Document:

exv4w2

 

Exhibit 4.2

THIS WARRANT (THIS “WARRANT”) AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE OR SOLD UNLESS A REGISTRATION STATEMENT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE. THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF (I) MAY BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN LOAN OR
OTHER FINANCING SECURED BY SUCH SECURITIES OR (II) MAY BE TRANSFERRED OR ASSIGNED TO AN AFFILIATE
OF THE HOLDER HEREOF WITHOUT THE NECESSITY OF AN OPINION OF COUNSEL OR THE CONSENT OF THE ISSUER
HEREOF.

WARRANT

TO
PURCHASE COMMON STOCK 

OF

INNUITY, INC.

					
	 	 	 	 	 
	Issue Date: May 3,
2007
	 	
	 	Warrant No. 1
	 	 	 	 	 

     THIS CERTIFIES that IMEPRIUM MASTER FUND, LTD. or any subsequent holder hereof (the “Holder”),
has the right to purchase from INNUITY, INC., a Utah corporation (the “Company”), up to 1,128,164
fully paid and nonassessable shares of the Company’s common stock, par value $0.00025 per share
(the “Common Stock”), subject to adjustment as provided herein, at a price per share equal to the
Exercise Price (as defined below), at any time and from time to time beginning on the date on which
this Warrant is issued (the “Issue Date”) and ending at 5:00 p.m., New York City time, on the third
(3rd) anniversary of the Issue Date or, if such day is not a Business Day, on the next succeeding
Business Day (the “Expiration Date”). This Warrant is issued pursuant to a Securities Purchase
Agreement, dated as of the date hereof (the “Securities Purchase Agreement”), by and among the
Company and the investors named therein. Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Securities Purchase Agreement.

1. EXERCISE.

     (a) Right to Exercise; Exercise Price. The Holder shall have the right to exercise
this Warrant at any time and from time to time during the period beginning on the Issue Date and
ending at 5 p.m., New York City time, on the Expiration Date as to all or any part of the shares
of Common Stock covered hereby (the “Warrant Shares”). The “Exercise Price” for each Warrant Share
purchased by the Holder upon the exercise of this Warrant shall be $0.01, subject

 

 

to adjustment for
the events specified in Section 6 of this Warrant.

     (b) Exercise Notice. In order to exercise this Warrant, the Holder shall (i) send by
facsimile transmission, at any time prior to 5:00 p.m., New York City time, on the Business Day on
which the Holder wishes to effect such exercise (the “Exercise Date”), to the Company an executed
copy of the notice of exercise in the form attached hereto as Exhibit A (the “Exercise Notice”) and
(ii) in the case of a Cash Exercise (as defined below), deliver the Exercise Price to the Company
by wire transfer of immediately available funds. The Holder shall promptly thereafter deliver the
original Warrant to the Company for cancellation (and replacement with a new Warrant if exercised
in part) pursuant to Section 1(d) of this Warrant. The Exercise Notice shall also state the name
or names in which the Warrant Shares issuable on such exercise shall be issued if other than the
Holder. In the case of a dispute as to the calculation of the Exercise Price or the number of
Warrant Shares issuable hereunder (including, without limitation, the calculation of any adjustment
pursuant to Section 6), the Company shall promptly issue to the Holder the number of Warrant Shares
that are not disputed, the Company and the Holder shall provide each other with their respective
calculations, and the Company shall thereafter promptly submit the disputed calculations to a
certified public accounting firm of national recognition (other than the Company’s independent
accountants). The Company shall use its best efforts to cause such accountant to calculate the
Exercise Price and/or the number of Warrant Shares issuable hereunder and to notify the Company and
the Holder of the results in writing no later than two (2) Business Days following the day on which
such accountant received the disputed calculations (the “Dispute Procedure”). Such accountant’s
calculation shall be deemed conclusive absent manifest error. The fees of any such accountant
shall be borne by the party whose calculations were most at variance with those of such accountant.

     (c) Holder of Record. The Holder shall, for all purposes, be deemed to have become
the holder of record of the Warrant Shares specified in an Exercise Notice on the Exercise Date
specified therein, irrespective of the date of delivery of such Warrant Shares. Except as
specifically provided herein, nothing in this Warrant shall be construed as conferring upon the
Holder any rights as a stockholder of the Company prior to the Exercise Date.

     (d) Cancellation or Replacement of Warrant. This Warrant shall be canceled upon its
exercise and, if this Warrant is exercised in part, the Company shall, at the time that it delivers
Warrant Shares to the Holder pursuant to such exercise as provided herein, issue a new warrant, and
deliver to the Holder a certificate representing such new warrant, with terms identical in all
respects to this Warrant (except that such new warrant shall be exercisable into the number of
shares of Common Stock with respect to which this Warrant shall remain unexercised); provided,
however, that the Holder shall be entitled to exercise all or any portion of such new warrant at
any time following the time at which this Warrant is exercised, regardless of whether the Company
has actually issued such new warrant or delivered to the Holder a certificate therefor.

2. DELIVERY OF WARRANT SHARES UPON EXERCISE.

     Upon receipt of an Exercise Notice and payment of the Exercise Price, if applicable, pursuant
to Section 1, the Company shall, (A) in the case of a Cash Exercise (as defined below), no later
than the close of business on the later to occur of (i) the third (3rd) Business Day

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following the
Exercise Date set forth in such Exercise Notice and (ii) the date on which the Company has received
payment of the Exercise Price, (B) in the case of a Cashless Exercise (as defined below), no later
than the close of business on the third (3rd) Business Day following the Exercise Date set forth in
such Exercise Notice, and (C) with respect to Warrant Shares that are the subject of a Dispute
Procedure, by the close of business on the third (3rd) Business Day following the
determination made pursuant to Section 1(b) (each of the dates specified in the foregoing clauses
(A), (B) or (C) being referred to as a “Delivery Date”), issue and deliver or cause to be delivered
to the Holder the number of Warrant Shares as shall be determined as provided herein. The Company
shall effect delivery of Warrant Shares to the Holder, as long as the Company’s designated transfer
agent or co-transfer agent in the United States for the Common Stock (the “Transfer Agent”)
participates in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program
(“FAST”), by crediting the account of the Holder or its nominee at DTC (as specified in the
applicable Exercise Notice) with the number of Warrant Shares required to be delivered, no later
than the close of business on such Delivery Date. In the event that the Transfer Agent is not a
participant in FAST, or if the Holder so specifies in an Exercise Notice or otherwise in writing on
or before the Exercise Date, the Company shall use reasonable efforts to effect delivery of Warrant
Shares by delivering to the Holder or its nominee physical certificates representing such Warrant
Shares, no later than the close of business on such Delivery Date. If any exercise would create a
fractional Warrant Share, such fractional Warrant Share shall be disregarded and the number of
Warrant Shares issuable upon such exercise, in the aggregate, shall be the nearest whole number of
Warrant Shares. Warrant Shares delivered to the Holder shall not contain any restrictive legend
unless such legend is required pursuant to the terms of the Securities Purchase Agreement.

3. FAILURE TO DELIVER WARRANT SHARES.

     (a) In the event that the Company fails for any reason (other than as a result of the Holder’s
failure, in the case of a Cash Exercise, to pay the aggregate Exercise Price for the Warrant Shares
being purchased) to deliver to the Holder the number of Warrant Shares specified in the applicable
Exercise Notice (without any restrictive legend to the extent permitted by the terms of the
Securities Purchase Agreement) on or before the Delivery Date therefor, or fails to remove any
restrictive legend from outstanding Warrant Shares at the request of the Holder in accordance with
the Securities Purchase Agreement on or before the date required therein following such request (an
“Exercise Default”), the Holder shall have the right to receive from the Company an amount equal to
(i) (N/365) multiplied by (ii) the then aggregate Market Price (as defined below) of the
Warrant Shares which are the subject of such Exercise Default multiplied by (iii) the lower
of eighteen percent (18%) and the maximum rate permitted by applicable law or by the applicable
rules or regulations of any Governmental Agency (the “Default Interest Rate”), where “N” equals the
number of days elapsed between the original Delivery Date of such Warrant Shares (or, in the event
of a failure to remove a legend from outstanding Warrant Shares, the date on which such unlegended
shares were required to be delivered) and the date on which such Exercise Default has been cured.
In the event that shares of Common Stock are purchased by or on behalf of the Holder in order to
make delivery on a
sale effected in anticipation of receiving Warrant Shares upon an exercise, the Holder shall
have the right to receive from the Company, in addition to the foregoing amounts, (i) the aggregate
amount paid by or on behalf of the Holder for such shares of Common Stock minus (ii) the

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aggregate amount of net proceeds, if any, received by the Holder from the sale of the Warrant
Shares issued by the Company pursuant to such exercise. Amounts payable under this Section 3(a)
shall be paid to the Holder in immediately available funds on or before the fifth (5th) Business
Day following written notice from the Holder to the Company specifying the amount owed to it by the
Company pursuant to this Section 3(a) and, if an Exercise Default continues to exist thereafter, at
the end of each period of thirty (30) days following such fifth Business Day.

     (b) In addition to its rights under Section 3(a), upon an Exercise Default, the Holder shall
have the right to pursue all other remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).

     (c) When used in this Warrant, the following terms shall have the respective meanings
indicated:

     “Market Price” means, with respect to one share of Common Stock, the greater of (i) the
arithmetical average of the daily VWAPs for the five (5) consecutive Trading Days occurring
immediately prior to date on which the applicable Exercise Default occurred and (ii) the
daily VWAP for the Trading Day on which the applicable Exercise Default occurred.

     “Trading Day” means any day on which shares of Common Stock are purchased and sold on
the Principal Market.

     “VWAP” on a Trading Day means the volume weighted average price of the Common Stock for
such Trading Day on the Principal Market as reported by Bloomberg Financial Markets or, if
Bloomberg Financial Markets is not then reporting such prices, by a comparable reporting
service of national reputation selected by the Investors and reasonably satisfactory to the
Company. If the VWAP cannot be calculated for the Common Stock on such Trading Day on any
of the foregoing bases, then the Company shall submit such calculation to an independent
investment banking firm of national reputation reasonably acceptable to the Holder, and
shall cause such investment banking firm to perform such determination and notify the
Company and the Holder of the results of determination no later than two (2) Business Days
from the time such calculation was submitted to it by the Company.

4. EXERCISE LIMITATION.

     In no event shall the Holder be permitted to exercise this Warrant, or part thereof, if, upon
such exercise, the number of shares of Common Stock beneficially owned by the Holder (other than
shares which may be deemed beneficially owned except for being subject to a limitation on exercise
or exercise analogous to the limitation contained in this Section 4), would exceed 4.9% of the
number of shares of Common Stock then issued and outstanding, it being the intent of the Company
and the Holder that the Holder not be deemed at any time to have the power to vote or dispose of
greater than 4.9% of the number of shares of Common Stock issued and outstanding at any time.
Nothing contained herein shall be deemed to restrict the right of the
Holder to exercise this Warrant at a time as such exercise will not violate the provisions of this
Section 4. As used herein, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act. To the extent that the limitation contained in this Section 4 applies
(and

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without limiting any rights the Company may otherwise have), the submission of an Exercise
Notice by the Holder shall be deemed to be the Holder’s representation that this Warrant is
exercisable pursuant to the terms hereof, the Company may rely on the Holder’s representation that
this Warrant is exercisable pursuant to the terms hereof, and the Company shall have no obligation
whatsoever to verify or confirm the accuracy of such representation. The Company shall have no
liability to any person if the Holder’s determination of whether this Warrant is exercisable
pursuant to the terms hereof is incorrect. The holders of Common Stock are to be deemed
third-party beneficiaries of the limitation imposed hereby and, accordingly, this Section 4 may not
be amended without the consent of the holders of a majority of the shares of Common Stock then
outstanding; provided, however, that the Holder shall have the right, upon sixty (60) days’ prior
written notice to the Company, to waive the provisions of this Section 4, without obtaining such
consent.

5. PAYMENT OF THE EXERCISE PRICE; CASHLESS EXERCISE.

     The Holder may pay the Exercise Price in either of the following forms or, at the election of
Holder, a combination thereof:

          (a) through a cash exercise (a “Cash Exercise”) by delivering immediately available funds, or

          (b) through a cashless exercise (a “Cashless Exercise”) but only if (i) an effective
Registration Statement is not available for the resale of all of the Warrant Shares issuable
hereunder at the time an Exercise Notice is delivered to the Company, or (ii) the Company in its
discretion otherwise consents in writing. The Holder shall effect a Cashless Exercise by
surrendering this Warrant to the Company and noting on the Exercise Notice that the Holder wishes
to effect a Cashless Exercise, upon which the Company shall issue to the Holder a number of Warrant
Shares determined as follows:

	 	 	 
	 

	 	X = Y x (A-B)/A
	 
	 	 
	where:

	 	X = the number of Warrant Shares to be issued to the Holder;
	 
	 	 
	 

	 	Y = the number of Warrant Shares with respect to which this Warrant
is being exercised;
	 
	 	 
	 

	 	A = the VWAP as of the Exercise Date (or if the Exercise Date is
not a Trading Day, then the VWAP as of the Trading Day immediately
preceding such Exercise Date); and
	 
	 	 
	 

	 	B = the Exercise Price.

     It is intended and acknowledged that the Warrant Shares issued in a Cashless Exercise
transaction shall be deemed to have been acquired by the Holder, and the holding period for the
Warrant Shares required by Rule 144 shall be deemed, subject to applicable law, to have been
commenced, on the Issue Date.

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6. ANTI-DILUTION ADJUSTMENTS; DISTRIBUTIONS.

     The Exercise Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 6.

     (a) Stock Splits, Stock Interests, Etc. If, at any time on or after the Issue Date,
the number of outstanding shares of Common Stock is increased by a stock split, stock dividend,
reclassification or other similar event, the Exercise Price shall be proportionately reduced. The
Exercise Price shall not be adjusted upwards if the number of outstanding shares of Common Stock is
decreased by a reverse stock split, combination, reclassification or other similar event. In such
event, the Company shall notify the Company’s transfer agent of such change on or before the
effective date thereof.

