ixenergy_10k-ex1011.htm


    EXHIBIT
10.11

     

    SECURITIES
PURCHASE AGREEMENT

     

     

    This
Securities Purchase Agreement (this "Agreement") is dated
as of July _, 2008 between IX Energy, Inc., a Delaware corporation (the "Company"), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and
collectively the "Purchasers").

     

    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 each
Purchaser, and each Purchaser, severally and not jointly, 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 each Purchaser agree as
follows:

     

    ARTICLE
I.

    DEFINITIONS

     

    Section
1.01 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 Notes (as defined herein), and (b) the following terms have the meanings set
forth in this Section 1.01:

     

    "Action" shall have
the meaning ascribed to such term in Section 3.01(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 405 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser.

     

    "Board of Directors"
means the board of directors of the Company.

     

    "Business Day" means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York 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
2.01.

     

    "Closing Date" means
the Business Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers' 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
capital stock of the Company, without par value, and any other shares of common
stock of the Public Company into which such securities may hereafter be
reclassified or changed into.

     

    "Common Stock
Equivalents" means any securities of the Company or the Subsidiaries that
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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    "GAAP" shall have the
meaning ascribed to such term in Section 3.01(h).

     

    "Indebtedness" means
(a) any liabilities for borrowed money or amounts owed in excess of $10,000
(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.

     

    "Intellectual Property
Rights" shall have the meaning ascribed to such term in Section
3.01(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
3.01(b).

     

    "Material Permits"
shall have the meaning ascribed to such term in Section 3.01(m).

     

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

     

    "Merger Ratio" shall
have the meaning ascribed to such term in Section 4.10.

     

    "Notes" means the 5%
Promissory Notes issued by the Company to the Purchasers hereunder, in the form
of Exhibit A
attached hereto.

     

    "Offering" means the
offering of up to a maximum of $600,000, consisting of 24 Units of
Securities.

     

    "Offering Price" means
the offering price per share of Common Stock of the Company or any
successor-in-interest to or parent of the Company issued in connection with the
Subsequent Financing, or the price per share at which any notes, debentures or
preferred stock of the Company or any successor-in-interest to or parent of the
Company issued in connection with the Subsequent Financing are
convertible.

     

    "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 informal investigation or partial proceeding, such as a deposition), whether
commenced or threatened.

     

    "Public Company" shall
mean any shell corporation that (i) is listed on the Over-the­-Counter
Bulletin Board ("OTCBB"), (ii) is
current its all of its periodic reports under the Securities Act of 1934, as
amended, and (iii) becomes a party to the Reverse Merger.

     

    "Purchaser Party"
shall have the meaning ascribed to such term in Section 4.06.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    "Required Approvals"
shall have the meaning ascribed to such term in Section 3.01(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.

     

    "Reverse Merger" shall
mean the merger of the Company with in into any Public Company or with any
Subsidiary of such Public Company.

     

    "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.

     

    "Securities" means the
Notes and the Shares of Common Stock included in the Units.

     

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

     

    "Shares" means the
shares of Common Stock issued or issuable to each Purchaser pursuant to this
Agreement.

     

    "Subscription Amount"
means, as to each Purchaser, the aggregate amount to be paid for the Units
purchased hereunder as specified below such Purchaser's name on the signature
page of this Agreement and next to the heading "Subscription Amount," in United
States dollars and in immediately available funds.

     

    "Subsequent Financing"
shall mean the sale of $3,500,000 or more of securities of the Company or any
successor-in-interest to or parent of the Company, upon such terms and
conditions as shall be acceptable to the board of directors of the Company, and
which shall be consummated simultaneously with the consummation of the Reverse
Merger.

     

    "Subsidiary" means any
corporation or other entity of which at least a majority of the securities or
other ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other subsidiaries.

     

    "Transaction
Documents" means the collective reference to this Agreement, the Notes,
the Accredited Investor Questionnaire, all exhibits and schedules thereto and
hereto and any other documents or agreements executed in connection with the
transactions contemplated hereunder.

