validity. This Agreement and each of the other Transaction Documents
have been duly executed and delivered by the Company and the Controlling Shareholders and
constitute the legal, valid and binding obligations of the Company and the Controlling
Shareholders, enforceable against the Company and the Controlling Shareholders in accordance with
their terms.



     Section 2.05 Authorized Capital Stock.



          (a) The Company’s authorized capital stock consists of (i) 5,000,000 shares of preferred
stock, par value $0.001 per share (the “Preferred Stock”), of which 4,392,286 shares shall be fixed
and determined as Series A Preferred Stock pursuant to the Certificate of Designation, and (ii)
500,000,000 shares of Common Stock. No other series or class of Preferred Stock has been
established or fixed. Immediately after the Closing, the number of shares of Preferred Stock and
Common Stock set forth on Schedule 2.05(a) will be validly issued and outstanding, fully
paid and nonassessable. In addition, immediately prior to the Closing, a sufficient number of
shares of Common Stock will be reserved for issuance upon issuance of the Preferred Stock
Conversion Shares, which shall be subject to adjustment based upon adjustments to the conversion
price of the Series A Preferred Stock. No shares are held in the Company’s treasury. The names of
the shareholders of record and the holders of all subscriptions, warrants, options, convertible
securities, and other rights (contingent or other) (the “Other Security Holders”) to purchase or
otherwise acquire equity securities of the Company, and the number of shares of stock and the
number of such subscriptions, warrants, options, convertible securities, and other such rights (the
“Other Securities”) held by each are as set forth in Schedule 2.05(a) hereto as of the date
hereof and the Closing Date. The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of the Company’s authorized
capital stock, are as set forth in the Restated Articles, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid, binding and
enforceable and in accordance with all applicable laws. Except as set forth in Schedule
2.05(a) hereto: (i) no Person owns of record any share of the Company’s capital stock, (ii) no
subscription, warrant, option, convertible security, or other right (contingent or other) to
purchase or otherwise acquire equity securities or equity related securities of the Company is
authorized or outstanding, and (iii) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible or exchangeable securities, or other such rights or
to

4









 






distribute to holders of any of its equity securities any evidence of indebtedness or asset.
Except as set forth in Schedule 2.05(a) hereto, the Company has no obligation (contingent
or other) to purchase, repurchase, redeem, retire or otherwise acquire any of its equity securities
or equity related securities or any interest therein or to pay any dividend or make any other
distribution in respect thereof. Except as set forth in Schedule 2.05(a), no stock plan,
stock purchase plan, stock option or other agreement or understanding between the Company and any
holder of any equity securities of the Company, or rights to purchase equity securities of the
Company, provides for acceleration or other changes in the vesting provisions or other terms of
such securities, as the result of any merger, sale of stock or assets, change in control or other
similar transaction by the Company. Other than as set forth in this Agreement and except as set
forth on Schedule 2.05(a), to the Company’s knowledge, there are no voting trusts or
agreements, stockholders’ agreements, pledge agreements, buy-sell agreements, rights of first
refusal, preemptive rights or other similar rights or proxies relating to any of the Company’s
securities, or agreements relating to the issuance, sale, redemption, transfer or other disposition
of the Company’s securities. All of the outstanding securities of the Company were issued in
compliance with all applicable federal and state securities laws.



     (b) The Shares have been duly authorized by the Company. When the Shares are issued and
delivered against payment therefor, and in accordance with the terms and conditions of this
Agreement, the Shares will be duly and validly issued, fully paid and nonassessable and will be
free and clear of all Liens, charges, restrictions, claims and encumbrances, other than
restrictions on transfer imposed by the Securities Act and applicable state securities laws. The
Preferred Stock Conversion Shares have been duly reserved for issuance upon conversion of the
Series A Preferred Stock and, when so issued in accordance therewith, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock and will be free and clear of
all Liens, charges, restrictions, claims and encumbrances, other than restrictions on transfer
imposed by the Securities Act and applicable state securities laws. Neither the issuance, sale or
delivery of the Shares, nor the issuance or delivery of the Preferred Stock Conversion Shares is
subject to any preemptive right of the Company’s stockholders or to any right of first refusal or
other right in favor of any Person. The consummation of the transactions contemplated hereunder
will not result in any anti-dilution adjustment or other similar adjustment to any of the Company’s
outstanding securities. Any Person with any right (other than the Purchaser) to purchase
securities of the Company, which would be triggered as a result of the transactions contemplated
under this Agreement, has waived such rights.



     (c) Immediately after the Closing, the voting power of the Shares will represent at least 95%
of the total voting power of all outstanding shares of capital stock of the Company, including
outstanding Common Stock.




     Section 2.06 Reports and Financial Statements. The Company has furnished or made
available to the Purchaser true and complete copies of all reports or registration statements it
has filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act and the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), for all periods subsequent to
November 1, 2002, all in the form so filed (collectively the “Company SEC Documents”). As of their
respective filing dates, the Company SEC Documents complied in all material respects



5









 




with the requirements of the Securities Act or the Exchange Act, as applicable, and, as of its
respective filing date, no Company SEC Document filed under the Exchange Act contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances in which they were
made, not misleading, except to the extent corrected by a subsequently filed document with the SEC
prior to the Closing Date. No Company SEC Document filed under the Securities Act contained an
untrue statement of material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading at the time such Company SEC Documents
became effective under the Securities Act. The Company’s financial statements, including the notes
thereto, included in the Company SEC Documents (the “Financial Statements”) comply as to form in
all material respects with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied (“GAAP”) and present fairly the Company’s
consolidated financial position at the dates thereof and of its operations and cash flows for the
periods specified (subject, in the case of unaudited statements, to normal audit adjustments).
Since the date of the most recent Company SEC Document, the Company has not effected any change in
any method of accounting or accounting practice, except for any such change required because of a
concurrent change in GAAP. No event since November 1, 2004, has occurred that requires the filing
of a Current Report on Form 8-K (an “8-K”) with the SEC for which an 8-K has not been so filed.
Since November 1, 2003, the Company has timely filed all material reports, registration statements
and other filings required by the SEC.




     Section 2.07 Disclosure Controls and Procedures.



          (a) The Company has established and maintains disclosure controls and procedures (as such term
is defined in Rules 13a-15 and 15d-15 under the Exchange Act) that (i) are designed to ensure that
material information relating to the Company, including its consolidated subsidiaries, is made
known to the Company’s Chief Executive Officer and its Chief Financial Officer by others within
those entities, particularly during the periods in which the filings made by the Company with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act are being prepared, (ii) have been
evaluated for effectiveness as of the end of each of the most recent fiscal year and most recent
fiscal quarter of the Company, and (iii) are effective to perform the functions for which they were
established.




          (b) The independent registered public accountants and the Audit Committee of the Board of
Directors, or, if no Audit Committee of the Board of Directors exists, the Board of Directors (the
“Board”) of the Company, have been advised of (i) any significant deficiencies in the design or
operation of internal controls which could adversely affect the Company’s ability to record,
process, summarize and report financial data, and (ii) any fraud, whether or not material, that
involves management or other employees who have a role in the Company’s internal controls; any
material weaknesses in internal controls have been identified for the accountants; and since the
date of the most recent evaluation of such disclosure controls and procedures, there have been no
significant changes in internal controls or in other factors that could significantly affect
internal controls, including any corrective actions with regard to significant deficiencies and
material weaknesses.




6









 








          (c) The principal executive officer and principal financial officer of the Company have made
all certifications required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and any
related rules and regulations promulgated by the SEC, each in effect on the date thereof, and the
statements contained in any such certification were complete and correct as of their respective
dates. The Company is otherwise in material compliance with all applicable provisions of the
Sarbanes-Oxley Act that are effective.




     Section 2.08 No Undisclosed Liabilities. The Company has no liabilities (whether
accrued, absolute, contingent or otherwise, known or unknown, and whether due or to become due or
asserted or unasserted), except (a) liabilities provided for in the Financial Statements (other
than liabilities which, in accordance with GAAP, need not be disclosed), (b) liabilities (including
accounts payable) incurred since September 30, 2005 (the “Balance Sheet Date”) in the ordinary
course of business consistent with past practice that are no greater than $10,000 in the aggregate,
(c) such other liabilities which are no more than $5,000 individually or $10,000 in the aggregate,
or (d) as set forth on Schedule 2.08. Except as set forth on Schedule 2.08, the
Company knows of no basis for the assertion against the Company of any liabilities not adequately
reflected or reserved against in the Financial Statements. Schedule 2.08 also contains a
true, complete and correct listing of all of the indebtedness owed by, and accounts payable and any
and all other liabilities (contingent or otherwise) of, the Company or any of its Subsidiaries and
the names and amounts owed to each of the respective payees of such obligations (the
“Debtholders”). The Company agrees to update such list as of the Closing Date.



     Section 2.09 Events Subsequent to the Balance Sheet Date. Except as set forth on
Schedule 2.09, since September 30, 2005:



          (a) there has been no Material Adverse Change nor has any event occurred which could
reasonably be expected to result in any Material Adverse Change;




          (b) there has not been any payment of, setting of a record date for, or declaration, setting
aside or authorizing the payment of, any dividend or other distribution in respect of any shares of
capital stock of the Company or any purchase, repurchase, retirement, redemption or other
acquisition by the Company, of any of the outstanding shares of capital stock or other securities
of, or other ownership interest in, the Company;




          (c) there has not been any transfer, issue, sale or other disposition by the Company of any
shares of capital stock or other securities of the Company or any grant of options, warrants, calls
or other rights to purchase or otherwise acquire shares of such capital stock or such other
securities;




          (d) the Company has not increased the compensation payable or to become payable, or awarded or
paid any bonuses to employees, officers, directors, consultants, advisors, agents, stockholders or
representatives of the Company nor has the Company either entered into any employment, deferred
compensation, severance or similar agreements (nor amended any such agreement) or agreed to
increase the compensation payable or to become payable by it to any of the Company’s employees,
officers, directors, consultants, independent contractors, advisors, agents, shareholders or
representatives or agreed to increase the coverage or benefits available under any severance pay,
deferred compensation, bonus or other incentive

7









 








compensation, pension or other employee benefit plan, payment or arrangement made to, for or
with such employees, officers, directors, consultants, independent contractors, advisors, agents,
shareholders or representatives;




          (e) the Company has not made any loans, advances, guarantees or capital contributions to, or
investments in, any Person, or acquired any assets or securities of any Person involving more than
$1,000 individually or $5,000 in the aggregate, other than ordinary advances for expenses incurred
in the ordinary course of business;




          (f) there has not been satisfaction or discharge of any Lien, claim or encumbrance or payment
of any obligation by the Company, except in the ordinary course of business and that has not
resulted in a Material Adverse Change;




          (g) there has not been any termination of, or change to, a material contract or arrangement by
which the Company or any of its assets is bound or subject;




          (h) there has not been any resignation or termination of employment of any employees,
officers, directors, consultants, advisors, agents or representatives of the Company;




          (i) the Company has not transferred or granted any rights under any contracts, leases,
licenses, agreements or Intellectual Property (as defined in Section 2.12 hereof) used by
the Company in its business;




          (j) there has not been any damage, destruction or loss, whether or not covered by insurance,
with respect to the property or assets of the Company having a replacement cost of more than $1,000
for any single loss or $5,000 for all such losses in the aggregate;




          (k) the Company has not mortgaged, pledged or subjected to any Lien or encumbrance any of its
assets, acquired any assets, or sold, assigned, transferred, conveyed, leased or otherwise disposed
of any assets, except for assets acquired or sold, assigned, transferred, conveyed, leased or
otherwise disposed of in the ordinary course of business consistent with the Company’s past
practice or Liens for taxes not yet due or payable;




          (l) the Company has not canceled or compromised any debt or claim, or amended, canceled,
terminated, relinquished, waived or released any contract or right or settled any claim;




          (m) the Company has not made, or entered into any binding commitment to make, any capital
expenditures or capital additions or betterments in excess of $5,000 in the aggregate;




          (n) the Company has not incurred any debts, obligations or liabilities, whether due or to
become due, except current liabilities incurred in the usual and ordinary course of business, none
of which current liabilities (individually or in the aggregate) has resulted in, or could
reasonably be expected to result in, a Material Adverse Change;




8









 








          (o) the Company has not entered into any material transaction except for this Agreement and
the other Transaction Documents;




          (p) the Company has not encountered, or to its knowledge, been threatened with, any labor
disputes, strikes, slowdowns, work stoppages or labor union organizing activities;




          (q) the Company has not made any change in the Company’s accounting principles, methods or
practices or depreciation or amortization policies or rates theretofore adopted;




          (r) the Company has not disclosed to any Person any trade secrets or confidential information,
except for disclosures made to Persons subject to valid and enforceable confidentiality agreements
or as required by applicable law;




          (s) the Company has not suffered or experienced any change in the relationship or course of
dealings between the Company and any of its suppliers or customers which supply goods or services
to the Company or purchase goods or services from the Company;




          (t) the Company has not made any payment to, or received any payment from, or made or received
any investment in, or entered into any transaction or series of related transactions (including,
without limitation, the purchase, sale, exchange or lease of assets, property or services, or the
making of a loan or guarantee) with any Affiliate or any members of their immediate families or any
legal entity controlled by either one of them; and




          (u) the Company has not entered into any agreement or commitment (contingent or otherwise) to
do any of the foregoing.




     Section 2.10 Litigation; Compliance with Law.



          (a) Except as set forth on Schedule 2.10, there is no (i) action, suit, claim,
proceeding or investigation pending or, to the best of the Company’s knowledge, threatened, against
or affecting the Company or its properties or assets, at law or in equity, or before or by any
federal, state, municipal or other governmental body, department, commission, board, bureau, agency
or instrumentality, domestic or foreign, (ii) arbitration proceeding pending or, to the best of the
Company’s knowledge, threatened, against or affecting the Company or its properties or assets, or
(iii) governmental inquiry pending or, to the best of the Company’s knowledge, threatened, against
or affecting the Company or its properties or assets (including, without limitation, any inquiry as
to the Company’s qualification to hold or receive any license or permit), and to the best of the
Company’s knowledge, there is no basis for any of the foregoing. The Company is not in default
with respect to any order, writ, judgment, injunction or decree known to or served upon the Company
of any court or of any federal, state, municipal or other governmental body, department,
commission, board, bureau, agency or instrumentality, domestic or foreign. Except as set forth on
Schedule 2.10, there is no action, suit, proceeding or investigation by the Company
pending, threatened or contemplated against others.




9









 








          (b) The Company has not received any opinion or memorandum or legal advice from legal counsel
to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage that
may be material to its business, prospects, financial condition, operations, property or affairs.
The Company has complied, in all material respects, with all laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and services, the Company has
all material permits, licenses and other authorizations required to conduct its business as
presently conducted and the Company has been operating its business pursuant to and in compliance
with the terms of all such permits, licenses and other authorizations. There is no existing law,
rule, regulation or order, and the Company is not aware of any proposed law, rule, regulation or
order, whether federal, state, county or local, which would prohibit or restrict the Company from,
or otherwise adversely affect the Company in, conducting its business in any jurisdiction in which
it is now conducting business.




     Section 2.11 Proprietary Information.



          (a) No third party has claimed or, to the best of the Company’s knowledge, has reason to
claim, that any Person employed or retained by, or affiliated with, the Company has (i) violated,
or may be violating, any of the terms or conditions of an employment, non-competition or
non-disclosure agreement with such third party, (ii) disclosed, or may be disclosing, or utilized,
or may be utilizing, any trade secret or proprietary information or documentation of such third
party, or (iii) interfered, or may be interfering, in the employment relationship between such
third party and any of its present or former employees. No third party has requested information
from the Company that suggests that such a claim might be contemplated. To the Company’s
knowledge, no Person employed by the Company or an Affiliate of the Company has employed, or
proposes to employ, any trade secret or any information or documentation proprietary to any former
employer, and, to the Company’s knowledge, no Person employed by the Company or an Affiliate of the
Company has violated any confidential relationship that such Person may have had with any third
party in connection with the development, manufacture or sale of any product or proposed product of
the Company or the development or sale of any service or proposed service of the Company, and the
Company has no reason to believe there will be any such employment or violation. Neither the
execution or delivery of this Agreement or any of the other Transaction Documents, nor the conduct
or proposed conduct of the Company’s business, nor the participation of any of the Company’s
officers, directors or employees in the conduct of the Company’s business, will conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any such Person is obligated to a third party.




          (b) Each employee, officer, consultant, advisor, agent and representative of the Company has
entered into and executed a Employee Non-Disclosure, Non-Solicitation and Proprietary Information
and Inventions Agreement or Non-Employee Non-Disclosure, Non-Solicitation and Proprietary
Information and Inventions Agreement, as the case may be, substantially in the forms which have
been delivered to the Purchaser (collectively, the “Non-Disclosure and Proprietary Information and
Inventions Agreement”), or an employment or consulting agreement containing substantially similar
terms, and such agreements are in full force and effect. The Company is not aware that any of its
employees, officers, consultants, advisors, agents and representatives is in violation of such
agreements, and the Company will use





10









 







its best efforts to prevent any such violation. In addition, to the best of the Company’s
knowledge, no current or former employee, officer, director, consultant, advisor, agent, or
representative has excluded works or inventions made prior to his or her employment or consulting
relationship with the Company from his or her assignment of inventions pursuant to their
Non-Disclosure and Proprietary Information and Inventions Agreement.




     Section 2.12 Intellectual Property.



          (a) Except as set forth in Schedule 2.12(a), the Company has all right, title and
interest in and to all patents and patent rights, trademarks and trademark rights, trade names and
trade name rights, service marks and service mark rights, service names and service name rights,
brand names, inventions, processes, formulae, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, trade secrets, industrial models, processes, designs,
methodologies, computer programs (including all source codes) and related documentation, technical
information, manufacturing, engineering and technical drawings, know-how, concepts and all pending
applications for and registrations of patents, trademarks, service marks and copyrights (together,
“Intellectual Property”) necessary for its business as now conducted and as proposed to be
conducted, without any conflict with or infringement upon the rights of others. Except as set
forth in Schedule 2.12(a), all registrations on behalf of the Company with and applications
to governmental or regulatory authorities in respect of all Intellectual Property of the Company
are valid and in full force and effect and are not subject to (i) any suits or other judicial or
administrative proceedings challenging their validity or enforceability, or (ii) any other actions
by the Company to maintain their validity or effectiveness, except for the routine payment of
governmental fees and the submission of oaths or other evidence required by statute. Except as set
forth in Schedule 2.12(a) and Schedule 2.12(c) hereto, there are no outstanding
options, licenses, security interests, or other interests or agreements of any kind relating to the
Intellectual Property of the Company. Except as set forth in Schedule 2.12(a) hereto, no
other Person (other than licensors of software that is generally commercially available, licensors
of Intellectual Property under the agreements disclosed pursuant to paragraph (d) below and
non-exclusive licensees of the Company’s Intellectual Property in the ordinary course of the
Company’s business) has any rights to any of the Intellectual Property owned or used by the
Company, and, to the Company’s knowledge, no other Person is infringing upon, violating or
misappropriating any of the Company’s Intellectual Property.




          (b) The Company has not, nor has it received any communications alleging that the Company has
violated, or, by conducting its business as now conducted or as proposed to be conducted, would
violate any of the Intellectual Property of any other Person. The Company is not aware that any
employee of the Company is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment, decree or order of any
court or administrative agency, that would interfere with the use of his or her best efforts to
promote the interests of the Company or that would conflict with the business of the Company as now
conducted or as proposed to be conducted. To the Company’s knowledge, neither the execution and
delivery of this Agreement or any of the other Transaction Documents, nor the carrying on of the
business of the Company by the Company’s employees, nor the conduct of the business of the Company
as now conducted or as proposed to

11









 








be conducted, will conflict with or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract, covenant or instrument under which any of such
employees is now obligated. The Company is not aware of any instances where its employees, agents,
advisors, consultants, independent contractors or representatives, have transferred Intellectual
Property of the Company or its Subsidiaries without the Company’s consent. To the Company’s
knowledge, the Company is not required to utilize any inventions of any of its employees (or people
it currently intends to hire) made prior to their employment by the Company.




          (c) Schedule 2.12(c) hereto sets forth each (i) patent that has been issued or
assigned to the Company with respect to any of its Intellectual Property, (ii) pending patent
application that the Company has made with respect to any of its Intellectual Property, (iii) any
copyright or trademark registration or application with respect to the Company’s Intellectual
Property, and (iv) license or other agreements pursuant to which the Company has granted any rights
to any third party with respect to any of its Intellectual Property.




          (d) Schedule 2.12(d) hereto sets forth each agreement with a third party pursuant to
which the Company obtains rights to Intellectual Property material to the business of the Company
(other than software that is generally commercially available) that is owned by a party other than
the Company. Other than license fees for software that is generally commercially available and
except as disclosed on Schedule 2.12(d) hereto, the Company is not obligated to pay any
royalties or other compensation to any third party in respect of their ownership, use or license of
any of such third party’s Intellectual Property.




          (e) The Company has taken reasonable precautions (i) to protect its rights in its Intellectual
Property and (ii) to maintain the confidentiality of its trade secrets, know-how and other
confidential Intellectual Property, and to the Company’s knowledge, there have been no acts or
omissions by the officers, directors, shareholders or employees of the Company, the result of which
would be to compromise the rights of any aspects of the Company to apply for or enforce appropriate
legal protection of any aspects of the Company’s Intellectual Property that are material to the
Company’s business as conducted or as proposed to be conducted at the time of such acts or
omissions.




          (f) The products, processes, proprietary technology and other proprietary know-how owned or
used by the Company were developed by the Company’s present or former employees or independent
contractors or consultants. The concepts, inventions and original works of authorship owned or
used by the Company were developed or conceived by employees, independent contractors or
consultants within the scope of their employment or retention by the Company and are connected with
the Company’s underlying products, services, processes and proprietary technology. With respect to
any independent contractors or consultants who were used or employed by the Company in the
development of the products, processes, proprietary technology and other proprietary know-how owned
or used by the Company, each has executed valid “work for hire” agreements and/or assignments of
all rights to such products, processes, proprietary technology and other proprietary know-how. No
portion of the Company’s Intellectual Property was jointly developed with any third party other
than those who have assigned their entire right, title and interest therein to the Company.




12









 








          (g) Except as disclosed in Schedule 2.12(g) hereto, neither the Company nor any
Subsidiary has granted or assigned to any other Person the right to manufacture any products or
develop or conduct research on any Intellectual Property or other services of the Company.




          (h) The Company is unaware that any of its officers, employees or consultants has disclosed,
or may be disclosing, or has utilized, or may be utilizing, any trade secret or proprietary
information of any third party; or has unlawfully interfered, or may be unlawfully interfering, in
the employment relationship with any third party and any of its present or former employees.




          Section 2.13 Real Property.




          (a) The Company does not own any real property.




          (b) Schedule 2.13(b) hereto sets forth a complete list of all leases of real property
by, or interests in real property of, the Company (each a “Real Property Lease,” and collectively,
the “Real Property Leases”) as lessee or lessor. Each of the Real Property Leases identified in
Schedule 2.13(b) is a valid and subsisting agreement, duly authorized and entered into and
enforceable in accordance with its terms, and there is no default under any Real Property Lease by
the Company, or to the Company’s knowledge, by any other party thereto, and no event has occurred
that with the lapse of time or the giving of notice or both would constitute a default thereunder.
As a result of each of the Real Property Leases, the Company holds a valid leasehold interest free
and clear of any Liens, charge, restrictions, claims or encumbrances of any nature whatsoever. The
Company has delivered or otherwise made available to the Purchaser and its counsel, true, correct
and complete copies of the Real Property Leases, together with all amendments, modifications,
supplements or side letters effecting the obligations of any party thereunder. The real property
premises leased by the Company under the Real Property Leases are in good operating condition,
normal wear and tear accepted, are reasonably fit and useable for the purpose for which they are
being used, are adequate and sufficient for the Company’s business, and conform to all material
respects to all applicable laws.




          Section 2.14 Assets. Except as set forth in Schedule 2.14 hereto, the Company
has good, legal and marketable title to all of its personal property and assets, in each case free
and clear of all Liens, charges, restrictions, claims or encumbrances of any nature whatsoever.
With respect to the material personal property and material assets that the Company leases (each a
“Personal Property Lease,” and collectively, the “Personal Property Leases”) (a) the Company is in
compliance with such Personal Property Leases, and (b) the Company holds a valid leasehold interest
free and clear of any Liens, charges, restrictions, claims or encumbrances of any nature
whatsoever. Each of the Personal Property Leases is a valid and subsisting agreement, duly
authorized and entered into and enforceable in accordance with its terms, and there is no default
under any Personal Property Lease by the Company or, to the Company’s knowledge, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of notice or both
would constitute a default thereunder. The Company has delivered or otherwise made available to
the Purchaser and its counsel true, correct and complete copies of the Personal Property Leases,
together with all amendments, modifications, supplements or side letters affecting the obligations
of any party thereunder. All material items of personal property

13









 








and assets owned or leased by the Company are in good operating condition, normal wear and
tear excepted, are reasonably fit and usable for the purposes for which they are being used, are
adequate and sufficient for the Company’s business, and conform in all material respects with all
applicable laws. The carrying value of the Company’s assets on the Financial Statements is not
overstated in any material respect.




     Section 2.15 Insurance. There is in full force and effect one or more policies of
insurance issued by insurers of recognized responsibility insuring the Company and its properties,
business and projects against such losses and risks, and in such amounts, on both a per occurrence
and an aggregate basis, as are customary in the case of corporations engaged in the same or similar
business and similarity situated. The Company has not received any notice or communication, either
oral or written (a) regarding the actual or possible cancellation or invalidation of any of such
policies or regarding any actual or possible adjustment in the amount of premiums payable with
respect to any of said policies, (b) regarding any actual or possible refusal of coverage under, or
any actual or possible rejection of any claim under, any of such policies, (c) that the Company
will be unable to renew its existing insurance coverage as and when the same shall expire, or (d)
that the issuer of any such policies may be unwilling or unable to perform any of its obligations
thereunder. There is no pending claim under any of the Company’s insurance policies, and no event
has occurred or condition or circumstance exists that might (with or without notice or lapse of
time), directly or indirectly, give rise to, or serve as a basis for, any such claim. The Company
is not in default with respect to any provision contained in any insurance policy, and the Company
has not failed to give any notice or present any presently existing claims under any insurance
policy in due and timely fashion. Schedule 2.15 hereto sets forth a list of each insurance
policy maintained by the Company relating to its properties, assets, business or personnel.



     Section 2.16 Taxes. Except as set forth on Schedule 2.16, the Company has
accurately and timely filed all federal, state, county and local tax returns and reports required
to be filed by it within the applicable period, and the Company has paid all taxes shown to be due
by such returns as well as all other taxes, assessments and governmental charges which have become
due or payable. Such returns and reports are true and correct in all material respects. The
Company has established adequate reserves on the Financial Statements for all taxes accrued but not
yet payable. The Company’s federal income tax returns have never been audited by the Internal
Revenue Service. No claim or deficiency assessment with respect to, or proposed adjustment of, the
Company’s federal, state, county or local taxes is currently assessed or pending or, to the best of
the Company’s knowledge, threatened, and, to the Company’s knowledge, there is no basis for any
such claim, assessment or adjustment. There is no tax Lien (other than for current taxes not yet
due and payable), whether imposed by any federal, state, county or local taxing authority,
outstanding against the Company’s assets, properties or business. The Company has not executed any
waiver of the statute of limitations on the assessment or collection of any tax or governmental
charge. The Company is not a party to any agreement relating to the sharing, allocation or
indemnification of taxes. Neither the Company nor any of its present or former shareholders has
ever made an election pursuant to Section 1362 or Section 341(f) of the Internal Revenue Code of
1986, as amended (the “Code”), that the Company be taxed as a Subchapter S corporation or a
collapsible corporation or any other election pursuant to the Code (other than elections that
relate solely to methods of accounting, depreciation or amortization) that would



14









 




result in a Material Adverse Change. Except as set forth in Schedule 2.16 hereto, the
Company has withheld or collected from each payment made to each of its employees, the amount of
all taxes (including, but not limited to, federal income taxes, Federal Insurance Contribution Act
taxes and Federal Unemployment Tax Act taxes) required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers or authorized depositories. The Company has
properly charged, collected and paid all applicable sales, use and other similar taxes. Except as
set forth in Schedule 2.16 hereto, the Company has withheld or collected from each payment
made to each non-employee the amount of all taxes required to be withheld or collected therefrom
and has paid the same to the proper tax receiving officers or authorized depositories ,or filed or
provided appropriate forms under the Code with respect thereto.




     Section 2.17 Agreements.



