Exhibit 10.3 





INVESTMENT AGREEMENT 



INVESTMENT AGREEMENT (this
“AGREEMENT”), dated as of September 18, 2006 by and between The Blackhawk Fund a Nevada
corporation (the “Company”), and Dutchess Private Equities Fund, II, LP, a Delaware
limited partnership (the “Investor”). 



WHEREAS, the parties desire that,
upon the terms and subject to the conditions contained herein, the Investor shall invest
up to Ten Million dollars ($10,000,000) to purchase the Company’s Common Stock, $.001 par
value per share (the “Common Stock”); 



WHEREAS, such investments will be
made in reliance upon the provisions of Section 4(2) under the Securities Act of 1933, as
amended (the “1933 Act”), Rule 506 of Regulation D, and the rules and regulations
promulgated thereunder, and/or upon such other exemption from the registration
requirements of the 1933 Act as may be available with respect to any or all of the
investments in Common Stock to be made hereunder; and 



WHEREAS, contemporaneously with the
execution and delivery of this Agreement, the parties hereto are executing and delivering
a Registration Rights Agreement substantially in the form attached hereto (the
“Registration Rights Agreement”) pursuant to which the Company has agreed to provide
certain registration rights under the 1933 Act, and the rules and regulations promulgated
thereunder, and applicable state securities laws. 



NOW THEREFORE, in consideration of
the foregoing recitals, which shall be considered an integral part of this Agreement, the
covenants and agreements set forth hereafter, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Company and the Investor
hereby agree as follows: 



SECTION 1.        DEFINITIONS. 



        As
used in this Agreement, the following terms shall have the following meanings specified
or indicated below, and such meanings shall be equally applicable to the singular and
plural forms of such defined terms. 



        “1933
Act” shall have the meaning set forth in the preamble of this agreement.  



        “1934
Act” shall mean the Securities Exchange Act of 1934, as it may be amended.  



        ”Affiliate”
shall have the meaning specified in Section 5(H), below.  



        “Agreement”
shall mean this Investment Agreement.  



        “Best
Bid” shall mean the highest posted bid price of the Common Stock during a given period of
time.  



        “By-laws”
shall have the meaning specified in Section 4(C).  



        “Certificate
of Incorporation” shall have the meaning specified in Section 4(C).  



        “Closing”
shall have the meaning specified in Section 2(G).  



        “Closing
Date” shall mean no more than seven (7) Trading Days following the Put Notice Date.  





 
	 	
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        “Common
Stock” shall have the meaning set forth in the preamble of this Agreement.  



        “Control”
or “Controls” shall have the meaning specified in Section 5(H).  



        “Effective
Date” shall mean the date the SEC declares effective under the 1933 Act the Registration
Statement covering the Securities.  



        “Environmental
Laws” shall have the meaning specified in Section 4(M).  



        “Equity
Line Transaction Documents” shall mean this Agreement, the Registration Rights Agreement.  



        “Execution
Date” shall mean the date indicated in the preamble to this Agreement.  



        “Indemnities”
shall have the meaning specified in Section 11.  



        “Indemnified
Liabilities” shall have the meaning specified in Section 11.  



        “Ineffective
Period” shall mean any period of time that the Registration Statement or any Supplemental
Registration Statement (as defined in the Registration Rights Agreement between the
parties) becomes ineffective or unavailable for use for the sale or resale, as
applicable, of any or all of the Registrable Securities (as defined in the Registration
Rights Agreement) for any reason (or in the event the prospectus under either of the
above is not current and deliverable) during any time period required under the
Registration Rights Agreement.  



        “Investor”
shall have the meaning indicated in the preamble of this Agreement.  



        “Material
Adverse Effect” shall have the meaning specified in Section 4(A).  



        “Maximum
Common Stock Issuance” shall have the meaning specified in Section 2(H).  



        “Minimum
Acceptable Price” with respect to any Put Notice Date shall mean seventy-five percent
(75%) of the lowest closing bid prices for the ten (10) Trading Day period immediately
preceding each Put Notice Date.  



        “Open
Market Adjustment Amount” shall have the meaning specified in Section 2(l).  



        “Open
Market Purchase” shall have the meaning specified in Section 2(l)  



        “Open
Market Share Purchase” shall have the meaning specified in Section 2(l).  



        “Open
Period” shall mean the period beginning on and including the Trading Day immediately
following the Effective Date and ending on the earlier to occur of (I) the date which is
thirty-six (36) months from the Effective Date; or (ii) termination of the Agreement in
accordance with Section 9, below.  



        “Pricing
Period” shall mean the period beginning on the Put Notice Date and ending on and
including the date that is five (5) Trading Days after such Put Notice Date.  



        “Principal
Market” shall mean the American Stock Exchange, Inc., the National Association of
Securities Dealers, Inc. Over-the-Counter Bulletin Board, the NASDAQ National Market
System or the NASDAQ SmallCap Market, whichever is the principal market on which the
Common Stock is listed.  






 
	 	
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        “Prospectus”
shall mean the prospectus, preliminary prospectus and supplemental prospectus used in
connection with the Registration Statement.  



        “Purchase
Amount” shall mean the total amount being paid by the Investor on a particular Closing
Date to purchase the Securities.  



        “Purchase
Price” shall mean ninety-three percent (93%) of the lowest closing Best Bid price of the
Common Stock during the Pricing Period.  



        “Put”
shall have the meaning set forth in Section 2(B)(1) hereof.  



        “Put
Amount” shall have the meaning set forth in Section 2(B)(1) hereof.  



        “Put
Notice” shall mean a written notice sent to the Investor by the Company stating the Put
Amount in U.S. dollars the Company intends to sell to the Investor pursuant to the terms
of the Agreement and stating the current number of Shares issued and outstanding on such
date.  



        “Put
Notice Date” shall mean the Trading Day, as set forth below, immediately following the
day on which the Investor receives a Put Notice, however a Put Notice shall be deemed
delivered on (a) the Trading Day it is received by facsimile or otherwise by the Investor
if such notice is received prior to 9:00 am Eastern Time, or (b) the immediately
succeeding Trading Day if it is received by facsimile or otherwise after 9:00 am Eastern
Time on a Trading Day. No Put Notice may be deemed delivered on a day that is not a
Trading Day.  



        “Put
Restriction” shall mean the days between the beginning of the Pricing Period and Closing
Date. During this time, the Company shall not be entitled to deliver another Put Notice.  



        “Put
Shares Due” shall have the meaning specified in Section 2(I).  



        “Registration
Period” shall have the meaning specified in Section 5(C), below.  



        “Registration
Rights Agreement” shall have the meaning set forth in the recitals, above.  



        “Registration
Statement” means the registration statement of the Company filed under the 1933 Act
covering the Common Stock issuable hereunder.  



        “Related
Party” shall have the meaning specified in Section 5(H).  



        “Resolution”
shall have the meaning specified in Section 8(E).  



        “SEC”
shall mean the U.S. Securities & Exchange Commission.  



        “SEC
Documents” shall have the meaning specified in Section 4(F).  



        “Securities”
shall mean the shares of Common Stock issued pursuant to the terms of the Agreement.  



        “Shares”
shall mean the shares of the Company’s Common Stock.  



        “Subsidiaries”
shall have the meaning specified in Section 4(A).  





 
	 	
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        “Trading
Day” shall mean any day on which the Principal Market for the Common Stock is open for
trading, from the hours of 9:30 am until 4:00 pm.  



