exv10w15



 





Exhibit 10.15




SECURITIES PURCHASE AGREEMENT




     This Securities Purchase Agreement (this “Agreement”) is dated as of August 14, 2007,
by and among Command Center, Inc., a Washington corporation (the “Company”), and MDB
Capital Group, LLC, a California limited liability company ( the “Purchaser”).



     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506
promulgated thereunder, the Company desires to issue and sell to the Purchaser, and the Purchaser
desires to purchase from the Company, securities of the Company as more fully described in this
Agreement.



     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and the Purchaser agree as follows:



ARTICLE I.

DEFINITIONS




     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a)
capitalized terms that are not otherwise defined herein have the meanings given to such terms in
the Note (as defined herein), and (b) the following terms have the meanings indicated in this
Section 1.1:




     “Action” shall have the meaning ascribed to such term in Section 3.1(j).




     “Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person, as
such terms are used in and construed under Rule 144 under the Securities Act.




     “Business Day” means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which banking institutions in the
State of California are authorized or required by law or other governmental action to close.




     “Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.




     “Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all conditions precedent
to (i) the Purchaser’s obligations to pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities have been satisfied or waived.




     “Commission” means the Securities and Exchange Commission.



 









 






     “Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may hereafter be
reclassified or changed into.




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




     “Company Counsel” means Rogers & Hool, LLP.




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




     “Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).




     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.




     “GT” means Greenberg Traurig LLP with offices located at One International
Place, Boston, MA 02110.




     “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).




     “Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).




     “Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.




     “Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).




     “Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).




     “Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.




     “Next Equity Financing” shall mean the first financing by the Company after the
date hereof in which the Company issues and sells shares of Common Stock and/or Common Stock
Equivalents in which the gross proceeds received by the Company are at least $6,000,000.




     “Next Equity Financing Securities” means the shares of Common Stock and/or
Common Stock Equivalents sold in the Next Equity Financing.



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     “Note” means the Convertible Promissory Note in the principal amount of
$500,000 due, subject to the terms therein, six (6) months from its date of issuance, issued
by the Company to the Purchaser hereunder, in the form of Exhibit A hereto.




     “Note Securities” means the Next Equity Financing Securities of the Company
issued and issuable upon conversion of the Notes.




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




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




     “Purchaser Party” shall have the meaning ascribed to such term in Section 4.11.




     “Registration Statement” means a registration statement covering the resale of
the Underlying Shares by the Purchaser.




     “Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).




     “Required Minimum” means, as of any date, the maximum aggregate number of
shares of Common Stock then issued or potentially issuable in the future pursuant to the
Transaction Documents, including any Underlying Shares issuable upon exercise or conversion
in full of the Warrant, the Note and the Note Securities.




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




     “SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).




     “Securities” means the Note, the Warrant, the Warrant Shares, the Note
Securities and the Underlying Shares.




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




     “Subscription Amount” means $500,000.




     “Subsidiary” means any subsidiary of the Company.




     “Trading Day” means a day on which the Common Stock is traded on a Trading
Market.



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




     “Transaction Documents” means this Agreement, the Note, the Warrant, and any
other documents or agreements executed in connection with the transactions contemplated
hereunder.




     “Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion of the Note and upon exercise of the Warrants, as well as any shares of Common
Stock issued and issuable upon conversion or exercise of the Note Securities.




     “Warrant” means the warrant to purchase 250,000 shares of Common Stock, in the
form of Exhibit B, delivered to the Purchaser at the Closing.




     “Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrant.



ARTICLE II.

PURCHASE AND SALE




     2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchaser agrees to purchase the Note and the
Warrant. The Purchaser shall deliver to the Company via wire transfer or a certified check
immediately available funds equal to the Subscription Amount and the Company shall deliver to the
Purchaser the Note and the Warrant and the other items set forth in Section 2.2 issuable at the
Closing. Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of Company Counsel, or such other location as the parties shall mutually
agree.



