Exhibit 10.1


 


COMMON STOCK AND
WARRANT PURCHASE AGREEMENT


 


THIS
COMMON STOCK AND WARRANT PURCHASE AGREEMENT (the “Agreement”) is entered
into as of May 4, 2006, by
and among ASPYRA, INC., a
California corporation (the “Company”), with headquarters located at
26115-A Mureau Road, Calabasas, California 91302, and the purchasers
(collectively, the “Purchasers” and each a “Purchaser”) set forth
on Schedule 1 hereof,
with regard to the following:


 


RECITALS


 


A.                                   The Company and Purchasers are executing
and delivering this Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D (“Regulation D”),
as promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “Securities Act”).


 


B.                                     The Purchasers desire to (a) purchase,
upon the terms and conditions stated in this Agreement, shares of the Company’s
Common Stock, no par value per share (the “Common Stock”) and (b) purchase,
upon the terms and conditions stated in this Agreement, the Stock Purchase
Warrants (the “Warrants”) to purchase shares of Common Stock, in the form attached
hereto as Exhibit A. The
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants are referred to herein as “Warrant Shares.”  The shares of Common Stock issued to the
Purchasers hereunder (exclusive of the Warrant Shares) are referred to herein
as the “Common Shares.”  The
Common Shares, the Warrants and the Warrant Shares are collectively referred to
herein as the “Securities”.


 


C.                                     Contemporaneously with the execution and
delivery of this Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement in the form attached hereto as Exhibit B (the “Registration
Rights Agreement,” and collectively with this Agreement, the Warrants and
any other documents or agreements executed in connection with the transactions
contemplated hereunder, the “Transaction Documents”), pursuant to which
the Company has agreed to provide certain registration rights under the
Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws.


 


AGREEMENTS


 


NOW,
THEREFORE, in consideration of their respective promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and Purchasers hereby agree as follows:


 


ARTICLE I

PURCHASE AND SALE OF COMMON STOCK AND WARRANTS


 


1.1                                 Purchase of Common Stock and Warrants. Subject to the terms and conditions of
this Agreement, the issuance, sale and purchase of the Common Shares and
Warrants shall be consummated in a “Closing.”  The purchase price (the “Purchase Price”)
shall be TWO DOLLARS ($2.00) per Unit, for up to
FOUR MILLION FIVE HUNDRED


 


1

















 


THOUSAND
DOLLARS ($4,500,000) for TWO MILLION TWO HUNDRED AND FIFTY THOUSAND
(2,250,000) Units. Each “Unit” will consist of (a) one (1) share
of Common Stock, and (b) three-fifths (3/5ths) of a Warrant for the
purchase of one (1) Warrant Share at an exercise price of  THREE DOLLARS ($3.00)
per share, with a term of THREE (3) years.
On the date of the Closing, subject to the satisfaction or waiver of the
conditions set forth in ARTICLES VI
and VII hereof, the Company
shall issue and sell to each Purchaser, and each Purchaser severally agrees to
purchase from the Company, the number of Common Shares and a Warrant to
purchase the number of Warrant Shares set forth on Schedule 1 hereto. Each Purchaser’s
obligation to purchase Common Shares and Warrants hereunder is distinct and
separate from each other Purchaser’s obligation to purchase, and no Purchaser
shall be required to purchase hereunder more than the number of Common Shares
and a Warrant to purchase the number of Warrant Shares set forth on Schedule 1 hereto. The obligations
of the Company with respect to each Purchaser shall be separate from the
obligations of each other Purchaser and shall not be conditioned as to any
Purchaser upon the performance of obligations of any other Purchaser. The
Purchase Price will be paid into Escrow as provided in Exhibit C
hereto.


 


1.2                                 Closing Fee. At the Closing, the Company will pay to GREAT AMERICAN INVESTORS, INC. (the “Placement
Agent”) a closing fee of  Seven Percent (7%) of the aggregate
Purchase Price, plus up to FIVE THOUSAND
DOLLARS ($5,000) in reimbursement of actual documented out-of-pocket
expenses. The Company hereby agrees to indemnify and hold harmless the
Placement Agent and its officers, directors, employees, agents and
shareholders, individually and collectively (“Placement Agent Indemnified
Person(s)”) from and against any and all claims, liabilities, losses,
damages, costs and reasonable expenses incurred by any Placement Agent
Indemnified Person (including reasonable fees and disbursements of counsel)
which are related to or arising out of: (i) any untrue statement of any
material fact made by the Company; or (ii) any omission of material
fact  necessary to make any statement not
misleading, made by the Company. The Company will not however, be responsible
for any claims, liabilities, losses, damages, or expenses, which resulted
directly or indirectly from the Placement Agent’s negligence or willful
misconduct.


 


1.3                                 Closing Date. Subject to the satisfaction (or waiver)
of the conditions set forth in ARTICLES VI
and VII below, the date and
time of the issuance, sale and purchase of the Common Shares and Warrants
pursuant to this Agreement shall be at 10:00 a.m.
California time, on May         ,
2006.


 


ARTICLE II

PURCHASER’S REPRESENTATIONS AND

WARRANTIES


 


Each
Purchaser represents and warrants to the Company, as of the date hereof and as
of the Closing, severally and not jointly with respect to itself and its
purchase hereunder and not with respect to any other Purchaser or the purchase
hereunder by any other Purchaser, that the following statements are true and
correct:


 


2.1                                 Investment Purpose. Purchaser is purchasing the Common
Shares and the Warrants for Purchaser’s own account for investment only and not
with a view toward or in connection with the public sale or distribution
thereof. Purchaser will not, directly or indirectly,


 


2

















 


offer,
sell, pledge or otherwise transfer its Common Shares, Warrants or any interest
therein except pursuant to transactions that are exempt from the registration
requirements of the Securities Act and/or sales registered under the Securities
Act. Purchaser understands that Purchaser must bear the economic risk of this
investment indefinitely, unless the Securities are registered pursuant to the
Securities Act and any applicable state securities laws or an exemption from
such registration is available, and that the Company has no present intention
of registering any such Securities other than as contemplated by the
Registration Rights Agreement.


 


2.2                                 Accredited Investor Status. Purchaser is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation D as provided in
Exhibit D hereto.


 


2.3                                 Reliance on Exemptions. Purchaser understands that the Common
Shares and Warrants are being offered and sold to Purchaser in reliance upon
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Purchaser set forth herein in
order to determine the availability of such exemptions and the eligibility of
Purchaser to acquire the Common Shares and Warrants.