SECTION 2.        PURCHASE AND SALE
OF COMMON STOCK. 



(A) PURCHASE AND SALE OF COMMON
STOCK. Subject to the terms and conditions set forth herein, the Company shall issue and
sell to the Investor, and the Investor shall purchase from the Company, up to that number
of Shares having an aggregate Purchase Price of Ten Million dollars ($10,000,000). 



(B) DELIVERY OF PUT NOTICES. 



        (I)
Subject to the terms and conditions of the Transaction Documents, and from time to time
during the Open Period, the Company may, in its sole discretion, deliver a Put Notice to
the Investor which states the dollar amount (designated in U.S. Dollars) (the “Put
Amount”), which the Company intends to sell to the Investor on a Closing Date (the
“Put”). The Put Notice shall be in the form attached hereto as Exhibit C and incorporated
herein by reference. The amount that the Company shall be entitled to Put to the Investor
(the “Put Amount”) shall be equal to, at the Company’s election, either: (A) Two Hundred
percent (200%) of the average daily volume (U.S. market only) of the Common Stock for the
Ten (10) Trading Days prior to the applicable Put Notice Date, multiplied by the average
of the three (3) daily closing bid prices immediately preceding the Put Date, or (B) two
hundred fifty thousand dollars ($250,000). During the Open Period, the Company shall not
be entitled to submit a Put Notice until after the previous Closing has been completed.
The Purchase Price for the Common Stock identified in the Put Notice shall be equal to
ninety-three percent (93%) of the lowest closing Best Bid price of the Common Stock
during the Pricing Period. 



(C) COMPANY’S RIGHT TO WITHDRAWAL.
The Company shall reserve the right, but not the obligation, to withdraw that portion of
the Put that is below the Minimal Acceptable Price, by submitting to the Investor, in
writing, a notice to cancel that portion of the Put. Any shares above the Minimal
Acceptable price due to the Investor shall be carried out by the Company under the terms
of this Agreement. 



(D) INTENTIONALLY OMITTED 



(E) CONDITIONS TO INVESTOR’S
OBLIGATION TO PURCHASE SHARES. Notwithstanding anything to the contrary in this
Agreement, the Company shall not be entitled to deliver a Put Notice and the Investor
shall not be obligated to purchase any Shares at a Closing (as defined in Section 2(G))
unless each of the following conditions are satisfied: 



        (I)
a Registration Statement shall have been declared effective and shall remain effective
and available for the resale of all the Registrable Securities (as defined in the
Registration Rights Agreement) at all times until the Closing with respect to the subject
Put Notice; 



        (II)
at all times during the period beginning on the related Put Notice Date and ending on and
including the related Closing Date, the Common Stock shall have been listed on the
Principal Market and shall not have been suspended from trading thereon for a period of
two (2) consecutive Trading Days during the Open Period and the Company shall not have
been notified of any pending or threatened proceeding or other action to suspend the
trading of the Common Stock; 







 
	 	
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        (III)
the Company has complied with its obligations and is otherwise not in breach of or in
default under, this Agreement, the Registration Rights Agreement or any other agreement
executed in connection herewith which has not been cured prior to delivery of the
Investor’s Put Notice Date; 



        (IV)
no injunction shall have been issued and remain in force, or action commenced by a
governmental authority which has not been stayed or abandoned, prohibiting the purchase
or the issuance of the Securities; and 



        (V)
the issuance of the Securities will not violate any shareholder approval requirements of
the Principal Market. 



If any of the events described in
clauses (I) through (V) above occurs during a Pricing Period, then the Investor shall
have no obligation to purchase the Put Amount of Common Stock set forth in the applicable
Put Notice. 



(F) RESERVED 



(G) MECHANICS OF PURCHASE OF SHARES
BY INVESTOR. Subject to the satisfaction of the conditions set forth in Sections 2(E), 7
and 8, the closing of the purchase by the Investor of Shares (a “Closing”) shall occur on
the date which is no later than seven (7) Trading Days following the applicable Put
Notice Date (each a “Closing Date”). Prior to each Closing Date, (I) the Company shall
deliver to the Investor pursuant to this Agreement, certificates representing the Shares
to be issued to the Investor on such date and registered in the name of the Investor; and
(II) the Investor shall deliver to the Company the Purchase Price to be paid for such
Shares, determined as set forth in Sections 2(B). In lieu of delivering physical
certificates representing the Securities and provided that the Company’s transfer agent
then is participating in The Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Investor, the Company shall use all
commercially reasonable efforts to cause its transfer agent to electronically transmit
the Securities by crediting the account of the Investor’s prime broker (as specified by
the Investor within a reasonably in advance of the Investor’s notice) with DTC through
its Deposit Withdrawal Agent Commission (“DWAC”) system. 



The Company understands that a delay
in the issuance of Securities beyond the Closing Date could result in economic damage to
the Investor. After the Effective Date, as compensation to the Investor for such loss,
the Company agrees to make late payments to the Investor for late issuance of Securities
(delivery of Securities after the applicable Closing Date) in accordance with the
following schedule (where “No. of Days Late” is defined as the number of trading days
beyond the Closing Date, with the Amounts being cumulative.): 






 
	 	
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	Late Payment for Each 

No. of Days Late 	$10,000 Worth of 

Common Stock 
	
      

    
	1	 	$100
	2	 	$200
	3	 	$300
	4	 	$400
	5	 	$500
	6	 	$600
	7	 	$700
	8	 	$800
	9	 	$900
	10	 	$1,000
	Over 10	 	$1,000 + $200 for each 

      Business Day late beyond 10 days
      
	
      

    




The Company shall make any payments
incurred under this Section in immediately available funds upon demand by the Investor.
Nothing herein shall limit the Investor’s right to pursue actual damages for the
Company’s failure to issue and deliver the Securities to the Investor, except that such
late payments shall offset any such actual damages incurred by the Investor, and any
Repurchase Adjustment Amount, as set forth below. 



(H) OVERALL LIMIT ON COMMON STOCK
ISSUABLE. Notwithstanding anything contained herein to the contrary, if during the Open
Period the Company becomes listed on an exchange that limits the number of shares of
Common Stock that may be issued without shareholder approval, then the number of Shares
issuable by the Company and purchasable by the Investor, shall not exceed that number of
the shares of Common Stock that may be issuable without shareholder approval (the
“Maximum Common Stock Issuance”). If such issuance of shares of Common Stock could cause
a delisting on the Principal Market, then the Maximum Common Stock Issuance shall first
be approved by the Company’s shareholders in accordance with applicable law and the
By-laws and Amended and Restated Certificate of Incorporation of the Company, if such
issuance of shares of Common Stock could cause a delisting on the Principal Market. The
parties understand and agree that the Company’s failure to seek or obtain such
shareholder approval shall in no way adversely affect the validity and due authorization
of the issuance and sale of Securities or the Investor’s obligation in accordance with
the terms and conditions hereof to purchase a number of Shares in the aggregate up to the
Maximum Common Stock Issuance limitation, and that such approval pertains only to the
applicability of the Maximum Common Stock Issuance limitation provided in this Section
2(H). 