     2.2 Deliveries.




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




     (i) this Agreement duly executed by the Company;




     (ii) a legal opinion of Company Counsel, in form and substance acceptable to
the Purchaser and its counsel;




     (iii) the Note with a principal amount of $500,000, registered in the name of
the Purchaser; and



     (iv) the Warrant registered in the name of the Purchaser to purchase 250,000
shares of Common Stock, with an exercise price equal to $1.50 per




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Warrant Share,
subject to adjustment therein.




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




     (i) this Agreement duly executed by the Purchaser;
and




     (ii) the Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company.



     2.3 Closing Conditions.




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




     (i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Purchaser contained herein;




     (ii) all obligations, covenants and agreements of the Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and




     (iii) the delivery by the Purchaser of the items set forth in Section 2.2(b) of
this Agreement.




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




     (i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;




     (ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;




     (iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;




     (iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and




     (v) from the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time prior
to the Closing Date, trading in securities generally
as reported by Bloomberg Financial Markets shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose



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trades are reported by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New York State
authorities nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such magnitude in its
effect on, or any material adverse change in, any financial market which, in each
case, in the reasonable judgment of the Purchaser, makes it impracticable or
inadvisable to purchase the Note at the Closing.



ARTICLE III.

REPRESENTATIONS AND WARRANTIES




     3.1 Representations and Warranties of the Company. The Company hereby makes the
representations and warranties set forth below to the Purchaser.




     (a) Subsidiaries. The Company owns, directly or indirectly, all of the capital
stock or other equity interests of each Subsidiary free and clear of any Liens, and all the
issued and outstanding shares of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights to subscribe for or
purchase securities. If the Company has no subsidiaries, then all other references in the
Transaction Documents to the Subsidiaries or any of them will be disregarded.




     (b) Organization and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as applicable),
with the requisite power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any Subsidiary is in
violation or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”)
and no Proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or qualification.




     (c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of each of the Transaction Documents by the



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Company and the consummation by it of the transactions contemplated hereby thereby have been
duly authorized by all necessary action on the part of the Company and no further action is
required by the Company, its board of directors or its stockholders in connection therewith
other than in connection with the Required Approvals. Each Transaction Document has been
(or upon delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its terms
except (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.




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




     (e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of
the Transaction Documents, other than (i) filings required pursuant to Section 4.6, (ii) the
notice and/or application(s) to each applicable Trading Market for the issuance and sale of
the Securities and the listing of the Underlying Shares for trading thereon in the time and
manner required thereby, and (iii) the filing of Form D with the Commission and such filings
as are required to be made under applicable state securities laws (collectively, the
“Required Approvals”).



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     (f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the Transaction Documents,
will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by
the Company. The Company has reserved from its duly authorized capital stock a number of
shares of Common Stock for issuance of the Underlying Shares at least equal to the Required
Minimum on the date hereof.




     (g) Capitalization. The capitalization of the Company is as previously
disclosed to the Purchaser in writing. The Company has not issued any capital stock since
its most recently filed periodic report under the Exchange Act, other than pursuant to the
exercise of employee stock options under the Company’s stock option plans, the issuance of
shares of Common Stock to employees pursuant to the Company’s employee stock purchase plan
and pursuant to the conversion or exercise of Common Stock Equivalents outstanding as of the
date of the most recently filed periodic report under the Exchange Act. No Person has any
right of first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents. Except as a
result of the purchase and sale of the Securities and except for an outstanding loan and
related warrants to Sonoran Pacific Resources, LLP that have been previously disclosed to
the Purchaser, there are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound
to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and
sale of the Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchaser) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. All of the outstanding shares of capital stock of the Company
are validly issued, fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the Board of Directors
of the Company or others is required for the issuance and sale of the Securities. There are
no stockholders agreements, voting agreements or other similar agreements with respect to
the Company’s capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.




     (h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was
required by law or regulation to file such material) (the foregoing



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materials, including the exhibits thereto and documents incorporated by reference
therein, being collectively referred to herein as the “SEC Reports”) on a timely
basis or has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective dates, the
SEC Reports complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated thereunder,
as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such financial statements
or the notes thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.




