Exhibit
4.1


 


SECURITIES
PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (this “Agreement”)
is dated as of               ,
2004, by and among Grant Ventures, Inc. (the “Company”), and the purchasers listed on Schedule 1 hereto (each a “Purchaser” and collectively, the “Purchasers”).


 


WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below), and Rule 506
promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desire to purchase
from the Company the (i) number of shares of Common Stock, and (ii) Warrants
set forth opposite each Purchaser’s name on Schedule 1 (collectively, the “Offering”) in an aggregate offering
amount of up to $2.0 million.


 


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


 


ARTICLE I.


 


DEFINITIONS


 


1.1         Definitions.  In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have
the meanings indicated in this Section 1.1:


 


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


 


“Agent Shares” shall have the meaning
ascribed to such term in Section 2.6.


 


“Agent Warrant Agreement” shall mean the
Placement Agent’s Warrant Agreement dated as of the Closing Date.


 


“Agent Warrants” shall have the meaning
ascribed to such term in Section 2.6.


 


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


 


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


 


“Closing” means the closing of the
purchase and sale of the Common Stock and the Warrants pursuant to Section 2.1
on
                ,
2004, or such other date as agreed to by the parties.


 


“Closing Date” means the date of the
Closing.


 


“Closing Price” means on any particular
date (a) the last reported closing bid price per share of Common Stock on such
date on the Trading Market (as reported by Bloomberg L.P. at


 
















 


4:15 p.m. (New York time)
as the last reported closing bid price for regular session trading on such
day), or (b) if there is no such price on such date, then the closing bid price
on the Trading Market on the date nearest preceding such date (as reported by
Bloomberg L.P. at 4:15 p.m. (New York time) as the closing bid price for
regular session trading on such day), or (c) if the Common Stock is not then
listed or quoted on the Trading Market and if prices for the Common Stock are
then reported in the “pink sheets” published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of the Common Stock
so reported, or (d) if the shares of Common Stock are not then publicly traded
the fair market value of a share of Common Stock as determined by an appraiser
selected in good faith by the Purchasers of a majority in interest of the
Shares then outstanding.


 


“Commission” means the Securities and
Exchange Commission.


 


“Common Stock” means the Company’s
common stock, par value $0.001 per share, and any securities into which such
Common Stock may hereafter be reclassified.


 


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


 


“Company Counsel” means Brown Raysman
Millstein Felder & Steiner LLP, or any other counsel reasonably acceptable
to the Company and the Placement Agent.


 


“Disclosure Schedules” means the
Disclosure Schedules attached hereto.


 


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


 


“Exchange Act” means the Securities
Exchange Act of 1934, as amended.


 


“Indemnified Party” shall have the
meaning ascribed to such term in Section 5.16(b).


 


“Indemnifying Party” shall have the meaning
ascribed to such term in Section 5.16(b).


 


“Investor Securities” means the Shares,
the Warrants and the Warrant Shares.


 


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


 


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


 


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


 


“Merger” shall have the meaning ascribed
to such term in Section 2.2(a)(ix).


 


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“Per Share Purchase Price” means
$0.1835, subject to adjustment for reverse or forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement and before the Closing.


 


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


 


“Placement Agent” means Duncan Capital
LLC.


 


“Registration Statement” means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Purchasers of the Shares and
the Warrant Shares and by the Placement Agent of the Agent Shares.


 


“Registration Rights Agreement” means
the Registration Rights Agreement, dated as of the date of this Agreement,
among the Company and each Purchaser, in the form of EXHIBIT A.


 


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


 


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


 


“Securities Act” means the Securities
Act of 1933, as amended.


 


“Shares” means the shares of Common
Stock purchased by the Purchasers pursuant to this Agreement.


 


“Subscription Amount” means as to each
Purchaser, the amount set forth below such Purchaser’s signature block on the
Signature Page of this Agreement in United States Dollars and in immediately
available funds.


 


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


 


 “Trading
Day” means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not quoted on a Trading Market,
a day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting price);
provided, that in the event that the Common Stock is not listed or quoted as
set forth in (i), and (ii) hereof, then Trading Day shall mean a Business Day.


 


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


 


“Transaction Documents” means this
Agreement, the Registration Rights Agreement, the Warrants, the Placement Agent
Warrant Agreement, the Agent Warrant(s) and any and all


 


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other agreements executed
by the Company in connection with the transactions contemplated hereunder.


 


“Transaction Securities” means the
Shares, the Warrants, the Warrant Shares, the Agent Warrants and the Agent
Shares.


 


“Warrants”
means the common stock purchase warrants in the form of EXHIBIT B issuable to each Purchaser at
Closing; such Warrants are exercisable to purchase up to the number of shares
of Common Stock equal to 20% of the aggregate number of Shares to be issued to
such Purchaser at the Closing, which shall be exercisable immediately after the
Closing Date and have an exercise price equal to $0.1835 and be exercisable for
a period of five years from the Closing Date.


 


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


 


ARTICLE II.


 


PURCHASE
AND SALE


 


2.1         Closing.  On the terms and subject to the conditions
set forth in this Agreement, at the Closing, the Company shall sell and issue
to each Purchaser and each Purchaser shall purchase from the Company such
number of Shares as shall equal such Purchaser’s Subscription Amount divided by
the Per Share Purchase Price.  The
Warrants shall be issued without additional consideration.  The aggregate number of Shares and the
aggregate number of Warrants each Purchaser shall receive is set forth opposite
each Purchaser’s name on Schedule 1.  Upon satisfaction of the conditions set forth
in Section 2.2, the Closing shall occur at such location as the
parties shall mutually agree.