     (b) Distributions. If, at any time after the Issue Date, the Company declares or
makes any distribution of cash, securities or any other rights or assets (including, without
limitation, securities that are excercisable for or convertible into shares of Common Stock or the
securities of any Subsidiary of the Company or any other entity) to holders of Common Stock (a
“Distribution”), the Company shall deliver written notice of such Distribution (a “Distribution
Notice”) to the Holder at least fifteen (15) days prior to the earlier to occur of (i) the record
date for determining stockholders entitled to such Distribution (the “Record Date”) and (ii) the
date on which such Distribution is made (the “Distribution Date”) (the earlier of such dates being
referred to as the “Determination Date”). The Holder shall be entitled to receive, and the Company
shall ensure that the Holder does receive, as and when distributed to the holders of Common Stock,
the same amount and type of cash, securities and all other rights and assets being distributed to
the holders of Common Stock as though the Holder were, on the Determination Date, a holder of a
number of shares of Common Stock into which this Warrant is exercisable as of such Determination
Date (such number of shares to be determined without giving effect to any limitations on such
exercise), and each such Distribution shall be made to the Holder as and when made to the holders
of Common Stock

     (c) Dilutive Issuances.

          (i) Adjustment Upon Dilutive Issuance. If, at any time after the Issue Date, the
Company issues or sells, or in accordance with Section 6(c)(ii) is deemed to have issued or sold,
any shares of Common Stock for no consideration or for a consideration per share less than the
Exercise Price on the date of such issuance or sale (or deemed issuance or sale) (such date being
deemed the Exercise Date for purposes hereof) (a “Dilutive Issuance”), then the Exercise Price
shall be adjusted so as to equal the consideration received or receivable by the Company (on a per
share basis) for the additional shares of Common Stock so issued, sold or deemed issued or sold in
such Dilutive Issuance (which, in the case of a deemed issuance or sale, shall be calculated in
accordance with Section 6(c)(ii) below). Notwithstanding the foregoing, no adjustment shall be
made pursuant to this Section 6(c)(i) if such adjustment would result in an increase in the
Exercise Price.

          (ii) Effect On Exercise Price Of Certain Events. For purposes of determining the
adjusted Exercise Price under Section 6(c)(i), the following will be applicable:

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               (A) Issuance Of Options. If the Company issues or sells any rights, warrants or
options to subscribe for, purchase or receive Common Stock or Convertible Securities (as defined
below) (any of the foregoing, “Options”), whether or not immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such Options (and the price of any
conversion of Convertible Securities, if applicable) is less than the Exercise Price in effect on
the date of issuance or sale of such Options, then the maximum total number of shares of Common
Stock issuable upon the exercise of all such Options (assuming full conversion, exercise or
exchange of Convertible Securities, if applicable) shall, as of the date of the issuance or sale of
such Options, be deemed to be outstanding and to have been issued and sold by the Company for such
price per share. For purposes of the preceding sentence, the “price per share for which Common
Stock is issuable upon the exercise of such Options” shall be determined by dividing (x)
the total amount, if any, received or receivable by the Company as consideration for the issuance
or sale of all such Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion, exercise or exchange thereof (determined in
accordance with the calculation method set forth in Section 6(c)(ii)(B)) at the time such
Convertible Securities first become convertible, exercisable or exchangeable, by (y) the maximum
total number of shares of Common Stock issuable upon the exercise of all such Options (assuming
full conversion, exercise or exchange of Convertible Securities, if applicable). No further
adjustment to the Exercise Price shall be made upon the actual issuance of such Common Stock upon
the exercise of such Options or upon the conversion, exercise or exchange of Convertible Securities
issuable upon exercise of such Options. To the extent that shares of Common Stock or Convertible
Securities are not delivered pursuant to such Options, upon the expiration or termination of such
Options, the Exercise Price shall be readjusted to the Exercise Price that would then be in effect
had the adjustments made upon the issuance of such Options been made on the basis of delivery of
only the number of shares of Common Stock actually delivered.

               (B) Issuance Of Convertible Securities. If the Company issues or sells any stock or
securities (other than Options) of the Company convertible into or exercisable or exchangeable for
Common Stock (any of the foregoing, “Convertible Securities”), whether or not immediately
convertible, exercisable or exchangeable, and the price per share for which Common Stock is
issuable upon such conversion, exercise or exchange is less than the Exercise Price in effect on
the date of issuance or sale of such Convertible Securities, then the maximum total number of
shares of Common Stock issuable upon the conversion, exercise or exchange of all such Convertible
Securities shall, as of the date of the issuance or sale of such Convertible Securities, be deemed
to be outstanding and to have been issued and sold by the Company for such price per share. If the
Convertible Securities so issued or sold do not have a fluctuating conversion or exercise price or
exchange ratio, then for the purposes of the immediately preceding sentence, the “price per share
for which Common Stock is issuable upon such conversion, exercise or exchange” shall be determined
by dividing (A) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any,
payable to the Company upon the conversion, exercise or exchange thereof (determined in
accordance with the calculation method set forth in this Section 6(c)(ii)(B)) at the time such

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Convertible Securities first become convertible, exercisable or exchangeable, by (B) the maximum
total number of shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities. If the Convertible Securities so issued or sold have a fluctuating
conversion or exercise price or exchange ratio (a “Variable Rate Convertible Security”), then for
purposes of the first sentence of this Section 6(c)(ii)(B), the “price per share for which Common
Stock is issuable upon such conversion, exercise or exchange” shall be deemed to be the lowest
price per share which would be applicable (assuming all holding period and other conditions to any
discounts contained in such Variable Rate Convertible Security have been satisfied) if the
conversion price of such Variable Rate Convertible Security on the date of issuance or sale thereof
were equal to the actual conversion price on such date (or such higher minimum conversion price if
such Variable Rate Convertible Security is subject to a minimum conversion price) (the “Assumed
Variable Market Price”), and, further, if the conversion price of such Variable Rate Convertible
Security at any time or times thereafter is less than or equal to the Assumed Variable Market Price
last used for making any adjustment under this Section 6(c) with respect to any Variable Rate
Convertible Security, the Exercise Price in effect at such time shall be readjusted to equal the
Exercise Price which would have resulted if the Assumed Variable Market Price at the time of
issuance of the Variable Rate Convertible Security had been equal to the actual conversion price of
such Variable Rate Convertible Security existing at the time of the adjustment required by this
sentence; provided, however, that if the conversion or exercise price or exchange ratio of a
Convertible Security may fluctuate solely as a result of provisions designed to protect against
dilution, such Convertible Security shall not be deemed to be a Variable Rate Convertible Security.
No further adjustment to the Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion, exercise or exchange of such Convertible Securities.

               (C) Change In Option Price Or Conversion Rate. If there is a change at any time
(including, without limitation, a change with respect to any Options or Convertible Securities
outstanding as of the Issue Date) in (x) the amount of additional consideration payable to the
Company upon the exercise of any Options; (y) the amount of additional consideration, if any,
payable to the Company upon the conversion, exercise or exchange of any Convertible Securities; or
(z) the rate at which any Convertible Securities are convertible into or exercisable or
exchangeable for Common Stock (in each such case, other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in effect at the time of such change
shall be readjusted to the Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion, exercise or exchange rate, as the case may be, at the time
initially issued or sold.

               (D) Calculation Of Consideration Received. If any Common Stock, Options or
Convertible Securities are issued or sold for cash, the consideration received therefor will be the
amount received by the Company therefor. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of which shall be other than cash,
including in the case of a strategic or similar arrangement in which the other entity will provide
services to the Company, purchase services from the Company or otherwise provide intangible
consideration to the Company, the amount of the consideration other than cash
received by the Company (including the net present value of the consideration expected by the
Company for the provided or purchased services) shall be the fair market value of such

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consideration. In case any Common Stock, Options or Convertible Securities are issued in connection
with any merger or consolidation in which the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair market value of such portion of the net assets
and business of the non-surviving corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The independent members of the Company’s Board of
Directors shall calculate reasonably and in good faith, using standard commercial valuation methods
appropriate for valuing such assets, the fair market value of any consideration.

          (iii) Exceptions To Adjustment Of Exercise Price. Notwithstanding the foregoing, no
adjustment to the Exercise Price shall be made pursuant to this Section 6(c) upon the issuance of
any Excluded Securities.

     (d) Notice Of Adjustments. Upon the occurrence of each adjustment or readjustment of
the Exercise Price pursuant to this Section 6 resulting in a change in the Exercise Price by more
than one percent (1%), or any change in the number or type of stock, securities and/or other
property issuable upon exercise of this Warrant, the Company, at its expense, shall promptly
compute such adjustment, readjustment or change and prepare and furnish to the Holder a certificate
setting forth such adjustment, readjustment or change and showing in detail the facts upon which
such adjustment, readjustment or change is based. The Company shall, upon the written request at
any time of the Holder, furnish to the Holder a like certificate setting forth (i) such adjustment,
readjustment or change, (ii) the Exercise Price at the time in effect and (iii) the number of
shares of Common Stock and the amount, if any, of other securities or property which at the time
would be received upon exercise of this Warrant.

     (e) Adjustments; Additional Shares, Securities or Assets. In the event that at any
time, as a result of an adjustment made pursuant to this Section 6, the Holder of this Warrant
shall, upon exercise of this Warrant, become entitled to receive securities or assets (other than
Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be
deemed to refer to and include such shares and/or other securities or assets; and thereafter the
number of such shares and/or other securities or assets shall be subject to adjustment from time to
time in a manner and upon terms as nearly equivalent as practicable to the provisions of this
Section 6. Any adjustment made herein that results in a decrease in the Exercise Price shall also
effect a proportional increase in the number of shares of Common Stock into which this Warrant is
exercisable.

7. MAJOR TRANSACTIONS.

     In the event of a merger, consolidation, business combination, tender offer, exchange of
shares, recapitalization, reorganization, redemption or other similar event, as a result of which
shares of Common Stock shall be changed into the same or a different number of shares of the same
or another class or classes of stock or securities or other assets of the Company or another entity
or the Company shall sell all or substantially all of its assets (each of the foregoing being a
“Major Transaction”), the Company will give the Holder at least ten (10) Trading Days’ written
notice prior to the earlier of (i) the closing or effectiveness of such Major Transaction and (ii)
the
record date for the receipt of such shares of stock or securities or other assets, and the
Holder shall be permitted to either (x) require the Company to repurchase this Warrant for cash in
an

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amount equal to the value of this Warrant calculated pursuant to the Black-Scholes pricing model
or (y) exercise this Warrant in whole or in part at any time prior to, on or after the record date
for the receipt of such consideration and shall be entitled to receive, in lieu of the shares of
Common Stock otherwise issuable upon exercise of this Warrant, such shares of stock, securities
and/or other assets as would have been issued or payable upon such Major Transaction with respect
to or in exchange for the number of shares of Common Stock which would have been issuable upon
exercise of this Warrant had such Major Transaction not taken place (without giving effect to any
limitations on such exercise contained in this Warrant or the Securities Purchase Agreement). If
and to the extent that the Holder retains this Warrant or any portion hereof following such record
date, the Company will cause the surviving or, in the event of a sale of assets, purchasing entity,
as a condition precedent to such Major Transaction, to assume by written instrument (in form and
substance reasonably satisfactory to the Holder) the obligations of the Company with respect to
this Warrant, with such adjustments to the Exercise Price and the securities covered hereby as may
be necessary in order to preserve the economic benefits of this Warrant to the Holder.

8. MISCELLANEOUS.

          (a) Failure to Exercise Rights not Waiver. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof. All rights and remedies of the Holder hereunder are
cumulative and not exclusive of any rights or remedies otherwise available. In the event that the
Company breaches any of its obligations hereunder to issue Warrant Shares or pay any amounts as and
when due, the Company shall bear all costs incurred by the Holder in collecting such amount,
including without limitation reasonable legal fees and expenses.

          (b) Notices. Any notice, demand or request required or permitted to be given by the
Company or the Holder pursuant to the terms of this Warrant shall be in writing and shall be deemed
delivered (i) when delivered personally or by verifiable facsimile transmission, unless such
delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to
be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to
an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail
(certified or registered mail, return receipt requested, postage prepaid), addressed as follows:

If to the Company:

Innuity, Inc.

8644 154th Avenue NE

Redmond, Washington 98052

Attn: John Wall

Tel: 425-479-9909

Fax: 425-278-1209

with a copy (which shall not constitute notice) to:

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DLA Piper US LLP

701 Fifth Avenue, Suite 7000

Seattle, Washington 98104

Attn: Michael Hutchings

Tel: 206-839-4800

Fax: 206-839-4801

and if to the Holder, to such address for such party as shall appear on the signature page of the
Securities Purchase Agreement executed by such party, or as shall be designated by such party in
writing to the other parties hereto in accordance this Section 8(b).

          (c) Amendments. No amendment, modification or other change to this Warrant, or waiver
of any agreement or other obligation of the Company under this Warrant, may be made or given unless
such amendment, modification or waiver is set forth in writing and is signed by the Company and by
the holders of a majority of the Warrant Shares underlying the Warrants then outstanding, it being
understood that upon the satisfaction of the preceding conditions, this and each other Warrant
(including any Warrant held by a holder thereof that did not execute the instrument specified in
the preceding clause) shall be deemed to incorporate any amendment, modification, change or waiver
effected thereby as of the effective date thereof. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.

          (d) Transfer of Warrant. The Holder may sell, transfer or otherwise dispose of all or
any part of this Warrant (including, without limitation, pursuant to a pledge) to any person or
entity as long as such sale, transfer or disposition is the subject of an effective registration
statement under the Securities Act and applicable state securities laws, or is exempt from
registration thereunder, and is otherwise made in accordance with the applicable provisions of the
Securities Purchase Agreement. From and after the date of any such sale, transfer or disposition,
the transferee hereof shall be deemed to be the holder of the portion of this Warrant acquired by
such transferee, and the Company shall, as promptly as practicable and at the Company’s cost and
expense, issue and deliver to such transferee a new Warrant identical in all respects to this
Warrant, in the name of such transferee. The Company shall be entitled to treat the original Holder
as the holder of this entire Warrant unless and until it receives written notice of the sale,
transfer or disposition hereof.

