Document:

EXHIBIT 10.8

COMMERCIAL GUARANTY

 

	
  Principal 

  	
  Loan Date 

  	
  Maturity 

  	
  Loan No.

  	
  Call/Coll

  	
  Account 

  	
  Officer 

  M3Y

  	
  Initials

  
	
  References
  in the shaded area are for Lender’s use only and do not limit the
  applicability of this document to any particular loan or item.  Any item above containing “* * *” has been
  omitted due to text length limitations.

  

 

	
  Borrower:

  	
  MEDICAL
  CV, INC. 

  9724 S ROBERT TRL 

  INVER GROVE HEIGHTS, MN 55077

  	
   

  	
  Lender:

  	
  ASSOCIATED
  BANK MINNESOTA, 

  NATIONAL ASSOCIATION 

  1801 RIVERSIDE AVENUE 

  MINNEAPOLIS, MN 55454

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Guarantor:

  	
  PAUL MILLER

  1809 LYDIA AV W

  ROSEVILLE, MN 55113

  	
   

  	
   

  	
   

  	
   

  

 

 

 

AMOUNT OF GUARANTY.  The principal amount of this Guaranty is Two
Million & 00/100 Dollars ($2,000,000.00).

CONTINUING GUARANTY.  For good and valuable consideration, PAUL
MILLER (“Guarantor”) absolutely and unconditionally guarantees and promises to
pay to ASSOCIATED BANK MINNESOTA, NATIONAL ASSOCIATION (“Lender”) or its order,
in legal tender of the United States of America, the Indebtedness (as that term
is defined below) of MEDICAL CV, INC. (“Borrower”) to Lender on the terms and
conditions set forth in the Guaranty. 
The obligations of Guarantor under this Guaranty are continuing.

MAXIMUM LIABILITY.  The maximum liability of Guarantor under
this Guaranty shall not exceed at any one time the sum of the principal amount
of $2,000,000.00, plus all interest thereon, plus all of Lender’s costs,
expenses, and reasonable attorneys’ fees incurred in connection with or
relating to (A) the collection of the Indebtedness, (B) the collection and sale
of any collateral for the Indebtedness or this Guaranty, or (C) the enforcement
of this Guaranty.  Attorneys’ fees
include, without limitation, reasonable attorneys’ fees whether or not there is
a lawsuit, and if there is a lawsuit, any fees and costs for trial and appeals.

The
above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one
time.  If Lender presently holds one or
more guaranties, or hereafter receives additional guaranties from Guarantor,
Lender’s rights under all guaranties shall be cumulative.  This Guaranty shall not (unless specifically
provided below to the contrary) affect or invalidate any such other
guaranties.  Guarantor’s liability will
be Guarantor’s aggregate liability under the terms of this Guaranty and any
such other unterminated guaranties.

INDEBTEDNESS GUARANTEED.  The Indebtedness guaranteed by this Guaranty
includes any and all of Borrower’s indebtedness to Lender and is used in the
most comprehensive sense and means and includes any and all of Borrower’s
liabilities, obligations and debts to Lender, now existing or hereinafter
incurred or created, including, without limitation, all loans, advances,
interest, costs, debts, overdraft indebtedness, credit card indebtedness, lease
obligations, other obligations, and liabilities of Borrower, or any of them,
and any present or future judgments against Borrower, or any of them; and
whether any such Indebtedness is voluntarily or involuntarily incurred, due or
not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined; whether Borrower may be liable individually or jointly with
others, or primarily or secondarily, or as guarantor or surety; whether recovery
on the Indebtedness may be or may become barred or unenforceable against
Borrower for any reason whatsoever; and whether the Indebtedness arises from
transactions which may be voidable on account of infancy, insanity, ultra
vires, or otherwise.

 

 

 

DURATION OF GUARANTY.  This Guaranty will take effect when received
by Lender without the necessity of any acceptance by Lender, or any notice to
Guarantor or to Borrower, and will continue in full force until all
Indebtedness incurred or contracted before receipt by Lender of any notice of
revocation shall have been fully and finally paid and satisfied and all of
Guarantor’s other obligations under this Guaranty shall have been performed in
full.  If Guarantor elects to revoke
this Guaranty, Guarantor may only do so in writing.  Guarantor’s written notice of revocation must be mailed to
Lender, by certified mail, at Lender’s address listed above or such other place
as Lender may designate in writing. 
Written revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Lender of Guarantor’s written
revocation.  For this purpose and
without limitation, the term “new Indebtedness” does not include Indebtedness
which at the time of notice of revocation is contingent, unliquidated,
undetermined or not due and which later becomes absolute, liquidated,
determined or due.  This Guaranty will
continue to bind Guarantor for all Indebtedness incurred by Borrower or
committed by Lender prior to receipt of Guarantor’s written notice of
revocation, including any extensions, renewals, substitutions or modifications
of the Indebtedness.  All renewals,
extensions, substitutions, and modifications of the Indebtedness granted after
Guarantor’s revocation, are contemplated under this Guaranty and, specifically
will not be considered to be new Indebtedness. 
This Guaranty shall bind Guarantor’s estate as to Indebtedness created
both before and after Guarantor’s death or incapacity, regardless of Lender’s
actual notice of Guarantor’s death. 
Subject to the foregoing, Guarantor’s executor or administrator or other
legal representative may terminate this Guaranty in the same manner in which
Guarantor might have terminated it and with the same effect.  Release of any other guarantor or termination
of any other guaranty of the Indebtedness shall not affect the liability of
Guarantor under this Guaranty.  A
revocation Lender receives from any one or more Guarantors shall not affect the
liability of any remaining Guarantors under this Guaranty.  It is anticipated that fluctuations may occur in the
aggregate amount of Indebtedness covered by this Guaranty, and Guarantor
specifically acknowledges and agrees that reductions in the amount of
Indebtedness, even to zero dollars ($0.00), prior to Guarantor’s written
revocation of this Guaranty shall not constitute a termination of this
Guaranty.  This Guaranty is beinging
upon Guarantor and Guarantor’s heirs, successors and assigns so long as any of
the guaranteed Indebtedness remains unpaid and even though the Indebtedness
guaranteed may from time to time be zero dollars ($0.00).

GUARANTOR’S AUTHORIZATION TO LENDER.  Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor’s liability under this Guaranty, from time to time: (A) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (B) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the Indebtedness or any part of the Indebtedness,
including increases and decreases of the rate of interest on the Indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(C) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (D) to release, substitute, agree not to sue, or deal with any one
or more of Borrower’s sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (E) to determine how, when and what
application of payments and credits shall be made on the Indebtedness; (F) to
apply such security and direct the order or manner of sale thereof, including
without limitation, any nonjudicial sale permitted by the terms of the
controlling security agreement or deed of trust, as Lender in its discretion
may determine; (G) to sell, transfer, assign or grant participations in all or
any part of the Indebtedness; and (H) to assign or transfer this Guaranty in
whole or in part.

 

 

 

GUARANTOR’S REPRESENTATIONS AND
WARRANTIES.  Guarantor
represents and warrants to Lender that (A) no representations or agreements of
any kind have been made to Guarantor which would limit or qualify in any way
the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request
and not at the request of Lender; (C) Guarantor has full power, right and
authority to enter into this Guaranty; (D) the provisions of this Guaranty do
not conflict with or result in a default under any agreement or other
instrument binding upon Guarantor and do not result in a violation of any law,
regulation, court decree or order applicable to Guarantor; (E) Guarantor has
not and will not, without the prior written consent of Lender, sell, lease,
assign, encumber, hypothecate, transfer, or otherwise dispose of all or
substantially all of Guarantor’s assets, or any interest therein; (F) upon
Lender’s request, Guarantor will provide to Lender financial and credit
information in form acceptable to Lender, and all such financial information
which currently has been, and all future financial information which will be
provided to Lender is and will be true and correct in all material respects and
fairly present Guarantor’s financial condition as of the dates the financial information
is provided; (G) no material adverse change has occurred in Guarantor’s
financial condition since the date of the most recent financial statements
provided to Lender and no event has occurred which may materially adversely
affect Guarantor’s financial condition; (H) no litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made
no representation to Guarantor as to the creditworthiness of Borrower; and (J)
Guarantor has established adequate means of obtaining from Borrower on a
continuing basis information regarding Borrower’s financial condition.  Guarantor agrees to keep adequately informed
from such means of any facts, events, or circumstances which might in any way
affect Guarantor’s risks under this Guaranty, and Guarantor further agrees
that, absent a request for information, Lender shall have no obligation to
disclose to Guarantor any information or documents acquired by Lender in the
course of its relationship with Borrower.

