Document:

exv10w1

 

Exhibit 10.1

RESIGNATION AGREEMENT AND RELEASE

     This Resignation Agreement and Release (“Agreement”) is entered into on February 20, 2006,
between RadioShack Corporation, a Delaware corporation (“Company”), and David J. Edmondson
(“Executive”).

     1. Termination of Duties. On February 20, 2006 (the “Effective Date”) Executive resigns as
President and Chief Executive Officer and a director of Company and from all other director and
officer positions with Company and its affiliates. On the Effective Date, the obligations and
responsibilities of the parties set forth in (i) that certain Severance Agreement between Company
and Executive dated December 11, 2003 (as amended, the “Severance Agreement”), (ii) that certain
Termination Protection Agreement for Corporate Executives between Company and Executive dated
August 26, 2005 (the “Termination Protection Agreement”), and (iii) that certain Employee Agreement
on Intellectual Property Rights and Confidential Information between Company and Executive dated
November 31 [sic], 1994 (the “Confidentiality Agreement” and, together with the Severance Agreement
and the Termination Protection Agreement, the “Termination Agreements”) are completely terminated,
except as provided in this Agreement.

     2. Salary. On the Effective Date, except as specifically set forth in Sections 3 and 4 below
and otherwise in this Agreement, Executive’s salary and benefits from Company shall cease to
accrue, and he shall cease to participate in any employee benefit plans or programs. Within three
(3) business days after the Effective Date, Company shall (i) pay to Executive any accrued and
unpaid salary payments due him as of the Effective Date, and (ii) reimburse Executive for all
unreimbursed expenses incurred by Executive during the performance of his duties in accordance with
the Company’s standard policy.

     3. Insurance Benefits. For a period of four (4) months from the Effective Date, Company shall
at its expense pay all of Executive’s premiums for such insurance he elects to receive under the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”). Thereafter, all insurance benefits
shall cease to accrue, except as provided by COBRA, and the Company shall not pay such premiums.

     4. Stock Options and Restricted Stock Awards. All outstanding stock options and restricted
stock awards that would have otherwise become exercisable or vested on or prior to December 31,
2006, shall become immediately exercisable or vested, as the case may be, on the Effective Date.
All outstanding stock options exercisable by Executive as of the Effective Date, including such
stock options that may become exercisable as a result of this provision, must be exercised by
Executive within 365 days after the Effective Date. For the avoidance of doubt, the foregoing
shall apply notwithstanding any conflicting provision contained in any stock option agreement,
restricted stock agreement, or similar equity agreement entered into between Company and Executive.

 

 

     5. Return of Property. Executive represents that he has returned all equipment and property
in his possession that belong to Company or that relate or refer to Company or its business,
including all files and programs (hard copy, electronic or otherwise), all originals and copies of
documents, notes, memoranda or any other materials that relate or refer to Company or its business
(hard copy, electronic or otherwise), and material that constitutes trade secrets or “Confidential
Information” as defined in Section 13 of this Agreement. In addition, Executive acknowledges that
the Company has the right to electronically examine all computer or telecommunications equipment
that he may have used in the course of performing his job duties and delete any Confidential
Information contained therein. After such examination, Executive may specifically identify to
Company and purchase one computer, one cellular telephone and one RIM/Blackberry device owned by
Company that he used while he was Chief Executive Officer. The purchase price will be the book
value of that computer, cellular telephone and RIM/Blackberry device on Company’s books. Within seven (7) business days
after the Effective Date, Executive shall be entitled to identify and retrieve in person all his
personal property from the Company premises.

     6. Additional Consideration. As additional consideration for the release and covenants by
Executive set forth in this Agreement, on the eighth calendar day after the Effective Date,
provided Executive has not exercised his revocation rights under Section 27 below, Company shall
pay Executive the aggregate amount of $975,000, payable as wages, in four equal payments of
$243,750 on February 21, 2006, May 19, 2006, August 21, 2006 and November 21, 2006, respectively,
less required state and federal deductions and federal tax withholding. Executive acknowledges
that he would not have otherwise been entitled to such payment except for entering into this
Agreement. Executive agrees that he is solely responsible for his tax obligations, if any,
including, but not limited to, all payment obligations, that may arise as a consequence of such
payment. Executive hereby agrees to hold the Company Released Parties (as defined in Section 9 of
this Agreement) harmless from and against, and agrees to reimburse and indemnify the Company
Released Parties for, any taxes, penalties, net loss, cost, damage or expense, including,
attorneys’ fees, incurred by any of the Company Released Parties arising out of the tax treatment
by Executive on his tax return(s) of any payments made to Executive pursuant to this Agreement.
Executive shall be afforded such coverage under the Company’s “directors and officers” liability
insurance policy, as provided therein relating to any claim or asserted claim that arose during the
time Executive was an officer or director of the Company. Nothing in this Agreement shall be
construed as releasing the Company’s “directors and officers” liability insurance policy. The
Company shall continue to maintain a “directors and officers” liability insurance policy that
covers past officers and directors for a period of at least 18 months after the Effective Date.

     7. Accrued Vacation. Within three (3) business days after the Effective Date, Company shall
pay Executive a single lump-sum payment of all his accrued, unused vacation pursuant to Company’s
standard policy in the amount of $57,692.

     8. Change in Control Representation. Company represents and warrants that, to the Company’s
knowledge, as of the Effective Date, (i) it is currently not contemplating or anticipating a Change
in Control (as defined in the Termination Protection Agreement), and (ii) no third party has
indicated to the Company any intention or taken steps reasonably calculated to effect a Change in
Control. This representation and warranty, made solely as of the Effective

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Date, shall not be a
continuing representation and warranty but shall survive the termination of the Agreement.

     9. Executive’s Release. In consideration of the promises, covenants and other valuable
consideration provided by Company in this Agreement, and to fully compromise and settle any and all
claims and causes of action of any kind whatsoever except as provided in this Agreement, Executive
hereby unconditionally release and discharge Company and its current and former employees,
officers, agents, directors, shareholders and affiliates and their respective current and former
employees, officers, agents, directors, shareholders and affiliates (collectively referred to as
“Company Released Parties”) from any and all claims, causes of action, losses, obligations,
liabilities, damages, judgments, costs, expenses (including attorneys’ fees) of any nature
whatsoever, known or unknown, contingent or non-contingent (collectively, “Claims”), that Executive
has as of the date of this Agreement, including, but not limited to, those arising (i) out of
Executive’s hiring, employment, termination of employment with Company or the Termination
Agreements and (ii) under federal or state law, including, but not limited to, the Age
Discrimination in Employment Act of 1967, 42 U.S.C. §§ 1981-1988, Title VII of the Civil Rights Act
of 1964, the Equal Pay Act, the Employee Retirement Income Security Act of 1974, the Consolidated
Omnibus Budget Reconciliation Act, the National Labor Relations Act, the Occupational Safety and
Health Act, the Fair Labor Standards Act, the Family and Medical Leave Act of 1993, the Workers
Adjustment and Retraining Act, the Americans with Disabilities Act of 1990, the Texas Labor Code,
the Texas Commission on Human Rights Act, the Texas Payday Act, Chapter 38 of the Texas Civil
Practices and Remedies Code, and any provision of the state or federal Constitutions or Texas
common law. This release includes, but is not limited to, any Claims Executive may have for
salary, wages, severance pay, vacation pay, sick pay, bonuses, benefits, pension, stock options,
overtime, and any other compensation or benefit of any nature. This release also includes, but is
not limited to, all common law claims including, but not limited to, claims for wrongful discharge,
breach of express or implied contract, implied covenant of good faith and fair dealing, intentional
infliction of emotional distress, fraud, negligence, defamation, conspiracy, invasion of privacy,
and/or tortious interference with current or prospective business relationships. Furthermore,
Executive agrees and relinquishes any right to re-employment with any of the Company Released
Parties. Except as specifically set forth in this Agreement, Executive also relinquishes any right
to payment or benefits (other than vested rights) under any benefit plan maintained or previously
or subsequently maintained by Company or any of the Released Parties or any of its or their
respective predecessors or successors. However, Executive does not release (a) his right to
enforce the terms of this Agreement, (b) his rights under the Indemnification Agreement effective
as of June 1, 2005 between Executive and Company (“Indemnification Agreement”), (c) his rights to
indemnification or advancement of expenses under Company’s charter or by-laws or under any
applicable policy (specifically including any applicable “directors and officers” insurance policy)
of or maintained by Company that is applicable to its directors or officers, and (d) his rights, if
any, under each of the plans listed on Appendix A (collectively, such plans referred to as the
“Compensation Plans”).