 


2.2         Closing Conditions.


 


(a)                                  At
the Closing, as a condition to the Purchasers’ obligations hereunder, each
Purchaser shall receive from or on behalf of the Company:


 


(i)                                     a
restricted stock certificate for such number of Shares set forth next to such
Purchaser’s name on Schedule 1
hereto purchased by each Purchaser;


 


(ii)                                  a
Warrant, registered in the name of such Purchaser, as duly executed by the
Company, entitling such Purchaser to purchase such number of Warrant Shares as
are set forth next to such Purchaser’s name on Schedule 1 hereto;


 


(iii)                               the
Registration Rights Agreement duly executed by the Company;


 


(iv)                              this
Agreement duly executed by the Company;


 


(v)                                 a
legal opinion from Company Counsel in form and substance reasonably
satisfactory to the Purchasers and Placement Agent;


 


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(vi)                              a
certificate of the Chief Executive Officer and Chief Financial Officer of the
Company stating, among other things, that (A) all the conditions set forth in
this Section 2.2(a) have been satisfied in all material respects,
(B) except as set forth in any Schedule to this Agreement, since
January 31, 2004, there has been no event, condition or circumstance that
has had or is reasonably expected to have a Material Adverse Effect, and (C)
the Company has complied in all material respects with all its covenants and
agreements set forth in the Transaction Documents;


 


(vii)                           a
certificate of the Secretary of the Company containing, among other items:  (A) true and complete copies, as of the
Closing Date, of the Articles of Incorporation and any amendments thereto and
the By-Laws, and any amendments thereto, of the Company, and (B) true and
complete copies of the resolutions of the Board of Directors of the Company
approving the Transaction Documents, Placement Agent compensation, the Offering
and all documents and matters relating thereto;


 


(viii)                        a Good
Standing Certificate of the Company dated as of a date no later than 5 days
prior to the Closing Date; and


 


(ix)                                the
merger by and between Impact Diagnostics, Inc. (“IDI”) and a wholly owned subsidiary of the Company,
pursuant to which IDI is the surviving entity (the “Merger”), shall have
been consummated.


 


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


 


(i)                                     this
Agreement duly executed by such Purchaser;


 


(ii)                                  such
Purchaser’s payment for the Shares and Warrants being purchased from the escrow
account by wire transfer of immediately available funds; and


 


(iii)                               the
Registration Rights Agreement duly executed by such Purchaser.


 


(c)          At the Closing, as a
condition to each party’s obligations hereunder, all representations and
warranties of the other parties herein shall remain true and correct in all
material respects as of the Closing Date.


 


(d)         As of the Closing Date,
as a condition to the Purchasers’ obligations hereunder, there shall have been
no Material Adverse Effect with respect to the Company since the date hereof.


 


(e)          As a condition to the
Purchasers’ obligations hereunder, from the date hereof to the Closing Date,
(i) trading in the Common Stock shall not have been suspended; (ii) trading in
securities shall not have been suspended or limited generally or on any Trading
Market; and (iii) no banking moratorium shall have been declared either by the
United States or New York State authorities.


 


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2.3         Escrow Provisions.  Pending the sale of the Shares and the
Warrants, all funds paid hereunder shall be deposited by the Company in a
non-interest bearing escrow account with Continental Stock Transfer & Trust
Company (the “Escrow Agent”)
pursuant to an escrow agreement by and among the Escrow Agent, the Company and
the Placement Agent (the “Escrow Agreement”).  If a Closing has not occurred on or prior to
July     , 2004, or such later date mutually agreed by
Company and Placement Agent (the “Termination
Date”), then this Agreement shall be void and all funds paid
hereunder by each Purchaser shall be promptly returned to each Purchaser
without interest and/or deduction, subject to Section 2.5.  If a Closing occurs on or prior to the
Termination Date, then all net purchase price proceeds shall promptly be paid
over to the Company.


 


2.4         Certificates.   Each Purchaser hereby authorizes and directs
the Company, upon the Closing, to deliver certificates representing the Shares
and Warrants to be issued to such Purchaser pursuant to this Agreement to such
Purchaser’s address indicated in this Agreement.


 


2.5         Return of Funds.  The Company reserves the right not to accept
the offer of the Purchaser to purchase the Shares and Warrants.  Each Purchaser hereby authorizes and directs
the Company to return any funds without interest and/or deductions for
unaccepted purchases to the same account from which the funds were drawn.


 


2.6         Expenses; Fees.  Simultaneously with payment for and delivery
of the Shares and Warrants, at the Closing, the Company shall:  (i) pay to the Placement Agent a cash fee
equal to ten (10%) percent of the aggregate purchase price of the Shares and
Warrants sold (the “Cash Fee”);
(ii) reimburse the Placement Agent for its actual out-of-pocket expenses
incurred in connection with the Offering, including, without limitation, the
reasonable fees and expenses of its legal counsel, not to exceed legal fees of
$20,000; (iii) pay all expenses in connection with the qualification of the
Securities under the blue sky laws of the states which the Placement Agent
shall designate, including filing fees and disbursements in connection with
such blue sky matters; (iv) pay certain fees to the Escrow Agent for acting as
escrow agent; and (v) issue to the Placement Agent five (5) year warrants (the
“Agent Warrants”) to
purchase 545,000 shares of Common Stock (the “Agent Shares”) at a per share exercise price equal to the
Per Share Purchase Price which shall otherwise be substantially in the same
form as the Warrants.  The Placement
Agent is performing additional advisory services in connection with the Merger
and shall also receive compensation in connection with the performance of such
advisory services.


 


2.7         Placement Agent.  The Investor Securities are being offered on
a “best-effort” basis by the Placement Agent. 
The Placement Agreement reserves the right, but is under no obligation,
to sell to its affiliates Shares and Warrants on the terms provided herein.


 


ARTICLE III.


 


REPRESENTATIONS
AND WARRANTIES


 


3.1         Representations and
Warranties of the Company.  Except as
set forth under the corresponding section of the Disclosure Schedules
delivered concurrently herewith, the Company hereby makes the following
representations and warranties as of the date hereof and as of the Closing Date
to each Purchaser:


 


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(a)          Subsidiaries.
Other than as disclosed on Schedule 3.1(a),
the Company has no direct or indirect operating subsidiaries (a “Subsidiary” and collectively, the “Subsidiaries”). Except as set forth on Schedule 3.1(a), the Company owns,
directly or indirectly, all of the capital stock of each Subsidiary free and clear
of any Liens, and all the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.


 


(b)         Organization and
Qualification. Each of the Company and the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiaries
is duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case
may be, would not result in (i) a material adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business or financial condition of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material Adverse Effect”).


 


(c)          Authorization;
Enforcement; Validity. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part of the
Company and no further corporate action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally and general principles of equity.


 


(d)         No Conflicts. The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby,
do not and will not (i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation, certificates of
designation (or similar document related to preferred stock), bylaws and/or
other organizational or charter documents, (ii) conflict with, or constitute a
default (or an event that 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 (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise), or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound, or (iii) result in a violation of any


 


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law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound, except in the case
of clause (ii) or (iii), for any conflict, default or violation that is not
reasonably expected to have a Material Adverse Effect.