     (i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in a subsequent
SEC Report, (i) there has been no event, occurrence or development that has had or that
could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has
not incurred any liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with past practice
and (B) liabilities not required to be reflected in the Company’s financial statements
pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, and (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital stock. The
Company does not have pending before the Commission any request for confidential treatment
of information. No event, liability or development has occurred or exists with respect to
the Company or its Subsidiaries or their respective business, properties, operations or
financial condition, that would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made that has not been publicly disclosed
at least one Trading Day prior to the date that this representation is made.




     (j) Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, any Subsidiary or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely



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affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) could, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.




     (k) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company which could
reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s relationship
with the Company, and neither the Company or any of its Subsidiaries is a party to a
collective bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. No executive officer, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive covenant,
and the continued employment of each such executive officer does not subject the Company or
any of its Subsidiaries to any liability with respect to any of the foregoing matters. The
Company and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.




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



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




     (n) Title to Assets. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases
with which the Company and the Subsidiaries are in compliance.




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




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




     (q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports or previously disclosed to the Purchaser in writing, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the



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Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each case in excess
of $60,000 other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other
employee benefits, including stock option agreements under any stock option plan of the
Company.




     (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The Company has
established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and designed such disclosure controls and procedures to
ensure that information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s most recently filed periodic
report under the Exchange Act (such date, the “Evaluation Date”). The Company
presented in its most recently filed periodic report under the Exchange Act the conclusions
of the certifying officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the Company’s internal control over financial reporting (as such term is
defined in the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.




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




     (t) Private Placement. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 3.2, no registration under the
Securities Act is required for the offer and sale of the Securities by the Company to the
Purchaser as contemplated hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of any applicable Trading Market.



12









 






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




     (v) Registration Rights. No Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the Company.




     (w) Listing and Maintenance Requirements. The Company files periodic and other
reports under the Exchange Act pursuant to Section 15(d) of the Exchange Act. The Company’s
Common Stock is not required to be registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating or suspending its filing obligations under the
Exchange Act nor does it have any intention to take any such action nor has the Company
received any notification that the Commission is contemplating terminating or suspending
such filing obligations. The Company has not, in the twelve (12) months preceding the date
hereof, received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.




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




     (y) Disclosure. All disclosure furnished by or on behalf of the Company to the
Purchaser regarding the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, with respect to the representations
and warranties made herein are true and correct with respect to such representations and
warranties and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company acknowledges and
agrees that the Purchaser does not make and has not made any representations or warranties
with respect to the transactions contemplated hereby other than those specifically set forth
in Section 3.2 hereof.




     (z) No Integrated Offering. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 3.2, neither the Company, nor any of



13









 







its affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provision of any Trading Market on which any of the
securities of the Company are listed or designated.




     (aa) Solvency. Based on the financial condition of the Company as of the
Closing Date after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the Company’s existing debts and
other liabilities (including known contingent liabilities) as they mature; (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its business as
now conducted and as proposed to be conducted including its capital needs taking into
account the particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof; and (iii) the current cash
flow of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of the cash,
would be sufficient to pay all amounts on or in respect of its liabilities when such amounts
are required to be paid. The Company does not intend to incur debts beyond its ability to
pay such debts as they mature (taking into account the timing and amounts of cash to be
payable on or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the
Closing Date. The SEC Reports set forth as of the dates thereof all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
shall mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business), (b) all
guaranties, endorsements and other contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the Company’s balance sheet
(or the notes thereto), except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of business; and (c)
the present value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default
with respect to any Indebtedness.




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




     (cc) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of general



14









 







solicitation or general advertising. The Company has offered the Securities for sale
only to the Purchaser.




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




     (ee) Accountants. To the knowledge of the Company, the Company’s accountants
are a registered public accounting firm as required by the Securities Act.




     (ff) No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to arise, between
the Company and the accountants and lawyers formerly or presently employed by the Company
and the Company is current with respect to any fees owed to its accountants and lawyers.




