Document:

Exhibit
10.1

July 17, 2006

William Leonard

3111 West Allegheny Avenue

Philadelphia, PA 19132

Re:                  Interim
CEO

Dear Bill:

This letter agreement (“Agreement”)
shall serve to evidence your appointment as interim Chief Executive Officer of
The Pep Boys — Manny, Moe & Jack (the “Company”).

1.             Your appointment shall continue until the earliest of
(i) the appointment of a permanent Chief Executive Officer by the Board of
Directors, (ii) your removal by the Board of Directors or (iii) the tender of
your resignation to the Board of Directors.

2.             In exchange for your services, you shall receive a
salary at a monthly rate of $83,333, payable in accordance with the Company’s
normal payroll practices.  During your
period of employment, you SHALL NOT be entitled to receive any cash
consideration on account of your service on the Board of Directors, but shall
be entitled to receive your customary equity grants.

3.             You specifically acknowledge that you SHALL NOT be
entitled to receive or participate in any of the Company’s welfare, retirement
or other benefits plans or receive any other perquisites.

4.             You
shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies, and their respective businesses, which shall have
been obtained by you during your employment by the Company or any of its
affiliated companies and which shall not be public knowledge (other than by
acts by you or your representatives in violation of this Agreement).  Following the termination of your employment
by the Company, you shall not, without the prior written consent of the Company
or as required by applicable law, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.

 

 

5.             This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors.   This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania without reference to principles of conflict of laws.  The parties hereto agree that exclusive
jurisdiction of any dispute regarding this Agreement shall be the state or
federal courts located in Philadelphia, Pennsylvania.  EACH PARTY HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL IN CONNECTION WITH ANY PROCEEDING OVER ANY DISPUTE ARISING UNDER THIS
AGREEMENT.  This Agreement constitutes
the entire agreement among the parties pertaining to the subject matter hereto,
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties.

 

	
  

  	
  Sincerely yours,

  
	
   

  	
   

  
	
   

  	
  /s/THE PEP
  BOYS—MANNY, MOE & JACK

  

 

Acknowledged and agreed
to by:

/s/ William LeonardExhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement is entered into and
dated as of July 19, 2006 (this “Agreement”),
by and among SatCon Technology Corporation, 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:

“Additional Warrants”
means, collectively, the Common Stock warrants issued upon exercise of the
Warrant B, in the form of Exhibit B-3.

“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 Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof
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
Significant Subsidiary thereof; (b) there is commenced against the Company or
any Significant Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Company or any Significant
Subsidiary thereof 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 Significant Subsidiary thereof 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 after such appointment; (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors; (f)
the Company or any Significant Subsidiary thereof 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 Significant Subsidiary thereof 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 Significant Subsidiary
thereof, 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 a majority of the voting rights or equity interests in the
Company (other than by means of conversion, redemption or exercise of the
Securities or in connection with the payment of principal or interest on the
Notes); (ii) a replacement of more than one-half of the members of the Company’s
board of directors that is not approved by a majority of 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 a sale of more than one-half of the assets of the Company, on a
consolidated basis, 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
a majority 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 that constitutes or results in a transfer of
more than a majority 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 

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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 and reasonably
acceptable to the Company.

“Commission” means
the Securities and Exchange Commission.

“Common Stock”
means the common stock of the Company, par value $0.01 per share, and any
securities into which such common stock may hereafter be reclassified.

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

“Company Counsel”
means Greenberg Traurig, LLP, counsel to the Company.

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

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

“Eligible Market”
means any of the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market, or the Nasdaq Capital Market (formerly the Nasdaq
SmallCap Market).

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

“Excluded Stock”
means the issuance of (A) Common Stock 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), including payments of dividends
on the Company’ outstanding shares of Series B Convertible Preferred Stock in
the form of Common Stock; (B) Common Stock or Common Stock Equivalents 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 or amended by the Company and approved by its shareholders or in
respect of the issuance of Common Stock upon exercise of any such options; (C)
Common Stock or Common Stock Equivalents upon exercise, conversion or
redemption of the Securities, or as payment of principal or interest on the
Notes, or upon exercise of warrants issued to the placement agent in connection
with the placement of the Securities; (D) securities issued as a result of any
stock split, stock dividend, reclassification, reorganization or similar event
with respect to the Common Stock; (E) Common Stock or Common Stock Equivalents
in connection with a merger, consolidation and/or acquisition of an entity,
business or assets (not primarily for the purpose of obtaining cash); (F)
Common Stock or Common Stock Equivalents 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; and (G) Common Stock or
Common Stock Equivalents in connection 

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with a bona fide joint venture, strategic partnership
or strategic alliance the primary purpose of which is not to raise cash.

“Filing Date” means
the 30th 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(a) or Section 6.1(f), the 30th day following the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement is required and may be filed 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 Convertible Notes due July 19, 2011 with an aggregate principal
face amount of $12,000,000 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 (including all Additional Warrants that can be
issued under the Transaction Documents).