          (e) Lost or Stolen Warrant. Upon receipt by the Company of evidence of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction)
of indemnity or security reasonably satisfactory to the Company, and upon surrender and
cancellation of this Warrant, if mutilated, the Company shall at the Company’s cost and expense
execute and deliver to the Holder a new Warrant identical in all respects to this Warrant.

          (f) Governing Law. This Warrant shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be performed entirely within
the State of New York.

          (g) Successors and Assigns. The terms and conditions of this Warrant shall inure to
the benefit of and be binding upon the respective successors (whether by merger or

11

 

otherwise) and
permitted assigns of the Company and the Holder. The Company may not assign its rights or
obligations under this Warrant except as specifically required or permitted pursuant to the terms
hereof.

[Signature Page to Follow]

12

 

     IN WITNESS WHEREOF, the Company has duly executed and delivered this Warrant as of the Issue
Date.

	 	 	 	 	 
	 	INNUITY, INC.

 	 
	 	By:  	/s/ JOHN R. WALL
 	 
	 	 	Name:  	John R. Wall 	 
	 	 	Title:  	Chief Executive Officer 	 

 

 

	 	 	 	 	 

EXHIBIT A to WARRANT

EXERCISE NOTICE

     The undersigned Holder hereby irrevocably exercises the right to purchase                                         
of the shares of Common Stock (“Warrant Shares”) of INNUITY, INC. evidenced by the
attached Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Warrant.

     1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be
made as:

   
          
          
       a Cash Exercise with respect to  
           
         
       
             Warrant Shares; and/or

                               a Cashless Exercise with respect to  
        
        
       
      
           Warrant Shares, as
permitted by Section 5(b) of the attached Warrant.

     2. Payment of Exercise Price. In the event that the Holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the Holder shall pay the
sum of $                                         to the Company in accordance with the terms of the Warrant.

Date:                                                             

                     Name of Registered Holder                    

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 

Holder Requests Delivery to be made: (check one)

By Delivery of Physical Certificates to the Above Address

Through Depository Trust Corporation
(Account                                                            )exv10w1

 

Exhibit 10.1

Execution Copy

SECURITIES PURCHASE AGREEMENT

          SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of May 3, 2007, by and between
INNUITY, INC., a Utah corporation (the “Company”), and each of the entities whose names appear on
the signature pages hereof. Such entities are each referred to herein as an “Investor” and,
collectively, as the “Investors”.

     A. The Company wishes to sell to each Investor, and each Investor wishes to purchase, upon the
terms and subject to the conditions set forth in this Agreement, (i) a Senior Secured Note in the
form attached hereto as Exhibit A (a “Note” and, collectively with the other Notes issued
hereunder, the “Notes”) and (ii) a warrant in the form attached hereto as Exhibit B (a “Warrant”
and, collectively with the other Warrants issued hereunder, the “Warrants”). The shares of the
Company’s common stock, par value $0.00025 per share (the “Common Stock”), issuable upon exercise
of the Warrants are referred to herein as the “Warrant Shares”. The Notes, the Warrants and the
Warrant Shares are collectively referred to herein as the “Securities”.

     B. The Warrants will (i) entitle the Investors to purchase an aggregate of 1,128,164 Warrant
Shares, subject to adjustment as provided therein, (ii) have an exercise price equal to $0.01 per
share, subject to adjustment as provided therein, and (iii) expire on the third anniversary of the
Closing Date (as defined below).

     C. The Company’s obligations under the Notes, including without limitation its obligation to
make payments of principal thereof and interest thereon, are guaranteed by each of the Company’s
direct and indirect subsidiaries pursuant to a Subsidiary Guarantee in the form attached hereto as
Exhibit C (the “Subsidiary Guarantee”), and are secured pursuant to the terms of a Security
Agreement in the form attached hereto as Exhibit D (the “Security Agreement”).

     D. The Company has agreed to effect the registration of the Warrant Shares for resale by the
holders thereof under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to a
Registration Rights Agreement in the form attached hereto as Exhibit E (the “Registration Rights
Agreement”).

     E. The sale of the Warrants by the Company to the Investors will be effected in reliance upon
the exemption from securities registration afforded by the provisions of Regulation D (“Regulation
D”), as promulgated by the Commission (as defined below) under the Securities Act.

     In consideration of the mutual promises made herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each
Investor hereby agree as follows:

 

 

1. PURCHASE AND SALE OF NOTES AND WARRANTS.

     1.1 Closing.

          (a) Upon the terms and subject to the satisfaction or waiver of the conditions set forth
herein, the Company agrees to sell and each Investor agrees to purchase (i) a Note with a principal
amount equal to the amount set forth below such Investor’s name on the signature pages hereof and
(ii) a Warrant exercisable into the number of shares of Common Stock set forth below such
Investor’s name on the signature pages hereof. The date on which the closing of such purchase and
sale occurs (the “Closing”) is hereinafter referred to as the “Closing Date”. The Closing will be
deemed to occur at the offices of Mazzeo Song LLP, 708 Third Avenue, 19th Floor, New
York, New York 10017 when (A) this Agreement and the other Transaction Documents (as defined below)
have been executed and delivered by the Company and each Investor, (B) each of the conditions to
the Closing described in this Agreement has been satisfied or waived as specified therein and (C)
payment of each Investor’s Purchase Price (as defined below) payable with respect to the Note and
Warrant being purchased by such Investor at the Closing has been made by wire transfer of
immediately available funds. At the Closing, the Company shall deliver to each Investor duly
executed instruments representing the Note and Warrant purchased by such Investor at the Closing.

          (b) The Company and the Investors hereby agree that the Company shall sell to the Investors,
and the Investors shall purchase from the Company, additional Notes in the aggregate principal
amount of $1,000,000 (the “Second Investment”), provided that the obligation of the Investors to
make the Second Investment shall be subject to the satisfaction or waiver of the following
conditions: (i) the Company shall have timely delivered to the Investors the legal opinion
required to be delivered pursuant to Section 4.19 of this Agreement, and there shall be no other
Event of Default that shall have occurred; and (ii) the Investors shall have completed their due
diligence of the Company and the Company Subsidiaries to their satisfaction. The terms of the
transaction documents to be entered into by the Company and the Investors in connection with Second
Investment shall be substantially similar to the Transaction Documents, provided that no additional
Warrants shall be issued to the Investors. Notwithstanding the foregoing, the Investors’
obligations to make the Second Investment shall terminate if the Second Investment has not been
consummated on or prior to the thirtieth (30th) day following the Closing and such delay
was not caused by an Investor’s breach of this Section 1.1(b).

     1.2 Certain Definitions. When used herein, the following terms shall have the
respective meanings indicated:

     “Affiliate” means, as to any Person (the “subject Person”), any other Person (a) that
directly or indirectly through one or more intermediaries controls or is controlled by, or
is under direct or indirect common control with, the subject Person, (b) that directly or
indirectly beneficially owns or holds ten percent (10%) or more of any class of voting
equity of the subject Person, or (c) ten percent (10%) or more of the voting equity of which
is directly or indirectly beneficially owned or held by the subject Person. For the

2

 

purposes of this definition, “control” when used with respect to any Person means the
power to direct the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, through representation on such Person’s board of
directors or other management committee or group, by contract or otherwise.

     “Board of Directors” means the Company’s board of directors.

     “Business Day” means any day other than a Saturday, a Sunday or a day on which the
Principal Market is closed or on which banks in the City of New York are required or
authorized by law to be closed.

     “Closing” and “Closing Date” have the respective meanings specified in Section 1.1(a)
of this Agreement.

     “Commission” means the Securities and Exchange Commission, and any successor regulatory
agency.

     “Common Stock” has the meaning specified in the recitals to this Agreement.

     “Company Subsidiaries” means the Subsidiaries of the Company set forth on Schedule
3.5(ii) and such other Subsidiaries of the Company that become party to the Subsidiary
Guarantee and/or the Security Agreement.

     “Debt” means, as to any Person at any time: (a) all indebtedness, liabilities and
obligations of such Person for borrowed money; (b) all indebtedness, liabilities and
obligations of such Person to pay the deferred purchase price of Property or services
(except trade accounts payable of such Person arising in the ordinary course of business
that are not past due by more than 90 days); (c) all capital lease obligations of such
Person; (d) all Debt of others guaranteed by such Person; (e) all indebtedness, liabilities
and obligations secured by a Lien existing on Property owned by such Person, whether or not
the indebtedness, liabilities or obligations secured thereby have been assumed by such
Person or are non-recourse to such Person; (f) all reimbursement obligations of such Person
(whether contingent or otherwise) in respect of letters of credit, bankers’ acceptances,
surety or other bonds and similar instruments; and (g) all liabilities and obligations of
such Person to redeem or retire shares of capital stock of such Person.

     “Disclosure Documents” means all SEC Documents filed with the Commission at least five
(5) Business Days prior to the Execution Date.

     “DTC” means The Depositary Trust Company (and any successor entity).

     “Effective Date” has the meaning specified in the Registration Rights Agreement.

     “Eligible Accounts” means, with respect to the Company, the accounts that arise in the
ordinary course of the business of the Company and the Company Subsidiaries (for

3

 

purposes of this definition, the Company and the Company Subsidiaries are sometimes
referred to herein individually as a “Company Entity” and collectively as the “Company
Entities”). Unless otherwise agreed to by the holders of a majority in principal amount of
the Notes, Eligible Accounts shall not include the following:

     (a) accounts that the account debtor has failed to pay in full within 90 days
of invoice date;

     (b) credit balances over 90 days;

     (c) accounts with respect to an account debtor, 25% of whose accounts the
account debtor has failed to pay within 90 days of invoice date;

     (d) accounts with respect to an account debtor, including Subsidiaries and
Affiliates of such account debtor, whose total obligations to the Company Entities
exceed 25% of all accounts of the Company Entities, to the extent such obligations
exceed the aforementioned percentage, except as approved in writing by the
Investors;

     (e) accounts with respect to which the account debtor does not have its
principal place of business in the United States, except for Eligible Foreign
Accounts;

     (f) accounts with respect to which the account debtor is the United States or
any department, agency, or instrumentality of the United States;

     (g) accounts with respect to which a Company Entity is liable to the account
debtor for goods sold or services rendered by the account debtor to any of the
Company Entities, but only to the extent of any amounts owing to the account debtor
against amounts owed to such Company Entity;

     (h) accounts with respect to which goods are placed on consignment, guaranteed
sale, sale or return, sale on approval, bill and hold, demo or promotional, or other
terms by reason of which the payment by the account debtor may be conditional;

     (i) accounts with respect to which the account debtor is an officer, employee,
agent or Affiliate of any Company Entity (including any inter-company accounts);

     (j) accounts that have not yet been billed to the account debtor or that
relate to deposits (such as good faith deposits) or other property of the account
debtor held by a Company Entity for the performance of services or delivery of goods
which any Company Entity has not yet performed or delivered;

4

 

     (k) accounts with respect to which the account debtor disputes liability or
makes any claim with respect thereto as to which the holders of a majority in
principal amount of the Notes believe, in their sole discretion, that there may be a
basis for dispute (but only to the extent of the amount subject to such dispute or
claim),

     (l) accounts with respect to which the account debtor is subject to any
insolvency or similar proceeding, or becomes insolvent or goes out of business;

     (m) accounts the collection of which the holders of a majority in principal
amount of the Notes reasonably determine after inquiry and consultation with the
Company Entities to be doubtful; and

     (n) retentions and hold-backs.

     “Eligible Foreign Accounts” means accounts with respect to which the account debtor
does not have its principal place of business in the United States and that are approved by
the holders of a majority in principal amount of the Notes on a case-by-case basis. All
Eligible Foreign Accounts must be calculated in U.S. Dollars.

     “Environmental Law” means any federal, state, provincial, local or foreign law,
statute, code or ordinance, principle of common law, rule or regulation, as well as any
Permit, order, decree, judgment or injunction issued, promulgated, approved or entered
thereunder, relating to pollution or the protection, cleanup or restoration of the
environment or natural resources, or to the public health or safety, or otherwise governing
the generation, use, handling, collection, treatment, storage, transportation, recovery,
recycling, discharge or disposal of hazardous materials.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder.

     “Event of Default” has the meaning specified in the Notes.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended (or any successor
act), and the rules and regulations promulgated thereunder (or respective successors
thereto).

     “Excluded Securities” means (i) the Warrants; (ii) the Warrant Shares and any other
securities issued upon the conversion or exercise of any other options, warrants,
convertible securities or any other agreements outstanding as of the Issue Date and
disclosed on Schedule 3.5(i) hereto; (iii) shares of Common Stock issuable or issued to
employees from time to time upon the exercise of options granted or to be granted in the
discretion of the Board of Directors pursuant to one or more employee stock option plans or
restricted stock plans in effect as of the Issue Date or adopted after the Issue Date by the
independent members of the Board of Directors; and (iv) shares of Common Stock

5

 

issued in connection with any stock split, stock dividend or recapitalization of the
Company.

     “Execution Date” means the date of this Agreement.

     “GAAP” means U.S. generally accepted accounting principles, applied on a consistent
basis. Accounting principles are applied on a “consistent basis” when the accounting
principles applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.

     “Governmental Authority” means any nation or government, any state, provincial or
political subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, including, without
limitation, any stock exchange, securities market or self-regulatory organization.

     “Governmental Requirement” means any law, statute, code, ordinance, order, rule,
regulation, judgment, decree, injunction, franchise, license or other directive or
requirement of any federal, state, county, municipal, parish, provincial or other
Governmental Authority or any department, commission, board, court, agency or any other
instrumentality of any of them.

