THE WARRANT MUST BE DELIVERED ON THE CLOSING DATE.
A FORM OF
WARRANT IS ATTACHED HERETO AS EXHIBIT B.
ALL THE REPRESENTATIONS, COVENANTS,
WARRANTIES, UNDERTAKINGS, AND INDEMNIFICATION, AND OTHER RIGHTS MADE OR GRANTED
TO OR FOR THE BENEFIT OF THE PURCHASER BY THE COMPANY ARE HEREBY ALSO MADE AND
GRANTED IN RESPECT OF THE WARRANT AND SHARES OF THE COMPANY'S COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANT (THE "WARRANT SHARES").
A FORM OF CLOSING
PAYMENT AND THE EXPENSES REFERRED TO IN THE PRECEDING CLAUSE (A) (NET OF
DEPOSITS PREVIOUSLY PAID BY THE COMPANY) SHALL BE PAID AT CLOSING OUT OF FUNDS
HELD PURSUANT TO THE ESCROW AGREEMENT (DEFINED BELOW) AND A DISBURSEMENT LETTER
(THE "DISBURSEMENT LETTER").
(C)
THE COMPANY SHALL REIMBURSE THE PURCHASER FOR ITS REASONABLE LEGAL
FEES FOR SERVICES RENDERED TO THE PURCHASER IN PREPARATION OF THIS AGREEMENT AND
THE RELATED AGREEMENTS, AND EXPENSES IN CONNECTION WITH THE PURCHASER'S DUE
DILIGENCE REVIEW OF THE COMPANY AND RELEVANT MATTERS.
AMOUNTS REQUIRED TO BE
PAID HEREUNDER WILL BE PAID AT THE CLOSING AND SHALL BE [$5,000.]
(D)
THE COMPANY WILL PAY A CASH FEE IN THE AMOUNT OF $90,000 (THE
"FUND MANAGEMENT FEE") TO LAURUS CAPITAL MANAGEMENT, L.L.C., A DELAWARE LIMITED
LIABILITY COMPANY.
THE FUND MANAGEMENT FEE MUST BE PAID ON THE CLOSING DATE.
THE AFOREMENTIONED FUND MANAGEMENT FEE AND LEGAL FEES WILL BE PAYABLE AT THE
CLOSING OUT OF FUNDS HELD PURSUANT TO A FUNDS ESCROW AGREEMENT TO BE ENTERED
INTO BY THE COMPANY, PURCHASER AND AN ESCROW AGENT.
3.
CLOSING, DELIVERY AND PAYMENT.
3.1
CLOSING.
SUBJECT TO THE TERMS AND CONDITIONS HEREIN, THE CLOSING
OF THE TRANSACTIONS CONTEMPLATED HEREBY (THE "CLOSING"), WHICH CLOSING IS
COMPRISED OF PURCHASER'S PURCHASE OF THE PREFERRED STOCK IN THE AGGREGATE
PRINCIPAL AMOUNT OF $5,000,000, SHALL TAKE PLACE ON THE DATE HEREOF, AT SUCH
OTHER TIME OR PLACE AS THE COMPANY AND PURCHASER MAY MUTUALLY AGREE (SUCH DATE
IS HEREINAFTER REFERRED TO AS THE "CLOSING DATE").
3.2
DELIVERY.
AT THE CLOSING, SUBJECT TO THE TERMS AND CONDITIONS
HEREOF, THE COMPANY WILL DELIVER TO THE PURCHASER THE CERTIFICATE OF VOTE OF
DIRECTORS IN THE FORM ATTACHED AS EXHIBIT A REPRESENTING THE STATED AMOUNT OF
$5,000,000 OF PREFERRED STOCK AND A COMMON STOCK PURCHASE WARRANT IN THE FORM
ATTACHED AS EXHIBIT B IN THE PURCHASER'S NAME REPRESENTING THE RIGHT TO PURCHASE
UP TO 50,000 WARRANT SHARES AND THE PURCHASER WILL DELIVER TO THE COMPANY
(I) THAT CERTAIN SECURED CONVERTIBLE TERM NOTE IN THE PRINCIPAL AMOUNT OF
$3,000,000 DATED JULY 6, 2005 (THE "$3,000,000 NOTE"), AND $2,000,000, LESS FEES
AND EXPENSES SET FORTH IN SECTION 2 HEREOF, BY CERTIFIED FUNDS OR WIRE TRANSFER
MADE PAYABLE TO THE ORDER OF THE COMPANY.
2
4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser as of the date of
this Agreement as set forth below.
As used herein, the term SEC Reports shall
mean the Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2004 and the Company's