     

    "Units" means the
units of securities of the Company offered pursuant to the Transaction
Documents; each Unit consisting of (a) $25,000 principal amount of Note, and (b)
0.3252 of one share of Common Stock of the Company, subject to adjustment based
on the Offering Price and Merger Ratio in the Subsequent Financing.

     

    "Westminster" means
Westminster Securities Corporation, the placement agent for the
transaction.

     

    ARTICLE
II.

    PURCHASE
AND SALE

     

    Section
2.01 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 Purchasers,
severally and not jointly, agree to purchase up to an aggregate of $600,000 of
Notes and 7.8048 shares of Common Stock, consisting of 24 full Units. Each
Purchaser shall deliver to the Company, via wire transfer or a certified check,
immediately available funds equal to its Subscription Amount and the Company
shall deliver to each Purchaser his or its respective Note and the applicable
number of shares of Common Stock, subject to adjustment based on the Offering
Price in the Subsequent Financing. The Company and each Purchaser shall deliver
the other items set forth in Section 2.02 deliverable at the Closing. Upon
satisfaction of the conditions set forth in Sections 2.02 and Section 2.03, the
Closing shall occur at the offices of Westminster or such other location as the
parties shall mutually agree.

     

    Section
2.02 Deliveries.

     

    (a)    Prior to
the Closing Date, each Purchaser shall deliver such Purchaser's Subscription
Amount by wire transfer or check to the Company.

     

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

     

    (i)            this
Agreement duly executed by the Company;

     

    (ii)    a Note
with a principal amount equal to such Purchaser's Subscription Amount,
registered in the name of such Purchaser; and

     

    (iii)    a
certificate evidencing a number of Shares equal to 0.5 of one share per Unit,
but subject to adjustment based on the final Offering Price and Merger Ratio in
the Subsequent Financing as provided in Section 4.10, and to adjustment for any
subsequent stock splits, reverse splits and similar capital
adjustments.

     

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

     

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

     

    (ii)    an
Accredited Investor Questionnaire, in the form of Exhibit
B

    attached
hereto.

     

    Section
2.03 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 on the Closing Date of the representations and
warranties of the Purchasers contained herein;

     

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

     

    (iii)    the
delivery by each Purchaser of the items set forth in Section 2.02(a) and (c) of
this Agreement.

     

    (b)    The
respective obligations of the Purchasers 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 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 2.02(b) 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, a banking moratorium shall not 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 each
Purchaser, makes it impracticable or inadvisable to purchase the Securities at
the Closing.

     

    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

     

    Section
3.01 Representations
and Warranties of the Company. Except as set forth in the Disclosure
Schedules, which Disclosure Schedules shall be deemed a part hereof and shall
qualify any representation or otherwise made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure Schedules,
the Company hereby makes the following representations and warranties to each
Purchaser:

     

    (a)    Subsidiaries. The
Company has no Subsidiaries.

     

    (b)    Organization and
Qualification. The Company 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. The Company is not in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. The Company
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, 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 Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, the Board of Directors
or the Company's 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 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 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
debt or otherwise) or other understanding to which the Company is a party or by
which any property or asset of the Company 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 is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company 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
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").

     

    (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 except as provided by the General
Corporation Law of the State of Delaware, free and clear of all Liens imposed by
the Company other than restrictions on transfer provided for in the Transaction
Documents. The Company has reserved from its duly authorized capital stock a
number of shares of Common Stock for issuance of the Shares at least equal to
the Required Minimum on the date hereof.

     

    (g)    Capitalization. The
capitalization of the Company is as set forth on Schedule 3.01(g),
which Schedule 3.01(g)
shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date hereof.
The Company has not issued any capital stock other than as set forth on Schedule 3.01(g). 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, there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) 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 or others is required
for the issuance and sale of the Securities.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (h)    Financial Statements.
Schedule
3.01(h) sets forth the unaudited financial statements of the Company for
the last two years and unaudited financial statements for its most recent fiscal
quarter. 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
such 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 March 31, 2008, (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, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.