     “Intellectual Property” means the collective reference to all existing rights,
priorities and privileges relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including, without limitation, (i) all
copyrights arising under the laws of the United States, any other country or any political
subdivision thereof, whether registered or unregistered and whether published or
unpublished, all registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and applications in
the United States Copyright Office, (ii) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions thereof, and all
applications for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, (iii) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and all
goodwill associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection therewith, whether
in the United States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political subdivision thereof,
or otherwise, and all common law rights related thereto, (iv) all trade secrets arising
under the laws of the United States, any other country or any political subdivision thereof,
(v) all rights to obtain any reissues, renewals or extensions of the foregoing, (vi) all
licenses for any of the foregoing, and (vii) all causes of action for infringement of the
foregoing.

     “Investment Company Act” has the meaning specified in Section 3.25 of this Agreement.

6

 

     “Investor Party” has the meaning specified in Section 4.9 of this Agreement.

     “Key Employee” has the meaning specified in Section 3.16 of this Agreement.

     “Lien” means, with respect to any Property, any lien, mortgage, pledge, hypothecation,
assignment, security interest, charge, easement or other encumbrance.

     “Material Adverse Effect” means an effect that is material and adverse to (i) the
consolidated business, properties, assets, operations, results of operations, financial
condition, credit worthiness or prospects of the Company and the Company Subsidiaries taken
as a whole, (ii) the ability of the Company or any Company Subsidiary to perform its
material obligations under this Agreement or the other Transaction Documents or (iii) the
rights and benefits to which an Investor is entitled under this Agreement or any of the
other Transaction Documents.

     “Material Contracts” means, as to the Company and the Company Subsidiaries, any
agreement required pursuant to Item 601 of Regulation S-B or Item 601 of Regulation S-K, as
applicable, promulgated under the Securities Act to be filed as an exhibit to any report,
schedule, registration statement or definitive proxy statement filed or required to be filed
by the Company with the Commission under the Exchange Act or any rule or regulation
promulgated thereunder, and any and all material amendments, modifications, supplements,
renewals or restatements thereof.

     “Pension Plan” means an employee pension benefit plan (as defined in ERISA) maintained
by the Company for employees of the Company or any of its Affiliates.

     “Permitted Debt” means the following:

     (a) the Notes;

     (b) Debt outstanding on the Execution Date and disclosed on Schedule 3.5(iv) hereto;

     (c) Subordinated Debt; and

     (d) Debt consisting of capitalized lease obligations and purchase money indebtedness
incurred in connection with acquisition of capital assets and obligations under
sale-leaseback or similar arrangements provided in each case that such obligations are not
secured by Liens on any assets of the Company or the Company Subsidiaries other than the
assets so leased.

     “Permitted Liens” means each of the following:

          (a) Liens in existence on the Execution Date and disclosed on Schedule 3.5(v) hereto;

7

 

          (b) encumbrances consisting of easements, rights-of-way, zoning restrictions or other
restrictions on the use of real Property or imperfections to title that do not (individually
or in the aggregate) materially impair the ability of the Company or any Company Subsidiary
to use such Property in its businesses, and none of which is violated in any material
respect by existing or proposed structures or land use;

          (c) Liens for taxes, assessments or other governmental charges (including without
limitation in connection with workers’ compensation and unemployment insurance) that are not
delinquent or which are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the Property subject to
such Liens, and for which adequate reserves (as determined in accordance with GAAP) have
been established;

          (d) Liens of mechanics, materialmen, warehousemen, carriers, landlords or other similar
statutory Liens securing obligations that are not yet due and are incurred in the ordinary
course of business or which are being contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of the Property
subject to such Liens, for which adequate reserves (as determined in accordance with GAAP)
have been established; and

          (e) mortgages on real Property in existence on the Execution Date and disclosed on
Schedule 3.22 hereto, and any replacements thereof, securing amounts not greater than the
amounts secured thereby on the Execution Date.

     “Person” means any individual, corporation, trust, association, company, partnership,
joint venture, limited liability company, joint stock company, Governmental Authority or
other entity.

     “Principal Market” means the principal exchange, market or quotation system on which
the Common Stock is listed, traded or quoted.

     “Property” means property and/or assets of all kinds, whether real, personal or mixed,
tangible or intangible (including, without limitation, all rights relating thereto).

     “Pro Rata Share” means, with respect to an Investor, the ratio determined by dividing
(i) the principal amount of the Note purchased hereunder by such Investor at the Closing by
(ii) the aggregate principal amount of all Notes purchased hereunder by all of the Investors
at the Closing.

     “Purchase Price” means, with respect to Securities purchased at the Closing, the
original principal amount of the Note purchased at the Closing.

     “Registration Rights Agreement” has the meaning specified in the recitals to this
Agreement.

8

 

     “Registration Statement” has the meaning specified in the Registration Rights
Agreement.

     “Registrable Securities” has the meaning specified in the Registration Rights
Agreement.

     “Regulation D” has the meaning specified in the recitals to this Agreement.

     “Reserved Amount” has the meaning specified in Section 4.3 of this Agreement.

     “Restricted Payment” means (a) any dividend or other distribution (whether in cash,
Property or obligations), direct or indirect, on account of (or the setting apart of money
for a sinking or other analogous fund for the benefit of) any shares of any class of capital
stock of the Company or the Company Subsidiaries now or hereafter outstanding, except a
dividend payable solely in shares of that class of stock to all of the holders of that
class; (b) any redemption, exchange, retirement, sinking fund or similar payment, purchase
or other acquisition for value, direct or indirect, of any shares of any class of capital
stock of the Company or any of its Affiliates now or hereafter outstanding, except the
Securities; (c) any prepayment of principal of, premium, if any, or interest on, or any
redemption, conversion, exchange, purchase, retirement, sinking fund or defeasance of, any
Debt (whether upon acceleration of such Debt, amendment of the terms governing such Debt or
otherwise) other than the Securities (it being understood that regularly scheduled payments
of principal and interest shall not be deemed a Restricted Payment); and (d) any bonus,
loan, advance or payment to any employee, officer, director or stockholder of the Company or
any of its Affiliates exclusive of the Restricted Payment Exceptions.

     “Restricted Payment Exceptions” means (i) reasonable base salary as currently in effect
paid to employees and officers in the ordinary course of business, (ii) reasonable bonuses
and base salary increases paid to employees that never served as an officer of the Company
or any of the Company Subsidiaries, provided that the aggregate amount of such bonuses and
base salary increases during any fiscal year shall not exceed 10% of the total base salary
payable to such non-officer employees during such fiscal year, (iii) 10-K and 10-Q bonuses
payable to Mr. Barney Linden in an amount not to exceed $5,000 per fiscal quarter, and (iv)
earn-out payments payable by in accordance with, and not more than what is required by, that
certain Contingent Offer of Employment Letter, dated June 16, 2005, between Vista.com, Inc.
and Steve Ferrante, as in effect as of the date hereof.

     “Rule 144” means Rule 144 under the Securities Act or any successor provision.

     “SEC Documents” means all reports, schedules, registration statements and definitive
proxy statements filed (or required to be filed) by the Company with the Commission from and
after December 31, 2005.

     “Securities” has the meaning specified in the recitals to this Agreement.

     “Securities Act” has the meaning specified in the recitals of this Agreement.

9

 

     “Subordinated Debt” means Debt of the Company which meets each of the following
requirements: (a) such Debt is wholly unsecured; (b) such Debt is contractually
subordinated, as to payment and liquidation, to the payment in full of the Notes on such
terms and pursuant to written agreements in such form and substance as are reasonably
acceptable to the holders of a majority in principal amount of the Notes, that restrict the
Company from pre-paying any amounts in respect of the principal of such Debt (upon
acceleration or otherwise) prior to the scheduled maturity thereof, and that restrict the
subordinated creditor from commencing any judicial or other collection efforts or exercising
any other remedies prior to the date that is ninety-one (91) days following the payment in
full of the Notes; and (c) such Debt does not mature prior to the date that is ninety-one
(91) days following the latest Maturity Date (as defined in the Notes) of the Notes then
outstanding.

     “Subsequent Placement” means any issuance, sale or exchange by the Company or any
Company Subsidiary at any time after the Closing Date, or any agreement or obligation of the
Company or any Company Subsidiary to issue, sell or exchange, at any time after the Closing
Date, (i) any shares of common stock of the Company or any Company Subsidiary, (ii) any
other equity security of the Company or any Company Subsidiary, including without limitation
preferred stock, (iii) any other security of the Company or any Company Subsidiary which by
its terms is convertible into or exchangeable or exercisable for any equity security of the
Company or any Company Subsidiary, (iv) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any such security described in the foregoing clauses (i)
through (iii), or (v) any debt instruments or securities, including promissory notes and
convertible debt instruments; provided, however, that the term “Subsequent Placement” shall
not be deemed to include any issuance, sale or exchange of Excluded Securities.

     “Subsidiary” means, with respect to any Person, any corporation or other entity of
which at least a majority of the outstanding shares of stock or other ownership interests
having by the terms thereof ordinary voting power to elect a majority of the board of
directors (or Persons performing similar functions) of such corporation or entity
(regardless of whether or not at the time, in the case of a corporation, stock of any other
class or classes of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries.

     “Termination Date” means the first date on which there are no Notes outstanding.

     “Transaction Documents” means (i) this Agreement, (ii) the Notes, (iii) the Warrants,
(iv) the Registration Rights Agreement, (v) the Security Agreement, (vi) the Subsidiary
Guarantee and (vi) all other agreements, documents and other instruments executed and
delivered by or on behalf of the Company or any of its officers at the Closing.

     “Transfer Agent” has the meaning specified in Section 2.5 of this Agreement.

10

 

     1.3 Other Definitional Provisions. All definitions contained in this Agreement are
equally applicable to the singular and plural forms of the terms defined. The words “hereof”,
“herein” and “hereunder” and words of similar import contained in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.

2. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.

     Each Investor (with respect to itself only) hereby represents and warrants to the Company and
agrees with the Company that, as of the Execution Date:

     2.1 Authorization; Enforceability. Such Investor is duly and validly organized,
validly existing and in good standing under the laws of the jurisdiction of its incorporation or
organization as set forth below such Investor’s name on the signature page hereof with the
requisite corporate power and authority to purchase the Notes and Warrants to be purchased by it
hereunder and to execute and deliver this Agreement and the other Transaction Documents to which it
is a party. This Agreement constitutes, and upon execution and delivery thereof, each other
Transaction Document to which such Investor is a party will constitute, such Investor’s valid and
legally binding obligation, enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws of
general application relating to or affecting the enforcement of creditors’ rights generally and
(ii) general principles of equity.

     2.2 Accredited Investor. Such Investor (i) is an “accredited investor” as that term
is defined in Rule 501 of Regulation D, (ii) was not formed or organized for the specific purpose
of making an investment in the Company, and (iii) is acquiring the Securities solely for its own
account and not with a present view to the public resale or distribution of all or any part
thereof, except pursuant to sales that are registered under, or exempt from the registration
requirements of, the Securities Act; provided, however, that in making such representation, such
Investor does not agree to hold the Securities for any minimum or specific term and reserves the
right to sell, transfer or otherwise dispose of the Securities at any time in accordance with the
provisions of this Agreement and with Federal and state securities laws applicable to such sale,
transfer or disposition. Such Investor can bear the economic risk of a total loss of its investment
in the Securities and has such knowledge and experience in business and financial matters so as to
enable it to understand the risks of and form an investment decision with respect to its investment
in the Securities.

     2.3 Information. The Company has, prior to the Execution Date, provided such Investor
with information regarding the business, operations and financial condition of the Company and has,
prior to the Execution Date, granted to such Investor the opportunity to ask questions of and
receive answers from representatives of the Company, its officers, directors, employees and agents
concerning the Company in order for such Investor to make an informed decision with respect to its
investment in the Securities. Neither such information nor any other investigation conducted by
such Investor or any of its representatives shall modify, amend or otherwise affect such Investor’s
right to rely on the Company’s representations and warranties contained in this Agreement.

     2.4 Limitations on Disposition. Such Investor acknowledges that, except as provided
in the Registration Rights Agreement, the Securities have not been and are not being registered
under

11

 

the Securities Act and may not be transferred or resold without registration under the
Securities Act or unless pursuant to an exemption therefrom.

     2.5 Legend. Such Investor understands that the certificates representing the Warrants
may bear at issuance a restrictive legend in substantially the following form:

“The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the “Securities Act”), or any
state securities laws, and may not be offered for sale or sold unless a
registration statement under the Securities Act and applicable state
securities laws shall have become effective with respect thereto, or an
exemption from registration under the Securities Act and applicable state
securities laws is available in connection with such offer or sale. These
securities and the securities issuable upon exercise hereof (i) may be
pledged or hypothecated in connection with a bona fide margin account or
other financing secured by such securities or (ii) may be transferred or
assigned to an affiliate of the holder hereof without the necessity of an
opinion of counsel or the consent of the issuer hereof.”

Notwithstanding the foregoing, it is agreed that, as long as (A) the resale or transfer (including
without limitation a pledge) of any of the Securities is registered pursuant to an effective
registration statement, (B) such Securities have been sold pursuant to Rule 144, subject to receipt
by the Company of customary documentation reasonably acceptable to the Company in connection
therewith, or (C) such Securities are eligible for resale under Rule 144(k) or any successor
provision, such Securities shall be issued without any legend or other restrictive language and,
with respect to Securities upon which such legend is stamped, the Company shall issue new
certificates without such legend to the holder upon request. The Company shall execute and deliver
written instructions to the transfer agent for its Common Stock (the “Transfer Agent”) as may be
necessary to satisfy any request by an Investor for removal of such legends no later than the close
of business on the third (3rd) Business Day following the receipt of the request from an
Investor to the extent such legends may be removed in accordance with this Section 2.5.

     2.6 Reliance on Exemptions. Such Investor understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from the registration requirements of
U.S. federal and state securities laws and that the Company is relying upon the truth and accuracy
of the representations and warranties of such Investor set forth in this Section 2 in order to
determine the availability of such exemptions and the eligibility of such Investor to acquire the
Securities. Such Investor acknowledges that it did not purchase the Securities based upon any
advertisement in any publication of general circulation. Such Investor is relying on the
representations, acknowledgements and agreements made by the Company in Section 3 and elsewhere in
this Agreement in making investing, trading and/or other decisions concerning the Company’s
securities.