 


(e)          Filings, Consents and
Approvals. The Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than the filing with the Commission of a Form D and the Registration Statement,
the application(s) and approvals to the Nasdaq SmallCap Market for the listing
of the Shares, Warrant Shares and the Agent Shares for trading thereon in the time
and manner required thereby, applicable Blue Sky filings, and the filing of a
current report on form 8-K under the Exchange Act.


 


(f)            Issuance of the
Securities. All of the Transaction Securities have been duly authorized
and, when issued and paid for in accordance with the Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear
of all Liens (other than Liens placed thereon by Purchasers or Placement
Agent).  The Company has reserved from
its duly authorized capital stock such number of shares of Common Stock so as
to permit the issuance of the Shares, the Warrant Shares and the Agent Shares.


 


(g)         Capitalization.  Immediately prior to the Closing, the issued
and outstanding shares of the Company’s capital stock (Common Stock and
preferred stock), all warrants, options and other securities convertible and/or
exchangeable into capital stock shall be as disclosed on Schedule 3.1(g) hereto.  Except as set forth on Schedule 3.1(g), All of the
Company’s outstanding securities have been and are, or upon issuance will be
duly authorized, validly issued, fully paid and non-assessable.  Except as disclosed in Schedule 3.1(g), (i) no shares of
the Company’s capital stock are subject to any preemptive rights, right of
participation, right of first refusal or any other similar rights; (ii)  there are no outstanding securities of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions at the option of the holder thereof, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem or register a security of the
Company or any of its Subsidiaries; (iii) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Transaction Securities as described in the
Transaction Documents; and (iv) the Company does not have any stock
appreciation rights or “phantom stock” agreements or any similar agreement. All
prior sales of securities of the Company were either registered under the
Securities Act and applicable state securities laws or exempt from such
registration, and no security holder has any rescission and/or similar rights
with respect thereto.


 


(h)         SEC Reports; Financial
Statements. The Company has filed all reports required to be filed by it
under the Securities Act and the Exchange Act, including pursuant to Section 13(a)
or Section 15(d) of the Exchange Act, for the two (2) years
preceding the date hereof (or such shorter period as the Company was required
by law to file such material) (the foregoing materials, including the exhibits
thereto, being collectively referred to herein as the “SEC Reports” and, together with the
Disclosure Schedules to this Agreement, the “Disclosure


 


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


 


(i)             Material Changes.
Since the date of the latest financial statements included within the SEC
Reports, (i) there has been no event, occurrence or development that has had or
is reasonably expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any material liabilities (contingent or otherwise) or
discharged or satisfied an lien or encumbrance other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or required to be disclosed in
filings made with the Commission, (iii) the Company has not altered its method
of accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its holders of Common Stock or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, (v) the Company has not issued any stock, bonds or other
securities or any rights, options or warrants with respect thereto, except in
connection with the Merger and as set forth on Schedule 3.1(i), (vi) the Company has not sold,
assigned or transferred any other tangible assets or canceled any debts or
claims, except in the ordinary course of business consistent with past
practice, (vii) the Company has not sold, assigned or transferred ay patent
rights, trademarks, trade names, copyrights, trade secrets or other intangibles
assets or intellectual property rights, or disclosed any proprietary
confidential information to any person, other than to IDI and its officers,
directors and agents in contemplation of the Merger, (viii) the Company has not
suffered any substantial losses or waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of any material
amount of prospective business, (ix) the Company has not made any changes in
employee compensation, (x) the Company has not entered into any other
transaction other than in the ordinary course of business consistent with past
practice, or (xi) the Company has not entered into an agreement, written or
otherwise, to take any of the foregoing actions. The Company does not have
pending before the Commission any request for confidential treatment of
information.


 


(j)             Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency
and/or regulatory authority (federal, state, county, local or foreign),
including, but not limited to, the Federal Trade Commission, the Food and Drug
Agency, the Consumer Product Safety Commission, the United States Department of
Agriculture


 


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and any State Attorney
General (collectively, an “Action”)
which is reasonably expected to (i) adversely affect or challenge the legality,
validity or enforceability of any of the Transaction Documents and/or the
Transaction Securities or (ii) result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor, to the knowledge of the Company, any current
director or officer thereof, is the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty.  To the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission, administrative agency and/or regulatory
authority involving the Company or any current directors or officers of the
Company. The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement that has been filed and not
withdrawn by the Company or any Subsidiary under the Exchange Act or the
Securities Act.


 


(k)          Labor Relations.
No material labor dispute exists or, to the knowledge of the Company, is
imminent with respect to any of the employees of the Company which is
reasonably expected to result in a Material Adverse Effect.


 


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


 


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


 


(n)         Title to Assets.
The Company and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them that is material to the business of the
Company and the Subsidiaries, taken as a whole. 
Any real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable leases
with which the Company and the Subsidiaries are in material compliance.


 


(o)         Intellectual Property
Rights.  The Company and its
Subsidiaries own, or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted.  None of the
Company’s trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual


 


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property rights have expired
or terminated, or are expected to expire or terminate within two years from the
date of this Agreement, except where such expiration or termination is not
either individually or in the aggregate reasonably expected to have a Material
Adverse Effect or where the Company has the opportunity to renew or otherwise
maintain any of the foregoing.  The
Company and its Subsidiaries do not have any knowledge of any infringement by
the Company or its Subsidiaries of trademarks, trade name rights, patents,
patent rights, copyrights, inventions, licenses, service names, service marks,
service mark registrations, trade secrets or other similar rights of others, or
of any such development of similar or identical trade secrets or technical
information by others and no claim, action or proceeding has been made or
brought against, or to the Company’s knowledge, has been threatened against,
the Company or its Subsidiaries regarding trademarks, trade name rights,
patents, patent rights, inventions, copyrights, licenses, service names,
service marks, service mark registrations, trade secrets or other infringement,
except where such infringement, claim, action or proceeding is not reasonably
expected to have either individually or in the aggregate a Material Adverse
Effect.  The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their material intellectual properties.


 


(p)         Transactions With
Affiliates and Employees.  Except as
set forth on Schedule 3.1(p),
none of the officers, directors and/or employees of the Company and the
Subsidiaries is a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $60,000 other than (a)
for payment of salary or consulting fees for services rendered, (b) reimbursement
for expenses incurred on behalf of the Company and (c) for other employee
benefits, including stock option agreements under any stock option plan of the
Company.


 


(q)         Internal Accounting
Controls.  The Company and each of
its Subsidiaries maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.