          (a) The Company is not a party to or otherwise bound by any written or oral agreement,
instrument, commitment or restriction, which, assuming due performance by the parties thereto,
individually or in the aggregate could reasonably be expected to result in a Material Adverse
Change. Except as set forth in Schedule 2.17 hereto (the items listed on such Schedule
2.17 shall be referred to as the “Contracts”), the Company is not a party to, nor is it or any
of its assets or properties bound by, any written or oral:





          (i) distributor, dealer, marketing, manufacturer’s representative or sales
agency agreement which is not terminable on less than ninety (90) days notice
without cost or other liability to the Company;




          (ii) agreement with any labor union or collective bargaining agreement;




          (iii) agreement with any supplier containing any provision permitting any party
other than the Company to renegotiate the price or other terms, or containing any
pay-back or other similar provision, upon the occurrence of a failure by the Company
to meet its obligations under the agreement when due or the occurrence of any other
event;




          (iv) agreement for the future purchase of fixed assets or for the future
purchase of materials, supplies, services or equipment in excess of its normal
operating requirements or at an excessive price, or any agreement that will result
in a loss to the Company upon completion of performance;




          (v) agreement for the employment of any officer, employee or other Person
(whether of a legally binding nature or in the nature of informal understandings) on
a full-time, part-time or consulting basis which is not terminable on notice without
cost or other liability to the Company;




          (vi) bonus, pension, profit-sharing, retirement, hospitalization, insurance,
stock purchase, stock option or other plan, agreement or understanding pursuant to
which benefits are provided to any employees, officers, directors, consultants,
advisors, agents, stockholders or representatives of the Company;



15









 






          (vii) loan agreement, credit agreement, promissory note, indenture,
subordination agreement, letter of credit or other agreement relating to the
borrowing of money or to the mortgaging or pledging of, or otherwise placing a Lien
or security interest on, any asset of the Company;




          (viii) guaranty of any obligation for borrowed money or otherwise;




          (ix) voting trust or agreement, stockholders’ agreement, pledge agreement,
buy-sell agreement, first refusal or preemptive rights agreement relating to any of
the Company’s securities;




          (x) acquisition, sale or lease agreement outside of the Company’s ordinary
course of business;




          (xi) partnership or joint venture agreement;




          (xii) agreement (A) which prohibits or requires consent for (1) a Change of
Control (as defined in Section 7.19 hereof) or merger of the Company, (2)
the sale of all or substantially all of the Company’s assets, (3) the transfer or
issuance of any securities of the Company, (4) the sale or issuance of any shares of
capital stock in the Company, or (5) the assignment, subletting or other transfer of
the rights under such agreement, or (B) which terminates, is subject to termination,
is materially and adversely affected, or is subject to being materially and
adversely affected, as a result of the occurrence of any event described in
subsection (A) hereof;




          (xiii) agreement, or group of related agreements with the same party or any
group of affiliated parties, under which the Company has advanced or agreed to
advance money or has agreed to lease any property as lessee or lessor;




          (xiv) agreement or obligation (contingent or otherwise) to issue, sell,
transfer, assign or otherwise distribute or dispose of, repurchase, redeem or
otherwise acquire, or retire any shares of its capital stock or any of its other
equity securities;




          (xv) assignment, license or other agreement with respect to any form of
intangible property;




          (xvi) agreement under which it has granted any Person an exclusive right to
market or distribute any of the Company’s products or services;




          (xvii) agreement under which it has granted any Person any registration rights;




          (xviii) agreement under which it has limited or restricted its right to operate
or to compete with any Person in any respect;



16









 






          (xix) agreement, or group of related agreements with the same party, involving
more than $10,000 or continuing over a period of more than three (3) months from the
date or dates thereof (including renewals or extensions optional with another
party), which agreement or group of agreements is not terminable by the Company
without penalty upon notice of thirty (30) days or less, or any agreement not made
in the ordinary course of business;




          (xx) agreement with any federal, state, municipal or other governmental body,
department, commission, board, bureau, agency or instrumentality, domestic or
foreign;




          (xxi) confidentiality agreement or standstill agreement, other than those made
in the ordinary course of business; or




          (xxii) binding commitment or agreement to enter into any of the foregoing.



          (b) The Company and, to the best of the Company’s knowledge, each other party thereto: (i)
has performed all the obligations required to be performed by them to date (or each non-performing
party has received a valid, enforceable and irrevocable written waiver with respect to its
non-performance), and (ii) has received no notice of default and are not in default (or, with due
notice or lapse of time or both, would be in default) under any agreement, contract, license,
understanding, evidence of indebtedness, note, indenture, instrument, commitment, plan or
arrangement to which the Company is a party or by which it or its property or assets may be bound.
The Company has no present expectation or intention of terminating or not fully performing any of
its obligations under any agreement, contract, license, understanding, evidence of indebtedness,
note, indenture, instrument, commitment, plan or arrangement, and the Company has no knowledge of
any breach or anticipated breach by the other party to any agreement, contract, license,
understanding, evidence of indebtedness, note, indenture, instrument, commitment, plan or
arrangement to which the Company is a party. The Company is in full compliance with all of the
terms and provisions of its Charter and Bylaws.




          (c) No previous or current party to any agreement or contract listed in Schedule 2.17
hereto has given written notice to the Company of, or made any claim with respect to, a desire or
intention to exercise any optional termination, cancellation or acceleration right thereunder, and
the Company has no knowledge of any notice of, or claim with respect to, any such desire or
intention. The Company has delivered or otherwise made available to the Purchaser true, correct
and complete copies of each of the agreements listed in Schedule 2.17 hereto, together with
all amendments, modifications, supplements or side letters affecting the obligations of any party
thereunder. Each of these agreements is valid and enforceable against the Company in accordance
with its terms.




     Section 2.18 Loans and Advances. The Company does not have any outstanding loans or
advances to any Person and is not obligated to make any such loans or advances, except, in each
case, for ordinary course advances to employees of the Company in respect of reimbursable business
expenses anticipated to be incurred by them in connection with their performance of services for
the Company.



17









 





     Section 2.19 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons. The
Company has not assumed, guaranteed, endorsed or otherwise become directly or contingently liable
for any indebtedness of any other Person (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to
or otherwise invest in such Person, or to otherwise assure any creditor of such Person against
loss), except for guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.



     Section 2.20 Significant Customers and Suppliers. No customer or supplier which was
significant to the Company during the period covered by the Financial Statements or which has been
significant to the Company thereafter, has terminated or breached, materially reduced or threatened
to terminate, breach or materially reduce its purchases from or provision of products or services
to the Company, as the case may be.



     Section 2.21 Offerings. Assuming the accuracy of the Purchaser’s representations and
warranties set forth in Article III hereof, the Company has complied with the Securities
Act and all applicable state securities laws in connection with (i) the offer, issuance and sale of
all previously issued securities of the Company, (ii) the offer, issuance and sale of the Shares,
and (iii) upon conversion of the Shares, the issuance and delivery of the Preferred Stock
Conversion Shares, and all of the foregoing issuances are exempt from the registration requirements
of the Securities Act and any applicable state securities laws, and neither the Company nor any
authorized agent acting on its behalf has taken any action that could cause the loss of such
exemptions. Neither the Company nor any Person authorized or employed by the Company as agent,
broker, dealer or otherwise in connection with the offering or sale of the Shares, the Preferred
Stock Conversion Shares or any security of the Company similar to the foregoing has offered the
Shares, the Preferred Stock Conversion Shares or any such similar security for sale to, or
solicited any offer to buy the Shares, the Preferred Stock Conversion Shares or any such similar
security from, or otherwise approached or negotiated with respect thereto with, any Person or
Persons other than Persons who are “accredited investors” as defined in Regulation D of the
Securities Act. Neither the Company nor any Person acting on its behalf has taken or will take any
other action (including, without limitation, any offer, issuance or sale of any security of the
Company under circumstances which might require the integration of such security with the Shares or
the Preferred Stock Conversion Shares under the Securities Act or the rules and regulations of the
SEC promulgated thereunder), in either case so as to subject the offering, issuance or sale of the
Shares and the Preferred Stock Conversion Shares to the registration provisions of the Securities
Act. Neither the Company nor any Person acting on its behalf has offered the Shares or the
Preferred Stock Conversion Shares to any Person by means of general or public solicitation or
general or public advertising, such as by newspaper or magazine advertisements, by broadcast media,
or at any seminar or meeting whose attendees were solicited by such means.



     Section 2.22 Brokers; Financial Advisors. No agent, broker, investment banker,
finder, financial advisor or other Person is or will be entitled to any broker’s or finder’s fee or
any other commission or similar fee from the Company, directly or indirectly, in connection with
the transactions contemplated by this Agreement and the other Transaction Documents, and no Person
is entitled to any fee or commission or like payment from the Company in respect thereof



18









 




based in any way on agreements, arrangements or understandings made by or on the Company’s
behalf.




     Section 2.23 Transactions With Affiliates. Except as set forth on Schedule
2.23 hereto, no employee, officer, director or Affiliate of the Company, or member of the
family of any such Person, or any corporation, limited liability company, partnership, trust or
other entity in which any such Person, or any member of the family of any such Person, is an
officer, director, trustee, partner or holder of more than five percent (5%) of the outstanding
equity interests thereof (collectively, the “Related Parties”), is a party to, or during the past
24 months has been a party to, any transaction with the Company, including any issuance of
securities or capital stock or any contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such Person, other than employment-at-will arrangements in the ordinary
course of business. None of the Persons described in this Section 2.23 has any, direct or
indirect, ownership interest in any Person that the Company is an Affiliate of or with which the
Company has a business relationship, or any Person that competes with the Company. Schedule
2.23 hereto lists all of the borrowings by the Company from any of the Related Parties, the
issuances of any promissory notes, shares of Common Stock or other securities of the Company to any
of the Related Parties, the respective dates of such events, the consideration received by the
Company for any such items, and the respective dates of any action by the Board of Directors to
approve any such items. The terms of each of the borrowings or issuances listed on Schedule
2.23 is no less favorable to the Company than the terms that would be available for similar
transactions with unrelated third parties. Any issuances of shares of Common Stock of the Company
to any Related Party have been in exchange for consideration equal to or exceeding the fair market
value of such shares.



     Section 2.24 Employees.



          (a) To the Company’s knowledge, no key employee or independent contractor and no group of the
Company’s key employees or independent contractors has any plans to terminate his, her or its
employment or relationship as an employee or independent contractor with the Company, nor does the
Company have any present intention to terminate the employment of any key employee or independent
contractor, or group of employees or independent contractors.




          (b) Schedule 2.24(b) hereto sets forth a true and complete list of (i) the names of
the Company’s employees, together with the title or job classification of each such Person and the
total compensation anticipated to be paid to each such Person by the Company during calendar year
2005 and anticipated to be paid in 2006, (ii) the name and amount of annual compensation of each
employee of the Company, together with such employee’s job title and amounts and forms of
compensation and fringe and severance benefits, and (iii) the name and amount of annual
compensation of each consultant, contractor or subcontractor equivalent of the Company during
calendar year 2005 or 2006 and for which a Form 1099 has been, or will be required to be, filed.
Except as set forth on Schedule 2.24(e), none of these individuals has an employment
agreement or understanding with the Company, whether oral or written, which is not terminable on
notice by the Company without cost or other liability to the Company.




19









 








          (c) To the Company’s knowledge, no employee of the Company is a party to or is otherwise bound
by any agreement or arrangement (including, without limitation, confidentiality agreements,
noncompetition agreements, licenses, covenants or commitments of any nature) or subject to any
judgment, decree, or order of any court or governmental body, (i) that would conflict with such
employee’s ability to perform his or her duties that have been assigned to him or her or (ii) that
would conflict with the Company’s business as now conducted or as proposed to be conducted.




          (d) The Company is not delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed through the date
hereof or amounts required to be reimbursed to them through the date hereof. The Company is in
compliance with all applicable federal, state and local laws, rules and regulations respecting
employment, employment practices, labor, terms and conditions of employment and wages and hours.
The Company is neither bound by nor subject to (and none of its assets or properties is bound by or
subject to) any written or oral commitment or arrangement with any labor union, and no labor union
has, to the best of the Company’s knowledge, sought to represent any of the Company’s employees,
representatives or agents. There is no labor strike, dispute, slowdown or stoppage pending or, to
the best of the Company’s knowledge, threatened against or involving the Company.




          (e) Schedule 2.24(e) hereto sets forth a list of all written employment agreements to
which the Company is a party, each of which is a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. No key employee of or key
consultant to the Company is in violation of any term of any employment contract or any other
contract or agreement relating to the relationship of any such employee or consultant with the
Company.




     Section 2.25 Environmental and Safety Laws. The Company is not in violation of any
applicable laws relating to the environment or occupational health and safety which is likely to
result in a Material Adverse Change and no material expenditures are or will be required in order
to comply with any such existing laws.



     Section 2.26 Employee Benefits. Except as set forth in Schedule 2.26 hereto,
the Company does not have in effect any employment agreements, consulting agreements with
individuals, deferred compensation, incentive compensation, stock option or other equity-based
stock awards, pension or retirement agreements, whether or not subject to the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), or arrangements, bonus, incentive or
profit-sharing plans or arrangements, or labor or collective bargaining agreements, written or
oral, other than oral at-will employment agreements (“Benefit Plans”). All Benefit Plans covering
employees (the “Plans”), to the extent subject to ERISA, are in compliance with ERISA, the Code and
all other applicable laws. Each Plan which is an “employee pension benefit plan” within the
meaning of Section 3(2) of ERISA (a “Pension Plan”) and which is intended to be qualified under
Section 401(a) of the Code, has received a favorable determination letter from the Internal Revenue
Service and the Company is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. There is no pending or, to the best of the Company’s
knowledge, threatened litigation relating to the



20









 




Plans. Neither the Company nor any of its Affiliates has engaged in a transaction with
respect to any Plan that, assuming the taxable period of such transaction expired as of the date
hereof, could subject the Company or any Affiliate to a tax or penalty imposed by either Section
4975 of the Code or Section 502(i) of ERISA in an amount which would be material. No Pension Plan
of the Company or any ERISA Affiliate (as defined below) is, nor has any Pension Plan of the
Company or any ERISA Affiliate ever been, subject to Title IV of ERISA or Section 412 of the Code.
Neither the Company, any of its Affiliates nor an entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (an “ERISA Affiliate”) has
contributed to a “multi-employer plan,” within the meaning of Section 3(37) of ERISA. All
contributions required to be made under the terms of any Benefit Plan have been timely made or have
been reflected on the Financial Statements. No ERISA Affiliate maintains or has ever maintained
any “employee benefit plan” as that term is defined in Section 3(3) of ERISA or any other employee
benefit policy, arrangement or the like which could result in any liability of the Company.




     Section 2.27 Foreign Corrupt Practices Act. Neither the Company, nor to the best of
the Company’s knowledge, any employees, officers, directors, consultants, advisors, agents,
shareholders or representatives of the Company or other Person acting on behalf of the Company, has
taken any action that would cause the Company to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended (the “FCPA”), or any rules and regulations thereunder. Each of the
Company’s internal management and accounting practices and controls are adequate to ensure
compliance with the FCPA. There is not now, and there has never been, any employment by the
Company of any governmental or political official in any country in the world.



     Section 2.28 Illegal or Unauthorized Payments; Political Contributions. Neither the
Company nor, to the best of the Company’s knowledge, any of the Company’s employees, officers,
directors, consultants, advisors, agents, shareholders or representatives has, directly or
indirectly, made or authorized any payment, contribution or gift of money, property, or services,
in contravention of applicable law: (a) as a kickback or bribe to any Person or (b) to any
political organization, or the holder of or any aspirant to any elective or appointive public
office, except for personal political contributions not involving the direct or indirect use of the
Company’s funds.



     Section 2.29 Pending Changes. There is no pending or, to the Company’s knowledge,
threatened change in any law, rule, regulation or order applicable to its business, operations,
properties, assets, products and services which is likely to result in a Material Adverse Change.



     Section 2.30 Investment Company Act. The Company is not, nor is it directly or to its
knowledge, indirectly Controlled by or acting on behalf of, any Person that is, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.



     Section 2.31 Product Liability. The Company has no liabilities (and, to the Company’s
knowledge, there is no basis for any present or future action against the Company giving rise to
any liability) arising out of any injury to individuals or property as a result of ownership,



21









 




possession or use of any product designed, manufactured, sold, leased or delivered by or any
services performed or delivered by the Company.




     Section 2.32 Registration Rights. Except as set forth on Schedule 2.32, no
Person has demand or other rights to cause the Company to file any registration statement under the
Securities Act relating to any securities of the Company or any right to participate in any such
registration statement, including, without limitation, piggyback registration rights.



     Section 2.33 Books and Records. The Company’s books of account, ledgers, order books,
records and documents accurately and completely reflect in accordance with usual and customary
prudent business practices all material information relating to the Company’s business, the
location and collection of the Company’s assets and the nature of all transactions giving rise to
the Company’s obligations and accounts receivable. The Company has previously delivered or made
available to the Purchaser and its counsel complete and correct copies of and all minutes and
consents reflecting meetings and actions taken by the Company’s Board of Directors and its
shareholders.



     Section 2.34 Disclosure. The Company has disclosed to the Purchaser all facts
material to the Company’s business, operations, assets, liabilities, prospects, properties,
condition (financial or otherwise) and results of operations. Neither this Agreement, nor any
Schedule or Exhibit to this Agreement, nor any other statements, documents or certificates made or
delivered in connection herewith or therewith contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein and therein not
misleading in light of the circumstances under which such statements were made. None of the
statements, documents, certificates or other items prepared or supplied by the Company with respect
to the transactions contemplated hereby contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained therein not misleading in light of
the circumstances under which such statements were made. There is no fact which the Company has
not disclosed to the Purchaser and its counsel in writing and of which the Company is aware which
has resulted in, or could result in, a Material Adverse Change. As of the date hereof, no facts
have come to the Company’s attention that would, in its opinion, require the Company to revise or
amplify the assumptions underlying such projections and other estimates or the conclusions derived
therefrom.



ARTICLE III.




REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER




     Section 3.01 Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company that:



          (a) it is an “accredited investor” within the meaning of Rule 501 of Regulation D under the
Securities Act;




          (b) it has sufficient knowledge and experience in investing in companies similar to the
Company in terms of the Company’s stage of development so as to be able to





22










 





evaluate the risks and merits of its investment in the Company and it is able financially to
bear the risks thereof, including a total loss of its investment;




          (c) it has had an opportunity to ask questions and receive answers from the Company regarding
the Company and the terms and conditions of the offering of the Shares. The foregoing, however,
does not in any way limit or modify the representations and warranties made by the Company and the
Controlling Shareholders in Article II;




          (d) the Shares and the Preferred Stock Conversion Shares being purchased by it are being
acquired for its own account for the purpose of investment and not with a view to, or for resale in
connection with, any distribution thereof within the meaning of the Securities Act;




          (e) it understands that (i) the Shares and the Preferred Stock Conversion Shares have not been
registered under the Securities Act or any state securities laws by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act and such laws, (ii) the
Shares and, upon conversion thereof, the Preferred Stock Conversion Shares must be held
indefinitely, unless a subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, and (iii) the Preferred Stock Conversion Shares will bear the legend
to such effect set forth in Section 3.02 hereof;




          (f) this Agreement and the other Transaction Documents to which it is a party constitutes the
Purchaser’s valid and legally binding obligation, enforceable in accordance with its terms. The
Purchaser represents that it has full power and authority to enter into this Agreement and each of
the other Transaction Documents to which it is a party; and




          (g) this Agreement and each of the other Transaction Documents to which the Purchaser is a
party have been duly executed and delivered by the Purchaser.




     Section 3.02 Legend. The Purchaser acknowledges that the certificates evidencing the
Shares and the Preferred Stock Conversion Shares will bear the legend set forth below or
substantially similar legend:




The securities represented hereby have not been registered under the Securities
Act of 1933, as amended (the “Act”), or under the securities laws of certain states.
these securities are subject to restrictions on transferability and resale and may
not be transferred or resold except as permitted under the Act and the applicable
state securities laws, pursuant to registration or exemption therefrom. The issuer
of these securities may require an opinion of counsel (which may be counsel for the
Company) in form and substance satisfactory to the issuer to the effect that any
proposed transfer or resale is in compliance with the Act and any applicable state
securities laws.


The legend set forth above shall be removed by the Company from any certificate evidencing Shares
or Preferred Stock Conversion Shares, and the Company shall issue a certificate without such legend
to the holder thereof, if requested, upon delivery to the Company of an opinion by counsel (which
may be counsel for the Company) that such security can be freely transferred in a


23









 






public sale without a registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which the Company issued the
Shares or Preferred Stock Conversion Shares; provided, however, that no opinion
from counsel shall be required for any dispositions pursuant to Rule 144(k) under the Securities
Act.




ARTICLE IV.




CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER AND THE COMPANY




     Section 4.01 Conditions to the Purchaser’s Obligations at the Closing. The
Purchaser’s obligation to purchase and pay for the Series A Shares being purchased by it on the
Closing Date is subject to the satisfaction of the following conditions, any of which may be waived
in whole or in part by the Purchaser and which conditions the Company and the Controlling
Shareholders, jointly and severally, agree to cause to be satisfied:



          (a) Representations and Warranties to be True and Correct. The representations and warranties
of the Company and the Controlling Shareholders under this Agreement shall be true, complete and
correct at and as of the Closing Date, except that representations and warranties that are
applicable to a particular date by their terms shall be true, complete and correct as of such
applicable date.




          (b) Performance. The Company shall have performed and complied with all agreements and
covenants contained herein required to be performed or complied with by it prior to or at such
Closing Date.




          (c) 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 Purchaser and its counsel,
and the Purchaser and its counsel shall have received all such counterpart originals or certified
or other copies of such documents as they reasonably may request.




          (d) Approvals. The Company shall have obtained any and all consents, waivers, registrations,
approvals or authorizations, with or by any governmental body and all consents, waivers, approvals
or authorizations of any other Person required for the valid execution of this Agreement and each
of the other Transaction Documents and for the consummation of the transactions contemplated hereby
and thereby, including without limitation the requisite shareholder approvals of the Restated
Articles and the Reverse Split.




          (e) No Injunction. No governmental body or any other Person shall have issued an order,
injunction, judgment, decree, ruling or assessment which shall then be in effect restraining or
prohibiting the completion of the transactions contemplated hereby or under any of the other
Transaction Documents, nor shall any such order, injunction, judgment, decree, ruling or assessment
be pending or, to the Company’s knowledge, threatened.




          (f) Restated Articles. The Restated Articles shall have been duly adopted by the requisite
number of shareholders of the Company and duly filed with the Secretary of State

24









 








of the State of Nevada or such other appropriate authority or agency of the State of Nevada,
and the Purchaser has received a certified copy of the filed Restated Articles.




          (g) Reverse Split. The Reverse Split shall have been fully effected, and the Company’s
transfer agent shall have provided to the Purchaser a certification as to the number of outstanding
shares of Common Stock, after taking into account the Reverse Split.




          (h) Certificate of Designation. The Certificate of Designation shall have been adopted by the
Company’s Board of Directors and, following the filing of the Restated Articles and consummation of
the Reverse Split, duly filed with the Secretary of State of the State of Nevada or such other
appropriate authority or agency of the State of Nevada, and the Purchaser shall have received a
certified copy of the filed Certificate of Designation.




          (i) Investor’s Rights Agreement. Each of the Company and the Controlling Shareholders shall
have executed and delivered the Investor’s Rights Agreement, substantially in the form attached
hereto as Exhibit D (the “Investor’s Rights Agreement”).




          (j) Escrow Agreement. The Company shall have executed and delivered the Escrow Agreement,
substantially in the form attached hereto as Exhibit E (the “Escrow Agreement”).




          (k) Employment Agreements. Each of the Controlling Shareholders shall have executed and
delivered an Employment Agreement, substantially in the form attached hereto as Exhibit F
(the “Employment Agreement”).




          (l) Non-Disclosure and Proprietary Information and Inventions Agreements. Each employee and
independent contractor of and consultant to the Company or its Subsidiaries will have entered into
a Non-Disclosure and Proprietary Information and Inventions Agreement in a form acceptable to the
Purchaser.




          (m) Non-Competition Agreements. Each key employee or consultant of the Company or its
Subsidiaries will have entered into a non-competition agreement in a form acceptable to the
Purchaser.




          (n) Officers and Board of Directors. The number of directors constituting the entire Board
shall have been fixed at no more than three. Each of the existing officers and directors of the
Company and the existing officers and directors of its Subsidiaries shall have executed and
delivered a Resignation (as defined herein) to the Company.




          (o) Waiver of Preemptive Rights. Holders of at least 80% of the outstanding shares of Common
Stock shall have executed and delivered Waivers (as defined herein) to the Company, and the Company
shall have provided true, correct and complete copies of such Waivers to the Purchaser. The
Waivers shall be valid and binding on the Closing Date and with respect to the terms of the
Transaction Documents.




          (p) Satisfaction Agreements. The Company shall have entered into a Satisfaction Agreement (as
defined herein) with each of its Debtholders and provided true,

25









 








correct and complete copies of all of the Satisfaction Agreements to the Purchaser. The
Satisfaction Agreements shall be valid and binding on the Closing Date and with respect to the
terms of the Transaction Documents.




          (q) Cancellation Agreements. The Company shall have entered into a Cancellation Agreement (as
defined herein) with each of its Other Securityholders, other than those Other Securityholders
listed on Schedule 5.06, and provided true, correct and complete copies of all of the
Cancellation Agreements to the Purchaser. The Cancellation Agreements shall be valid and binding
on the Closing Date and with respect to the terms of the Transaction Documents.




          (r) Opinion of Company’s Counsel. The Purchaser shall have received from Vial, Hamilton, Koch
& Knox, LLP, counsel for the Company, an opinion dated such Closing Date, in form and scope
reasonably satisfactory to the Purchaser and its counsel, which includes matters as to Nevada law.




          (s) Material Adverse Change. As of the Closing, there shall not have occurred a Material
Adverse Change.




          (t) Supporting Documents. The Purchaser and its counsel shall have received copies of the
following documents:





     (i) (A) the Restated Articles, certified as of a recent date by the Secretary
of State of the State of Nevada, (B) the articles of incorporation (or similar
organizational document) for each Subsidiary, certified as of a recent date by the
Secretary of State of the jurisdiction where it was formed, and (B) certificates of
appropriate governmental officials dated as of a recent date as to the due
incorporation or formation, existence and good standing and the payment of all
franchise taxes by the Company and each of the Subsidiaries, and listing all
documents of the Company and its Subsidiaries on file with said governmental
officials;




     (ii) a certificate of the Secretary of the Company and each Subsidiary dated
the Closing Date, certifying: (A) that attached thereto is a true, correct and
complete copy of the Bylaws and the Restated Articles, as amended by the Certificate
of Designation, each as amended and in effect on the date of such certification, and
that no other amendments or modifications to such Bylaws or Restated Articles have
been authorized; (B) that attached thereto is a true, correct and complete copy of
all resolutions adopted by the Company’s Board of Directors authorizing the
execution, delivery and performance of each of the Transaction Documents, the
approval of the Restated Articles, the approval of the Reverse Split, the approval
of the Certificate of Designation, the issuance, sale and delivery of the Shares,
and the reservation of the Preferred Stock Conversion Shares, and that all such
resolutions are in full force and effect, have not been amended, modified or
rescinded and are the only resolutions adopted in connection with the transactions
contemplated by the Transaction Documents; (C) that attached thereto is a true,
correct and complete copy of all resolutions



26









 







adopted by the shareholders of the Company approving the Restated Articles, the
Reverse Split and the execution, delivery and performance of each of the Transaction
Documents; (D) that attached thereto is a true, correct and complete copy of the
bylaws and articles of incorporation (or similar organizational documents) for each
Subsidiary, each as amended and in effect on the date of such certification, and
that no other amendments or modifications thereto have been authorized; and (E) to
the incumbency and specimen signature of each officer(s) of the Company and its
Subsidiaries executing any of the Transaction Documents, and any certificate or
instrument furnished pursuant hereto, and a certification by another authorized
officer(s) of the Company and its Subsidiaries as to the incumbency and signature of
the officer signing the certificate referred to in this clause (ii);




     (iii) a certificate, executed by the Chief Executive Officer and Chief
Operating Officer of the Company, dated the applicable Closing Date, certifying to
the fulfillment of the specific conditions set forth in Sections 4.01(a),
4.01(b) hereto and to the fulfillment of all of the conditions in this
Article IV in general; and




     (iv) such additional supporting documents and other information with respect to
the Company’s operations and affairs as the Purchaser or its counsel reasonably may
request. All such documents shall be satisfactory in form and substance to the
Purchaser and its counsel.



     Section 4.02 Conditions to the Company’s Obligations at the Closing. The Company’s
obligation to sell and issue the Shares on the Closing Date is subject to the satisfaction, on or
before such Closing Date, of the following conditions, any of which may be waived in whole or in
part by the Company:



          (a) Representations and Warranties to be True and Correct. The representations and warranties
of the Purchaser contained in Article III shall be true, complete and correct at and as of
the Closing, with the same effect as though such representations and warranties had been made on
and as of such date.




          (b) Approvals. The Purchaser shall have obtained any and all consents, waivers, approvals or
authorizations, with or by any governmental body and all consents, waivers, approvals or
authorizations of any other Person required for the valid execution of this Agreement and each of
the other Transaction Documents and for the consummation of the transactions contemplated hereby
and thereby.




          (c) No Injunction. No governmental body or any other Person shall have issued an order,
injunction, judgment, decree, ruling or assessment which shall then be in effect restraining or
prohibiting the completion of the transactions contemplated hereby, nor, to the Company’s
knowledge, shall any such order, injunction, judgment, decree, ruling or assessment be threatened
or pending.




27









 





          (d) Investor’s Rights Agreement. The Purchaser shall have executed and delivered the
Investor’s Rights Agreement.