     2.7 Non-Affiliate Status; Common Stock Ownership. Such Investor is not an Affiliate
of the Company or of any other Investor and is not acting in association or concert with any other
Person in regard to its purchase of the Securities or otherwise in respect of the Company. Such
Investor’s investment in the Securities is not for the purpose of acquiring,

12

 

directly or indirectly, control of, and it has no intent to acquire or exercise control of, the
Company or to influence the decisions or policies of the Board of Directors.

     2.8 Fees. Such Investor has not agreed to pay any compensation or other fee, cost or
related expenditure to any underwriter, broker, agent or other representative in connection with
the transactions contemplated hereby.

     2.9 No Conflicts. The execution and performance of this Agreement and the other
Transaction Documents to which it is a party do not conflict in any material respect with any
agreement to which such Investor is a party or is bound, any court order or judgment applicable to
such Investor, or the constituent documents of such Investor.

     2.10 No Governmental Review. Such Investor understands that no U.S. federal or state
agency or any other Governmental Authority has passed on or made any recommendation or endorsement
of the Securities or the fairness or suitability of an investment in the Securities nor have such
authorities passed upon the accuracy of any information provided to such Investor or made any
findings or determinations as to the merits of the offering of the Securities.

     2.11 Certain Trading Activities. Such Investor has not, in violation of the
securities laws, directly or indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor, engaged in any transactions in the securities of the Company
since the time that such Investor was first contacted by the Company or Kaufman Bros., L.P.
regarding the investment in the Company contemplated by the Transaction Documents. Such Investor
covenants that neither it nor any Person acting on its behalf or pursuant to any understanding with
it will engage in any transactions in the securities of the Company prior to the time that the
transactions contemplated by this Agreement are publicly disclosed pursuant to Section 4.1(c).

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and
warrants to each Investor and agrees with each Investor that, as of the Execution Date:

     3.1 Organization, Good Standing and Qualification. Each of the Company and the
Company Subsidiaries is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite power and authority to
carry on its business as now conducted. Each of the Company and the Company Subsidiaries is duly
qualified to transact business and is in good standing in each jurisdiction in which it conducts
business except where the failure so to qualify has not had or would not reasonably be expected to
have a Material Adverse Effect.

     3.2 Authorization; Consents. The Company has the requisite corporate power and
authority to enter into and perform its obligations under the Transaction Documents, to issue and
sell the Notes and the Warrants to the Investors in accordance with the terms hereof and thereof,
and to issue the Warrant Shares upon exercise of the Warrants. Each Company Subsidiary has the
requisite power and authority to enter into and perform its obligations under the Subsidiary
Guarantee and the Security Agreement. All corporate action on the part of the Company by its
officers, directors and stockholders necessary for the authorization, execution and delivery of,
and

13

 

the performance by the Company of its obligations under, the Transaction Documents has been taken,
and no further consent or authorization of the Company, its Board of Directors, stockholders, any
Governmental Authority or any other Person (other than such approval as may be required under the
Securities Act and applicable state laws in respect of the Registration Rights Agreement) is
required (pursuant to any rule of the Principal Market or otherwise). All corporate action on the
part of each Company Subsidiary by its officers, directors, stockholders, members or governors
necessary for the authorization, execution and delivery of, and the performance by such Company
Subsidiary of its obligations under the Subsidiary Guarantee and the Security Agreement has been
taken. The Board of Directors has determined that the sale and issuance of the Securities, and the
consummation of the other transactions contemplated hereby and by the other Transaction Documents,
are in the best interests of the Company.

     3.3 Enforcement. This Agreement has been duly executed and delivered by the Company,
and at the Closing, each of the Company and the Company Subsidiaries will have duly executed and
delivered each of the other Transaction Documents to which such entity is a party. This Agreement
constitutes, and at the Closing, each of the other Transaction Documents to which the Company or
any of the Company Subsidiaries is a party will constitute, the valid and legally binding
obligations of the Company and the Company Subsidiaries, enforceable against the Company and the
Company Subsidiaries in accordance with their respective terms, subject to (i) applicable
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or other similar laws of
general application relating to or affecting the enforcement of creditors’ rights generally and
(ii) general principles of equity.

     3.4 Disclosure Documents; Agreements; Financial Statements; Other Information. The
Company is subject to the reporting requirements of the Exchange Act and the Company has filed with
the Commission all SEC Documents that the Company was required to file with the Commission on or
after December 31, 2005. The Company is not aware of any event occurring or expected to occur on
or prior to the Closing Date (other than the transactions effected hereby) that would require the
filing of, or with respect to which the Company intends to file, a Form 8-K after the Closing.
Each SEC Document filed on or after December 31, 2005, as of the date of the filing thereof with
the Commission (or if amended or superseded by a filing prior to the Execution Date, then on the
date of such amending or superseding filing), complied in all material respects with the
requirements of the Securities Act or Exchange Act, as applicable, and the rules and regulations
promulgated thereunder and, as of the date of such filing (or if amended or superseded by a filing
prior to the Execution Date, then on the date of such filing), such SEC Document (including all
exhibits and schedules thereto and documents incorporated by reference therein) did not, contain an
untrue statement of material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading. All documents required to be filed as exhibits to the SEC Documents filed on or
after December 31, 2005 have been filed as required. Except as set forth in the Disclosure
Documents, the Company has no liabilities, contingent or otherwise, other than liabilities incurred
in the ordinary course of business which, under GAAP, are not required to be reflected in the
financial statements included in the Disclosure Documents and which, individually or in the
aggregate, are not material to the consolidated business or financial condition of the Company and
the Company Subsidiaries taken as a whole. As of their respective dates, the financial statements
of the Company included in the SEC Documents filed on or after December 31, 2005 complied as to
form in all

14

 

material respects with applicable accounting requirements and the published rules and regulations
of the Commission with respect thereto. Such financial statements have been prepared in accordance
with GAAP consistently applied at the times and during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end adjustments). The
Company will prepare the financial statements to be included in any reports, schedules,
registration statements and definitive proxy statements that the Company is required to file or
files with the Commission after the date hereof in accordance with GAAP (except in the case of
unaudited interim statements, to the extent they may exclude footnotes or may be condensed or
summary statements).

     3.5 Capitalization; Debt Schedule. The capitalization of the Company, including its
authorized capital stock, the number of shares issued and outstanding, the number of shares
issuable and reserved for issuance pursuant to the Company’s stock option plans and agreements, the
number of shares issuable and reserved for issuance pursuant to securities (other than the
Warrants) exercisable for, or convertible into or exchangeable for any shares of Common Stock and
the number of shares initially to be reserved for issuance upon exercise of the Warrants, is set
forth on Schedule 3.5(i) hereto. All outstanding shares of capital stock of the Company have been,
or upon issuance will be, validly issued, fully paid and non-assessable. All of the direct and
indirect Subsidiaries of the Company are set forth on Schedule 3.5(ii) hereto. The Company or a
Company Subsidiary owns all of the capital stock of each Company Subsidiary, which capital stock is
validly issued, fully paid and non-assessable, and no shares of the capital stock of the Company or
any Company Subsidiary are subject to preemptive rights or any other similar rights of the
stockholders of the Company or any such Company Subsidiary or any Liens created by or through the
Company or any such Company Subsidiary. Except as disclosed on Schedule 3.5(i) or as contemplated
herein, there are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible into or
exercisable or exchangeable for, any shares of capital stock of the Company or any Company
Subsidiary, or arrangements by which the Company or any Company Subsidiary is or may become bound
to issue additional shares of capital stock of the Company or any Company Subsidiary (whether
pursuant to anti-dilution, “reset” or other similar provisions). Schedule 3.5(iv) identifies all
Debt of the Company and/or the Company Subsidiaries currently outstanding as of the date hereof,
and Schedule 3.5(v) identifies all Liens encumbering any of the assets of the Company and/or the
Company Subsidiaries as of the date hereof.

     3.6 Due Authorization; Valid Issuance. The Notes are duly authorized and, when
issued, sold and delivered in accordance with the terms of this Agreement, will be duly and validly
issued, free and clear of any Liens imposed by or through the Company. The Warrants are duly
authorized and, when issued, sold and delivered in accordance with the terms of this Agreement,
will be duly and validly issued, free and clear of any Liens imposed by or through the Company. The
Warrant Shares issuable under the Warrants are duly authorized and reserved for issuance. Assuming
the accuracy of each Investor’s representations contained herein, the issuance and sale of the
Notes and Warrants under this Agreement will be effected in compliance with all applicable Federal
and state securities laws.

15

 

     3.7 Form SB-2. The Company is eligible to register the Warrant Shares for resale in a
secondary offering by each Investor on a registration statement on Form SB-2 under the Securities
Act. To the Company’s knowledge, as of the date hereof and as of the Closing Date, there exist no
facts or circumstances (including without limitation any required approvals or waivers of any
circumstances that may delay or prevent the obtaining of accountant’s consents) that could
reasonably be expected to prohibit or delay the preparation, filing or effectiveness of such
registration statement on Form SB-2.

     3.8 No Conflict; No Violation. Neither the Company nor any Company Subsidiary is in
violation of any provisions of its charter, bylaws or any other governing document. Neither the
Company nor any Company Subsidiary is in violation of or in default (and no event has occurred
which, with notice or lapse of time or both, would constitute a default) under any provision of any
instrument or contract to which it is a party or by which it or any of its Property is bound, or in
violation of any provision of any Governmental Requirement applicable to the Company or any Company
Subsidiary. The execution, delivery and performance of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and thereby will not result
in any violation of any provisions of the Company’s or any Company Subsidiary’s charter, bylaws or
any other governing document or in a default under any provision of any instrument or contract to
which the Company or Company Subsidiary is a party or by which it or any of its Property is bound,
or in violation of any provision of any Governmental Requirement applicable to the Company or
Company Subsidiary or be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, instrument or contract or an event
which results in the creation of any Lien upon any assets of the Company or of any Company
Subsidiary or the triggering of any preemptive or anti-dilution rights (including without
limitation pursuant to any “reset” or similar provisions) or rights of first refusal or first
offer, or any other rights that would allow or permit the holders of the Company’s securities or
any other Person to purchase shares of Common Stock or other securities of the Company or Company
Subsidiary (whether pursuant to a stockholder rights plan provision or otherwise).

     3.9 Financial Condition; Taxes; Litigation.

          3.9.1 The financial condition of each of the Company and each Company Subsidiary is, in all
material respects, as described in the Disclosure Documents, except for changes in the ordinary
course of business and normal year-end adjustments that are not, in the aggregate, materially
adverse to the consolidated business or financial condition of the Company and the Company
Subsidiaries taken as a whole. There has been no (i) material adverse change to the business,
operations, properties, financial condition, prospects or results of operations of the Company and
the Company Subsidiaries taken as a whole since the date of the Company’s most recent financial
statements contained in the Disclosure Documents, (ii) material adverse change to the Company’s
cash balances or cash flows during the 90 days preceding the date hereof, or (iii) change by the
Company in its accounting principles, policies and methods except as required by changes in GAAP.

          3.9.2 Except as set forth on Schedule 3.9.2, each of the Company and the Company Subsidiaries
has prepared in good faith and duly and timely filed all tax returns required to be filed

16

 

by it and such returns are complete and accurate in all material respects and the Company and the
Company Subsidiaries each has paid all taxes required to have been paid by it, except for taxes
which it reasonably disputes in good faith or the failure of which to pay has not had or would not
reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.9.2,
neither the Company nor any Company Subsidiary has any liability with respect to taxes that accrued
on or before the date of the most recent balance sheet of the Company included in the Disclosure
Documents in excess of the amounts accrued with respect thereto that are reflected on such balance
sheet.

          3.9.3 Except as set forth on Schedule 3.9.2, neither the Company nor any Company Subsidiary
is the subject of any pending or, to the Company’s knowledge, threatened inquiry, investigation or
administrative or legal proceeding of a material nature by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, the Commission, any state securities commission or
other Governmental Authority.

          3.9.4 Except as set forth in the Disclosure Documents (and if not set forth therein, except
as set forth on Schedule 3.9.4), there is no material claim, litigation or administrative
proceeding pending, or, to the Company’s knowledge, threatened or contemplated, against the Company
or any Company Subsidiary, or against any officer, director or employee of the Company or any such
Company Subsidiary in connection with such person’s employment therewith. Neither the Company nor
any Company Subsidiary is a party to or subject to the provisions of, any order, writ, injunction,
judgment or decree of any court or Government Authority which has had or would reasonably be
expected to have a Material Adverse Effect.

     3.10 Acknowledgement of Dilution. The Company acknowledges that the issuance of the
Warrant Shares upon exercise of the Warrants may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions. The Company
further acknowledges that its obligation to issue the Warrant Shares in accordance with the terms
of the Warrants shall not be affected, regardless of the effect of any such dilution. The Company
further acknowledges that, to the extent not otherwise prohibited by the terms of this Agreement,
each Investor may enter into hedging transactions with respect to the Common Stock and that such
sales or transactions may have a downward effect on the market price of the Common Stock.

     3.11 Intellectual Property. Except as set forth in the Disclosure Documents:

          (a) The Company and the Company Subsidiaries own, free and clear of claims or rights or any
other Person, with full right to use, sell, license, sublicense, dispose of, and bring actions for
infringement of, or, to the knowledge of the Company, has acquired licenses or other rights to use,
all Intellectual Property necessary for the conduct of its business as presently conducted (other
than with respect to software which is generally commercially available and not used or
incorporated into the Company’s products and open source software which may be subject to one or
more “general public” licenses). All works that are used or incorporated into the Company’s or any
of the Company Subsidiaries’ services, products or services or products actively under development
and which is proprietary to the Company or such Company Subsidiary was developed by or for the
Company or the Company Subsidiaries by the current or former employees,

17

 

consultants or independent contractors of the Company or the Company Subsidiaries or purchased
or licensed by the Company or one or more Company Subsidiaries.