 


(r)            Certain Fees.
Except for payments payable to the Placement Agent by the Company, the Company
has not entered into agreement to pay any brokerage or finder’s fees or
commissions to any person including, but not limited to, any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this Agreement.
The Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement, except to the extent a Purchaser
made an agreement to make any such payment.


 


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


 


(t)            Investment Company.
The Company is not, and is not an Affiliate of, an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.


 


(u)         No General
Solicitation. Neither the Company, its Subsidiaries, any of their
Affiliates nor any person acting on their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D
under the Securities Act) in connection with the offer or sale of the
Transaction Securities.


 


(v)         No Integrated
Offering. Neither the Company, its Subsidiaries, any of their Affiliates
nor any person acting on 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 require registration of any of the Transaction
Securities under the Securities Act or cause the Offering to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable stockholder approval provisions, including without limitation, under
the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. None of
the Company, its Subsidiaries, their controlled Affiliates and any person
acting on their behalf will take any action or steps referred to in the
preceding sentence that would require registration of any of the Transaction
Securities under the Securities Act or cause the Offering to be integrated with
other offerings.


 


(w)       Tax Status. The
Company and each of its Subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, except when the failure to do so would not
be reasonably expected to have a Material Adverse Effect, and has paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations
or to the Company’s knowledge otherwise due and payable, except those being
contested in good faith and has set aside on its books reserves in accordance
with GAAP reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes by the Company or any of its Subsidiaries in any
material amount claimed to be due by the taxing authority of any jurisdiction.


 


(x)           Registration Rights.  Except with respect to Purchasers and the
Placement Agent and except as provided on Schedule 3.1(x)
hereto, no person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company.


 


(y)         Right of First
Refusal. Except with regard to Duncan Capital LLC, no person, firm or other
business entity is a party to any agreement, contract or understanding, written
or oral entitling such party to a right of first refusal to act as agent with
respect to offerings of securities by the Company; provided, however, for the
avoidance of doubt, it is agreed and understood that Duncan Capital LLC has no
rights of first refusal to purchase securities in respect to this Offering.


 


12
















 


(z)           Disclosure. The
Company confirms that, neither the Company nor any of its officers or directors
has provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material, non-public
information. The Company understands and confirms that the Purchasers will rely
on the foregoing representations in effecting transactions in securities of the
Company.  All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby in this Agreement and in the Disclosure Schedules to this Agreement,
furnished by or on behalf of the Company, are true and correct and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.


 


(aa)                            Insurance.  Each of the Company and its Subsidiaries
maintain insurance of the types and in the amounts deemed adequate for its
business, including, but not limited to, product liability insurance, insurance
covering real and personal property owned or leased by the Company and its
subsidiaries against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against by companies of similar size and
engaged in business similar to that of the Company, all of which insurance is
in full force and effect.


 


(bb)                          Environmental.  The Company and each of its Subsidiaries is,
to its knowledge, in compliance with all applicable published rules and
regulations (and applicable standards and requirements) of the United States
Environmental Protection Agency (the “EPA”) and of any similar State agency,
expect where the failure to be in such compliance would not reasonably be expected
to have a Material Adverse Effect.  There
is no suit, claim, action or proceeding now pending before any court,
governmental agency or board, or other forum, nor, to the knowledge of the
Company, is any of the same threatened by any Person for (i) noncompliance by
the Company with any environmental law, rule, regulation or requirement, or
(ii) relating to the release or threatened release into the environment by the
Company of any pollutant, toxic or hazardous material, oil, or waste generated
by the Company.  The Company has not
released any Hazardous Materials (as hereinafter defined) at any site owned or
leased by the Company or shipped any Hazardous Materials for treatment, storage
or disposal at any other site of facility. 
For purposes of this Section 3.1(bb), “Hazardous Materials” shall mean and
include any solid, hazardous or toxic waste, substance or material as defined
in the United States Resource Conservation and Recovery Act; the Clean Air Act;
the Clean Water Act; the Toxic Substances Control Act; the Comprehensive
Environmental Response, Compensation and Liability Act; applicable state laws
for the protection of the environment, and the regulations promulgated under
any of the foregoing.


 


(cc)                            Foreign
Corrupt Practices.  Neither the Company,
nor any of its Subsidiaries, nor any director, officer, agent, employee or
other person acting on behalf of the Company or any of its Subsidiaries has, in
the course of its actions for, or on behalf of, the Company, (a) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from corporate funds, (b) violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended, or (c) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.


 


13
















 


(dd)                          Sarbanes-Oxley
Act.  The Company is in substantial
compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”),
including the rules and regulations promulgated thereunder that are currently
effective.  The Company intends to
materially comply with other applicable provisions of Sarbanes-Oxley, including
the rules and regulations promulgated thereunder, upon the effectiveness of
such provisions.


 


3.2         Representations and Warranties
of the Purchasers; Affirmative Covenants. Each Purchaser hereby, for itself
and for no other Purchaser, represents and warrants as of the date hereof and
as of the Closing Date to the Company, acknowledging that the Company is
relying upon the accuracy and completeness of the representations and
warranties set forth herein to, among other things, ensure that registration
under Section 5 of the Securities Act is not required in connection with
the sale of the Securities pursuant hereto, as follows:


 


(a)          Organization;
Authority. Such Purchaser, if not a natural person, is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder, and the execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms.


 


(b)         Investment Intent.
Such Purchaser understands that the Investor Securities are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Investor Securities as
principal for its own account and not with a view to or for distributing or
reselling such Investor Securities or any part thereof or interest therein, has
no present intention of distributing any of such Investor Securities and has no
arrangement or understanding with any other Person regarding the distribution
of such Investor Securities.  Such
Purchaser is acquiring the Investor Securities hereunder in the ordinary course
of its business. Such Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Investor
Securities.


 


(c)          Purchaser Status.
At the time such Purchaser was offered the Shares and Warrants, it was, and at
the date hereof it is and on the Closing Date it will be an “accredited
investor” as defined in Rule 501(a) under the Securities Act. Such Purchaser
has completed the Accredited Investor Questionnaire, attached hereto as EXHIBIT C, attesting to the same, which
questionnaire is incorporated herein by reference.  Such Purchaser is not, and is not required to
be, registered as a broker-dealer under Section 15 of the Exchange Act. In
making an investment decision as to whether to purchase the Shares and Warrants
offered hereby, each Purchaser has relied solely upon the SEC Reports and the
representation and warranties of the Company contained herein.  Each Purchaser has had the opportunity to ask
questions of, and receive answers from, representatives of the Company
concerning the Company and the officers and all such questions have been asked
and answered by the Company to the satisfaction of the Purchaser.


