exv10w1



 





Exhibit 10.1




NOVINT TECHNOLOGIES, INC.




UNIT SUBSCRIPTION AGREEMENT

COMMON STOCK

AND WARRANTS




UNIT SUBSCRIPTION AGREEMENT dated as of February 23, 2007 (this “Agreement”), among Novint
Technologies, Inc., a Delaware corporation (the “Company”), and the persons who execute
this agreement as investors (each an “Investor” and collectively the “Investors”).



Background: The Company desires to sell to the Investors, and the Investors desire to
purchase, up to a maximum of nine million (9,000,000) Units (as defined below) consisting of shares
of common stock, $.01 par value per share, of the Company (the “Shares”) and 5-year
warrants, in substantially the form attached hereto as Exhibit 1, exercisable to purchase
up to a maximum of 9,000,000 Shares at $1.50 per share (the “Warrants”). The Company may
also sell an additional one million (1,000,000) Units ( the “Additional Securities”) on the
same terms to a strategic investor by March 30, 2007. The proceeds of the sale of Units will be
used in the development and continuance of the business of the Company and each of its
Subsidiaries.



     In consideration of the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged, the parties agree as
follows:



Certain Definitions:




     “Action” has the meaning set forth in Section 2.10.



     “Additional Securities” has the meaning set forth in Background.



     “Affiliate” means, as to any Person, any other Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under common control with
such Person. As used in this definition, “control” (including, with its correlative
meanings, “controlled by” and “under common control with”) shall mean possession,
directly or indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership interests, by contract
or otherwise).



     “Anti-Dilution Period” means the period commencing on the Closing Date and ending 18
months after the initial Registration Statement (as defined in the Investor Rights Agreement) is
declared effective provided that the period shall be extended up to an additional six months to the
extent any and all Suspensions (as defined in the Investor Rights Agreement) exceed sixty (60) days
in the aggregate during such period.



     “Blue Sky Laws” has the meaning set forth in Section 2.7(b).



     “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to remain closed.



 









 





     “Certificate of Incorporation” has the meaning set forth in Section 2.2(a).



     “Closing Date” has the meaning set forth in Section 1.2.



     “Closing” has the meaning set forth in Section 1.2.



     “Common Stock” means the Company’s Common Stock, $.01 par value per share, authorized
as of the date hereof, and any stock of any class or classes (however designated) hereafter
authorized upon reclassification thereof, which, if the Board of Directors declares a dividend or
distribution, has the right to participate in the distribution of earnings and assets of the
Company after the payment of dividends or other distributions on any shares of capital stock of the
Company entitled to a preference and in the voting for the election of directors of the Company.



     “Company” has the meaning set forth at the head of this Agreement and any corporation
or other entity which shall succeed to or assume, directly or indirectly, the obligations of the
Company hereunder. The term “corporation” shall include an association, joint stock
company, business trust, limited liability company or other similar organization.



     “Company Disclosure Letter” means the disclosure letter dated February 23, 2007
delivered to the Investors prior to the execution of this Agreement, which letter is incorporated
in this Agreement.



     “Company IP” has the meaning set forth in Section 2.12(a).



     “Convertible Security” means any (i) option to purchase or right to subscribe for
Common Stock, (ii) security by its terms convertible into or exchangeable for Common Stock or (iii)
option to purchase or right to subscribe for such convertible or exchangeable securities.



     “Contemplated Transactions” has the meaning set forth in Section 2.1(b).



     “Exchange Act” has the meaning set forth in Section 2.7(b).



     “Exempt Issuance” means (i) all shares of Common Stock issued or issuable to
employees, directors or consultants pursuant to any equity compensation plan that is in effect on
the date of this Agreement, (ii) all shares of Common Stock issued or issuable to employees or
directors pursuant to any equity compensation plan approved by the stockholders of the Company
after the date of this Agreement, (iii) all shares of Common Stock issued or issuable to employees,
directors or consultants as bona fide compensation for business services rendered, not compensation
for fundraising activities, (iv) all shares of Common Stock issued or issuable to bona fide leasing
companies, strategic partners, or major lenders or other financing or credit transaction which is
not an equity capital raising event for the Company, (v) all shares of Common Stock issued or
issuable as the purchase price in a bona fide acquisition or merger (including reasonable fees paid
in connection therewith) or (vi) all Warrant Shares, Additional Shares and shares issued upon
conversion or exercise of other Convertible Securities outstanding on the date of the last Closing
hereunder.



     “Fair Value” has the meaning set forth in Section 1.5.



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     “First Closing” has the meaning set forth in Section 1.2.



     “First Closing Date” has the meaning set forth in Section 1.2.



     “Form 10-KSB Financial Statements” has the meaning set forth in Section
2.9(c).



     “Governmental Body” has the meaning set forth in Section 2.7(b).



     “Indemnified Party” has the meaning set forth in Section 5.2(b).



     “Indemnifying Party” has the meaning set forth in Section 5.2(c).



     “Information Statement” has the meaning set forth in Section 2.2(b)(i).



     “Investor Rights Agreement” has the meaning set forth in Section 1.3(a).



     “Investor” shall mean each Investor who purchases Units hereunder, including without
limitation investors who purchase Units on the Second Closing Date.



     “Knowledge” shall mean, with respect to a particular fact or other matter, the
knowledge, after reasonable investigation, of the Chief Executive Officer or Chief Financial
Officer of the Company.



     “Legal Requirement” has the meaning set forth in Section 2.8.



     “Losses” has the meaning set forth in Section 5.2(b).



     “Material Adverse Effect” has the meaning set forth in Section 2.1(a).



     “Material Agreement” has the meaning set forth in Section 2.7.



     “Notice” has the meaning set forth in Section 6.6.



     “Other Securities” has the meaning set forth in the Warrants.



     “Person” means any individual, sole proprietorship, partnership, corporation, limited
liability company, business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity, any university or similar institution, or any government or any
agency or instrumentality or political subdivision thereof.



     “Purchased Shares” has the meaning set forth in Section 1.1(a).



     “Purchased Warrants” has the meaning set forth in Section 1.1(a).



     “Registration Waivers” shall mean the waivers of registration rights in substantially
the form attached hereto as Exhibit 5.



     “Restated Certificate” has the meaning set forth in Section 2.2(b)(i).



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     “Rule 144” means Rule 144 promulgated under the Securities Act or any successor or
substitute rule, law or provision.



     “SEC” means the Securities and Exchange Commission.



     “SEC Documents” has the meaning set forth in Section 2.9(a).



     “Second Closing” has the meaning set forth in Section 1.2.



     “Second Closing Date” has the meaning set forth in Section 1.2.



     “Securities” has the meaning set forth in Section 1.1(a).



     “Securities Act” has the meaning set forth in Section 2.5.



     “Shares” has the meaning set forth in Background.



     “Subsidiary” means any significant subsidiary (as defined under Rule 1.02(w) of
Regulation S-X promulgated by the SEC) of the Company.



     “Transaction Documents” has the meaning set forth in Section 1.3(a).



     “Underlying Securities” means the shares of Common Stock or Other Securities issued or
from time to time issuable upon exercise of the Warrants.



     “Unit” means (i) one Share and (ii) one Warrant.