GUARANTOR’S WAIVERS.  Except as prohibited by applicable law,
Guarantor waives any right to require Lender (A) to continue lending money or
to extend other credit to Borrower; (B) to make any presentment, protest,
demand, or notice of any kind, including notice of any nonpayment of the
Indebtedness or of any nonpayment related to any collateral, or notice of any
action or nonaction on the part of Borrower, Lender, any surety, endorser, or
other guarantor in connection with the Indebtedness or in connection with the
creation of new or additional loans or obligations; (C) to resort for payment
or to proceed directly or at once against any person, including Borrower or any
other guarantor; (D) to proceed directly against or exhaust any collateral held
by Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other
applicable provisions of the Uniform Commercial Code; (F) to pursue any other
remedy within Lender’s power; or (G) to commit any act or omission of any kind,
or at any time, with respect to any matter whatsoever.

In
addition to the waivers set forth herein, if now or hereafter Borrower is or
shall become insolvent and the Indebtedness shall not at all times until paid
be fully secured by collateral pledged by Borrower, Guarantor hereby forever
waives and gives up in favor of Lender and Borrower, and Lender’s and
Borrower’s respective successors, any claim or right to payment Guarantor may
now have or hereafter have or acquire against Borrower, by subrogation or
otherwise, so that at no time shall Guarantor be or become a “creditor” of Borrower
within the meaning of 11 U.S.C. section 547(b), or any successor provision of
the Federal bankruptcy laws.

Guarantor
also waives any and all rights or defenses arising by reason of (A) any “one
action” or “anti-deficiency” law or any other law which may prevent Lender from
bringing any action, including a claim for deficiency, against Guarantor,
before or after Lender’s commencement or completion of any foreclosure action,
either judicially or by exercise of a power of sale; (B) any election of remedies
by Lender which destroys or otherwise adversely affects Guarantor’s subrogation
rights or Guarantor’s rights 

 

 

 

to
proceed against Borrower for reimbursement, including without limitation, any
loss of rights Guarantor may suffer by reason of any law limiting, qualifying,
or discharging the Indebtedness; (C) any disability or other defense of
Borrower, of any other guarantor, or of any other person, or by reason of the
cessation of Borrower’s liability from any cause whatsoever, other than payment
in full in legal tender, of the Indebtedness; (D) any right to claim discharge
of the Indebtedness on the basis of unjustified impairment of any collateral
for the Indebtedness; (E) any statute of limitations, if at any time any action
or suit brought by Lender against Guarantor is commenced, there is outstanding
Indebtedness of Borrower to Lender which is not barred by any applicable
statute of limitations; or (F) any defenses given to guarantors at law or in
equity other than actual payment and performance of the Indebtedness.  If payment is made by Borrower, whether
voluntarily or otherwise, or by any third party, on the Indebtedness and
thereafter Lender is forced to remit the amount of that payment to Borrower’s
trustee in bankruptcy or to any similar person under any federal or state
bankruptcy law or law for the relief of debtors, the Indebtedness shall be
considered unpaid for the purpose of the enforcement of this Guaranty.

Guarantor
further waives and agrees not to assert or claim at any time any deductions to
the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.

GUARANTOR’S UNDERSTANDING WITH
RESPECT TO WAIVER.  Guarantor
warrants and agrees that each of the waivers set forth above is made with
Guarantor’s full knowledge of its significance and consequences and that, under
the circumstances, the waivers are reasonable and not contrary to public policy
or law.  If any such waiver is
determined to be contrary to any applicable law or public policy, such waiver
shall be effective only to the extent permitted by law or public policy.

RIGHT OF SETOFF.  To the extent permitted by applicable law,
Lender reserves a right of setoff in all Guarantor’s accounts with Lender
(whether checking, savings, or some other account).  This includes all accounts Guarantor holds jointly with someone
else and all accounts Guarantor may open in the future.  However, this does not include any IRA or
Keogh accounts, or any trust accounts for which setoff would be prohibited by
law.  Guarantor authorizes Lender, to
the extent permitted by applicable law, to hold these funds if there is a
default, and Lender may apply the funds in these accounts to pay what Guarantor
owes under the terms of this Guaranty.

SUBORDINATION OF BORROWER’S DEBTS
TO GUARANTOR.  Guarantor
agrees that the Indebtedness of Borrower to Lender, whether now existing or
hereafter created, shall be superior to any claim that Guarantor may now have
or hereafter acquire against Borrower, whether or not Borrower becomes
insolvent.  Guarantor hereby expressly
subordinates any claim Guarantor may have against Borrower, upon any account
whatsoever, to any claim that Lender may now or hereafter have against
Borrower.  In the event of insolvency
and consequent liquidation of the assets of Borrower, through bankruptcy, by an
assignment for the benefit of creditors, by voluntary liquidation, or
otherwise, the assets of Borrower applicable to the payment of the claims of
both Lender and Guarantor shall be paid to Lender and shall be first applied by
Lender to the Indebtedness of Borrower to Lender.  Guarantor does hereby assign to Lender all claims which it may
have or acquire against Borrower or against any assignee or trustee in
bankruptcy of Borrower; provided however, that such assignment shall be
effective only for the purpose of assuring to Lender full payment in legal
tender of the Indebtedness.  If Lender
so requests, any notes or credit agreements now or hereafter evidencing any
debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to
Lender.  Guarantor agrees, and Lender is
hereby authorized, in the name of Guarantor, from time to time to execute and
file financing statements and continuation statements and to execute such other
documents and to take such other actions as Lender deems necessary or
appropriate to perfect, preserve and enforce its rights under this Guaranty.

 

 

 

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a
part of this Guaranty:

Amendments.  This Guaranty, together with any Related
Documents, constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Guaranty. 
No alteration of or amendment to this Guaranty shall be effective unless
given in writing and signed by the party or parties sought to be charged or
bound by the alteration or amendment.

Attorneys’ Fees; Expenses.  Guarantor agrees to pay upon demand all of
Lender’s costs and expenses, including Lender’s reasonable attorneys’ fees and
Lender’s legal expenses, incurred in connection with the enforcement of this
Guaranty.  Lender may hire or pay
someone else to help enforce this Guaranty, and Guarantor shall pay the costs
and expenses of such enforcement.  Costs
and expenses include Lender’s reasonable attorneys’ fees and legal expenses
whether or not there is a lawsuit, including reasonable attorneys’ fees and
legal expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. 
Guarantor also shall pay all court costs and such additional fees as may
be directed by the court.

Caption Headings.  Caption headings in this Guaranty are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Guaranty.

Governing Law.  This Guaranty will be governed by, construed
and enforced in accordance with federal law and the laws of the State of
Minnesota.  This Guaranty has been
accepted by Lender in the State of Minnesota.

Integration.  Guarantor further agrees that Guarantor has
read and fully understands the terms of this Guaranty; Guarantor has had the
opportunity to be advised by Guarantor’s attorney with respect to this
Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence
is not required to interpret the terms of this Guaranty.  Guarantor hereby indemnifies and holds
Lender harmless from all losses, claims, damages, and costs (including Lender’s
attorneys’ fees) suffered or incurred by Lender as a result of any breach by
Guarantor of the warranties, representations and agreements of this paragraph.

Interpretation.  In all cases where there is more than one
Borrower or Guarantor, then all words used in this Guaranty in the singular
shall be deemed to have been used in the plural where the context and
construction so require; and where there is more than one Borrower named in
this Guaranty or when this Guaranty is executed by more than one Guarantor, the
words “Borrower” and “Guarantor” respectively shall mean all and any one or
more of them.  The words “Guarantor,”
“Borrower,” and “Lender” include the heirs, successors, assigns, and
transferees of each of them.  If a court
finds that any provision of this Guaranty is not valid or should not be
enforced, that fact by itself will not mean that the rest of this Guaranty will
not be valid or enforced.  Therefore, a
court will enforce the rest of the provisions of this Guaranty even if a
provision of this Guaranty may be found to be invalid or unenforceable.  If any one or more of Borrower or Guarantor
are corporations, partnerships, limited liability companies, or similar
entities, it is not necessary for Lender to inquire into the powers of Borrower
or Guarantor or of the officers, directors, partners, managers, or other agents
acting or purporting to act on their behalf, and any Loan indebtedness made or
created in reliance upon the professional exercise of such powers shall be
guaranteed under this Guaranty.

 

 

 

Notices.  Any notice required to be given under this
Guaranty shall be given in writing, and except for revocation notices by Guarantor,
shall be effective when actually delivered, when actually received by
telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this
Guaranty.  All revocation notices by
Guarantor shall be in writing and shall be effective upon delivery to Lender as
provided in the section of this Guaranty entitled “DURATION OF GUARANTY.”  Any party may change its address for notices
under this Guaranty by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party’s
address.  For notice purposes, Guarantor
agrees to keep Lender informed at all times of Guarantor’s current
address.  Unless otherwise provided or
required by law, if there is more than one Guarantor, any notice given by
Lender to any Guarantor is deemed to be notice given to all Guarantors.