“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.

“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 Common Stock (including Underlying Shares) issued or issuable
pursuant to the Transaction Documents, together with any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing.

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“Registration Statement”
means the initial registration statement required to be filed under Article VI
and any additional registration statements contemplated by Section 6.1(a)
or 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 90th day following the Closing Date, and (ii) with respect
to any additional Registration Statements that may be required pursuant to Section
6.1(a) or Section 6.1(f), the 60th day (or, in the event of a review
of such additional Registration Statement by the Commission, the 90th day) following the date on which the Company
first knows, or reasonably should have known, that such additional Registration
Statement is required and may be filed 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 Warrant A, the Warrant B, the Additional Warrant 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.

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

“SVB Credit Facility” means the Loan and Security Agreement, dated
January 28, 2005, between the Company, certain of the Company’s Subsidiaries
and Silicon Valley Bank, as amended.

“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 any 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 Warrant A, the Warrant B, the Additional
Warrant, the Security Agreement and any other documents or agreements executed
or delivered in connection with the transactions contemplated hereby.

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“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 conversion or redemption of the
Notes or as payment of principal or interest on the Notes, (ii) upon exercise
of the Warrants, (iii) upon exercise of the Additional Warrants issued upon
exercise of the Warrant B, and (v) 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 the volume weighted average trading price per share of
Common Stock on such date on an Eligible Market as reported by Bloomberg L.P.,
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.

“Warrant A” means,
collectively, the Common Stock warrants issued and sold under this Agreement,
in the form of Exhibit B-1.

“Warrant B” means,
collectively, the Common Stock warrants issued and sold under this Agreement,
in the form of Exhibit B-2.

 “Warrants” means,
collectively, each of the Warrant A and Warrant B issued and sold under this
Agreement

ARTICLE II.

PURCHASE AND SALE

2.1       Closing.  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, the Warrant A
and the Warrant B 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.

(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 A, 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”.

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(iii)          a Warrant B, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire (A) such
number of Underlying Shares indicated on Schedule A hereto under the
heading “Warrant B Shares”, and (B) an Additional Warrant, pursuant to which
such Purchaser shall have the right to acquire up to the number of Underlying
Shares indicated on Schedule A hereto under the heading “Additional
Warrant Shares” (assuming full exercise of Warrant B), each on the terms set
forth therein;

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

(v)           evidence
that all amounts outstanding under the SVB Credit Facility have been paid in
full and the SVB Credit Facility has been terminated;

(vi)          the
Security 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; 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 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 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 

 7
 

 

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,
reasonably expect to (i) adversely affect the legality, validity or
enforceability of any Transaction Document, (ii) result in a material adverse
effect on the results of operations, assets, prospects, 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 other than in connection with the Required Approvals.  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, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be limited by applicable law.

(d)  No Conflicts.  Except as set forth on Schedule 3.1(d),
the execution, delivery and performance 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) subject to the Required Approvals, result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations 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 

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case as, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

(e)  Filings, Consents and Approvals.  Except as set forth on Schedule 3.1(e),
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 notices and/or 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 (if required), (v) applicable Blue Sky filings and (vi) to
the extent the Purchasers require shareholder approval to be obtained pursuant
to any of the Transaction Documents (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 as set forth herein), and shall not be subject
to preemptive rights or similar rights of shareholders. Assuming the accuracy
of the Purchasers representations and warranties set forth in Section 3.2, the
Securities will be 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.  Excluding the Securities, 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.  Except as set forth on Schedule
3.1(g), 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, 

 9
 

 

beneficial ownership of in excess of 5% of the
outstanding Common Stock, ignoring 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, including the exhibits thereto and the
documents incorporated by reference therein, 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, as applicable, and none of the SEC Reports,
when filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.  The financial
statements of the Company included in the SEC Reports 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 in the SEC Reports or on Schedule 3.1(i), (i) there has been
no event, occurrence or development that, individually or in the aggregate, has
had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or 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.

 

 10

 

 

(j)  Absence of Litigation.  There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency 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, reasonably be
expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of the Company.  The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.

(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 could not, individually or in the aggregate, 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 

 11
 

 

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, reasonably
be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.

(n)  Title to Assets.  Except as set forth on Schedule 3.1(n),
the Company and the Subsidiaries have good and marketable title in fee simple
to all real property (if any) 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 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 disclosed in the SEC Reports, 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 reasonably be expected to result
in 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 SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $60,000.

 12
 

 

 

(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 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 after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (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 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.  Assuming the accuracy of the Purchasers’
representation and warranties set forth in Section 3.2, neither the Company nor
any of its Affiliates nor 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. 

 13
 

 

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 (except to the extent the
Purchasers require shareholder approval to be obtained under the Transaction
Documents). The 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)  Form S-3 Eligibility. The Company
is eligible to register the resale of its 
Common Stock by the Purchasers under Form S-3 promulgated under the
Securities Act.

