Document:

Exhibit 10.4

Exhibit 10.4

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of April 20, 2009,
between UFood Restaurant Group, Inc., a Nevada corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its successors and assigns, 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 of 1933, as amended, and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully described in this
Agreement.

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 agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized
terms that are not otherwise defined herein have the meanings given to such terms in the Debentures
(as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:

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

“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 405 under the Securities Act.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any 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 Securities pursuant
to Section 2.1.

“Closing Date” means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all conditions
precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been satisfied or
waived.

 

 

 

“Closing Statement” means the Closing Statement in the form on Annex A
attached hereto.

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may hereafter be
reclassified or changed.

“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 exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.

“Company Counsel” means Robinson & Cole LLP, with offices located at 1055
Washington Boulevard, 9th Floor, Stamford, CT 06901.

“Conversion Price” shall have the meaning ascribed to such term in the
Debentures.

“Debentures” means the 8% Senior Secured Convertible Debentures due, subject to
the terms therein, 3 years from their date of issuance, issued by the Company to the
Purchasers hereunder, in the form of Exhibit A attached hereto.

“Disclosure Schedules” shall mean the disclosure schedules provided by the
Company to the Purchasers on the date hereof.

“Effective Date” means the date that the initial Registration Statement filed
by the Company pursuant to the Registration Rights Agreement is first declared effective by
the Commission.

“Escrow Agent” means Signature Bank, a New York State chartered bank and having
an office at 261 Madison Avenue, New York, New York 10016.

“Escrow Agreement” means the escrow agreement entered into prior to the date
hereof, by and among the Company and the Escrow Agent pursuant to which the Purchasers,
shall deposit Subscription Amounts with the Escrow Agent to be applied to the transactions
contemplated hereunder.

“Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).

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

 

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“Exempt Issuance” means the issuance of (a) shares of Common Stock or options
(i) to employees, officers or directors of the Company pursuant to any stock or option plan
duly adopted and in effect as of the date hereof or (ii) duly adopted after the date
hereof by a majority of the non-employee members of the Board of Directors or a
majority of the members of a committee of non-employee directors established for such
purpose, (b) securities upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other securities exercisable or exchangeable for or convertible into
 shares of Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to increase the
number of such securities or to decrease the exercise price, exchange price or conversion
price of such securities, and (c) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors of the Company, provided
that any such issuance shall only be to a Person (or to the equityholders of a Person) which
is, itself or through its subsidiaries, an operating company or an asset in a business
synergistic with the business of the Company and shall provide to the Company additional
benefits in addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising capital or to
an entity whose primary business is investing in securities, (d) with the prior written
consent of Garden State, up to an amount of Debentures and warrants equal to the difference
between $7,000,000 and the aggregate Subscription Amounts hereunder, on the same terms and
conditions and prices as hereunder and (e) up to $50,000 in any 12 month period, of
securities issued or issuable in connection with a bank loan, lease or other non-equity
interim financing.

“FWS” means Feldman Weinstein & Smith LLP with offices located at 420 Lexington
Avenue, Suite 2620, New York, New York 10170-0002.

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

“Garden State” means Garden State Securities, Inc.

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

“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).

“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).

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

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

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

“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.

 

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“Participation Maximum” shall have the meaning ascribed to such term in Section
4.12(a).

“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.

“Pre-Notice” shall have the meaning ascribed to such term in Section 4.12(b).

“Pro Rata Portion” shall have the meaning ascribed to such term in Section
4.12(e).

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.

“Public Information Failure” shall have the meaning ascribed to such term in
Section 4.3(b).

“Public Information Failure Payments” shall have the meaning ascribed to such
term in Section 4.3(b).

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.

“Purchaser Questionnaire” means the Confidential Purchaser Questionnaire, dated
the date hereof, by each Purchaser, in the form of Exhibit G attached hereto.

“Registration Rights Agreement” means the Registration Rights Agreement, dated
the date hereof, among the Company and the Purchasers, in the form of Exhibit B
attached hereto.

“Registration Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.

“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).

“Required Minimum” means, as of any date, the maximum aggregate number of
 shares of Common Stock then issued or potentially issuable in the future pursuant to the
Transaction Documents, including any Underlying Shares issuable upon exercise in full of all
Warrants or conversion in full of all Debentures (including Underlying Shares issuable as
payment of interest on the Debentures), ignoring any conversion or exercise limits set forth
therein, and assuming that the Conversion Price is at all times on and after the date of
determination 75% of the then Conversion Price on the Trading Day immediately prior to the
date of determination.

 

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“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.

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

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

“Securities” means the Debentures, the Warrants, the Warrant Shares and the
Underlying Shares.

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

“Security Agreement” means the Security Agreement, dated the date hereof, among
the Company and the Purchasers, in the form of Exhibit E attached hereto.

“Security Documents” shall mean the Security Agreement, the Subsidiary
Guarantees and any other documents and filing required thereunder in order to grant the
Purchasers a security interest in the assets of the Company and the Subsidiaries as provided
in the Security Agreement, including all UCC-1 filing receipts.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or reservation
of borrowable shares of Common Stock).

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Debentures and Warrants purchased hereunder as specified below such Purchaser’s
name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

“Subsequent Financing” shall have the meaning ascribed to such term in Section
4.12(a).

“Subsequent Financing Notice” shall have the meaning ascribed to such term in
Section 4.12(b).

“Subsidiary” means any subsidiary of the Company as set forth on Schedule
3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.

“Subsidiary Guarantee” means the Subsidiary Guarantee, dated the date hereof,
by each Subsidiary in favor of the Purchasers, in the form of Exhibit F attached
hereto.

 

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“Trading Day” means a day on which the principal Trading Market is open for
trading.

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE Alternext,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the
foregoing).

“Transaction Documents” means this Agreement, the Debentures, the Warrants, the
Registration Rights Agreement, the Security Agreement, the Subsidiary Guarantee, the Escrow
Agreement, the Purchaser Questionnaires, all exhibits and schedules thereto and hereto and
any other documents or agreements executed in connection with the transactions contemplated
hereunder.

“Transfer Agent” means Continental Stock Transfer & Trust Company, the current
transfer agent of the Company, with a mailing address of 17 Battery Place, 8th Floor, New
York, New York 10004-1123, and a facsimile number of, (212) 509-5150, and any successor
transfer agent of the Company.

“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion or redemption of the Debentures and upon exercise of the Warrants and issued and
issuable in lieu of the cash payment of interest on the Debentures in accordance with the
terms of the Debentures.

“Variable Rate Transaction” shall have the meaning ascribed to such term in
Section 4.13(b).

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in
the “Pink Sheets” published by Pink OTC Markets, Inc. (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) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by the
Purchasers of a majority in interest of the Securities then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.

“Warrants” means, collectively, the Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants
shall be exercisable immediately and have a term of exercise equal to 5 years, in the
form of Exhibit C attached hereto

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

 

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ARTICLE II.

PURCHASE AND SALE

2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree
to purchase, no less than $2,000,000 in principal amount of the Debentures and up to an aggregate
of $7,000,000. At the Closing, (i) each Purchaser shall deliver to the Company via wire transfer
or a certified check of immediately available funds equal to such Purchaser’s Subscription Amount
as set forth on the signature page hereto executed by such Purchaser, (ii) the Company shall
deliver to each Purchaser its respective Debenture and a Warrant, as determined pursuant to Section
2.2(a), and (iii) the Company and each Purchaser shall deliver the other items set forth in Section
2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of FWS or such other location as the
parties shall mutually agree and Garden State shall deliver to the Escrow Agent the Form of Escrow
Release Notice (as defined in the Escrow Agreement), duly executed.

2.2 Deliveries.

(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following:

(i) this Agreement duly executed by the Company;

(ii) a legal opinion of Company Counsel, substantially in the form of
Exhibit D attached hereto;

(iii) a Debenture with a principal amount equal to such Purchaser’s
Subscription Amount, registered in the name of such Purchaser;

(iv) a Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 50% of such Purchaser’s Subscription
Amount divided by $0.13, with an exercise price equal to $0.14, subject to
adjustment therein;

(v) the Security Agreement, duly executed by the Company and each Subsidiary,
along with all of the Security Documents, including the Subsidiary Guarantee, duly
executed by the parties thereto; and

(vi) the Registration Rights Agreement duly executed by the Company.

 

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(b) On or prior to the Closing Date, 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 Subscription Amount by wire transfer to the Escrow Agent;

(iii) the Security Agreement duly executed by such Purchaser;

(iv) the Registration Rights Agreement duly executed by such Purchaser; and

(v) a Purchaser Questionnaire completed and duly executed by such Purchaser.

2.3 Closing Conditions. 

(a) The obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein (unless such
representations or warranties are made as of a specific date, in which case as of
the specific date therein);

(ii) all obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed;

(iii) the minimum aggregate Subscription Amount hereunder shall be $2,000,000;
and

(iv) the delivery by each Purchaser of the items set forth in Section 2.2(b) of
this Agreement.

