Document:

exv10w18

 

EXHIBIT 10.18

SECOND AMENDMENT TO THE TERMINATION AGREEMENT BETWEEN

MOBILEPRO CORPORATION AND ARNE DUNHEM DATED NOVEMBER 26, 2003

This Second Amendment to the Termination Agreement (defined below) between
Mobilepro Corporation and Arne Dunhem (this “Amendment”) is entered into this
8th day of April, 2004, by and between Arne Dunhem (“Dunhem”), on the one hand,
and Mobilepro Corp. (the “Company”), on the other hand. The parties hereto
represent as follows:

     WHEREAS, the Company and Dunhem are party to a termination agreement
between the Company and Dunhem dated November 26, 2003 (the “Termination
Agreement”) pursuant to which the Company agreed to pay a Separation Payment
based on an annual salary of $180,000, in equal installments on the 15th and
last day of each calendar month, continuing through December 31, 2004, unless
the success fee is paid to you under the terms of the Termination Agreement in
connection with the anticipated $1 million financing from Cornell Capital, in
which case Mobilepro will pay your salary in equal installments on the 15th and
last day of each calendar month, continuing through July 31, 2004, which
Separation Payment has been paid through March 31, 2004; and

     WHEREAS, the Company received $1,000,000 from Cornell Capital for which
Dunhem has been eligible to receive the Separation Payment based on an annual
salary in equal installments on the 15th and last day of each calendar month,
continuing through July 31, 2004; and

     WHEREAS Dunhem has agreed to forego the remaining installment payments
continuing through July 31, 2004 in recognition of the Company’s cash flow
constraints and other considerations and has instead agreed to reduce the
remaining Separation Payments to $30,000 to be paid by April 15, 2004 through
the normal payroll process.

     NOW, THEREFORE, in consideration of the mutual agreements and promises
contained herein, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereby agree as follows:

	 	1.	 	Dunhem waives the right to receive the remaining installment
payments continuing through July 31, 2004 and agrees to accept a
reduced Separation Payment of $30,000 to be paid by April 15, 2004
through the normal payroll process.
	 
	 	2.	 	Except as amended hereby, the Agreement shall continue in full
force and effect.
	 
	 	3.	 	This Amendment may be signed in one or more counterparts, each of
which shall be deemed an original and all of which, taken together,
shall be deemed one and the same documents.

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first set forth above.

MOBILEPRO CORP.

By: Kurt Gordon

Title: CFO

WE HAVE READ THE FOREGOING AND FULLY UNDERSTAND ITS TERMS AND ACCEPT THESE
TERMS. WE ARE SIGNING THIS AGREEMENT FREELY AND VOLUNTARILY, HAVING BEEN GIVEN
A FULL AND FAIR OPPORTUNITY TO CONSIDER IT AND CONSULT WITH ADVISORS OF OUR
CHOICE.

AGREED AND ACCEPTED:

Arne Dunhemexv10w19

 

EXHIBIT 10.19

THIRD AMENDMENT TO THE TERMINATION AGREEMENT BETWEEN

MOBILEPRO CORPORATION AND ARNE DUNHEM DATED NOVEMBER 26, 2003

This Third Amendment to the Termination Agreement (defined below) between
Mobilepro Corporation and Arne Dunhem (this “Amendment”) is entered into this
2nd day of May 2004, by and between Arne Dunhem (“Dunhem”), on the one hand,
and Mobilepro Corp. (the “Company”), on the other hand. The parties hereto
represent as follows:

     WHEREAS, the Company and Dunhem are party to a termination agreement
between the Company and Dunhem dated November 26, 2003, and first amended on
the 30th of December 2003, and second amendment made on the 8th day of April
2004 (hereafter referred to as the “Termination Agreement”) pursuant to which
the Company granted Dunhem five-year warrants to purchase 4.0 million shares of
Mobilepro’s common stock at an exercise price of $.029 per share which vested
in two equal installments on January 31 and April 30, 2004.; and

     WHEREAS, the Company and Dunhem agreed that the warrants and the
convertible debenture shares referred to in Section 5 of the Termination
Agreement and the warrants referred to in Section 7 of the Termination
Agreement shall be included in the next registration statement or subsequent
registration statements under the Securities Act of 1933 (a “Registration
Statement”) except to the extent that certain shares have not vested (in which
case, subject to the terms of Section 5 of the Termination Agreement, they will
be included in the next Registration Statement filed after vesting) or an
underwriter engaged by Mobilepro in connection with a Registration Statement
determines that including such shares in a Registration Statement filed by
Mobilepro will have a material adverse effect on the distribution of the
securities on behalf of Mobilepro (if the securities to be sold are for its own
account (a “Company Registration”) or on behalf of the holders who had the
right to cause Mobilepro to file such Registration Statement (if the securities
are to be sold on their account (a “Demand Registration”)), in which case the
amount of the securities to be registered will be reduced pro-rata in the case
of a Company Registration, with the amount of securities of the other holders
of Mobilepro securities seeking to have their shares included in such Company
Registration or in the case of a Demand Registration, with Mobilepro and the
holders of Mobilepro securities (other than the holders making the Demand
Registration) seeking to have their shares included in such Demand
Registration; and

     WHEREAS, the Company recognized that the 421,038 options granted to you in
2002 are valid and shall be exercisable until November 15, 2008; and

     WHEREAS Dunhem has agreed to forego the warrant grant of 4.0 million
shares of Mobilepro’s common stock at an exercise price of $.029 per share and
has instead agreed to reduce the warrant grant by 50% to 2.0 million shares
which are fully vested; and

 

 

     WHEREAS Dunhem has agreed to forego the registration requirements of the
Company relating to the warrants and the convertible debenture shares referred
to in Section 5 of the Termination Agreement and the warrants referred to in
Section 7 of the Termination Agreement and has instead agreed to the
registration of only the warrant grant of 2.0 million shares in the next
immediate registration agreement following this Amendment, any and all other
warrants and convertible debenture shares under the Termination Agreement will
be considered for registration under a future registration statement at
Mobilepro’s election; and

     WHEREAS Dunhem has agreed to forego the 421,038 options granted to you in
2002 in recognition of an error made in calculating the amount of options and
has instead agreed to reduce the amount to 421,037 options and shall be
exercisable until November 15, 2008 with original rights remaining the same
relating to the original terms of the options.