          (e) Escrow Agreement. The Purchaser shall have executed and delivered the Escrow Agreement.




ARTICLE V.




COVENANTS OF THE COMPANY




     The Company covenants and agrees with the Purchaser that:



     Section 5.01 Preparation and Mailing of Information Statement. The Company shall
promptly prepare and file with the Securities and Exchange Commission (the “SEC”) an Information
Statement on Schedule 14C (the “Information Statement”) in accordance with and under the Exchange
Act and rules and regulations promulgated thereunder, containing the information specified in
Schedule 14C with respect to the Restated Articles, the Reverse Split, this Agreement and the other
Transaction Documents and the transactions contemplated herein and therein. The Purchaser and its
counsel shall have a right to review, comment and approve the preliminary and definitive forms of
the Information Statement. At the earliest time permitted under SEC rules, the Company will cause
the definitive Information Statement to be mailed to its shareholders. The Company will notify the
Purchaser and its counsel promptly of the receipt of any comments from the staff of the SEC and of
any request by the staff of the SEC for amendments or supplements to the Information Statement or
for additional information, and will supply the Purchaser and its counsel with copies of all
correspondence between the Company or any of its representatives and the SEC with respect to the
Information Statement and shall permit the Purchaser and its counsel to review, comment on and
approve such correspondence and any other responses or communications to or with the SEC. Whenever
any event occurs which is required to be set forth in an amendment or supplement to the Information
Statement, the Company shall promptly inform the Purchaser and its counsel of such occurrences and
prepare and file with the SEC and mail to its shareholders such amendment or supplement to the
Information Statement, after first obtaining the review, comment and approval of the Purchaser and
its counsel. The Company agrees that the information contained in the Information Statement shall
be true and correct in all material respects without omission of any material fact which is
required to make such information not false or misleading.



     Section 5.02 Filing of Restated Articles; Effecting Reverse Split. On the
21st day after the mailing of the Information Statement to the Company’s shareholders,
or such later date as may be required by rules promulgated by the SEC if an amendment or supplement
to the Information Statement is required to be sent to the Company’s shareholders, the Company
shall cause to be executed and filed with the Nevada Secretary of State the Restated Articles and
shall take all actions necessary or advisable to effect the Reverse Split in such a manner so that
no stockholders of the Company have any dissenters’ rights. The Company shall promptly provide a
copy to the Purchaser of the filed Restated Articles. Prior to the Closing, the Company shall
cause the Transfer Agent to provide a certification as to the number of outstanding shares of the
Common Stock, which must reflect the impact of the Reverse Split.



28









 





     Section 5.03 Authorization of Series A Preferred Stock. Promptly following the
effectiveness of the filing of the Restated Articles, the Company shall (A) first, cause its Board
of Directors to approve the Certificate of Designation for the Series A Preferred Stock, and (B)
second, execute and file the Certificate of Designation with the Nevada Secretary of State. The
Company shall also cause its Board of Directors to ratify, authorize and approve the issuance, sale
and delivery of the Shares to the Purchaser pursuant to this Agreement and the establishment of the
reserve for issuance of the Preferred Stock Conversion Shares.



     Section 5.04 Current Report on Form 8-K. The Company shall prepare and file with the
SEC a Current Report on Form 8-K, within the filing deadlines of the instructions of such form,
which shall contain all information required by Form 8-K in respect of this Agreement. The
Purchaser and its counsel shall have the right to review, comment on and approve the contents of
such Form 8-K. The Company agrees that the information contained in the Form 8-K shall be true and
correct in all material respects without any omission of any material fact which is required to
make such information not false or misleading.



     Section 5.05 Waiver of Preemptive Rights Violations. Prior to the Closing, the
Company shall obtain the execution and delivery by the holders of at least 80% of the outstanding
shares of Common Stock of the Company of a waiver of preemptive rights and a release of any and all
claims, whether past or present, that such holder may have against the Company or its Subsidiaries,
substantially in the form attached hereto as Exhibit G (the “Waiver”). The Purchaser shall
have a right to review and approve any changes to any Waiver that are proposed by any holders of
the Common Stock.



     Section 5.06 Agreements With Debtholders and Other Securityholders. Prior to the
Closing, the Company shall cause to be executed and delivered between the Company and separately
with each of its Debtholders an agreement regarding the satisfaction and release of all obligations
of the Company or any Subsidiary to the Debtholders and any Liens securing such indebtedness and a
release of any and all claims, whether past or present, that such Debtholder may have against the
Company or its Subsidiaries, substantially in the form of Exhibit H attached hereto (the
“Satisfaction Agreements”). Prior to the Closing, the Company shall cause to be executed and
delivered by and between the Company and separately with each of the Other Securityholders, other
than those Other Securityholders set forth on Schedule 5.06 (which describes the Other
Securities of such Other Securityholders), an agreement relating to the cancellation and release of
the Other Securities and a release of any and all claims, whether past or present, that such Other
Securityholder may have against the Company or its Subsidiaries, substantially in the form of
Exhibit I attached hereto (the “Cancellation Agreements”).



     Section 5.07 Reserve for Preferred Stock Conversion Shares. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of Common Stock, for the
purpose of issuing the Preferred Stock Conversion Shares upon conversion of the Series A Preferred
Stock and otherwise complying with the terms of this Agreement such number of its duly authorized
shares of Common Stock as shall be sufficient to effect the conversion of the Series A Preferred
Stock or otherwise to comply with the terms of this Agreement. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of
the Series A Preferred Stock or otherwise to comply with the terms of this



29









 







Agreement, the Company will forthwith take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes. The Company will use its best efforts to obtain any authorization,
consent, approval or other action by or make any filing with any court or governmental or
administrative body that may be required under applicable state securities laws in connection with
the issuance of shares of Common Stock upon conversion of the Series A Preferred Stock.



     Section 5.08 Corporate Existence. The Company shall preserve and maintain, and cause
each Subsidiary to preserve and maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain qualified, and cause
each Subsidiary to qualify and remain qualified, as a foreign corporation in each jurisdiction in
which such qualification is necessary or desirable in view of its business and operations or the
ownership or lease of its properties.



     Section 5.09 Preservation of Property and Assets. The Company shall use its best
efforts to secure, preserve and maintain, and cause any Subsidiary to use its best efforts to
secure, preserve and maintain, all licenses and other rights to use the patents, processes,
licenses, permits, trademarks, trade names, inventions, copyrights or other Intellectual Property
rights owned or possessed by it and deemed by the Company to be material to the conduct of its
business or the business of any Subsidiary. The Company shall also use its best efforts to
maintain and preserve, and cause each Subsidiary to use its best efforts to maintain and preserve,
all of its other properties and assets necessary for the proper conduct of its business, in good
repair, working order and condition, ordinary wear and tear excepted, and, from time to time, make
all necessary and proper repairs, renewals, replacements, additions and improvements thereto; and
the Company and its Subsidiaries will at all times comply with each material provision of all
leases to which any of them is a party or under which any of them occupies property.



     Section 5.10 Insurance. The Company shall obtain and maintain, and cause each of its
Subsidiaries to maintain, as to its respective properties and business, with financially sound and
reputable insurers, insurance against such casualties and contingencies and of such types and in
such amounts as is customary for companies similarly situated.



     Section 5.11 Inspection, Consultation and Advice. The Company shall permit, and cause
each any of its Subsidiaries to permit, the Purchaser and such persons as it may designate, at
Purchaser’s expense, to visit and inspect any of the properties of the Company and any Subsidiary,
examine their books and take copies and extracts therefrom, discuss the affairs, finances and
accounts of the Company and any Subsidiary with their officers, employees and public accountants
(and the Company hereby authorizes said accountants to discuss with such holder and such designees
such affairs, finances and accounts), and consult with and advise the management of the Company and
any Subsidiary as to the Company’s affairs, finances and accounts, all at reasonable times and upon
reasonable notice, provided that the Purchaser shall cause the persons they so designate to
maintain any and all information relating to the Company confidential. In the event of the
Company’s breach of any of the covenants contained in this



30









 




Article V, the Company shall be responsible for the fees and expenses incurred by
Purchaser in enforcing its rights under this Article V.




     Section 5.12 Restrictive Agreements Prohibited. Neither the Company nor any
Subsidiary shall become a party to any agreement that by its terms restricts the Company’s
performance of this Agreement, any of the other Transaction Documents, the Restated Articles or the
Bylaws.



     Section 5.13 Transactions with Affiliates. Except for transactions contemplated by
this Agreement, neither the Company nor any Subsidiary shall enter into any transaction with any
director, officer, employee or holder of more than five percent (5%) of the outstanding capital
stock of any class or series of capital stock of the Company or any Subsidiary (other than the
Purchaser and its Affiliates), member of the family of any such Person, or any corporation,
partnership, trust or other entity in which any such Person, or member of the family of any such
Person, is a director, officer, trustee, partner or holder of more than five percent (5%) of the
outstanding capital stock thereof.



     Section 5.14 Use of Proceeds. The Company shall apply $230,000 of the Total Purchase
Price, which will be paid to the Company at the Closing in accordance with Section 1.02, to
pay in full all accounts payable and other obligations listed in Schedule 5.14 hereto,
which schedule shall be subject to approval by the Purchaser prior to the Closing. The remaining
portion of the Total Purchase Price shall be deposited with the escrow agent under the Escrow
Agreement and disbursed solely in accordance with the terms thereof and subject to the conditions
therein.



     Section 5.15 Non-Disclosure, Non-Solicitation and Proprietary Information and Inventions
Agreement. Prior to the Closing, the Company shall cause each officer, director, employee,
consultant and independent contractor now or hereafter employed by it, or its Subsidiaries, to
enter into the Non-Disclosure, Non-Solicitation and Proprietary Information and Inventions
Agreement, in form acceptable to the Purchaser.



     Section 5.16 Payment of Taxes; Trade Debt. The Company shall pay and discharge, and
cause each Subsidiary to pay and discharge, all taxes, assessments and governmental charges or
levies imposed upon it or upon its income, profits or business, or upon any properties belonging to
it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid,
might become a Lien or charge upon any properties of the Company or any Subsidiary;
provided, however, that neither the Company, nor any Subsidiary, shall be required
to pay any such tax, assessment, charge, levy or claim which is being contested or extended in good
faith and by appropriate proceedings if the Company or any Subsidiary shall have set aside on its
books sufficient reserves, if any, with respect thereto. The Company shall pay and cause any
Subsidiary to pay, when due, or in conformity with customary trade terms, all lease obligations,
all trade debt, and all other indebtedness incident to the operations of the Company or any
Subsidiary, except such as are being contested in good faith and by proper proceedings if the
Company or Subsidiary concerned shall have set aside on its books sufficient reserves, if any, with
respect thereto.



31









 





     Section 5.17 Internal Accounting Controls. The Company shall devise and maintain a
system of internal accounting controls sufficient to provide reasonable assurances that (a)
transactions are executed in accordance with Company management’s general or specific
authorization, (b) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP or any other criteria applicable to such statements, and to
maintain accountability for assets, (c) access to assets is permitted only in accordance with
Company management’s general or specific authorization, and (d) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.



     Section 5.18 Other Items. The Company shall have completed or resolved, and shall
cause its Subsidiaries to have completed and resolved, all of the actions and items listed in
Schedule 5.18 hereto to the Purchaser’s reasonable satisfaction on or prior to the
45th day following the Closing Date. In connection therewith, the Purchaser and its
counsel shall have a right to review, comment and approve all materials filed with any federal,
state, municipal or other governmental body, department, commission, board, bureau, agency or
instrumentality, domestic or foreign and all agreements entered into. In the event that such
actions and items are not completed in the Purchaser’s reasonable satisfaction, it shall constitute
an Event of Default (as defined in the Certificate of Designation), pursuant to which the holders
of a Majority-in-Interest (as defined in the Certificate of Designation) of the Series A Preferred
Stock may elect to require that the Company redeem all of the Series A Preferred Stock outstanding,
as set forth in the Certificate of Designation. Purchaser hereby covenants and agrees not to
unreasonably interfere with, or hinder, the Company’s performance of this Section 5.18.



     Section 5.19 Indemnity.



          (a) The Company and each of the Controlling Stockholders, jointly and severally, agree to
indemnify, defend and hold harmless the Purchaser (and its partners (and each officer and director
thereof), directors, managers, officers, members, stockholders, employees, Affiliates, agents and
permitted assigns) (collectively, “Purchaser Indemnified Parties”) from and against any and all
losses, claims, liabilities, damages, deficiencies, costs or expenses (including, without
limitation, interest, penalties, reasonable attorneys’ fees, disbursements and related charges and
any costs or expenses that a Purchaser Indemnified Party incurs to enforce its right to
indemnification) (collectively, “Losses”) based upon, arising out of or otherwise in respect of (i)
any material inaccuracy in or material breach of any representations, warranties, covenants or
agreements of the Company or a Controlling Stockholder contained in this Agreement or any of the
other Transaction Documents or (ii) any taxes of the Company and its affiliates relating to periods
prior to the Closing.




          (b) The Purchaser agrees to indemnify, defend and hold harmless the Company and its directors,
officers, employees, Affiliates, agents and control persons (collectively, the “Company Indemnified
Parties”) from and against any and all Losses based upon, arising out of or otherwise in respect of
any material inaccuracy in or material breach of any representations, warranties, covenants or
agreements of the Purchaser contained in this Agreement or any of the other Transaction Documents.




32









 








          (c) The provisions of this Section 5.19 shall not limit or impair any right or remedy
arising from breach of this Agreement or any of the other Transaction Documents. In addition to
any other remedy provided by law, injunctive relief may be obtained to enjoin the breach, or
threatened breach, of any provision of this Agreement and each party shall be entitled to specific
performance by the others of their obligations hereunder and thereunder. All remedies, either
under this Agreement, by law or as may otherwise be afforded to the Purchaser or the Company, as
the case may be, shall be cumulative.




     Section 5.20 Compliance with Laws. The Company shall comply, and cause each
Subsidiary to comply, with all applicable laws, rules, regulations and orders.



     Section 5.21 Keeping of Records and Books of Account. The Company shall keep, and
cause each Subsidiary to keep, adequate records and books of account, in which complete entries
will be made in accordance with GAAP consistently applied, reflecting all financial transactions of
the Company and any Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made.



     Section 5.22 Publicity. Except as may be required by law, the Company shall not issue
or cause the publication of any press release, advertisement or other public communication relating
to (a) the Purchaser (or any Affiliate of the Purchaser) or (b) this Agreement or any of the other
Transaction Documents, without the Purchaser’s prior written consent.



     Section 5.23 Operations. From the date of this Agreement until the Closing Date, the
Company will use its best efforts, and cause its Subsidiaries to use their best efforts, to:



          (a) carry on their respective businesses in substantially the same manner as the Company and
the Subsidiaries have heretofore conducted their respective businesses and not make any material
change in personnel, leases, operations, finance, accounting policies or real or personal property;




          (b) maintain the assets of the Company and the Subsidiaries and all parts thereof in as good
working order and condition as at present, ordinary wear and tear accepted; and




          (c) perform all of the obligations of the Company and the Subsidiaries under the Real Estate
Leases, the Personal Property Leases, and the Contracts.




     Section 5.24 Negative Covenants. From the date hereof to the Closing Date, the
Company shall not, and shall cause its Subsidiaries not to, without the prior written consent of
the Purchaser:



          (a) amend or terminate any of the Real Property Leases, the Personal Property Leases, or the
Contracts, enter into any contract or commitment, or incur or agree to incur any liability, except
in the ordinary course of business and in no event greater than $1,000 per item or which is not
terminable without cause or penalty within sixty (60) days following the Closing;




33









 








          (b) amend any of the Benefit Plans, increase the compensation payable or to become payable or
make a bonus payment to or otherwise enter into one or more bonus agreements with any employee or
agent;




          (c) create, assume or permit to exist any new indebtedness or borrowing, new guaranty of any
indebtedness or obligation, or new mortgage, pledge or other Lien upon any of the assets of the
Company and the Subsidiaries, whether now owned or hereafter acquired;




          (d) sell, assign or otherwise transfer, dispose of any property, plant or equipment (other
than supplies);




          (e) issue, sell or grant any shares of Common Stock or Preferred Stock or any Other
Securities; or




          (f) take any action outside the ordinary course of business.




     Section 5.25 Board; Resignations of Directors and Officers. Prior to Closing, the
Board shall cause the number of directors constituting the entire Board to be fixed at no more than
three. Prior to the Closing, the Company shall obtain from each of the existing officers and
directors of the Company and the existing officers, other than the Controlling Stockholders in
their positions, as the case may be, as Chief Executive Officer and Chief Operating Officer of
DiscLive, and directors of its Subsidiaries the execution and delivery of a written irrevocable
resignation (“Resignation”) from all offices, boards and committees thereof and other positions
held by such Person with the Company and its Subsidiaries, as the case may be, subject to the
Employment Agreement (as defined herein), if applicable. Each Resignation shall only be effective
upon its acceptance by the Company, provided, however, each Resignation shall be accepted by the
Company as and when so directed by the Purchaser.



ARTICLE VI.




TERMINATION




     Section 6.01 Termination. This Agreement and the transactions contemplated herein may
be terminated and abandoned at any time on or prior to the Closing Date:



          (a) by mutual consent of the Company and the Purchaser;




          (b) by the Purchaser if:





     (i) the Purchaser is not in material breach of its obligations hereunder and
any representation or warranty made herein for the benefit of the Purchaser is
untrue, the Purchaser has not waived such breach and such breach is not cured within
ten (10) days after written notice to the Company;




     (ii) the Purchaser is not in material breach of its obligations hereunder, and
the Company or the Controlling Stockholders shall have defaulted in any respect in
performance of any material obligation under this Agreement and such



34









 







breach is not cured within ten (10) days of the breaching party’s receipt of a
notice from the Purchaser that such breach exists or has occurred or the Purchaser
has not waived the breach; or




     (iii) consummation of the transactions contemplated by this Agreement would
violate any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction;



          (c) by the Company if:





     (i) neither the Company nor any Controlling Stockholder is in material breach
of its or his obligations hereunder, and any representation or warranty made herein
for the benefit of the Company or the Controlling Stockholder is untrue, the Company
and the Controlling Stockholders have not waived such breach and such breach is not
cured within ten (10) days after written notice to the Company;




     (ii) neither the Company nor any Controlling Stockholder is in material breach
of its or his obligations hereunder, and the Company shall have defaulted in any
respect in performance of any material obligation under this Agreement, and such
breach is not cured within ten (10) days of the Purchaser’s receipt of a notice from
the Company or any Controlling Stockholder that such breach exists or has occurred
or the Company and the Controlling Stockholders have not waived the breach; or




     (iii) consummation of the transactions contemplated by this Agreement would
violate any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction; or



          (d) by either the Purchaser or the Company if the Closing Date does not occur on or before
February 28, 2006 (the “Final Closing Date”) (or such later date as may be mutually agreed upon by
the parties hereto), so long as such party has complied with the provisions of this Agreement;
provided, however, that if the Closing Date has not occurred because of a party’s breach of this
Agreement, then such Final Closing Date shall be extended for 10 days to the extent such breach can
be cured and such breaching party is using commercially reasonable efforts to effect such cure.




     Section 6.02 Manner of Exercise. In the event of termination and abandonment by the
Purchaser or the Company, or both, authorized by Section 6.01, written notice thereof shall
forthwith be given to the other parties and this Agreement shall terminate.



     Section 6.03 Effect of Termination. If this Agreement is terminated pursuant to
Section 6.01, all further obligations of the parties under this Agreement will terminate
and become void and of no force and effect, except that the obligations in this Section and
Sections 5.19 and 5.22 will survive; provided that any termination of this Agreement
pursuant to Section 6.01 of this Agreement shall not relieve any party from any liability
for any material breach of any representation, warranty or covenant contained in this Agreement.



35









 





ARTICLE VII.




MISCELLANEOUS




     Section 7.01 Survival of Agreements. Except as otherwise provided herein or therein,
all covenants, agreements, representations and warranties made in any of the Transaction Documents
or any certificate or instrument delivered to the Purchaser or the Company pursuant to or in
connection with any of the Transaction Documents shall survive the execution and delivery of all of
the Transaction Documents, the issuance, sale and delivery of the Shares, and the issuance and
delivery of the Preferred Stock Conversion Shares for a period of one year following the Closing
Date; provided, however, that the representations and warranties of the Company and the
Controlling Stockholders in Section 2.16 hereof shall continue thereafter and shall survive
until the expiration of the applicable statute of limitations. All statements contained in any
certificate or other instrument delivered by the Company or the Purchaser hereunder or thereunder
or in connection herewith or therewith shall be deemed to constitute representations and warranties
made by the Company or the Purchaser, as the case may be.



     Section 7.02 Entire Agreement. This Agreement, together with the Schedules hereto and
any certificates, documents, instruments and writings that are delivered pursuant hereto and
thereto, constitute the entire agreement and understanding of the parties in respect of the subject
matter hereof and supersede all prior understandings, agreements or representations by or among the
parties, written or oral, to the extent they relate in any way to the subject matter hereof.



     Section 7.03 Assignment; Binding Effect. No party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written approval of the
other parties; provided, however, that without the consent of any other party
hereto the rights of the Purchaser hereunder are assignable to an Affiliate of the Purchaser. All
of the terms, agreements, covenants, representations, warranties and conditions of this Agreement
are binding upon, and inure to the benefit of and are enforceable by, the parties and their
respective successors and permitted assigns, whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements benefiting the Purchaser
shall inure to the benefit of any and all subsequent holders from time to time of the Shares or the
Preferred Stock Conversion Shares, as the case may be. Nothing in this Agreement shall create or
be deemed to create any third-party beneficiary rights in any Person not a party to this Agreement
except as provided below. Whether or not any express assignment has been made, the provisions of
this Agreement which are for the benefit of the Purchaser as a purchaser or holder of the Shares
(or any securities pursuant to which the Shares may be converted or exercised into) are also for
the benefit of and enforceable by any subsequent holder of such Shares or other securities to the
same extent they would have been enforceable by the Purchaser. Upon any permitted assignment, the
references in this Agreement to the Purchaser shall also apply to any such assignee unless the
context otherwise requires.



     Section 7.04 Notices. All notices, requests and other communications provided for or
permitted to be given under this Agreement must be in writing and shall be given by personal
delivery, by certified or registered United States mail (postage prepaid, return receipt
requested), by a nationally recognized overnight delivery service for next day delivery, or by
facsimile



36









 







transmission, as follows (or to such other address as any party may give in a notice given in
accordance with the provisions hereof):


If to the Purchaser:



Radical Holdings LP

c/o Radical Management LLC

5424 Deloache Avenue

Dallas, Texas 75220

Fax: (214) 696-6310

Attn: President



With a copy to (which does not constitute notice):



Robert S. Hart

5424 Deloache Avenue

Dallas, Texas 75220

Fax: (214) 696-3380



and



Jenkens & Gilchrist, P.C.

1445 Ross Avenue, Suite 3700

Dallas, Texas 75202

Phone: (214) 855-4500

Fax: (214) 855-4300

Attn: Robert W. Dockery, Esq.



If to the Company:



Immediatek, Inc.

2435 North Central Expressway, Suite 1610

Richardson, Texas 75080

Phone: (972) 852-2876

Fax: (972) 722-0818

Attn: Zach Bair, President



With a copy to (which does not constitute notice):



Vial, Hamilton, Koch & Knox, LLP

1700 Pacific Avenue, Suite 2800

Dallas, Texas 75201

Phone: (214) 712-4441

Fax: (214) 712-4402

Attn: Craig G. Ongley, Esq.




37









 







If to the Controlling Stockholders:



Zach Bair

2435 North Central Expressway, Suite 1200

Richardson, Texas 75080

Fax: (972) 722-0818



Paul Marin

2435 North Central Expressway, Suite 1200

Richardson, Texas 75080

Fax: (972) 722-0818



With a copy to (which does not constitute notice):



Vial, Hamilton, Koch & Knox, LLP

1700 Pacific Avenue, Suite 2800

Dallas, Texas 75201

Phone: (214) 712-4441

Fax: (214) 712-4402

Attn: Craig G. Ongley, Esq.



All notices, requests or other communications will be effective and deemed given only as follows:
(i) if given by personal delivery, upon such personal delivery, (ii) if sent by certified or
registered mail, on the fifth business day after being deposited in the United States mail, (iii)
if sent for next day delivery by overnight delivery service, on the date of delivery as confirmed
by written confirmation of delivery, or (iv) if sent by facsimile, upon the transmitter’s
confirmation of receipt of such facsimile transmission, except that if such confirmation is
received after 5:00 p.m. (in the recipient’s time zone) on a business day, or is received on a day
that is not a business day, then such notice, request or communication will not be deemed effective
or given until the next succeeding business day. Notices, requests and other communications sent
in any other manner, including by electronic mail, will not be effective.




     Section 7.05 Specific Performance; Remedies. Each party acknowledges and agrees that
the other parties would be damaged irreparably if any provision of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. Accordingly, the
parties will be entitled to an injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically this Agreement and its provisions in any action or
proceeding instituted in any court of the United States or any state thereof having jurisdiction
over the parties and the matter, in addition to any other remedy to which they may be entitled, at
law or in equity. Except as expressly provided herein, the rights, obligations and remedies
created by this Agreement are cumulative and in addition to any other rights, obligations or
remedies otherwise available at law or in equity. Except as expressly provided herein, nothing
herein will be considered an election of remedies.



38









 





     Section 7.06 Submission to Jurisdiction; Waiver of Jury Trial.



          (a) Submission to Jurisdiction. Any action, suit or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this Agreement or the
transaction contemplated hereby shall only be brought in any federal court located in Dallas
County, Texas or any Texas state court located in Dallas County, Texas, and each party consents to
the exclusive jurisdiction and venue of such courts (and of the appropriate appellate courts
therefrom) in any such action, suit or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying of the venue of any
such action, suit or proceeding in any such court or that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum. Process in any such action,
suit or proceeding may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, service of process on such party
as provided in Section 7.04 shall be deemed effective service of process on such party.




          (b) Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES THAT ANY DISPUTE THAT MAY ARISE OUT
OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE SUCH PARTY HEREBY EXPRESSLY WAIVES ITS RIGHT TO JURY TRIAL OF ANY DISPUTE BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATING HERETO OR ANY DEALINGS AMONG THEM
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO
ENCOMPASS ANY AND ALL ACTIONS, SUITS AND PROCEEDINGS THAT RELATE TO THE SUBJECT MATTER OF THE
TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS,
AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY REPRESENTS THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER,
(ii) SUCH PARTY UNDERSTANDS AND WITH THE ADVICE OF COUNSEL HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (iii) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (iv) SUCH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND REPRESENTATIONS IN THIS
SECTION 7.06(b).




     Section 7.07 Headings. The article and section headings contained in this Agreement
are inserted for convenience only and will not affect in any way the meaning or interpretation of
this Agreement.



     Section 7.08 Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Texas, without giving effect to any choice of law
principles.



39









 





     Section 7.09 Amendments. This Agreement may not be amended or modified without the
written consent of the Company, the Controlling Shareholders and the Purchaser.



     Section 7.10 Extensions; Waivers. Any party may, for itself only, (a) extend the time
for the performance of any of the obligations of any other party under this Agreement, (b) waive
any inaccuracies in the representations and warranties of any other party contained herein or in
any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any such extension or waiver will be
valid only if set forth in a writing signed by the party to be bound thereby. No waiver by any
party of any default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant hereunder or affect in any way any rights arising because of any
prior or subsequent occurrence. Neither the failure nor any delay on the part of any party to
exercise any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right or remedy preclude any other or further exercise of the
same or of any other right or remedy.



     Section 7.11 Severability. The provisions of this Agreement will be deemed severable
and the invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof; provided that if any provision of this Agreement, as
applied to any party or to any circumstance, is judicially determined not to be enforceable in
accordance with its terms, the parties agree that the court judicially making such determination
may modify the provision in a manner consistent with its objectives such that it is enforceable,
and/or to delete specific words or phrases, and in its modified form, such provision will then be
enforceable and will be enforced.



     Section 7.12 Counterparts; Effectiveness. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original but all of which together will
constitute one and the same instrument. This Agreement will become effective when one or more
counterparts have been signed by each of the parties and delivered to the other parties. For
purposes of determining whether a party has signed this Agreement or any document contemplated
hereby or any amendment or waiver hereof, only a handwritten original signature on a paper document
or a facsimile copy of such a handwritten original signature shall constitute a signature,
notwithstanding any law relating to or enabling the creation, execution or delivery of any contract
or signature by electronic means.



     Section 7.13 Construction. This Agreement has been freely and fairly negotiated among
the parties. If an ambiguity or question of intent or interpretation arises, this Agreement will
be construed as if drafted jointly by the parties and no presumption or burden of proof will arise
favoring or disfavoring any party because of the authorship of any provision of this Agreement.
Any reference to any law will be deemed to refer to such law as in effect on the date hereof and
all rules and regulations promulgated thereunder, unless the context requires otherwise. The words
“include,” “includes,” and “including” will be deemed to be followed by “without limitation.”
Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender,
and words in the singular form will be construed to include the plural and vice versa, unless the
context otherwise requires. The words “this Agreement,” “herein,”



40









 




“hereof,” “hereby,” “hereunder,” and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. The parties intend that
each representation, warranty, and covenant contained herein will have independent significance.
If any party has breached any covenant contained herein in any respect, the fact that there exists
another covenant relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached will not detract from or mitigate the fact that the
party is in breach of the first covenant.