     

    (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 of its property before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the 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 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.

     

    (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 that could reasonably be expected
to result in a Material Adverse Effect. None of the Company's employees is a
member of a union that relates to such employee's relationship with the Company,
and the Company is not a party to a collective bargaining agreement, and the
Company believes that its relationships with its 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 in favor of any third party, and the continued employment of each such
executive officer does not subject the Company to any liability with respect to
any of the foregoing matters. The Company is 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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (1)    Compliance. The
Company is not (i) 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 under), nor has the Company received
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) in violation of any order
of any court, arbitrator or governmental body, or (iii) 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.

     

    (m)    Regulatory Permits.
The Company possesses all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary to
conduct its business as presently conducted, except where the failure to possess
such permits could not reasonably be expected to result in a Material Adverse
Effect ("Material
Permits"), and the Company has not received any notice of proceedings
relating to the revocation or modification of any Material Permit.

     

    (n)    Title to Assets. The
Company has good and marketable title in fee simple to all real property owned
by it and good and marketable title in all personal property owned by it that is
material to the business of the Company, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and Liens for the payment of federal, state or
other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the Company is
held by it under valid, subsisting and enforceable leases with which the Company
is in compliance.

     

    (o)    Patents and
Trademarks. The Company has, or has 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 its
business as presently conducted and which the failure to so have could have a
Material Adverse Effect (collectively, the "Intellectual Property Rights").
The Company has not received a notice (written or otherwise) that any of the
Intellectual Property Rights used by the Company 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 has taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of its intellectual properties, except where failure to do so could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     

    (p)    Insurance. The
Company is 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 is engaged. The Company has no 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 on Schedule 3.01(q),
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 (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $10,000
other than for (i) payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii)
other employee benefits, including stock option agreements under any stock
option plan of the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (r)    Internal Accounting
Controls. The Company maintains 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.

     

    (s)    Certain Fees. All
brokerage or finder's fees or commissions that 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 are as set forth on Schedule 3.01(s). The
Purchasers 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 Purchasers' representations and warranties set
forth in Section 3.02, no registration under the Securities Act is required for
the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby.

     

    (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 of 1940, as amended.

     

    (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)    Application of Takeover
Protections. The Company and the 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 Purchasers as a
result of the Purchasers 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
Purchasers' ownership of the Securities.

     

    (x)    Disclosure. All
disclosure furnished by or on behalf of the Company to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3.02 hereof.

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (y)    No Integrated
Offering. Assuming the accuracy of the Purchasers' representations and
warranties set forth in Section 3.02, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act which would require the registration of any such securities
under the Securities Act.

     

    (z)    Solvency. Based on
the consolidated financial condition of the Company as of the Closing Date after
giving effect to the receipt by the Company of the proceeds from the sale of the
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. Schedule 3.01(z) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company, or for which the Company has commitments. The Company is not in
default with respect to any Indebtedness.

     

    (aa)    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 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 that has been asserted or threatened against the
Company.

     

    (bb)    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
solicitation or general advertising. The Company has offered the Securities for
sale only to the Purchasers and certain other "accredited investors" within the
meaning of Rule 501 under the Securities Act.

     

    (cc)    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) that is in violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (dd)    Accountants. The
Company's accounting firm is set forth on Schedule 3.01(dd). To the
knowledge and belief of the Company, such accounting firm is a registered public
accounting firm as required by the Exchange Act.

     

    (ee)    Seniority. As of the
Closing Date, no Indebtedness or other claim against the Company is senior to
the Notes in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than indebtedness secured by
purchase money security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior only as to the
property covered thereby).

     

    (ff)    Acknowledgment Regarding
Purchasers' Purchase of Securities. The Company acknowledges and agrees
that each of the Purchasers 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 no Purchaser is
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated thereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers' purchase of the Securities. The Company further represents to each
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.

     

    (gg)    Manufacturing and Marketing
Rights. Except as set forth on Schedule 3.01(gg), the Company
has not granted rights to manufacture, produce, assemble, license, market, or
sell its products to any other Person and is not bound by any agreement that
affects the Company's exclusive right to develop, manufacture, assemble,
distribute, market or sell its products.