          (b) The business of the Company and the Company Subsidiaries as presently conducted and the
production, marketing, licensing, use and servicing of any products or services of the Company and
the Company Subsidiaries do not, to the knowledge of the Company, infringe or conflict with any
patent, trademark, copyright, or trade secret rights of any third parties or any other Intellectual
Property of any third parties in any material respect. Neither the Company nor any Company
Subsidiary has received written notice from any third party asserting that any Intellectual
Property owned or licensed by the Company or the Company Subsidiaries, or which the Company or any
Company Subsidiary otherwise has the right to use, is invalid or unenforceable by the Company or
such Company Subsidiary and, to the Company’s knowledge, there is no valid basis for any such claim
(whether or not pending or threatened).

          (c) No claim is pending or, to the Company’s knowledge, threatened against the Company or any
Company Subsidiary nor has the Company or any Company Subsidiary received any written notice or
other written claim from any Person asserting that any of the Company’s or a Company Subsidiary’s
present or contemplated activities infringe or may infringe in any material respect any
Intellectual Property of such Person, and the Company is not aware of any infringement by any other
Person of any material rights of the Company or any Company Subsidiary under any Intellectual
Property Rights.

          (d) All licenses or other agreements under which the Company or any Company Subsidiary is
granted Intellectual Property (excluding licenses to use software utilized in the Company’s or such
Company Subsidiary’s internal operations and which is generally commercially available) are in full
force and effect and, to the Company’s knowledge, there is no material default by any party
thereto. The Company has no reason to believe that the licensors under such licenses and other
agreements do not have and did not have all requisite power and authority to grant the rights to
the Intellectual Property purported to be granted thereby.

          (e) All licenses or other agreements under which the Company or any Company Subsidiary has
granted rights to Intellectual Property to others (including all end-user agreements) are in full
force and effect, there has been no material default by the Company or any Company Subsidiary
thereunder and, to the Company’s knowledge, there is no material default of any provision thereof
relating to Intellectual Property by any other party thereto.

          (f) The Company and the Company Subsidiaries have taken all steps required in accordance with
commercially reasonable business practice to establish and preserve their ownership in their owned
Intellectual Property and to keep confidential all material technical information developed by or
belonging to the Company or the Company Subsidiaries which has not been patented or copyrighted.
To the Company’s knowledge, neither the Company nor any Company Subsidiary is making any unlawful
use of any Intellectual Property of any other Person, including, without limitation, any former
employer of any past or present employees of the Company or any Company Subsidiary. To the
Company’s knowledge, neither the Company, any Company Subsidiary nor any of their respective
employees has any agreements or arrangements with former employers of such employees relating to
any Intellectual Property of such employers,

18

 

which materially interfere or conflict with the performance of such employee’s duties for the
Company or any Company Subsidiary or result in any former employers of such employees having any
rights in, or claims on, the Company’s or any Company Subsidiary’s Intellectual Property. Each
employee of the Company and of each Company Subsidiary is subject to the policies regarding
confidentiality and proprietary information described in the Company’s current employee handbook,
which policies are reasonably sufficient to protect the Intellectual Property interests of the
Company or a Company Subsidiary in inventions created by its employees. The Company and each
Company Subsidiary has obtained executed assignment agreements from any current or former employees
with respect to the development by such employees of intellectual property that have become the
subject of registered patents or of outstanding applications for registration. The Company and
each Company Subsidiary has taken reasonable security measures to guard against unauthorized
disclosure or use of any of its Intellectual Property that is confidential or proprietary; and the
Company has no reason to believe that any Person (including, without limitation, any former
employee or consultant of the Company or of any Company Subsidiary) has unauthorized possession of
any of its Intellectual Property, or any part thereof, or that any Person has obtained unauthorized
access to any of its Intellectual Property. The Company and each Company Subsidiary has complied
in all material respects with its respective obligations pursuant to all agreements relating to
Intellectual Property rights that are the subject of licenses granted by third parties, except for
any non-compliance that has not had or would not reasonably be expected to have a Material Adverse
Effect.

     3.12 Registration Rights; Rights of Participation. Except as set forth on Schedule
3.12, (A) the Company has not granted or agreed to grant to any person or entity any rights
(including “piggy-back” registration rights) to have any securities of the Company registered with
the Commission or any other governmental authority which has not been satisfied in full, or are
being satisfied in full pursuant to existing registration statements or waived on or prior to the
date hereof, and (B) no person or entity, including, but not limited to, current or former
stockholders of the Company, underwriters, brokers, agents or other third parties, has any right of
first refusal, preemptive right, right of participation, anti-dilutive right or any similar right
to participate in, or to receive securities or other assets of the Company solely as a result of
the transactions contemplated by this Agreement or the other Transaction Documents.

     3.13 Solicitation; Other Issuances of Securities. Neither the Company nor any Company
Subsidiary or Affiliate, nor any Person acting on its or their behalf, (i) has engaged in any form
of general solicitation or general advertising (within the meaning of Regulation D) in connection
with the offer or sale of the Securities, (ii) has, directly or indirectly, made any offers or
sales of any security or the right to purchase any security, or solicited any offers to buy any
security or any such right, under circumstances that would require registration of the Securities
under the Securities Act or (iii) has issued any shares of Common Stock or shares of any series of
preferred stock or other securities or instruments convertible into, exchangeable for or otherwise
entitling the holder thereof to acquire shares of Common Stock which would be integrated with the
sale of the Securities to such Investor or the issuance of the Warrant Shares for purposes of the
Securities Act or of any applicable stockholder approval provisions nor will the Company or any
Company Subsidiary or Affiliate take any action or steps that would require registration of any of
the Securities under the Securities Act or cause the offering of the Securities to be so integrated
with other offerings.

19

 

     3.14 Fees. Except for the fees payable to Kaufman Bros., L.P., the Company is not
obligated to pay any brokers, finders or financial advisory fees or commissions to any underwriter,
broker, agent or other representative in connection with the transactions contemplated hereby. The
Company will indemnify and hold harmless such Investor from and against any claim by any person or
entity alleging that such Investor is obligated to pay any such compensation, fee, cost or related
expenditure in connection with the transactions contemplated hereby.

     3.15 Foreign Corrupt Practices. Neither the Company, any Company Subsidiary nor, to
the knowledge of the Company, any director, officer, agent, employee or other person acting on
behalf of the Company or any Company Subsidiary, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to political activity, (ii)
made any direct or indirect unlawful payment to any foreign or domestic government official or
employee, or (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended,
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.

     3.16 Key Employees. Each of the Company’s and each Company Subsidiary’s executive
officers (as defined in Rule 501(f) of the Securities Act) (each, a “Key Employee”) is currently
serving in the capacity described in the Disclosure Documents. The Company has no knowledge of any
fact or circumstance (including without limitation (i) the terms of any agreement to which such
person is a party or any litigation in which such person is or may become involved and (ii) any
illness or medical condition that could reasonably be expected to result in the disability or
incapacity of such person) that would limit or prevent any such person from serving in such
capacity on a full-time basis in the foreseeable future, or of any intention on the part of any
such person to limit or terminate his or her employment with the Company or any Company Subsidiary.
To the knowledge of the Company, no Key Employee has borrowed money pursuant to a currently
outstanding loan that is secured by Common Stock or any right or option to receive Common Stock.

     3.17 Employee Matters. There is no strike, labor dispute or union organization
activities pending or, to the knowledge of the Company, threatened between the Company or any
Company Subsidiary and any of their employees. Other than as set forth on Schedule 3.17 or in the
Disclosure Documents, no employees of the Company or any Company Subsidiary belong to any union or
collective bargaining unit. The Company and each Company Subsidiary has complied in all material
respects with all applicable federal and state equal opportunity and other laws related to
employment.

     3.18 Environment. Except as disclosed in the Disclosure Documents, the Company and
the Company Subsidiaries have no liabilities under any Environmental Law, nor, to the Company’s
knowledge, do any factors exist that are reasonably likely to give rise to any such liability,
affecting any of the properties owned or leased by the Company or any Company Subsidiary that,
individually or in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any Company Subsidiary has violated any Environmental Law
applicable to it now or previously in effect, other than such violations or infringements that,
individually or in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect.

20

 

     3.19 ERISA. The Company does not maintain or contribute to, or have any obligation
under, any Pension Plan. The Company is in compliance in all material respects with the presently
applicable provisions of ERISA and the United States Internal Revenue Code of 1986, as amended,
with respect to each Pension Plan except in any such case for any such matters that, individually
or in the aggregate, have not had, and would not reasonably be expected to have, a Material Adverse
Effect.

     3.20 Disclosure. Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents and the information to be disclosed by the
Company pursuant to Section 4.1(c), the Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Investors or their agents or counsel with any
information that it believes constitutes or might constitute material, nonpublic information. The
Company understands and confirms that the Investors will rely on the foregoing representation and
the obligations of the Company under Section 4.1 in effecting transactions in securities of the
Company. All disclosure furnished by or on behalf of the Company to the Investors regarding the
Company and the Company Subsidiaries, and their respective businesses and the transactions
contemplated hereby, including the Schedules to this Agreement, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the twelve months
preceding the date of this Agreement did not, at the time they were issued, contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements, in light of the circumstances under which they were made
and when made, not misleading. The Company acknowledges and agrees that no Investor makes or has
made any representations or warranties with respect to the transactions contemplated hereby other
than those specifically set forth in Section 2.

     3.21 Insurance. The Company maintains insurance for itself and the Company
Subsidiaries in such amounts and covering such losses and risks as are reasonably sufficient and
customary in the businesses in which the Company and the Company Subsidiaries are engaged. As of
the date hereof and as of the Closing Date, no notice of cancellation has been received for any of
such policies and the Company is in compliance in all material respects with all of the terms and
conditions thereof. The Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue to conduct its business as currently conducted
without a significant increase in cost. Without limiting the generality of the foregoing, the
Company maintains Director’s and Officer’s insurance in an amount not less than $3 million for each
covered occurrence.

     3.22 Property. The Company and the Company Subsidiaries have good and marketable
title to all real and personal Property owned by them, in each case free and clear of all Liens,
except for Permitted Liens. Any Property held under lease by the Company or the Company
Subsidiaries is held by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made or proposed to be made of such Property by
the Company or any Company Subsidiary. The information set forth Schedule 3.22 is true and
accurate in all material respects as of the date set forth therein.

21

 

     3.23 Regulatory Permits. The Company and the Company Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, except where the failure
to have any such certificate, authorization or permit would not have a Material Adverse Effect, and
neither the Company nor any such Company Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or permit.

     3.24 Exchange Act Registration; OTC Bulletin Board. The Company’s Common Stock is
registered pursuant to Section 12(g) of the Exchange Act and is quoted on the OTC Bulletin Board.
The Company currently meets the continuing eligibility requirements for quotation on the OTC
Bulleting Board and has not received any notice from such service that it may not currently satisfy
such requirements or that such continued quotation is in any way threatened. The Company has taken
no action designed to, or which, to the knowledge of the Company, may have the effect of,
terminating the registration of the Common Stock under the Exchange Act or qualification to have
the Common Stock quoted on the OTC Bulletin Board.

     3.25 Investment Company Status. The Company is not, and immediately after any Closing
will not be, an “investment company” or an entity “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940, as amended (the “Investment Company Act”), and
shall conduct its business in a manner so that it will not become subject to the Investment Company
Act.

     3.26 Transfer Taxes. No stock transfer or other taxes (other than income taxes) are
required to be paid in connection with the issuance and sale of any of the Securities, other than
such taxes for which the Company has established appropriate reserves and intends to pay in full on
or before the Closing.

     3.27 Sarbanes-Oxley Act; Internal Controls and Procedures. The Company is in material
compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended,
and any and all applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof. The Company maintains internal accounting controls, policies and
procedures, and such books and records as are reasonably designed to provide reasonable assurance
that (i) all transactions to which the Company or any Company Subsidiary is a party or by which its
properties are bound are effected by a duly authorized employee or agent of the Company, supervised
by and acting within the scope of the authority granted by the Company’s senior management; (ii)
the recorded accounting of the Company’s consolidated assets is compared with existing assets at
regular intervals; and (iii) all transactions to which the Company or any Company Subsidiary is a
party, or by which its properties are bound, are recorded (and such records maintained) in
accordance with all Government Requirements and as may be necessary or appropriate to ensure that
the financial statements of the Company are prepared in accordance with GAAP.

     3.28 Embargoed Person. None of the funds or other assets of the Company or the
Company Subsidiaries shall constitute property of, or shall be beneficially owned, directly or
indirectly, by any person subject to trade restrictions under United States law, including, but not
limited to, the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., the

22

 

Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations
promulgated under any such United States laws (each, an “Embargoed Person”), with the result that
the investments evidenced by the Securities are or would be in violation of law. No Embargoed
Person shall have any interest of any nature whatsoever in the Company or any Company Subsidiary
with the result that the investments evidenced by the Securities are or would be in violation of
law. None of the funds or other assets of the Company or the Company Subsidiaries shall be derived
from any unlawful activity with the result that the investments evidenced by the Securities are or
would be in violation of law.

     3.29 Transactions with Interested Persons; Restricted Payments. No officer, director,
stockholder or employee of the Company or any Company Subsidiary is or has made any arrangements
with the Company or any Company Subsidiary to become a party to any transaction with the Company or
any Company Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or
from any officer, director, stockholder or such employee or, to the knowledge of the Company, any
entity in which any officer, director, stockholder or any such employee has a substantial interest
or is an officer, director, trustee or partner. Neither the Company nor any Company Subsidiary has
made any Restricted Payments during the 90 days preceding the date hereof.

     3.30 Customers and Suppliers. The relationships of the Company and the Company
Subsidiaries with their respective customers and suppliers are maintained on commercially
reasonable terms. To the Company’s knowledge, no customer or supplier of the Company or any
Company Subsidiary has any plan or intention to terminate its agreement with the Company or such
Company Subsidiary, which termination would reasonably be expected to have a Material Adverse
Effect.