 


(d)         Experience of Such
Purchaser. Each Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial


 


14
















 


matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Investor Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment
in the Investor Securities and, at the present time, is, and at the Closing will
be, able to afford a complete loss of such investment.


 


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


 


(f)            Compliance with the
Securities Laws. Such Purchaser hereby confirms its understanding that it
may not cover short sales made prior to the Effective Date with shares of
Common Stock registered for resale in the Registration Statement.


 


(g)         No Conflicts.  The execution, delivery and performance of
the Transaction Documents by such Purchaser and the consummation by such
Purchaser of the transactions contemplated thereby, do not and will not
conflict with or violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which such Purchaser is subject or
any provision of its organizational documents or other similar governing
instruments or any provision of such Purchaser’s certificate or articles of
incorporation, certificates of designation (or similar document related to
preferred stock), bylaws and/or other organizational or charter documents.


 


(h)         No Advice.
Purchaser understands that nothing in this Agreement or any other materials
presented to Purchaser in connection with the purchase and sale of the Investor
Securities constitutes legal, tax or investment advice. Purchaser has consulted
such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the Investor
Securities.  Such Purchaser has reviewed
with such Purchaser’s own tax advisors the United States and applicable
foreign, federal, state, local, municipal and other tax consequences of an
investment in and sale of the Investor Securities.  Such Purchaser is relying solely on such
advisors and not on any statements or representations of the Company or any of
its representatives and understands that such Purchaser (and not the Company)
shall be responsible for such Purchaser’s own tax liability that may arise as a
result of an investment in the Investor Securities.


 


(i)             No Litigation, Etc.
There is no action, suit, proceeding, judgment, claim or investigation pending
or, to the knowledge of the Purchaser, threatened against the Purchaser which
could reasonably be expected in any manner to challenge or seek to prevent,
enjoin, alter or materially delay any of the transactions contemplated by the
Transaction Documents.


 


(j)             Filings, Consents
and Approvals.  Such Purchaser is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by such Purchaser of the Transaction
Documents, other than the filing by the Purchaser with the Commission of such
reports under the Exchange Act as may be required in connection with this
Agreement, the Transaction Documents and the transactions contemplated hereby
and thereby, and any filings required by the securities or blue sky laws of the
various states.


 


15
















 


(k)          Placement Agent.
Each Purchaser agrees that neither the Placement Agent nor any of its
respective directors, officers, affiliates, employees or agents shall be liable
to the Purchaser for any action taken or omitted to be taken by it in
connection therewith, except for bad faith, willful misconduct or gross
negligence.


 


(l)             Certain Fees.  The Company shall have no obligation with
respect to any fees incurred by any Purchaser or with respect to any claims
made by or on behalf of other Persons for commissions, brokerage or finder’s
fees that may be due to Persons from such Purchaser in connection with the
transactions contemplated by this Agreement.


 


(m)       Address.  Each Purchaser hereby represents that the
address of such Purchaser furnished by it at the end of this Subscription
Agreement is the Purchaser’s principal residence if he or she is an individual
or the address of its principal place of business address if it is a
corporation or other entity.


 


(n)         Confidentiality.  Each Purchaser hereby agrees to and shall
keep strictly confidential and will not disclose or divulge any confidential,
proprietary or secret information which the Purchaser may obtain from the
Company (the “Confidential Information”), including by way of example
and not in limitation thereof, financial statements, reports and other
materials submitted by the Company to the purchaser, (i) unless required to be
disclosed by law or pursuant to any judgment, order, subpoena or decree of any
court having competent jurisdiction, or unless such information is or becomes
publicly known (other than as a result of this Section 3.2(m)), (ii)
unless, to the extent applicable, to such Purchaser’s constituent limited
partners; provided, however, that
such Purchaser shall use its best efforts to ensure that such limited partner
shall keep any Confidential Information disclosed confidential, or (iii) unless
the Company gives its written consent to the Purchaser’s release of such
information, except that no such written consent shall be required (and the
Purchaser shall be free to release such information) if such information is to
be provided to the Purchaser’s lawyer or accountant who are instructed to
comply with this provision, and each Purchaser shall be responsible for making
sure its lawyer and accountant so comply.  
For the avoidance of doubt, Confidential Information shall include the fact
that Confidential Information has been made available hereunder, the fact that
discussions and negotiations have taken place concerning a possible transaction
involving the parties hereto and any of the terms, conditions or facts with
respect thereto.


 


(o)         Reliance on Advisors.  Such Purchaser has reviewed with such
Purchaser’s own tax advisors the United States and applicable foreign, federal,
state, local, municipal and other tax consequences of an investment in the
Buyer Common Stock, where applicable, and the Transactions.  Such Seller is relying solely on such
advisors and not on any statements or representations of Buyer or any of its
representatives and understands that such Seller (and not Buyer) shall be responsible
for such Seller’s own tax liability that may arise as a result of an investment
in the Buyer Common Stock or as a result of the Transactions.


 


The Company acknowledges
and agrees that each Purchaser does not make or has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2
and Section 4.1.


 


16
















 


ARTICLE IV.


 


OTHER
AGREEMENTS OF THE PARTIES


 


4.1         Transfer Restrictions.


 


(a)          The Investor Securities
may only be disposed of in compliance with state and federal securities laws.
In connection with any transfer of Investor Securities other than pursuant to
an effective registration statement filed under the Securities Act of 1933, as
amended, pursuant to Rule 144 (if appropriate documentation is provided
satisfactory to legal counsel to the Company), in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor (and reasonably acceptable to the Company), the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such transferred
Investor Securities under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.


 


(b)         The Purchasers agree to
the imprinting, so long as is required by this Section 4.1(b) or
applicable law, of a legend on any of the Investor Securities in the following
form:


 


THESE SECURITIES HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF, THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE FORM AND SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER
OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.


