Document:

Exhibit 10.51

 

MACADAMIA NUT PURCHASE CONTRACT

Between

Mauna Loa Macadamia Nut Corporation (Buyer)

And

ML Macadamia Orchards, L.P. (Seller)

 

This Agreement is effective July 1, 2003 between Mauna Loa Macadamia Nut
Corporation, hereinafter called Buyer, and ML Macadamia Orchards, L.P.,
hereinafter called Seller.

 

1. Buyer
shall buy from Seller and Seller shall sell to Buyer all of the crop produced
by the Seller’s Orchard, commonly known as Lot X, consisting of 78.44 tree
acres of mature trees in Keaau, Hawaii County, Hawaii, either in husk or
wet-in-shell delivered by Seller or Seller’s agent, to Buyer’s plant at Keaau,
Hawaii on an FOB basis from July 1, 2003 until December 31, 2006. Seller shall
be responsible for the delivery, at Seller’s expense, of the husked macadamia
nuts to the processing facilities of Buyer located at Keaau. Title to the nuts
and the risk of loss thereof shall pass from Seller to Buyer at the time trucks
or trailers containing the nuts deliver the nuts into Buyer’s physical possession
at Buyer’s plant at Keaau.

 

2. The
purchase price for each delivery shall be $0.60 per adjusted gross pound
delivered. Gross pounds shall be adjusted to a 25% moisture equivalent basis
and for trash/spoilage (as defined in paragraph 5) outside a 10% to 13% range
(see Exhibit A).

 

3. Buyer
shall pay for all nuts delivered within each month, by payments to Seller
within 30 days after the end of that calendar month. Check will be forwarded to
Seller as reflected in paragraph 8 below. In the event that payment is not made
within 30 days after the end of the calendar month in which delivery was made,
the unpaid amount shall bear interest at the Bank of Hawaii prime rate plus 1%.

 

4. Buyer will
draw samples at Keaau plant as follows. One sample of twenty pounds will be
divided into two samples and dried down to 1.5 % moisture. The first sample
will be the basis for the payment after moisture and quality adjustments have
been made. The second sample will be a back-up sample to be held for a joint
review in the event there is a disagreement over the first sample. Seller will
have the option of requesting a review within fifteen days after the date of
each payment check.

 

5. Pursuant
to Paragraph 2, trash/spoilage is defined as the sum of extraneous material and
those kernels deemed unmarketable because of insect damage, mold, bacteria,
germination, hollow centers, rodent damage, and shrivels. Extraneous material
means all foreign materials other than in-shell macadamia nuts, such as leaves,
twigs, rocks, and husks.

 

6. Neither of
the parties hereto shall be liable or accountable to the other party for any
delay in complying or any failure to comply with any of the terms, provisions
or conditions of this Contract in the event that such failure shall have been
caused by an act of God (fire, floods, drought, etc.), strike, lockout, public
enemy, war, civil commotion, riot, condemnation, judicial or governmental order
or other requirement of law (such as but not limited to governmental
regulations concerning hazards of marketing or consumption of macadamia nuts)
or the refusal or failure of any governmental office to grant any permit or
order necessary for compliance herewith by either party hereto, nor shall
either of the parties be liable or accountable to the other party for any
damages arising from any such delay or failure.

 

7. Seller
agrees that the agricultural chemicals used in his orchards will be limited to
those approved by the United States Environmental Protection Agency. All
chemicals will be applied as directed by the label.

 

8. For
convenience of operation hereunder, each of Seller and Buyer shall designate
one representative to serve as the channel or communication for delivering
information to and securing necessary action by its principals.

 

 

58

 

Any party may change its
representative from time to time by delivering written notice of such change to
the other party. Until further notice is given, each party’s representative
shall be the person listed in the notice address below:

 

	
  Seller:

  	
   

  	
  Buyer:

  
	
   

  	
   

  	
   

  
	
  ML
  Macadamia Orchards, L.P.

  	
   

  	
  Mauna Loa
  Macadamia Nut Corporation

  
	
  P.O. Box
  1826

  	
   

  	
  2445 McCabe
  Way, Suite 250

  
	
  Papaikou,
  HI 96781-1826

  	
   

  	
  Irvine, CA
  92614

  
	
  (808)
  969-8052

  	
   

  	
  (949)
  851-1994

  
	
  Attention:
  Dennis Simonis

  	
   

  	
  Attention:
  Darrell Askey

  

 

9. The parties may terminate
this Contract at any time by mutual agreement in writing. In the event that any
party shall be in default (as defined below), the non-defaulting party may
terminate this Contract at any time by delivering written notice of such
termination to the defaulting party.

 

A party shall be in “default”
under this Contract in the event that: (i) it files any voluntary proceeding
for dissolution or under any federal or state bankruptcy, insolvency,
receivership or similar law; (ii) any such proceeding is commenced against it
involuntarily and is not dismissed within 60 days; (iii) it makes any
composition with or assignment for the benefit of its creditors; (iv) it enters
into any corporate reorganization or acquisition without making adequate
provision for the performance of its obligations under this Contract; (v) it
fails to perform any of its obligations when due under this Contract and it
fails to correct such non-performance within 30 days after written demand for
performance is made by the other party or, if such non-performance cannot be
corrected within 30 days, it does not state in writing its intent to cure such
default, deliver such written notice to the other party, and begin immediately
to cure said default as soon as reasonably possible; or (vi) it repeatedly
fails to perform its obligations under this Contract except upon receipt of
written demand for performance.

 

10. This contract will be
primarily performed in and shall be governed by and construed in accordance
with the laws of the State of Hawaii. Each of the parties consents to the
jurisdiction of the courts of the State of Hawaii or any federal court sitting
in Hawaii and agrees that Hawaii is an appropriate venue for any action that
may be brought under this contract.

 

11. This Contract represents
the entire agreement and understanding of the parties with respect to the
subject matter hereof. The parties specifically acknowledge and agree that no
joint venture or lease is created hereby and that neither party is hereby
appointed as the agent of the other party. This contract will run with the land
and will be binding on any successors or assigns of Buyer or Seller.

 

 

	
   

  	
  In witness
  whereof, Seller and Buyer have caused this Macadamia Nut Purchase Contract to
  be executed on This 25th day of August 2003.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Seller:

  	
  s/s

  	
   

  
	
   

  	
  Dennis
  Simonis

  
	
   

  	
  ML
  Macadamia Orchards, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Buyer:

  	
  s/s

  	
   

  
	
   

  	
  Darrell
  Askey

  
	
   

  	
  Mauna Loa
  Macadamia Nut Corporation

  
	
   

  	
   

  

 

59

 

EXHIBIT A

 

Example 1. Within the 10%-13%
band

 

	
  Gross WIS pounds delivered

  	
   

  	
  10,000

  	
   

  
	
  Trash/Spoilage

  	
   

  	
  11

  	
  %

  
	
  Adjustment for trash and spoilage (no adjustment)

  	
   

  	
  0

  	
   

  
	
  Subtotal adjusted gross pounds

  	
   

  	
  10,000

  	
   

  
	
  Delivered moisture

  	
   

  	
  21

  	
  %

  
	
  Adjusted gross pounds @ 25% moisture

  	
   

  	
  10,533

  	
   

  

 

Example 2. Over the 10% -13%
band

 

	
  Gross WIS pounds delivered

  	
   

  	
  10,000

  	
   

  
	
  Trash/Spoilage

  	
   

  	
  14

  	
  %

  
	
  Adjustment for trash and spoilage (13% less 14%)

  	
   

  	
  (100

  	
  )

  
	
  Subtotal adjusted gross pounds

  	
   

  	
  9,900

  	
   

  
	
  Delivered moisture

  	
   

  	
  21

  	
  %

  
	
  Adjusted gross pounds @ 25% moisture

  	
   

  	
  10,428

  	
   

  

 

Example 3. Under the 10%-13%
band

 

	
  Gross WIS pounds delivered

  	
   

  	
  10,000

  	
   

  
	
  Trash/Spoilage

  	
   

  	
  9

  	
  %

  
	
  Adjustment for trash and spoilage (10% less 9%)

  	
   

  	
  100

  	
   

  
	
  Subtotal adjusted gross pounds

  	
   

  	
  10,100

  	
   

  
	
  Delivered moisture

  	
   

  	
  21

  	
  %

  
	
  Adjusted gross pounds @ 25% moisture

  	
   

  	
  10,639

  	
   

  

 

60Exhibit
4.1

 

EXECUTION
COPY

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (the “Agreement”),
dated as of March 16, 2004, by and among Vaso Active Pharmaceuticals, Inc., a
Delaware corporation, with headquarters located at 99 Rosewood Drive,
Suite 260, Danvers, Massachusetts 01923 (the
“Company”), and the investors
listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).

