Document:

EX-10.3

 

Exhibit 10.3

FIRST AMENDMENT

TO

CNX GAS CORPORATION

EQUITY INCENTIVE PLAN

This First Amendment (this “Amendment”) to the CNX Gas Corporation Equity Incentive Plan, effective
June 30, 2005, as amended and restated on August 1, 2005
(the “Plan”), is dated October 11, 2006.
Capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the
Plan.

Pursuant to its authority under Section 12(a) of the Plan, the Board of Directors of CNX Gas
Corporation hereby amends the Plan as follows:

1. Amendment to the Plan. The first paragraph of Section 3(a) of the Plan is hereby deleted in its
entirely and replaced with the following:

3. Shares Available for Awards; Limitations.

(a) Shares Available. The maximum number of Shares that may be delivered pursuant to
Awards granted under the Plan shall be 2,500,000. No Participant receiving an Award shall
be granted: (i) Options or Stock Appreciation Rights with respect to more than 350,000
Shares during any fiscal year; (ii) Performance Awards (denominated and paid in Shares)
which could result in such Participant receiving more than 150,000 Shares for each full or
partial fiscal year of the Company contained in the performance period of a particular
Performance Award; or (iii) Performance Awards (paid in cash) which could result in such
Participant receiving a cash amount in equivalent value equal to more than 250,000 Shares
for each full or partial fiscal year of the Company contained in the performance period of a
particular Performance Award. The foregoing limitations shall be subject to adjustment as
provided in Section 3(c), but only to the extent that any such adjustment will not affect
the status of: (i) any Award intended to qualify as performance-based compensation under
Section 162(m) of the Code; or (ii) any Award intended to qualify as an Incentive Stock
Option.

2. No Other Amendments. Except as expressly amended by this Amendment, the Plan shall remain in
full force and effect.

3. Headings. The article and section headings contained in this Amendment are inserted for
convenience only and will not affect in any way the meaning or interpretation of this Amendment.

 

 

IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the date stated in the
introductory paragraph of this Amendment.

	 	 	 
	 

	 	By Order of the Board of Directors,
	 
	 	 
	 
	 	 
	 
	 	 
	 

	 	/s/ Nicholas J. DeIuliis
	 

	 	 
	 

	 	Name: Nicholas J. DeIuliis
	 

	 	Title: President and Chief Executive OfficerEX-10.4

 

Exhibit 10.4

Non-Employee Director Compensation

	 	 	 	 	 	 	 	 
	 
	 	Cash Compensation* **:	 	 	Dollar Value:	 
	 	Board Membership Annual Award
	 	 	$	35,000	 	 
	 	Board Meeting Attendance Fee
	 	 	$	1,500	 	 
	 	Audit Committee Chair Annual Award
	 	 	$	10,000	 	 
	 	Audit Committee Meeting Attendance Fee
	 	 	$	1,000	 	 
	 	Compensation Committee Chair Annual Award
	 	 	$	5,000	 	 
	 	Compensation Committee Meeting Attendance Fee
	 	 	$	1,000	 	 
	 	Finance Committee Chair Annual Award
	 	 	$	5,000	 	 
	 	Finance Committee Meeting Attendance Fee
	 	 	$	1,000	 	 
	 	Nominating and Corporate Governance Committee Chair Annual Award
	 	 	$	5,000	 	 
	 	Nominating and Corporate Governance Committee Meeting Attendance Fee
	 	 	$	1,000	 	 
	 

	 	 	 	 	 	 
	 
	 	Equity Compensation**:	 	 	Dollar Value:	 
	 	Initial Election Grant Value

	 	 	$60,000

(in restricted stock units)	 
	 	Annual Grant Value

	 	 	$70,000

(in restricted stock units)	 
	 

* Cash payments shall be made quarterly in arrears with respect to service actually rendered.

** Directors who are also employees of CONSOL Energy Inc. will not receive any cash or equity
compensation for their services as directors on the Board of Directors of CNX Gas Corporation.exv10w1

 

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement is entered into and dated as of October 10, 2006 (this
“Agreement”), by and among ProLink Holdings Corp., a Delaware corporation (the “Company”), and each
of the purchasers identified on the signature pages hereto (each, a “Purchaser” and collectively,
the “Purchasers”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), 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, certain securities of
the Company pursuant to the terms set forth herein.

     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, severally and not jointly, agree as follows:

ARTICLE I.

DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms shall have the meanings set forth in this Section 1.1:

          “Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a discretionary basis by
the same investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.

          “Bankruptcy Event” means any of the following events: (a) the Company or any Subsidiary
commences a case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction relating to the Company or any Subsidiary thereof; (b) there is commenced
against the Company or any Subsidiary any such case or proceeding that is not dismissed within
60 days after commencement; (c) the Company or any Subsidiary is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or proceeding is entered;
(d) the Company or any Subsidiary suffers any appointment of any custodian or the like for it or
any substantial part of its property that is not discharged or stayed within 60 days; (e) the
Company or any Subsidiary makes a general assignment for the benefit of creditors; (f) the
Company or any Subsidiary fails to pay, or states that it is unable to pay or is unable to pay,
its debts generally as they become due; (g) the Company or any Subsidiary calls a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring of its debts; or
(h) the Company or any Subsidiary, by any act or failure to act, expressly indicates its

 

 

consent
to, approval of or acquiescence in any of the foregoing or takes any corporate or other action
for the purpose of effecting any of the foregoing.

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

          “Change of Control” means the occurrence of any of the following in one or a series of
related transactions: (i) an acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1) under the Exchange Act) of more than one-third of
the voting rights or equity interests in the Company; (ii) a replacement of more than one-third
of the members of the Company’s board of directors that is not approved by those individuals who
are members of the board of directors on the date hereof (or other directors previously approved
by such individuals); (iii) a merger or consolidation of the Company or any Subsidiary or a sale
of more than one-third of the assets of the Company in one or a series of related transactions,
unless following such transaction or series of transactions, the holders of the Company’s
securities prior to the first such transaction continue to hold at least two-thirds of the
voting rights and equity interests in of the surviving entity or acquirer of such assets; (iv) a
recapitalization, reorganization or other transaction involving the Company or any Subsidiary
that constitutes or results in a transfer of more than one-third of the voting rights or equity
interests in the Company; (v) consummation of a “Rule 13e-3 transaction” as defined in Rule
13e-3 under the Exchange Act with respect to the Company, or (vi) the execution by the Company
or its controlling shareholders of an agreement providing for or reasonably likely to result in
any of the foregoing events.

          “Closing” means the closing of the purchase and sale of the Securities pursuant to Section
2.1.

          “Closing Date” means the date of the Closing.

          “Closing Price” 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 an Eligible Market or
any other national securities exchange, the closing bid price per share of the Common Stock for
such date (or the nearest preceding date) on the primary Eligible Market or exchange on which
the Common Stock is then listed or quoted; (b) if prices for the Common Stock are then quoted on
the OTC Bulletin Board, the closing bid price per share of the Common Stock for such date (or
the nearest preceding date) so quoted; (c) if prices for the Common Stock are then reported in
the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the most recent closing
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 a majority in interest of the Purchasers.

          “Commission” means the Securities and Exchange Commission.

          “Common Stock” means the common stock of the Company, par value $0.0001 per share, and any
securities into which such common stock may hereafter be reclassified.

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          “Common Stock Equivalents” means, collectively, Options and Convertible Securities.

          “Company Counsel” means Fennemore Craig, P.C., counsel to the Company.

          “Contemplated Financing” means the contemplated private placement of equity and derivative
securities of the Company currently being discussed with investors with Merriman
Curhan Ford, as the placement agent, with a minimum placement of $10 million of such
securities.

          “Convertible Securities” means any stock or securities (other than Options) convertible
into or exercisable or exchangeable for Common Stock.

          “Deposit Account Control Agreement” means the Deposit Account Control Agreement dated as of
the Closing Date, among the Iroquois Master Fund, Ltd., as agent, the Company and M&I Bank
substantially in the form of Exhibit H.

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

          “Eligible Institutional Lender” means (a) Comerica Bank or any of its affiliates, (b) a
commercial bank having total assets in excess of $5,000,000,000 or any affiliate or subsidiary
thereof, (c) a savings and loan association or savings bank organized under the laws of the
United States or any State thereof having a net worth, determined in accordance with GAAP, in
excess of $250,000,000, or (d) any other creditworthy and reputable entity that is regularly
engaged in the business of lending and is acceptable to holders of 50.1% of the aggregate
outstanding principal amount of the Notes.

          “Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange,
the Nasdaq National Market, the Nasdaq Capital Market and the OTC Bulletin Board.

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

          “Excluded Stock” means the issuance of Common Stock (A) upon exercise or conversion of any
options or other securities described in Schedule 3.1(g) (provided that such exercise or
conversion occurs in accordance with the terms thereof, without amendment or modification, and
that the applicable exercise or conversion price or ratio is described in such schedule); or (B)
in connection with any issuance of shares or grant of options to employees, officers, directors
or consultants of the Company pursuant to any stock option plan or employee benefit plan
described in Schedule 3.1(g) or hereafter adopted by the Company and approved by its
shareholders or in respect of the issuance of Common Stock upon exercise of any such options,
(C) pursuant to a bona fide firm commitment underwritten public offering with a nationally
recognized underwriter (excluding any equity lines) in an aggregate offering amount greater than
$20,000,000, or (D) in connection with a bona fide joint venture, strategic partnership, or
strategic alliance the primary purpose of which is not to raise cash.