(I) If, by the third (3rd) business
day after the Closing Date, the Company fails to deliver any portion of the shares of the
Put to the Investor (the “Put Shares Due”) and the Investor purchases, in an open market
transaction or otherwise, shares of Common Stock necessary to make delivery of shares
which would have been delivered if the full amount of the shares to be delivered to the
Investor by the Company (the “Open Market Share Purchase”) , then the Company shall pay
to the Investor, in addition to any other amounts due to Investor pursuant to the Put,
and not in lieu thereof, the Open Market Adjustment Amount (as defined below). The “Open
Market Adjustment Amount” is the amount equal to the excess, if any, of (x) the
Investor’s total purchase price (including brokerage commissions, if any) for the Open
Market Share Purchase minus (y) the net proceeds (after brokerage commissions, if any)
received by the Investor from the sale of the Put Shares Due. The Company shall pay the
Open Market Adjustment Amount to the Investor in immediately available funds within five
(5) business days of written demand by the Investor. By way of illustration and not in
limitation of the foregoing, if the Investor purchases shares of Common  






 
	 	
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Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover an Open Market Purchase with
respect to shares of Common Stock it sold for net proceeds of $10,000, the Open Market
Purchase Adjustment Amount which the Company will be required to pay to the Investor will
be $1,000. 



(J) (J) LIMITATION ON AMOUNT OF
OWNERSHIP. Notwithstanding anything to the contrary in this Agreement, in no event shall
the Investor be entitled to purchase that number of Shares, which when added to the sum
of the number of shares of Common Stock beneficially owned (as such term is defined under
Section 13(d) and Rule 13d-3 of the 1934 Act), by the Investor, would exceed 4.99% of the
number of shares of Common Stock outstanding on the Closing Date, as determined in
accordance with Rule I 3d-I (j) of the 1934 Act. 



SECTION 3.        INVESTOR’S
REPRESENTATIONS, WARRANTIES AND COVENANTS. 



The Investor represents and warrants
to the Company, and covenants, that: 



(A) SOPHISTICATED INVESTOR. The
Investor has, by reason of its business and financial experience, such knowledge,
sophistication and experience in financial and business matters and in making investment
decisions of this type that it is capable of (I) evaluating the merits and risks of an
investment in the Securities and making an informed investment decision; (II) protecting
its own interest; and (III) bearing the economic risk of such investment for an
indefinite period of time. 



(B) AUTHORIZATION; ENFORCEMENT. This
Agreement has been duly and validly authorized, executed and delivered on behalf of the
Investor and is a valid and binding agreement of the Investor enforceable against the
Investor in accordance with its terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies. 



(C) SECTION 9 OF THE 1934 ACT.
During the term of this Agreement, the Investor will comply with the provisions of
Section 9 of the 1934 Act, and the rules promulgated thereunder, with respect to
transactions involving the Common Stock. The Investor agrees not to sell the Company’s
stock short, either directly or indirectly through its affiliates, principals or
advisors, the Company’s common stock during the term of this Agreement. 



(D) ACCREDITED INVESTOR. Investor is
an “Accredited Investor” as that term is defined in Rule 501(a) of Regulation D of the
1933 Act. 



(E) NO CONFLICTS. The execution,
delivery and performance of the Transaction Documents by the Investor and the
consummation by the Investor of the transactions contemplated hereby and thereby will not
result in a violation of Partnership Agreement or other organizational documents of the
Investor. 



(F) OPPORTUNITY TO DISCUSS. The
Investor has received all materials relating to the Company’s business, finance and
operations which it has requested. The Investor has had an opportunity to discuss the
business, management and financial affairs of the Company with the Company’s management. 



(G) INVESTMENT PURPOSES. The
Investor is purchasing the Securities for its own account for investment purposes and not
with a view towards distribution and agrees to resell or otherwise dispose of the
Securities solely in accordance with the registration provisions of the 1933 Act (or
pursuant to an exemption from such registration provisions). 






 
	 	
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(H) NO REGISTRATION AS A DEALER. The
Investor is not and will not be required to be registered as a “dealer” under the 1934
Act, either as a result of its execution and performance of its obligations under this
Agreement or otherwise. 



(I) GOOD STANDING. The Investor is a
Limited Partnership, duly organized, validly existing and in good standing in the State
of Delaware. 



(J) TAX LIABILITIES. The Investor
understands that it is liable for its own tax liabilities. 



(K) REGULATION M. The Investorwill
comply with Regulation M under the 1934 Act, if applicable. 



SECTION 4.        REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. 



Except as set forth in the Schedules
attached hereto, or as disclosed on the Company’s SEC Documents, the Company represents
and warrants to the Investor that: 



(A) ORGANIZATION AND QUALIFICATION.
The Company is a corporation duly organized and validly existing in good standing under
the laws of the State of Nevada, and has the requisite corporate power and authorization
to own its properties and to carry on its business as now being conducted. Both the
Company and the companies it owns or controls (“Subsidiaries”) are duly qualified to do
business and are in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in good
standing would not have a Material Adverse Effect. As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on the business, properties, assets,
operations, results of operations, financial condition or prospects of the Company and
its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or
by the agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the Transaction
Documents (as defined in Section 1 and 4(B), below). 



(B) AUTHORIZATION; ENFORCEMENT;
COMPLIANCE WITH OTHER INSTRUMENTS. 



        (I)
The Company has the requisite corporate power and authority to enter into and perform
this Agreement, the Registration Rights Agreement, and each of the other agreements
entered into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the “Transaction Documents”), and to issue the Securities
in accordance with the terms hereof and thereof. 



        (II)
The execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby, including without
limitation the reservation for issuance and the issuance of the Securities pursuant to
this Agreement, have been duly and validly authorized by the Company’s Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors, or its shareholders. 



        (III)
The Transaction Documents have been duly and validly executed and delivered by the
Company. 



        (IV)
The Transaction Documents constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. 








 
	 	
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(C) CAPITALIZATION. As of the date
hereof, the authorized capital stock of the Company consists of 4,000,000,000 shares of
Common Stock, $.001 par value per share, of which as of the date hereof, 17,209,007 and
3,209,007 shares are issued and outstanding; 20,000,000 shares of Series A Preferred
Stock authorized with 9,000,000 shares issued or outstanding; 10,000,000 shares of Series
B Preferred Stock authorized with 10,000,000 shares issued or outstanding; 20,000,000
shares of Series C Preferred Stock authorized with 10,000,000 shares issued or
outstanding as of June 30,2006, and 0 shares reserved for issuance pursuant to options,
warrants and other convertible securities. All of such outstanding shares have been, or
upon issuance will be, validly issued and are fully paid and nonassessable. 



Except as disclosed in the Company’s
publicly available filings with the SEC: 



(I) no shares of the Company’s
capital stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company; (II) there are no outstanding debt
securities; (Ill) there are no outstanding shares of capital stock, options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the Company
or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the Company
or any of its Subsidiaries; (IV) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act (except the Registration Rights Agreement); (V) there are
no outstanding securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is or may become bound to
redeem a security of the Company or any of its Subsidiaries; (VI) there are no securities
or instruments containing anti- dilution or similar provisions that will be triggered by
the issuance of the Securities as described in this Agreement; (VII) the Company does not
have any stock appreciation rights or “phantom stock” plans or agreements or any similar
plan or agreement; and (VIII) there is no dispute as to the classification of any shares
of the Company’s capital stock. 



The Company has furnished to the
Investor, or the Investor has had access through EDGAR to, true and correct copies of the
Company’s Amended and Restated Certificate of Incorporation, as in effect on the date
hereof (the “Certificate of Incorporation”), and the Company’s By-laws, as in effect on
the date hereof (the “By-laws”), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in respect
thereto. 



