Filed by Bowne Pure Compliance





Exhibit 4.1




BRIDGE LOAN AGREEMENT




THIS BRIDGE LOAN AGREEMENT (“Agreement”) is made as of the [                    ] day of November, 2008, by
and among Smart Move, Inc., a Delaware corporation (the “Company”), and John Thomas Bridge &
Opportunity Fund, L.P. ( “Investor”).



Recitals




A. The Company and the Investor 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 U.S. Securities and Exchange Commission (the “SEC”) under the Securities
Act of 1933, as amended; and



B. The Company wishes to procure a short-term loan (the “Bridge Loan”) from Investor and
Investor is willing to lend funds to the Company upon the terms and conditions stated in this
Agreement, in exchange for an unsecured promissory note in the form attached hereto as Exhibit “A”
in the principal amount of $300,000, bearing interest at the rate of 10% per annum, the
“Debenture”) and (ii) an Equity Consideration consisting of (A) shares of Company common stock, par
value $.0001 per share (“Common Stock) and (B) a three-year warrant to purchase shares of Company
Common Stock in the form attached hereto as Exhibit B (the “Warrant”), more fully set forth
in Section 2.2.



In consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:



1. Definitions. In addition to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following terms shall have the meanings set
forth below:




“10-KSB” has the meaning set forth in Section 4.6



“Affiliate” means, with respect to any Person, any other Person which directly or
indirectly through one or more intermediaries Controls, is controlled by, or is under common
control with, such Person.



“Business Day” means a day, other than a Saturday or Sunday, on which banks in
Houston, Texas are open for the general transaction of business.




“Closing” has the meaning set forth in Section 3.




“Closing Date” has the meaning set forth in Section 3.



“Company’s Knowledge” means the actual knowledge of the executive officers (as defined
in Rule 405 under the 1933 Act) of the Company, after due inquiry.



“Confidential Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes, procedures and techniques,
research and development information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans, and customer and
supplier lists and related information).



“Control” (including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.



“Debenture” has the meaning set forth in recitals.


 


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“Debenture Shares” means the shares of Common Stock issuable to Investor upon a
default of the Debenture, should Investor elect to convert all or a part of such Debenture as
permitted upon such a default.




“Environmental Laws” has the meaning set forth in Section 4.16.



“Equity Consideration” means the Equity Shares and Warrant to be issued as set forth
in Section 2.2.




“Equity Shares” shall have the meaning as set forth in Section 2.2.




“Evaluation Date” has the meaning set forth in Section 4.26.



“Extension Fees” shall mean the Company Common Stock to be issued pursuant to the
Debenture in the event that the maturity date is extended.




“GAAP” has the meaning set forth in Section 4.18.




“Infringe” has the meaning set forth in Section 4.15(d).



“Intellectual Property” means all of the following: (i) patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not reduced to
practice); (ii) 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; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals
for any of the foregoing; and (v) proprietary computer software (including but not limited to data,
data bases and documentation).




“License Agreements” has the meaning set forth in Section 4.15(b).



“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise), business, or prospects of
the Company and its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform
its obligations under the Transaction Documents.




“New Financing Transaction” has the meaning as set forth in Section 2.2.



“Obligation Date Market Price” shall mean, as of any date of determination: i) in the case of
a determination date coinciding with any public offering of securities that include Common Stock
(with or without other securities) by the Company under the 1933 Act (other than a shelf
registration) the price at which the Company or any underwriter sells the securities to the public,
and ii) in all other cases the average closing price per share of the Common Stock on the American
Stock Exchange or other principal national securities exchange on which the shares of Common Stock
or other securities (as the case may be) are listed or admitted to trading for the five (5)
consecutive trading days preceding the date on or as of which the relevant obligation to be
satisfied by issuance of restricted shares of Common Stock or Warrants exercisable to acquire
Common Stock falls due, or if the shares of Common Stock are not listed or admitted to trading on
any national securities exchange, the average of the reported bid and asked prices during such 15
trading day period in the over the counter market as furnished by the National Quotation Bureau,
Inc



“Person” means an individual, corporation, partnership, limited liability company,
trust, business trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity not specifically
listed herein.




“Purchase Price” means $300,000.




“SEC Filings” has the meaning set forth in Section 4.6.



“Securities” means the Debenture, the Equity Shares, the Warrant and the Underlying
Shares.


 


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“Subsidiary” of any Person means another Person, an amount of the voting securities,
other voting ownership or voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or indirectly by such
first Person.



“Transaction Documents” means this Agreement, the Warrant, the Debenture, and the
Registration Rights Agreement.




“Underlying Shares” means the Warrant Shares and the Debenture Shares.




“Warrants” has the meaning set forth in the recitals.