     1. Purchase and Sale of Units.




          1.1. Sale and Issuance of Securities.




          (a) The Company shall sell to the Investors and the Investors shall purchase
from the Company, up to a maximum of 9,000,000 Units, at a price per Unit equal to
$1.00, for a purchase price aggregating up to a maximum of $9,000,000.00. In
addition, the Company may sell the Additional Securities to a strategic investor for
a purchase price aggregating up to $1,000,000.00 at a Second Closing. The Shares
sold as part of the Units are referred to as the “Purchased Shares” and the
Warrants sold as part of the Units are referred to as the “Purchased
Warrants” and collectively with the Purchased Shares, the “Securities”.




          (b) The number of Purchased Shares and Purchased Warrants to be purchased by
each Investor from the Company is set forth on the signature page here, subject to
acceptance, in whole or in part, by the Company.




          1.2. Closings. On and after February 16, 2007, the Company shall accept
subscriptions under this Agreement. The first closing (the “First Closing”) of the
purchase and sale of the Securities hereunder shall take place on March 2, 2007 or such
other date thereafter, but no later than March 30, 2007, as is agreed to by the Company



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and Investors who subscribe for at least 2,500,000 Units (the “First Closing
Date”). A second closing (the “Second Closing, and with the First Closing, the
“Closings”) for the sale of the Additional Securities shall take place no later than
March 30, 2007 (the “Second Closing Date”, and with the First Closing Date, the
“Closing Dates”). Each Closing shall take place at the offices of Hahn & Hessen
LLP, the Investors’ counsel, in New York, New York, or at such other location as is mutually
acceptable to the Investors and the Company, subject to fulfillment of the conditions to the
Closing set forth in the Agreement. At each Closing:




          (a) each Investor purchasing Securities at the Closing shall deliver to the
Company or its designees by wire transfer or such other method of payment as the
Company shall approve, an amount equal to the purchase price of the Securities
purchased by such Investor hereunder, as set forth opposite such Investor’s name on
the signature pages hereof;




          (b) the Company shall authorize its transfer agent to arrange delivery to each
Investor of one or more stock certificates registered in the name of the Investor,
or in such nominee name(s) as designated by the Investor in writing, representing
the number of Purchased Shares as set forth opposite such Investor’s name on the
signature page hereof; and




          (c) the Company shall issue and deliver to each Investor purchasing Securities
at each Closing the Warrants, registered in the name of such Investor, pursuant to
which such Investor shall have the right to acquire the number of Underlying
Securities as set forth opposite such Investor’s name on the signature page hereof
on the terms set forth therein.




          1.3. Investors’ Conditions to Closing. The obligation of the Investors to
complete the purchase of the Securities at the applicable Closing is subject to the Company
delivering Securities as set forth in Section 1.2 and to fulfillment of the following
conditions:




          (a) the Company shall execute and deliver to the Investors an Investor Rights
Agreement, dated the First Closing Date, in the form attached as Exhibit 2
with respect to the Purchased Shares and the Underlying Securities (the
“Investor Rights Agreement”, and with the Registration Waivers, the
Agreement and the Warrants, the “Transaction Documents);




          (b) the Company shall deliver to the Investors an opinion of counsel, dated the
applicable Closing Date and reasonably satisfactory to counsel for the Investors,
with respect to the matters set forth on Exhibit 3;




          (c) the representation and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects as of the date of this
Agreement and as of the applicable Closing Date as though made on and as of the
applicable Closing Date (except to the extent such representations and warranties
speak as of an earlier date, in which case such representations and



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warranties shall be true and correct in all material respects as of such
earlier date), and the Company shall have performed in all material respects all
covenants and other obligations required to be performed by it under this Agreement
at or prior to the applicable Closing Date, and the Investors shall have received a
certificate signed on behalf of the Company by an authorized officer of the Company
to such effect;




          (d) the Company shall deliver to Investors a certified copy of its Certificate
of Incorporation and by-laws and a Certificate of Good Standing from the Secretary
of State of the State of Delaware;




          (e) the Company shall pay the Investors’ expenses to the extent set forth in
Section 6.9 hereof;




          (f) the Company shall have received Registration Waivers from each Person
(other than as disclosed on the Company Disclosure Letter) having any registration
or similar rights in respect of any Company securities; and




          (g) the Company shall have executed and delivered all other documents
reasonably requested by counsel for the Investors.




          1.4 Company’s Conditions to Closing.




          (a) The obligation of the Company to complete the sale of the Securities at the First
Closing is subject to fulfillment of the following conditions:




          (i) the Investors shall execute and deliver to the Company the Investor Rights
Agreement; and




          (ii) the representation and warranties of such Investors set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of the
First Closing Date as though made on and as of the First Closing Date (except to the
extent such representations and warranties speak as of an earlier date), in which
case such representations and warranties shall be true and correct in all material
respects as of such earlier date), and such Investors shall have performed in all
material respects all covenants and other obligations required to be performed by
them under this Agreement, if any at or prior to the First Closing Date.




          (b) The obligation of the Company to complete the sale of the Securities at the Second
Closing is subject to fulfillment of the following conditions:




          (i) one or more Investors shall purchase at least 500,000 Units;




          (ii) such Investors shall execute and deliver to the Company the Investor
Rights Agreement; and



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          (iii) the representation and warranties of such Investors set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of the
Second Closing Date as though made on and as of the First Closing Date (except to
the extent such representations and warranties speak as of an earlier date), in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date), and such Investors shall have performed
in all material respects all covenants and other obligations required to be
performed by them under this Agreement, if any at or prior to the Second Closing
Date.




          1.5 Anti-Dilution. In the event the Company shall complete an offering of
securities for cash other than an Exempt Issuance (an “Offering”) during the
Anti-Dilution Period at a price per Share (or equivalent convertible securities and in each
case taking into account the fair value (the “Fair Value”) of any other securities
or assets sold with the securities included in the Offering) of $1.00 per Share (or the
Adjusted Purchase Price Per Share then in effect, if less) or less (the “Subsequent
Price”), then, in such event, the purchase price of Purchased Shares issued hereunder
(deemed to be $1.00 per Purchased Share for purposes of this Section 1.5) shall be
automatically adjusted to equal the Subsequent Price (the “Adjusted Purchase Price Per
Share”), and an additional number of Shares shall be issued to each Investor as if the
purchase price per Share were such Adjusted Purchase Price Per Share; provided that warrants
included in an Offering of units having terms and coverage such that the Fair Value of such
Warrants is higher than the Warrants included in the Units (the “Similar Warrants”)
shall be deemed to have no value for purposes of this Section 1.5 only. Upon such event,
the Company shall, and without further action on the part of the each Investor, issue such
additional Shares to each Investor as shall result from the Adjusted Purchase Price Per
Share. Such additional Shares shall be issued and delivered to each Investor within fifteen
(15) days following the consummation of each Offering. For illustration purposes only, if
the Company completed an offering of units consisting of Shares and warrants (other than
Similar Warrants) at a price per unit of $.85, and the Fair Value of the warrants sold in
the unit with each Share is $.10, then the Adjusted Purchase Price per Share will be $.75
(that is, $.85 minus $.10), and each Investor will receive a number of additional Shares
equal to one-third of such Investor’s Purchased Shares; that is, an Investor who purchased
1,000,000 Units for $1,000,000 would receive additional Shares so that such Investor will
have received an aggregate of 1,333,333 Purchased Shares ($1,000,000/$.75) in respect of the
Investor’s $1,000,000 investment. For purposes of this Section 1.5, Fair Value shall mean
the fair value of the warrant or other security or asset as determined in good faith by the
Board of Directors of the Company in good faith in accordance with generally accepted
accounting principles.