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          “Filing Date” means the 120th day following the Closing Date with respect to the initial
Registration Statement required to be filed hereunder, and, with respect to any additional
Registration Statements that may be required pursuant to Section 6.1(f), the 15th day
following the date on which the Company first knows, or reasonably should have known, that such
additional Registration Statement is required under such Section.

          “Losses” means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including without limitation costs of preparation of legal action and reasonable
attorneys’ fees.

          “Notes” means the Senior Secured Notes due April 11, 2007 with an aggregate principal face
amount of $4,5000,000 issued by the Company to the Purchasers hereunder in the form of
Exhibit A hereto.

          “Options” means any rights, warrants or options to subscribe, directly or indirectly for or
purchase Common Stock or Convertible Securities.

          “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.

          “Post-Effective Amendment” means a post-effective amendment to the Registration Statement.

          “Post-Effective Amendment Filing Deadline” means the 10th Trading Day after the
Registration Statement cease to be effective pursuant to applicable securities laws due to the
passage of time or the occurrence of an event requiring the Company to file a Post-Effective
Amendment.

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

          “Prospectus” means the prospectus included in the Registration Statement (including,
without limitation, a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable Securities covered
by the Registration Statement, and all other amendments and supplements to the Prospectus
including post effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

          “Purchaser Counsel” means Malhotra & Associates LLP, counsel to Iroquois Master Fund, Ltd.

          “Registrable Securities” means any Underlying Shares issued or issuable pursuant to the
Transaction Documents, together with any securities issued or issuable upon any

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stock split,
dividend or other distribution, recapitalization or similar event with respect to the foregoing.

          “Registration Statement” means the initial registration statement required to be filed
under Article VI and any additional registration statements contemplated by Section 6.1(f),
including (in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by reference in such
registration statement.

          “Required Effectiveness Date” means (i) with respect to the initial Registration Statement
required to be filed hereunder, the 180th day following the Closing Date, and (ii) with respect
to any additional Registration Statements that may be required pursuant to Section
6.1(f), the 60th day following the date on which the Company first knows, or reasonably
should have known, that such additional Registration Statement is required under such Section.

          “Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively,
promulgated by the Commission pursuant to the Securities Act, as such Rules 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.

          “Securities” means the Notes, the Warrants and the Underlying Shares issued or issuable (as
applicable) to the applicable Purchaser pursuant to the Transaction Documents.

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

          “Security Agreement” means the Security Agreement dated as of the Closing Date, among the
Company, Iroquois Master Fund, Ltd., as agent, and the Purchasers substantially in the form of
Exhibit E.

          “Senior Debt” means the obligations of the Company pursuant to that certain Loan and
Security Agreement dated as of June 30, 2006 by and between the Company and Comerica Bank (the
“Comerica Loan”) and the Promissory Note dated as of an even date therewith evidencing the debt
of the Company with respect to the Comerica Loan and, subject to Section 4.10(b), the proposed
replacement term loan for such Comerica Loan that does not exceed $2,500,000 and the revolving
credit facility the aggregate amount of which does not exceed $3,000,000; provided, however,
that the Company shall not borrow or request any funding under the revolving credit facility
without the prior written consent of holders of 50.1% of the aggregate outstanding principal
amount of the Notes.

          “Subordination Agreement” means the Subordination and Standstill Agreement dated as of the
Closing Date, among the Purchasers, the Company and Comerica Bank substantially in the form of
Exhibit G.

          “Subsidiary” means any subsidiary of the Company that is required to be listed on
Schedule 3.1(a).

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          “Trading Day” means (a) any day on which the Common Stock is listed or quoted and traded on
its primary Trading Market, or (b) if the Common Stock is not then listed or quoted and traded
on any Trading Market, then any Business Day.

          “Trading Market” means the OTC Bulletin Board or any other Eligible Market or any national
securities exchange, market or trading or quotation facility on which the Common Stock is then
listed or quoted.

          “Transaction Documents” means this Agreement, the Notes, the Deposit Account Control
Agreement, the Subordination Agreement, the Warrant, the Security Agreement, the Transfer Agent
Instructions and any other documents or agreements executed or delivered in connection with the
transactions contemplated hereby.

          “Transfer Agent Instructions” means the Company’s transfer agent instructions in the form
of Exhibit C.

          “Underlying Shares” means the shares of Common Stock issuable (i) upon exercise of the
Warrants, (ii) upon payment of interest in Conversion Shares pursuant to the Notes, and (iii) in
satisfaction of any other obligation of the Company to issue shares of Common Stock pursuant to
the Transaction Documents, and in each case, any securities issued or issuable in exchange for
or in respect of such securities.

          “VWAP” means on any particular Trading Day or for any particular period the volume weighted
average trading price per share of Common Stock on such date or for such period on an Eligible
Market as reported by Bloomberg Financial Markets, or any successor performing similar
functions; provided, however, that during any period the VWAP is being determined, the VWAP
shall be subject to adjustment from time to time for stock splits, stock dividends, combinations
and similar events as applicable.

          “Warrants” mean, collectively, the Common Stock warrants issued and sold under this
Agreement, in the form of Exhibit B.

ARTICLE II.

PURCHASE AND SALE

     2.1 Closing. The Closing Date shall be 10:00 a.m., New York City time, on
the date hereof (or such later date as is mutually agreed to by the Company and each Purchaser)
after notification of satisfaction (or waiver) of the conditions to the Closing set forth in
Article V. Subject to the terms and conditions set forth in this Agreement, at the Closing, the
Company shall issue and sell to each Purchaser, and each Purchaser shall, severally and not
jointly, purchase from the Company, the Notes and the Warrants for the purchase price set forth on
Schedule A hereto under the heading “Purchase Price”. The Closing shall take place at the
offices of Purchaser Counsel or at such other location or time as the parties may agree.

2.2 Closing Deliveries.

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

               (i) a Note, registered in the name of such Purchaser, in the principal amount
indicated on Schedule A hereto under the heading “Note Principal Amount”;

               (ii) a Warrant, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire such number of Underlying Shares indicated on
Schedule A hereto under the heading “Warrant Shares”.

               (iii) the legal opinion of Company Counsel, in the form of Exhibit D,
executed by such counsel and delivered to the Purchasers;

               (iv) the Security Agreement executed by the parties thereto;

               (v) the Subordination Agreement executed by the parties thereto;

               (vi) the Deposit Account Control Agreement executed by the parties thereto;

               (vii) copies of the Uniform Commercial Code financing statements and other documents
or agreements required by the Security Agreement with respect to the security granted thereby, and
evidence of the filing of such financing statement, documents or agreements;

               (viii) duly executed Transfer Agent Instructions acknowledged by the Company’s
transfer agent; and

               (ix) any other document reasonably requested by the Purchasers or Purchaser Counsel.

          (b) At the Closing, each Purchaser shall deliver or cause to be delivered to the
Company (i) the purchase price indicated below such Purchaser’s name on the signature page of this
Agreement under the heading “Purchase Price”, in United States dollars and in immediately available
funds, by wire transfer to an account designated in writing by the Company for such purpose, and
(ii) the Security Agreement and the Subordination Agreement executed by such Purchaser.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to the Purchasers:

          (a) Subsidiaries. The Company does not directly or indirectly control or
own any interest in any other corporation, partnership, joint venture or other business
association or entity (a “Subsidiary”), other than those listed in Schedule 3.1(a). Except
as disclosed in Schedule 3.1(a), the Company owns, directly or indirectly, all of the
capital stock or comparable

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equity interests of each Subsidiary free and clear of any lien, charge,
claim, security interest, encumbrance, right of first refusal or other restriction (collectively,
“Liens”), and all the issued and outstanding shares of capital
stock or comparable equity interests of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.

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

          (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 hereunder and thereunder have been duly authorized by all
necessary action on the part of the Company and no further consent or action is required by the
Company, its Board of Directors or its stockholders. Each Transaction Document has been (or upon
delivery will be) duly executed by the Company is, or when delivered in accordance with the terms
hereof, will constitute, the valid and binding obligation of the Company enforceable against the
Company in accordance with its terms. Neither the Company nor any Subsidiary is in violation of
any of the provisions of its certificate or articles of incorporation, by laws or other
organizational or charter documents.

          (d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of
the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) 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

8

 

subject (including federal and state securities laws and regulations and the rules and regulations
of any self-regulatory organization to which the Company or its securities are subject), or by
which any property or asset of the Company or a Subsidiary is bound or affected; except in each
case as, individually or in the aggregate, do not have or are not reasonably be expected to result
in a Material Adverse Effect.

          (e) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing with the Commission of a Form 8-K Current Report,
(ii) the filing with the Commission of the Registration Statement, (iii) the application(s) to each
Trading Market for the listing of the Underlying Shares for trading thereon, (iv) the notification
to the Trading Market of the change in the number of shares outstanding, and (v) applicable Blue
Sky filings (collectively, the “Required Approvals”).

