Document:

exv10w1

 

Exhibit 10.1

AGREEMENT FOR GLOBAL RESOLUTION AND

MUTUAL RELEASE OF ALL CLAIMS

          This Agreement for Global Resolution and Mutual Release of All Claims (the “Global Resolution
Agreement”) is made and entered into as of September 30, 2005, by and between Cygnus, Inc., a
Delaware Corporation with its principal place of business at 88 Kearny Street, 4th
floor, San Francisco CA 94108 (“Cygnus”) and Ortho-McNeil Pharmaceutical, Inc., a Delaware
Corporation with its principal place of business at U.S. Route 202, Raritan, New Jersey 08869 and a
wholly-owned subsidiary of Johnson & Johnson (“OMP”). Cygnus and OMP may be referred to herein
individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS:

A.      On or about April 15, 2004, Cygnus demanded an arbitration that became captioned Cygnus,
Inc. v. Ortho-McNeil Pharmaceutical, Inc., AAA Case No. 72 181 01233 04 JMM (the “Matter”).
The allegations, causes of action, and claims for relief alleged, or which could have been alleged,
in the Matter are collectively referred to as the “Action”; and

B.      Cygnus and OMP each desire to resolve finally all asserted or potential disputes or claims that
did, could or might arise from or relating to the Asset Purchase Agreement, dated November 17, 1999
(“APA”) or the Action on the terms and conditions set forth below, and each desires to obtain full,
final and mutual releases from the other regarding any and all claims related to or that might have
arisen from the APA or the Action;

NOW, THEREFORE, in consideration of the terms and conditions set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby stipulate and agree as follows:

          1.      Dismissals. Upon the full execution of this Global Resolution Agreement, Cygnus
shall deliver to OMP an executed dismissal with prejudice of all claims in the Matter (“Cygnus
Dismissal”) that shall be complete in all respects and ready for filing with the AAA panel (the
“Panel”) selected to hear the Matter. The dismissal shall be held by counsel for Cygnus until
completion of payment as set forth in Paragraph 2 has occurred and been confirmed in writing by
OMP, at which time the dismissal shall be filed with the Panel. Each Party shall bear its own
attorneys’ fees and costs incurred in the Action.

          2.      Payment. OMP agrees to pay via wire transmission to Cygnus the cash sum of Four
Million Dollars ($4,000,000.00) at the time that the Parties exchange executed signature pages of
this Global Resolution Agreement. The Parties expressly agree that no additional payments of any
type are due or owing by any Party.

          3.      Release of OMP by Cygnus. For and in consideration of the terms and provisions of
this Global Resolution Agreement, Cygnus, on behalf of itself and, as

 

 

applicable, each of its employees, agents, attorneys, insurers, accountants, heirs, executors,
administrators, conservators, successors, assigns, current and former directors and officers,
stockholders and direct and indirect parents, subsidiaries and affiliates, hereby fully and forever
releases and discharges OMP, each of its employees, agents, attorneys, insurers, accountants,
heirs, executors, administrators, conservators, successors, assigns, current and former directors
and officers, stockholders and direct and indirect parents, subsidiaries and affiliates from and
against any and all liability, claims, demands, contracts, debts, obligations, damages, losses,
actions, causes of action, or suits of whatever kind or nature, whether known or unknown, that
arise out of or relate to any matter or thing, including but not limited to the Action, and Cygnus
covenants not to sue or otherwise institute or prosecute any legal, administrative or other
proceeding against OMP except as may be necessary to enforce the provisions of this Global
Resolution Agreement.

          4.      Release of Cygnus by OMP. For and in consideration of the terms and provisions of
this Global Resolution Agreement, OMP, on behalf of itself and, as applicable, each of its
employees, agents, attorneys, insurers, accountants, heirs, executors, administrators,
conservators, successors, assigns, current and former directors and officers, shareholders and
direct and indirect subsidiaries and affiliates, hereby fully and forever releases and discharges
Cygnus, each of its employees, agents, attorneys, insurers, accountants, heirs, executors,
administrators, conservators, successors, assigns, current and former directors and officers,
stockholders and direct and indirect parents, subsidiaries and affiliates from and against any and
all liability, claims, demands, contracts, debts, obligations, damages, losses, actions, causes of
action, or suits of whatever kind or nature, whether known or unknown, that arise out of or relate
to any matter or thing, including but not limited to the Action, and OMP covenants not to sue or
otherwise institute or prosecute any legal, administrative or other proceeding against Cygnus,
except as may be necessary to enforce the provisions of this Global Resolution Agreement.

          5.      Release of Escrow Agent by Cygnus. For and in consideration of the terms and
provisions of this Global Resolution Agreement, Cygnus, on behalf of itself and, as applicable,
each of its employees, agents, attorneys, insurers, accountants, heirs, executors, administrators,
conservators, successors, assigns, current and former directors and officers, stockholders and
direct and indirect parents, subsidiaries and affiliates, hereby fully and forever releases and
discharges the Escrow Agent, as defined in Section 2.4 of the APA , each of its employees, agents,
attorneys, insurers, accountants, heirs, executors, administrators, conservators, successors,
assigns, current and former directors and officers, stockholders and direct and indirect parents,
subsidiaries and affiliates from and against any and all liability, claims, demands, contracts,
debts, obligations, damages, losses, actions, causes of action, or suits of whatever kind or
nature, whether known or unknown, that arise out of or relate to the Action or the APA, and Cygnus
covenants not to sue or otherwise institute or prosecute any legal, administrative or other
proceeding against the Escrow Agent except as may be necessary to enforce the provisions of this
Global Resolution Agreement. Cygnus acknowledges that it has no claim to any funds held by the
Escrow Agent and that any such funds may be disbursed to OMP. Cygnus agrees to execute any
additional documents that may be required to effectuate this provision.

          6.      Books and Records. Pursuant to the definition of “Books and Records” contained in
Section 1.1 of the APA entered into by the Parties, Cygnus maintained

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possession of laboratory notebooks relating to drug delivery and, upon request, provided
access to OMP. Cygnus will deliver, or will cause to be delivered, these notebooks to OMP’s
Redwood City facility within three (3) business days after the execution of this Global Resolution
Agreement.

          7.      Public Disclosure. The Parties acknowledge that Cygnus will issue a press release
and file a copy of said press release and of this Global Resolution Agreement attached to a Form
8-K or other appropriate report with the U.S. Securities and Exchange Commission (the “SEC”) upon
execution of this Global Resolution Agreement. The Parties further acknowledge that Cygnus will
disclose the terms of this Global Resolution Agreement in its periodic reports filed with the SEC.
OMP expresses no opinion with respect to Cygnus’s press release and disclosures.

