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Exhibit 10.10  

 
 

LEAD MARKETING AGREEMENT    
    

        THIS LEAD MARKETING AGREEMENT ("Agreement") is made and entered into this 1st day of August, 2005
("Effective Date"), between EduTrades, Inc., a corporation duly organized and incorporated in the State of Nevada ("EduTrades"), and Whitney Education Group, Inc., to include its parent,
subsidiaries, affiliates, successors and assigns ("Whitney"), a corporation duly organized and incorporated in the State of Florida. 

WITNESSETH:  

        WHEREAS, EduTrades is in the business of developing, producing and marketing post secondary educational curriculum on securities and financial investment and
asset protection; 

        WHEREAS,
Whitney has entered into an Administrative Services Agreement with EduTrades to manage and maintain EduTrades' customer leads database ("Database"); 

        WHEREAS,
EduTrades is interested in soliciting Whitney's services with respect to marketing efforts to be conducted and targeted at the Database, and EduTrades desires to enter into a
binding agreement with Whitney, in accordance with the terms and conditions set forth below. 

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

TERMS AND CONDITIONS

ARTICLE 1: SERVICES TO BE PERFORMED BY WHITNEY  

        1.01 In
conjunction with the management and maintenance of the Database addressed in the Administrative Services Agreement entered into by and between EduTrades and Whitney
concurrently with this Agreement ("Administrative Services Agreement"), Whitney shall serve EduTrades by conducting database marketing, through various efforts, to be determined by Whitney, including
but not limited to telemarketing calls, email campaigns, and direct marketing, for the purpose of selling products and services provided, offered or sold by or through EduTrades and Whitney. 

        1.02 Whitney
shall process all orders for products and services related to real estate and fulfilled by or through Whitney ("Whitney Products") through Whitney's merchant
accounts. Whitney shall process all orders for products and services related to stock market and securities and fulfilled by or through EduTrades ("EduTrades Products") through merchant account
specifically designated for EduTrades transactions. Whitney shall not process any other sales through the EduTrades designated merchant account(s) other than those which are fulfilled by or through
EduTrades. 

        1.03 Whitney
will conduct regularly scheduled monitoring sessions of its representatives' telemarketing calls to ensure that all calls that are placed are within the
guidelines of United States Federal and State laws, and will provide quality control feedback as a result of these monitoring sessions. Contractor shall assume complete and total liability for all of
its telemarketing calls, promotions and projects. 

        1.04 Whitney
agrees to prepare and maintain full, accurate and complete records of each Database marketing project. Whitney agrees to provide EduTrades with reporting of
results in a format and frequency which has been mutually agreed upon by Whitney and EduTrades. 

        1.05 Whitney
shall provide the services under this Agreement in a professional, courteous manner, consistent with industry standards. Whitney shall comply with all
applicable association, local, state, and federal laws, ordinances, rules, regulations and codes, including but not limited to, the Telephone Consumer Protection Act of 1991, The Telemarketing Sales
Rule, and the Ethical Guidelines for Telemarketers as published by the Direct Marketing Association. Whitney shall keep all Confidential Information and information generated as a result of this
Agreement confidential and shall make all 

 

reasonable
efforts to keep such information away from competing companies. Whitney shall provide to EduTrades, in a mutually agreed upon frequency and format listed in Exhibit "A," the name of any
party who notifies Whitney that such party does not wish to be solicited by EduTrades. 

        1.06 Whitney
shall notify EduTrades promptly of any existing or possible litigation, which may be brought against Whitney regarding the services provided to EduTrades or to
any other customer or client of Whitney. 

        1.07 Whitney
shall use the customer database owned by EduTrades and maintained by Whitney, which Whitney agrees to keep confidential as set forth in ARTICLE 6: CONFIDENTIAL
INFORMATION. 

        1.08 Whitney
shall be solely responsible for and shall hold EduTrades harmless for any and all costs of its doing business including without limitation, all employees
Whitney chooses to hire, all taxes, income tax, FICA, workman's compensation, rent, utilities, withholding, postage, telephone, photocopying, salaries, travel, and all other direct and indirect
overhead costs. Whitney agrees to follow all wage and salary requirements as set forth by local, state and federal law. 

        1.09 In
the event that Whitney should subcontract to a third party any of the services contemplated by this Agreement, Whitney shall require such third party to comply with
all of the standards set forth in this Agreement. 

ARTICLE 2: SERVICES TO BE PERFORMED BY EDUTRADES  

        2.01 EduTrades
shall, as set forth in the Administrative Services Agreement, permit Whitney to manage and maintain the Database. EduTrades shall further permit Whitney to
market to such leads contained in the Database in any manner or method, at the sole discretion of Whitney, as set forth in the instant Agreement. EduTrades shall retain all ownership rights to the
Database, whether or not such leads contained therein are generated by Whitney under this Agreement. All customer leads generated from the sale or offer for sale of EduTrades Products shall be
considered as part of the Database and are EduTrades' Confidential Information. Whitney shall not use the Database for any other purpose other than as set forth in this Agreement. 

        2.02 EduTrades
shall provide Whitney with such promotional, sales and technical information, literature and brochures, catalog sheets, price lists, order forms, sales aids,
and other information (collectively, "Creative Elements"), which shall be used by Whitney to assist in marketing the EduTrades Products. All other Creative Elements intended to be used by Whitney must
be approved by EduTrades in writing. Whitney's use of unauthorized material constitutes breach of this Agreement and immediate grounds for termination at the discretion of EduTrades. 

        2.03 EduTrades
shall inform Whitney of any new, related, modified or changed information concerning the EduTrades Products. 

        2.04 EduTrades
shall retain control and complete ownership of the Database. Whitney shall not market to the Database in any manner other than those set forth in this
Agreement, unless EduTrades consents in writing. 

ARTICLE 3: COMPENSATION  

        3.01 As
compensation for the marketing services performed by Whitney under this Agreement, Whitney shall be compensated as set forth in the Administrative Services
Agreement. 

        3.02 All
refund requests received with respect to the sale of EduTrades Products, as transacted by Whitney under this Agreement, shall be processed by EduTrades. All refund
requests received with respect to the sale of Whitney Products, as transacted by Whitney under this Agreement, shall be processed by Whitney. 

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ARTICLE 4: TERM AND TERMINATION  

        4.01 Term.
The date of commencement of this Agreement shall be on the Effective Date first set forth above and shall continue for one (1) year, to be automatically
renewed for one (1) year terms, subject to review and renegotiation of this Agreement by the parties. 

        4.02 Right
to Terminate on Notice. EduTrades and Whitney each shall have the right, exercisable in its absolute discretion, to terminate this Agreement upon thirty
(30) days prior written notice received by United States registered mail, certified mail, UPS Next Day Letter or Federal Express Next Day Letter by the other party. 

        4.04 Termination
of Rights. On the termination of this Agreement, all obligations of the parties hereunder shall terminate, except for rights to payments accrued prior to
such termination and the provisions applicable after termination. 

        4.05 Post-termination
Actions. Upon expiration or termination of this Agreement, Whitney shall cease selling all EduTrades Products, immediately cease and desist
from using or displaying any forms of advertising indicative of EduTrades and/or EduTrades Products, and cease utilizing the Database and/or proprietary information. Contractor shall also comply with
all provisions set forth in Article 6.03. 

ARTICLE 5: INDEMNIFICATION  

        5.01 Each
party shall release, defend, indemnify, and hold the other party and its parent, affiliates, subsidiaries, officers, directors, agents, owners, employees,
trustees, successors and assigns harmless with respect to any claims, actions, causes of action, damages, fines, expenses, court costs, attorney fees, liability damage or judgment suffered by either
party or his agents, resulting from or attributable to any breach of the other party's or his agent's responsibilities, representations and warranties herein, and/or arising from the purchase or use
of the party's products or services sold by the other party, and/or all negligent acts or omissions of a party or his agents contained herein. 