     

    (hh)    Employees. The
Company does not have any collective bargaining agreements with any of its
employees. There is no labor union organizing activity pending or, to the
Company's knowledge, threatened with respect to the Company. The Company is not
a party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and to the Company's knowledge the continued employment by the Company of their
respective present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company has not received any notice alleging that any such violation has
occurred. No employee of the Company has been granted the right to continued
employment by the Company or to any material compensation following termination
of employment with the Company. The Company is not aware that any officer, key
employee or group of employees intends to terminate his, her or their employment
with the Company nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees. The Company is 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.

     

    (ii)    Obligations of
Management. Each officer and key employee of the Company is currently
devoting substantially all of his or her business time to the conduct of
business
of the Company. The Company is not aware that any officer or key employee of the
Company is planning to work less than full time at the Company in the future. No
officer or key employee is the currently working or, to the Company's knowledge,
plans to work for a competitive enterprise, whether or not such officer of key
employee is or will be compensated by such enterprise.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (jj)    Environmental and Safety
Laws. Except as set forth on Schedule
3.01(j):

     

    (i)    The
Company is, and at all times has been, in full compliance with, and has not been
and is not in violation of or liable under, any Environmental Law. The Company
has no basis to expect, nor has it or any other Person for whose conduct it is
or may be held to be responsible received, any actual or threatened order,
notice, or other communication from (i) any governmental body or private citizen
acting in the public interest, or (ii) the current or prior owner or operator of
any facilities, of any actual or potential violation or failure to comply with
any Environmental Law, or of any actual or threatened obligation to undertake or
bear the cost of any environmental, health, and safety liabilities with respect
to any of the facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has had an interest, or with respect to
any property or facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by the Company,
or any other Person for whose conduct it are or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.

     

    (ii)    There are
no pending or, to the knowledge of the Company, threatened claims, encumbrances,
or other restrictions of any nature, resulting from any environmental, health,
and safety liabilities or arising under or pursuant to any Environmental Law,
with respect to or affecting any of the facilities or any other properties and
assets (whether real, personal, or mixed) in which the Company has or had an
interest.

     

    (iii)    The
Company has no knowledge of any basis to expect, nor has it or any other Person
for whose conduct it is or may be held responsible, received, any citation,
directive, inquiry, notice, order, summons, warning, or other communication that
relates to Hazardous Materials, or any alleged, actual, or potential violation
or failure to comply with any Environmental Law, or of any alleged, actual, or
potential obligation to undertake or bear the cost of any environmental, health,
and safety liabilities with respect to any of the facilities or any other
properties or assets (whether real, personal, or mixed) in which the Company had
an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by the Company, or any other Person for whose conduct it is or may be
held responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.

     

    (iv)    Neither
the Company nor any other Person for whose conduct it is or may be held
responsible, had any environmental, health, and safety liabilities with respect
to the facilities or, to the knowledge of the Company, with respect to any other
properties and assets (whether real, personal, or mixed) in which the Company
(or any predecessor), has or had an interest, or at any property geologically or
hydrologically adjoining the facilities or any such other property or
assets.

     

    (v)    There are
no Hazardous Materials present on or in the environment at the facilities or at
any geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the facilities or such adjoining property, or incorporated
into any structure therein or thereon. Neither the Company nor any other Person
for whose conduct it is or may be held responsible, or to the knowledge of the
Company, any other Person, has permitted or conducted, or is aware of, any
hazardous activity conducted with respect to the facilities or any other
properties or assets (whether real, personal, or mixed) in which the Company has
or had an interest except in full compliance with all applicable Environmental
Laws.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (vi)    There has
been no release or, to the knowledge of the Company, threat of release, of any
Hazardous Materials at or from the facilities or at any other locations where
any Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest, or to the knowledge of the Company any
geologically or hydrologically adjoining property, whether by the Company, or
any other Person.