No Waiver by Lender.  Lender shall not be deemed to have waived
any rights under this Guaranty unless such waiver is given in writing and
signed by Lender.  No delay or omission
on the part of Lender in exercising any right shall operate as a waiver of such
right or any other right.  A waiver by
Lender of a provision of this Guaranty shall not prejudice or constitute a
waiver of Lender’s right otherwise to demand strict compliance with that
provision or any other provision of this Guaranty.  No prior waiver by Lender, nor any course of dealing between
Lender and Guarantor, shall constitute a waiver of any Lender’s rights or of
any of Guarantor’s obligations as to any future transactions.  Whenever the consent of Lender is required
under this Guaranty, the granting of such consent by Lender in any instance
shall not constitute continuing consent to subsequent instances where such
consent is required and in all cases such consent may be granted or withheld in
the sole discretion of Lender.

Successors and Assigns.  Subject to any limitations stated in this
Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding
upon and inure to the benefit of the parties, their successors and assigns.

Waive Jury.  Lender and Guarantor hereby waive the right
to any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other.

DEFINITIONS.  The following capitalized words and terms
shall have the following meanings when used in this Guaranty.  Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America.  Words and
terms used in the singular shall include the plural, and the plural shall
include the singular, as the context may require.  Words and terms not otherwise defined in this Guaranty shall have
the meanings attributed to such terms in the Uniform Commercial Code.

Borrower.  The word “Borrower” means MEDICAL CV, INC.,
and all other persons and entities signing the Note in whatever capacity.

Guarantor.  The word “Guarantor” means each and every
person or entity signing this Guaranty, including without limitation PAUL
MILLER.

Guaranty.  The word “Guaranty” means the guaranty from
Guarantor to Lender, including without limitation a guaranty of all or part of
the Note.

Indebtedness.  The word “Indebtedness” means Borrower’s
indebtedness to Lender as more particularly described in this Guaranty.

 

 

 

Lender.  The word “Lender” means ASSOCIATED BANK
MINNESOTA, NATIONAL ASSOCIATION, its successors and assigns.

Note.  The word “Note” means the promissory note dated November 23,
2002, in
the original principal amount of $2,500,000.00 from Borrower to
Lender, together with all renewals of, extensions of, modifications of,
refinancings of, consolidations of, and substitutions for the promissory note
or agreement.

Related Documents.  The words “Related Documents” mean all
promissory notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security deeds,
collateral mortgages, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
Indebtedness.

EACH UNDERSIGNED GUARANTOR
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS
TERMS.  IN ADDITION, EACH GUARANTOR
UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND
DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL
TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF
GUARANTY”.  NO FORMAL ACCEPTANCE BY
LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE.  THIS GUARANTY IS DATED NOVEMBER 23, 2002.

GUARANTOR:

 

	
  x

  	
  /s/
  Paul K. Miller

  
	
    PAUL MILLER,
  IndividuallyEXHIBIT 4.4

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE
AGREEMENT (this “Agreement”), is entered into as of March 31, 2003, by and
among Centiv, Inc., a Delaware corporation (the “Company”), and the purchasers
identified on Exhibit A to this Agreement (the “Purchasers”).

 

Background

 

A.  Each Purchaser desires to purchase units (“Units”) from the
Company, each Unit consisting of (i) one share of the Company’s Series B
Preferred Stock, $.001 par value per share (the “Series B Preferred Stock”), having
the rights, preferences and privileges set forth in the Certificate of
Designations, Preferences and Rights attached hereto as Exhibit C (“Certificate
of Designations”) and (ii) a warrant in the form attached hereto as Exhibit D
(the “Warrants”) to purchase two shares of the Company’s Common Stock, $.001
per share (“Common Stock”).  The
purchase price per Unit shall be $5.00 (the “Purchase Price”).  The shares of Series B Preferred Stock
included in the Units (the “Shares”) are convertible into shares of Common
Stock in accordance with the Certificate of Designations.  The initial conversion ratio is ten (10)
shares of Common Stock for each one (1) share of Series B Preferred Stock.  The Preferred Stock and Warrant included
within a Unit are not linked and may be transferred separate from each other
once acquired by a Purchaser.

 

B.  In connection with the purchase and sale of the Units, the
parties to this Agreement are entering into an Amended and Restated Investor
Rights Agreement in the form attached to this Agreement as Exhibit E (the
“Investor Rights Agreement”), pursuant to which the Company has agreed to
provide certain registration and other rights to the Purchasers.

 

NOW, THEREFORE, the Company and the Purchasers
hereby agree as follows:

 

1.               CERTAIN DEFINITIONS.

 

For purposes of this
Agreement, the following terms shall have the meanings ascribed to them as
provided below:

 

“Common Stock Beneficially
Owned” with respect to a Purchaser or group of Purchasers includes all
shares of Common Stock then held or acquirable by such Purchaser or group of
Purchasers that were acquired or are acquirable (a) directly upon exercise of
outstanding Warrants and (b) upon conversion of Shares.

 

“Conversion Shares”
shall mean the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock.

 

“Investment Amount”
shall mean the dollar amount to be invested in the Company at the Closing
pursuant to this Agreement by any Purchaser, either in cash or by conversion of
the principal and accrued interest under the Senior Subordinated Debt, as set
forth opposite such Purchaser’s name on Exhibit A.

 

“Material Adverse Effect”
shall mean any material adverse effect on (i) the ability of the Company to
perform its obligations hereunder (including the issuance of the Shares and the
Warrants), under the Certificate of Designations, under the Warrants (including
the issuance of the Warrant Shares)

 

 

or under the Investor Rights Agreement or (ii)
the business, operations, prospects, properties or financial condition of the
Company and its subsidiaries, taken as a whole.

 

“Securities” shall
mean the Shares, the Warrants, the Warrant Shares and the Conversion Shares.

 

“Senior Subordinated Debt”
shall mean the indebtedness evidenced by the Company’s Senior Subordinated
Convertible Promissory Notes issued under the Senior Subordinated Convertible
Bridge Loan and Warrant Agreement dated September 30, 2002 by and among the
Company and the investors identified therein.

 

“Shares” means the
shares of Series B Preferred Stock to be issued and sold by the Company and
purchased by the Purchasers at the Closing, including those shares to be issued
in exchange for shares of Series A Convertible Preferred Stock pursuant to
Section 2.3.

 

“Warrant Shares” shall
mean the shares of capital stock issuable upon exercise of or otherwise
pursuant to the Warrants.

 

2.               PURCHASE AND SALE OF SHARES AND WARRANTS.

 

2.1  Sale and Issuance of
Securities.  The Company has
authorized the sale and issuance of up to 1,000,000 Units.  Subject to the terms and conditions of this
Agreement, the Company will issue and sell to each Purchaser, and such
Purchaser shall purchase from the Company, the number of Units set forth
opposite the name of such Purchaser on Exhibit A at the Purchase Price, for an
aggregate purchase price equal to the Investment Amount set forth opposite the
name of such Purchaser on Exhibit A. The commitments to purchase Units are the
several, and not joint, obligations of each Purchaser.

 

2.2  Closing. Subject to
the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, the closing of the purchase and sale of the Securities (the “Closing”)
shall be at the offices of Gardner Carton &Douglas LLC, 191 North Wacker
Drive, Suite 3700, Chicago, Illinois at 12:00 noon Chicago Time on March 31,
2003, or such other date or time as the parties may mutually agree (“Closing
Date”).  At the Closing, each Purchaser
shall pay the Company an amount equal to such Purchaser’s Investment Amount by
wire transfer to the Company, in accordance with the Company’s written wiring
instructions, and/or by surrender of Senior Subordinated Debt for cancellation
of principal and interest against delivery of certificates representing the
Shares and duly executed Warrants included in the Units being purchased by such
Purchaser.

 

2.3  Exchange of Series A Convertible Preferred Stock.  At the Closing, the Purchasers who own
Series A Convertible Preferred Stock as set forth on Exhibit B shall exchange
Series A Convertible Preferred Stock for shares of Series B Preferred Stock as
follows:  for each ten dollars of
Investment Amount invested by a Purchaser, the Purchaser will surrender one (1)
share of Series A Convertible Preferred Stock and the warrants, on a pro rata
basis, issued in connection with such share of Series A Convertible Preferred
Stock and receive in exchange from the Company two (2) shares of Series B
Preferred Stock (which shares shall be in addition to the shares purchased for
the Investment Amount); provided, however, that no Warrants will be issued in
connection with the shares of Series B Preferred Stock issued pursuant to this
Section 2.3.  In addition, the warrants
to purchase Series A Preferred Stock held by such Purchasers which are not
surrendered, if any, will be converted, in accordance with their terms, into
warrants to purchase Common Stock.

 

2.4  Senior Subordinated Debt Warrant Cancellation. The
Purchasers who are paying for some or all of their Investment Amount by way of
cancellation of Senior Subordinated Debt hereby agree that upon the
cancellation of such Senior Subordinated Debt, a pro rata portion of the
warrants to purchase

 

2

 

Common Stock they were issued in connection
with the issuance of the Senior Subordinated Debt will be cancelled in
proportion to the percentage of the Senior Subordinated Debt that they hold
that is being cancelled hereunder.