 

WHEREAS:

 

A.            The Company and each Buyer are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the 1933 Act;

 

B.            The Company has authorized a new series of subordinated
convertible notes of the Company in the form attached hereto as Exhibit A
(together with any subordinated convertible notes issued in replacement thereof
in accordance with the terms thereof, the “Notes”),
which Notes shall be convertible into shares of the Company’s Class A Common
Stock, par value $0.0001 per share (the “Class
A  Common Stock”) (as
converted, the “Conversion Shares”),
in accordance with the terms of the Notes;

 

C.            Each Buyer wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, (i) that
aggregate principal amount of Notes set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers (which aggregate principal amount for all
Buyers shall be $7,500,000) and (ii) warrants, in substantially the form
attached hereto as Exhibit B (the “Warrants”),
to acquire that number of shares of Class A Common Stock for each $1,000 of principal
amount of Notes purchased (as exercised, collectively, the “Warrant Shares”) equal to the quotient of
(i) $200 divided by (ii) $9.00 (the “Valuation
Price”) as set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers;

 

D.            Contemporaneously with the execution
and delivery of this Agreement, the parties hereto are executing and delivering
a Registration Rights Agreement, substantially in the form attached hereto as Exhibit
C (the “Registration Rights Agreement”),
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Conversion Shares, the Repayment Shares (as defined in the
Notes), the Interest Shares (as defined in the Notes) and the Warrant Shares
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws; and

 

G.            The Notes, the Conversion Shares, the Repayment Shares,
the Interest Shares, the Warrants and the Warrant Shares collectively are
referred to herein as the “Securities”.

 

 

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

 

1.             PURCHASE AND SALE OF NOTES AND WARRANTS.

 

(a)           Purchase of Notes and Warrants.

 

(i)            Notes and Warrants.  Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a)
below, the Company shall issue and sell to each Buyer, and each Buyer
severally, but not jointly, agrees to purchase from the Company on the Closing
Date (as defined below), a principal amount of Notes, as is set forth opposite
such Buyer’s name in column (3) on the Schedule of Buyers,  along with Warrants to acquire that number
of Warrant Shares for each $1,000 principal amount of Notes purchased equal to
the quotient of (A) $200 divided by (B) the Valuation Price (the “Closing”).

 

(ii)           Closing. 
The Closing shall occur on the Closing Date at the offices of Schulte
Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.

 

(iii)          Purchase Price. 
The purchase price for each Buyer (the “Purchase Price”) of the Notes and related Warrants to be
purchased by each such Buyer at the Closing shall be equal to $1.00 for each
$1.00 of principal amount of Notes being purchased by such Buyer at the
Closing.

 

(b)           Closing Date. 
The date and time of the Closing (the “Closing
Date”) shall be 10:00 a.m., New York Time, on the date hereof,
subject to notification of satisfaction (or waiver) of the conditions to the
Closing set forth in Sections 6(a) and 7(a) below (or such later date as is
mutually agreed to by the Company and each Buyer).

 

(c)           Form of Payment. 
On the Closing Date, (i) each Buyer shall pay its Purchase Price to the
Company for the Notes and Warrants to be issued and sold to such Buyer at the
Closing, by wire transfer of immediately available funds in accordance with the
Company’s written wire instructions, and (ii) the Company shall deliver to
each Buyer the Notes (in the principal amounts as such Buyer shall request)
which such Buyer is then purchasing along with the Warrants (in the amounts as
such Buyer shall request) such Buyer is purchasing, duly executed on behalf of
the Company and registered in the name of such Buyer or its designee.

 

2.             BUYER’S
REPRESENTATIONS AND WARRANTIES.

 

Each
Buyer represents and warrants with respect to only itself that:

 

(a)           No Public Sale or Distribution.  Such Buyer is (i) acquiring the Notes and
Warrants and (ii) upon conversion of the Notes and exercise of the Warrants
(other than pursuant to a Cashless Exercise (as defined in the Warrants)) will
acquire the Conversion Shares issuable upon conversion of the Notes and the
Warrant Shares issuable upon exercise of the Warrants, in the ordinary course
of business for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein,

 

2

 

such Buyer does not agree to hold any of 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 the registration requirements of the 1933 Act and applicable
state securities laws.  Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business.

 

(b)           Accredited Investor Status.  Such Buyer is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D.

 

(c)           Reliance on Exemptions.  Such Buyer understands that the Securities are being offered and
sold 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 in part upon the truth and accuracy of, and such Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire
the Securities.

 

(d)           Information. 
Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by such Buyer.  Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of
the Company.  Neither such inquiries nor
any other due diligence investigations conducted by such Buyer or its advisors,
if any, or its representatives shall modify, amend or affect such Buyer’s right
to rely on the Company’s representations and warranties contained herein.  Such Buyer understands that its investment
in the Securities involves a high degree of risk.  Such Buyer has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect
to its acquisition of the Securities.

 

(e)           No Governmental Review.  Such Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.

 

(f)            Transfer or Resale.  Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not
be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company an
opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
such Buyer provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated
under the 1933 Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable,

 

3

 

any resale of the Securities under circumstances in which the seller
(or the Person (as defined in Section 3(s)) through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules
and regulations of the SEC thereunder; and (iii) neither the Company nor any
other Person is under any obligation to register the Securities under the 1933
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder.  The
Securities may be pledged in connection with a bona fide margin account or
other loan secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Buyer effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company pursuant
to this Agreement or any other Transaction Document, including, without
limitation, this Section 2(f); provided, that in order to make any sale,
transfer or assignment of Securities, such Buyer and its pledgee makes such
disposition in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.

 

(g)           Legends. 
Such Buyer understands that the certificates or other instruments
representing the Notes and the Warrants and, until such time as the resale of
the Conversion Shares, the Repayment Shares, the Interest Shares and the
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares, the Repayment Shares, the Interest Shares and the Warrant
Shares, except as set forth below, shall bear any legend as required by the
“blue sky” laws of any state and a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of
such stock certificates):

 

[NEITHER THE ISSUANCE AND
SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE [CONVERTIBLE][EXERCISABLE] HAVE BEEN][THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

 

The legend set forth above shall be removed
and the Company shall issue a certificate without such legend to the holder of
the Securities upon which it is stamped, if, unless otherwise required by state
securities laws, (i) such Securities are registered for resale under the 1933
Act, (ii) in

 

4

 

connection with a sale, assignment or other
transfer, such holder provides the Company with an opinion of counsel, in a
form reasonably acceptable to the Company, to the effect that such sale,
assignment or transfer of the Securities may be made without registration under
the applicable requirements of the 1933 Act, or (iii) such holder provides the
Company with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A.

 

(h)           Validity; Enforcement.  This Agreement and the Registration Rights Agreement have been
duly and validly authorized, executed and delivered on behalf of such Buyer and
shall constitute the legal, valid and binding obligations of such Buyer
enforceable against such Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

 

(i)            No Conflicts. 
The execution, delivery and performance by such Buyer of this Agreement
and the Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of such Buyer 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 such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.

