Document:

Exhibit
10.2

 

SERIES A-1 PREFERRED STOCK PURCHASE AGREEMENT

 

THIS SERIES
A-1 PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”) is made and
entered into as of September 22, 2004, by and among Commercial Credit Group
Inc., a Delaware corporation (the “Company”), and each of those
entities, severally and not jointly, whose names are set forth on the Schedule
of Investors attached hereto as Schedule A (which entities are
hereinafter collectively referred to as the “Investors” and each
individually as an “Investor”).

 

R E C I T A L S

 

WHEREAS, the
Company has authorized the offer and sale of up to an aggregate of Sixty
Thousand (60,000) shares (collectively, the “Shares”) of its Series A-1
Preferred Stock, par value $.00001 per share (the “Series A-1 Preferred
Stock”) for a total purchase price of Six Million Dollars ($6,000,000);

 

WHEREAS, the
Investors desire to purchase the Shares on the terms and conditions set forth
herein; and

 

WHEREAS, the
Company desires to issue and sell the Shares to the Investors on the terms and
conditions set forth herein.

 

NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

 

1.  Agreement to Sell and Purchase the Shares.

 

1.1  Authorization of Shares.  The Company has authorized (a) the sale,
issuance and delivery of the Shares to the Investors and (b) the issuance and
delivery of the shares of the Company’s Common Stock, par value $.00001 per
share (“Common Stock”), issuable upon conversion of the Shares
(collectively, the “Conversion Shares”). 
The Shares and the Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Amended and Restated Certificate
of Incorporation of the Company, in the form attached hereto as Exhibit A
(the “Restated Charter”), which Restated Charter shall be filed with the
Secretary of State of the State of Delaware prior to the Initial Closing (as
defined in Section 2.1).

 

1.2  Sale and Purchase.

 

(a)  Initial Closing.  Subject to the terms and conditions of this
Agreement, at the Initial Closing, the Company will sell, issue and deliver to
each Investor, severally and not jointly, and each Investor will purchase from
the Company, severally and not jointly, the number of Shares set forth opposite
such Investor’s name on Schedule A under the heading “Initial Closing
Shares” (the “Initial Closing Shares”) at a purchase price of
$100.00 per Share.

 

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(b)  Subsequent Closings.  Subject to the terms and conditions of this
Agreement, at one or more Subsequent Closings (as defined in Section 2.2), the
Company will sell, issue and deliver to each Investor, severally and not
jointly, and each Investor will purchase from the Company, severally and not
jointly, up to the number of Shares set forth opposite each Investor’s name on Schedule
A under the heading “Subsequent Closing Shares” (the “Subsequent
Closing Shares”) at a purchase price of $100.00 per Share.

 

1.3  Use of Proceeds.  The Company will use the proceeds from the
sale of the Series A-1 Preferred Stock to the Investors and the proceeds from
the sale of shares of its Series A-2 Preferred Stock (the “Series A-2
Preferred Stock”) to Daniel J. McDonough, Kevin T. McGinn, W.J. Mattocks
and Richard W. Radom (collectively, the “Founders”) pursuant to that
certain Series A-2 Stock Purchase Agreement to be entered into among the
Company and the Founders prior to or concurrently with the Initial Closing (the
“Founders Purchase Agreement”) for (a) expenses related to the Initial
Closing and the completion of the Senior Debt Facility (as hereinafter
defined), as more fully set forth on Schedule 1.3(a); (b) start-up
expenses in an amount not to exceed One Hundred and Fifteen Thousand Dollars
($115,000) as detailed in the Company’s business plan attached hereto as Schedule
1.3(b) (the “Business Plan”); (c) reasonable and customary expenses
related to the Subsequent Closings; (d) working capital and loan and leasing
activities in accordance with the Business Plan; or (e) as otherwise may be
approved by the Board of Directors of the Company (the “Board”); provided,
however, notwithstanding the foregoing, in no event shall any such
proceeds be used to reduce indebtedness or make payments to any affiliate or
stockholder of the Company other than in ordinary arm’s length transactions
that have been approved by the Board.

 

2.  Initial Closing, Delivery and Payment.

 

2.1  Initial Closing.  The initial closing of the sale and purchase
of the Shares under this Agreement (the “Initial Closing”) shall take
place as soon as possible after the execution and delivery hereof at a time and
place that is mutually convenient to the Company and the Investors (the date of
the Initial Closing is sometimes hereinafter referred to as the “Closing
Date”).  In lieu of convening in
person for the purpose of conducting the Initial Closing, the Company and the
Investors may mutually agree to effect the execution and delivery of this
Agreement, the Related Agreements (as defined in Section 3.1) and any other
documents required to complete the Initial Closing by means of an exchange of facsimile
signatures with original copies to follow by overnight courier service.   Notwithstanding anything contained herein to
the contrary, the purchase price for the Initial Closing Shares allocated to
Envest II LLC (“Envest”) may be paid at any time within thirty (30) days
after the date hereof (assuming that the Initial Closing occurs prior to such
date); provided, however, the Company shall not deliver to Envest
certificates for such Initial Closing Shares until such purchase price has been
paid.  Envest recognizes and acknowledges
that the other Investors and the Company are relying on the aforesaid covenant
and agreement by Envest in connection with their decision to complete the
Initial Closing hereunder.  As security
for the duties and obligations of Envest to acquire its Initial Closing Shares
in accordance with the provisions of this Section 2.1, Envest shall,
concurrently with the Initial Closing, deposit the sum of Two Hundred Thousand
Dollars ($200,000) (the “Envest Escrow”) into escrow with the Company,
which Envest Escrow shall (i) be applied on account of the purchase price due
from Envest in respect of the Initial Closing Shares acquired by Envest
pursuant hereto and (ii) be forfeited to the Company in the event that Envest
fails to acquire the

 

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Initial Closing Shares in accordance with the
provisions of this Section 2.1 and such failure is not attributable to any
breach by the Company of its duties and obligations hereunder, all of which shall
be set forth in a letter agreement by and between Envest and the Company that
is reasonably satisfactory to the parties thereto.

 

2.2  Subsequent Closings.  At any time within twenty-four (24) months
after the Initial Closing, upon a determination of the need for additional
funding by the Board of Directors of the Company, the Company may give no less
than twenty (20) days’ notice to the Investors (a “Funding Notice”) of
the time and place of one or more closings at which the Company shall sell, and
the Investors shall purchase, on terms and conditions contained in this
Agreement, the Subsequent Closing Shares. 
The Funding Notice shall set forth: (i) the number of Subsequent Closing
Shares to be purchased by each Investor and the aggregate purchase price
payable by each Investor (it being understood that each Investor shall be
required to purchase its pro-rata share of such Subsequent Closing Shares);
(ii) the wire transfer instructions for the Company to which the purchase price
for the Subsequent Closing Shares shall be delivered by the Investors; (iii) a
certificate from an authorized officer of the Company to the effect that the
conditions precedent set forth in Section 5.3 hereof have been satisfied, other
than the conditions set forth in Section 5.3(f) (which shall be satisfied
concurrently with or as soon as possible after the purchase price has been paid
in respect of the Subsequent Closing Shares); and (iv) the manner in which the
proceeds of the sale of the Subsequent Closing Shares being purchased will be
used by the Company (which shall be in accordance with Section 1.3
hereof).  The dates of the purchase and
sale of the Subsequent Closing Shares are collectively referred to in this
Agreement as the “Subsequent Closing Dates” and the closing or closings
as the “Subsequent Closings.”

 

2.3  Delivery and Payment.  At the Initial Closing and each of the
Subsequent Closings, subject to the terms and conditions of this Agreement, the
Company will deliver to each Investor a certificate representing the number of
Shares to be purchased by such Investor at the Initial Closing or Subsequent
Closing, as appropriate, against payment of the purchase price therefor by wire
transfer of immediately available funds to an account designated in writing by
the Company not less than two (2) business days prior to the Initial Closing or
Subsequent Closing, as appropriate.

 

3.  Representations and Warranties.  The Company represents and warrants to each
Investor as of the date hereof and as of the Closing Date and each of the
Subsequent Closing Dates that the statements contained in this Section 3 are
true and correct, except as set forth in the Schedule of Exceptions attached to
this Agreement (it being agreed that the Company may amend the Schedule of
Exceptions as of the Closing Date and each of the Subsequent Closing Dates to
reflect matters arising between the date hereof or the Subsequent Closing Date,
as appropriate, and each of the Subsequent Closing Dates).  The Schedule of Exceptions shall be arranged
in numbered paragraphs and each exception shall be deemed to qualify the
specific numbered section of this Agreement which is referenced in the
applicable exception.

 

3.1  Organization, Good Standing and
Qualification.

 

(a)  The Company is a corporation duly organized,
validly existing and in good standing under the Laws (as defined in Section
3.15) of the State of Delaware.  The
Company has all requisite corporate power and authority to own and operate its
properties and assets, to

 

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execute and deliver this Agreement, the
Investor Rights Agreement in the form attached hereto as Exhibit B (the “Investor
Rights Agreement”) and the Stockholders’ Agreement in the form attached
hereto as Exhibit C (the “Stockholders’ Agreement,” and together
with the Investor Rights Agreement, the “Related Agreements”), to issue
and sell the Shares and the Conversion Shares, to carry out the provisions of
this Agreement and the Related Agreements and to carry on its business as
currently conducted and as proposed to be conducted.  The Company is duly qualified and in good
standing in the State of North Carolina and in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure
to do so would not have a Material Adverse Effect on the Company.  For purposes of this Agreement, the phrase “Material
Adverse Effect” shall mean any material adverse change in or effect (financial
or other) on the Company’s business, results of operations, assets,
liabilities, prospects or financial condition.

 

(b)  The Company will not, as of the Initial
Closing or any Subsequent Closing, be in violation or default of any term of
its Restated Charter or Bylaws.  The
execution, delivery, and performance of this Agreement and the Related
Agreements by the Company, and the sale, issuance and delivery of the Shares
pursuant hereto and of the issuance and delivery of the Conversion Shares
pursuant to the Restated Charter, will not, with or without the passage of time
or giving of notice, result in any such violation, or be in conflict with or
constitute a default under its Restated Charter or Bylaws.

 

(c)  The minute books of the Company provided to counsel
for the Investors and made available for inspection and copying by each
Investor contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.

 

3.2  Subsidiaries.  The Company does not own or control any
equity security or other interest of any other corporation, limited partnership
or other business entity.  The Company is
not a participant in any joint venture, partnership or similar arrangement.

 

3.3  Capitalization.

 

(a)  The authorized capital stock of the Company
as of the Initial Closing consist of (i) one million  (1,000,000) shares of Common Stock, one
hundred thirty-four thousand fifty (134,050) shares of which are issued and
outstanding, and (ii) Seventy-One Thousand Four Hundred and Ninety-Four
(71,494) shares of Preferred Stock, of which Sixty Thousand (60,000) will be
designated Series A-1 Preferred Stock and Eleven Thousand Four Hundred and
Ninety-Four (11,494) will be designated as Series A-2 Preferred Stock.
Immediately prior to the Initial Closing, there will be no shares of Series A-1
Preferred Stock or shares of Series A-2 Preferred Stock issued and
outstanding.  Schedule 3.3(a) sets
forth the issued and outstanding shares of Common Stock and Preferred Stock
immediately following the Initial Closing, including all Common Stock issued
and outstanding on as-converted, fully-diluted basis, assuming the purchase and
sale of all of the Initial Closing Shares hereunder and the purchase and sale
of the Series A-2 Preferred Stock under the Founders’ Purchase Agreement. Such
capitalization table identifies by name and number of securities owned, each
stockholder and other holder of the Company’s outstanding securities and
convertible securities.

 

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(b)  Under the Company’s Equity Compensation Plan
(the “Plan”), which Plan shall be established after the Initial Closing
pursuant to the provisions of Section 5.4(b) hereof, Forty-Four Thousand Six
Hundred and Eighty-Four (44,684) shares of Common Stock are available for
issuance as of the Closing Date, of which no shares of Common Stock are issued
as restricted stock or are subject to options granted and outstanding as of the
Closing Date.  No employee, officer,
director or consultant has options or any other securities that provide for
accelerated vesting upon a “Change of Control Transaction” (as defined
in the Restated Charter) or termination of employment or service or any other
event, except for those vesting or similar provisions contained in those
certain Buy-Sell Agreements (collectively, the “Buy-Sell Agreement”) to
be entered into on or before the Initial Closing by and between the Company and
each of the Founders.

 

(c)  Other than the shares reserved for issuance
under the Plan, and except as may be issued pursuant to this Agreement, the
Related Agreements and under the Founders’ Purchase Agreement, there are no
outstanding options, warrants, rights (including conversion or preemptive
rights, rights of first refusal and phantom stock rights), proxy, voting,
transfer restriction or stockholder agreements, or agreements of any kind for
the purchase or acquisition from the Company of any of its securities.  No person or entity has any right to acquire
any securities of the Company or any option or warrant to acquire any
securities of the Company based on any broker, finder or investment banking
type relationship with or with respect to the Company.

 

(d)  Except as required pursuant to the Investor
Rights Agreement, the Company is not under any obligation, and has not granted
any rights, to “register” (as defined in the Investor Rights Agreement)
any of the Company’s presently outstanding securities or any of its securities
that may hereafter be issued.  Except as
contemplated in the Stockholders’ Agreement or the Buy-Sell Agreement, no
stockholder of the Company has entered into any agreement with respect to the
voting or transfer of equity securities of the Company.

 

(e)  All issued and outstanding shares of the
Company’s Common Stock (i) have been duly authorized and validly issued and are
fully paid and nonassessable and (ii) were issued in accordance with all
applicable securities Laws, including, without limitation, the registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”),
and applicable state securities Laws (such state securities Laws, together with
the Securities Act, the “Acts”) or pursuant to an exemption from such
registration requirements.

 

(f)  The rights, preferences and privileges of the
Shares will be as stated in the Restated Charter.  The Conversion Shares, with respect to issued
and outstanding Shares, have been duly and validly reserved for issuance. When
issued in compliance with the provisions of this Agreement and the Restated
Charter, the Shares and the Conversion Shares will be (i) validly issued, fully
paid and nonassessable (ii) issued in compliance with applicable federal and
state securities Laws and (iii) except as set forth in the Related Agreements,
will be free of any mortgage, pledge, lien, conditional sale agreement,
security agreement, encumbrance or other charge (collectively, “Liens”);
provided, however, that the Shares and the Conversion Shares may
be subject to restrictions on transfer under state and/or federal securities
Laws.

 

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3.4  Authorization; Binding Obligations.  All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Initial Closing
and Subsequent Closings and the authorization, sale, issuance and delivery of
the Shares pursuant hereto and the issuance and delivery of the Conversion
Shares pursuant to the Restated Charter has been taken.  This Agreement has been, and the Related
Agreements will be, when executed and delivered at the Initial Closing, duly
executed and delivered by the Company and constitute or, in the case of the
Related Agreement, will constitute, valid and binding obligations of the
Company enforceable in accordance with their respective terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other Laws of general application affecting enforcement of creditors’ rights,
(b) as limited by general principles of equity that restrict the availability
of equitable remedies, and (c) to the extent that the enforceability of the
indemnification provisions in the Investor Rights Agreement may be limited by
applicable Laws.