(w)  Listing and Maintenance Requirements.  The Company has not, in the two years
preceding the date hereof, 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.

(x)  Registration Rights.  Except as described herein or on Schedule
3.1(x), 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.

(y)  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.

(z)  Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, which
shall be disclosed to the public in the press release issued pursuant to Section
4.8 hereof, 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 

 14
 

 

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.

(aa)  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.

(bb)  Acknowledgment Regarding Purchasers’ Purchase of
Securities.  The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to 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 and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by 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 and
the other Transaction Documents to which it is a party, including any promises
or commitments for any additional investment by any such Purchaser in the
Company.

(cc)  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.

(dd)  Ranking.  Except as set forth on Schedule 3.1(dd),
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, other than indebtedness
secured by purchase money security interests (which is senior only as to
underlying assets covered thereby) and capital lease obligations (which is
senior only as to the property covered thereby).

(ee)  Indebtedness.  Except as set forth on Schedule 3.1(ee)
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.

(ff)  Taxes. 
Except for matters that would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, 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 

 15
 

 

apply.  There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the Company knows of no basis for any such
claim.

(gg)  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 would not, individually or in the aggregate,
have a Material Adverse Effect, there are no past or present events,
conditions, circumstances, activities, practices, actions, omissions or plans
relating to or in any way affecting the Company or the Subsidiaries that
violate or may violate 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 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).

(hh)  Sarbanes-Oxley
Act. The Company is in compliance with all provisions 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 which are
applicable to the Company 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 and each other Transaction Document to which
it is a party have been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. 
Each Transaction Document to which it is a party has been duly executed
by such Purchaser and, when delivered by such Purchaser in accordance with its
terms, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium 

 16
 

 

and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be limited by applicable law.

(b)  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, and on each date on which it
shall exercise any warrants or Additional Warrants or convert any Notes it will
be, an “accredited investor” as defined in Rule 501(a) under the Securities
Act.  Such Purchaser is not a registered
broker-dealer under Section 15 of the Exchange Act.

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

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

(f)  Short Sales and Confidentiality Prior To The Date
Hereof.  Other than the
transaction contemplated hereunder, such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, executed any disposition, including short
sales, in the securities of the Company during the period commencing from June
16, 2006 until the date hereof (“Discussion Time”).  Notwithstanding the foregoing, in the case of
a Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction).

 17
 

 

 

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
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] [CONVERTIBLE]] 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] [CONVERSION] 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

 18
 

 

(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 promptly
after the Effective Date to effect the removal of the legend hereunder.  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’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).

(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, provided any
such pledgee or secured party is an “accredited investor” as defined in Rule
501(a) under the Securities Act and agrees to be bound by the provisions of
this Agreement.  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. 
The Company acknowledges each Purchaser’s right, subject to the
provisions of this Agreement, at all times to sell or otherwise dispose of all
or any part of the Securities, including, without limitation, shares of Common
Stock issued as payment of interest or principal on the Notes,
in compliance with applicable federal and state securities laws.

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.  Upon the request of any Purchaser, the
Company shall deliver to such Purchaser a written certification of a duly
authorized officer as to whether it has complied with the preceding sentence.
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 

 19
 

 

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.

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, if applicable: (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 90th day
after such notice, or (ii) within five Trading Days after delivery of a written
notice of exercise or conversion of Securities which cannot be satisfied as a
result of a breach by the Company of Section 4.5(a), 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 or converting Purchaser elects the first option under the preceding
sentence and the Company fails to obtain the required shareholder approval on
or prior to the 90th day after such notice, then within three Trading Days
after such 90th day, the Company shall pay the Cash Amount to such Purchaser,
as liquidated damages and not as penalty.

4.6       Subsequent
Placements.

(a) 
From the date hereof until 30 Trading Days after 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)

 20

 

 

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”).

(b)  From the Effective Date 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).

(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) a pro rata portion of 50% of the Offered Securities based on
such Purchaser’s pro rata portion of the aggregate principal amount of 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 7
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  

 21
 

 

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.

(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
sell 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 and 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 in accordance with the preceding sentence.

(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.

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

 22
 

 

 

4.7       Conversion and Exercise Procedures.  Except as qualified respectively by the
Warrants, the Additional Warrants or the Notes, the form of Exercise Notice
included in the Warrants and Additional Warrants and the form of Holder
Conversion Notice included in the Notes set forth the totality of the
procedures required by the Purchasers in order to exercise the Warrants or
Additional Warrants or convert the Notes. 
No additional legal opinion or other information or instructions shall
be necessary to enable the Purchasers to exercise their Warrants or convert
their Notes.  The Company shall honor
exercises of the Warrants and Additional Warrants and conversions of the Notes
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
July 20, 2006, the Company shall issue a press release acceptable to the
Purchasers disclosing all material terms of the transactions contemplated
hereby.  Within two Business Days 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, 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), and any
subsequent periodic report filed under the Exchange Act, 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 (including
the filing of the final Transaction Documents (including signature pages
thereto) with the Commission), in which case the Company shall provide the
Purchasers with prior notice of such disclosure.  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 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, 

 23
 

 

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 Company shall use the net proceeds from the sale of the Securities
hereunder 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.