 

(j)            Residency. 
Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.

 

3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and
warrants to each of the Buyers that:

 

(a)           Organization and Qualification.  The Company is a corporation duly organized
and validly existing in good standing under the laws of the jurisdiction in
which it is incorporated, and has the requisite corporate power and
authorization 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 and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect.  As used
in this Agreement, “Material Adverse Effect”
means any material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or otherwise) or
prospects of the Company or on the transactions contemplated hereby and the
other Transaction Documents or by the agreements and instruments to be entered
into in

 

5

 

connection herewith or therewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
below).  The Company has no Subsidiaries
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest).

 

(b)           Authorization; Enforcement; Validity.  The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Notes, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions (as defined in Section 5(b)), the Warrants and each
of the other agreements entered into by the parties hereto in connection with
the transactions contemplated by this Agreement (collectively, the “Transaction Documents”) and to issue the
Securities in accordance with the terms hereof and thereof.  The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation,
the issuance of the Notes and the Warrants and the reservation for issuance and
the issuance of the Conversion Shares, the Repayment Share, the Interest Shares  and the Warrant Shares issuable upon
conversion, issuance or exercise thereof, as the case may be, have been duly
authorized by the Company’s Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders.  This Agreement and the
other Transaction Documents of even date herewith have been duly executed and
delivered by the Company, and constitute the legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their
respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally,
the enforcement of applicable creditors’ rights and remedies.

 

(c)           Issuance of Securities.  The Notes and the Warrants are duly authorized and, upon issuance
in accordance with the terms hereof, shall be free from all taxes, liens and
charges with respect to the issue thereof. 
As of the Closing, a number of shares of Class A Common Stock shall have
been duly authorized and reserved for issuance which equals the sum of 130% of
the number of shares of Class A Common Stock issuable upon conversion of the
Notes to be issued at such Closing and 130% of the number of shares of Class A
Common Stock issuable upon exercise of the Warrants to be issued at such
Closing.  Upon conversion, exercise or
issuance in accordance with the Notes or the Warrants, as the case may be, the
Conversion Shares, the Repayment Shares, the Interest Shares and the Warrant
Shares, respectively, will be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Class A Common
Stock.  Assuming the accuracy of each of
the representations and warranties of the Buyers contained in Section 2, the
issuance by the Company of the Securities is exempt from registration under the
1933 Act.

 

(d)           No Conflicts. 
The execution, delivery and performance of the Transaction Documents by
the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Notes and the Warrants and reservation for issuance and issuance of the
Conversion Shares, the Interest Shares, the Repayment Shares and the Warrant
Shares) will not (i) result in a violation of the

 

6

 

certificate of incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock or bylaws
of the Company 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 material agreement, indenture or instrument to which the
Company is a party, except which are the subject of written waivers or consents
which have been obtained or effected on or prior to the Closing Date or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market) applicable to the Company or by which any
property or asset of the Company is bound or affected.

 

(e)           Consents. 
Except as disclosed in Schedule 3(e), the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof.  All consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the
Closing Date (other then filings and reports relating to the offer and sale of
the Securities required under Regulation D or applicable securities or “Blue
Sky” laws as contemplated under Section 4(b) of this Agreement), and the
Company is unaware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the registration, application or
filings pursuant to the preceding sentence. 
The Company is not in violation of the listing requirements of the
Principal Market and has no knowledge of any facts which would reasonably lead
to delisting or suspension of the Class A Common Stock in the foreseeable
future.

 

(f)            Acknowledgment
Regarding Buyer’s Purchase of Securities. 
The Company acknowledges and agrees that each Buyer is acting solely in
the capacity of arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and that no
Buyer is (i) an officer or director of the Company, (ii) an “affiliate” of the
Company (as defined in Rule 144) or (iii) to the knowledge of the Company, a
“beneficial owner” of more than 10% of the Class A Common Stock (as defined for
purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
“1934 Act”)).  The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a Buyer
or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer’s purchase of the Securities.  The Company further represents to each Buyer
that the Company’s decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.

 

(g)           No General Solicitation; Placement Agent’s Fees.  Neither the Company, nor any of its
affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection

 

7

 

with the offer or sale of the Securities.  The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. 
The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, attorney’s fees and
out-of-pocket expenses) arising in connection with any such claim.  The Company has not engaged any placement
agent or other agent in connection with the sale of the Notes and the Warrants.

 

(h)           No Integrated Offering.  None of the Company, any of its affiliates, and any Person acting
on 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 any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of
the Company are listed or designated. 
None of the Company, its affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings.

 

(i)            Dilutive Effect. 
The Company understands and acknowledges that the number of Conversion
Shares issuable upon conversion of the Notes and the Warrant Shares issuable
upon exercise of the Warrants will increase in certain circumstances.  The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Notes, the
Company’s option to issue the Repayment Shares and Interest Shares in
accordance with this Agreement and the Notes  and
its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrants is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.

 

(j)            Application of Takeover Protections; Rights Agreement.  The Company and its board of directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Certificate of Incorporation (as defined in Section 3(r)) or the laws
of the state of its incorporation which is or could become applicable to any
Buyer as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and any
Buyer’s ownership of the Securities.  The
Company has not adopted a stockholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Class A Common Stock or a
change in control of the Company.

 

(k)           SEC Documents; Financial Statements.  The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof, and all exhibits included therein and
financial statements and schedules thereto and

 

8

 

documents incorporated by reference therein being hereinafter referred
to as the “SEC Documents”).  The Company has delivered to the Buyers or
their respective representatives true, correct and complete copies of the SEC
Documents not available on the EDGAR system. 
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act 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 the
light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared
in accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).  No other information provided by or on
behalf of the Company to the Buyers which is not included in the SEC Documents,
including, without limitation, information referred to in Section 2(d) of this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in the
light of the circumstance under which they are or were made, not misleading.

 

(l)            Absence of Certain Changes.  Since the filing date of the Company’s
registration statement and prospectus as set forth in Part I of Schedule 3(l),
there has been no material adverse change and no material adverse development
in the business, properties, operations, condition (financial or otherwise),
results of operations or prospects of the Company.  Except as disclosed in Part II of Schedule 3(l), since December 31, 2002, the Company has not (i) declared or paid any
dividends, (ii) sold any assets, individually or in the aggregate, in excess of
$100,000 outside of the ordinary
course of business or (iii) had capital expenditures, individually or in the
aggregate, in excess of $500,000.  The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. 
The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below).  For purposes of
this Section 3(l), “Insolvent”
means (i) the present fair saleable value of the Company’s assets is less than
the amount required to pay the Company’s total Indebtedness(as defined in
Section 3(s)), (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature
or (iv) the Company has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted.

 

9

 

(m)          No Undisclosed Events, Liabilities, Developments or
Circumstances.  No event, liability,
development or circumstance has occurred or exists, or is contemplated to occur
with respect to the Company or its business, properties, prospects, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement on Form SB-2 filed
with the SEC relating to an issuance and sale by the Company of its Class A
Common Stock and which has not been publicly announced.

 

(n)           Conduct of Business; Regulatory Permits.  The Company is not in violation of any term
of or in default under its Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or Bylaws or its organizational charter or bylaws. Except
as disclosed in Schedule 3(n), the Company is not in violation of any
judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company, and the Company will not conduct its business in
violation of any of the foregoing, except for possible violations which would
not, individually or in the aggregate, have a Material Adverse Effect.  Without limiting the generality of the
foregoing, the Company is not in violation of any of the rules, regulations or
requirements of The Nasdaq SmallCap Market (the “Principal Market”) and has no knowledge of any facts or
circumstances which would reasonably lead to delisting or suspension of the
Class A Common Stock by the Principal Market in the foreseeable future.  Since December 11, 2003, (i) the Class A
Common Stock has been designated for quotation on the Principal Market, (ii)
trading in the Class A Common Stock has not been suspended by the SEC or the
Principal Market and (iii) the Company has received no communication, written
or oral, from the SEC or the Principal Market regarding the suspension or
delisting of the Class A Common Stock from the Principal Market.  The Company possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, except
where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.