     3.31 Accountants. The Company’s accountants, who the Company expects will render
their opinion with respect to the financial statements to be included in the Company’s Annual
Report on Form 10-KSB for the year ended December 31, 2007, are, to the Company’s knowledge,
independent accountants as required by the Securities Act.

     3.32 Eligible Accounts. The aggregate amount of Eligible Accounts of the Company and
the Company Subsidiaries as of April 30, 2007 was equal to $1,422,196.

     3.33 No Other Agreements. The Company has not, directly or indirectly, entered into
any agreement with or granted any right to any Investor relating to the terms or conditions of the
transactions contemplated by the Transaction Documents, except as expressly set forth in the
Transaction Documents.

     3.34 Solvency. (i) The fair saleable value of the Company’s assets exceeds the amount
that will be required to be paid on or in respect of the Company’s existing Debt; (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its business as now
conducted and as proposed to be conducted; and (iii) the expected cash flows of the Company for
future periods, together with the proceeds the Company would receive upon liquidation of its

23

 

assets and the proceeds from expected debt or equity offerings, after taking into account all
anticipated uses of such amounts, would be sufficient to pay all Debt when such Debt is required to
be paid. The Company has no knowledge of any facts or circumstances which led it to believe that
it will be required to file for reorganization or liquidation under bankruptcy or reorganization
laws of any jurisdiction, and has no present intention to so file.

4. COVENANTS OF THE COMPANY AND EACH INVESTOR.

     4.1 Filings and Disclosure Reports. The Company agrees with each Investor that the
Company will:

          (a) file a Form D with respect to the Securities issued at the Closing as and when required
under Regulation D and provide a copy thereof to such Investor promptly after such filing;

          (b) at or prior to the Closing, take such action as the Company reasonably determines upon the
advice of counsel is necessary to qualify the Securities for sale under applicable state or
“blue-sky” laws or obtain an exemption therefrom, and shall promptly provide evidence of any such
action to such Investor at such Investor’s request; and

          (c) (i) on or prior to 8:30 a.m. (eastern time) on the second Business Day following the
Execution Date, issue a press release disclosing the material terms of this Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby, and (ii) on or prior to
5:00 p.m. (eastern time) on the fourth Business Day following the Execution Date, file with the
Commission a Current Report on Form 8-K disclosing the material terms of and including as exhibits
this Agreement and the other Transaction Documents and the transactions contemplated hereby and
thereby; provided, however, that each Investor shall have a reasonable opportunity to review and
comment on any such press release or Form 8-K prior to the issuance or filing thereof; and
provided, further, that if the Company fails to issue a press release disclosing the material terms
of this Agreement and the other Transaction Documents within the time frames described herein, any
Investor may issue a press release disclosing such information without any notice to or consent by
the Company. Thereafter, the Company shall timely file any filings and notices required by the
Commission or applicable law with respect to the transactions contemplated hereby.

     4.2 Existence and Compliance. The Company agrees that it will, and will cause each
Company Subsidiary to, while any Investor holds any Securities:

          (a) maintain its corporate existence in good standing;

          (b) comply with all Governmental Requirements applicable to the operation of its business,
except for instances of noncompliance that are immaterial;

          (c) comply with all agreements, documents and instruments binding on it or affecting its
Properties or business, including, without limitation, all Material Contracts, except for instances
of noncompliance that are immaterial;

24

 

          (d) provide each Investor with copies of all materials sent to its stockholders at the same
time as such materials are delivered to such stockholders (provided that such delivery shall be
deemed effected in accordance herewith if the Company provides the Investors with a link to the
EDGAR filing containing such materials);

          (e) timely file with the Commission all reports required to be filed pursuant to the Exchange
Act and refrain from terminating its status as an issuer required by the Exchange Act to file
reports thereunder even if the Exchange Act or the rules or regulations thereunder would permit
such termination;

          (f) take commercially reasonable steps to limit sales of Common Stock by the Company’s Key
Employees listed on Schedule 4.2(f) during the period beginning on the Execution Date and ending on
the Effective Date, other than pursuant to any 10b-5(1) trading plans in effect as of the Execution
Date and disclosed to each Investor in writing prior to such date;

          (g) ensure that the Common Stock is at all times quoted on the OTC Bulletin Board or otherwise
listed or quoted on the Nasdaq Capital Market, the American Stock Exchange, the New York Stock
Exchange, or the Nasdaq National Market; and

          (h) use commercially reasonable efforts to maintain adequate insurance coverage (including D&O
insurance) for the Company and each Company Subsidiary.

     4.3 Reservation of Common Stock. The Company shall, on the Closing Date, have
authorized and reserved for issuance to the Investors free from any preemptive rights, and shall
keep available at all times during which any Notes or Warrants are outstanding, a number of shares
of Common Stock (the “Reserved Amount”) that, on the Closing Date, is not less than two hundred
percent (200%) of the number of Warrant Shares that would be issuable if the Warrants were then
exercised in full; in each such case, without regard to any limitation or restriction on (x) the
issuance of such Securities or (y) the exercise of any Warrants. The Reserved Amount shall be
allocated among the Investors in accordance with each Investor’s Pro Rata Share. In the event that
an Investor shall sell or otherwise transfer any of such Investor’s Warrants, each transferee shall
be allocated a pro rata portion of such transferor’s Reserved Amount. Any portion of the Reserved
Amount allocated to any Investor or other Person which no longer holds any Warrants shall be
reallocated to the remaining Investors pro rata based on the number of the Registrable Securities
held by such Investors at such time. In the event that the Reserved Amount is insufficient at any
time to cover one hundred twenty five percent (125%) of the Registrable Securities issued or
issuable to the Investors under the Warrants (such number to be determined (x) using the exercise
price of the Warrants in effect at such time and (y) without regard to any limitation or
restriction on (1) the issuance of such Registrable Securities or (2) the exercise of any
Warrants), the Company shall take such action (including without limitation holding a meeting of
its stockholders) to increase the Reserved Amount to cover two hundred percent (200%) of such
Registrable Securities, such increase to be effective not later than the thirtieth (30th) day (or
sixtieth (60th) day, in the event stockholder approval is required for such increase) following the
Company’s receipt of written notice of such deficiency. While any Warrants are outstanding, the
Company shall not reduce the Reserved Amount without obtaining the prior written consent of each
Investor then holding a Warrant.

25

 

     4.4 Use of Proceeds. The Company shall use the proceeds from the sale of the Notes
and Warrants (i) first, for the repayment in full of all of the Debt owed by the Company and/or the
Company Subsidiaries to or under City Search, the Wells Fargo facility and the Comerica facility
and (ii) second, for general working capital purposes.

     4.5 Transactions with Affiliates. The Company agrees that, during the period
beginning on the Execution Date and ending on the Termination Date, any transaction or arrangement
between the Company or any Company Subsidiary, on the one hand, and any Affiliate of the Company or
any Company Subsidiary (including, in the case of the Company, any Company Subsidiary, and in the
case of a Company Subsidiary, the Company or any other Company Subsidiary), or any officer,
director, manager, shareholder, member or employee of the foregoing, on the other hand, shall be
effected on an arms’ length basis and shall be approved by the independent members of board of
directors of the Company or the board of directors or equivalent thereof of the Company Subsidiary,
as the case may be.

     4.6 Use of Investor Name. Except as may be required by applicable law and/or this
Agreement, the Company shall not use, directly or indirectly, any Investor’s name or the name of
any of its Affiliates in any advertisement, announcement, press release or other similar
communication unless it has received the prior written consent of such Investor for the specific
use contemplated or as otherwise required by applicable law or regulation.

     4.7 Limitations on Disposition. No Investor shall sell, transfer, assign or dispose
of any Warrants or Warrant Shares, unless:

          (a) there is then in effect an effective registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance with such
registration statement; or

          (b) such Investor has notified the Company in writing of any such disposition, and furnished
the Company with an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such Securities under the Securities Act; provided,
however, that no such opinion of counsel will be required (A) if the sale, transfer, assignment or
disposition is made to an Affiliate of such Investor, (B) if the sale, transfer, assignment or
disposition is made pursuant to Rule 144 and such Investor provides the Company with evidence
reasonably satisfactory to the Company that the proposed transaction satisfies the requirements of
Rule 144, (C) if such Securities are eligible for resale under Rule 144(k) or any successor
provision or (D) if in connection with a bona fide pledge or hypothecation of any Securities under
a margin arrangement with a broker-dealer or other financial institution or the sale of any such
Securities by such broker-dealer or other financial institution following such Investor’s default
under such margin arrangement.

     4.8 Disclosure of Non-Public Information. In addition to the Company’s obligations
under Section 4.1, the Company agrees that it will not at any time following the Execution Date
disclose material non-public information to any Investor without first obtaining such Investor’s
written consent to such disclosure.

26

 

     4.9 Indemnification of Investors. The Company will indemnify and hold each Investor
and its directors, managers, officers, shareholders, members, partners, employees and agents (each,
an “Investor Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements,
court costs and reasonable attorneys’ fees and costs of investigation that any such Investor Party
may suffer or incur as a result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against an Investor, or any of them or their
respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Investor,
with respect to any of the transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of such Investor’s representation, warranties or covenants under the
Transaction Documents or any agreements or understandings such Investor may have with any such
stockholder or any violations by such Investor of state or federal securities laws or any conduct
by such Investor which constitutes fraud, gross negligence, willful misconduct or malfeasance). If
any action shall be brought against any Investor Party in respect of which indemnity may be sought
pursuant to this Agreement, such Investor Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof with counsel of its own choosing.
Any Investor Party shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Investor Party except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable
period of time following such Investor Party’s written request that it do so, to assume such
defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue between the position of the Company and
the position of such Investor Party. The Company will not be liable to any Investor Party under
this Agreement (i) for any settlement by an Investor Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but
only to the extent that a loss, claim, damage or liability is attributable to such Investor Party’s
wrongful actions or omissions, or gross negligence or to such Investor Party’s breach of any of the
representations, warranties, covenants or agreements made by such Investor in this Agreement or in
the other Transaction Documents.

     4.10 Limitation on Debt and Liens. During the period beginning on the Execution Date
and ending on the Termination Date, the Company shall refrain, and shall ensure that each Company
Subsidiary refrains, from (A) incurring any Debt other than Permitted Debt, and (B) granting,
establishing or maintaining any Lien on any of its Property other than Permitted Liens.

     4.11 Restricted Payments. During the period beginning on the Execution Date and
ending on the Termination Date, the Company will not, and will not permit any Company Subsidiary
to, make any Restricted Payments other than Restricted Payments made by a Company Subsidiary to the
Company.

     4.12 Eligible Accounts. During the period beginning on the date hereof and ending on
the Termination Date, the aggregate amount of Eligible Accounts of the Company and the Company
Subsidiaries shall on the last Business Day of each calendar month be equal to or exceed
$1,100,000. In furtherance of the foregoing, the Company shall, on or prior to the 30th
day following each fiscal quarter following the Closing Date (or, if such fiscal quarter is the

27

 

Company’s fourth fiscal quarter, then on or prior to the 45th day following such fiscal
quarter), deliver to each Investor a certificate certified by the Chief Financial Officer of the
Company certifying (i) that on the last Business Day of each calendar month during such fiscal
quarter, the aggregate amount of Eligible Accounts of the Company and the Company Subsidiaries
equaled or exceeded $1,100,000, and (ii) the actual amount of Eligible Accounts of the Company and
the Company Subsidiaries as of the last day of such fiscal quarter.

     4.13 Disposition of Property. During the period beginning on the Execution Date and
ending on the Termination Date, the Company will not, and will not permit any Company Subsidiary
to, (i) dispose in a single transaction or in a series of related transactions all or any part of
its Property unless (x) such disposition is in the ordinary course of business and for fair market
value, and (y) such Property is not material to the Company’s or any Company Subsidiary’s business,
operations or financial condition or performance or (ii) sell, assign or otherwise transfer any
equity interest in any Company Subsidiary to a Person other than the Company or another Company
Subsidiary.

     4.14 Subsequent Placements; Equity Participation.

          (a) During the period beginning on the Execution Date and ending on the date on which none of
the Warrants remains outstanding, the Company shall not effectuate a Subsequent Placement without
first complying with the provisions of Section 4.14(b) below. During the period beginning on the
Execution Date and ending on the Termination Date, the Company shall not permit any Company
Subsidiary to effectuate a Subsequent Placement of any kind whatsoever.

          (b) If the Company effectuates a Subsequent Placement, the Company shall, concurrently with
the closing of such Subsequent Placement, issue to each Investor, for no consideration, an amount
of each type of security being issued to the parties participating in such Subsequent Placement
determined in accordance with the following formula:

	 	 	 	 	 	 	 	 	 
	 

	 	Where:
	 	X
	 	=
	 	the amount of each type of security to be issued to such
Investor
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	A
	 	=
	 	the quotient obtained by dividing (i) the total number of
shares of Common Stock for which such Investor’s Warrant
is then exercisable by (ii) the total number of shares of
Common Stock outstanding prior to giving effect to the
contemplated Subsequent Placement
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	B
	 	=
	 	the total amount of such type of security to be issued to
the participants of such Subsequent Placement (excluding
the amount of such security to be issued to the Investors
hereunder)

28

 

To illustrate the provisions of this Section 4.14(b), if the Company effectuated a Subsequent
Placement pursuant to which the Company issued to the participants of such Subsequent Placement a
total of 200 shares of Common Stock and warrants to purchase a total of 100 shares of Common Stock,
and prior to such issuance, the total number of shares of Common Stock outstanding was 1,000
shares, then the Company would issue the following amounts to an Investor that held a Warrant that
is then exercisable for a total of 20 shares of Common Stock:

Common Stock

Warrants

     (c) Any securities that are issued to an Investor as a result of a Subsequent Placement under
Section 4.14(b) above shall have the same terms and conditions, mutatis mutandis, granted to the
parties participating in such Subsequent Placement.