(b) The respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:

(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Company contained herein (unless such
representations or warranties are made as of a specific date, in which case as of
the specific date therein);

(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;

 

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(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;

(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof;

(v) the minimum aggregate Subscription Amount hereunder shall be $2,000,000;
and

(vi) from the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission or the Company’s principal Trading
Market (except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not
have been established on securities whose trades are reported by such service, or on
any Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of each Purchaser,
makes it impracticable or inadvisable to purchase the Securities at the Closing.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify
any representation or otherwise made herein to the extent of the disclosure contained in the
corresponding section of the Disclosure Schedules, the Company hereby makes the following
representations and warranties to each Purchaser:

(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company
are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of
the capital stock or other equity interests of each Subsidiary free and clear of any Liens,
and all of 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 to
subscribe for or purchase securities. If the Company has no subsidiaries, all other
references to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

 

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(b) Organization and Qualification. The Company and each of 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, with the requisite
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 nor default 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, could not have or
reasonably be expected to 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, prospects or condition (financial or otherwise) 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”)
and no Proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c) Authorization; Enforcement. 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 hereunder and thereunder.
The execution and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and no further action is
required by the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals. Each Transaction Document
to which it is a party has been (or upon delivery will have been) duly executed by the
Company and, when delivered in accordance with the terms hereof and thereof, will constitute
the valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.

(d) No Conflicts. Except as set forth on Schedule 3.1(d), the
execution, delivery and performance by the Company of the Transaction Documents, the
issuance and sale of the Securities and the consummation by it of the transactions
contemplated hereby and thereby to which it is a party 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, bylaws 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, result in the creation of any Lien upon any of the properties or assets of
the Company or any Subsidiary, 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
affected, or (iii) subject to the Required Approvals, conflict with or result in a
violation of any 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 or affected; except in the case of
each of clauses (ii) and (iii), such as could not have or reasonably be expected to result
in a Material Adverse Effect.

 

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(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: (i) the filings required pursuant to Section 4.6 of
this Agreement, (ii) the filing with the Commission pursuant to the Registration Rights
Agreement, (iii) those consents, waivers and authorizations set forth on Schedule
3.1(e), (iv) the notice and/or application(s) to each applicable Trading Market for the
issuance and sale of the Securities and the listing of the Underlying Shares for trading
thereon in the time and manner required thereby, and (v) the filing of Form D with the
Commission and such filings as are required to be made under applicable state securities
laws (collectively, the “Required Approvals”).

(f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction Documents. The
Underlying Shares, when issued in accordance with the terms of the Transaction Documents,
will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by
the Company other than restrictions on transfer provided for in the Transaction Documents.
The Company has reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the
date hereof.

 

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(g) Capitalization. The capitalization of the Company, as of the date hereof,
is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include
the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the
Company as of the date hereof. The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act, other than pursuant to the exercise
of employee stock options under the Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee stock purchase plans and
pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the
date of the most recently filed periodic report under the Exchange Act. No Person has any
right of first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents. Except as a
result of the purchase and sale of the Securities or as set forth on Schedule
3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common Stock Equivalents. Except
as set forth on Schedule 3.1(g), the issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase securities. Except as set
forth on Schedule 3.1(g), no further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance and sale of the Securities.
There are no stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to the knowledge
of the Company, between or among any of the Company’s stockholders.

(h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange Act, 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 the light of the circumstances under which they
were made, not misleading. The Company has never been an issuer subject to Rule 144(i)
under the Securities Act. The financial statements of the Company included in the SEC
Reports comply 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 have been prepared in accordance with United States
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, immaterial, year-end audit adjustments.

 

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(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the date
hereof, or as set forth on Schedule 3.1(i): (i) there has been no event, occurrence
or development that has had or that would reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise)
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 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
stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock option plans. The
Company does not have pending before the Commission any request for confidential treatment
of information. Except for the issuance of the Securities contemplated by this Agreement or
as set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence
or development has occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective business, properties,
operations, assets or financial condition, that would be required to be disclosed by the
Company under applicable securities laws at the time this representation is made or deemed
made that has not been publicly disclosed at least 1 Trading Day prior to the date that this
representation is made.

(j) Litigation. Except as set forth on Schedule 3.1(j), 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 or regulatory authority (federal, state, county, local or foreign)
(collectively, an “Action”) which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been 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.
There has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or any current or
former director or officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.

 

13

 

(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 could
reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s relationship
with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and, except as set forth on Schedule
3.1(k), the Company and its Subsidiaries believe that their relationships with their
employees are good. No executive officer, to the knowledge of
the Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive covenant in
favor of any third party, and the continued employment of each such executive officer does
not subject the Company or any of its Subsidiaries to any liability with respect to any of
the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be expected to
have 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 judgment, decree or order of any court, arbitrator or governmental body or (iii) is or
has been in violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws
applicable to its business and all such laws that affect the environment, except in each
case as would not have or reasonably be 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 described
in the SEC Reports, except where the failure to possess such permits could not reasonably be
expected to result in a Material Adverse Effect (“Material Permits”), and neither
the Company nor any Subsidiary has received any 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 and good and marketable title in all
personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except as set forth on Schedule
3.1(n) and except for Liens as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such property by
the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes,
the payment of which is neither delinquent nor subject to penalties. 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.

 

14

 

(o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other
intellectual property rights and similar rights as described in the SEC Reports as necessary
or material for use in connection with their respective businesses and which the failure to
so have could have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Neither the Company nor any Subsidiary has received a notice (written or
otherwise) that any of the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the
Company, all such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where failure to
do so could not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance coverage at least
equal to the aggregate Subscription Amount. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.

(q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently 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 $120,000 other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock option plan
of the Company.

 

15

 

(r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in
conformity with 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. The Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the Company’s most recently
filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.

(s) Certain Fees. Other than the fees of Garden State and as set forth in
Schedule 3.1(s) attached hereto, no brokerage or finder’s fees or commissions are or
will be payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. 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 the Transaction Documents.

(t) 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 Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does not contravene
the rules and regulations of the Trading Market.

(u) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an
“investment company” subject to registration under the Investment Company Act of 1940, as
amended.

(v) Registration Rights. Except as set forth on Schedule 3.1(v), other
than each of the Purchasers, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.

 

16

 

(w) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. Except as set forth on Schedule 3.1(w), the
Company is, and has no reason to believe that it will not in the foreseeable future continue
to be, in compliance with all such listing and maintenance requirements.

(x) Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.

(y) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or might
constitute material, non-public information. The Company understands and confirms that the
Purchasers will rely on the foregoing representation in effecting transactions in securities
of the Company. All of the disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, is true and correct and does 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. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not contain any untrue
statement of a material fact or omit 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 and when made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in Section 3.2
hereof.

(z) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of (i) the Securities Act which would require the
registration of any such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated. 

 

17

 

(aa) Solvency. Based on the consolidated financial condition of the Company as
of the Closing Date, after giving effect to the receipt by the Company of the proceeds from
the sale of the Securities hereunder: (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they
mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on
its business as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business conducted by the
Company, and projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would receive, were
it to liquidate all of its assets, after taking into account all anticipated uses of the
cash, would be sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and amounts of cash
to be payable on or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule 3.1(aa) sets forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in the ordinary course of
business), (y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of
business; and (z) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

(bb) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, the
Company and each Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been asserted or threatened against
the Company or any Subsidiary.

(cc) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited investors” within the meaning of Rule 501
under the Securities Act.

 

18

 

(dd) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has: (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(ee) Accountants. The Company’s accounting firm is set forth on Schedule
3.1(ee) of the Disclosure Schedules. To the knowledge of the Company, such accounting
firm: (i) is a registered public accounting firm as required by the Exchange Act and (ii)
shall express its opinion with respect to the financial statements to be included in the
Company’s Annual Report for the year ending December 31, 2008.

(ff) Seniority. As of the Closing Date, no Indebtedness or other claim against
the Company is senior to the Debentures in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured
by purchase money security interests (which is senior only as to underlying assets covered
thereby) and capital lease obligations (which is senior only as to the property covered
thereby).

(gg) No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to arise, between
the Company and the accountants and lawyers formerly or presently employed by the Company
and the Company is current with respect to any fees owed to its accountants and lawyers
which could affect the Company’s ability to perform any of its obligations under any of the
Transaction Documents.

(hh) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated thereby and any advice given by
any Purchaser or any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities. The Company further represents to each Purchaser
that the Company’s decision to enter into this Agreement and the other Transaction Documents
has been based solely on the independent evaluation of the transactions contemplated hereby
by the Company and its representatives.

 

19

 

(ii) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f)
and 4.16 hereof), it is understood and acknowledged by the Company that: (i) none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the
Securities for any specified term, (ii) past or future open market or other
transactions by any Purchaser, specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s publicly-traded
securities, (iii) any Purchaser, and counter-parties in “derivative” transactions to which
any such Purchaser is a party, directly or indirectly, may presently have a “short” position
in the Common Stock and (iv) each Purchaser shall not be deemed to have any affiliation with
or control over any arm’s length counter-party in any “derivative” transaction. The Company
further understands and acknowledges that (y) one or more Purchasers may engage in hedging
activities at various times during the period that the Securities are outstanding,
including, without limitation, during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and (z) such hedging activities
(if any) could reduce the value of the existing stockholders’ equity interests in the
Company at and after the time that the hedging activities are being conducted. The Company
acknowledges that such aforementioned hedging activities do not constitute a breach of any
of the Transaction Documents.