        5.02 These
indemnification obligations shall survive termination of this Agreement. 

ARTICLE 6: CONFIDENTIAL INFORMATION  

        6.01 Whitney
recognizes that it may be necessary for Whitney to receive Confidential or Proprietary Information with regard to this Agreement. This Confidential and
Proprietary Information has been compiled by EduTrades at great expense and over a great amount of time. The Confidential and Proprietary Information is the sole and exclusive property of EduTrades.
In performing the services under this Agreement, Whitney may be provided or may otherwise come into the possession of proprietary information, customer databases, customer leads, customer information,
product and service information, and other confidential information regarding the business and services of EduTrades (hereinafter, the "Confidential Information") all of which are valuable to
EduTrades or are required by law or good business practices to be held confidential. Whitney agrees to receive, hold and treat all Confidential Information received from EduTrades as confidential and
secret and agrees to use its best efforts to protect the confidentiality and secrecy of such Confidential Information. Whitney agrees to only divulge Confidential Information to its employees who are
required to have such knowledge in connection with the performance of their obligations under this Agreement, and Whitney shall not disclose, directly or indirectly, any Confidential Information
whatsoever, including without limitation, for its own benefit or any third party's benefit. Confidential Information does not include information which (i) was or becomes generally available to
the public, (ii) was or becomes available on a non-confidential basis, provided that the source of such information was not bound by a confidentiality agreement in respect thereof,
(iii) was within Whitney's possession prior to being furnished by or on behalf of EduTrades, provided that the source of such information was not bound by a confidentiality 

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agreement
in respect thereof, or (iv) the information is a duplication of materials that Whitney already possesses. 

        6.02 The
provisions of Section 6.01 shall also apply to EduTrades in regards to any confidential information regarding the business and services of Whitney in all
aspects as set forth in Section 6.01. 

        6.03 Upon
termination of this Agreement, each party shall destroy all copies of Confidential Information, return all original documents and publicity materials, discontinue
all use of computer links, erase all of the other party's Intellectual Property contained in the party's computer memory or data storage, and destroy all Confidential Information stored on computer,
disk, CD-Rom or computer backup within five (5) days after this Agreement terminates. Each party shall provide a certified document within five (5) days stating that: "All
Confidential Information of the disclosing party in the receiving party's possession has either been destroyed, erased, or returned." 

        6.04 The
terms and conditions of this Agreement shall be considered Confidential Information and shall not be revealed to another party until five (5) years on or
after the date of termination. Additionally, each party agrees that it will not disclose any Confidential Information to any third party and will not use Confidential Information of the other party
for any purpose other than for the performance of the rights and obligations hereunder during the terms of this Agreement and for a period of five (5) years thereafter, without prior written
consent of the disclosing party. Each party further agrees that Confidential Information shall remain the sole property of the other party and that it will take all reasonable precautions to prevent
any unauthorized disclosure of Confidential Information by its employees. 

ARTICLE 7: INDEPENDENT CONTRACTOR RELATIONSHIP; NO COMPETITION  

        The parties acknowledge and agree that in performance of the services under this Agreement, Whitney is acting as an independent contractor, and all Whitney's
employees, personnel and agents are not entitled to any EduTrades benefits, including but not limited to workers compensation. Nothing in this Agreement shall be construed or deemed to create any
joint venture, partnership, agency, employer-employee or other relationship between the parties. All personnel supplied by Whitney under this Agreement are not EduTrades' personnel or agents, and
Whitney assumes full responsibility for their acts. Whitney is not an agent of EduTrades and shall not enter into any agreements on behalf of EduTrades or bind EduTrades in any way. The rights and
obligations of the parties shall be limited to those expressly set forth herein. 

        Whitney
agrees that it will not compete with EduTrades in the stock training business and EduTrades agrees that it will not compete with Whitney in the real estate training business
during the life of this Agreement. 

ARTICLE 8: PROPRIETARY INFORMATION  

        EduTrades shall have sole and exclusive ownership of all right, title and interest in and to EduTrades' Proprietary Information and Materials, including ownership
of all copyrights, trademarks, service marks, patents, and trade secrets pertaining thereto (collectively, the "Proprietary Information"). Whitney may use EduTrades' Confidential and Proprietary
Information and Materials subject only to the rights and privileges expressly granted by EduTrades. 

        EduTrades
claims and reserves all rights and benefits afforded under federal and international copyright law in all software programs and documentation included in the Materials and
copyrighted works. The binary or object doc version of such software programs may under no circumstances be reverse-engineered or reverse-compiled without Company's further written consent. 

        The
Confidential and Proprietary Information is considered to include valuable trade secrets of EduTrades. Whitney acknowledges that, in the event of any breach of this Agreement,
EduTrades will 

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not
have an adequate remedy in money or damages. EduTrades therefore shall be entitled in such event to obtain an injunction against such breach from any court of competent jurisdiction immediately
upon request. EduTrades' right to obtain such relief shall not limit its rights to obtain other remedies. 

ARTICLE 9: GENERAL PROVISIONS  

        9.01 Entire
Agreement. This Agreement supersedes any and all other agreements, either oral or in writing between the parties hereto with respect to the terms and conditions
of this Agreement, and contains all of the covenants and agreements between the parties with respect to same. Each party to this Agreement acknowledges that no representation, inducements, promises,
or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement, or promise not
contained in this Agreement shall be valid or binding on either party, except that any other written agreement dated concurrent with or after this Agreement shall be valid as between the signing
parties thereto. 

        9.02 No
Waiver. The failure of either party to insist on strict compliance with any of the terms, covenants or conditions of this Agreement by the other party shall not be
deemed a waiver of that term, covenant or condition, nor shall any waiver or relinquishment of any right or power at any one time or times be deemed a waiver or relinquishment of that right or power
for all or any other times under this Agreement. 

        9.03 Severability.
If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall
nevertheless continue in full force without being impaired or invalidated in any way. 

        9.04 Notice.
Each notice, request or demand given or required to be given pursuant to this Agreement shall be in writing and shall be deemed sufficiently given if deposited
in the United States mail, First Class, postage pre-paid, and addressed to the address of the intended recipient set forth below, or to such other address as may be specified in this
Agreement or in writing by the parties: 

	If to Whitney:	 	Name:	 	Ronald S. Simon
	 	 	Address:	 	1612 E. Cape Coral Pkwy, Suite B

Cape Coral, FL 33904
	 	 	Telephone:	 	(239) 542-0643
	 	 	Facsimile:	 	(239) 540-6565
	 	 	Copy to:	 	Marie B. Code, Esq.

1612 E. Cape Coral Pkwy, Suite A

Cape Coral, FL 33904
	

If to EduTrades:	
 	

Name:	
 	

 
	 	 	Address:	 	 
	 	 	City, State, Zip:	 	 
	 	 	Telephone:	 	 
	 	 	Facsimile:	 	 

        9.05 Governing
Law and Attorney Fees. This Agreement shall be deemed to have been made in the State of Florida. This Agreement and all matters arising out of or otherwise
relating to this Agreement shall be governed by the laws of the State of Florida. The parties hereby submit to the personal jurisdiction of the state and federal courts of the State of Florida.
Exclusive venue for any litigation and all claims arising from or in connection with the subject matter of this Agreement shall be with the state and federal courts in and for Lee, Palm Beach or
Broward Counties, Florida, which shall be decided by Whitney, and the parties hereby expressly waive any venue privileges which may be asserted in connection with this Agreement. In any arbitration
and/or litigation arising out of this 

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Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and costs, including attorneys' fees incurred on appeal. 

        9.06 Authority
to Enter Agreement. The parties warrant that they have the authority to enter into this Agreement and that entering into this Agreement is not restricted or
prohibited by any existing agreement to which they are parties. Additionally, the parties represent and warrant that this Agreement has been authorized and approved by all necessary corporate actions.
Both parties warrant and represent that all individuals executing this Agreement have the authority to do so. Any misrepresentations will bind the fraudulent party/signatory individually. 

        9.07 Right
to Audit. EduTrades shall have the right to audit Whitney's business records concerning services to be rendered under this Agreement, and any other matters
related to EduTrades' students, upon five (5) days prior written notice to Whitney. EduTrades shall have the right to receive photocopies of Whitney's business records concerning services
rendered under this Agreement, and any other matters related to EduTrades' students, upon five (5) days prior written notice provided to Whitney. Failure to abide by the terms of this provision
may result in the termination of this Agreement. 

        9.08 Assignment.
The rights and liabilities of this Agreement shall be binding on and inure to the benefit of the respective parties and their respective heirs, legal
representatives, successors and assigns. 

        9.09 Headings.
All section and subsection headings contained in this Agreement are for convenience only and shall not be deemed to constitute a part of this Agreement nor
affect the meaning of same. 

        9.10 No
Drafter. Both parties warrant and represent that each have had equal input in drafting this Agreement and have had the opportunity to consult with independent legal
counsel. 

        9.11 Assignment.
The parties shall not sell, transfer, assign, sublicense, or subcontract any right or obligation hereunder without the prior written consent of the other
party. 