     NOW, THEREFORE, in consideration of the mutual agreements and promises
contained herein, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereby agree as follows:

	 	1.	 	Dunhem waives the right to receive the warrant grant of 4.0 million shares of Mobilepro’s common stock and agrees to accept a reduced
warrant grant of 2.0 million shares, which are fully vested.
	 
	 	2.	 	Dunhem waives the registration rights to the warrants and the
convertible debenture shares referred to in Section 5 of the
Termination Agreement and the warrants referred to in Section 7 of the
Termination Agreement and agrees to accept registration rights only on
the warrant grant of 2.0 million shares in the next immediate
registration agreement following this Amendment, any and all other
warrants and convertible debenture shares under the Termination
Agreement will be considered for registration under a future
registration statement at Mobilepro’s election.
	 
	 	3.	 	Dunhem waives the right to receive the 421,038 options granted to
you in 2002 and agrees to accept 421,037 options and shall be
exercisable until November 15, 2008 with original rights remaining the
same relating to the original terms of the options.
	 
	 	4.	 	Except as amended hereby, the Agreement shall continue in full
force and effect.
	 
	 	5.	 	This Amendment may be signed in one or more counterparts, each of
which shall be deemed an original and all of which, taken together,
shall be deemed one and the same documents.

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first set forth above.

MOBILEPRO CORP.

By: Kurt Gordon

Title: CFO

WE HAVE READ THE FOREGOING AND FULLY UNDERSTAND ITS TERMS AND ACCEPT THESE
TERMS. WE ARE SIGNING THIS AGREEMENT FREELY AND VOLUNTARILY, HAVING BEEN GIVEN
A FULL AND FAIR OPPORTUNITY TO CONSIDER IT AND CONSULT WITH ADVISORS OF OUR
CHOICE.

AGREED AND ACCEPTED:

Arne Dunhemexv10w20

 

	 	 	 	 	 

EXHIBIT 10.20

STANDBY EQUITY DISTRIBUTION AGREEMENT

     AGREEMENT dated as of the 13th day of May 2004 (the “Agreement”) between
CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership (the “Investor”),
and MOBILEPRO CORP., a corporation organized and existing under the laws of the
State of Delaware (the “Company”).

     WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from the
Company up to One Hundred Million Dollars ($100,000,000) of the Company’s
common stock, par value $0.001 per share (the “Common Stock”); and

     WHEREAS, such investments will be made in reliance upon the provisions of
Regulation D (“Regulation D”) of the Securities Act of 1933, as amended, and
the regulations promulgated thereunder (the “Securities Act”), and or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made
hereunder.

     WHEREAS, the Company has engaged Newbridge Securities Inc., to act as the
Company’s exclusive placement agent in connection with the sale of the
Company’s Common Stock to the Investor hereunder pursuant to the Placement
Agent Agreement dated the date hereof by and among the Company, the Placement
Agent and the Investor (the “Placement Agent Agreement”).

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I.

Certain Definitions

     Section 1.1. “Advance” shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.

     Section 1.2. “Advance Date” shall mean the date Butler Gonzalez LLP Escrow
Account is in receipt of the funds from the Investor and Butler Gonzalez LLP,
as the Investor’s Counsel, is in possession of free trading shares from the
Company and therefore an Advance by the Investor to the Company can be made and
Butler Gonzalez LLP can release the free trading shares to the Investor. No
Advance Date shall be less than six (6) Trading Days after an Advance Notice
Date.

     Section 1.3. “Advance Notice” shall mean a written notice to the Investor
setting forth the Advance amount that the Company requests from the Investor
and the Advance Date.

     Section 1.4. “Advance Notice Date” shall mean each date the Company
delivers to the Investor an Advance Notice requiring the Investor to advance
funds to the Company, subject to

 

 

the terms of this Agreement. No Advance Notice Date shall be less than
seven (7) Trading Days after the prior Advance Notice Date.

     Section 1.5. “Bid Price” shall mean, on any date, the closing bid price
(as reported by Bloomberg L.P.) of the Common Stock on the Principal Market or
if the Common Stock is not traded on a Principal Market, the highest reported
bid price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc.

     Section 1.6. “Closing” shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.3.

     Section 1.7. “Commitment Amount” shall mean the aggregate amount of up to
One Hundred Million Dollars ($100,000,000) which the Investor has agreed to
provide to the Company in order to purchase the Company’s Common Stock pursuant
to the terms and conditions of this Agreement.

     Section 1.8. “Commitment Period” shall mean the period commencing on the
earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investor shall have made payment
of Advances pursuant to this Agreement in the aggregate amount of One Hundred
Million Dollars ($100,000,000), (y) the date this Agreement is terminated
pursuant to Section 2.5, or (z) the date occurring twenty-four (24) months
after the Effective Date.

     Section 1.9. “Common Stock” shall mean the Company’s common stock, par
value $0.001 per share.

     Section 1.10. “Condition Satisfaction Date” shall have the meaning set
forth in Section 7.2.

     Section 1.11. “Damages” shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney’s fees
and disbursements and costs and expenses of expert witnesses and
investigation).

     Section 1.12. “Effective Date” shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).

     Section 1.13. “Escrow Agreement” shall mean the escrow agreement among the
Company, the Investor, and Butler Gonzalez LLP dated the date hereof.

     Section 1.14. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.

     Section 1.15. “Material Adverse Effect” shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to enter into and perform any of its
obligations under this Agreement or the Registration Rights Agreement in any
material respect.

2

 

     Section 1.16. “Market Price” shall mean the average of the two (2) lowest
VWAP’s of the Common Stock during the Pricing Period.

     Section 1.17. “Maximum Advance Amount” shall be Two Million Dollars
($2,000,000) per Advance Notice.

     Section 1.18. “NASD” shall mean the National Association of Securities
Dealers, Inc.

     Section 1.19. “Person” shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.

     Section 1.20. “Placement Agent” shall mean Newbridge Securities Inc., a
registered broker-dealer.

     Section 1.21. “Pricing Period” shall mean the five (5) consecutive Trading
Days after the Advance Notice Date.

     Section 1.22. “Principal Market” shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange, the OTC Bulletin Board
or the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.

     Section 1.23. “Purchase Price” shall be set at ninety eight percent (98%)
of the Market Price during the Pricing Period.

     Section 1.24. “Registrable Securities” shall mean the shares of Common
Stock to be issued hereunder (i) in respect of which the Registration Statement
has not been declared effective by the SEC, (ii) which have not been sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act (“Rule 144”) or (iii)
which have not been otherwise transferred to a holder who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing
a restrictive legend.