 

3.               THE PURCHASER’S REPRESENTATIONS AND
WARRANTIES.

 

Each Purchaser severally and
not jointly represents and warrants to the Company as follows:

 

3.1  Purchase for Own Account. 
The Purchaser is purchasing the Securities for the Purchaser’s own
account and not with a present view towards the distribution thereof.  The Purchaser understands that the Purchaser
must bear the economic risk of this investment indefinitely, unless the
Securities are registered pursuant to the Securities Act of 1933, as amended
(the “Securities Act”), and any applicable state securities or blue sky laws or
an exemption from such registration is available, and that the Company has no
present intention of registering any such Securities other than as contemplated
by the Investor Rights Agreement. Notwithstanding anything in this Section 3.1
to the contrary, by making the foregoing representation, the Purchaser does not
agree to hold the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption from registration under
the Securities Act and any applicable state securities laws.

 

3.2  Information.  The
Purchaser has been furnished all materials relating to the business, finances
and operations of the Company and its subsidiaries and materials relating to
the offer and sale of the Securities which have been requested by the
Purchaser.  The Purchaser has been
afforded the opportunity to ask questions of the Company and has received
satisfactory answers to any such inquiries. 
Neither such inquiries nor any other due diligence investigation
conducted by the Purchaser or its counsel or any of its representatives shall
modify, amend or affect the Purchaser’s right to rely on the Company’s
representations and warranties contained in Section 4 below.

 

3.3  Governmental Review. 
The Purchaser understands that no United States federal or state agency
or any other government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.

 

3.4  Authorization; Enforcement.  The Purchaser has the requisite power and authority to enter into
and perform its obligations under this Agreement and to purchase the Units in
accordance with the terms hereof.  This
Agreement has been duly and validly authorized, executed and delivered on
behalf of the Purchaser and is a valid and binding agreement of the Purchaser
enforceable against the Purchaser in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other laws affecting creditors’ rights and remedies generally and
to general principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity).

 

3.5  Transfer or Resale. 
The Purchaser understands that (i) except as provided in the Investor
Rights Agreement, the Securities have not been and are not being registered
under the Securities Act or any state securities laws, and may not be
transferred unless (a) subsequently registered thereunder, (b) the Purchaser
shall have delivered to the Company an opinion of counsel reasonably acceptable
to the Company (which opinion shall be in form, substance and scope customary
for opinions of counsel in comparable transactions) to the effect that the
Securities to be sold or transferred may be sold or transferred under an exemption
from such registration, (c) sold under Rule 144 promulgated under the
Securities Act (or a successor rule), or (d) sold or transferred to an
affiliate of the Purchaser pursuant to an exemption under the Securities Act;
and (ii) neither the Company nor any other person is under any obligation to
register such Securities under the Securities Act or any state securities laws
or to comply

 

3

 

with the terms and conditions of any exemption
thereunder, in each case, other than pursuant to the Investor Rights Agreement.

 

3.6.  Legends.  The Purchaser understands that the Shares, the Warrants and,
until such time as the Conversion Shares and shares of Common Stock issuable
directly upon exercise of the Warrants have been registered under the
Securities Act as contemplated by the Investor Rights Agreement or otherwise
may be sold by the Purchaser under Rule 144, the certificates for such
Conversion Shares and other shares of Common Stock  may bear 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, or the securities laws of any state of the United States.  The securities represented hereby may not be
offered or sold in the absence of an effective registration statement for the
securities under applicable securities laws unless offered, sold or transferred
under an available exemption from the registration requirements of those laws.

 

The legend set forth above shall be removed
and the Company shall issue a certificate without such legend to the holder of
any Security upon which it is stamped, if, (a) the sale of such Security is
registered under the Securities Act, (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under the Securities
Act or (c) such holder provides the Company with reasonable assurances that
such Security can be sold under Rule 144(k). 
The Purchaser agrees to sell all Securities, including those represented
by a certificate(s) from which the legend has been removed, pursuant to an
effective registration statement or under an exemption from the registration
requirements of the Securities Act.  In
consideration of such removal, the Purchaser agrees and covenants that in
connection with the registration of such Securities, it will sell all
Securities in accordance with the plan of distribution contained in the
registration statement pursuant to which it is selling its Securities, it will
deliver a prospectus in accordance with the prospectus delivery requirements of
the Securities Act, and in the event that the Company informs such Purchaser
that the registration statement has ceased to be effective under the Securities
Act, such Purchaser shall, at the request of the Company, return its Securities
for legending unless at such time such Securities may be sold under Rule
144(k).

 

3.7  Accredited Investor Status.  The Purchaser is an “accredited investor” as that term is defined
in Rule 501(a) of Regulation D promulgated by the Securities and Exchange
Commission (“SEC”) under the Securities Act (“Regulation D”).

 

3.8  Company Reliance. 
The Purchaser understands that the Shares are being offered and sold
and  the Warrants are being issued  to it in reliance on specific exemptions
from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgments, and understandings of the Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Securities.

 

4.               REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and
warrants to each Purchaser as follows:

 

4.1  Organization and Qualification.  The Company is a corporation duly organized and existing under
the laws of Delaware, and has the requisite corporate power to own its
properties and to carry on its business as now being conducted.  The Company is duly qualified as a foreign
corporation to do business

 

4

 

and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. The Company does not have any subsidiaries and does not have an equity
interest greater than 20% in any other entity.

 

4.2  Authorization; Enforcement.  (i) The Company has the requisite corporate power and authority
to enter into and perform its obligations under this Agreement, the Certificate
of Designation, the Warrants and the Investor Rights Agreement, to issue and
sell the Shares and the Warrants in accordance with the terms hereof, to issue
the Warrant Shares upon exercise of the Warrants in accordance with the terms
of the Warrants and to issue the Conversion Shares upon conversion of the
Shares in accordance with the Certificate of Designations; (ii) the execution,
delivery and performance of this Agreement, the Warrants and the Investor
Rights Agreement by the Company, the adoption and filing of the Certificate of
Designations and the consummation by it of the transactions contemplated hereby
and thereby (including, without limitation, the reservation for issuance and issuance
of the Shares and the issuance of the Warrants, and the reservation for
issuance and issuance of the Warrant Shares and Conversion  Shares) have been duly authorized by the
Company’s Board of Directors and no further consent or authorization of the Company,
its Board of Directors or its stockholders (except for ratification of the
anti-dilution protection afforded to the Shares) is required; (iii) this
Agreement has been duly executed and delivered by the Company; (iv) the
Certificate of Designations has been duly filed with the Delaware Secretary of
State; and (v) this Agreement constitutes, and, upon execution and delivery by
the Company of the Investor Rights Agreement and the Warrants, such agreements
will constitute, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other laws affecting creditors’ rights and remedies generally and to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).

 

4.3  Capitalization. 
The capitalization of the Company as of the date hereof is set forth on
Section 4.3 of Schedule 4 to this Agreement (the “Disclosure Schedule”),
including the 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, the number of shares issuable and reserved
for issuance pursuant to securities exercisable for, or convertible into or
exchangeable for any shares of capital stock. 
Section 4.3 of the Disclosure Schedule also sets forth the number of
Shares to be issued pursuant to the terms hereof and the number of Warrant
Shares to be issued upon the exercise of the Warrants and the number of
Conversion Shares reserved for issuance upon conversion of the Series B
Preferred Stock.  All of such
outstanding shares of the Company’s capital stock have been, or upon issuance
will be, validly issued, fully paid and nonassessable. The Series B Preferred
Stock has the rights, preferences and privileges set forth in the Certificate
of Designations.  Except as set forth in
Section 4.3 of the Disclosure Schedule, no shares of capital stock of the
Company (including the Shares and the Warrant Shares) or any of the
subsidiaries are subject to preemptive rights or any other similar rights of
the stockholders of the Company or any liens or encumbrances.  Except for the Securities and as disclosed
in Section 4.3 of the Disclosure Schedule, as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its subsidiaries, or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or such subsidiaries, and
(ii) there are no agreements or arrangements under which the Company or any of
its subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Investor Rights
Agreement).  Except as set forth in
Section 4.3 of the Disclosure Schedule there are no securities or instruments
containing anti-dilution or similar provisions that may be triggered by the
issuance of the Securities in accordance with the terms of this Agreement, the
Warrants or the Investor Rights Agreement

 

5

 

and the holders of the securities and
instruments listed in Section 4.3 of such Disclosure Schedule have waived any
rights they may have under such anti-dilution or similar provisions in
connection with the issuance of the Securities in accordance with the terms of
this Agreement, the Warrants or the Investor Rights Agreement.  The Company has made available to each
Purchaser true and correct copies of the Company’s Certificate of Incorporation
as in effect on the date hereof (“Certificate of Incorporation”), the Company’s
By-laws as in effect on the date hereof (the “By-laws”) and all other
instruments and agreements governing securities convertible into or exercisable
or exchangeable for capital stock of the Company, except for stock options
granted under any employee benefit plan or director stock option plan of the
Company.