     2. Representations and Warranties of the Company. The Company hereby represents and
warrants to each of the Investors as follows:




          2.1. Corporate Organization; Authority; Due Authorization.




          (a) The Company (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its



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incorporation, (ii) has the corporate power and authority to own or lease its
properties as and in the places where its business is now conducted and to carry on
its business as now conducted, and (iii) is duly qualified as a foreign corporation
authorized to do business in every jurisdiction where the failure to so qualify,
individually or in the aggregate, would have a material adverse effect on the
operations, assets, liabilities, financial condition or business of the Company and
its Subsidiaries taken as a whole (a “Material Adverse Effect”). Set forth
in Section 2.1(a) of the Company Disclosure Letter is a complete and correct list of
all Subsidiaries. Each Subsidiary is duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and is qualified
to do business as a foreign corporation in each jurisdiction in which qualification
is required, except where failure to so qualify would not have, individually or in
the aggregate, a Material Adverse Effect.




          (b) The Company (i) has the requisite corporate power and authority to execute,
deliver and perform this Agreement and the other Transaction Documents to which it
is a party and to incur the obligations herein and therein and (ii) has been
authorized by all necessary corporate action to execute, deliver and perform this
Agreement and the other Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby (the “Contemplated
Transactions”). This Agreement is and each of the other Transaction Documents
will be on each Closing Date a valid and binding obligation of the Company
enforceable in accordance with its terms except as limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting the enforcement of
creditors’ rights and the availability of equitable remedies (regardless of whether
such enforceability is considered in a proceeding at law or equity).




          2.2. Capitalization; Authorization of Additional Shares of Common Stock.




          (a) Current Capitalization. The authorized capital stock of the
Company consisted of (i) 50,000,000 shares of Common Stock, $.01 par value, of which
21,149,299 shares of Common Stock are outstanding and (ii) 4,000 shares of Preferred
Stock, $.01 par value, of which no shares are outstanding. All outstanding shares
of capital stock of the Company were issued in compliance with all applicable
Federal and state securities laws, and the issuance of such shares was duly
authorized by all necessary corporate action on the part of the Company. Except as
contemplated by this Agreement or as set forth in Section 2.2(a) of the Company
Disclosure Letter, there are (A) no outstanding subscriptions, warrants, options,
conversion privileges or other rights or agreements obligating the Company to
purchase or otherwise acquire or issue any shares of capital stock of the Company
(or shares reserved for such purpose), (B) no preemptive rights contained in the
Company’s Certificate of Incorporation, as amended (the “Certificate of
Incorporation”), the By-laws of the Company or contracts to which the Company is
a party or rights of first refusal with respect to the issuance of additional shares
of capital stock of the Company (other than as



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set forth in the Investor Rights Agreement), including without limitation the
Securities and the Underlying Securities, and (C) no commitments or understandings
(oral or written) of the Company to issue any shares, warrants, options or other
rights to acquire any equity securities of the Company other than with respect to
existing antidilution rights of existing investors, the effect of which is
accurately set forth in the Company Disclosure Letter. To the Company’s Knowledge,
except as set forth in Section 2.2(a) of the Company Disclosure Letter, none of the
shares of Common Stock are subject to any stockholders’ agreement, voting trust
agreement or similar arrangement or understanding. Except as set forth in Section
2.2(a) of the Company Disclosure Letter, the Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to vote
(or which are convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter.




          (b) Amendment to Certificate of Incorporation; Information Statement;
Stockholders Meeting.




          (i) The Board of Directors of the Company and holders of a majority of the
outstanding Shares acting by written consent have approved a restatement and
amendment to the Certificate of Incorporation authorizing the issuance of additional
shares of Common Stock and deleting the Company’s authorized preferred stock, which
would enable the Company to be in compliance with the covenant set forth in Section
5.1(b) below (the “Restated Certificate”). In furtherance thereof, as
promptly as possible, but in no event later than 15 business days following the date
of this Agreement. In connection therewith, the Company will promptly prepare and
file with the SEC a Schedule 14C Information Statement (as amended or supplemented,
the “Information Statement”), and, after receiving and promptly responding
to any comments of the SEC thereon, shall promptly mail the Information Statement to
the stockholders of the Company. The Company will comply with Section 14(a) of the
Exchange Act and the rules promulgated thereunder in relation to the Information
Statement and any other materials to be sent to the stockholders of the Company in
connection with the approval of the Restated Certificate, and the Information
Statement shall not, on the date the Information Statement (or any amendment thereof
or supplement thereto) is first mailed to stockholders, contain any statement that,
at the time and in the light of the circumstances under which it is made, is false
or misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication with respect to the
matters disclosed therein. Promptly upon the expiration of the twenty day waiting
period required by the SEC, the Company shall file cause the Restated Certificate to
be duly filed in the State of Delaware.




          (ii) Subject to its fiduciary obligations under applicable law (as determined
in good faith by the Company’s Board of Directors, after having taken into account
the written advice of the Company’s outside counsel), the



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Company’s Board of Directors shall take all commercially reasonable action to
enable filing and effectiveness of the Restated Certificate.




          (iii) In the event that (x) the Company does not file the Information Statement
within 15 business days following the date of this Agreement, (y) the Company fails
to file the Restated Certificate and make it effective under Delaware law within 90
days following the date of this Agreement, or (z) the Company’s Board of Directors
fails to act as required pursuant to the provisions of Section 2.2(b)(ii), the
Company shall pay to each Investor a cash penalty equal to 10% of the aggregate
amount invested by such Investor at the applicable Closing; provided, however, that,
with respect to clause (y) above, no such penalty shall apply in the event that a
delay beyond the 90th day arises out of review by the SEC as long as the
Company continues to use its best efforts to cause the Information Statement to be
approved by the SEC and mailed to stockholders. Any payments made pursuant to this
Section 2.2(b)(iii) shall not constitute the Investors’ exclusive remedy for such
events.




          2.3. Validity of Securities. The issuance of the Securities has been duly
authorized by all necessary corporate action on the part of the Company and, when issued to,
delivered to, and paid for by the Investors in accordance with this Agreement, the Purchased
Shares will be validly issued, fully paid and non-assessable.




          2.4. Underlying Securities. The issuance of the Underlying Securities upon
exercise of the Purchased Warrants has been duly authorized, and the Underlying Securities
and at all times subsequent to the amendment of Company’s Certificate of Incorporation to
increase its authorized capital stock (the “Capital Amendment”) and prior to such exercise
will have been, duly reserved for issuance upon such exercise and, when so issued, will be
validly issued, fully paid and non-assessable.




          2.5. Private Offering. Neither the Company nor anyone authorized to act on its
behalf has within the last 12 months issued, sold or offered any security of the Company
(including, without limitation, any Common Stock or warrants of similar tenor to the
Purchased Warrants) to any Person under circumstances that would cause the issuance and sale
of the Securities, as contemplated by this Agreement, to the Company’s knowledge to be
subject to the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the “Securities Act”). The Company agrees that neither the Company nor
anyone authorized to act on its behalf will offer the Securities or any part thereof or any
similar securities for issuance or sale to, or solicit any offer to acquire any of the same
from, anyone so as to make the issuance and sale of the Securities subject to the
registration requirements of Section 5 of the Securities Act.