          8.      Cooperation Regarding Information Transfer. Pursuant to Section 6.1(b) of the APA,
the Parties shall continue to cooperate to return or transfer information that was inadvertently
transferred to the other Party or that one Party inadvertently failed to transfer to the other
Party.

          9.      Non-Assignment of Claims. Each Party hereto represents and warrants to each other
Party hereto that no portion of any claim, right, interest, demand, debt, liability, account,
obligation or cause of action released herein has been assigned, conveyed or transferred, by
operation of law or otherwise, to any other person or entity. In the event that any claim, demand
or suit should be made or instituted against any Party hereto because of any such purported
assignment, conveyance or transfer, the Party from whom such assignment, conveyance or transfer was
alleged to have occurred agrees to indemnify and hold harmless the other Party against such claim,
suit or demand and to pay and satisfy any such claim, suit or demand, including all expenses of
investigation, attorneys’ fees and costs.

          10.      Authority to Enter into Global Resolution Agreement. All individuals signing this
Global Resolution Agreement warrant and represent that they have full authority to execute the same
on behalf of the Party on whose behalf each signs. Each Party hereto warrants and represents that
it has full power and authority to perform all obligations set forth in this Global Resolution
Agreement, and agrees to execute all documents and instruments necessary to implement this Global
Resolution Agreement.

          11.      Later Discovered Facts. The Parties are aware that they may hereafter discover
claims or facts in addition to or different from those they now know or believe to be true with
respect to the Matter, the Action, or any aspect of the business relationship by or between the
Parties. Nevertheless, it is the Parties’ intention to fully, finally, and forever settle and
release all such matters and all claims within the scope of the above releases that may exist or
may heretofore have existed.

          12.      Integrated Instrument. This Global Resolution Agreement constitutes a single,
integrated written contract expressing the entire agreement of the Parties. No covenants,
agreements, representations, or warranties of any kind whatsoever, whether express or implied in
law or fact, have been made by any Party to this Global Resolution Agreement, except as
specifically set forth in this Global Resolution Agreement. All prior or contemporaneous
discussions or negotiations have been and are merged and integrated

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into, or are superseded by, this Global Resolution Agreement.

          13.      No Oral Modification. This Global Resolution Agreement may not be altered,
amended, or extinguished except by a writing that expressly refers to this instrument and is signed
subsequent to the date of this instrument by duly authorized representatives of the respective
Parties.

          14.      Severability. If any provision of this Global Resolution Agreement is held to be
invalid, void, or unenforceable for any reason, the balance of the provisions shall nevertheless
remain in full force and effect and shall in no way be affected, impaired, or invalidated.

          15.      Full Satisfaction. The consideration to be paid under this Global Resolution
Agreement, the releases of liability herein, and the obligations required under this Global
Resolution Agreement are acknowledged by the Parties to be in full and complete settlement and
satisfaction of all claims, as released above.

          16.      No Admissions. The Parties understand and acknowledge that this Global Resolution
Agreement constitutes a compromise and settlement of disputed claims and is not an admission of
liability or wrongdoing by any Party. The Parties agree that neither this Global Resolution
Agreement nor any of its terms shall be offered or received as evidence in any proceeding in any
forum as an admission or as other evidence of any liability or wrongdoing.

          17.      Counterparts. This Global Resolution Agreement may be executed in counterparts
and by facsimile signature, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.

          18.      Headings. The headings and captions used in this Global Resolution Agreement are
for convenience only and shall not be deemed to affect in any way the language of the provisions to
which they refer.

          19.      Voluntary Execution. The Parties respectively represent and warrant that:

          19.1    No Party has made any statement or representation to any other Party regarding
any fact relied upon in entering into this Global Resolution Agreement. This Global
Resolution Agreement is made without reliance upon any inducement, statement, promise, or
representation other than those contained within this Global Resolution Agreement.

          19.2    This Global Resolution Agreement is executed voluntarily and without any duress
or undue influence on the part of or on behalf of the Parties hereto, with the full intent
of releasing all claims, except as expressly reserved herein.

          19.3    The Parties have read this Global Resolution Agreement.

          19.4    The Parties understand the terms and consequences of this Global Resolution
Agreement and of the releases it contains.

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          19.5    The Parties are fully aware of the legal and binding effect of this Global
Resolution Agreement.

          20.      Governing Law. This Global Resolution Agreement shall be governed, construed and
enforced in accordance with the laws of the State of New Jersey, without giving effect to its
choice of law provisions.

          21.      Dispute Resolution. The Parties agree that any dispute arising from or relating
to this Global Resolution Agreement shall be submitted for resolution to arbitration before a
single arbitrator pursuant to the rules then pertaining of the CPR Institute for Dispute
Resolution, or successor (“CPR”), except where those rules conflict with these provisions, in which
case these provisions control. The arbitration will be held in San Francisco, CA.

          22.      Assignment. This Global Resolution Agreement shall not be assignable by any Party
without the prior written consent of the other Parties.

          23.      Confidentiality. Each Party agrees that any Proprietary Information as defined
below it has obtained or will obtain from any other Party is the confidential property of the
disclosing Party, and may not be used by the receiving Party other than in connection with the
activities contemplated under this Global Resolution Agreement. Except as expressly permitted in
this Global Resolution Agreement, the receiving Party will hold in confidence and not use or
disclose any Proprietary Information of the disclosing Party and shall obtain the prior written
permission of the other party before releasing such Proprietary Information to a third party. If
such permission is granted, the releasing Party shall ensure that the third party is bound to the
same obligations of confidentiality. The restrictions on use and disclosure of Proprietary
Information imposed upon a receiving Party under this Paragraph shall continue in full force and
effect for a period of 5 years after the execution of this Global Resolution Agreement.

	 	23.1	 	“Proprietary Information” of a Party means:
	 
	 	(i)	 	non-public financial information concerning such Party;
	 
	 	(ii)	 	any other information designated as confidential by such
Party in writing; provided that Proprietary Information shall not include any
information that is:

	 	(A)	 	already in possession of the receiving Party
at or before the time of disclosure hereunder as shown by the
receiving Party’s files existing at the time of disclosure antedating
the date of disclosure; or
	 
	 	(B)	 	now or hereafter publicly known or otherwise
known by the receiving party through no wrongful act of the receiving
party (provided that if Proprietary Information becomes publicly
known, this shall not excuse a prior disclosure by the receiving
Party); or

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	 	(C)	 	lawfully received by the receiving Party from
a third party without obligation of confidence; or
	 
	 	(D)	 	developed by the receiving Party or its
affiliates independent of any disclosure made hereunder as shown by
the receiving Party’s files; or
	 
	 	(E)	 	required by law to be disclosed by the receiving party, provided that
the disclosing party is given at least 10 calendar days written notice of
the legal requirement.