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



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



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




2. Debenture and Other Securities Issued in Exchange for Bridge Loan Funding.



2.1 Purchase and Issuance of the Debenture. Subject to the terms and conditions of
this Agreement, on the Closing Date the Investor shall purchase and the Company shall sell and
issue to the Investor the Debenture in the principal amount of $300,000, in the form attached
hereto as Exhibit A, in exchange for the Purchase Price.



2.2 Purchase of Debenture and Issuance of the Equity Consideration. Concurrently upon
the closing of a single or a series of debt, equity, equity equivalent or other financings
resulting in the Company receiving gross proceeds of at least Five Million Dollars ($5,000,000)
occurring subsequent to the date of this Agreement (“New Financing Transaction”), the Company will
issue to the Investor the Equity Shares and the Warrant. The Equity Shares shall consist of a
number of shares of Common Stock equal to the original principal amount of the Debenture divided by
the Obligation Date Market Price. The Warrant shall be in the form attached as Exhibit B to this
Agreement and shall provide for the right to purchase a number of shares of Company Common Stock
equal to 200% of the Equity Shares actually issued, at an exercise price per share equal to 150% of
the Obligation Date Market Price used in determining the number of Equity Shares actually issued.



2.3 Lock-up/Leak Out. In the event the Company proposes to complete an
underwritten public offering within 12 months of the Closing, then the Investor shall execute a
lock-up agreement pursuant to which the Investor will agree not to sell, pledge, hypothecate,
transfer, assign or in any other manner dispose of the of the Equity Shares or the Underlying
Shares for a period not to exceed six months following the Closing. For the three months following
the six month lock-up period, the Investor may sell, pledge, hypothecate, transfer, assign or in
any other manner dispose of the Equity Shares or the Underlying Shares in an amount not to exceed
1% of the total outstanding shares of Company Common Stock at the beginning of such three month
period. For the three months following the nine month lock-up/leak-out period, the Investor may
sell, pledge, hypothecate, transfer, assign or in any other manner dispose of the Equity Shares or
the Underlying Shares in an amount not to exceed 1% of the total outstanding shares of Company
Common Stock at the beginning of such three month period. Notwithstanding the preceding, in no
event will the Investor be subject to a lock-up agreement that is more restrictive than offered to
the Company’s officers, directors, and the holders of 5% or more of the Company’s Common Stock. All
sales shall be subject to the requirements of SEC Rule 144 unless the resale is registered under
the 1933 Act.


 


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2.4 Registration of Resale of Securities. On or before the later of (i) 60 days
following the issuance of the Equity Right Shares and the Warrant, and (ii) the earlier of (A) 10
days after the Company files its Annual Report on Form 10-K for the 2008 fiscal year or (B) April
30, 2009, the Company shall file a Registration Statement covering the resale of the Equity Right
Shares and the Warrant. Within 60 days following the conversion
of the Debenture upon an event of default, the Company shall file a Registration Statement covering
the resale of the Debenture Shares. To document this covenant of the Company, concurrently upon
(a) the issuance of the Equity Right Shares and the Warrant or (b) the conversion of all or a
portion of the Debenture upon an event of default thereunder, the Company shall execute and deliver
a registration rights agreement, in the form attached hereto as Exhibit C (“Registration Rights
Agreement”).



3. Closing. Within one Business Day of the date of executing this Agreement, the
Company shall cause the delivery of the Debenture registered in the name and amount as set forth on
the signature page attached hereto and the Investor shall wire to the Company in same day funds an
amount representing such Investor’s Purchase Price, as set forth on the signature page hereto
(“Closing” or “Closing Date”). The Closing shall occur upon confirmation that the conditions to
Closing in Section 6 hereof have been satisfied.



4. Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investor that, except as set forth in the SEC Filings:



4. 1 Organization, Good Standing and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power and authority to
carry on its business as now conducted and to own its properties. Each of the Company and its
Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or leasing of property
makes such qualification or leasing necessary unless the failure to so qualify has not had and
could not reasonably be expected to have a Material Adverse Effect. The Company’s Subsidiaries are
listed in the SEC Filings.



4.2 Authorization. The Company has full power and authority and has taken all
requisite action on the part of the Company, its officers, directors and stockholders necessary for
(i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization
of the performance of all obligations of the Company hereunder or thereunder, and (iii) the
authorization, issuance (or reservation for issuance) and delivery of the Securities. The
Transaction Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally.



4.3 Capitalization. Except as disclosed in the SEC Filings made subsequent to October
27, 2008, the Definitive Proxy Statement filed for the company’s special meeting of shareholders
held October 27, 2008 sets forth (a) the authorized capital stock of the Company on the date
hereof; (b) the number of shares of capital stock issued and outstanding; (c) the number of shares
of capital stock issuable pursuant to the Company’s stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities (excluding the Equity
Shares and Underlying Shares) exercisable for, or convertible into or exchangeable for any shares
of capital stock of the Company. All of the issued and outstanding shares of the Company’s capital
stock have been duly authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights and were issued in full compliance with applicable state and federal securities
law and any rights of third parties other than as described in the SEC filings. All of the issued
and outstanding shares of capital stock of the Company each Subsidiary have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive rights, were issued in
full compliance with applicable state and federal securities law.