          2.6. Brokers and Finders. Except as set forth in Section 2.6 of the Company
Disclosure Letter, the Company has not retained any broker, investment banker or finder in
connection with the Contemplated Transactions. No broker, investment banker or finder will
receive a fee, commission or other compensation in respect of any purchase of Units by AIGH
Investment Partners, LLC, Globis Capital Partners, L.P., any



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of their respective affiliates or any other Investors introduced to the Company by AIGH
Investment Partners, LLC or Globis Capital Partners, L.P.




          2.7. No Conflict; Required Filings and Consents.




          (a) The execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company do not, and the consummation by the Company of
the Contemplated Transactions will not, (i) conflict with or violate the Certificate
of Incorporation or the By-laws of the Company or its Subsidiaries assuming the due
filing of the Capital Amendment, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or its Subsidiaries
or by which any property or asset of the Company or its Subsidiaries is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, result in
the loss of a material benefit under, or give to others any right of purchase or
sale, or any right of termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company or of any of its Subsidiaries pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any of
its Subsidiaries is a party or by which the Company or of any of its Subsidiaries or
any property or asset of the Company or of any of its Subsidiaries is bound or
affected (the “Material Agreements”); except, in the case of clauses (ii)
and (iii) above, for any such conflicts, violations, breaches, defaults or other
occurrences that would not prevent or delay consummation of any of the Contemplated
Transactions in any material respect or otherwise prevent the Company from
performing its obligations under this Agreement or any of the other Transaction
Documents in any material respect, and would not, individually or in the aggregate,
have a Material Adverse Effect.




          (b) The execution and delivery of this Agreement and the other Transaction
Documents by the Company do not, and the performance of this Agreement and the other
Transaction Documents and the consummation by the Company of the Contemplated
Transactions will not, require, on the part or in respect of the Company, any
consent, approval, authorization or permit of, or filing with or notification to,
any Governmental Body (as hereinafter defined) except for the filing of a Form D
with the SEC and applicable requirements, if any, of the Securities Exchange Act of
1934, as amended (the “Exchange Act”) or any state securities or “blue sky”
laws (collectively, “Blue Sky Laws”), and any approval required by
applicable rules of the markets in which the Company’s securities are traded. For
purposes of this Agreement, “Governmental Body” shall mean any: (i) nation,
state, commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature in the United States; (ii) federal, state, local,
municipal, foreign or other government; or (iii) governmental or quasi-governmental
authority of any nature (including any governmental



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division, department, agency, commission, instrumentality, official,
organization, unit, body or entity and any court or other tribunal) in the United
States.




          2.8. Compliance. Except as set forth in the SEC Documents or in Section 2.8 of
the Company Disclosure Letter, neither the Company nor any Subsidiary is in conflict with,
or in default or violation of (i) any law, rule, regulation, order, judgment or decree
applicable to the Company or such Subsidiary or by which any property or asset of the
Company or such Subsidiary is bound or affected (“Legal Requirement”), or (ii) any
Material Agreement, in each case except for any such conflicts, defaults or violations that
would not, individually or in the aggregate, have a Material Adverse Effect. Neither the
Company nor any Subsidiary has received any written notice or other communication from any
Governmental Body regarding any actual or possible violation of, or failure to comply with,
any Legal Requirement, except any such violations or failures that would not, individually
or in the aggregate, have a Material Adverse Effect.




          2.9. SEC Documents; Financial Statements.




          (a) The information contained in the following documents, did not, as of the
date of the applicable document, include any 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, in the light of the circumstances in which they were made,
not misleading, as of their respective filing dates or, if amended, as so amended
(the following documents, collectively, the “SEC Documents”), provided that
the representation in this sentence shall not apply to any misstatement or omission
in any SEC Document filed prior to the date of this Agreement which was superseded
by a subsequent SEC Document filed prior to the date of this Agreement:




          (i) the Company’s Annual Report on Form 10-KSB for the year ended December 31,
2005;




          (ii) the Company’s Quarterly Reports on Form 10-QSB for the quarters ended
March 31, 2006, June 30, 2006 and September 30, 2006; and




          (iii) the Company’s interim filings on Form 8-K or other appropriate forms
filed on any date after December 31, 2006 and on or before each Closing.




          (b) In addition, as of the date of this Agreement, the Company Disclosure
Letter, when read together with the SEC Documents and the information,
qualifications and exceptions contained in this Agreement, does not include any
untrue statement of a material fact or omit to state a material fact in light of the
circumstances in which such written disclosures were made.




          (c) The Company has filed all forms, reports and documents required to be filed
by it with the SEC for the 12 months preceding the date of this Agreement, including
without limitation the SEC Documents. As of their



12









 







respective dates, the SEC Documents filed prior to the date hereof complied as
to form in all material respects with the applicable requirements of the Securities
Act, the Exchange Act, and the rules and regulations thereunder.




          (d) The Company’s Annual Report on Form 10-KSB for the year ended December 31,
2005, includes consolidated balance sheets as of December 31, 2004 and 2005 and
consolidated statements of income for the one year periods then ended (collectively,
the “Form 10-KSB Financial Statements”).




          (e) The Company’s Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2006, includes consolidated balance sheets as of September 30, 2006
and consolidated statements of income for the quarters ended June 30, 2005 and 2006
(the “Form 10-QSB Financial Statements” and together with the Form 10-K
Financial Statements, the “Financial Statements”).




          (f) The Financial Statements (including the related notes and schedules
thereto) fairly present in all material respects the consolidated financial
position, the results of operations, retained earnings or cash flows, as the case
may be, of the Company for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments that would not be
material in amount or effect), in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except as
may be noted therein.




          2.10. Litigation. Except as set forth in the SEC Documents or in Section 2.10
of the Company Disclosure Letter, there are no claims, actions, suits, investigations,
inquiries or proceedings (each, an “Action”) pending against the Company or any of
its Subsidiaries or, to the Knowledge of the Company, threatened against the Company or any
of its Subsidiaries, at law or in equity, or before or by any court, tribunal, arbitrator,
mediator or any federal or state commission, board, bureau, agency or instrumentality, that,
individually or in the aggregate, would reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents or in Section 2.10 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to or subject
to the provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.




          2.11. Absence of Certain Changes. Except as specifically contemplated by this
Agreement or as set forth in Section 2.11 of the Company Disclosure Letter or in the SEC
Documents, since September 30, 2006, there has not been (a) any material adverse change in
the business, prospects or financial condition of the Company; (b) any dividends or other
distribution of assets to stockholders of the Company; (c) any acquisition (by merger,
consolidation, acquisition of stock and/or assets or otherwise) of any Person by the
Company; or (d) any transactions, other than in the ordinary course of business, consistent
in all material respects with past practices, with any of its officers, directors or
principal stockholders or any of their respective Affiliates.



13









 






2.12. Intellectual Property.




          (a) To the knowledge of the Company it owns, or has the right to use, sell or
license all intellectual property reasonably required for the conduct of its
business as presently conducted (collectively, the “Company IP”) except for
any failure to own or have the right to use, sell or license the Company IP that
would not have a Material Adverse Effect.