          24.      Force Majeure. No liability or loss of rights hereunder shall result to any Party
from delay or failure in performance (other than payment of money) caused by governmental actions
or restrictions (provided that any such governmental action or restriction was not the result of
actions of a Party to this Global Resolution Agreement), war, terrorist activities, civil
commotion, riots, strikes, power outages, lock outs and acts of God such as fire, flood,
earthquakes, lightning, drought or other similar or dissimilar causes that are beyond the control
of the Parties (each, a “Force Majeure Act”).

          25.      Interpretation. The Parties agree that the rule of construction to the effect
that any ambiguities are resolved against the drafting Party shall not be employed in the
interpretation of this Agreement and that the terms and conditions of this Agreement shall be
construed fairly with respect to the Parties hereto and shall not be construed in favor or against
any one Party, regardless of which Party was generally responsible for the preparation of this
Agreement.

          IN WITNESS WHEREOF, this Global Resolution Agreement is hereby executed as of the dates set
forth below.

	 	 	 
	CYGNUS, INC.

	 	ORTHO-MCNEIL
PHARMACEUTICAL, INC.
	 
	By : /s/ John C Hodgman

	 	By: /s/ Steven P. Berman
	 

	 	 
	 
	Print Name: John C Hodgman

	 	Print Name: Steven P. Berman
	 

	 	 
	 
	Title:
Chairman, President & CEO

	 	Title: Asst Secy
	 

	 	 
	 
	Date:
30 Sept 2005

	 	Date: 9/30/05

	 

	 	 

-6-exv4w8

 

WARRANT No. W-PP-5-2

VISEON, INC.

(Formerly RSI Systems, Inc.)

Common Stock Purchase Warrant

August 9, 2005

THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND ANY SECURITIES ACQUIRED
UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT.

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	1. EXERCISE OF WARRANT
	 	 	1	 
	 
	 	 	 	 
	1.1. Manner of Exercise
	 	 	1	 
	1.2. When Exercise Effective
	 	 	2	 
	1.3. Delivery of Stock Certificates, etc
	 	 	2	 
	1.4. Company to Reaffirm Obligations
	 	 	2	 
	1.5. Payment by Application of Shares Otherwise Issuable
	 	 	2	 
	1.6. Tax Basis
	 	 	3	 
	 
	 	 	 	 
	2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE
	 	 	3	 
	 
	 	 	 	 
	2.1. Warrant Price
	 	 	3	 
	2.2. Extraordinary Dividends and Distributions
	 	 	3	 
	2.3. Treatment of Stock Dividends, Stock Splits, etc
	 	 	3	 
	2.4. Computation of Consideration
	 	 	4	 
	2.5 Minimum Adjustment of Warrant Quantity
	 	 	4	 
	2.6. Abandoned Dividend or Distribution
	 	 	4	 
	 
	 	 	 	 
	3. CONSOLIDATION, MERGER, ETC
	 	 	5	 
	 
	 	 	 	 
	3.1. Adjustments for Consolidation, Merger, Sale of
Assets, Reorganization, etc
	 	 	5	 
	3.2. Assumption of Obligations
	 	 	5	 
	 
	 	 	 	 
	4. OTHER DILUTIVE EVENTS
	 	 	5	 
	 
	 	 	 	 
	5. NO DILUTION OR IMPAIRMENT
	 	 	6	 
	 
	 	 	 	 
	6. ACCOUNTANTS’ REPORT AS TO ADJUSTMENTS
	 	 	6	 
	 
	 	 	 	 
	7. FINANCIAL AND BUSINESS INFORMATION
	 	 	7	 
	 
	 	 	 	 
	7.1. Filings
	 	 	7	 
	7.2. Notices of Corporate Action
	 	 	7	 
	 
	 	 	 	 
	8. RESTRICTIONS ON TRANSFER
	 	 	8	 
	 
	 	 	 	 
	8.1. Restrictive Legends
	 	 	8	 
	8.2. Transfers to Comply With the Securities Act
	 	 	8	 
	8.3. Termination of Restrictions
	 	 	9	 
	 
	 	 	 	 
	9. RESERVATION OF STOCK, ETC
	 	 	9	 

i

 

	 	 	 	 	 
	 	 	Page
	10. REGISTRATION AND TRANSFER OF WARRANTS, ETC
	 	 	9	 
	 
	 	 	 	 
	10.1. Warrant Register; Ownership of Warrants
	 	 	9	 
	10.2. Transfer of Warrants
	 	 	10	 
	10.3. Replacement of Warrants
	 	 	10	 
	10.4. Adjustments To Warrant Quantity
	 	 	10	 
	10.5 Fractional Shares
	 	 	10	 
	 
	 	 	 	 
	11. DEFINITIONS
	 	 	10	 
	 
	 	 	 	 
	12. REMEDIES; SPECIFIC PERFORMANCE
	 	 	13	 
	 
	 	 	 	 
	13. NO RIGHTS OR LIABILITIES AS SHAREHOLDER
	 	 	13	 
	 
	 	 	 	 
	14. NOTICES
	 	 	13	 
	 
	 	 	 	 
	15. AMENDMENTS
	 	 	14	 
	 
	 	 	 	 
	16. DESCRIPTIVE HEADINGS, ETC
	 	 	14	 
	 
	 	 	 	 
	17. LAW GOVERNING AGREEMENT
	 	 	14	 
	 
	 	 	 	 
	EXHIBIT A FORM OF SUBSCRIPTION
	 	 	16	 
	 
	 	 	 	 
	EXHIBIT B FORM OF ASSIGNMENT
	 	 	17	 

ii

 

VISEON, INC.

(Formerly RSI Systems, Inc.)