 


2.4                                 Information. The Company has made available the
documents publicly filed by the Company with the SEC (such documents
collectively, the “SEC Documents”). Purchaser has been afforded the
opportunity to ask questions of the Company, was permitted to meet with the
Company’s officers and has received what the Purchaser believes to be complete
and satisfactory answers to any such inquiries. Except for the SEC Documents
and the answers received by Purchaser as a result of inquiries made by
Purchaser to Company officers, and except as otherwise provided in this
Agreement, the Purchaser is not relying upon any information, representations
or warranties of any other party. Neither such inquiries nor any other due
diligence investigation conducted by Purchaser or any of its representations
shall modify, amend or affect Purchaser’s right to rely on the Company’s
representations and warranties contained in ARTICLE III. Purchaser understands that Purchaser’s
investment in the Securities involves a high degree of risk, including without
limitation the risks and uncertainties disclosed in the SEC Documents.


 


2.5                                 Governmental Review. Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.


 


2.6                                 Transfer or Resale. Purchaser understands that (i) except
as provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under the Securities Act or any state securities
laws, and may not be offered, sold, pledged or otherwise transferred
unless subsequently registered thereunder or an exemption from such
registration is available (which exemption the Company expressly agrees may be
established as contemplated in clauses (b) and (c) of Section 5.1
hereof); (ii) any sale of such Securities made in reliance on Rule 144
under the Securities Act (or a successor rule) (“Rule 144”)  may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of such Securities without registration under the Securities Act under
circumstances in which the seller may be deemed to be an underwriter (as
that term is defined in the Securities


 


3

















 


Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder in order for such resale to be allowed, (iii) the
Company is under no obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case, other than pursuant to this Agreement
or the Registration Rights Agreement) and (iv) the Company has agreed to
register the Common Shares and Warrant Shares as provided in the Registration
Rights Agreement.


 


2.7                                 Legends. Purchaser understands that, subject to ARTICLE V hereof, the certificates
for the Warrants and, until such time as the Warrant Shares and Common Shares
have been registered under the Securities Act as contemplated by the
Registration Rights Agreement or otherwise may be sold by Purchaser
pursuant to Rule 144 (subject to and in accordance with the procedures
specified in ARTICLE V
hereof), the certificates for the Common Shares and the Warrant Shares will
bear a restrictive legend (the “Legend”), which will include language in
substantially the following form:


 


THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.


 


2.8                                 Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their respective terms, except to the extent
that such validity or enforceability may be subject to or affected by any
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights or
remedies of creditors generally, or by other equitable principles of general
application.


 


2.9                                 Residency. Purchaser is a resident of the jurisdiction set
forth under Purchaser’s name on the signature page hereto executed by
Purchaser.


 


2.10                           Hedging Transactions. Purchaser does not have an existing
short position with respect to the Company’s Common Stock.


 


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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


The
Company represents and warrants to each Purchaser as of the date hereof and as
of the Closing that the following statements are true and correct, except as
set forth on the disclosure schedules attached hereto as Schedule 2 (the “Company
Disclosure Schedules”) and accept as disclosed in the SEC Documents.


 


3.1                                 Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized and existing in good standing
under the laws of the jurisdiction in which it is incorporated, and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted. The Company and each of its subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction where the failure so to qualify or be in good standing could
reasonably be expected to have a Material Adverse Effect. “Material Adverse
Effect” means any effect which, individually or in the aggregate with all
other effects, reasonably would be expected to be materially adverse to the
business, operations, properties, financial condition, operating results or
prospects of the Company and its subsidiaries, taken as a whole on a
consolidated basis or on the transactions contemplated hereby.


 


3.2                                 Authorization; Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform under the
Transaction Documents, and to issue, sell and perform its obligations with
respect to the Securities in accordance with the terms hereof and thereof and
in accordance with the terms and conditions of the Securities; (b) the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Common Shares and the
Warrants, and the reservation for issuance of the Warrant Shares) have been
duly authorized by all necessary corporate action and no further consent or
authorization of the Company, its board of directors, or its stockholders or
any other Person is required with respect to any of the transactions
contemplated hereby or thereby; (c)  this Agreement, the Registration
Rights Agreement, the Common Shares, and the Warrants have been duly executed
and delivered by the Company; and (d) this Agreement, the Registration
Rights Agreement, the Common Shares, and the Warrants constitute legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except (i) to the extent that such
validity or enforceability may be subject to or affected by any bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally the enforcement of, creditors’ rights or remedies of
creditors generally, or by other equitable principles of general application,
and (ii) as rights to indemnity and contribution under the Registration
Rights Agreement may be limited by federal or state securities laws. “Person”
means any individual, sole proprietorship, partnership, limited liability
company, joint venture, trust, unincorporated association, corporation, entity
or government (whether federal, state, county, city or otherwise, including,
without limitation, any instrumentality, division, agency or department
thereof).


 


3.3                                 Capitalization. The capitalization of the Company as of
December 31, 2005, including
the authorized capital stock, the number of shares issued and outstanding, the
number of shares reserved for issuance pursuant to the Company’s stock option
plans, the


 


5

















 


number
of shares reserved for issuance pursuant to securities (other than the
Warrants) exercisable for, or convertible into or exchangeable for, any shares
of Common Stock and the number of shares to be reserved for issuance upon
exercise of the Warrants is set forth on Schedule 3.3
hereof. All of such outstanding shares of capital stock have been, or upon
issuance will be, validly issued, fully paid and nonassessable. No shares of
capital stock of the Company (including the Common Shares and the Warrant
Shares) are subject to preemptive rights or any other similar rights of the
stockholders of the Company or any liens or encumbrances. Except as disclosed
in Schedule 3.3
hereof, as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exercisable or exchangeable for, any shares of capital stock of the Company or
any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries, (ii) issuance of the Securities will not trigger anti-dilution
rights for any other outstanding or authorized securities of the Company, and (iii) there
are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Registration Rights Agreement).
The Company has made available to Purchaser true and correct copies of the
Company’s Articles of Incorporation as in effect on the date hereof (“Articles
of Incorporation”), and the Company’s By-laws as in effect on the date
hereof (the “By-laws”). The Company has set forth on Schedule 3.3 hereof all
instruments and agreements (other than the Articles of Incorporation and
By-laws) governing securities convertible into or exercisable or exchangeable
for Common Stock of the Company (and the Company shall provide to Purchaser
copies thereof upon the request of Purchaser).