          (f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens (other than restrictions under applicable
securities laws), and shall not be subject to preemptive rights or similar rights of shareholders.
The Securities are issued in compliance with applicable securities laws, rules and regulations.
The Company has
reserved from its duly authorized capital stock the maximum number of shares of Common Stock
issuable under the Transaction Documents.

          (g) Capitalization. The number of shares and type of all authorized, issued
and outstanding capital stock, options and other securities of the Company (whether or not
presently convertible into or exercisable or exchangeable for shares of capital stock of the
Company) is set forth in Schedule 3.1(g). All outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable and have been issued in compliance with
all applicable securities laws. No securities of the Company are entitled to preemptive or similar
rights, and 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 and except as disclosed in
Schedule 3.1(g), there are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities, rights or obligations
convertible into 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
securities or rights convertible or exchangeable into shares of Common Stock. The issue 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 such securities. To
the knowledge of the Company, except as specifically disclosed in Schedule 3.1(g), no
Person or group of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under
the Exchange Act), or has the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of 5% of the outstanding Common Stock, ignoring

9

 

for such
purposes any limitation on the number of shares of Common Stock that may be owned at any single
time.

          (h) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period
as the Company was required by law to file such material) (the foregoing materials being
collectively referred to herein as the “SEC Reports” and, together with the Schedules to this
Agreement, the “Disclosure Materials”) 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. The Company has delivered to the Purchasers a copy
of all SEC Reports filed within the 10 days preceding the date hereof. As of their respective
dates, the SEC Reports complied in all material respects with the requirements of the Securities
Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder,
and none of the SEC Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports 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 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 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. All material agreements to which the Company or
any Subsidiary is a party or to which the property or assets of the Company or any Subsidiary are
subject are included as part of or specifically identified in the SEC Reports.

          (i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed on Schedule
3.1(i), the SEC Reports or in Schedule 3.1(i), (i) there has been no event, occurrence
or development that, individually or in the aggregate, has had or that could 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 required to be disclosed in filings made with the Commission, (iii)
the Company has not altered its method of accounting or the identity of its auditors, (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.

          (j) Absence of Litigation. Except as described in Schedule 3.1(j),
there is no action, suit, inquiry, notice of violation, proceeding or, to the knowledge of the
Company investigation pending or threatened against or affecting the Company, any Subsidiary or any
of

10

 

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, individually or in the aggregate, have or 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.

          (k) Employee Matters. Neither the Company nor any of the Subsidiaries is
engaged in any unfair labor practice (as defined in the National Labor Relations Act); except for
matters which would not, individually or in the aggregate, have a Material Adverse Effect, (i)
there is (A) no unfair labor practice complaint pending or, to the Company’s knowledge after due
inquiry, threatened against the Company or any of the Subsidiaries before the National Labor
Relations Board, and no grievance or arbitration proceeding arising out of or under collective
bargaining agreements is pending or threatened, (B) no strike, labor dispute, slowdown or stoppage
pending or, to the Company’s knowledge, threatened against the Company or any of the Subsidiaries
and (C) no union representation dispute currently existing concerning the employees of the Company
or any of the Subsidiaries, and (ii) to the Company’s knowledge, there has been no violation of any
applicable federal, state, local or foreign law relating to discrimination in the hiring, promotion
or pay of employees, any applicable wage or hour laws or any applicable provision of the Employee
Retirement Income Security Act of 1974 or the rules and regulations promulgated thereunder
concerning the employees of the Company or any of the Subsidiaries.

          (l) Compliance. Neither the Company nor any Subsidiary (i) is in default
under or in violation of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or not such default
or violation has been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state and local laws
relating to taxes, environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as does not, individually or in the
aggregate, 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, individually or in the
aggregate, have or result in a Material Adverse Effect
(“Material Permits”), and neither the

11

 

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 that is material to the business
of the Company and the Subsidiaries 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 for Liens identified as Permitted Liens under the Security Agreement and
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. Any real
property and facilities held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in
compliance.

          (o) Patents and Trademarks. Except as described in Schedule 3.1(o),
the Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material for use in connection
with their respective businesses as described in the SEC Reports 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 written notice that 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.

          (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.
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
Schedule 3.1(q), 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.

          (r) Internal Accounting Controls. 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

12

 

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.

          (s) Solvency. Based on the financial condition of the Company as of the
Closing Date, (i) the Company’s fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current fiscal year 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 debt 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).

          (t) Certain Fees. Except as described in Schedule 3.1(t), 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 this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and hold harmless the
Purchasers, their employees, officers, directors, agents, and partners, and their respective
Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation
and attorney’s fees) and expenses suffered in respect of any such claimed or existing fees, as such
fees and expenses are incurred.

          (u) Private Placement. Neither the Company nor, to the knowledge of the
Company, any Person acting on the Company’s behalf has sold or offered to sell or solicited any
offer to buy the Securities by means of any form of general solicitation or advertising. Neither
the Company nor any of its Affiliates nor, to the Company’s knowledge, any Person acting on the
Company’s behalf has, directly or indirectly, at any time within the past six months, made any
offer or sale of any security or solicitation of any offer to buy any security under circumstances
that would (i) eliminate the availability of the exemption from registration under Regulation D
under the Securities Act in connection with the offer and sale
of the Securities as contemplated hereby or (ii) cause the offering of the Securities pursuant
to the Transaction Documents to be integrated with prior offerings by the Company for purposes of
any stockholder approval provisions under the rules and regulations of any Trading Market. 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 and no shareholder
approval is required for the Company to fulfill its obligations under the Transaction Documents.
The

13

 

Company is not a United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980.

          (v) Listing and Maintenance Requirements. The Company has not, since
December 23, 2005, received notice (written or oral) from any Eligible 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 Eligible Market. 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.

          (w) Registration Rights. Except as described in Schedule 3.1(w),
the Company has not granted or agreed to grant to any Person any rights (including “piggy back”
registration rights) to have any securities of the Company registered with the Commission or any
other governmental authority that have not been satisfied.

          (x) Application of Takeover Protections. The Company and its 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 the Company’s issuance of the Securities and the Purchasers’ ownership of the
Securities.

          (y) Disclosure. Except for the Contemplated Financing, 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 constitutes or might constitute material,
non-public
information. The Company understands and confirms that the Purchasers will rely on the
foregoing representations in effecting transactions in securities of the Company. All disclosure
provided to the Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their business, properties,
prospects, operations or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been so publicly
announced or disclosed. 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.

          (z) No Violation. The issuance and sale of the Securities contemplated
hereby does not conflict with or violate any rules or regulations of the Trading Market.

          (aa) Acknowledgment Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of

14

 

an
arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby.
The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company or any other Purchaser (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Purchaser’s purchase of the Securities. The
Company further represents to each Purchaser that the Company’s decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and its
representatives. The Company further acknowledges that no Purchaser has made any promises or
commitments other than as set forth in this Agreement, including any promises or commitments for
any additional investment by any such Purchaser in the Company.

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

          (cc) Ranking. Except for the Senior Debt and as set forth on Schedule
3.1(cc), as of the date of this Agreement, no indebtedness of the Company is senior to, or pari
passu with, the Notes in right of payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise.

          (dd) Indebtedness. Except for the Senior Debt and as set forth on
Schedule 3.1(dd) and trade payables arising in the ordinary course of business not more
than sixty (60) days past due, the Company does not have any indebtedness.

          (ee) Taxes. The Company and each of its Subsidiaries (i) has made or filed
all federal, foreign and state income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and (iii) has set aside on its
books provision reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim.

          (ff) Environmental. The Company and the Subsidiaries and their properties,
assets and operations are in compliance with, and hold all permits, authorizations and approvals
required under, Environmental Laws (as defined below), except to the extent that failure to so
comply or to hold such permits, authorizations or approvals would not, individually or in the
aggregate, have a Material Adverse Effect; except as set forth on Schedule 3.1(ff), there
are no past or present events, conditions, circumstances, activities, practices, actions, omissions
or plans that could reasonably be expected to give rise to any material costs or liabilities to the
Company or the Subsidiaries under, or to interfere with or prevent compliance by the Company or the
Subsidiaries with, Environmental Laws; except as would not, individually or in the aggregate, have
a Material Adverse Effect, neither the Company nor any of the Subsidiaries (i) is the subject of
any investigation, (ii) has received any notice or claim, (iii) is a party to or affected by any
pending or threatened action, suit or proceeding, (iv) is bound by any judgment, decree or order or
(v) has entered into any agreement, in each case relating to any alleged violation of any

15

 

Environmental Law or any actual or alleged release or threatened release or cleanup at any location
of any Hazardous Materials (as defined below)
(as used herein, “Environmental Law” means any federal, state, local or foreign law, statute,
ordinance, rule, regulation, order, decree, judgment, injunction, permit, license, authorization or
other binding requirement or common law (including any applicable regulations and standards adopted
by the International Maritime Organization) relating to health, safety or the protection, cleanup
or restoration of the environment or natural resources, including those relating to the
distribution, processing, generation, treatment, storage, disposal, transportation, other handling
or release or threatened release of Hazardous Materials, and
“Hazardous Materials” means any
material (including, without limitation, pollutants, contaminants, hazardous or toxic substances or
wastes) that is regulated by or may give rise to liability under any Environmental Law).