Except as described in the SEC Filings, the Company does not have outstanding stockholder
purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right
to purchase any equity interest in the Company upon the occurrence of certain events.


 


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4.4 Valid Issuance. The Debenture and the Debenture Shares have been duly and validly
authorized and, when issued and paid for pursuant to this Agreement, will be validly issued, fully
paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other
than those created by the Investor), except for restrictions on transfer set forth in the
Transaction Documents and those imposed by applicable securities laws. The Warrant and the Warrant
Shares shall have been duly and validly authorized and will be validly issued, fully paid and
non-assessable free and clear of all encumbrances and restrictions, except for restrictions on
transfer set forth in the Transaction Documents or imposed by applicable securities laws. The
Equity Shares and Extension Fees have been duly and validly authorized and will be validly issued,
fully paid and non-assessable free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities
laws. The Company has reserved a sufficient number of shares of shares of Common Stock for
issuance as the Equity Share and Warrant component of the Equity Consideration and for purposes of
any payment of Extension Fees, interest or other obligations as described in the Debenture, except
for restrictions on transfer set forth in the Transaction Documents or imposed by applicable
securities laws. The Company has reserved a sufficient number of shares of shares of Common Stock
for issuance of the Equity Shares, free and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities
laws.



4.5 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, and except in respect of an additional
listing application by the America Stock Exchange, no governmental body, agency, or official other
than filings that have been made pursuant to applicable state securities laws and post-sale filings
pursuant to applicable state and federal securities laws which the Company undertakes to file
within the applicable time periods. Subject to the accuracy of the representations and warranties
of the Investor set forth in Section 5 hereof, the Company has taken all action necessary to exempt
(i) the issuance and sale of shares comprising the Equity Shares component of the Equity
Consideration and the Extension Fees, (ii) the issuance of the Warrant Shares upon due exercise of
the Warrants, (iii) the issuance of the Debenture Shares in the case of a default of the Debenture,
and (iv) the other transactions contemplated by the Transaction Documents 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 Certificate of
Incorporation or Bylaws that is or could reasonably be expected to become applicable to the
Investor 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
Investor or the exercise of any right granted to the Investor pursuant to this Agreement or the
other Transaction Documents.



4.6 Delivery of SEC Filings; Business. The Company has made available to the Investor
through the EDGAR system, true and complete copies of the Company’s most recent Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2007 (the “10-KSB”), and all other reports filed
by the Company pursuant to the 1934 Act since the filing of the 10-KSB and prior to the date hereof
(collectively, the “SEC Filings”). The SEC Filings are the only filings required of the Company
pursuant to the 1934 Act for such period. The Company and its Subsidiaries are engaged in all
material respects only in the business described in the SEC Filings and the SEC Filings contain a
complete and accurate description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole.



4.7 Use of Proceeds. The net proceeds of the sale of the Debenture hereunder shall be
used by the Company for working capital.



4.8 No Material Adverse Change. Since September 30, 2008, except as identified and
described in the SEC Filings, there has not been:



(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
Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, except for changes in the
ordinary course of business which have not had 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;


 


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(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;



(v) any satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except proposals to secure waivers or commitments from
existing debt holders to defer scheduled payments of interest or principal as described in the SEC
filings, or in the ordinary course of business (as such business is presently conducted and as it
is proposed to be conducted);



(vi) any change or amendment to the Company’s Certificate of Incorporation or Bylaws, except
as described in the Proxy Statement filed in connection with a Special Meeting of Shareholders held
on October 27, 2008, 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.




4.9 SEC Filings.



(a) Since January 1, 2008, at the time of filing thereof, the SEC Filings complied as to form
in all material respects with the requirements of the 1934 Act and did 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 the light of the circumstances under which they were made, not
misleading. All SEC comments on any filing made pursuant to the 1933 Act or 1934 Act have been
resolved to the satisfaction of the SEC.



(b) Each registration statement and any amendment thereto filed by the Company since February
9, 2007 pursuant to the 1933 Act and the rules and regulations thereunder, as of the date such
statement or amendment became effective, complied as to form in all material respects with the 1933
Act and did not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made therein not
misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue
date and as of the closing of any sale of securities pursuant thereto did not contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.



4.10 No Conflict, Breach, Violation or Default. The execution, delivery and
performance of the Transaction Documents by the Company and the issuance and sale of the Securities
will not conflict with or result in a breach or violation of any of the terms and provisions of, or
constitute a default under (i) the Company’s Certificate of Incorporation or the Company’s Bylaws,
both as in effect on the date hereof (true and complete copies of which have been made available to
the Investor through the EDGAR system), or (ii)(a) any statute, rule, regulation or, subject to
approval of listing, any order of the American Stock Exchange or of any governmental agency or body
or any court, domestic or foreign, having jurisdiction over the Company, any Subsidiary or any of
their respective assets or properties, or (b) any agreement or instrument to which the Company or
any Subsidiary is a
party or by which the Company or a Subsidiary is bound or to which any of their respective assets
or properties is subject.