     10. Company’s Release. In consideration of the promises, covenants and other valuable
consideration provided by Executive in this Agreement, and to fully compromise and settle any and
all claims and causes of action of any kind whatsoever except as provided in this Agreement,
Company hereby unconditionally releases and discharges Executive and his spouse, heirs, executors,
administrators, attorneys and other agents (collectively referred to as, the

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“Executive Released
Parties”) from any and all Claims that Company has as of the date of this Agreement, including, but
not limited to, those arising out of Executive’s hiring, employment, termination of employment with
Company or the Termination Agreements. This release
includes, but is not limited to, any Claims the Company may have for salary, wages, severance
pay, vacation pay, sick pay, bonuses, benefits, pension, stock options, overtime, and any other
compensation or benefit of any nature. This release also includes, but is not limited to, all
common law claims including, but not limited to, claims for breach of express or implied contract,
implied covenant of good faith and fair dealing, fraud, negligence, defamation, conspiracy, and/or
tortious interference with current or prospective business relationships. However, Company does
not release (a) its right to enforce the terms of this Agreement, (b) its rights under the
Indemnification Agreement, (c) its rights with respect to indemnification or advancement of expenses
under Company’s charter or by-laws or under any applicable policy (specifically including any
applicable “directors and officers” insurance policy) of or maintained by Company that is
applicable to its directors or officers, and (d) its rights under any of the Compensation Plans.

     11. No Actions Against Company Released Parties. Executive will not bring any action or
lawsuit against any of the Company Released Parties related to any matters released by Executive
under Section 9 of this Agreement. If Executive brings or asserts any such action or lawsuit on a
released Claim, he shall pay all costs and expenses, including attorneys’ fees, incurred by the
Company Released Parties in defending the action or lawsuit. However, Executive may bring an
action or lawsuit to enforce the terms of this Agreement, the Indemnification Agreement, the
Company’s charter or by-laws, or any of the Compensation Plans.

     12. No Actions Against Executive Released Parties. Company will not bring any actions or
lawsuit against any of the Executive Released Parties related to any matters released by Company
under Section 10 of this Agreement. If Company brings or asserts any such action or lawsuit on a
released Claim, it shall pay all costs and expenses, including attorneys’ fees, incurred by the
Executive Released Parties in defending the action or lawsuit. However, Company may bring an
action or lawsuit to enforce the terms of this Agreement, the Indemnification Agreement, the
Company’s charter or by-laws, or any of the Compensation Plans.

     13. Confidentiality. Executive agrees not to make any unauthorized use, publication, or
disclosure of any confidential, proprietary and non-public information generated or acquired by
Executive during the course of his employment with Company, including, but not limited to, any
confidential, trade secret or public information (“Confidential Information”). Executive
understands that Confidential Information includes information not generally known by or available
to the public about or belonging to Company, or belonging to other companies to whom Company may
have an obligation to maintain information in confidence, and that authorization for disclosure may
be obtained only through Company’s general counsel or designee.

     14. Non-Disparagement. Executive agrees that he will not criticize, defame or disparage any
of the Company Released Parties, their plans, or their actions to any third party, either orally or
in writing. Company agrees that it will not criticize, defame or disparage any of the Executive
Released Parties, their plans, or their actions to any third party, either orally or in writing and
that it will use reasonable efforts to prevent any of its current officers or directors from
criticizing, defaming or disparaging any of the Executive Released Parties, their plans, or their
actions to any third party, either orally or in

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writing. Company agrees only to give neutral
reference information about Executive if requested by prospective employers. The provisions
of this Section 14 shall not apply to any truthful statement(s) required to be made by any of the
Executive Released Parties or Company Released Parties or by any representative of the Executive
Released Parties or the Company Released Parties in any legal proceeding or governmental (including
all agencies thereof) or regulatory filing, investigation or proceeding.

     15. Non-Competition; Non-Solicitation.

     (a) Executive hereby agrees that for a period of 18 months after the Effective Date, Executive
will not, directly or indirectly, own, have a proprietary interest (except for less than 5% of any
listed company or company traded in the over-the-counter market) of any kind in, be employed by, be
a partner in, or serve as a consultant to or in any other capacity with any firm, partnership,
corporation, business enterprise or individual, within the continental United States, that is
engaged in the sale of consumer electronics and obtains at least 10% of its annual revenues from
the sale of consumer electronics (which shall not include manufacturers of any kind).

     (b) In consideration of the amounts to be paid or provided to Executive hereunder, Executive
covenants that he shall not, directly or indirectly, or whether for his own account or for the
account of any other person, (i) at any time for a period of 18 months following the Effective
Date, solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise,
any person who is, as of the Effective Date, an employee of the Company, or in any manner induce or
attempt to induce any employee of the Company to terminate his or her employment with the Company;
provided, however, that general solicitations of employment not directed at Company employees shall
not be prohibited by this Section 15(b)(i); or (ii) at any time for a period of 18 months following
the Effective Date, interfere with the Company’s relationship with any person, including any person
who is, as of the Effective Date, an employee, contractor, vendor, supplier or customer of the
Company.

     (c) If any court of competent jurisdiction holds that any of the obligations or restrictions
in this Section 15 are unreasonable or unenforceable as written, the court may reform the
obligations or restrictions to make them enforceable, and the obligations and restrictions shall
remain in full force and effect as reformed by the court.

     16. Breach of this Agreement. If a court of competent jurisdiction determines that either
party has breached or failed to perform any part of this Agreement, the non-breaching party shall
be entitled to injunctive relief to enforce the Agreement and the breaching party shall be
responsible for paying the non-breaching party’s costs and attorneys’ fees incurred in enforcing
the Agreement. This Section does not apply to any claims Executive may have regarding the Older
Worker Benefit Protection Act.

     17. Severability. Should any of the provisions of this Agreement be rendered invalid by a
court or government agency of competent jurisdiction, the remainder of this Agreement shall, to the
fullest extent permitted by applicable law remain in full force and effect.