     Section 1.25. “Registration Rights Agreement” shall mean the Registration
Rights Agreement dated the date hereof, regarding the filing of the
Registration Statement for the resale of the Registrable Securities, entered
into between the Company and the Investor.

     Section 1.26. “Registration Statement” shall mean a registration statement
on Form S-1 or SB-2 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered there under in accordance with the
provisions of this Agreement and the Registration Rights Agreement, and in
accordance with the intended method of distribution of such securities), for
the registration of the resale by the Investor of the Registrable Securities
under the Securities Act.

3

 

     Section 1.27.
“Regulation D“ shall have the meaning set forth in the
recitals of this Agreement.

     Section 1.28. “SEC” shall mean the Securities and Exchange Commission.

     Section 1.29. “Securities Act” shall have the meaning set forth in the
recitals of this Agreement.

     Section 1.30. “SEC Documents” shall mean Annual Reports on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the date hereof, filed by the
Company for a period of at least twelve (12) months immediately preceding the
date hereof or the Advance Date, as the case may be, until such time as the
Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.

     Section 1.31. “Trading Day” shall mean any day during which the New York
Stock Exchange shall be open for business.

     Section 1.32. “VWAP” shall mean the volume weighted average price of the
Company’s common stock as quoted by Bloomberg, LP.

ARTICLE II.

Advances

     Section 2.1.
Investments.

          (a) Advances. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII hereof), on any Advance
Notice Date the Company may request an Advance by the Investor by the delivery
of an Advance Notice. The number of shares of Common Stock that the Investor
shall receive for each Advance shall be determined by dividing the amount of
the Advance by the Purchase Price. No fractional shares shall be issued.
Fractional shares shall be rounded to the next higher whole number of shares.
The aggregate maximum amount of all Advances that the Investor shall be
obligated to make under this Agreement shall not exceed the Commitment Amount.

     Section 2.2.
Mechanics.

          (a) Advance Notice. At any time during the Commitment Period, the Company
may deliver an Advance Notice to the Investor, subject to the conditions set
forth in Section 7.2; provided, however, the amount for each Advance as
designated by the Company in the applicable Advance Notice, shall not be more
than the Maximum Advance Amount. The aggregate amount of the Advances pursuant
to this Agreement shall not exceed the Commitment Amount. The Company
acknowledges that the Investor may sell shares of the Company’s Common Stock
corresponding with a particular Advance Notice on the day the Advance Notice is
received by the Investor. There will be a minimum of seven (7) Trading Days
between each Advance Notice Date.

4

 

          (b) Date
of Delivery of Advance Notice. An Advance Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by
the Investor if such notice is received prior to 12:00 noon Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a
day which is not a Trading Day. No Advance Notice may be deemed delivered, on
a day that is not a Trading Day.

          (c) Pre-Closing Share Credit. Within two (2) business days after the
Advance Notice Date, the Company shall credit shares of the Company’s Common
Stock to the Investor’s balance account with The Depository Trust Company
through its Deposit Withdrawal At Custodian system, in an amount equal to the
amount of the requested Advance divided by the closing Bid Price of the
Company’s Common Stock as of the Advance Notice Date multiplied by one point
one (1.1). Any adjustments to the number of shares to be delivered to the
Investor at the Closing as a result of fluctuations in the closing Bid Price of
the Company’s Common Stock shall be made as of the date of the Closing. Any
excess shares shall be credited to the next Advance. In no event shall the
number of shares issuable to the Investor pursuant to an Advance cause the
Investor to own in excess of nine and 9/10 percent (9.9%) of the then
outstanding Common Stock of the Company.

          (d) Hardship. In the event the Investor sells the Company’s Common Stock
pursuant to subsection (c) above and the Company fails to perform its
obligations as mandated in Section 2.5 and 2.2 (c), and specifically fails to
provide the Investor with the shares of Common Stock for the applicable
Advance, the Company acknowledges that the Investor shall suffer financial
hardship and therefore shall be liable for any and all losses, commissions,
fees, or financial hardship caused to the Investor.

     Section 2.3. Closings. On each Advance Date, which shall be six (6)
Trading Days after an Advance Notice Date, (i) the Company shall deliver to the
Investor’s Counsel, as defined pursuant to the Escrow Agreement, shares of the
Company’s Common Stock, representing the amount of the Advance by the Investor
pursuant to Section 2.1 herein, registered in the name of the Investor which
shall be delivered to the Investor, or otherwise in accordance with the Escrow
Agreement and (ii) the Investor shall deliver to Butler Gonzalez LLP (the
“Escrow Agent”) the amount of the Advance specified in the Advance Notice by
wire transfer of immediately available funds which shall be delivered to the
Company, or otherwise in accordance with the Escrow Agreement. In addition, on
or prior to the Advance Date, each of the Company and the Investor shall
deliver to the other through the Investor’s Counsel all documents, instruments
and writings required to be delivered by either of them pursuant to this
Agreement in order to implement and effect the transactions contemplated
herein. Payment of funds to the Company and delivery of the Company’s Common
Stock to the Investor shall occur in accordance with the conditions set forth
above and those contained in the Escrow Agreement; provided, however, that to
the extent the Company has not paid the fees, expenses, and disbursements of
the Investor, the Investor’s counsel and Kirkpatrick & Lockhart LLP in
accordance with Section 12.4, the amount of such fees, expenses, and
disbursements may be deducted by the Investor (and shall be paid to the
relevant party) from the amount of the Advance with no reduction in the amount
of shares of the Company’s Common Stock to be delivered on such Advance Date.

5

 

     Section 2.4. Termination of Investment. The obligation of the Investor to
make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of fifty
(50) Trading Days, other than due to the acts of the Investor, during the
Commitment Period, and (ii) the Company shall at any time fail materially to
comply with the requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written notice from the Investor, provided,
however, that this termination provision shall not apply to any period
commencing upon the filing of a post-effective amendment to such Registration
Statement and ending upon the date on which such post effective amendment is
declared effective by the SEC..

     Section 2.5. Agreement to Advance Funds.

          (a) The Investor agrees to advance the amount specified in the Advance
Notice to the Company after the completion of each of the following conditions
and the other conditions set forth in this Agreement:

               (i) the execution and delivery by the Company, and the Investor, of this
Agreement, and the Exhibits hereto;

               (ii) the Company’s Common Stock shall have been authorized for quotation
on the National Association of Securities Dealers Inc.’s Over the Counter
Bulletin Board.