     (gg) Acknowledgment Regarding Purchaser’s Purchase of Securities. The Company
acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s
length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that the Purchaser is not acting as a fiduciary
of the Company (or in any similar capacity) with respect to the Transaction Documents and
the transactions contemplated thereby and any advice given by the Purchaser or any of its
representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchaser’s purchase of the Securities.
The Company further represents to the Purchaser that the Company’s decision to enter into
this Agreement and the other Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its representatives.



     3.2 Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:




     (a) Organization; Authority. The Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization
with full right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution, delivery and performance by the
Purchaser of the transactions contemplated by this Agreement have been duly authorized by
all necessary corporate or similar action on the part of the



15









 







Purchaser. Each Transaction Document to which it is a party has been duly executed by
the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of the Purchaser, enforceable against it
in accordance with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.




     (b) Own Account. The Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Securities as principal for its own account and not with
a view to or for distributing or reselling such Securities or any part thereof in violation
of the Securities Act or any applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities Act or any applicable
state securities law and has no direct or indirect arrangement or understandings with any
other persons to distribute or regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser’s right to sell the Securities
pursuant to the Registration Statement or otherwise in compliance with applicable federal
and state securities laws) in violation of the Securities Act or any applicable state
securities law. The Purchaser is acquiring the Securities hereunder in the ordinary course
of its business.




     (c) Purchaser Status. At the time the Purchaser was offered the Securities, it
was, and at the date hereof it is, and on each date on which it exercises the Warrant or
converts the Note it will be either: (i) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act.




     (d) Experience of Purchaser. Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.




     (e) General Solicitation. Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general advertisement.




     (f) Disclosure of Information. The Purchaser has had an opportunity to ask
questions and receive answers from the Company regarding the terms and conditions of the
issuance and sale of the Securities and the business, properties, prospects and



16









 







financial condition of the Company and to obtain any additional information requested
and has received and considered all information it deems relevant to make an informed
decision to purchase the Securities. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser’s right to rely on the truth, accuracy and completeness of
such information and the Company’s representations and warranties contained in this
Agreement.



ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES




     4.1 Transfer Restrictions.




     (a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than pursuant to an
effective registration statement or Rule 144, to the Company or to an affiliate of the
Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably acceptable to the Company, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such transfer
does not require registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of the Purchaser under this Agreement.




     (b) The Purchaser agrees to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in the following form:




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



17









 






     The Company acknowledges and agrees that the Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security
interest in some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by
the provisions of this Agreement and, if required under the terms of such arrangement, the
Purchaser may transfer pledged or secured Securities to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval of the Company and no legal
opinion of legal counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such pledge. At the
Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are subject to registration
hereunder, the preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.




     (c) Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) while a registration
statement covering the resale of such security is effective under the Securities Act, or
(ii) following any sale of such Underlying Shares pursuant to Rule 144, or (iii) if such
Underlying Shares are eligible for sale under Rule 144(k), or (iv) if such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The Company shall
cause its counsel to issue a legal opinion to the Company’s transfer agent promptly after
the Effective Date if required by the Company’s transfer agent to effect the removal of the
legend hereunder. If all or any portion of the Note or the Warrant is converted or
exercised (as applicable) at a time when there is an effective registration statement to
cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under
Rule 144(k) or if such legend is not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by the staff of
the Commission) then such Underlying Shares shall be issued free of all legends. The
Company agrees that following the Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than five (5) Trading Days following
the delivery by the Purchaser to the Company or the Company’s transfer agent of a
certificate representing Underlying Shares, as applicable, issued with a restrictive legend,
deliver or cause to be delivered to the Purchaser a certificate representing such shares
that is free from all restrictive and other legends. The Company may not make any notation
on its records or give instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section. Certificates for Underlying Shares
subject to legend removal hereunder shall be transmitted by the transfer agent of the
Company to the Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System.




     (d) The Purchaser agrees that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the



18









 







Company’s reliance that the Purchaser will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant
to a Registration Statement, they will be sold in compliance with the plan of distribution
set forth therein.



     4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including without limitation its obligation to issue the
Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any
such dilution or any claim the Company may have against the Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other stockholders of the
Company.