(D) ISSUANCE OF SHARES. The Company
has reserved ________ Shares for issuance pursuant to this Agreement, which have been
duly authorized and reserved those Shares for issuance (subject to adjustment pursuant to
the Company’s covenant set forth in Section 5(F) below) pursuant to this Agreement. Upon
issuance in accordance with this Agreement, the Securities will be validly issued, fully
paid for and non-assessable and free from all taxes, liens and charges with respect to
the issue thereof. In the event the Company cannot register a sufficient number of Shares
for issuance pursuant to this Agreement, the Company will use its best efforts to
authorize and reserve for issuance the number of Shares required for the Company to
perform its obligations hereunder as soon as reasonably practicable. 



(E) NO CONFLICTS. The execution,
delivery and performance of the Equity Line Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby will not
(I) result in a violation of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred stock of the
Company or the By-laws; or (II) conflict with, or constitute a material default (or an
event which with notice or lapse of  







 
	 	
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time or both would become a material
default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage, indebtedness or
instrument to which the Company or any of its Subsidiaries is a party, or to the
Company’s knowledge result in a violation of any law, rule, regulation, order, judgment
or decree (including United States federal and state securities laws and regulations and
the rules and regulations of the Principal Market or principal securities exchange or
trading market on which the Common Stock is traded or listed) applicable to the Company
or any of its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Except as disclosed in Schedule 4(e), neither the
Company nor its Subsidiaries is in violation of any term of, or in default under, the
Certificate of Incorporation, any Certificate of Designations, Preferences and Rights of
any outstanding series of preferred stock of the Company or the Bylaws or their
organizational charter or by-laws, respectively, or any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for possible conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations that
would not individually or in the aggregate have or constitute a Material Adverse Effect.
The business of the Company and its Subsidiaries is not being conducted, and shall not be
conducted, in violation of any law, statute, ordinance, rule, order or regulation of any
governmental authority or agency, regulatory or self-regulatory agency, or court, except
for possible violations the sanctions for which either individually or in the aggregate
would not have a Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act or any securities laws of any states, to the
Company’s knowledge, the Company is not required to obtain any consent, authorization,
permit or order of, or make any filing or registration (except the filing of a
registration statement as outlined in the Registration Rights Agreement between the
Parties) with, any court, governmental authority or agency, regulatory or self-regulatory
agency or other third party in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, the Transaction Documents in accordance with the
terms hereof or thereof. All consents, authorizations, permits, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the date hereof and are in full force and
effect as of the date hereof. Except as disclosed in Schedule 4(e), the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to any of
the foregoing. The Company is not, and will not be, in violation of the listing
requirements of the Principal Market as in effect on the date hereof and on each of the
Closing Dates and is not aware of any facts which would reasonably lead to delisting of
the Common Stock by the Principal Market in the foreseeable future. 



(F) SEC DOCUMENTS; FINANCIAL
STATEMENTS. As of the date hereof, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as the “SEC
Documents”). The Company has delivered to the Investor or its representatives, or they
have had access through EDGAR to, true and complete copies of the SEC Documents. As of
their respective filing dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, by a firm that is a member of the Public
Companies Accounting Oversight Board (“PCAOB”) consistently applied, during the periods
involved (except (I) as may be otherwise indicated in such financial statements  











 
	 	
10	 


















or the notes thereto, or (II) in the
case of unaudited interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No other written information provided
by or on behalf of the Company to the Investor which is not included in the SEC
Documents, including, without limitation, information referred to in Section 4(D) of this
Agreement, contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements therein, in the light of the circumstance
under which they are or were made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or agents have provided the
Investor with any material, nonpublic information which was not publicly disclosed prior
to the date hereof and any material, nonpublic information provided to the Investor by
the Company or its Subsidiaries or any of their officers, directors, employees or agents
prior to any Closing Date shall be publicly disclosed by the Company prior to such
Closing Date. 



(G) ABSENCE OF CERTAIN CHANGES.
Except as otherwise set forth in the SEC Documents, the Company does not intend to change
the business operations of the Company in any material way. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection pursuant to
any bankruptcy law nor does the Company or its Subsidiaries have any knowledge or reason
to believe that its creditors intend to initiate involuntary bankruptcy proceedings. 



(H) ABSENCE OF LITIGATION AND/OR
REGULATORY PROCEEDINGS. Except as set forth in the SEC Documents, there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the knowledge of
the executive officers of Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company’s Subsidiaries or any of
the Company’s or the Company’s Subsidiaries’ officers or directors in their capacities as
such, in which an adverse decision could have a Material Adverse Effect. 



(I) ACKNOWLEDGMENT REGARDING
INVESTOR’S PURCHASE OF SHARES. The Company acknowledges and agrees that the Investor is
acting solely in the capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that the Investor is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Equity Line Transaction
Documents and the transactions contemplated hereby and thereby and any advice given by
the Investor or any of its respective representatives or agents in connection with the
Equity Line Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to the Investor’s purchase of the Securities, and is not being relied
on by the Company. The Company further represents to the Investor that the Company’s
decision to enter into the Equity Line Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives. 



(J) NO UNDISCLOSED EVENTS,
LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set forth in the SEC Documents, as
of the date hereof, no event, liability, development or circumstance has occurred or
exists, or to the Company’s knowledge is contemplated to occur, with respect to the
Company or its Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement filed with the SEC relating
to an issuance and sale by the Company of its Common Stock and which has not been
publicly announced. 



(K) EMPLOYEE RELATIONS. Neither the
Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such dispute  









 
	 	
11	 




















threatened. Neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that relations with their employees are good. No executive
officer (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such
officer intends to leave the Company’s employ or otherwise terminate such officer’s
employment with the Company. 



(L) INTELLECTUAL PROPERTY RIGHTS.
The Company and its Subsidiaries own or possess adequate rights or licenses to use all
trademarks, trade names, service marks, service mark registrations, service names,
patents, patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective businesses
as now conducted. Except as set forth in the SEC Documents, none of the Company’s
trademarks, trade names, service marks, service mark registrations, service names,
patents, patent rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights necessary to conduct
its business as now or as proposed to be conducted have expired or terminated, or are
expected to expire or terminate within two (2) years from the date of this Agreement. The
Company and its Subsidiaries do not have any knowledge of any infringement by the Company
or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service mark registrations, trade
secret or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set forth in
the SEC Documents, there is no claim, action or proceeding being made or brought against,
or to the Company’s knowledge, being threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and its
Subsidiaries have taken commercially reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties. 



(M) ENVIRONMENTAL LAWS. The Company
and its Subsidiaries (I) are, to the knowledge of the management and directors of the
Company and its Subsidiaries, in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”); (II) have, to the knowledge of the management and
directors of the Company, received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses; and
(Ill) are in compliance, to the knowledge of the management and directors of the Company,
with all terms and conditions of any such permit, license or approval where, in each of
the three (3) foregoing cases, the failure to so comply would have, individually or in
the aggregate, a Material Adverse Effect. 



(N) N) TITLE. The Company and its
Subsidiaries have good and marketable title to all personal property owned by them which
is material to the business of the Company and its Subsidiaries, in each case free and
clear of all liens, encumbrances and defects except such as are described in the SEC
Documents or such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the Company or
any of its Subsidiaries. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries. 



(O) INSURANCE. Each of the Company’s
Subsidiaries are insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company reasonably believes to
be prudent and customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any of its Subsidiaries has been refused any insurance  









 
	 	
12	 
















coverage sought or applied for and
neither the Company nor its Subsidiaries 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 at a cost that would not have a Material Adverse Effect. 



