Document:

Certificate of Designations of Series B Convertible Preferred Stock

 Exhibit 4.1 
  

CERTIFICATE OF DESIGNATIONS OF PREFERENCES AND RIGHTS OF 
 SERIES B CONVERTIBLE PREFERRED STOCK 
 OF 
 Global ePoint, Inc. 
 a Nevada
corporation 
  
 The undersigned, John Pan certifies that:

  
 1. He is the duly acting President and Secretary of Global
ePoint, Inc., a corporation organized and existing under the Corporation Code of the State of Nevada (the “Corporation”). 
  
 2. Pursuant to authority conferred upon the Board of Directors by the Amended and Restated Articles of Incorporation of the Corporation, as amended, and
pursuant to the provisions of Section 78.1955 of the General Corporation Law of Nevada, said Board of Directors, has previously designated the Corporation’s Series A Convertible Preferred Stock (“Series A Preferred
Stock”). 
  
 3. Pursuant to authority conferred upon
the Board of Directors by the Amended and Restated Articles of Incorporation of the Corporation, as amended, and pursuant to the provisions of Section 78.1955 of the General Corporation Law of Nevada, said Board of Directors, pursuant to a unanimous
written consent effective as of May 11, 2005, adopted a resolution establishing the rights, preferences, privileges and restrictions of, and the number of shares comprising, the Corporation’s Series B Convertible Preferred Stock, which
resolution is as follows: 
  
 RESOLVED, that a series of Preferred
Stock in the Corporation, having the rights, preferences, privileges and restrictions, and the number of shares constituting such series and the designation of such series, set forth below be, and it hereby is, authorized by the Board of Directors
of the Corporation pursuant to authority given by the Corporation’s Certificate of Incorporation. 
  
 NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes and determines the Determinations of, the number of shares constituting, and the
rights, preferences, privileges and restrictions relating to, a new series of Preferred Stock as follows: 
  
 (a) Determination. The series of Preferred Stock is hereby designated Series B Convertible Preferred Stock (the “Series B Preferred
Stock”). 
  
 (b) Authorized Shares. The number
of authorized shares constituting the Series B Preferred Stock shall be Fifty-Five Thousand (55,000) shares of such series. 
  
 (c) Dividends. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends and to
the extent permitted by applicable law, the holders of the Series B Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of any assets of the Corporation legally available therefor, such dividends as
may be declared from time to time by the Board of Directors. 
  

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 (d) Liquidation Preference. 
  
 (i) Preference upon Liquidation, Dissolution or Winding Up. In the event of any dissolution or
winding up of the Corporation, whether voluntary or involuntary, holders of each outstanding share of Series B Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to shareholders,
whether such assets are capital, surplus or earnings, an amount equal to $100.00 (the “Series B Purchase Price”) per share of Series B Preferred Stock held (as adjusted for any stock splits, stock dividends or
recapitalizations of the Series B Preferred Stock) and any declared but unpaid dividends on such share, before any payment shall be made to the holders of the Common Stock, or any other stock of the Corporation ranking junior to the Series B
Preferred Stock with regard to any distribution of assets upon liquidation, dissolution or winding up of the Corporation. The holders of the Series A Preferred Stock and Series B Preferred Stock, and the holders of any other shares of stock on
parity with the Series B Preferred Stock, shall be entitled to share in any distribution which is not sufficient to pay in full the aggregate of the amounts payable thereon. If, upon any liquidation, dissolution or winding up of the Corporation, the
assets to be distributed to the holders of the Series A Preferred Stock and Series B Preferred Stock, and the holders of any other shares of stock on parity with the Series B Preferred Stock, shall be insufficient to permit payment to such
shareholders of the full preferential amounts aforesaid, then all of the assets of the Corporation available for distribution to shareholders shall be distributed to the holders of Series A Preferred Stock and Series B Preferred Stock, and the
holders of any other shares of stock on parity with the Series B Preferred Stock, ratably, in accordance with the respective preferential amounts payable on such stock. Each holder of the Series B Preferred Stock shall be entitled to receive that
portion of the assets available for distribution to the holders of the Series B Preferred Stock as the number of outstanding shares of Series B Preferred Stock held by such holder bears to the total number of shares of Series B Preferred Stock. Such
payment shall constitute payment in full to the holders of the Series B Preferred Stock upon the liquidation, dissolution or winding up of the Corporation. After such payment shall have been made in full, or funds necessary for such payment shall
have been set aside by the Corporation in trust for the account of the holders of Series B Preferred Stock, so as to be available for such payment, such holders of Series B Preferred Stock shall be entitled to no further participation in the
distribution of the assets of the Corporation. 
  
 (ii) Consolidation, Merger and Other Corporate Events. A consolidation or merger of the Corporation (except into or with a subsidiary corporation) or a sale, lease, mortgage, pledge, exchange, transfer or other disposition of all or
substantially all of the assets of the Corporation or any reclassification of the stock of the Corporation (other than a change in par value or from no par to par, or from par to no par or as the result of an event described in subsection (v), (vi),
(vii) or (viii) of paragraph (f)), shall be regarded as a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this paragraph (d), provided, however, in the case of a merger, if (a) the Corporation is the
surviving entity, (b) the Corporation’s shareholders hold a majority of the shares of the surviving entity, and (c) the Corporation’s directors hold a majority of the seats on the board of directors of the surviving entity, then such
merger shall not be regarded as a liquidation, dissolution or winding up within the meaning of this paragraph (d). In no event shall the issuance of new classes of stock, whether senior, junior or on a parity with the Series B Preferred Stock, or
any stock splits, be deemed a “reclassification” under or otherwise limited by the terms hereof. 
  

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 (iii) Distribution of Cash and Other Assets. In the event of a liquidation,
dissolution or winding up of the Corporation resulting in the availability of assets other than cash for distribution to the holders of the Series B Preferred Stock, the holders of the Series B Preferred Stock shall be entitled to a distribution of
cash and/or assets equal to the value of the liquidation preference stated in subsection (i) of this paragraph (d), which valuation shall be made solely by the Board of Directors, and provided that such Board of Directors was acting in good faith,
shall be conclusive. 
  
 (iv) Distribution to
Junior Security Holders. After the payment or distribution to the holders of the Series B Preferred Stock of the full preferential amounts aforesaid, the holders of Series B Preferred Stock shall have no further rights in respect at such Series
B Stock which shall become null and void, and the holders of the Common Stock then outstanding, or any other stock of the Corporation ranking as to assets upon liquidation, dissolution or winding up of the Corporation junior to the Series B
Preferred Stock, shall be entitled to receive ratably all of the remaining assets of the Corporation. 
  