          (gg) Sarbanes-Oxley Act. The Company is in compliance with applicable
requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by
the Commission thereunder in effect as of the date of this Agreement, except where such
noncompliance could not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.

     3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to the Company as
follows:

          (a) Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization with
the requisite corporate, limited liability company 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, delivery and performance by such
Purchaser of this Agreement have been duly authorized by all necessary corporate or limited
liability company action on the part of such Purchaser. This Agreement has been duly executed by
such Purchaser and, when delivered by such Purchaser in accordance with terms hereof, will
constitute the valid and legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms.

          (b) Investment Intent. Such Purchaser is acquiring the Securities for its
own account and not with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser’s right, subject to the provisions of this
Agreement, at all times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act or under an exemption
from such registration and in compliance with applicable federal and state securities laws.
Nothing contained herein shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. 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 at the date hereof it is, an (i) “accredited investor” as defined in Rule
501(a) under the Securities Act or (2) a “qualified institutional buyer” as defined in Rule 144A
under the Securities Act. Such Purchaser is not a registered broker-dealer under Section 15 of the
Exchange Act.

16

 

          (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.

          (f) Nature of the Investment. Such Purchaser understands the nature of this
investment, is fully aware and familiar with the business operations of the Company, and is able to
evaluate the merits and risks of an investment in the Securities.

          (g) Disclosure. Such Purchaser has been given the opportunity to ask
questions about the Company and has been granted access to all information, financial and
otherwise, with respect to the Company which has been requested, has examined such information, and
is satisfied with respect to the same.

          (h) Advice. Such Purchaser has been encouraged to rely upon the advice of
his, her or its legal counsel and accountants or other financial advisors with respect to the tax
and other considerations relating to the
investment in the Securities and, in determining to invest in the Securities, has relied
solely upon (i) the advice of its legal counsel and accountants or other financial advisors with
respect to the tax, economic and other consequences involved and (ii) such Purchaser’s own,
independent evaluation of the business, operations and prospects of the Company and the merits and
risks of the investment in the Securities.

          (i) Nature of Investment. Such Purchaser has been advised and understands
that this investment is, by its nature, very speculative.

          (j) Approval by the Commission. Such Purchaser understands that no federal
or state agency, including the Commission or the securities regulatory agency of any state, has
approved or disapproved the Securities, passed upon or endorsed the merits of the Securities, or
made any finding or determination as to the fairness of the Securities.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

          (a) The Securities may only be disposed of pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from the registration
requirements of the Securities Act, and in compliance with any applicable state securities laws.
In connection with any transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set forth herein, the
Company may require the transferor to provide to the Company an opinion of counsel selected

17

 

by the
transferor, the form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to register on the books
of the Company and with its transfer agent, without any such legal opinion, any transfer of
Securities by a Purchaser to an Affiliate of such Purchaser, provided that the transferee certifies
to the Company that it is an “accredited investor” as defined in Rule 501(a) under the Securities
Act.

          (b) The Purchasers agree to the imprinting, except as otherwise permitted by Section
4.1(c), the following legend on any certificate evidencing Securities:

	 	 	[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT]
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

          (c) Certificates evidencing Securities shall not be required to contain the legend set
forth in Section 4.1(b) or any other legend (i) while a Registration Statement covering the resale
of such Securities is effective under the Securities Act, or (ii) following any sale of such
Securities pursuant to Rule 144, or (iii) if such Securities are eligible for sale under Rule
144(k), 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 the legal opinion included in the Transfer Agent
Instructions to the Company’s transfer agent on the Effective Date. Following the Effective Date
or at such earlier time as a legend is no longer required for certain Securities, the Company will
no later than three Trading Days following the delivery by a Purchaser to the Company or the
Company’s transfer agent of a legended certificate representing such Securities, deliver or cause
to be delivered to such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions on transfer set
forth in Section 4.1(b). For so long as any Purchaser owns Securities, the Company will not effect
or publicly announce its intention to effect any exchange, recapitalization or other

18

 

transaction
that effectively requires or rewards physical delivery of certificates evidencing the Common Stock.

          (d) The Company acknowledges and agrees that a Purchaser may from time to time
pledge or grant a security interest in some or all of the Securities in connection with a bona fide
margin agreement or other
loan or financing arrangement secured by the Securities and, if required under the terms of
such agreement, loan or 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 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 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 the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders thereunder.

     4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Securities (including the Underlying Shares) will 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 Securities (including 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 that the Company may have against any Purchaser. Anything in this Agreement or elsewhere
herein to the contrary notwithstanding, it is understood and agreed by the Company (i) that none of
the Purchasers have been asked 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) that future
open market or other transactions by any Purchaser, including short sales, and 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) that any Purchaser, and counter parties in
“derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently
may have a “short” position in the Common Stock, and (iv) that each
Purchaser shall not be deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction.

     4.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants 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. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to the Purchasers and
make publicly available in accordance with paragraph (c) of Rule 144 such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably request to satisfy
the provisions of Rule 144 applicable to the issuer of securities relating to transactions for the
sale of securities pursuant to Rule 144.

19

 

     4.4 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, 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 to the Purchasers or that would
be integrated with the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market.

     4.5 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 be required to
fulfill its obligations in full under the Transaction Documents.

          (b) The Company shall (i) in the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing application covering all of
the shares of Common Stock issued or issuable under the Transaction Documents, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing on each Trading Market as
soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing, and (iv)
maintain the
listing of such Common Stock on each such Trading Market or another Eligible Market.

          (c) In the case of a breach by the Company of Section 4.5(a), in addition to the
other remedies available to the Purchasers, the Purchasers shall have the right to require the
Company to either: (i) use its best efforts to obtain the required shareholder approval necessary
to permit the issuance of such shares of Common Stock as soon as is possible, but in any event not
later than the 60th day after such notice, or (ii) within five Trading Days after delivery of a
written notice, pay cash to such Purchaser, as liquidated damages and not as a penalty, in an
amount equal to the number of shares of Common Stock not issuable by the Company times 115% of the
arithmetic average of the VWAP for each of the five Trading Days immediately prior to the date of
such notice or, if greater, the five Trading Days immediately prior to the date of payment (the
“Cash Amount”). If the exercising Purchaser elects the first option under the preceding sentence
and the Company fails to obtain the required shareholder approval on or prior to the 60th day after
such notice, then within three Trading Days after such 60th day, the Company shall pay the Cash
Amount to such Purchaser, as liquidated damages and not as penalty.

     4.6 Subsequent Placements.

          (a) Except for the Contemplated Financing, from the date hereof until 30 Trading
Days following the Effective Date, the Company will not, directly or indirectly, offer, sell, grant
any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option
to purchase or other disposition of) any of its or the Subsidiaries’ equity or equity equivalent
securities, including without limitation any debt, preferred stock or other instrument or security
that is, at any time during its life and under any circumstances, convertible into or exchangeable
or exercisable for Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a “Subsequent Placement”).

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                    (b) From and after the date hereof and for so long as the Notes are outstanding, the
Company will not, directly or indirectly, effect any Subsequent Placement unless the Company shall
have first complied with this Section 4.6(b), it being understood and agreed that this Section
4.6(b) shall apply to the Contemplated Financing.

               (i) The Company shall deliver to each Purchaser a written notice (the
“Offer”) of any proposed or intended issuance or sale or exchange of the securities being
offered (the “Offered Securities”) in a Subsequent Placement,
which Offer shall (w) identify and describe the Offered Securities, (x) describe the
price and other terms upon which they are to be issued, sold or exchanged, and the number or
amount of the Offered Securities to be issued, sold or exchanged, (y) identify the Persons
or entities to which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with each Purchaser a portion of
the Offered Securities in an amount equal to twice such Purchaser’s initial aggregate
principal investment amount in the Notes purchased hereunder (the “Basic Amount”), and (B)
with respect to each Purchaser that elects to purchase its Basic Amount, any additional
portion of the Offered Securities attributable to the Basic Amounts of other Purchasers as
such Purchaser shall indicate it will purchase or acquire should the other Purchasers
subscribe for less than their Basic Amounts (the “Undersubscription Amount”).

               (ii) To accept an Offer, in whole or in part, a Purchaser must deliver a
written notice to the Company prior to the end of the 7 Trading Day period of the Offer,
setting forth the portion of the Purchaser’s Basic Amount that such Purchaser elects to
purchase and, if such Purchaser shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Purchaser elects to purchase (in either case,
the “Notice of Acceptance”). If the Basic Amounts subscribed for by all Purchasers are less
than the total of all of the Basic Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be entitled to purchase, in
addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; provided, however, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the “Available Undersubscription Amount”), each Purchaser who has subscribed
for any Undersubscription Amount shall be entitled to purchase on that portion of the
Available Undersubscription Amount as the Basic Amount of such Purchaser bears to the total
Basic Amounts of all Purchasers that have subscribed for Undersubscription Amounts, subject
to rounding by the Board of Directors to the extent its deems reasonably necessary.