     (d) In addition to the foregoing, prior to the consummation of any Subsequent Placement, the
Company shall provide to each Investor copies of the final definitive investment documents for such
Subsequent Placement.

     4.15 Acquisitions and Investments. During the period beginning on the Execution Date
and ending on the Termination Date, the Company will not, nor will it permit any Company Subsidiary
to, purchase or otherwise acquire the capital stock or other equity interests in or assets
(constituting a business unit) of, any Person or agree to do so, unless (i) the business or entity
to be acquired has had net positive cash flow from operations (determined in accordance with GAAP
after deducting the amount of capital expenditures) during the twelve-month period immediately
preceding such acquisition and (ii) the Company in good faith believes that the acquired business
or entity will continue to generate such positive cash flow during the twelve-month period
immediately following such acquisition.

     4.16 Issuance of Warrant Shares. The Company shall cause all Warrant Shares, when

29

 

issued and delivered in accordance with the terms of the Warrants, to be duly and validly issued,
fully paid and nonassessable, free and clear of any Liens imposed by or through the Company.

     4.17 Newly Created Subsidiaries. During the period beginning on the Execution Date
and ending on the Termination Date, if the Company creates or acquires any new Subsidiary, then,
contemporaneously with such creation or acquisition, the Company shall cause such new Subsidiary to
become party to the Subsidiary Guarantee and Security Agreement.

     4.18 Notice of Event of Default. Upon the occurrence of an Event of Default, the
Company shall (i) notify the Investors of the nature of such Event of Default as soon as
practicable (but in no event later than one Business Day after the Company becomes aware of such
Event of Default), and (ii) not later than two Business Days after delivering such notice to the
Investors, issue a press release disclosing such Event of Default and take such other actions as
may be necessary to ensure that none of the Investors are in the possession of material, nonpublic
information as a result of receiving such notice from the Company.

     4.19 Delivery of Legal Opinion and Certain Collateral. The Company will have
delivered (i) to each Investor an opinion of counsel for the Company and the Company Subsidiaries
dated as of the Closing Date and in the form attached hereto as Exhibit F no later than the tenth
(10th) day after the Closing, and (ii) to Imperium Advisers, LLC, as collateral agent, certificates
representing the Pledged Securities (as defined in the Security Agreement and all Necessary
Endorsements (as defined in the Security Agreement) in connection therewith no later than the fifth
(5th) day after the Closing.

5. CONDITIONS TO CLOSING.

     5.1 Conditions to Investors’ Obligations at the Closing. Each Investor’s obligations
to effect the Closing, including without limitation its obligation to purchase a Note and Warrant
at the Closing, are conditioned upon the fulfillment (or waiver by such Investor in its sole and
absolute discretion) of each of the following events as of the Closing Date, and the Company shall
use commercially reasonable efforts to cause each of such conditions to be satisfied:

	 	5.1.1	 	the representations and warranties of the Company set forth in
this Agreement and in the other Transaction Documents shall be true and correct
in all material respects as of such date as if made on such date (except that
to the extent that any such representation or warranty relates to a particular
date, such representation or warranty shall be true and correct in all material
respects as of that particular date);
	 
	 	5.1.2	 	the Company shall have complied with or performed in all
material respects all of the agreements, obligations and conditions set forth
in this Agreement and in the other Transaction Documents that are required to
be complied with or performed by the Company on or before the Closing;
	 
	 	5.1.3	 	[Reserved]

30

 

	 	5.1.4	 	the Company shall have executed and delivered to such Investor
the Note and the Warrant being purchased by such Investor at the Closing;
	 
	 	5.1.5	 	the Company shall have executed and delivered to such Investor
the Registration Rights Agreement and the Security Agreement, and each Company
Subsidiary shall have executed and delivered to such Investor the Security
Agreement and the Subsidiary Guarantee;
	 
	 	5.1.6	 	the Company shall have delivered to such Investor a
certificate, signed by the Secretary or an Assistant Secretary of the Company,
attaching (i) the articles of incorporation and by-laws of the Company and (ii)
resolutions passed by its Board of Directors to authorize the transactions
contemplated hereby and by the other Transaction Documents, and (iii)
resolutions passed by the respective boards of directors of the Company
Subsidiaries to authorize the transactions contemplated by the Security
Agreement and the Subsidiary Guarantee, and certifying that such documents are
true and complete copies of the originals and have not been amended or
superseded, it being understood that such Investor may rely on such certificate
as a representation and warranty of the Company made herein;
	 
	 	5.1.7	 	the Company shall have obtained the written agreement of the
Key Employees listed on Schedule 4.2(f) to refrain from selling shares of
Common Stock for the period specified in, and in accordance with, Section
4.2(f) of this Agreement;
	 
	 	5.1.8	 	there shall have occurred no material adverse change in the
Company’s consolidated business or financial condition since the date of the
Company’s most recent financial statements contained in the Disclosure
Documents;
	 
	 	5.1.9	 	the Company shall have authorized and reserved for issuance
the aggregate number of shares of Common Stock required to be authorized and
reserved under Section 4.3;
	 
	 	5.1.10	 	there shall be no injunction, restraining order or decree of any nature of
any court or Government Authority of competent jurisdiction that is in effect
that restrains or prohibits the consummation of the transactions contemplated
hereby and by the other Transaction Documents; and
	 
	 	5.1.11	 	the Company shall have paid the expenses described in Section 6.10 of this
Agreement.

31

 

     5.2 Conditions to Company’s Obligations at the Closing. The Company’s obligations to
effect the Closing with an Investor are conditioned upon the fulfillment (or waiver by the Company
in its sole and absolute discretion) of each of the following events as of the Closing Date:

	 	5.2.1	 	the representations and warranties of such Investor set forth
in this Agreement and in the other Transaction Documents to which it is a party
shall be true and correct in all material respects as of such date as if made
on such date (except that to the extent that any such representation or
warranty relates to a particular date, such representation or warranty shall be
true and correct in all material respects as of that date);
	 
	 	5.2.2	 	such Investor shall have complied with or performed all of the
agreements, obligations and conditions set forth in this Agreement that are
required to be complied with or performed by such Investor on or before the
Closing;
	 
	 	5.2.3	 	there shall be no injunction, restraining order or decree of
any nature of any court or Government Authority of competent jurisdiction that
is in effect that restrains or prohibits the consummation of the transactions
contemplated hereby and by the other Transaction Documents;
	 
	 	5.2.4	 	such Investor shall have executed each Transaction Document to
which it is a party and shall have delivered the same to the Company; and
	 
	 	5.2.5	 	such Investor shall have tendered to the Company the Purchase
Price for the Note and the Warrant being purchased by it at the Closing by wire
transfer of immediately available funds (provided that the aggregate Purchase
Price payable by the Investors shall be net of $522,566, which amount shall be
wired by the Investors to City Search pursuant to the written instructions of
the Company, and further net of the expenses described in Section 6.10).

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6. MISCELLANEOUS.

     6.1 Survival; Severability. The representations, warranties, covenants and
indemnities made by the parties herein and in the other Transaction Documents shall survive the
Closing notwithstanding any due diligence investigation made by or on behalf of the party seeking
to rely thereon. In the event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that in such case the parties shall
negotiate in good faith to replace such provision with a new provision which is not illegal,
unenforceable or void, as long as such new provision does not materially change the economic
benefits of this Agreement to the parties.

     6.2 No Reliance. Each party acknowledges that (i) it has such knowledge in business
and financial matters as to be fully capable of evaluating this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby, (ii) it is not relying on any
advice or representation of any other party in connection with entering into this Agreement, the
other Transaction Documents or such transactions (other than the representations made in this
Agreement or the other Transaction Documents), (iii) it has not received from any other party any
assurance or guarantee as to the merits (whether legal, regulatory, tax, financial or otherwise) of
entering into this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own legal, regulatory,
tax, business, investment, financial and accounting advisors to the extent that it has deemed
necessary, and has entered into this Agreement and the other Transaction Documents based on its own
independent judgment and, if applicable, on the advice of such advisors, and not on any view
(whether written or oral) expressed by any other party.

     6.3 Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor hereunder are several and not joint with the obligations of the other Investors hereunder,
and no Investor shall be responsible in any way for the performance of the obligations of any other
Investor hereunder. The Company acknowledges and agrees that nothing contained herein or in any
other Transaction Document, and no action taken by any Investor pursuant hereto or thereto, shall
be deemed to constitute the Investors as a partnership, an association, a joint venture or any
other kind of entity, or a “group” as described in Section 13(d) of the Exchange Act, or create a
presumption that the Investors are in any way acting in concert with respect to such obligations or
the transactions contemplated by this Agreement. Each Investor has been represented by its own
separate counsel in connection with the transactions contemplated hereby, shall be entitled to
protect and enforce its rights, including without limitation rights arising out of this Agreement
or the other Transaction Documents, individually, and shall not be required to join any other
Investor as an additional party in any proceeding for such purpose.

     6.4 Injunctive Relief. The Company and each Investor acknowledges and agrees that a
breach by it of its obligations hereunder will cause irreparable harm to the other and that the
remedy or remedies at law for any such breach will be inadequate and agrees, in the event of any
such breach, in addition to all other available remedies, the non-breaching party shall be entitled
to an injunction restraining any breach and requiring immediate and specific performance of such
obligations without the necessity of showing economic loss or the posting of any bond.

33

 

     6.5 Governing Law; Jurisdiction; Waiver of Jury Trial. (a) This Agreement shall be
governed by and construed under the laws of the State of New York applicable to contracts made and
to be performed entirely within the State of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City and County of New York
for the adjudication of any dispute hereunder or any other Transaction Document or in connection
herewith or therewith or with any transaction contemplated hereby or thereby, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law.

          (b) EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY DISPUTE OR CONTROVERSY THAT
MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS
AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.5(b).

     6.6 Successors and Assigns. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective successors and permitted assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement. An Investor may assign its rights and obligations hereunder in connection with any
private sale or transfer of the Securities in accordance with the terms hereof and of the other
Transaction Documents, as long as, as a condition precedent to such transfer, the transferee
executes an acknowledgment agreeing to be bound by the applicable provisions of this Agreement, in
which case the term “Investor” shall be deemed to refer to such transferee as though such
transferee were

34

 

an original signatory hereto. The Company may not assign its rights or obligations under this
Agreement.

     6.7 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, and all of which together shall constitute one and the same
instrument. This Agreement may be executed and delivered by facsimile transmission.

     6.8 Headings. The headings used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this Agreement.

     6.9 Notices. Any notice, demand or request required or permitted to be given by the
Company or the Investor pursuant to the terms of this Agreement shall be in writing and shall be
deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such
delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to
be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to
an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail
(certified or registered mail, return receipt requested, postage prepaid), addressed as follows:

If to the Company:

Innuity, Inc.

8644 154th Avenue NE

Redmond, Washington 98052

Attn: John Wall

Tel: 425-479-9909

Fax: 425-278-1209

with a copy (which shall not constitute notice) to:

DLA Piper US LLP

701 Fifth Avenue, Suite 7000

Seattle, Washington 98104

Attn:   Michael Hutchings

Tel:    206-839-4800

Fax:    206-839-4801

and if to any Investor, to such address for such Investor as shall appear on the signature page
hereof executed by such Investor, or as shall be designated by such Investor in writing to the
Company in accordance with this Section 6.9.

     6.10 Expenses. The Company and each Investor shall pay all costs and expenses that it
incurs in connection with the negotiation, execution, delivery and performance of this Agreement or
the other Transaction Documents, provided, however, that that the Company shall, at the Closing,
pay to Imperium Advisers, LLC (“Imperium”) an amount of $40,000 in immediately available funds as
reimbursement for its out-of-pocket expenses (including without limitation legal fees and

35

 

expenses) incurred or to be incurred by it in connection with its due diligence investigation of
the Company and the negotiation, preparation, execution, delivery and performance of this Agreement
and the other Transaction Documents. At the Closing, the amount due for such fees and expenses may
be netted out of the Purchase Price payable by any Investor managed by Imperium.

     6.11 Entire Agreement; Amendments. This Agreement and the other Transaction Documents
constitute the entire agreement between the parties with regard to the subject matter hereof and
thereof, superseding all prior agreements or understandings, whether written or oral, between or
among the parties. No amendment, modification or other change to this Agreement or waiver of any
agreement or other obligation of the parties under this Agreement may be made or given unless such
amendment, modification or waiver is set forth in writing and is signed by the Company and (i)
prior to the Termination Date, by the holders of a majority of the aggregate principal of the Notes
then outstanding and the holders of a majority of the aggregate number of the Warrant Shares into
which the Warrants then outstanding are exercisable (without regard to any limitation on the
exercise of the Warrants), and (ii) on and after the Termination Date, by the holders of a majority
of the aggregate number of the Warrant Shares into which the Warrants then outstanding are
exercisable (without regard to any limitation on the exercise of the Warrants). Any waiver or
consent shall be effective only in the specific instance and for the specific purpose for which
given.

[Signature Pages to Follow]

36

 

          IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first-above
written.

	 	 	 	 	 	 	 
	INNUITY, INC.	 	 
	 
	 	 	 	 	 	 
	By:	 	/s/ JOHN R. WALL	 	 
	 	 	 	 	 
	 	 	Name: John R. Wall	 	 
	 	 	Title: Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	IMPERIUM MASTER FUND, LTD.	 	 
	 
	 	 	 	 	 	 
	By:	 	Imperium Advisers, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ MAURICE HRYSHKO
 

Name: Maurice Hryshko, Esq.
	 	 
	 

	 	 	 	Title: General Counsel	 	 

	 	 	 	 	 	 	 
	Principal Amount of Note Purchased at Closing:

	 	$	1,000,000	 	 	 
	 
	 	 	 	 	 	 
	Number of Shares into which Warrant Exercisable:

	 	 	1,128,164	 	 	 

ADDRESS:

c/o Imperium Advisers, LLC

153 East 53rd Street- 29th Floor

New York, NY 10022

Attn: Maurice Hryshko, Esq.

Tel: (212) 433-1360

Fax: (212) 433-1361

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