Warrant to Purchase Common Stock

Void on August 8, 2010

	 	 	 
	Common Stock Warrant 

	 	Las Vegas, Nevada
	 
	 	 
	Warrant No. W-PP-5-2

	 	August 9, 2005

     VISEON, INC. f/k/a RSI Systems, Inc. (the “Company”), a Nevada corporation, for value
received, hereby certifies that W. RUSSELL BYERS or registered assigns (the “Holder”), is
entitled to purchase from the Company up to Two Hundred Fifty Thousand (250,000) shares (the
“Warrant Quantity”) of duly authorized, validly issued, fully paid and nonassessable common
stock, par value $0.01 per share, of the Company (the “Common Stock”) at the purchase price
per share of One Dollar and Twenty-Six Cents ($1.26), at any time or from time to time prior to
5:00 p.m. Central Standard time, on August 8, 2010 (the “Expiration Date”), all subject to
the terms, conditions and adjustments set forth hereinbelow in this Warrant.

     This Warrant (the term “Warrant” shall include any such warrants issued in
substitution or as a replacement herefor) is issued in connection with that certain Loan Agreement
dated August 9, 2005 entered into by and between the Company and W. RUSSELL BYERS. This Warrant,
so issued, originally evidences the right to purchase a number of shares of Common Stock equal to
the Warrant Quantity, subject to adjustment, if any, as provided herein. Concurrently herewith,
the Company and Holder are also entering into that certain Piggy Back Registration Rights Agreement
(hereinafter the “Registration Rights Agreement”) concerning the underlying shares of
Common Stock to be issued on the exercise hereof. Certain capitalized terms used in this Warrant
are defined in Section 11, any capitalized term not defined in Section 11 shall have the meaning
ascribed in the Registration Rights Agreement or other Investment Documents; references to an
“Exhibit” are, unless otherwise specified, to one of the Exhibits attached to this Warrant and
references to a “Section” are, unless otherwise specified, to one of the Sections of this Warrant.

1. Exercise of Warrant.

     1.1 Manner of Exercise. This Warrant may be exercised by the Holder, in whole or in
part, during normal business hours on any Business Day, by surrender of this Warrant to the Company
at its principal office, accompanied by the Form of Subscription in substantially the form attached
as Exhibit A to this Warrant (or a reasonable facsimile thereof) duly executed by the Holder and
accompanied by payment, in cash, by wire transfer, certified check or official bank check payable
to the order of the Company, or in the manner provided in Section 1.5 (or by any combination of
such methods), in the amount obtained by multiplying (a) the number of shares of Common Stock
designated in such Form of Subscription by (b) One Dollar and Twenty-Six Cents ($1.26), and such
Holder shall thereupon be entitled to receive such number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) on the Effective Date of
Exercise.

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     1.2 When Exercise Effective. Each exercise of this Warrant shall be deemed to have
been effected immediately prior to the close of business on the Effective Date of Exercise. At
such time the Person or Persons in whose name or names any certificate or certificates for shares
of Common Stock (or Other Securities) shall be issuable upon such exercise, as provided in Section
1.3, shall be deemed to have become the Holder or holders of record thereof.

     1.3 Delivery of Stock Certificates, etc. As soon as practicable after each exercise
of this Warrant, in whole or in part, and in any event within ten Business Days following the
Effective Date of Exercise, the Company at its expense (including the payment by it of any
applicable transfer taxes) will cause to be issued in the name of and delivered to the Holder
hereof or, subject to Section 8, as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct,

     (a) a certificate or certificates for the number of duly authorized, validly issued,
fully paid and nonassessable shares, including, if the Company so elects, fractional shares,
of Common Stock (or Other Securities) to which such Holder shall be entitled upon such exercise plus, at
the discretion of the Company, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash in an amount equal to the same fraction of the Current Market
Price per share on the Business Day next preceding the date of such exercise, and

     (b) in case such exercise is in part only, a new Warrant or Warrants of like tenor,
calling in the aggregate on the face or faces thereof for the number of shares of Common
Stock equal (without giving effect to any adjustment thereof) to the number of such shares
called for on the face of this Warrant minus the number of such shares designated by the
Holder upon such exercise as provided in Section 1.1.

In lieu of physical delivery of the shares being issued upon exercise, provided that the Company’s
transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated
Securities Transfer (“FAST”) program, upon request of the Holder and in compliance with the
provisions hereof, the Company shall use its reasonable efforts to cause its transfer agent to
electronically transmit the shares being issued to the Holder by crediting the account of the
Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission system. The time
period for delivery described herein shall apply to the electronic transmittals described herein.

     1.4 Company to Reaffirm Obligations. The Company will, at the time of each exercise
of this Warrant, upon the request of the Holder, acknowledge in writing its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if the Holder shall fail to
make any such request, such failure shall not affect the continuing obligation of the Company to
afford such rights to such Holder.

     1.5 Payment by Application of Shares Otherwise Issuable. Upon any exercise of this
Warrant, the Holder may, at its option, instruct the Company, by written notice accompanying the
surrender of this Warrant at the time of such exercise, to apply to the payment required by Section
1.1 such number of the shares of Common Stock otherwise issuable to such Holder upon such exercise
as shall be specified in such notice, in which case an amount equal to the excess of the aggregate
Current Market Price of such specified number of shares on the date

Page-2

 

of exercise over the portion of
the payment required by Section 1.1 attributable to such shares shall be deemed to have been paid
to the Company and the number of shares issuable upon such exercise shall be reduced by such
specified number.

     1.6 Tax Basis. The Company and the Holder shall mutually agree as to the tax basis of
this Warrant for purposes of the Internal Revenue Code of 1986, as amended (the “Code”),
and the treatment of this Warrant under the Code by each of the Company and the Holder shall be
consistent with such agreement.

2. Adjustment of Common Stock Issuable Upon Exercise. This Warrant initially evidences the
right to purchase a number of shares of Common Stock equal to the Warrant Quantity, subject to
adjustment as provided in this Section 2.

     2.1 Warrant Price. The “Warrant Price” shall be fixed at One Dollar and
Twenty-Six Cents ($1.26) per share of Common Stock received upon exercise of this Warrant.

     2.2 Extraordinary Dividends and Distributions. In the event that the Company at any
time or from time to time after the date hereof shall declare, order, pay or make a dividend or
other distribution (including, without limitation, any distribution of other or additional stock or
other securities or property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Stock other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a regularly scheduled cash dividend payable out
of consolidated earnings or earned surplus, determined in accordance with generally accepted
accounting principles, then, in each such case, subject to Section 2.6, the Warrant Quantity in
effect immediately prior to the close of business on the record date fixed for the determination of
holders of any class of securities entitled to receive such dividend or distribution shall be
increased, effective as of the close of business on such record date, to an amount determined by
multiplying such Warrant Quantity by a fraction

     (x) the numerator of which shall be the Current Market Price in effect on such record
date or, if the Common Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading, and

     (y) the denominator of which shall be such Current Market Price, less the amount of
such dividend or distribution (as determined in good faith by the Board of Directors of the
Company) applicable to one share of Common Stock,

provided that, in the event that the amount of such dividend as so determined is equal to or
greater than 10% of such Current Market Price or in the event that such fraction is greater than
10/9, in lieu of the foregoing adjustment, adequate provision shall be made so that the Holder of
this Warrant shall receive a pro rata share of such dividend based upon the maximum number of
shares of Common Stock at the time issuable to such Holder.