4.10     Indebtedness.

(a)  For so long as the Notes are outstanding,
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); 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, to the extent permissible under the Note.

(b) 
The provisions of this Section 4.10 shall terminate and be of no further
force or effect upon the conversion or 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 (other than by conversion of the Notes) 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.

 24
 

 

 

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 at least $3,000,000 in
principal amount of the 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 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 cash dividend or
make any other cash distribution with respect to, any shares of capital stock
or any other securities that are convertible into or exercisable for such stock
(excluding with respect to the Securities as contemplated by the Transaction
Documents);

(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) 
From the date of this Agreement until the 30th Trading Day following the  Effective Date, the Company shall not without
first obtaining the written approval of Iroquois Master Fund, Ltd:

(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;

(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) create, incur, assume or suffer to exist indebtedness greater
than $100,000 in aggregate, other than (A) indebtedness set forth on Schedule
3.1(ee), (B) trade payables arising in the ordinary course of business not more
than 90 days past due, and (C) capital lease obligations and purchase money
indebtedness of up to $150,000 in the aggregate incurred in connection with the
acquisition of capital assets and capital lease obligations with respect to
newly acquired or leased assets;

 25
 

 

 

(viii)  create or suffer to exist
any Lien or transfer upon or against any of its property or assets now owned or
hereafter acquired, except with respect to indebtedness allowed pursuant to
Section 4.13(b)(vii) above; 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.  If any Purchaser or any of its Affiliates or
any officer, director, partner, controlling person, employee or agent of a
Purchaser or any of its Affiliates (a “Related
Person”) becomes involved in any capacity in any Proceeding brought
by or against any Person in connection with or as a result of the transactions
contemplated by the Transaction Documents, the Company will indemnify and hold
harmless such Purchaser or Related Person for its reasonable legal and other
expenses (including the costs of any investigation, preparation and travel) and
for any Losses incurred in connection therewith, as such expenses or Losses are
incurred, excluding only Losses that result directly from such Purchaser’s or
Related Person’s gross negligence or willful misconduct.  In addition, the Company shall indemnify and
hold harmless each Purchaser and Related Person from and against any and all
Losses, as incurred, arising out of or relating to any breach by the Company of
any of the representations, warranties or covenants made by the Company in this
Agreement or any other Transaction Document, or any allegation by a third party
that, if true, would constitute a breach. 
The conduct of any Proceedings for which indemnification is available
under this paragraph shall be governed by Section 6.4(c) below.  The indemnification obligations of the
Company under this paragraph shall be in addition to any liability that the
Company may otherwise have and shall be binding upon and inure to the benefit
of any successors, assigns, heirs and personal representatives of the
Purchasers and any such Related Persons. 
If the Company breaches its obligations under any Transaction Document,
then, in addition to any other liabilities the Company may have under any
Transaction Document or applicable law, the Company shall pay or reimburse the
Purchasers on demand for all costs of collection and enforcement (including
reasonable attorneys’ fees and expenses). 
Without limiting the generality of the foregoing, the Company specifically
agrees to reimburse the Purchasers on demand for all costs of enforcing the
indemnification obligations in this paragraph.

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.  For so long as the Notes are outstanding,
(i)  no indebtedness of the Company is or will be senior to, or pari passu
with, the Notes in right of payment, whether with respect of interest, damages
or upon liquidation or dissolution or otherwise and (ii) 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 for borrowed money of
any kind, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any 

 26
 

 

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 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);  provided
further, 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, to the extent permissable under the Note.

4.17     Reverse
Merger.        For so long as at least
$3,000,000 in principal amount of the Notes 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.

 27
 

 

 

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;

(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 be on Form S-3 and shall contain (except if otherwise directed by the
Purchasers) the “Plan of Distribution”, substantially as attached hereto as Exhibit
F.  In the event the Form S-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another 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 

 28
 

 

Securities are eligible for sale without registration
pursuant to subparagraph (k) of Rule 144 (the “Effectiveness
Period”).

(c) 
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.