     Section 7.14 Attorneys’ Fees. If any dispute among any parties arises in connection
with this Agreement, the prevailing party in the resolution of such dispute in any action or
proceeding will be entitled to an order awarding full recovery of reasonable attorneys’ fees and
expenses, costs and expenses (including experts’ fees and expenses and the costs of enforcing this
Section 7.14) incurred in connection therewith, including court costs, from the
non-prevailing party.



     Section 7.15 Brokerage. Each party hereto will indemnify and hold harmless the others
against and in respect of any claim for brokerage or other commissions relative to this Agreement
or to the transactions contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third party.



     Section 7.16 Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a
reference to a specific number of shares of the Company’s capital stock of any class or series
(other than with respect to the Series A Preferred Stock, the Series A Shares, the Shares or the
Preferred Stock Conversion Shares), then, upon the occurrence of any subdivision, combination or
stock dividend of such class or series of stock, the specific number of shares so referenced in
this Agreement will automatically be proportionally adjusted to reflect the effect of such
subdivision, combination or stock dividend on the outstanding shares of such class or series of
stock.



     Section 7.17 Aggregation of Stock. All shares of Common Stock owned or acquired by
the Purchaser or its Affiliated entities or persons (assuming full conversion, exchange and
exercise of all convertible, exchangeable and exercisable securities into Common Stock) shall be
aggregated together for the purpose of determining the availability of any right under this
Agreement.



     Section 7.18 No-Shop Clause. From and after the date of the execution and delivery of
this Agreement by the Company until the earlier of the termination of this Agreement or the Closing
Date, the Company will not, without the prior written consent of the Purchaser: (i) offer for sale
the assets of the Company and the Subsidiaries (or any material portion thereof) or any shares or
interest in any of the Company or the Subsidiaries, (ii) solicit offers to buy all or any material
portion of the assets of the Company and the Subsidiaries or any shares or interest of any of the
Company or the Subsidiaries, (iii) hold discussions with any party (other than the Purchaser)
looking toward such an offer or solicitation or looking toward a merger or consolidation of any of
the Company or the Subsidiaries, or (iv) enter into any agreement with any party (other than the
Purchaser) with respect to the sale or other disposition of the assets of



41









 




the Company and the Subsidiaries (or any material portion thereof) or any shares or interest
in any of the Company or the Subsidiaries, or with respect to any merger, consolidation, or similar
transaction involving any of the Company or the Subsidiaries.




     Section 7.19 Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):



     “Affiliate” means, with respect to any Person, (i) any other Person of which securities or
other ownership interests representing more than twenty percent (20%) of the voting interests are,
at the time such determination is being made, owned, Controlled or held, directly or indirectly, by
such Person, or (ii) any other Person which, at the time such determination is being made, is
Controlling, Controlled by or under common Control with, such Person. As used herein, “Control,”
whether used as a noun or verb, refers to the possession, directly or indirectly, of the power to
direct, or cause the direction of, the management or policies of a Person, whether through the
ownership of voting securities or otherwise.



     “Change of Control” means (A) the acquisition at any time by a “person” or “group” (as such
terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) who or which are the beneficial
owners (as defined in Rule 13(d)-3 under the Exchange Act), directly or indirectly, of securities
representing more than 50% of the combined voting power of the election of directors of the then
outstanding securities of the Company or any successor of the Company; (B) approval by the
shareholders of the Company of any sale or disposition of substantially all of the assets or
earning power of the Company; or (C) approval by the shareholders of the Company of any merger,
consolidation, or statutory share exchange to which the Company is a party as a result of which the
persons who were stockholders immediately prior to the effective date of the merger, consolidation
or share exchange shall have beneficial ownership of less than 50% of the combined voting power in
the election of directors of the surviving corporation.



     “Company” shall have the meaning set forth in the preambles of this Agreement. For purposes
of Article II, the term “Company” shall include its Subsidiaries, unless context clearly
indicates otherwise.



     “Lien” shall mean a mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance,
lien (statutory or otherwise, including, without limitation, any lien for taxes), security
interest, preference, participation interest, priority or security agreement or preferential
arrangement of any kind or nature whatsoever, including, without limitation, any conditional sale
or other title retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing and the filing of any document under the law of any applicable
jurisdiction to evidence any of the foregoing.



     “Material Adverse Change” shall mean a material adverse change in the Company’s business,
operations, assets, liabilities, prospects, properties, condition (financial or otherwise) or
results of operations.



42









 





     “Person” shall mean an individual, corporation, trust, partnership, limited liability company,
joint venture, unincorporated organization, government body or any agency or political subdivision
thereof, or any other entity.



     “Subsidiary” shall mean, as to the Company, any corporation of which more than fifty percent
(50%) of the outstanding stock having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether or not at the time stock of any other class
or classes of such corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned by the Company, or by one or more of
its subsidiaries, or by the Company and one or more of its subsidiaries.



     “Transaction Documents” shall mean this Agreement, the Investor’s Rights Agreement, the Escrow
Agreement, the Satisfaction Agreements, the Cancellation Agreements, the Waivers, the Closing
certificates, the Restated Articles, the Certificate of Designation, the Non-Competition
Agreements, the Non-Disclosure and Proprietary Information and Intention Agreements, and any other
documents or agreements required as a condition to the Closing or required to be delivered by the
Company to the Purchaser.



     Section 7.20 Obligations of Controlling Shareholders. Prior to the Closing, the
Controlling Shareholders shall cause the Company to comply with all of its representations,
warranties, covenants and agreements contained in this Agreement and the other Transaction
Documents. Each of the Controlling Shareholders agrees that:



          (a) if he is a Debtholder or Other Securityholder, he shall promptly execute and deliver to
the Company a Satisfaction Agreement or Cancellation Agreement, as the case may be, with respect to
the obligations of the Company to him or Other Securities;




          (b) he shall, and shall cause his Affiliates and related persons, to cooperate fully with the
Company and the Purchaser to consummate the transactions contemplated by this Agreement;




          (c) he shall execute and deliver at Closing a release in favor of the Company and its
Subsidiaries that forever releases, discharges, acquits and forgives each of them from any and all
claims, actions, suits, demands, agreements, and each of them, if more than one, liabilities,
judgments, and proceedings both at law and in equity that he may have arising from the beginning of
time to the date of the Closing;




          (d) he shall not transfer any of his shares of Common Stock or grant any proxies or enter into
any voting trust or other agreement or understanding with respect to voting of his shares of Common
Stock;




          (e) at any meeting of the stockholders of the Company called to consider and vote upon any
matter related to this Agreement or the transactions contemplated hereby, and at every adjournment
or postponement thereof, or in connection with any written consent of shareholders of the Company
in lieu of such a meeting, all of his shares of Common Stock (whether now owned or hereafter
acquired) will be voted (i) in favor of the adoption of this Agreement and the approval of any
transaction, document or agreement required for the

43









 








consummation of this Agreement, including the approval of the Restated Articles and the
Reverse Split, and (ii) against any action that is intended, or could reasonably be expected, to
impede, frustrate, interfere with, impair, delay, adversely affect or prevent consummation of the
transactions contemplated by this Agreement; and




          (f) his failure to perform his agreements hereunder will cause irreparable damage to the
Company and the Purchaser for which damages, even if available, will not be an adequate remedy,
and, accordingly, he consents to the issuance of injunctive relief (including a temporary
restraining order) to compel performance of his obligations and to the granting by any court of the
remedy of specific performance of his obligations hereunder.




     Section 7.21 Incorporation of Exhibits, Annexes and Schedules. The exhibits, annexes
and schedules identified in this Agreement are incorporated herein by reference and made a part
hereof for all purposes.



SIGNATURE PAGE FOLLOWS





44










 






SECURITIES PURCHASE AGREEMENT



Signature Page



     IN WITNESS WHEREOF, the Company, the Controlling Shareholders and the Purchaser have executed
this Securities Purchase Agreement as of the day and year first above written.



	 	 	 	 	 	 	 	 	 
	 	 	COMPANY:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	IMMEDIATEK, INC.,	 	 
	 	 	a Nevada corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ ZACH BAIR	 	 
	 	 	 	 	 	 	 
	 	 	Name:	 	Zach Bair	 	 
	 	 	Title:	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	PURCHASER:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	RADICAL HOLDINGS LP,	 	 
	 	 	a Texas limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Radical Management LLC,	 	 
	 	 	 	 	a Texas limited liability company,	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ MARK CUBAN	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Mark Cuban	 	 
	 

	 	 	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	CONTROLLING STOCKHOLDERS:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	/s/ ZACH BAIR
	 	 
	 	 	 	 	 
	 	 	Zach Bair	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	/s/ PAUL MARIN
	 	 
	 	 	 	 	 
	 	 	Paul Marin	 	 






 









 






SCHEDULES

TO

SECURITIES PURCHASE AGREEMENT



(Intentionally Omitted)



 









 








EXHIBIT A

TO

SECURITIES PURCHASE AGREEMENT




FORM OF CERTICATE OF DESIGNATION FOR SERIES A PREFERRED




(Attached)





 










 






IMMEDIATEK, INC.




Certificate of Designation, Rights and Preferences of

Series A Convertible Preferred Stock

of

IMMEDIATEK, INC.




     Immediatek, Inc. (the “Corporation”), a corporation organized and existing under the law of
the State of Nevada (the “NRS”), hereby certifies that, pursuant to the authority conferred upon
the board of directors of the Corporation (the “Board of Directors”) by its Amended and
Restated Articles of Incorporation, as amended (the “Restated Articles “), which authorizes the
issuance, by the Corporation, in one or more series of up to 5,000,000 shares of preferred stock,
par value $0.001 per share (the “Preferred Stock”), and in accordance with the provisions of NRS
78.1955, the Board of Directors at a meeting duly called and held on ___, 2006 duly adopted
the following resolutions:



     RESOLVED, that, pursuant to the authority vested in the Board of Directors by the provisions
of Article V of the Restated Articles and in accordance with the provisions of NRS 78.1955, the
Board of Directors hereby creates and provides for the issue of a series of Preferred Stock
consisting of 4,392,286 shares herein designated as the Series A Convertible Preferred Stock (the
“Series A Preferred Stock”), having the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series (in addition to the powers, designations
preferences and relative, participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, set forth in the Restated Articles that are applicable to the
Preferred Stock of all series) are hereby fixed as follows (certain terms used herein being defined
in Section B.3. hereof):



A. PROVISIONS RELATING TO THE SERIES A PREFERRED STOCK




     1. Dividends. The holders of the Series A Preferred Stock shall not be entitled to
any preferential dividends. The holders of the Series A Preferred Stock shall be entitled to
participate on an as-converted basis in cash any dividends declared and paid on the Common Stock,
other than dividends declared and paid on the Common Stock in cash out of the proceeds from the
original issue of the Series A Preferred Stock.



     2. Liquidation.



          (a) Upon any Liquidation Event, the holders of shares of Series A Preferred Stock then
outstanding shall be entitled to receive, out of the funds and assets of the Corporation legally
available therefor (the “Available Assets and Funds”), before any payment shall be made to the
holders of shares of Junior Stock, an amount per share equal to the greater of (i) the Stated Value
for a share of Series A Preferred Stock and (ii) the amount such holder would have received had such
holder converted such share of Series A Preferred Stock into shares of Common Stock immediately
prior to such Liquidation Event. If, upon any such Liquidation Event, the Available Assets and
Funds shall be insufficient to pay the holders of shares of Series A Preferred Stock the full
amount to which they shall be entitled, the holders of shares of Series A Preferred Stock and




1









 







any Parity Stock shall share ratably in any distribution of the Available Assets and Funds in
proportion to the respective amounts that would otherwise be payable in respect of the shares held
by them upon such distribution if all amounts payable on or with respect to such shares were paid
in full.




     3. Ranking. The Series A Preferred Stock shall, with respect to redemption rights,
rights on liquidation, winding up, corporate reorganization and dissolution rank senior to the
Junior Stock.



     4. Optional Redemption.



          (a) Holders’ Redemption Rights. Upon an Event of Default, the holders of a
Majority-in-Interest of the Series A Preferred Stock then outstanding may require the Corporation
to redeem the Series A Preferred Stock at any time or from time to time, in whole but not in part,
at a redemption price per share equal to the Stated Value, plus declared and unpaid dividends, if
any, to the Redemption Date (the “Redemption Price”). Such redemption shall be effected in
accordance with the procedures set forth in subsections A.4.(b) and A.4.(c) hereof.




          (b) Notice. Upon an Event of Default, the Corporation shall mail notice of such Event
of Default within ten (10) days of such Event of Default to the holders of record of the Series A
Preferred Stock. Within a twenty-day period following such notice by the Company to the holders of
the Series A Preferred Stock, each record holder of the Series A Preferred Stock shall be entitled
to provide notice to the Corporation of his election to require the Company to redeem the
outstanding shares of Series A Preferred Stock. In the event that the holders of a
Majority-in-Interest of the Series A Preferred Stock then outstanding elect to require the
Corporation to redeem shares of the Series A Preferred Stock pursuant to this subsection
A.4., the Corporation shall mail notice of such redemption by first-class mail, postage
prepaid, and mailed not less than ten (10) days nor more than sixty (60) days after to the date the
holders of a Majority-in-Interest of the Series A Preferred Stock elected to cause the redemption
of the Series A Preferred Stock (each such date, a “Redemption Date”) to the holders of record of
the shares of Series A Preferred Stock to be redeemed, at their respective addresses as such
addresses shall appear in the records of the Corporation; provided, however, that failure to give
such notice or any defect therein or in the mailing thereof shall not affect the validity of the
proceeding for the redemption of any shares so to be redeemed. Each such notice shall state: (i)
the Redemption Date, (ii) the number of shares of Series A Preferred Stock to be redeemed, (iii)
the Redemption Price, and (iv) the place or places where certificates for such shares are to be
surrendered for payment of the Redemption Price.




          (c) Right of the Holders of Series A Preferred Stock upon Redemption. Following the
Redemption Date, said shares of Series A Preferred Stock to be redeemed shall no longer be deemed
to be outstanding and shall not have the status of shares of Series A Preferred Stock, and all
rights of the holders thereof as stockholders of the Company (except the right to receive the
applicable Redemption Price on the Redemption Date) shall cease, unless the Corporation defaults in
the payment of the Redemption Price on the Redemption Date, in which case all rights of the holders
to whom payment of the Redemption Price was not made on the




2









 




Redemption Date shall continue until the Redemption Price is paid to such holders, and such
holders shall have the rights of the terms of the Series A Preferred Stock set forth herein.




     5. Conversion.



          (a) Right to Convert. Subject to and in compliance with this Section A.5.,
each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof,
at any time and from time to time, into that number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the Stated Value for such share by the Conversion Price
(defined below) for such share in effect at the time of conversion. The price at which shares of
Common Stock shall be deliverable upon conversion of Series A Preferred Stock without the payment
of additional consideration by the holder thereof (the “Conversion Price”) shall initially be $[to
be completed to equal 95% of outstanding Common Stock]. Such initial Conversion Price shall be
subject to adjustment from time to time as provided in this Section A.5.




          (b) Mechanics of Conversion. Each holder of Series A Preferred Stock who desires to
convert the same into shares of Common Stock shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series A
Preferred Stock or Common Stock, and shall give written notice to the Corporation at such office
that such holder elects to convert the same and shall state therein the number of shares of Series
A Preferred Stock being converted. Thereupon, the Corporation shall promptly issue and deliver at
such office to such holder a certificate or certificates for the number of shares of Common Stock
to which such holder is entitled. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the certificate representing the
shares of Series A Preferred Stock to be converted, and the person entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.




          (c) Adjustments for Stock Splits and Combinations. If the Corporation at any time or
from time to time after the Original Issue Date (as defined below) effects a subdivision of the
outstanding Common Stock, the Conversion Price then in effect immediately before the subdivision
shall be proportionately decreased, and conversely, if the Corporation at any time or from time to
time after the Original Issue Date combines the outstanding shares of Common Stock into a smaller
number of shares, the Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this subsection A.5.(c) shall become
effective at the close of business on the date the subdivision or combination becomes effective.
“Original Issue Date” means the date on which shares of Series A Preferred Stock are originally
issued under this Certificate of Designation.




          (d) Adjustments for Certain Dividends and Distributions. If the Corporation at any
time or from time to time after the Original Issue Date makes or issues, or fixes a record date for
the determination of holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, then and in each such event the Conversion Price then
in effect shall be adjusted as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, so that it will equal the price determined
by multiplying the Conversion Price then in effect by a fraction (1) the numerator of




3









 




which is the total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date and (2) the denominator
of which shall be the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution; provided, however,
that if such record date is fixed and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter the Conversion Price shall be adjusted
pursuant to this subsection A.5.(d) as of the time of actual payment of such dividends or
distributions.




          (e) Adjustments for Dividends and Other Distributions. In the event the Corporation
at any time or from time to time after the Original Issue Date makes or issues, or fixes a record
date for the determination of holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Corporation other than shares of Common Stock, then and
in each such event provision shall be made so that the holders of Series A Preferred Stock shall
receive upon conversion thereof, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Corporation which they would have received had their
Series A Preferred Stock been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section A.5 with respect to the rights
of the holders of the Series A Preferred Stock.




          (f) Adjustment for Reclassification, Exchange and Substitution. In the event that, at
any time or from time to time after the Original Issue Date, the Common Stock issuable upon the
conversion of the Series A Preferred Stock is changed into the same or a different number of shares
of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets, provided for elsewhere in this Section A.5), then and in
any such event each holder of Series A Preferred Stock shall have the right thereafter to convert
such Series A Preferred Stock into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change, by holders of shares of
Common Stock into which such shares of Series A Preferred Stock could have been converted
immediately prior to such recapitalization, reclassification or change, all subject to further
adjustment as provided herein.




          (g) No Adjustment for Certain Issuances. Notwithstanding anything to the contrary
herein, no adjustment will be made to the Conversion Price (1) for issuances of Common Stock upon
conversion of shares of the Series A Preferred Stock; or (2) for issuances of Common Stock,
options, warrants or other convertible securities as a dividend or distribution on the Series A
Preferred Stock.




          (h) Sale of Shares.





          (1) If at any time or from time to time after the Original Issue Date, the Corporation
issues or sells, or is deemed by the express provisions of this subsection A.5.(h)
to have issued or sold, Additional Shares of Common Stock (as hereinafter



4









 







defined), other than as a dividend or other distribution on any class of stock as
provided in subsection A.5.(d) above and other than upon a subdivision or
combination of shares of Common Stock as provided in subsection A.5.(c) above, then
and in each such event the Conversion Price then in effect shall be adjusted as of the time
of such issuance or sale so that it will equal the price determined by multiplying the
Conversion Price then in effect by a fraction (1) the numerator of which is the total number
of shares of Common Stock issued and outstanding immediately prior to the time of such
issuance or sale and (2) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such issuance or sale
plus the number of shares of Common Stock issued or sold.




          (2) For the purpose of the adjustment required under this subsection A.5.(h),
if the Corporation issues or sells any rights or options for the purchase of, or stock or
other securities convertible or exchangeable, with or without consideration, into Additional
Shares of Common Stock (such convertible or exchangeable stock or securities being
hereinafter referred to as “Convertible Securities”), then in each case the Corporation
shall be deemed to have issued at the time of the issuance of such rights or options or
Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon
exercise or conversion thereof. No further adjustment of the Conversion Price, adjusted
upon the issuance of such rights, options or Convertible Securities, shall be made as a
result of the actual issuance of Additional Shares of Common Stock on the exercise of any
such rights or options or the conversion of any such Convertible Securities.




          If any such rights or options, or the conversion or exchange privilege represented by
any such Convertible Securities, shall expire without having been exercised, the Conversion
Price adjusted upon the issuance of such rights, options or Convertible Securities shall be
readjusted to the Conversion Price which would have been in effect had an adjustment been
made on the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such
rights or options or rights of conversion or exchange of such Convertible Securities.
Further, if any shares of Common Stock issuable upon the exercise or conversion of options
or warrants that are issued and outstanding on the Original Issue Date shall no longer be
issuable thereunder due to expiration, termination or otherwise, the Conversion Price shall
be adjusted as of the time of such expiration so that it will equal the price determined by
multiplying the Conversion Price then in effect by a fraction (1) the numerator of which is
the total number of shares of Common Stock issued and outstanding immediately prior to the
time of such expiration, plus the number of shares of Common Stock no longer exercisable
pursuant to such option or warrant and (2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the time of
such expiration.




          (3) For the purpose of the adjustment required under this subsection A.5.(h),
if the Corporation issues or sells any rights or options for the purchase of Convertible
Securities, then in each such case the Corporation shall be deemed to have issued at the
time of the issuance of such rights or options the maximum number of Additional Shares of
Common Stock issuable upon conversion or exchange of the total



5









 







amount of Convertible Securities covered by such rights or options. No further
adjustment of the Conversion Price, adjusted upon the issuance of such rights or options,
shall be made as a result of the actual issuance of the Convertible Securities upon the
exercise of such rights or options or upon the actual issuance of Additional Shares of
Common Stock upon the conversion of such Convertible Securities. The provisions of
paragraph (2) above for the readjustment of the Conversion Price upon the expiration of
rights or options or the rights of conversion or exchange of Convertible Securities shall
apply mutatis mutandis to the rights, options and Convertible Securities
referred to in this paragraph (3).



          (i) Notices of Record Date. In the event of (a) any taking by the Corporation of
record of the holders of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or (ii) any capital reorganization
of the Corporation, any reclassification or recapitalization of the capital stock of the
Corporation, any merger or consolidation of the Corporation with or into any other corporation, or
any transfer of all or substantially all of the assets of the Corporation to any other Person or
any voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall mail to each holder of Series A Preferred Stock at least thirty (30) days prior
to the record date specified therein, a notice specifying (1) the date on which any such record is
to be taken for the purpose of such dividend or distribution and a description of such dividend or
distribution, (2) the date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and
(3) the date, if any, that is to be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.




          (j) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of Series A Preferred Stock. If more than one share of Series A Preferred Stock shall
be surrendered for conversion at any one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Series A Preferred Stock so surrendered. In lieu of any fractional share to
which the holder would otherwise be entitled, the Corporation shall pay cash equal to the product
of such fraction multiplied by the Fair Market Value of one share of the Corporation’s Common Stock
on the date of conversion.




          (k) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number
of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of
all outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such purpose.




6









 








          (l) Notices. All notices and other communications required by the provisions of this
Section A.5 shall be in writing and shall be deemed to have been duly given if delivered
personally, mailed by certified mail (return receipt requested) or sent by overnight delivery
service, cable, telegram, facsimile transmission or telex to each holder of record at the address
of such holder appearing on the books of the Corporation. Notice so given shall, in the case of
notice so given by mail, be deemed to be given and received on the fourth calendar day after
posting, in the case of overnight delivery service, on the date of actual delivery and, in the case
of notice so given by cable, telegram, facsimile transmission, telex or personal delivery, on the
date of actual transmission or, as the case may be, personal delivery.




          (m) Payment of Taxes. The Corporation will pay all taxes (other than taxes based upon
income) and other governmental charges that may be imposed with respect to the issue or delivery of
shares of Common Stock upon conversion of shares of Series A Preferred Stock, including, without
limitation, any tax or other charge imposed in connection with any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that in which the shares of Series A
Preferred Stock so converted were registered.




          (n) No Dilution or Impairment. The Corporation shall not amend its Amended and
Restated Articles of Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, for
the purpose of avoiding, or seeking to avoid, the observance or performance of any of the terms to
be observed or performed hereunder by the Corporation, but will at all times in good faith assist
in carrying out all such action as may be reasonably necessary or appropriate in order to protect
the conversion rights of the holders of the Series A Preferred Stock against dilution or other
impairment.




     6. Voting. The holders of shares of Series A Preferred Stock shall be entitled to
vote on all matters required or permitted to be voted upon by the stockholders of the Corporation
and, except to the extent specifically provided herein, each holder shall be entitled to the number
of votes equal to the largest number of full shares of Common Stock into which all shares of Series
A Preferred Stock held by such holder could be converted, pursuant to the provisions of Section
A.5, at the record date for the determination of the stockholders entitled to vote on such
matters or, if no record date is established, at the date such vote is taken or any written consent
of stockholders is first executed. Except as otherwise expressly provided herein or as required by
law, the holders of Series A Preferred Stock shall vote together as a single class with the holders
of Common Stock on all matters.



B. GENERAL PROVISIONS




     1. Protective Provisions. In addition to any other vote or consent required herein or
by law, unless the directors designated by the holders of the shares of the Series A Preferred
Stock originally issued under the Purchase Agreement (as defined herein) control the Board of
Directors of the Corporation with respect to all actions, for so long as any shares of the Series A
Preferred Stock originally issued under the Purchase Agreement remain outstanding (subject to
equitable adjustments for stock splits, stock dividends and the like with respect to the Series A
Preferred Stock), except where the vote or written consent of the holders of a greater number of
shares of the Corporation is required by law or by the Amended and Restated Articles of



7









 







Incorporation, and in addition to any other vote required by law or by the Amended and
Restated Articles of Incorporation, the Corporation shall not, and the Corporation shall cause its
subsidiaries not to, as applicable, without the prior vote or written consent of the holders of at
least 75% of the shares of the Series A Preferred Stock originally issued under the Purchase
Agreement then outstanding:



     (a) amend the articles or bylaws in any manner that would alter or change any of the rights,
preferences, privileges or restrictions of the Series A Preferred Stock or the shares issuable upon
conversion of the Series A Preferred Stock;



     (b) reclassify any outstanding securities into securities having rights, preferences or
privileges senior to, or on a parity with, the Series A Preferred Stock;



     (c) authorize or issue any additional shares of capital stock (other than to holders of the
Series A Preferred Stock);



     (d) merge or consolidate with or into any corporation or other Person;




     (e) sell all or substantially all their respective assets in a single transaction or series of
related transactions;



     (f) license all or substantially all of their respective intellectual property in a single
transaction or series of related transactions;



     (g) liquidate or dissolve;




     (h) alter any rights of the holders of the Series A Preferred Stock or change the size of the
Board of Directors;



     (i) declare or pay any dividends (other than dividends payable to the Corporation or its
subsidiaries) on or declare or make any other distribution, directly or indirectly, on account of
any shares of Common Stock now or hereafter outstanding;



     (j) repurchase any outstanding shares of capital stock (other than repurchases or redemptions
of the Series A Preferred Stock in accordance with the terms hereof);



     (k) approve or modify by 10% or more the aggregate amount of any annual or other operating or
capital budget, or approve or modify by 50% or more any single line item of any such operating or
capital budget;



     (l) increase the salary of any officer or employee or pay any bonus to any officer, director
or employee not contemplated in a budget or bonus plan approved by directors designated by the
holders of the shares of the Series A Preferred Stock originally issued under the Purchase
Agreement then outstanding;



     (m) retain, terminate or enter into any salary or employment negotiations or employment
agreement with any employee or any future employee;



8









 





     (n) incur indebtedness (other than trade payables) or enter into contracts or leases that
require payments in excess of $5,000 in the aggregate;



     (o) make or incur any single capital expenditure;



     (p) award stock options, stock appreciation rights or similar employee benefits or determine
vesting schedules, exercise prices or similar features;



     (q) make any material change in the nature of its business or enter into any new line of
business, joint venture or similar arrangement;



     (r) pledge its assets or guarantee the obligations of any other individual or entity;



     (s) recommend approval of any new equity incentive plan;



     (t) form or acquire any subsidiary, joint venture or similar business entity; or



     (u) directly or indirectly enter into, or permit to exist, any material transaction with any
affiliate of the Corporation, any director or officer or any affiliate of a director or officer, or
transfer, pay, loan or otherwise obligate the Corporation to give cash, services, assets or other
items of value to affiliates, officers or directors or any affiliate of a officer or director or
commit to do any of the preceding after the date hereof, except for employee compensation or for
reimbursement of ordinary business expenses.



     2. Board of Directors. For so long as any shares of the Series A Preferred Stock
originally issued under the Purchase Agreement remain outstanding, the holders of a
Majority-in-Interest of the shares of the Series A Preferred Stock originally issued under the
Purchase Agreement then outstanding shall have the right to designate all the Persons to serve as
directors on the Board of Directors of the Corporation and its subsidiaries. If the holders of the
shares of the Series A Preferred Stock originally issued under the Purchase Agreement then
outstanding choose not to designate any directors, the holders of a Majority-in-Interest of the
shares of the Series A Preferred Stock originally issued under the Purchase Agreement then
outstanding may appoint a designee to serve as an observer at all meetings of the Corporation’s or
its subsidiaries’ Board of Directors and committees thereof, and such designee will be (a) entitled
to all notices of meetings of the Board of Directors and committees thereof and all instruments in
which action is proposed to be taken by written consent in lieu of a meeting, each as and when
provided to the directors, and (b) furnished with the materials furnished to the directors for such
meetings or written consents in lieu of a meeting. Notwithstanding anything herein to the
contrary, for so long as the Radical Holdings LP or its affiliates owns any of the shares of the
Series A Preferred Stock then issued and outstanding, the directors or any committee of directors
of the Corporation or its subsidiaries shall not hold a meeting or take any action by written
consent, unless written notice thereof, which contains a reasonable description of the matters to
be acted upon, is sent to the holders of the Series A Preferred Stock at least ten calendar days in
advance of the action proposed to be taken.