        9.12 Force
Majeure. Either party shall not be responsible for any failure to perform due to unforeseen circumstances or to causes beyond its reasonable control, including
but not limited to, acts of God, war, riot, embargoes, civil or military acts, terrorism, fire, flood, earthquakes, hurricanes, tropical storms, tornadoes, other natural disasters, strikes,
transportation shortages, fuel shortages, energy shortages, labor shortages, material shortages, telecommunications failures, hacking, SPAM, computer failure, server failure, or software failure for
so long as such event continues to delay the party's performance. If any force majeure event occurs, the party shall give prompt written notice to the
other party and will use commercially reasonable efforts to minimize the impact of the event. 

        9.13 Survival.
The parties' rights and obligations under Articles 5, 6, 7, and 8 shall survive any expiration or earlier termination of this Agreement. 

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        IN
WITNESS THEREOF, the parties hereto, intending to be legally bound hereby, have caused this Agreement to be executed by their respective duly authorized representatives as of the day
indicated. 

	WHITNEY	 	EDUTRADES
	
 Whitney Education Group, Inc.	
 	

EduTrades, Inc.
	

/s/  RONALD S. SIMON      
 Ronald S. Simon, Secretary	
 	

/s/  NICOLAS MATURO      
 Nicolas Maturo, CEO
	

 Date	
 	

 Date
	

 Reviewed by Legal	
 	

 

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LEAD MARKETING AGREEMENTEXHIBIT 10.1

    Exhibit
      10.1

     

    PURCHASE
      AGREEMENT

    

    

    THIS
      PURCHASE AGREEMENT
      (the
“Agreement”)
      is
      entered into as of the 15th day of September, 2005, by and among Equitex,
      Inc.,
      a
      Delaware corporation; Pandora
      Select Partners, L.P.,
      a
      British Virgin Islands limited partnership (“Pandora”)
      and
Whitebox
      Hedged High Yield Partners, L.P.,
      a
      British Virgin Islands limited partnership (“WHHY”).
      Pandora and WHHY are individually referred to herein as a “Purchaser”
      and
      together as the “Purchasers.”

    

    R
      E C I T A L S
      :

    

    WHEREAS,
      in
      consideration of a $900,000.00 loan by Pandora and a $600,000.00 loan by WHHY
      (representing $1,500,000 in the aggregate), the Company proposes to issue to
      Pandora and WHHY, respectively, and each such Purchaser desires to severally
      (and not jointly) purchase, a corresponding secured convertible promissory
      note
      in the form attached as Exhibit A (each, a “Note”
      and
      together, the “Notes”)
      and a
      warrant in the form attached as Exhibit B (each, a “Warrant”
      and
      together, the “Warrants”)
      to
      purchase (subject to certain adjustments) shares of the Company’s common stock,
      $0.01 par value (the “Common
      Stock”).

    

    NOW,
      THEREFORE,
      in
      consideration of the foregoing recitals and the mutual promises hereinafter
      set
      forth, the parties hereto agree as follows:

    

    SECTION
      1. AGREEMENT
      TO SELL AND PURCHASE

    

    1.1. Authorization
      of Transactions.
      On or
      prior to the closing of the transactions contemplated in this Agreement (the
      “Closing”),
      the
      Company shall have authorized the sale and issuance to the Purchasers of the
      Notes, Warrants and the shares of Common Stock issuable upon conversion of
      the
      Notes, payment on the Notes and exercise of the Warrants (collectively, the
      “Shares”),
      in
      accordance with and subject to the terms of the Notes and Warrants, as
      applicable.

    

    1.2.  Sale
      and Purchase.
      Subject
      to the terms and conditions hereof, at the Closing, the Company hereby agrees
      to
      issue and sell to each Purchaser, and each Purchaser severally (and not jointly)
      agrees to purchase from the Company, such Purchaser’s respective Note and
      Warrant for an aggregate purchase price from all Purchasers of
      $1,500,000.

    

    SECTION
      2. CLOSINGS,
      DELIVERIES AND PAYMENTS

    

    2.1.  Closing.
      The
      Closing shall take place at 10:00 a.m. on the date hereof at the offices of
      the
      Purchasers’ legal counsel, Messerli & Kramer P.A., in Minneapolis,
      Minnesota, or at such other time or place as the Company and the Purchasers
      may
      mutually agree (the “Closing
      Date”).
      At the
      Closing, subject to the terms and conditions hereof, the Company will issue,
      sell and deliver to each Purchaser its respective Note and Warrant, against
      payment by each Purchaser of its allocable portion of the $1,500,000 aggregate
      purchase price by certified check or wire transfer of immediately available
      funds. At the Closing, the Company shall also execute and deliver to the
      Purchasers the Registration Rights Agreement in the form attached as
Exhibit
      C
      (the
“Registration
      Rights Agreement”),
      the
      Amended Security Agreement in the form attached as Exhibit
      D
      (the
“Security
      Agreement”)
      and the
      Stock Pledge Agreement in the form attached as Exhibit
      E
      (the
“Stock
      Pledge Agreement”).
      At the
      Closing, the Company shall also cause Henry Fong to execute and deliver to
      the
      Purchasers a Guaranty in the form attached as Exhibit
      F
      (the
“Guaranty”).

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SECTION
      3. REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

    

    The
      Company hereby makes the following representations and warranties to each of
      the
      Purchasers as of the Closing Date.

    

    3.1. Organization,
      Good Standing and Qualification.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware. The Company’s only subsidiaries are (i)
      FastFunds Financial Corporation, a Nevada corporation and its operating
      subsidiary, Chex Services, Inc., a Minnesota corporation, and Denairs
      Corporation, a Delaware corporation; and (ii) Nova Financial Systems, Inc.,
      a
      Florida corporation (each, a “Subsidiary”
and
      together, the “Subsidiaries”).
      The
      Company has all requisite corporate power and authority to own and operate
      its
      properties and assets, to execute and deliver this Agreement, the Notes, the
      Warrants, the Registration Rights Agreement, the Security Agreement and the
      Stock Pledge Agreement (together, the “Transaction
      Documents”),
      to
      pledge certain of the Company’s assets as described in the Security Agreement
      and the Stock Pledge Agreement as security for the Notes (the “Collateral”),
      to
      issue and sell the Shares upon conversion of the Notes, upon payment on the
      Notes and upon exercise of the Warrants, to carry out the provisions of the
      Transaction Documents, and to carry on its business as presently conducted
      and
      as presently proposed to be conducted. Each Subsidiary is duly organized,
      validly existing and in good standing under the laws of its jurisdiction of
      incorporation or organization and has the power and authority to own or lease
      its properties and to conduct its business as now conducted. The Company and
      each of its Subsidiaries is duly qualified to do business and is in good
      standing in each jurisdiction 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 be so qualified would not have
      a
material
      adverse effect on the Company, or its business or properties, taken as a
      whole.

    

    3.2. Capitalization.
      The
      authorized capital stock of the Company consists of 2,000,000 shares of
      Preferred Stock, par value $0.01 per share, of which, as of the Closing Date,
      3,055 shares of Series K are issued and outstanding; and 50,000,000 shares
      of
      Common Stock, par value $0.01 per share, of which 7,230,443 shares are issued
      and 7,220,704 are outstanding. As of the Closing Date, and except as disclosed
      on Schedule 3.2 or in the Company's quarterly annual and current reports or
      other filings (the foregoing reports and filings being collectively referred
      to
      herein as the “SEC
      Reports”)
      filed
      with the Securities and Exchange Commission (the “Commission”),
      the
      Company has no outstanding options, warrants or other rights to acquire any
      capital stock, or securities convertible or exchangeable for capital stock
      or
      for securities themselves convertible or exchangeable for capital stock
      (together, “Convertible
      Securities”).
      As of
      the Closing Date, and except as disclosed on Schedule 3.2 or in the SEC Reports,
      the Company has no agreement or commitment to sell or issue any shares of
      capital stock or Convertible Securities. All issued and outstanding shares
      of
      the Company’s capital stock (i) have been duly authorized and validly issued,
      (ii) are fully paid and nonassessable, (iii) are free from any preemptive and
      cumulative voting rights and (iv) were issued pursuant to valid exemptions
      under
      federal and state securities laws. As of the Closing Date, and except as
      disclosed on Schedule 3.2 or in the SEC Reports, there are no outstanding rights
      of first refusal or proxy or shareholder agreements of any kind relating to
      any
      of the Company’s securities to which the Company or any of its executive
      officers and directors is a party or as to which the Company otherwise has
      knowledge of. When issued in compliance with the provisions of the Notes and
      the
      Warrants (and upon payment as provided by the Warrants), the Shares will be
      validly issued, fully paid and nonassessable, and will be free of any liens
      or
      encumbrances; provided,
      however,
      that the
      Shares may be subject to restrictions on transfer under applicable state and
      federal securities laws.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.3. Authorization;
      Binding Obligations. All
      corporate action on the part of the Company, its officers, directors and
      shareholders necessary for the authorization of the Transaction Documents,
      the
      performance of all obligations of the Company hereunder and thereunder at the
      Closing, including the pledge of the Collateral as security for the Notes,
      and
      the authorization, sale, issuance and delivery of the Shares upon conversion
      of
      the Notes, upon payment on the Notes and upon exercise of the Warrants in
      accordance with and subject to the terms of the Notes and Warrants, as
      applicable, has been taken or will be taken prior to the Closing. The
      Transaction Documents, when executed and delivered, will be valid and binding
      obligations of the Company enforceable in accordance with their terms, except
      (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
      or other laws of general application affecting enforcement of creditors’ rights
      generally, (ii) as limited by laws relating to the availability of specific
      performance, injunctive relief or other equitable remedies and (iii) to the
      extent that the enforceability of the indemnification provisions of the
      Registration Rights Agreement may be limited by applicable laws. The sale of
      the
      Shares upon exercise of the Warrants or upon conversion of the Notes or upon
      payment on the Notes is not and will not be subject to any preemptive rights
      or
      rights of first refusal.