 (v) Preference; Priority. References to a stock that is “senior” to, on a “parity”
with or “junior” to other stock as to liquidation shall refer, respectively, to rights of priority of one series or class of stock over another in the distribution of assets on any liquidation, dissolution or winding up of
the Corporation. With regard to rights and payments upon liquidation, the Series B Preferred Stock shall be senior to the Common Stock of the Corporation, on parity with the Series A Preferred Stock and junior to any subsequent series of Preferred
Stock issued by the Corporation. 
  
 (e) Voting Rights.
Except as otherwise required by law, the holder of shares of Series B Preferred Stock shall not have the right to vote on matters that come before the shareholders. 
  
 (f) Conversion Rights. The holders of Series B Preferred Stock will have the following conversion rights: 

 
 (i) Right to Convert. Subject to and in compliance
with the provisions of this paragraph (f), any issued and outstanding shares of Series B Preferred Stock may, at the option of the holder, be converted at any time or from time to time into fully paid and non-assessable shares of Common Stock at the
conversion rate in effect at the time of conversion, determined as provided herein; provided, that a holder of Series B Preferred Stock may at any given time convert only up to that number of shares of Series B Preferred Stock so that, upon
conversion, the aggregate beneficial ownership of the Corporation’s Common Stock (calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of (a) such holder and all persons affiliated with such holder, or (b)
M.A.G. Capital, LLC and its affiliates, is not more than 9.99% of the Corporation’s Common Stock then outstanding. 
  
 (ii) Mechanics of Conversion. Before any holder of Series B Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation, and shall give written notice to the Corporation at such office in the form attached hereto as Annex C (the
“Conversion Notice”) that he elects to convert the same and shall state therein the number of shares of Series B Preferred Stock being converted. Thereupon, the Corporation shall promptly 

  

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issue and deliver at such office to such holder of Series B Preferred Stock a certificate or certificates for the number of shares of Common Stock to which
he shall be entitled. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Preferred Stock to be converted and delivery of the Conversion Notice to the
Corporation, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date to the extent permitted
by applicable law. 
  
 (iii) Conversion
Price. The number of shares into which one share of Series B Preferred Stock shall be convertible shall be determined by dividing the Series B Purchase Price by the then existing Conversion Price (as set forth below) (the “Conversion
Ratio”). The “Conversion Price” per share for the Series B Preferred Stock shall be equal to $2.80 per share. The Conversion Price shall be adjusted upon the occurrence of any event in paragraph (f) (v)-(ix).

  
 (iv) Mandatory Conversion. Subject to
the conditions set forth in this subpart (iv), the Corporation, at its option, may by delivery of written notice to a holder of Series B Preferred Stock convert all, or a portion, of the then outstanding Series B Preferred Stock held by such holder
into Common Stock, at the Conversion Ratio then in effect. The conversion shall be effective on the fifth day following the holder’s receipt of written notice from the Corporation. Notwithstanding the foregoing the Corporation shall not be
permitted to effect a mandatory conversion hereunder unless (i) as a result, the holder and its affiliates shall be holders of record of outstanding shares of Common Stock of no more than 9.99% of the total shares of Common Stock outstanding as of
such time, (ii) the Common Stock to be issued upon conversion of the Series B Preferred Stock shall be registered; and (iii) the closing price of the Common Stock for the 20 preceding trading days is equal to or greater than $3.75 per share (as
adjusted for any subdivisions or combinations of the outstanding Common Stock). For purposes of calculating the record ownership of the outstanding shares of Common Stock held of record by the holder and its affiliates, the records maintained by the
transfer agent and registrar for the Common Stock shall be the exclusive source considered for purposes of determining share ownership and the holder’s affiliates shall be deemed to consist exclusively of such parties identified to the
Corporation in writing from time to time. 
  
 (v)
Adjustment for Stock Splits and Combinations. If the Corporation shall at any time, or from time to time after the date shares of the Series B Preferred Stock are first issued (the “Original Issue Date”), effect a subdivision
of the outstanding Common Stock, the Conversion Price in effect immediately prior thereto shall be proportionately decreased, and conversely, if the Corporation shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph (f)(v) shall become effective at the close of business on the date the
subdivision or combination becomes effective. 
  
 (vi) Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time, or from time to time after the Original Issue Date, shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each 

  

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such event the Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed,
as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction: 
  
 the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and 
  
 the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter, the Conversion Price shall be adjusted pursuant to this paragraph (f)(vi) as of the time of actual payment of such
dividends or distributions. 
  
 (vii)
Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of such Series B Preferred Stock shall receive upon
conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had their Series B Preferred Stock been converted into Common Stock on the date of
such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during
such period under this paragraph (f) with respect to the rights of the holders of the Series B Preferred Stock. 
  
 (viii) Adjustment for Reclassification Exchange or Substitution. If the Common Stock issuable upon the conversion of the
Series B Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this paragraph (f)), then and in each such event the holder of each share of Series B Preferred Stock shall have the right thereafter
to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, by holders of the number of shares of Common Stock into which such shares of
Series B Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein. 
  
 (ix) Reorganization, Mergers, Consolidations or Sales of Assets. If at any time or from time to time
there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this paragraph (f)) or a merger or consolidation of the Corporation with or into
another corporation, 

  

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or the sale of all or substantially all of the Corporation’s properties and assets to any other person, then, as a part of such reorganization, merger,
consolidation or sale, provision shall be made so that the holders of the Series B Preferred Stock shall thereafter be entitled to receive upon conversion of such Series B Preferred Stock, the number of shares of stock or other securities or
property of the Corporation or of the successor corporation resulting from such merger or consolidation or sale, to which a holder of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger,
consolidation or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this paragraph (f) with respect to the rights of the holders of the Series B Preferred Stock after the reorganization, merger,
consolidation or sale to the end that the provisions of this paragraph (f) (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Series B Preferred Stock) shall be applicable after
that event as nearly equivalent as may be practicable. 
  
 (x) Certificate of Adjustment. In each case of an adjustment or readjustment of the Conversion Price or the securities issuable upon conversion of the Series B Preferred Stock, the Corporation shall compute such adjustment or
readjustment in accordance herewith and the Corporation’s Chief Financial Officer shall prepare and sign a certificate showing such adjustment or readjustment, and shall mail such certificate by first class mail, postage prepaid, to each
registered holder of the Series B Preferred Stock at the holder’s address as shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or
readjustment is based. 
  
 (xi) Notices of
Record Date. In the event of (A) any taking by the Corporation of a record of the holders of any class or series of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution or
(B) any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation or any transfer of all or substantially all of the assets of the Corporation to any other corporation, entity or
person, or any voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the Corporation shall mail to each holder of Series B Preferred Stock at least 10 days prior to the record date specified therein, a notice specifying
(1) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (2) the date on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective and (3) the time, if any is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares, of Common
Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up. 
  