 


3.4                                 No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company, and the consummation by the
Company of transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance, as applicable, of the
Securities) do not and will not (a) result in a violation of the Articles
of Incorporation or By-laws or (b) conflict with, or constitute a default
(or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which the Company or any of its subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
U.S. federal and state securities laws) applicable to the Company or any of its
subsidiaries, or by which any property or asset of the Company or any of its
subsidiaries, is bound or affected (except for such possible conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect).
Neither the Company nor any of its subsidiaries is in violation of its Articles
of Incorporation or other organizational documents. Neither the Company nor any
of its subsidiaries, is in default (and no event has occurred which has not
been waived which, with notice or lapse of time or both, could reasonably be
expected to put the Company or any of its subsidiaries in default) under, nor
has there occurred any event giving others (with notice or lapse of time or
both) any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, except for possible violations, defaults or rights as
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its subsidiaries are not being conducted, and
shall not be


 


6

















 


conducted
so long as a Purchaser owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations the sanctions for which either individually or in the aggregate
would not have a Material Adverse Effect. Except as (A) such as may be
required under the Securities Act in connection with the performance of the
Company’s obligations under the Registration Rights Agreement, (B) filing
of a Form D with the SEC, and (C) compliance with the state
securities or Blue Sky laws of applicable jurisdictions, the Company is not
required to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or the Registration Rights Agreement or
to perform its obligations in accordance with the terms hereof or thereof.


 


3.5                                 Consents. The execution, delivery and performance by the
Company of the Transaction Documents and the offer, issuance and sale of the
Securities require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official other than (i) filings
that have been made pursuant to applicable state securities laws, (ii) post-sale
filings pursuant to applicable state and federal securities laws, and (iii) any
consent, action or filing that either individually or in the aggregate would
not have a Material Adverse Effect. Subject to the accuracy of the
representations and warranties of each Purchaser set forth in ARTICLE II hereof, the Company has
taken all action necessary to exempt (i) the issuance and sale of the
Common Shares, (ii) the issuance of the Common Shares, (iii) the
issuance of the Warrants, and (iv) the issuance of the Warrant Shares,
from the provisions of any stockholder rights plan or other “poison pill”
arrangement, any anti-takeover, business combination or control share law or
statute binding on the Company or to which the Company or any of its assets and
properties may be subject and any provision of the Company’s Articles of
Incorporation or By-laws that is or could reasonably be expected to become
applicable to the Purchasers as a result of the transactions contemplated
hereby, including without limitation, the issuance of the Securities and the
ownership, disposition or voting of the Securities by the Purchasers or the
exercise of any right granted to the Purchaser pursuant to this Agreement or
the other Transaction Documents.


 


3.6                                 SEC Documents; Financial Statements. Since December 31, 2004, the
Company has timely filed the SEC Documents required to be filed by it with the
SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). The Company has made available to
each Purchaser true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents which is required to be updated or
amended under applicable law has not been so updated or amended. The consolidated
financial statements of the Company included in the SEC Documents have been
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, and the rules and regulations of the SEC during the
periods involved (except (i) as may be otherwise indicated in such
consolidated financial statements or the notes thereto, or (ii) in the
case of unaudited interim statements, to the extent


 


7

















 


they
do not include footnotes or are condensed or summary statements) and present
accurately and completely the consolidated financial position of the Company
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in a manner clearly evident to a sophisticated institutional
investor in the consolidated financial statements or the notes thereto of the
Company included in the SEC Documents, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business consistent with past practice subsequent to the
date of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business consistent with past
practice and not required under generally accepted accounting principles to be
reflected in such financial statements. To the extent required by the rules of
the SEC applicable thereto, the SEC Documents contain a complete and accurate
list of all material undischarged written or oral contracts, agreements, leases
or other instruments to which the Company or any subsidiary is a party or by
which the Company or any subsidiary is bound or to which any of the properties
or assets of the Company or any subsidiary is subject (each a “Contract”).
None of the Company, its subsidiaries or, to the Company’s Knowledge, any of
the other parties thereto, is in breach or violation of any Contract, which
breach or violation would have a Material Adverse Effect. No event, occurrence
or condition exists which, with the lapse of time, the giving of notice, or
both, could become a default by the Company or its subsidiaries thereunder
which could reasonably be expected to have a Material Adverse Effect. For
purposes of this Agreement, “Company’s Knowledge” means the actual
knowledge of the executive officers (as defined in Rule 405 under the
Securities Act) of the Company, after due inquiry.


 


3.7                                 Absence of Certain Changes. Since December 31,
2005, there has been no material adverse change and no material
adverse development in the business, properties, operations, financial
condition, results of operations or prospects of the Company, or clearly
evident to a sophisticated institutional investor from the  SEC Documents, including, without limitation:


 


(i)                  any change in the consolidated assets,
liabilities, financial condition or operating results of the Company from that
reflected in the financial statements included in the Company’s Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2005, except
for changes in the ordinary course of business which have not and could not
reasonably be expected to have a Material Adverse Effect, individually or in
the aggregate;


 


(ii)               any declaration or payment of any
dividend, or any authorization or payment of any distribution, on any of the
capital stock of the Company, or any redemption or repurchase of any securities
of the Company;


 


(iii)            any material damage, destruction or loss,
whether or not covered by insurance to any assets or properties of the Company
or its subsidiaries;


 


(iv)           any waiver, not in the ordinary course of
business, by the Company or any subsidiary of a material right or of a material
debt owed to it;


 


8

















 


(v)              any satisfaction or discharge of any
lien, claim or encumbrance or payment of any obligation by the Company or a
subsidiary, except in the ordinary course of business and which is not material
to the assets, properties, financial condition, operating results or business
of the Company and its subsidiaries taken as a whole (as such business is
presently conducted and as it is proposed to be conducted);


 


(vi)           any change or amendment to the Company’s
Articles of Incorporation or By-laws, or material change to any material
contract or arrangement by which the Company or any subsidiary is bound or to
which any of their respective assets or properties is subject;


 


(vii)        any material labor difficulties or labor
union organizing activities with respect to employees of the Company or any
subsidiary;


 


(viii)     any material transaction entered into by
the Company or a subsidiary other than in the ordinary course of business;


 


(ix)             the loss of the services of any key
employee, or material change in the composition or duties of the senior
management of the Company or any subsidiary;


 


(x)                the loss or threatened loss of any
customer which has had or could reasonably be expected to have a Material
Adverse Effect; or


 


(xi)             any other event or condition of any
character that has had or could reasonably be expected to have a Material
Adverse Effect.


 


3.8                                 Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, or self-regulatory organization or body pending or, to the Company’s
Knowledge or any of its subsidiaries, threatened against or affecting the
Company, any of its subsidiaries, or any of their respective directors or
officers in their capacities as such. There are no facts known to the Company
which, if known by a potential claimant or governmental authority, could
reasonably be expected to give rise to a claim or proceeding which, if asserted
or conducted with results unfavorable to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect.


 


3.9                                 Tax Matters. The Company and each subsidiary has
timely prepared and filed all tax returns required to have been filed by the
Company or such subsidiary with all appropriate governmental agencies and
timely paid all taxes shown thereon or otherwise owed by it. The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company or any subsidiary nor, to the Company’s
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company and
its subsidiaries, taken as a whole. All taxes and other assessments and levies
that the Company or any subsidiary is required to withhold or to collect for
payment have been duly


 


9

















 


withheld
and collected and paid to the proper governmental entity or third party when
due. There are no tax liens or claims pending or, to the Company’s Knowledge,
threatened against the Company or any subsidiary or any of their respective
assets or property. There are no outstanding tax sharing agreements or other
such arrangements between the Company and any subsidiary or other corporation
or entity.