 


The Company acknowledges
and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the
Investor Securities to a financial institution that is an “accredited investor”
as defined in Rule 501(a) under the Securities Act and, if required under the
terms of such arrangement, such Purchaser may transfer pledged or secured
Investor Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no legal opinion
of legal counsel of the pledgee, secured party or pledgor shall be


 


17
















 


required in connection
with the grant of the pledge. Further, no notice shall be required of grant of
the pledge. At the appropriate Purchaser’s expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Transaction Securities may reasonably request in connection with a pledge or
transfer of the Investor Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) under the Securities
Act or other applicable provision of the Securities Act to appropriately amend
the list of selling stockholders thereunder. 
Notwithstanding anything to the contrary, any such pledgee shall not be
entitled to any rights under any of the Transaction Documents unless and until
such pledgee executes a written agreement to be bound by Purchasers’
obligations under the Transaction Documents.


 


(c)          Subject to compliance
with all laws, rules and regulations including, but not limited to, the
Securities Act and the Exchange Act, and the rules and regulations of any
applicable Trading Market certificates evidencing the Shares and Warrant Shares
shall not contain any legend (including the legend set forth in Section 4.1(b)),
(i) following any sale of the Shares or Warrant Shares pursuant to a
registration statement (including the Registration Statement) covering the
resale of such security, or (ii) following any sale of the Shares or Warrant
Shares pursuant to Rule 144, or (iii) if such Shares or Warrant Shares are
eligible for sale under Rule 144(k) and appropriate documentation is provided
satisfactory to legal counsel to the Company, including, but not limited to and
opinion of counsel reasonably satisfactory to the Company in form and substance
reasonably satisfactory to the Company, or (iv) if such legend is not required
under applicable regulation of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).  The Company agrees that at such time as such
legend is no longer required under and pursuant to this Section 4.1(c),
it will, no later than three (3) Trading Days following the delivery by a
Purchaser to the Company or the Company’s transfer agent of a certificate
representing Shares and/or Warrant Shares, as the case may be, issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser (i) a
certificate representing such securities that is free from all restrictive and
other legends, or (ii) in lieu of delivering physical certificates representing
the Shares and/or Warrant Shares, and provided that the Company’s transfer
agent is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (or FAST) program, upon request of the Purchaser,
the Company shall use its reasonable commercial efforts to cause its transfer
agent to electronically transmit the Shares and/or Warrant Shares by crediting
the account of the Purchaser’s Prime Broker with DTC through its Deposit
Withdrawal Agent Commission (or DWAC) system. 
Except as required by applicable law, rules or regulations or the
provisions of or rules and regulations governing any applicable Transaction
Document, 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.


 


(d)         Each Purchaser severally
and not jointly agrees that the removal of the restrictive legend from
certificates representing the Shares and the Warrant Shares as set forth in
this Section 4.1 is predicated upon the Company’s reliance that the
Purchaser will sell any Investor Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom.


 


4.2         Integration. The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of any of the
Transaction Securities in a manner that


 


18
















 


would require the
registration under the Securities Act of the sale of the Investor Securities to
the Purchasers or that would be integrated with the offer or sale of the
Investor Securities for purposes of the rules and regulations of any Trading
Market.  


 


4.3         Securities Laws
Disclosure; Publicity. The Company shall by 8:30 a.m., Eastern Daylight
Time on the second Business Day following the Closing, issue a press release
(which shall be followed by a Form 8-K filing within one (1) Business Day
thereafter) or file a Current Report on Form 8-K, disclosing all material terms
of the transactions contemplated hereby, to the extent permitted by applicable
law. The Company and the Placement Agent shall consult with each other in
issuing any press releases with respect to the transactions contemplated
hereby, and neither the Company nor the Placement Agent  shall issue any such press release or otherwise
make any such public statement without the prior consent of the Company, with
respect to any press release of the Placement Agent, or without the prior
consent of the Placement Agent (or Purchaser(s), if so requested), with respect
to any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser,
or include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection with
the Registration Statement contemplated by the Registration Rights Agreement
and (ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).


 


4.4         Shareholders Rights
Plan.  The Company has no
shareholders rights plans or similar plans or arrangements presently in effect.


 


4.5         Use of Proceeds.
The Company covenants and agrees that all of the net proceeds that it receives
from the sale of the Shares and Warrants pursuant to this Agreement, although
distributed, allocated and expended by the Company in its sole discretion, shall
be used for general working capital and corporate purposes.


 


4.6         Form D and Blue Sky.
The Company shall file a Form D with respect to the Transaction Securities as
required under Regulation D under the Securities Act and, upon written request,
provide a copy thereof to each Purchaser and the Placement Agent promptly after
such filing. The Company shall, on or before the Closing, take such action as
the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify any Transaction Securities for sale to the
Purchasers and/or the Placement Agent pursuant to this Agreement under
applicable securities or “Blue Sky” laws of the states of the United States,
and shall provide evidence of any such action so taken to the Purchasers on or
prior to the Closing. The Company shall make all filings and reports relating
to the offer and sale of the Transaction Securities required under applicable
securities or “Blue Sky” laws of the states of the United States following the
Closing. 


 


4.7         Reservation of Common
Stock.  As of the date hereof, the
Company has reserved 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
Shares, the Warrant Shares and the Agent Shares.


 


19
















 


4.8         Indemnification by the
Purchasers. Notwithstanding the termination of this Agreement, each of the
Purchasers severally and not jointly agrees to indemnify and hold harmless the
Company and its officers, directors, agents, representatives, shareholders and
employees and each of their respective Affiliates, from and against any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation, as incurred, that any
such Person may suffer or incur which are caused by or arise out of (i) any
material breach or default in the performance by it of any covenant, obligation
or agreement made by it in this Agreement or in any of the Transaction
Documents; (ii) any material misrepresentation or material breach of warranty
or representation made by it in this Agreement or in any of the Transaction
Documents; or (iii) the enforcement of this Agreement.  Notwithstanding anything to the contrary
provided herein or elsewhere, the liability of each Purchaser under this Section 4.8
shall be limited to the amount paid by the Purchaser pursuant hereto to
purchase the Investor Securities, and the procedures and timing for
indemnification by the Purchasers under this Section 4.8 shall
follow the procedures and provisions of Sections 5.16(b) and (c), mutatis
mutandis, with respect to indemnification by the Company of the
Purchasers.


 


ARTICLE V.


 


MISCELLANEOUS


 


5.1         Fees and Expenses.
Except as otherwise set forth in this Agreement, each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.


 


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


 


5.3         Notices. Any and
all notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on (a) the next Business Day, if sent by U.S. nationally recognized overnight
courier service, or (b) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications to the
Company shall be as set forth below and for each Purchaser shall be as set
forth on the signature pages attached hereto.