          (b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a breach of
any instrument or agreement governing any Company IP, will not cause the forfeiture
or termination or give rise to a right of forfeiture or termination of any Company
IP or impair the right of Company and its Subsidiaries to use, sell or license any
Company IP, except for the occurrence of any such breach, forfeiture, termination or
impairment that would not, individually or in the aggregate, result in a Material
Adverse Effect.




          (c) (i) None of the manufacture, marketing, license, sale and use of any
product currently licensed or sold by the Company or any of its Subsidiaries
violates any license or agreement between the Company or any of its Subsidiaries and
any third party or, to the Knowledge of the Company, infringes any intellectual
property right of any other party; and (ii) there is no pending or, to the Knowledge
of the Company, threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any Company IP; except, with respect to
clauses (i) and (ii), for any violations, infringements, claims or litigations that
would not, individually or in the aggregate, have a Material Adverse Effect.




          2.13 No Adverse Actions. Except as set forth in the SEC Documents or in
Section 2.13 of the Company Disclosure Letter, there is no existing, pending or, to the
Knowledge of the Company, threatened termination, cancellation, limitation, modification or
change in the business relationship of the Company or any of its Subsidiaries, with any
supplier, customer or other Person except such as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.




          2.14. Registration Rights. Except as set forth in the Investor Rights
Agreement or in Section 2.14 of the Company Disclosure Letter, the Company is not under any
obligation to register under the Securities Act any of its currently outstanding securities
or any securities issuable upon exercise or conversion of its currently outstanding
securities nor is the Company obligated to register or qualify any such securities under any
Blue Sky Laws.




          2.15. Corporate Documents. The Company’s Certificate of Incorporation and
By-laws, each as amended to date, which are certified as of each Closing Date are true,
correct and complete and contain all amendments thereto.



14









 






          2.16. Disclosure. On or before 9:00 a.m., New York City Time, on the fourth
Business Day after each Closing, the Company shall file with the SEC a Current Report on
Form 8-K describing the material terms of the Contemplated Transactions, and attaching as
exhibits to such Form 8-K copies of this Agreement and the other Transaction Documents, as
required by the SEC. Except for information that may be provided to the Investors pursuant
to this Agreement, the Company shall not, and shall use commercially reasonable efforts to
cause each of its officers, directors, employees and agents not to, provide any Investor
with any material nonpublic information regarding the Company from and after the filing of
such Form 8-K without the express written consent of such Investor.




          2.17. Use of Proceeds. The net proceeds received by the Company from the sale
of the Securities shall be used by the Company for working capital and general corporate
purposes, including without limitation to support the operations of each of the
Subsidiaries.



        3. Representations and Warranties of the Investors. Each Investor represents and
warrants to the Company as follows:




          3.1. Authorization. If an entity, such Investor (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization, and
(ii) has the power and authority to own and hold the Units. Such Investor (i) has full
power and authority to execute, deliver and perform this Agreement and the other Transaction
Documents to which it is a party and to incur the obligations herein and therein and (ii) if
applicable has been authorized by all necessary corporate or equivalent action to execute,
deliver and perform this Agreement and the other Transaction Documents and to consummate the
Contemplated Transactions. This Agreement is and each of the other Transaction Documents
will be upon the execution and delivery by Investor, a valid and binding obligation of such
Investor enforceable in accordance with its terms, except as limited by applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement
of creditors’ rights and the availability of equitable remedies (regardless of whether such
enforceability is considered in a proceeding at law or equity).




          3.2. Brokers and Finders. Investor has either not retained an investment
banker, broker or finder, or has provided the name and information concerning such entity to
the Company on or prior to the applicable Closing Date.




          3.3 No Governmental Review. Such Investor understands that no United States
Federal or state agency or any other Governmental Body has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the
investment in the Securities nor has any agency or other Governmental Body passed upon or
endorsed the merits of the offering of the Securities.




          3.4. No Conflict; Required Filings and
Consents.



15









 






          (a) The execution, delivery and performance of this Agreement and the other
Transaction Documents by each Investor do not, and the consummation by such Investor
of the Contemplated Transactions will not, (i) if such Investor is an entity,
conflict with or violate the Certificate of Incorporation or the By-laws (or
equivalent or comparable documents) of such Investor, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to such Investor or
by which any property or asset of such Investor is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, result in the loss of a
material benefit under, or give to others any right of purchase or sale, or any
right of termination, amendment, acceleration, increased payments or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of such Investor pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation to
which such Investor is a party or by which such Investor or any property or asset of
such Investor is bound or affected; except, for any such conflicts, violations,
breaches, defaults or other occurrences that would not prevent or delay consummation
of any of the Contemplated Transactions in any material respect or otherwise prevent
such Investor from performing its obligations under this Agreement or any of the
other Transaction Documents in any material respect.




          (b) The execution and delivery of this Agreement and the other Transaction
Documents by each Investor do not, and the performance of this Agreement and the
other Transaction Documents and the consummation by such Investor of the
Contemplated Transactions will not, require, on the part or in respect of such
Investor, any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Body.




     4. Securities Laws.




          4.1.
Securities Laws Representations and Covenants of Investors.




          (a) Each Investor represents and warrants to the Company that: this Agreement
is made by the Company with such Investor in reliance upon such Investor’s
representation to the Company, which by such Investor’s execution of this Agreement
such Investor hereby confirms, that the Securities to be received by such Investor
will be acquired for investment for such Investor’s own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof such
that such Investors would constitute an “underwriter” under the Securities Act;
provided that this representation and warranty shall not limit (i) the Investor’s
right to sell the Underlying Securities pursuant to the Investor Rights Agreement or
in compliance with an exemption from registration under the Securities Act and in
compliance with all applicable Federal Securities laws and Blue Sky Laws or (ii) the
Investor’s right to indemnification under this Agreement, if any or the Investor
Rights Agreement, if any.



16









 






          (b) Each Investor understands and acknowledges that (i) the offering of the
Securities pursuant to this Agreement will not be registered under the Securities
Act or qualified under any Blue Sky Laws on the grounds that the offering and sale
of the Securities are exempt from registration and qualification, respectively,
under the Securities Act and the Blue Sky Laws, (ii) nothing in this Agreement or
any of the other Transaction Documents or in any other materials presented by or on
behalf of the Company to such Investor in connection with the purchase of Securities
constitutes legal, tax or investment advice, (iii) such Investor has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of Securities, (iv) except
as provided in the Investor Rights Agreement, the Company has not undertaken to
register the Securities pursuant to the Securities Act and will have no obligation
to effect on behalf of any Investor any registration or qualification under the
Securities Act or under any Blue Sky Laws or to assist any Investor in complying
with any exemption from registration or qualification under the Securities Act or
under any Blue Sky Laws and (v) if the Securities have not been registered under the
Securities Act and Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the Person through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the Securities Act) may
require compliance with some other exemption under the Securities Act or the rules
and regulations of the SEC thereunder.




          (c) Each Investor covenants that, unless the Purchased Shares, the Purchased
Warrants, the Underlying Securities or any other shares of capital stock of the
Company received in respect of the foregoing have been registered pursuant to the
Investor Rights Agreement being entered into among the Company and the Investors,
such Investor will not dispose of such securities unless and until such Investor
shall have notified the Company of the proposed disposition and shall have furnished
the Company with an opinion of counsel reasonably satisfactory in form and substance
to the Company to the effect that (x) such disposition will not require registration
under the Securities Act and (y) appropriate action necessary for compliance with
the Securities Act, all applicable Blue Sky Laws and any other applicable state,
local or foreign law has been taken; provided, however, that an
Investor may dispose of such securities without providing the opinion referred to
above if the sale of the securities is made in reliance on, and in accordance with
the terms of Rule 144.