     2.3 Treatment of Stock Dividends, Stock Splits, etc. In the event that the Company at
any time or from time to time after the date hereof shall declare or pay any dividend on the Common
Stock payable in Common Stock, or shall effect a subdivision of the outstanding shares of Common
Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), then, and in each such case, Additional Shares of Common
Stock shall be deemed to have been issued (a) in the case of any

Page-3

 

such dividend, immediately after
the close of business on the record date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in the case of any such subdivision, at the
close of business on the day immediately prior to the day upon which such corporate action becomes
effective.

     2.4 Computation of Consideration. For the purposes of this Section 2,

     (a) the consideration for the issue or sale of any Additional Shares of Common Stock
shall, irrespective of the accounting treatment of such consideration,

     (i) insofar as it consists of cash, be computed at the net amount of cash
received by the Company, without deducting any expenses paid or incurred by the
Company or any commissions or compensations paid or concessions or discounts allowed
to underwriters, dealers or others performing similar services in connection with
such issue or sale,

     (ii) insofar as it consists of property (including securities) other than cash,
be computed at the fair value thereof at the time of such issue or sale, as
determined in good faith by the Board of Directors of the Company, and

     (iii) in case Additional Shares of Common Stock are issued or sold together
with other stock or securities or other assets of the Company for a consideration
which covers both, be the portion of such consideration so received, computed as
provided in clauses (i) and (ii) above, allocable to such Additional Shares of
Common Stock, all as determined in good faith by the Board of Directors of the
Company;

     (b) Additional Shares of Common Stock deemed to have been issued pursuant to Section
2.2, relating to stock dividends, stock splits, etc., shall be deemed to have been issued
for no consideration.

     2.5 Minimum Adjustment of Warrant Quantity. If the amount of any adjustment of the
Warrant Quantity required pursuant to this Section 2 would be less than one tenth (1/10) of one
percent (1%) of the Warrant Quantity in effect at the time such adjustment is otherwise so required
to be made, such amount shall be carried forward and adjustment with respect thereto made at the
time of and together with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one tenth (1/10) of one percent (1%)
of such Warrant Quantity. All calculations under this Warrant shall be made to the nearest
one-hundredth of a share.

     2.6 Abandoned Dividend or Distribution. If the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a dividend or other
distribution (which results in an adjustment to the Warrant Quantity under the terms of
this Warrant) and shall, thereafter, and before such dividend or distribution is paid or
delivered to shareholders entitled thereto, legally abandon its plan to pay or deliver such
dividend or distribution, then any adjustment made to the Warrant Quantity by reason of the taking
of such record shall be reversed, and any subsequent adjustments, based thereon, shall be
recomputed.

Page-4

 

3. Consolidation, Merger, etc.

     3.1 Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. In
case the Company after the date hereof (a) shall consolidate with or merge into any other Person
and shall not be the continuing or surviving corporation of such consolidation or merger, or (b)
shall permit any other Person to consolidate with or merge into the Company and the Company shall
be the continuing or surviving Person but, in connection with such consolidation or merger, the
Common Stock or Other Securities shall be changed into or exchanged for stock or other securities
of any other Person or cash or any other property, or (c) shall transfer all or substantially all
of its properties or assets to any other Person, or (d) shall effect a capital reorganization or
reclassification of the Common Stock or Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for which adjustment
in the Warrant Quantity is provided in Section 2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder, upon the exercise hereof at any time after the consummation
of such transaction, shall be entitled to receive (at the aggregate Warrant Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon such exercise
immediately prior to such consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the highest amount of securities, cash or other
property to which such Holder would actually have been entitled as a shareholder upon such
consummation if such Holder had exercised the rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly equivalent as possible
to the adjustments provided for herein.

     3.2 Assumption of Obligations. Notwithstanding anything contained in the Warrant or
in any other Investment Document to the contrary, the Company will not effect any of the
transactions described in clauses (a) through (d) of Section 3.1 unless, prior to the consummation
thereof, each Person (other than the Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to the Holder, (a) the obligations of the Company under this
Warrant (if the Company shall survive the consummation of such transaction, such assumption shall
be in addition to, and shall not release the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the Company under each other Investment
Document and (c) and the obligation to deliver to such Holder such shares of stock,
securities, cash or property as, in accordance with the foregoing provisions of this Section 3,
such Holder may be entitled to receive. In addition, such Person shall have delivered to such
Holder an opinion of counsel for such Person, which counsel shall be reasonably satisfactory to
such Holder, stating that this Warrant shall thereafter continue in full force and effect and the
terms hereof (including, without limitation, all of the provisions of this Section 3) shall be
applicable to the stock, securities, cash or property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any rights pursuant hereto.

4. Other Dilutive Events. In case any event shall occur as to which the provisions of
Section 2 or Section 3 are not strictly applicable but the failure to make any adjustment would not
fairly protect the purchase rights represented by this Warrant in accordance with the essential
intent and principles of such Sections, then, in each such case, upon receipt of a written request
by the Holder, the Company shall appoint a firm of independent certified public accountants of
recognized national standing (which may be the regular auditors of the Company), which shall

Page-5

 

give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and
principles established in Sections 2 and 3, necessary to preserve, without dilution, the purchase
rights represented by this Warrant. Upon receipt of such opinion, the Company will promptly mail a
copy thereof to the Holder and shall make the adjustments described therein, if any.

5. No Dilution or Impairment. The Company will not, by amendment of its articles of
incorporation or through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder against dilution or other
impairment. Without limiting the generality of the foregoing, the Company (a) shall not permit the
par value of any shares of stock receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid and nonassessable
shares of stock, free from all taxes, liens,
security interests, encumbrances, preemptive rights and charges on the exercise of the Warrants
from time to time outstanding, (c) will not take any action which results in any adjustment of the
Warrant Quantity if the total number of shares of Common Stock (or Other Securities) issuable after
the action upon the exercise of all of the Warrants would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the Company’s certificate of incorporation
and available for the purpose of issue upon such exercise, and (d) will not issue any capital stock
of any class which is preferred as to dividends or as to the distribution of assets upon voluntary
or involuntary dissolution, liquidation or winding-up, unless the rights of the holders thereof
shall be limited to a fixed sum or percentage of par value or a sum determined by reference to a
formula based on a published index of interest rates, an interest rate publicly announced by a
financial institution or a similar indicator of interest rates in respect of participation in
dividends and to a fixed sum or percentage of par value in any such distribution of assets.