     4.3 Furnishing of Information. As long as the Purchaser owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as the Purchaser owns Securities, if the Company is not required to file
reports pursuant to the Exchange Act, it will prepare and furnish to the Purchaser and make
publicly available in accordance with Rule 144(c) such information as is required for the Purchaser
to sell the Securities under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, to the extent required from time
to time to enable such Person to sell such Securities without registration under the Securities Act
within the requirements of the exemption provided by Rule 144.



     4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities to the Purchaser or that
would be integrated with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.



     4.5 Conversion and Exercise Procedures. The procedures set forth in the Note and the
Warrant set forth the totality of the procedures required of the Purchaser in order to exercise the
Warrant or convert the Note. No additional legal opinion or other information or instructions
shall be required of the Purchaser to exercise the Warrant or convert the Note. The Company shall
honor exercises of the Warrant and conversions of the Note and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in the Transaction Documents.



     4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. Eastern
time on the second Trading Day following the date hereof, issue a Current Report on Form 8-K
disclosing the material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company and the Purchaser shall consult with each other



19









 




in issuing any other press releases with respect to the transactions contemplated hereby, and
neither the Company nor the Purchaser shall issue any such press release or otherwise make any such
public statement without the prior consent of the Company, with respect to any press release of the
Purchaser, or without the prior consent of the Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the other party with
prior notice of such public statement or communication. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of the Purchaser, or include the name of the Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without the prior written
consent of the Purchaser, except (i) as required by federal securities law in connection with (A)
the Registration Statement and (B) the filing of final Transaction Documents (including signature
pages thereto) with the Commission and (ii) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the Purchaser with prior notice
of such disclosure permitted under this subclause (ii).




     4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that the Purchaser is an “Acquiring Person”
under any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that the Purchaser could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchaser.



     4.8 Registration Rights.



          (a) In connection with the Next Equity Financing, the Purchaser shall be granted, with respect
to the Underlying Shares, the same registration rights granted to the investors in the Next Equity
Financing.




          (b) If, at any time there is not an effective Registration Statement covering all of the
Underlying Shares, the Company shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the account of others under
the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or equity securities
issuable in connection with the Company’s stock option or other employee benefit plans), then the
Company shall deliver to the Purchaser a written notice of such determination and, if within
fifteen (15) days after the date of the delivery of such notice, the Purchaser shall so request in
writing, the Company shall include in such registration statement all or any part of such
Underlying Shares the Purchaser requests to be registered; provided, however, that the Company
shall not be required to register any Underlying Shares pursuant to this Section 4.8(b) that are
eligible for resale pursuant to Rule 144(k) promulgated by the Commission pursuant to the
Securities Act or that are the subject of a then effective Registration Statement. Any Underlying
Shares that are to be included in a registered public offering pursuant to this Section 2(g) shall
be offered and sold upon such terms as the managing underwriters thereof determine. The



20









 






managing underwriters may condition the Purchaser’s participation in such a registered public
offering upon the Purchaser’s execution of an underwriting agreement containing customary terms and
conditions which would customarily be applicable to selling shareholders. If the managing
underwriters for a registered public offering determine that the number of shares of Common Stock
proposed to be sold in such offering would adversely affect the marketing of the shares of Common
Stock to be sold by the Company therein or by the Person or Persons who exercised their right to
require the Company to register such offering under the Securities Act, then the number of shares
of Common Stock to be included in such offering shall be reduced until the number of such shares
does not exceed the number that the managing underwriters believe can be sold without any such
adverse effects; provided that any shares to be excluded shall be so excluded in the following
order of priority: (i) securities held by any Person or Persons other than (A) the Purchaser or (B)
any Person or Persons who exercised their demand right to require the Company to register such
offering under the Securities Act; (ii) securities to be registered on behalf of the Company, if
any, if such registered offering was initiated by any Person or Persons exercising their demand
right to require the Company to register such offering under the Securities Act and (iii) the
Underlying Shares sought to be included by the Purchaser and any other Persons exercising their
registration rights as determined on a pro-rata basis (based upon the aggregate number of shares of
Common Stock sought to be included in such registered offering).




     4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes.