 

(o)           Foreign Corrupt Practices.  Neither the Company, nor any director,
officer, agent, employee or other Person acting on behalf of the Company has,
in the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
(iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.

 

(p)           Sarbanes-Oxley Act.  The Company is in compliance with any and
all applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof,
except where such noncompliance would not have, individually or in the
aggregate, a Material Adverse Effect.

 

10

 

(q)           Transactions With Affiliates.  Except as set forth on Schedule 3(q)
and in the SEC Documents filed at least ten days prior to the date hereof and
other than the grant of stock options disclosed on Schedule 3(r), none
of the officers, directors or employees of the Company is presently a party to
any transaction with the Company or (other than for ordinary course services as
employees, officers or directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any such officer, director or employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.

 

(r)            Equity Capitalization.  As of the date hereof, the authorized capital stock of the
Company consists of (x) 20,000,000 shares of Class A Common Stock and
10,000,000 shares of Class B Common Stock, of which as of the date hereof, 5,798,604 shares of Class A
Common Stock and 4,500,000 shares of Class B Common Stock are issued and outstanding, 2,250,000
shares of Class A Common Stock are
reserved for issuance pursuant to the Company’s stock option and purchase plans
and 4,935,000 shares of Class A Common Stock are reserved for issuance pursuant to securities (other than the Notes
and the Warrants) exercisable or exchangeable for, or convertible into, shares
of Class A Common Stock, and (y) 10,000,000 shares of preferred stock, of which as of the date hereof, none are issued and outstanding.  All of such outstanding shares have been, or
upon issuance will be, validly issued and are fully paid and nonassessable.  Except as set forth in Schedule 3(r),
no shares of the Company’s capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company; 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 contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or 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; there are no
outstanding debt securities, notes, debentures, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
of the Company or by which the Company is or may become bound; there are no
financing statements securing obligations in any material amounts, either
singly or in the aggregate, filed in connection with the Company; there are no
agreements or arrangements under which the Company is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement); there are no outstanding securities or instruments of the
Company which contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to redeem a security of the Company; there are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Securities; (viii) the Company does
not have any stock appreciation rights or “phantom stock” plans or agreements
or any similar plan or agreement; and the Company has no liabilities or
obligations required to be disclosed in the SEC Documents but not so disclosed
in the SEC Documents, other than those incurred in the ordinary course of the
Company’s business and which, individually or in the

 

11

 

aggregate, do not or would not have a Material Adverse Effect.  The Company has furnished to the Buyer true,
correct and complete copies of the Company’s Certificate of Incorporation, as
amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s Bylaws, as
amended and as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible into, or
exercisable or exchangeable for, Class A Common Stock and the material rights
of the holders thereof in respect thereto.

 

(s)           Indebtedness and Other Contracts.  Except as disclosed in Schedule 3(s),
the Company (i) has no outstanding Indebtedness, (ii) is not a party to any
contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument would
result in a Material Adverse Effect, (iii) is not in violation of any term of
or in default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, and (iv) is not
a party to any contract, agreement or instrument relating to any Indebtedness,
the performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. 
Schedule 3(s) provides a detailed description of the material
terms of any such outstanding Indebtedness. 
For purposes of this Agreement: 
(x) “Indebtedness” of any
Person means, without duplication (A) all indebtedness for borrowed money, (B)
all obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any
Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the holders
of such liability will be protected (in whole or in part) against loss with
respect thereto; and (z) “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.

 

12

 

(t)            Absence of Litigation.  There is no action, suit, proceeding, inquiry or investigation
before or by the Principal Market, any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, the Class A Common Stock,
the Class B Common Stock or any of the Company’s officers or directors in their
capacities as such, except as set forth in Schedule 3(t).

 

(u)           Insurance. 
The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company is engaged.  The Company has
not been refused any insurance coverage sought or applied for and the Company
has no reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.

 

(v)           Employee Relations.  (i)  The Company is not a
party to any collective bargaining agreement or employs any member of a
union.  The Company believes that its
relations with their employees are good. 
No executive officer of the Company (as defined in Rule 501(f) of the
1933 Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer’s employment with the Company.  No executive officer of the Company, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company to any liability
with respect to any of the foregoing matters.

 

(ii)           The Company is in compliance with all federal, state,
local and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

 

(w)          Title.  The
Company has good and marketable title in fee simple to all real property and
good and marketable title to all personal property owned by it which is
material to the business of the Company, free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company.   Any real
property and facilities held under lease by the Company is held by it under
valid, subsisting and enforceable leases with such exceptions as are not material
and do not interfere with the use made and proposed to be made of such property
and buildings by the Company.

 

(x)            Intellectual Property Rights.  The Company owns or possesses adequate
rights or licenses to use all trademarks, trade names, service marks, service
mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental

 

13

 

authorizations, trade secrets and other intellectual property rights (“Intellectual Property Rights”) necessary to
conduct their respective businesses as now conducted.  None of the Company’s Intellectual Property Rights have expired
or terminated, or are expected to expire or terminate, within three years from
the date of this Agreement.  The Company
does not have any knowledge of any infringement by the Company of Intellectual
Property Rights of others.  There is no
claim, action or proceeding being made or brought, or to the knowledge of the
Company, being threatened, against the Company regarding its Intellectual Property
Rights.  The Company is unaware of any
facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings.  The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all of its intellectual properties.

 

(y)           Environmental Laws.  The Company (i) is in compliance with any and all Environmental
Laws (as hereinafter defined), (ii) has received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct its
business and (iii) is in compliance with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i), (ii)
and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.  The term “Environmental
Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes (collectively, “Hazardous Materials”)  into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

 

(aa)         Tax Status. 
The Company (i) has made or filed all federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) 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 (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. 
There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.

 

(bb)         Internal
Accounting Controls.  The Company
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management’s general or specific authorization
and (iv) the recorded accountability for assets and liabilities is

 

14

 

compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.

 

(cc)         Disclosure. 
The Company confirms that neither it nor, to its knowledge, any officer,
director or agent of the Company has provided any of the Buyers or their
respective agents or counsel with any information that constitutes material, nonpublic information.  The Company understands and confirms that
each of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. 
All disclosure provided to the Buyers regarding the Company, its business
and the transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company are true and correct and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.  No event or circumstance has occurred or
information exists with respect to the Company or any Subsidiary or either of
its or their respective business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company on or before the date hereof
but which has not been so publicly announced or disclosed (assuming for this
purpose that the Company’s reports filed under the Exchange Act of 1934, as
amended, are being incorporated into an effective registration statement filed
by the Company under the 1933 Act).  The
Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

 

4.             COVENANTS.

 

(a)           Best Efforts. 
Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.

 

(b)           Form D and Blue Sky.  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
Buyer promptly after such filing.  The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary in order to obtain an exemption for or
to qualify the Securities for sale to the Buyers at the Closing pursuant to
this Agreement under applicable securities or “Blue Sky” laws of the states of
the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date.  The Company shall
make all filings and reports relating to the offer and sale of the Securities
required under applicable securities or “Blue Sky” laws of the states of the
United States following the Closing Date.

 

(c)           Reporting Status. 
Until the date on which the Investors (as defined in the Registration
Rights Agreement) shall have sold all the Conversion Shares, the Repayment
Shares, the Interest Shares and Warrant Sharesand none of the Notes  or
the Warrants is outstanding (the “Reporting
Period”), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and

 

15

 

regulations thereunder would otherwise permit such termination.