 

3.5  Financial Statements.

 

(a)  The Company has delivered to the Investors
financial projections and pro forma financial statements describe on Schedule
3.5 (collectively, the “Projections”).  The Projections were prepared in good faith
and are based on the Company’s experience in the industry and on assumptions of
fact and opinion as to future events which the Company, on the date of issuance
of the Projections and on the date hereof, made in good faith and believes to
be reasonable; provided, however, the representation and warranty
made in this Section 3.5(a) shall not constitute a guarantee or warranty that
the Company will achieve any of the financial results projected in the
Projections.

 

(b)  All financial statements required to be
delivered to the Investors under the Related Agreements prior to the Initial
Closing or any Subsequent Closing (collectively, the “Financial Statements”),
shall be complete and correct in all material respects and have been prepared
in accordance with U.S. generally accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods indicated (with the
exception of footnotes that may be required by GAAP).  The Financial Statements shall fairly
present, in all material respects, the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein,
subject to normal year-end audit adjustments, none of which will be material in
amount.  All other information required
to be delivered to the Investors prior to any Subsequent Closing under the
Related Agreements shall be complete and accurate in all material respects.

 

3.6  Liabilities.  Except as (a) disclosed on, or reflected or
reserved against in, the Financial Statements; (b) current liabilities incurred
in the ordinary course of the Company’s business since the date of the most
recent Financial Statements or (c) performance obligations under agreements to
which the Company is a party incurred in the ordinary course of the Company’s
business and not required under GAAP to be reflected in the financial
statements of the Company which, in the cases of paragraphs (a) and (b),
individually and in the aggregate will not have a Material Adverse Effect, the
Company does not have and is not subject to any liability or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, asserted or
unasserted, known or unknown (including, without limitation, liabilities as
guarantor or

 

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otherwise with respect to obligations of
others, or liabilities for taxes due or then accrued or to become due).

 

3.7  Agreements.

 

(a)  Schedule 3.7(a) sets forth a list of
agreements, understandings, arrangements or other commitments, written or oral,
to which the Company is a party or by which it is bound, (i) that are
terminable without the consent of the Company and that, if terminated, would
have a Material Adverse Effect on the Company, or (ii) that involve or may
involve (A) obligations (contingent or otherwise) of the Company, or payments
to the Company, in each case in excess of $5,000, or (B) the license of any
Intellectual Property (as defined below) by the Company to any third party or
by a third party to the Company (other than off the shelf shrink wrap
licenses), (C) provisions restricting or affecting the development, manufacture
or distribution of the Company’s products or services, (D) indemnification by
the Company with respect to infringement of proprietary rights or (E) any other
agreement, understanding or instrument to which the Company is a party or by
which it is bound that is material to the Company (the items described in (i)
and (ii) above, collectively, the “Material Contracts”).  The Material Contracts are in full force and
effect and are valid, binding and enforceable in accordance with their
terms.  The Company has furnished to the
Investors complete and correct copies of all such Material Contracts.

 

(b)  The Company is not and has never been a party
to, as a contractor or subcontractor, and is not making and has never made, any
bid or proposal with respect to, any government contract.

 

(c)  Neither the Company nor, to the best of the
Company’s knowledge, any other party is in material violation or default under
any Material Contract and no event has occurred which with notice, lapse of
time or both would constitute a violation default thereunder. The execution,
delivery, and performance of this Agreement and the Related Agreements by the
Company, and the sale, issuance and delivery of the Shares pursuant hereto and
of the issuance and delivery of the Conversion Shares pursuant to the Restated
Charter, will not, with or without the passage of time or giving of notice,
result in any such violation, or be in conflict with or constitute a default
under any Material Contract.

 

(d)  Schedule 3.7(d) sets forth a list of
all agreements, understandings, arrangements or other commitments, written or
oral, made by any Founder which (i) are for the benefit of the Company, (ii)
obligate the Company in any way or (iii) otherwise affect the business of the
Company (collectively, the “Founder Agreements”).  The Founders have assigned all Founder Agreements
(and their right, title and interest thereunder) to the Company. All such
assignments of the Founder Agreements are enforceable, binding and in full
effect.  The Founder Agreements are
binding and enforceable by the Company according to their respective terms.

 

3.8  Obligations to Related Parties.  Except as set forth in (i) the Buy-Sell
Agreement, (ii) the four (4) separate Employment Agreements to be entered into
on or before the Initial Closing between the Company and each of the Founders
(collectively, the “Founders’ Employment Agreements”), and (iii) the
Related Agreements, the Company has no obligations to

 

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executive officers, directors,
stockholders or employees of the Company other than for standard employee
benefits made generally available to all employees.  Except as set forth on Schedule 3.8,
none of the executive officers, directors or stockholders of the Company, or
any members of their immediate families, are indebted to the Company or, to the
best of the Company’s knowledge, have any direct or indirect ownership interest
in any firm or corporation with which the Company is affiliated or with which
the Company has a business relationship, or any firm or corporation which
competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent of such company) which may
compete with the Company.  No executive
officer or director or member of their immediate families or, to the best of
the Company’s knowledge, any stockholder, is, directly or indirectly,
interested in any Material Contract with the Company.  The Company is not a guarantor or indemnitor
of any indebtedness of any other person, firm or corporation.  For purposes of this Agreement, the phrases “knowledge
of the Company” or “to the best of the Company’s knowledge” or words
of similar import, mean the knowledge of any director, officer, or Founder of
the Company, including facts of which directors, officers, and/or Founders, in
the reasonably prudent exercise of their duties, should be aware.

 

3.9  Changes.  Since the later of the date on the
Projections or the date of any
audited Financial Statements delivered to the Investors, there has not been:

 

(a)  Any event that has had or could reasonably be
expected to have a Material Adverse Effect on the Company;

 

(b)  Any resignation or termination of any
executive officer, key employee or group of employees of the Company, except as
approved by the Board;

 

(c)  Any damage, destruction or loss, whether or
not covered by insurance, with respect to the properties and assets of the
Company;

 

(d)  Any waiver or compromise by the Company of a
valuable right or of a material debt owed to it in excess of $25,000, except as
approved by the Board;

 

(e)  Any loans made by the Company to any
stockholder, employee, executive officer or director of the Company, other than
advances made in the ordinary course of business;

 

(f)  Any material change in any compensation
arrangement or agreement with any employee, executive officer, director or
stockholder, except as approved by the Board;

 

(g)  Any declaration or payment of any dividend or
other distribution of the assets of the Company;

 

(h)  Any labor organization activity related to
the Company;

 

(i)  Any debt for borrowed money incurred, assumed
or guaranteed by the Company, except (i) those for immaterial amounts and for
current liabilities incurred in the ordinary course of business, (ii) under the
Senior Debt Facility, or (iii) amounts approved by the Board;

 

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(j)  Any sale, mortgage, pledge, transfer, lease
or other assignment of any Intellectual Property (as defined in Section
3.11(i)) owned by the Company, other than licenses of the Company’s software
and products on a non-exclusive basis in the ordinary course of business;

 

(k)  Any material change in any Material Contract,
except as approved by the Board;

 

(l)  Any sale, mortgage, pledge, transfer, lease
or other assignment of any of its tangible assets outside of the ordinary
course of business, except as approved by the Board;

 

(m)  Any capital expenditure in excess of $25,000,
except as approved by the Board; or

 

(n)  Any arrangement or commitment by the Company
to do any of the acts described in subsection (a) through (m) above, except as
approved by the Board.

 

3.10  Real and Personal Property.

 

(a)  Real Property.  The Company does not own any real
property.  All of the real property
leased by the Company (the “Leased Real Property”) is identified in Schedule
3.10(a).  The schedule of Leased Real
Property set forth in Schedule 3.10(a) is a complete, accurate, and
correct list of the Company’s Leased Real Property.  Each of the leases for the Leased Real
Property set forth in Schedule 3.10(a) is in full force and effect and
has not been modified, amended, or altered, in writing or otherwise.  Neither the Company nor, to the best of the
Company’s knowledge, any other party thereto is in default under any of said
leases, nor has any event occurred which, with the giving of notice or the
passage of time, or both, would give rise to a default.

 

(b)  Personal Property.  The Company has good title (or valid
leasehold estates in the case of leased property and assets) to all of its
personal property and assets and all such personal property and assets are in
good working condition.  None of such
personal property or assets is subject to any Lien, except as set forth on Schedule
3.10(b) (the “Permitted Liens”). 
The Financial Statement reflect all personal property and assets of the
Company (other than assets disposed of in the ordinary course of business since
the date of the Financial Statements), and such properties and assets are
sufficient for the Company to conduct the business of the Company as currently
conducted and as proposed to be conducted.

 

3.11  Intellectual Property.

 

(a)  The Company owns, or is licensed or otherwise
possesses enforceable rights to use, all Intellectual Property (as defined
below) used in or necessary for the conduct of its business as currently
conducted and as proposed to be conducted. 
There are no claims or demands pending by any other person pertaining to
any of such Intellectual Property nor, to the best of the Company’s knowledge,
is there a claim or demand threatened, and no proceedings have been instituted
or, to the best of the Company’s knowledge, threatened which challenge the
rights of the Company with respect to such Intellectual Property.

 

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(b)  With respect to Intellectual Property that is
owned by the Company, all such Intellectual Property is owned free and clear of
Liens, other than Permitted Liens. All patents, patent applications,
trademarks, trademark applications, trademark registrations, service marks, service
work applications, service mark registrations, and registered copyrights which
are owned by the Company are listed in Schedule 3.11(b).  All such patents, patent applications,
trademarks, trademark registrations, trademark applications, and registered
copyrights have been duly registered in, filed in or issued by the United
States Patent and Trademark Office, the United States Register of Copyrights,
or the corresponding offices of other jurisdictions as identified on Schedule
3.11(b), and have been properly maintained and renewed in accordance with
all applicable provisions of Law and administrative regulations of the United
States and each such jurisdiction.

 

(c)  All licenses or other agreements under which
the Company is granted rights in Intellectual Property of any third person are
listed in Schedule 3.11(c).  All
such licenses or other agreements are in full force and effect, there is no
default by the Company or, to the best of the Company’s knowledge, by any other
party thereto, and all of the rights of the Company thereunder are freely
transferable without restriction or royalty of any kind (including, without
limitation, to any successor-in-interest as a result of a merger,
consolidation, asset sale or similar transaction resulting in a change of
control).  The licensors under said
licenses and other agreements have and, at the time of the grant of such
licenses or agreements, had all requisite power and authority to grant the
rights purported to be conferred thereby. 
The execution, delivery, and performance of this Agreement and the
Related Agreements by the Company, and the sale, issuance and delivery of the
Shares pursuant hereto and of the issuance and delivery of the Conversion
Shares pursuant to the Restated Charter, will not, with or without the passage
of time or giving of notice, impair or otherwise affect the rights of the
Company under any such license or agreement.

 

(d)  All licenses or other agreements under which
the Company has granted rights to others in its Intellectual Property are
listed in Schedule 3.11(d).  All
such licenses or other agreements are in full force and effect, there is no
default by the Company or, to the best of the Company’s knowledge, by any other
party thereto, and all of the rights of the Company thereunder are freely
transferable without restriction or royalty of any kind (including, without
limitation, to any successor-in-interest as a result of a merger,
consolidation, asset sale or similar transaction resulting in a change of
control). The execution, delivery, and performance of this Agreement and the
Related Agreements by the Company, and the sale, issuance and delivery of the
Shares pursuant hereto and of the issuance and delivery of the Conversion
Shares pursuant to the Restated Charter, will not, with or without the passage
of time or giving of notice, impair or otherwise affect the rights of the
Company under any such license or agreement.

 

(e)  The Company has taken all commercially
reasonable measures required to establish and preserve its ownership of all
Intellectual Property developed by, or on behalf of, the Company.  The Company has required all current and
former employees and all consultants and independent contractors having access
to, or who were involved in the development of, any of the Intellectual
Property owned or developed by the Company, to execute enforceable agreements
that provide valid written assignment of all inventions and developments
conceived or created by them in the course of their employment or services, and
all such persons are in compliance with such agreements.  The Company has no knowledge of any
infringement by

 

10

 

others of any of its Intellectual
Property.  The Company does not believe
it is or will be necessary to use any inventions of any of its employees (or
persons it intends to hire) made prior to their employment by the Company.  All current and former employees and all
consultants and independent contractors hired by the Company having access to
confidential or proprietary information of the Company have agreed to maintain
the confidentiality of all confidential and proprietary information of the
Company and of any information of third parties received by the Company under
an obligation of confidentiality.

 

(f)  To the best of the Company’s knowledge, the
Company has not infringed, does not infringe and, by conducting its business as
currently conducted or as proposed to be conducted, will not infringe, in any
material respect, or unlawfully or wrongfully use the Intellectual Property of
any third person.  No proceeding charging
the Company with infringement of any Intellectual Property of any third person
has been filed or, to the best of the Company’s knowledge, is threatened to be
filed, except as set forth on Schedule 3.11(f).  There exists no unexpired patent or, to the
best of the Company’s knowledge, patent application which includes claims that
would be infringed by or otherwise adversely affect the products, activities,
or business of the Company as currently conducted or as proposed to be
conducted.

 

(g)  The Company is not making unauthorized use of
any confidential information or trade secrets of any person, including without
limitation, any former employer of any past or present employee of the Company.  Except as set forth on Schedule 3.11(g),
neither the Company nor any employee of the Company is obligated under any duty
or agreement (including any license, confidentiality agreement, covenant or
commitment of any nature), or subject to any judgment, decree or order of any
court or administrative agency, that would interfere in any manner with the use
of their best efforts to promote the interests of the Company or that would
conflict with the Company’s business as now conducted or proposed to be
conducted.  To the best of the Company’s
knowledge, no employee or consultant is in violation of any proprietary
information or assignment of inventions agreement, or in any such similar
agreement, with any former employer or contractor, and the carrying on of the Company’s
business and the conduct of the Company’s business as proposed will not
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, such agreements.

 

(h)  Schedule 3.11(h) sets forth a list of
all licenses or other agreements under which any Founder is granted rights in
Intellectual Property which (i) are for the benefit of the Company, (ii)
obligate the Company in any way or (iii) otherwise affect the business of the
Company (collectively, the “Founder Intellectual Property Agreements”).  The Founders have assigned all Founder
Intellectual Property Agreements (and all right, title and interest thereunder)
to the Company.  All such assignments of
the Founder Intellectual Property Agreements are enforceable, binding and in
full effect.  The Founder Intellectual
Property Agreements are binding and enforceable by the Company according to
their respective terms.