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     18. No Admission. This Agreement shall not in any way be construed as an admission by either
party of any acts of wrongdoing, violation of any statute, law or legal or contractual right.

     19. Ambiguities in the Agreement. The parties acknowledge that this Agreement has been
drafted, prepared, negotiated and agreed to jointly, with advice of each party’s counsel, and to
the extent that any ambiguity should appear, now or at any time in the future, latent or apparent,
such ambiguity shall not be resolved or construed against either party.

     20. Confidentiality. Except as required by law or provided in this Agreement, each of the
parties agrees to keep confidential the specific terms of this Agreement, and shall not disclose
the terms of this Agreement or the circumstances of Executive’s resignation to any person except
Executive’s spouse, the financial, tax and legal advisors of Executive and Company (and the
executive officers and Board of Directors of Company), or as necessary to enforce this Agreement.
Any disclosure made hereunder shall be made only on the condition that the party to whom disclosure
is made agrees to protect the confidentiality of the information disclosed. This Agreement may be
disclosed in, or filed as an exhibit to, any filing required to be made by the Company under any
securities laws.

     21. Notices. All notices and other communications hereunder will be in writing. Any notice or
other communication hereunder shall be deemed duly given if it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set
forth:

     If to Executive:

David J. Edmondson

712 Arch Adams Street

Fort Worth, Texas 76016

     With a courtesy copy, which shall not constitute notice, to:

Weil, Gotshal & Manges LLP

200 Crescent Court, Suite 300

Dallas, Texas 75201

Attention: D. Gilbert Friedlander

     If to Company:

RadioShack Corporation

300 RadioShack Circle

MS CF4-101

Fort Worth, Texas 76102

Attention: Senior Vice President — Chief Legal Officer

                    and Corporate Secretary

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Any party may send any notice or other communication hereunder to the intended recipient at the
address set forth using any other means (including personal delivery, expedited courier, messenger
services, telecopy (sent to Company at 817.415.6593), telex, ordinary mail or electronic mail), but
no such notice or other communication shall be deemed to have been duly given unless and until it
is actually received by the intended recipient. Any party may change the address to which notices and other communications hereunder are to be delivered by giving the
other party notice in the manner set forth herein.

     22. Counterpart Agreements. This Agreement may be executed in multiple counterparts, whether
or not all signatories appear on these counterparts, and each counterpart shall be deemed an
original for all purposes.

     23. Choice of Law/Venue. This Agreement shall be deemed performable by all parties in, and
venue shall be in the state or federal courts located in, Tarrant County, Texas and the
construction and enforcement of this Agreement shall be governed by Texas law without regard to its
conflict of laws rules.

     24. No Assignment of Claims. Executive represents and warrants that he has not transferred or
assigned to any person or entity any claim involving any of the Company Released Parties or any
portion thereof or interest therein.

     25. Entire Agreement. Other than the Compensation Plans, this Agreement sets forth the entire
agreement between the parties, and fully supersedes any and all prior agreements, understandings,
or representations between the parties pertaining to the subject matter of this Agreement.

     26. Binding Effect of Agreement. This Agreement shall be binding upon Executive, Company and
their heirs, administrators, representatives, executors, successors, and assigns.

     27. Time to Sign and Return Agreement. Executive acknowledges and agrees that he first
received the original of this Agreement on or before February 20, 2006. Executive also understands
and agrees that he has been given at least 21 calendar days from the date he first received this
Agreement to obtain the advice and counsel of the legal representative of his choice and to decide
whether to sign it. Executive acknowledges that he has been advised and has sought the advice of
his own counsel. Executive understands that he may sign the Agreement at any time on or before the
expiration of this 21-day period. Executive also understands that for seven calendar days after he
signs this Agreement he has the right to revoke it, and that this Agreement will not become
effective and enforceable until after the expiration of this seven-day period in which he did not
exercise his right of revocation. Executive specifically understands and agrees that any attempt
by him to revoke this Agreement after the seven-day period has expired is, or will be, ineffective.
Executive represents and agrees that he has thoroughly discussed all aspects and effects of this
Agreement with his attorney, that he has had a reasonable time to review the Agreement, that he
fully understands all the provisions of the Agreement and that he is voluntarily entering into this
Agreement. By signing this Agreement, Executive acknowledges the following:

I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THE FOREGOING AGREEMENT, THAT I UNDERSTAND ALL OF ITS
TERMS, AND THAT I AM ENTERING INTO IT

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VOLUNTARILY. I FURTHER ACKNOWLEDGE THAT I AM AWARE OF MY
RIGHTS TO REVIEW AND CONSIDER THIS AGREEMENT FOR 21 DAYS AND TO CONSULT WITH AN ATTORNEY ABOUT IT,
AND STATE THAT BEFORE SIGNING THIS AGREEMENT, I HAVE EXERCISED THESE RIGHTS TO THE FULL EXTENT THAT
I DESIRED.

[Signature page to follow.]

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Executed as of February 20, 2006.

	 	 	 
	 
	 	/s/ David J. Edmondson
	 
	 
	 
	 	David J. Edmondson

RADIOSHACK CORPORATION

	 	 	 
	By:
	 	/s/ Thomas G. Plaskett
	 
	 
	 
	 	Name:  Thomas G. Plaskett
	 
	 	Title: Director

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Appendix A

COMPENSATION AND BENEFIT PLANS

	1.	 	RadioShack Corporation Officers Deferred Compensation Plan
	 
	2.	 	RadioShack 401(k) Plan
	 
	3.	 	RadioShack Investment Plan
	 
	4.	 	RadioShack Employees Supplemental Stock Plan
	 
	5.	 	RadioShack Corporation 1985 Stock Option Plan
	 
	6.	 	Post Retirement Death Benefit Plan for Executive Employees of RadioShack Corporation and
Subsidiaries
	 
	7.	 	RadioShack Corporation 1993, 1997, 1999 and 2001 Incentive Stock Plans
	 
	8.	 	The following stock option agreements:

	 	•	 	Incentive Stock Plan(s) Stock Option Agreement (Nonqualified and Incentive Stock
Options) dated February 24, 2005
	 
	 	•	 	Incentive Stock Plan(s) Stock Option Agreement (Nonqualified and Incentive Stock Options)
dated February 20, 2004
	 
	 	•	 	Incentive Stock Plan(s) Stock Option Agreement dated February 20, 2003
	 
	 	•	 	Incentive Stock Plan(s) Stock Option Agreement (Nonqualified and Incentive Stock Options)
dated January 2, 2002
	 
	 	•	 	Incentive Stock Plan Incentive Stock Option Agreement dated February 22, 2001
	 
	 	•	 	Incentive Stock Plan Nonqualified Stock Option Agreement dated February 22, 2001
	 
	 	•	 	1997 Incentive Stock Plan Incentive Stock Option Agreement dated May 18, 2000
	 
	 	•	 	1997 Incentive Stock Plan Nonqualified Stock Option Agreement dated May 18, 2000
	 
	 	•	 	Tandy Corporation 1997 Incentive Stock Plan Incentive Stock Option Agreement dated July
24, 1999
	 
	 	•	 	Tandy Corporation 1997 Incentive Stock Plan Nonqualified Stock Option Agreement dated July
24, 1999
	 