 

(d)           Use of Proceeds. 
The Company will use the proceeds from the sale of the Securities for
working capital purposes and not for the (i) repayment of any
outstanding Indebtedness of the Company or (ii) redemption or repurchase of any
of its equity securities.

 

(e)           Financial Information.  The Company agrees to send the following to each Investor during
the Reporting Period (i) unless the following are filed with the SEC through
EDGAR and are available to the public through the EDGAR system, within one (1)
Business Day after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports
on Form 8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, (ii) on the same day as the release
thereof, facsimile copies of all press releases issued by the Company, and
(iii) copies of any notices and other information made available or given to
the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.

 

(f)            Listing.  The Company shall promptly secure the
listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon each national securities exchange and automated
quotation system, if any, upon which shares of Class A Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Class A Common Stock shall be so listed, such listing of
all Registrable Securities from time to time issuable under the terms of the
Transaction Documents.  The Company
shall maintain the Class A Common Stock’s authorization for quotation on the
Principal Market or the Nasdaq National Market.  The Company shall not take any action which would be reasonably
expected to result in the delisting or suspension of the Class A Common Stock
on the Principal Market.  The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(f).

 

(g)           Fees.  The
Company shall reimburse the Buyers in the aggregate amount of $35,000 for the
Buyers’ reasonable expenses incurred in connection with the preparation,
execution and performance of this Agreement and the transactions contemplated
hereunder, which amount will be net funded from the Purchase Price of Riverview
Group LLC at the Closing.  The Company
shall be responsible for the payment of any placement agent’s fees, financial
advisory fees, or broker’s commissions (other than for Persons engaged by any
Buyer) relating to or arising out of the transactions contemplated hereby.  The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in
connection with any claim relating to any such payment.  Except as otherwise set forth in this
Agreement or in the Transaction Documents, each party to this Agreement shall
bear its own expenses in connection with the sale of the Securities to the
Buyers.

 

(h)           Pledge of Securities.  The Company acknowledges and agrees that the Securities may be
pledged by an Investor (as defined in the Registration Rights Agreement) in
connection with a bona fide margin agreement or other loan or financing
arrangement that is

 

16

 

secured by the Securities.  The
pledge of Securities shall not be deemed to be a transfer, sale or assignment
of the Securities hereunder, and no Investor effecting a pledge of Securities
shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other
Transaction Document, including, without limitation, Section 2(f) hereof;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) hereof in order to effect a sale, transfer or assignment
of Securities to such pledgee.  The
Company hereby agrees to execute and deliver such documentation as a pledgee of
the Securities may reasonably request in connection with a pledge of the
Securities to such pledgee by an Investor.

 

(i)            Disclosure of Transactions and Other Material
Information.  On or before 8:30
a.m., New York Time, on  the first
Business Day following the date hereof, the Company shall file a Current Report
on Form 8-K describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act, and attaching the material
Transaction Documents (including, without limitation, this Agreement (and all
schedules to this Agreement), the form of Note, the form of Warrant and the
Registration Rights Agreement) as exhibits to such filing (including all
attachments, the “8-K Filing”).  From and after the filing of the 8-K Filing
with the SEC, unless required pursuant to Section 3(i) of the Registration
Rights Agreement, no Buyer shall be in possession of any material, nonpublic
information received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in
the 8-K Filing.  Unless required pursuant
to Section 3(i) of the Registration Rights Agreement, the Company shall not,
and shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide any Buyer with any
material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without
the express written consent of such Buyer. 
In the event of a breach of the foregoing covenant by the Company, any
of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise, of
such material, nonpublic information without the prior approval by the Company,
its Subsidiaries, or any of its or their respective officers, directors,
employees or agents.  No Buyer shall
have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, shareholders or agents for any such
disclosure.  Subject to the foregoing,
neither the Company nor any Buyer shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval
of any Buyer, to make any press release or other public disclosure with respect
to such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).

 

(j)            Restriction on Redemption and Cash Dividends.  So long as any Notes are outstanding, the
Company shall not, directly or indirectly, redeem, or declare or pay any cash
dividend or distribution on, the Class A Common Stock without the prior express
written consent of the holders of Notes representing not less than a majority
of the aggregate principal amount of

 

17

 

the then outstanding Notes.

 

(k)           Additional Notes; Variable Securities; Additional
Registration Statement.  For so long
as any Buyer beneficially owns any Securities, the Company will not issue any
Notes other than to the Buyers as contemplated hereby and the Company shall not
issue any other securities that would cause a breach or default under the
Notes.  For long as any Notes
remain outstanding, the Company shall not, in any manner, issue or sell any
rights, warrants or options to subscribe for or purchase Class A Common Stock
or directly or indirectly convertible into or exchangeable or exercisable for
Class A Common Stock (other than Excluded Securities (as defined in the Notes))
at a price which varies or may vary with the market price of the Class A Common
Stock, including by way of one or more reset(s) to any fixed price unless the
conversion, exchange or exercise price of any such security cannot be less than
the then applicable Conversion Price (as defined in the Notes) with respect to
the Class A Common Stock under any into which any Note is convertible.  Until
such time as the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective by the SEC, the Company will not file a
registration statement under the 1933 Act relating to securities that are not
the Securities, other than a registration statement on Form S-8, in order to
register increases in the shares underlying equity incentive plans in existence
as of the date of this Agreement.

 

(l)            Corporate Existence.  So long as any Buyer beneficially owns any Notes or Warrants, the
Company shall maintain its corporate existence and shall not sell all or
substantially all of the Company’s assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company’s assets,
where the surviving or successor entity in such transaction (i) assumes the
Company’s obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose common stock is quoted on or listed for trading on the Nasdaq National
Market or The New York Stock Exchange, Inc.

 

(m)          Reservation of Shares.  The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, the
sum of (i) 130% of the number of
shares of Class A Common Stock issuable upon conversion of the Notes being
issued at the Closing and (ii) 130% of the number of shares of Class A Common
Stock issuable upon exercise of the Warrants being issued at the Closing.

 

(n)           Conduct
of Business.  The business of the
Company and its Subsidiaries shall not be conducted in violation of any law,
ordinance or regulation of any governmental entity, except where such
violations would not result, either individually or in the aggregate, in a
Material Adverse Effect.

 

(o)           Right of Participation.

 

(i)            For a period of 18 months following the Closing Date, the
Company shall not issue, sell or exchange, agree or obligate itself to issue,
sell or exchange or reserve or set aside for issuance, sale or exchange (a “Future Issuance”), but excluding any
Excluded Securities (as defined in the Notes), (A) any shares of Class A Common
Stock, (B) any

 

18

 

other equity security of the Company, including without limitation
shares of preferred stock, (C) any debt security of the Company (other than
debt with no equity feature), including without limitation any debt security
which by its terms is convertible into or exchangeable for any equity security
of the Company, (D) any security of the Company that is a combination of debt
and equity, or (E) any option, warrant or other right to subscribe for,
purchase or otherwise acquire any such equity security or any such debt
security of the Company, unless in each case the Company shall have first
offered to sell (in the case of public offerings, to the extent permitted by
the SEC and other applicable laws, as reasonably determined by the Company upon
consultation with counsel) the Offered Securities (as defined below) to the
Buyers (in all respects upon identical terms and conditions, including, without
limitations, unit price and interest rates) as follows:  The Company shall offer to sell to each
Buyer (1) that portion of the Offered Securities as the principal amount of
Notes acquired by such Buyer at the Closing bears to the total principal amount
of Notes acquired by all Buyers at the Closing (the “Basic Amount”), and (2) such additional portion of the Offered
Securities as such Buyer shall indicate it will purchase should the other
Buyers subscribe for less than their Basic Amounts (the “Undersubscription Amount”), at a price and
on such other terms as shall have been specified by the Company in writing
delivered to such Buyer (the “Offer”),
which Offer by its terms shall remain open and irrevocable for a period of
twenty (20) days from receipt of the Offer. “Offered
Securities” means 50% of the aggregate amount of the securities
being issued or sold in the Future Issuance; provided, however,
that with respect to Future Issuances that are underwritten public offerings,
“Offered Securities” means the Buyers’ pro rata share of the aggregate amount
of securities being issued or sold in such Future Issuance, calculated on a
fully diluted basis.