 


3.10                           Transactions with Affiliates. Except as disclosed in the SEC
Documents, none of the officers or directors of the Company and, to the Company’s
Knowledge, none of the employees of the Company is presently a party to any
transaction with the Company or any subsidiary (other than as holders of stock
options and/or warrants, and 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 Company’s Knowledge, any entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.


 


3.11                           Internal Controls. The Company and the subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles 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 difference. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the Exchange Act. The Company’s officers certified to the
Company’s internal controls as of the filing of the Company’s Form 10-KSB
for the fiscal year  ended December 31, 2005 and since that date,
that there have been no significant changes in the Company’s internal controls
(as such term is defined in Section 307(b) of Regulation S-K) or, to
the Company’s Knowledge, any other facts that would significantly affect the
Company’s internal controls. The Company is not required at this date to
certify its internal controls under Section 404 of the Sarbanes-Oxley Act
of 2002 and has not taken any steps necessary to evaluate its internal controls
to determine whether it will be able to take such a certification.


 


3.12                           Disclosure. No information relating to or concerning the Company
set forth in this Agreement contains an untrue statement of a material fact. No
information relating to or concerning the Company set forth in any of the SEC
Documents contains a statement of material fact that was untrue as of the date
such SEC Document was filed with the SEC. The Company has not omitted to state
a material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. Except for the execution and performance of this Agreement, no
material fact (within the meaning of the federal securities laws of the United
States and of applicable state securities laws) exists with respect to the
Company which has not been publicly disclosed.


 


10

















 


3.13                           Acknowledgment Regarding Purchaser’s Purchase
of the Securities.
The Company acknowledges and agrees that Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect
to this Agreement or the transactions contemplated hereby, that this Agreement
and the transaction contemplated hereby, and the relationship between each
Purchaser and the Company, are “arms-length,” and that any statement made by
Purchaser (except as set forth in ARTICLE II),
or any of its representatives or agents, in connection with this Agreement and
the transactions contemplated hereby is not advice or a recommendation, is
merely incidental to Purchaser’s purchase of the Securities and has not been
relied upon as such in any way by the Company, its officers or directors. The
Company further represents to Purchaser that the Company’s decision to enter
into this Agreement and the transactions contemplated hereby has been based
solely on an independent evaluation by the Company and its representatives.


 


3.14                           No General Solicitation. Neither the Company nor any distributor
participating on the Company’s behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any “general solicitation,” as described in Rule 502(c) under
Regulation D, with respect to any of the Securities being offered hereby.


 


3.15                           No Integrated Offering. 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 prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
the registration under the Securities Act pursuant to the provisions of
Regulation D. The transactions contemplated hereby are exempt from the
registration requirements of the Securities Act, assuming the accuracy of the
representations and warranties herein contained of each Purchaser.


 


3.16                           No Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder’s fees or
similar payments by Purchaser relating to this Agreement or the transactions
contemplated hereby.


 


3.17                           Intellectual Property.


 


(i)                  To the Company’s Knowledge, all
Intellectual Property of the Company and its subsidiaries is currently in
compliance with all legal requirements (including timely filings, proofs and
payments of fees) and is valid and enforceable, except where the failure to be
in compliance or to be valid and enforceable has not and could not reasonably
be expected to have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole. No Intellectual Property of the Company or its
subsidiaries which is necessary for the conduct of Company’s and each of its
subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted has been or is now involved in any cancellation,
dispute or litigation, and, to the Company’s Knowledge, no such action is
threatened. No patent of the Company or its subsidiaries has been or is now
involved in any interference, reissue, re-examination or opposition proceeding.
“Intellectual Property” means all of the following: (a) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice);


 


11

















 


(b) trademarks,
service marks, trade dress, trade names, corporate names, logos, slogans and
Internet domain names, together with all goodwill associated with each of the
foregoing; (c) copyrights and copyrightable works; (d) registrations,
applications and renewals for any of the foregoing; and (e) proprietary
computer software (including but not limited to data, data bases and
documentation).


 


(ii)               All of the licenses and sublicenses and
consent, royalty or other agreements concerning Intellectual Property which are
necessary for the conduct of the Company’s and each of its subsidiaries’ respective
businesses as currently conducted or as currently proposed to be conducted to
which the Company or any subsidiary is a party or by which any of their assets
are bound (other than  generally
commercially available, non custom, off the shelf software application programs
having a retail acquisition price of less than $10,000 per license)
(collectively, “License Agreements”) are valid and binding obligations
of the Company or its subsidiaries that are parties thereto and, to the Company’s
Knowledge, the other parties thereto, enforceable in accordance with their
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally,
and there exists no event or condition which will result in a material
violation or breach of or constitute (with or without due notice or lapse of
time or both) a default by the Company or any of its subsidiaries under any
such License Agreement.


 


(iii)            The Company and its subsidiaries own or
have the valid right to use all of the Intellectual Property that is necessary
for the conduct of the Company’s and each of its subsidiaries’ respective
businesses as currently conducted or as currently proposed to be conducted and
for the ownership, maintenance and operation of the Company’s and its
subsidiaries’ properties and assets, free and clear of all liens, encumbrances,
adverse claims or obligations to license all such owned Intellectual Property,
other than licenses entered into in the ordinary course of the Company’s and
its subsidiaries’ businesses. The Company and its subsidiaries have a valid and
enforceable right to use all third party Intellectual Property and confidential
information used or held for use in the respective businesses of the Company
and its subsidiaries.


 


(iv)           To the Company’s Knowledge, the conduct
of the Company’s and its subsidiaries’ businesses as currently conducted does
not infringe or otherwise impair or conflict with (collectively, “Infringe”)
any Intellectual Property rights of any third party or any confidentiality
obligation owed to a third party, and, to the Company’s Knowledge, the
Intellectual Property and confidential information of the Company and its
subsidiaries which are necessary for the conduct of Company’s and each of its
subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted are not being Infringed by any third party. There is
no litigation or order pending or outstanding or, to the Company’s Knowledge,
threatened or imminent, that seeks to limit or challenge or that concerns the
ownership, use, validity or enforceability of any Intellectual Property or
confidential information of the Company and its


 


12

















 


subsidiaries and the
Company’s and its subsidiaries’ use of any Intellectual Property or
confidential information owned by a third party, and, to the Company’s
Knowledge, there is no valid basis for the same.