	 	•	 	Tandy Corporation 1997 Incentive Stock Plan Incentive Stock Option Agreement dated October
23, 1998
	 
	 	•	 	Tandy Corporation 1997 Incentive Stock Plan Nonqualified Stock Option Agreement dated
October 23, 1998
	 
	 	•	 	Tandy Corporation 1993 Nonqualified Stock Plan Incentive Stock Option Agreement NO.
93-NSO-63 dated October 17, 1997
	 
	 	•	 	Tandy Corporation 1993 Incentive Stock Plan Incentive Stock Option Agreement NO.
93-ISO-0253 dated October 17, 1997
	 
	 	•	 	Tandy Corporation 1993 Incentive Stock Plan Incentive Stock Option Agreement NO.
93-ISO-0195 dated October 18, 1996
	 
	 	•	 	Tandy Corporation 1993 Incentive Stock Plan Nonqualified Stock Option Agreement NO.
93-NSO-0052 dated October 18, 1996
	 
	 	•	 	Tandy Corporation 1993 Incentive Stock Plan Incentive Stock Option Agreement NO.
93-ISO-143 dated October 20, 1995
	 
	 	•	 	Tandy Corporation 1993 Incentive Stock Plan Nonqualified Stock Option Agreement NO.
93-NSO-30 dated October 20, 1995
	 
	 	•	 	Tandy Corporation 1993 Incentive Stock Plan Incentive Stock Option Agreement NO.
93-ISO-118 dated December 16, 1994
	 
	 	•	 	Any other vested plans between Company and Executive.

10exv10w1

 

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

     This
Securities Purchase Agreement (this “Agreement”) is
dated as of February 16, 2006, among
AdStar, Inc., a Delaware corporation (the “Company”), and the investors identified on the signature
pages hereto (each, an “Investor” and collectively, the “Investors”).

     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Investor, and each Investor, severally and not jointly,
desires to purchase from the Company certain securities of the Company, as more fully described in
this Agreement.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and the Investors agree as follows:

ARTICLE 1.

DEFINITIONS

     1.1. Definitions. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms shall have the meanings indicated in this Section
1.1:

          “Action” means any action, claim, suit, inquiry, notice of violation, proceeding (including,
without limitation, any investigation or partial proceeding such as a deposition) or investigation
pending or threatened in writing against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or administrative agency,
regulatory authority (federal, state, provincial, county, local or foreign), stock market, stock
exchange or trading facility.

          “Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144.

          “Business Day” means any day except Saturday, Sunday and any day which is a federal legal
holiday or a day on which banking institutions in the State of New York or California are
authorized or required by law or other governmental action to close.

          “Closing” means the closing of the purchase and sale of the Shares pursuant to Article II of
this Agreement.

          “Closing Date” means the Business Day on which all of the conditions set forth in Sections 5.1
and 5.2 hereof are satisfied, or such other date as the parties may agree.

          “Commission” means the Securities and Exchange Commission.

 

 

          “Common Stock” means the common stock of the Company, par value $0.0001 per share, and any
securities into which such common stock may hereafter be reclassified, converted or exchanged.

          “Common Stock Equivalents” means any securities of the Company or any Subsidiary which entitle
the holder thereof to acquire Common Stock at any time, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any time convertible into
or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other
securities that entitle the holder to receive, directly or indirectly, Common Stock.

          “Company Counsel” means Morse, Zelnick, Rose & Lander, LLP.

          “Company Deliverables” has the meaning set forth in Section 2.2(a).

          “Disclosure Materials” has the meaning set forth in Section 3.1(h).

          “Effective Date” means the date that the initial Registration Statement required by Section
2(a) of the Registration Rights Agreement is first declared effective by the Commission.

          “Evaluation Date” has the meaning set forth in Section 3.1(s).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “GAAP” means U.S. generally accepted accounting principles.

          “Intellectual Property Rights” has the meaning set forth in Section 3.1(p).

          “Investment Amount” means, with respect to each Investor, the Investment Amount indicated on
such Investor’s signature page to this Agreement.

          “Investor Deliverables” has the meaning set forth in Section 2.2(b).

          “Investor Party” has the meaning set forth in Section 4.7.

          “Lien” means any lien, charge, encumbrance, security interest, right of first refusal or other
restrictions of any kind.

          “Losses” has the meaning set forth in Section 4.7.

          “Material Adverse Effect” means any of (i) a material and adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the
results of operations, assets, prospects, business or condition (financial or otherwise) of the
Company and the Subsidiaries, or (iii) an adverse impairment to the Company’s ability to perform on
a timely basis any of its obligations under any Transaction Document.

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          “New York Courts” means the state and federal courts sitting in the City of New York, Borough
of Manhattan.

          “Outside Date” means February 24, 2006.

          “Per Share Purchase Price” equals $1.65, subject to equitable adjustment in the event of stock
splits and similar occurrences with respect to the Common Stock.

          “Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.

          “Registration Rights Agreement” means the Registration Rights Agreement, dated as of the
Closing Date, among the Company and the Investors, in the form of Exhibit B hereto.

          “Registration Statement” means a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale by the Investors of the Shares.

          “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “SEC Reports” has the meaning set forth in Section 3.1(h).

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

          “Shares” means the shares of Common Stock issued or issuable to the Investors pursuant to this
Agreement.

          “Short Sales” include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements (including on
a total return basis), and sales and other transactions through non-US broker dealers or foreign
regulated brokers.

          “Subsidiary” means any “significant subsidiary” as defined in Rule 1-02(w) of the Regulation
S-X promulgated by the Commission under the Exchange Act.

          “Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other
than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other
than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any
Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as
reported by The Pink Sheets, LLC (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the

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event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii)
hereof, then Trading Day shall mean a Business Day.

          “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange,
the NASDAQ National Market, the NASDAQ SmallCap Market or OTC Bulletin Board on which the Common
Stock is listed or quoted for trading on the date in question.

          “Transaction Documents” means this Agreement, the Registration Rights Agreement, and any other
documents or agreements executed in connection with the transactions contemplated hereunder.

ARTICLE 2.

PURCHASE AND SALE

     2.1. Closing. Subject to the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and
not jointly, purchase from the Company, the Shares representing such Investor’s Investment Amount.
The Closing shall take place at the offices of Bryan Cave LLP, 1290 Avenue of the Americas, New
York, NY 10104 on the Closing Date or at such other location or time as the parties may agree.

     2.2. Closing Deliveries. (a) At the Closing, the Company shall deliver or cause to be
delivered to each Investor the following (the “Company Deliverables”):

               (i) a certificate evidencing a number of Shares equal to such Investor’s Investment Amount
divided by the Per Share Purchase Price, registered in the name of such Investor;

               (ii) the legal opinion of Company Counsel, in agreed form, addressed to the Investors;

               (iii) the Registration Rights Agreement, duly executed by the Company; and

               (iv) an officer’s certificate, in accordance with Section 5.1(h).

          (b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the
following (the “Investor Deliverables”):

               (i) its Investment Amount, in United States dollars and in immediately available funds, by
wire transfer to an account designated in writing by the Company for such purpose; and

               (ii) the Registration Rights Agreement, duly executed by such Investor.

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ARTICLE 3.