 

(ii)           Notice of each Buyer’s intention to accept, in whole or in
part, any Offer made pursuant to Section 4(o)(i) shall be evidenced by a
writing signed by such Buyer and delivered to the Company prior to the end of
the 20-day period of such Offer, setting forth such of the Buyer’s Basic Amount
as such Buyer elects to purchase and, if such Buyer shall elect to purchase all
of its Basic Amount, the Undersubscription Amount as such Buyer shall elect to
purchase (the “Notice of Acceptance”).  If the Basic Amounts subscribed for by all
Buyers are less than the total Offered Securities then each Buyer who has set
forth Undersubscription Amounts in its Notice of Acceptance shall be entitled
to purchase all Undersubscription Amounts it has subscribed for; provided,
however, that should the Undersubscription Amounts subscribed for exceed
the difference between the Offered Securities and the Basic Amounts subscribed
for (the “Available Undersubscription Amount”),
each Buyer who has subscribed for any Undersubscription Amount shall be
entitled to purchase only that portion of the Available Undersubscription
Amount as the Undersubscription Amount subscribed for by such Buyer bears to
the total Undersubscription Amounts subscribed for by all Buyers, subject to
rounding by the Board of Directors of the Company to the extent it deems reasonably
necessary.

 

(iii)          Permitted Sales of Refused Securities.  If Notices of Acceptance are not given by
the Buyers in respect of all of the Offered Securities, the Company shall have
sixty (60) days from the expiration of the period set forth in Section 4(o)(i)
to close the sale of all or any part of such Offered Securities as to which a
Notice of Acceptance has not been given by the Buyer (the “Refused Securities”) (as well as the other
securities proposed to be issued in a Future Issuance) to any other Person or
Persons, but only for cash and otherwise in all respects

 

19

 

upon terms and conditions, including, without limitation, unit price
and interest rates, which are no more favorable, in the aggregate, to such
other Person or Persons or less favorable to the Company than those set forth
in the Offer.

 

(iv)          Reduction in Amount of Offered Securities.  If the Company shall propose to sell less
than all the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4(o)(iii) above), then each Buyer may, at its sole
option and in its sole discretion, reduce the number or other units of the
Offered Securities specified in its Notice of Acceptance to an amount which
shall be not less than the amount of the Offered Securities which such Buyer
elected to purchase pursuant to Section 4(o)(ii) multiplied by a fraction, (A)
the numerator of which shall be the amount of Offered Securities which the
Company actually proposes to sell, and (B) the denominator of which shall be
the amount of all Offered Securities. 
In the event that any Buyer so elects to reduce the number or amount of
Offered Securities specified in its Notice of Acceptance, the Company may not
sell or otherwise dispose of more than the reduced amount of the Offered
Securities until such securities have been offered to the Buyers in accordance
with Section 4(o).

 

(v)           Closing. 
Upon each closing under this Section 4(o), which shall include full
payment to the Company, the Buyer shall purchase from the Company, and the
Company shall sell to the Buyer the number of Offered Securities specified in
the Notices of Acceptance, as reduced pursuant to Section 4(o)(iv) if the
Buyers have so elected, upon the terms and conditions specified in the
Offer.  The purchase by the Buyers of
any Offered Securities is subject in all cases to the preparation, execution
and delivery by the Company and the Buyers of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Buyers and their respective counsel.

 

(vi)          Further Sale. 
In each case, any securities proposed to be issued in a Future Issuance
that are not purchased by the Buyers or other Person or Persons in accordance
with Section 4 may not be sold or otherwise disposed of until they are again
offered to the Buyers to the same extent, and under the procedures specified
in, Section 4(o).

 

(vii)         Exception. 
The rights of the Buyers under this Section 4(o) shall not apply to
Excluded Securities (as defined in the Notes).

 

(p)           Limitations
on Short Sales.

 

(i)            Solely
with respect to the Conversion Shares, Repayment Shares and the Interest Shares
issuable pursuant to the Notes that each Buyer owns, each Buyer agrees that it
will not enter into any short sales with respect thereto from the period
commencing on the Closing Date and ending on the date which all of the Notes it
owns are no longer outstanding; provided that the foregoing shall not
apply if after the Effectiveness Deadline (as defined in the Registration
Rights Agreement) such Conversion Shares, Repayment Shares and Interest Shares
are not registered for resale pursuant to the Registration Statement.

 

(ii)           Solely
with respect to the Warrant Shares issuable pursuant to the

 

20

 

Warrants that each Buyer owns, each Buyer agrees that it will not enter
into short sales relating to more than 50% of the Warrant Shares issuable
pursuant to the Warrants that such Buyer owns from the period commencing on the
Closing Date and ending on the date which all of the Warrants are no longer
outstanding; provided that the foregoing shall not apply if after the
Effectiveness Deadline such Warrant Shares are not registered for resale
pursuant to the Registration Statement.

 

5.             REGISTER; TRANSFER AGENT INSTRUCTIONS.

 

(a)           Register. 
The Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to each
holder of Notes or Warrants), a register for the Notes and the Warrants, in
which the Company shall record the name and address of the Person in whose name
the Notes  and the Warrants have
been issued (including the name and address of each transferee), the principal
amount of Notes held by such Person and the number of Warrant Shares issuable
upon exercise of the Warrants held by such Person.  The Company shall keep the register open and available at all
times during business hours for inspection of any Buyer or its legal
representatives.

 

(b)           Transfer Agent Instructions.  The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company (“DTC”),
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares, the Repayment Shares, the Interest Shares and the Warrant
Shares  in such amounts as
specified from time to time by each Buyer to the Company upon issuance of the
Repayment Shares or Interest Shares or conversion of the Notes or exercise of
the Warrants in the form of Exhibit D attached hereto (the “Irrevocable Transfer Agent Instructions”).  The Company warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b), and stop transfer instructions to give effect to Section 2(g)
hereof, will be given by the Company to its transfer agent, and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents.  If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Section 2(f), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment.  In the event that such sale, assignment or
transfer involves Conversion Shares, Repayment Shares, Interest Shares or
Warrant Shares sold, assigned or transferred pursuant to an effective
registration statement or pursuant to Rule 144, the transfer agent shall issue
such Securities to the Buyer, assignee or transferee, as the case may be,
without any restrictive legend.  The
Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to a Buyer. 
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5(b) will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5(b), that a Buyer shall be entitled, in addition to
all other available remedies, to an order and/or 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.

 

21

 

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

 

(a)           Closing Date. 
The obligation of the Company hereunder to issue and sell the Notes  and the related Warrants to each Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:

 

(i)            Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.

 

(ii)           Such Buyer and each other Buyer shall have delivered to
the Company the Purchase Price (less, in the case of The Riverview Group LLC,
the amounts withheld pursuant to Section 4(g)) for the Notes and the related
Warrants being purchased by such Buyer and each other Buyer at the Closing by
wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company.

 

(iii)          The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer 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 such Buyer at or prior to the Closing Date.

 

7.             CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

 

(a)           Closing Date. 
The obligation of each Buyer hereunder to purchase the Notes  and the related Warrants at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:

 

(i)            The Company shall have executed and delivered to such
Buyer (i) each of the Transaction Documents and (ii) the Notes (in such
principal amounts as such Buyer shall request)and the related Warrants (in such amounts as such Buyer shall
request) being purchased by such Buyer at the Closing pursuant to this
Agreement.