6. Accountants’ Report as to Adjustments. In each case of any adjustment or readjustment
in the shares of Common Stock (or Other Securities) issuable upon the exercise of this Warrant, the
Company at its expense will promptly compute such adjustment or readjustment in accordance with the
terms of this Warrant and cause independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company) selected by the Company to verify such
computation (other than any computation of the fair value of property as determined in good faith
by the Board of Directors of the Company) and prepare a report setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof and the facts upon
which such adjustment or readjustment is based, including a statement of (a) the consideration
received or to be received by the Company for any Additional Shares of Common Stock issued or sold
or deemed to have been issued, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Warrant Quantity in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by Section 2) on account thereof. The Company will forthwith
mail a copy of each such report to each Holder of a Warrant and will, upon the written request at
any time of any Holder of a Warrant, furnish to such Holder a like report setting forth the Warrant
Quantity at the time in effect and showing in reasonable detail how it was calculated. The Company
will also keep copies of all such reports at its principal office and will cause the same to be
available for

Page-6

 

inspection at such office during normal business hours by any Holder of a Warrant or
any prospective purchaser of a Warrant designated by the Holder thereof.

7. Financial and Business Information.

     7.1 Filings. During any period when the Company is a Public Company, the Company will
file on or before the required date (including all applicable extensions) all required regular or
periodic reports (pursuant to the Exchange Act) with the Commission and will deliver to the Holder
promptly upon their becoming available one copy of each report, notice or proxy statement sent by
the Company to its stockholders generally, and of each regular or periodic report (pursuant to the
Exchange Act) and any registration statement, prospectus or written communication (other than
transmittal letters) (pursuant to the Securities Act), filed by the Company with (i) the Commission
or (ii) any securities exchange on which shares of Common Stock are listed.

     7.2 Notices of Corporate Action. In the event of

     (a) any taking by the Company of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any dividend
(other than a regular periodic dividend payable in cash out of earned surplus in an amount
not exceeding the amount of the immediately preceding cash dividend for such period) or
other distribution, or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to receive any other right, or

     (b) any capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company or any consolidation or merger involving the Company and
any other Person, any transaction or series of transactions in which more than 50% of the
Voting Securities of the Company are transferred to another Person or any transfer, sale or
other disposition of all or substantially all the assets of the Company to any other Person,
or

     (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company,

the Company will mail to the Holder a notice specifying (i) the date or expected date on which any
such record is to be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right, and (ii) the date or expected date on which
any such reorganization, reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place and the time, if any such time is to be
fixed, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, sale, disposition, liquidation or winding-up. Such notice shall be mailed
at least ten (10) days prior to the date therein specified.

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8. Restrictions on Transfer.

     8.1 Restrictive Legends. Except as otherwise permitted by this Section 6, each
Warrant (including each Warrant issued upon the transfer of any Warrant) shall be stamped or
otherwise imprinted with a legend in substantially the following form:

“THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF
ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
SUCH LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT.”

Except as otherwise permitted by this Section 8, each certificate for Common Stock (or Other
Securities) issued upon the exercise of any Warrant, and each certificate issued upon the transfer
of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a
legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE, AND MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.”

     8.2 Transfer to Comply With the Securities Act. Restricted Securities may not be
sold, assigned, pledged, hypothecated, encumbered or in any manner transferred or disposed of, in
whole or in part, except in compliance with the provisions of the Securities Act and state
securities or Blue Sky laws and the terms and conditions hereof.

Page-8

 

 

     8.3 Termination of Restrictions. The restrictions imposed by this Section 5 on the
transferability of Restricted Securities shall cease and terminate as to any particular Restricted
Securities (a) when a registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (b) when such securities are sold pursuant to Rule 144
(or any similar provision then in force) under the Securities Act, or (c) when, in the opinion of
both counsel for the Holder and counsel for the Company, such restrictions are no longer required
or necessary in order to protect the Company against a violation of the Securities Act upon any
sale or other disposition of such securities without registration thereunder. Whenever such
restrictions shall cease and terminate as to any Restricted Securities, the Holder shall be
entitled to receive from the Company, without expense, new securities of like tenor not bearing the
applicable legends required by Section 6.1.

9. Reservation of Stock, etc. The Company shall at all times reserve and keep available,
solely for issuance and delivery upon exercise of this Warrant, the number of shares of Common
Stock (or Other Securities) from time to time issuable upon exercise of this entire Warrant at the
time outstanding. All shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be validly issued and,
in the case of shares, fully paid and nonassessable with no liability on the part of the holders
thereof, and, in the case of all securities, shall be free from all taxes, liens, security
interests, encumbrances, preemptive rights and charges. The transfer agent for the Common Stock,
which may be the Company (“Transfer Agent”), and every subsequent Transfer Agent for any
shares of the Company’s capital stock issuable upon the exercise of any of the purchase rights
represented by this Warrant, are hereby irrevocably authorized and directed at all times until the
Expiration Date to reserve such number of authorized and unissued shares as shall be requisite for
such purpose. The Company shall keep copies of this Warrant on file with the Transfer Agent for
the Common Stock and with every subsequent Transfer Agent for any shares of the Company’s capital
stock issuable upon the exercise of the rights of purchase represented by this Warrant. The
Company shall supply such Transfer Agent with duly executed stock certificates for such purpose.
All Warrant certificates surrendered upon the exercise of the rights thereby evidenced shall be
canceled, and such canceled Warrants shall constitute sufficient evidence of the number of shares
of stock that have been issued upon the exercise of such Warrants. Subsequent to the Expiration
Date, no shares of stock need be reserved in respect of any unexercised Warrant.

10. Registration and Transfer of Warrants, etc.

     10.1 Warrant Register; Ownership of Warrants. Each Warrant issued by the Company
shall be numbered and shall be registered in a warrant register (the “Warrant Register”) as
it is issued and transferred, which Warrant Register shall be maintained by the Company at its
principal office or, at the Company’s election and expense, by a Warrant Agent or the Company’s
transfer agent. The Company shall be entitled to treat the registered Holder of any Warrant on
the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the part of any other
Person, and shall not be affected by any notice to the contrary, except that, if and when any
Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes. Subject to Section 9, a Warrant, if properly
assigned, may be exercised by a new holder without a new Warrant first having been issued.