REPRESENTATIONS AND WARRANTIES

     3.1. Representations and Warranties of the Company. The Company hereby makes the following
representations and warranties to each Investor:

          (a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than as
specified in the SEC Reports. Except as disclosed in Schedule 3.1(a), the Company owns,
directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and all
Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar rights.

          (b) Organization and Qualification. The Company and each Subsidiary are duly
incorporated or otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other organizational or charter
documents. The Company and each Subsidiary are duly qualified to conduct its respective businesses
and are in good standing as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.

          (c) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application.

          (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
thereby do not and will not (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a default (or an
event that 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 (with or without notice, lapse
of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company
or

5

 

Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by which any property or
asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.

          (e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or registration
with, any court or other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement, (ii) filings required by
state securities laws, (iii) the filing of a Notice of Sale of Securities on Form D with the
Commission under Regulation D of the Securities Act, (iv) the filings required in accordance with
Section 4.5 and (v) those that have been made or obtained prior to the date of this Agreement.

          (f) Issuance of the Shares. The Shares have been duly authorized and, when issued and
paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid
and nonassessable, free and clear of all Liens. The Company has reserved from its duly authorized
capital stock the shares of Common Stock issuable pursuant to this Agreement in order to issue the
Shares.

          (g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance
under the Company’s various option and incentive plans, is specified in the SEC Reports. Except as
specified in the SEC Reports, no securities of the Company are entitled to preemptive or similar
rights, and no Person has any right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by the Transaction Documents.
Except as specified in the SEC Reports, there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any Person any right to subscribe
for or acquire, any shares of capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound to
issue any shares of capital stock of the Company, or securities or rights convertible or
exchangeable into any shares of capital stock of the Company. The issue and sale of the Shares
will not, immediately or with the passage of time, obligate the Company to issue any shares of
capital stock of the Company or other securities to any Person (other than the Investors under the
Transaction Documents) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or reset price under
such securities.

          (h) SEC Reports; Financial Statements. The Company has filed all reports, forms or
other information required to be filed by it under the Securities Act and the Exchange

6

 

Act,
including pursuant to Section 13(a) or 15(d) thereof, for the twenty four months preceding the date
hereof (or such shorter period as the Company was required by law to file such reports, forms or
other information) (the foregoing materials being collectively referred to herein as the “SEC
Reports” and, together with the Schedules to this Agreement (if any), the “Disclosure Materials”)
on a timely basis or has timely filed a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. As of their respective dates, the
SEC Reports complied in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading. The financial statements
of the Company included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved, except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments. For purposes of this
Agreement, any reports, forms or other information provided to the Commission, whether by filing,
furnishing or otherwise providing, is included in the term “filed” (or any derivations thereof).

          (i) Press Releases. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement do not individually or taken as a whole contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under which
they were made and when made, not misleading.

          (j) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has
been no event, occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent
or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities (not to exceed
$100,000) not required to be reflected in the Company’s financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission, (iii) the Company has not altered its
method of accounting or the identity of its auditors, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or purchased, redeemed or
made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has
not issued any equity securities, except pursuant to existing
Company stock option plans and consistent with past practice. The Company does not have
pending before the Commission any request for confidential treatment of information.

          (k) Litigation. There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the Shares or (ii)
except as specifically disclosed in the SEC Reports, could, if there were an unfavorable decision,

7

 

individually or in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof (in his or her
capacity as such), is or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of fiduciary duty, except as
specifically disclosed in the SEC Reports. There has not been, and to the knowledge of the
Company, there is not pending any investigation by the Commission involving the Company or any
current or former director or officer of the Company (in his or her capacity as such). The
Commission has not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.

          (l) Labor Relations. No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company.

          (m) Compliance. Neither the Company nor any Subsidiary (i) is in default under or in
violation of (and no event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or that it is in violation
of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such default or violation
has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body,
or (iii) is or has been in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. The Company is in compliance
with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and
regulations thereunder, that are applicable to it, except where such noncompliance could not have
or reasonably be expected to result in a Material Adverse Effect.

          (n) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation or modification of any
such permits.

          (o) Title to Assets. The Company and the Subsidiaries have good and marketable title
in fee simple to all real property owned by them that is material to their respective businesses
and good and marketable title in all personal property owned by them that
is material to their respective businesses, in each case free and clear of all Liens, except
for Liens as do not materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and the Subsidiaries. Any
real property and facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in

8

 

compliance, except as could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.

          (p) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to
use, all patents, patent applications, trademarks, trademark applications, service marks, trade
names, copyrights, licenses and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC Reports and which the failure
to so have could, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company
nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person. Except as set forth
in the SEC Reports, to the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of the Intellectual
Property Rights.

          (q) Insurance. The Company and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as are prudent and
customary in the businesses in which the Company and the Subsidiaries are engaged. The Company has
no reason to believe that it will not be able to renew its and the Subsidiaries’ 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 on terms consistent with market for the Company’s and
such Subsidiaries’ respective lines of business.

          (r) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.

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

9

 

accordance with Item
307 of Regulation S-K under the Exchange Act for the Company’s most recently ended fiscal quarter
or fiscal year-end (such date, the “Evaluation Date”). The Company presented in its most recently
filed Form 10-KSB or Form 10-QSB the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the Company’s internal
controls (as such term is defined in Item 308(c) of Regulation S-K under the Exchange Act) or, to
the Company’s knowledge, in other factors that could significantly affect the Company’s internal
controls.

          (t) Solvency. Based on the financial condition of the Company as of the Closing Date
(and assuming that the Closing shall have occurred), (i) the Company’s fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they mature, (ii)
the Company’s assets do not constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof, and (iii) the current cash
flow of the Company, together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would be sufficient to
pay all amounts on or in respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on or in respect of its debt).

          (u) Certain Fees. Except as described in Schedule 3.1(u), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Investors shall have no obligation with respect
to any fees or with respect to any claims (other than such fees or commissions owed by an Investor
pursuant to written agreements executed by such Investor which fees or commissions shall be the
sole responsibility of such Investor) made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions contemplated by
this Agreement.

          (v) Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b)-(e), no registration under the
Securities Act is required for the offer and sale of the Shares by the Company to the Investors
under the Transaction Documents. The Company is eligible to register its Common Stock for resale
by the Investors under Form S-3 promulgated under the Securities Act. Except as specified in
Schedule 3.1(v), the Company has not granted or agreed to grant to any Person any rights
(including “piggy-back” registration rights) to have any securities of the Company registered with
the Commission or any other governmental authority that have not been satisfied or exercised.

          (w) Listing and Maintenance Requirements. Except as specified in the SEC Reports, the
Company has not, in the two years preceding the date hereof, received notice from any Trading
Market to the effect that the Company is not in compliance with the listing or maintenance
requirements thereof. The Company is, and has no reason to believe that it will not

10

 

in the
foreseeable future continue to be, in compliance with the listing and maintenance requirements for
continued listing of the Common Stock on the Trading Market on which the Common Stock is currently
listed or quoted. The issuance and sale of the Shares under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the Common Stock is currently
listed or quoted, and no approval of the shareholders of the Company thereunder is required for the
Company to issue and deliver to the Investors the Shares contemplated by the Transaction Documents.

          (x) Investment Company. The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company” within the meaning
of the Investment Company Act of 1940, as amended.