(d) 
If: (i) any Registration Statement is not filed on or prior to the
Filing Date (if the Company files such Registration Statement 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 (v) after a Registration
Statement is filed with and declared effective by the Commission, and prior to
the expiration of the Effectiveness Period, such Registration Statement ceases
to be continuously 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, (vi) an amendment to a Registration
Statement is not filed by the Company with the Commission within 10 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,
(vii) the Common Stock is not listed or quoted, or is suspended from trading on
an Eligible Market for a period of five Trading Days (which need not be
consecutive Trading Days) (it being understood and agreed that there shall be
no “Event” hereunder if the Common Stock is listed or quoted, and trading is
allowed on another Eligible Market), or (viii) the exercise rights of the
Purchasers pursuant to the Warrants are suspended for any reason (it being
understood and agreed that, to the extent that the exercise of the Warrants are
limited as a result of the restrictions set forth in Section 11 of the
Warrants, this Section 6.1(c)(viii) shall not constitute an Event) (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 five 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 1%
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 1.5% of the
aggregate purchase price paid by such Purchaser pursuant to this Agreement
(collectively, the “Payment Amount”).  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 

 29
 

 

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.  The partial liquidated damages pursuant to
the terms hereof shall apply on a daily pro-rata basis for any portion of a
month prior to the cure of an Event.  Notwithstanding
anything to the contrary, in no event shall the aggregate Payment Amount exceed
24% of the aggregate purchase price paid by such Purchaser pursuant to this
Agreement.

(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.

(g) 
Notwithstanding anything in this Agreement to the contrary, after 60
consecutive Trading Days of continuous effectiveness of the initial
Registration Statement filed and declared effective pursuant to this Agreement,
the Company may, by written notice to the Purchasers, suspend sales under a
Registration Statement after the Effective Date thereof and/or require that the
Purchasers immediately cease the sale of shares of Common Stock pursuant
thereto and/or defer the filing of any subsequent Registration Statement if the
Company is engaged in a material merger, acquisition or sale and the Board of
Directors determines in good faith, by appropriate resolutions, that, as a
result of such activity, (A) it would be materially detrimental to the Company
(other than as relating solely to the price of the Common Stock) to file a
Registration Statement or allow such sales under a Registration Statement at
such time and (B) it is in the best interests of the Company to restrict such
sales or defer proceeding with such registration at such time (a “Suspension Event”). Upon receipt of such
notice, each Purchaser shall immediately discontinue any sales of Registrable
Securities pursuant to such registration until such Purchaser has received
copies of a supplemented or amended Prospectus or until such Purchaser is
advised in writing by the Company that the then-current Prospectus may be used
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus. In no
event, however, shall this right be exercised to suspend sales beyond the
period during which (in the good faith determination of the Company’s Board of
Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company’s rights, under this Section 6(g) may
be exercised for a period of no more than 2 times in any twelve-month period,
of which no more than 7 Trading Days may be consecutive. Immediately after the
end of any suspension period under this Section 6(g), the Company shall take
all necessary actions (including filing any required supplemental prospectus)
to restore the effectiveness of the applicable Registration Statement and the
ability of the Purchasers to publicly resell their Registrable Securities
pursuant to such effective Registration Statement.  For the purposes of clause (v) of Section
6.1(d), the suspension of the

 

 30

 

 

Registration Statement due to a Suspension Event in
accordance with this Section 6.1(g) shall not constitute an Event.

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

(a) 
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 Purchasers and
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.  Each Purchaser agrees to furnish to the
Company a completed Questionnaire in the form attached hereto as Exhibit G
(a “Selling Stockholder Questionnaire”)
not more than 7 Trading Days following the date hereof.

(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 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 (provided that the
Company may redact any information contained therein which could constitute
material non-public information as to any Purchaser which has not executed a
confidentiality agreement with the Company); 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.

(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; (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 

 31
 

 

 

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; (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 or (viii) the occurrence or existence of a Suspension
Event.

(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)  If
requested by any Purchaser, 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.  Subject to the terms
of this Agreement, 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 (if required); (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.

(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 

 32
 

 

 

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; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any material tax in
any such jurisdiction where it is not then so subject or file a general consent
to service of process in any such jurisdiction.

(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 under the circumstances taking into account the
Company’s good faith assessment of any adverse consequences to the Company and
its stockholders of the premature disclosure of such event, 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 and executes a
confidentiality agreement with the Company.

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

(m)  If
the Company is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because any Purchaser fails
to furnish information expressly required by the Commission within seven
Trading Days of the Company’s request, any liquidated damages that are accruing
at such time as to such Purchaser only shall be tolled and any Event that may
otherwise occur solely because of such delay shall be suspended as to such
Purchaser only, until such information is delivered to the Company.

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 

 33
 

 

 

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.  In no event shall the Company be responsible
for any broker or similar commissions of any Purchaser or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Purchasers.

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, 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)(iv)-(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, members, shareholders, partners,
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) to the extent arising solely out of or based solely upon: (x) such
Purchaser’s failure to comply with the prospectus delivery requirements of the
Securities Act or (y) 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

 34
 

 

 

misleading (i) 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 (ii) to the
extent that (A) 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 (B) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(iv)-(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.  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 the reasonable fees and expenses of no more than one
separate 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.