 


(v)              The consummation of the transactions
contemplated hereby will not result in the alteration, loss, impairment of or
restriction on the Company’s or any of its subsidiaries’ ownership or right to
use any of the Intellectual Property or confidential information which is
necessary for the conduct of Company’s and each of its subsidiaries’ respective
businesses as currently conducted or as currently proposed to be conducted.


 


(vi)           The Company and its subsidiaries have
taken reasonable steps to protect the Company’s and its subsidiaries’ rights in
their Intellectual Property. Each employee, consultant and contractor who has
had access to confidential information which is necessary for the conduct of
Company’s and each of its subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has executed an agreement to
maintain the confidentiality of such confidential information and has executed
appropriate agreements that are substantially consistent with the Company’s
standard forms thereof. Except under confidentiality obligations, there has
been no material disclosure of any of the Company’s or its subsidiaries’
confidential information to any third party.


 


3.18                           Environmental Matters. Neither the Company nor any subsidiary
is in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or operates
any real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws; and there is no pending or, to the Company’s Knowledge,
threatened investigation that might lead to such a claim.


 


3.19                           Certificates, Authorities and Permits. The Company and each subsidiary possess
adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now operated
by it, and neither the Company nor any subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company or such
subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.


 


3.20                           Key Employees. No Key Employee, to the Company’s
Knowledge, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each Key Employee does
not subject the Company or any of its subsidiaries to any liability with
respect to any of the foregoing matters. No Key Employee has, to the Company’s
Knowledge,


 


13

















 


any
intention to terminate his employment with, or services to, the Company or any
of its subsidiaries. “Key Employee” means STEVEN M. BESBECK, the President and Chief Executive Officer.


 


3.21                           Labor Matters.


 


(i)                  The Company is not a party to or bound by
any collective bargaining agreements or other agreements with labor
organizations. The Company has not violated in any material respect any laws,
regulations, orders or contract terms, affecting the collective bargaining
rights of employees, labor organizations or any laws, regulations or orders
affecting employment discrimination, equal opportunity employment, or employees’
health, safety, welfare, wages and hours.


 


(ii)               (A) There are no labor disputes
existing, or to the Company’s Knowledge, threatened, involving strikes,
slow-downs, work stoppages, job actions, disputes, lockouts or any other
disruptions of or by the Company’s employees, (B) there are no unfair
labor practices or petitions for election pending or, to the Company’s
Knowledge, threatened before the National Labor Relations Board or any other
federal, state or local labor commission relating to the Company’s employees, (C) no
demand for recognition or certification heretofore made by any labor
organization or group of employees is pending with respect to the Company and (D) to
the Company’s Knowledge, the Company enjoys good labor and employee relations
with its employees and labor organizations.


 


(iii)            To the Company’s Knowledge, the Company
is, and at all times has been, in full compliance in all material respects with
all applicable laws respecting employment (including laws relating to
classification of employees and independent contractors) and employment
practices, terms and conditions of employment, wages and hours, and immigration
and naturalization. There are no claims pending against the Company before the
Equal Employment Opportunity Commission or any other administrative body or in
any court asserting any violation of Title VII of the Civil Rights Act of 1964,
the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other
federal, state or local law, statute or ordinance barring discrimination in
employment.


 


(iv)           The Company is not a party to, or bound
by, any employment or other contract or agreement that contains any severance,
termination pay or change of control liability or obligation, including,
without limitation, any “excess parachute payment,” as defined in Section 2806(b) of
the Internal Revenue Code.


 


14

















 


ARTICLE IV

COVENANTS


 


4.1                                 Reasonable Efforts. The parties shall use their
commercially reasonable efforts to timely satisfy each of the conditions
described in ARTICLES VI
and VII of this Agreement
and to seek its Board of Directors’ approval of this Agreement.


 


4.2                                 Securities Laws; Disclosure; Press
Release. The
Company agrees to file a Form D with respect to the Securities with the
SEC as required under Regulation D. The Company shall, on or prior to the date
of Closing, take such action as is necessary to sell the Securities to each
Purchaser under applicable securities laws of the states of the United States. The
Company agrees to file a Form 8-K disclosing this Agreement and the
transactions contemplated hereby with the SEC within four (4) business
days following the date of Closing. The Company and each Purchaser shall
consult with each other in connection with the Form 8-K disclosing this
Agreement and the transactions contemplated hereby, and in issuing any other
press releases with respect to the transactions contemplated hereby, and no
Purchaser shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, which consent shall not
unreasonably be withheld, 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.


 


4.3                                 Reporting Status. So long as any Purchaser beneficially
owns any of the Securities, the Company shall use commercially reasonable
efforts to timely file all reports required to be filed with the SEC pursuant
to the Exchange Act, and the Company shall not voluntarily terminate its status
as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.


 


4.4                                 Reservation of Common Stock. The Company has currently THREE MILLION SIX HUNDRED THOUSAND (3,600,000)
shares of Common Stock duly authorized and reserved for issuance of the Common
Shares and the Warrant Shares. Such shares, as well as any additional shares of
Common Stock subsequently authorized by the Company’s stockholders and Board of
Directors for issuance of the Common Shares, and, in the case of the Warrant
Shares, upon the exercise of the Warrants in accordance with the terms thereof,
as applicable, shall be reserved by the Company, and the Company shall continue
to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue the Warrant Shares pursuant to any exercise of the Warrants.


 


4.5                                 Listing of Common Stock. The Company hereby agrees to use
commercially reasonable efforts to maintain the listing of the Common Stock on
the American Stock Exchange. The Company further agrees, if, following the
effective date of a registration statement covering the Warrant Shares, the
Company applies to have the Common Stock traded on any other trading market, it
will include in such application all of the Warrant Shares, and will take such
other action as is reasonably necessary to cause all of the Warrant Shares to be
listed on such other trading market as promptly as possible. The Company will
take all action reasonably necessary to continue the listing and trading of its
Common Stock on a trading market and will use its commercially reasonable
efforts to comply in all respects with the Company’s reporting, filing and
other obligations under the bylaws or rules of the trading market.


 


15

















 


4.6                                 Right of First Offer. Subject to the terms and conditions
specified in this Section 4.6, the Company hereby grants to each Purchaser
a right of first offer with respect to future sales by the Company of its
Shares (as hereinafter defined). Each time the Company proposes to offer any
shares of, or securities convertible into or exercisable or exchangeable for
any shares of, any class of its capital stock (“Shares”), the
Company shall first make an offering of such Shares to each Purchaser in
accordance with the following provisions:


 


(i)                  The Company shall deliver a notice by
certified mail (“Notice”) to the Purchasers stating (i) its bona fide
intention to offer such Shares, (ii) the number of such Shares to be
offered, and (iii) the price and terms, if any, upon which it proposes to
offer such Shares.