(jj) Regulation M Compliance. Except as set forth on Schedule 3.1(jj),
the Company has not, and to its knowledge no one acting on its behalf has, (i) taken,
directly or indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person
any compensation for soliciting another to purchase any other securities of the Company,
other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s
placement agent in connection with the placement of the Securities.

(kk) Stock Option Plans. Except as set forth on Schedule 3.1(kk), each
stock option granted by the Company under the Company’s stock option plan was granted (i) in
accordance with the terms of the Company’s stock option plan and (ii) with an exercise price
at least equal to the fair market value of the Common Stock on the date such stock option
would be considered granted under GAAP and applicable law. No stock option granted under the
Company’s stock option plan has been backdated. The Company has not knowingly granted, and
there is no and has been no Company policy or practice to knowingly grant, stock options
prior to, or otherwise knowingly coordinate the grant of stock options with, the release or
other public announcement of material information regarding the Company or its Subsidiaries
or their financial results or prospects.

 

20

 

3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows (unless as of a specific date therein):

(a) Organization; Authority. Such Purchaser is either an individual or 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 hereunder and
thereunder. The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have been duly
authorized by all necessary corporate, partnership, limited liability company or similar
action, as applicable, 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, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

(b) Own Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for its own
account and not with a view to or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of the Securities Act
or any applicable state securities law and has no direct or indirect arrangement or
understandings with any other persons to distribute or regarding the distribution of such
Securities in violation of the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s right to sell the Securities
pursuant to the Registration Statement or otherwise in compliance with applicable federal
and state securities laws). Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.

(c) Purchaser Status. At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises any Warrants
or converts any Debentures it will be either: (i) an “accredited investor” as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such
Purchaser is not required to be registered as a broker-dealer under Section 15 of the
Exchange Act.

(d) Experience of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the 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 Securities and, at
the present time, is able to afford a complete loss of such investment.

(e) General Solicitation. Such Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding the 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.

 

21

 

(f) Certain Transactions and Confidentiality. Other than consummating the
transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Purchaser,
executed any purchases or sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company setting
forth the material terms of the transactions contemplated hereunder and ending immediately
prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser
that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct
knowledge of the investment decisions made by the portfolio managers managing other portions
of such Purchaser’s assets, the representation set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement. Other than to other Persons party to
this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to
it in connection with this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained
herein shall constitute a representation or warranty, or preclude any actions, with respect
to the identification of the availability of, or securing of, available shares to borrow in
order to effect Short Sales or similar transactions in the future.

(g) Disclosure of Information; Due Diligence. Such Purchaser has had an
opportunity to ask questions of and receive answers from the Company’s management regarding
the Company and the terms and conditions of the offering of the Securities hereunder and to
obtain additional information necessary to verify the accuracy of the information supplied
or to which the Purchaser had access.

(h) Restricted Securities. Such Purchaser understands that the Securities to
be acquired hereunder are characterized as “restricted securities” under the federal
securities laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act only in certain
limited circumstances and in accordance with the terms and conditions set forth in the
legend described below. In this connection, such Purchaser represents that the Purchaser is
familiar with Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.

(i) Brokers. Other than Garden State, the Purchaser has no contract,
arrangement or understanding with any broker, finder or similar agent with respect to the
transactions contemplated by the Transaction Documents.

(j) State of Residence. Such Purchaser was offered the Securities in the
jurisdiction listed in the Purchaser’s permanent address set forth under “Address of Notice
for Purchaser” on the signature page hereto and intends that the securities law of that
jurisdiction govern the Purchaser’s subscription.

 

22

 

     The Company acknowledges and agrees that the representations contained in Section 3.2 shall not
modify, amend or affect such Purchaser’s right to rely on the Company’s representations and
warranties contained in this Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or delivered in connection
with this Agreement or the consummation of the transaction contemplated hereby.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than pursuant to an
effective registration statement or Rule 144, to the Company or to an Affiliate of a
Purchaser or 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 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 the Registration Rights Agreement and shall have the rights and
obligations 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,
of a legend on any of the Securities in the following form:

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [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 SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND
THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] 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 OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

23

 

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 Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by
the provisions of this Agreement and the Registration Rights Agreement and, if required
under the terms of such arrangement, such Purchaser may transfer pledged or secured
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 required in connection therewith. Further, no notice
shall be required of such pledge. At the appropriate Purchaser’s sole expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the Securities,
including, if the Securities are subject to registration pursuant to the Registration Rights
Agreement, 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 (as defined in the Registration Rights
Agreement) thereunder.

(c) Certificates evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) while a registration
statement (including the Registration Statement) covering the resale of such security is
effective under the Securities Act, (ii) following any sale of such Underlying Shares
pursuant to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule 144,
without the requirement for the Company to be in compliance with the current public
information required under Rule 144 as to such Underlying Shares and without volume or
manner-of-sale restrictions or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer
Agent to effect the removal of the legend hereunder. If all or any portion of a Debenture
is converted or Warrant is exercised at a time when there is an effective registration
statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be
sold under Rule 144 and the Company is then in compliance with the current public
information required under Rule 144, or if such Underlying Shares may be sold under Rule 144
without the requirement for the Company to be in compliance with the current public
information required under Rule 144 as to such Underlying Shares and without volume or
manner-of-sale restrictions or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission) then such Underlying Shares shall be issued free of
all legends. The Company agrees that following the Effective Date or at such time as such
legend is no longer required under this Section 4.1(c), it will, no later than three Trading
Days following the delivery by a Purchaser to the Company or the Transfer Agent of a
certificate representing Underlying Shares, as applicable, issued with a restrictive legend
(such third Trading Day, the “Legend Removal Date”), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares subject to
legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with the Depository Trust Company
System as directed by such Purchaser.

 

24

 

(d) In addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of
Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are
submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject
to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading
Days after such damages have begun to accrue) for each Trading Day after the fourth Trading
Day after the Legend Removal Date until such certificate is delivered without a legend.
Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s
failure to deliver certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies available to it at
law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief.

(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees with
the Company that such Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the plan of distribution set
forth therein, and acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance upon this understanding.

4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its obligation to issue the
Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any
such dilution or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other stockholders of the
Company.

 

25

 

4.3 Furnishing of Information; Public Information.

(a) If the Common Stock is not registered under Section 12(b) or 12(g) of the Exchange
Act on the date hereof, the Company agrees to cause the Common Stock to be registered under
Section 12(g) of the Exchange Act on or before the 60th calendar day following
the date hereof. Until the earliest of the time that (i) no Purchaser owns Securities or
(ii) the Warrants have expired, the Company covenants to maintain the registration of the
Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to
the Exchange Act even if the Company is not then subject to the reporting requirements
of the Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities, including without limitation, under Rule
144. The Company further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to enable such
Person to sell such Securities without registration under the Securities Act, including
without limitation, within the requirements of the exemption provided by Rule 144.

(b) At any time during the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may be sold without the
requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to
satisfy the current public information requirement under Rule 144(c) (a “Public
Information Failure”) then, in addition to such Purchaser’s other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a
penalty, by reason of any such delay in or reduction of its ability to sell the Securities,
an amount in cash equal to two percent (2.0%) of the aggregate Subscription Amount of such
Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth
(30th) day (pro rated for periods totaling less than thirty days) thereafter
until the earlier of (a) the date such Public Information Failure is cured and (b) such time
that such public information is no longer required for the Purchasers to transfer the
Underlying Shares pursuant to Rule 144. The payments to which a Purchaser shall be entitled
pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure
Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the
last day of the calendar month during which such Public Information Failure Payments are
incurred and (ii) the third (3rd) Business Day after the event or failure giving
rise to the Public Information Failure Payments is cured. In the event the Company fails to
make Public Information Failure Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Public Information Failure, and such Purchaser shall have the right to
pursue all remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.

4.4 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 the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities or that would be integrated
with the offer or sale of the Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such subsequent
transaction. 

 

26

 

4.5 Conversion and Exercise Procedures. Each of the form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the Debentures set
forth the totality of the procedures required of the Purchasers in order to exercise the
Warrants or convert the Debentures. No additional legal opinion, other information or instructions
shall be required of the Purchasers to exercise their Warrants or convert their Debentures. The
Company shall honor exercises of the Warrants and conversions of the Debentures and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set forth in the
Transaction Documents.