          (d) Each Investor represents to the Company that: (i) such Investor is able to
fend for itself in the Contemplated Transactions; (ii) such Investor has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of such Investor’s prospective investment in the
Securities and has so evaluated the merits and risks of such investment; (iii) such
Investor has the ability to bear the economic risks of such Investor’s prospective
investment and can afford the complete loss of such investment; (iv) such Investor
has been furnished with and has reviewed the SEC Documents and the Company
Disclosure Letter; (v) such Investor has been



17









 







furnished with and has had access to such information as is in the SEC
Documents and in the Company Disclosure Letter, together with the opportunity to
obtain such additional information as it requested to verify the accuracy of the
information contained therein or otherwise supplied to such Investor so that such
Investor can make an informed investment decision with respect to an investment in
the Securities; (vi) such Investor has had access to officers of the Company and an
opportunity to ask questions of and receive answers from such officers and has had
all questions that have been asked by such Investor satisfactorily answered by the
Company; and (vii) such Investor is not subscribing to purchase the Securities as a
result of or subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over television
or radio, or presented at any seminar or meeting, or any solicitation of a
subscription by a Person not previously known to such Investor in connection with
investments in securities generally.




          (e) Each Investor represents to the Company that: (i) such Investor (A) was
qualified at the time such Investor was offered the securities, (B) qualifies on the
date hereof, and (C) will qualify on the applicable Closing Date, as an “accredited
investor” as such term is defined under Rule 501 promulgated under the Securities
Act. Any Investor that is a corporation, a partnership, a limited liability
company, a trust or other business entity further represents to the Company that it
has not been organized for the purpose of purchasing the Securities.




          (f) By acceptance hereof, each Investor acknowledges that the Purchased Shares,
the Purchased Warrants, the Underlying Securities and any shares of capital stock of
the Company received in respect of the foregoing held by it may not be sold by such
Investor without registration under the Securities Act or an exemption therefrom,
and therefore such Investor may be required to hold such securities for an
indeterminate period.




          (g) In connection with any transfer of Securities made by each Investor in
compliance with the provisions of this Agreement, such Investor will cause each
proposed transferee of such Securities to agree and take hold such Securities
subject to the provisions of this Agreement.




          (h) The Investor will not, directly or indirectly, except (as to each of
clauses (i), (ii) and (iii) below) in compliance with (that is, only to the extent
required to comply with) the Securities Act and such other securities or Blue Sky
laws as may be applicable, (i) offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge of)
any of the Shares, (ii) engage in any short sale which results in a disposition of
any of the Shares by Investor, or (iii) hedge the economic risk of the Investor’s
investment in the Shares.




          (i) The representations, warranties and covenants of each Investor in this
Agreement are made severally and not jointly.



18









 






          4.2. Legends. All certificates for the Purchased Shares, Purchased Warrants
and the Underlying Securities, and each certificate representing any shares of capital stock
of the Company received in respect of the foregoing, whether by reason of a stock split or
share reclassification thereof, a stock dividend thereon or otherwise, and each certificate
for any such securities issued to subsequent transferees of any such certificate (unless
otherwise permitted herein) shall bear the following legend:



    “THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (“THE SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS
OR BLUE SKY LAWS.”




     5. Additional Covenants of the Company.




          5.1. Reports, Information, Securities.




          (a) The Company shall cooperate with each Investor in supplying such
information as may be reasonably requested by such Investor to complete and file any
information reporting forms presently or hereafter required by the SEC as a
condition to the availability of the safe harbor pursuant to Rule 144 for the sale
of any of the Purchased Shares, the Purchased Warrants, the Underlying Securities
and shares of capital stock of the Company received in respect of the foregoing.




          (b) The Company shall (i) use its best efforts to complete the Information
Statement, to deliver the Information Statement to its stockholders and to file the
Restated Certificate in the State of Delaware, and (ii) thereafter keep reserved for
issuance a sufficient number of authorized but unissued shares of Common Stock (or
Other Securities into which the Purchased Warrants are then exercisable) so that the
Purchased Warrants may be converted or exercised to purchase Common Stock (or such
Other Securities) at any time.




          5.2. Expenses; Indemnification.




          (a) The Company agrees to pay on each Closing Date and save the Investors
harmless against liability for (i) the payment of any stamp or similar taxes
(including interest and penalties, if any) that may be determined to be payable in
respect of the execution and delivery of this Agreement, and the issue and sale of
any Securities and the Underlying Securities, (ii) the expense of



19









 







preparing and issuing the certificates for the Securities and the Underlying
Securities, and (iii) the cost of delivering the Securities and the Underlying
Securities of each Investor to such Investor’s address, insured in accordance with
customary practice. Each Investor shall be responsible for its out-of-pocket
expenses arising in connection with the Contemplated Transactions, except that the
Company shall pay fees and disbursements of counsel to the Investors as set forth in
Section 6.9.




          (b) The Company hereby agrees and acknowledges that the Investors have been
induced to enter into this Agreement and to purchase the Securities hereunder, in
part, based upon the representations, warranties, agreements and covenants of the
Company contained herein. The Company hereby agrees to pay, indemnify and hold
harmless the Investors and any director, officer, partner, member, employee or other
affiliate of any Investor (each, an “Indemnified Party”) against all claims,
losses and damages resulting from any and all legal or administrative proceedings,
including without limitation, reasonable attorneys’ fees and expenses incurred in
connection therewith (but in no event for more than one law firm for all the
Investors)(collectively, “Losses”), resulting from a breach by the Company
of any representation or warranty of the Company contained herein or the failure of
the Company to perform any agreement or covenant made herein;




          (c) As soon as reasonably practicable after receipt by any Indemnified Party
of notice of any Losses in respect of which the Company (the “Indemnifying
Party”) may be required to provide indemnification thereof under this Section
5.2, the Indemnified Party shall give written notice thereof to the Indemnifying
Party. The Indemnified Party may, at its option, claim indemnity under this Section
5.2 as soon as a claim has been threatened by a third party, regardless of whether
any actual Losses have been suffered, so long as counsel for such Indemnified Party
shall in good faith determine that such claim is not frivolous and that the
Indemnifying Party may be required to provide indemnification therefor as a result
thereof and shall give notice of such determination to the Indemnifying Party. The
Indemnified Party shall permit the Indemnifying Party at the Indemnifying Party’s
option and expense, to assume the defense of any such claim by counsel mutually and
reasonably satisfactory to the Indemnifying Party and a majority in interest of the
Indemnified Parties and to settle or otherwise dispose of the same;
provided, however, that each Indemnified Party may at all times
participate in such defense at such Indemnified Party’s expense; and
provided further, however that the Indemnifying Party shall
not, in defense of any such claim, except with the prior written consent of the
Indemnified Party, consent to the entry of any judgment or settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff in
question to such Indemnified Party of a release of all liabilities in respect of
such claim. If the Indemnifying Party does not promptly assume the defense of such
claim or if any such counsel is unable to represent one or more of the Indemnified
Parties due to a conflict of interest, then an Indemnified Party may assume, to the
extent separable, the defense of such portion of the claim as to



20









 







which the conflict arose (and, if not separable, the entire claim) and be
entitled to indemnification and prompt reimbursement from the Indemnifying Party for
such Indemnified Party’s reasonable costs and expenses incurred in connection
therewith, including without limitation, reasonable attorneys’ fees and expenses
(not to exceed the cost of more than one law firm for all Investors). Such fees and
expenses shall be reimbursed to the Indemnified Parties as soon as practicable after
submission of invoices to the Indemnifying Party.