9









 





     3. Definitions. As used herein with respect to the Series A Preferred Stock, the
following terms have the following meanings:


“Additional Shares of Common Stock” means all shares of Common Stock issued after the Original
Issue Date, in each event other than shares of Common Stock issued upon conversion of the Series A
Preferred Stock.



“Common Stock” means the common stock of the Corporation, $0.001 par value per share.



An “Event of Default” shall exist if within 45 days from the Original Issue Date:




     (a) any representation or warranty made or deemed made by or on behalf of the Corporation in
the Purchase Agreement, or any amendment or modification thereof or waiver thereunder, or in any
report, certificate, financial statement or other document furnished pursuant to or in connection
the Purchase Agreement, or any amendment or modification thereof or waiver thereunder, shall prove
to have been materially incorrect when made or deemed made; or



     (b) the Corporation shall fail to satisfy its obligations pursuant to Section 5.18 of the
Purchase Agreement.


“Fair Market Value” means (i) if the Common Stock is listed on a national securities exchange, the
closing sale price per share on the principal exchange on which the Common Stock is listed as
reported by such exchange, (ii) if the Common Stock is quoted in the National Market System, the
closing sale price per share as reported by Nasdaq, (iii) if the Common Stock is traded in the
over-the-counter market but not quoted in the National Market System, the average of the closing
bid and asked quotations per share as reported by Nasdaq, or any other nationally accepted
reporting medium if Nasdaq quotations shall be unavailable, or (iv) if none of the foregoing
applies, the fair market value of such stock as reasonably determined in good faith by the Board of
Directors of the Corporation.



“Junior Stock” means shares of Common Stock and any other class or series of capital stock of the
Corporation that by its express terms provides that is ranks junior to the Series A Preferred Stock
as to distribution of assets on liquidation, dissolution or winding up.



“Liquidation Event” means the liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, and also includes (i) the acquisition of the Corporation by another
entity by means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) that results in the sale, disposition or
other transfer of more than fifty percent (50%) of the outstanding voting power of the Corporation
or (ii) a sale, exclusive license or other disposition of all or substantially all of the assets of
the Corporation.



“Majority-in-Interest” means the holders of a majority of the Series A Preferred Stock.



“Parity Stock” means any class or series of capital stock of the Corporation ranking on a parity
with the Series A Preferred Stock as to distribution of assets on liquidation, dissolution or
winding up.




10









 







“Person” means any individual, corporation, partnership, trust, joint venture, organization,
association, government or agency or political subdivision thereof, or any other entity.



“Purchase Agreement” means that certain Securities Purchase Agreement, dated as of January ___,
2006, by and among the Corporation, Radical Holdings LP and the other parties thereto.



“Senior Stock” any class or series of capital stock of the Corporation that by its express terms
provides that it ranks senior to the Series A Preferred Stock as to distribution of assets on
liquidation, dissolution or winding up.



“Stated Value” means a stated value per share equal to $0.683015632 with respect to the Series A
Preferred Stock.




11









 





     IN WITNESS WHEREOF, Immediatek, Inc. has caused this Certificate of Designation, Rights and
Preferences of Series A Convertible Preferred Stock to be signed
by its President, on this ___ day
of                      2006, and such person hereby affirms under penalty of perjury that this Certificate of
Designation, Rights and Preferences of Series A Convertible Preferred Stock is the act and deed of
Immediatek, Inc. and that the facts stated herein are true and correct.



	 	 	 	 	 	 	 
	 	 	IMMEDIATEK, INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

Zach Bair
	 	 
	 

	 	Title:
	 	President	 	 







 









 






EXHIBIT B

TO

SECURITIES PURCHASE AGREEMENT




FORM OF AMENDED AND RESTATED ARTICLES






 









 








AMENDED AND RESTATED ARTICLES OF INCORPORATION




OF




IMMEDIATEK, INC.




     That the undersigned for the purpose of forming a corporation under and by virtue of the laws
of the State of Nevada, do hereby adopt the following Amended and Restated Articles of
Incorporation.



ARTICLE I



The name of the corporation shall be Immediatek, Inc.




ARTICLE II




     The incorporators:


Zach Bair, 2435 N. Central Expressway, Suite 1200, Richardson, Texas, 75080



Paul Marin, 2435 N. Central Expressway, Suite 1200, Richardson, Texas, 75080




ARTICLE III




     The purpose for which this corporation is organized is the transaction of any and all lawful
business.



ARTICLE IV




     There are no limitations on the powers of the corporation.



ARTICLE V




     Section 5.01 Authorization and Characteristics of Shares The corporation shall have
authority to issue five hundred million (500,000,000) shares of common stock at a par value of
$0.001 per share; and five million (5,000,000) shares of preferred stock at a par value of $0.001
per share. The preferred stock may be issued, from time to time, in one or more series, as
authorized by the Board of Directors. The Board of Directors, by resolution, shall designate that
series to distinguish it from other series and classes of stock of the corporation, shall specify
the number of shares to be included in the series, and shall fix the terms, rights, restrictions,
and qualifications of, the shares of the series, including any preferences, voting power, dividend
rights and redemption, sinking fund and conversion rights. The relative powers, preferences and
rights of each series of preferred stock in relation to the powers, preferences and rights of each
other series of preferred stock shall be as fixed, from time to time, by the Board of Directors in
the resolution or resolutions authorizing the issuance of each series adopted by the Board of
Directors.



B-1









 





     Except as otherwise required by law, these Amended and Restated Articles of Incorporation or
the provisions of any resolutions adopted by the Board of Directors authorizing the issuance of
preferred stock, each holder of shares of common stock shall be entitled to one vote in respect of
each share of common stock held in his name on the books of the corporation on each matter voted
upon by the stockholders. Cumulative voting of shares is expressly prohibited.



     Section 5.02 Reverse Split of Outstanding Stock Each one (1) share of common stock of
the corporation, par value $0.001 per share, either issued and outstanding or held by the
corporation in treasury, immediately prior to the time of the filing and recording of these Amended
and Restated Articles of Incorporation (“Articles”) in the Office of the Secretary of State of the
State of Nevada, shall, upon the filing and recording of the Articles in the Office of the
Secretary of State of the State of Nevada, thereby and thereupon automatically be reclassified and
changed, without any further action, into one-tenth (1/10th) of a validly issued, fully
paid and nonassessable share of common stock of the corporation, par value $0.001 per share.
Further, the purchase or exercise price of each one (1) share of common stock of the corporation
acquirable pursuant to every right, option and warrant outstanding immediately prior to the time of
the filing and recording of the Articles in the Office of the Secretary of State of the State of
Nevada, shall, upon the filing and recording of the Articles in the Office of the Secretary of
State of the State of Nevada, thereby and thereupon automatically be increased, without any further
action, by multiplying the purchase or exercise price then in effect by ten (10), all in accordance
with and upon the terms of the right, option or warrant. The corporation shall not issue any
fractional shares with respect to the combination. To the extent that a shareholder holds a
fractional share of common stock after giving effect to the combination provided for in this
Section 5.02, such shareholder shall receive one whole share of common stock in lieu of such
fractional share.



ARTICLE VI




     The holders of the capital stock of the corporation shall not have any preemptive rights.



ARTICLE VII




     The corporation shall be managed by a Board of Directors whose number, duties and
responsibilities are set forth in Bylaws adopted by the corporation. The names and addresses of
the persons who currently serve as Directors are as follows:


Zach Bair, 2435 N. Central Expressway, Suite 1200, Richardson, Texas, 75080



Paul Marin, 2435 N. Central Expressway, Suite 1200, Richardson, Texas, 75080




B-2









 








ARTICLE VII




     The name and address of the Resident Agent is:



Nevada Corporate Headquarters

101 Convention Center Drive, Suite 700

Las Vegas, NV 89109




ARTICLE IX




     The Board of Directors of the corporation may, from time to time, distribute on a pro-rata
basis to the shareholders of the corporation out of the capital surplus of the corporation, a
portion of the corporation’s assets, in cash or property.



ARTICLE X




     The corporation shall indemnify the directors and officers of the corporation from any and all
liability to the fullest extent permitted by law.



     These Amended and Restated Articles of Incorporation have been duly adopted in accordance with
general corporation law of the State of Nevada.



     The number of shares of the corporation outstanding that were entitled to vote on an amendment
to the Articles of Incorporation was: 38,169,655; that said changes and amendments have been
consented to and approved by the stockholders holding at least a majority of each class of voting
stock outstanding and entitled to vote thereon.



     The number of shares that consent to such amendments was 21,831,712 (57.19%) and the number
that voted against was 0 (0%).



     The undersigned has signed these Amended and Restated Articles of Incorporation on ___,
2006.



	 
	Signed:

	 

	 

	Zach Bair

	Chief Executive Officer & President








B-3










 





EXHIBIT C

TO

SECURITIES PURCHASE AGREEMENT




BYLAWS OF ITEK




(Intentionally Omitted)




 









 





EXHIBIT D

TO

SECURITIES PURCHASE AGREEMENT




INVESTOR’S RIGHTS AGREEMENT




(Attached)





 










 






INVESTOR’S RIGHTS AGREEMENT




     This INVESTOR’S RIGHTS AGREEMENT (this “Agreement”) dated as of ___, 2006, is entered
into by and among Immediatek, Inc., a Nevada corporation (the “Company”), Radical Holdings LP, a
Texas limited partnership (the “Purchaser”), Zach Bair, an individual residing in the State of
Texas (“Bair”), and Paul Marin, an individual residing in the State of Texas (“Marin,” and together
with Bair, collectively, the “Founders”).



     A. The Company has filed a Certificate of Designation, Rights and Preferences establishing a
series of convertible preferred stock, namely, the Series A Convertible Preferred Stock, par value
$0.001 per share (the “Series A Preferred Stock”); and



     B. The
Company, the Founders and the Purchaser are parties to that certain Securities Purchase
Agreement dated as of January    , 2006 (the “Purchase Agreement”) pursuant to which the Company has
agreed to sell, and the Purchaser has agreed to purchase 4,392,286 shares of the Series A Preferred
Stock (the “Series A Shares”) of the Company at the closing on the date hereof; and



     C. The Company’s and the Purchaser’s respective obligations under the Purchase Agreement are
conditioned upon the execution and delivery of this Agreement.



AGREEMENT




     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter
set forth, the parties hereto agree as follows.



ARTICLE I




REGISTRATION RIGHTS




     Section 1.1 Definitions. For purposes of this Agreement:



     (a) “Affiliate” means, with respect to any Person, (i) any other Person of which securities or
other ownership interests representing more than twenty percent (20%) of the voting interests are,
at the time such determination is being made, owned, Controlled or held, directly or indirectly, by
such Person or (ii) any other Person which, at the time such determination is being made, is
Controlling, Controlled by or under common Control with, such Person. As used herein, “Control”,
whether used as a noun or verb, refers to the possession, directly or indirectly, of the power to
direct, or cause the direction of, the management or policies of a Person, whether through the
ownership of voting securities or otherwise.



     (b) “Holder” means (i) the Purchaser, (ii) a Person that is a permitted transferee under
Section 1.11 hereof and (iii) a Person that owns Registrable Securities; provided, however,
that for purposes of this Agreement, Holders of Registrable Securities will not be required to
convert their Preferred Shares into Common Stock in order to exercise the registration rights
granted hereunder, until immediately before the closing of the offering to which the registration
relates.



 









 





     (c) “NASD” means the National Association of Securities Dealers, Inc.



     (d) “Participating
Holders” means Holders participating, or electing to participate, in an
offering of Registrable Securities.



     (e) “Person” means any individual, firm, corporation, company, partnership, trust,
incorporated or unincorporated association, limited liability company, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other entity of any kind,
and shall include any successor (by merger or otherwise) of any such entity.



     (f) “Preferred
Shares” means the Series A Shares.



     (g) “Registrable
Securities” means any shares of common stock of the Company (“Common Stock”)
(i) issued or issuable upon conversion of the Preferred Shares; (ii) otherwise held or deemed held
by conversion by the Purchaser or acquired pursuant to any other right; and (iii) issued or
issuable with respect to the securities referred to in clauses (i) and (ii) above by virtue of any
stock split, combination, stock dividend, merger, consolidation or other similar event;
provided, however, that shares of Common Stock that are considered to be
Registrable Securities shall cease to be Registrable Securities (A) upon the sale thereof pursuant
to an effective registration statement, (B) upon the transfer thereof in a private transaction
where the transferor’s rights under this Agreement are not assigned, or (C) when such securities
cease to be outstanding.



     (h) “Registration Expenses” mean all expenses (other than underwriting discounts and
commissions) arising from, or incident to, the performance of, or compliance with, this Agreement,
including, without limitation, (i) SEC, stock exchange, NASD and other registration and filing
fees, (ii) all fees and expenses incurred in connection with complying with any securities or blue
sky laws (including, without limitation, fees, charges and disbursements of counsel in connection
with blue sky qualifications of the Registrable Securities), (iii) all printing, messenger and
delivery expenses, (iv) the fees, charges and disbursements of counsel to the Company and of its
independent public accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including, without limitation, any expenses arising from any special
audits or “comfort letters” required in connection with or incident to any registration), (v) the
fees, charges and disbursements of any special experts retained by the Company in connection with
any registration pursuant to the terms of this Agreement, (vi) all internal expenses of the Company
(including, without limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (vii) the fees and expenses incurred in connection with the listing of
the Registrable Securities on any securities exchange or Nasdaq and (viii) Securities Act liability
insurance (if the Company elects to obtain such insurance), regardless of whether any Registration
Statement filed in connection with such registration is declared effective. “Registration
Expenses” shall also include fees, charges and disbursements of one (1) firm of counsel to all of
the Participating Holders participating in any underwritten public offering pursuant to this
Agreement (which shall be selected by a majority, based on the number of Registrable Securities to
be sold, of the Participating Holders).



2









 






     (i) “Registration
Statement” shall mean any registration statement of the Company filed with the
SEC on the appropriate form pursuant to the Securities Act that covers any of the shares of Common
Stock and any other Registrable Securities pursuant to the provisions of this Agreement and all
amendments and supplements to any such Registration Statement, including post-effective amendments,
in each case including the prospectus contained therein, all exhibits thereto and all materials
incorporated by reference therein.



     (j) “SEC” or “Commission” means the United States Securities and Exchange Commission.



     (k) “Securities
Act” means the Securities Act of 1933, as amended, or any similar federal
statute, and the rules and regulations of the Commission promulgated thereunder, all as the same
shall be in effect at the time.



     (l) “Selling
Expenses” shall mean the underwriting fees, discounts, selling commissions and
stock transfer taxes applicable to all Registrable Securities registered by the Participating
Holders.



Section 1.2. Demand Registration.




     (a) Request by Holders. If the Company receives at any time a written request
from Holders that hold at least twenty percent (20%) of the Registrable Securities then outstanding
(the “Requesting Holders”) that the Company register Registrable Securities held by Requesting
Holders (a “Demand Request”), then the Company shall, within ten (10) days after receipt of such
Demand Request, give written notice of such request
(“Request Notice”) to all Holders. Each Demand
Request shall (x) specify the number of Registrable Securities that the Requesting Holders intend
to sell or dispose of, (y) state the intended method or methods of sale or disposition of the
Registrable Securities and (z) specify the expected price range (net of underwriting discounts and
commissions) acceptable to the Requesting Holders to be received for such Registrable Securities.
Following receipt of a Demand Request, the Company shall:



          (i) cause to be filed, as soon as practicable, but within ninety (90) days of the date of
delivery to the Company of the Demand Request, a Registration Statement covering such Registrable
Securities that the Company has been so requested to register by the Requesting Holders and other
Holders who request to the Company that their Registrable Securities be registered within twenty
(20) days of the mailing of the Request Notice, providing for the registration under the Securities
Act of such Registrable Securities to the extent necessary to permit the disposition of such
Registrable Securities in accordance with the intended method of distribution specified in such
Demand Request;



          (ii) use its best efforts to have such Registration Statement declared effective by the SEC as
soon as practicable thereafter; and



          (iii) refrain from filing any other Registration Statements, other than pursuant to a
Registration Statement on Form S-4 or S-8 (or similar or successor forms), with respect to any
other securities of the Company until such date that is one hundred and eighty (180) days following
effectiveness of the Registration Statement filed in response to the Demand Request.



3









 





     (b) Effective Registration Statement. A registration requested pursuant to this
Agreement shall not be deemed to have been effected (i) unless a Registration Statement with
respect thereto has become effective and remained effective in compliance with the provisions of
the Securities Act with respect to the disposition of all Registrable Securities covered by such
Registration Statement until such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the Holders thereof set forth in such
Registration Statement; (ii) if, after it has become effective, such registration is interfered
with by any stop order, injunction or other order or requirement of the SEC or other governmental
agency or court and has not thereafter become effective, or if the offering of Registrable
Securities is not consummated for any reason, including, without limitation, if the underwriters of
an underwritten public offering advise the Participating Holders that the Registrable Securities
cannot be sold at a net price per share equal to or above the net price disclosed in the
preliminary prospectus; (iii) if the conditions to closing specified in the underwriting agreement,
if any, entered into in connection with such registration are not satisfied or waived; or (iv) if
the Requesting Holders are cut back regarding the Registrable Securities requested to be
registered.



     (c) Selection of Underwriters. In the event that the Company is required to file a
Registration Statement covering any Registrable Securities of any Requesting Holders pursuant to
Section 1.2(a) hereof and the proposed public offering is to be an underwritten public
offering, the managing underwriter shall be one or more reputable, nationally recognized investment
banks selected by a majority in interest of the Requesting Holders and reasonably acceptable to the
Company, which consent shall not be unreasonably withheld, delayed or conditioned.



     (d) Priority for Demand Registration. Notwithstanding any other provision of this
Agreement, if the managing underwriter of an underwritten public offering determines and advises
the Participating Holders and the Company in writing that the inclusion of all securities proposed
to be included by the Company and any other Holders in the underwritten public offering would
materially and adversely interfere with the successful marketing of the Requesting Holders’
Registrable Securities, then the Company and other Holders shall not be permitted to include any
securities in excess of the amount, if any, of securities that the managing underwriter of such
underwritten public offering shall reasonably and in good faith agree in writing to include in such
public offering in addition to the amount of Registrable Securities to be registered for the
Requesting Holders. The Company will be obligated to include in such Registration Statement, as to
each Holder, only a portion of the Registrable Securities such Holder has requested be registered
equal to the ratio which such Holder’s requested Registrable Securities bears to the total number
of Registrable Securities requested to be included in such Registration Statement by all Holders
who have requested that their Registrable Securities be included in such Registration Statement. It
is acknowledged by the parties hereto that pursuant to the foregoing provision, the securities to
be included in a registration requested by the Requesting Holders pursuant to Section 1.2
shall be allocated:



          (i) first, to the Participating Holders; and



          (ii) second, to the Company and any other shareholders of the Company requesting registration
of securities of the Company.



4









 





     (e) Limitations on Demand Registrations.



          (i) The Company may delay making a filing of a Registration Statement or taking action in
connection therewith by not more than ninety (90) days if the Company provides a written
certificate signed by the President and Chief Executive Officer of the Company to the
Holders, prior to the time it would otherwise have been required to file such Registration
Statement or take such action pursuant to this Section 1.2, stating that the Board has
determined in good faith that the filing of such Registration Statement would be seriously
detrimental to the Company or would otherwise materially adversely affect a financing, acquisition,
disposition, merger or other material transaction (collectively, a “Valid Business Reason”) and
that it is therefore essential to defer the filing of the Registration Statement; provided,
however, that such right to delay a Demand Request shall be exercised by the Company not
more than once in any twelve (12) month period and the Company shall only have the right to delay a
Demand Request so long as such Valid Business Reason exists, and during such time, the Company may
not file a Registration Statement for securities to be issued and sold for its own account or for
that of anyone other than the Holders.



          (ii) The Company shall only be obligated to effect two (2) Demand Requests pursuant to this
Section 1.2.



          (iii) The Company shall not be required to comply with a Demand Request unless the reasonably
anticipated aggregate gross proceeds to be raised (before any underwriting discounts and
commissions) would be equal to or exceed $1,000,000.



     (f) Cancellation of Registration. A majority in interest of the Participating Holders
shall have the right to cancel a proposed registration of Registrable Securities pursuant to this
Section 1.2 when, (i) in their discretion, market conditions are so unfavorable as to be
seriously detrimental to an offering pursuant to such registration or (ii) the request for
cancellation is based upon material adverse information relating to the Company that is different
from the information known to the Participating Holders at the time of the Demand Request. Such
cancellation of a registration shall not be counted as one of the two (2) Demand Requests, and
notwithstanding anything to the contrary in the Agreement, the Company shall be responsible for the
expenses of the Participating Holders incurred in connection with the registration prior to the
time of cancellation.



     Section 1.3. Piggyback Registrations.



     (a) Right to Include Registrable Securities. Each time that the Company proposes for
any reason to register any of its Common Stock under the Securities Act, either for its own account
or for the account of a stockholder or stockholders exercising demand registration rights other
than Demand Requests pursuant to Section 1.2 hereof or pursuant to a Registration Statement
on Forms S-4 or S-8 (or similar or successor forms) (a
“Proposed Registration”), the Company shall
promptly give written notice of such Proposed Registration to all of the Holders of Registrable
Securities (which notice shall be given not less than thirty (30) days prior to the expected
effective date of the Company’s Registration Statement) and shall offer such Holders the right to
request inclusion of any of such Holder’s Registrable Securities in the Proposed Registration. No
registration pursuant to this Section 1.3 shall relieve the Company of its



5









 







obligation to register Registrable Securities pursuant to a Demand Request, as contemplated by
Section 1.2 hereof. The rights to piggyback registration may be exercised an unlimited
number of occasions.



     (b) Piggyback Procedure. Each Holder of Registrable Securities shall have twenty (20)
days from the date of receipt of the Company’s notice referred to in Section 1.3(a) above
to deliver to the Company a written request specifying the number of Registrable Securities such
Holder intends to sell and such Holder’s intended method of disposition. Any Holder shall have the
right to withdraw such Holder’s request for inclusion of such holder’s Registrable Securities in
any Registration Statement pursuant to this Section 1.3 by giving written notice to the
Company of such withdrawal. Subject to Section 1.3(d) below, the Company shall use its
best efforts to include in such Registration Statement all such Registrable Securities so requested
to be included therein; provided, however, that the Company may at any time
withdraw or cease proceeding with any such Proposed Registration if it shall at the same time
withdraw or cease proceeding with the registration of all other shares of Common Stock originally
proposed to be registered.



     (c) Selection of Underwriters. The managing underwriter for any Proposed Registration
that involves an underwritten public offering shall be one or more reputable, nationally recognized
investment banks selected by the Company and reasonably acceptable to a majority in interest of the
Holders.



     (d) Priority for Piggyback Registration. Notwithstanding any other provision of this
Agreement, if the managing underwriter of an underwritten public offering determines and advises
the Company and the Holders in writing that the inclusion of all Registrable Securities proposed to
be included by the Holders of Registrable Securities in the underwritten public offering would
materially and adversely interfere with the successful marketing of the Company’s securities, then
the Holders of Registrable Securities shall not be permitted to include any Registrable Securities
in excess of the amount, if any, of Registrable Securities that the managing underwriter of such
underwritten public offering shall reasonably and in good faith agree in writing to include in such
public offering in addition to the amount of securities to be registered for the Company. The
Company will be obligated to include in such Registration Statement, as to each Holder, only a
portion of the Registrable Securities such Holder has requested be registered equal to the ratio
which such Holder’s requested Registrable Securities bears to the total number of Registrable
Securities requested to be included in such Registration Statement by all Holders who have
requested that their Registrable Securities be included in such Registration Statement. It is
acknowledged by the parties hereto that, pursuant to the foregoing provision, the securities to be
included in a registration initiated by the Company shall be allocated:



          (i) first, to the Company; and



          (ii) second, pari passu among the Holders and all other holders of securities of the Company
with piggyback registration rights.



6









 





     If as a result of the provisions of this Section 1.3(d), any Holder shall not be
entitled to include all of its Registrable Securities in a registration that such Holder has
requested to be so included, such Holder may withdraw such Holder’s request to include Registrable
Securities in such Registration Statement.



     (e) Underwritten Offering. In the event that the Proposed Registration by the Company
is, in whole or in part, an underwritten public offering of securities of the Company, any request
under this Section 1.3 shall specify that the Registrable Securities be included in the
underwriting on the same terms and conditions as the shares, if any, otherwise being sold through
underwriters under such registration.



     Section 1.4
Form S-3 Registration. Any Holder (an
“Initiating Form S-3 Holder”) may
request, at any time, that the Company file a Registration Statement under the Securities Act on
Form S-3 (or similar or successor form) covering the sale or other distribution of all or any
portion of the Registrable Securities held by such Initiating Form S-3 Holder pursuant to Rule 415
under the Securities Act (“Form S-3 Demand”) if (i) the reasonably anticipated aggregate gross
proceeds would equal or exceed $5,000,000, (ii) the Company is a registrant qualified to use Form
S-3 (or any similar or successor form) to register such Registrable Securities and (iii) the plan
of distribution of the Registrable Securities is other than pursuant to an underwritten public
offering. If such conditions are met, the Company shall use its best efforts to register under the
Securities Act on Form S-3 (or any similar or successor form) at the earliest practicable date, for
sale in accordance with the method of disposition specified in the Form S-3 Demand, the number of
Registrable Securities specified in such Form S-3 Demand. In connection with a Form S-3 Demand,
the Company agrees to include in the prospectus included in any Registration Statement on Form S-3,
such material describing the Company and intended to facilitate the sale of securities being so
registered as is reasonably requested for inclusion therein by the Initiating Form S-3 Holders,
whether or not the rules applicable to preparation of Form S-3 require the inclusion of such
information. Notwithstanding the foregoing, if the Company shall furnish to the Initiating Form
S-3 Holders a certificate signed by the Chief Executive Officer and Chief Financial Officer of the
Company stating that in the good faith opinion of the Board of Directors of the Company, a Valid
Business Reason exists, the Company shall have the right to delay or defer taking action with
respect to such filing for a period of ninety (90) days after receipt of the Form S-3 Demand;
provided, however, that such right to delay or defer a Form S-3 Demand shall be
exercised by the Company not more than once in any twelve (12) month period, the Company shall only
have the right to delay a Form S-3 Demand so long as such Valid Business Reason exists, and during
such time the Company may not file a Registration Statement for securities to be issued and sold
for its own account or for that of any other Holders. Form S-3 Demands will not be deemed to be
Demand Requests as described in Section 1.2 hereof and Holders shall have the right to
request an unlimited number of Form S-3 Demands. Notwithstanding the foregoing, the Company shall
not be obligated to file more than one (1) Registration Statement on Form S-3 pursuant to this
Section 1.4 in any given six (6) month period.



7









 





     Section 1.5. Registration Procedures.