 35
 

 

 

Subject to the terms of this Agreement, 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; 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 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 (i) any sale by such Purchaser of Registrable
Securities pursuant to a Registration Statement will be made in accordance with
the Plan of Distribution attached hereto as Exhibit F and (ii) 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 

 36
 

 

 

described in Sections 6.2(c)(iv) through (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 (as it may have been amended or
supplemented) may be resumed, and such documents are on file with the
Commission.  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(x) 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 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; provided,
however, that, the Company shall not be required to register any
Registrable Securities pursuant to this Section 6.7 that are eligible for
resale pursuant to Rule 144(k) promulgated under the Securities Act.

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 fifth 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 $50,000 for
their legal fees and expenses incurred in connection with the preparation and
negotiation of this Agreement, of which amount $20,000 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.

 37
 

 

 

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 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:

	
  If to the Company:

  	
   

  	
  SatCon Technology Corporation

  
	
   

  	
   

  	
  27 Drydock Avenue

  
	
   

  	
   

  	
  Boston, MA 02210

  
	
   

  	
   

  	
  Attn: David B. Eisenhaure, CEO

  
	
   

  	
   

  	
  Fax No.: (617) 897-2401

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
  Greenberg Traurig, LLP

  
	
   

  	
   

  	
  One International Place

  
	
   

  	
   

  	
  Boston, MA 02110

  
	
   

  	
   

  	
  Attn: Jonathan Bell

  
	
   

  	
   

  	
  Fax No.: (617) 310-6001

  
	
   

  	
   

  	
   

  
	
  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 66%
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 differently
may be given by Purchasers holding at least a majority of the Registrable
Securities to which such waiver or consent relates.  No consideration shall be offered or paid to
any holder of the Notes to amend or consent to a waiver or modification of any
provision of this Note unless the same consideration is also offered to all the
holders of the Notes.

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. 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, subject to the terms of this 

 38
 

 

 

Agreement, Securities may be assigned to any Person in
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 for the applicable
statute of limitations.

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

 39

 

 

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.

 40
 

 

 

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 

 41
 

 

 

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]

 42
 

 

 

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.

SATCON
TECHNOLOGY

CORPORATION

	
  By:

  	
   

  	
  /s/ David B.
  Eisenhaure

  	
   

  
	
   

  	
   

  	
  Name: David B.
  Eisenhaure

  	
   

  
	
   

  	
   

  	
  Title: Chief
  Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ David E.
  O’Neil

  	
   

  
	
   

  	
   

  	
  Name: David E.
  O’Neil

  
	
   

  	
   

  	
  Title: Vice
  President of Finance and

  Treasurer

  

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF PURCHASERS FOLLOW.]

 43
 

 

 

	
  IROQUOIS MASTER FUND,
  LTD.    

  
	
   

  
	
  By:

  	
  /s/ Joshua
  Silverman

  
	
  Name:

  	
  Joshua Silverman

  
	
  Title:

  	
  Authorized
  Signatory

  
	
   

  
	
  Note Principal
  Amount: $2,500,000

  
	
   

  
	
  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.

  
	
   

  

 

 44
 

 

 

	
  ROCKMORE INVESTMENT MASTER

  FUND LTD

  
	
   

  
	
  By:

  	
  /s/ Bruce
  Bernstein

  
	
  Name:

  	
  Bruce Bernstein

  
	
  Title:

  	
  Managing Member

  
	
   

  
	
  Note Principal
  Amount: $1,500,000

  
	
   

  
	
  Address for
  Notice:

  
	
  650 Fifth
  Avenue, 24th Floor

  
	
  New York, NY
  10019

  
	
  Facsimile No.:
  (212) 258-2315

  
	
  Telephone No.:
  (212) 258-2303

  
	
  Attn: Anya
  Sigalow

  
	
   

  

 

	
  HIGHBRIDGE INTERNATIONAL LLC

  
	
   

  
	
  By: Highbridge
  Capital Management, LLC

  
	
   

  
	
  By: 

  	
  /s/ Adam J.
  Chill

  
	
  Name:

  	
  Adam J. Chill

  
	
  Title:

  	
  Managing
  Director

  
	
   

  
	
  Note Principal
  Amount: $1,000,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  c/o Highbridge
  Capital Management, LLC

  
	
  9 West 57th Street, 27th Floor

  
	
  New York, NY
  10019

  
	
  Facsimile No.:
  (212) 751-0755

  
	
  Telephone No.:
  (212) 287-4720

  
	
  Attn: Ari J.
  Storch/ Adam J. Chill

  

 

 45
 

 

 

	
  NITE CAPITAL LP

  
	
   

  
	
  By:

  	
  /s/ Keith A.
  Goodman

  
	
  Name:

  	
  Keith A. Goodman

  
	
  Title:

  	
  Manager of the
  General Partner

  
	
   

  
	
  Note Principal
  Amount: $600,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  Nite Capital LP

  
	
  100 East Cook
  Avenue, Ste 201

  
	
  Libertyville, IL
  60048

  
	
  Facsimile No.:
  (847) 968-2648

  
	
  Telephone No.:
  (847) 968-2655

  
	
  Attn: Keith
  Goodman

  

 

	
  RHP MASTER FUND, LTD

  
	
   

  
	
  By:

  	
  Rock Hill
  Investment Management, L.P

  
	
  By:

  	
  RHP General
  Partner, LLC

  
	
   

  
	
  By:

  	
  /s/ Wayne Bloch

  
	
  Name:

  	
  Wayne Bloch

  
	
  Title:

  	
  Managing Partner

  
	
   

  
	
  Note Principal
  Amount: $1,000,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  Rock Hill
  Investment Management, L.P.