     

    (vii)    The
Company has delivered to the Purchasers true and complete copies and results of
any reports, studies, analyses, tests, or monitoring possessed or initiated by
the Company pertaining to Hazardous Materials in, on, or under the facilities,
or concerning compliance by the Company, or any other Person for whose conduct
they are or may be held responsible, with Environmental Laws.

     

    For the
purpose of this Section, "Hazardous Material"
shall mean (i) materials that are listed or otherwise defined as "hazardous" or
"toxic" under any applicable federal, local or state and/or foreign laws and
regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control of
the hazardous wastes, or other activities involving hazardous substances,
including building materials or (ii) petroleum products or nuclear
materials.

     

    For the
purpose of this Section 3.01(jj), "Environmental Law"
shall mean any applicable statute, law, rule or regulation relating to the
environment, including, without limitation, statutes, laws, rules or regulations
relating to the following: (i) advising appropriate authorities, employees, and
the public intended or actual releases of pollutants or hazardous substances or
material, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the environment; (ii) preventing or reducing to
acceptable levels the release of pollutants or hazardous substances or materials
into the environment; (iii) reducing the quantities, preventing the release, or
minimizing the hazardous characteristic of waste that are generated; (iv)
assuring that products are designed, formulated, packaged, and used so that they
do not present unreasonable risks to human health or the environment when used
or disposed of; (v) protecting resources, species or ecological amenities; (vi)
reducing to acceptable levels the risk inherent in the transportation of
hazardous substances, pollutants, oil or other potentially harmful substances;
(vii) cleaning up pollutants that have been released, preventing the threat of
release or paying the costs of such clean up or prevention; or (viii) making
responsible parties pay private parties, or groups of them, for damages done to
their health or to the environment, or permitting self appointed representatives
of the public interest to recover for injuries done to public
assets.

     

    (kk)    Accounts Receivable.
All accounts receivable of the Company that are reflected on the Company's
balance sheet or interim balance sheet or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on the
balance sheet or interim balance sheet or on the accounting records of the
Company as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the interim balance sheet
represented of the Accounts Receivable reflected therein and will not represent
a material adverse change in the composition of such Accounts Receivable in
terms of aging). Subject to such reserves, each of the Accounts Receivable
either has been or will be collected in full without any set-off, within ninety
days after the day on which it must become due and payable. There is no contest,
claim, or right of set-off, other than returns in the ordinary course of
business, under any agreement and/or contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. Schedule 3.01(kk)
contains a complete and accurate list of all Accounts Receivable as of
the date of the interim balance sheet, which list sets forth the aging of such
Accounts Receivable.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (ll)    Inventory. All
inventory of the Company, whether or not reflected in the balance sheet or
interim balance sheet, consists of a quality and quantity usable and salable in
the ordinary course of business, except for obsolete items and items of below
standard quality, all of which have been written off or written down to net
realizable value in the balance sheet or interim balance sheet or on the
accounting records of the Company as of the Closing Date, as the case may be.
All inventories not written off have been priced at the lower of cost or market
on the last in, first out basis. The quantities of each item of inventory
(whether raw materials, work­in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the
Company.

     

    (mm)    Employee Benefits.
The Company does not maintain, and is not required by any applicable law to
maintain, any "employee benefit plan" as such term is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended, or any other
employee benefit plan, program or arrangement of any kind.

     

    (nn)    Returns and
Complaints. The Company has received no customer complaints concerning
its or its Subsidiaries' products and/or services, nor has it had any of its
products returned by a purchaser thereof, other than minor, nonrecurring
warranty problems.

     

    Section
3.02 Representations
and Warranties of the Purchasers. Each Purchaser, for himself or itself
and for no other Purchaser hereby, represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:

     

    (a)    Organization;
Authority. Such Purchaser is either an individual or 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 and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary corporate or
similar action on the part of such Purchaser. Each Transaction Document to which
it is a party has been duly executed by such Purchaser, and when delivered by
such Purchaser in accordance with the terms hereof, will constitute the valid
and legally binding obligation of such 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. Such
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 a 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. Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)    Purchaser Status. At
the time such Purchaser was offered the Securities, it was, and at the date
hereof it is, 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. Such
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act.