     6. Miscellaneous.




          6.1. Entire Agreement; Successors and Assigns. This Agreement and the other
Transaction Documents constitute the entire contract between the parties relative to the
subject matter hereof and thereof, and no party shall be liable or bound to the other in any
manner by any warranties or representations (express or implied) or agreements or covenants
except as specifically set forth herein or therein. This Agreement and the other
Transaction Documents supersede any previous agreement among the parties with respect to the
subject matter hereof and thereof. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective executors, administrators, heirs,
successors and assigns of the parties. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.




          6.2. Survival of Representations and Warranties. Notwithstanding any right of
the Investors fully to investigate the affairs of the Company and notwithstanding any
knowledge of facts determined or determinable by any Investor pursuant to such right of
investigation, each Investor has the right to rely fully upon the representations,
warranties, covenants and agreements of the Company contained in this Agreement or in any
documents delivered pursuant to this Agreement. All such representations and warranties of
the Company contained in this Agreement shall survive the execution and delivery of this
Agreement and each Closing hereunder and shall continue in full force and effect until the
earlier of (a) the date that is one year after the last Closing and (b) the sale of all of
the Shares pursuant to Rule 144 under the Securities Act or an effective registration
statement under the Securities Act covering the Purchased Shares and Underlying Securities.
All representations and warranties of the Investors contained in this Agreement shall
survive the execution and delivery of this Agreement and the applicable Closing hereunder.
The covenants of the Investors (to the extent set forth in Section 4.1(c)) and the Company
set forth in this Agreement shall survive the applicable Closing.




          6.3. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to principles
of conflicts of law. Each party hereby irrevocably consents and submits to the jurisdiction
of any New York State or United States Federal Court sitting in the State of New York,
County of New York, over any action or proceeding arising out of or relating to this
Agreement and irrevocably consents to the service of any and all process in any such action
or proceeding in the manner for the giving of Notices at its address specified



21









 







in Section 6.6. Each party further waives any objection to venue in the State
of New York, County of New York and any objection to an action or proceeding in such state
and county on the basis of forum non conveniens. Each party also waives any right to trial
by jury.




          6.4. Counterparts. This Agreement may be executed (including by facsimile
transmission) with counterpart signature pages or in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument.




          6.5. Headings. The headings of the sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this Agreement.




          6.6. Notices. Any notice or other communication required or permitted to be
given hereunder (each a “Notice”) shall be given in writing and shall be made by
personal delivery or sent by courier or certified or registered first-class mail (postage
prepaid), addressed to a party at its address shown below or at such other address as such
party may designate by three days advance Notice to the other parties.



     Any Notice to any of the Investors shall be sent to the addresses for such Investor set
forth on the signature pages hereof, with a copy to:


Hahn & Hessen LLP

488 Madison Avenue

New York, New York 10022

Attention: James Kardon, Esq.




     Any Notice to the Company shall be sent to:


Novint Technologies, Inc.

4109 Bryan Ave NW

Albuquerque, NM 87114

Attention: CEO



with a copy to:



Richardson & Patel LLP

10900 Wilshire Blvd., Suite 500

Los Angeles, CA. 90024

Fax: 310.208.1154

Attention: Nimish Patel, Esq.




                       Each Notice shall be deemed given and effective upon receipt (or refusal of receipt).



22









 






          6.7. Rights of Transferees. Any and all rights and obligations of each of the
Investors herein incident to the ownership of Securities or the Underlying Securities shall
pass successively to all subsequent transferees of such securities until extinguished
pursuant to the terms hereof; provided, however, that no Investor may transfer or assign its
rights under this Agreement (other than to an Affiliate) between the date of this Agreement
and the applicable Closing Date.




          6.8. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable law, but if
any provision of this Agreement shall be deemed prohibited or invalid under such applicable
law, such provision shall be ineffective to the extent of such prohibition or invalidity,
and such prohibition or invalidity shall not invalidate the remainder of such provision or
any other provision of this Agreement.




          6.9. Fees and Expenses




          (a) Subject to Section 6.9(c), irrespective of whether any Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement.




          (b) Each Investor shall be responsible for all costs and expenses incurred by such
Investor in connection with the negotiation, execution, delivery and performance of this
Agreement, except that the Company shall pay at each Closing for the legal fees and expenses
of Hahn & Hessen LLP, as counsel to the Investors, not exceeding a cap of $50,000; provided
that the Company shall also be obliged to pay additional legal fees and expenses of Hahn &
Hessen LLP incurred after the last Closing relating to filing of the Restated Certificate or
the Company’s performance under the Warrants up to an additional amount of $10,000.




          (c) If any action at law or in equity is necessary to enforce or interpret any of the
terms of this Agreement, the prevailing party shall be entitled to reasonable attorney’s
fees, costs and necessary disbursements in addition to any other relief to which such party
may be entitled.




          6.10. Amendments and Waivers. Unless a particular provision or section of this
Agreement requires otherwise explicitly in a particular instance, any provision of this
Agreement may be amended and the observance of any provision of this Agreement may be waived
(either generally or in a particular instance and either retroactively or prospectively),
only with the written consent of the Company and the holders of a majority of the Purchased
Shares (not including for this purpose any Purchased Shares which have been sold to the
public pursuant to a registration statement under the Securities Act or an exemption
therefrom). Any amendment or waiver effected in accordance with this Section 6.10 shall be
binding upon each Investor, each holder of any Securities at the time outstanding (including
without limitation securities into which any such Securities are convertible or
exercisable), each future holder thereof, and the Company.



23









 






          6.11. Company Disclosure Letter. Information disclosed in any section of the
Company Disclosure Letter shall be deemed to be disclosed with respect to the corresponding
numbered section of this Agreement, as well as to such other sections of this Agreement to
which such disclosure shall reasonably pertain to in light of the form and substance of the
disclosure made.




          6.12. Construction. Words (including capitalized terms defined herein) in the
singular shall be held to include the plural and vice versa as the context requires. The
words “herein,” “hereinafter,” “hereunder” and words of similar import used in this
Agreement shall, unless otherwise stated, refer to this Agreement as a whole and not to any
particular provision of this Agreement. All references to “$” in this Agreement and the
other agreements contemplated hereby shall refer to United States dollars (unless otherwise
specified expressly). Any reference to any gender includes the other genders.



[REMAINDER OF PAGE INTENTIONALLY BLANK]




24









 








SIGNATURE PAGE

TO

NOVINT TECHNOLOGIES, INC.