 


(ii)               By written notification received by the
Company, within ten (10) business days after receipt of the Notice, each
Purchaser may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon exercise of the Warrants then held, by such Purchaser bears to
the total number of shares of Common Stock outstanding as of the date of the
Notice (assuming full conversion and exchange of all the then outstanding
shares of the capital stock of the Company convertible into or exchangeable for
Common Stock) (such proportion hereinafter referred to as such Purchaser’s “Pro
Rata Share”). If all of the Shares offered to the Purchasers are not purchased
by the Purchasers, the Company shall reoffer any remaining Shares to the
Purchasers purchasing their full allotment upon the terms set forth in Sections
4.6(i) and 4.6(ii), except that such Purchasers must exercise or decline
such additional purchase rights within ten (10) calendar days after the
receipt of such reoffer.


 


(iii)            If all Shares referred to in the Notice
are not elected to be obtained as provided in Section 4.6(ii) hereof,
the Company may, during the 90 day period following the expiration of the
period provided in subsection 4.6(ii) hereof, offer the remaining
unsubscribed portion of such Shares to any person or persons at a price not
less than, and upon terms no more favorable to the offeree than those specified
in the Notice. If the Company does not enter into an agreement for the sale of
the Shares within such period, or if such agreement is not consummated within
90 days of the execution thereof, the right provided hereunder shall be deemed
to be revived and such Shares shall not be offered unless first reoffered to
the Purchasers in accordance herewith.


 


(iv)           The right of first offer in this 4.6
shall not be applicable (i) to shares of capital stock (or options,
warrants or other rights to purchase or subscribe for such capital stock) issuable
or issued to (x) employees, consultants, directors or advisors of the Company
pursuant to a stock option plan, restricted stock plan or other similar
arrangement approved by the Company’s Board of


 


16

















 


Directors, or (y)
vendors, financial institutions, equipment leasing companies, lessors or
customers of the Company pursuant to arrangements approved by the Company’s
Board of Directors, (ii) to the issuance of securities pursuant to the
conversion, exercise or exchange of convertible, exercisable or exchangeable
securities outstanding as of the date of this Agreement, (iii) to the
issuance of securities in connection with a bona fide acquisition by the
Company of any business or assets or any joint venture or strategic allegiance
or similar transaction, the terms of which are approved by the Board of
Directors, (iv) to the issuance of securities in connection with any stock
split, stock dividend, combination or other recapitalization of the Company,
and (v) to the issuance of any securities pursuant to any transactions
approved by the Board of Directors, primarily for the purpose of (a) joint
ventures, licensing or research and development activities, or (b) distribution
or manufacture of this corporation’s products or services.


 


(v)              Notwithstanding any other provision of
this Section 4.6, any Purchaser may waive his, her or its rights with
respect to any particular offer or right given under, or any provision
contained in Section 4.6 by notice in writing to the Company.


 


4.7                                 Corporate Existence. So long as any Purchaser beneficially
owns any Securities, the Company shall maintain its corporate existence, except
in the event of a merger, consolidation or sale of all or substantially all of
the Company’s assets, as long as the surviving or successor entity in such
transaction assumes the Company’s obligations hereunder and under the
agreements and instruments entered into in connection herewith.


 


4.8                                 Hedging Transactions. No Purchaser has an existing short position
with respect to the Company’s Common Stock. Each Purchaser agrees not to,
directly or indirectly, enter into any short sales with respect to the Common
Stock prior to the date on which such Purchaser is entitled to sell, transfer
the number of shares of Common Stock as to which such Purchaser proposes to
establish a short position. This Section 4.8 shall not prohibit
such Purchaser from at any time entering into options contracts with respect to
the Common Stock, including puts and calls including delivering Common Stock in
satisfaction of any exercised options.


 


4.9                                 Use of Proceeds. The Company will use the proceeds of
the sale for working capital needs consistent with financial budgets approved
from time to time by the Company’s Board of Directors.


 


ARTICLE V

LEGEND REMOVAL, TRANSFER, CERTAIN SALES, ADDITIONAL SHARES


 


5.1                                 Removal of Legend. The Legend shall be removed and the
Company shall issue a certificate without such Legend to the holder of any
Security upon which it is stamped, and a certificate for a security shall be
originally issued without the Legend, if, (a) the sale of such Security is
registered under the Securities Act, (b) such holder provides the Company
with an opinion of counsel, in form, substance and scope customary for opinions
of


 


17

















 


counsel
in comparable transactions and reasonably satisfactory to the Company and its
counsel (the reasonable cost of which shall be borne by the Company if, after
one (1) year, neither an effective registration statement under the
Securities Act or Rule 144 is available in connection with such sale) to
the effect that a public sale or transfer of such Security may be made
without registration under the Securities Act pursuant to an exemption from
such registration requirements or (c) such Security can be sold pursuant
to Rule 144 and the holder provides the Company with reasonable assurances
that the Security can be so sold without restriction or (d) such Security
can be sold pursuant to Rule 144(k). The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section. Each
Purchaser agrees to sell all Securities, including those represented by a certificate(s)
from which the Legend has been removed, or which were originally issued without
the Legend, pursuant to an effective registration statement, in accordance with
the manner of distribution described in such registration statement and to
deliver a prospectus in connection with such sale, or in compliance with an
exemption from the registration requirements of the Securities Act. In the
event the Legend is removed from any Security or any Security is issued without
the Legend and the Security is to be disposed of other than pursuant to the
registration statement or pursuant to Rule 144, then prior to, and as a
condition to, such disposition such Security shall be relegended as provided
herein in connection with any disposition if the subsequent transfer thereof
would be restricted under the Securities Act. Also, in the event the Legend is
removed from any Security or any Security is issued without the Legend and
thereafter the effectiveness of a registration statement covering the resale of
such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to Purchaser holding such Security, the Company may require
that the Legend be placed on any such Security that cannot then be sold
pursuant to an effective registration statement or Rule 144 or with
respect to which the opinion referred to in clause (b) next above has not
been rendered, which Legend shall be removed when such Security may be
sold pursuant to an effective registration statement or Rule 144 or such
holder provides the opinion with respect thereto described in clause (b) next
above.