               (iii) Investor’s Counsel shall have received the shares of Common Stock
applicable to the Advance in accordance with Section 2.2(c) hereof;

               (iv) the Company’s Registration Statement with respect to the resale of
the Registrable Securities in accordance with the terms of the Registration
Rights Agreement shall have been declared effective by the SEC;

               (v) the Company shall have obtained all material permits and
qualifications required by any applicable state for the offer and sale of the
Registrable Securities, or shall have the availability of exemptions therefrom.
The sale and issuance of the Registrable Securities shall be legally permitted
by all laws and regulations to which the Company is subject;

               (vi) the Company shall have filed with the Commission in a timely manner
all reports, notices and other documents required of a “reporting company”
under the Exchange Act and applicable Commission regulations;

               (vii) the fees as set forth in Section 12.4 below shall have been paid or
can be withheld as provided in Section 2.3; and

               (viii) the conditions set forth in Section 7.2 shall have been satisfied.

               (ix) The Company shall have provided to the Investor an acknowledgement,
from Bagell, Josephs & Company LLC as to its ability to provide all consents
required in order to file a registration statement in connection with this
transaction;

6

 

               (x) The Company’s transfer agent shall be DWAC eligible.

     Section 2.6. Lock Up Period.

               (i) During the Commitment Period, the Company shall not, issue or sell (i)
any Common Stock or Preferred Stock without consideration or for a
consideration per share less than the Bid Price on the date of issuance or (ii)
issue or sell any warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock
without consideration or for a consideration per share less than the Bid Price
on the date of issuance.

               (ii) On the date hereof, the Company shall obtain from each officer and
director a lock-up agreement, as defined below, in the form annexed hereto as
Schedule 2.6 agreeing to only sell in compliance with the volume limitation of
Rule 144.

ARTICLE III.

Representations and Warranties of Investor

     Investor hereby represents and warrants to, and agrees with, the Company
that the following are true and as of the date hereof and as of each Advance
Date:

     Section 3.1. Organization and Authorization. The Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest
and the execution and delivery of this Agreement by such Investor, the
performance by such Investor of its obligations hereunder and the consummation
by such Investor of the transactions contemplated hereby have been duly
authorized and requires no other proceedings on the part of the Investor. The
undersigned has the right, power and authority to execute and deliver this
Agreement and all other instruments (including, without limitations, the
Registration Rights Agreement), on behalf of the Investor. This Agreement has
been duly executed and delivered by the Investor and, assuming the execution
and delivery hereof and acceptance thereof by the Company, will constitute the
legal, valid and binding obligations of the Investor, enforceable against the
Investor in accordance with its terms.

     Section 3.2. Evaluation of Risks. The Investor has such knowledge and
experience in financial tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction. It recognizes that its investment in the Company involves a
high degree of risk.

     Section 3.3. No Legal Advice From the Company. The Investor acknowledges
that it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. The Investor is relying solely on such counsel and advisors
and not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.

7

 

     Section 3.4. Investment Purpose. The securities are being purchased by the
Investor for its own account, for investment and without any view to the
distribution, assignment or resale to others or fractionalization in whole or
in part. The Investor agrees not to assign or in any way transfer the
Investor’s rights to the securities or any interest therein and acknowledges
that the Company will not recognize any purported assignment or transfer except
in accordance with applicable Federal and state securities laws. No other
person has or will have a direct or indirect beneficial interest in the
securities. The Investor agrees not to sell, hypothecate or otherwise transfer
the Investor’s securities unless the securities are registered under Federal
and applicable state securities laws or unless, in the opinion of counsel
satisfactory to the Company, an exemption from such laws is available.

     Section 3.5.
Accredited Investor. The Investor is an “Accredited
Investor” as that term is defined in Rule 501(a)(3) of Regulation D of the
Securities Act.

     Section 3.6. Information. The Investor and its advisors (and its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information it deemed
material to making an informed investment decision. The Investor and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries nor any other due diligence
investigations conducted by such Investor or its advisors, if any, or its
representatives shall modify, amend or affect the Investor’s right to rely on
the Company’s representations and warranties contained in this Agreement. The
Investor understands that its investment involves a high degree of risk. The
Investor is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such
Investor to obtain information from the Company in order to evaluate the merits
and risks of this investment. The Investor has sought such accounting, legal
and tax advice, as it has considered necessary to make an informed investment
decision with respect to this transaction.

     Section 3.7. Receipt of Documents. The Investor and its counsel has
received and read in their entirety: (i) this Agreement and the Exhibits
annexed hereto; (ii) all due diligence and other information necessary to
verify the accuracy and completeness of such representations, warranties and
covenants; (iii) the Company’s Form 10-KSB for the year ended year ended March
31, 2003 and Form 10-QSB for the period ended June 30, 2003; Form 10-QSB for
the period ended September 30, 2003 and Form 10-QSB for the period ended
December 31, 2003; and (iv) answers to all questions the Investor submitted to
the Company regarding an investment in the Company; and the Investor has relied
on the information contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.

     Section 3.8. Registration Rights Agreement and Escrow Agreement. The
parties have entered into the Registration Rights Agreement and the Escrow
Agreement, each dated the date hereof.

     Section 3.9. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the shares of Common Stock offered hereby.

8

 

     Section 3.10. Not an Affiliate. The Investor is not an officer, director
or a person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company or
any “Affiliate” of the Company (as that term is defined in Rule 405 of the
Securities Act). Neither the Investor nor its Affiliates has an open short
position in the Common Stock of the Company, and the Investor agrees that it
will not, and that it will cause its Affiliates not to, engage in any short
sales of or hedging transactions with respect to the Common Stock, provided
that the Company acknowledges and agrees that upon receipt of an Advance Notice
the Investor will sell the Shares to be issued to the Investor pursuant to the
Advance Notice, even if the Shares have not been delivered to the Investor.