 

(ii)           Such Buyer shall have received the opinion of Robinson
& Cole LLP, the
Company’s counsel, dated as of the Closing Date, in substantially the form of Exhibit
E attached hereto.

 

(iii)          The Company shall have delivered to such Buyer a copy of
the Irrevocable Transfer Agent Instructions, in the form of Exhibit D
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company’s transfer agent.

 

22

 

(iv)          The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each of its Subsidiaries in such corporation’s state of incorporation issued by
the Secretary of State of such state of incorporation, as of a date within 10
days of the Closing Date.

 

(v)           The Company shall have delivered to such Buyer a
certificate evidencing the Company’s qualification as a foreign corporation and
good standing issued by the Secretary of State of the States of Massachusetts
and Delaware, as of a date within 10 days of the Closing Date.

 

(vi)          The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware within 10 days of the Closing Date.

 

(vii)         The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted
by the Company’s Board of Directors in a form reasonably acceptable to such
Buyer (the “Resolutions”), (ii)
the Certificate of Incorporation and (iii) the Bylaws, each as in effect at the
Closing, in the form attached hereto as Exhibit F.

 

(viii)        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 (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer in the form attached hereto as Exhibit
G.

 

(ix)           The Company shall have delivered to such Buyer a letter
from the Company’s transfer agent certifying the number of shares of Class A
Common Stock outstanding as of a date within five days of the Closing Date.

 

(x)            The Class A Common Stock (I) shall be designated
for quotation or listed on the Principal Market and (II) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from
trading on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened, as of the Closing Date, either (A) in
writing by the SEC or the Principal Market or (B) by falling below the minimum
listing maintenance requirements of the Principal Market.

 

(xi)           The Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale of the
Notes and the Warrants.

 

(xii)          The Company shall have delivered to such Buyer such other

 

23

 

documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.

 

8.             TERMINATION. 
In the event that the Closing shall not have occurred with respect to a
Buyer on or before five (5) Business Days from the date hereof due to the Company’s
or such Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above (and the nonbreaching party’s failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party; provided, however,
this if this Agreement is terminated pursuant to this Section 8, the Company
shall remain obligated to reimburse the non-breaching Buyers for the expenses
described in Section 4(g) above.

 

9.             MISCELLANEOUS.

 

(a)           Governing Law; Jurisdiction; Jury Trial.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York
or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is improper.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof.  Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

 

(b)           Counterparts. 
This Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party; provided that a facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile signature.

 

(c)           Headings. 
The headings of this Agreement are for convenience of

 

24

 

reference and shall not form part of, or affect the interpretation of,
this Agreement.

 

(d)           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 in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

 

(e)           Entire Agreement; Amendments.  This Agreement supersedes all other prior
oral or written agreements between the Buyers, the Company, their affiliates
and Persons acting on their behalf with respect to the matters discussed
herein, and this Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters covered herein
and therein and, except as specifically set forth herein or therein, neither
the Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. 
No provision of this Agreement may be amended other than by an instrument
in writing signed by the Company and the holders of Notes representing at least
two-thirds of the aggregate principal amount of the Notes, or, if prior to the
Closing Date, the Company and the Buyers listed on the Schedule of Buyers as
being obligated to purchase at least a majority of the aggregate principal
amount of the Notes, and any amendment to this Agreement made in conformity
with the provisions of this Section 9(e) shall be binding on all Buyers and
holders of Notes, as applicable.  No
provision hereof may be waived other than by an instrument in writing signed by
the party against whom enforcement is sought. 
No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Notes then outstanding.  No consideration shall be offered or paid to
any Person to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents unless the same consideration also is offered
to all of the parties to the Transaction Documents, holders of Notes or holders
of the Warrants, as the case may be. 
The Company has not, directly or indirectly, made any agreements with
any Buyers relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.

 

(f)            Notices. 
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: 
(i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
Business Day after deposit with an overnight courier service, in each case
properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall
be:

 

	
  If to the Company:

  	
   

  
	
   

  	
   

  
	
   

  	
  Vaso
  Active Pharmaceuticals, Inc.

  
	
   

  	
  99
  Rosewood Drive, Suite 260

  
	
   

  	
  Danvers,
  Massachusetts 01923

  
	
   

  	
  Telephone:

  	
  (978)
  750-0090

  
	
   

  	
  Facsimile:

  	
  (978)
  750-0085

  
	
   

  	
  Attention:

  	
  John
  J. Masiz

  

 

25

 

	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
  Robinson
  & Cole LLP

  
	
   

  	
  One
  Boston Place

  
	
   

  	
  Boston,
  Massachusetts 02108

  
	
   

  	
  Telephone:

  	
  (617)
  557-5955

  
	
   

  	
  Facsimile:

  	
  (617)
  557-5999

  
	
   

  	
  Attention:

  	
  David
  A. Garbus, Esq.

  
	
   

  	
   

  	
   

  
	
  If to the Transfer Agent:

  
	
   

  	
   

  	
   

  
	
   

  	
  EquiServe
  Trust Company, N.A.

  
	
   

  	
  Transfer
  Agent and Registrar

  
	
   

  	
  150
  Royall Street

  
	
   

  	
  Mail
  Stop 45-02-62

  
	
   

  	
  Canton,
  MA 02021

  
	
   

  	
  Telephone:

  	
  (781)
  575-2934

  
	
   

  	
  Facsimile:

  	
  (781)
  575-2420

  
	
   

  	
  Attention:

  	
  Deb
  Spearin

  

 

If to a Buyer, to its address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer’s representatives as set forth on
the Schedule of Buyers, or to such other address and/or facsimile number and/or
to the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change.  Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by
an overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.

 

(g)           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns, including any
purchasers of the Notes or the Warrants. 
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the holders of Notes
representing at least a majority of the aggregate principal amount of the Notes
then outstanding, including by merger or consolidation, except pursuant to a
Change of Control (as defined in Section 5 of the Notes) with respect to which
the Company is in compliance with Section 5 of the Notes and Section 4(b) of
the Warrants.  A Buyer may assign some
or all of its rights hereunder without the consent of the Company, in which
event such assignee shall be deemed to be a Buyer hereunder with respect to
such assigned rights.

 

(h)           No Third Party Beneficiaries.  This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

 

26

 

(i)            Survival. 
Unless this Agreement is terminated under Section 8, the representations
and warranties of the Company and the Buyers contained in Sections 2 and 3 and
the agreements and covenants set forth in Sections 4, 5 and 9 shall survive the
Closing.  Each Buyer shall be
responsible only for its own representations, warranties, agreements and covenants
hereunder.

 

(j)            Further Assurances.  Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions
contemplated hereby.

 

(k)           Indemnification. 
In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition
to all of the Company’s other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their stockholders, partners,
members, officers, directors, employees and direct or indirect investors and
any of the foregoing Persons’ agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any
Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation
or breach of any representation or warranty made by the Company in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the Company pursuant
to the transactions contemplated by the Transaction Documents.  To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.  Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this
Section 9(k) shall be the same as those set forth in Section 6 of the
Registration Rights Agreement.

 

(l)            No Strict Construction.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of

 

27

 

strict construction will be applied against any party.

 

(m)          Remedies. 
Each Buyer and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law.  Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. 
Furthermore, the Company recognizes that in the event that it fails to
perform, observe, or discharge any or all of its obligations under the
Transaction Documents, any remedy at law may prove to be inadequate relief to
the Buyers.  The Company therefore
agrees that the Buyers shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages and without posting a bond or other security.

 

(n)           Payment Set Aside. 
To the extent that the Company makes a payment or payments to the Buyers
hereunder or pursuant to any of the other Transaction Documents or the Buyers
enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

 

(o)           Independent Nature of Buyers’ Obligations and
Rights.  The obligations of each
Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way
for the performance of the obligations of any other Buyer under any Transaction
Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Buyer pursuant
hereto or thereto, shall be deemed to constitute the Buyers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents.  Each Buyer confirms that it
has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors.  Each Buyer shall be entitled to independently
protect and enforce its rights, including, without limitations, the rights
arising out of this Agreement or out of any other Transaction Documents, and it
shall not be necessary for any other Buyer to be joined as an additional party
in any proceeding for such purpose.