 (xii) Fractional Shares. No fractional shares of
Common Stock shall be issued upon conversion of the Series B Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall round down to the nearest whole number. 
  
 (xiii) Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock, 

  

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One Million Seven Hundred Eighty-Five Thousand Seven Hundred Fourteen (1,785,714) shares of Common Stock, and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series B Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 
  
 (xiv) Notices. Any notice required by the provisions of this paragraph (f) to be given to the holders of shares of Series B
Preferred Stock shall be deemed given (A) if deposited in the United States mail, postage prepaid, or (B) if given by any other reliable or generally accepted means (including by facsimile or by a nationally recognized overnight courier service), in
each case addressed to each holder of record at his address (or facsimile number) appearing on the books of the Corporation. 
  
 (xv) Payment of Taxes. The Corporation will pay all transfer taxes and other governmental charges that may be imposed in respect of
the issue or delivery of shares of Common Stock upon conversion of shares of Series B Preferred Stock. 
  
 (xvi) No Dilution or Impairment. The Corporation shall not amend its Articles of Incorporation or participate in any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, without the approval of a majority of the then outstanding Series B Preferred Stock. 
  
 (g) No Re-issuance of Preferred Stock. Any shares of Series B Preferred Stock acquired by the Corporation by reason of purchase, conversion or
otherwise shall be canceled, retired and eliminated from the shares of Series B Preferred Stock that the Corporation shall be authorized to issue. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock
and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth in the Articles of Incorporation or in any certificate of Determination creating a series of Preferred Stock or any
similar stock or as otherwise required by law. 
  
 (h)
Severability. If any right, preference or limitation of the Series B Preferred Stock set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule, law or public policy, all other rights, preferences and
limitations set forth herein that can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall nevertheless remain in full force and effect, and no right, preference or limitation herein shall be deemed
dependent upon any other such right, preference or limitation unless so expressed herein. 
  
 3. The number of authorized shares of Preferred Stock of the Corporation is 2,000,000 and the number of shares of Series B Stock, none of which has been issued, is 55,000. 
  

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 Each of the undersigned declares under penalty of perjury that the matters set out in the foregoing
Certificate are true of his own knowledge. Executed at City of Industry, California, on this 23th day of May, 2005.

  

			
	
	 /s/ John Pan

	 Name:
	 	 John Pan

	 Title:
	 	 President and Secretary

  

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 ANNEX A 
  
 NOTICE OF CONVERSION 
  
 The undersigned hereby elects to convert shares of Series B Convertible Preferred Stock, no par value per share (the “Series A Preferred Stock”)
of Global ePoint, Inc., a Nevada corporation (the “Company”) into shares of common stock, $0.03 par value per share (the “Common Stock”), of the Company according to the conditions hereof, as of later of the date of the
Company’s receipt of this Notice, together with the certificate representing the shares of Series B Preferred Stock to be converted, or such later date written below. If Common Stock is to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect thereto and deliver such certificates and opinions as reasonably requested by the Company in accordance therewith. 
  
 By the delivery of this Notice of Conversion, the undersigned represents and
warrants to the Company that its ownership of the Common Stock does not exceed the amounts determined in accordance with Section 13(d) of the Exchange Act, specified under Section (f)(i) of the Certificate of Designations for the Series B Preferred
Stock. 
  
 The undersigned agrees to comply with the prospectus
delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock. 
  
 Conversion calculations: 
  
 Date to Effect Conversion:                               
                                        
                                        
                                        
                                     
  
 Number of shares of Preferred Stock to be Converted:                       
                                        
                                        
                                 
  
 Number of shares of Common Stock to be issued:                        
                                        
                                        
                                        

 
 Shares to be issued in the name of:                           
                                        
                                        
                                        
                          
  
 Holder:                                     
                                        
                                        
                                        
                                        
        
  
 Authorized Signature:                                  
                                        
                                        
                                        
                        
  
 Name:                                     
                                        
                                        
                                        
                                        
          
  
 Title:                                     
                                        
                                        
                                        
                                        
            
  
 Address:                                     
                                        
                                        
                                        
                                        
      
  
                                       
                                        
                                        
                                        
                                        
                   
  
                                       
                                        
                                        
                                        
                                        
                   
  

 -9-Subscription Agreement

 Exhibit 10.1 
  
 Global ePoint, Inc. 
  
 Shares of Series B Convertible Preferred Stock and Common Stock Warrants 
  
 SUBSCRIPTION AGREEMENT 
  
 May 20, 2005 
  
 M.A.G. Capital, LLC 
 Mercator Momentum Fund, LP 
 Mercator Momentum Fund III, LP 
 Monarch Pointe Fund, Ltd. 
 555 South Flower Street, Suite 4200 
 Los Angeles, California 90071 
  
 Ladies and Gentlemen: 
  
 Global ePoint, Inc., a Nevada corporation (the “Company”), hereby confirms its agreement with Mercator Momentum
Fund, LP, Mercator Momentum Fund III, LP, Monarch Pointe Fund, Ltd. (collectively, the “Purchasers”) and M.A.G. CAPITAL, LLC (“MAG”), as set forth below. 
  
 1. The Securities. Subject to the terms and conditions herein
contained, the Company shall issue and sell to the Purchasers and the Purchasers shall purchase from the Company, an aggregate of: (a) Fifteen Thousand (15,000) shares of its Series B Convertible Preferred Stock (the “Series B
Stock”), which shall be convertible into shares (the “Conversion Shares”) of the Company’s Common Stock (the “Common Stock”) in accordance with the formula set forth in the
Certificate of Designation further described below and (b) Two Hundred Sixty-Seven Thousand Eight Hundred Fifty-Seven (267,857) warrants, substantially in the form attached hereto at Exhibit A (the “Warrants”), to
acquire up to Two Hundred Sixty-Seven Thousand Eight Hundred Fifty-Seven (267,857) shares of Common Stock (the “Warrant Shares”). The rights, preferences and privileges of the Series B Stock are as set forth in the
Certificate of Designation of Series B Preferred Stock as filed with the Secretary of State of the State of Nevada (the “Certificate of Designation”) in the form attached hereto as Exhibit B. The number of Conversion
Shares and Warrant Shares that any Purchaser may acquire at any time are subject to limitation in the Certificate of Designation and in the Warrants, respectively, so that the aggregate number of shares of Common Stock of which such Purchaser and
all persons affiliated with such Purchaser have beneficial ownership (calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended) does not at any time exceed 9.99% of the Company’s then outstanding Common Stock.

  

 The Series B Stock and the Warrants sold pursuant to this Agreement are sometimes herein collectively
referred to as the “Securities.” This Agreement, the Certificate of Designation, Registration Rights Agreement and the Warrant Agreements are sometimes herein collectively referred to as the “Transaction
Documents.” 
  