4.6 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m. (New York
City time) on the Trading Day immediately following the date hereof, issue a Current Report on Form
8-K and press release disclosing the material terms of the transactions contemplated hereby, and
including the Transaction Documents (except the Purchaser Questionnaires) as exhibits thereto.
From and after the issuance of such press release, the Company shall have publicly disclosed all
material, non-public information delivered to any of the Purchasers by the Company or any of its
Subsidiaries, or any of their respective officers, directors, employees or agents in connection
with the transactions contemplated by the Transaction Documents. The Company and each Purchaser
shall consult with each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release
nor otherwise make any such public statement without the prior consent of the Company, with respect
to any press release of any Purchaser, or without the prior consent of the Purchasers holding at
least 67% of the then outstanding Securities and each such Purchaser to which the press release
applies, 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:
(a) as required by federal securities law in connection with (i) any registration statement
contemplated by the Registration Rights Agreement and (ii) the filing of final Transaction
Documents (including signature pages thereto) with the Commission and (b) 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 this clause (b).

4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person”
under any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers.

 

27

 

4.8 Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the Company covenants and agrees
that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company.

4.9 Use of Proceeds. Except as set forth on Schedule 4.9 attached hereto, the
Company shall use the net proceeds from the sale of the Securities hereunder for working capital
purposes and shall not use such proceeds for: (a) the satisfaction of any portion of the Company’s
debt (other than payment of trade payables in the ordinary course of the Company’s business and
prior practices), (b) the redemption of any Common Stock or Common Stock Equivalents or (c) the
settlement of any outstanding litigation.

4.10 Indemnification of Purchasers. Subject to the provisions of this Section 4.10,
the Company will indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any other title), each
Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from 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 that any
such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity,
or any of them or their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such Purchaser’s
representations, warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any violations by such
Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the
right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Purchaser Party except to the extent that (i) the employment thereof has
been specifically authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict on any material issue between
the position of the Company and the position of such Purchaser Party, in which case the Company
shall be responsible for the reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any
settlement by a Purchaser Party effected without the Company’s prior written consent, which shall
not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants or agreements
made by such Purchaser Party in this Agreement or in the other Transaction Documents.

 

28

 

4.11 Reservation and Listing of Securities.

(a) The Company shall maintain a reserve from its duly authorized shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as may then be
required to fulfill its obligations in full under the Transaction Documents.

(b) If, on any date, the number of authorized but unissued (and otherwise unreserved)
 shares of Common Stock is less than the Required Minimum on such date, then the Board of
Directors shall use commercially reasonable efforts to amend the Company’s certificate or
articles of incorporation to increase the number of authorized but unissued shares of Common
Stock to at least the Required Minimum at such time, as soon as possible and in any event
not later than the 75th day after such date.

(c) The Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an additional shares
listing application covering a number of shares of Common Stock at least equal to the
Required Minimum on the date of such application, (ii) take all steps necessary to cause
such shares of Common Stock to be approved for listing or quotation on such Trading Market
as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing and
(iv) maintain the listing or quotation of such Common Stock on any date at least equal to
the Required Minimum on such date on such Trading Market or another Trading Market.

4.12 Participation in Future Financing.

(a) Subject to Section 4.12(g), from the date hereof until the date that is the
twenty-four month anniversary of the Closing Date, upon any issuance by the Company or any
of its Subsidiaries of Common Stock, Common Stock Equivalents for cash consideration,
Indebtedness (or a combination of units hereof) (a “Subsequent Financing”), each
Purchaser shall have the right to participate in up to an amount of the Subsequent Financing
equal to 100% of the Subsequent Financing (the “Participation Maximum”) on the same
terms, conditions and price provided for in the Subsequent Financing.

(b) At least ten (10) Trading Days prior to the closing of the Subsequent Financing,
the Company shall deliver to each Purchaser a written notice of its intention to effect a
Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it
wants to review the details of such financing (such additional notice, a “Subsequent
Financing Notice”). Upon the request of a Purchaser, provided to the Company in writing
after receipt of a Pre-Notice, and only upon a request by such Purchaser, for a Subsequent
Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after
such request, deliver a Subsequent Financing Notice to such Purchaser. The Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be
raised thereunder and the Person or Persons through or with whom such Subsequent
Financing is proposed to be effected and shall include a term sheet or similar document
relating thereto as an attachment.

 

29

 

(c) Each Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time) on the 10th
Trading Day after all of the Purchasers have received the Pre-Notice that such Purchaser
desires to participate in the Subsequent Financing, the amount of the Purchaser’s
participation, and representing and warranting that the Purchaser has such funds ready,
willing, and available for investment on the terms set forth in the Subsequent Financing
Notice. If the Company receives no such notice from a Purchaser as of such 10th Trading
Day, such Purchaser shall be deemed to have notified the Company that it elects not to
participate in the Subsequent Financing.

(d) If by 5:30 p.m. (New York City time) on the 10th Trading Day after all of the
Purchasers have received the Pre-Notice, notifications by the Purchasers of their
willingness to participate in the Subsequent Financing (or to cause their designees to
participate) indicates a desire to purchase, in the aggregate, less than the total amount of
the Subsequent Financing, then the Company may effect the remaining portion of such
Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing
Notice.

(e) If by 5:30 p.m. (New York City time) on the tenth (10th) Trading Day
after all of the Purchasers have received the Pre-Notice, the Company receives responses to
a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate
amount of the Participation Maximum, each such Purchaser shall have the right to purchase
its Pro Rata Portion (as defined below) of the Participation Maximum. “Pro Rata
Portion” means the ratio of (x) the Subscription Amount of Securities purchased on the
Closing Date by a Purchaser participating under this Section 4.12 and (y) the sum of the
aggregate Subscription Amounts of Securities purchased on the Closing Date by all Purchasers
participating under this Section 4.12 plus the aggregate subscription amounts of investors
party to securities purchase agreement(s) contemplated by clause (d) in the definition of
Exempt Issuance that are participating in such Subsequent Financing pursuant to
participation rights granted to such investors under such agreements that are substantially
similar to this Section 4.12.

(f) The Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in this
Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice
within thirty (30) Trading Days after the date of the initial Subsequent Financing Notice.

(g) Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of (i)
an Exempt Issuance, or (ii) an underwritten public offering of Common Stock.

 

30

 

4.13 Subsequent Equity Sales.

(a) Subject to Section 4.13(c), from the date hereof until ninety (90) days after the
Effective Date, neither the Company nor any Subsidiary shall issue, enter into any agreement
to issue or announce the issuance or proposed issuance of any shares of Common Stock or
Common Stock Equivalents; provided, however, that the ninety (90) day period
set forth in this Section 4.13 shall be extended for the number of Trading Days during such
period in which (i) trading in the Common Stock is suspended by any Trading Market, or (ii)
following the Effective Date, the Registration Statement is not effective or the prospectus
included in the Registration Statement may not be used by the Purchasers for the resale of
the Underlying Shares.

(b) From the date hereof until such time as no Purchaser holds any of the Securities,
the Company shall be prohibited from effecting or entering into an agreement to effect any
issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock
Equivalents for cash consideration (or a combination of units thereof) involving a Variable
Rate Transaction. “Variable Rate Transaction” means a transaction in which the
Company (i) issues or sells any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive, additional shares of
Common Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the trading prices of or quotations for the
 shares of Common Stock at any time after the initial issuance of such debt or equity
securities or (B) with a conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related to the
business of the Company or the market for the Common Stock or (ii) enters into any
agreement, including, but not limited to, an equity line of credit, whereby the Company may
sell securities at a future determined price. Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which remedy shall be
in addition to any right to collect damages.

(c) Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of an
Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.

4.14 Equal Treatment of Purchasers. No consideration (including any modification of
any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. Further, the Company shall not
make any payment of principal or interest on the Debentures in amounts which are disproportionate
to the respective principal amounts outstanding on the Debentures at any applicable time. For
clarification purposes, this provision constitutes a separate right granted to each Purchaser by
the Company and negotiated separately by each Purchaser, and is intended for the Company to treat
the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert
or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

31

 

4.15 Certain Transactions and Confidentiality. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its
behalf or pursuant to any understanding with it will execute any purchases or sales, including Short
Sales, of any of the Company’s securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as described in Section 4.6. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as
the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to
the initial press release as described in Section 4.6, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the information included in the
Transaction Documents and the Disclosure Schedules. Notwithstanding the foregoing, and
notwithstanding anything contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby
that it will not engage in effecting transactions in any securities of the Company after the time
that the transactions contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.6, (ii) no Purchaser shall be restricted or
prohibited from effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions contemplated by this
Agreement are first publicly announced pursuant to the initial press release as described in
Section 4.6 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its
Subsidiaries after the issuance of the initial press release as described in Section 4.6.
Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and
the portfolio managers have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets, the covenant set forth above shall
only apply with respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.

4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy thereof, promptly
upon request of any Purchaser. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale
to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of
the United States, and shall provide evidence of such actions promptly upon request of any
Purchaser.

4.17 Capital Changes. Until the one year anniversary of the Effective Date, the
Company shall not undertake a reverse or forward stock split or reclassification of the Common
Stock without the prior written consent of the Purchasers holding a majority in principal amount
outstanding of the Debentures.

 

32

 

ARTICLE V.

MISCELLANEOUS

5.1 Termination. This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between
the Company and the other Purchasers, by written notice to the other parties, if the
Closing has not been consummated on or before April 15, 2009; provided,
however, that such termination will not affect the right of any party to sue for any breach
by the other party (or parties).