 

[Signature Page Follows]

 

28

 

IN WITNESS WHEREOF, each Buyer and the Company have caused have
caused their respective signature page to this Securities Purchase Agreement to
be duly executed as of the date first written above.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  VASO
  ACTIVE PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John J. Masiz

  	
   

  
	
   

  	
   

  	
  Name:  John J. Masiz

  
	
   

  	
   

  	
  Title:   
  Chief Executive Officer

  

 

[Signature
Page to Securities Purchase Agreement]

 

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  THE
  RIVERVIEW GROUP LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terry Feeney

  	
   

  
	
   

  	
   

  	
  Name:  Terry Feeney

  
	
   

  	
   

  	
  Title:
     Chief Operating Officer

  
					

 

[Signature
Page to Securities Purchase Agreement]

 

 

SCHEDULE OF BUYERS

 

	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  	
   

  
	
  Buyer

  	
   

  	
  Address
  and Facsimile Number

  	
   

  	
  Aggregate

  Principal

  Amount of

  Notes

  	
   

  	
  Number

  of Warrants

  	
   

  	
  Legal
  Representative’s

  Address and Facsimile Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Riverview Group LLC

  	
   

  	
  666 Fifth Avenue, 8th
  Floor

  New York, New York  10103

  Attention:  Daniel Cardella

  Facsimile:(212) 977-1667

  Telephone: (212) 841-4100

  Residence:  Delaware

  	
   

  	
  $

  	
  7,500,000

  	
   

  	
  166,667

  	
   

  	
  Schulte Roth & Zabel
  LLP

  919 Third Avenue

  New York, New York  10022

  Attention:  Eleazer Klein, Esq.

  Facsimile: (212) 593-5955

  Telephone:  (212) 756-2000

  	
   

  
											

 

 

	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Note

  	
   

  
	
  Exhibit B

  	
  Form of Warrants

  	
   

  
	
  Exhibit C

  	
  Form of Registration
  Rights Agreement

  	
   

  
	
  Exhibit D

  	
  Form of Irrevocable
  Transfer Agent Instructions

  	
   

  
	
  Exhibit E

  	
  Form of Company Counsel
  Opinion

  	
   

  
	
  Exhibit F

  	
  Form of Secretary’s
  Certificate

  	
   

  
	
  Exhibit G

  	
  Form of Officer’s
  Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 3(e)

  	
   

  	
  Consents

  	
   

  
	
  Schedule 3(s)

  	
   

  	
  Indebtedness and Other
  Contracts

  	
   

  
	
  Schedule 3(t)

  	
   

  	
  Litigation

  	
   

  

 

 

SCHEDULE
3(e)

 

CONSENTS

 

None

 

 

SCHEDULE 3(l)

 

ABSENCE OF CERTAIN CHANGES

 

Part I

 

Registration Statement on Form SB-2, No 333-106785, filed by Vaso
Active Pharmaceuticals, Inc. on December 9, 2003, as amended, and the exhibits
filed thereunder.

 

Part II

 

Effective on March 5, 2003, the Company declared a 200% stock dividend
to holders of record of shares of both the Company’s Class A and Class B common
stock as of February 23, 2004.

 

 

SCHEDULE 3(q)

 

TRANSACTIONS WITH AFFILIATES  

 

1.  Each of John Masiz and Dr.
Stephen Carter has entered into an employment agreement with the Company.  A description of the terms of these
employment agreements is found on page 45 of the prospectus included in the
Company’s Registration Statement on Form SB-2, No 333-106785, filed by Vaso
Active Pharmaceuticals, Inc., dated December 9, 2003, as amended.

 

 

SCHEDULE
3(r)

 

OPTIONS

 

Options Granted During Fiscal Year Ended December 31, 2003

 

	
  Name

  	
   

  	
  Number of

  Shares

  Underlying

  Options

  Granted (#)

  	
   

  	
  % of Total

  Options

  Granted to

  Employees

  in the

  Fiscal Year

  	
   

  	
  Exercise

  Price Per

  Share

  ($/Share)

  	
   

  	
  Grant

  Date

  Market

  Price

  ($/Share)

  	
   

  	
  Grant

  Date

  Present

  Value ($)

  	
   

  	
  Expiration

  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John J Masiz *

  	
   

  	
  300,000

  	
   

  	
  31.8

  	
  %

  	
  1.83

  	
   

  	
  1.67

  	
   

  	
  550,000

  	
   

  	
  12/15/13

  	
   

  
	
  Kevin J. Seifert
  *

  	
   

  	
  225,000

  	
   

  	
  23.8

  	
  %

  	
  1.67

  	
   

  	
  1.67

  	
   

  	
  375,000

  	
   

  	
  12/15/13

  	
   

  
	
  Dr. Steven G.
  Carter *

  	
   

  	
  225,000

  	
   

  	
  23.8

  	
  %

  	
  1.67

  	
   

  	
  1.67

  	
   

  	
  375,000

  	
   

  	
  12/15/13

  	
   

  
	
  Joseph
  Frattaroli *

  	
   

  	
  90,000

  	
   

  	
  9.5

  	
  %

  	
  1.67

  	
   

  	
  1.67

  	
   

  	
  150,000

  	
   

  	
  12/15/13

  	
   

  

 

* Options were granted to the above executives to purchase an aggregate
of 840,000 shares of our Class A common stock under the Company’s 2003 Stock
Incentive Plan. These options were granted using the price per share of the
Company’s Class A common stock as determined by the closing price of the
Company’s registration on December 15, 2003. 50% of the options granted to Mr.
Masiz and Dr. Carter will vest immediately after 60 days from the date of grant
and 25% will vest on each of the first and second anniversary dates of the
grant. One-third of the options granted to Mr. Frattaroli will vest on each of
the first, second and third anniversary dates of the grant.

 

2.             In addition to the
options set forth above, the Company has also granted options to certain of its
employees to purchase an aggregate of 357,000 shares of Class A common stock
under the Company’s 2003 Stock Incentive Plan (collectively, the “Employee
Options”).  The Employee Options were
granted as of January 15, 2003 at a per share exercise price of $6.33.  The Employee Options vest completely over a
four year period, at the rate of 25% each year on the anniversary date of the
grant.

 

3.             The Company has
also agreed to issue Kashner Davidson Securities Corp. warrants to purchase an
aggregate of 150,000 shares of Class A common stock of the Company as of the
Issuance Date, pursuant to that certain Underwriter’s Consent, dated as of
March 16, 2004.

 

 

SCHEDULE 3(s)

 

INDEBTEDNESS

 

1.     The
Company owes approximately $20,000 in unpaid management fees to its parent,
BioChemics, Inc., for the period of January, 2004 to present.

 

2.     The
Company owes approximately $89,500 to its parent, BioChemics, Inc., for charges
paid by BioChemics to third parties on behalf of the Company.

 

 

SCHEDULE 3(t)

 

ABSENCE OF LITIGATION

 

1.  Reference is made to certain
telephonic inquiries from the Securities and Exchange Commission to the Company
on March 3 and March 9, 2004 and from Nasdaq on March 12, 2004, respectively,
both regarding (i) the level of trading in the Company’s Class A common stock
and the Company’s knowledge of the possible reasons therefor; (ii) a medical
study report, dated August 24, 1998, referenced in the Company’s prospectus;
(iii) the Company’s 3:1 stock split and possible institutional interest in the
Company’s Class A common stock; and (iv) the technology relating to the
Company’s OTC products.

 

No further inquiries have been received by the Company from the SEC or
Nasdaq since the dates of their respective inquiries as set forth above.

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