 The Securities will be offered
and sold to the Purchasers without such offers and sales being registered under the Securities Act of 1933, as amended (together with the rules and regulations of the Securities and Exchange Commission (the “SEC”) promulgated
thereunder, the “Securities Act”), in reliance on exemptions therefrom. 
  
 In connection with the sale of the Securities, the Company has made available (including electronically via the SEC’s EDGAR system) to the Purchasers
its periodic and current reports, forms, schedules, proxy statements and other documents (including exhibits and all other information incorporated by reference) filed with the SEC under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) through the Closing Date. These reports, forms, schedules, statements, documents, filings and amendments, are collectively referred to as the “Disclosure Documents.” All references in
this Agreement to financial statements and schedules and other information which are “contained,” “included” or “stated” in the Disclosure Documents (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules, documents, exhibits and other information which is incorporated by reference in the Disclosure Documents. 
  

The offer and sale of the Series B Stock pursuant to this Agreement is part of an offering by the Company of up to 55,000 shares of Series B Stock. The
Purchasers acknowledge that the Company may be conducting additional sales of Series B Stock on the same terms and conditions set forth herein and nothing in the Transaction Documents shall restrict the Company’s right to do so. 
  
 2. Representations and Warranties of the Company. Except as set forth
on the Disclosure Schedule (the “Disclosure Schedule”) delivered by the Company to the Purchasers on the Closing Date (as defined in Section 3 below), the Company represents and warrants to and agrees with the Purchasers and
MAG as follows: 
  
 (a) The Disclosure Documents
as of the respective dates they were filed with the SEC did not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made,
not misleading. The Disclosure Documents and the documents incorporated or deemed to be incorporated by reference therein, at the time they were filed complied, at the time of filing, in all material respects with the requirements of the Securities
Act and/or the Exchange Act, as the case may be, as applicable. 
  
 (b) Schedule A attached hereto sets forth a complete list of the subsidiaries of the Company (the “Subsidiaries”). Each of the Company and its Subsidiaries has been duly incorporated and
each of the Company and the Subsidiaries is validly existing in good standing as a corporation under the laws of its jurisdiction of incorporation, with the requisite corporate power and authority to own its properties and conduct its business as
now conducted as 

  

 
described in the Disclosure Documents and is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the business, condition
(financial or other), properties, prospects or results of operations of the Company and the Subsidiaries, taken as a whole (any such event, a “Material Adverse Effect”); as of the Closing Date, the Company will have the
authorized, issued and outstanding capitalization set forth in on Schedule B attached hereto (the “Company Capitalization”); except as set forth in the Disclosure Documents or on Schedule A, the Company does not
have any subsidiaries or own directly or indirectly any of the capital stock or other equity or long-term debt securities of or have any equity interest in any other person; all of the outstanding shares of capital stock of the Company and the
Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights and are owned free and clear of all liens, encumbrances, equities, and restrictions on
transferability (other than those imposed by the Securities Act and the state securities or “Blue Sky” laws) or voting; except as set forth in the Disclosure Documents, all of the outstanding shares of capital stock of the Subsidiaries are
owned, directly or indirectly, by the Company; except as set forth on Schedule B or in the Disclosure Documents, no options, warrants or other rights to purchase from the Company or any Subsidiary, agreements or other obligations of the
Company or any Subsidiary to issue or other rights to convert any obligation into, or exchange any securities for, shares of capital stock of or ownership interests in the Company or any Subsidiary are outstanding; and except as set forth in the
Disclosure Documents or on Schedule C, there is no agreement, understanding or arrangement among the Company or any Subsidiary and each of their respective stockholders or any other person relating to the ownership, registration or
disposition of any capital stock of the Company or any Subsidiary or the election of directors of the Company or any Subsidiary or the governance of the Company’s or any Subsidiary’s affairs, and, if any, such agreements, understandings
and arrangements will not be breached or violated as a result of the execution and delivery of, or the consummation of the transactions contemplated by, the Transaction Documents. 
  
 (c) The Company has the requisite corporate power and authority to execute, deliver and perform its
obligations under the Transaction Documents. Each of the Transaction Documents has been duly and validly authorized by the Company and, when executed and delivered by the Company, will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms except as the enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating
to or affecting creditors’ rights generally or (B) general principles of equity and the discretion of the court before which any proceeding therefore may be brought (regardless of whether such enforcement is considered in a proceeding at law or
in equity) (collectively, the “Enforceability Exceptions”). 
  
 (d) The Series B Stock and the Warrants have been duly authorized and, when issued upon payment thereof in accordance with this Agreement,
will have been validly issued, fully paid and non-assessable. The Conversion Shares issuable have been duly authorized and validly reserved for issuance, and when issued upon conversion of the Series B Stock in accordance with the terms of the
Certificate of Designation, will have been validly 

 
issued, fully paid and non-assessable. The Warrant Shares have been duly authorized and validly reserved for issuance, and when issued upon exercise of the
Warrants in accordance with the terms thereof, will have been validly issued, fully paid and non-assessable. The Common Stock of the Company conforms to the description thereof contained in the Disclosure Documents. Except as set forth on
Schedule C, the stockholders of the Company have no preemptive or similar rights with respect to the Common Stock. 
  
 (e) No consent, approval, authorization, license, qualification, exemption or order of any court or governmental agency or body or third
party is required for the performance of the Transaction Documents by the Company or for the consummation by the Company of any of the transactions contemplated thereby, or the application of the proceeds of the issuance of the Securities as
described in this Agreement, except for such consents, approvals, authorizations, licenses, qualifications, exemptions or orders (i) as have been obtained on or prior to the Closing Date, (ii) as are not required to be obtained on or prior to the
Closing Date that will be obtained when required, or (iii) the failure to obtain which would not, individually or in the aggregate, have a Material Adverse Effect. 
  
 (f) Except as set forth on Schedule D, none of the Company or the Subsidiaries is (i) in material
violation of its articles of incorporation or bylaws (or similar organizational document), (ii) in breach or violation of any statute, judgment, decree, order, rule or regulation applicable to it or any of its properties or assets, which breach or
violation would, individually or in the aggregate, have a Material Adverse Effect, or (iii) except as described in the Disclosure Documents, in default (nor has any event occurred which with notice or passage of time, or both, would constitute a
default) in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate or agreement
or instrument to which it is a party or to which it is subject, which default would, individually or in the aggregate, have a Material Adverse Effect. 
  