 

4.4  Issuance of Shares. 
The Shares are duly authorized and when issued and paid for in
accordance with the terms hereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances, and
will not be subject to preemptive rights or other similar rights of
stockholders of the Company and will not impose personal liability upon the
holder thereof. The Warrant Shares are duly authorized and reserved for
issuance, and, upon exercise of the Warrants in accordance with the terms
thereof, the Warrant Shares will be validly issued, fully paid and
non-assessable and free from all taxes and liens, claims and encumbrances and
will not be subject to preemptive rights or other similar rights of
stockholders of the Company and will not impose personal liability upon the
holder thereof. The Conversion Shares are duly authorized and reserved for
issuance, and, upon conversion of the Series B Preferred Stock in accordance
with the terms of the Certificate of Designations, will be validly issued,
fully paid and non-assessable and free from all taxes and liens, claims and
encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof.

 

4.5  No Conflicts.  The
execution, delivery and performance of this Agreement, the Investor Rights
Agreement and the Warrants by the Company, and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Shares, Conversion
Shares and the Warrant Shares and the issuance of the Warrants) will not (i)
conflict with or result in a violation of the Company’s Certificate of
Incorporation (including the Certificate of Designations, Preferences and
Rights of the Series A Convertible Preferred Stock) or By-laws or (ii) conflict
with, or constitute a default (or an event which, with notice or lapse of time
or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement,
indenture or instrument to which the Company is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
United States federal and state securities laws and regulations) applicable to
the Company or by which any property or asset of the Company is bound or
affected. The Company is not in violation of its Certificate of Incorporation,
By-laws and other organizational documents and the Company is not in default
(and no event has occurred which, with notice or lapse of time or both, would
put the Company or any of its subsidiaries in default) under, nor has there
occurred any event giving others (with notice or lapse of time or both) any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party, except for
actual or possible violations, defaults or rights as would not, individually or
in the aggregate, have a Material Adverse Effect.  The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental entity, except for
actual or possible violations, if any, the sanctions for which either singly or
in the aggregate would not have a Material Adverse Effect. Except as set forth
in Section 4.5 of the Disclosure Schedule and except as specifically
contemplated by this Agreement or the Warrants and as required under the
Securities Act and any applicable state securities laws, the Company is not
required to obtain any consent, approval, authorization or order of, or make
any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement (including, without
limitation, the issuance and sale of the Shares and Warrants as

 

6

 

provided hereby), the Certificate of
Designations (including the issuance of the Conversion Shares) or the Warrants (including
the issuance of the Warrant Shares), in each case in accordance with the terms
hereof or thereof.  Except as set forth
in Section 4.5 of the Disclosure Schedule, the Company is not in violation of
the listing requirements of the Nasdaq Stock Market (“Nasdaq”) and does not
reasonably anticipate that the Common Stock will be delisted by Nasdaq in the
foreseeable future based on its rules (and interpretations thereof) as
currently in effect.

 

4.6.  SEC Documents; Financial Statements.  Since January 1, 2000, the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and has filed all registration statements
and other documents required to be filed by it with the SEC pursuant to the
Securities Act (all of the foregoing, including the financial statements and
schedules thereto and documents incorporated by reference therein, the “SEC
Documents”). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.  Any statements made in any such SEC
Documents that are or were required to be updated or amended under applicable
law have been so updated or amended.  As
of their respective dates, the financial statements of the Company included in
the SEC Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC applicable with
respect thereto.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its subsidiaries as of the dates thereof
and the results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).  Except as set forth in
the SEC Documents, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to the date of such SEC Documents and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in such
SEC Documents, which liabilities and obligations referred to in clauses (i) and
(ii), individually or in the aggregate, would not have a Material Adverse
Effect. Except as disclosed in the SEC Documents, since December 31, 2000,
there has been no change by the Company in the method for which it accounts for
revenues or expenses under generally accepted accounting principles.

 

4.7  Absence of Certain Changes.  Except as disclosed in the SEC Documents, since September 30,
2002, there has been no change or development which individually or in the
aggregate has had or could reasonably be expected to have a Material Adverse
Effect.

 

4.8  Absence of Litigation. 
Except as disclosed in the SEC Documents, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, threatened
in writing against or affecting the Company, or any of its subsidiaries, or any
of their directors or officers in their capacities as such which would
reasonably be expected to have a Material Adverse Effect or which would
adversely affect the validity, enforceability of, or the authority or ability
of the Company to perform its obligations under this Agreement (including the
issuance of the Shares and the Warrants), the Certificate of Designations
(including the issuance of the Conversion Shares). the Investor Rights
Agreement, the Warrants

 

7

 

(including the issuance of the Warrant Shares)
or any other agreement or document delivered pursuant hereto or thereto.

 

4.9  Intellectual Property. 
The Company owns or is licensed to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, permits, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, “Intangibles”) necessary for the conduct of its
business as now being conducted and as proposed to be conducted.  To the knowledge of the Company, after
reasonable inquiry, the Company is not infringing or in conflict with any other
person with respect to any Intangibles which, individually or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect. The Company has not received written notice that it is
infringing upon third party Intangibles. 
The Company has not entered into any consent, indemnification,
forbearance to sue or settlement agreements with respect to the validity of the
Company’s ownership or right to use its Intangibles and to the Company’s knowledge,
after reasonable inquiry, there is no basis for any claim relating to any
consent, indemnification, forbearance to sue or settlement agreement with
respect to the validity of the Company’s or such subsidiary’s ownership or
right to use its Intangibles to be successful. 
The Intangibles are valid and enforceable, and no registration relating
thereto has lapsed, expired or been abandoned or canceled or is the subject of
cancellation or other adversarial proceedings, and all applications therefor
are pending and in good standing. The Company has complied, in all material
respects, with its contractual obligations relating to the protection of the
Intangibles used pursuant to licenses. 
To the Company’s knowledge, no person is infringing on or violating the
Intangibles owned or used by the Company.

 

4.10  Foreign Corrupt Practices.  Neither the Company, nor any director or
officer, nor, to the Company’s knowledge, any agent, employee or other person
acting on behalf of the Company or any of its subsidiaries has, in the course
of such person’s actions for, or on behalf of, the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

 

4.11  Environment.  Except as disclosed in the SEC Documents (i)
there is no environmental liability, nor factors likely to give rise to any
environmental liability, affecting any of the properties of the Company that,
individually or in the aggregate, would have a Material Adverse Effect and (ii)
the Company has not 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 will not have a Material
Adverse Effect.

 

4.12  Title.  The Company has good title in fee simple to all real property and
good title to all personal property owned by it which is material to its
business, free and clear of all liens, encumbrances and defects except for
liens to secure the Company’s bank lines of credit and such defects in title
that, individually or in the aggregate, could not have a Material Adverse
Effect.  Any real property and
facilities held under lease by the Company are held by the Company under valid,
subsisting and enforceable leases with such exceptions which have not had and
will not have a Material Adverse Effect.

 

4.13  Insurance.  The Company maintains such insurance relating to its business,
operations, assets, key-employees and officers and directors as is appropriate
to their  business, assets and
operations, in such amounts and against such risks as are customarily carried
and insured against by owners of

 

8

 

comparable businesses, assets and operations,
and such insurance coverages will be continued in full force and effect to and
including the Closing Date other than those insurance coverages in respect of
which the failure to continue in full force and effect could not reasonably be
expected to have a Material Adverse Effect.

 

4.14  Disclosure.  All information relating to or concerning the Company set forth
in this Agreement or provided to the Purchaser in connection with the
transactions contemplated hereby, including the disclosure contained in
Schedule 4, viewed in its entirety, is true and correct in all material
respects and the Company has not omitted to state any material fact necessary
in order to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading.  No event or circumstance has occurred or
exists with respect to the Company or its businesses, properties, operations,
prospects or financial conditions, which has not been publicly disclosed but,
under applicable law, rule or regulation, would be required to be disclosed by
the Company in a registration statement filed on the date hereof by the Company
under the Securities Act with respect to a primary issuance of the Company’s
securities.  The Company has not
provided, and without the Purchaser’s request therefore, will not hereafter
provide to the Purchaser, any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company but
which has not been disclosed.

 

4.15  Acknowledgment Regarding the Purchaser’s
Purchase of the Securities. The Company acknowledges and agrees that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement or the transactions
contemplated hereby, and the relationship between the Company and the Purchaser
is “arms length” and that any statement made by the Purchaser or any of its
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is
merely incidental to the Purchaser’s purchase of Securities and has not been
relied upon by the Company, its officers or directors in any way. The Company
further represents to the Purchaser that the Company’s decision to enter into
this Agreement has been based solely on an independent evaluation by the
Company and its representatives.

 

4.16  No Brokers.  The Company has not engaged any person, whose fees are being paid
exclusively by the Company, to which or to whom brokerage commissions, finder’s
fees, financial advisory fees or similar payments are or will become due in
connection with this Agreement or the transactions contemplated.