     (a) Obligations of the Company. Whenever registration of Registrable Securities is
required pursuant to this Agreement, the Company shall use its best efforts to effect the
registration and sale of such Registrable Securities in accordance with the intended method of
distribution thereof as promptly as possible, and in connection with any such request, the Company
shall, as expeditiously as possible:



          (i) Preparation
of Registration Statement; Effectiveness. Prepare and file with the SEC (in
any event not later than ninety (90) days after receipt of a Demand Request to file a Registration
Statement with respect to Registrable Securities), a Registration Statement on any form on which
the Company then qualifies, which counsel for the Company shall deem appropriate and pursuant to
which such offering may be made in accordance with the intended method of distribution thereof
(except that the Registration Statement shall contain such information as may reasonably be
requested for marketing or other purposes by the managing underwriter), and use its best efforts to
cause any registration required hereunder to become effective as soon as practicable after the
initial filing thereof and remain effective for a period of not less than one hundred and eighty
(180) days (or such shorter period in which all Registrable Securities have been sold in accordance
with the methods of distribution set forth in the Registration Statement); provided,
however, that, in the case of any registration of Registrable Securities on Form S-3 that
are intended to be offered on a continuous or delayed basis, such one hundred eighty (180) day
period shall be extended, if necessary, to keep the Registration Statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule under the
Securities Act, permits an offering on a continuous or delayed basis;



          (ii) Participation
in Preparation. Provide any Participating Holder, any underwriter
participating in any disposition pursuant to a Registration Statement and any attorney, accountant
or other agent retained by any Participating Holder or underwriter (each, an “Inspector” and,
collectively, the “Inspectors”), the opportunity to reasonably participate (including, but not
limited to, reviewing, commenting on and attending all meetings) in the preparation of such
Registration Statement, each prospectus included therein or filed with the SEC and each amendment
or supplement thereto;



          (iii) Due
Diligence. For a reasonable period prior to the filing of any Registration
Statement pursuant to this Agreement, make available for inspection and copying by the Inspectors
such financial and other information and books and records, pertinent corporate documents and
properties of the Company and its subsidiaries and cause the officers, directors, employees,
counsel and independent registered public accountants of the Company and its subsidiaries to
respond to such inquiries and to supply all information reasonably requested by any such Inspector
in connection with such Registration Statement, as shall be reasonably necessary, in the judgment
of the respective counsel referred to in Section 1.5(a)(ii), to conduct a reasonable
investigation within the meaning of the Securities Act;



          (iv) General
Notifications. Promptly notify in writing the Participating Holders, the sales
or placement agent, if any, therefor and the managing underwriter of the securities being sold, (A)
when such Registration Statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with



8









 







respect to any such Registration Statement or any post-effective amendment, when the same has
become effective, (B) when the SEC notifies the Company whether there will be a “review” of such
Registration Statement and (C) of any comments (oral or written) by the SEC and by the blue sky or
securities commissioner or regulator of any state with respect thereto or (D) of any request by the
SEC for any amendments or supplements to such Registration Statement or the prospectus or for
additional information;



          (v) 10b-5
Notification. Promptly notify in writing the Participating Holders, the sales or
placement agent, if any, therefor and the managing underwriter of the securities being sold
pursuant to any Registration Statement at any time when a prospectus relating thereto is required
to be delivered under the Securities Act upon discovery that, or upon the happening of any event as
a result of which, any prospectus included in such Registration Statement (or amendment or
supplement thereto) contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and the Company shall promptly prepare a
supplement or amendment to such prospectus and file it with the SEC (in any event no later than ten
(10) days following notice of the occurrence of such event to each Participating Holder, the sales
or placement agent and the managing underwriter) so that after delivery of such prospectus, as so
amended or supplemented, to the purchasers of such Registrable Securities, such prospectus, as so
amended or supplemented, shall not contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made;



          (vi) Notification
of Stop Orders; Suspensions of Qualifications and Exemptions. Promptly
notify in writing the Participating Holders, the sales or placement agent, if any, therefor and the
managing underwriter of the securities being sold of the issuance by the SEC of (A) any stop order
issued or threatened to be issued by the SEC or (B) any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and the
Company agrees to use commercially reasonable best efforts to (x) prevent the issuance of any such
stop order, and in the event of such issuance, to obtain the withdrawal of any such stop order and
(y) obtain the withdrawal of any order suspending or preventing the use of any related prospectus
or suspending the qualification of any Registrable Securities included in such Registration
Statement for sale in any jurisdiction at the earliest practicable date;



          (vii) Amendments
and Supplements; Acceleration. Prepare and file with the SEC such
amendments, including post-effective amendments to each Registration Statement as may be necessary
to keep such Registration Statement continuously effective for the applicable time period required
hereunder and, if applicable, file any Registration Statements pursuant to Rule 462(b) under the
Securities Act; cause the related prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then
in force) promulgated under the Securities Act; and comply with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended methods of disposition by
the sellers thereof set forth in such Registration Statement as



9









 








so amended or in such prospectus as so supplemented. If a majority in interest of the
Participating Holders so request, to request acceleration of effectiveness of the Registration
Statement from the SEC and any post-effective amendments thereto, if any are filed;
provided that at the time of such request, the Company does not in good faith believe that
it is necessary to amend further the Registration Statement in order to comply with the provisions
of this subparagraph. If the Company wishes to further amend the Registration Statement prior to
requesting acceleration, it shall have five (5) days to so amend prior to requesting acceleration;



          (viii) Copies. Furnish as promptly as practicable to each Participating Holder and Inspector
prior to filing a Registration Statement or any supplement or amendment thereto, copies of such
Registration Statement, supplement or amendment as it is proposed to be filed, and after such
filing such number of copies of such Registration Statement, each amendment and supplement thereto
(in each case including all exhibits thereto), the prospectus included in such Registration
Statement (including each preliminary prospectus) and such other documents as each such
Participating Holder or underwriter may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Participating Holder;



          (ix) Blue
Sky. Use commercially reasonable efforts to, prior to any public offering of the
Registrable Securities, register or qualify (or seek an exemption from registration or
qualifications) such Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any Participating Holder or underwriter may request, and to continue such
qualification in effect in each such jurisdiction for as long as is permissible pursuant to the
laws of such jurisdiction, or for as long as a Participating Holder or underwriter requests or
until all of such Registrable Securities are sold, whichever is shortest, and do any and all other
acts and things which may be reasonably necessary or advisable to enable any Participating Holder
to consummate the disposition in such jurisdictions of the Registrable Securities;



          (x) Other
Approvals. Use commercially reasonable efforts to obtain all other approvals,
consents, exemptions or authorizations from such governmental agencies or authorities as may be
necessary to enable the Participating Holders and underwriters to consummate the disposition of
Registrable Securities;



          (xi) Agreements. Enter into customary agreements (including any underwriting agreements in
customary form), and take such other actions as may be reasonably required in order to expedite or
facilitate the disposition of Registrable Securities;



          (xii) “Cold
Comfort” Letter. Obtain a “cold comfort” letter from the Company’s independent
public accountants in customary form and covering such matters of the type customarily covered by
“cold comfort” letters as the managing underwriter may reasonably request, and reasonably
satisfactory to a majority in interest of the Participating Holders;



          (xiii) Legal
Opinion. Furnish, at the request of any underwriter of Registrable Securities on
the date such securities are delivered to the underwriters for sale pursuant to such registration,
an opinion, dated such date, of counsel representing the Company for the purposes of such
registration, addressed to the Holders, and the placement agent or sales agent, if any, thereof and
the underwriters, if any, thereof, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such underwriter may reasonably



10









 







request and as are customarily included in such opinions, and reasonably satisfactory to a
majority in interest of the Participating Holders;



          (xiv) SEC
Compliance, Earnings Statement. Use its best efforts to comply with all applicable
rules and regulations of the SEC and make available to its shareholders, as soon as reasonably
practicable, but no later than fifteen (15) months after the effective date of any Registration
Statement, an earnings statement covering a period of twelve (12) months beginning after the
effective date of such Registration Statement, in a manner which satisfies the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;



          (xv) Certificates,
Closing. Provide officers’ certificates and other customary closing
documents;



          (xvi) NASD. Cooperate with each Participating Holder and each underwriter participating in
the disposition of such Registrable Securities and underwriters’ counsel in connection with any
filings required to be made with the NASD;



          (xvii) Road
Show. Cause appropriate officers as are requested by an managing underwriter to
participate in a “road show” or similar marketing effort being conducted by such underwriter with
respect to an underwritten public offering;



          (xviii) Listing. Use its best efforts to cause all such Registrable Securities to be listed
on each securities exchange on which similar securities issued by the Company are then listed and
if not so listed, to be eligible for quotation on the NASD automated quotation system;



          (xix) Transfer
Agent, Registrar and CUSIP. Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereto and a CUSIP number for all such Registrable
Securities, in each case, no later than the effective date of such registration;



          (xx) Private
Sales. Use its best efforts to assist a Holder in facilitating private sales of
Registrable Securities by, among other things, providing officers’ certificates and other customary
closing documents; and



          (xxi) Commercially
Reasonable Efforts. Use commercially reasonable efforts to take all other
actions necessary to effect the registration of the Registrable Securities contemplated hereby.



     (b) Seller Information. The Company may require each Participating Holder as to which
any registration of such Holder’s Registrable Securities is being effected to furnish the Company
with such information regarding such Participating Holder and such Participating Holder’s method of
distribution of such Registrable Securities as the Company may from time to time reasonably request
in writing.



     (c) Notice to Discontinue. Each Participating Holder whose Registrable Securities are
covered by a Registration Statement filed pursuant to this Agreement agrees that, upon receipt of
written notice from the Company of the happening of any event of the kind described in Section
1.5(a)(v), such Participating Holder shall forthwith discontinue the disposition of Registrable
Securities until such Participating Holder’s receipt of the copies of the supplemented



11









 







or amended prospectus contemplated by Section 1.5(a)(v) or until it is advised in
writing by the Company that the use of the prospectus may be resumed and has received copies of any
additional or supplemental filings which are incorporated by reference into the prospectus, and, if
so directed by the Company in the case of an event described in Section 1.5(a)(v), such
Participating Holder shall deliver to the Company (at the Company’s expense) all copies, other than
permanent file copies then in such Participating Holder’s possession, of the prospectus covering
such Registrable Securities which is current at the time of receipt of such notice. If the Company
shall give any such notice, the Company shall extend the period during which such Registration
Statement is to be maintained effective by the number of days during the period from and including
the date of the giving of such notice pursuant to Section 1.5(a)(v) to and including the
date when the Participating Holder shall have received the copies of the supplemented or amended
prospectus contemplated by, and meeting the requirements of, Section 1.5(a)(v).



     Section 1.6. Registration Expenses. Except as otherwise provided herein, all
Registration Expenses shall be borne by the Company. All Selling Expenses relating to Registrable
Securities registered shall be borne by the Participating Holders of such Registrable Securities
pro rata on the basis of the number of shares so registered.



     Section 1.7. Indemnification.



     (a) Indemnification by the Company. The Company agrees, notwithstanding termination
of this Agreement, to indemnify and hold harmless to the fullest extent permitted by law, each
Holder, each of its directors, officers, employees, advisors, agents and general or limited
partners (and the directors, officers, employees, advisors and agents thereof), their respective
Affiliates and each Person who controls (within the meaning of the Securities Act or the Exchange
Act) any of such Persons, and each underwriter and each Person who controls (within the meaning of
the Securities Act or the Exchange Act) any underwriter
(collectively, “Holder Indemnified
Parties”) from and against any and all losses, claims, damages, expenses (including, without
limitation, reasonable costs of investigation and fees, disbursements and other charges of counsel,
any amounts paid in settlement effected with the Company’s consent, which consent shall not be
unreasonably withheld or delayed and any costs incurred in enforcing the Company’s indemnification
obligations hereunder) or other liabilities (collectively,
“Losses”) to which any such Holder
Indemnified Party may become subject under the Securities Act, Exchange Act, any other federal law,
any state or common law or any rule or regulation promulgated thereunder or otherwise, insofar as
such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) are
resulting from or arising out of or based upon (i) any untrue, or alleged untrue, statement of a
material fact contained in any Registration Statement, prospectus or preliminary prospectus (as
amended or supplemented) or any document incorporated by reference in any of the foregoing or
resulting from or arising out of or based upon any omission, or alleged omission, to state therein
a material fact required to be stated therein or necessary to make the statements therein (in the
case of a prospectus, in light of the circumstances under which they were made), not misleading or
(ii) any violation by the Company of the Securities Act, Exchange Act, any other federal law, any
state or common law or any rule or regulation promulgated thereunder or otherwise incident to any
registration, qualification or compliance and in any such case, the Company will promptly reimburse
each such Holder Indemnified Party for any legal and any other Losses reasonably incurred in



12









 







connection with investigating, preparing or defending any such claim, loss, damage, liability,
action or investigation or proceeding (collectively, a
“Claim”); provided, however,
that the Company shall not be liable to any Holder Indemnified Party for any Losses that arise out
of or are based upon written information provided by a Holder Indemnified Party specifically
stating it is for use in the Registration Statement. Such indemnity obligation shall remain in
full force and effect regardless of any investigation made by or on behalf of the Holder
Indemnified Parties and shall survive the transfer of Registrable Securities by such Holder
Indemnified Parties.



     (b) Indemnification by Holders. In connection with any proposed registration in which
a Holder is participating pursuant to this Agreement, each such Holder shall furnish to the Company
in writing such information with respect to such Holder as the Company may reasonably request or as
may be required by law for use in connection with any Registration Statement or prospectus or
preliminary prospectus to be used in connection with such registration and each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, any underwriter retained by
the Company and their respective directors, officers, partners, employees, advisors and agents,
their respective Affiliates and each Person who controls (within the meaning of the Securities Act
or the Exchange Act) any of such Persons to the same extent as the foregoing indemnity from the
Company to the Holders as set forth in Section 1.7(a) (subject to the exceptions set forth
in the foregoing indemnity, the proviso to this sentence and applicable law), but only with respect
to any such information furnished in writing by such Holder expressly for use therein;
provided, however, that the liability of any Holder under this Section
1.7(b) shall be limited to the amount of the net proceeds received by such Holder in the
offering giving rise to such liability. Such indemnity obligation shall remain in full force and
effect regardless of any investigation made by or on behalf of the Holder Indemnified Parties
(except as provided above) and shall survive the transfer of Registrable Securities by such Holder.



     (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification
hereunder (the “Indemnified Party”) agrees to give prompt written notice to the indemnifying party
(the “Indemnifying Party”) after the receipt by the Indemnified Party of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof made in writing for
which the Indemnified Party intends to claim indemnification or contribution pursuant to this
Agreement; provided, however, that, the failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of any liability that it may have to the Indemnified Party
hereunder unless and to the extent such Indemnifying Party is materially prejudiced by such
failure. If notice of commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory to such
Indemnified Party. The Indemnified Party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of such counsel shall
be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the
Indemnifying Party fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment or (iii) the named parties to any such action
(including, but not limited to, any impleaded parties) reasonably believe that the representation
of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate
under applicable standards of professional conduct. In the case of clause (ii) above



13









 







and (iii) above, the Indemnifying Party shall not have the right to assume the defense of such
action on behalf of such Indemnified Party. No Indemnifying Party shall be liable for any
settlement entered into without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the written consent of the Indemnified Party,
effect the settlement of, compromise or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the Indemnified Party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (A) includes an unconditional
release of the Indemnified Party from all liability arising out of such action or claim and (B)
does not include a statement as to, or an admission of, fault, culpability or a failure to act by
or on behalf of any Indemnified Party. The rights afforded to any Indemnified Party hereunder
shall be in addition to any rights that such Indemnified Party may have at common law, by separate
agreement or otherwise.



     (d) Contribution. If the indemnification provided for in this Section 1.7
from the Indemnifying Party is unavailable or insufficient to hold harmless an Indemnified Party in
respect of any Losses referred to herein, then the Indemnifying Party, in lieu of indemnifying the
Indemnified Party, shall contribute to the amount paid or payable by the Indemnified Party as a
result of such Losses in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and the Indemnified Party, as well as any other relevant equitable
considerations. The relative faults of the Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged omission to state a
material fact, was made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the Indemnifying Party’s and Indemnified Party’s relative intent, knowledge,
access to information and opportunity to correct or prevent such action; provided,
however, that the liability of any Holder under this Section 1.7(d) shall be
limited to the amount of the net proceeds received by such Holder in the offering giving rise to
such liability. The amount paid or payable by a party as a result of the Losses or other
liabilities referred to above shall be deemed to include, subject to the limitations set forth in
Sections 1.7(a), 1.7(b) and 1.7(c), any legal or other fees, charges or
expenses reasonably incurred by such party in connection with any investigation or proceeding.



     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 1.7(d) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this
Section 1.7(d).



     Section 1.8. Rule 144 and Rule 144A; Other Exemptions. With a view to making available
to the Holders the benefits of Rule 144 and Rule 144A promulgated under the Securities Act and
other rules and regulations of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration, the Company covenants that it shall (i) file in a
timely manner all reports and other documents required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations promulgated by the SEC thereunder and (ii) take
such further action as each Holder may reasonably request (including,



14









 







but not limited to, providing any information necessary to comply with Rule 144 and Rule 144A, if
available with respect to resales of the Registrable Securities under the Securities Act), all to
the extent required from time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions provided by (x) Rule
144 and Rule 144A (if available with respect to resales of the Registrable Securities) under the
Securities Act, as such rules may be amended from time to time or (y) any other rules or
regulations now existing or hereafter adopted by the SEC. Upon the written request of a Holder,
the Company shall deliver to the Holder a written statement as to whether it has complied with such
requirements.



     Section 1.9. Certain Limitations On Registration Rights. No Holder may
participate in any Registration Statement hereunder unless such Holder completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements and agrees to sell such
Holder’s Registrable Securities on the basis provided in any underwriting agreement approved by the
Holder or Holders entitled hereunder to approve such arrangements; provided,
however, that no such Holder shall be required to make any representations or warranties to
the Company or the underwriters in connection with any such registration other than representations
and warranties as to (i) such Holder’s ownership of its Registrable Securities to be sold or
transferred, (ii) such Holder’s power and authority to effect such transfer and (iii) such matters
pertaining to compliance with securities laws as may be reasonably requested. Such Holders of
Registrable Securities to be sold by such underwriters may, at their option, require that any or
all of the representations and warranties by, and the other agreements on the part of the Company
to and for the benefit of such underwriters, shall also be made to and for the benefit of such
Holders and that any or all of the conditions precedent to the obligations of the underwriters
under the underwriting agreement be conditions precedent to the obligations of the Holders.



     Section 1.10. Limitations on Subsequent Registration Rights. The Company agrees that
from and after the date of this Agreement, it shall not, without the prior written consent of the
Holders of at least 51% of the Registrable Securities then outstanding, enter into any agreement
(or amendment or waiver of the provisions of any agreement) with any holder or prospective holder
of any securities of the Company that would grant such holder registration rights that are more
favorable, pari passu or senior to those granted to the Purchaser hereunder.



     Section 1.11. Transfer of Registration Rights. The rights of a Holder hereunder may be
transferred or assigned in connection with a transfer of Registrable Securities to (i) any
Affiliate of a Holder, (ii) any subsidiary, parent, partner, limited partner, shareholder or member
of a Holder or (iii) any party or parties to a transaction or series of related transactions who,
after such transaction, holds or collectively hold at least 1,000,000 shares of Registrable
Securities (as adjusted for any stock dividends, stock splits, combinations and reorganizations and
similar events). Notwithstanding the foregoing, such rights may only be transferred or assigned
provided that all of the following additional conditions are satisfied: (a) such transfer or
assignment is effected in accordance with applicable securities laws; (b) such transferee or
assignee agrees in writing to become subject to the terms of this Agreement; and (c) the Company is
given written notice by such Holder of such transfer or assignment, stating the name and address of
the transferee or assignee and identifying the Registrable Securities with respect to which such
rights are being transferred or assigned.



15









 





ARTICLE II




COVENANTS OF THE COMPANY




     The Company hereby covenants with the Purchaser as follows:



     Section 2.1 Rights to Appoint Directors; Notice. For so long as any shares of the
Series A Preferred Stock originally issued under the Purchase Agreement remain outstanding, the
holders of a majority-in-interest of the shares of the Series A Preferred Stock originally issued
under the Purchase Agreement then outstanding shall have the right to designate all the Persons to
serve as directors on the Board of Directors of the Company and its subsidiaries. If the holders
of the shares of the Series A Preferred Stock originally issued under the Purchase Agreement then
outstanding choose not to designate any directors, the holders of a majority-in-interest of the
shares of the Series A Preferred Stock originally issued under the Purchase Agreement then
outstanding may appoint a designee to serve as an observer at all meetings of the Company’s or its
subsidiaries’ Board of Directors and committees thereof, and such designee will be (a) entitled to
all notices of meetings of the Board of Directors and committees thereof and all instruments in
which action is proposed to be taken by written consent in lieu of a meeting, each as and when
provided to the directors, and (b) furnished with the materials furnished to the directors for such
meetings or written consents in lieu of a meeting. Notwithstanding anything herein to the
contrary, for so long as the Purchaser owns any of the shares of the Series A Preferred Stock then
issued and outstanding, the directors or any committee of directors of the Company or its
subsidiaries shall not hold a meeting or take any action by written consent, unless written notice
thereof, which contains a reasonable description of the matters to be acted upon, is sent to the
Purchaser at least ten calendar days in advance of the action proposed to be taken.



     Section 2.2 Protective Provisions. Unless the directors designated by the holders of
the shares of the Series A Preferred Stock originally issued under the Purchase Agreement control
the Board of Directors of the Company with respect to all actions, for so long as any shares of the
Series A Preferred Stock originally issued under the Purchase Agreement remain outstanding, the
Company shall not, and the Company shall cause its subsidiaries not to, without the approval of the
holders of at least 75% of the shares of the Series A Preferred Stock originally issued under the
Purchase Agreement then outstanding:



     (a) amend the charter or bylaws in any manner that would alter or change any of the rights,
preferences, privileges or restrictions of the Series A Preferred Stock or the Preferred Stock
Conversion Shares (as defined in the Purchase Agreement);



     (b) reclassify any outstanding securities into securities having rights, preferences or
privileges senior to, or on a parity with, the Series A Preferred Stock;



     (c) authorize or issue any additional shares of capital stock (other than to Purchaser in
accordance with this Agreement or the Purchase Agreement);



     (d) merge or consolidate with or into any corporation or other Person;



16









 





     (e) sell all or substantially all their respective assets in a single transaction or series of
related transactions;



     (f) license all or substantially all of their respective intellectual property in a single
transaction or series of related transactions;



     (g) liquidate or dissolve; or



     (h) alter any rights of the holders of the Series A Preferred Stock or change the size of the
Board of Directors.



     (i) declare or pay any dividends (other than dividends payable to the Company or its
subsidiaries) on or declare or make any other distribution, directly or indirectly, on account of
any shares of Common Stock now or hereafter outstanding;



     (j) repurchase any outstanding shares of capital stock (other than repurchases or redemptions
of the Series A Preferred Stock in accordance with its terms);



     (k) approve or modify by 10% or more the aggregate amount of any annual or other operating or
capital budget, or approve or modify by 50% or more any single line item of any such operating or
capital budget;



     (l) increase the salary of any officer or employee or pay any bonus to any officer, director
or employee not contemplated in a budget or bonus plan approved by directors designated by the
holders of the shares of the Series A Preferred Stock originally issued under the Purchase
Agreement then outstanding;



     (m) retain, terminate or enter into any salary or employment negotiations or employment
agreement with any employee or any future employee;



     (n) incur indebtedness (other than trade payables) or enter into contracts or leases that
require payments in excess of $5,000 in the aggregate;



     (o) make or incur any single capital expenditure;



     (p) award stock options, stock appreciation rights or similar employee benefits or determine
vesting schedules, exercise prices or similar features;



     (q) make any material change in the nature of its business or enter into any new line of
business, joint venture or similar arrangement;



     (r) pledge its assets or guarantee the obligations of any other individual or entity;



     (s) recommend approval of any new equity incentive plan;



     (t) form or acquire any subsidiary, joint venture or similar business entity; or



17









 





     (u) directly or indirectly enter into, or permit to exist, any material transaction with any
affiliate of the Company, any Founder or any affiliate of a Founder, or transfer, pay, loan or
otherwise obligate the Company to give cash, services, assets or other items of value to
affiliates, Founders or any affiliate of a Founder or commit to do any of the preceding after the
date hereof, except for employee compensation or for reimbursement of ordinary business expenses.



     Section 2.3 Budget; Other Information. Unless the directors designated by the
holders of the shares of the Series A Preferred Stock originally issued under the Purchase
Agreement control the Board of Directors of the Company with respect to all actions, for so long as
any shares of the Series A Preferred Stock originally issued under the Purchase Agreement remain
outstanding, the Company will provide to the holders of the Series A Preferred Stock originally
issued under the Purchase Agreement the proposed budget for each fiscal year at least sixty (60)
days prior to the start of such fiscal year and such budget shall be subject to the approval of the
holders of the majority-in-interest of the shares of the Series A Preferred Stock originally issued
under the Purchase Agreement then outstanding. The Company also will provide to the Purchaser all
other information relating to the financial condition, business, prospects, or corporate affairs of
the Company as updated or as the Purchaser may from time to time reasonably request.



     Section 2.4 Inspection, Consultation and Advice. The Company shall permit the
Purchaser and such Persons as it may designate, at the Purchaser’s expense, to visit and inspect
any of the properties of the Company, examine their books and take copies and extracts therefrom,
discuss the affairs, finances and accounts of the Company with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with the Purchaser and
its designees such affairs, finances and accounts), and consult with and advise the management of
the Company as to the Company’s affairs, finances and accounts, all at reasonable times and upon
reasonable notice.



ARTICLE III




FOUNDER AND COMPANY COVENANTS




     Section 3.1
Right of First Refusal. (a) If a Founder (the
“Offering Founder”)
proposes to make or allow a Transfer (as defined herein) to any Person (other than a
Transfer related to an Involuntary Transfer, which is covered by Section 3.2 below), of all
or any part of the securities of the Company now owned or hereafter acquired by him, her or it
(“Option Shares”), then the Offering Founder
shall give written notice thereof (the “Notice”) to
the Purchaser. The Notice shall contain an offer to sell the Option Shares to the Purchaser in
accordance with the terms of this Agreement, and shall, as applicable:




	 	(i)	 	State the name and address of the proposed transferee;
	 
	 	(ii)	 	State the amount, type and fair market value of the
consideration to be received for the Option Shares and the other terms of the
proposed Transfer as are necessary to fully understand the terms of the offer
to Transfer; and




18









 






	 	(iii)	 	Include a copy of the executed agreement, if any, between the
Offering Founder and any such third party purchaser covering the Option Shares.





     (b) For
15 calendar days after receipt of the Notice (the “Offer
Period”), the Purchaser shall
have the right, but shall not be obligated, to elect to purchase all or any portion of the Option
Shares. This right may be exercised by the Purchaser by giving written notice of exercise to the
Offering Founder before expiration of the Offering Period.



     (c) If the Purchaser elects to purchase all or a portion of the Option Shares, the purchase of
the Option Shares so elected to be purchased shall be consummated within a period of 30 calendar
days following the expiration of the Offering Period. The Offering Founder shall have the right to
Transfer all of the Option Shares not so elected to be purchased by the Purchaser pursuant to this
Section 3.1 to the transferee named in the Notice upon the terms stated therein. Any
Option Shares not so Transferred, and any Option Shares reacquired by the Offering Founder
subsequent to its Transfer, shall be subject to the provisions and conditions of this Agreement.



     (d) The purchase price of the Option Shares purchased by the Purchaser pursuant to the terms
of this Section 3.1 shall be the same price as offered by the proposed transferee as
described in the Notice, or an equivalent amount of cash as reasonably determined by the parties
(unless there is a dispute as to the determination of such amount, in which case it shall be
determined in good faith by a majority of the directors).



     (e) For purposes of this Agreement, “Transfer” and any derivations thereof shall mean a
conveyance, sale, disposition, pledge, hypothecation or other transfer. For purposes of this
Agreement, when “Transfer” or any derivations thereof is used in relation to Company securities, it
shall include the sale, conveyance, disposition, pledge or other transfer of any rights, voting
powers or other interests in such securities.



     (f) Notwithstanding the foregoing, shares of capital stock of the Company beneficially owned
by Founders that are used to settle obligations of the Company or its subsidiaries shall be
excluded from the provisions of this Section 3.1 to the extent that Purchaser is provided
with reasonable written evidence that said shares are being used for such purpose.



     Section 3.2 Option to Purchase on Involuntary Transfers.



     (a) An “Involuntary Transfer” shall mean:



               (i) a Transfer to the transferor Founder’s spouse or former spouse, or heirs of such spouse or
former spouse, in connection with a division of their community or other property upon divorce or
the death of such spouse;



               (ii) a general assignment for the benefit of creditors, or any assignment to a creditor
resulting from the creditor’s foreclosure upon or execution against such shares;



               (iii) a transferor Founder (A) voluntarily commences any proceeding or files any petition
seeking liquidation, reorganization or other relief under any federal, state or



19









 








foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (B)
applies for, or consents to, the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for such Founder or for a substantial part of his assets, (B) files
an answer admitting the material allegations of a petition filed against it in any such proceeding;



               (iv) the entry of a judicial order granting the relief requested by the petitioner in an
involuntary proceeding filed against the transferor Founder; or



               (v) any other transfer by operation of law or by foreclosure of any security interest,
excluding the death of a Founder.



     (b) If an Involuntary Transfer occurs, the Founder subject to such Involuntary Transfer (or
the Person receiving such shares upon an Involuntary Transfer, as applicable) (each the
“Transferring Person”) shall give written
notice thereof (the “Transfer Notice”) to the Purchaser.
The Transfer Notice shall specify the Involuntary Transfer and contain an offer to sell the
Transferring Person’s shares (or the portion of the shares subject to the Involuntary Transfer),
referred to as the “Subject Shares”) to the Purchaser in accordance with the terms of this
Agreement.



     (c) The Purchaser shall have the option to acquire the Subject Shares according to procedures
comparable to those contained in Section 3.1, with the notice of exercise of such option
being given to the Transferring Person.



     (d) If the Purchaser elects to purchase all or a portion of the Subject Shares, the purchase
of the Subject Shares so elected to be purchased shall be consummated within a period of 30
calendar days following the expiration of the Offering Period.



     (e) The Transferring Person shall continue to hold the Subject Shares not so elected to be
purchased by the Purchaser pursuant to this Section 3.2.



     (f) The purchase price per share of the Subject Shares elected to be purchased by the
Purchaser pursuant to the terms of this Section 3.2 shall be the average closing price per
share of Company Common Stock, as reported by the exchange or quotation system on which shares of
Company Common Stock are then listed or quoted, for the ten (10) consecutive trading days three
trading days immediately prior to their purchase by the Purchaser; provided, however, if Company
Common Stock is not then listed or quoted, the purchase price shall be determined by mutual
agreement of the Purchaser and the Transferring Person.