 


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4.11 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 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.



4.12 Title to Properties. Except as disclosed in the SEC Filings with respect to
security interests held by existing convertible note and debenture holders, the Company and each
Subsidiary has good and marketable title to all real properties and all other properties and assets
owned by it, in each case free from liens, encumbrances and defects that would materially affect
the value thereof or materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each Subsidiary holds any
leased real or personal property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof by them.



4.13 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.




4.14 Labor Matters.



(a) 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.



(b) (i) 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, (ii) 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,
(iii) no demand for recognition or certification heretofore made by any labor organization or group
of employees is pending with respect to the Company and (iv) to the Company’s Knowledge, the
Company enjoys good labor and employee relations with its employees and labor organizations.



(c) The Company is, and at all times has been, in 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.


 


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(d) Except as disclosed in the SEC Filings, 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.



(e) Each of the Company’s employees is a Person who is either a United States citizen or a
permanent resident entitled to work in the United States. To the Company’s Knowledge, the Company
has no liability for the improper classification by the Company of such employees as independent
contractors or leased employees prior to the Closing.




4.15 Intellectual Property.



(a) 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. 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.



(b) 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.



(c) 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 and Confidential Information, 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.



(d) 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 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.



(e) The consummation of the transactions contemplated hereby and by the other Transaction
Documents 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.


 


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(f) The Company and its Subsidiaries have taken reasonable steps to protect the Company’s and
its Subsidiaries’ rights in their Intellectual Property and Confidential Information. 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.



4.16 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, which violation, contamination, liability or claim has had or
could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate;
and there is no pending or, to the Company’s Knowledge, threatened investigation that might lead to
such a claim.



4.17 Litigation. There are no pending actions, suits or proceedings against or
affecting the Company, its Subsidiaries or any of its or their properties; and to the Company’s
Knowledge, no such actions, suits or proceedings are threatened or contemplated.



4.18 Financial Statements. The financial statements included in each SEC Filing filed
on or after January 1, 2008 present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of operations and cash
flows for the periods shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent basis (“GAAP”)
(except as may be disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-Q under the 1934 Act).



4.19 Insurance Coverage. The Company and each Subsidiary maintains in full force and
effect insurance coverage that is customary for comparably situated companies for the business
being conducted and properties owned or leased by the Company and each Subsidiary, and the Company
reasonably believes such insurance coverage to be adequate against all liabilities, claims and
risks against which it is customary for comparably situated companies to insure.



4.20 Brokers and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to
any agreement, arrangement or understanding entered into by or on behalf of the Company, other than
a $15,000 fee to be paid to John Thomas Financial, Inc. and a $21,000 fee to be paid to Paulson
Investment Company, Inc.



4.21 No Directed Selling Efforts or General Solicitation. Neither the Company nor any
Person acting on its behalf has conducted any general solicitation or general advertising (as those
terms are used in Regulation D) in connection with the offer or sale of any of the Securities.



4.22 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
Company security or solicited any offers to buy any security, under circumstances that would
adversely affect reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the Securities under the 1933
Act.


 


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4.23 Private Placement. The offer and sale of the Securities to the Investor as
contemplated hereby is exempt from the registration requirements of the 1933 Act.



4.24 Questionable Payments. Neither the Company nor any of its Subsidiaries, nor
their respective directors, officers or employees nor, to the Company’s Knowledge, any of their
respective current or former stockholders, agents or other Persons acting on behalf of the Company
or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from corporate funds; (c)
established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d)
made any false or fictitious entries on the books and records of the Company or any Subsidiary; or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment
of any nature.



4.25 Transactions with Affiliates. Except as disclosed in the SEC Filings, 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.



4.26 Internal Controls. The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of the end of the period covered by the
most recently filed periodic report under the 1934 Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under the 1934 Act the conclusions of
the certifying officers about the effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date, which conclusions disclose certain weaknesses
identified by such officers and being addressed by the Company as therein described, to which
reference is here made for a more particular description. Since the Evaluation Date, there have
been no significant changes in the Company’s internal controls (as such term is defined in Item 308
of Regulation S-B) or, to the Company’s Knowledge, in other factors that could significantly affect
the Company’s internal controls. 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 1934 Act.



4.27 Saleable Value of Assets. Based on the financial condition of the Company as of
the Closing Date and giving effect to the net proceeds from the Closing, the Company’s fair
saleable value of its 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, provided, however, that the Company has no assurance that a fair saleable value could
be realized upon the sale of its assets under current market conditions and has disclosed its need
to complete a New Financing Transaction. As of Closing, the Company does not intend to incur new
indebtedness 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) and the Company’s need to complete
a New Financing Transaction as described herein.