(P) REGULATORY PERMITS. The Company
and its Subsidiaries have in full force and effect all certificates, approvals,
authorizations and permits from the appropriate federal, state, local or foreign
regulatory authorities and comparable foreign regulatory agencies, necessary to own,
lease or operate their respective properties and assets and conduct their respective
businesses, and neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate, approval,
authorization or permit, except for such certificates, approvals, authorizations or
permits which if not obtained, or such revocations or modifications which, would not have
a Material Adverse Effect. 



(Q) INTERNAL ACCOUNTING CONTROLS.
The Company and each of its 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 specf1c authorizations; (II) transactions are
recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles by a firm with membership to the PCAOB 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. 



(R) NO MATERIALLY ADVERSE CONTRACTS,
ETC. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate
or other legal restriction, or any judgment, decree, order, rule or regulation which in
the judgment of the Company’s officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to
any contract or agreement which in the judgment of the Company’s officers has or is
expected to have a Material Adverse Effect. 



(S) TAX STATUS. The Company and each
of its Subsidiaries has made or filed all United States federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to which it is
subject (unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any jurisdiction, and
the officers of the Company know of no basis for any such claim. 



(T) CERTAIN TRANSACTIONS. Except as
set forth in the SEC Documents filed at least ten (10) days prior to the date hereof and
except for arm’s length transactions pursuant to which the Company makes payments in the
ordinary course of business upon terms no less favorable than the Company could obtain
from disinterested third parties and other than the grant of stock options disclosed in
the SEC Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership,  






 
	 	
13	 















trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner. 



(U) DILUTIVE EFFECT. The Company
understands and acknowledges that the number of shares of Common Stock issuable upon
purchases pursuant to this Agreement will increase in certain circumstances including,
but not necessarily limited to, the circumstance wherein the trading price of the Common
Stock declines during the period between the Effective Date and the end of the Open
Period. The Company’s executive officers and directors have studied and fully understand
the nature of the transactions contemplated by this Agreement and recognize that they
have a potential dilutive effect on the shareholders of the Company. The Board of
Directors of the Company has concluded, in its good faith business judgment, and with
full understanding of the implications, that such issuance is in the best interests of
the Company. The Company specifically acknowledges that, subject to such limitations as
are expressly set forth in the Equity Line Transaction Documents, its obligation to issue
shares of Common Stock upon purchases pursuant to this Agreement is absolute and
unconditional regardless of the dilutive effect that such issuance may have on the
ownership interests of other shareholders of the Company. 



(V) LOCK-UP. The Company shall cause
its officers, insiders, directors, and affiliates or other related parties under control
of the Company, to refrain from selling Common Stock during each Pricing Period. 



(W) NO GENERAL SOLICITATION. Neither
the Company, nor any of its affiliates, nor any person acting on its behalf, has engaged
in any form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Common Stock to be offered as
set forth in this Agreement. 



(X) NO BROKERS, FINDERS OR FINANCIAL
ADVISORY FEES OR COMMISSIONS. No brokers, finders or financial advisory fees or
commissions will be payable by the Company, it’s agents or Subsidiaries, with respect to
the transactions contemplated by this Agreement, except as otherwise disclosed in this
Agreement. 



SECTION 5.        COVENANTS OF THE
COMPANY 



(A) BEST EFFORTS. The Company shall
use all commercially reasonable efforts to timely satisfy each of the conditions set
forth in Section 7 of this Agreement. 



(B) BLUE SKY. The Company shall, at
its sole cost and expense, on or before each of the Closing Dates, take such action as
the Company shall reasonably determine is necessary to qualify the Securities for, or
obtain exemption for the Securities for, sale to the Investor at each of the Closings
pursuant to this Agreement under applicable securities or “Blue Sky” laws of such states
of the United States, as reasonably specified by the Investor, and shall provide evidence
of any such action so taken to the Investor on or prior to the Closing Date. 



(C) REPORTING STATUS. Until one of
the following occurs, the Company shall file all reports required to be filed wi:h the
SEC pursuant to the 1934 Act, and the Company shall not terminate its status, or take an
action or fail to take any action, which would terminate its status as a reporting
company under the 1934 Act: (I) this Agreement terminates pursuant to Section 9 and the
Investor has the right to sell all of the Securities without restrictions pursuant to
Rule 144(k) promulgated under the 1933 Act, or such other exemption (ii) the date on
which the Investor has sold all the Securities and this Agreement has been terminated
pursuant to Section 9. 



(D) USE OF PROCEEDS. The Company
will use the proceeds from the sale of the Shares (excluding amounts paid by the Company
for fees as set forth in the Transaction Documents) for general corporate  










 
	 	
14	 





















and working capital purposes and
acquisitions or assets, businesses or operations or for other purposes that the Board of
Directors, in its good faith deem to be in the best interest of the Company. 



(E) FINANCIAL INFORMATION. During
the Registration Period, the Company agrees to make available to the Investor via EDGAR
or other electronic means the following documents and information on the forms set forth:
(I) within five (5) Trading Days after the filing thereof with the SEC, a copy of its
Annual Reports on Form 1O-KSB, its Quarterly Reports on Form 1O-QSB, any Current Reports
on Form 8-K and any Registration Statements or amendments filed pursuant to the 1933 Act;
(II) copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making available or
giving thereof to the shareholders; and (Ill) within two (2) calendar days of filing or
delivery thereof, copies of all documents filed with, and all correspondence sent to, the
Principal Market, any securities exchange or market, or the National Association of
Securities Dealers, Inc., unless such information is material nonpublic information. 



(F) RESERVATION OF SHARES. The
Company shall take all action necessary to at all times have authorized, and reserved for
the purpose of issuance, a sufficient number of shares of Common Stock to provide for the
issuance of the Securities to the Investor as required hereunder. In the event that the
Company determines that it does not have a sufficient number of authorized shares of
Common Stock to reserve and keep available for issuance as described in this Section
5(F), the Company shall use all commercially reasonable efforts to increase the number of
authorized shares of Common Stock by seeking shareholder approval for the authorization
of such additional shares. 



(G) LISTING. The Company shall
promptly secure and maintain the listing of all of the Registrable Securities (as defined
in the Registration Rights Agreement) on the Principal Market and each other national
securities exchange and automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall maintain, such
listing of all Registrable Securities from time to time issuable under the terms of the
Equity Line Transaction Documents. Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market (excluding suspensions of not more
than one (1) trading day resulting from business announcements by the Company). The
Company shall promptly provide to the Investor copies of any notices it receives from the
Principal Market regarding the continued eligibility of the Common Stock for listing on
such automated quotation system or securities exchange. The Company shall pay all fees
and expenses in connection with satisfying its obligations under this Section 5(G). 



(H) TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall cause each of its Subsidiaries not to, enter into,
amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or
supplement, any agreement, transaction, commitment or arrangement with any of its or any
Subsidiary’s officers, directors, persons who were officers or directors at any time
during the previous two (2) years, shareholders who beneficially own 5% or more of the
Common Stock, or Affiliates or with any individual related by blood, marriage or adoption
to any such individual or with any entity in which any such entity or individual owns a
5% or more beneficial interest (each a “Related Party”), except for (I) customary
employment arrangements and benefit programs on reasonable terms, (II) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a disinterested third party other than
such Related Party, or (Ill) any agreement, transaction, commitment or arrangement which
is approved by a majority of the disinterested directors of the Company. For purposes
hereof, any director who is also an officer of the Company or any Subsidiary of the
Company shall not be a disinterested director with respect to any such agreement,
transaction, commitment or arrangement. “Affiliate” for purposes hereof means, with
respect to any person or entity, another person or entity that, directly or indirectly,
(I) has a 5% or more equity interest in that person or entity, (II) has 5% or more common
ownership with that  










 
	 	
15	 



















 


person or entity, (III) controls
that person or entity, or (IV) is under common control with that person or entity.
“Control” or “Controls” for purposes hereof means that a person or entity has the power,
directly or indirectly, to conduct or govern the policies of another person or entity. 