     Section 3.3 Lock-Up. Notwithstanding anything herein to the contrary, each Founder
hereby severally agrees not to, directly or indirectly, sell, contract to sell, make any short sale
of, loan, grant any option for the purchase of, mortgage, hypothecate or otherwise transfer or
dispose of any of the securities of the Company now beneficially owned or hereafter acquired by
such Founder until the fifth (5th) anniversary of the date of this Agreement without the
prior written consent of the Purchaser, which consent may be withheld in its sole discretion;
provided, however, that on the third (3rd) anniversary of the date of
this Agreement, one-half of the securities of the Company beneficially owned by such Founder on
such date shall be released



20









 







from the provisions of this Section 3.3; provided further, in the event that
a Founder is terminated otherwise than for “cause” (as defined in that certain Employment Agreement
by and between the Company and such Founder), such Founder shall be entitled to Transfer, publicly
or otherwise, in any given month, an aggregate of ten percent (10%) of the securities beneficially
owned by such Founder (calculated at the date of this Agreement and adjusted for stock splits,
combinations and similar events), subject to applicable securities laws. Notwithstanding the
foregoing, shares of Common Stock beneficially owned by Founders that are issued to Dolman
Technology Capital, Inc. pursuant to the exercise of those certain Warrants, dated as of June 22,
2004, by and between Dolman Technology Capital, Inc. and such Founder, shall be excluded from the
provisions of this Section 3.3; provided that such Warrants shall not be amended, modified
or altered in manner whatsoever without the prior written consent of the Purchaser nor shall a
settlement of such Warrants be effected on any terms different than those contained in such
Warrants.



ARTICLE IV




GENERAL PROVISIONS




     Section 4.1
Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties in respect of the subject matter hereof and supersedes all prior
understandings, agreements or representations by or among the parties, written or oral, to the
extent they relate in any way to the subject matter hereof.



     Section 4.2
Successors and Assigns. All of the terms, agreements, covenants,
representations, warranties and conditions of this Agreement are binding upon, and inure to the
benefit of and are enforceable by, the parties and their respective successors, legal
representatives, heirs and permitted assigns.



     Section 4.3.
Notices. All notices, requests and other communications provided for or
permitted to be given under this Agreement must be in writing and shall be given by personal
delivery, by certified or registered United States mail (postage prepaid, return receipt
requested), by a nationally recognized overnight delivery service for next day delivery, or by
facsimile transmission, as follows (or to such other address as any party may give in a notice
given in accordance with the provisions hereof):


If to the Purchaser:



Radical Holdings LP

c/o Radical Management LLC

5424 Deloache Avenue

Dallas, Texas 75220

Fax: (214) 696-6310

Attn: President




21









 







With a copy to (which does not constitute notice):



Robert S. Hart

5424 Deloache Avenue

Dallas, Texas 75220

Fax: (214) 696-3380



and



Jenkens & Gilchrist, P.C.

1445 Ross Avenue, Suite 3700

Dallas, Texas 75202

Phone: (214) 855-4500

Fax: (214) 855-4300

Attn: Robert W. Dockery, Esq.



If to the Company:



Immediatek, Inc.

2435 North Central Expressway, Suite 1610

Richardson, Texas 75080

Phone: (972) 852-2876

Fax: (972) 722-0818

Attn: Zach Bair, President



With a copy to (which does not constitute notice):



Vial, Hamilton, Koch & Knox, LLP

1700 Pacific Avenue, Suite 2800

Dallas, Texas 75201

Phone: (214) 712-4441

Fax: (214) 712-4402

Attn: Craig G. Ongley, Esq.



If to the Founders:



Zach Bair

2435 North Central Expressway, Suite 1200

Richardson, Texas 75080

Fax: (972) 722-0818



Paul Marin

2435 North Central Expressway, Suite 1200

Richardson, Texas 75080

Fax: (972) 722-0818




22









 







With a copy to (which does not constitute notice):



Vial, Hamilton, Koch & Knox, LLP

1700 Pacific Avenue, Suite 2800

Dallas, Texas 75201

Phone: (214) 712-4441

Fax: (214) 712-4402

Attn: Craig G. Ongley, Esq.




     All notices, requests or other communications will be effective and deemed given only as follows:
(i) if given by personal delivery, upon such personal delivery, (ii) if sent by certified or
registered mail, on the fifth business day after being deposited in the United States mail, (iii)
if sent for next day delivery by overnight delivery service, on the date of delivery as confirmed
by written confirmation of delivery, (iv) if sent by facsimile, upon the transmitter’s confirmation
of receipt of such facsimile transmission, except that if such confirmation is received after 5:00
p.m. (in the recipient’s time zone) on a business day, or is received on a day that is not a
business day, then such notice, request or communication will not be deemed effective or given
until the next succeeding business day. Notices, requests and other communications sent in any
other manner, including by electronic mail, will not be effective.



     Section 4.4 Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Texas, without giving effect to any choice of law
principles.



     Section 4.5 Submission to Jurisdiction; Waiver of Jury Trial.



     (a) Submission to Jurisdiction. Any action, suit or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this Agreement shall
only be brought in any federal court located in Dallas County, Texas or any Texas state court
located in Dallas County, Texas, and each party consents to the exclusive jurisdiction and venue of
such courts (and of the appropriate appellate courts therefrom) in any such action, suit or
proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it
may now or hereafter have to the laying of the venue of any such action, suit or proceeding in any
such court or that any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum. Process in any such action, suit or proceeding may be served on any
party anywhere in the world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, service of process on such party as provided in Section 4.3 shall
be deemed effective service of process on such party.



     (b) Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES THAT ANY DISPUTE THAT MAY ARISE OUT
OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE SUCH PARTY HEREBY EXPRESSLY WAIVES ITS RIGHT TO JURY TRIAL OF ANY DISPUTE BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATING HERETO OR ANY DEALINGS AMONG THEM
RELATING TO THE MATTERS CONTEMPLATED HEREIN. THE SCOPE OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY
AND ALL ACTIONS, SUITS AND PROCEEDINGS



23









 







THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT AND CONTEMPLATED HEREBY, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH
PARTY HEREBY REPRESENTS THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT IN THE EVENT OF ANY ACTION,
SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) SUCH PARTY UNDERSTANDS, AND WITH THE
ADVICE OF COUNSEL HAS CONSIDERED, THE IMPLICATIONS OF THIS WAIVER, (iii) SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND REPRESENTATIONS IN THIS SECTION 4.5(b).



     Section 4.6 Headings. The article and section headings contained in this Agreement
are inserted for convenience only and will not affect in any way the meaning or interpretation of
this Agreement.



     Section 4.7 Amendments. This Agreement may be amended only by a written instrument
signed by the Company, the Purchaser and the Holders of at least a majority of the Registrable
Securities, except for Article III, which may be amended only by a written instrument
signed by the Company, the Purchaser and the Founders.



     Section 4.8 Extensions; Waivers. Any party may, for itself only, (a) extend the time
for the performance of any of the obligations of any other party under this Agreement, (b) waive
any inaccuracies in the representations and warranties of any other party contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any such extension or waiver will be
valid only if set forth in a writing signed by the party to be bound thereby. No waiver by any
party of any default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation
or breach of warranty or covenant hereunder or affect in any way any rights arising because of any
prior or subsequent such occurrence. Neither the failure nor any delay on the part of any party to
exercise any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right or remedy preclude any other or further exercise of the
same or of any other right or remedy.



     Section 4.9 Severability. The provisions of this Agreement will be deemed severable
and the invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof; provided that if any provision of this Agreement, as
applied to any party or to any circumstance, is judicially determined not to be enforceable in
accordance with its terms, the parties agree that the court judicially making such determination
may modify the provision in a manner consistent with its objectives such that it is enforceable,
and/or to delete specific words or phrases, and in its modified form, such provision will then be
enforceable and will be enforced.



24









 





     Section 4.10 Counterparts; Effectiveness. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original but all of which together will
constitute one and the same instrument. This Agreement will become effective when one or more
counterparts have been signed by each of the parties and delivered to the other parties. For
purposes of determining whether a party has signed this Agreement or any document contemplated
hereby or any amendment or waiver hereof, only a handwritten original signature on a paper document
or a facsimile copy of such a handwritten original signature shall constitute a signature,
notwithstanding any law relating to or enabling the creation, execution or delivery of any contract
or signature by electronic means.



     Section 4.11 Specific Performance; Remedies. Each party acknowledges and agrees that
the other parties would be damaged irreparably if any provision of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. Accordingly, the
parties will be entitled to an injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically this Agreement and its provisions in any action or
proceeding instituted in any court of the United States or any state thereof having jurisdiction
over the parties and the matter, in addition to any other remedy to which they may be entitled, at
law or in equity. Except as expressly provided herein, the rights, obligations and remedies
created by this Agreement are cumulative and in addition to any other rights, obligations or
remedies otherwise available at law or in equity. Except as expressly provided herein, nothing
herein will be considered an election of remedies.



     Section 4.12 Construction. This Agreement has been freely and fairly negotiated
among the parties. If an ambiguity or question of intent or interpretation arises, this Agreement
will be construed as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party because of the authorship of any provision of this
Agreement. Any reference to any law will be deemed to refer to such law as in effect on the date
hereof and all rules and regulations promulgated thereunder, unless the context requires otherwise.
The words “include,” “includes,” and “including” will be deemed to be followed by “without
limitation.” Pronouns in masculine, feminine and neuter genders will be construed to include any
other gender, and words in the singular form will be construed to include the plural and vice
versa, unless the context otherwise requires. The words “this Agreement,” “herein,” “hereof,”
“hereby,” “hereunder,” and words of similar import refer to this Agreement as a whole and not to
any particular subdivision unless expressly so limited. The parties intend that each
representation, warranty and covenant contained herein will have independent significance. If any
party has breached any covenant contained herein in any respect, the fact that there exists another
covenant relating to the same subject matter (regardless of the relative levels of specificity)
which the party has not breached will not detract from or mitigate the fact that the party is in
breach of the first covenant.



SIGNATURE PAGE FOLLOWS




25









 





     IN WITNESS WHEREOF, the parties hereto have executed this Investor’s Rights Agreement as of
the date first above written.



	 	 	 	 	 	 	 	 	 
	COMPANY:	 	IMMEDIATEK, INC.	 	 
	 	 	a Nevada corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Name: Zach Bair	 	 
	 	 	Title: President & Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	PURCHASER:	 	RADICAL HOLDINGS LP	 	 
	 	 	a Texas limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Radical Management LLC,	 	 
	 	 	 	 	a Texas limited liability company,	 	 
	 	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Mark Cuban	 	 
	 

	 	 	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	FOUNDERS:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Zach Bair	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Paul Marin	 	 


















 






EXHIBIT E

TO

SECURITIES PURCHASE AGREEMENT




FORM OF ESCROW AGREEMENT




(Attached)
















 






ESCROW AGREEMENT




     THIS
ESCROW AGREEMENT (this “Agreement”), dated effective
___, 2006, is entered into by
and among Immediatek, Inc., a Nevada corporation (the “Company”), Radical Holdings LP, a
Texas limited partnership (“Radical”), and Guaranty Bank (“Escrow Agent”).



RECITALS




     A. The Company and Radical are parties to that certain Securities Purchase Agreement, dated as
of January    , 2006 (the “Purchase Agreement”), pursuant to which the Company has agreed to
issue and sell, and Radical has agreed to purchase, shares of Series A Convertible Preferred Stock
of the Company (the “Series A Shares”) upon the terms and subject to the conditions set
forth in the Purchase Agreement;



     B. The Purchase Agreement provides that $2,770,000 of the aggregate purchase price for the
Series A Shares shall be deposited with the Escrow Agent and disbursed in accordance with the terms
and subject to the conditions set forth in this Agreement;



     C. Escrow Agent has agreed to accept and hold the Escrow Funds (as defined herein) and to
disburse the Escrow Funds in accordance with the terms and subject to conditions hereof; and



     D. It is a condition to the purchase and sale of the Series A Shares pursuant to the Purchase
Agreement that the Company, Radical and Escrow Agent enter into this Agreement.



AGREEMENT




     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto (jointly the “Parties” and individually a
“Party”), for themselves, their successors and assigns, hereby agree as follows:



     1. Definitions. The following terms shall have the following meanings herein:



          “Action
Date” shall mean                     , 2006.




          “Closing Funds” shall mean $2,470,000.




          “Escrow Account” shall mean the non-interest-bearing account established by Escrow Agent for
deposit of the Escrow Funds, which shall be titled “Guaranty Bank, as Escrow Agent for Immediatek.”




          “Escrow Funds” shall mean, collectively, the Closing Funds and the Final Funds.




          “Escrow Period” shall mean the period commencing on the date hereof and ending on the date on
which all the Escrow Funds have been disbursed in accordance with Section 4 hereof.




          “Final Funds” shall mean $300,000.




ESCROW AGREEMENT - PAGE 1









 





          “Representative” shall mean the President or any Vice President of Radical Management, LLC,
the sole general partner of Radical, or a successor Representative as selected by Radical
Management, LLC.




          “Written Direction” shall mean a written direction executed by Representative, directing
Escrow Agent to disburse all or a portion of the Escrow Funds or to take or refrain from taking an
action pursuant hereto.




     2. Appointment of and Acceptance by Escrow Agent. The Company and Radical hereby
appoint Escrow Agent to serve as escrow agent hereunder. Escrow Agent hereby accepts such
appointment and, upon receipt by check or wire transfer of the Escrow Funds in accordance with
Section 3 below, agrees to hold, deposit and disburse the Escrow Funds in accordance with the
terms, and subject to conditions, of this Agreement.



     3. Deposit of Escrow Funds. Radical shall deposit all Escrow Funds with Escrow Agent
by check or by wire transfer to the following account:


Guaranty Bank

ABA# 314970664

Credit Account # [Account Number]

Attn: Cass Robinson

Immediatek Escrow




     4. Disbursement of Escrow Funds.



          a. Prior to the distribution of the Escrow Funds in accordance with this Section 4, neither
the Company nor its officers shall be entitled to any Escrow Funds and no amounts deposited in the
Escrow Account shall become the property of, or become subject to the debts of, the Company, the
officers thereof or any other person.




          b. If, on or before the Action Date, all items set forth in Schedule A to this
Agreement have been completed to Radical’s reasonable satisfaction, the Representative shall
deliver to Escrow Agent a Written Direction to disburse the Closing Funds to the Company. The
Written Direction may include a breakdown of the amount to be disbursed to third parties for fees
and expenses and the amount to be disbursed to the Company. The Company hereby covenants and
agrees to use the Closing Funds disbursed to the Company in the following manner and priority:




               (1) the Company shall retain $750,000 of the Closing Funds for general working capital to be
utilized for the permitted purposes set forth in Schedule B to this Agreement;



               (2) payment in full of all indebtedness, obligations and liabilities (contingent or
otherwise), including, without limitation, accounts payable and taxes owing, of the Company and its
subsidiaries that remain outstanding or exist following the date hereof, including, without
limitation, any and all amounts to be paid under those certain Satisfaction Agreements made by and
between the Company or its subsidiaries and third-parties, copies of which were previously
delivered to Radical on or prior to the date hereof, and the resolution and satisfaction of any and
all claims, whether past or present;



ESCROW AGREEMENT - PAGE 2









 





               (3)
payments to all holders of subscriptions, warrants, options, convertible or exchangeable
securities or other rights (contingent or other) to purchase or otherwise acquire equity securities
or equity related securities of the Company or its subsidiaries necessary to provide for the full
and final cancellation, termination and release of such subscriptions, warrants, options,
convertible or exchangeable securities and rights, including, without limitation, any and all
amounts to be paid under those certain Cancellation Agreements made by and between the Company or
its subsidiaries and third-parties, copies of which were previously delivered to Radical on or
prior to the date hereof;



               (4) payment in full of all expenses, costs, fees and other charges incurred by the Company and
its subsidiaries to complete the items set forth in Schedule A attached hereto, including,
without limitation, payment of all fees and expenses incurred by the Company in connection with the
negotiation and documentation of this Agreement, the Purchase Agreement and the documents and
transactions contemplated thereby, including the reasonable fees and disbursements of the Company’s
counsel, and the fees and expenses of Ernst & Young LLP in rending its valuation opinion; and



               (5) pursuant to an appropriate resolution of the Board of Directors of the Company, an amount
(the “Dividend Amount”) equal to the Closing Funds less the total amounts paid or
payable pursuant to the foregoing items (1) through (4) of this Section 4.b., shall be paid over to
                     (the “Payment Agent”), who will serve as the Company’s dividend payment
agent to effect the payment of the Dividend Amount to the holders of the outstanding Common Stock
of record as of the record date set forth in such resolution of the Board of Directors, pro rata in
accordance with the number of shares held by each holder. The Company and the Payment Agent shall
execute and deliver an appropriate dividend payment agent agreement, in a form reasonably
acceptable to Radical.



          c. If all items set forth in Schedule A to this Agreement have not been completed to
Radical’s reasonable satisfaction on or prior to the Action Date, the Representative shall be
entitled to, and shall so, deliver to Escrow Agent a Written Direction to disburse all the Escrow
Funds to Radical. The disbursement of the Escrow Funds to Radical pursuant to such Written
Direction shall constitute a partial redemption of the Series A Shares pursuant to the terms of the
Series A Convertible Preferred Stock of the Company.




          d. If (i) any representation or warranty made, or deemed made, by or on behalf of the Company,
Zach Bair (“Bair”) or Paul Marin (“Marin”) in the Purchase Agreement, that certain
Investor’s Rights Agreement, dated                     , 2006 (the “Rights Agreement”), by and among
the Company, Radical, Bair and Marin, or any other document, instrument or agreement contemplated
by the Purchase Agreement or the Rights Agreement to which the Company, Bair or Marin is party, or
any amendment or modification thereof or waiver thereunder, or in any report, certificate,
financial statement or other document furnished pursuant to, or in connection with, the Purchase
Agreement, Rights Agreement or any other document, instrument or agreement contemplated by the
Purchase Agreement or the Rights Agreement, or any amendment or modification thereof or waiver
thereunder, shall prove to have been materially incorrect when made or deemed made; (ii) the
Company, Bair or Marin shall fail to observe or perform any covenant, condition or agreement
contained in the Purchase Agreement, Rights Agreement or any other document, instrument or
agreement contemplated by the Purchase Agreement or the Rights Agreement, on or prior to the first
anniversary of the date of this Agreement; or (iii) any claims or liabilities (whether
accrued, absolute, contingent or otherwise, known or unknown, and whether due or to become due
or asserted or unasserted) arise or are made against the Company or its subsidiaries on or prior to
the first anniversary of the date of this Agreement, the Representative shall be entitled to, and
shall so, deliver to Escrow Agent a Written Direction to disburse all the Escrow Funds then in the
Escrow Account to Radical. If after any disbursements to Radical provided for in the foregoing




ESCROW AGREEMENT - PAGE 3









 





sentences of this Section 4.d. are made and after the first anniversary of the date of this
Agreement, any Escrow Funds remain in the Escrow Account, the Representative shall deliver to
Escrow Agent a Written Direction to disburse such funds to the Company.



          e. Notwithstanding the foregoing, the Representative may, from time to time and in its sole
discretion, provide a Written Direction to the Escrow Agent to disburse Closing Funds to the
Company, which such funds will be used to fund the Company’s operations. Any amounts disbursed to
the Company pursuant to this Section 4.e. shall reduce the amount set forth in Section 4.b.(1).




     5. Disbursement to Court. If, at any time, any dispute exists between the Company and
Radical with respect to the holding or disposition of any portion of the Escrow Funds or any other
obligations of Escrow Agent hereunder, or if, at any time, Escrow Agent is unable to determine, to
Escrow Agent’s sole satisfaction, the proper disposition of any portion of the Escrow Funds or
Escrow Agent’s proper actions with respect to its obligations hereunder, or if the Representative
has not appointed a successor Escrow Agent to act hereunder within thirty (30) days following the
furnishing by Escrow Agent of a notice of resignation pursuant to Section 7 hereof, then Escrow
Agent may, in its sole discretion, take either or both of the following actions:



          a. suspend the performance of any of its obligations hereunder until such dispute or
uncertainty is resolved to the sole satisfaction of Escrow Agent or until a successor Escrow Agent
is appointed (as the case may be); provided, however, that Escrow Agent shall continue to hold the
Escrow Funds in accordance with Section 6 hereof; and/or




          b. petition (by means of an interpleader action or any other appropriate method) any court of
competent jurisdiction in Dallas County, Texas, for instructions with respect to such dispute or
uncertainty and pay into such court all Escrow Funds in the Escrow Account for holding and
disposition in accordance with the instructions of such court.




          Escrow Agent shall have no liability to any person with respect to any such suspension of
performance or disbursement into court, specifically including any liability or claimed liability
that may arise, or be alleged to have arisen, out of or as a result of any delay in the
disbursement of funds held in the Escrow Account or any delay in or with respect to any other
action required or requested of Escrow Agent.




          Notwithstanding anything to contrary herein, Escrow Agent shall disburse, and shall have no
liability whatsoever for disbursing, the Escrow Funds in accordance with a Written Direction
delivered to the Escrow Agent by the Representative, even if a dispute exists between the Company
and Radical prior to, during and after such Written Direction.




     6. Deposit of Escrow Funds. Escrow Agent shall deposit the Escrow Funds only in a
non-interest bearing account at Guaranty Bank that is insured to the fullest extent permitted by
law by the Federal Deposit Insurance Corporation.



     The deposit of the Escrow Funds shall be made in the name of Escrow Agent, as Escrow Agent
under the terms hereof. If the Escrow Funds are received by Escrow Agent for deposit into the
Escrow Account after 2:00 p.m. Dallas, Texas time, Escrow Agent shall not be required to deposit
such funds or to effect such deposit instructions until the next day upon which Guaranty Bank is
open for business.



     7. Resignation or Removal of Escrow Agent. Escrow Agent may resign from the
performance of its duties hereunder at any time by giving ten (10) business days’ prior written
notice to the



ESCROW AGREEMENT - PAGE 4








 





Representative and the Company; or Escrow Agent may be removed, with or without cause, by the
Representative, acting by furnishing a Written Direction to Escrow Agent, at any time by the giving
of ten (10) business days’ prior written notice to Escrow Agent. Such resignation or removal shall
take effect upon the appointment of a successor Escrow Agent as provided below. Upon any such
notice of resignation or removal, the Representative shall appoint a successor Escrow Agent
hereunder. Upon the acceptance in writing of any appointment as Escrow Agent hereunder by a
successor Escrow Agent, such successor Escrow Agent shall thereupon succeed to, and become vested
with, all the rights, powers, privileges and duties of the retiring Escrow Agent, and the retiring
Escrow Agent shall be discharged from its duties and obligations hereunder, but shall not be
discharged from any liability for actions taken as Escrow Agent hereunder prior to such succession.
After any retiring Escrow Agent’s resignation or removal, the provisions hereof shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Escrow Agent hereunder.



     8. Liability of Escrow Agent.



          a. Escrow Agent shall have no liability or obligation with respect to the Escrow Funds, except
for Escrow Agent’s willful misconduct or gross negligence. Escrow Agent’s sole responsibility
shall be for the safekeeping, deposit and disbursement of the Escrow Funds in accordance with the
terms hereof. Escrow Agent shall have no implied duties or obligations and shall not be charged
with knowledge or notice of any fact or circumstance not specifically set forth herein. Escrow
Agent may rely upon any instrument, not only as to its due execution, validity and effectiveness,
but also as to the truth and accuracy of any information contained therein, which Escrow Agent
shall in good faith believe to be genuine, to have been signed or presented by the person or
parties purporting to sign the same and to conform to the provisions hereof. In no event shall
Escrow Agent be liable for incidental, indirect, special, consequential or punitive damages.
Escrow Agent shall not be obligated to take any legal action or commence any proceeding in
connection with the Escrow Funds or this Agreement, or to appear in, prosecute or defend any such
legal action or proceeding. Escrow Agent may consult with legal counsel selected by it in the
event of any dispute or question as to the construction of any of the provisions hereof or of any
other agreement or of its duties hereunder and shall incur no liability and shall be fully
indemnified from any liability whatsoever in acting in accordance with the opinion or instruction
of legal counsel.




          b. Escrow Agent is authorized, in its sole discretion, to comply with orders issued or process
entered by any court with respect to the Escrow Funds, without determination by Escrow Agent of
such court’s jurisdiction in the matter. If any portion of the Escrow Funds is at any time
attached, garnished or levied upon under any court order, or in case the payment, assignment,
transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court
order, or in case any order, judgment or decree shall be made or entered by any court affecting
such property or any part thereof, then and in any such event, Escrow Agent is authorized, in its
sole discretion, to rely upon and comply with any such order, writ, judgment or decree as to which
it is advised by legal counsel is binding upon it without the need for appeal or other action; and
if Escrow Agent complies with any such order, writ, judgment or decree, it shall not be liable to
the Company, Radical or to any other person or entity by reason of such compliance even though such
order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or
vacated.




     9. Indemnification of Escrow Agent. The Company and Radical shall, to the extent
permitted by law and to the extent provided herein, severally but not jointly, indemnify and hold
harmless Escrow Agent from and against any and all actions, claims, losses, damages, liabilities,
costs and expenses of any kind or nature whatsoever (including, without limitation, reasonable
attorneys’ fees, costs and expenses) incurred by or asserted against Escrow Agent as a result of or
arising from Escrow Agent’s acting as Escrow Agent hereunder; provided, however, that Escrow Agent
shall not have the right to be indemnified



ESCROW AGREEMENT - PAGE 5









 





hereunder for any liability finally determined by a court of competent jurisdiction, subject to no
further appeal, to have resulted solely from the gross negligence or willful misconduct of Escrow
Agent. The obligations of the Company and Radical under this Section 9 shall survive any
termination hereof and the resignation or removal of Escrow Agent.



     10. Fees of Escrow Agent. As compensation for Escrow Agent’s services hereunder,
Radical shall pay Escrow Agent
                                        
Dollars ($___) as an acceptance fee and
                                         
Dollars ($___) as an administration fee.



     11. Representations and Warranties of Escrow Agent. Escrow Agent makes the following
representations and warranties to the Company and Radical:



          a. Escrow Agent is a federal savings bank duly organized and validly existing under the laws
of the United States of America and has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.




          b. This Agreement has been duly approved by all necessary corporate action of Escrow Agent,
has been executed by duly authorized officers of Escrow Agent and constitutes the valid and binding
agreement of Escrow Agent, enforceable in accordance with its terms.




          c. The execution, delivery and performance of this Agreement by Escrow Agent will not violate,
conflict with or cause a default under the charter or bylaws of Escrow Agent, any applicable law or
regulation, any court order or administrative ruling or decree to which Escrow Agent is a party or
any of its property is subject, or any agreement, contract, indenture or other binding arrangement
to which Escrow Agent is a party or any of its property is subject.




     12. Consent to Jurisdiction and Venue. IN THE EVENT THAT ANY PARTY COMMENCES A
LAWSUIT OR OTHER PROCEEDING RELATED TO OR ARISING FROM THIS AGREEMENT, THE PARTIES AGREE THAT THE
UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF TEXAS SHALL HAVE SOLE AND EXCLUSIVE
JURISDICTION OVER ANY SUCH PROCEEDING. IF SUCH COURT LACKS FEDERAL SUBJECT MATTER JURISDICTION,
THE PARTIES AGREE THAT THE DISTRICT COURT OF DALLAS COUNTY, TEXAS SHALL HAVE SOLE AND EXCLUSIVE
JURISDICTION. THE PARTIES CONSENT TO, AND AGREE TO SUBMIT TO, THE JURISDICTION OF EITHER OF THE
COURTS SPECIFIED HEREIN AND AGREE TO ACCEPT SERVICE OR PROCESS TO VEST PERSONAL JURISDICTION OVER
THEM IN ANY OF THESE COURTS.



     13. Notice. All notices and other communications permitted or required hereunder
shall be in writing and shall be deemed to have been validly served, given or delivered five (5)
days after deposit in the United States mail, by certified mail, return receipt requested, postage
prepaid; or one (1) day after delivery to any reputable overnight courier; or on the same day when
transmitted by facsimile transmission with printed confirmation of transmission, and addressed to
the intended Party as follows:



	 	 	 	 	 
	 

	 	To Escrow Agent:
	 	Guaranty Bank
	 

	 	 	 	8333 Douglas Avenue
	 

	 	 	 	Dallas, Texas 75225
	 

	 	 	 	Attn: Cass Robinson
	 

	 	 	 	Telephone: 214.360.2622
	 

	 	 	 	Telecopier: 214.360.2760






ESCROW AGREEMENT - PAGE 6









 






	 	 	 
	To the Company:
	 	Immediatek, Inc.
	 	 	2435 North Central Expressway, Suite 1610
	 	 	Richardson, Texas 75080
	 	 	Attn: President
	 	 	Telephone: (972) 852-2876
	 	 	Telecopier: (972) 722-0818
	 	 	 
	With a copy to (which does not constitute notice):
	 	 	 
	 	 	Vial, Hamilton, Koch & Knox, LLP
	 	 	1700 Pacific Avenue, Suite 2800
	 	 	Dallas, Texas 75201
	 	 	Attn: Craig G. Ongley, Esq.