Page-9

 

 

     10.2 Transfer of Warrants. Subject to compliance with Section 5, this Warrant and all
rights hereunder are transferable in whole or in part, without charge to the Holder hereof, upon
surrender of this Warrant with a properly executed Form of Assignment attached hereto as Exhibit B
at the principal office of the Company. Upon any partial transfer, the Company shall at its
expense issue and deliver to the Holder a new Warrant of like tenor, in the name of the Holder,
which shall be exercisable for such number of shares of Common Stock with respect to which rights
under this Warrant were not so transferred.

     10.3 Replacement of Warrants. On receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office and cancellation
thereof, the Company at its expense shall execute and deliver, in lieu thereof, a new Warrant of
like tenor.

     10.4 Adjustments To Warrant Quantity. Notwithstanding any adjustment in the Warrant
Quantity or in the number or kind of shares of Common Stock purchasable upon exercise of this
Warrant, any Warrant theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially issued.

     10.5 Fractional Shares. Notwithstanding any adjustment pursuant to any provision of
this Warrant, the Company may, but shall not be required to, issue fractions of shares upon
exercise of this Warrant or to distribute certificates which evidence fractional shares. In lieu
of fractional shares, the Company shall make payment to the Holder, at the time of exercise of this
Warrant as herein provided, in an amount in cash equal to such fraction multiplied by the Current
Market Price of a share of Common Stock on the date of Warrant exercise.

11. Definitions. As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:

     Additional Shares of Common Stock: All shares (including treasury shares) of Common
Stock issued or sold by the Company after the date hereof, whether or not subsequently
reacquired or retired by the Company, other than

(a) shares issued upon the exercise of the Warrant,

(b) such additional number of shares as may become issuable upon the exercise of the
Warrant by reason of adjustments required pursuant to provisions applicable to the
Warrant as in effect on the date hereof,

(c) shares, warrants, options and other securities issued at any time to the Holder
or any Affiliate thereof.

     Affiliate: Any person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the applicable person. For
purposes of this definition “control” has the meaning specified in Rule 12b-2 under the
Exchange Act.

Page-10

 

 

     Business Day: Any day other than a Saturday or a Sunday or a day on which commercial
banking institutions in the City of Nevada are authorized by law to be closed. Any
reference to “days” (unless Business Days are specified) shall mean calendar days.

     Code: As defined in Section 1.6.

     Commission: The Securities and Exchange Commission or any other federal agency at the
time administering the Securities Act.

     Common Stock: As defined in the introduction to this Warrant, such term to include any
stock into which such Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or classes (however
designated) of the Company the holders of which have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares entitled to
preference.

     Company: As defined in the introduction to this Warrant, such term to include any
corporation, which shall succeed to or assume the obligations of the Company hereunder in
compliance with Section 3.

     Convertible Securities: Any evidences of indebtedness, shares of stock (other than
Common Stock) or other securities directly or indirectly convertible into or exchangeable
for Additional Shares of Common Stock.

     Effective Date of Exercise: The first Business day which occurs following the
expiration of ninety (90) days from the date the company receives the Form of Subscription
and payment as set forth in Section 1.1.

     Exchange Act: The Securities Exchange Act of 1934, or any similar federal statute, and
the rules and regulations of the Commission thereunder, all as the same shall be in effect
at the time.

     Expiration Date: As defined in the introduction to this Warrant.

     Holder: As defined in the introduction to this Warrant.

     Investment Documents: The documents executed by and between the Company and the
Investor dated July 20, 2005 in furtherance of the consummation of the transactions
contemplated hereby, including this Agreement, the Subscription Agreement, the Warrant and
the Registration Rights Agreement, all as the same may be modified or amended from time to
time.

     Market Price or Current Market Price: On any date specified herein, the amount per
share of the Common Stock, equal to (a) the last reported sale price of such
Common Stock, regular way, on such date or, in case no such sale takes place on such
date, the average of the closing bid and asked prices thereof regular way on such date, in
either case as officially reported on the principal national securities exchange on which
such Common Stock is then listed or admitted for trading, or (b) if such Common Stock is not
then listed or admitted for trading on any national securities exchange but is

Page-11

 

 

designated as a national market system security by the NASD, the last reported trading price of the Common
Stock on such date, or (c) if there shall have been no trading on such date or if the Common
Stock is not so designated, the average of the closing bid and asked prices of the Common
Stock on such date as shown by the NASD automated quotation system, or (d) if such Common
Stock is not then listed or admitted for trading on any national exchange or quoted in the
over-the-counter market, the higher of (x) the book value thereof as determined by any firm
of independent public accountants of recognized standing selected by the Board of Directors
of the Company as of the last day of any month ending within 60 days preceding the date as
of which the determination is to be made and (y) the fair value thereof (as of a date which
is within 20 days of the date as of which the determination is to be made) determined in
good faith by the Board of Directors of the Company.

     NASD: The National Association of Securities Dealers, Inc.

     Other Securities: Any stock (other than Common Stock) and other securities of the
Company or any other Person (corporate or otherwise), which the Holders of the Warrants at
any time shall be entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock or Other
Securities.

     Person: An individual, firm, partnership, corporation, professional corporation,
trust, joint venture, association, joint stock company, limited liability company,
unincorporated organization or any other entity or organization, including a government or
agency or political subdivision thereof, and shall include any successor (by merger or
otherwise) of such entity.

     Restricted Securities: (a) any Warrants bearing the applicable legend set forth in
Section 5.1, (b) any shares of Common Stock (or Other Securities) issued or issuable upon
the exercise of Warrants which are evidenced by a certificate or certificates bearing the
applicable legend set forth in such Section, and (c) any shares of Common Stock (or Other
Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other
distribution with respect to, or resulting from a subdivision of the outstanding shares of
Common Stock (or other Securities) into a greater number of shares by reclassification,
stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or
Other Securities) issued upon such exercise, which are evidenced by a certificate or
certificates bearing the applicable legend set forth in such Section.

     Securities Act: The Securities Act of 1933, or any similar federal statute, and the
rules and regulations of the Commission thereunder, all as the same shall be in effect at
the time.

     Voting Securities: Stock of any class or classes (or equivalent interests), if the
Holders of the stock of such class or classes (or equivalent interests) are ordinarily, in
the absence of contingencies, entitled to vote for the election of the directors (or persons
performing similar functions) of such business entity, even though the right so to vote has
been suspended by the happening of such a contingency.