 

(i)  As used in this Agreement, the term “Intellectual
Property” means (i) inventions (whether or not patentable), trade secrets,
technical data, databases, customer lists, designs, tools, methods, processes,
technology, ideas, know how and other confidential or proprietary information
and materials; (ii) trade marks and service marks (whether or not registered),
applications for trade marks and service marks, trade names, logos, trade dress
and

 

11

 

other proprietary indicia and all goodwill
associated therewith; (iii) documentation, advertising copy, marketing
materials, specifications, mask works, drawings, graphics, databases,
recordings and other works of authorship, whether or not protected by
copyright; (iv) source code, object code, data and operating files, user
manuals, documentation, flow charts, algorithms, compilers, development tools,
maintenance records and other materials related to computer programs; (v)
internet web-sites and domain names; and (vi) all forms of legal rights and
protections that may be obtained for, or may pertain to, the Intellectual
Property set forth in clauses (i) through (v) in any country of the world,
including, without limitation, all letters patent, patent applications,
provisional patents, design patents, PCT filings and other rights to inventions
or designs, all registered and unregistered copyrights in both published and
unpublished works, trade secret rights, mask works, moral rights or other
literary property or authors rights, rights regarding trademarks and other
proprietary indicia, and all applications, registrations, issuances, divisions,
continuations, renewals, reissuances and extensions of the foregoing.

 

3.12  Litigation.  Except as set forth on Schedule 3.12,
(a) there is no litigation, arbitration, mediation or proceeding or
investigation pending or, to the best of the Company’s knowledge, threatened
against the Company or affecting any of its properties or assets or against any
officer, director, or Founder of the Company in his or her capacity as an
officer, director or employee of the Company, or which may call into question
the validity or hinder the enforceability of this Agreement or any Related
Agreement or the transactions contemplated hereby and thereby, (b) to the best
of the Company’s knowledge, there has not occurred any event nor does there
exist any condition on the basis of which any such litigation, arbitration,
mediation proceeding or investigation might be properly instituted or
commenced, (c) the Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality and (d) there is no action or suit by the Company pending
or, to the best of the Company’s knowledge, threatened against others.

 

3.13  Tax Returns and Payments.  The Company has filed on a timely basis all
tax returns and reports as and when required by Law. Such tax returns and
reports correctly and completely reflect the Company’s liability for taxes and
all other information required to be reported thereon.  The Company has paid all taxes and other
assessments due to be paid before the Initial Closing. The Company has
adequately provided for, in its books of account and related records, liability
for all unpaid taxes, being current taxes not yet due and payable. The Company
has not been advised that any of its returns, federal, state or other, has been
or is being audited, or of any deficiency in assessment in its federal, state
or other taxes.  All taxes and other
assessments and levies which the Company is required to withhold or collect
have been withheld and collected and have been paid over to the proper
governmental authorities when required.

 

3.14  Employees and Consultants.

 

(a)  Except as approved by the Board after the
Initial Closing, the Company does not maintain or contribute to any employee
benefit plan, pension plan, stock option, bonus or incentive plan, severance
pay policy or agreement, deferred compensation agreement, or any similar plan
or agreement (an “Employee Benefit Plan”).  No other corporation, trade, or business
exists which would be treated together with the Company as a single “employer”
under the provisions of Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the “Code”). 
Each Employee Benefit Plan has been and is currently administered in

 

12

 

compliance with its constituent documents and
all reporting, disclosure and other requirements of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), and the Code and any
other Law applicable to such Employee Benefit Plan. There are no unfunded
obligations of the Company under any retirement, pension, profit-sharing,
deferred compensation plan or similar program, and any employee contributions
withheld from payroll have been timely and fully contributed to the appropriate
Employee Benefit Plan as required under applicable Law. The Company is not
required to make any payments or contributions to any Employee Benefit Plan
pursuant to any collective bargaining agreement or any applicable labor
relations Law.  The Company has never
maintained or contributed to any Employee Benefit Plan providing or promising
any health or other nonpension benefits to terminated employees (other than continuation
coverage, at the maximum applicable premium permitted to be charged by the
Company, required under Section 4980B of the Code, or Section 601 of the
ERISA).

 

(b)  Schedule 3.14(b) sets forth a list of
(i) all salaried employees of the Company, together with each such employee’s
position, date of employment, salary, and any other compensation payable to
such employee (including, without limitation, compensation payable pursuant to
bonus, deferred compensation or commission arrangements), and (ii) each
contract, commitment, arrangement, or understanding, whether oral or written,
relating to the employment of, or the performance of services by, any employee,
consultant, or independent contractor. 
The Company is not delinquent in payments to any of its employees or
consultants for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it to the date hereof or amounts
required to be reimbursed to such employees or consultants.  The Company is in compliance, in all material
respects, with all applicable Laws, agreements, orders, and consent decrees
respecting labor, employment, immigration, fair employment practices, terms and
conditions of employment, and wages and hours. 
The Company has no collective bargaining agreements with any of its
employees.  There is no labor union
organizing activity pending or, to the best of the Company’s knowledge,
threatened with respect to the Company. 
There are no charges of employment discrimination or unfair labor
practices or any strikes, slowdowns, stoppages of work, or any other concerted
interference with normal operations, pending or, to the best of the Company’s
knowledge, threatened against or involving the Company.

 

(c)  To the best of the Company’s knowledge, no
employee of the Company, nor any consultant with whom the Company has
contracted, is in violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right of any such
individual to be employed by, or to contract with, the Company because of the
nature of the business conducted by the Company; and to the best of the Company’s
knowledge after due inquiry, the continued employment by the Company of its
present employees, and the performance of the Company’s contracts with its
independent contractors, will not result in any such violation.  Except as set forth on Schedule 3.14(c),
the Company has not received notice alleging that any such violation has
occurred.  Except as set forth on Schedule
3.14(c), no employee of the Company has been granted the right to continued
employment by the Company or to any material compensation following termination
of employment with the Company.  To the
best of the Company’s knowledge, no executive officer, Key Employee or group of
employees intends to terminate his, her or their employment with the Company,
nor does the Company have a present intention to terminate the employment of
any executive officer, Key Employee or group of employees.

 

13

 

3.15  Compliance with Laws; Authorizations.

 

(a)  The Company has complied in all material
respects with each, and is not in violation of, any law, statute, regulation,
rule, ordinance or order (“Laws”), including environmental Laws, to
which the Company or its business, operations, employees, assets or properties
are or have been subject.  No event has
occurred or circumstances exist that (with or without the passage of time or
the giving of notice) may result in a material violation of, conflict with or
failure on the part of the Company to comply with, any Law.  The Company has not received notice regarding
any violation of, conflict with, or failure to comply with, any Law. The
execution, delivery, and performance of this Agreement and the Related
Agreements by the Company, and the sale, issuance and delivery of the Shares
pursuant hereto and of the issuance and delivery of the Conversion Shares
pursuant to the Restated Charter, will not, with or without the passage of time
or giving of notice, result in any such violation, or be in conflict with or
constitute a default under any Law.

 

(b)  The Company owns, holds, possesses or
lawfully uses in the operation of its business all franchises, licenses,
permits and registrations (“Authorizations”) which are required or
otherwise necessary for it to conduct its business as currently conducted or as
proposed to be conducted or for the ownership and use of the assets owned or
used by the Company in the conduct of its business, free and clear of all
Liens, other than Permitted Liens.  Such
Authorizations are valid and in full force and effect and none of such
Authorizations will be terminated or impaired or become terminable as a result
of the transactions contemplated by this Agreement or the Related
Agreements.  All Authorizations are
listed in Schedule 3.15(b).  No
event has occurred or circumstances exist that, with or without the passage of
time or the giving of notice, may result in a violation of, conflict with,
failure on the part of the Company to comply with the terms of, or the
revocation, withdrawal, termination, cancellation, suspension or modification
of any Authorization.  The Company has
not received notice regarding any violation of, conflict with, failure to
comply with the terms of, or any revocation, withdrawal, termination,
cancellation, suspension or modification of, any Authorization.  The Company is not in default and has not
received notice of any claim of default, with respect to any Authorization.

 

3.16  Offering Valid.  Assuming the accuracy of the representations
and warranties of the Investors contained in Section 4.2 hereof, the offer,
sale, issuance and delivery of the Shares and the Conversion Shares will be
exempt from the registration requirements of the Securities Act, and will have
been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities Laws.

 

3.17  Insurance.  The Company has insurance policies with
respect to its business and properties, on both a per occurrence and an
aggregate basis, as are customarily carried by persons engaged in the same or
similar businesses as the Company.  There
is no default by the Company, or to the best of the Company’s knowledge, by any
insurance carrier of such policies, or event which could give rise to a default
under any such policy.

 

3.18  Real Property Holding Company.  The Company is not a United States real
property holding company within the meaning of Section 897(c)(2) of the Code.

 

14

 

3.19  Qualified Small Business Stock.  The Series A-1 Preferred Stock sold hereunder
constitutes “qualified small business stock” as defined in Section
1202(c) of the Code. The Company shall use diligent efforts to comply with the
reporting requirements of Section 1202(d)(1)(C) of the Code and any related
regulations promulgated thereby.  In
addition, within a reasonable time (which shall not exceed thirty (30) days
after any Investor delivers to the Company a written request therefor), the
Company shall deliver to such Investor a written statement informing the
Investor whether, to the best of the Company’s knowledge, such Investor’s
interest in the Company constitutes “qualified small business stock” as
defined in Section 1202(c) of the Code. 
The Company’s obligation to furnish a written statement pursuant to this
Section 3.19 shall continue notwithstanding the fact that a class of the
Company’s securities may be traded on an established securities market.  As of the Closing Date, the Company is a “qualified
small business” within the meaning of Section 1202(d) of the Code, meets
the “active business requirement” of Section 1202(e) of the Code and has
made no “significant redemptions” within the meaning of Section 1202(c)(3)(B)
of the Code.

 

3.20  Investment Company Act.  The Company is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended nor is the
Company directly or indirectly controlled by or acting on behalf of any person
which is an “investment company.”

 

3.21  Disclosure.  The representations and warranties made or
contained in this Agreement and the schedules and exhibits hereto, and the
certificates executed or delivered in connection herewith, when taken together,
do not and shall not contain any untrue statement of a material fact and do not
and shall not omit to state a material fact required to be stated therein or
necessary in order to make such representations and warranties not misleading
in light of the circumstances in which they were made or delivered.  There have been no events or transactions, or
facts or information which have not been disclosed herein or in a schedule
hereto which have or could reasonably be expected to have a Material Adverse
Effect.

 

4.  Representations and Warranties of Investors.  Each Investor, severally as to itself and not
jointly, hereby represents and warrants to the Company as of the date hereof
and as of the Closing Date and each Subsequent Closing Date that the statements
contained in this Section 4 are true and correct as follows.

 

4.1  Requisite Power and Authority.  Such Investor has all necessary power and
authority to execute and deliver this Agreement and the Related Agreements and
to carry out their provisions.  All
action on such Investor’s part required for the execution and delivery of this
Agreement and the Related Agreements has been taken.  Upon their execution and delivery, this
Agreement and the Related Agreements will be duly executed and delivered by
such Investor and constitute valid and binding obligations of such Investor,
enforceable in accordance with their respective terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other Laws of
general application affecting enforcement of creditors’ rights, (b) as limited
by general principles of equity that restrict the availability of equitable
remedies and (c) to the extent that the enforceability of the indemnification
provisions of the Investor Rights Agreement may be limited by applicable Laws.

 

15

 

4.2  Investment Representations.  Such Investor is an “accredited investor”
as such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act. Such Investor is purchasing the Shares and Conversion Shares
for its own account, for investment purposes only and has no current
arrangements or understandings for the resale or distribution to others and
will only resell such Shares and Conversion Shares any part thereof pursuant to
a registration or an available exemption under applicable Law.  Such Investor acknowledges that the offer and
sale of the Shares and Conversion Shares have not been registered under the
Securities Act or the securities Laws of any state or other jurisdiction, and
that the Shares and Conversion Shares are being offered and sold pursuant to an
exemption from registration contained in the Securities Act, and cannot be
disposed of unless they are subsequently registered under the Securities Act and
any applicable state Laws or an exemption from such registration is
available.  Such Investor understands and
agrees that the Shares and the Conversion Shares will bear a legend
substantially similar to the legend set forth below in addition to any other
legend that may be required by applicable Law, the Restated Charter, the
Bylaws, and the Related Agreements, as the same may be amended from time to
time, or by any agreement between the Company and such Investor:

 

THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT (A) PURSUANT TO
AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS, OR (B) IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS.

 

4.3  No Conflicts.  The execution, delivery and performance by
such Investor of this Agreement and each Related Agreement and the transactions
contemplated thereby does not and will not (a) conflict with, violate or result
in any default under the organizational documents of the Investor,  (b) with or without the giving of notice or
the lapse of time, or both, result in any violation or breach of, or constitute
a default under, or result in any right to accelerate or result in the creation
of any Liens pursuant to, or right of termination under, any material contract
to which such Investor is a party or by which such Investor or any of its
property is bound, or (c) conflict with or violate any requirement of Law to
which such Investor is subject, which could reasonably be expected to have a
material adverse effect upon such Investor’s ability to perform its duties and
obligations under this Agreement and the Related Agreements.

 

4.4  Consents.  The execution, delivery and performance by
such Investor of this Agreement and the Related Agreements and the consummation
of the transactions contemplated thereby do not and will not require the
consent or approval of, or notice to, or other action of any Governmental
Authority or other third party, which consent or approval, as appropriate, has
not been obtained.

 

16

 

4.5  Litigation.  There is no litigation, arbitration,
mediation or proceeding or investigation pending or, to the knowledge of each
Investor, threatened against such Investor or affecting any of its properties or
assets or against any officer, director, or employee of such Investor in his or
her capacity as an officer, director or employee of the Investor, that could
reasonably be expected to have a material adverse effect upon such Investor’s
ability to perform its duties and obligations under this Agreement and the
Related Agreements or which may call into question the validity or hinder the
enforceability of this Agreement or any Related Agreement or the transactions
contemplated hereby and thereby; nor has there occurred any event nor does
there exist any condition on the basis of which any such litigation,
arbitration, mediation proceeding or investigation might be properly instituted
or commenced. Such Investor is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality could reasonably be expected to have a material adverse
effect upon such Investor’s ability to perform its duties and obligations under
this Agreement and the Related Agreements. There is no action or suit by such
Investor pending or, to such Investor’s knowledge, threatened against others
could reasonably be expected to have a material adverse effect upon such
Investor’s ability to perform its duties and obligations under this Agreement
and the Related Agreements.

 

4.6  Broker’s, Finder’s or Similar Fees.  There are no brokerage commissions, finder’s
fees or similar fees or commissions payable in connection with the transactions
contemplated hereby, or by any other Related Agreements to which such Investor
is a party, based on any agreement, arrangement or understanding with such
Investor or any action taken by such Investor.

 

4.7  Residence.  If such Investor is an individual, then the
Investor resides in the state or province identified in the address of such
Investor on the signature pages hereof; if such Investor is a partnership,
corporation, limited liability company or other entity, then the office or
offices of such Investor in which its principal place of business is located is
the address or addresses of such Investor set forth on the signature pages
hereof.

 

5.  Conditions to Closings; Post-Closing
Covenants.

 

5.1  Conditions to Obligations of the Investors
for Initial Closing.  Each Investor’s
obligation to purchase the Initial Shares at the Initial Closing is subject to
the satisfaction or waiver, on or prior to the Closing Date, of the following
conditions:

 

(a)  Representations and Warranties.  The representations and warranties made by
the Company in Section 3 hereof shall be true and correct as of the Closing
Date as if they had been made on and as of the Closing Date.