 


5.2                                 Transfer Agent Instructions. The Company agrees that following the
effective date of the registration statement or at such time as such legend is
no longer required under  Section 5.1,
it will, no later than ten (10)  days following the delivery by a
Purchaser to the Company or the Company’s transfer agent of a certificate
representing Warrant Shares issued with a restrictive legend (such date, the “Legend
Removal Date”), deliver or cause to be delivered to such Purchaser a
certificate representing such Securities that is free from all restrictive and
other legends, registered in the name of each Purchaser or its nominee for the
Warrant Shares in such amounts determined in accordance with the terms of the
Warrants. The Company covenants that no instruction other than such
instructions referred to in this ARTICLE V,
and stop transfer instructions to give effect to Section 2.6 hereof
in the case of the Warrant Shares prior to registration of the Warrant Shares
under the Securities Act, will be given by the Company to its transfer agent
and that the Securities shall otherwise be freely transferable on the books and
records of the Company. Nothing in this Section shall affect in any way
each Purchaser’s obligations and agreement set forth in Section 5.1
hereof to resell the Securities pursuant to an effective registration statement
and to deliver a prospectus in connection with such sale or in compliance with
an exemption from the registration requirements of applicable securities laws. If
(a) a Purchaser provides the Company with an opinion of counsel, which


 


18

















 


opinion
of counsel shall be in form, substance and scope customary for opinions of
counsel in comparable transactions and reasonably satisfactory to the Company
and its counsel (the reasonable cost of which shall be borne by the Company if,
after one (1) year, neither an effective registration statement under
the Securities Act or Rule 144 is available in connection with such sale),
to the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from registration or (b) a Purchaser
transfers Securities to an affiliate which is an accredited investor (within
the meaning of Regulation D under the Securities Act) and which delivers
to the Company in written form the same representations, warranties and
covenants made by Purchaser hereunder or pursuant to Rule 144, the Company
shall permit the transfer, and, in the case of the Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates in such name and
in such denomination as specified by such Purchaser. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
a Purchaser by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this ARTICLE V
will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this ARTICLE V,
that a Purchaser shall be entitled, in addition to all other available remedies
to an injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond
or other security being required.


 


ARTICLE VI

CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL


 


6.1                                 Conditions to the Company’s Obligation to
Sell. The
obligation of the Company hereunder to issue and sell the Common Shares and
Warrants to a Purchaser at the Closing is subject to the satisfaction, as of
the date of the Closing and with respect to such Purchaser, of each of the
following conditions thereto, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its
sole discretion:


 


(i)                  Such Purchaser shall have executed and
delivered the signature page to this Agreement and the Registration Rights
Agreement;


 


(ii)               Such Purchaser shall have wired its
aggregate Purchase Price set forth on Schedule 1
hereto to the Escrow;


 


(iii)            The representations and warranties of
such Purchaser shall be true and correct as of the date when made and as of the
Closing with the same force and effect as though such representations and
warranties had been made on and as of the date of Closing (except for
representations and warranties that speak as of a specific date), and such
Purchaser shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the applicable Purchaser at or prior
to the Closing;


 


(iv)           No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory


 


19

















 


organization having
authority over the matters contemplated hereby which restricts or prohibits the
consummation of any of the transactions contemplated by this Agreement;


 


(v)              The Company shall have obtained all
waivers, authorizations, approvals and consents needed to consummate the
transaction contemplated by this Agreement which the Company agrees to
diligently procure;


 


(vi)           Purchaser shall have delivered an officer’s
certificate, in form and substance reasonably acceptable to the Company,
as to the accuracy of such Purchaser’s representations and warranties pursuant
to ARTICLE II; and


 


(vii)        Any right of first offer has been
complied with or waived.


 


ARTICLE VII

CONDITIONS TO EACH PURCHASER’S OBLIGATION TO PURCHASE


 


7.1                                 The obligation of each Purchaser
hereunder to purchase the Common Shares and Warrants to be purchased by it on
the date of the Closing is subject to the satisfaction of each of the following
conditions, provided that these conditions are for each Purchaser’s sole
benefit and may be waived by such Purchaser at any time in such Purchaser’s
sole discretion:


 


(i)                  The Company shall have executed and
delivered the signature page to this Agreement and the Registration Rights
Agreement;


 


(ii)               The Company shall have delivered to the
Escrow duly issued certificates for the Common Shares being so purchased by
Purchaser and Warrants being issued to such Purchaser at the Closing;


 


(iii)            The representations and warranties of the
Company shall be true and correct in all material respects as of the date when
made and as of the Closing with the same force and effect as though such
representations and warranties had been made on and as of the date of Closing,
and the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing;


 


(iv)           No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement;


 


(v)              The Company shall have delivered an
officer’s certificate, in form and substance reasonably acceptable to the
Purchaser, as to the accuracy of the Company’s representations and warranties
pursuant to ARTICLE III;
and


 


20

















 


(vi)           Any right of first offer has been
complied with or waived.


 


ARTICLE VIII

GOVERNING LAW; MISCELLANEOUS


 


8.1                                 Governing Law: Jurisdiction. This Agreement shall be governed by and
construed in accordance with the California Corporation Law (in respect of
matters of corporation law) and the laws of the State of California (in respect
of all other matters) applicable to contracts made and to be performed in the
State of California. The parties hereto irrevocably consent to the jurisdiction
of the United States federal courts and state courts located in the County of
Los Angeles in the State of California in any suit or proceeding based on or
arising under this Agreement or the transactions contemplated hereby and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company and each Purchaser irrevocably waives
the defense of an inconvenient forum to the maintenance of such suit or
proceeding in such forum. The Company and each Purchaser further agrees that
service of process upon the Company or such Purchaser, as applicable, mailed by
the first class mail in accordance with Section 8.6 shall be
deemed in every respect effective service of process upon the Company or such
Purchaser in any suit or proceeding arising hereunder. Nothing herein shall
affect Purchaser’s right to serve process in any other manner permitted by law.
The parties hereto agree that a final non-appealable judgment in any such suit
or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner. The
parties hereto irrevocably waive any right to a trial by jury under applicable
law.


 


8.2                                 Counterparts. This Agreement may be executed in
two or more counterparts, including, without limitation, by facsimile
transmission, all of which counterparts 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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause additional original executed signature pages to be delivered
to the other parties as soon as practicable thereafter.


 


8.3                                 Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation
of, this Agreement.


 


8.4                                 Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.


 


8.5                                 Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the maters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument
in writing signed by the party to be charged with enforcement and no provision
of this Agreement may be amended other than by an instrument in writing
signed by the Company and each Purchaser.


 


21

















 


8.6                                 Notice. Any notice herein required or permitted to be given
shall be in writing and may be personally served or delivered by
nationally-recognized overnight courier or by facsimile machine confirmed
telecopy, and shall be deemed delivered at the time and date of receipt (which
shall include telephone line facsimile transmission). The addresses for such
communications shall be:


 


if to the Company:

Aspyra, Inc.

26115-A Mureau Road

Calabasas, CA  91302

Attention: 
Steven M. Besbeck

Facsimile: 818-880-4398


 


with copy to:

Sheppard Mullin
Richter & Hampton, LLP

800 Anacapa Street

Santa Barbara, CA 93101

Attention: 
Joseph E. Nida, Esq.