4.28 Disclosures. Neither the Company nor any Person acting on its behalf has
provided the Investor or its agent or counsel with any information that constitutes or might
constitute material, non-public information. The written materials delivered to the Investor in
connection with the transactions contemplated by the Transaction Documents do not contain any
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they were made, not
misleading.


 


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5. Representations and Warranties of the Investor. The Investor hereby represents and
warrants to the Company that:



5.1 Organization and Existence. Investor is a validly existing corporation, limited
partnership or limited liability company and has all requisite corporate, partnership or limited
liability company power and authority to invest in the Securities pursuant to this Agreement.



5.2 Authorization. The execution, delivery and performance by Investor of the
Transaction Documents to which Investor is a party have been duly authorized and will each
constitute the valid and legally binding obligation of such Investor, enforceable against Investor
in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally.



5.3 Purchase Entirely for Own Account. The Securities to be received by Investor
hereunder will be acquired for Investor’s own account, not as nominee or agent, and not with a view
to the resale or distribution of any part thereof in violation of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise distributing the
same in violation of the 1933 Act without prejudice, however, to such Investor’s right at all times
to sell or otherwise dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Securities for any period of time except as required by law.
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in
a business that would require it to be so registered.



5.4 Investment Experience; Knowledge of Risk Profile. Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities and has such
knowledge and experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment contemplated hereby. Investor recognizes that the consideration
being given by the Company in exchange for the Loan in the form of Equity Consideration reflects
that this investment has a high degree of risk and the potential for loss of the entire investment.
The security being purchase is unsecured, and the Company has had recurring losses and has a
substantial amount of secured debt. There can be no assurance that a New Financing as described
herin will occur.



5.5 Disclosure of Information. Investor has had an opportunity to receive all
information related to the Company requested by it and to ask questions of and receive answers from
the Company regarding the Company, its business and the terms and conditions of the offering of the
Securities. Investor acknowledges receipt of copies of the SEC Filings, that all statements,
representations and warranties of the Company in this Agreement are deemed supplemented or
qualified by the disclosures therein contained, that the SEC Filings include forward looking
statements concerning results or expectations that are subject to significant risks as therein
described which the Investor has been advised to consider in making the Bridge Loan and related
investment in the securities constituting the Equity Consideration. Neither such inquiries nor any
other due diligence investigation conducted by such Investor shall modify, amend or affect
Investor’s right to rely on the Company’s representations and warranties contained in this
Agreement.



5.6 Restricted Securities. Such Investor understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without registration under the
1933 Act only in certain limited circumstances and in compliance with applicable federal and state
securities laws.



5.7 Legends. It is understood that, except as provided below, certificates evidencing
the Securities may bear the following or any similar legend:



(a) “The securities represented hereby may not be transferred unless (i) such securities have
been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities
may be sold pursuant to Rule 144, or (iii) the Company has received an opinion of counsel
reasonably satisfactory to it that such transfer may lawfully be made without registration under
the Securities Act of 1933 or qualification under applicable state securities laws.
Notwithstanding the foregoing, the securities may be pledged in connection with a bona fide margin
account secured by the securities.”



(b) If required by the authorities of any state in connection with the issuance of sale of the
Securities, the legend required by such state authority.


 


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5.8 Accredited Investor. Investor is an accredited investor as defined in Rule 501(a)
of Regulation D, as amended, under the 1933 Act.



5.9 No General Advertisement. Investor did not learn of the investment in the
Securities as a result of any public advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media or broadcast over
television, radio or internet or presented at any seminar or other general advertisement.



5.10 Brokers and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to
any agreement, arrangement or understanding entered into by or on behalf of such Investor, except
as set forth in Section 4.20.



5.11 Patriot Act. Neither Investor nor any of its Affiliates has been designated, and
is not owned or controlled, by a “suspected terrorist” as defined in Executive Order 13224. None
of the cash used to fund such Investor’s portion of the Purchase Price has been, and none of the
cash used to fund any cash exercise of such Investor’s Warrants will be, or derived from, any
activity that could cause the Company to be in violation of the United States Bank Secrecy Act, the
United States International Money Laundering Control Act of 1986 or the United States International
Money Laundering Abatement and Anti-Terrorist Financing Act of 2001.




6. Conditions to Closing.



6.1 Conditions to the Investor’s Obligations. The obligation of Investor to purchase
the Debenture at the Closing is subject to the fulfillment to Investor’s satisfaction, on or prior
to the Closing Date, of the following conditions, any of which may be waived by Investor:



(a) The representations and warranties made by the Company in Section 4 hereof qualified as to
materiality shall be true and correct at all times prior to and on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier date, and, the
representations and warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly speaks as of an
earlier date, in which case such representation or warranty shall be true and correct in all
material respects as of such earlier date. The Company shall have performed in all material
respects all obligations and covenants herein required to be performed by it on or prior to the
Closing Date.