 

(b)  Performance of Obligations.  The Company shall have performed all
obligations required herein to be performed by it on or prior to the Initial
Closing.

 

(c)  Compliance Certificate.  The Company shall have delivered to the
Investors a Compliance Certificate, executed by the President of the Company,
dated as of the Closing Date, to the effect that the conditions specified in subsections
(a) and (b) of this Section 5.1 have been satisfied.

 

17

 

(d)  No Material Adverse Change.  There shall have been no event that has had,
or could be reasonably expected to have, a Material Adverse Effect on the
Company.

 

(e)  Regulatory Approvals.  All authorizations, approvals and permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required to be obtained on or prior to the Initial
Closing in connection with the issuance of and sale of the Shares pursuant to
this Agreement shall have been duly obtained and shall be effective as of the
Initial Closing.

 

(f)  Secretary’s Certificate; Corporate
Documents.  The Investors shall have
received from the Secretary of the Company a certificate having attached
thereto: (i) the Restated Charter as in effect at the time of the Initial
Closing (and evidence of the filing thereof with the Secretary of State of the
State of Delaware), (ii) the Company’s Bylaws as in effect at the time of the
Initial Closing, (iii) resolutions approved by the Board of Directors
authorizing the transactions contemplated hereby, (iv) resolutions approved by
the Company’s stockholders authorizing the filing of the Restated Charter, and
(v) good standing certificates with respect to the Company from the applicable
authority(ies) in Delaware and any other jurisdiction in which the Company is
qualified to do business, dated a recent date before the Initial Closing.

 

(g)  Investor Rights Agreement.  The Investor Rights Agreement shall have been
executed and delivered by the Company and the other parties thereto.

 

(h)  Stockholders’ Agreement.  The Stockholders’ Agreement shall have been
executed and delivered by the Company and the Founders.

 

(i)  Buy-Sell Agreements.  A Buy-Sell Agreement shall have been executed
and delivered by the Company and each Founder and shall be in the form of Exhibit
D-1 through Exhibit D-4 attached hereto, as appropriate.

 

(j)  Board of Directors.  Upon the Initial Closing, the authorized size
of the Board shall be four (4), and the Board shall consist of Daniel J.
McDonough, David Apple, Kevin Wilson, and John Morgan, with a fifth member to be appointed thereto after the
Initial Closing in accordance with the Stockholders’ Agreement.

 

(k)  Legal Opinion.  The Investors shall have received from legal
counsel to the Company an opinion addressed to them, which is reasonably
satisfactory, in form and substance, to the Investors.

 

(l)  Founders’ Employment Agreements.  The Founders’ Employment Agreements shall
have been executed and delivered by the Company and the Founders and shall be
satisfactory, in form and substance, to the Investors.

 

(m)  Senior Debt Facility.  The Company and Wells Fargo Foothill,
Inc.  (in its capacity as arranger and
administrative agent, “Wells Fargo”; the lender or lenders with respect
to which Wells Fargo serves as administrative agent, the “Senior Lender”)
shall have executed and delivered to one another loan documents (collectively, the
“Senior Loan Documents”) satisfactory to the Investors pertaining to a
revolving credit facility being made available by the Senior Lender to the
Company in the maximum amount of Twenty Million Dollars

 

18

 

($20,000,000) (the “Senior Debt Facility”)
pursuant to the provisions of the Senior Loan Documents.

 

(n)  Purchase of Series A-2 Preferred Stock.  The Founders shall have purchased the Series
A-2 Preferred Stock as provided in the Founders Purchase Agreement and the
Founders Purchase Agreement shall be reasonably satisfactory, in form and
substance, to the Investors.

 

(o)  Key Man Life Insurance.  The Company shall have obtained and delivered
to the Investors a copy of a key man life insurance policy on the life of
Daniel J. McDonough in the amount of $3,000,000 with the proceeds payable to
the Company.

 

(p)  McDonough Indemnity.  The McDonough Indemnity shall be reasonably
satisfactory, in form and substance, to the Investors.

 

(q)  Initial Closing.  The Initial Closing shall have occurred by
October 15, 2004.

 

5.2  Conditions to Obligations of the Company
for the Initial Closing and Subsequent Closings.  The Company’s obligation to issue and sell
the Shares at the Initial Closing and the Subsequent Closings, as applicable,
is subject to the satisfaction or waiver, on or prior to the Closing Date and
each of the Subsequent Closing Dates, as applicable, of the following
conditions:

 

(a)  Representations and Warranties.  The representations and warranties made by
the Investors in Section 4 hereof shall be true and correct as of the Closing
Date and each of the Subsequent Closing Dates, as applicable, with the same
force and effect as if they had been made on and as of the Closing Date and
each of the Subsequent Closing Dates, as applicable.

 

(b)  Performance of Obligations.  Such Investors shall have performed all
obligations required herein to be performed by such Investors on or prior to
the Initial Closing and the Subsequent Closings, as applicable.

 

(c)  Regulatory Approvals.  All authorizations, approvals and permits, if
any, of any governmental authority or regulatory body of the United States or
of any state that are required to be obtained on or prior to the Initial
Closing and the Subsequent Closings, as applicable, in connection with the
issuance of and sale of the Shares being acquired pursuant to this Agreement
shall have been duly obtained and shall be effective as of the Initial Closing
and the Subsequent Closings, as applicable.

 

(d)  Stockholders’ Agreement.  The Stockholders’ Agreement shall have been
executed and delivered by the Investors.

 

(e)  McDonough Indemnity.  The Company shall have executed and delivered
to and in favor of Daniel J. McDonough (“McDonough”) an agreement (the “McDonough
Indemnity”) under which it shall indemnify, defend and hold McDonough
harmless from all loss, expenses, damages, and claims arising under any
validity (or similar) agreement executed and

 

19

 

delivered by McDonough in favor of the Senior
Lender, with such exceptions thereto and exclusions therefrom as may be
mutually satisfactory to McDonough and the Company.

 

5.3  Conditions to Obligations of the Investors
for Subsequent Closings.  Each
Investor’s obligation to purchase Subsequent Closing Shares at the Subsequent
Closing applicable thereto is subject to the satisfaction or waiver, on or
prior to the applicable Subsequent Closing Date, of the following conditions:

 

(a)  Funding Notice.  The Company shall have executed and delivered
a Funding Notice to the Investors, together with the officer’s certificate
required thereby, which officer’s certificate shall include reasonably
satisfactory evidence that a Funding Event (as defined below) has occurred.

 

(b)  Funding Event.  Either: (i) the proceeds from the sale of the
Subsequent Closing Shares shall be required by the Company to (A) satisfy a
leverage ratio or similar financial covenant imposed by the Senior Lender under
the Senior Loan Documents or (B) cure or prevent a payment or other default
under the Senior Loan Documents, provided  that the Senior Lender
has agreed to continue to provide the Company with credit availability under
the Senior Debt Facility and (if applicable) waive the default under the Senior
Loan Documents in the case of a Funding Event described in this clause (i); or
(ii) the Board shall have determined that it requires the capital resulting
from the sale of the Subsequent Closing Shares (in either case, a “Funding
Event”).

 

(c)  Legal Investment.  The sale and issuance of the Subsequent
Closing Shares to be purchased at the Subsequent Closing shall be legally
permitted by all laws and regulations to which Investors and the Company are
subject.

 

(d)  Performance of Obligations.  The Company shall have performed, in all
material respects, all obligations required herein to be performed by the
Company on or prior to the Subsequent Closing.

 

(e)  Consents, Permits and Waivers.  The Company shall have obtained any and all
consent, permits and waivers necessary or appropriate for consummation of the
transactions contemplated by the Subsequent Closing (except for such as may be
properly obtained following the Subsequent Closing).

 

(f)   Delivery of Certificates.  The Investors shall have received from the
Company certificates evidencing the Subsequent Closing Shares to be issued and
sold to the Investors as of the Subsequent Closing and registered in the name
of each Investor, against delivery to the Company by each Investor of a wire
transfer in the amount of the purchase price for the Subsequent Closing Shares
purchased by each such Investor at the Subsequent Closing.

 

(g)  Initial Closing.  The Initial Closing shall have occurred.

 

5.4  Certain Post-Closing Covenants.  The Company covenants and agrees as to take
the following actions after the Initial Closing:

 

20

 

(a)  Confidentiality and Related Agreements.  The Company shall require all future
employees and consultants having access to, or who are, were or will be
involved in the development of, any of the Intellectual Property owned or
developed (or to be developed) by the Company, to execute agreements under
which such employees and consultants (i) agree to maintain the confidentiality
of all confidential and proprietary information of the Company and (ii) provide
assignments of all inventions and developments conceived or created by them in
the course of their employment or services, which form of agreement shall be
approved by the Board.  The agreements
required to be executed pursuant to this Section 5.4(a) shall be executed
concurrently with the employment or engagement, as appropriate, of the employee
or consultant by the Company.

 

(b)  Adoption of Plan.  The Company shall formulate and adopt the Plan
as soon as practicable after the Initial Closing with the approval of the
Board.

 

6.  Miscellaneous.

 

6.1  Governing Law.  This Agreement shall be governed, construed
and interpreted in accordance with the Laws of the State of Delaware, without
giving effect to principles of conflicts of Law or choice of Law that would
cause the substantive Laws of any other jurisdiction to apply.  The Company irrevocably submits and consents
to the jurisdiction of any Delaware state court or federal court sitting in Delaware
over any action or proceeding arising out of or relating to the Agreement or
the other Related Agreements, and the Company hereby irrevocably agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such courts.

 

6.2  Survival; Indemnification of Investors.

 

(a)  The representations, warranties, covenants
and agreements made in this Agreement, the Schedule of Exceptions, any Related
Agreement or any other agreement, certificate, document or instrument furnished
pursuant hereto shall survive any investigation made by any Investor and the
closing of the transactions contemplated hereby and shall in no way be affected
by any investigation of the subject matter thereof made by or on behalf of the
Investors or the Company, as appropriate.

 

(b)  The Company hereby agrees to hold harmless
and indemnify the Investors, the Investors’ direct and indirect subsidiaries,
affiliated entities and corporations, and each of their partners, executive
officers, directors, employees, stockholders, agents and representatives
(collectively, referred to as the “Investor Indemnitees”) against any
and all damages, liabilities, losses, costs and expenses (including reasonable
attorneys’ fees and expenses), whether or not arising out of third-party
claims, based upon, or arising out of, or relating to, (i) any inaccuracy in,
or any breach by the Company of, any representation or warranty contained in
this Agreement, the Schedule of Exceptions, any Related Agreement or any other
agreement, certificate, document or instrument furnished pursuant hereto, or
(ii) any breach of any covenant or agreement by the Company contained in this
Agreement, the Schedule of Exceptions, any Related Agreement or any other
agreement, certificate, document or instrument furnished pursuant hereto
(collectively, the “Indemnifiable Claims”) ; provided  that
the Company shall not be liable under this Section 6.2  to an Investor Indemnitee for: (i) any amount
paid in settlement

 

21

 

of claims without the Company’s prior written
consent (which consent shall not be unreasonably withheld); (ii) to the extent
that it is judicially determined that such Indemnifiable Claims resulted from
the willful misconduct or gross negligence of such Investor Indemnitee; or
(iii) to the extent that it is determined that such Indemnifiable Claims
resulted from the material breach by such Investor Indemnitee of any
representation, warranty, covenant or other agreement of such Investor
Indemnitee contained in this Agreement or any Related Agreement or any other
contract to which it is a party; provided, that if an Investor
Indemnitee is reimbursed hereunder for any expenses, such reimbursement of
expenses shall be refunded to the extent it is judicially determined that the
Indemnifiable Claim in question resulted from (i) the willful misconduct or
gross negligence of such Investor Indemnitee or (ii) the material breach by
such Investor Indemnitee of any representation, warranty, covenant or other agreement
of such Investor Indemnitee contained in this Agreement or the Related
Agreements.

 

(c)  The Company shall reimburse, promptly
following request therefor, all reasonable expenses incurred by an Investor
Indemnitee in connection with any Indemnifiable Claim, including, without
limitation, any threatened, pending or completed action, suit, arbitration,
investigation or other proceeding arising out of, or relating to, any
Indemnifiable Claim.

 

(d)  Each Investor Indemnitee under this Section
6.2 will, promptly after the receipt of notice of the commencement of any
action, investigation, claim or other proceeding against such Investor
Indemnitee in respect of which indemnity may be sought from the Company under
this Section 6.2, notify the Company in writing of the commencement thereof.
The failure by any Investor Indemnitee to so notify the Company of any such
action shall not relieve the Company from any liability which it may have to
such Investor Indemnitee unless, and only to the extent that, such omission
results in the Company’s forfeiture of substantive rights or defenses or the
Company is otherwise irrevocably prejudiced in defending such proceeding. In
case any such action, claim or other proceeding shall be brought against any
Investor Indemnitee and it shall notify the Company of the commencement
thereof, the Company shall be entitled to assume the defense thereof at its own
expense, with counsel reasonably satisfactory to the Investor Indemnitee; provided
that any Investor Indemnitee may, at its own expense, retain separate
counsel to participate in such defense. 
The Company agrees that it will not, without the prior written consent
of the holders holding at least a majority of the issued and outstanding Shares,
settle, compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding relating to the matters contemplated
hereby (if any Investor Indemnitee is a party thereto or has been actually
threatened to be made a party thereto) unless such settlement, compromise or
consent includes an unconditional release of the Investors and each other
Investor Indemnitee from all liability arising or that may arise out of such
claim, action or proceeding.  The Company
shall not be liable for any settlement of any claim, action or proceeding
effected against an Investor Indemnitee without the prior written consent of
the Company.

 

(e)  The rights to indemnification set forth in
this Section 6.2 are in addition to, and not in limitation of, all rights and
remedies to which the Investors may be entitled. All remedies, either under
this Agreement, the Related Agreements, the Restated Charter, by Law, or
otherwise afforded to any party, shall be cumulative and not alternative.

 

22

 

6.3  Amendment and Waiver.  Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only by the
written consent of (a) the Company, and (b) Investors owning not less than 66
2/3% of the shares of Common Stock issued or issuable upon conversion of the
Series A-1 Preferred Stock owned (or subscribed for) by all Investors (the “Required
Investors”). Any amendment or waiver effected in accordance with this
Section 6.3 shall be binding upon the Company and each Investor, and their
respective successors and assigns. For purposes of this Section 6.3, any
reference to “66 2/3% of the shares of Common Stock issued or issuable upon
conversion of Series A-1 Preferred Stock” shall exclude all shares of
Common Stock issuable upon payment of Accruing Dividends, assuming for purposes
of this calculation that all Accruing Dividends are paid in cash in lieu of the
issuance of Common Stock.  The term “Accruing
Dividends” shall have the meanings given to such term in the Restated
Charter, as the same may be amended and/or restated from time to time.

 

6.4  Entire Agreement.  This Agreement, the exhibits and schedules
hereto, and the Related Agreements delivered pursuant hereto constitute the
entire agreement among the parties relative to the specific subject matter
hereof and thereof.