     4.10 Reimbursement. If the Purchaser becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder of the Company (except as a result of
sales, pledges, margin sales and similar transactions by the Purchaser to or with any other
stockholder), solely as a result of the Purchaser’s acquisition of the Securities under this
Agreement, the Company will reimburse the Purchaser for its reasonable legal and other expenses
(including the cost of any investigation preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the Purchaser who are
actually named in such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the Purchaser and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchaser and any such Affiliate and any such Person.
The Company also agrees that neither the Purchaser nor any such Affiliates, partners, directors,
agents, employees or controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of acquiring the
Securities under this Agreement.



     4.11 Indemnification of the Purchaser. Subject to the provisions of this Section
4.11, the Company will indemnify and hold the Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any other title), each
Person who controls the Purchaser (within the meaning of Section 15 of the Securities Act and



21









 




Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of such controlling
person (each, a “Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any
such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against the Purchaser, or any of its
Affiliates, by any stockholder of the Company who is not an Affiliate of the Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of the Purchaser’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings the Purchaser may have with any such
stockholder or any violations by the Purchaser of state or federal securities laws or any conduct
by the Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance). If
any action shall be brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof with counsel of its own choosing
reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that
(i) the employment thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and to employ counsel
or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material
conflict on any material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the reasonable fees and
expenses of no more than one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party effected without
the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii)
to the extent, but only to the extent that a loss, claim, damage or liability is attributable to
any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements
made by such Purchaser Party in this Agreement or in the other Transaction Documents.




     4.12 Reservation and Listing of Securities.




     (a) The Company shall maintain a reserve from its duly authorized shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as may be required
to fulfill its obligations in full under the Transaction Documents.




     (b) The Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an additional shares
listing application covering a number of shares of Common Stock at least equal to the
Required Minimum on the date of such application, (ii) take all steps necessary to cause
such shares of Common Stock to be approved for listing on such Trading Market as soon as
possible thereafter, (iii) provide to the Purchaser evidence of such listing, and (iv)



22









 







maintain the listing of such Common Stock on any date at least equal to the Required
Minimum on such date on such Trading Market or another Trading Market.



     4.13 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy thereof, promptly
upon request of the Purchaser. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale
to the Purchaser at the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request of the Purchaser.



     4.14 Market Stand-Off” Agreement. Purchaser hereby agrees that it will not, without
the prior written consent of the managing underwriter, during the period commencing on the date of
the final prospectus relating to the closing of the issuance and sale of equity securities of the
Company in the Company’s next underwritten public offering pursuant to an effective registration
statement under the Securities Act (the “Public Offering”), and ending on the date specified by the
Company and the managing underwriter (such period not to exceed one hundred eighty (180) days) (a)
lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any of the Company’s equity securities (whether such equity
securities are then owned by Purchaser or thereafter acquired) held immediately prior to the
effectiveness of the registration statement for such offering, or (b) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic consequences of
ownership of the Company’s equity securities acquired through the exercise of the Warrant, whether
any such transaction described in clause (a) or (b) above is to be settled by delivery of
securities, in cash, or otherwise. The foregoing provisions of this Section 4.14 shall apply only
to the Company’s Public Offering, shall not apply to the sale of any shares to an underwriter
pursuant to an underwriting agreement and shall only be applicable to Purchaser if all officers and
directors and greater than five percent (5%) stockholders of the Company enter into similar
agreements. The underwriters in connection with the Company’s Public Offering are intended
third-party beneficiaries of this Section 4.14 and shall have the right, power, and authority to
enforce the provisions hereof as though they were a party hereto. Purchaser further agrees to
execute such agreements as may be reasonably requested by the underwriters in the Company’s Public
Offering that are consistent with this Section 4.14 that are necessary to give further effect
thereto.



ARTICLE V.

MISCELLANEOUS




     5.1 Termination. This Agreement may be terminated by the Purchaser by written notice
to the other parties, if the Closing has not been consummated on or before August 15, 2007.