 (g) The execution, delivery and performance by the Company of the Transaction Documents and the consummation by the Company of the
transactions contemplated thereby and the fulfillment of the terms thereof will not (a) violate, conflict with or constitute or result in a breach of or a default under (or an event that, with notice or lapse of time, or both, would constitute a
breach of or a default under) any of (i) the terms or provisions of any contract, indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate or agreement or instrument to which any of the
Company or the Subsidiaries is a party or to which any of their respective properties or assets are subject, (ii) the articles of incorporation or bylaws of any of the Company or the Subsidiaries (or similar organizational document) or (iii) any
statute, judgment, decree, order, rule or regulation of any court or governmental agency or other body applicable to the Company or the Subsidiaries or any of their respective properties or assets or (b) result in the imposition of any lien upon or
with respect to any of the properties or assets now owned or hereafter acquired by the Company or any of the Subsidiaries; which violation, conflict, breach, default or lien would, individually or in the aggregate, have a Material Adverse Effect.

  

 (h) The audited consolidated financial statements included in the Disclosure Documents
present fairly the consolidated financial position, results of operations, cash flows and changes in shareholders’ equity of the entities, at the dates and for the periods to which they relate and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis; the interim un-audited consolidated financial statements included in the Disclosure Documents present fairly the consolidated financial position, results of operations and cash flows of
the entities, at the dates and for the periods to which they relate subject to year-end audit adjustments and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis with the audited consolidated
financial statements included therein; the selected financial and statistical data included in the Disclosure Documents present fairly the information shown therein and have been prepared and compiled on a basis consistent with the audited financial
statements included therein, except as otherwise stated therein; and each of the auditors previously engaged by the Company or to be engaged in the future by the Company is an independent certified public accountant as required by the Securities Act
for an offering registered thereunder. 
  
 (i)
Except as described in the Disclosure Documents, there is not pending or, to the knowledge of the Company, threatened any action, suit, proceeding, inquiry or investigation, governmental or otherwise, to which any of the Company or the Subsidiaries
is a party, or to which their respective properties or assets are subject, before or brought by any court, arbitrator or governmental agency or body, that, if determined adversely to the Company or any such Subsidiary, would, individually or in the
aggregate, have a Material Adverse Effect or that seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Securities to be sold hereunder or the application of the proceeds therefrom or the other
transactions described in the Transaction Documents. 
  
 (j) The Company and the Subsidiaries own or possess adequate licenses or other rights to use all patents, trademarks, service marks, trade names, copyrights and know-how that are necessary to conduct their businesses as described in the
Disclosure Documents. None of the Company or the Subsidiaries has received any written notice of infringement of (or knows of any such infringement of) asserted rights of others with respect to any patents, trademarks, service marks, trade names,
copyrights or know-how that, if such assertion of infringement or conflict were sustained, would, individually or in the aggregate, have a Material Adverse Effect. 
  
 (k) Each of the Company and the Subsidiaries possesses all licenses, permits, certificates, consents,
orders, approvals and other authorizations from, and has made all declarations and filings with, all federal, state, local and other governmental authorities, all self-regulatory organizations and all courts and other tribunals presently required or
necessary to own or lease, as the case may be, and to operate its respective properties and to carry on its respective businesses as now or proposed to be conducted as set forth in the Disclosure Documents (“Permits”), except
where the failure to obtain such Permits would not, individually or in the aggregate, have a Material Adverse Effect and none of the Company or the Subsidiaries has received any notice of any proceeding relating to revocation or modification of any
such Permit, except as described in the Disclosure Documents and except where such revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect. 
  

 (l) Subsequent to the respective dates as of which information is given in the Disclosure
Documents or as set forth on Schedule C, and except as described therein, (i) the Company and the Subsidiaries have not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions not in
the ordinary course of business or (ii) the Company and the Subsidiaries have not purchased any of their respective outstanding capital stock, or declared, paid or otherwise made any dividend or distribution of any kind on any of their respective
capital stock or otherwise (other than, with respect to any of such Subsidiaries, the purchase of capital stock by the Company), (iii) there has not been any material increase in the long-term indebtedness of the Company or any of the Subsidiaries,
(iv) there has not occurred any event or condition, individually or in the aggregate, that has a Material Adverse Effect, and (v) the Company and the Subsidiaries have not sustained any material loss or interference with respect to their respective
businesses or properties from fire, flood, hurricane, earthquake, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding. 
  
 (m) There are no material legal or governmental proceedings
nor are there any material contracts or other documents required by the Securities Act to be described in a prospectus that are not described in the Disclosure Documents or as set forth on Schedule C. Except as described in the Disclosure
Documents, none of the Company or the Subsidiaries is in default under any of the contracts described in the Disclosure Documents, has received a notice or claim of any such default or has knowledge of any breach of such contracts by the other party
or parties thereto, except for such defaults or breaches as would not, individually or in the aggregate, have a Material Adverse Effect. 
  
 (n) Each of the Company and the Subsidiaries has good and marketable title to all real property described in the Disclosure Documents as
being owned by it and good and marketable title to the leasehold estate in the real property described therein as being leased by it, free and clear of all liens, charges, encumbrances or restrictions, except, in each case, as described in the
Disclosure Documents or such as would not, individually or in the aggregate, have a Material Adverse Effect. All material leases, contracts and agreements to which the Company or any of the Subsidiaries is a party or by which any of them is bound
are valid and enforceable against the Company or any such Subsidiary, are, to the knowledge of the Company, valid and enforceable against the other party or parties thereto and are in full force and effect. 
  
 (o) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns, except where the failure to so file such returns would not, individually or in the aggregate, have a Material Adverse Effect, and has paid all taxes shown as due thereon; and
other than tax deficiencies which the Company or any Subsidiary is contesting in good faith and for which adequate reserves have been provided in accordance with generally accepted accounting principles, there is no tax deficiency that has been
asserted against the Company or any Subsidiary that would, individually or in the aggregate, have a Material Adverse Effect. 
  
 (p) None of the Company or the Subsidiaries is, or immediately after the Closing Date will be, required to register as an “investment
company” or a company 

  

 
“controlled by” an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “Investment
Company Act”). 
  
 (q) None of the
Company or the Subsidiaries or, to their knowledge, any of such entities’ directors, officers, employees, agents or controlling persons, has taken, directly or indirectly, any action designed, or that might reasonably be expected, to cause or
result in the stabilization or manipulation of the price of the Common Stock. 
  
 (r) None of the Company, the Subsidiaries or, to their knowledge, any of their respective Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act) directly, or through any agent, engaged in any
form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Securities or engaged in any other conduct that would cause such offering to be constitute
a public offering within the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the representations and warranties of the Purchasers in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the
Securities to the Purchasers in the manner contemplated by this Agreement to register any of the Securities under the Securities Act. 
  
 (s) There is no strike, labor dispute, slowdown or work stoppage with the employees of the Company or any of the Subsidiaries which is
pending or, to the knowledge of the Company or any of the Subsidiaries, threatened. 
  
 (t) Each of the Company and the Subsidiaries carries general liability insurance coverage comparable to other companies of its size and
similar business. 
  