 

6.5  Notices.  All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified; (b) when sent by confirmed telex,
facsimile or electronic mail if sent during normal business hours of the
recipient, if not, then on the next business day; (c) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (d) the next business day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt.  All
communications shall be sent to the Company at the address or facsimile number
set forth on its signature page hereto and to each Investor at the address or
facsimile number set forth on Schedule A hereto or at such other address as the
Company or each Investor may designate by ten (10) days’ advance written notice
to the other parties hereto.

 

6.6  Severability.  In the event one or more of the provisions of
this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

 

6.7  Expenses.  Each party shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of the Agreement; provided, however, that, if the
Initial Closing occurs, the Company shall, at the Initial Closing, reimburse to
the Investors, an amount not to exceed Seventy-Five Thousand Dollars ($75,000),
for fees and expenses incurred in connection with this transaction.

 

6.8  Broker’s Fees.  The Company shall be solely responsible for
the payment of all broker fees to Anderson LeNeave & Co. and Kropschot
Financial Services.  Each party
represents and warrants that other than Anderson LeNeave & Co. and
Kropschot Financial Services, no agent, broker, investment banker, person or
firm acting on behalf of or under the authority of such party is or will be
entitled to any broker’s or finder’s fee or any other commission directly or
indirectly in connection with the transactions contemplated herein.  The

 

23

 

Company agrees to indemnify each Investor
against any fee or commission payable by such Investor for which the Company is
responsible, and each Investor agrees to indemnify the Company against any fee
or commission payable by the Company for which such Investor is responsible.

 

6.9  Exculpation Among Investors.  Each Investor acknowledges that it is not
relying upon any person, firm, or corporation, other than the Company and its
executive officers and directors, in making its investment or decision to
invest in the Company.  Each Investor
agrees that no Investor nor the respective controlling persons, executive
officers, directors, partners, agents, or employees of any Investor shall be
liable to any other Investor for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Shares and Conversion
Shares.

 

6.10  Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

6.11  Successors and Assigns.  The provisions hereof shall inure to the
benefit of, and be binding upon, the successors and assigns of the parties
hereto.

 

6.12  Titles and Subtitles.  The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

24

 

[SERIES A-1 PREFERRED STOCK PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date set forth in the first paragraph hereof.

 

	
   

  	
  COMMERCIAL CREDIT GROUP INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel J. McDonough

  
	
   

  	
  Name:

  	
  Daniel J. McDonough

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  212 South Tryon Street

  
	
   

  	
  Suite 1400

  
	
   

  	
  Charlotte, NC 28281

  
	
   

  	
  Attention: Mr. Daniel J. McDonough

  
	
   

  	
  Telephone:

  
	
   

  	
  Facsimile:

  
	
   

  	
   

  
				

 

25

 

	
   

  	
  WINMARK CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Morgan

  
	
   

  	
  Name:

  	
  John Morgan

  
	
   

  	
  Title:

  	
  Authorized Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  4200 Dahlberg Drive, Suite 100

  
	
   

  	
  Minneapolis, MN 55422-4837

  
	
   

  	
  Attention:

  	
  Mr. John Morgan

  
	
   

  	
  Telephone:

  	
  (763) 520-8404

  
	
   

  	
  Facsimile:

  	
  (763) 520-8410

  
						

 

26

 

List of Exhibits

 

	
  Exhibit A

  	
  -

  	
  Amended and Restated Certificate of
  Incorporation

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  -

  	
  Investor Rights Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  -

  	
  Stockholders’ Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
  -

  	
  Buy-Sell Agreements

  

 

27Exhibit 10.3

 

EXECUTION COPY

 

SECURITIES PURCHASE AGREEMENT

 

THIS
SECURITIES PURCHASE AGREEMENT (this
“Agreement”) is made and entered into as of October 13, 2004, by
and between Winmark Corporation, a Minnesota corporation (the “Purchaser”),
and BridgeFunds Limited, a
Nevada corporation (the “Company”). 
As used herein, the parties hereto are hereinafter sometimes referred to
collectively as the “Parties” and each as a “Party”.

 

WHEREAS, the Company wishes to issue and sell
to the Purchaser a warrant to purchase an aggregate of Two Hundred Fifty Six
Thousand Seven Hundred Forty One (256,741) shares of the common stock, par
value $0.01 per share (the “Common Stock”), of the Company (such
warrant, the “Warrant”), such Warrant to have the terms, and to be subject
to the conditions, set forth in the form of Warrant annexed hereto as Exhibit
A;

 

WHEREAS, the Company wishes to issue and sell
to the Purchaser senior subordinated promissory notes having an aggregate face
value of Two Million Dollars ($2,000,000.00) (such senior subordinated
promissory notes, the “Notes”), each such Note to have the terms, and to
be subject to the conditions, set forth in the form of Note annexed hereto as Exhibit
B; and

 

WHEREAS, the Purchaser wishes to purchase
from the Company, and the Company desires to issue and sell to the Purchaser,
the Warrant and all of the Notes (collectively, the Warrant and the Notes are
hereinafter sometimes referred to as the “Securities”) on the terms and
subject to the conditions set forth in this Agreement (such purchase is
hereinafter referred to as the “Securities Purchase”).

 

NOW,
THEREFORE, in consideration of
the premises and mutual covenants set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties, intending to be legally bound hereby, do mutually agree as
follows:

 

ARTICLE 1

 

PURCHASE AND SALE OF SECURITIES

 

1.1           Purchase and Sale
of Warrant and Initial Note. 
Subject to the terms and conditions contained herein, at the Initial
Closing (as defined herein), the Company agrees to issue and sell to the
Purchaser, and the Purchaser hereby agrees to purchase from the Company, (a)
the Warrant and (b) a Note having an aggregate face value of Five Hundred
Thousand Dollars ($500,000.00) (the “Initial Note”).

 

 

1.2 Purchase
and Sale of Second Note, Third Note and Fourth Note.

 

(a)           If, during the period
from the date hereof through April 13, 2006, the Company shall have
provided the Purchaser with evidence reasonably satisfactory to the Purchaser
that the Company has originated, in the aggregate, Three Hundred Fifty Thousand
Dollars ($350,000.00) of Customer Claimant Funding (the “Second Funding
Threshold”), then as soon as practicable after the Company’s provision of
such evidence to the Purchaser, at a closing to occur subsequent to the Initial
Closing (an “Additional Closing”), and subject to the terms and
conditions contained herein, the Company shall issue and sell to the Purchaser,
and the Purchaser shall purchase from the Company, a Note having an aggregate
face value of Five Hundred Thousand Dollars ($500,000.00) (the “Second Note”).

 

(b)           If, during the period
from the date hereof through April 13, 2006, the Company shall have
provided the Purchaser with evidence reasonably satisfactory to the Purchaser
that the Company has originated, in the aggregate, Eight Hundred Fifty Thousand
Dollars ($850,000.00) of Customer Claimant Funding (the “Third Funding
Threshold”), then as soon as practicable after the Company’s provision of
such evidence to the Purchaser, at an Additional Closing, and subject to the
terms and conditions contained herein, the Company shall issue and sell to the
Purchaser, and the Purchaser shall purchase from the Company, a Note having an
aggregate face value of Five Hundred Thousand Dollars ($500,000.00) (the “Third
Note”).

 

(c)           If, during the period
from the date hereof through April 13, 2006, the Company shall have
provided the Purchaser with evidence reasonably satisfactory to the Purchaser
that the Company has originated, in the aggregate, One Million Three Hundred
Fifty Thousand Dollars ($1,350,000.00) of Customer Claimant Funding (the “Fourth
Funding Threshold”), then as soon as practicable after the Company’s
provision of such evidence to the Purchaser, at an Additional Closing, and
subject to the terms and conditions contained herein, the Company shall issue
and sell to the Purchaser, and the Purchaser shall purchase from the Company, a
Note having an aggregate face value of Five Hundred Thousand Dollars ($500,000.00)
(the “Fourth Note”).

 

1.3           Definitions.  As used herein, the following terms shall
have the following respective meanings:

 

(a)           “Agreement” means this
agreement, including all Exhibits and Schedules hereto, as it may be amended,
modified or supplemented from time to time in accordance with its terms.

 

(b)           “Applicable Law” means,
with respect to any Person, any and all provisions of any constitution, treaty,
statute, law, regulation, ordinance, code, rule, judgment, rule of common law,
order, judgment, ruling, decree, award, injunction, consent, concession, grant,
franchise, license, agreement, directive, guideline, policy, requirement, or
other governmental restriction or any similar form of decision of, or
determination by, or any interpretation or administration of any of the
foregoing by, any Governmental Authority, as in effect at the relevant time, as
applicable to such Person or its Subsidiaries or their respective assets.

 

2

 

(c)           “Board of Directors”
means the board of directors of the Company.

 

(d)           “Business Day” means any
day other than a Saturday, Sunday or other day on which banking institutions
are authorized or required to be closed in the State of Minnesota.

 

(e)           “Claim Proceeds Purchase
Agreement” means any agreement entered into between the Company and any
customer of the Company (who is a claimant in one or more litigation matters)
pursuant to which (a) the Company purchases from such customer an interest in a
portion of the claim proceeds relating to such customer’s litigation matters in
exchange for a specified amount (the “Claim Proceeds Purchase Price”)
advanced by the Company to such customer and (b) such customer agrees to pay to
the Company, under certain circumstances, from any claim proceeds realized by
such customer, an amount equivalent to (i) the Claim Proceeds Purchase Price
plus (ii) an additional amount or amounts specified in such agreement.

 

(f)            “Consent” means any
consent, approval, license, permit, franchise, concession, agreement, waiver,
grant, privilege, immunity, exemption, order or authorization of, or
registration, certification, qualification, designation, declaration,
publication or filing with, or report, registration, notice or notification to,
any Governmental Authority or any other Person.

 

(g)           “Customer Claimant
Funding” means the aggregate amount of funds advanced by the Company to its
customers pursuant to all Claim Proceeds Purchase Agreements that are entered
into since the Initial Closing Date.

 

(h)           “Employee Options” means
any options that (i) are issued to employees, officers or directors of, or
consultants to, the Company, pursuant to the Employee Option Plan, and (ii) are
exercisable for shares of Common Stock.

 

(i)            “Employee Option Plan”
means the BridgeFunds Limited 2004 Stock Option Plan, as authorized and
approved by the Board of Directors of the Company effective as of April 1,
2004.

 

(j)            “Encumbrance” means any
lien, encumbrance, hypothecation, right of others, proxy, voting trust or
similar arrangement, pledge, security interest, collateral security agreement,
attachment in aid of execution, limitation on voting rights, limitation on
rights of ownership, claim, charge, mortgage, pledge, objection, title defect,
title retention agreement, option, restrictive covenant, easement, deed of
trust, right-of-way, encroachment, use restriction, restriction on transfer,
right of first refusal, right of first offer or any comparable interest or
right voluntarily incurred or arising by operation of law, of any nature
whatsoever, and includes, without limitation, any agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.

 

(k)           “Executive Committee”
means the executive committee of the Board of Directors.

 

(l)            “GAAP” means generally
accepted U.S. accounting principles, applied on a basis consistent with the
basis on which the Company’s financial statements have been prepared.

 

3

 

(m)          “Governmental Authority”
means any local, state, federal or supranational entity exercising executive,
legislative, judicial, regulatory or administrative functions, power or
authority of, or pertaining to, government, or any arbitrator, arbitral tribunal,
panel or body or self regulatory organization or any subdivision thereof having
jurisdiction.

 

(n)           “Intellectual Property”
means patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, proprietary information and other intellectual property.

 

(o)           “knowledge of the
Company,” the “Company’s knowledge” or any other similar qualification in this
agreement means the knowledge and belief, after reasonable inquiry, of A. Mark
Berlin, Jr., Richard T. Ostlund, and/or Scott H. Anderson.

 

(p)           “Legal Opinion” means
the opinion of Lionel, Sawyer & Collins, special counsel to the Company, to
be dated as of even date herewith, in the form attached hereto as Exhibit C.

 

(q)           “Materially Adverse
Effect” on any Person means any materially adverse effect on the assets,
liabilities, financial condition, operating results, customer, employee or
supplier relations, business (as currently conducted), business condition or
financing arrangements of such Person (taken as a whole on a consolidated basis
with its consolidated subsidiaries, if any) or on the ability of such Person to
perform the transactions contemplated hereby to be performed by such Person.

 

(r)            “Materially Adverse
Change” with respect to any Person means any materially adverse change in the
assets, liabilities, financial condition, operating results, customer, employee
or supplier relations, business (as currently conducted), business condition or
financing arrangements of such Person (taken as a whole on a consolidated basis
with its consolidated subsidiaries, if any) or in the ability of such Person to
perform the transactions contemplated hereby to be performed by such Person.

 

(s)           “Person” means any
individual, corporation, partnership, limited liability company, joint venture,
business trust, association or other business entity of any type or nature or
any governmental authority.

 

(t)            “Related Documents”
means the Warrant, the Notes and the Stockholder Agreement

 

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

 

(v)           “Stockholder Agreement”
means that certain Stockholder Agreement by and among the Company and certain
other Persons, such Stockholder Agreement to have the terms, and to be subject
to the conditions, set forth in the form of Stockholder Agreement annexed
hereto as Exhibit D.

 

(w)          “Subsidiary” means any
corporation or other entity in which the company owns, directly or indirectly,
a majority of the capital stock or other equity interest or the financial

 

4

 

results of which are consolidated with the
financial results of the company in accordance with GAAP.

 

(x)            “Warrant Shares” means
the 256,741 shares of Common Stock issuable upon exercise of the Warrant.

 

ARTICLE 2

 

CLOSINGS; CLOSING DELIVERIES

 

2.1           Closings.  The initial closing of the transactions
contemplated hereby (the “Initial Closing”) shall take place
simultaneously with the execution and delivery of this Agreement, at the
offices of Mayer, Brown, Rowe & Maw LLP, 190 South LaSalle Street, Chicago,
Illinois 60603.  The date on which the
Initial Closing occurs is called the “Initial Closing Date”.  Each
Additional Closing shall take place at the offices of Mayer, Brown, Rowe &
Maw LLP, 190 South LaSalle Street, Chicago, Illinois 60603, as soon as practicable
after the satisfaction of the closing conditions for such Additional Closing,
in each case, at such time as shall be agreed upon by the Parties.  The
date on which each Additional Closing occurs is called an “Additional
Closing Date”.

 

2.2           Initial Closing.  At the Initial Closing:

 

(a)           the Company shall issue
and deliver to the Purchaser (i) a warrant certificate representing the
Warrant, duly registered in the name of the Purchaser or its nominee and (ii)
the Initial Note, duly registered in the name of the Purchaser or its nominee,
against payment by the Purchaser of Five Hundred Thousand Dollars ($500,000.00)
as the purchase price therefor (such amount to be delivered by the Purchaser by
wire transfer to such account of the Company as has been designated in writing
by the Company);

 

(b)           the Company shall
execute and deliver to the Purchaser the Stockholder Agreement (as executed by
each of the Persons contemplated to be a party thereto); and

 

(c)           the Company shall cause
to be delivered to the Purchaser a duly executed copy of the Legal Opinion.