     5.2 Fees and Expenses. The Company and the Purchaser shall each pay their own
expenses in connection with the transactions contemplated by this Agreement; provided, however,
that the Company shall reimburse the Purchaser for reasonable legal fees, up to a



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maximum of $10,000 in the aggregate, and disbursements in connection therewith. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with
the delivery of any Securities to the Purchaser.




     5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules.



     5.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached hereto.



     5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an amendment, by the
Company and the Purchaser or, in the case of a waiver, by the party against whom enforcement of any
such waived provision is sought. No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.



     5.6 Headings. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.



     5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser
(other than by merger). The Purchaser may assign any or all of its rights under this Agreement to
any Person to whom the Purchaser assigns or transfers any Securities, provided such transferee
agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the
Transaction Documents that apply to the “Purchaser”.



     5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.11.



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     5.9 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of California, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in either the City of Los Angeles or the City of Santa Monica. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in either the City of Los Angeles or the City of Santa Monica for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper or is an inconvenient venue for such proceeding. The parties
hereby waive all rights to a trial by jury. If either party shall commence an action or proceeding
to enforce any provisions of the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution of such action or
proceeding.



     5.10 Survival. The representations, warranties, covenants and other agreements
contained herein shall survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.



     5.11 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature
page were an original thereof.



     5.12 Severability. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.



     5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other Transaction



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Documents, whenever the Purchaser exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related obligations within the
periods therein provided, then the Purchaser may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided, however,
in the case of a rescission of a conversion of the Note or exercise of the Warrant, the Purchaser
shall be required to return any shares of Common Stock subject to any such rescinded conversion or
exercise notice.




     5.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any reasonable
third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities.



     5.15 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchaser and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in
any action for specific performance of any such obligation the defense that a remedy at law would
be adequate.



     5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to
the Purchaser pursuant to any Transaction Document or the Purchaser enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or
any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set
aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to
the Company, a trustee, receiver or any other person under any law (including, without limitation,
any bankruptcy law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.



     5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to
insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be
compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or proceeding that may be brought by the
Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction Document, it is expressly agreed and
provided that the total liability of the Company under the Transaction Documents for payments in
the nature of interest shall not exceed the maximum lawful rate authorized under applicable law
(the “Maximum Rate”), and, without limiting the foregoing, in



26









 




no event shall any rate of interest or default interest, or both of them, when aggregated with
any other sums in the nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of
interest allowed by law and applicable to the Transaction Documents is increased or decreased by
statute or any official governmental action subsequent to the date hereof, the new maximum contract
rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the
Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be
applied by the Purchaser to the unpaid principal balance of any such indebtedness or be refunded to
the Company, the manner of handling such excess to be at the Purchaser’s election.




     5.18 Construction. The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal
rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments
hereto.



(Signature Pages Follow)




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



	 	 	 	 	 	 	 	 	 
	COMMAND CENTER, INC.	 	 	 	Address for Notice:
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	Command Center, Inc.
	 	 	 	 	 	 	 
	 

	 	Name:

Title:
	 	 	 	 	 	3773 W. Fifth Avenue

Post Falls, ID 83854

Attention: Brad Herr, Secretary

Phone: 208-773-7450

Fax: 208-773-7467






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




Rogers & Hool LLP

Suite 850

The Camelback Esplanade

2425 East Camelback Road

Phoenix, Arizona 85016

Attention: Michael D. Hool

Phone: (602) 852-5550

Fax: (602) 852-5570




	 	 	 	 	 	 	 	 	 
	MDB CAPITAL GROUP, LLC	 	 	 	Address for Notice:
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	MDB Capital Group, LLC
	 	 	 	 	 	 	 
	 

	 	Name:

Title:
	 	 	 	 	 	401 Wilshire Boulevard

Suite 1020

Santa Monica, California 9040

Attn: Anthony DiGiandomenico

Phone: 310-526-5015

	 

	 	 	 	 	 	 	 	Fax: 310-526-5020






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




Greenberg Traurig LLP

One International Place

Boston, MA 02110

Attention: Bradley A. Jacobson

Phone: (617) 310-6205

Fax: (617) 279-8402





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