               (iii) The Company shall have 5 Trading Days from the expiration of the period
set forth in Section 4.6(b)(ii) above to issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the Purchasers
(the “Refused Securities”), but only to the offerees described in the Offer and only upon
terms and conditions (including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring Person or Persons or less favorable to the Company
than those set forth in the Offer.

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               (iv) In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in Section
4.6(b)(iii) above), then each Purchaser may, at its sole option and in its sole discretion,
reduce the number or amount of the Offered Securities specified in its Notice of Acceptance
to an amount that shall be not less than the number or amount of the Offered Securities that
the Purchaser elected to purchase pursuant to Section 4.6(b)(ii) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered Securities to be
issued or sold to Purchasers pursuant to Section 4.6(c)(ii) above prior to such reduction)
and (ii) the denominator of which shall be the original amount of the Offered Securities.
In the event that any Purchaser so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Company may not issue, sell or
exchange more than the reduced number or amount of the Offered Securities unless and until
such securities have again been offered to the Purchasers in accordance with Section
4.6(b)(i) above.

               (v) Upon the closing of the issuance, sale or exchange of all or less than
all of the Refused Securities, the Purchasers shall acquire from the Company, and the
Company shall issue to the Purchasers, the number or amount of Offered Securities specified
in the Notices of Acceptance, as reduced pursuant to Section 4.6(b)(iv) above if the
Purchasers have so elected, upon the terms and conditions specified in the Offer. The
purchase by the Purchasers of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Purchasers of a purchase
agreement relating to such Offered Securities reasonably satisfactory in form and substance
to the Purchasers and their respective counsel. Notwithstanding anything to the contrary
contained in this Agreement, if the Company does not consummate the closing of the issuance,
sale or exchange of all or less than all of the Refused Securities within 7 Trading Days of
the expiration of the period set forth in Section 4.6(b)(ii), the Company shall issue to the
Purchasers the number or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4.6(b)(iv) above if the Purchasers have so
elected, upon the terms and conditions specified in the Offer.

               (vi) Any Offered Securities not acquired by the Purchasers or other Persons
in accordance with Section 4.6(b)(iii) above may not be issued, sold or exchanged until they
are again offered to the Purchasers under the procedures specified in this Agreement.

               (vii) Notwithstanding anything to the contrary in this Section 4.6 and unless
otherwise agreed to by the Purchasers, the Company shall either
confirm in writing to the Purchasers that the transaction with respect to the
Subsequent Placement has been abandoned or shall publicly disclose its intention to issue
the Offered Securities, in either case in such a manner such that the Purchasers will not be
in possession of material non-public information, by the tenth (10th) Business
Day following delivery of the Offer Notice. If by the tenth (10th) following
delivery of the Offer Notice no public disclosure regarding a transaction with respect to
the Offered Securities has been made, and no notice regarding the abandonment of such
transaction has been received by the Purchasers, such transaction shall be deemed to have
been abandoned and the Purchasers

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shall not be deemed to be in possession of any material,
non-public information with respect to the Company. Should the Company decide to pursue
such transaction with respect to the Offered Securities, the Company shall provide each
Purchaser with another Offer Notice and each Purchaser will again have the right of
participation set forth in this Section 4.6. The Company shall not be permitted to deliver
more than four such Offer Notices to the Buyers in any 12 month period.

               (c) The restrictions contained in paragraph (b) of this Section 4.6 shall not apply
to Excluded Stock.

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

             4.8 Securities Laws Disclosure; Publicity. On or before 8:30 a.m., New York
time, on October 9, 2006, the Company shall issue a press release acceptable to the Purchasers
disclosing all material terms of the transactions contemplated hereby. Within two Business Day of
the date of this Agreement, the Company shall file a Current Report on Form 8-K with the Commission
(the “8-K Filing”) describing the terms of the transactions contemplated by the Transaction
Documents and including as exhibits to such Current Report on Form 8-K this Agreement and the form
of Notes and Warrants, in the form required by the Exchange Act. Thereafter, the Company shall
timely file any filings and notices required by the Commission or applicable law with respect to
the transactions contemplated hereby and provide copies thereof to the Purchasers promptly after
filing. Except with
respect to the 8-K Filing and the press release referenced above (a copy of which will be
provided to Purchaser Counsel for its review as early as practicable prior to its filing), the
Company shall, at least two Trading Days prior to the filing or dissemination of any disclosure
required by this paragraph, provide a copy thereof to the Purchasers for their review. The Company
and the Purchasers shall consult with each other in issuing any press releases or otherwise making
public statements or filings and other communications with the Commission or any regulatory agency
or Trading Market with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement, filing or other
communication without the prior consent of the other, 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, filing or other 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 to the extent such disclosure (but not any disclosure as to the
controlling Persons thereof) is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure. Except for the
Contemplated Financing, the Company shall not, and shall cause each of its Subsidiaries and its and
each of their respective officers, directors, employees and agents not to, provide any Purchaser
with any material nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the 8-K Filing without the express written consent of such Purchaser. In the
event of

23

 

a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its
or their respective officers, directors, employees and agents, in addition to any other remedy
provided herein or in the Transaction Documents, a Purchaser shall have the right to require the
Company to make a public disclosure, in the form of a press release, public advertisement or
otherwise, of such material nonpublic information. No Purchaser shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the foregoing, neither the Company nor
any Purchaser shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of any Purchaser, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and regulations (provided
that in the case of clause (i) Purchaser Counsel shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release). Each press release
disseminated during the 12 months prior to the Closing Date did not at the time of release 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, not misleading.

     4.9 Use of Proceeds. The net proceeds shall be used for working capital
purposes and not for the satisfaction of any portion of the Company’s debt (other than payment of
trade payables and accrued expenses in the ordinary course of the Company’s business and prior
practices), to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation. In no event shall the net proceeds be used to repay the amounts due under
the Letter Factoring Agreement with FOC Financial L.P.

     4.10 Indebtedness.

          (a) At any time after the date of this Agreement, other than the Senior Debt and any
permitted replacement or refinancing of the Senior Debt, neither the Company nor any Subsidiary of
the Company shall incur any indebtedness, liability or obligation that is senior to, or pari passu
with, the Notes in right of payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise; provided, however, that notwithstanding the foregoing,
the Company may, in the ordinary course of business, incur indebtedness secured by purchase money
security interests (which will be senior only as to the underlying assets covered thereby) and
indebtedness under capital lease obligations (which will be senior only as to the underlying
assets covered thereby).

          (b) Notwithstanding anything to the contrary, the Company shall be permitted to
amend, modify, replace or refinance the Senior Debt with a new term note with an Eligible
Institutional Lender in an amount not exceeding $2,500,000 and enter into a revolving credit
facility with an
Eligible Institutional Lender not exceeding $3,000,000; provided however, that (i) the
maturity date of any new term note shall be after the maturity date of the Notes and (ii) the
Company shall not borrow or request any funding under the revolving credit facility without the
prior written consent of holders of 50.1% of the aggregate outstanding principal amount of the
Notes.

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          (c) The provisions of this Section 4.10 shall terminate and be of no further force
or effect upon the indefeasible repayment in full of the Notes and all accrued interest thereon and
any and all expenses or liabilities relating thereto.

     4.11 Repayment of Notes. Each of the parties hereto agrees that all
repayments of the Notes (including any accrued interest thereon) by the Company will be paid pro
rata to the holders thereof based upon the principal amount then outstanding to each of such
holders.

     4.12 No Impairment. At all times after the date hereof, the Company will
not take or permit any action, or cause or permit any Subsidiary to take or permit any action that
impairs or adversely affects the rights of the Purchasers under the Agreement or the Notes.

     4.13 Fundamental Changes.

                  (a) In addition to any other rights provided by law or set forth herein, from and
after the date of this Agreement and for so long as any Notes remain outstanding, the Company shall
not without first obtaining the approval (by vote or written consent, as provided by law) of the
holders of a majority of the outstanding principal face amount of the Notes:

              (i) purchase, redeem (other than pursuant to equity incentive agreements with
non-officer employees giving the Company the right to repurchase shares upon the termination
of services) or set aside any sums for the purchase or redemption of, or declare or pay any
dividend (including a dividend payable in stock of the Company) or make any other
distribution with respect to, any shares of capital stock or any other securities that are
convertible into or exercisable for such stock;

              (ii) change the nature of the Company’s business to any business which is fundamentally
distinct and separate from the business currently conducted by the Company; or

              (iii) cause or permit any Subsidiary of the Company directly or indirectly to take any
actions described in clauses (a) through (b) above, other than issuing securities to the
Company.

                  (b) Except as set forth in Section 4.10(b) above and for the Contemplated
Financing, from the date of this Agreement until the 30th Trading Day following the
Effective Date, the Company shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of a majority of the outstanding principal face amount
of the Notes:

     (i) acquire or merge with any other business entity;

     (ii) sell a substantial portion of assets not in the ordinary course of
business;

     (iii) enter into a transaction that results in or cause a Change of Control;

     (iv) amend the Company’s charter or by-laws;

25

 

               (v) increase the number of shares issuable pursuant to any stock option or
other equity incentive plan;

               (vi) change the nature of the Company’s business to any business which is
fundamentally distinct and separate from the business currently conducted by the Company;

               (vii) except as set forth on Schedule 3.1(dd), create, incur, assume or
suffer to exist indebtedness greater than $100,000 in aggregate;

               (viii) except as set forth on Schedule 3.1(dd), create or suffer to exist any
Lien or transfer upon or against any of its property or assets now owned or hereafter
acquired, except for indebtedness less than $100,000 in aggregate; or

               (ix) cause or permit any Subsidiary of the Company directly or indirectly to
take any actions described in clauses (i) through (viii) above, other than issuing
securities to the Company.