 

4.17  Tax Status.  The Company has made or filed (or has sought extensions for) all
material federal, state and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and only
to the extent that the Company has set aside on its books provisions adequate
for the payment of all unpaid and unreported taxes) and has paid all taxes and
other governmental assessments and charges that are material  in amount, shown or determined to be due on
such returns, reports and declarations, except those being contested in good
faith and has set aside on its books provisions adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply.  Except with respect
to amounts totaling in the aggregate less than $50,000, there are no unpaid
taxes claimed to be due by the taxing authority of any jurisdiction.  The Company has not executed a waiver with
respect to any statute of limitations relating to the assessment or collection
of any federal, state or local tax. 
Since January 1, 1996, none of the Company’s tax returns has been or is
being audited by any taxing authority.

 

4.18  Transactions with
Affiliates.  Except for
(i) stock options and stock issuances disclosed in Section 4.3 of the
Disclosure Schedule, (ii) regular salary payments and fringe benefits under an

 

9

 

individual’s
compensation package with the Company, and (iii) transactions disclosed in
Section 4.18 of the Disclosure Schedule, none of the officers, employees,
directors or other affiliates of the Company are a party to any transactions
with the Company and there have been no assumptions or guarantees by the
Company of any obligations of such affiliates or loans by the Company to any
such affiliates.

 

4.19  No General Solicitation.  Neither the Company nor any person
participating on the Company’s behalf in the transactions contemplated hereby
has conducted any “general solicitation” or “general advertising”  as such terms are used in Regulation D, with
respect to any of the Securities being offered hereby.

 

4.20  No Integrated Offering.  Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions.

 

4.21  Form S-3 Eligibility.  The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-3
under the Securities Act.  To the
Company’s knowledge, after reasonable investigation, 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 would prohibit or delay the preparation and filing of a
registration statement on Form S-3 with respect to the Registrable Securities
(as defined in the Investor Rights Agreement).

 

4.22  Employees and Consultants. None of
the employees of the Company is represented by any labor union, and there is no
labor strike or other labor trouble pending with respect to the Company
(including, without limitation, any organizational drive) or, to the Company’s
knowledge, threatened.  No officer or
key employee of the Company has advised the Company (orally or in writing) that
he intends to terminate his employment with the Company. Each employee and
consultant of the Company and each subsidiary has executed in favor of the
Company or such subsidiary, the Company’s (or such subsidiary’s) standard form
confidentiality and proprietary inventions assignment agreement.

 

4.23                           Outstanding
indebtedness.  Section 4.3
of Schedule 4 contains a list of all outstanding indebtedness of the Company,
other than trade payables and accrued liabilities incurred in the ordinary
course of business, as of February 28, 2003. 
The Company has not incurred any material indebtedness since that
date.  The Company will not use the
proceeds of this offering to repay any such indebtedness, other than Senior
Subordinated Debt which is not surrendered for cancellation to purchase Units
hereunder.

 

5.               COVENANTS.

 

5.1  Best Efforts.  The
parties shall use their best efforts timely to satisfy each of the conditions
set forth in Section 6 and Section 7 of this Agreement.

 

5.2  Form D.  The
Company agrees to file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to each Purchaser promptly
after such filing.  The Company shall
take such action as the Company shall reasonably determine is necessary to
qualify the Securities for sale to the Purchasers pursuant to this Agreement
under applicable securities or “blue sky” laws of the states of the United
States or obtain exemption therefrom, and shall provide evidence of any such
action so taken to each Purchaser on or prior to the Closing Date.

 

10

 

5.3  Reporting Status. 
So long as any Purchaser beneficially owns any Securities or has the
right to acquire any Securities pursuant to this Agreement, the Certificate of
Designations or the Warrants, the Company shall timely file all reports
required to be filed with the SEC pursuant to the Exchange Act, and shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination, provided, however, that the obligations of the Company
in this Section 5.3 shall terminate on the date on which (i) all rights to
acquire Securities pursuant to this Agreement, the Certificate of Designations
or the Warrants have been exercised in full or have expired, and (ii) all
Securities beneficially owned by all Purchasers and their permitted assigns may
be immediately sold to the public in a single transaction pursuant to Rule
144(k) under the Securities Act or otherwise without registration or
restriction.

 

5.4  Expenses.  The Company and the Purchasers will each
bear their respective legal and other fees and expenses in connection with the
transactions contemplated in this Agreement; provided, however, the Company
shall pay the reasonable fees and expenses of a single counsel to the Purchasers,
not to exceed $50,000.

 

5.5  Reservation of Shares. 
The Company has and shall at all times have authorized and reserved for
the purpose of issuance a sufficient number of shares of Common Stock and
Series B Preferred Stock to provide for the issuance of the Shares as provided
in Section 2 hereof, the issuance of the Conversion Shares upon conversion of
the Series B Preferred Stock pursuant to the Certificate of Designations, and
the full exercise of the Warrants and the issuance of the Warrant Shares in
connection therewith and as otherwise required hereby and by the Warrants.  The Company shall not reduce the number of
shares of Common Stock and Series B Preferred Stock reserved for issuance under
this Agreement (except as a result of the issuance of the Shares hereunder),
the Certificate of Designations (except as a result of the conversion of the
Series B Preferred Stock) or the Warrants (except as a result of the expiration
of the Warrants or the issuance of the Warrant Shares upon the exercise of the
Warrants), without the consent of the Purchasers.

 

5.6  Listing.  The
Company will use its commercially reasonable efforts to continue the listing
and trading of its Common Stock on Nasdaq and will comply in all respects with
the Company’s reporting, filing and other obligations under the bylaws or rules
of Nasdaq.

 

5.7  Corporate Existence. 
The Company shall maintain its corporate existence, except in the event
of a merger, consolidation or sale of all or substantially all of the Company’s
assets in which the  surviving or
successor entity in such transaction (a) assumes the Company’s obligations
hereunder and under the Warrants and under the agreements and instruments
entered into in connection herewith and (b) is a publicly traded Company whose
common stock is listed and trades on Nasdaq, the New York Stock Exchange
(“NYSE”) or the American Stock Exchange (“AMEX”), provided, however, that the
obligations in this Section 5.7 shall terminate on the date that each Purchaser
or its assignee no longer has any right to acquire Securities pursuant to this
Agreement, upon conversion of the Series B Preferred Stock or upon exercise of
the Warrants, and all Securities beneficially owned by the Purchasers and their
permitted assigns may be immediately sold to the public in a single transaction
pursuant to Rule 144(k) under the Securities Act or otherwise without
registration or restriction.

 

5.8  No Integrated Offering. 
Neither the Company, nor any of its affiliates, nor any person acting on
its or their behalf, shall, directly or indirectly, make any offers or sales of
any security or solicit any offers to buy any security under circumstances that
would require registration of the Securities being offered hereby under the
Securities Act or cause this offering of Securities to be integrated with any
prior

 

11

 

or future offering of securities of the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions.

 

5.9                                 Anti-Dilution
Protection. Notwithstanding anything contained in the
Certificate of Designations, for a period of time beginning on the date of
issuance of the Series B Preferred Stock and ending on the date the
stockholders of the Company ratify the issuance of the Series B Preferred Stock
(which ratification will be submitted to stockholders for approval at the next
annual meeting of stockholders of the Company), the anti-dilution protection
provided under Section B(4)(e)(iv) of the Certificate of Designations in the
form of an automatic reduction of the Series B Preferred “Conversion Price” in
the event the Company issues “Additional Shares of Common Stock” for a
consideration per share less than the “Conversion Price” then in effect shall
have no force and effect.  The Company
shall use its best efforts to obtain such ratification at a meeting of
stockholders of the Company on or before July 31, 2003.

 

5.10                           No Further
Issuances.  The Company
will not, without the prior written consent of the Purchasers holding a
majority of the then outstanding Series B Preferred Stock issued pursuant to
this Agreement, issue any additional shares of Series B Preferred Stock.

 

6.               CONDITIONS TO THE COMPANY’S OBLIGATION TO
SELL.

 

The obligation of the Company
hereunder to issue and sell Units to a Purchaser at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions; provided, however, that these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion.

 

6.1  Execution of Agreements. The applicable Purchaser shall
have executed the signature page to this Agreement and the Investor Rights
Agreement, and delivered the same to the Company.

 

6.2  Payment of Investment Amount. 
The applicable Purchaser shall have delivered to the Company such
Purchaser’s Investment Amount in accordance with Section 2 above.

 

6.3  Representations and Warranties True.  The representations and warranties of the
applicable Purchaser shall be true and correct as of the date when made and as
of the Closing Date as though made at that time, and the applicable Purchaser
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Purchaser at or prior to the
Closing Date.

 

6.4  No Prohibitions. 
No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

 

6.5  Certificate of Designations.  The Certificate of Designations shall have been filed with the
Delaware Secretary of State.

 

7.               CONDITIONS TO EACH PURCHASER’S OBLIGATION TO
PURCHASE SHARES AND WARRANTS.

 

The obligation of each
Purchaser hereunder to purchase Units to be purchased by it hereunder is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that

 

12

 

these conditions are for such Purchaser’s sole
benefit and may be waived by such Purchaser at any time in such Purchaser’s
sole discretion:

 

7.1  Execution of Agreements. 
The Company shall have executed the signature pages to this Agreement
and the Investor Rights Agreement, and delivered the same to the Purchaser.