     

    (d)    Experience of Such
Purchaser. Such 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.
Such 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.

     

    ARTICLE
IV.

    OTHER
AGREEMENTS OF THE PARTIES

     

    Section
4.01 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 a Purchaser or in connection with a pledge as contemplated in
Section 4.01(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 a Purchaser
under this Agreement.

     

    (b)    The
Purchasers agree to the imprinting, so long as is required by this Section 4.01,
of a legend on any of the Securities in the following form:

     

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

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    The
Company acknowledges and agrees that a 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, such 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 appropriate 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.

     

    (c)    Certificates
evidencing the Shares shall not contain any legend (including the legend set
forth in Section 4.01(b) hereof): (i) following any sale of such Shares pursuant
to a registration statement covering the resale of such Shares that is effective
under the Securities Act, or (ii) following any sale of such Shares pursuant to
Rule 144, or (iii) 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 agrees that following such
time as such legend is no longer required under this Section 4.01(c), it will,
no later than three Business Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing Shares, as
applicable, issued with a restrictive legend, deliver or cause to be delivered
to such the acquirer of such Purchaser's Shares a certificate representing such
shares that is free from all restrictive and other legends. The Company may not
make any notation on its records or give instructions to the Company's transfer
agent that enlarge the restrictions on transfer set forth in this
Section.

     

    Section
4.02 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 to the
Purchasers in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers.

     

    Section
4.03 Publicity.
The Company and each Purchaser shall consult with each other in issuing any
other press releases with respect to the transactions contemplated hereby, and
neither the Company nor any 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 any Purchaser, or without the
prior consent of each 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 any Purchaser, or include the name of any Purchaser in any
filing with any regulatory agency without the prior written consent of such
Purchaser, except to the extent such disclosure is required by law, in which
case the Company shall provide the Purchasers with prior notice of such
disclosure.

     

    Section
4.04 Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with
the consent of the Company, any other Person, that any 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 any 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
Purchasers.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
4.05 Use of
Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use such
proceeds for (a) the satisfaction of any portion of the Company's debt (other
than payment of trade payables in the ordinary course of the Company's business
and prior practices), (b) the redemption of any Common Stock or Common Stock
Equivalents or (c) the settlement of any outstanding litigation

     

    Section
4.06 Indemnification
of Purchasers. Subject to the provisions of this Section 4.06, the
Company will indemnify and hold each 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 such Purchaser (within the meaning of Section 15 of the Securities Act
and 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 a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser's representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser that 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.

     

    Section
4.07 Reservation of
Securities. 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.

     

    Section
4.08 Equal Treatment
of Purchasers. No consideration shall be offered or paid to any Person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents. Further, the Company shall not make
any payment of principal or interest on the Notes in amounts which are
disproportionate to the respective principal amounts outstanding on the Notes at
any applicable time. For clarification purposes, this provision constitutes a
separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended for the Company to treat the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
4.09 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 any 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 Purchasers 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 any Purchaser.

     

    Section
4.10 Adjustment of
Shares Based Upon Offering Price. The 0.3252 of one share of Common Stock
included in the Units is predicated upon (i) a $0.75 per share Offering Price of
the Common Stock or other securities issued or issuable in connection with the
Subsequent Financing and (ii) a merger ratio of 41,000 shares of common stock in
the Public Company being exchanged for each share of Common Stock in connection
with the Reverse Merger (the "Merger Ratio"). Upon
completion of the Subsequent Financing, such number of Shares of Common Stock
included in the Units:

     

    (a)    will be
increased or decreased, based on the actual Offering Price of Common Stock or
other senior securities convertible into Common Stock of the Public Company that
are sold in the Subsequent Financing if such effective Offering Price is higher
than or less than $0.75;

     

    (b)    will be
increased or decreased, based on the actual Merger Ratio; and

     

    (c)    will be
substituted for shares of Common Stock or other senior securities convertible
into Common Stock of the Public Company pursuant to the Reverse
Merger.