 


If to
the Company:


 


Grant
Ventures, Inc.


5792 South 900 East,
Suite B


Salt Lake City, UT 84121


Attention:
                              


Telephone:
(      )        -
        


Facsimile:
(      )
      -        


 


20
















 


With a
copy to:


 


Brown Raysman Millstein
Felder & Steiner LLP


900 Third Avenue


New York, New York 10022


Attention:  Steven S. Pretsfelder


Telephone:  (212) 895-2625


Fax:  (212) 895-2900


 


5.4         Amendments; Waivers.  No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No consideration shall
be offered or paid to any person to amend or consent to a waiver or
modification of any provision of the Transaction Documents unless the same
consideration is also offered to all of the parties to the Transaction
Documents or holders of the Shares or Warrants, as the case may be.  No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.


 


5.5         Construction.  The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.  Any reference herein to a
Section or Schedule or Exhibit means a Section of or a
Schedule or Exhibit to this Agreement, unless otherwise stated.


 


5.6         Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser. Any Purchaser,
however, may assign any or all of its Investor Securities and/or rights under
this Agreement to any Person, provided such Purchaser complies with
Section 4.1 and such transferee agrees in writing to be bound, with respect
to the transferred Investor Securities and otherwise, by the provisions hereof
that apply to the “Purchasers.”


 


5.7         No Third-Party
Beneficiaries.  This Agreement is
intended for the benefit of the parties hereto and their respective successors
and permitted assigns and, except as provided in Sections 4.10 and 5.16, is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.


 


5.8         Governing Law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York without regard to the conflicts of laws
principles thereof. The parties hereto hereby irrevocably agree that any suit
or proceeding arising directly and/or indirectly pursuant to or under this
Agreement, shall be brought solely in a federal or state court located in the
City, County and State of New York. By its execution hereof, the parties hereby
covenant and irrevocably submit to the in
personam jurisdiction of the federal and state courts located in the
City, County and State of New York and agree that any process in any such


 


21
















 


action may be served upon
any of them personally, or by certified mail or registered mail upon them or
their agent, return receipt requested, with the same full force and effect as
if personally served upon them in New York City. The parties hereto waive any
claim that any such jurisdiction is not a convenient forum for any such suit or
proceeding and any defense or lack of in
personam jurisdiction with respect thereto.


 


5.9         Survival. The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and delivery of the Shares and Warrants and until no
Purchaser owns any Shares, Warrants and/or Warrant Shares.


 


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


 


5.11   Severability. If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.


 


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


 


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


 


5.14   Payment Set Aside. To
the extent that the Company makes a payment or payments to any Purchaser
pursuant to any Transaction Document or a Purchaser enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof


 


22
















 


are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall, to
the extent permissible under applicable law, be revived and continued in full
force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.


 


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


 


5.16   Indemnification by the
Company.


 


(a)          From and after the
Closing, the Company shall, notwithstanding any termination of this Agreement,
indemnify and hold harmless each Purchaser, the officers, directors, agents and
employees of each of them, each Person who controls any such Purchaser (within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses relating to an
Indemnified Party’s (as defined below) actions to enforce the provisions of
this Section 5.16) (collectively, “Losses”), as incurred, that may be suffered or incurred
which are caused by or arise out of (i) any material misrepresentation or
material breach of any representation or warranty made by the Company in the
Transaction Documents, or, (ii) any material breach of any covenant, agreement
or obligation of the Company contained in the Transaction Documents, or (iii)
any cause of action, suit or claim brought or made against such Indemnified
Party and arising out of or resulting from the execution, delivery, performance
or enforcement of the Transaction Documents executed pursuant hereto by any of
the Indemnified Parties.  If the
indemnification provided for in this Section 5.16 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any Losses, then the Indemnifying Party (as defined below), in lieu
of indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of Losses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the actions or omissions that resulted in such Losses as well as any other
relevant equitable considerations.  The
Company shall notify the Purchasers promptly of the institution, threat or
assertion of any proceeding of which the Company is aware in connection with
the transactions contemplated by this Agreement.


 


23
















 


(b)         Conduct of
Indemnification Proceedings. If any proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified
Party shall promptly notify the Company (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall have the right to assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof; provided,
however, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that such failure
shall have materially and adversely prejudiced the Indemnifying Party.


 


An Indemnified Party
shall have the right to employ separate counsel in any such proceeding and to
participate in, but not control, the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed to assume the defense of
such proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in a timely manner in any such proceeding; or (3) the named
parties to any such proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel in writing that a conflict of interest
actually would exist if the same counsel were to represent such Indemnified
Party and the Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and the reasonable fees and
expenses of one separate counsel for all Indemnified Parties in any matters
related on a factual basis shall be at the expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such
proceeding affected without its written consent. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such proceeding.


 


(c)          Timing of Payments.  All reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend such
proceeding in a manner not inconsistent with this Section 5.16
shall be paid to the Indemnified Party, as incurred, within fifteen (15)
Trading Days of written notice thereof to the Indemnifying Party; provided,
however, that the Indemnified Party shall promptly reimburse the
Indemnifying Party for that portion of such fees and expenses applicable to
such actions for which such Indemnified Party is not entitled to
indemnification hereunder, determined based upon the relative faults of the
parties.


 


(Remainder
of Page Intentionally Left Blank)


 


24
















 


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


 


	
   

  	
  GRANT
  VENTURES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


25
















 


PURCHASERS
SIGNATURE PAGE


 


	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  Address

  	
   

  
	
   

  	
   

  
	
  Facsimile Number

  	
   

  
	
   

  	
   

  
	
  Tax Id #:

  	
   

  
	
   

  	
   

  
	
  Subscription
  Amount:$

  	
   

  	
   

  
				



 


26
















 


INDEX
OF EXHIBITS AND SCHEDULES


 


	
  EXHIBITS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  -

  	
   

  	
  Form of Registration
  Rights Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  -

  	
   

  	
  Form of Warrant

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  -

  	
   

  	
  Accredited Investor
  Questionnaire

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES

  
	
   

  
	
  Schedule 1

  	
   

  	
  -

  	
   

  	
  List of Purchasers and
  Securities Received

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 3.1(a)

  	
   

  	
  -

  	
   

  	
  Subsidiaries

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 3.1(g)

  	
   

  	
  -

  	
   

  	
  Capitalization

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 3.1(i)

  	
   

  	
  -

  	
   