 

2.3           Additional Closings.

 

(a)           The obligations of the
Purchaser to purchase the Second Note, the Third Note and the Fourth Note at
each Additional Closing are subject to satisfaction (or written waiver) at or
prior to such Additional Closing of the following conditions: 

 

(i)            The Company shall have
provided the Purchaser with evidence reasonably satisfactory to the Purchaser
of the occurrence of the Second Funding Threshold, the Third Funding Threshold
or the Fourth Funding Threshold (as applicable).

 

5

 

(ii)           The representations and
warranties of the Company contained in Article 4 of this Agreement
(as supplemented and amended in accordance with Section 6.5(c)) shall
be accurate, true and correct on and as of the Additional Closing Date, and the
events or circumstances underlying the need for such supplements or amendments
shall not have a Material Adverse Effect on the Company.

 

(iii)          All acts or covenants
required hereunder to be performed by the Company at or prior to the Additional
Closing shall have been fully performed by it in all material respects.

 

(iv)          The Company shall have
provided the Purchaser sufficient opportunity to ask questions and receive
answers from the officers of the Company regarding the Securities, the Company
and its business, prospects and financial condition, for purposes of Purchaser
providing the representation and warranty contained in Section 3.5
hereof.

 

(v)           The Company shall have delivered
to the Purchaser a certificate of the Company dated as of the Additional
Closing Date, executed by a duly authorized officer of the Company, certifying
as to the satisfaction of the conditions set forth in Sections 2.3(a)(i),
2.3(a)(ii), 2.3(a)(iii) and 2.3(a)(iv).

 

(b)           The obligations of the
Company to issue the Second Note, the Third Note and the Fourth Note at each
Additional Closing are subject to satisfaction (or written waiver) at or prior
to such Additional Closing of the following conditions:

 

(i)            The representations and
warranties of the Purchaser contained in Article 3 of this
Agreement, subject however to Section 2.3(a)(iv), shall be accurate, true
and correct in all material respects at and as of the Additional Closing Date.

 

(ii)           All acts or covenants
required hereunder to be performed by the Purchaser at or prior to the
Additional Closing shall have been fully performed by it in all material
respects.

 

(iii)          The Purchaser shall have
delivered to the Company a certificate of the Purchaser dated as of the
Additional Closing Date, executed by a duly authorized officer of the
Purchaser, certifying as to the satisfaction of the conditions set forth in Sections
2.3(b)(i) and 2.3(b)(ii).

 

(c)           At each Additional
Closing, the Company shall issue and deliver to the Purchaser the Second Note,
the Third Note or the Fourth Note (as applicable), in each case, duly
registered in the name of the Purchaser or its nominee, against payment by the
Purchaser of Five Hundred Thousand Dollars ($500,000.00) as the purchase price
therefor (such amount to be delivered by the Purchaser by wire transfer to such
account of the Company as has been designated in writing by the Company).

 

6

 

2.4           Further Assurances.  The Purchaser, on the one hand, and the
Company, on the other hand, shall use all reasonable efforts to take all such
other actions as may be necessary or desirable to carry out the purposes of
this Agreement.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

As an
inducement to the Company to enter into this Agreement and the Stockholder
Agreement, the Purchaser hereby represents and warrants to the Company as
follows:

 

3.1           Organization and
Qualification.  The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Minnesota.

 

3.2           Authorization.  The Purchaser has the requisite power and
authority and has taken all required corporation action necessary to permit it
to execute and deliver this Agreement and the Warrant and to carry out its
obligations hereunder and thereunder The execution and delivery of this
Agreement and the Warrant by the Purchaser and the consummation by the
Purchaser of the transactions contemplated hereby and thereby to be performed
by it have been duly authorized by all necessary corporate action on the part
of the Purchaser, and no other corporate proceedings on the part of the
Purchaser are necessary to authorize this Agreement, the Warrant or any of such
transactions.  Each of this Agreement and
the Warrant has been duly executed and delivered by the Purchaser and
constitutes a legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws relating to the enforcement of creditors’ rights
generally or by general principles of equity, regardless of whether such
enforceability is considered at law or in equity.

 

3.3           No Conflict.  The execution, delivery and performance of
this Agreement and the Warrant by the Purchaser is not a breach or violation
of, and does not conflict with or constitute, with or without the passage of
time or the giving of notice (or both), a default under, its Articles of
Incorporation or its Bylaws.

 

3.4           Accredited Purchaser.  The Purchaser is an “Accredited Investor” as
defined in  Regulation D under the
Securities Act because the Purchaser is a corporation, not formed for the
specific purpose of acquiring the Securities, having total assets in excess of
$5,000,000, whose purchase is directed by a “Sophisticated Person” (as defined
in Regulation D under the Securities Act) who has such knowledge and experience
in financial and business matters that he or she is capable of evaluating the
merits and risks of the prospective investment.

 

3.5           Opportunity for Review
of Company Information. 
The Purchaser acknowledges that it has had the opportunity to ask
questions of and receive answers from officers of the Company regarding the
Securities, the Company and its business, prospects and financial condition.

 

7

 

3.6           Investment Intent.  The Purchaser is acquiring the Securities for
purposes of investment only, for its own account and with no intention of
distributing any portion thereof in violation of applicable federal or state
securities laws.

 

3.7           Legend.  The Purchaser acknowledges and agrees that
the Company is authorized to imprint on all certificates and instruments
evidencing the Securities and on any certificates or instruments issued in
replacement or exchange for those Securities, and agrees to comply with any
legend provided in any of the Related Documents to be imprinted on such
certificates and instruments.  At the
request of the holder of any certificate or instrument evidencing any of the
Securities or any certificate or instrument issued in replacement or exchange
for any certificate or instrument evidencing any of the Securities, the foregoing
legend shall be removed by the Company from such certificate or instrument if
the Securities evidenced thereby have been registered under the Securities Act
or have become eligible for resale pursuant to Rule 144(k) under the Securities
Act.

 

3.8           Experience; Financial
Condition.  The Purchaser has
such experience in investing in securities of private companies, and has such
knowledge and experience in financial and business matters, that it is capable
of evaluating the merits and risks of acquisition of the Securities and
protecting its own interests in connection therewith, and of making an informed
investment decision with respect thereto. 
The Purchaser’s financial condition is such that it is able to bear the
risk of holding the Securities for an indefinite period of time and the risk of
loss of the Purchaser’s entire investment in the Securities.

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

As an
inducement to the Purchaser to enter into and perform this Agreement, the
Company represents and warrants to the Purchaser as follows:

 

4.1           Organization and
Qualification.  The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has the requisite corporate power and authority,
and has all necessary governmental approvals, to own or lease and operate its
properties and to carry on its business as it is currently conducted
(exclusive, however, of any such governmental approval the absence of which
would not, and could not reasonably be anticipated to, have a Materially
Adverse Effect on the Company).  The
Company has made available to the Purchaser true, correct and complete copies
of the Articles of Incorporation and Bylaws of the Company, including all
amendments, restatements and other modifications thereto or thereof, as in
effect immediately prior to the execution and delivery of this Agreement.  Except as set forth on Schedule 4.1,
the Company is duly licensed or qualified or qualified as a foreign corporation
in every jurisdiction in which the nature of the business transacted by it or
the character of the properties owned or leased by it requires such
qualification (exclusive, however, of any such license or qualification the
absence of which would not, and could not reasonably be anticipated to, have a
Materially Adverse Effect on the Company).

 

8

 

4.2           Authorization; Issuance
of Warrant Shares.

 

(a)           The Company has the
requisite power and authority and has taken all required corporation action
necessary to permit it to execute and deliver this Agreement and the Related
Documents and to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement
and the Related Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby to be performed by it have
been duly authorized by all necessary corporate action on the part of the
Company, and no other corporate proceedings on the part of the Company are
necessary to authorize any of this Agreement and the Related Documents or any
of such transactions.  Each of this
Agreement, the  Warrant, the Initial Note
and the Stockholder Agreement has been duly executed by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or other
similar laws relating to the enforcement of creditors’ rights generally or by
general principles of equity, regardless of whether such enforceability is
considered at law or in equity.  Each of
the Second Note, the Third Note and the Fourth Note will be duly executed by
the Company in accordance with the terms of this Agreement, and at such time of
such execution, each such Note will constitute a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws relating to the enforcement of
creditors’ rights generally or by general principles of equity, regardless of
whether such enforceability is considered at law or in equity.

 

(b)           The Warrant Shares have
been duly reserved for issuance upon exercise of the Warrant and, when so
issued, will be duly authorized, validly issued and outstanding, fully paid and
nonassessable shares of Common Stock.

 

4.3           No Conflict.  The execution, delivery and performance of
this Agreement and the Related Documents by the Company does not or will not
(as applicable) violate (a) any provision of the Articles of Incorporation or
Bylaws of the Company or (b) any Applicable Law, regulation, order, judgment or
decree, or result in the breach of or constitute a default (or an event which,
with notice or lapse of time or both would constitute a default) under any
agreement, instrument or understanding to which the Company is a party, except,
in the case of Section 4.3(b), for any breaches or defaults that
would not, and could not reasonably be anticipated to, have a Materially
Adverse Effect on the Company.

 

4.4           Capitalization.

 

(a)           As of the Initial
Closing Date, the authorized capital stock of the Company consists of 5,000,000
shares of Common Stock, of which (i) 931,500 shares of Common Stock are issued
and outstanding (all of which issued and outstanding shares of Common Stock are
held of record by the Persons and in the amounts set forth on Schedule 4.4(a)),
(ii) 150,000 shares of Common Stock are reserved for issuance upon exercise of
Employee Options, and (iii) the Warrant Shares are reserved for issuance upon
exercise of the Warrant.

 

9

 

(b)           As of the Initial
Closing Date, Employee Options exercisable for 95,464 shares of Common Stock have been issued by the Company (all of
which Employee Options are held of record by the Persons and in the amounts set
forth on Schedule 4.4(b)).

 

(c)           As of the Initial
Closing Date, all of the outstanding shares of Common Stock are validly issued,
fully paid and nonassesable.

 

(d)           Except as set forth on Schedule 4.4(d),
as of the Initial Closing Date, except as contemplated by this Agreement and
each of the Related Documents, (i) the Company has not issued or granted (or
agreed or otherwise committed to issue or grant), and there are not otherwise
outstanding, any shares of Common Stock or other securities issued by the
Company and (ii) there are no existing options, warrants, conversion privileges
or other rights, agreements, arrangements or commitments obligating the Company
to issue or sell any shares of Common Stock or other securities to be issued by
the Company or securities or obligations of any kind exercisable for,
convertible into or exchangeable for any shares of Common Stock or other
securities to be issued by the Company.

 

4.5           Compliance With
Securities Laws.

 

(a)           As of the Initial
Closing Date, all of the outstanding shares of Common Stock and other
securities of the Company have been issued in accordance with the registration
or qualification provisions of the Securities Act and any relevant state
securities laws, or pursuant to valid exemptions therefrom.

 

(b)           Subject to the accuracy
of the Purchaser’s representations contained herein, the offer, sale and
issuance of the Warrant and the Notes hereunder and the issuance and delivery
of any of the Warrant Shares upon exercise of the Warrant, when exercised in
accordance with the terms of such Warrant, do not and will not (as applicable)
require registration under the Securities Act or any state securities laws.

 

4.6           Voting Agreement.  Except for the Stockholder Agreement and as
set forth on Schedule 4.6, the Company is not a party or otherwise
subject to any agreement or understanding, and to the Company’s knowledge,
there is no agreement or understanding between any Persons, that affects or
relates to the voting or transfer of shares of the capital stock of the
Company. 

 

4.7           Subsidiaries.  Except as set forth on Schedule 4.7,
(a) the Company does not have any Subsidiary nor does it own or control,
directly or indirectly, any interest in any other Person, and (b) the Company
is not a participant in any joint venture, partnership or similar arrangement.  

 

4.8           Financial Statements; Undisclosed
Liabilities.

 

(a)           Schedule 4.8 sets forth a true
and complete copy of (i) the unaudited balance sheet of the Company, dated as
of September 30, 2004 (the “Balance Sheet”), (ii) the unaudited
statement of profit and loss of the Company for the period from January 1,
2004 through September 30, 2004 (the “Income Statement”) and (iii)
the unaudited statement of cash flows of the Company for the period from January 1,
2004 through September 30, 2004 (the

 

10

 

“Cash Flow Statement” and, together
with the Balance Sheet and the Income Statement, the “Financial Statements”).  The Financial Statements present fairly in
all material respects the financial condition of the Company as of September 30,
2004 and the results of operations and cash flows of the Company for the period
covered thereby, subject to normal year-end accounting adjustments and the
absence of footnote disclosure.  Except
as set forth on Schedule 4.8, the Financial Statements were prepared
in accordance with GAAP.

 

(b)           Except as set forth on
the Balance Sheet (including any notes thereto), the Company has no liabilities
or obligations other than liabilities or obligations incurred by the Company
after September 30, 2004 in the ordinary course of its business.

 

4.9           No Materially Adverse
Changes.  Since September 30,
2004, except as set forth on Schedule 4.9, (a) to the Company’s
knowledge, there has not been any Materially Adverse Change with respect to the
Company and (b) the Company has not declared or paid any dividend or authorized
or made any other distribution upon or with respect to any of the shares of
Common Stock or any other securities of the Company.

 

4.10         Litigation.  Except as set forth on Schedule 4.10,
there are no actions, suits, proceedings or orders, at law or in equity,
pending or (to the Company’s knowledge) threatened against the Company, and, to
the Company’s knowledge, there are no investigations pending or threatened
against the Company before or by any Governmental Authority.

 

4.11         Operating Consents.  Except as set forth on Schedule 4.11,
to the Company’s knowledge, the Company has all Consents, whether issued or
granted by any Governmental Authority or other Person, necessary for the
conduct of its business as currently conducted (such Consents, collectively,
the “Operating Consents”), excluding those Consents the failure of which
to have would not, and could not reasonably be anticipated to, have a
Materially Adverse Effect on the Company. 
Except as set forth on Schedule 4.11, the Company is not in
default under any of the Operating Consents, except for those defaults which
would not, and could not reasonably be anticipated to, have a Materially
Adverse Effect on the Company.

 

4.12         Certain Violations or
Defaults of Governing Documents of the Company.  The Company is not in violation or default of
any provision of its Articles of Incorporation or its Bylaws.

 

4.13         Owned Real Property.  Except as set forth on Schedule 4.13,
the Company does not own any real property.

 

4.14         Real Property Leases.  Set forth on Schedule 4.14 is a
list of all agreements pursuant to which real property is leased to the
Company.  Except as set forth on Schedule 4.14,
there exists no event of default (nor any event which with notice or lapse of
time would constitute an event of default) with respect to any such agreement
by the Company, except for those defaults which would not, and could not
reasonably be anticipated to, have a Materially Adverse Effect on the Company.  Except as set forth on Schedule 4.14,
each such agreement is in full force and effect and is enforceable against the
applicable lessor in accordance with its terms.

 

4.15         Agreements; Actions.

 

11

 

(a)           Set forth on Schedule 4.15(a)
is a list of each written agreement to which the Company is a party or is
otherwise bound as of the Initial Closing Date: 

 

(i)            constituting a Claim
Proceeds Purchase Agreement; 

 

(ii)           under which it has
created, incurred, assumed, or guaranteed (or may create, incur, assume, or
guarantee) indebtedness for borrowed money or capitalized lease obligations
involving more than $50,000 or pursuant to which a lien is or may be imposed on
any of the assets of the Company (other than in the ordinary course of business
of the Company); and 

 

(iii)
for the making of any loan or advance of funds by the Company to any Person
(other than Claim Proceeds Purchase Agreements and ordinary advances to employees
for travel expenses).