     Section 3.11. Trading Activities. The Investor’s trading activities with
respect to the Company’s Common Stock shall be in compliance with all
applicable federal and state securities laws, rules and regulations and the
rules and regulations of the Principal Market on which the Company’s Common
Stock is listed or traded. Neither the Investor nor its affiliates has an open
short position in the Common Stock of the Company and, except as set forth
below, the Investor shall not and will cause its affiliates not to engage in
any short sale as defined in any applicable SEC or National Association of
Securities Dealers rules on any hedging transactions with respect to the Common
Stock. Without limiting the foregoing, the Investor agrees not to engage in any
naked short transactions in excess of the amount of shares owned (or an
offsetting long position) during the Commitment Period. The Investor shall be
entitled to sell Common Stock during the applicable Pricing Period.

ARTICLE IV.

Representations and Warranties of the Company

     Except as stated below, on the disclosure schedules attached hereto or in
the SEC Documents (as defined herein), the Company hereby represents and
warrants to, and covenants with, the Investor that the following are true and
correct as of the date hereof:

     Section 4.1. Organization and Qualification. The Company is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority
corporate power to own its properties and to carry on its business as now being
conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect on
the Company and its subsidiaries taken as a whole.

     Section 4.2. Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority
to enter into and perform this Agreement, the Registration Rights Agreement,
the Escrow Agreement, the Placement Agent Agreement and any related agreements,
in accordance with the terms hereof and thereof, (ii) the execution and
delivery of this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Placement Agent Agreement and any related agreements by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, have been duly authorized by the Company’s Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) this Agreement, the

9

 

Registration Rights Agreement, the Escrow Agreement, the Placement Agent
Agreement and any related agreements have been duly executed and delivered by
the Company, (iv) this Agreement, the Registration Rights Agreement, the Escrow
Agreement, the Placement Agent Agreement and assuming the execution and
delivery thereof and acceptance by the Investor and any related agreements
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may
be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’ rights and remedies.

     Section 4.3. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 600,000,000 shares of Common Stock,
par value $0.001 per share and 5,000,000 shares of Preferred Stock of which
232,914,196 shares of Common Stock and 35,425 shares of Preferred Stock were
issued and outstanding. All of such outstanding shares have been validly
issued and are fully paid and nonassessable. Except as disclosed in the SEC
Documents, no shares of Common Stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company. Except as disclosed in the SEC Documents, as of the date hereof, (i)
there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company or any of
its subsidiaries, or contracts, commitments, understandings or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities (iii) there are no outstanding registration
statements other than on Form S-8 and (iv) except as set forth on Schedule 4.3,
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their securities under
the Securities Act (except pursuant to the Registration Rights Agreement).
There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by this Agreement or any related agreement or
the consummation of the transactions described herein or therein. The Company
has furnished to the Investor true and correct copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the date hereof
(the “Certificate of Incorporation”), and the Company’s By-laws, as in effect
on the date hereof (the “By-laws”), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto.

     Section 4.4. No Conflict. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations of any
outstanding series of preferred stock of the Company or By-laws or (ii)
conflict with or constitute a default (or an event which 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 of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market on which the Common Stock is
quoted) applicable to the Company or

10

 

any of its subsidiaries or by which any material property or asset of the
Company or any of its subsidiaries is bound or affected and which would cause a
Material Adverse Effect. Except as disclosed in the SEC Documents, neither the
Company nor its subsidiaries is in violation of any term of or in default under
its Certificate of Incorporation or By-laws or their organizational charter or
by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted in violation of any
material law, ordinance, regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the
Securities Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by
this Agreement or the Registration Rights Agreement in accordance with the
terms hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any fact or circumstance which
might give rise to any of the foregoing.

     Section 4.5. SEC Documents; Financial Statements. Since January 1, 2003,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC under of the Exchange Act.
The Company has delivered to the Investor or its representatives, or made
available through the SEC’s website at http://www.sec.gov, true and complete
copies of the SEC Documents. As of their respective dates, the financial
statements of the Company disclosed in the SEC Documents (the “Financial
Statements”) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and, fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Investor which is
not included in the SEC Documents contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

     Section 4.6. 10b-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any material fact
required to be stated therein necessary to make the statements made, in light
of the circumstances under which they were made, not misleading.

     Section 4.7. No Default. Except as disclosed in the SEC Documents, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it
is a party or by which it is or its property is bound and neither the

11

 

execution, nor the delivery by the Company, nor the performance by the
Company of its obligations under this Agreement or any of the exhibits or
attachments hereto will conflict with or result in the breach or violation of
any of the terms or provisions of, or constitute a default or result in the
creation or imposition of any lien or charge on any assets or properties of the
Company under its Certificate of Incorporation, By-Laws, any material
indenture, mortgage, deed of trust or other material agreement applicable to
the Company or instrument to which the Company is a party or by which it is
bound, or any statute, or any decree, judgment, order, rules or regulation of
any court or governmental agency or body having jurisdiction over the Company
or its properties, in each case which default, lien or charge is likely to
cause a Material Adverse Effect on the Company’s business or financial
condition.

     Section 4.8.
Absence of Events of Default. Except for matters described
in the SEC Documents and/or this Agreement, no Event of Default, as defined in
the respective agreement to which the Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an Event
of Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect on the Company’s business, properties, prospects,
financial condition or results of operations.

     Section 4.9.
Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct
their respective businesses as now conducted. The Company and its
subsidiaries do not have any knowledge of any infringement by the Company or
its subsidiaries of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service mark
registrations, trade secret or other similar rights of others, and, to the
knowledge of the Company, there is no claim, action or proceeding being made or
brought against, or to the Company’s knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
mark registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.

     Section 4.10.
Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of
the Company’s or its subsidiaries’ employees is a member of a union and the
Company and its subsidiaries believe that their relations with their employees
are good.

     Section 4.11. Environmental Laws. The Company and its subsidiaries are
(i) in compliance with any and all applicable material foreign, federal, state
and local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (“Environmental Laws”), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval.

12

 

     Section 4.12.
Title. Except as set forth in the SEC Documents, the
Company has good and marketable title to its properties and material assets
owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are not material to
the business of the Company. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.

     Section 4.13.
Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company
nor any such 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 at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company and its subsidiaries, taken as a whole.

     Section 4.14.
Regulatory Permits. The Company and its subsidiaries
possess all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.

     Section 4.15.
Internal Accounting Controls. The Company and each of its
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 generally accepted accounting principles 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.

     Section 4.16.
No Material Adverse Breaches, etc. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is subject
to any charter, corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the judgment of the Company’s officers has
or is expected in the future to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.