(b) The Company shall have obtained any and all consents, permits, approvals, registrations
and waivers necessary or appropriate for consummation of the purchase and sale of the Securities
and the consummation of the other transactions contemplated by the Transaction Documents, all of
which shall be in full force and effect.



(c) No judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.



(d) The Company shall have filed a listing application with the American Stock Exchange to
list the Underlying Shares, Extension Fees and the Equity Consideration Shares on the American
Stock Exchange with in twenty-four (24) hours to the date of this Agreement.


 


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(e) The Company shall have delivered a Certificate, executed on behalf of the Company by its
Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board of
Directors
of the Company approving the transactions contemplated by this Agreement and the other Transaction
Documents, and the issuance of the Securities, certifying the current versions of the Certificate
of Incorporation and Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the Company.



(f) The Investor shall have received an opinion from the Company’s counsel, dated as of the
Closing Date, in form and substance reasonably acceptable to the Investor and addressing such legal
matters as the Investor may reasonably request.



(g) No stop order or suspension of trading shall have been imposed by the SEC or any other
governmental or regulatory body with respect to public trading in the Common Stock.




(h) The Company shall have delivered the Securities to the Investor.



6.2 Conditions to Obligations of the Company. The Company’s obligation to sell and
issue the Debenture at the Closing is subject to the fulfillment to the satisfaction of the Company
on or prior to the Closing Date of the following conditions, any of which may be waived by the
Company:



(a) The representations and warranties made by the Investor in Sections 5.1 and 5.2 hereof
(the “Investment Representations”), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date. The Investment Representations shall be
true and correct in all respects when made, and shall be true and correct in all respects on the
Closing Date with the same force and effect as if they had been made on and as of said date. The
Investor shall have performed in all material respects all obligations and covenants herein
required to be performed prior to the Closing Date.




(b) The Investor shall have delivered the Purchase Price to the Company.



6.3 Termination by Either Company or Investor. Either the Company or Investor shall
have the right to terminate this Agreement if the Closing hasn’t occurred prior to December 1,
2008.




7. Covenants and Agreements of the Company.



7.1 Reservation of Common Stock. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for the purpose of
providing for the exercise of the Warrant, conversion of the Debenture, payment of Extension Fees
and the issuance of the Equity Shares, such number of shares of Common Stock as shall from time to
time equal the number of Underlying Shares, Extension Fees and the Equity Shares issuable pursuant
to this Agreement in accordance with their respective terms. In the event the Company shall
at any time after the date of this Agreement and prior to the date the Equity Consideration is paid
in full: (i) declare a dividend on shares of Common Stock payable in shares of any class of capital
stock of the Company, (ii) subdivide the outstanding shares of Common Stock into a greater number
of shares of Common Stock, (iii) combine the outstanding shares of Common Stock into a smaller
number of shares pursuant to a reverse split, or (iv) issue any shares of capital stock in a
reclassification of shares of the Common Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing corporation), then in such
event the number and kind of shares of capital stock issued at the Maturity Date of the Debenture
or issuable pursuant to Warrants to be delivered at the Maturity Date as the Equity Consideration
hereunder, shall be proportionately adjusted so that the Investor shall be entitled to receive the
aggregate number and kind of shares of capital stock corresponding to the number and kind of shares
which the Investor would have been entitled to receive if the securities comprising the Equity
Consideration had been issuable and issued immediately prior to such date. For the avoidance of
doubt, in the case of a reverse split, the number of shares which the Investor would be entitled to
receive hereunder or upon exercise of the Default Conversion right under the Debenture or upon
exercise of the right to purchase securities under the Warrant would be reduced to the applicable
fraction (e.g., one-tenth to one-fifteenth) of the number of shares of common stock which the
Investor would have received or been able to purchase upon an issuance, conversion or exercise
occurring immediately prior to the reverse split, at an issue price, conversion price or exercise
price equal to the corresponding multiple (e.g., ten to fifteen times) the price in effect before
the reverse split, resulting in the same aggregate price or value being
deemed received or required to be paid upon exercise as would have been applicable immediately
preceding the reverse split.


 


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7.2 Reports. The Company will furnish to the Investor and/or assignee such
information relating to the Company and its Subsidiaries as from time to time may reasonably be
requested by the Investor and/or assignee; provided, however, that the Company shall not disclose
material nonpublic information to the Investor, or to advisors to or representatives of the
Investor, unless prior to disclosure of such information the Company identifies such information as
being material nonpublic information and provides the Investor, such advisors and representatives
with the opportunity to accept or refuse to accept such material nonpublic information for review
and Investor enters into an appropriate confidentiality agreement with the Company with respect
thereto.