  	
  Transactions with
  Affiliates and Employees

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 3.1(x)

  	
   

  	
  -

  	
   

  	
  Registration Rights

  



 
















 


EXHIBIT
A


 


FORM
OF REGISTRATION RIGHTS AGREEMENT


 
















 


EXHIBIT
B


 


FORM
OF WARRANT


 
















 


EXHIBIT
C


 


ACCREDITED
INVESTOR QUESTIONNAIRE


 


The Purchaser warrants
and represents to the Company that it qualifies as an “accredited investor,” as
such term is defined in Rule 501(a) of Regulation D under the Act by virtue of
the fact that the Purchaser meets the following criteria at the time of the
sale of the Shares and Warrants to the Purchaser (Purchaser to initial the
applicable categories below):


 


I.  ACCREDITED INVESTOR STATUS


 


A.                                   Individual
Investors:  (Initial one or more of
the following statements)


 


1.                                              I
certify that I am an accredited investor because I have had individual income
(exclusive of any income earned by my spouse) of more than $200,000 in each of
the two most recent calendar years and I reasonably expect to have an
individual income in excess of $200,000 for the current year.


 


2.                                              I
certify that I am an accredited investor because I have had joint income with
my spouse in excess of $300,000 in each of the two most recent calendar years
and I reasonably expect to have joint income with my spouse in excess of
$300,000 for the current year.


 


3.                                              I
certify that I am an accredited investor because I have an individual net
worth, or my spouse and I have a joint net worth, in excess of $1,000,000.


 


B.                                     Partnerships,
Corporations, Trusts or Other Entities: (Initial one of the following
statements)


 


1.     The undersigned hereby certifies that it is
an accredited investor because it is:


 


a.                          any
corporation, partnership or Massachusetts or similar business trust, not formed
for the specific purpose of acquiring the securities offered, with total assets
in excess of $5,000,000;


 


b.                         a
trust with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed by a
person who has such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of an investment in the
securities offered as described in Rule 506(b)(2)(ii) under the Act;


 


c.                          an
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, whose investment decisions are made by a plan fiduciary,
as defined in Section 3 (21) of such Act, which is either a bank, savings
and loan association, an insurance company or registered investment adviser;


 


d.                         a
self-directed employee benefit plan, with investment decisions made solely by
persons that are accredited investors;


 
















 


e.                          an
employee benefit plan whose total assets exceed $5,000,000;


 


f.                            an
organization described in Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000;


 


g.                         a
private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940;


 


h.                         any
bank as defined in Section 3(a)(2) of the Act or any savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the
Act whether acting in its individual or fiduciary capacity;


 


i.                             any
broker dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934, as amended;


 


j.                             any
insurance company as defined in Section 2(13) of the Act;


 


k.                          any
investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act;


 


l.                                  any Small Business Investment Company
licensed by the U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958; or


 


2.                                              The
undersigned hereby certifies that it is an accredited investor because it is an
entity in which each of the equity owners qualifies as an accredited investor
under items A(1), (2) or (3) or item B(1) above.


 


	
   

  	
   

  	
   

  	
  If the Purchaser is an
  INDIVIDUAL, or if

  purchased as JOINT TENANTS, as TENANTS IN

  COMMON, or as COMMUNITY PROPERTY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print Name(s)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature(s) of
  Purchaser(s)

  	
   

  	
  Signature(s) of
  Purchaser(s)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
   

  
					



 
















 


	
   

  	
  If the Purchaser is a
  PARTNERSHIP,

  CORPORATION, TRUST, LIMITED LIABILITY

  PARTNERSHIP or LIMITED LIABILITY COMPANY:

   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Partnership,
  Corporation, Trust, LLP or LLC

  	
   

  
	
   

  	
   

  
	
  State of Organization

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  
					



 
















 


SCHEDULE 1


 


LIST
OF PURCHASERS AND AMOUNTS


 


	
  Name
  of Purchaser

  	
   

  	
  Amount of Shares and Warrant Shares Purchased

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Shares

  	
   

  	
  Warrant Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Shares

  	
   

  	
  Warrant Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Shares

  	
   

  	
  Warrant Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Shares

  	
   

  	
  Warrant Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Shares

  	
   

  	
  Warrant Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 
















 


SCHEDULE 3.1(a)


 


SUBSIDIARIES


 


Impact
Diagnostics, Inc., a Utah corporation


 


2
















 


SCHEDULE 3.1(g)


 


CAPITALIZATION


 




	
   

  	
   

  	
  Shares

  	
   

  
	
  Common Stock,
  par value $0.01

  	
   

  	
   

  	
   

  
	
  Current Impact Shareholders

  	
   

  	
  35,325,492

  	
   

  
	
  Current Grant Shareholders

  	
   

  	
  6,000,000

  	
   

  
	
  Bridges & Pipes LLC

  	
   

  	
  2,720,000

  	
   

  
	
  New Investors (ass. $2 million
  placement)

  	
   

  	
  10,900,000

  	
   

  
	
  Total Common Stock

  	
   

  	
  54,945,492

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Convertible
  Notes

  	
   

  	
   

  	
   

  
	
  6% 1 year Note, $122,500 face
  value

  	
   

  	
  1,328,939

  	
   

  
	
  6% 3 Year Note, $350,000 face
  value

  	
   

  	
  417,667

  	
   

  
	
   

  	
   

  	
  1,746,606

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Options/Warrants

  	
   

  	
   

  	
   

  
	
  5 year warrant, Strike of $0.18
  per share

  	
   

  	
  545,000

  	
   

  
	
  New Investor Warrants, strike of
  $0.18

  	
   

  	
  2,180,000

  	
   

  
	
  Management Options, Strike of
  $0.18

  	
   

  	
  3,618,254

  	
   

  
	
  5 year warrants, Strike of $0.01
  per share

  	
   

  	
  2,695,000

  	
   

  
	
   

  	
   

  	
  9,038,254

  	
   

  






 


3
















 


SCHEDULE 3.1(i)


 


TRANSACTIONS WITH AFFILIATES AND EMPLOYEES


 


None


 


4
















 


SCHEDULE 3.1(x)


 


REGISTRATION RIGHTS


 


Citadel Holdings has piggyback registration rights with
respect to 25,000 warrants it holds to purchase common stock of the Company and
417,667 warrants to purchase common stock of the Company to be issued to
Citadel upon conversion of a $350,000 convertible promissory note issued by the
Company to Citadel.


 


5