 

(b)           Prior to entering into
any Claim Proceeds Purchase Agreement with any Person whose primary place of
residence or business is located in a state (the “Applicable State”) in
which there are no Persons with which the Company had previously entered into a
Claim Proceeds Purchase Agreement, the Company (i) consulted with legal counsel
(which may or may not be licensed to practice in the Applicable State) with
respect to the validity and enforceability of Claim Proceeds Purchase
Agreements under the Applicable Law of the Applicable State and (ii) on the basis
of such legal consultations, among other factors, attempted in good faith to
make a considered business judgment with respect to the advisability of
entering into such Claim Proceeds Purchase Agreement.

 

(c)           Except as set forth on Schedule 4.15(c),
the Company has not: (i) received any written claims from any Persons asserting
that any Claim Proceeds Purchase Agreement is not valid or enforceable under
Applicable Law; or (ii) otherwise received any written notice which is in turn
validated by legal counsel of any change in Applicable Law of any state or of
any change in the interpretation or application of Applicable Law of any state
with respect to the enforceability of any Claim Proceeds Purchase Agreement in
such state (other than, in the case of each of clauses (i) and (ii), any such
written claims or changes in Applicable Law of any state or any change in the
interpretation or application of Applicable Law of any state that have not, and
could not reasonably anticipated to, have a Materially Adverse Effect on the
Company.

 

4.16         Related Party
Transactions.  Except as set
forth on Schedule 4.16, and except for employment agreements and
director indemnification agreements, (a) the Company has not entered into any
agreement, arrangement or transaction with (i) any employee, officer, director
or stockholder of the Company (each such Person, for purposes of this Section 4.16,
an “Affiliate”), (ii) any member of the immediate family of any such
Affiliate or (iii) any Person in which such Affiliate has any direct or
indirect ownership interest, and (b) none of the Affiliates owns any property
or right, tangible or intangible, which is used in the Company’s business.

 

4.17         Employee Benefit Plans.  Except as set forth in Schedule 4.17,
the Company does not have any employee benefit plan as defined in the Employee
Retirement Income Security Act of 1974, as amended.

 

12

 

4.18         Taxes.  Except as set forth on Schedule 4.18,
(a) the Company has prepared and filed all tax returns required to be filed by
it, which tax returns are true, correct and complete, (b) the Company has paid
or made provision for the payment of all taxes that are due or claimed to be
due from it by any Governmental Authority, (c) there are no liens for taxes
upon any assets, tangible or intangible, of the Company, (d) there are no
pending claims, disputes or questions related to, or claims for, taxes of the
Company and (e) the Company has not granted any extension of the period of
limitation applicable to any claim for Taxes.

 

4.19         Employment and Labor
Matters.

 

(a)           Schedule 4.19(a) sets forth a
list of all directors, officers and employees of the Company as of the Initial
Closing Date.

 

(b)           Except as set forth on Schedule 4.19(b),
(i) the Company is not bound by or subject to (and none of the assets or
properties of the Company is bound by or subject to) any contract, commitment
or arrangement with any labor union, and no labor union has requested or has
sought to represent any of the employees, representatives or agents of the
Company, and (ii) there is no strike or other labor dispute involving the
Company pending, or to the Company’s knowledge, threatened, which would have,
or could reasonably be anticipated to have, a Materially Adverse Effect on the Company,
nor to the Company’s knowledge is there any labor organization activity
involving the employees of the Company.

 

4.20         Title to Property and
Assets.  Except as set forth on Schedule 4.20,
the Company owns its property and assets free and clear of any and all
Encumbrances, except Encumbrances that have arisen in the ordinary course of
business and do not materially impair the Company’s ownership or use of such
property or assets.

 

4.21         Insurance.  Set forth on Schedule 4.21 is a
complete list and full and fair description (inclusive of the amount of
coverage and deductibles or co-insurance) of each and all of the insurance
policies maintained by, or for the benefit of, the Company.

 

4.22         Regulation U.  None of the activities or operations of the
Company are subject to any provisions of Regulation U of the Board of Governors
of the Federal Reserve System (12 CFR 221).

 

4.23         Investment Company Act.  The Company is not required to be registered
as an investment company under the Investment Company Act of 1940, as amended,
or the regulations promulgated thereunder.

 

4.24         Disclosure.  The representations and warranties made or
contained in this Agreement, and the certificates executed or delivered in
connection herewith, are accurate and do not omit any fact required to be
stated therein or necessary in order to make such representations, warranties
or certificates not misleading in light of the circumstances in which they were
made or delivered.

 

13

 

ARTICLE 5

 

EXPENSES, TAXES AND OTHER MATTERS

 

5.1           Expenses.  If the Securities Purchase shall be
consummated, the Company shall promptly reimburse the Purchaser’s out-of-pocket
expenses (including legal fees), incurred in connection with the negotiation,
documentation and execution of this Agreement and the other agreements,
documents and instruments contemplated hereby and the performance of the
transactions contemplated hereby and thereby, up to a maximum of Fifteen
Thousand Dollars ($15,000.00).  Except as
provided in the preceding sentence, each of the Purchaser and the Company shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.

 

5.2           Taxes Arising from
Securities Purchase. 
The Purchaser, on the one hand, and the Company, on the other hand,
shall equally bear the cost of all sales, transfer and other similar taxes that
result from or are occasioned by the Securities Purchase.

 

5.3           Notification of Certain
Matters.  Each Party shall give
prompt written notice to the other of any material failure of such Party, or
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by him/her/it
hereunder.  Company shall give immediate
notice to the Purchaser of (and shall promptly provide the Purchaser with
copies of all relevant material related to): (i) any claims known to the
Company from any Persons asserting that any Claim Proceeds Purchase Agreement
is not valid and enforceable under Applicable Law; or (ii) any notice or
information known to the Company concerning a change in the Applicable Law or a
change in the interpretation or application of Applicable Law that would have a
Material Adverse Effect on the Company.

 

5.4           Certain Additional
Covenants.  At any time during
which the Purchaser owns any outstanding Notes or the Warrant:

 

(a)           Prior to entering into
any Claim Proceeds Purchase Agreement with any Person whose primary place of
residence or business is located in a state in which there are no Persons with
which the Company had previously entered into a Claim Proceeds Purchase
Agreement, the Company shall (i) consult with legal counsel (which may or may
not be licensed to practice in the Applicable State) with respect to the validity
and enforceability of Claim Proceeds Purchase Agreements under the Applicable
Law of the Applicable State and (ii) on the basis of such legal consultations,
among other factors, attempt in good faith to make a considered business
judgment with respect to the advisability of entering into such Claim Proceeds
Purchase Agreement.

 

(b)           The Company shall cause
to be done all things necessary to maintain, preserve and renew its corporate
existence and all material licenses, authorizations and permits necessary to
the conduct of its business.

 

(c)           The Company shall apply
for and continue in force adequate insurance covering risks of such types and
in such amounts as are customary for corporations of similar size engaged in
similar lines of business.

 

14

 

(d)           The Company shall pay
and discharge, when due and payable, all taxes, assessments and governmental
charges imposed upon its properties or upon the income or profits therefrom (in
each case before the same becomes delinquent and before penalties accrue
thereon) unless the same is being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with GAAP,
consistently applied) have been established on its books with respect thereto.

 

(e)           The Company shall pay
and discharge, when due and payable, all interest and principal amounts payable
under the Notes and any other indebtedness of the Company (in each case before
the same becomes delinquent and before penalties accrue thereon), subject to
the terms and conditions of the Notes and such other indebtedness, unless the
same is being contested in good faith and by appropriate proceedings and
adequate reserves (as determined in accordance with GAAP, consistently applied)
have been established on its books with respect thereto.

 

5.5           Attendance at Board
Meetings, Executive Committee Meetings and Stockholder Meetings.  At any time during which the Purchaser owns
any outstanding Notes or the Warrant, the Purchaser shall have the right to
designate one of its directors, officers or other representatives to (a) attend
all meetings of the Board of Directors, the Executive Committee and the
stockholders of the Company, in each case in a nonvoting observer capacity, (b)
receive notice of such meetings and (c) receive the information provided by the
Company to the Board of Directors, the Executive Committee and the stockholders
of the Company for such meetings (as applicable).  If, at any time, the Purchaser owns neither
any outstanding Notes nor the Warrant, all of the Purchaser’s rights and
entitlements set forth in this Section 5.5 shall thereafter expire.

 

5.6           Designation of Director.  At any time during which the Purchaser owns
any outstanding Notes or the Warrant, the Purchaser shall have the right, at
its option, by providing written notice to the Chief Executive Officer of the
Company, to designate one member of the Board of Directors.  If the Purchaser exercises such right in
accordance with the previous sentence, then the Person designated by the
Purchaser shall be elected as a member of the Board of Directors in accordance
with the terms of (i) this Section 5.6 and (ii) Section 2.1 of
the Stockholder Agreement.

 

(a)           Subject to Section 5.6(c),
any director designated by the Purchaser pursuant to this Section 5.6
shall be removed from the Board of Directors, with or without cause, at the
written request of the Purchaser, and, subject to Section 78.335 of the
Nevada General Corporation Law, under no other circumstances.

 

(b)           Subject to Section 5.6(c),
if any director designated by the Purchaser pursuant to this Section 5.6
for any reason ceases to serve on the Board of Directors during his or her term
of office, the resulting vacancy on the Board of Directors shall be filled by
an individual designated by the Purchaser.

 

(c)           If, at any time, the
Purchaser owns neither any outstanding Notes nor the Warrant, the Purchaser
shall become ineligible to designate or remove an individual to or from a
directorship of the Company pursuant to this Section 5.6, and all
rights and entitlements

 

15

 

hereunder to designate or remove an
individual to or from such directorship shall thereafter expire.  Notwithstanding any of the foregoing, if, at
any time, the Purchaser owns neither any outstanding Notes nor the Warrant, and
an individual designated by the Purchaser pursuant to this Section 5.6
is then serving as a director of the Company, such individual shall hold office
as director until his or her successor is elected and qualified in accordance
with the Bylaws of the Company or until his or her earlier resignation or
removal in accordance with the Bylaws of the Company.

 

5.7           Information Rights.

 

(a)           Financial Statements.

 

(i)            Monthly Financial
Statements.  Within thirty (30)
days of the end of each month, the Company shall deliver to the Purchaser an
unaudited balance sheet, an unaudited profit and loss statement and an
unaudited statement of cash flows for and as of the end of such month, each
prepared in accordance with GAAP, except that no notes need to be attached to
such statements and year-end audit adjustments do not need to be made.

 

(ii)           Quarterly Financial
Statements.  Within sixty (60)
days of the end of each of the first three fiscal quarters, the Company shall
deliver to the Purchaser an unaudited balance sheet, an unaudited profit or
loss statement and an unaudited statement of cash flows for and as of the end
of such fiscal quarter, each prepared in accordance with GAAP, except that no
notes need to be attached to such statements and year-end audit adjustments do
not need to be made.

 

(iii)          Annual Financial
Statements.  Within ninety (90)
days of the end of each fiscal year, the Company shall deliver to the Purchaser
an audited balance sheet, an audited profit or loss statement and an audited
statement of cash flows for and as of the end of such fiscal year, each prepared
in accordance with GAAP.

 

(b)           Inspection and Copying
of Records.  Upon reasonable
written request by the Purchaser, the Purchaser shall have the right during
normal business hours to inspect and copy such Company documents (at the
expense of the Purchaser) as have been reasonably requested; provided, however,
that nothing herein shall obligate the Company to take any actions that would
unreasonably interrupt the normal course of the Company’s business.

 

(c)           Expiration of Purchaser’s
Information Rights. 
If, at any time, the Purchaser owns neither any outstanding Notes nor
the Warrant, all of the Purchaser’s rights and entitlements set forth in Sections
5.7(a) and 5.7(b) shall thereafter expire.

 

5.8           Stockholder Agreement.

 

(a)           The Purchaser covenants
that, if at any time the Purchaser exercises the Warrant, in whole or in part,
to purchase any shares of Common Stock, then the Purchaser shall, prior to or
simultaneously with such exercise, execute and deliver to the Company and each
Stockholder (as defined in the Stockholder Agreement) a counterpart of the
Stockholder 

 

16

 

Agreement, in form and substance
reasonably agreeable to the Company, pursuant to which the Purchaser agrees to
be bound by, and to comply with, all provisions of the Stockholder Agreement as
a Stockholder.

 

(b)           Each Party agrees that,
if at any time the Purchaser exercises the Warrant, in whole or in part, for
LLC Interests of the LLC (as such terms are defined in the Warrant), as
contemplated by the provisions of Section 1(b)(ii) of the Warrant, then
the LLC Interests issued to the Purchaser in connection with such exercise
shall be subject to the same rights and obligations set forth in the
Stockholder Agreement as if such LLC Interests were equivalent to that number
of shares of Common Stock that otherwise would have been issued to the
Purchaser upon such exercise of such Warrant.

 

5.9           Confidentiality.

 

(a)           Each Party agrees that,
except with the prior written permission of the other Party, it shall at all
times keep confidential, and not divulge, furnish or make accessible to anyone
(other than its counsel, accountants and other representatives with a need to
know), or use to establish or conduct any business or operations in competition
with the business of the other Party, any confidential information, knowledge
or data concerning or relating to the business or financial affairs of the
other Party to which such Party has been or shall become privy by reason of
this Agreement or discussions or negotiations relating to this Agreement or any
actions taken by a Party in compliance with the terms and conditions of this
Agreement (such confidential information, knowledge or data, whether
communicated in writing or orally, is hereinafter sometimes referred to as “Confidential
Information,” and all documents containing any such confidential
information, knowledge or data is hereinafter sometimes referred to as “Confidential
Documents”), and upon request, the Party that has received Confidential
Information from the other Party will return to the Party providing the same
all Confidential Documents (and all copies thereof) in its possession, or will
certify to such providing Party that all such Confidential Documents not
returned have been destroyed. 
Confidential Information shall not include any information, knowledge or
data that a Party can demonstrate: (i) was already in such Party’s possession
prior to negotiations related to this Agreement or the transactions
contemplated hereby; (ii) is or becomes publicly and openly known or otherwise
in the public domain through no fault of such Party; (iii) is received by such
Party in a nonconfidential manner from a third party having the right to
disclose such information or (iv) is required to be disclosed in order for the
Purchaser to comply with any federal securities or other Applicable Laws.  Notwithstanding anything else contained
herein to the contrary, the provisions of this Section 5.9 shall
survive any termination of this Agreement.

 

(b)           Notwithstanding any
other provision of this Agreement, it is understood and agreed that the remedy
of indemnity payments pursuant to Article 6 and other remedies at
law would be inadequate in the case of any breach of the covenants contained in
this Section 5.9. 
Accordingly, each Party shall be entitled, without limiting its other
remedies and without the necessity of proving actual damages or posting any
bond, to equitable relief, including the remedy of specific performance or
injunction, with respect to any breach or threatened breach of such covenants
and each Party consents to the entry thereof.