 

7.2  Delivery of Shares and Warrants.  The Company shall have delivered to the Purchaser duly executed
certificates representing the number of Shares and duly executed Warrants being
purchased by such Purchaser, including the Shares issuable under Section 2.3.

 

7.3 Representations and
Warranties True.  The
representations and warranties of the Company shall be true and correct as of
the date when made and as of the Closing Date as though made at that time and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date.  The Purchaser
shall have received a certificate, executed on behalf of the Company by its
Chief Financial Officer, dated as of the Closing Date, to the foregoing effect
and attaching true and correct copies of the resolutions adopted by the
Company’s Board of Directors authorizing the execution, delivery and
performance by the Company of its obligations under this Agreement, the
Warrants and the Investor Rights Agreement.

 

7.4  No Prohibitions. 
No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental
authority of competent jurisdiction or any self-regulatory organization, or the
staff of any thereof, having authority over the matters contemplated hereby which
questions the validity of, or challenges or prohibits the consummation of, any
of the transactions contemplated by this Agreement.

 

7.5  Opinion Letter. 
The Purchaser shall have received a signed opinion letter of Gardner
Carton & Douglas LLC, the Company’s counsel with respect to the
transactions under this Agreement, dated as of the Closing Date, covering the
matters set forth in Exhibit F to this Agreement and in form and substance
satisfactory to the Purchasers.

 

7.6  No Material Adverse Effect.  From the date of this Agreement through the Closing Date, there
shall not have occurred any Material Adverse Effect.

 

7.7  Minimum Investment Amount.  Purchasers will be purchasing Units with a minimum aggregate
Investment Amount of $1,250,000 (excluding for these purposes the cancellation
of Senior Subordinated Debt).

 

7.8  Certificate of Designations.  The Certificate of Designations shall have been filed with the
Delaware Secretary of State.

 

7.9  Nasdaq Listing. 
The Company shall have filed Notification Form: Listing of Additional
Shares for listing the Conversion Shares and the Warrant Shares for quotation
on Nasdaq and trading in the Common Stock (or on Nasdaq generally) shall not
have been suspended.

 

8.               GOVERNING LAW; MISCELLANEOUS.

 

8.1  Governing Law; Jurisdiction.  This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts made and to be
performed in

 

13

 

the State of California.  Each party hereto irrevocably consents to
the non-exclusive jurisdiction of the United States federal courts and the
state courts located in San Francisco, California in any suit or proceeding
based on or arising under this Agreement. 
Each party hereto irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding in such courts.  Each party hereto further agrees that
service of process upon the Company mailed by first class mail to the address
set forth in Section 8.6 shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding.  Nothing herein shall affect the right of any
Purchaser to serve process in any other manner permitted by law. Each party
hereto agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.

 

8.2  Counterparts.  This
Agreement may be executed in two or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party.  This Agreement, once executed by
a party, may be delivered to the other parties hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause the manually
executed signature pages hereof to be physically delivered to the other party
within five (5) days of the execution hereof.

 

8.3  Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

 

8.4  Severability.  If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

 

8.5  Entire Agreement; Amendments; Waiver.  This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchasers make any
representation, warranty, covenant or undertaking with respect to such
matters.  No provision of this Agreement
may be waived or amended other than by an instrument in writing signed by the
Company and by the Purchasers as provided in Section 8.12 hereof.  Any waiver by the Purchasers, on the one
hand, or the Company, on the other hand, of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision of or any breach of any other provision of this
Agreement.  The failure of the
Purchasers, on the one hand, or the Company, on the other hand to insist upon
strict adherence to any term of this Agreement on one or more occasions shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.

 

8.6  Notices.  Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier or by confirmed facsimile, and shall be
effective five (5) days after being placed in the mail, if mailed, one (1)
business day after being deposited with a nationally recognized overnight
delivery service, or immediately if delivered personally, by same-day courier
or by confirmed facsimile in each case addressed to a party in accordance with
this Section 8.6.  The addresses for
such communications shall be:

 

If to the Company:

 

Centiv,
Inc.

998
Forest Edge Drive

 

14

 

Vernon
Hills, IL 60061

Telephone
No.:  847-876-8300

Facsimile
No.:  847-955-1269

Attention:  President

 

With a copy to:

 

Gardner
Carton & Douglas LLC

191
North Wacker Drive, Suite 3700

Chicago,
IL  60610

Telephone
No.:  312-569-1142

Facsimile
No.:  312-569-3142

Attention:  Stephen A. Tsoris

 

If to the Purchaser, to the address of such
Purchaser set forth on Exhibit A to this Agreement, with a copy to:

 

Richard
Friedman, Esq.

9705
Eagle Rising Cove

Austin,
TX 78730

Telephone
No.:   (512) 338-0145

Telecopy
No.:    (512) 338-9131

 

Each party shall provide
notice to the other parties of any change in address.

 

8.7  Successors and Assigns. 
This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns.  The Purchasers may assign their rights under this Agreement, in
whole or in part, in connection with a transfer of the Securities to which such
rights relate.  The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the  Purchasers,
except in connection with a merger, consolidation or sale of all or
substantially all of the Company’s assets in which the surviving or successor
entity in such transaction (a) assumes the Company’s obligations hereunder and
under the Warrants and under the agreements and instruments entered into in
connection herewith and (b) is a publicly traded Company whose common stock is
listed and trades on Nasdaq, NYSE or AMEX.

 

8.8.  Survival.  The agreements and covenants set forth in Section 5 shall survive
the closing.  The representations and
warranties of the Purchasers set forth in Section 3 and of the Company set
forth in Section 4 shall survive the Closing Date, notwithstanding any due
diligence investigation conducted by or on behalf of the Company or the
Purchasers, respectively.  Moreover,
none of the representations and warranties made by the Company herein shall act
as a waiver of any rights or remedies a Purchaser may have under applicable
federal or state securities laws.

 

8.9.  Publicity.  The Company and Talkot Capital as the representative of the
Purchasers shall have the right to review and comment upon the issuance of any
press releases, any SEC filing, or any other public filings or statements with
respect to the transactions contemplated hereby.  Each Purchaser shall be provided documents to review at least two
business days prior to the filing or other issuance thereof except that draft
press releases shall be provided to each Purchaser at least one business day
prior to issuance. Within five business days after the Closing Date, the
Company shall file a Current Report on Form 8-K or other appropriate form with
the SEC disclosing the transactions contemplated hereby.

 

15

 

8.10  Joint Participation in Drafting.  Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Investor
Rights Agreement and the Warrants. As such, the language used herein and
therein shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any party to this Agreement, the Investor Rights Agreement or the
Warrants.

 

8.11  Equitable Relief.  The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to a Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.  Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations hereunder will be inadequate
and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Agreement, that a Purchaser shall be entitled, in addition
to all other available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.

 

8.12  Determinations.  Except as otherwise expressly provided
herein, all amendments, consents, approvals and other determinations to be made
by the Purchasers pursuant to this Agreement and all waivers to or of any
provisions in this Agreement prior to the Closing Date shall be made by
Purchasers that have agreed to invest more than 50% of the aggregate Investment
Amounts to be invested by all Purchasers and except as otherwise expressly
provided herein, all amendments, consents, approvals and other determinations
to be made by the Purchasers pursuant to this Agreement and all waivers to or
of any provisions in this Agreement after the Closing Date shall be made by
Purchasers who beneficially own more than 50% of the Common Stock Beneficially
Owned by all Purchasers (or their permitted assigns) at the time of such
amendment, consent, approval or other determination.

 

8.13 Conflict Waiver. 
Each Purchaser hereby acknowledges that Richard Friedman, Esq. is
representing the interests of multiple Purchasers in connection with the
transactions contemplated by this Agreement and hereby waives any conflict of
interest with respect to such representation that may result from particular
Purchasers having interests potentially in conflict with other Purchasers with
respect to such transactions.

 

IN WITNESS WHEREOF, the
Purchasers and the Company have executed this Agreement as of the date set
forth in the first paragraph of this Agreement.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  CENTIV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas M. Mason

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
							

 

16

 

CENTIV,
INC.