     

    3.4. Financial
      Statements.
      The
      Company's audited consolidated balance sheet at December 31, 2004, and the
      audited consolidated statements of operations, cash flows and stockholders’
deficit of the Company for the years ended, December 31, 2004 and 2003, and
      the
      Company's unaudited consolidated balance sheet at June 30, 2005, and the
      unaudited consolidated statements of operations and cash flows of the Company
      for the six months ended June 30, 2005 and 2004 (all of the foregoing together,
      the “Financial
      Statements”),
      as
      filed with the Commission, fairly present in all material respects the
      consolidated financial condition, operating results and cash flow of the Company
      as of the respective dates and for the respective periods covered thereby.
      The
      Financial Statements, as filed with the Commission, have been prepared in
      accordance with generally accepted accounting principles in the United States
      ("GAAP")
      applied
      on a consistent basis (except as may be indicated in the notes thereto) and
      comply in all material respects with applicable accounting requirements and
      the
      rules and regulations of the Securities and Exchange Commission (the
"Commission")
      as in
      effect at the time of filing with the Commission. For purposes hereof,
      "Latest
      Statement Date"
      means
      June 30, 2005 and "Latest
      Financial Statements"
      means
      the unaudited financial statements of the Company at and for the six months
      ended June 30, 2005.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.5. Liabilities.
      Neither
      the Company nor any Subsidiaries (i) has any material liabilities and (ii)
      to
      the best of its knowledge, has any material contingent liabilities, in each
      case
      not otherwise disclosed in the Latest Financial Statements or in the SEC
      Reports, except (A) current liabilities incurred in the ordinary course of
      business subsequent to the Latest Statement Date and (B) obligations under
      contracts and commitments incurred in the ordinary course of business and not
      required under GAAP to be reflected in the Latest Financial Statements, which,
      in both cases have not had, either in any individual case or in the aggregate,
      a
      material adverse effect on the Company, or its business or properties, taken
      as
      a whole.

    

    3.6. Certain
      Agreements and Actions. Except
      as
      disclosed in the SEC Reports, neither the Company nor any Subsidiary has (i)
      declared or paid any dividends, or authorized or made any distribution upon
      or
      with respect to any class or series of its capital stock, (ii) since the Latest
      Statement Date, incurred any indebtedness for money borrowed or any other
      material liabilities out of the ordinary course of business, (iii) made any
      loans or advances to any person, other than ordinary advances for travel or
      entertainment expenses or (iv) sold, exchanged or otherwise disposed of any
      of its assets or rights, other than in the ordinary course of
      business.

    

    3.7. Obligations
      of or to Related Parties.
      Except
      as disclosed on Schedule 3.7 or in the SEC Reports, there are no obligations
      of
      the Company or any Subsidiary to officers, directors or key employees of the
      Company or any Subsidiary or, to the Company's knowledge, to any members of
      their immediate families or other affiliates, other than (i) for accrued
      salaries, (ii) reimbursement for expenses reasonably incurred on behalf of
      the
      Company or any Subsidiary and (iii) for other employee benefits made generally
      available to all employees (including stock option agreements outstanding under
      any stock option plan approved by the Board of Directors of the Company). Except
      as disclosed on Schedule 3.7 or in the SEC Reports, to the Company's knowledge,
      none of the officers, directors or key employees of the Company or any
      Subsidiary or, to the Company's knowledge, any members of their immediate
      families or other affiliates, are indebted to the Company or any Subsidiary
      or
      have any direct or indirect ownership interest in any firm, corporation or
      other
      entity with which the Company or any Subsidiary is affiliated or with which
      the
      Company or any Subsidiary has a business relationship, or any firm, corporation
      or other entity that competes with the Company or any Subsidiary, except that
      such officers, directors, employees and members of their immediate families
      may
      own securities (with beneficial ownership not exceeding 2%) in publicly-traded
      companies that compete with the Company or any Subsidiary. Except as disclosed
      on Schedule 3.7 or in the SEC Reports, no officer, director or key employee
      of
      the Company or any Subsidiary, or, to the Company’s knowledge, any member of
      their immediate families or other affiliates, is, directly or indirectly,
      interested in or a party to any material contract with the Company or any
      Subsidiary. Except as disclosed on Schedule 3.7 or in the SEC Reports, neither
      the Company nor any Subsidiary is a guarantor or indemnitor of any indebtedness
      of any other person, firm or corporation.

    

    3.8. Changes.
      Since
      the Latest Statement Date, and except as disclosed in the SEC Reports, there
      has
      not been, to the Company’s knowledge, any event or condition of any character
      that, either individually or cumulatively, has materially and adversely affected
      the business, assets, liabilities, financial condition, operations or prospects
      of the Company.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.9. Title
      to Properties and Assets; Liens. Except
      as
      set forth on Schedule 3.9 or in the SEC Reports, the Company and each Subsidiary
      has good and marketable title to its properties and assets, including the
      properties and assets reflected in the Latest Financial Statements, in each
      case
      subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than
      (i) those resulting from taxes that have not yet become delinquent,
      (ii)  liens and encumbrances that do not materially detract from the value
      of the property subject thereto or materially impair the operations of the
      Company or any Subsidiary and (iii) those that have otherwise arisen in the
      ordinary course of business. With respect to the property and assets it leases,
      the Company or any Subsidiary is in compliance with such leases in all material
      respects and, to the Company's knowledge, holds a valid leasehold interest
      free
      of any liens, claims or encumbrances. All facilities, machinery, equipment,
      fixtures and other properties owned, leased or used by the Company or any
      Subsidiary are in good operating condition and repair and are reasonably fit
      and
      usable for the purposes for which they are being used, reasonable wear and
      tear
      excepted.

    

    3.10. Patents
      and Trademarks.
      Schedule
      3.10 contains a listing of all U.S. and foreign patents and patent applications,
      and U.S. and foreign trademarks and service marks and applications therefor,
      owned by, assigned to or licensed to the Company and each Subsidiary not
      otherwise set forth in the SEC Reports. Except as set forth on Schedule 3.10
      or
      in the SEC Reports, the Company or any Subsidiary owns or has a valid right
      to
      use all patents, trademarks, service marks, trade names, copyrights, trade
      secrets, information and other proprietary rights and processes necessary for
      its business as now conducted and as proposed to be conducted, without any
      known
      infringement of the rights of others. The Company is not aware that any of
      its
      employees is obligated under any contract (including licenses, covenants or
      commitments of any nature) or other agreement, or subject to any judgment,
      decree or order of any court or administrative agency, that would interfere
      with
      their duties to the Company or that would conflict with the Company’s business
      as now conducted or proposed to be conducted. None of the execution or delivery
      of, or the performance of the transactions contemplated by, the Transaction
      Documents, the pledge of the Collateral by the Company to secure the Notes,
      the
      carrying on of the Company’s business by the employees of the Company nor the
      conduct of the Company’s business as currently conducted or proposed to be
      conducted will conflict with or result in a breach of the terms, conditions
      or
      provisions of, or constitute a default under, any contract, covenant or
      instrument under which any employee is now obligated. The Company does not
      believe it is or will be necessary to utilize any inventions, trade secrets
      or
      proprietary information of any of its employees made prior to their employment
      by the Company, except for inventions, trade secrets or proprietary information
      that have been exclusively assigned to the Company.