            4.14 Reimbursement. In consideration of each Purchaser’s execution and
delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company’s other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless each Purchaser and each other holder of the Securities and all
of their stockholders, partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons’ agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Related Persons”) from and against any and all actions, causes of action,
suits, claims and Losses in connection therewith (irrespective of whether any such Related Person
is a party to the action for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Related Person
as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made in the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation
contained in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against
such Related Person by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (iii)
the status of such Purchaser or holder of the Securities as an investor in the Company. To the
extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and procedures with respect to
the rights and obligations under this Section 4.14 shall be the same as those set forth in Section
6.4(c) below.

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     4.15 Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an “Acquiring Person” under any shareholders
rights plan or similar 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 Underlying Shares under the Transaction Documents or under any other agreement between
the Company and the Purchasers.

     4.16 Seniority. Except for the Senior Debt and as set forth in Schedule
3.1(dd) or as otherwise permitted in Section 4.10 above (the “Existing Indebtedness”),
no indebtedness of the Company is senior to, or pari passu with, this Notes in right of payment,
whether with respect to interest, damages or upon liquidation or dissolution or otherwise. Other
than the Existing Indebtedness and any renewal, refinancing or replacement thereof pursuant to
Section 4.10(b) that does not exceed the aggregate amount of the Existing Indebtedness and the
borrowing availability under the related credit or loan agreements on the date hereof, the Company
will not, and will not permit any Subsidiary to, directly or indirectly, enter into, create, incur,
assume or suffer to exist any indebtedness of any kind, that is senior or pari passu in any respect
to the Company’s obligations under the Notes, whether with respect to interest or upon liquidation
or dissolution, or otherwise, other than indebtedness secured by purchase money security interests
(which will be senior only as to the underlying assets covered thereby) and indebtedness under
capital lease obligations (which will be senior only as to the assets covered thereby); and the
Company will not, and will not permit any subsidiary to, directly or indirectly, incur any Lien on
or with respect to any of its property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom, that is senior or pari passu in any respect to the
Company’s obligations under the Notes, whether
with respect to interest or upon liquidation or dissolution, or otherwise; provided, however,
that the Company may incur any such indebtedness if the proceeds received in respect thereof are
used for repayment of the Notes in full.

     4.17 Delivery of Certificates. In addition to any other rights available to
a Purchaser, if the Company fails to deliver to such Purchaser a certificate representing Common
Stock on the date on which delivery of such certificate is required by any Transaction Document,
and if after such date such Purchaser purchases (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by such Purchaser of the shares that the
Purchaser anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three
Trading Days after such Purchaser’s request and in such Purchaser’s discretion, either (i) pay cash
to such Purchaser in an amount equal to such Purchaser’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to such Purchaser a certificate or
certificates representing such Common Stock and pay cash to such Purchaser in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common
Stock, times (B) the Closing Price on the date of the event giving rise to the Company’s obligation
to deliver such certificate.

     4.18  MFN Provision. If any time following the Closing Date, the Company or
any Subsidiary of the Company offers to issue or issues to any Person any security of the Company
or any Subsidiary of the Company, then the Company shall offer to each Purchaser the right to
exchange all or a portion of the Notes then held by such Purchaser, plus accrued but unpaid

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interest for such security. Such offer shall be made at the same time and in the same manner as if
such offer is being made to any other potential purchaser of such security. Each Purchaser shall
have 10 Trading Days to review the offer and determine whether it wants to exchange all or any
portion of the Notes for such new security.

     4.19 Reverse Split. For so long as any Warrants remain outstanding, the
Company shall not effect a reverse stock split of one or more classes of the Company’s Common
Stock.

ARTICLE V.

CONDITIONS

     5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to the satisfaction or
waiver by such Purchaser, at or before the Closing, of each of the following conditions:

          (a) Representations and Warranties. The representations and warranties of
the Company contained herein shall be true and correct in all material respects as of the date when
made and as of the Closing as though made on and as of such date;

          (b) Performance. The Company and each other Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied with by it at or prior
to the Closing;

          (c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the consummation of any of the
transactions contemplated by the Transaction Documents;

          (d) Adverse Changes. Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably would be expected to have or result
in a Material Adverse Effect; and

          (e) No Suspensions of Trading in Common Stock; Listing. Trading in the
Common Stock shall not have been suspended by the Commission or any Trading Market (except for any
suspensions of trading of not more than one Trading Day solely to permit dissemination of material
information regarding the Company) at any time since the date of execution of this Agreement, and
the Common Stock shall have been at all times since such date listed for trading on an Eligible
Market.

     5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell Securities at the Closing is
subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:

          (a) Representations and Warranties. The representations and warranties of
the Purchasers contained herein shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made on and as of such date;

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          (b) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Purchasers at or prior to
the Closing; and

          (c) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction that prohibits the consummation of any of the
transactions contemplated by the Transaction Documents.

ARTICLE VI.

REGISTRATION RIGHTS

     6.1 Shelf Registration.

          (a) As promptly as possible, and in any event on or prior to the Filing Date, the
Company shall prepare and file with the Commission a “shelf” Registration Statement covering the
resale of all Registrable Securities for an offering to be made on a continuous basis pursuant to
Rule 415. If for any reason the Commission does not permit all of the Registrable Securities to be
included in such Registration Statement, then the Company shall prepare and file with the
Commission a separate Registration Statement with respect to any such Registrable Securities not
included with the initial Registration Statements, as expeditiously as possible, but in no event
later than the date which is 30 days after the date on which the Commission shall indicate as being
the first date such filing may be made. The Registration Statement shall contain (except if
otherwise directed by the Purchasers) the “Plan of Distribution”, substantially as attached hereto
as Exhibit F. The Company shall (i) register the resale of the Registrable Securities on
an appropriate form in accordance herewith as the Purchasers may consent and (ii) attempt to
register the Registrable Securities on Form S-3 as soon as such form is available, provided that
the Company shall maintain the effectiveness of the Registration Statements then in effect until
such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared effective by the
Commission.

          (b) The Company shall use its best efforts to cause the Registration Statement to be
declared effective by the Commission as promptly as possible after the filing thereof, but in any
event prior to the Required Effectiveness Date, and shall use its best efforts to keep the
Registration Statement continuously effective under the Securities Act until the earlier of (i) the
fifth anniversary of the Effective Date, (ii) the date when all Registrable Securities covered by
such Registration Statement have been sold publicly, or (iii) the date on which the Registrable
Securities are eligible for sale without registration pursuant to subparagraph (k) of Rule 144 (the
“Effectiveness Period”). The Company shall notify each Purchaser in writing promptly (and in any
event within one business day) after receiving notification from the Commission that the
Registration Statement has been declared effective.

          (c) As promptly as possible, and in any event no later than the Post-Effective
Amendment Filing Deadline, the Company shall prepare and file with the Commission a Post-Effective
Amendment. The Company shall use its best efforts to cause the Post-Effective Amendment to be
declared effective by the Commission as promptly as possible after the filing

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thereof, but in any
event prior to the 15th Trading Day following the Post-Effective Amendment Filing
Deadline. The Company shall notify each Purchaser in writing promptly (and in any event within one
business day) after receiving notification from the Commission that the Post-Effective Amendment
has been declared effective.

          (d) If: (i) any Registration Statement is not filed on or prior to the Filing Date
or a Post-Effective Amendment is not filed on or prior to the Post-Effective Amendment Filing
Deadline (if the Company files such Registration Statement or amendment without affording the
Purchasers the opportunity to review and comment on the same as required by Section 6.2(a) hereof,
the Company shall not be deemed to have satisfied this clause (i)), or (ii) the Company fails to
file with the Commission a request for acceleration in accordance with Rule 461 promulgated under
the Securities Act, within five Trading Days after the date that the Company is notified (orally or
in writing, whichever is earlier) by the Commission that a Registration Statement will not be
“reviewed,” or will not be subject to further review, or (iii) the Company fails to respond to any
comments made by the Commission within 10 days after the receipt of such comments, or (iv) a
Registration Statement filed hereunder is not declared effective by the Commission by the Required
Effectiveness Date or a Post-Effective
Amendment is not declared effective on or prior to the 15th Trading Day following
the Post-Effective Amendment Filing Deadline, or (v) after a Registration Statement is filed with
and declared effective by the Commission, such Registration Statement ceases to be effective as to
all Registrable Securities to which it is required to relate at any time prior to the expiration of
the Effectiveness Period without being succeeded within 10 Trading Days by an amendment to such
Registration Statement or by a subsequent Registration Statement filed with and declared effective
by the Commission, or (vi) an amendment to a Registration Statement is not filed by the Company
with the Commission within ten Trading Days after the Commission’s having notified the Company that
such amendment is required in order for such Registration Statement to be declared effective, or
(vii) the Common Stock is not listed or quoted, or is suspended from trading on it Trading Market
for a period of three Trading Days (which need not be consecutive Trading Days), or (viii) the
exercise rights of the Purchasers pursuant to the Warrants are suspended for any reason (any such
failure or breach being referred to as an “Event,” and for purposes of clause (i), (iv) or (viii)
the date on which such Event occurs, or for purposes of clause (ii) the date on which such five
Trading Day period is exceeded, or for purposes of clauses (iii), (v) or (vi) the date which such
ten Trading Day-period is exceeded, or for purposes of clause (vii) the date on which such three
Trading Day period is exceeded, being referred to as “Event Date”), then: (x) on each such Event
Date the Company shall pay to each Purchaser an amount in cash, as partial liquidated damages and
not as a penalty, equal to 2% of the aggregate purchase price paid by such Purchaser pursuant to
this Agreement; and (y) on each monthly anniversary of each such Event Date thereof (if the
applicable Event shall not have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Purchaser an amount in cash, as partial liquidated damages and not as a
penalty, equal to 2% of the aggregate purchase price paid by such Purchaser pursuant to the
Purchase Agreement. Such payments shall be in partial compensation to the Purchasers and shall not
constitute the Purchaser’s exclusive remedy for such events. If the Company fails to pay any
liquidated damages pursuant to this Section in full within seven days after the date payable, the
Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Purchaser, accruing daily from the date such
liquidated
 damages are due until such amounts, plus all such interest thereon, are paid in full.