7.3 No Conflicting Agreements. The Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any material respect with the
Company’s obligations to the Investor under the Transaction Documents.



7.4 Insurance. The Company shall maintain in full force and effect insurance coverage
that is customary for comparably situated companies for the business being conducted and properties
owned or leased by the Company and each Subsidiary, in amounts the Company reasonably believes to
be adequate against all liabilities, claims and risks against which it is customary for comparably
situated companies to insure.



7.5 Compliance with Laws. The Company will comply in all material respects with all
applicable laws, rules, regulations, orders and decrees of all governmental authorities.



7.6 Listing of Common Stock. The Company will use commercially reasonable efforts to
implement its plan to restore compliance as previously approved by the American Stock Exchange and
necessary in order to continue the listing and trading of its Common Stock on the American Stock
Exchange and, in accordance, therewith, will use commercially reasonable efforts to comply in all
respects with the Company’s reporting, filing and other obligations under the bylaws or rules of
such market.



7.7 Removal of Legends. Upon the earlier of (i) registration for resale of the
Underlying Shares and the Equity Shares or (ii) applicable provisions of Rule 144 allowing sales to
be made free of restrictions becoming available, the Company shall (A) deliver to the transfer
agent for the Common Stock (the “Transfer Agent”) irrevocable instructions that the Transfer Agent
shall reissue a certificate representing shares of Common Stock without legends upon receipt by
such Transfer Agent of the legended certificates for such shares, together with either (1) a
customary representation by the Investor that Rule 144 applies to the shares of Common Stock
represented thereby or (2) a statement by the Investor that such Investor has sold the shares of
Common Stock represented thereby in accordance with the plan of distribution contained in the
registration statement and, if applicable, in accordance with any prospectus delivery requirements,
and (B) cause its counsel to deliver to the Transfer Agent one or more blanket opinions to the
effect that the removal of such legends in such circumstances may be effected under the 1933 Act.
From and after the earlier of such dates, upon an Investor’s written request, the Company shall
promptly cause certificates evidencing the Investor’s Securities to be replaced with certificates
which do not bear such restrictive legends, and Underlying Shares subsequently issued upon due
exercise of the Warrant or as provided in the the Debenture shall not bear such restrictive legends
provided the provisions of either clause (i) or clause (ii) above, as applicable, are satisfied
with respect to such Underlying Shares. When the Company is required to cause unlegended
certificates to replace previously issued legended certificates, if instructions to the Transfer
Agent to deliver unlegended certificates are not delivered to the Transfer Agent within three (3)
Business Days after the Investor’s written request to the Company therefor confirming Investor’s
prior submission of legended certificate(s) to the Transfer Agent along with all legal opinions and
other documents customarily required to be furnished to the Transfer Agent as provided above and
executed in proper form (or to the Company, in the case of the Warrant or Debenture), the Company
shall be liable to the Investor for liquidated damages in an amount equal to 3% of the aggregate
purchase price of the Securities evidenced by such certificate(s) as of the end of each thirty (30)
day period beyond such three (3) Businesss (or portion thereof if extending beyond a single thirty
day period) that the instructions to deliver unlegended certificates have not been so delivered.


 


14









 





7.8 Prohibited Transactions. From the date hereof until the date the Debenture is
repaid in full, the Company shall be prohibited from effecting or entering into an agreement to
effect any subsequent
financing involving a “Variable Rate Transaction”. The term “Variable Rate Transaction” shall mean
a transaction in which the Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (A) at a conversion, exercise or exchange rate or other price that is
based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at
any time after the initial issuance of such debt or equity securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for the Common Stock or
(ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby
the Company may sell securities at a future determined price.



7.9 Other Negative Covenants. Until the later of the maturity date of the Debenture and one
day after the closing of the New Financing Tranasction, unless such transaction is approved in
writing by the Investor, the Company hereby further covenants and agrees that it will not:




(i) Sell, lease, or otherwise dispose of all or substantially all of its assets;




(ii) Dissolve, liquidate, or wind up its business;




(iii) Conduct its business other than in its ordinary and usual course;



(iv) Pay any dividend or make any other distributions of cash or property to any of the
holders of its capital stock;




(v) Merge or consolidate with another entity;



(vi) Issue any shares of Company capital stock or Company debt securities, except for
securities to be issued pursuant to existing agreements, bank or other financing that does not
provide for the issuance of Company equity or equity equivalent securities..



7.10 Best Efforts. The Company shall use its best efforts to close a New Financing
Transaction within six months of the date of this Agreement.




8. Survival and Indemnification.



8.1 Survival. The representations, warranties, covenants and agreements contained in
this Agreement shall survive the Closing of the transactions contemplated by this Agreement.



8.2 Indemnification. The Company agrees to indemnify and hold harmless the Investor
and its Affiliates and their respective directors, officers, employees and agents from and against
any and all losses, claims, damages, liabilities and expenses (including without limitation
reasonable attorney 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”) to which such Person may become subject
as a result of any breach of representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under the Transaction Documents, and will reimburse any such
Person for all such amounts as they are incurred by such Person.