13

 

     Section 4.17.
Absence of Litigation. Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending against or affecting the Company, the Common Stock
or any of the Company’s subsidiaries, wherein an unfavorable decision, ruling
or finding would (i) have a Material Adverse Effect on the transactions
contemplated hereby (ii) adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, this
Agreement or any of the documents contemplated herein, or (iii) except as
expressly disclosed in the SEC Documents, have a Material Adverse Effect on the
business, operations, properties, financial condition or results of operation
of the Company and its subsidiaries taken as a whole.

     Section 4.18.
Subsidiaries. Except as disclosed in the SEC Documents or
as set forth on Schedule 4.18, the Company does not presently own or control,
directly or indirectly, any interest in any other corporation, partnership,
association or other business entity.

     Section 4.19.
Tax Status. Except as disclosed in the SEC Documents, to
the Company’s knowledge there are no unpaid taxes in any material amount due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.

     Section 4.20.
Certain Transactions. Except as set forth in the SEC
Documents none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (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 corporation, partnership, trust or other entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.

     Section 4.21.
Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties.

     Section 4.22.
Use of Proceeds. The Company represents that the net
proceeds from this offering will be used for general corporate purposes.
However, in no event shall the net proceeds from this offering be used by the
Company for the payment (or loaned to any such person for the payment) of any
judgment, or other liability, incurred by any executive officer, officer,
director or employee of the Company, except for any liability owed to such
person for services rendered, or if any judgment or other liability is incurred
by such person originating from services rendered to the Company, or the
Company has indemnified such person from liability.

     Section 4.23.
Further Representation and Warranties of the Company. For
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will maintain the listing of its Common Stock on the Principal Market.

14

 

     Section 4.24.
Opinion of Counsel. Investor shall receive an opinion
letter from Kirkpatrick & Lockhart LLP, counsel to the Company on the date
hereof.

     Section 4.25.
Opinion of Counsel. The Company will obtain for the
Investor, at the Company’s expense, any and all opinions of counsel which may
be reasonably required in order to sell the securities issuable hereunder
without restriction.

     Section 4.26.
Dilution. The Company is aware and acknowledges that
issuance of shares of the Company’s Common Stock could cause dilution to
existing shareholders and could significantly increase the outstanding number
of shares of Common Stock.

ARTICLE V.

Indemnification

     The Investor and the Company represent to the other the following with
respect to itself:

     Section 5.1.
Indemnification.

          (a) In consideration of the Investor’s execution and delivery of this
Agreement, and in addition to all of the Company’s other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Investor, and all of its officers, directors, partners, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the
“Investor
Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses
in connection therewith (irrespective of whether any such Investor Indemnitee
is a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by the Investor Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of
any representation or warranty made by the Company in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or the Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby, or (c) any cause of action, suit or claim brought or made
against such Investor Indemnitee not arising out of any action or inaction of
an Investor Indemnitee, and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Investor
Indemnitees. To the extent that the foregoing undertaking by the Company may
be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.

          (b) In consideration of the Company’s execution and delivery of this
Agreement, and in addition to all of the Investor’s other obligations under
this Agreement, the Investor shall defend, protect, indemnify and hold harmless
the Company and all of its officers, directors, shareholders, employees and
agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the
“Company

15

 

Indemnitees”) from and against any and all Indemnified Liabilities
incurred by the Company Indemnitees or any of them as a result of, or arising
out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Investor in this Agreement, the
Registration Rights Agreement, or any instrument or document contemplated
hereby or thereby executed by the Investor, (b) any breach of any covenant,
agreement or obligation of the Investor(s) contained in this Agreement, the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Investor, or (c) any cause of
action, suit or claim brought or made against such Company Indemnitee based on
misrepresentations or due to a breach by the Investor and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Company Indemnitees. To the extent that the foregoing
undertaking by the Investor may be unenforceable for any reason, the Investor
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law.

          (c) The obligations of the parties to indemnify or make contribution under
this Section 5.1 shall survive termination.

ARTICLE VI.

Covenants of the Company

     Section 6.1.
Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all material respects with the terms thereof.

     Section 6.2.
Listing of Common Stock. The Company shall maintain the
Common Stock’s authorization for quotation on a Principal Market.

     Section 6.3. Exchange Act Registration. The Company will cause its Common
Stock to continue to be registered under Section 12(g) of the Exchange Act,
will file in a timely manner all reports and other documents required of it as
a reporting company under the Exchange Act and will not take any action or file
any document (whether or not permitted by Exchange Act or the rules thereunder
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Exchange Act.

     Section 6.4.
Transfer Agent Instructions. Not later than two (2) business
days after each Advance Notice Date and prior to each Closing and the
effectiveness of the Registration Statement and resale of the Common Stock by
the Investor, the Company will deliver instructions to its transfer agent to
issue shares of Common Stock free of restrictive legends.

     Section 6.5.
Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.

     Section 6.6. Notice of Certain Events Affecting Registration; Suspension
of Right to Make an Advance. The Company will immediately notify the Investor
upon its becoming aware of the occurrence of any of the following events in
respect of a registration statement or related prospectus relating to an
offering of Registrable Securities: (i) receipt of any request for

16

 

additional
information by the SEC or any other Federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to the registration statement or related prospectus; (ii) the
issuance by the SEC or any other Federal or state governmental authority of
any stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus of any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in the Registration Statement,
related prospectus or documents so that, in the case of the Registration
Statement, 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 not misleading, and that in the case of the related
prospectus, 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; and (v) the Company’s reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate;
and the Company will promptly make available to the Investor any such
supplement or amendment to the related prospectus. The Company shall not
deliver to the Investor any Advance Notice during the continuation of any of
the foregoing events.

     Section 6.7.
Expectations Regarding Advance Notices. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends
to raise during such calendar quarter, if any, through the issuance of Advance
Notices. Such notification shall constitute only the Company’s good faith
estimate and shall in no way obligate the Company to raise such amount, or any
amount, or otherwise limit its ability to deliver Advance Notices. The failure
by the Company to comply with this provision can be cured by the Company’s
notifying the Investor, in writing, at any time as to its reasonable
expectations with respect to the current calendar quarter.

     Section 6.8.
Restriction on Sale of Capital Stock. During the Commitment
Period, the Company shall not issue or sell (i) any Common Stock or Preferred
Stock without consideration or for a consideration per share less than the bid
price of the Common Stock determined immediately prior to its issuance, (ii)
issue or sell any Preferred Stock warrant, option, right, contract, call, or
other security or instrument granting the holder thereof the right to acquire
Common Stock without consideration or for a consideration per share less than
such Common Stock’s Bid Price determined immediately prior to its issuance, or
(iii) file any registration statement on Form S-8.