    

    3.11. Compliance
      with Other Instruments.
      Except
      as disclosed on Schedule 3.11 or in the SEC Reports, neither the Company nor
      any
      Subsidiary is in violation or default of any term of its Articles or Certificate
      of Incorporation, as applicable, or Bylaws (in each case, as amended or
      restated), or in any material respect of any mortgage, indenture, contract,
      agreement, instrument or contract to which it is party or by which it is bound
      or of any judgment, decree, order, writ or, to its knowledge, any statute,
      rule
      or regulation applicable to the Company or any Subsidiary that would materially
      and adversely affect the business, assets, liabilities, financial condition,
      operations or prospects of the Company. The execution and delivery of, and
      the
      performance of and compliance with the transactions contemplated by, the
      Transaction Documents, and the issuance and sale of the Shares upon conversion
      of the Notes or upon exercise of the Warrants in accordance with the terms
      thereof, respectively, will not, with or without the passage of time or giving
      of notice, result in any such material violation, or be in conflict with or
      constitute a default under any such term, or result in the creation of any
      mortgage, pledge, lien, encumbrance or charge upon any of the properties or
      assets of the Company or any Subsidiary or the suspension, revocation,
      impairment, forfeiture or nonrenewal of any permit, license, authorization
      or
      approval applicable to the Company or any Subsidiary, the business or operations
      of the Company or any Subsidiary or any of the assets or properties of the
      Company or any Subsidiary, except for such results that would not materially
      and
      adversely affect the business, assets, liabilities, financial condition,
      operations or prospects of the Company.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.12. Litigation.
      Except
      as disclosed in the SEC Reports, there is no action, suit, proceeding or
      investigation pending or, to the Company’s knowledge, currently threatened
      against the Company that questions the validity of this Agreement or the other
      Transaction Documents or the right of the Company to enter into any of such
      agreements, or to consummate the transactions contemplated hereby or thereby.
      Except as disclosed in the SEC Reports, there is no action, suit, proceeding
      or
      investigation or, to the Company’s knowledge, currently threatened against the
      Company or any Subsidiary that might result, either individually or in the
      aggregate, in any material adverse change in the assets, condition, affairs
      or
      prospects of the Company, financial or otherwise, or any change in the current
      equity ownership of the Company. The foregoing includes, without limitation,
      actions pending or threatened involving the prior employment of any of the
      employees of the Company or any Subsidiary, their use in connection with the
      business of the Company or any Subsidiary of any information or techniques
      allegedly proprietary to any of their former employers or their obligations
      under any agreements with prior employers. Neither the Company nor any
      Subsidiary is a party or subject to the provisions of any order, writ,
      injunction, judgment or decree of any court or government agency or
      instrumentality.

    

    3.13. Tax
      Returns and Payments.
      Except
      as set forth on Schedule 3.13, the Company and each Subsidiary has timely filed
      all tax returns (federal, state and local) required to be filed by it. All
      taxes
      shown to be due and payable on such returns, any assessments imposed, and,
      to
      the Company’s knowledge, all other taxes due and payable by the Company or any
      Subsidiary on or before the Closing have been paid or will be paid prior to
      the
      time they become delinquent. Except as set forth on Schedule 3.13, the Company
      has not been advised (i) that any of the tax returns of the Company or any
      Subsidiary have been or are being audited as of the date hereof or (ii) of
      any deficiency in assessment or proposed judgment to its federal, state or
      other
      taxes. The Company has no knowledge of any liability of any tax to be imposed
      upon the properties or assets of the Company or any Subsidiary as of the date
      of
      this Agreement that is not adequately provided for.

    

    3.14. Employees.
      Neither
      the Company nor any Subsidiary has collective bargaining agreements with any
      of
      its employees. There is no labor union organizing activity pending or, to the
      Company's knowledge, threatened with respect to the Company or any Subsidiary.
      Except as set forth on Schedule 3.14 or in the SEC Reports, no employee has
      any
      agreement or contract, written or verbal, regarding his employment. Except
      as
      disclosed on Schedule 3.14 or in the SEC Reports, neither the Company nor any
      Subsidiary is a party to or bound by any currently effective employment
      contract, deferred compensation arrangement, bonus plan, incentive plan, profit
      sharing or defined benefit plan, retirement agreement or other employee
      compensation plan or agreement. To the Company’s actual knowledge, no employee
      of the Company, nor any consultant with whom the Company has contracted, is
      in
      violation of any material 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 to be conducted by the Company; and, to the Company’s
      knowledge, 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. The Company has not received any written
      or oral notice alleging that any such violation has occurred. Except as
      disclosed on Schedule 3.14 or in the SEC Reports, no employee of the Company
      or
      any Subsidiary has been granted the right to continued employment by the Company
      or to any material compensation following termination of employment with the
      Company. The Company is not aware that any officer or key employee, or that
      any
      group of key employees, intends to terminate their employment with the Company
      or any Subsidiary, nor does the Company or any Subsidiary have a present
      intention to terminate the employment of any officer, key employee or group
      of
      key employees.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.15. Registration
      Rights.
      Except
      (i) for registration rights granted pursuant to that certain Registration Rights
      Agreement dated March 8, 2004 (the “March
      2004 Registration Rights Agreement”),
      (ii)
      as disclosed on Schedule 3.15, or (iii) as set forth in the SEC Reports, or
      (iv)
      required pursuant to the Registration Rights Agreement, the Company is presently
      not under any obligation, and has not granted any rights, to register (as
      defined in the Registration Rights Agreement) any of the Company’s presently
      outstanding securities or any of its securities that may hereafter be
      issued.

    

    3.16. Compliance
      with Laws; Permits.
      Except
      as disclosed in the SEC Reports, neither the Company nor any Subsidiary is
      in
      violation of any applicable statute, rule, regulation, order or restriction
      of
      any domestic or foreign government or any instrumentality or agency thereof
      in
      respect of the conduct of its business or the ownership of its properties that
      would materially and adversely affect the business, assets, liabilities,
      financial condition, operations or prospects of the Company. No governmental
      orders, permissions, consents, approvals or authorizations are required to
      be
      obtained and no registrations or declarations are required to be filed in
      connection with the execution and delivery of, and the performance of the
      transactions contemplated by, the Transaction Documents, the pledge of the
      Collateral to secure the Notes or the issuance of the Shares upon conversion
      of
      the Notes upon payment of the Notes or upon exercise of the Warrants, except
      such as has been duly and validly obtained or filed, or with respect to any
      filings that must be made after the Closing, as will be filed in a timely
      manner. Each of the Company and the Subsidiaries has all franchises, permits,
      licenses and any similar authority necessary for the conduct of its business
      as
      now being conducted by it, the lack of which could materially and adversely
      affect the business, properties, prospects or financial condition of the Company
      and the Company believes it can obtain any similar authority for the conduct
      of
      its business as now conducted or planned to be conducted.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.17. Environmental
      and Safety Laws.
      Neither
      the Company nor any Subsidiary is in violation of any applicable statute, law
      or
      regulation relating to the environment or occupational health and safety, where
      such violation would have a material adverse effect on the Company, and to
      the
      Company’s knowledge, no material expenditures are or will be required in order
      to comply with any such existing statute, law or regulation. Without limiting
      the foregoing:

    

    
      	(i)  	
              with
                respect to any real
                property owned, leased or otherwise utilized by the Company or any
                Subsidiary (“Real
                Property”),
                neither the Company nor any Subsidiary is or has in the past been
                in
                violation of any Hazardous Substance Law which violation could reasonably
                be expected to result in a material liability to the Company or its
                properties and assets;

            

    

    

    
      	(ii)  	
              neither
                the Company, any Subsidiary nor, to the knowledge of the Company,
                any
                third party has used, released, generated, manufactured, produced
                or
                stored, in, on, under, or about any Real Property, or transported
                thereto
                or therefrom, any Hazardous Substances that could reasonably be expected
                to result in a material liability to the Company under any Hazardous
                Substance Law;

            

    

    

    
      	(iii)  	
              to
                the knowledge of the Company, there are no underground tanks, whether
                operative or temporarily or permanently closed, located on any Real
                Property that could reasonably be expected to result in a material
                liability to the Company under any Hazardous Substance
                Law;

            

    

    

    
      	(iv)  	
              there
                are no Hazardous Substances used, stored or present at, or on, or
                to the
                knowledge of the Company that could reasonably be expected to migrate
                onto
                any Real Property, except in compliance with Hazardous Substance
                Laws;
                and

            

    

    

    
      	(v)  	
              to
                the knowledge of the Company, there neither is nor has been any condition,
                circumstance,
                action, activity or event that could reasonably be expected to be
                a
                material violation by the Company or any Subsidiary of any Hazardous
                Substance Law, or to result in liability to the Company or any Subsidiary
                under any Hazardous Substance Law.