Page-12

 

 

     Warrant: As defined in the introduction to this Warrant.

     Warrant Price: As defined in Section 2.

     Warrant Quantity: As defined in the introduction to this Warrant.

12. Remedies; Specific Performance. The Company stipulates that there would be no adequate
remedy at law to the Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this Warrant and
accordingly, the Company agrees that, in addition to any other remedy to which the Holder may be
entitled at law or in equity, the Holder shall be entitled to seek to compel specific performance
of the obligations of the Company under this Warrant, without the posting of any bond, in
accordance with the terms and conditions of this Warrant in any court of the United States or any
State thereof having jurisdiction, and if any action should be brought in equity to enforce any of
the provisions of this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or omission by the Holder hereto in
exercising any right or remedy accruing upon any such breach shall not impair the right or remedy
or constitute a waiver of or acquiescence in any such breach. No remedy shall be exclusive of any
other remedy. All available remedies shall be cumulative.

13. No Rights or Liabilities as Shareholder. Nothing contained in this Warrant shall be
construed as conferring upon the Holder hereof any rights as a shareholder of the Company or as
imposing any obligation on the Holder to purchase any securities or as imposing any liabilities on
the Holder as a shareholder of the Company, whether such obligation or liabilities are asserted by
the Company or by creditors of the Company. The Holder hereof shall not acquire any rights as a
shareholder of the Company until the day following the Effective Date of Exercise.

14. Notices. Any notice or other communication required or permitted hereunder shall be
deemed given if in writing and delivered personally, telegraphed, telexed, sent by facsimile
transmission or sent by certified, registered or express mail, postage prepaid. Any such notice
shall be deemed given when so delivered personally or sent by overnight air courier or facsimile
transmission or, if mailed, two days after the date of deposit in the United States mail, as
follows:

If to Holder:

W. Russell Byers

170 Skimhampton Road

Amagansett; New York 11930

Facsimile: 631 329 2231

If to Viseon, Inc.:

Viseon, Inc.

Attn: President

545 E. John Carpenter Freeway, Suite 1420

Irving, TX 75062

Facsimile: 214-424-5785

With a copy to:

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Albert B. Greco, Jr.

Law Offices of Albert B. Greco, Jr.

16901 N. Dallas Parkway, Suite 230

Addison, Texas 75001

Facsimile: 972-818-7343

Any party may be given notice in accordance with this Section by any other party at another address
or person for receipt of notices, if such party so designates such other person or address in
writing in accordance with this Section 14. The Company shall give Notice to any subsequent Holder
at such address as it appears in the Warrant Register.

All such notices and communications (and deliveries) shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; when receipt is acknowledged, if telecopied;
on the next Business Day, if timely delivered to a courier guaranteeing overnight delivery; and
five days after being deposited in the mail, if sent first class or certified mail, return receipt
requested, postage prepaid; provided, that the exercise of any Warrant shall be effective in the
manner provided in Section 1.

15. Amendments. This Warrant and any term hereof may not be amended, modified,
supplemented or terminated, and waivers or consents to departures from the provisions hereof may
not be given, except by written instrument duly executed by the party against which enforcement of
such amendment, modification, supplement, termination or consent to departure is sought.

16. Descriptive Headings, etc. The headings in this Warrant are for convenience of
reference only and shall not limit or otherwise affect the meaning of terms contained herein.
Unless the context of this Warrant otherwise requires: (1) words of any gender shall be deemed to
include each other gender; (2) words using the singular or plural number shall also include the
plural or singular number, respectively; (3) the words “hereof”, “herein” and “hereunder” and words
of similar import when used in this Warrant shall refer to this Warrant as a whole and not to any
particular provision of this Warrant, and Section and paragraph references are to the Sections and
paragraphs of this Warrant unless otherwise specified; (4) the word “including” and words of
similar import when used in this Warrant shall mean “including, without limitation,” unless
otherwise specified; (5) “or” is not exclusive; and (6) provisions apply to successive events and
transactions.

17. Law Governing Agreement. This Agreement shall be interpreted, construed and enforced
and its construction and performance shall be governed by the laws of the State of Nevada without regard to principles of conflicts of
laws, except to the extent that Federal law may apply.

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Viseon, Inc.

          (Formerly RSI Systems, Inc.)

	 	 	 	 	 
	 	 	 
	By:

Its:

	 	John Harris

Chief Executive Officer	 	 

Page-15

 

 

Exhibit A

FORM OF SUBSCRIPTION

[To be executed only upon exercise of Warrant]

To: Viseon, Inc.:

The undersigned registered holder of the within Warrant hereby irrevocably exercises such Warrant
for, and purchases thereunder,
                                        * shares of Common stock of Viseon, Inc.
(Formerly RSI Systems, Inc.) and herewith makes payment of $                                         therefor, and
requests that the certificates for such shares be issued in the name of, and delivered to
                                                                                , whose address is                                                                                 
                                                                                                                                            

	 	 	 	 	 
	Dated:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	(Signature must conform in all respects to the

name of holder as specified on the face of Warrant)
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	(Street Address)
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	(City) (State) Zip Code)

 

			
	*	 	Insert here the number of shares called for on
the face of this Warrant (or, in the case of a partial exercise, the portion
thereof as to which this Warrant is being exercised), in either case without
making any adjustment for any other securities or property or cash which,
pursuant to the adjustment provisions of this Warrant, may be delivered upon
exercise. In the case of partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of the Warrant, to
the holder surrendering the Warrant.

 

 

Exhibit B

FORM OF ASSIGNMENT

[To be executed only upon assignment of Warrant]

     For value received, the undersigned registered holder of the within Warrant hereby sells,
assigns and transfers unto                                                                                 
the right represented by such Warrant to purchase                                                                                                                         shares of Common Stock of
Viseon, Inc. (Formerly RSI Systems, Inc.), to which such Warrant relates, and appoints
                                                                                , Attorney to make such transfer on the books of Viseon,
Inc. (Formerly RSI Systems, Inc.), maintained for such purpose, with full power of substitution in
the premises.

	 	 	 	 	 
	Dated:
	 	 	 	 
	 

	 
	 	 
	 

	 	 	 	(Signature must conform in all respects to the

name of holder as specified on the face of Warrant)
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	(Street Address)
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	(City) (State) Zip Code)

Signed in the presence of:

                                                                                

 

                                                                                

                        (printed name)

 

                                                                                

 

                                                                                

                        (printed name)

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