     Section 6.9.
Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with
or into, or a transfer of all or substantially all the assets of the Company to
another entity (a “Consolidation Event”) unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.

17

 

     Section 6.10.
Issuance of the Company’s Common Stock. The sale of the
shares of Common Stock shall be made in accordance with the provisions and
requirements of Regulation D and any applicable state securities law.

ARTICLE VII.

Conditions for Advance and Conditions to Closing

     Section 7.1.
Conditions Precedent to the Obligations of the Company. The
obligation hereunder of the Company to issue and sell the shares of Common
Stock to the Investor incident to each Closing is subject to the satisfaction,
or waiver by the Company, at or before each such Closing, of each of the
conditions set forth below.

          (a) Accuracy
of the Investor’s Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects.

          (b) Performance
by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement and the Registration Rights Agreement to
be performed, satisfied or complied with by the Investor at or prior to such
Closing.

     Section 7.2. Conditions Precedent to the Right of the Company to Deliver
an Advance Notice and the Obligation of the Investor to Purchase Shares of
Common Stock. The right of the Company to deliver an Advance Notice and the
obligation of the Investor hereunder to acquire and pay for shares of the
Company’s Common Stock incident to a Closing is subject to the fulfillment by
the Company, on (i) the date of delivery of such Advance Notice and (ii) the
applicable Advance Date (each a “Condition Satisfaction Date”), of each of the
following conditions:

          (a) Listing
of the Company’s Common Stock. The Company’s Common Stock
shall have been authorized for quotation on a Principal Market.

          (b) Registration
of the Common Stock with the SEC. The Company shall have
filed with the SEC a Registration Statement with respect to the resale of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement. As set forth in the Registration Rights Agreement, the Registration
Statement shall have previously become effective and shall remain effective on
each Condition Satisfaction Date and (i) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends to issue a stop
order with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC’s concerns have been addressed and the Investor is reasonably satisfied
that the SEC no longer is considering or intends to take such action), and (ii)
no other suspension of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist. The Registration
Statement must have been declared effective by the SEC prior to the first
Advance Notice Date.

          (c) Authority. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights

18

 

Agreement for the offer and sale of the shares of Common Stock, or shall have the availability of
exemptions therefrom. The sale and issuance of the shares of Common Stock
shall be legally permitted by all laws and regulations to which the Company is
subject.

          (d) Fundamental
Changes. There shall not exist any fundamental changes to
the information set forth in the Registration Statement which would require the
Company to file a post-effective amendment to the Registration Statement.

          (e) Performance
by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement (including, without limitation, the
conditions specified in Section 2.5 hereof) and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or
prior to each Condition Satisfaction Date.

          (f) 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
or directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have the effect
of prohibiting or adversely affecting any of the transactions contemplated by
this Agreement.

          (g) No
Suspension of Trading in or Delisting of Common Stock. The trading
of the Common Stock is not suspended by the SEC or the Principal Market (if the
Common Stock is traded on a Principal Market). The issuance of shares of
Common Stock with respect to the applicable Closing, if any, shall not violate
the shareholder approval requirements of the Principal Market (if the Common
Stock is traded on a Principal Market). The Company shall not have received
any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal Market).

          (h) Maximum
Advance Amount. The amount of any individual Advance requested by the Company shall not exceed the Maximum Advance Amount. In addition, in no event shall
the number of shares issuable to the Investor pursuant to an Advance cause the
Investor to own in excess of nine and 9/10 percent (9.9%) of the then
outstanding Common Stock of the Company.

          (i) No
Knowledge. The Company has no knowledge of any event which would
be more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective.

          (j) Other. On each Condition Satisfaction Date, the Investor shall have
received the certificate executed by an officer of the Company in the form of
Exhibit A attached hereto.

ARTICLE VIII.

Due Diligence Review; Non-Disclosure of Non-Public Information

     Section 8.1.
Due Diligence Review. Prior to the filing of the
Registration Statement the Company shall make available for inspection and
review by the Investor, advisors to and

19

 

representatives of the Investor, any
underwriter participating in any disposition of the Registrable
Securities on behalf of the Investor pursuant to the Registration
Statement, any such registration statement or amendment or supplement thereto
or any blue sky, NASD or other filing, all financial and other records, all SEC
Documents and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company’s officers, directors and employees to
supply all such information reasonably requested by the Investor or any such
representative, advisor or underwriter in connection with such Registration
Statement (including, without limitation, in response to all questions and
other inquiries reasonably made or submitted by any of them), prior to and from
time to time after the filing and effectiveness of the Registration Statement
for the sole purpose of enabling the Investor and such representatives,
advisors and underwriters and their respective accountants and attorneys to
conduct initial and ongoing due diligence with respect to the Company and the
accuracy of the Registration Statement.

     Section 8.2.
Non-Disclosure of Non-Public Information.

          (a) The Company shall not disclose non-public information to the Investor,
advisors to or representatives of the Investor unless prior to disclosure of
such information the Company identifies such information as being non-public
information and provides the Investor, such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public
information hereunder, require the Investor’s advisors and representatives to
enter into a confidentiality agreement in form reasonably satisfactory to the
Company and the Investor.

          (b) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they were made, not
misleading. Nothing contained in this Section 8.2 shall be construed to mean
that such persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may not obtain
non-public information in the course of conducting due diligence in accordance
with the terms of this Agreement and nothing herein shall prevent any such
persons or entities from notifying the Company of their opinion that based on
such due diligence by such persons or entities, that the Registration Statement
contains an untrue statement of material fact or omits a material fact required
to be stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.

20

 

ARTICLE IX.

Choice of Law/Jurisdiction

     Section 9.1.
Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Hudson County, New Jersey, and expressly
consent to the jurisdiction and venue of the Superior Court of New Jersey,
sitting in Hudson County, New Jersey and the United States District Court of
New Jersey, sitting in Newark, New Jersey, for the adjudication of any civil
action asserted pursuant to this paragraph.

ARTICLE X.

Assignment/Termination

     Section 10.1. Assignment. Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person.

     Section 10.2. Termination. The obligations of the Investor to make
Advances under Article II hereof shall terminate twenty-four (24) months after
the Effective Date.

ARTICLE XI.

Notices

     Section 11.1. Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

	 	 	 
	If to the Company, to:

	 	MobilePro Corp.