 

17

 

ARTICLE 6

 

INDEMNITIES

 

6.1           Survival of
Representations and Warranties. 
All representations and warranties made by the Purchaser or the Company
in this Agreement shall survive the Initial Closing and each Additional Closing
until such time as the Purchaser no longer owns any outstanding Notes.  For purposes of this Article 6,
all representations and warranties of the Parties set forth in this Agreement
shall be deemed to have been made by such Parties exclusively on and as of the
Initial Closing Date and (as supplemented and amended in accordance with Section 6.5(c))
on and as of each Additional Closing Date.

 

6.2           Company to Indemnify.  Subject to the limitations in this Article 6,
the Company, agrees to indemnify and hold harmless the Purchaser and its
directors, officers, employees and agents from and against all claims, losses,
liabilities and expenses, including reasonable counsel fees and expenses
(collectively referred to as “Losses”) which may be suffered or incurred
by any of them as a result of a breach of (a) any representation or warranty of
the Company contained in this Agreement or (b) any covenant of the Company
contained in this Agreement.

 

6.3           Purchaser to Indemnify.  Subject to the limitations in this Article 6,
the Purchaser hereby agrees to indemnify and hold harmless the Company and its
directors, officers, employees and agents from and against all Losses which may
be suffered or incurred by any of them as a result of a breach of (a) any
representation or warranty of the Purchaser contained in this Agreement or (b)
any covenant of the Purchaser contained in this Agreement.

 

6.4           Claims.  As promptly as is reasonably practicable
after becoming aware of a claim for indemnification under this Agreement, the
indemnified Party shall give notice to the indemnifying Party of such claim,
which notice shall specify the facts alleged to constitute the basis for such
claim, the representations, warranties, covenants and obligations alleged to
have been breached and the amount that the indemnified Party seeks hereunder
from the indemnifying Party, together with such information as may be necessary
for the indemnifying Party to determine that the limitations in Section 6.5
have been satisfied or do not apply; provided,
however, that the failure of
the indemnified Party to give such notice shall not relieve the indemnifying
Party of its obligations under this Article 6 except to the extent
(if any) that the indemnifying Party shall have been prejudiced thereby.

 

6.5           Certain Limitations.

 

(a)           Basket.  Neither the Company, considered as a Party on
one hand, nor the Purchaser, considered as a Party on the other hand, shall be
required to indemnify the other such Party (or any related indemnified Persons)
for any Losses relating to any matter subject to indemnification under this Article 6
unless, and only to the extent that, such Losses exceed, in the aggregate,
Fifty Thousand Dollars ($50,000) (the “Basket Amount”).

 

(b)           Inapplicability of
Basket.  Notwithstanding anything
else contained herein to the contrary, the Basket Amount shall not apply to any
breach of this Agreement constituting fraud, any intentional misstatement, any
breach referred to in clause (b) of Section 6.2 above, any breach
referred to in clause (b) of Section 6.3 above or any breach of any
of the Related Documents.

 

18

 

(c)           Schedules and Additional
Closings.  The Company shall, from
time to time prior to or at each Additional Closing, by notice in accordance
with the terms of this Agreement, supplement or amend any Schedule hereto
in order to correct any matters which would constitute a breach of any
representation, warranty, covenant or obligation contained herein.

 

(d)           Surrender of Notes.  If the Company is obligated to indemnify the Purchaser
for any Losses in accordance with the terms and conditions of this Article 6,
then upon the payment of such Losses by the Company to the Purchaser, the
Purchaser shall surrender to the Company a Note or Notes representing an
aggregate principal amount that is equivalent to the amount of such Losses, it
being understood that:

 

(i)            the Initial Note shall
be surrendered prior to the Second Note, the Second Note shall be surrendered
prior to the Third Note and the Third Note shall be surrendered prior to the
Fourth Note;

 

(ii)           if the amount of such
Losses is lesser than the aggregate face value 
of the surrendered Notes, then upon the surrender of any such Note, the
Company shall issue to or on the order of the Purchaser a replacement note
having an aggregate face value that is equivalent to the remaining principal
amount on such Note that has not been surrendered by the Purchaser; and

 

(iii)
the surrender of Notes pursuant to this Section 6.5(f) shall not be deemed
to constitute an optional prepayment subject to the terms of Section 5.1
of such Notes.

 

(e)           No Speculative,
Incidental, etc. Damages. 
In no event shall either Party have any liability under this Agreement
or otherwise in connection with the transactions contemplated hereby for any
special, speculative, incidental, punitive, indirect or consequential damages
or for lost profits.

 

6.6           Exclusive Remedy.  The sole and exclusive remedy at law of each
of the Parties in any cause of action based thereon against the other Party for
any inaccuracy, misrepresentation or default in, or breach of, any of the
representations, warranties, covenants or other agreements given or made by
either Party in this Agreement shall be as set forth in this Article 6
and in Section 5.9.  To the
extent either Party or any of its affiliates has any Losses (a) for which it
may assert any other right to indemnification, contribution or recovery from
the other Party (whether under this Agreement or under any common law theory or
any statute or other Applicable Law, or otherwise) and (b) that have resulted
from any inaccuracy, misrepresentation or default in, or breach of, any of the
representations, warranties, covenants or other agreements given or made by the
other Party in this Agreement, such Party hereby waives, releases and agrees
not to assert such right, and such Party agrees to cause each of its affiliates
to waive, release and agree not to assert such right, regardless of the theory
upon which any claim may be based, including contract, equity, tort, fraud,
warranty, strict liability or any other theory of liability except to the
extent such claims are based upon actual fraud.

 

19

 

6.7           Subrogation.  Upon making any payment to an indemnified
Party in respect of any Loss, the indemnifying Party will, to the extent of
such payment, be subrogated to all rights of the indemnified Party against any
third party in respect of the Losses to which such payment relates.  Such indemnified Party and indemnifying Party
will execute upon request all instruments reasonably necessary to evidence or
further perfect such subrogation rights.

 

6.8           Insurance.  To the extent the amount of any Losses has
been reduced as a consequence of any insurance proceeds actually received,
either Party’s entitlement to recover such Losses hereunder shall be reduced
accordingly.

 

ARTICLE 7

 

GENERAL PROVISIONS

 

7.1           Public Statements.

 

(a)           The Purchaser may be
required to make, and on occasion not to make, disclosures under the federal
securities laws and other Applicable Laws. 
Accordingly, the Company shall not make any public announcement or
statement that mentions by name or otherwise identifies the Purchaser with
respect to the Securities Purchase, this Agreement, any related transaction or
any other subject without the approval of the Purchaser.  The Company agrees to cooperate with the
Purchaser and its legal counsel in preparing any public announcement or
statement that, in the sole discretion of the Purchaser or its counsel, is
required to be made under Applicable Law.

 

(b)           Neither the Purchaser
nor any of its affiliates shall make any public announcement or statement that
mentions by name or otherwise identifies the Company with respect to the
Securities Purchase, this Agreement, any related transaction or any other
subject without the approval of the Company, which approval shall not be
unreasonably withheld; provided, however, that the Purchaser shall be
entitled to make any public announcement, statement or disclosure that, in the
sole opinion of the Purchaser or its legal counsel, is required under any
federal securities laws or other Applicable Laws.

 

7.2           Notices.  All notices and other communications required
or provided for hereunder shall be in writing and shall be sufficiently given
if made by hand delivery, by telecopier, by recognized overnight courier
service or by registered or certified mail (postage prepaid and return receipt
requested) to the intended Party at the following applicable address (or at
such other address for a Party as shall be specified by it by like notice given
by such Party to the other Party):

 

20

 

	
  If to the Purchaser:

  	
  Winmark Corporation

  4200 Dahlberg Drive

  Suite 100

  Minneapolis, Minnesota 55422-4837

  Facsimile: (763) 520-8410

  
	
   

  	
   

  
	
  With a copy to:

  	
  Lindquist & Vennum P.L.L.P.

  4200 IDS Center, 80 South 8th Street

  Minneapolis, Minnesota 55402-2205

  Attn: Jonathan R. Flora, Esq.

  Facsimile: (612) 371-3207

  
	
   

  	
   

  
	
  If to the Company:

  	
  BridgeFunds Limited

  13911 Ridgedale Drive

  Suite 110

  Minnetonka, MN 55305

  Facsimile: (952) 417-0039

  
	
   

  	
   

  
	
  With a copy to:

  	
  Mayer, Brown, Rowe & Maw LLP

  190 South LaSalle Street

  Chicago, IL 60603

  Attn: James J. Junewicz, Esq.

  Facsimile: (312) 706-8157

  

 

All such notices and other communications
shall be deemed to have been received: when delivered by hand, if personally
delivered; three (3) Business Days after being deposited in the mail, postage
prepaid, if delivered by mail; the next Business Day, if sent by recognized
overnight courier service; and when receipt acknowledged, if telecopied; provided, however,
notice to a Party’s attorney shall not constitute notice to such Party.

 

7.3           Interpretation.  The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement or any provision hereof.  References in this Agreement to Sections and
Articles (or any other subdivision) refer, unless otherwise stated, to sections
and articles (or any other subdivision) of this Agreement.  When used in this Agreement, words such as “herein,”
“hereinafter,” “hereof,” “hereto,” “hereby” and “hereunder,” and words of like
import, unless the context requires otherwise, refer to this Agreement as a
whole, and not to any particular Section, Article or other subdivision
hereof.  As used in this Agreement, the
masculine, feminine and neuter genders shall be deemed to include the others if
the context requires, and if the context requires, the use of the singular
shall include the plural and vice versa.  This Agreement is the product of mutual
negotiations by the Parties and their counsels; and no Party shall be deemed
the draftsperson of this Agreement or any provision hereof or to have provided
same.  Accordingly, in the event of any
inconsistency or ambiguity of any provision of this Agreement, such
inconsistency or ambiguity shall not be interpreted against either Party.

 

21

 

7.4           Severability.  The provisions of this Agreement shall be
deemed severable, and the invalidity or unenforceability of any term or
provision hereof or thereof shall not affect the validity or enforceability of
this Agreement or any of the other terms or provisions hereof.  In the event any term or provision hereof
shall be determined to be invalid or unenforceable as applied to any situation
or circumstance or in any jurisdiction, such invalidity or unenforceability
shall not apply or extend to any other situation or circumstance or in any
other jurisdiction or affect the validity or enforceability of any other term
or provision.  It is the Parties’ intent
that this Agreement and each term and provision hereof be enforceable in
accordance with its terms and to the fullest extent permitted by Applicable
Law.  Accordingly, to the extent any term
or provision of this Agreement shall be determined or deemed to be invalid or
unenforceable, such provision shall be deemed amended or modified to the
minimum extent necessary to make such provision, as so amended or modified,
valid and enforceable.

 

7.5           Integration.  This Agreement is  intended by the Parties as a final expression
of their agreement, and is intended to be a complete and exclusive statement of
the agreement and understanding of the Parties, in respect of the subject
matter contained herein, constitutes the entire agreement of the Parties with
respect to the subject matter hereof and supersedes, and merges herein, all
prior and contemporaneous negotiations, discussions, representations,
understandings and agreements among the Parties, whether oral or written, with respect
to such subject matter.

 

7.6           Assignment and Lack of
Third Party Beneficiaries. 
This Agreement and the rights, duties and obligations hereunder may not
be assigned or delegated by either Party without the prior written consent of
the other Party; provided, however, that the Purchaser may assign its rights
under this Agreement to any wholly owned subsidiary of the Purchaser without
the Company’s prior written consent.  Any
purported assignment or delegation of rights, duties or obligations hereunder
made without the prior written consent of the other Party shall be null and
void and of no force or effect.  This
Agreement and the provisions hereof shall be binding upon and enforceable against
each of the Parties and its successors and assigns and shall inure to the
benefit of and be enforceable by each of the Parties and its successors and
permitted assigns.  Except as expressly
provided for in this Agreement, this Agreement is not intended to confer any
rights or benefits on any Persons other than the Parties and their respective
successors and permitted assigns.

 

7.7           Amendment and Waiver. This Agreement
may be amended, modified or supplemented only to the extent expressly set forth
in a writing that is signed by the Party to be charged therewith and that sets
forth therein that its purpose is to amend, modify or supplement this Agreement
or some term, condition or provision hereof. 
No waiver of any term, condition or provision of this Agreement or of
any breach or violation of this Agreement or any provision hereof shall be
effective except to the extent expressly set forth in a writing that is signed
by the Party to be charged therewith. 
Without limiting the generality of the foregoing, no failure to object
or otherwise act, and no conduct (including, without limitation, any failure or
delay in enforcing this Agreement or any provision hereof or any acceptance or
retention of payment) or course of conduct or dealing, by either Party shall be
deemed (a) to constitute a waiver by such Party of the breach or violation of
this Agreement or of any provision hereof by the other Party or (b) to have
caused or reflected any amendment or other modification of this Agreement or of

 

22

 

any term or provision hereof.  Any waiver may be made in advance or after
the right waived has arisen or the breach or default waived has occurred, and
any waiver may be conditional.  No waiver
of any breach or violation of any agreement or provision herein contained shall
be deemed a waiver of any preceding or succeeding breach or violation thereof
nor of any other agreement or provision herein contained.  No waiver or extension of time for
performance of any obligation or act shall be deemed a waiver or extension of
the time for performance of any other obligation or act.

 

7.8           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.

 

7.9           Governing Law; Waiver of
Jury Trial; Consent to Jurisdiction. 
Each of the parties expressly waives its right to a jury trial with
respect to any suit, litigation or other judicial proceeding regarding this
Agreement or any dispute hereunder or relating hereto.  This Agreement shall be governed by,
interpreted under and construed in accordance with the internal laws of the
State of Nevada applicable to contracts executed and to be performed wholly
within that State without giving effect to the choice or conflict of laws
principles or provisions thereof.  Each
of the Parties agrees that any dispute under or with respect to this Agreement
shall be determined before the state or federal courts situated in Minneapolis,
Minnesota, which courts shall have exclusive jurisdiction over and with respect
to any such dispute, and each of the Parties hereby irrevocably submits to the
jurisdiction of such courts.  Each Party
hereby agrees not to raise any defense or objection, under the theory of forum non conveniens or otherwise, with
respect to the jurisdiction of any such court. 
In addition to such other method as may be available under Applicable
Law, each Party agrees that any summons, complaint or other papers or process in
connection with any such dispute may be served on it in the same manner in
which a Notice may be given to it pursuant to Section 7.2 above.

 

[SIGNATURE PAGE FOLLOWS]

 

23

 

IN WITNESS WHEREOF, each of the Parties has caused this Securities
Purchase Agreement to be executed on the date first written above by its
respective officer or other representative thereunder duly authorized.

 

 

	
   

  	
  WINMARK CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Mark Hooley

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mark Hooley

  
	
   

  	
   

  	
  Title:

  	
  Vice President and General
  Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BRIDGEFUNDS LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  A. Mark
  Berlin, Jr.

  	
   

  
	
   

  	
   

  	
  Name:

  	
  A. Mark Berlin, Jr.

  
	
   

  	
   

  	
  Title:

  	
  President and Chief
  Executive Officer

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