SECURITIES
PURCHASE AGREEMENT

PURCHASER
SIGNATURE PAGE

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (PRINT NAME OF PURCHASER)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (SIGNATURE)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (PRINTED NAME OF SIGNATORY)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (TITLE OF SIGNATORY)

  

 

 

Exhibits and Schedules

 

Exhibit A – Schedule of Purchasers

Exhibit B – Series A Exchange

Exhibit C – Certificate of Designations,
Preferences and Rights

Exhibit D – Form of Warrant

Exhibit E – Investor Rights Agreement

Exhibit F – Form of Opinion of Company Counsel

 

Schedule 4 – Disclosure Schedule

 

17

 

EXHIBIT A

 

SCHEDULE OF PURCHASERS

 

	
  Name and
  address

  	
   

  	
  Cash
  Invested at

  Closing

  	
   

  	
  Senior
  Subordinated

  Debt Cancelled at

  Closing (including

  interest)

  	
   

  	
  Investment

  Amount

  	
   

  	
  Number of
  Units

  Purchased

  	
   

  
	
  Talkot Crossover Fund

  2400 Bridgeway, Suite 300

  Sausalito, CA 94965

  Telephone No.:  (415) 332-3760

  Telecopy No.:  (415) 332-3760

  x6019

  Attention:  Thomas B. Akin

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
  25,000

  	
   

  	
  $

  	
  525,000

  	
   

  	
  105,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Thomas B. Akin

  2400 Bridgeway, Suite 300

  Sausalito, CA 94965

  Telephone No.:  (415) 332-3760

  Telecopy No.:  (415) 332-3760

  x6019

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
  25,000

  	
   

  	
  $

  	
  525,000

  	
   

  	
  105,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EDJ Limited

  c/o Deltec Bank & Trust

  Deltec House/Lyford Cay

  P.O. Box N-3229

  Nassau, Bahamas

  Telephone No.:  (415) 461-4410

  Telecopy No.:  (415) 461-4405

  Attention:  Jeffrey H. Porter

  	
   

  	
  $

  	
  100,000

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  100,000

  	
   

  	
  20,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ben Joseph Partners

  300 Drakes Landing Road, Suite 175

  Greenbrae, CA 94904-3124

  Telephone No.:  (415) 461-4410

  Telecopy No.:  (415) 461-4405

  Attention:  Jeffrey H. Porter

  	
   

  	
  $

  	
  50,000

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  50,000

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pennell Venture Partners

  Marathon
  Fund II, LP

  Pennell Venture Partners

  10 Jones Street, 6th Floor

  New York, NY 10014

  Telephone No.:  (212) 206-1295

  Telecopy No.:  (646) 365-3195

  Attention:  Thomas B. Pennell

  	
   

  	
  $

  	
  200,000

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  200,000

  	
   

  	
  40,000

  	
   

  

 

18

 

	
  Name and
  address

  	
   

  	
  Cash
  Invested at

  Closing

  	
   

  	
  Senior
  Subordinated

  Debt Cancelled at

  Closing (including

  interest)

  	
   

  	
  Investment

  Amount

  	
   

  	
  Number of
  Units

  Purchased

  	
   

  
	
  John Larkin

  Centiv, Inc.

  998 Forest Edge Drive

  Vernon Hills, IL  60061

  

  Telephone:  847-876-8302

  Fax:  847-955-1269

  	
   

  	
  $

  	
  100,000

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  100,000

  	
   

  	
  20,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jim Corfman

  Minotaur Fund, L.P.

  131 Olive Hill Lane

  Woodside, CA  94062

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
  300,000

  	
   

  	
  $

  	
  800,000

  	
   

  	
  160,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jeff Porter

  Porter Partners, L.P.

  300 Drakes Landing Road

  Suite 175

  Greenbrae, CA  94904-3124

  	
   

  	
  $

  	
  50,000

  	
   

  	
  $

  	
  150,000

  	
   

  	
  $

  	
  200,000

  	
   

  	
  40,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
  2,500,000

  	
   

  	
  500,000

  	
   

  

 

19

 

EXHIBIT
B

 

SERIES
A EXCHANGE

 

	
  Name of
  Purchaser

  	
   

  	
  Shares of
  Series A Convertible Preferred

  Stock to be surrendered

  	
   

  	
  Shares of
  Series B Preferred Stock to

  be issued in exchange

  	
   

  
	
  Talkot Crossover Fund

  2400 Bridgeway, Suite 200

  Sausalito, CA 94965

  	
   

  	
  50,000

  	
   

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Thomas B. Akin

  2400 Bridgeway, Suite 200

  Sausalito, CA 94965

  	
   

  	
  50,000

  	
   

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pennell Venture Partners

  Marathon Fund II, LP

  Pennell Venture Partners

  10 Jones Street, 6th Floor

  New York, NY 10014

  	
   

  	
  20,000

  	
   

  	
  40,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EDJ Limited

  c/o Deltec Bank & Trust

  Deltec House/Lyford Cay

  P.O. Box N-3229

  Nassau, Bahamas

  	
   

  	
  10,000

  	
   

  	
  20,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ben Joseph Partners

  300 Drakes Landing Road,

  Suite 175

  Greenbrae, CA 94904-3124

  	
   

  	
  5,000

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  135,000

  	
   

  	
  270,000

  	
   

  

 

20

 

EXHIBIT
C

 

CERTIFICATE
OF DESIGNATIONS

 

See Exhibit 3.3

 

21

 

EXHIBIT
D

 

FORM
OF WARRANT

 

See Exhibit 4.5

 

22

 

EXHIBIT
E

 

AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT

 

See Exhibit 4.5

 

23

 

EXHIBIT
F

 

COMPANY
COUNSEL OPINION MATTERS

 

These opinions will be delivered subject to Gardner Carton & Douglas
LLC’s standard exceptions, conditions and caveats in similar opinions,
including, without limitation, knowledge qualifiers where appropriate and a
statement that the opinions are limited to the laws of the States of Illinois
and Delaware and the federal laws of the United States.

 

(1)                                  The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
state of Delaware and has the corporate power to own and hold its properties
and to carry on its business as currently conducted.  The Company is duly qualified to do business in Illinois and is
in good standing in that state.

 

(2)                                  The Company has
the corporate power to execute, deliver and perform its obligations under the
Agreement, the Investor Rights Agreement and the Warrants (collectively, the
“Transaction Documents”).

 

(3)                                  Each of the
Transaction Documents and the Certificate of Designations has been duly
authorized by all requisite corporate action on the part of the Company.  Each of the Transaction Documents has been
duly executed and delivered on behalf of the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms.

 

(4)                                  The authorized
capital stock of the Company consists of Forty Million (40,000,000) shares,
consisting of Thirty Five Million (35,000,000) shares of Class A Common Stock,
per value $0.001 per share and Five Million (5,000,000) shares of Preferred
Stock, par value $0.001 per share, 1,000,000 of which have been designated Series
A Convertible Preferred Stock and have the rights, preferences and privileges
set forth in the Series A Convertible Preferred Stock Certificate of
Designations and 1,000,000 of which have been designated Series B Convertible
Preferred Stock and have the rights preferences and privileges set forth in the
Series B Convertible Preferred Stock Certificate of Designations.  To our knowledge, Section 4.3 of the
Disclosure Statement does not omit any outstanding capital stock of the Company
or its subsidiaries or any 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 of its subsidiaries, or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock.

 

(5)                                  The Shares and
Warrants to be issued under the Securities Purchase Agreement have been duly authorized
and, when issued and paid for in accordance with the provisions of the
Securities Purchase Agreement, will be validly issued, and the Shares will be
fully paid and nonassessable.  Any
shares of Common Stock issuable under the Warrants when issued in accordance
with the terms of the Warrants will be validly issued, fully paid and
non-assesssable.  Any shares of Common
Stock issuable upon conversion of the Series B Preferred Stock when issued in
accordance with the terms of the Certificate of Designations will be validly
issued, fully paid and non-assesssable.

 

(6)                                  The execution
and delivery by the Company of each of the Transaction Documents and the
performance by the Company of its obligations thereunder will not (a) result in
any breach or violation of the terms or provisions of the Company’s Certificate
of Incorporation (including the Series A Convertible Preferred Stock
Certificate of Desingations) or Bylaws, (b) conflict with or contravene any law
or regulation of any state or U.S. federal governmental authority applicable to
the Company or its assets and property, (c) conflict with or contravene any
writ, judgment or decree applicable to the

 

24

 

Company
or its assets and properties of which we have knowledge, or (d) conflict with,
or constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement, indenture
or instrument to which the Company or any of its subsidiaries is a party that
is filed as an exhibit to, or incorporated by reference in, any of the SEC
Documents.

 

(7)                                  To our
knowledge, there is no action, suit, investigation or proceeding pending or
overtly threatened in writing against the Company by or before any court,
arbitrator or governmental body, department, commission, board, bureau, agency,
or instrumentality which questions the validity of any of the Transaction
Documents, the Shares, or the performance by the Company if its obligations
under any of the Transaction Documents.

 

(8)                                  No consent, approval,
authorization, or order of, and no notice to or filing with, any state or U.S.
federal governmental agency or body (other than any securities law filings), or
any court or any Delaware governmental agency with respect to the Delaware
General Corporation Law, is required to be obtained or made by the Company for
the execution and delivery by the Company of the Transaction Documents or performance
by the Company of its obligations under any of the Transaction Documents or the
Certificate of Designations, except such as have been obtained or made, or are
contemplated by the Securities Purchase Agreement to be made after the Closing.

 

(9)                                  The Series B
Convertible Preferred Stock Certificate of Designations has been duly filed
with the Delaware Secretary of State.

 

25

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