(I) FILING OF FORM 8-K. On or before
the date which is four (4) Trading Days after the Execution Date, the Company shall file
a Current Report on Form 8-K with the SEC describing the terms of the transaction
contemplated by the Equity Line Transaction Documents in the form required by the 1934
Act, if such filing is required. 



(J) CORPORATE EXISTENCE. The Company
shall use all commercially reasonable efforts to preserve and continue the corporate
existence of the Company. 



(K) NOTICE OF CERTAIN EVENTS
AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shaH promptly
notify the Investor upon the occurrence of any of the following events in respect of a
Registration Statement or related prospectus in respect of an offering of the Securities:
(I) receipt of any request for additional information by the SEC or any other federal or
state governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or related
prospectus; (II) the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of any Registration Statement or
the initiation of any proceedings for that purpose; (Ill) receipt of any notification
with respect to the suspension of the qualification or exemption from qualification of
any of the Securities for sale in any jurisdiction or the initiation or notice of any
proceeding for such purpose; (IV) the happening of any event that makes any statement
made in such Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, related prospectus or
documents so that, in the case of a Registration Statement, it will not contain 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 not misleading, and that in
the case of the related prospectus, it will not contain 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 under which
they were made, not misleading; and (V) the Company’s reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate, and the
Company shall promptly make available to Investor any such supplement or amendment to the
related prospectus. The Company shall not deliver to Investor any Put Notice during the
continuation of any of the foregoing events in this Section 5(K). 



(L) REIMBURSEMENT. If (I) the
Investor becomes involved in any capacity in any action, proceeding or investigation
brought by any shareholder of the Company, in connection with or as a result of the
consummation of the transactions contemplated by the Equity Line Transaction Documents,
or if the Investor is impleaded in any such action, proceeding or investigation by any
person (other than as a result of a breach of the Investor’s representations and
warranties set forth in this Agreement); or (II) the Investor becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC against or
involving the Company or in connection with or as a result of the consummation of the
transactions contemplated by the Equity Line Transaction Documents (other than as a
result of a breach of the Investor’s representations and warranties set forth in this
Agreement), or if this Investor is impleaded in any such action, proceeding or
investigation by any person, then in any such case, the Company will reimburse the
Investor for its reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as such expenses are
incurred. In addition, other than with respect to any matter in which the Investor is a
named party, the Company will pay to the Investor the charges, as reasonably determined
by the Investor, for the time of any officers or employees of the Investor devoted to
appearing and preparing to appear as witnesses, assisting in preparation for hearings, 











 
	 	
16	 





















trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other proceedings relating to
the subject matter of this Agreement. The reimbursement obligations of the Company under
this section 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 Investor that
are actually named in such action, proceeding or investigation, and partners, directors,
agents, employees, attorneys, accountants, auditors and controlling persons (if any), as
the case may be, of Investor and any such affiliate, and shall be binding upon and inure
to the benefit of any successors of the Company, the Investor and any such affiliate and
any such person. 



(M) TRANSFER AGENT. Upon
effectiveness of the Registration Statement, and for so long as the Registration
Statement is effective, the Company shall deliver instructions to its transfer agent to
issue Shares to the Investor that are covered for resale by the Registration Statement
free of restrictive legends. 



SECTION 6.        INTENTIONALLY
OMITTED 



SECTION 7.        CONDITIONS OF THE
COMPANY’S OBLIGATION TO SELL. 



The obligation hereunder of the
Company to issue and sell the Securities to the Investor is further subject to the
satisfaction, at or before each Closing Date, of each of the following conditions set
forth below. These conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion. 



(A) The Investor shall have executed
this Agreement and the Registration Rights Agreement and delivered the same to the
Company. 



(B) The Investor shall have
delivered to the Company the Purchase Price for the Securities being purchased by the
Investor between the end of the Pricing Period and the Closing Date via a Put Settlement
Sheet (hereto attached as Exhibit D). After receipt of confirmation of delivery of such
Securities to the Investor, the Investor, by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company will disburse the funds
constituting the Purchase Amount. 



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



SECTION 8.        FURTHER CONDITIONS
OF THE INVESTOR’S OBLIGATION TO PURCHASE. 



The obligation of the Investor
hereunder to purchase Shares is subject to the satisfaction, on or before each Closing
Date, of each of the following conditions set forth below. 



(A) The Company shall have executed
the Equity Line Transaction Documents and delivered the same to the Investor. 



(B) The Common Stock shall be
authorized for quotation on the Principal Market and trading in the Common Stock shall
not have been suspended by the Principal Market or the SEC, at any time beginning on the
date hereof and through and including the respective Closing Date (excluding suspensions
of not more than one (1) Trading Day resulting from business announcements by the
Company, provided that such suspensions occur prior to the Company’s delivery of the Put
Notice related to such Closing). 



(C) The representations and
warranties of the Company shall be true and correct as of the date when made and as of
the applicable Closing Date as though made at that time and the Company shall have
performed,  













 
	 	
17	 

























satisfied and complied with the
covenants, agreements and conditions required by the Equity Line Transaction Documents to
be performed, satisfied or complied with by the Company on or before such Closing Date.
The Investor may request an update as of such Closing Date regarding the representation
contained in Section 4(C) above. 



(D) The Company shall have executed
and delivered to the Investor the certificates representing, or have executed electronic
book-entry transfer of, the Securities (in such denominations as the Investor shall
request) being purchased by the Investor at such Closing. 



(E) The Board of Directors of the
Company shall have adopted resolutions consistent with Section 4(B)(II) above (the
“Resolutions”) and such Resolutions shall not have been amended or rescinded prior to
such Closing Date. 



(F) Reserved 



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



(H) The Registration Statement shall
be effective on each Closing Date and no stop order suspending the effectiveness of the
Registration statement shall be in effect or to the Company’s knowledge shall be pending
or threatened. Furthermore, on each Closing Date (I) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends to issue a stop order with
respect to such Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of such Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the SEC’s concerns have been
addressed and Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (II) no other suspension of the use or withdrawal of
the effectiveness of such Registration Statement or related prospectus shall exist. 



(I) At the time of each Closing, the
Registration Statement (including information or documents incorporated by reference
therein) and any amendments or supplements thereto shall not contain 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 not misleading or which would require public
disclosure or an update supplement to the prospectus. 



(J) If applicable, the shareholders
of the Company shall have approved the issuance of any Shares in excess of the Maximum
Common Stock Issuance in accordance with Section 2(H) or the Company shall have obtained
appropriate approval pursuant to the requirements of Nevada law and the Company’s
Articles of Incorporation and By-laws. 



(K) The conditions to such Closing
set forth in Section 2(E) shall have been satisfied on or before such Closing Date. 