  
	
  c/o Three Bala
  Plaza, East Suite 585

  
	
  Bala Aynwyd, PA
  19004

  
	
  Facsimile No.:
  (610) 949-9600

  
	
  Telephone No.:
  (610) 949-9700

  
	
  Attn: Keith S.
  Marlowe

  
			

 

 46
 

 

 

	
  BRISTOL INVESTMENT FUND, LTD.    

  
	
   

  
	
  By:

  	
  /s/ Paul Kessler

  
	
  Name:

  	
  Paul Kessler

  
	
  Title:

  	
  Director

  
	
   

  
	
  Note Principal
  Amount: $650,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  c/o Bristol
  Capital Advisors, LLC

  
	
  10990 Wilshire
  Boulevard, Suite 1410

  
	
  Los Angeles,
  California 90024

  
	
  Facsimile No.:
  (310) 696-0334

  
	
  Telephone No.:
  (310) 696-0333

  
	
  Attn: Amy Wang,
  Esq.

  

 

	
  HUDSON BAY FUND, LP    

  
	
   

  
	
  By:

  	
  /s/ Yoav Roth

  
	
  Name:

  	
  Yoav Roth

  
	
  Title:

  	
  Principal/
  Portfolio Manager

  
	
   

  
	
  Note Principal
  Amount: $800,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  Hudson Bay Fund,
  LP

  
	
  120 Broadway, 40th Floor

  
	
  New York, NY
  10271

  
	
  Facsimile No.:
  (212) 571-1279

  
	
  Telephone No.:
  (212) 571-1244

  
	
  Attn: Yoav Roth

  
	
  yroth@hudsonbaycapital.com

  

 

 47
 

 

 

	
  HUDSON BAY OVERSEAS FUND,
  LTD    

  
	
   

  
	
  By:

  	
  /s/ Yoav Roth

  
	
  Name:

  	
  Yoav Roth

  
	
  Title:

  	
  Principal/Portfolio
  Manager

  
	
   

  
	
  Note Principal
  Amount: $200,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  Hudson Bay
  Overseas Fund, Ltd

  
	
  120 Broadway, 40th Floor

  
	
  New York, NY
  10271

  
	
  Facsimile No.:
  (212) 571-1279

  
	
  Telephone No.:
  (212) 571-1244

  
	
  Attn: Yoav Roth

  
	
  yroth@hudsonbaycapital.com

  

 

	
  CAPITAL VENTURES
  INTERNATIONAL     

  
	
   

  
	
  By: Heights
  Capital Management, Inc., its authorized agent

  
	
   

  
	
  By:

  	
  /s/ Martin
  Kobinger

  
	
  Name:

  	
  Martin Kobinger

  
	
  Title:

  	
  Investment
  Manager

  
	
   

  
	
  Note Principal Amount:
  $2,100,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  c/o Heights
  Capital Management

  
	
  101 California
  Street, Suite 3250

  
	
  San Francisco,
  CA 94111

  
	
  Facsimile No.:
  (415) 403-6525

  
	
  Telephone No.:
  (415) 403-6500

  
	
  Attn: Sam Winer
  or Martin Kobinger

  

 

 48
 

 

 

	
  ENABLE GROWTH PARTNERS
  LP    

  
	
   

  
	
  By: 

  	
  /s/ Brendan
  O’Neil

  
	
  Name:

  	
  Brendan O’Neil

  
	
  Title:

  	
  Principal and
  Portfolio Manager

  
	
   

  
	
  Note Principal
  Amount: $750,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  One Ferry
  Building Suite 255

  
	
  San Francisco,
  CA 94111

  
	
  Facsimile No.: (415)
  677-1580

  
	
  Telephone No.:
  (415) 677-1578

  
	
  Attn: Brendan
  O’Neil

  

 

	
  ENABLE OPPORTUNITY PARTNERS
  LP    

  
	
   

  
	
  By:

  	
  /s/ Brendan
  O’Neil

  
	
  Name:

  	
  Brendan O’Neil

  
	
  Title:

  	
  Principal and
  Portfolio Manager

  
	
   

  
	
  Note Principal
  Amount: $150,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  One Ferry
  Building Suite 255

  
	
  San Francisco,
  CA 94111

  
	
  Facsimile No.:
  (415) 677-1580

  
	
  Telephone No.:
  (415) 677-1578

  
	
  Attn: Brendan
  O’Neil

  

 

 49
 

 

 