5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse Garden
State the non-accountable sum of $50,000 for its legal fees and expenses, $10,000 of which has been
paid prior to the Closing. The Company shall deliver to each Purchaser, prior to the Closing, a
completed and executed copy of the Closing Statement, attached hereto as Annex A. Except
as expressly set forth in the Transaction Documents to the contrary, 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. The Company shall pay all Transfer Agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

5.3 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.

5.4 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
the earliest of: (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight courier service or
(d) upon actual receipt by the party to whom such notice is required to be given. The address for
such notices and communications shall be as set forth on the signature pages attached hereto.

5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers holding at least 67% in interest of the Securities then outstanding or,
in the case of a waiver, by the party against whom enforcement of any such waived provision is
sought. 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 any party to exercise any right hereunder in any manner impair the exercise of any such
right.

5.6 Headings. 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.

 

33

 

5.7 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 (other than by merger). Any Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that
such transferee agrees in writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the “Purchasers.”

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

5.9 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of
any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by
law. If either party shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then in addition to the obligations of the Company under Section 4.10, the
prevailing party in such action or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.

5.10 Survival. The representations, warranties, covenants and agreements made herein
shall survive the Closing and the delivery of the Securities for the applicable statute of
limitations or, until, by their respective terms, they are no longer operative.

5.11 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 or by e-mail delivery of a “.pdf” format data
file, 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 or
”.pdf” signature page were an original thereof.

 

34

 

5.12 Severability. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights; provided, however, that in the case of a
rescission of a conversion of a Debenture or exercise of a Warrant, the applicable Purchaser shall
be required to return any shares of Common Stock subject to any such rescinded conversion or
exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid
to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate
evidencing such restored right).

5.14 Replacement of Securities. If any certificate or instrument evidencing any
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 (in the case of mutilation), 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. The applicant
for a new certificate or instrument under such circumstances shall also pay any reasonable
third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities.

5.15 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 contained in the Transaction Documents and hereby agree to waive and not to assert in
any action for specific performance of any such obligation the defense that a remedy at law would
be adequate.

 

35

 

5.16 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 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 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.

5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to
insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be
compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction Document, it is expressly agreed and
provided that the total liability of the Company under the Transaction Documents for payments in
the nature of interest shall not exceed the maximum lawful rate authorized under applicable law
(the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of
interest or default interest, or both of them, when aggregated with any other sums in the nature of
interest that the Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective
date thereof forward, unless such application is precluded by applicable law. If under any
circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded
to the Company, the manner of handling such excess to be at such Purchaser’s election.

5.18 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 or
non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other 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 Documents. 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
has been represented by its own separate legal counsel in their review and negotiation of the
Transaction Documents. For reasons of administrative convenience only, each Purchaser
and its respective counsel have chosen to communicate with the Company through FWS. FWS does
not represent any of the Purchasers and only represents Garden State, as placement agent. 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 any of the
Purchasers.

 

36

 

5.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated
damages or other amounts owing under the Transaction Documents is a continuing obligation of the
Company and shall not terminate until all unpaid partial liquidated damages and other amounts have
been paid notwithstanding the fact that the instrument or security pursuant to which such partial
liquidated damages or other amounts are due and payable shall have been canceled.

5.20 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day,
then such action may be taken or such right may be exercised on the next succeeding Business Day.

5.21 Construction. The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal
rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments
hereto. In addition, each and every reference to share prices and shares of Common Stock in any
Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

5.22 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE
GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVES FOREVER TRIAL BY JURY. 

(Signature Pages Follow)

 

37

 

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.

	 	 	 	 	 	 	 
	UFOOD RESTAURANT GROUP, INC.	 	Address for Notice:
	 
	 	 	 	 	 	 
	By:	 	/s/ George Naddaff	 	Fax:
	 	 	 	 	 
	 

	 	Name:
	 	George Naddaff	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 

With a copy to (which shall not constitute notice):

Robinson & Cole, LLP

1055 Washington Blvd.

Stamford, CT 60901

Attn: Richard A. Krantz

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

38

 

[PURCHASER SIGNATURE PAGES TO UFFC SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:                                                                   
                                                      

Signature of Authorized Signatory of Purchaser:                                       
                                          

Name of Authorized Signatory:              
                                                                                       

Title of Authorized Signatory:                                          
                                                           

Email Address of Authorized Signatory:            
                                                                                         

Facsimile Number of Authorized Signatory:                                                               
                                      

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as address for notice):

Subscription Amount: $                                        

Shares:                                         

Warrant Shares:                                         

Social Security Number or EIN Number:                                         

[SIGNATURE PAGES CONTINUE]

 

39

 

Annex A

CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date hereto, the purchasers
shall purchase up to $[                     of Common Stock and Warrants from UFood Restaurant Group, Inc. a
Nevada corporation (the “Company”). All funds will be wired into an account maintained by
the Company. All funds will be disbursed in accordance with this Closing Statement.

Disbursement Date: [                     ___, 2009

	 	 	 	 	 
	I. PURCHASE PRICE
	 	 	 	 
	 
	 	 	 	 
	Gross Proceeds to be Received	 	$	 	 
	 
	 	 	 	 
	II. DISBURSEMENTS
	 	 	 	 
	 
	 	$	 	 
	 
	 	$	 	 
	 
	 	$	 	 
	 
	 	$	 	 
	 
	 	$	 	 
	 
	 	 	 	 
	Total Amount Disbursed:
	 	$	 	 

	 	 	 	 	 
	WIRE INSTRUCTIONS:	 	 
	 
	 	 	 	 
	To:
	 	 	 	 
	 

	 	 

	 	 
	To:
	 	 	 	 
	 

	 	 	 	 

 

40Exhibit 10.5

Exhibit 10.5

UFood Restaurant Group, Inc.

PLACEMENT AGENT AGREEMENT

Dated as of February 4, 2009

Garden State Securities, Inc.

328 Newman Springs Road

Red Bank, New Jersey 07701

Gentlemen:

UFood Restaurant Group, Inc., a corporation organized under the laws of the state of Nevada
(the “Company”) proposes to offer for sale (the “Offering”) in a private offering
pursuant to Regulation D promulgated under the Securities Act of 1933, as amended (the
“Securities Act”) (i) 8% Senior Secured Convertible Debentures due three years following
their issuance (the “Debentures”) and (ii) common stock purchase warrants (the
“Warrants”) to purchase shares of common stock of the Company, par value $0.001 per share
(the “Common Stock” and such shares of Common Stock, the “Warrant Shares”). The
Debentures, the Warrants, the shares of Common Stock underlying the Debentures and the Warrant
Shares are collectively referred to herein as the “Securities”. This agreement (the
“Agreement”) shall confirm our agreement concerning Garden State Securities, Inc. acting as
the exclusive selling or placement agent (the “Placement Agent” or “GSS”) in
connection with the sale of the Securities.

1. Appointment of Placement Agent. On the basis of the representations and warranties
contained herein, and subject to the terms and conditions set forth herein, the Company hereby
appoints Garden State Securities, Inc. as exclusive Placement Agent/placement agent for a period
beginning on the date hereof and terminating the later of 90 days from the date of this Agreement
or end of the offering period of the Offering (unless terminated sooner pursuant to the terms
hereof or extended with mutual consent of both parties) and grants to GSS the exclusive right to
offer, as its agent, the Securities pursuant to the terms of this Agreement. On the basis of such
representations and warranties, and subject to such conditions, GSS hereby accepts such appointment
and agree to use its reasonable best efforts to secure subscribers to purchase subscriptions for
the Securities. The Company understands that the Placement Agent is being retained to obtain
subscriptions for the Securities on a “best efforts” basis and has not guaranteed the sale of any
Securities and is not purchasing any of the Securities for its own account. GSS shall be entitled
to engage other FINRA member firms as subagents or selected dealers, whose compensation, if any,
shall be payable solely by GSS.

2. Terms of the Offering.

(a) The Offering shall consist of Debentures and Warrants. The Offering is being made
on a “best efforts” basis with a minimum offering amount of subscriptions equal to
$2,000,000. In the event a subscription is not accepted by the Company or GSS, such
rejected subscription funds will be returned to the subscriber without interest or
deduction.

 

 

 

(b) The Placement Agent’s counsel and Company’s counsel will prepare a Securities
Purchase Agreement, a Form of Debenture, a Form of Warrant, a Security Agreement, a
Subsidiary Guarantee and a Registration Rights Agreement, to be delivered to all
prospective investors. The Securities Purchase Agreement, Debenture, Warrant, the
Security Agreement and Subsidiary Guarantee and Registration Rights Agreement, including all
supplements, exhibits, schedules and appendices thereto and other documents delivered
therewith, are referred to herein as the “Documents” and shall include any
supplements or amendments in accordance with this Agreement. Unless otherwise stated or
approved by the Company, the Documents shall reflect the terms set forth on the Term Sheet
attached hereto as Exhibit A. The Offering shall commence on the date hereof, and
shall expire at 3:00 p.m., New York time, on April 15, 2009 (unless extended with mutual
consent of both parties). Such period, as same may be so extended, shall hereinafter be
referred to as the “Offering Period.”