     

    Accordingly,
and by way of illustration, if the Public Company issues in the Subsequent
Financing, its preferred stock or convertible notes, convertible into Common
Stock of the Public Company at a conversion price of $0.50 per share (as
adjusted based on the exchange ratio pursuant to which shares of the Company are
exchanged for shares of the Public Company), the number of Shares of Common
Stock included in each Unit shall be increased from 0.3252 of one share to
0.4878 of one share of common stock of the Public Company. Furthermore, if the
Merger Ratio is decreased to 20,000 shares of common stock in the Public Company
being exchanged for each share of Common Stock in connection with the Reverse
Merger, the number of shares of Common Stock included in each Unit shall be
increased from 0.3252 of one share to 0.6667 of one share of common stock of the
Public Company.

     

    Section
4.11 Registration
Rights. If, at any time after the date hereof, the Company (or the Public
Company) shall determine to prepare and file with the Commission a registration
statement relating to an offering for its 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 stock option or other employee benefit plans, the Company
shall send to each Purchaser a written notice of determination and if, within 20
calendar days after the date of such notice, a Purchaser shall so request in
writing, the Company shall include in such registration statement all or any
part of the Common Stock that such Purchaser requests to be registered; provided, however, that (i)
the Company shall not be required to register any such shares that are eligible
for resale without the requirement to be in compliance with Rule 144(c)(1) and
otherwise without restriction or limitation pursuant to Rule 144.; and (ii) such
registration rights shall be subject, in the case of an underwritten public
offering of securities of the Public Company or the Company, to customary
underwriters "cut backs."

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    ARTICLE
V.

    MISCELLANEOUS

     

    Section
5.01 Termination. This
Agreement may be terminated by any Purchaser, as to such Purchaser's obligations
hereunder only and without any effect whatsoever on the obligations between the
Company and the other Purchasers, by written notice to the other parties, if the
Closing has not been consummated on or before July 31, 2008; provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

     

    Section
5.02 Fees and
Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers,
counsel, 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. 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 Purchasers.

     

    Section
5.03 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.

     

    Section
5.04 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
Business Day, (b) the next Business 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 Business Day
or later than 5:30 p.m. (New York City time) on any Business Day, (c) the second
Business 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.

     

    Section
5.05 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 Purchasers holding a majority of the outstanding
principal of the Notes. 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.

     

    Section
5.06 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.

     

    Section
5.07 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 (other than by
merger) without the prior written consent of each Purchasers holding a majority
of the outstanding principal of the Notes. Any Purchaser may assign any or all
of its rights under this Agreement to any Person to whom such Purchaser assigns
or transfers any Securities, provided that 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 "Purchasers."

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
5.08 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 4.06.

     

    Section
5.09 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 New York,
without regard to the principles of conflicts of law thereof. Each party agrees
that all legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan
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. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. 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.

     

    Section
5.10 Survival.
The representations and warranties shall survive the Closing and the delivery of
the Securities for the applicable statue of limitations.

     

    Section
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.

     

    Section
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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
5.13 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.

     

    Section
5.14 Remedies.
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Purchasers 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.

     

    Section
5.15 Payment Set
Aside. To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a 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.

     

    Section
5.16 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 any 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 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 any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such 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 such Purchaser's election.

     

    Section
5.17 Independent
Nature of Purchasers' Obligations and Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
5.18 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.

     

    Section
5.19 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.

     

    Section
5.20 Waiver of Jury
Trial. In any action, suit or proceeding in any jurisdiction brought by
any party against any other party, the parties each knowingly and intentionally,
to the greatest extent permitted by applicable law, hereby absolutely,
unconditionally, irrevocably and expressly waives forever trial by
jury.

     

    (Signature
Pages Follow)

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    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.

    
 

     

    
      	IX ENERGY,
      INC.	Address for
      Notice:
	 	 
	By:_________________	Fax:
	Name:	 
	Title:	 


    

     

     

     

     

     

     

     

     

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