UNIT SUBSCRIPTION AGREEMENT

Dated as of February 23, 2007




     IF the INVESTOR is an INDIVIDUAL, please complete the following:



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



	 	 	 	 	 	 	 
	Amount of Subscription:	 	 	 	 
	$
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Print Name	 	 
	 
	 	 	 	 	 	 
	Number of Units to be Purchased:
                    (including
the
same
number
of
Purchased
Shares
and
related
Purchased
Warrants)	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Signature of Investor
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Social Security Number
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Address and Fax Number
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	E-mail Address
	 
	 	 	 	 	 	 
	 

	 	 	 	State of Domicile:	 	 
	 

	 	 	 	 	 	 
	Accepted and Agreed to as of
the date first
above written:	 	 	 	 
	 
	 	 	 	 	 	 
	NOVINT TECHNOLOGIES, INC.	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 

















 





SIGNATURE PAGE

TO

NOVINT TECHNOLOGIES, INC.

UNIT SUBSCRIPTION AGREEMENT

Dated as of February 23, 2007




     IF the INTERESTS will be held as JOINT TENANTS, as TENANTS IN COMMON, or as COMMUNITY
PROPERTY, please complete the following:



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



	 	 	 	 	 	 	 
	Amount of Subscription:	 	 	 	 
	 	 	 	 	 
	$                     	 	 	 	Print Name of Purchaser
	 
	 	 	 	 	 	 
	Number of Units to be Purchased:
                    (including the
same number of
Purchased Shares
and related Purchased
Warrants)	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Signature of a Purchaser
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Social Security Number
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Print Name of Spouse or Other Purchaser
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Signature of Spouse or Other Purchaser
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Social Security Number
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Address
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	Fax Number
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	E-mail Address
	 
	 	 	 	 	 	 
	 

	 	 	 	State of Domicile:	 	 
	 

	 	 	 	 	 	 
	Accepted and Agreed as of the
date first

above written:	 	 	 	 
	 
	 	 	 	 	 	 
	NOVINT TECHNOLOGIES, INC.	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	
 
	 	 	 	 
	Dated:

	 	
 
	 	 	 	 






 









 





SIGNATURE PAGE

TO

NOVINT TECHNOLOGIES, INC.

UNIT SUBSCRIPTION AGREEMENT

Dated as of February 23, 2007




     IF the INVESTOR is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY, TRUST or OTHER
ENTITY, please complete the following:



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



	 	 	 	 	 	 	 
	Amount of Subscription

	 	 	$	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Number of Units to be Purchased:                     , including the same number of
Purchased Shares and related Purchased Warrants)
	 	 	 	 	 	 
	
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 	 	Print Full Legal Name of Partnership,
Company, Limited Liability Company, Trust
or Other Entity







			
	By:	 	
 

(Authorized Signatory)






			
	Name:	 	
 







			
	Title:	 	
 







			
	Address and Fax Number:	 	
 








			
	 








			
	Taxpayer Identification Number:	 	
 







			
	Date and State of Incorporation or
Organization:	 	
 







			
	Date on which Taxable Year Ends:	 	
 







			
	E-mail Address:	 	
 






	 
	Accepted and Agreed as of the date first

above written:

	 

	NOVINT TECHNOLOGIES, INC.

	 







			
	By:	 	
 







			
	Name:	 	
 







			
	Title:	 	
 







			
	Dated:	 	
 






 









 





EXHIBITS TO THE UNIT SUBSCRIPTION AGREEMENT




	 	 	 
	Exhibit 1:

	 	Form of Warrants
	Exhibit 2:

	 	Form of Investor Rights Agreement
	Exhibit 3:

	 	Form of Legal Opinion
	Exhibit 4:

	 	Form of Restated Certificate
	Exhibit 5:

	 	Form of Registration Waiver







 









 








Exhibit 3




Form of Legal Opinion- General Counsel



The opinion will be subject to standard qualifications and exceptions, reasonably acceptable to
counsel for the Investors.




     1. The Company is validly existing as a corporation and is in good standing under the law of
the State of Delaware.



     2. The Company has the requisite corporate power and authority to execute and deliver the
Investment Documents to which it is a party and to (i) sell and issue the Securities under the
Agreement, (ii) issue the Underlying Securities upon the Restated Certificate being duly filed and
accepted in the State of Delaware and thereafter the exercise of the Warrants, and (iii) perform
its obligations under the Investment Documents.



     3. The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock
and 4,000 shares of Preferred Stock. Based upon (i) a Certificate of the Chief Executive Officer,
and (ii) in reliance upon the Dilution Agreements (which we assume have been duly executed and are
binding upon the signatory parties thereto), we believe that the Company’s statements in the
Company Disclosure Letter concerning the effect of the application of anti-dilution provisions in
currently outstanding securities and agreements of the Company correctly reflects the application
of those provisions in light of the Dilution Agreements and giving effect to the Closing.



     4. The execution, delivery and performance by the Company of the Investment Documents have
been duly authorized by all necessary corporate action on part of the Company. Each of the
Investment Documents to which the Company is a party has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.



     5. The execution and delivery by the Company of the Investment Documents, the performance by
the Company of its obligations under the Investment Documents, and the issuance of the Securities
do not violate any provision of the Certificate of Incorporation, Restated Certificate or By-laws
of the Company, or any provision of any Federal law applicable to the Company and to be customarily
applicable to transactions of the nature set forth in the Investment Documents.



     6. The execution and delivery by the Company of the Investment Documents, the performance by
the Company of its obligations under the Investment Documents, and the issuance of the Securities
do not violate, or constitute a default under, any note, bond, mortgage, indenture, contract,
agreement, lease or other instrument filed as an exhibit to the Company’s annual report on Form
10-KSB for the year ended December 31, 2005 to which the Company is bound or to which any of the
property or assets of the Company is subject (it being understood that no opinion is expressed with
respect to any financial covenant in any such note, bond,



 









 







mortgage, indenture, contract, agreement, lease or other instrument insofar as the covenant
requires a computation).



     7. Other than as set forth in the Investment Documents and the Company Disclosure Letter, to
our knowledge, there are no preemptive rights, rights of first refusal or rights of first offer
with respect to the issuance of the Securities or the performance by the Company of its obligations
under the Investment Documents, and the Securities and Underlying Securities, when issued and paid
for, all in compliance with the provisions of the Investment Documents will be free of any liens
and encumbrances other than restrictions on transfer imposed by Federal or state securities laws



     8. When issued and paid for and when certificates representing the Shares and the Warrants
have been issued to the Investors, all in compliance with the provisions of the Purchase Agreement,
the Shares and Warrants will be validly issued, fully paid and nonassessable; provided,
however, that the Shares and Warrants may be subject to restrictions on transfer under
applicable state and federal securities laws. The Underlying Securities, when issued upon the due
exercise of the Warrants including the payment of consideration thereof, will be validly issued,
fully paid and nonassessable.



     9. Based solely on a Certificate of the Chief Executive Officer of the Company as to factual
matters, the Company is not, and, immediately after giving effect to the sale of the Securities in
accordance with the Investment Documents and the application of the proceeds as described in
Section 2.17 of the Agreement, will not be, required to be registered as an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.



     10. Subject to the accuracy of the Investors’ representations and warranties in the Agreement,
and upon the filing of Form D in compliance with Regulation D under the Securities Act, the sale of
the Units in conformity with the terms of the Agreement constitutes a transaction exempt from the
registration requirements of Section 5 of the Securities Act.



     11. Based solely upon our review of the resolutions of the Board of Directors of the Company
relating to the Investment Documents, the Common Stock issuable upon exercise of the Warrants has
been validly reserved for issuance assuming the filing and acceptance of the Restated Certificate
in the State of Delaware.