(c) Each prospective investor (a “Prospective Investor”) who desires to
purchase Securities shall deliver to the Placement Agent the Securities Purchase Agreement
and other Documents required to be executed by the investor and deliver to the Escrow Agent
described below immediately available funds in the amount necessary to purchase the amount
of Securities such Prospective Investor desires to purchase. The Placement Agent shall not
have any obligation to independently verify the accuracy or completeness of any information
contained in any Documents or the authenticity, sufficiency, or validity of any check
delivered by any Prospective Investor in payment for Securities. Purchasers in the Offering
shall be “accredited investors” as determined in accordance with Regulation D. The
Placement Agent and the Company shall be entitled to rely upon the statements made by the
Prospective Investors in the Documents executed by them.

(d) The Securities will be offered only by approaching prospective purchasers on an
individual basis. No general solicitation or general advertising in any form will be used
by the Company or GSS in connection with the offering of the Securities. Each prospective
purchaser and each prospective purchaser will be an “Accredited Investor” as defined
in Regulation D, or a “Qualified Institutional Buyer” as defined in Rule 144A, in
each case promulgated under the Securities Act.

3. Closing/Release of Funds. All subscription funds shall be deposited and held in an
escrow account at Signature Bank (the “Escrow Agent”), pursuant to an Escrow Agreement
among GSS, the Company and the Escrow Agent. There may be one or more Closings of the Offering
(each, a “Closing”). Funds for Closings subsequent to the initial Closing shall also be
deposited in the escrow account, unless otherwise agreed by GSS and the Company. Each Closing shall
be held at such time as the conditions as provided in the Securities Purchase Agreement have been
satisfied. References herein to each actual closing date thereof shall be referred to as a
“Closing Date.”

4.  Representations and Warranties of the Placement Agent. The Placement Agent
represents and warrants to the Company as follows:

(a) The Placement Agent is duly incorporated and validly existing and in good standing
under the laws of its State of incorporation.

(b) The Placement Agent is, and at the time of each Closing will be, a member in good
standing of FINRA.

 

2

 

(c) Offers and sales of Securities by the Placement Agent will be made only in
accordance with this Agreement and in compliance with the provisions of Regulation D and the
Securities Act and the Placement Agent will furnish to each investor a copy of the Documents
prior to accepting any subscription for the Securities.

5. Compensation and Expenses.

(a) The Placement Agent shall be entitled, on each Closing Date, out of the escrow
account or by such other means acceptable to GSS, as compensation for its services as
Placement Agent under this Agreement, to selling Commissions payable in cash equal to 10% of
the aggregate subscription amount of the Securities sold in the Offering. The Placement
Agent shall additionally be entitled to $20,000 for its fees and expenses at the first
Closing plus a non-accountable cash expense allowance of 3% of the aggregate subscription
amount of the Securities sold in the Offering. Payment shall be made to the Placement Agent
simultaneously with each Closing under the Securities Purchase Agreement.

(b) In addition to the compensation payable to the Placement Agent set forth in clause
(a) above, the Company shall grant the Placement Agent (or its assigns, subject to
compliance with the terms and conditions of this Section) warrants to purchase a number of
 shares of Common Stock, equal to 20% of the maximum number of shares of Common Stock
underlying the Debentures and Warrants to be sold in the Offering, which shall have an
exercise price equal to the exercise price of the Warrants being issued in the Offering (the
“Placement Agent Warrants”). The Placement Agent Warrants shall be issued at each
Closing, and shall be exercisable immediately upon their issuance and continuing for a
period of five (5) years thereafter. The Placement Agent shall be entitled to “piggyback”
registration rights with respect to the shares of Common Stock underlying the Placement
Agent Warrants to request that the Company include the underlying shares in a registration
statement filed by the Company which includes shares to be sold by other selling security
holders. The Company shall not include the underlying shares in any registration statement
without the prior written consent of the Placement Agent. The Placement Agent Warrants may
be issued to employees and/or affiliates of the Placement Agent in such amounts as the
Placement Agent shall notify in writing the Company prior to or after the Closing. In
addition, the Placement Agent Warrants shall be exercisable on a net “cashless” basis at the
option of the Placement Agent (and the other holders of the Placement Agent Warrants) if at
any time after six months from the date of issuance of the Placement Agent Warrants there is
no effective registration statement registering, or no current prospectus available for, the
resale of the shares underlying the Placement Agent Warrants. Notwithstanding anything to
the contrary, the Warrants shall otherwise include terms and conditions identical to those
provided to the investors in the Offering.

(c) In addition to the fees and expenses described in Sections 5(a) and 5(b) above, the
Company acknowledges and agrees that, in an effort to minimize transaction costs, GSS has
engaged Feldman Weinstein & Smith LLP, as placement agent counsel (“FWS”) on a flat
fee and expense basis with $10,000.00 to be paid to commence definitive transaction
documents and $20,000.00 to be paid upon the first Closing. The Company agrees to pay such
legal fees and expenses of GSS. Accordingly, for the benefit of GSS, the Company shall pay
to FWS $10,000.00 upon execution of this Agreement to commence definitive documentation (prior
receipt of which is hereby acknowledged) and $20,000.00 upon the first Closing. Other than
the fees and expenses set forth in this Section 5, the Company shall not be responsible for
any other fees or expenses incurred by GSS.

 

3

 

6. Representations and Warranties of the Company.

The Company represents and warrants to, and agrees with, the Placement Agent, each subagent
and each selected dealer that, as of the date hereof, and as of each Closing Date:

(i) No Documents or information provided by the Company to the Prospective Investors,
including, without limitation the SEC Reports (as defined below), contains or shall contain
any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of circumstances made
therein not misleading.

(ii) The Company is, and at all times during the period from the date hereof to and
including the Closing Date will be, a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, with full corporate power and
authority, and has obtained all necessary consents, authorizations, approvals, orders,
licenses, certificates, and permits and declarations of and from, and has made filings with,
all federal, state and local authorities, to own, lease, license, and use its properties and
assets and to conduct its business as presently conducted and/or in any such case where the
failure to have any of the foregoing would not have a material adverse effect on the
Company’s presently conducted business. As of the date hereof, the Company is, and at all
times during the period from the date hereof to and including the Closing Date, duly
qualified to do business and is in good standing in every jurisdiction in which its
ownership, leasing, licensing, or use of property and assets or the conduct of its business
makes such qualification necessary except where the failure to be so qualified would not
have a material adverse effect on the Company’s business.

(iii) As of the date hereof, except as disclosed in the Company’s filings with the SEC
(the “SEC Reports”), there is no, and as of each Closing Date, except as shall be
disclosed in the SEC Reports, the Documents and the Securities Purchase Agreement (including
the schedules thereto), there shall not be any, litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation pending or to the
Company’s knowledge threatened, with respect to the Company, or its respective operations,
businesses, properties, or assets, or which individually or in the aggregate do not now have
and will not in the future have a material adverse effect upon the operations, business,
properties, or assets of the Company.

(iv) The Company is not in violation or breach of, or in default with respect to, any
material term of its constituent documents, as in effect as the date hereof and as of each
Closing Date.

(v) The Company has all requisite corporate power and authority to execute, deliver,
and perform this Agreement and to consummate the transactions contemplated hereby. All
necessary corporate proceedings of the Company have been duly taken to authorize the
execution, delivery, and performance by the Company of this Agreement.

 

4

 

(vi) The Securities and the Placement Agent’s Warrants (and underlying warrant shares),
when issued and delivered pursuant to the of the Offering shall be duly authorized, validly
issued, fully paid and non-assessable, without any personal liability attaching to the
ownership thereof solely by being such holder and shall not have been issued in violation of
any preemptive rights of stockholders.

(vii) Neither the Company nor any of its officers, directors, or affiliates has engaged
or will engage, directly or indirectly, in any act or activity that may jeopardize the
status of the offering and sale of the Securities as an exempt transaction under
Regulation D of the Securities Act of 1933, as amended.

(viii) The Placement Agent and each subagent and selected dealer shall be entitled to
rely upon the representations and warranties contained in the Documents on the same basis as
if the representations and warranties have been made hereunder to the Placement Agent, each
subagent and each selected dealer.

(ix) To the knowledge of the Company, during the past five years, except as disclosed
in the Documents, none of the current officers or directors of the Company have been:

(a) The subject of a petition under the federal bankruptcy laws or any state
insolvency law filed by or against them, or by a receiver, fiscal agent or similar
officer appointed by a court for their business or property, or any partnership in
which any or them was a general partner at or within two years before the time of
such filing, or any corporation or business association of which any of them was an
executive officer at or within two years before the time of such filing;

(b) Convicted in a criminal proceeding or a named subject of a pending criminal
proceeding (excluding traffic violations and other minor offenses);

(c) The subject of any order, judgment, or decree not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining any of them from, or otherwise limiting, any of the following
activities:

(i) acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity Futures
Trading Commission, or an associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank,
savings and loan association or insurance company, or engaging in or
continuing any conduct or practice in connection with any such activity;

(ii) engaging in any type of business practice; or

 

5

 

(iii) engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of federal or
state securities law or federal commodity laws.