6701 Democracy Boulevard

Suite 300

Bethesda, MD 20817

Attention: Jay O. Wright

President and Chief Executive Officer

Telephone: (301) 524-4759

Facsimile: (301) 315-9027

21

 

\

	 	 	 
	With a copy to:

	 	Kirkpatrick & Lockhart LLP

201 South Biscayne Boulevard – Suite 2000

Miami, FL 33131-2399

Attention: Clayton E. Parker, Esq.

Telephone: (305) 539-3300

Facsimile: (305) 358-7095

	 
	 	 
	If to the Investor(s):

	 	Cornell Capital Partners, LP

101 Hudson Street – Suite 3606

Jersey City, NJ 07302

Attention: Mark Angelo

Portfolio Manager

Telephone: (201) 985-8300

Facsimile: (201) 985-8266

	 
	 	 
	With a Copy to:

	 	Butler Gonzalez LLP

1416 Morris Avenue - Suite 207

Union, NJ 07083

Attention: David Gonzalez, Esq.

Telephone: (908) 810-8588

Facsimile: (908) 810-0973

Each party shall provide five (5) days’ prior written notice to the other party
of any change in address or facsimile number.

ARTICLE XII.

Miscellaneous

     Section 12.1. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which 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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof, though failure to deliver such copies shall not affect the
validity of this Agreement.

     Section 12.2. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of this Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.

     Section 12.3. Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given

22

 

Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or
any successor thereto. The written mutual consent of the Investor and the
Company shall be required to employ any other reporting entity.

     Section 12.4. Fees and Expenses. The Company hereby agrees to pay the
following fees:

          (a) Legal Fees. Each of the parties shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement and the transactions
contemplated hereby, except that upon the execution of this Agreement the
Company will pay Ten Thousand Dollars ($10,000) to Butler Gonzalez LLP for
legal, administrative, and escrow fees. Subsequently on each advance date, the
Company will pay Butler Gonzalez LLP, the sum of Five Hundred Dollars ($500)
for legal, administrative and escrow fees and any outstanding fees of
Kirkpatrick & Lockhart LLP directly out the proceeds of any Advances hereunder.

          (b) Commitment Fees.

               (i) On each Advance Date the Company shall pay to the Investor, directly
from the gross proceeds held in escrow, an amount equal to three percent (3%)
of the amount of each Advance. The Company hereby agrees that if such payment,
as is described above, is not made by the Company on the Advance Date, such
payment will be made at the direction of the Investor as outlined and mandated
by Section 2.3 of this Agreement.

               (ii) Upon the execution of this Agreement the Company shall issue to the
Investor seven million nine hundred ninety thousand (7,990,000) shares of the
Company’s Common Stock (the “Investor’s Shares”).

               (iii) Fully Earned. The Investor’s Shares shall be deemed fully earned as
of the date hereof.

               (iv) Registration Rights. The two million nine hundred ninety five
thousand (2,995,000) Investor’s Shares will have “piggy-back” registration
rights.

     Section 12.5. Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder’s fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.

23

 

     Section 12.6. Confidentiality. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party’s domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by
it as a result of this Agreement or in connection herein.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

24

 

     IN WITNESS WHEREOF, the parties hereto have caused this Standby Equity
Distribution Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.

	 	 	 	 	 
	 	COMPANY:

MOBILEPRO CORP.

 	 
	 	By:  	
 	 
	 	 	Name:  	Jay O. Wright 	 
	 	 	Title:  	President & Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	INVESTOR:

CORNELL CAPITAL PARTNERS, LP

 	 
	 	By:  	Yorkville Advisors, LLC
 
	 	Its:  	General Partner
 	 

	 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	Name:  	Mark Angelo 	 
	 	Title:  	Portfolio Manager 	 

25

 

	 	 	 	 	 

EXHIBIT A

ADVANCE NOTICE/COMPLIANCE CERTIFICATE

MOBILEPRO CORP.

     The
undersigned,
                         hereby certifies, with respect to
the sale of shares of Common Stock of MobilePro Corp., (the “Company”),
issuable in connection with this Advance Notice and Compliance Certificate
dated
                        
(the “Notice”), delivered pursuant to the Standby
Equity Distribution Agreement (the “Agreement”), as follows:

     1. The undersigned is the duly elected President of the Company.

     2. There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post effective
amendment to the Registration Statement.

     3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Advance Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in the Agreement.

     4. The
Advance requested is                         .

     The
undersigned has executed this Certificate this          day of
        .

	 	 	 	 	 
	 	MOBILEPRO CORP.

 	 
	 	By:  	
 	 
	 	Name:  	 	 
	 	Title:  	 	 

 

 

	 	 	 	 	 

SCHEDULE 2.6

MOBILEPRO CORP.

     The undersigned hereby agrees that for a period commencing on the date
hereof and expiring on the termination of the Agreement dated April
       , 2004
between MobilePro Corp., (the “Company”), and Cornell Capital Partners, LP,
(the “Investor”) (the “Lock-up Period”), he, she or it will not, directly or
indirectly, without the prior written consent of the Investor, issue, offer,
agree or offer to sell, sell, grant an option for the purchase or sale of,
transfer, pledge, assign, hypothecate, distribute or otherwise encumber or
dispose of except pursuant to Rule 144 of the General Rules and Regulations
under the Securities Act of 1933, any securities of the Company, including
common stock or options, rights, warrants or other securities underlying,
convertible into, exchangeable or exercisable for or evidencing any right to
purchase or subscribe for any common stock (whether or not beneficially owned
by the undersigned), or any beneficial interest therein (collectively, the
“Securities”).

     In order to enable the aforesaid covenants to be enforced, the undersigned
hereby consents to the placing of legends and/or stop-transfer orders with the
transfer agent of the Company’s securities with respect to any of the
Securities registered in the name of the undersigned or beneficially owned by
the undersigned, and the undersigned hereby confirms the undersigned’s
investment in the Company.

Dated: _______________, 2004

	 	 	 	 	 
	 

	 	Signature
	 
	 	 	 	 
	

	 	

	

	 	Address:
	

	 	

	

	 	City, State, Zip Code:
	

	 	 	 	
 
	 
	 	 	 	 
	

	 	

	

	 	Print Social Security Number
	

	 	or Taxpayer I.D. Number

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00066-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00066-of-00352.parquet"}], [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00066-of-00352.parquet"}]]