30

 

          (e) The Company shall not, prior to the Effective Date of the Registration
Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities.

          (f) If the Company issues to the Purchasers any Common Stock pursuant to the
Transaction Documents that is not included in the initial Registration Statement, then the Company
shall file an additional Registration Statement covering such number of shares of Common Stock on
or prior to the Filing Date and shall use it best efforts, but in no event later than the Required
Effectiveness Date, to cause such additional Registration Statement to become effective by the
Commission.

     6.2 Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:

          (a) Subject to the Company’s compliance with all applicable requirements of the
Securities Act, the Exchange Act and the regulations thereto, not less than three Trading Days
prior to the filing of a Registration Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to the Purchaser Counsel copies of all such
documents proposed to be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Purchasers and Purchaser Counsel,
and (ii) cause its officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel,
to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall
not file a Registration Statement or any such Prospectus or any amendments or supplements thereto
to which Purchasers holding a majority of the Registrable Securities shall reasonably object.

          (b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously effective, subject
appropriate blackout periods required to comply with Securities Laws, as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the Securities Act all of
the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as
promptly as reasonably possible, and in any event within ten days, to any comments received
from the Commission with respect to the Registration Statement or any amendment thereto and as
promptly as reasonably possible provide the Purchasers true and complete copies of all
correspondence from and to the Commission relating to the Registration Statement; and (iv) comply
in all material respects with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of disposition by the
Purchasers thereof set forth in the Registration Statement as so amended or in such Prospectus as
so supplemented.

31

 

          (c) Notify the Purchasers of Registrable Securities to be sold and Purchaser Counsel
as promptly as reasonably possible, and (if requested by any such Person) confirm such notice in
writing no later than one Trading Day thereafter, of any of the following events: (i) the
Commission notifies the Company whether there will be a “review” of any Registration Statement;
(ii) the Commission comments in writing on any Registration Statement (in which case the Company
shall deliver to each Purchaser a copy of such comments and of all written responses thereto);
(iii) any Registration Statement or any post-effective amendment is declared effective; (iv) the
Commission or any other Federal or state governmental authority requests any amendment or
supplement to any Registration Statement or Prospectus or requests additional information related
thereto; (v) the Commission issues any stop order suspending the effectiveness of any Registration
Statement or initiates any Proceedings for that purpose; (vi) the Company receives notice of any
suspension of the qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (vii)
the financial statements included or incorporated by reference in any Registration Statement become
ineligible for inclusion or incorporation therein or any statement made in any Registration
Statement or Prospectus or any document incorporated or deemed to be incorporated therein by
reference is untrue in any material respect or any revision to a Registration Statement, Prospectus
or other document is required so that it will not 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 the light of the circumstances under which they were made, not misleading.

          (d) Use its best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or (ii) any
suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in any
jurisdiction, as soon as possible.

          (e) Furnish to each Purchaser and Purchaser Counsel, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such documents with the
Commission.

          (f) Promptly deliver to each Purchaser and Purchaser Counsel, without charge, as
many copies of the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto by each of the
selling Purchasers in connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto.

          (g) (i) In the time and manner required by each Trading Market, prepare and file
with such Trading Market an additional shares listing application covering all of the Registrable
Securities; (ii) take all steps necessary to cause such Registrable Securities to be approved for
listing on each Trading Market as soon as possible thereafter; (iii) provide to the Purchasers
evidence of such listing; and (iv) maintain the listing of such Registrable Securities on each such
Trading Market or another Eligible Market.

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          (h) Prior to any public offering of Registrable Securities, use its best efforts to
register or qualify or cooperate with the selling Purchasers and Purchaser Counsel in connection
with the registration or qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Purchaser requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement.

          (i) Cooperate with the Purchasers to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which
certificates shall be free, to the extent permitted by this Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations and registered in
such names as any such Purchasers may request.

          (j) Upon the occurrence of any event described in Section 6.2(c)(vii), as promptly
as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to
the Registration Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading.

          (k) Cooperate with any due diligence investigation undertaken by the Purchasers in
connection with the sale of Registrable Securities, including, without limitation, by making
available any documents and information; provided that the Company will not deliver or make
available to any Purchaser material, nonpublic information unless such Purchaser specifically
requests in advance to receive material, nonpublic information in writing.

          (l) Comply with all applicable rules and regulations of the Commission.

     6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or compliance with this
Agreement by the Company, including without limitation (a) all registration and filing fees and
expenses, including without limitation those related to filings with the Commission, any Trading
Market and in connection with applicable state securities or Blue Sky laws, (b) printing expenses
(including without limitation expenses of printing certificates for Registrable Securities and of
printing prospectuses requested by the Purchasers), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions contemplated by
this Agreement, and (f) all listing fees to be paid by the Company to the Trading Market.

     6.4 Indemnification.

          (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Purchaser, the officers,

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directors,
partners, members, agents, brokers (including brokers who offer and sell Registrable Securities as
principal as a result of a pledge or any failure to perform under a margin call of Common Stock),
investment advisors and employees of each of them, each Person who controls any such Purchaser
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, partners, members, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all Losses, as incurred,
arising out of or relating to any untrue or alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in
the light of the circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (i) such untrue statements, alleged untrue statements, omissions or
alleged omissions are based solely upon information regarding such Purchaser furnished in writing
to the Company by such Purchaser expressly for use therein, or to the extent that such information
relates to such Purchaser or such Purchaser’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Purchaser expressly for use
in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (ii) in the case of an occurrence of an event of the type specified in
Section 6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective Prospectus after the
Company has notified such Purchaser in writing that the Prospectus is outdated or defective and
prior to the receipt by such Purchaser of the Advice contemplated in Section 6.5.

          (b) Indemnification by Purchasers. Each Purchaser shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees,
each Person who controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses
(as determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review) arising solely out
of any untrue statement of a material fact contained in the Registration Statement, any Prospectus,
or any form of prospectus, or in any amendment or supplement thereto, or arising solely out of any
omission of a material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of
the circumstances under which they were made) not misleading to the extent, but only to the extent,
that such untrue statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (i) such untrue statements or omissions are based solely upon
information regarding such Purchaser furnished in writing to the Company by such Purchaser
expressly for use therein, or to the extent that such information relates to such Purchaser or such
Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the Registration Statement,
such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (ii) in the
case of an occurrence of an event of the type specified in Section 6.2(c)(v)-(vii), the use by such
Purchaser of an outdated or defective Prospectus after the Company has notified such Purchaser in
writing that the Prospectus is outdated or defective and prior to the receipt by such Purchaser of
the Advice

34

 

contemplated in Section 6.5. In no event shall the liability of any selling Purchaser
hereunder be greater in amount than the dollar amount of the net proceeds received by such
Purchaser upon the sale of the Registrable Securities giving rise to such indemnification
obligation.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”),
such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of
its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.

          An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party
has agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent such Indemnified
Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying
Party shall not be liable for any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes
an unconditional release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.

          All fees and expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred,
within ten Trading Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake
to reimburse all such fees and expenses to the extent it is finally judicially determined that
such Indemnified Party is not entitled to indemnification hereunder).

          (d) Contribution. If a claim for indemnification under Section 6.4(a) or (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise), then each

35

 

Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or omission or
alleged omission of a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party
as a result of any Losses shall be deemed to include, subject to the limitations set forth in
Section 6.4(c), any reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this Section was available to such
party in accordance with its terms.

          The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6.4(d) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 6.4(d), no
Purchaser shall be required to contribute, in the aggregate, any amount in excess of the amount
by which the net proceeds actually received by such Purchaser from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

          The indemnity and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.