(d) the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated of any federal or state authority barring, suspending or
otherwise limiting for more than sixty (60) days their right to engage in any
activity described in paragraph (c)(i) above, or be associated with persons engaged
in any such activity;

(e) found by any court of competent jurisdiction in a civil action or by the
Securities and Exchange Commission (the “SEC” or the “Commission”) to
have violated any federal or state securities law, and the judgment in such civil
action or finding by the Commission has not been subsequently reversed, suspended or
vacated;

(f) found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal commodities law,
and the judgment in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or vacated; or

(g) found by a court or an administrative agency to have or is alleged to have
violated any foreign securities laws.

(x) The Company maintains a system of internal accounting and other controls sufficient
to provide reasonable assurances that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of reliable financial statements in conformity with United States
generally accepted accounting principles and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accounting for assets is compared with existing assets
at reasonable intervals and appropriate action is taken with respect to any material
differences.

(xi) To the Company’s knowledge, the Company is not currently in violation of any
material provisions of: (a) any federal or state environmental law, (b) Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder (“ERISA”), (c) the Bank Secrecy Act, as amended, (d) the Money
Laundering Control Act of 1986, as amended, (e) the Foreign Corrupt Practices Act, or (f)
the Uniting and Strengthening of America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (“USA Patriot Act”) Act of 2001, and the rules and
regulations promulgated under any such law, or any successor law.

(xii) The Company (a) has paid, as applicable, all federal, state, local and foreign
taxes shown to be due on its tax returns and has furnished all information returns it is
required to furnish pursuant to the Internal Revenue Code of 1986, as amended, (b) has
established adequate reserves for such taxes which are not due and payable and (c) does not
have any tax deficiency or claims outstanding, proposed or assessed against it.

 

6

 

(xiii) All offers and sales of securities of the Company issued during the three year
period prior to the date hereof were at all relevant times duly registered or exempt from
the registration requirements of the Securities Act (or applicable foreign securities laws)
and the rules and regulations thereunder and were duly registered or the subject of an
available exemption from the registration requirements of the applicable United States’
state securities or blue sky laws. The Company has not, directly or indirectly, solicited
any offer to buy or offered to sell any securities during the twelve-month period ending on
the date hereof which, to the knowledge of the Company, would be integrated with the
Offering.

(xiv) During the term of this Agreement, neither the Company nor any of its
subsidiaries will, directly or indirectly, solicit or otherwise encourage the submission of
any proposal or offer from any person or entity relating to any issuance of the Company’s or
any of its subsidiaries’ equity securities (including debt securities with any equity
feature) or participate in any discussions regarding the Offering. The Company will
immediately cease all contacts, discussions and negotiations with third parties regarding
any offerings of its equity securities.

7. Covenants of the Company. The Company covenants that it will:

(a) Deliver without charge to the Placement Agent such number of copies of the
Documents and any supplement or amendment thereto as may reasonably be requested by the
Placement Agent.

(b) Notify the Placement Agent promptly of rejection of any subscription. The Company
shall not (i) accept subscriptions from, or make sales of Securities to, any Subscribers who
are not, to the Company’s knowledge, accredited investors, or (ii) unreasonably reject any
subscription for Securities.

(c) The Company shall cause, at its cost and expense, all “blue sky” filings related to
the Offering and required by applicable law to be made in due and proper form and substance
and in a timely manner as required under the laws of the states in which Securities are sold
(the “Blue Sky Filings”). In addition, the Company shall cause, at its cost and
expense, a Form D related to the Offering to be filed with the Commission in due and proper
form and substance and in a timely manner. The Company shall deliver true and correct
copies of all Blue Sky Filings and the Form D, as filed with the Commission, to the
Placement Agent within 15 days of the final closing date. The Company shall pay the expense
of the filing fee to the Corporate Finance Department of FINRA for the filing under FINRA
Rule 2710 that may be required for this Offering.

 

7

 

8. Conditions of Closing. The obligations of the Placement Agent pursuant to this
Agreement shall be subject, in the Placement Agent’s discretion, to the continuing accuracy of the
representations and warranties of the Company contained herein and in each certificate and document
contemplated under this Agreement to be delivered to the Placement Agent, as of the date hereof and
as of the applicable Closing Date, with respect to the performance by the Company of its
obligations hereunder, and to the following conditions:

(a) At each Closing, the Placement Agent, the investors and the Company shall have
executed documents in form and substance reasonably acceptable to them. Any legal opinion
addressed to the investors shall also be addressed to the Placement Agent and contain
reliance language for each subagent and selected dealer.

(b) All proceedings taken in connection with the issuance, sale, and delivery of the
Securities shall be satisfactory in form and substance to GSS, the investors and the
Company.

9. Termination. This Agreement may be terminated by the Placement Agent (i) at any
time in the event the Placement Agent has determined, in good faith, that the Documents misstate a
material fact or fail to contain a material fact required to be stated therein or necessary to make
the statements therein not misleading or (ii) upon three days written notice. The Company may not
terminate this Agreement in the absence of a material breach of any covenant, representation or
warranty contained in this Agreement made by the Placement Agent.

10. Indemnification and Contribution.

(a) The Company agrees to indemnify and hold harmless the Placement Agent, its
officers, directors, partners, employees, agents (including subagents and selected dealers),
and counsel, and each person, if any, who controls the Placement Agent within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), against any and all loss, liability, claim, damage,
and expense whatsoever (which shall include, for all purposes of this Section 10, but not be
limited to, attorneys’ fees and any and all expense whatsoever incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or litigation) as and
when incurred arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained in the Documents, or any omission or
alleged omission to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to the Company as stated
in Section 10(b) with respect to the Placement Agent expressly for inclusion in the
Documents or (ii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Agreement. The foregoing agreement to indemnify shall be in
addition to any liability the Company may otherwise have, including liabilities arising
under this Agreement.

 

8

 

If any action is brought against the Placement Agent or any of its officers, directors,
partners, employees, agent, or counsel, or any controlling persons of the Placement Agent
(an “indemnified party”), in respect of which indemnify may be sought against the
Company pursuant to the foregoing paragraph, such indemnified party or parties shall
promptly notify the
Company (the “indemnifying party”) in writing of the institution of such action (but
the failure so to notify shall not relieve the indemnifying party from any liability it may
have other than pursuant to this Section 10(a)) and the indemnifying party shall promptly
assume the defense of such action, including the employment of counsel (reasonably
satisfactory to such indemnified party or parties) and payment of expenses. Such
indemnified party shall have the right to employ its own counsel in any such case, but the
fees and expense of such counsel shall be at the expense of such indemnified party unless
the employment of such counsel shall have been authorized in writing by the indemnifying
party in connection with the defense of such action or the indemnifying party shall not have
promptly employed counsel satisfactory to such indemnified party or parties to have charge
of the defense of such action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them or to other
indemnified parties which are different from or additional to those available to one or more
of the indemnifying parties, in any of which events such reasonable fees and expenses of one
such counsel shall be borne by the indemnifying party and the indemnifying party shall not
have the right to direct the defense of such action on behalf of the indemnified party or
parties. Anything in this paragraph to the contrary notwithstanding, the indemnifying party
shall not be liable for any settlement of any such claim or action effected without its
written consent. The Company agrees to promptly notify the Placement Agent of the
commencement of any litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of the Securities or the Documents.

(b) The Placement Agent agrees to indemnify and hold harmless the Company, its
officers, directors, employees, agents, and counsel, and each other person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, to the same extent as the foregoing indemnity from the Company to the
Placement Agent in Section 10(a), with respect to any and all loss, liability, claim,
damage, and expense whatsoever (which shall include, for all purposes of this Section 10,
but not be limited to, reasonable attorneys’ fees and any and all expense whatsoever
incurred in investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement of any claim
or litigation) as and when incurred arising out of, based upon, or in connection with (i)
statements or omissions, if any, made in the Documents in reliance upon and in conformity
with written information furnished to the Company with respect to the Placement Agent
expressly for inclusion in the Documents, or (ii) any breach of any representation,
warranty, covenant or agreement of the Placement Agent contained in this Agreement. If any
action shall be brought against the Company or any other person so indemnified based on the
Documents and in respect of which indemnity may be sought against the Placement Agent
pursuant to this Section, the Placement Agent shall have the rights and duties given to the
indemnifying party, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section 10(a)
hereof.

 

9

 

(c) To provide for just and equitable contribution, if (i) an indemnified party makes
a claim for indemnification pursuant to Section 10(a) or 10(b) hereof but it is found in a
final judicial determination, not subject to further appeal, that such indemnification may
not be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party seeks
contribution under the Securities
Act, the Exchange Act, or otherwise, then the Company (including for this purpose any
contribution made by or on behalf of any officer, director, employee, agent, or counsel of
the Company, or any controlling person of the Company), on the one hand, and the Placement
Agent (including for this purpose any contribution by or on behalf of an indemnified party),
on the other hand, shall contribute to the losses, liabilities, claims, damages, and
expenses whatsoever to which any of them may be subject, in such proportions as are
appropriate to reflect the relative benefits received by the Company, on the one hand, and
the Placement Agent, on the other hand; provided, however, that if applicable law does not
permit such allocation, then other relevant equitable considerations such as the relative
fault of the Company and the Placement Agent in connection with the facts which resulted in
such losses, liabilities, claims, damages, and expenses shall also be considered. The
relative benefits received by the Company, on the one hand, and the Placement Agent, on the
other hand, shall be deemed to be in the same proportion as (x) the total proceeds from the
Offering (net of compensation payable to the Placement Agent pursuant to Section 5(a) hereof
but before deducting expenses) received by the Company, and (y) the compensation received by
the Placement Agent pursuant to Section 5(a) hereof.