(L) The Company shall have certified
to the Investor the number of Shares of Common Stock outstanding when a Put Notice is
given to the Investor. The Company’s delivery of a Put Notice to the Investor constitutes
the Company’s certification of the existence of the necessary number of shares of Common
Stock reserved for issuance. 



SECTION 9.        TERMINATION. This
Agreement shall terminate upon any of the following events: 







 
	 	
18	 
















        (I)
when the Investor has purchased an aggregate of Ten Million dollars ($10,000,000) in the
Common Stock of the Company pursuant to this Agreement; or, 



        (II)
on the date which is thirty-six (36) months after the Effective Date. 



SECTION 10.       SUSPENSION 



This Agreement shall be suspended
upon any of the following events, and shall remain suspended until such event is
rectified: 



        (I)
the trading of the Common Stock is suspended by the SEC, the Principal Market or the NASD
for a period of two (2) consecutive Trading Days during the Open Period; or, 



        (II)
The Common Stock ceases to be registered under the 1934 Act or listed or traded on the
Principal Market. Immediately upon the occurrence of one of the above-described events,
the Company shall send written notice of such event to the Investor. 



SECTION 11.       INDEMNIFICATION. 



In consideration of the parties
mutual obligations set forth in the Transaction Documents, each of the parties (in such
capacity, an “lndemnitor”) shall defend, protect, indemnify and hold harmless the other
and all of the other party’s shareholders, officers, directors, employees, counsel, and
direct or indirect investors and any of the foregoing person’s agents or other
representatives (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and
against any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and reasonable expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of,
or arising out of, or relating to (I) any misrepresentation or breach of any
representation or warranty made by the Indemnitor or any other certificate, instrument or
document contemplated hereby or thereby; (II) any breach of any covenant, agreement or
obligation of the Indemnitor contained in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby; or (III) any cause of
action, suit or claim brought or made against such Indemnitee by a third party and
arising out of or resulting from the execution, delivery, performance or enforcement of
the Transaction Documents or any other certificate, instrument or document contemplated
hereby or thereby, except insofar as any such misrepresentation, breach or any untrue
statement, alleged untrue statement, omission or alleged omission is made in reliance
upon and in conformity with information furnished to Indemnitor which is specifically
intended for use in the preparation of any such Registration Statement, preliminary
prospectus, prospectus or amendments to the prospectus. To the extent that the foregoing
undertaking by the Indemnitor may be unenforceable for any reason, the Indemnitor shall
make the maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The indemnity provisions contained
herein shall be in addition to any cause of action or similar rights Indemnitor may have,
and any liabilities the Indemnitor or the Indemnitees may be subject to. 



SECTION 12.       GOVERNING LAW;
DISPUTES SUBMITTED TO ARBITRATION. 



(A) All disputes arising under this
agreement shall be governed by and interpreted in accordance with the laws of the
Commonwealth of Massachusetts, without regard to principles of conflict of laws. The
parties to this agreement will submit all disputes arising under this agreement to
arbitration in Boston, Massachusetts before a single arbitrator of the American
Arbitration Association (“AAA”). The arbitrator  







 
	 	
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shall be selected by application of
the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator
shall be an attorney admitted to practice law in the Commonwealth of Massachusetts. No
party to this agreement will challenge the jurisdiction or venue provisions as provided
in this section. No party to this agreement will challenge the jurisdiction or venue
provisions as provided in this section. Nothing contained herein shall prevent the party
from obtaining an injunction. 



(B) LEGAL FEES; AND MISCELLANEOUS
FEES. Except as otherwise set forth in the Transaction Documents, each party shall pay
the fees and expenses of its advisers, counsel, the accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. Any attorneys’ fees
and expenses incurred by either the Company or the Investor in connection with the
preparation, negotiation, execution and delivery of any amendments to this Agreement or
relating to the enforcement of the rights of any party, after the occurrence of any
breach of the terms of this Agreement by another party or any default by another party in
respect of the transactions contemplated hereunder, shall be paid on demand by the party
which breached the Agreement and/or defaulted, as the case may be. The Company shall pay
all stamp and other taxes and duties levied in connection with the issuance of any
Securities. 



(C) COUNTERPARTS. This Agreement may
be executed in two or more identical counterparts, all of which 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; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with the same
force and effect as if the signature were an original signature. 



(D) HEADINGS; SINGULAR/PLURAL. The
headings of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include the feminine. 



(E) SEVERABILITY. If any provision
of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the remainder of
this Agreement in that jurisdiction or the validity or enforceability of any provision of
this Agreement in any other jurisdiction. 



(F) ENTIRE AGREEMENT; AMENDMENTS.
This Agreement is the FINAL AGREEMENT between the Company and the Investor with respect
to the terms and conditions set forth herein, and, the terms of this Agreement may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the
Parties. No provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Investor, and no provision hereof may be waived
other than by an instrument in writing signed by the party against whom enforcement is
sought. The execution and delivery of the Equity Line Transaction Documents shall not
alter the force and effect of any other agreements between the Parties, and the
obligations under those agreements. 



(G) NOTICES. Any notices or other
communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered (I) upon receipt, when delivered
personally; (II) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the sending
party); or (Ill) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be: 







 
	 	
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If to the Company: 



The Blackhawk Fund
                     
1802 N. Carson Street, Suite 212-3018 
Carson City, NV 89701
 
Telephone: (775) 887-0670 
Facsimile: 



If to the Investor: 



Dutchess Private Equities Fund, II,
LP, 
50 Commonwealth Avenue, Suite 2 
Boston, MA 02116 
Telephone: 617-301-4700 
Facsimile:
617-249-0947 



Each party shall provide five (5)
days prior written notice to the other party of any change in address or facsimile number. 



(H) NO ASSIGNMENT. This Agreement
may not be assigned. 



(I) NO THIRD PARTY BENEFICIARIES.
This Agreement is intended for the benefit of the parties hereto and is not for the
benefit of, nor may any provision hereof be enforced by, any other person, except that
the Company acknowledges that the rights of the Investor may be enforced by its general
partner. 



(J) SURVIVAL. The representations
and warranties of the Company and the Investor contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4 and 5, and the indemnification
provisions set forth in Section 11, shall survive each of the Closings and the
termination of this Agreement. 



(K) PUBLICITY. The Company and the
Investor shall consult with each other in issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and no party shall
issue any such press release or otherwise make any such public statement without the
prior consent of the other party, which consent shall not be unreasonably withheld or
delayed, except that no prior consent shall be required if such disclosure is required by
law, in which such case the disclosing party shall provide the other party with prior
notice of such public statement. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of the Investor without the prior consent of the Investor,
except to the extent required by law. The Investor acknowledges that this Agreement and
all or part of the Transaction Documents may be deemed to be “material contracts” as that
term is defined by Item 601(b)(1O) of Regulation S-B, and that the Company may therefore
be required to file such documents as exhibits to reports or registration statements
filed under the 1933 Act or the 1934 Act. The Investor further agrees that the status of
such documents and materials as material contracts shall be determined solely by the
Company, in consultation with its counsel. 



(L) FURTHER ASSURANCES. Each party
shall do and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby. 






 
	 	
21	 














(M) PLACEMENT AGENT. The Company
agrees to pay _____________, a registered broker dealer ____ percent (_%) of the Put
Amount on each draw toward the fee. The Investor shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other persons or entities
for fees of a type contemplated in this Section that may be due in connection with the
transactions contemplated by the Transaction Documents. The Company shall indemnify and
hold harmless the Investor, their employees, officers, directors, agents, and partners,
and their respective affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney’s fees) and expenses incurred in respect
of any such claimed or existing fees, as such fees and expenses are incurred. 