 (u) Each of the Company and
the Subsidiaries maintains internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management’s authorization, (B) transactions are recorded as necessary to permit preparation of its
financial statements and to maintain accountability for its assets, and (C) access to its material assets is permitted only in accordance with management’s authorization and (D) the values and amounts reported for its material assets are
compared with its existing assets at reasonable intervals. 
  
 (v) Except as set forth in Section 3(c) or on Schedule C, the Company does not know of any claims for services, either in the nature of a finder’s fee or financial advisory fee, with respect to the
offering of the Securities and the transactions contemplated by the Transaction Documents. 
  
 (w) The Common Stock is traded on the NASDAQ Small Cap (the “NASDAQ Small Cap”). Except as described in the
Disclosure Documents, the Company currently is not in violation of, and the consummation of the transactions contemplated by the Transaction Documents will not violate, any rule of the National Association of Securities Dealers. 
  
 (x) The Company is eligible to use SB-2 for the resale of
the Conversion Shares and the Warrant Shares by the Purchaser or their transferees and the Warrant 

  

 
Shares by the Purchasers, MAG or their transferees. The Company has no reason to believe that it is not capable of satisfying the registration or
qualification requirements (or an exemption therefrom) necessary to permit the resale of the Conversion Shares and the Warrant Shares under the securities or “blue sky” laws of any jurisdiction within the United States. 
  
 (y) Set forth on Schedule E is the Company’s
intended use of the proceeds from this transaction. 
  
 (z) Except as set forth on Schedule F, none of the officers or directors of the Company (i) has been convicted of any crime (other than traffic violations or misdemeanors not involving fraud) or is currently under investigation or
indictment for any such crime, (ii) has been found by a court or governmental agency to have violated any securities or commodities law or to have committed fraud or is currently a party to any legal proceeding in which either is alleged, (iii) has
been the subject of a proceeding under the bankruptcy laws or any similar state laws, or (iv) has been an officer, director, general partner, or managing member of an entity which has been the subject of such a proceeding. 
  
 3. Purchase, Sale and Delivery of the Securities. 
  
 (a) Issuance of Series B Stock and Warrants. On the
basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each Purchaser, and each Purchaser agrees to purchase from the
Company, the shares of Series B Stock, at the purchase price of $100.00 per share (“Purchase Price”), in the amount attributed to the Purchaser on the signature page hereto. In connection with the purchase and sale of Series
B Stock, for no additional consideration, the Company shall issue to each Purchaser and MAG Warrants, each warrant entitling the holder to purchase one share of Common Stock, subject to adjustment as set forth in the form of Warrant attached hereto
as Exhibit A, in the amounts attributed to each Purchaser and MAG on the signature page hereto. 
  
 (b) Closing. The closing of the transactions described herein (the “Closing”) shall take place at a time
and on a date (the “Closing Date”) to be specified by the parties, which will be no later than 12:00 p.m. (Pacific time) on May 20, 2005. On the Closing Date, the Company shall deliver (a) certificates in definitive form for
the Series B Stock in the names and amounts set forth on the signature page hereto, (b) Warrants, in the names and amounts set forth on the signature page hereto, (c) the Subscription Agreement, Certificate of Designation and Registration Rights
Agreement, each duly executed on behalf of the Company, and (d) the Opinion of Counsel in the form attached hereto as Exhibit C. On the Closing Date, the Purchasers shall deliver (i) the Purchase Price of $100.00 per share of Series B Stock
by wire transfer of immediately available funds to an account designated by the Company, and (ii) the Subscription Agreement and Registration Rights Agreement, each duly executed on behalf of the Purchasers and MAG. The Closing will occur when all
documents and instruments necessary or appropriate to effect the transactions contemplated herein are exchanged by the parties and all actions taken at the Closing will be deemed to be taken simultaneously. 
  

 (c) Due Diligence Fees and Expenses. The Company shall reimburse (i) MAG for its
due diligence in the amount of three percent (3%) of the Purchase Price paid by the Purchaser (“Due Diligence Fees”), and (ii) MAG for its legal fees in the amount of $10,000. 
  
 4. Certain Covenants of the Company. The Company covenants and agrees
with each Purchaser as follows: 
  
 (a) None of
the Company or any of its Affiliates will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any “security” (as defined in the Securities Act) which could be integrated with the sale of the Securities in a
manner which would require the registration under the Securities Act of the Securities. 
  
 (b) The Company will not become, at any time prior to the expiration of three years after the Closing Date, an open-end investment
company, unit investment trust, closed-end investment company or face-amount certificate company that is or is required to be registered under the Investment Company Act. 
  
 (c) None of the proceeds of the Series B Stock will be used to reduce or retire any insider note or
convertible debt held by an officer or director of the Company. 
  
 (d) Subject to Section 8 of this Agreement, the Conversion Shares and the Warrant Shares will be listed for trading on the NASDAQ Small Cap, or such market on which the Company’s shares are subsequently listed or
traded, immediately following the effectiveness of the Registration Statement. 
  
 (e) The Company will use best efforts to do and perform all things required to be done and performed by it under this Agreement and the
other Transaction Documents and to satisfy all conditions precedent on its part to the obligations of the Purchasers to purchase and accept delivery of the Securities. 
  
 5. Conditions of the Purchasers’ Obligations. The obligation of each Purchaser to purchase and pay for the
Securities is subject to the following conditions unless waived in writing by the Purchaser: 
  
 (a) The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects
(other than representations and warranties with a Material Adverse Effect qualifier, which shall be true and correct as written) on and as of the Closing Date; the Company shall have complied in all material respects with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date. 
  
 (b) None of the issuance and sale of the Securities pursuant to this Agreement or any of the transactions contemplated by any of the other
Transaction Documents shall be enjoined (temporarily or permanently) and no restraining order or other injunctive order shall have been issued in respect thereof; and there shall not have been any legal action, order, decree or other administrative
proceeding instituted or, to the Company’s knowledge, threatened against the Company or against any Purchaser relating to the issuance of the Securities or any 

  

 
Purchaser’s activities in connection therewith or any other transactions contemplated by this Agreement, the other Transaction Documents or the
Disclosure Documents. 
  
 (c) The Purchasers
shall have received certificates, dated the Closing Date and signed by the Chief Executive Officer and the Chief Financial Officer of the Company, to the effect of paragraphs 5(a) and (b) have been duly satisfied. 
  
 (d) The Purchasers shall have received an opinion of Preston
Gates & Ellis LLP with respect to the authorization of the Series B Stock, the Conversion Shares, the Warrants and the Warrant Shares and other customary matters in the form attached hereto as Exhibit C. 
  