            

    

    

    For
      purposes hereof, “Hazardous
      Substances”
      means
      (statutory acronyms and abbreviations having the meaning given them in the
      definition below of “Hazardous
      Substances Laws”)
      substances defined as “hazardous substances,” “pollutants” or “contaminants” in
      Section 101 of the CERCLA; those substances defined as “hazardous waste,”
“hazardous materials” or “regulated substances” by the RCRA; those substances
      designated as a “hazardous substance” pursuant to Section 311 of the CWA;
      those substances defined as “hazardous materials” in Section 103 of the
      HMTA; those substances regulated as a hazardous chemical substance or mixture
      or
      as an imminently hazardous chemical substance or mixture pursuant to
      Sections 6 or 7 of the TSCA; those substances defined as “contaminants” by
      Section 1401 of the SDWA, if present in excess of permissible levels; those
      substances regulated by the Oil Pollution Act; those substances defined as
      a
      pesticide pursuant to Section 2(u) of the FIFRA; those substances defined
      as a source, special nuclear or by-product material by Section 11 of the
      AEA; those substances defined as “residual radioactive material” by
      Section 101 of the UMTRCA; those substances defined as “toxic materials” or
“harmful physical agents” pursuant to Section 6 of the OSHA; those
      substances defined as hazardous wastes in 40 C.F.R. Part 261.3; those
      substances defined as hazardous waste constituents in 40 C.F.R.
      Part 260.10, specifically including Appendix VII and VIII of Subpart D of
      40 C.F.R. Part 261; those substances designated as hazardous substances in
      40 C.F.R. Parts 116.4 and 302.4; those substances defined as hazardous
      substances or hazardous materials in 49 C.F.R. Part 171.8; those substances
      regulated as hazardous materials, hazardous substances, or toxic substances
      in
      40 C.F.R. Part 1910; any chemical, material, toxin, pollutant, or waste
      regulated by or in any other Hazardous Substances Laws; and in the regulations
      adopted and publications promulgated pursuant to said laws, whether or not
      such
      regulations or publications are specifically referenced herein.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Hazardous
      Substances Law”
      means
      any of:

    

    
      	 	
              (i)

            	
              the
                Comprehensive Environmental Response, Compensation, and Liability
                Act of
                1980, as amended (42 U.S.C. Section 9601 et
                seq.)
                (“CERCLA”);

            

    

    

    
      	 	
              (ii)

            	
              the
                Federal Water Pollution Control Act (33 U.S.C. Section 1251
                et
                seq.)
                (“Clean
                Water Act”
                or
                “CWA”);

            

    

    

    
      	 	
              (iii)

            	
              the
                Resource Conservation and Recovery Act (42 U.S.C. Section 6901
                et
                seq.)
                (“RCRA”);

            

    

    

    
      	 	
              (iv)

            	
              the
                Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et
                seq.)
                (“AEA”);

            

    

    

    
      	 	
              (v)

            	
              the
                Clean Air Act (42 U.S.C. Section 7401 et
                seq.)
                (“CAA”);

            

    

    

    
      	 	
              (vi)

            	
              the
                Emergency Planning and Community Right to Know Act (42 U.S.C.
                Section 11001 et
                seq.)
                (“EPCRA”);

            

    

    

    
      	 	
              (vii)

            	
              the
                Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
                Section 136 et
                seq.)
                (“FIFRA”);

            

    

    

    
      	 	
              (viii)

            	
              the
                Oil Pollution Act of 1990 (33 U.S.C.A. Section 2701 et
                seq.);

            

    

    

    
      	 	
              (ix)

            	
              the
                Safe Drinking Water Act (42 U.S.C. Sections 300f et
                seq.)
                (“SDWA”);

            

    

    

    
      	 	
              (x)

            	
              the
                Surface Mining Control and Reclamation Act of 1974 (30 U.S.C.
                Sections 1201 et
                seq.)
                (“SMCRA”);

            

    

    

    
      	 	
              (xi)

            	
              the
                Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.)
                (“TSCA”);

            

    

    

    
      	 	
              (xii)

            	
              the
                Hazardous Materials Transportation Act (49 U.S.C. Section 5101
                et
                seq.)
                (“HMTA”);
                

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	
              (xiii)

            	
              the
                Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C.
                Section 7901 et seq.) (“UMTRCA”);

            

    

    

    
      	 	
              (xiv)

            	
              the
                Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.)
                (“OSHA”);
                and

            

    

    

    
      	 	
              (xv)

            	
              all
                other federal, state and local governmental rules which govern Hazardous
                Substances, and the regulations adopted and publications promulgated
                pursuant to all such foregoing
                laws.

            

    

    

    3.18. Offering
      Valid.
      Assuming
      the accuracy of the representations and warranties of the Purchasers contained
      in Section 4, the offer, sale and issuance of the Notes and the Warrants (and
      the Shares issuable upon conversion of the Notes, upon payment on the Notes
      or
      upon exercise of the Warrants) will be exempt from the registration requirements
      of the Securities Act of 1933, as amended (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
      the State of Minnesota.

    

    3.19. Full
      Disclosure.
      None of
      this Agreement, the Notes, the Warrants, the Registration Rights Agreement,
      the
      Security Agreement or the Stock Pledge Agreement contains any untrue statement
      of a material fact nor, to the Company’s knowledge and belief, omits to state a
      material fact necessary in order to make the statements contained herein or
      therein not misleading.

    

    3.20. Insurance.
      The
      Company has fire and casualty insurance policies with coverage customary for
      companies similarly situated to the Company.

    

    3.21. Investment
      Company Act.
      The
      Company is not, and will not use the proceeds from the Notes in a manner so
      as
      to become, an “investment company,” or a company “controlled” by an “investment
      company,” within the meaning of the Investment Company Act of 1940, as
      amended.

    

    3.22. Security
      Interest in Collateral.
      The
      Company owns the Collateral free and clear of all claims, liens or encumbrances
      of any kind, except for the security interests granted in such Collateral
      pursuant to that certain Security Agreement dated March 8, 2004 (the
“Original
      Security Agreement”).
      Upon
      consummation of the transactions as contemplated hereby, the Purchasers will,
      together, have a first priority security interest in the
      Collateral.

    

    3.23. Foreign
      Corrupt Practices; Sarbanes-Oxley. 

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) The
      Company is in compliance in all material respects with all provisions of the
      Sarbanes-Oxley Act of 2002 (and related rules of the Commission) that are
      applicable to it as of the Closing Date.

    

    3.24. Brokers
      or Finders.
      Except
      as set forth in Schedule 3.24, the Company has not incurred nor will incur,
      directly or indirectly, any liability for any brokerage or finders’ fees or
      agent’s commissions or any similar charges (whether payable in cash, in equity
      securities or by a combination thereof) in connection with this Agreement or
      any
      transaction contemplated hereby.

    

    3.25. Reporting
      Status. Except
      as
      set forth in Schedule 3.25, the Company has filed on a timely basis all SEC
      Reports required to be filed by it under the Securities Act and the Securities
      Exchange Act of 1934, as amended (the "Exchange
      Act")
      for the
      twelve months preceding the date hereof or such shorter period as the Company
      has been required by law to file such SEC Reports or has timely filed a valid
      extension of such time of filing and has filed any such SEC Reports prior to
      the
      expiration of any such extension. As of their respective dates, the SEC Reports
      complied in all material respects with the requirements of the Securities Act
      and the Exchange Act and the rules and regulations of the Commission promulgated
      thereunder, and none of the SEC Reports, when filed, contained any untrue
      statement of a material fact or omitted to state a material fact required to
      be
      stated therein or necessary in order to make the statements therein, in light
      of
      the circumstances under which they were made, not misleading.

    

    3.26 NASDAQ
      Compliance.
      The
      Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
      Act, and is quoted on the NASDAQ SmallCap Market (the “NASDAQ”).
      The
      Company has taken no action designed to, or likely to have the effect of, and
      the transactions contemplated by this Agreement will not have the effect of,
      terminating the registration of the Common Stock under the Exchange Act or
      de-listing of the Common Stock from the NASDAQ. Except as disclosed in the
      SEC
      Reports, the Company has not received any notification that the Commission,
      the
      NASD, the NASDAQ or any other self-regulatory organizational body is
      contemplating terminating such registration or listing. Without limiting the
      foregoing, the Transaction Documents and the transactions contemplated by them
      require no stockholder approval under the rules or interpretations of the
      NASDAQ.

    

    3.27. 
      No Manipulation of Stock.
      Neither
      the Company, nor any of its directors, officers or controlling persons, has
      taken or will, in violation of applicable law, take, any action designed to
      or
      that might reasonably be expected to cause or result in, or which has
      constituted, stabilization or manipulation of the price of the Common Stock
      to
      facilitate the sale or resale of the securities issued or issuable in connection
      with the transactions contemplated hereunder.