 


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8.3 Conduct of Indemnification Proceedings. Promptly after receipt by any Person
(the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any action, proceeding or investigation in respect of
which indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall promptly
notify the Company in writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the
payment of all fees and expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its obligations
hereunder except to the extent that the Company is materially prejudiced by such failure to notify.
In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the
Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the
reasonable judgment of counsel to such Indemnified Person representation of both parties by the
same counsel would be inappropriate due to actual or potential differing interests between them.
The Company shall not be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated above) by reason of
such settlement or judgment. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, the Company shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party, unless such
settlement includes an unconditional release of such Indemnified Person from all liability arising
out of such proceeding.




9. Miscellaneous.



9.1 Successors and Assigns. This Agreement may not be assigned by a party hereto
without the prior written consent of the Company or the Investor, as applicable, provided, however,
that an Investor may assign its rights and delegate its duties hereunder in whole or in part to an
Affiliate or to a third party acquiring some or all of its Securities in a private transaction
without the prior written consent of the Company, after notice duly given by Investor to the
Company provided, that no such assignment or obligation shall affect the obligations of Investor
hereunder. The provisions of this Agreement shall inure to the benefit of and be binding upon the
respective permitted successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.



9.2 Counterparts; Faxes. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument. This Agreement may also be executed via facsimile, which shall be deemed an
original.



9.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.



9.4 Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)
if given by telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed
given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such
notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to be notified at the
address as follows, or at such other address as such party may designate by ten days’ advance
written notice to the other party:




If to the Company:




Smart Move, Inc.

5990 Greenwood Plaza Blvd, #2 Suite 390

Greenwood Village, CO 80111

Attention: Chris Sapyta

Facsimile: 720-488-0199




With a copy to:




[                                        ]

[                                        ]

[                                        ]

Attention: [                                        ]

Facsimile: [                                        ]




If to the Investor, to the address set forth on the signature page.



 



16









 






9.5 Expenses. The parties hereto shall pay their own costs and expenses in connection
herewith, except that the Company shall pay $6,000 of the fees and expenses of Brewer & Pritchard;
it being understood that Brewer & Pritchard has only rendered legal advice to the Investor and not
to the Company in connection with the transactions contemplated hereby, and that the Company has
relied for such matters on the advice of its own respective counsel. Such expenses shall be paid
not later than the Closing. The Company shall reimburse the Investor upon demand for all
reasonable out-of-pocket expenses incurred by the Investor, including without limitation
reimbursement of attorneys’ fees and disbursements, in connection with any amendment, modification
or waiver of this Agreement or the other Transaction Documents. In the event that legal
proceedings are commenced by any party to this Agreement against another party to this Agreement in
connection with this Agreement or the other Transaction Documents, the party or parties which do
not prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the
prevailing party in such proceedings.



9.6 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the Investor. Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such Securities, and the Company.



9.7 Publicity. No public release or announcement concerning the transactions
contemplated hereby shall be issued without the prior written consent of the Company and any press
release mentioning the Investor shall be submitted for approval of the Investor (which shall not be
unreasonably withheld). Notwithstanding, the Company will file such Current Report on Form 8-K as
well as copies of the Transaction Documents and make such other disclosures as required to fulfill
its obligations under applicable securities laws in the manner and time required by the SEC.



9.8 Severability. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions hereof but shall be
interpreted as if it were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which renders any
provision hereof prohibited or unenforceable in any respect.



9.9 Entire Agreement. This Agreement, including the Exhibits and the Disclosure
Schedules, and the other Transaction Documents constitute the entire agreement among the parties
hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the subject matter
hereof and thereof.



9.10 Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to carry
out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein
contained.



9.11 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the State of Colorado
without regard to the choice of law principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of Texas located in Harris County
and the United States District Court for the Southern District of Texas for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices
under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any
such court in any such suit, action or proceeding and to the laying of venue in such court. Each
party hereto irrevocably waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE
PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS
AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.


 


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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written.



	 	 	 	 	 
	The Company:	 SMART MOVE, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



	 	 	 	 	 
	The Investor:	 JOHN THOMAS BRIDGE & OPPORTUNITY
FUND, L.P.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



Aggregate Purchase Price: $300,000

Principal Amount of Debenture: $300,000




Address for Notice:




John Thomas Bridge & Opportunity Fund, L.P.

3 Riverway, Suite 1800

Houston, Texas 77056

Attention: George Jarkesy




with a copy to:




Brewer & Pritchard, P.C.

3 Riverway, Suite 1800

Houston, Texas 77056

Attn: Thomas C. Pritchard

Telephone: (713) 209-2911

Facsimile: (713) 209-2921

Email: Pritchard@bplaw.com





 


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