The relative fault, in the case of an untrue statement, alleged untrue statement,
omission, or alleged omission, shall be determined by, among other things, whether such
statement, alleged statement, omission, or alleged omission relates to information supplied
by the Company or by the Placement Agent, or their respective employees, agents or
representatives, and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement, alleged statement, omission, or alleged
omission. The Company and the Placement Agent agree that it would be unjust and inequitable
if the respective obligations of the Company and the Placement Agent for contribution were
determined by pro rata or per capita allocation of the aggregate losses, liabilities,
claims, damages, and expenses or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 10(c). In no case shall the Placement
Agent by responsible for a portion of the contribution obligation in excess of the
compensation received by it pursuant to Section 5(a) hereof. No person guilty of a
fraudulent misrepresentation shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 10(c), each
person, if any, who controls the Placement Agent within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act and each officer, director, partners,
employee, agent, and counsel of the Placement Agent, shall have the same rights to
contribution as the Placement Agent, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and each officer, director, employee, agent, and counsel of the Company, shall have the same
rights to contribution as the Company, subject in each case to the provisions of this
Section 10(c). Anything in this Section 10(c) to the contrary notwithstanding, no party
shall be liable for contribution with respect to the settlement of any claim or action
effected without its written consent.

 

10

 

11. Representations and Agreements to Survive Delivery. All representations,
warranties, covenants, and agreements contained in this Agreement shall be deemed to be
representations, warranties, covenants, and agreements at the Closing Date and, such
representations and warranties shall remain operative and in full force and effect regardless of
any investigation made by or on behalf
of the Placement Agent or any indemnified person, or by or on behalf of the Company or any
person or entity which is entitled to be indemnified under Section 10, and shall survive for a
period of five (5) years from the date hereof. In addition, notwithstanding the foregoing and any
election hereunder or any termination of this Agreement, and whether or not the terms of this
Agreement are otherwise carried out, the provisions of Section 10 shall survive for a period of
seven (7) years from the date hereof.

12. Notices. All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and shall be either (i) mailed by first class mail in which
case delivery shall be deemed to be made three days following deposit in the United States mail; or
(ii) sent by overnight courier service in which case delivery shall be deemed to be made upon
delivery, to: (a) Garden State Securities, Inc., 328 Newman Springs Road, Red Bank, New Jersey
07701, Attention: Ernest Pellegrino, with a copy to Robert Charron, Esq., Feldman Weinstein &
Smith LLP, 420 Lexington Avenue, Suite 2620, New York, New York 10170-0002, and (b) UFood
Restaurant Group, Inc., 225 Washington Street, Suite 100, Newton, Massachusetts 02458, with a copy
to Robinson & Cole LLP, 1055 Washington Boulevard, Stamford, CT 06901, Attention: Richard Krantz.

13. Parties. This Agreement shall inure solely to the benefit of, and shall be binding
upon, the Placement Agent and the Company and the persons and entities referred to in Section 10
who are entitled to indemnification or contribution, and their respective successors, legal
representatives, and assigns (which shall not include any purchaser, as such, of Securities), and
no other person shall have or be construed to have any legal or equitable right remedy, or claim
under or in respect of or by virtue of this Agreement or any provision herein contained.

14. Construction; Governing Law; Submission to Jurisdiction. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions contemplated by this
Agreement (whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in the state and
federal courts sitting in the City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not
to assert in any suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper or is an
inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner
permitted by law. If either party shall commence an action or proceeding to enforce any provisions
of this Agreement, then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding. IN ANY ACTION, SUIT, OR
PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY,
UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

11

 

15. No Fiduciary Relationship. The Company acknowledges and agrees that: (i) the
offering and sale of the Securities pursuant to this Agreement is an arm’s-length commercial
transaction between the Company and the Placement Agent; (ii) in connection therewith and with the
process leading to the Offering, the Placement Agent is not acting as the agent or fiduciary of the
Company; (iii) the Placement Agent has not assumed an advisory or fiduciary responsibility in favor
of the Company with respect to the Offering contemplated hereby or the process leading thereto,
including any negotiation related to the pricing of the Securities; and (iv) the Company has
consulted its own legal and financial advisors to the extent it has deemed appropriate in
connection with this Agreement and the Offering.

16. Counterparts. This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute one agreement. This
Agreement may be executed by facsimile signature and delivered by facsimile transmission.

17. Entire Agreement. This Agreement, together with the letter agreement dated
December 18, 2008 between the Company and GSS, constitutes the entire agreement of the parties with
respect to the subject matter hereof and thereof and supersedes all prior written agreements and
all prior and contemporaneous oral agreements, understandings and negotiations between the parties
with respect to the Offering; provided, however, that with respect to the Offering,
the provisions of Section 5 of this Agreement shall supersede Paragraph 2 of such letter agreement.
Neither the Company nor the Placement Agent has relied on any written or oral representations or
inducements, other than those that are set forth in this Agreement and the fee agreement in
executing and delivering this Agreement. This Agreement may not be modified or amended except in
writing executed by the Company and the Placement Agent.

[signature page appears next]

 

12

 

If the foregoing correctly sets forth the understanding between us, please so indicate in the
space provided below for that purpose, whereupon this Agreement shall constitute a binding
agreement between us.

	 	 	 	 	 
	 	Very truly yours,

UFOOD RESTAURANT GROUP, INC.

 	 
	 	By:  	/s/ George Naddaff
 	 
	 	 	Name:  	George Naddaff 	 
	 	 	Title:  	Chief Executive Officer 	 

Accepted as of the date

first above written:

GARDEN STATE SECURITIES, INC.

	 	 	 	 	 	 	 
	By:	 	/s/ Ernest Pellegrino	 	 
	 	 	 	 	 
	 

	 	Name:
	 	Ernest Pellegrino	 	 
	 

	 	Title:
	 	Director of Corporate Finance	 	 

 

13

 

FIRST AMENDMENT

TO

PLACEMENT AGENT AGREEMENT

This First Amendment (this “Amendment”) made effective as of April 15, 2009 (the
“Effective Date”) by and among Garden State Securities, Inc., as exclusive selling
agent/placement agent (“GSS”) and UFood Restaurant Group, Inc., a Nevada corporation (the
“Company”).

WITNESSETH:

WHEREAS, the Company and GSS are parties to that certain Placement Agent Agreement dated
February 4, 2009 (the “Agent Agreement”); and

WHEREAS, the Company and GSS now desire to amend the Agent Agreement to reflect mutually
agreed upon revised terms in accordance with the provisions of this Amendment.

NOW THEREFORE, in consideration of the promises and mutual covenants contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:

1. Definitions. Capitalized terms used herein, but not otherwise defined, shall have
the meanings ascribed to them in the Agent Agreement.

2. Termination of Offering Period. The termination of the Offering shall be extended
until April 24, 2009. As such, the last sentence of Section 2(b) shall be amended and restated in
its entirety to read as follows:

“The Offering shall commence on the date hereof, and shall expire at 3:00 p.m.,
New York time, on April 24, 2009 (unless extended with mutual consent of both
parties). Such period, as same may be so extended, shall hereinafter be
referred to as the “Offering Period.”

3. Reference to and Effect on the Agent Agreement.

	 	a.	 	On and after the date hereof, each reference to “this
Agreement,” “hereunder,” “hereof,” “herein,” or words of like import shall mean
and be a reference to the Agent Agreement as amended hereby. No reference to
this Amendment need be made in any instrument or document at any time referring
to the Agent Agreement, a reference to the Agent Agreement in any such
instrument or document to be deemed to be a reference to the Agent Agreement as
amended hereby.

	 	b.	 	Except as expressly amended by this Amendment, the provisions
of the Agent Agreement shall remain in full force and effect.

4. Counterparts; Facsimile Signatures. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
a single instrument. This Agreement may be executed by facsimile signatures.

 

14

 

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to the Placement Agent
Agreement to be executed by their duly authorized representatives as of the date first indicated
above.

	 	 	 	 	 	 	 
	UFOOD RESTAURANT GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	By:	 	/s/ George Naddaff	 	 
	 	 	 	 	 
	 

	 	Name:
	 	George Naddaff	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	GARDEN STATE SECURITIES, INC.	 	 
	 
	 	 	 	 	 	 
	By:	 	/s/ Ernest Pellegrino	 	 
	 	 	 	 	 
	 

	 	Name:
	 	Ernest Pellegrino	 	 
	 

	 	Title:
	 	Director of Corporate Finance	 	 

 

15

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