          (y) Application of Takeover Protections. The Company has 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 Company’s Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors or shareholders of the
Company prior to the Closing Date as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Shares and the Investors’ ownership of the Shares.

          (z) No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction Documents.

          (aa) Disclosure. The Company confirms that neither it nor any Person acting on its
behalf has provided any Investor or its respective agents or counsel with any information that the
Company believes constitutes material, non-public information except insofar as the existence and
terms of the proposed transactions hereunder may constitute such information. The Company
understands and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure provided to the
Investors regarding the Company, its business and the transactions contemplated hereby, furnished
by or on behalf of the Company (including the Company’s representations and warranties set forth in
this Agreement) 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.

     3.2. Representations and Warranties of the Investors. Each Investor hereby, for itself and
for no other Investor, represents and warrants to the Company as follows:

          (a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and otherwise to carry out its
obligations thereunder. The execution, delivery and performance by such Investor of the

11

 

transactions contemplated by this Agreement has been duly authorized by all necessary corporate or,
if such Investor is not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Investor. Each of this Agreement and the Registration
Rights Agreement has been duly executed by such Investor, and when delivered by such Investor in
accordance with the terms hereof, will constitute the valid and legally binding obligation of such
Investor, enforceable against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

          (b) Investment Intent. Such Investor is acquiring the Shares as principal for its own
account for investment purposes only and not with a view to or for distributing or reselling such
Shares or any part thereof, without prejudice, however, to such Investor’s right at all times to
sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal
and state securities laws. Subject to the immediately preceding sentence, nothing contained herein
shall be deemed a representation or warranty by such Investor to hold the Shares for any period of
time. Such Investor is acquiring the Shares hereunder in the ordinary course of its business. Such
Investor does not have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Shares.

          (c) Investor Status. At the time such Investor was offered the Shares, it was, and at
the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.
Such Investor is not a registered broker-dealer under Section 15 of the Exchange Act.

          (d) General Solicitation. Such Investor is not purchasing the Shares as a result of
any advertisement, article, notice or other communication regarding the Shares published in any
newspaper, magazine or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.

          (e) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Shares and the merits and risks of investing in the
Shares; (ii) access to information about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect to the investment.
Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or
its representatives or counsel shall modify, amend or affect such Investor’s right to
rely on the truth, accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction Documents.

          (f) Certain Trading Activities. Such Investor has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Investor, engaged in any
transactions in the securities of the Company (including, without limitations, any

12

 

Short Sales
involving the Company’s securities) since the earlier to occur of (1) the time that such Investor
was first contacted by the Company or any other Person regarding an investment in the Company and
(2) the 30th day prior to the date of this Agreement. Such Investor covenants that
neither it nor any Person acting on its behalf or pursuant to any understanding with it will engage
in any transactions in the securities of the Company (including Short Sales) prior to the time that
the transactions contemplated by this Agreement are publicly disclosed.

          (g) Independent Investment Decision. Such Investor has independently evaluated the
merits of its decision to purchase Shares pursuant to the Transaction Documents, and such Investor
confirms that it has not relied on the advice of any other Investor’s business and/or legal counsel
in making such decision. If such Investor is other than SF Capital Partners Ltd., such Investor
represents and warrants that Bryan Cave LLP has not acted as its legal counsel in connection with
the transactions contemplated by the Transaction Documents.

          (h) Limited Ownership. The purchase by such Investor of the Shares issuable to it at
the Closing will not result in such Investor (individually or together with any other Person with
whom such Investor has identified, or will have identified, itself as part of a “group” in a public
filing made with the Commission involving the Company’s securities) acquiring, or obtaining the
right to acquire, in excess of 19.999% of the outstanding shares of Common Stock or the voting
power of the Company on a post transaction basis that assumes that the Closing shall have occurred.
Such Investor does not presently intend to, alone or together with others, make a public filing
with the Commission to disclose that it has (or that it together with such other Persons have)
acquired, or obtained the right to acquire, as a result of the Closing (when added to any other
securities of the Company that it or they then own or have the right to acquire), in excess of
19.999% of the outstanding shares of Common Stock or the voting power of the Company on a post
transaction basis that assumes that the Closing shall have occurred.

The Company acknowledges and agrees that no Investor has made or makes any representations or
warranties with respect to the transactions contemplated hereby other than those specifically set
forth in this Section 3.2.

ARTICLE 4.

OTHER AGREEMENTS OF THE PARTIES

     4.1.      (a) Shares may only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of the Shares other than pursuant to an effective
registration statement, to the Company, to an Affiliate of an Investor or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Shares under the Securities Act.

          (b) Certificates evidencing the Shares will contain the following legend, until such time as
they are not required under Section 4.1(c):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE

13

 

SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT SECURED BY SUCH SECURITIES.

          The Company acknowledges and agrees that an Investor may from time to time pledge, and/or
grant a security interest in some or all of the Shares pursuant to a bona fide margin agreement in
connection with a bona fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Shares to the pledgees or secured parties.
Such a pledge or transfer would not be subject to approval or consent of the Company and no legal
opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection
with the pledge, but such legal opinion may be required in connection with a subsequent transfer
following default by the Investor transferee of the pledge. No notice shall be required of such
pledge. At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Shares may reasonably request in
connection with a pledge or transfer of the Shares including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.

          (c) Certificates evidencing the Shares shall not contain any legend (including the legend set
forth in Section 4.1(b)): (i) while a registration statement covering the resale of such Shares is
effective under the Securities Act, or (ii) following a sale or transfer of such Shares pursuant to
an effective registration statement (including the Registration Statement), or (iii) following a
sale or transfer of such Shares pursuant to Rule 144 (assuming the transferor is not an Affiliate
of the Company), or (iv) while such Shares are eligible for sale under Rule
144(k). Following such time as restrictive legends are not required to be placed on
certificates representing Shares pursuant to the preceding sentence, the Company will, no later
than three Trading Days following the delivery by an Investor to the Company or the Company’s
transfer agent of a certificate representing Shares containing a restrictive legend, deliver or
cause to be delivered to such Investor a certificate representing such Shares that is free from all
restrictive or other legends (such third Trading Day, the “Share Delivery Date”). If by the Share
Delivery Date, the Company fails to deliver the required number of Shares free from all legends,
and if after the Share Delivery Date and prior to the receipt of such Shares free from restrictive
legends,

14

 

the Investor, or any third party on behalf of such Investor, purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Investor of such Shares (a “Buy-In”), then the Company shall pay in cash to the Investor (for costs
incurred either directly by such Investor or on behalf of a third party) the amount by which the
total purchase price paid for Common Stock as a result of the Buy-In (including brokerage
commissions, if any) exceed the proceeds received by such Investor as a result of the sale to which
such Buy-In relates. The Investor shall provide the Company written notice indicating the amounts
payable to the Investor in respect of the Buy-In. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge the restrictions on
transfer set forth in this Section.

     4.2. Furnishing of Information. As long as any Investor owns the Shares, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Investor owns Shares, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Investors and make publicly available in
accordance with Rule 144(c) such information as is required for the Investors to sell the Shares
under Rule 144. The Company further covenants that it will take such further action as any holder
of Shares may reasonably request, all to the extent required from time to time to enable such
Person to sell the Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144.