 6. Representations and Warranties of the Purchasers. 
  
 (a) Each Purchaser and MAG represents and warrants to the
Company that the Securities to be acquired by it hereunder (including the Conversion Shares and the Warrant Shares that it may acquire upon conversion or exercise thereof, as the case may be) are being acquired for its own account for investment and
with no intention of distributing or reselling such Securities (including the Conversion Shares and the Warrant Shares that it may acquire upon conversion or exercise thereof, as the case may be) or any part thereof or interest therein in any
transaction which would be in violation of the securities laws of the United States of America or any State. Nothing in this Agreement, however, shall prejudice or otherwise limit a Purchaser’s right to sell or otherwise dispose of all or any
part of such Conversion Shares or Warrant Shares under an effective registration statement under the Securities Act and in compliance with applicable state securities laws or under an exemption from such registration. By executing this Agreement,
each Purchaser further represents that such Purchaser does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to any Person with respect to any of the Securities. 
  
 (b) Each Purchaser and MAG understands that the Securities
(including the Conversion Shares and the Warrant Shares that it may acquire upon conversion or exercise thereof, as the case may be) have not been registered under the Securities Act and may not be offered, resold, pledged or otherwise transferred
except (a) pursuant to an exemption from registration under the Securities Act (and, if requested by the Company, based upon an opinion of counsel acceptable to the Company) or pursuant to an effective registration statement under the Securities Act
and (b) in accordance with all applicable securities laws of the states of the United States and other jurisdictions. 
  
 Each Purchaser and MAG agrees to the imprinting, so long as appropriate, of the following legend on the Securities (including the Conversion Shares and
the Warrant Shares that it may acquire upon conversion or exercise thereof, as the case may be): 
  
 The shares of stock evidenced by this certificate have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered,
sold, pledged or otherwise transferred (“transferred”) in the absence of such registration or an applicable exemption therefrom. In the absence of such 

  

 
registration, such shares may not be transferred unless, if the Company requests, the Company has received a written opinion from counsel in form and
substance satisfactory to the Company stating that such transfer is being made in compliance with all applicable federal and state securities laws. 
  
 The legend set forth above may be removed if and when the Conversion Shares or the Warrant Shares, as the case may be, are disposed of pursuant to an
effective registration statement under the Securities Act or in the opinion of counsel to the Company experienced in the area of United States Federal securities laws such legends are no longer required under applicable requirements of the
Securities Act. The Series B Stock, the Warrants, the Conversion Shares and the Warrant Shares shall also bear any other legends required by applicable Federal or state securities laws, which legends may be removed when in the opinion of counsel to
the Company experienced in the applicable securities laws, the same are no longer required under the applicable requirements of such securities laws. The Company agrees that it will provide each Purchaser, upon request, with a substitute
certificate, not bearing such legend at such time as such legend is no longer applicable. Each Purchaser agrees that, in connection with any transfer of the Conversion Shares or the Warrant Shares by it pursuant to an effective registration
statement under the Securities Act, the Purchaser will comply with all prospectus delivery requirements of the Securities Act. The Company makes no representation, warranty or agreement as to the availability of any exemption from registration under
the Securities Act with respect to any resale of the Series B Stock, the Warrants, the Conversion Shares or the Warrant Shares. 
  
 (c) Each Purchaser and MAG is an “accredited investor” within the meaning of Rule 501(a) of Regulation D under the Securities
Act. Neither Purchaser nor MAG learned of the opportunity to acquire Securities or any other security issuable by the Company through any form of general advertising or public solicitation. 
  
 (d) Each Purchaser and MAG represents and warrants to the
Company that it has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, having been represented by counsel, and has
so evaluated the merits and risks of such investment and is able to bear the economic risk of such investment and, at the present time, is able to afford a complete loss of such investment. 
  
 (e) Purchaser represents and warrants to the Company that
(i) the purchase of the Securities to be purchased by it has been duly and properly authorized and this Agreement has been duly executed and delivered by it or on its behalf and constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally
and to general principles of equity; (ii) the purchase of the Securities to be purchased by it does not conflict with or violate its charter, by-laws or any law, regulation or court order applicable to it; and (iii) the purchase of the Securities to
be purchased by it does not impose any penalty or other onerous condition on the Purchaser under or pursuant to any applicable law or governmental regulation. 
  

 (f) Each Purchaser and MAG represents and warrants to the Company that neither it nor any
of its directors, officers, employees, agents, partners, members, controlling persons or shareholders holding 5% or more of the Common Stock outstanding on the Closing Date, has taken or will take, directly or indirectly, any actions designed, or
might reasonably be expected to cause or result in the stabilization or manipulation of the price of the Common Stock. 
  
 (g) Each Purchaser and MAG acknowledges it or its representatives have reviewed the Disclosure Documents and further acknowledges that it
or its representatives have 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 Securities and
the merits and risks of investing in the Securities; (ii) access to information about the Company and the Company’s financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate
its investment in the Securities; and (iii) the opportunity to obtain such additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy and completeness of the
information contained in the Disclosure Documents. 
  
 (h) Each Purchaser and MAG represents and warrants to the Company that it has based its investment decision solely upon the information contained in the Disclosure Documents and such other information as may have been provided to it or its
representatives by the Company in response to their inquiries, and has not based its investment decision on any research or other report regarding the Company prepared by any third party (“Third Party Reports”). Purchaser
understands and acknowledges that (i) the Company does not endorse any Third Party Reports and (ii) its actual results may differ materially from those projected in any Third Party Report. 
  
 (i) Each Purchaser and MAG understands and acknowledges that
(i) any forward-looking information included in the Disclosure Documents supplied to Purchaser by the Company or its management is subject to risks and uncertainties, including those risks and uncertainties set forth in the Disclosure Documents; and
(ii) the Company’s actual results may differ materially from those projected by the Company or its management in such forward-looking information. 
  
 (j) Each Purchaser and MAG understands and acknowledges that (i) the Securities are offered and sold without registration under the
Securities Act in a private placement that is exempt from the registration provisions of the Securities Act and (ii) the availability of such exemption depends in part on, and that the Company and its counsel will rely upon, the accuracy and
truthfulness of the foregoing representations and the Purchaser hereby consents to such reliance. 
  
 (k) Covenants of Purchasers Not to Short Stock. Purchasers, on behalf of themselves and their affiliates, hereby covenants and
agree not to, directly or indirectly, offer to “short sell”, contract to “short sell” or otherwise “short sell” the securities of the Company, including, without limitation, shares of Common Stock that will be received
as a result of the conversion of the Series B Stock or the exercise of the Warrants. 
  