     

    SECTION
      4. REPRESENTATIONS
      AND WARRANTIES OF THE PURCHASER

    

    Each
      Purchaser hereby severally, but not jointly, represents and warrants to the
      Company as of the Closing Date and agrees, as follows: 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.1. Authorization.
      Such
      Purchaser has full power and authority to enter into this Agreement and each
      of
      the Transaction Documents, and each such agreement, when executed and delivered
      by such Purchaser, will constitute the valid and binding obligation of the
      Purchaser enforceable in accordance with its terms, except (i) as limited by
      applicable bankruptcy, insolvency, reorganization, moratorium or other laws
      of
      general application affecting enforcement of creditors’ rights generally,
      (ii) as limited by laws relating to the availability of specific
      performance, injunctive relief or other equitable remedies and (iii) to the
      extent that the enforceability of the indemnification provisions of the
      Registration Rights Agreement may be limited by applicable laws. 

    

    4.2. Investment
      Representations.
      Such
      Purchaser understands that neither the offer nor the sale of the Purchaser’s
      Note, the Warrant or the Shares has been registered under the Securities Act.
      The Purchaser also understands that the Purchaser’s Note and Warrant are being
      offered and sold pursuant to an exemption from registration contained in the
      Securities Act based in part upon the Purchaser’s representations contained in
      the Agreement. The Purchaser hereby represents and warrants as
      follows:

    

    (a) Purchaser
      Bears Economic Risk. The
      Purchaser has substantial experience in evaluating and investing in private
      placement transactions of securities in companies similar to the Company so
      that
      it is capable of evaluating the merits and risks of its investment in the
      Company and has the capacity to protect its own interests. The Purchaser must
      bear the economic risk of this investment indefinitely unless the Purchaser’s
      respective Note or Warrant (or the Shares) are registered pursuant to the
      Securities Act, or an exemption from registration is available. Except as
      contemplated by the Registration Rights Agreement, the Purchaser has no present
      intention of selling or otherwise transferring its respective Note, the Warrant
      or the Shares, or any interest therein. The Purchaser also understands that
      there is no assurance that any exemption from registration under the Securities
      Act will be available and that, even if available, such exemption may not allow
      the Purchaser to transfer all or any portion of the Purchaser’s respective Note,
      the Warrant or the Shares under the circumstances, in the amounts or at the
      times the Purchaser might propose.

    

    (b) Acquisition
      for Own Account.
      Except
      as contemplated by the Registration Rights Agreement, the Purchaser is acquiring
      its respective Note, the Warrant and the Shares for its own account for
      investment only, and not with a view towards their public
      distribution.

    

    (c) Purchaser
      Can Protect Its Interest.
      The
      Purchaser represents that by reason of its, or of its management’s, business or
      financial experience, the Purchaser has the capacity to protect its own
      interests in connection with the transactions contemplated in this Agreement,
      the Note, the Warrant and the Registration Rights Agreement. Further, the
      Purchaser is aware of no publication of any advertisement in connection with
      the
      transactions contemplated in the Agreement.

    

    (d) Accredited
      Investor.
      The
      Purchaser represents that it is an accredited investor within the meaning of
      Rule 501 of Regulation D of the Securities Act.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (e) Residence.
      The
      Purchaser represents that it is organized under the laws of the British Virgin
      Islands and that its principal office is located in the State of
      Minnesota.

    

    (f) Rule
      144.
      The
      Purchaser acknowledges and agrees that its respective Note and Warrant, and,
      if
      issued, its Shares, must be held indefinitely unless they are subsequently
      registered under the Securities Act or an exemption from such registration
      is
      available. The Purchaser has been advised or is aware of the provisions of
      Rule 144 promulgated under the Securities Act, which permits limited resale
      of shares purchased in a private placement subject to the satisfaction of
      certain conditions, including, among other things: the availability of certain
      current public information about the Company, the resale occurring not less
      than
      one year after a party has purchased and paid for the security to be sold,
      the
      sale being through an unsolicited “broker’s transaction” or in transactions
      directly with a market maker (as such term is defined under the Exchange Act)
      and the number of shares being sold during any three-month period not exceeding
      specified limitations. 

    

    4.3. Transfer
      Restrictions. The
      Purchaser acknowledges and agrees that its respective Note and Warrant and,
      if
      issued, its Shares, are subject to restrictions on transfer and will bear
      restrictive legends.

    

    SECTION
      5. CONDITIONS FOR CLOSING

    

    5.1. Conditions
      for the Company to Satisfy.
      The
      several obligations
      of each Purchaser to purchase its respective Note and Warrant as contemplated
      by
      this Agreement is subject to satisfaction of the following contingencies at
      or
      prior to the Closing:

    

    (a) The
      Company shall have executed and delivered to the Purchasers at Closing the
      Transaction Documents.

    

    (b) The
      Company shall have paid Whitebox Advisors a $45,000 cash origination fee, plus
      all reasonable out-of-pocket expenses for due diligence, related to the
      transactions contemplated hereby.

    

    (c) Maslon
      Edelman Borman & Brand, LLP, legal counsel to the Company, shall have
      delivered an opinion to the Purchasers with respect to the following matters
      (which opinion may contain customary exclusions and limitations that are
      reasonably acceptable to counsel for the Purchasers):

    

    
      	 	
              (i)

            	
              The
                Company is a corporation duly incorporated, validly existing and
                in good
                standing under the laws of the State of Delaware. The Company has
                all
                corporate power and authority necessary to own its properties and
                to
                conduct its business as, to our knowledge, it is presently
                conducted.

            

    

     

    
      	 	
              (ii)

            	
              The
                Company has the requisite corporate power and authority to execute,
                deliver and perform its obligations under the Transaction
                Documents.

            

    

     

    
      	 	
              (iii)

            	
              The
                Transaction Documents have been duly authorized by all necessary
                corporate
                action on the part of the Company.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	 	
              (iv)

            	
              The
                authorized capital stock of the Company consists of 50,000,000 shares
                of
                Common Stock, par value $0.01 per share, and 2,000,000 shares of
                Preferred
                Stock, par value $0.01 per share. To our knowledge, except as described
                in
                the Purchase Agreement (including the schedules and exhibits thereto),
                there are no other presently outstanding preemptive rights to purchase
                from the Company any of the authorized but unissued stock of the
                Company.

            

    

     

    
      	 	
              (v)

            	
              Each
                of the Transaction Documents, when executed and delivered by the
                Company,
                will constitute valid and binding obligations of the Company, enforceable
                against the Company in accordance with their
                terms.

            

    

     

    
      	 	
              (vi)

            	
              When
                issued in compliance with the provisions of the Notes and Warrants
                (and
                upon payment as provided by the Warrants), the Shares will be validly
                issued, fully paid and nonassessable, and will be free of any liens
                or
                encumbrances; provided, however, that the Shares may be subject to
                restrictions on transfer under applicable state and federal securities
                laws.

            

    

     

    
      	 	
              (vii)

            	
              The
                execution and delivery of the Transaction Documents by the Company
                will
                not result in (i) a violation of the Company's Certificate of
                Incorporation or Bylaws (in each case, as amended or restated) or
                (ii) to
                our knowledge, a violation or default under any agreement known by
                us to
                which the Company is a party or by which any of its properties or
                assets
                are bound.

            

    

     

    
      	 	
              (viii)

            	
              To
                our knowledge, except as disclosed in the SEC Reports, there is no
                other
                action, suit, proceeding or investigation pending or currently threatened
                against the Company that questions the validity of the Purchase Agreement
                or the other Transaction Documents, or the right of the Company to
                enter
                into any of such agreements, or to consummate the transactions
                contemplated thereby. To our knowledge, except as disclosed in the
                SEC
                Reports, neither the Company nor any Subsidiary is a party or subject
                to
                the provisions of any order, writ, injunction, judgment or decree
                of any
                court or government agency or instrumentality.

            

    

     

    
      	 	
              (ix)

            	
              Upon
                consummation of the transactions contemplated by the Transaction
                Documents, including delivery of the Security Agreement, and filing
                of a
                UCC Financing Statement covering the Collateral, a security interest
                in
                the Collateral will attach in favor of the
                Purchasers.

            

    

     

    SECTION
      6. OTHER AGREEMENTS

     

    The
      Company covenants and agrees to the following (as to which the failure to comply
      shall constitute an event of default under (i) the Notes, the Security Agreement
      and the Stock Pledge Agreement, and (ii) the notes issued pursuant to that
      certain Purchase Agreement dated March 8, 2004 between the Company and the
      Investors).