	
  PIERCE DIVERSIFIED STRATEGY

  MASTER FUND LLC, ENA

  
	
   

  
	
  By:

  	
  /s/ Brendan
  O’Neil

  
	
  Name:

  	
  Brendan O’Neil

  
	
  Title:

  	
  Principal and
  Portfolio Manager

  
	
   

  
	
  Note Principal
  Amount: $100,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  One Ferry
  Building Suite 255

  
	
  San Francisco,
  CA 94111

  
	
  Facsimile No.:
  (415) 677-1580

  
	
  Telephone No.:
  (415) 677-1578

  
	
  Attn: Brendan
  O’Neil

  

 

	
  ALPHA CAPITAL ANSTALT

  
	
   

  
	
  By:

  	
  /s/ Konrad
  Ackermann

  
	
  Name:

  	
  Konrad Ackermann

  
	
  Title:

  	
  Director

  
	
   

  
	
  Note Principal
  Amount: $650,000

  
	
   

  
	
  Address for
  Notice:

  
	
   

  
	
  Alpha Capital

  
	
  c/o LH Financia1

  
	
  160 Central Park
  South, Suite 2701

  
	
  New York, NY
  10019

  
	
  Facsimile No.:
  (212) 586-8244

  
	
  Telephone No.:
  (212) 586-8224

  
	
  Attn: Joe Hammer

  

 

 50
 

 

 

Schedule A

	
  PURCHASERS

  	
   

  	
   

  	
   

  	
  NOTE

  PRINCIPAL

  AMOUNT

  	
   

  	
  WARRANT A

  SHARES

  	
   

  	
  WARRANT B

  SHARES

  	
   

  	
  MAXIMUM

  ADDITIONAL

  WARRANT

  SHARES(1)

  	
   

  	
  PURCHASE

  PRICE

  	
   

  
	
  Iroquois Master
  Fund, Ltd.

  	
   

  	
  $

  	
  2,500,000

  	
   

  	
  757,576

  	
   

  	
  757,576

  	
   

  	
  378,788

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
  Rockmore
  Investment Master Fund Ltd.

  	
   

  	
  $

  	
  1,500,000

  	
   

  	
  454,546

  	
   

  	
  454,546

  	
   

  	
  227,273

  	
   

  	
  $

  	
  1,500,000

  	
   

  
	
  RHP Master Fund,
  Ltd.

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  303,031

  	
   

  	
  303,031

  	
   

  	
  151,516

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  Highbridge
  International LLC

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  303,031

  	
   

  	
  303,031

  	
   

  	
  151,516

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  Capital Ventures
  International

  	
   

  	
  $

  	
  2,100,000

  	
   

  	
  636,364

  	
   

  	
  636,364

  	
   

  	
  318,182

  	
   

  	
  $

  	
  2,100,000

  	
   

  
	
  Enable Growth
  Partners LP

  	
   

  	
  $

  	
  750,000

  	
   

  	
  227,273

  	
   

  	
  227,273

  	
   

  	
  113,637

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  Enable Opportunity
  Partners LP

  	
   

  	
  $

  	
  150,000

  	
   

  	
  45,455

  	
   

  	
  45,455

  	
   

  	
  22,728

  	
   

  	
  $

  	
  150,000

  	
   

  
	
  Pierce
  Diversified Strategy Master Fund LLC, Ena

  	
   

  	
  $

  	
  100,000

  	
   

  	
  30,303

  	
   

  	
  30,303

  	
   

  	
  15,152

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  Hudson Bay Fund,
  LP

  	
   

  	
  $

  	
  800,000

  	
   

  	
  242,425

  	
   

  	
  242,425

  	
   

  	
  121,213

  	
   

  	
  $

  	
  800,000

  	
   

  
	
  Hudson Bay
  Overseas Fund, Ltd.

  	
   

  	
  $

  	
  200,000

  	
   

  	
  60,606

  	
   

  	
  60,606

  	
   

  	
  30,303

  	
   

  	
  $

  	
  200,000

  	
   

  
	
  Bristol
  Investment Fund, Ltd.

  	
   

  	
  $

  	
  650,000

  	
   

  	
  196,970

  	
   

  	
  196,970

  	
   

  	
  98,485

  	
   

  	
  $

  	
  650,000

  	
   

  
	
  Nite Capital LP

  	
   

  	
  $

  	
  600,000

  	
   

  	
  181,818

  	
   

  	
  181,818

  	
   

  	
  90,909

  	
   

  	
  $

  	
  600,000

  	
   

  
	
  Alpha Capital Anstalt

  	
   

  	
  $

  	
  650,000

  	
   

  	
  196,970

  	
   

  	
  196,970

  	
   

  	
  98,485

  	
   

  	
  $

  	
  650,000

  	
   

  

(1)             Actual
number of Additional Warrant Shares will be equal to 50% of the actual number
of Warrant B Shares purchased upon exercise of Warrant B.

 

 51

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00107-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00107-of-00352.parquet"}]]