     4.3. Integration. The Company shall not, and shall use its best efforts to ensure that no
Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Shares in a manner that would require the registration
under the Securities Act of the sale of the Shares to the Investors, or that would be integrated
with the offer or sale of the Shares for purposes of the rules and regulations of any Trading
Market in a manner that would require stockholder approval of the sale of the Shares to the
Investors.

     4.4. Subsequent Registrations. Other than pursuant to the Registration Statement, prior to
the Effective Date, the Company may not file any registration statement (other than on Form S-8)
with the Commission with respect to any securities of the Company.

     4.5. Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the Trading
Day following the execution of this Agreement, and by 9:00 a.m. (New York time) on the Trading Day
following the Closing Date, the Company shall issue press releases in a form approved by the
Investors disclosing the transactions contemplated hereby and the Closing. On the Trading Day
following the execution of this Agreement the Company will file a Current Report on Form 8-K
disclosing the material terms of the Transaction Documents (and attach as exhibits thereto the
Transaction Documents), and on the Trading Day following the Closing Date the Company will file an
additional Current Report on Form 8-K to disclose the Closing. In addition, the Company will make
such other filings and notices in the manner and time required by the Commission and the Trading
Market on which the Common Stock is listed. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Investor, or include the name of any Investor in any filing with
the Commission (other than the Registration Statement and any exhibits to filings made in respect
of this transaction in

15

 

accordance with periodic filing requirements under the Exchange Act) or any
regulatory agency or Trading Market, without the prior written consent of such Investor, except to
the extent such disclosure is required by law or Trading Market regulations.

     4.6. Limitation on Issuance of Future Priced Securities. During the six months following
the Closing Date, the Company shall not issue any “Future Priced Securities” as such term is
described by NASD IM-4350-1.

     4.7. Indemnification of Investors. In addition to the indemnity provided in the
Registration Rights Agreement, the Company will indemnify and hold the Investors and their
directors, officers, shareholders, partners, employees and agents (each, an “Investor Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs
and expenses, including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation (collectively, “Losses”) that any such Investor Party
may suffer or incur as a result of or relating to any misrepresentation, breach or inaccuracy of
any representation, warranty, covenant or agreement made by the Company in any Transaction
Document. In addition to the indemnity contained herein, the Company will reimburse each Investor
Party for its reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection therewith, as such expenses
are incurred. Except as otherwise set forth herein, the mechanics and procedures with respect to
the rights and obligations under this Section 4.7 shall be the same as those set forth in Section 5
of the Registration Rights Agreement.

     4.8. Non-Public Information. The Company covenants and agrees that neither it nor any
other Person acting on its behalf will provide any Investor or its agents or counsel with any
information that the Company believes constitutes material non-public information, unless prior
thereto such Investor shall have executed a written agreement regarding the confidentiality and use
of such information. The
Company understands and confirms that each Investor shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

     4.9. Listing of Shares. The Company agrees, (i) if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application the Shares, and will
take such other action as is necessary or desirable to cause the Shares to be listed on such other
Trading Market as promptly as possible, and (ii) it will take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and will comply in all
material respects with the Company’s reporting, filing and other obligations under the bylaws or
rules of the Trading Market.

     4.10. Use of Proceeds. The Company will use the net proceeds from the sale of the Shares
hereunder for working capital purposes and not for the satisfaction of any portion of the Company’s
debt (other than payment of trade payables and accrued expenses in the ordinary course of the
Company’s business and consistent with prior practices), or to redeem any Common Stock or Common
Stock Equivalents.

16

 

ARTICLE 5.

CONDITIONS PRECEDENT TO CLOSING

     5.1. Conditions Precedent to the Obligations of the Investors to Purchase Shares. The
obligation of each Investor to acquire Shares at the Closing is subject to the satisfaction or
waiver by such Investor, at or before the Closing, of each of the following conditions:

          (a) Representations and Warranties. The representations and warranties of the Company
contained herein shall be true and correct in all material respects as of the date when made and as
of the Closing as though made on and as of such date;

          (b) Performance. The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the Closing;

          (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;

          (d) Adverse Changes. Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably could have or result in a Material Adverse
Effect;

          (e) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock
shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day solely to permit
dissemination of material information regarding the Company) at any time since the date of
execution of this Agreement, and the Common Stock shall have been at all times since such date
listed for trading on a Trading Market;

          (f) Nasdaq Listing. If applicable, the Nasdaq Stock Market shall have waived
application of the 15 day prior notice contained in NASD Marketplace Rule 4310(c)(17)(D) or such
timeframe shall have expired without objection;

          (g) Company Deliverables. The Company shall have delivered the Company Deliverables
in accordance with Section 2.2(a);

          (h) Closing Officer’s Certificate. At the Closing, the Company shall have delivered
to each Investor an officer’s certificate to the effect that each of the conditions specified in
Sections 5.1(a) — 5.1(f) is satisfied in all respects; and

          (i) Termination. This Agreement shall not have been terminated as to such Investor in
accordance with Section 6.5 herein.

     5.2. Conditions Precedent to the Obligations of the Company to sell Shares. The obligation
of the Company to sell Shares at the Closing is subject to the satisfaction or waiver by the
Company, at or before the Closing, of each of the following conditions:

17

 

          (a) Representations and Warranties. The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made on and as of such date;

          (b) Performance. Each Investor shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing;

          (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;

          (d) Nasdaq Listing. If applicable, the Nasdaq Stock Market shall have waived
application of the 15 day prior notice contained in NASD Marketplace Rule 4310(c)(17)(D) or such
timeframe shall have expired without objection;

          (e) Investor Deliverables. Each Investor shall have delivered its Investor
Deliverables in accordance with Section 2.2(b); and

          (f) Termination. This Agreement shall not have been terminated as to such Investor in
accordance with Section 6.5 herein.

ARTICLE 6.

MISCELLANEOUS

     6.1. Fees and Expenses. At the Closing, the Company shall reimburse SF Capital Partners
Ltd. $15,000 in connection with its legal fees concerning the transactions contemplated by the
Transaction Documents (SF Capital Partners Ltd. may deduct such amount from the portion of its
Investment Amount deliverable to the Company at the Closing), it being understood that Bryan Cave
LLP has only rendered legal advice to SF Capital Partners Ltd., and not to the Company or any other
Investor in connection with the transactions contemplated hereby, and that each of the Company and
each Investor has relied for such matters on the advice of its own respective counsel. Except as
specified in the immediately preceding sentence and in the Registration Rights Agreement, each
party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of the Transaction Documents. The Company shall pay all stamp
and other taxes and duties levied in connection with the sale of the Shares.

     6.2. Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules
thereto, contain the entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements, understandings, discussions and representations, oral or
written, with respect to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.

18

 

     6.3. Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile (provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:

	 	 	 	 	 
	 

	 	If to the Company:
	 	AdStar, Inc.
	 

	 	 	 	4553 Glencoe Avenue, Suite 300
	 

	 	 	 	Marina del Rey, California 90292
	 

	 	 	 	Facsimile: (310) 577-8266
	 

	 	 	 	Attention: President
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Morse, Zelnick, Rose & Lander, LLP
	 

	 	 	 	405 Park Avenue, Suite 1401
	 

	 	 	 	New York, NY 10022
	 

	 	 	 	Facsimile: (212) 838-9190
	 

	 	 	 	Attention: Stephen Zelnick, Esq.
	 