(N) NO STRICT CONSTRUCTION. The
language used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be applied
against any party, as the parties mutually agree that each has had a full and fair
opportunity to review this Agreement and seek the advice of counsel on it. 



(O) REMEDIES. The Investor shall
have all rights and remedies set forth in this Agreement and the Registration Rights
Agreement and all rights and remedies which such holders have been granted at any time
under any other agreement or contract and aH of the rights which the Investor has by law.
Any person having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to recover
damages by reason of any default or breach of any provision of this Agreement, including
the recovery of reasonable attorneys fees and costs, and to exercise all other rights
granted by law. 



(P) PAYMENT SET ASIDE. To the extent
that the Company makes a payment or payments to the Investor hereunder or under the
Registration Rights Agreement or the Investor enforces or exercises its rights hereunder
or 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. 



(Q) PRICING OF COMMON STOCK. For
purposes of this Agreement, the bid price of the Common Stock shall be as reported on
Bloomberg. 



SECTION 13.       NON-DISCLOSURE OF
NON-PUBLIC INFORMATION. 



(a) The Company shall not disclose
non-public information to the Investor, its advisors, or its representatives. 



(b) Nothing herein shall require the
Company to disclose non-public information to the Investor or its advisors or
representatives, and the Company represents that it does not disseminate non-public
information to any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided, immediately
notify the advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose the
specific event or circumstance) of which it becomes aware, constituting nonpublic
information (whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in the
prospectus included in the Registration Statement would cause such prospectus to include
a material misstatement or to omit a 







 
	 	
22	 
















material fact required to be stated
therein in order to make the statements, therein, in light of the circumstances in which
they were made, not misleading. Nothing contained in this Section 13 shall be construed
to mean that such persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may not obtain
non-public information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or entities
from notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue statement of
material fact or omits a material fact required to be stated in the Registration
Statement or necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading. 



[BALANCE OF PAGE LEFT
BLANK INTENTIONALLY] 






 
	 	
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SIGNATURE PAGE OF
INVESTMENT AGREEMENT 



Your signature on this Signature
Page evidences your agreement to be bound by the terms and conditions of the Investment
Agreement and the Registration Rights Agreement as of the date first written above. 



The undersigned signatory hereby
certifies that he has read and understands the Investment Agreement, and the
representations made by the undersigned in this Investment Agreement are true and
accurate, and agrees to be bound by its terms. 



DUTCHESS PRIVATE
EQUITIES FUND, II, LP. 
BY ITS GENERAL PARTNER, 
DUTCHESS CAPITAL MANAGEMENT, LLC 



By:
                                                       ________________________________ 

        
  Douglas H. Leighton, Managing Member 







THE BLACKHAWK FUND 



By:
                                                       ________________________________ 

         Brent Fouch, Chief Financial Officer 








 
	 	
24	 















LJST OF SCHEDULES 



Schedule 4(a)
Subsidiaries 





 
	 	
25	 















EXHIBIT A 



[Filed separately as
exhibit] 





 
	 	
26	 















EXHIBIT B 



FORM OF NOTICE OF EFFECTIVENESS 
OF
REGISTRATION STATEMENT 



Date: _____________  



[TRANSFER AGENT] 



	 	                  Re:  	  	The
Blackhawk Fund 






Ladies and Gentlemen: 



        We
are counsel to The Blackhawk Fund a Nevada corporation (the “Company”), and have
represented the Company in connection with that certain Investment Agreement (the
“Investment Agreement”) entered into by and among the Company and
_________________________ (the “Investor”) pursuant to which the Company has agreed to
issue to the Investor shares of the Company’s common stock, $.OO1 par value per share
(the “Common Stock”) on the terms and conditions set forth in the Investment Agreement.
Pursuant to the Investment Agreement, the Company also has entered into a Registration
Rights Agreement with the Investor (the “Registration Rights Agreement”) pursuant to
which the Company agreed, among other things, to register the Registrable Securities (as
defined in the Registration Rights Agreement), including the shares of Common Stock
issued or issuable under the Investment Agreement under the Securities Act of 1933, as
amended (the “1933 Act”). In connection with the Company’s obligations under the
Registration Rights Agreement, on ____________ , 2006, the Company filed a Registration
Statement on Form 5- (File No. 333-) (the “Registration Statement”) with the Securities
and Exchange Commission (the “SEC”) relating to the Registrahie Securities which names
the Investor as a selling shareholder thereunder. 



        In
connection with the foregoing, we advise you that [a member of the SEC’s staff has
advised us by telephone that the SEC has entered an order declaring the Registration
Statement effective [the Registration Statement has become effective] under the 1933 Act
at [enter the time of effectiveness] on [enter the date of effectiveness] and to the best
of our knowledge, after telephonic inquiry of a member of the SEC’s staff, no stop order
suspending its effectiveness has been issued and no proceedings for that purpose are
pending before, or threatened by, the SEC and the Registrable Securities are available
for resale under the 1933 Act pursuant to the Registration Statement. 



	 	Very truly yours,
	 	 
	 	
      [Company Counsel] 

      






   





	 	
27	 




















EXHIBIT C 



Date: 



RE: Put Notice Number 



Dear Mr. Leighton, 



This is to inform you that as of
today, The Blackhawk Fund, a Nevada corporation (the “Company”), hereby elects to
exercise its right pursuant to the Investment Agreement to require Dutchess Private
Equities Fund, II LP to purchase shares of its common stock. The Company hereby certifies
that: 



The amount of this put is
$___________ 



The Pricing Period runs from
________ until ________ 


The current number of shares issued and outstanding as of the Company are:



_______________________________________________ 



The number of shares currently
available for issuance on the SB-2 for the Equity Line are: 



_____________________________ 






Regards, 



______________________________________ 

Brent Fouch, CFO 
The Blackhawk Fund 






 
	 	
28	 














EXHIBIT D 
PUT
SETTLEMENT SHEET 



Date: 



Dear Mr. Fouch, 



Pursuant to the Put given by The
Blackhawk Fund to Dutchess  Private  Equities Fund, II, L.P. on  _________________ 200_,
we are now submitting the amount of common shares for you to issue to Dutchess. 



Please have a certificate bearing no
restrictive legend totaling ___________ shares issued to Dutchess Private Equities Fund,
II, LP immediately and send via DWAC to the following account: 


 

XXXXXX


If not DWAC eligible, please send
FedEx Priority Overnight to: 



XXXXXX 



Once these shares are received by
us, we will have the funds wired to the Company. 



Regards, 



Douglas H. Leighton 









 
	 	
29	 


















	DATE	PRICE	 
	Date of Day 1	Closing Bid of Day 1	 
	Date of Day 2	Closing Bid of Day 2	 
	Date of Day 3	Closing Bid of Day 3	 
	Date of Day 4	Closing Bid of Day 4	 
	Date of Day 5	Closing Bid of Day 5	 
	 
	LOWEST
1 (ONE) CLOSING BID IN PRICING PERIOD 
	 
	PUT
AMOUNT
	 
	AMOUNT
WIRED TO COMPANY 
	 
	PURCHASE
PRICE (93)% (NINETY-THREE PERCENT)
	 
	AMOUNT
OF SHARES DUE






The undersigned has completed this
Put as of this ____th day of 200_. 






__________________________________ 

Brent Fouch, CFO 






 
	 	
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