     6.5 Dispositions. Each Purchaser agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement. Each Purchaser further agrees that,
upon receipt of a notice from the Company of the occurrence of any event of the kind described in
Sections 6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such Registrable
Securities under the Registration Statement until such Purchaser’s receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by Section 6.2(j), or
until it is advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce
the provisions of this paragraph.

     6.6 No Piggyback on Registrations. Except as set forth on Schedule
3.1(w) neither the Company nor any of its security holders (other than the Purchasers in such
capacity pursuant hereto) may include securities of the Company in the Registration Statement other
than the

36

 

Registrable Securities, and the Company shall not after the date hereof enter into
any agreement providing any such right to any of its security holders.

     6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the Securities Act of
any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company shall send to each
Purchaser written notice of such determination and if, within fifteen days after receipt of such
notice, any such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such Purchaser requests to be
registered.

ARTICLE VII.

MISCELLANEOUS

     7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been consummated by the
third Trading Day following the date of this Agreement; provided that no such termination will
affect the right of any party to sue for any breach by the other party (or parties).

     7.2 Fees and Expenses. At the Closing, the Company shall pay to Iroquois
Master Fund, Ltd. an aggregate of $45,000 for their legal fees and expenses incurred in connection
with the preparation and negotiation of this Agreement, of which amount $10,000 has been previously
paid by the Company. In lieu of the foregoing remaining payment, Iroquois Master Fund, Ltd. may
retain such amount at the Closing. 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 issuance
of any Securities.

     7.3 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. At or after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably requested in order to
give practical effect to the intention of the parties under the Transaction Documents.

     7.4 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 (i) the date of transmission, if such notice or communication is
delivered via

37

 

facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New
York City time) on a Trading Day, (ii) the Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number specified in this
Agreement later than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New
York City time) on such date, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) 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
follows:

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	 	If to the Company:
	 	ProLink Holdings Corp. 

410 S. Benson Lane 

Chandler, Arizona 85224

Attn: Dave M. Gomez, Esq. 

Fax No.: 480.785.7446
	 
	 	 	 	 
	 

	 	With a copy to:
	 	With a copy to:
	 

	 	 	 	Fennemore Craig, P.C. 

3003 North Central Ave., Ste. 2600

Phoenix, Arizona 85012

Attn: Sarah A. Strunk 

Fax No.: 602.916.5527
	 
	 	 	 	 
	 

	 	If to the Purchasers:
	 	To the address set forth under such
Purchaser’s name on the signature
pages attached hereto.

     or such other address as may be designated in writing hereafter, in the same manner, by such
Person.

     7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and holders
collectively holding 51% of the aggregate principal amount outstanding under the Notes or, in the
case of a waiver, by the party against whom enforcement of any such waiver 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 either
party to exercise any right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Purchasers under Article VI and that
does not directly or indirectly affect the rights of other Purchasers may be given by Purchasers
holding at least a majority of the Registrable Securities to which such waiver or consent relates.

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

     7.7 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
the Purchasers. Subject to restrictions contained herein and in the other Transaction Documents,
any Purchaser may assign its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply to the “Purchasers.”
Notwithstanding anything to the contrary herein, Securities may be assigned to any Person in

39

 

connection with a bona fide margin account or other loan or financing arrangement secured by such
Securities.

     7.8 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 that each
Related Person is an intended third party beneficiary of Section 4.14 and each Indemnified Party is
an intended third party beneficiary of Section 6.4 and (in each case) may enforce the provisions of
such Sections directly against the parties with obligations thereunder.

     7.9 Governing Law; Venue; Waiver of Jury Trial. 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 any of
the 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, Borough of Manhattan. Each party hereto 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 this
Agreement), 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. Each party hereto 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
manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out
of or relating to this Agreement or any of the Transaction Documents or the transactions
contemplated hereby or thereby. If either party shall commence an action or proceeding to enforce
any provisions of this Agreement or any Transaction Document, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and
other reasonable costs and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

     7.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable.

     7.11 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

40

 

signature is delivered by facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is executed) the same with the
same force and effect as if such facsimile signature page were an original thereof.

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

     7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the 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.

     7.14 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, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Securities.

     7.15 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 described in the foregoing sentence and hereby agrees to waive in any action
for specific performance of any such obligation the defense that a remedy at law would be adequate.

     7.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Notes or Warrants or any Purchaser enforces
or exercises its rights hereunder or 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 by 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.

41

 

     7.17 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 of interest applicable to the Transaction
Documents from the effective date 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.

     7.18 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 of the obligations of any other Purchaser under any Transaction Document. The decision
of each Purchaser to purchase Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of the Subsidiary
which may have been made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any liability to any other
Purchaser (or any other Person) relating to or arising from any such information, materials,
statements or opinions. Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Purchasers are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Document. The Company hereby confirms that it
understands and agrees that the Purchasers are not acting as a “group” as that term is used in
Section 13(d) of the Exchange Act. Each Purchaser acknowledges that no other Purchaser has acted as
agent for such Purchaser in connection with making its investment hereunder and that no other
Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment
hereunder. Each Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser represents that it has been
represented by its own separate legal counsel in its
review

42

 

and negotiations of this Agreement and the Transaction Documents and each party
represents and confirms that Malhotra & Associates LLP represents only Iroquois Master Fund, Ltd.
in connection with this Agreement and the other Transaction Documents.

     7.19 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities
or rights convertible into, or entitling the holder thereof to receive directly or indirectly
shares of Common Stock), combination or other similar recapitalization or event occurring after the
date hereof, each reference in this Agreement to a number of shares or a price per share shall be
amended to appropriately account for such event.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW]

43

 

     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.

	 	 	 	 	 
	 	 	PROLINK HOLDINGS CORP.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Lawrence D. Bain
	 

	 	 	 	Lawrence D. Bain
	 

	 	 	 	President and Chief Executive Officer

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF PURCHASERS FOLLOW.]

44

 

Iroquois Master Fund, Ltd.

By:      /s/ Joshua Silverman

Name: Joshua Silverman

Title:  Authorized Signatory

Note Principal Amount: $1,000,000

Address for Notice:

Iroquois Master Fund Ltd.

641 Lexington Avenue, 28th Floor

New York, NY 10022

Facsimile No.:212-207-3452

Telephone No.:212-974-3070

Attn: Joshua Silverman

With a copy to:

Malhotra & Associates LLP

11 Penn Plaza, 5th Floor

New York, New York 10001

Facsimile No.: (212) 504-0863

Telephone No.: (212) 593-2284

Attn: Gary Malhotra, Esq.

[Signature Page to Securities Purchase Agreement]

45

 

Bonanza Master Fund, Ltd.

By:   /s/ Brian Ladin

        Brian Ladin

        Partner

Note Principal Amount: $2,000,000

Address for Notice:

Bonanza Master Fund Ltd.

300 Crescent Court, Ste. 250

Dallas, Texas 75201

Facsimile No.:

Telephone No.:

Attn: Brian Ladin

With a copy to:

Facsimile No.:

Telephone No.:

Attn:

[Signature Page to Securities Purchase Agreement]

46

 

WPG Distressed/Special Situations Overseas, L.P.

By:  /s/ William G. Butterly, III

        William G. Butterly, III

        Senior Managing Director

Note Principal Amount: $400,000

Address for Notice:

WPG Distressed/Special Situations Overseas, L.P.

c/o Robeco USA, L.L.C.

909 Third Avenue, 32nd Floor

New York, NY 10022

Facsimile No.:

Telephone No.:

Attn: William G. Butterly, III

            Senior Managing Director

With a copy to:

Facsimile No.:

Telephone No.:

Attn:

[Signature Page to Securities Purchase Agreement]

47

 

WPG Event-Driven Multi-Strategy Overseas, L.P.

By:  /s/ William G. Butterly, III

        William G. Butterly, III

        Senior Managing Director

Note Principal Amount: $100,000

Address for Notice:

WPG Event-Driven Multi-Strategy Overseas, L.P.

c/o Robeco USA, L.L.C.

909 Third Avenue, 32nd Floor

New York, NY 10022

Facsimile No.:

Telephone No.:

Attn: William G. Butterly, III

        Senior Managing Director

With a copy to:

Facsimile No.:

Telephone No.:

Attn:

[Signature Page to Securities Purchase Agreement]

48

 

Highbridge International LLC

By: Highbridge Capital Management, LLC

By:   /s/ Adam J. Chill

        Adam J. Chill

Note Principal Amount: $500,000

Address for Notice:

c/o Highbridge Capital Management, LLC

9 West 57th Street, 27th Floor

New York, NY 10019

Facsimile No.:

Telephone No.:

Attn: Adam J. Chill

With a copy to:

Facsimile No.:

Telephone No.:

Attn:

[Signature Page to Securities Purchase Agreement]

49

 

Rockmore Investment Master Fund Ltd

By:    /s/ Bruce Bernstein

        Bruce Bernstein

        Managing Member

Note Principal Amount: $500,000

Address for Notice:

Rockmore Investment Master Fund Ltd.

650 5th Avenue, 24th Floor

New York, NY 10019

Facsimile No.: 212.258.2315

Telephone No.: 212.258.2303

Attn: Bruce Bernstein

           Managing Member

With a copy to:

Facsimile No.:

Telephone No.:

Attn:

[Signature Page to Securities Purchase Agreement]

50

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