     

    6.1 Reporting
      Requirements. The
      Company covenants to timely file (or obtain extensions in respect thereof and
      file within the applicable grace period) all reports required to be filed by
      the
      Company after the date hereof pursuant to the Exchange Act.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    6.2 Internal
      Accounting Controls.
      The
      Company shall maintain a system of internal accounting controls sufficient
      to
      provide reasonable assurance that (i) transactions are executed in accordance
      with management's general or specific authorizations, (ii) transactions are
      recorded as necessary to permit preparation of financial statements in
      conformity with GAAP and to maintain asset accountability, (iii) access to
      assets is permitted only in accordance with management's general or specific
      authorization, and (iv) the recorded accountability for assets is compared
      with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences. The Company shall maintain disclosure controls
      and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) that
      are
      designed to ensure that material information relating to the Company, including
      its subsidiaries, is made known to the certifying officers by others within
      those entities, particularly during the period in which the Company's Form
      10-KSB (or 10-K) or Form 10-QSB (or 10-Q), as the case may be, is being
      prepared.

     

    6.3. Inspection.
      The
      Company shall permit any person designated by the Purchasers to visit and
      inspect any of the properties of the Company, to examine the books and records
      of the Company and make copies thereof and to discuss the affairs of the Company
      with its officers, employees and independent accountants at such reasonable
      times and intervals as the Purchasers may request; provided, however, that
      each
      of the Purchasers and each such person designated by the Purchasers shall have
      executed a confidentiality agreement reasonably acceptable to the
      Company.

     

    6.4. Indebtedness.
      The
      Company will not incur, create, issue, assume or suffer to exist any
      Indebtedness that ranks equal or senior in right of payment of the Notes without
      the prior written consent of the Purchasers. For purposes hereof, “Indebtedness”
means
      with respect to any person at the time of any determination, without
      duplication, all obligations, contingent or otherwise, which in accordance
      with
      GAAP should be classified upon such person's balance sheet as liabilities,
      but
      in any event including: (a) obligations for borrowed money, (b) obligations
      evidenced by bonds, debentures, notes or other similar instruments, (c)
      obligations upon which interest charges are customarily paid or accrued, (d)
      obligations under conditional sale or other title retention agreements relating
      to property purchased by such person, (e) obligations for the deferred purchase
      price of property or services, (f) obligations secured by any lien on property
      owned or acquired subject thereto, whether or not the obligation secured thereby
      has been assumed and whether or not the obligation secured is the obligation
      of
      the owner or another party, (g) capitalized lease obligations and contingent
      obligations; (i) net liabilities under any interest rate swap, collar or other
      interest rate hedging agreement, and (j) all obligations of any partnership
      or
      joint venture in which the Company is or may become personally liable.

     

    SECTION
      7. MISCELLANEOUS

     

    7.1. Governing
      Law.
      This
      Agreement shall be governed by the laws of the State of Minnesota as such laws
      are applied to agreements between Minnesota residents entered into and performed
      entirely in Minnesota.

    

    7.2. Survival.
      The
      representations, warranties, covenants and agreements made herein shall survive
      any investigation made by the parties and the closing of the transactions
      contemplated hereby. All statements as to factual matters contained in any
      certificate or other instrument delivered by or on behalf of the Company
      pursuant hereto in connection with the transactions contemplated hereby shall
      be
      deemed to be representations and warranties by the Company hereunder solely
      as
      of the date of such certificate or instrument.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    7.3. Successors
      and Assigns.
      Except
      as otherwise expressly provided herein, the provisions hereof shall inure to
      the
      benefit of, and be binding upon, the successors, assigns, heirs, executors
      and
      administrators of the parties hereto and shall inure to the benefit of and
      be
      enforceable by each person who shall be a holder of the Notes, the Warrants
      or
      the Shares from time to time.

    

    7.4. Entire
      Agreement.
      The
      Transaction Documents and the other documents delivered pursuant hereto
      constitute the full and entire understanding and agreement between the parties
      with regard to the subjects hereof and no party shall be liable or bound to
      any
      other in any manner by any representations, warranties, covenants and agreements
      except as specifically set forth herein and therein.

    

    7.5. Severability.
      In case
      any provision of the Agreement shall be invalid, illegal or unenforceable,
      the
      validity, legality and enforceability of the remaining provisions shall not
      in
      any way be affected or impaired thereby.

    

    7.6. Amendment
      and Waiver.
      This
      Agreement may be amended or modified, and any provision hereunder may be waived,
      only upon the written consent of the Company and Purchasers.

    

    7.7. Notices.
      All
      notices, requests, consents, and other communications hereunder shall be in
      writing and shall be deemed effectively given and received (a) when made if
      delivered in person (with written confirmation of receipt) or (b) on the date
      received if sent by national overnight courier service or (c) when receipt
      is
      acknowledged by the receiving party if delivered by facsimile or electronic
      email, addressed as follows:

     

    
       

      
        
          	 	
                  
                    (a)

                  

                	
                  
                    if
                      to the Company, at

                    

                    Equitex,
                      Inc.

                    7315
                      East Peakview Avenue

                    Englewood,
                      Colorado 80111

                    Attention:
                      Henry Fong, President

                    Facsimile:
                      (561) 624-0866

                    Email:
                      hfong@equitex.net

                    

                    with
                      a copy to:

                    

                    Maslon
                      Edelman Borman & Brand, LLP

                    3300
                      Wells Fargo Center, 90 South 7th Street

                    Minneapolis,
                      Minnesota 55402

                    Attention:
                      William M. Mower, Esq.

                    Facsimile:
                      (612) 642-8358

                    Email:
                      bill.mower@maslon.com

                  

                

        

        
          	 	 	 

        

        
          	 	 	 

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (b)

              	
                if
                  to the Purchasers, in care of:

                 

                Whitebox
                  Advisors, LLC

                3033
                  Excelsior Boulevard, Suite 300

                Minneapolis,
                  Minnesota 55416

                Attention:
                  Jonathan Wood, Chief Financial Officer

                Facsimile:
                  (612) 253-6151

                Email:
                  jwood@whiteboxadvisors.com

                

                with
                  a copy to:

                

                Messerli
                  & Kramer P.A.

                150
                  South Fifth Street, Suite 1800

                Minneapolis,
                  Minnesota 55402

                Attention:
                  Jeffrey C. Robbins, Esq.

                Facsimile:
                  (612) 672-3777

                Email:
                  jrobbins@mandklaw.com

              

      

       

    

    

    7.8. Indemnification
      by the Company.
      The
      Company agrees to indemnify and hold the Purchasers, their affiliates and the
      directors, officers, managers, employees and agents of each of the foregoing
      (each, a "Purchaser
      Party")
      harmless against any and all claims, losses, liabilities, obligations, damages,
      judgments, costs or expenses (including reasonable legal fees and costs) that
      any such Purchaser Party may suffer, sustain or become subject to as a result
      of, or in connection with, or in any way related to or by reason of (a) any
      misrepresentation, breach or inaccuracy of any representation, warranty,
      covenant or agreement made by the Company in any of the Transaction Documents;
      or (b) the execution, delivery or performance of any of the Transaction
      Documents or any transaction contemplated by any of the Transaction
      Documents.

    

    7.9. Expenses.
      At
      Closing, the Company shall pay the Purchaser’s counsel, Messerli & Kramer
      P.A., an amount not to exceed $20,000 for its actual legal fees and expenses
      in
      representing the Purchasers in connection with the transactions contemplated
      hereby. In addition, the Company agrees to pay or reimburse the Purchasers
      for
      their reasonable legal fees and expenses that they may incur after the date
      hereof in connection with the granting of any waiver with respect to, the
      modification of any of the terms or provisions of or the enforcement of any
      of
      the Transaction Documents.

    

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

     

    7.11. Counterparts.
      This
      Agreement may be delivered via facsimile or other means of electronic
      communication, and may be executed in counterparts, each of which shall be
      an
      original, but all of which together shall constitute one
      instrument.

    

    [signature
      page follows]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have executed this Purchase Agreement as of the date first above
      written.

     

     

    
      
        	Equitex, Inc.	 	 	
                Pandora
                  Select Partners, L.P. and

                Whitebox
                  Hedged High Yield Partners, L.P.,

              
	 	 	 	 
	 	 	 	 
	/s/ Henry
                Fong	 	 	/s/ Jonathan
                Wood
	
                
                  

                

                By: Henry
                  Fong

                Its: President

              	 	 	
                
                  

                

                By: Jonathan
                  Wood

                Their: Managing
                  Director

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