Facsimile: (805) 568-1955


 


If to the Purchasers:


 


See Schedule 1


 


with a copy to:


 


Jay Weil, Esq.

27 Viewpoint Road

Wayne, New Jersey 07470

Attention: 
Jay Weil, Esq.

Facsimile:  212-688-7273


 


If to any
other Purchaser,
to such address set forth under such Purchaser’s name on the signature page hereto
executed by such Purchaser. Each party shall provide notice to the other
parties of any change in address.


 


8.7                                 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other. Notwithstanding
the foregoing, each Purchaser may assign its rights and obligations
hereunder to any of its “affiliates,” as that term is defined under the
Securities Act, without the consent of the Company so long as such affiliate is
an accredited investor (within the meaning of Regulation D under the
Securities Act) and agrees in writing to be bound by this Agreement. This
provision shall not limit each Purchaser’s right to transfer the Securities
pursuant to the terms of this Agreement or to assign such Purchaser’s rights
hereunder to any


 


22

















 


such
transferee. In that regard, if Purchaser sells all or part of its Common
Shares to someone that acquires the shares subject to restrictions on
transferability (other than restrictions, if any, arising out of the transferee’s
status as an affiliate of the Company), Purchaser shall be permitted to assign
its rights hereunder, in whole or in part, to such transferee.


 


8.8                                 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.


 


8.9                                 Survival; Indemnification. The representations and warranties of
the Company and the agreements and covenants shall survive the closing
hereunder notwithstanding any due diligence investigation conducted by or on
behalf of Purchaser. The Company agrees to indemnify and hold harmless each
Purchaser and each of each Purchaser’s officers, directors, employees,
partners, agents and affiliates from and against any and all losses, claims,
damages, liabilities and expenses (including without limitation reasonable
attorneys’ fees and disbursements and other expenses incurred in connection
with investigating, preparing or defending any action, claim or proceeding,
pending or threatened and the costs of enforcement thereof) (collectively, “Losses”)  arising as a result of or related to any
breach or alleged breach by the Company of any of its representations or
covenants set forth herein, including advancement of expenses as they are
incurred. The representations and warranties of the Purchasers shall survive
the Closing hereunder and each Purchaser shall indemnify and hold harmless the
Company and each of its officers, directors, employees, partners, agents and
affiliates from and against any and all Losses arising as a result of the
breach of such Purchaser’s representations and warranties.


 


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


 


8.11                           Remedies. No provision of this Agreement providing for any
remedy to a Purchaser shall limit any remedy which would otherwise be available
to such Purchaser at law or in equity. Nothing in this Agreement shall limit
any rights a Purchaser may have with any applicable federal or state
securities laws with respect to the investment contemplated hereby. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Purchaser. Accordingly, the Company acknowledges that the
remedy at law for a material breach of its obligations under this Agreement
will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Agreement, that a Purchaser shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate compliance, without the
necessity of showing economic loss and without any bond or other security being
required.


 


8.12                           Final Agreement. This Agreement, when executed by the
parties hereto, shall constitute the final agreement between the parties and
upon such execution Purchasers and the Company accept the terms hereof and have
no cause of action against each other for prior


 


23

















 


negotiations
preceding the execution of this Agreement. This Agreement shall supersede the
Term Sheet For Potential Investment between the parties hereto.


 


8.13                           Attorney-in-Fact. The undersigned Purchasers hereby
appoint Aspyra, Inc. as their Attorney-in-Fact to execute the Registration
Rights Agreement and the Stock Purchase Escrow Agreement, which are Exhibits B and C
to this Agreement.


 


24

















 


IN
WITNESS WHEREOF, the undersigned Purchasers and the Company have caused this
Agreement to be duly executed as of the date first above written.


 


	
  COMPANY:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ASPYRA, INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Steven M. Besbeck

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Steven M. Besbeck

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PURCHASERS:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number of Units:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name Typed or Printed

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number of Units:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name Typed or Printed

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  	
   

  	
   

  	
   

  
														



 


25

















 


LIST OF EXHIBITS


 


	
  EXHIBIT A

  	
  -

  	
  WARRANT

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  -

  	
  REGISTRATION RIGHTS AGREEMENT

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  -

  	
  STOCK PURCHASE ESCROW AGREEMENT

  
	
   

  	
   

  	
   

  
	
  EXHIBIT D

  	
  -

  	
  ACCREDITED INVESTOR QUESTIONNAIRE

  



 


26

















 


Exhibit A

To

Common Stock and Warrant Purchase Agreement


 


 


FORM OF WARRANT


 

















 


Exhibit B

To

Common Stock and Warrant Purchase Agreement


 


 


REGISTRATION RIGHTS
AGREEMENT


 

















 


Exhibit C

To

Common Stock and Warrant Purchase Agreement


 


 


STOCK PURCHASE ESCROW
AGREEMENT


 

















 


Exhibit D

To

Common Stock and Warrant Purchase Agreement


 


 


ACCREDITED
INVESTOR QUESTIONNAIRE


 

















 


List of Schedules

to

Common Stock and Warrant Purchase Agreement


 


	
  Schedule 1

  	
  -

  	
  List
  of Investors

  
	
   

  	
   

  	
   

  
	
  Schedule 2

  	
  -

  	
  Company
  Disclosure Schedules

  
	
   

  	
   

  	
   

  
	
  Schedule 3.3

  	
  -

  	
  Capitalization

  



 

















 


SCHEDULE 1

TO COMMON STOCK AND WARRANT PURCHASE AGREEMENT


 


LIST OF
INVESTORS


 


	
  Investor

  Name and Address and Telephone

  Number

  	
   

  	
  Shares of Common Stock

  	
   

  	
  Warrant Shares

  	
   

  	
  Aggregate

  Purchase Price

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Totals:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


SCHEDULE 2

TO

COMMON STOCK AND WARRANT PURCHASE AGREEMENT


 


 


COMPANY DISCLOSURE SCHEDULES


 

















 


SCHEDULE 3.3

TO

COMMON STOCK AND WARRANT PURCHASE AGREEMENT


 


CAPITALIZATION

AS OF DECEMBER 31, 2005


 


	
   

  	
   

  	
  Number of Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Authorized
  Stock as:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Common
  Stock:

  	
   

  	
  20,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Outstanding
  Stock:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Common
  Stock:

  	
   

  	
  8,498,400

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Stock
  Options:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  123,592
  non-qualified stock options issued and outstanding, of which 57,500 is
  exercisable at prices ranging from $.72 to $2.75 per share

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  398,078
  incentive stock options, issued and outstanding, of which 102,500 is
  exercisable at prices ranging from $.72 to $2.75 per share

  	
   

  	
   

  	
   

  



 

















 


SCHEDULE 3.21

TO

COMMON STOCK AND WARRANT PURCHASE AGREEMENT