	 	 	 	 
	 

	 	If to SF Capital Partners Ltd.
	 	c/o Stark Investments
	 

	 	 	 	3600 South Lake Drive
	 

	 	 	 	St. Francis, WI 53235
	 

	 	 	 	Facsimile: (414) 294-7692
	 

	 	 	 	Attention: Todd M. W. Turall, Esq.
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Bryan Cave LLP
	 

	 	 	 	1290 Avenue of the Americas
	 

	 	 	 	New York, NY 10104
	 

	 	 	 	Facsimile: (212) 541-1432
	 

	 	 	 	Attention: Eric L. Cohen, Esq.
	 
	 	 	 	 
	 

	 	If to any other Investor:
	 	To the address set forth under such Investor’s name
	 

	 	 	 	on the signature pages hereof

or such other address as may be designated in writing hereafter, in the same manner, by such
Person.

     6.4. Amendments; Waivers; No Additional Consideration. No provision of this Agreement may
be waived or amended except in a written instrument signed by the Company and the Investors holding
a majority of the Shares. No waiver of any default with respect to
any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition

19

 

or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right. No consideration shall be offered or paid to any Investor to amend
or consent to a waiver or modification of any provision of any Transaction Document unless the same
consideration is also offered to all Investors who then hold Shares.

     6.5. Termination. This Agreement may be terminated prior to Closing:

          (a) by written agreement of the Investors and the Company;

          (b) by the Company or an Investor (as to itself but no other Investor) upon written notice to
the other, if the Closing shall not have taken place by 6:30 p.m. Eastern time on the Outside Date;
provided, that the right to terminate this Agreement under this Section 6.5(b) shall not be
available to any Person whose failure to comply with its obligations under this Agreement has been
the cause of or resulted in the failure of the Closing to occur on or before such time; or

          (c) by an Investor (as to itself but no other Investor) if it concludes in good faith that any
of the conditions precedent contained Sections 5.1(c), (d) or (e) shall have been breached or shall
not be capable of being satisfied by the Outside Date despite the assumed best efforts of the
Company.

     In the event of a termination pursuant to this Section, the Company shall promptly notify all
non-terminating Investors and shall pay to SF Capital Partners Ltd. all of the fees and expenses
incurred by SF Capital Partners Ltd. (including reasonable legal fees and expenses) in connection
with this Agreement and the transactions contemplated by this Agreement through the termination
date. Other than as to the foregoing fees and expenses, upon a termination in accordance with this
Section 6.5, the Company and the terminating Investor(s) shall not have any further obligation or
liability (including as arising from such termination) to the other and no Investor will have any
liability to any other Investor under the Transaction Documents as a result therefrom.

     6.6. Construction. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 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 strict construction will be applied against any party. This
Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement or any of the Transaction Documents.

     6.7. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the
Investors. Any Investor may assign any or all of its rights under this Agreement to any Person to
whom such Investor assigns or transfers any Shares, provided such transferee agrees in writing to
be bound, with respect to the transferred Shares, by the provisions hereof that apply to the
“Investors.”

20

 

     6.8. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.7 (as to each Investor Party).

     6.9. Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all Actions concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of the any of the Transaction Documents), and hereby irrevocably waives,
and agrees not to assert in any Action, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Action has been commenced in an improper or
inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such Action by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an Action to enforce any
provisions of a Transaction Document, then the prevailing party in such Action shall be reimbursed
by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Action.

     6.10. Survival. The representations, warranties, agreements and covenants contained herein
shall survive the Closing and the delivery of the Shares.

     6.11. Execution. This Agreement may be executed in two or more counterparts, all of which
when taken together 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, it being understood
that both parties need not sign the same counterpart. In the event that any signature is delivered
by facsimile transmission, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if such
facsimile signature page were an original thereof.

     6.12. Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.

21

 

     6.13. Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained
in (and without limiting any similar provisions of) the Transaction Documents, whenever any
Investor exercises a right, election, demand or option under a Transaction Document and the Company
does not timely perform its
related obligations within the periods therein provided, then such Investor may rescind or
withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future actions and rights.

     6.14. Replacement of Shares. If any certificate or instrument evidencing any Shares is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and customary and reasonable indemnity, if requested. The
applicants for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement Shares. If a
replacement certificate or instrument evidencing any Shares is requested due to a mutilation
thereof, the Company may require delivery of such mutilated certificate or instrument as a
condition precedent to any issuance of a replacement.

     6.15. Remedies. In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Investors and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law would be adequate.

     6.16. Payment Set Aside. To the extent that the Company makes a payment or payments to any
Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights
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.

     6.17. Independent Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance of the obligations of
any other Investor under any Transaction Document. The decision of each Investor to purchase
Shares pursuant to the Transaction Documents has been made by such Investor independently of any
other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to
constitute the Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in concert or as a group
with respect to

22

 

such obligations or the transactions contemplated by the Transaction Documents.
Each Investor acknowledges that no other Investor has acted as agent for such Investor in
connection with making its investment hereunder and that no Investor will be acting as agent of
such Investor in connection with monitoring its investment in the Shares or enforcing its rights
under the Transaction Documents. Each Investor shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other Investor to be joined
as an additional party in any proceeding for such purpose. The Company acknowledges that each of
the Investors has been provided with the same Transaction Documents for the purpose of closing a
transaction with multiple Investors and not because it was required or requested to do so by any
Investor.

     6.18. Limitation of Liability. Notwithstanding anything herein to the contrary, the
Company acknowledges and agrees that the liability of an Investor arising directly or indirectly,
under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of
the assets of such Investor, and that no trustee, officer, other investment vehicle or any other
Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest
of such a Investor shall be personally liable for any liabilities of such Investor.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW]

23

 

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

	 	 	 	 	 
	 	ADSTAR, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR INVESTORS FOLLOW]

24

 

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

	 	 	 	 	 
	 	 	NAME OF INVESTOR
	 
	 	                                                                                     
	 	 	 
	 
	 	 
	 	 	By:                                                                                
	 

	 	 	 	Name:
	 
	 	 	 	Title:
	 
	 	 	 	 
	 	 	Investment Amount: $                                                
	 
	 	 	 	 
	 	 	Tax ID No.:                                                                   
	 
	 	 	 	 
	 	 	ADDRESS FOR NOTICE
	 
	 	 	 	 
	 	 	c/o:                                                                              
	 
	 	 	 	 
	 	 	Street:                                                                          
	 
	 	 	 	 
	 	 	City/State/Zip:                                                            
	 
	 	 	 	 
	 	 	Attention:                                                                   
	 
	 	 	 	 
	 	 	Tel:                                                                             
	 
	 	 	 	 
	 	 	Fax:                                                                             
	 
	 	 	 	 
	 	 	DELIVERY INSTRUCTIONS
	 	 	      (if different from above)
	 
	 	 	 	 
	 	 	c/o:                                                                            
	 
	 	 	 	 
	 	 	Street:                                                                         
	 
	 	 	 	 
	 	 	City/State/Zip:                                                         
	 
	 	 	 	 
	 	 	Attention:                                                                 
	 
	 	 	 	 
	 	 	Tel:                                                                           

25

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