Telephone: (214) 712-4441
	 	 	Telecopier: (214) 712-4402
	 
	To Radical:
	 	Radical Holdings LP
	 	 	c/o Radical Management, LLC
	 	 	5424 Deloache Avenue
	 	 	Dallas, Texas 75220
	 	 	Telecopier: (214) 696-6310
	 	 	Attn: President
	 	 	 
	With copies to (which does not constitute notice):
	 	 	 
	 	 	Robert S. Hart
	 	 	5424 Deloache Avenue
	 	 	Dallas, Texas 75220
	 	 	Telecopier: (214) 696-3380
	 	 	 
	 	 	Jenkens & Gilchrist, P.C.
	 	 	1445 Ross Avenue, Suite 3700
	 	 	Dallas, Texas 75202
	 	 	Attn: Robert W. Dockery, Esq.
	 	 	Telephone: (214) 855-4500
	 	 	Telecopier: (214) 855-4300
	 	 	 
	or to such other address as each Party may designate for itself by like notice.






     14. Amendment or Waiver. This Agreement may be changed, waived, discharged or
terminated only by a writing signed by the Company, Radical and Escrow Agent. No delay or omission
by any Party in exercising any right with respect hereto shall operate as a waiver. A waiver on
any one occasion shall not be construed as a bar to, or waiver of, any right or remedy on any
future occasion.



     15. Severability. To the extent any provision hereof is prohibited by, or invalid
under, applicable law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions
hereof.



ESCROW AGREEMENT - PAGE 7









 





     16. Governing Law. This Agreement shall be construed and interpreted in accordance
with, and governed by, the laws of the State of Texas, without giving effect to any choice of law
principles.



     17. Entire Agreement. This Agreement constitutes the entire agreement among the
Parties related to the holding, deposit and disbursement of the Escrow Funds and sets forth in its
entirety the obligations and duties of Escrow Agent with respect to the Escrow Funds.



     18. Binding Effect. All of the terms hereof, as amended from time to time, shall be
binding upon, inure to the benefit of and be enforceable by the respective heirs, successors and
permitted assigns of the Parties.



     19. Execution in Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which together will constitute
one and the same instrument. This Agreement will become effective when one or more counterparts
have been signed by each of the Parties and delivered to the other Parties. For purposes of
determining whether a Party has signed this Agreement or any document contemplated hereby or any
amendment or waiver hereof, only a handwritten original signature on a paper document or a
facsimile copy of such a handwritten original signature shall constitute a signature,
notwithstanding any law relating to or enabling the creation, execution or delivery of any contract
or signature by electronic means..



     20. Termination. Upon the first to occur of (i) the disbursement of all amounts in
the Escrow Account pursuant to Written Directions and (ii) the disbursement of all amounts in the
Escrow Account into court pursuant to Section 5 hereof, this Agreement shall terminate and Escrow
Agent shall have no further obligation or liability whatsoever with respect to this Agreement or
the Escrow Funds.



SIGNATURE PAGE FOLLOWS




ESCROW AGREEMENT - PAGE 8









 








     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first
above written.



	 	 	 	 	 	 	 
	 	 	IMMEDIATEK, INC.,	 	 
	 	 	a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

Zach Bair
	 	 
	 

	 	Title:
	 	President & Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	RADICAL HOLDINGS LP,	 	 
	 	 	a Texas limited partnership	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Radical Management, LLC,

a Texas limited liability company,

its general partner	 	 
	 
	 	 	 	 	 	 





	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

Mark Cuban
	 	 
	 

	 	Title:
	 	President	 	 






	 	 	 	 	 	 	 
	 	 	GUARANTY BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 






ESCROW AGREEMENT - PAGE 9









 







Schedule A




Action Items



(Intentionally Omitted)



ESCROW AGREEMENT - PAGE 10









 











Schedule B




Permitted Purposes




(Intentionally Omitted)





ESCROW AGREEMENT - PAGE 11










 






EXHIBIT F

TO

SECURITIES PURCHASE AGREEMENT


FORM OF EMPLOYMENT AGREEMENT


(Attached)




 









 








EMPLOYMENT AGREEMENT




     THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of this                     
day of                     , 2006, by and between DiscLive, Inc., a Delaware corporation (the
“Company”), and                      (“Employee”), upon the following terms and
conditions:



     1. Employment. For the three (3) year period commencing on                      1, 2006 (the
“Effective Date”) and terminating on                      31, 2009 (the “Term”), the
Company shall retain the services of Employee as                                          to perform such duties
and services as may be assigned to him by the [Chairman of the Board of Directors][President and
Chief Executive Officer] of the Company, including, without limitation, those duties set forth in
Paragraph 6 hereof.



     2. Acceptance by Employee. Employee hereby accepts his engagement by the Company to
serve as                     of the Company, as provided in Paragraph 1 above, and agrees to
perform the duties of such position in accordance with the terms of this Agreement.



     3. Compensation. As full and complete compensation for the services to be rendered to
the Company by Employee hereunder, the Company shall pay to Employee a salary at the following
annual rates during the Term: (A) for the first full 12-month period of the Term commencing on the
Effective Date during which Employee serves as                                         (February 1, 2006 through
January 31, 2007), the annual base salary of Employee shall be $[102,000][94,800]; (B) for the
second full 12-month period of the Term during which Employee serves as                                         
(February 1, 2007 through January 31, 2008), the annual base salary of Employee shall be
$[107,100][99,540]; and (C) for the third full 12-month period of the Term during which Employee
serves as                      (February 1, 2008 through January 31, 2009), the annual base salary
of Employee shall be $[112,455][104,517]. All salary shall be payable by the Company to Employee
on a current basis



-1-









 




as services are rendered in accordance with regular payroll practices of the
Company. The first payment hereunder shall be made on February 15, 2006.




     4. Benefits. During the Term, Employee will be entitled to participate in any benefit
plan that is commonly made available to employees at all other companies that are affiliated with
the Company, subject to the limitations, restrictions and terms of said policies.



     5. General Expenses and Other Benefits.



          A. The Company shall reimburse Employee during the Term for all appropriately documented
expenses reasonably incurred by him in the performance of his duties for the Company hereunder that
are approved in advance by the Chairman of the Board of Directors of the Company.




          B. Employee shall be entitled to vacation time as is customarily made available to the
Company’s executive employees. Employee’s vacation shall be determined at such times as shall be
reasonably agreed upon by Employee and the Chairman the Board of Directors of the Company.




     6. Responsibilities and Duties; Promotional Activities.



          A. During the Term, Employee shall devote substantially all of his time, attention, skills and
energy (vacation time and absence for sickness or similar disability excepted) to the business and
affairs of the Company. He shall function as                                         and shall, on a first
priority basis, perform any and all Company-related duties as may be assigned to him from time to
time by [the Chairman of the Board of Directors] [President and Chief Executive Officer] of the
Company.




          B. Employee shall not, to the detriment of the Company or in conflict or in competition with
the Company or its personnel, make public appearances, participate in radio or





-2-









 







television programs,
write or sponsor newspaper or magazine articles, or sponsor commercial products or services.




     7. Representations and Warranties. Employee hereby represents, warrants and agrees
that:



          A. Employee has extraordinary and unique skill and ability and his exclusive services rendered
to the Company hereunder cannot be replaced or the loss thereof adequately compensated in money
damages. Any breach by Employee of this Agreement will cause irreparable injury to the Company.
Therefore, it is agreed that in the event Employee in any manner breaches, or threatens to breach,
this Agreement, the Company, in addition to any other remedies that may be available to it, shall
have the right to obtain without the necessity of posting any bond, from any court having
jurisdiction, such equitable relief as may be appropriate, including, without limitation, a decree
enjoining Employee from any further such breach, or threatened breach, of this Agreement. The
Employee further agrees that the seeking of such relief shall not be considered a waiver of the
arbitration agreement contained in Paragraph 26B.




          B. Employee has the full right, title and authority to enter into this Agreement and perform
his obligations hereunder.




          C. Employee has not granted, nor will he grant, any right, do any act or enter into any
agreement or understanding whatsoever that may or will prevent, impair or hinder Employee’s full
performance of his obligations hereunder.




          D. Employee shall not conduct himself in any manner whatsoever nor do any act, fail to do any
act nor make any statement that may or will impair, impugn, denigrate, disparage, or reflect
negatively upon the name, reputation or business interests of the Company, the owners of the
Company or any officers, directors, employees, partners or affiliates of the Company or of direct
or indirect owners of the Company.




-3-









 








          8. Exclusive Use of Talent and Duty of Loyalty. During the Term, Employee shall not
perform, directly or indirectly, any duties or provide any consultative or related services for any
other entity or person, nor, directly or indirectly, control or otherwise be involved in any
business that is competitive with the Company. Employee agrees to exercise a duty of loyalty and
fidelity to the Company during the Term.




     9. Termination.



          A. The Company shall have the right to terminate the employment of Employee under this
Agreement for cause immediately upon written notice to Employee. For purposes of this Agreement,
“cause” shall mean the occurrence of any of the following:




               (i) Employee’s failure to perform any of the duties, obligations or responsibilities
contemplated by this Agreement;



               (ii) The death of Employee;



               (iii) The disability of Employee (meaning the physical or mental inability of Employee to
perform the essential functions of his position, with or without reasonable accommodation as
required by law, for a period of 90 consecutive days or 90 days in a 180 day period, as determined
by a physician selected by the Company); provided, however, that termination of employment due to
disability shall not occur until Employee has exhausted all leave entitlement, if any, under the
Family and Medical Leave Act;



               (iv) Employee intentionally and knowingly uses or possesses illegal drugs at any time, or
intentionally and knowingly abuses alcohol while in the course and scope of his employment with the
Company or is impaired by alcohol while driving any vehicle; or



               (v) Employee’s conviction or pleading nolo contendere to any felony or misdemeanor, other than
minor traffic violations or similar offenses.



-4-









 




Upon termination of Employee’s employment with the Company under this Paragraph 9A, the
Term shall end, and the Company will have no obligation to provide or pay any compensation or
other payments to Employee under this Agreement that would have otherwise accrued after such
termination date.




          B. The Company may also terminate this Agreement upon written notice to Employee on account of
any reason other than as provided in Paragraph 9A. Upon such termination of Employee’s
employment with the Company under this Paragraph 9B, the Term shall end, and the Company
shall have no obligation to provide or pay any compensation or other payments to Employee hereunder
accruing after such termination date, except that such termination shall in no way affect
Employee’s right to receive the lesser of (i) the aggregate of the sums payable pursuant to
Paragraph 3 for the remaining term of this Agreement in the amounts and at the times called
for by such paragraph and (ii) a sum equal to the Employee’s then current annual compensation under
Paragraph 3 payable in accordance with the regular payroll practices of the Company over a
period of one year following the date of termination of this Agreement, in each case subject to the
offset provisions of Paragraph 10 below This provision shall survive such termination.




     10. Right of Offset. In the event the Company shall terminate this Agreement other
than for cause, as defined by this Agreement, the Company shall be entitled to offset any remaining
salary due to Employee pursuant to Paragraph 9B hereof against any compensation received by
Employee during the period the Company is required to continue payments to Employee hereunder. In
the event the Company shall determine that the compensation received by Employee for such
subsequent employment is below a rate reasonable for such employment, the Company shall instead be
entitled to offset compensation still owing to Employee against such reasonable rate. This
provision shall survive such termination.



-5-









 





     11. Confidential Information.



          A. Company Information. Employee hereby covenants and agrees at all times during the
Term and thereafter to hold in strictest confidence, and not to use, except for the benefit of the
Company, or to disclose to any person, firm or corporation without written authorization of the
Company’s Board of Directors, any of the Company’s Confidential Information (as defined herein). Employee hereby understands and acknowledges that
“Confidential Information” means any and all information that relates to the Company’s
actual or anticipated business or research and development, technical data, trade secrets or
know-how, including, but not limited to, research, product plans or other information regarding the
Company’s products or services and markets therefor, customer lists and customers (including, but
not limited to, the Company’s customers on whom Employee called or with whom Employee became
acquainted during the Term), software, developments, inventions, processes, formulas, technology,
designs, drawings, engineering, hardware configuration information, marketing, finances or other
business information. Employee further understands that Confidential Information does not include
any of the foregoing items that is or becomes publicly known through no wrongful act or omission of
Employee or of others who were under confidentiality obligations as to the item or items involved.
Further, Employee shall not write, or supply information to others for the purpose of writing, any
books, periodicals or other publications (including fictional accounts) concerning any current or
former employer, partner or indirect or direct owner of the Company or communicate with reporters
or other members of the media concerning any such persons or any such Confidential Information.
Employee acknowledges and agrees that any and all information and reports obtained or produced by
Employee in the performance of his duties and responsibilities hereunder shall at all times remain
the confidential property of the Company. This provision shall survive the termination or
expiration of this Agreement.




          B. Third Party Information. Employee recognizes that the Company has received, and in
the future will receive, from third parties their confidential or proprietary information, subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it
only for certain limited purposes. Employee hereby agrees to hold all




-6-









 







such confidential or
proprietary information in the strictest confidence, and not to disclose it to any person, firm or
corporation or to use it, except as necessary in carrying out his work for the Company consistent
with the Company’s agreement with such third party.




     12. Inventions.



          A. Inventions Retained and Licensed. Employee has attached hereto as Exhibit
A a list describing all inventions, original works of authorship, developments, improvements
and trade secrets that (i) were made by Employee prior to the Effective Date, (ii) belong to
Employee, (iii) relate to the Company’s proposed business, products or research and development and
(iv) are not assigned to the Company hereunder (collectively, “Prior Inventions”); or, if
no such list is attached, Employee represents and warrants to the Company that there are no such
Prior Inventions. Employee hereby agrees that he will not incorporate, or permit to be
incorporated, any Prior Invention owned by Employee or in which Employee has an interest into a
Company product, process or service without the Company’s prior written consent. Notwithstanding
the foregoing sentence, if, in the course of Employee’s employment with the Company, Employee
incorporates into a Company product, process or service a Prior Invention owned by Employee or in
which Employee has an interest, Employee hereby grants to the Company a nonexclusive, royalty-free,
fully paid-up, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell
such Prior Invention as part of, or in connection with, such product, process or service, and to
practice any method related thereto.




          B. Assignment of Inventions. Employee hereby covenants and agrees that Employee will
promptly make full written disclosure to the Company, will hold in trust for the sole right and
benefit of the Company, and hereby assign to the Company, or its designee, all Employee’s right,
title and interest in and to any and all inventions, original works of authorship, developments,
concepts, improvements, designs, discoveries, ideas, trademarks or trade secrets, whether or not
patentable or registrable under copyright or similar laws, which Employee may, solely or jointly,
conceive or develop or reduce to practice, or has or cause to be conceived or developed or reduced
to practice, prior to or during the period of time Employee is in the employ of the Company
(collectively, “Inventions”). Employee further acknowledges and understands that all
original works of authorship that are made by Employee (solely or jointly with others)






-7-









 







within the
scope of and during the period of Employee’s employment with the Company and that are protectable
by copyright are “works made for hire,” as that term is defined in the United States Copyright Act.
Employee hereby understands and agrees that the decision whether or not to commercialize or market
any Invention is within the Company’s sole discretion and for the
Company’s sole benefit and that no royalty will be due to Employee as a result of the
Company’s efforts to commercialize or market any such Invention.




          C. Inventions Assigned to the United States. Employee hereby covenants and agrees to
assign to the United States government all Employee’s right, title and interest in and to any and
all Inventions whenever such full title is required to be in the United States by a contract
between the Company and the United States or any of its agencies.




          D. Maintenance of Records. Employee hereby agrees to keep and maintain adequate and
current written records of all Inventions during the term of Employee’s employment with the
Company. The records will be in the form of notes, sketches, drawings and any other format that
may be specified by the Company. The records will be available to the Company and remain the
Company’s sole property at all times.




          E. Patent and Copyright Registrations. Employee hereby covenants and agrees to assist
the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s
rights in any Inventions and any copyrights, patents, mask work rights or other intellectual
property rights relating thereto in any and all countries, including, but not limited to, the
disclosure to the Company of all pertinent information and data with respect thereto, the execution
of all applications, specifications, oaths, assignments and all other instruments that the Company
deems necessary in order to apply for and obtain such rights and in order to assign and convey to
the Company, its successors, assigns, and nominees the sole and exclusive rights, title and
interest in and to such Inventions, and any copyrights, patents, mask work rights or other
intellectual property rights relating thereto. Employee hereby further agrees that Employee’s
obligation to execute, or cause to be executed, when it is in Employee’s power to do so, any such
instrument or papers shall continue after the termination of this Agreement. If the Company is
unable because of Employee’s mental or physical incapacity or for any other




-8-









 







reason to secure
Employee’s signature to apply for or to pursue any application for any United States or foreign
patents or copyright registrations covering any Inventions or original works of authorship assigned
to the Company as above, then Employee hereby irrevocably designates and appoints the Company and
its duly authorized officers and agents as Employee’s agent and attorney in fact, to act for and in Employee’s behalf and stead to execute and file any such applications and to do
all other lawfully permitted acts to further the prosecution and issuance of letters patent or
copyright registrations thereon with the same legal force and effect as if executed by Employee.




     13. Solicitation of Employees. Employee hereby agrees that for a period of two (2)
years immediately following the termination of Employee’s relationship with the Company for any
reason (whether with or without cause, at the option either of the Company or Employee, with or
without notice), Employee will not, either directly or indirectly, solicit, induce, recruit or
encourage any of the Company’s employees to leave their employment or contractors to terminate
their relationship with the Company, or hire or take away such employees or contractors, or attempt
to solicit, induce, recruit, encourage, hire or take away employees or contractors of the Company,
either for himself or for any other person or entity.



     14. Interference. Employee hereby agrees that during the course of Employee’s
employment and for a period of two (2) years immediately following the termination of Employee’s
relationship with the Company for any reason (whether with or without cause, at the option either
of the Company or Employee, with or without notice), Employee will not, either directly or
indirectly, interfere with the Company’s relationships with any of its customers or clients whom
Employee served or whose names became known to Employee during the course of Employee’s employment
(“Covered Clients or Customers”). This paragraph is geographically limited to any location
or place of business where a Covered Client or Customer is present and available for solicitation
at that time. Employee hereby acknowledges that he may not avoid the purpose and intent of this
paragraph by engaging in conduct within the geographically limited area from a remote location
through means such as telecommunications, written correspondence, computer generated or assisted
communications, or other similar methods.



-9-









 





15. Covenant Not to Compete.




          A. Employee hereby covenants and agrees that during the Term and for a period of two (2) years
immediately following the termination of Employee’s relationship with the Company for any reason
(whether with or without cause, at the option either of the Company or Employee, with or without
notice), Employee will not without the Company’s prior written consent, either directly or
indirectly, (i) serve in any capacity that could require Employee to use any of the Confidential
Information, goodwill or training that Employee received or had access to during Employee’s
employment with the Company, including, as an advisor, agent, supervisor, consultant, contractor,
director, employee, officer, partner, proprietor or otherwise of, (ii) have any ownership interest
in (except for passive ownership of one percent (1%) or less of any entity whose securities have
been registered under the Securities Act of 1933, as amended, or Section 12 of the Securities
Exchange Act of 1934, as amended) or (iii) participate in the organization, financing, operation,
management or control of, any business in competition with the Company’s business as conducted by
the Company during the course of Employee’s employment with the Company (including any customer of
the Company). The foregoing covenant shall cover Employee’s activities in every part of the
Territory (as defined herein). “Territory” shall mean (i) all counties in the State of
Texas, (ii) all other states of the United States of America and (iii) all other countries of the
world; provided that, with respect to clauses (ii) and (iii), the Company either (1) derives at
least five percent (5%) of its gross revenues from such geographic area prior to the date of the
termination of Employee’s relationship with the Company or (2) has active plans for the
introduction of such product or services in such geographic area within six (6) months of the date
of the termination of Employee’s relationship with the Company. Employee stipulates that the
foregoing is a reasonable geographic area because of the scope of the Company’s operations and
Employee’s activities, and that this paragraph creates a narrowly tailored advance approval
requirement in order to avoid unfair competition and irreparable harm to Company and is not
intended or to be construed as a general restraint from engaging in a lawful profession or a
general covenant against competition. Further, Employee hereby agrees that Employee may not avoid
the purpose and intent of this paragraph by engaging in conduct within the geographically limited
area from a remote location through means such as telecommunications, written correspondence,
computer generated or




-10-









 







assisted communications, or other similar methods.




          B. Employee hereby understands and acknowledges that Employee’s fulfillment of the obligations
contained in this Agreement, including, but not limited to, Employee’s obligation neither to use,
except for the benefit of the Company, or to disclose the Company’s Confidential Information and
Employee’s obligation not to compete contained in Paragraph 15.A. above is necessary to
protect the Company’s Confidential Information and to preserve the Company’s value and goodwill.
Employee hereby further acknowledges the time, geographic and scope limitations of Employee’s
obligations under Paragraph 15.A. above are reasonable, especially in light of the
Company’s desire to protect its Confidential Information, and that Employee will not be precluded
from gainful employment if Employee is obligated not to compete with the Company during the period
and within the Territory as described above.




          C. The covenants contained in Paragraph 15.A. above shall be construed as a series of
separate covenants, one for each city, county and state of any geographic area in the Territory.
Except for geographic coverage, each such separate covenant shall be deemed identical in terms to
the covenant contained in Paragraph 15.A. above. If, in any judicial proceeding, a court
refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable
covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit
the remaining separate covenants (or portions thereof) to be enforced. In the event the provisions
of Paragraph 15.A. above are deemed to exceed the time, geographic or scope limitations
permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic
or scope limitations, as the case may be, then permitted by such law.




     16. Returning Company Documents, etc. Employee hereby agrees that, at the time of
leaving the employ of the Company, Employee will deliver to the Company (and will not keep in his
possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports,
proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned items developed by
Employee pursuant to his employment with the Company or otherwise belonging to the Company, its
successors or assigns, including, but not limited to, those records



-11-









 







maintained pursuant to Paragraph 12.D. above. In the event of the termination of Employee’s
employment, Employee hereby agrees to sign and deliver the “Termination Certification” attached
hereto as Exhibit B.



     17. Survival of Covenants. Each of the provisions or restrictions set forth in
Paragraphs 6B. 9B, 10, 11, 12, 13, 14, 15, 16, 19, 21 and 22 hereof shall survive the
termination of Employee’s employment with Company. Further, the existence of any claim or cause of
action by Employee against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to enforcement by Company of such provisions or restrictions, and in the event
an enforcement remedy is sought for Employee’s violation of any of those provisions or
restrictions, the time periods provided for in such paragraphs, if any, shall be extended by one
day for each day Employee failed to comply with the provision or restriction at issue.



     18. Standards. Employee shall comply with the Company’s policies for its employees as
adopted from time to time and shall act at all times with due regard to public convention and
morals, and shall refrain from engaging in conduct, committing any act or becoming involved in any
situation or occurrence that will bring Employee into public disrepute, scandal, contempt or
ridicule or which prejudices or is detrimental to the Company, its owners or employees.



     19. Notification of New Employer. In the event that Employee leaves the employ of the
Company, Employee hereby grants consent to notification by the Company to Employee’s new employer
about Employee’s rights and obligations under this Agreement.



     20. Further Assurances; No Conflict. Employee agrees to execute any proper oath or
verify any proper document required to carry out the terms of this Agreement. Employee represents
that his performance of all the terms of this Agreement will not breach any agreement to keep in
confidence proprietary information acquired by Employee in confidence or in trust prior to his
employment by the Company. Employee has not entered into, and Employee agrees that Employee will
not enter into, any oral or written agreement in conflict herewith.



-12-









 





     21. Attorneys’ Fees. If either party hereto commences any action or proceeding in
connection with or to enforce or interpret any term or provision of this Agreement, the prevailing
party, as determined by the persons or persons who try the facts, shall be entitled to receive from
the losing party such prevailing party’s reasonable and necessary attorneys’ fees and costs
incurred in connection therewith.



     22. Limit of Liability. No liability or obligation of any sort to Employee shall
exist until Employee gives the Company written notice of his claim and the Company fails to cure or
remedy the claim within thirty (30) days of Employee’s written notice. Any such liability or
obligation shall come solely from the assets of the Company, and no owner, partner, shareholder,
officer, employee or director of the Company shall be individually or personally liable for any
claim, liability or obligations arising under this Agreement or arising out of Employee’s
employment. This provision shall survive the termination or expiration of this Agreement.



     23. Headings. Paragraph headings in this Agreement shall not affect in any way the
meaning or interpretation of any provisions of this Agreement.



     24. Severability. The illegality, invalidity or unenforceability of a provision
herein shall not affect the legality, validity or enforceability of any other provision herein.



     25. Notices. All notices or communications to either party hereunder shall be in
writing and shall be deemed given when personally delivered, or when mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:



	 	 	 	 	 
	 

	 	If to Company:
	 	                                        
	 

	 	 	 	DiscLive, Inc.
	 
	 	 	 	 
	 

	 	 	 	                                        
	 
	 	 	 	 
	 

	 	 	 	                                        
	 
	 	 	 	 
	 

	 	 	 	With Copy to (which shall not constitute notice):
	 
	 	 	 	 
	 

	 	 	 	Robert Hart
	 

	 	 	 	5424 Deloache Avenue
	 

	 	 	 	Dallas, Texas 75220






-13-









 






	 	 	 	 	 
	 

	 	If to Employee:
	 	                                        
	 
	 	 	 	 
	 

	 	 	 	                                        
	 
	 	 	 	 
	 

	 	 	 	                                        






     26. Applicable Law and Agreement to Arbitration.



          A. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF TEXAS WITHOUT REGARD FOR CONFLICTS OF LAWS PRINCIPLES. EACH PARTY HERETO HEREBY EXPRESSLY
CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN DALLAS, TEXAS FOR
ANY LAWSUIT FILED ARISING FROM OR RELATING TO THIS AGREEMENT, SUBJECT IN ALL RESPECTS TO THE
PROVISIONS OF PARAGRAPH 26B BELOW.




          B. Except as otherwise expressly provided herein, the parties further agree that any and all
disputes between the parties concerning this Agreement, the performance under this Agreement, or
otherwise related to the parties’ relationship, shall be submitted to arbitration with
JAMS/Endispute under short form submission or as otherwise agreed to between the parties, in Dallas
County, Texas. The seeking of equitable relief from a court of law pending the institution of
arbitration by either party, shall not be deemed or considered to be a waiver of the parties’
agreement to arbitrate their disputes.




     27. Assignment. This Agreement, and the rights, benefits and interests hereunder, may
not be assigned, transferred or pledged by Employee in any way. The rights of the Company
hereunder may be assigned to any entity that succeeds to substantially all of the operations of the
Company through any asset or stock transfer, provided that any assignee agrees, in writing, to
perform all of the Company’s obligations hereunder.



     28. Entire Agreement. This Agreement sets forth the entire understanding between the
parties with respect to subject matter hereof and supersedes and replaces all prior and
contemporaneous warranties, representations and agreements, whether written or oral, relating to
the subject matter hereof and Employee is not relying on any such warranties, representations or



-14-









 







agreements in executing this Agreement. This Agreement may not be amended or modified except by
written agreement executed by Employee and the Company.



     29. Counterparts. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.



     30. Voluntary and Informed Acts. Employee hereby acknowledges and agrees to each of
the following items:



          A. Employee is executing this Agreement voluntarily and without any duress or undue influence
by the Company or anyone else;




          B. Employee has carefully read this Agreement; Employee has asked any questions needed for
Employee to understand the terms, consequences and binding effect of this Agreement and fully
understand them; and




          C. Employee has had the opportunity to seek the advice of an attorney of his choice before
signing this Agreement, and has either obtained such advice or does not wish to seek it.




SIGNATURE PAGE FOLLOWS




-15-









 








     IN
WITNESS WHEREOF, the parties have executed this Agreement on the                      day of
                    ,
2006, to be effective as of                      1, 2006.



	 	 	 	 	 	 	 
	EMPLOYEE	 	DISCLIVE, INC.,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	[Name of Employee]

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 





-16-









 






EXHIBIT A




LIST OF PRIOR INVENTIONS

AND ORIGINAL WORKS OF AUTHORSHIP




                         No inventions or improvements

                         Additional Sheets Attached




Signature of Employee:                                         

Print Name of Employee:                                         

Date:                                        




 









 





EXHIBIT B




TERMINATION CERTIFICATION




     I certify that I do not have in my possession, nor have I failed to return, any devices,
records, data, notes, reports, proposals, lists, correspondence, specifications, drawings,
blueprints, sketches, materials, equipment, other documents or property, or reproductions of any
aforementioned items belonging to DiscLive, Inc., its parents, subsidiaries, affiliates, successors
or assigns (together, the “Company”).



     I further certify that I have complied with all the terms of the Employment Agreement signed
by me, including, but not limited to, the reporting of any Inventions or Other Inventions (as such
terms are defined therein).



     I confirm and reaffirm my agreements, covenants, understandings and acknowledgements contained
in the Employment Agreement.



Date:
                              




	 	 	 	 	 
	 

	 	 	 	 
	 

	 	(Employee’s Signature)	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Type/Print Employee’s Name)	 	 







 










 






EXHIBIT G

TO

SECURITIES PURCHASE AGREEMENT




FORM OF WAIVER OF PREEMPTIVE RIGHTS




(Intentionally Omitted)




 









 





EXHIBIT H

TO

SECURITIES PURCHASE AGREEMENT




FORM OF SATISFACTION AGREEMENT




(Intentionally Omitted)




 









 





EXHIBIT I

TO

SECURITIES PURCHASE AGREEMENT




FORM OF CANCELLATION AGREEMENT




(Intentionally Omitted)