 7. Termination. 
  
 (a) This Agreement may be terminated in the sole discretion of the Company by notice to each Purchaser if at
the Closing Date: 
  
 (i) the representations and
warranties made by any Purchaser in Section 6 are not true and correct in all material respects; or 
  
 (ii) as to the Company, the sale of the Securities hereunder (i) is prohibited or enjoined by any applicable law or governmental
regulation or (ii) subjects the Company to any penalty, or in its reasonable judgment, other onerous condition under or pursuant to any applicable law or government regulation that would materially reduce the benefits to the Company of the sale of
the Securities to such Purchaser, so long as such regulation, law or onerous condition was not in effect in such form at the date of this Agreement. 
  
 (b) This Agreement may be terminated by any Purchaser or MAG as to such party only by notice to the Company given in the event that the
Company shall have failed, refused or been unable to satisfy all material conditions on its part to be performed or satisfied hereunder on or prior to the Closing Date, or if after the execution and delivery of this Agreement and immediately prior
to the Closing Date, trading in securities of the Company on the NASDAQ Small Cap shall have been suspended. 
  
 (c) This Agreement may be terminated by mutual written consent of all parties. 
  
 8. Registration. Within 45 days after the Closing Date (the
“Filing Due Date”), the Company shall prepare and file with the SEC a Registration Statement covering the resale of the maximum number of Conversion Shares issuable upon conversion of the Series B Stock and the Warrant Shares
(collectively, the “Registrable Securities”), as set forth in the Registration Rights Agreement attached hereto as Exhibit D. Within 90 days after filing the Registration Statement (the “Effective Due
Date”), such Registration Statement must be declared effective by the SEC. Notwithstanding the forgoing, in the event that the Company enters into an agreement to acquire another business (“Target”) within the first two weeks
following the Closing Date and is unable to obtain audited financial statements from a Target for inclusion in the Registration Statement on or before 40 days after the Closing Date, then the Filing Due Date shall be 75 days after the Closing Date
and the Effective Due Date shall be 100 days after the Registration Statement is filed with the SEC. 
  
 9. Event of Default. If an Event of Default (as defined below) occurs, the Purchasers and MAG shall have the right to exercise any or all of the
rights given to the Purchasers and MAG relating to the Securities, as further described in the Certificate of Designation. 
  
 The Purchaser and MAG need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Purchaser and
MAG may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration 

  

 
may be rescinded and annulled by Purchaser and MAG at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event
of Default or impair any right consequent thereon. 
  
 An
“Event of Default” shall include (a) the commencement by the Company of a voluntary case or proceeding under the bankruptcy laws, (b) the breach by Company of any of the covenants or representations made herein, or (c) the
Company’s failure to: (i) discharge or stay a bankruptcy proceeding within 60 days of such action being taken against the Company, (ii) file the Registration Statement with the SEC on or before the Filing Due Date, (iii) have the Registration
Statement deemed effective by the SEC on or before the Filing Due Date; (iv) maintain trading of the Company’s Common Stock on the NASDAQ Small Cap except for any periods when the stock is traded on the OTC BB, the NASDAQ National Stock Market,
the AMEX or the NYSE, (v) pay the expenses and Due Diligence Fees referred to in Section 3(c) within three (3) days after the Closing; or (vi) deliver to Purchasers, or Purchasers’ broker, as directed, Common Stock that Purchasers have
converted within three (3) business days of such conversions. 
  
 IN THE EVENT
THAT THE COMPANY FAILS TO FILE THE REGISTRATION STATEMENT WITH THE SEC ON OR BEFORE THE FILING DUE DATE OR THE REGISTRATION STATEMENT IS NOT DEEMED EFFECTIVE BY THE SEC ON OR BEFORE THE EFFECTIVE DUE DATE, AS A REMEDY FOR SUCH AN EVENT OF DEFAULT,
COMPANY SHALL PAY TO PURCHASERS, IN CASH, $0.066 PER SHARE PURCHASED HEREUNDER FOR EACH DAY THAT THE REGISTRATION STATEMENT FILING IS DELAYED. PURCHASERS AND COMPANY ACKNOWLEDGE AND AGREE THAT THEY HAVE MUTUALLY DISCUSSED THE IMPRACTICALITY AND
EXTREME DIFFICULTY OF FIXING THE ACTUAL DAMAGES PURCHASER WOULD INCUR IN THE CASE OF SUCH AN EVENT OF DEFAULT, AND THAT AS A RESULT OF SUCH DISCUSSION THE PARTIES AGREE THAT $0.066 PER SHARE FOR EACH DAY THAT THE REGISTRATION STATEMENT FILING IS
DELAYED REPRESENTS A REASONABLE ESTIMATE OF THE ACTUAL DAMAGES WHICH PURCHASERS WOULD INCUR IN THE CASE OF SUCH AN EVENT OF DEFAULT. PURCHASERS AND COMPANY SPECIFICALLY AND EXPRESSLY AGREE TO ABIDE BY THE TERMS AND PROVISIONS OF THIS PARAGRAPH
CONCERNING LIQUIDATED DAMAGES. 
  
 10. Notices. All
communications hereunder shall be in writing and shall be hand delivered, mailed by first-class mail, couriered by next-day air courier or by facsimile and confirmed in writing (i) if to the Company, at the addresses set forth below, or (ii) if to
Purchaser or MAG, to the address set forth for such party on the signature page hereto. 
  
 Global ePoint, Inc. 
 339 South Cheryl Lane 
 City of Industry, CA 91789 
 Attention: Toresa Lou 
 Telephone No.: (909) 869-1688 
 Facsimile No.: (909) 598-2936 

 with a copy to: 
  
 Preston, Gates & Ellis LLP 
 1900 Main Street, Suite 600 
 Irvine, CA 92614-7319 
 Attn: Daniel K. Donahue 
 Telephone No.: (949) 253-0900 
 Facsimile No.: (949) 253-0902 
  
 All such notices and communications shall be deemed to have been duly given: (i) when delivered by hand, if personally delivered; (ii) five business days after being deposited in the mail, postage prepaid, if mailed certified mail, return
receipt requested; (iii) one business day after being timely delivered to a next-day air courier guaranteeing overnight delivery; (iv) the date of transmission if sent via facsimile to the facsimile number as set forth in this Section or the
signature page hereof prior to 3:00 p.m. on a business day, or (v) the business day following the date of transmission if sent via facsimile at a facsimile number set forth in this Section or on the signature page hereof after 3:00 p.m. or on a date
that is not a business day. Change of a party’s address or facsimile number may be designated hereunder by giving notice to all of the other parties hereto in accordance with this Section. 
  
 11. Survival Clause. The respective representations, warranties,
agreements and covenants of the Company and the Purchaser set forth in this Agreement shall survive until the first anniversary of the Closing. 
  
 12. Fees and Expenses. Within three (3) days of Closing, the Company agrees to pay to MAG the legal expenses incurred in connection with the
preparation and negotiation of the Transaction Documents up to $10,000. Any amounts paid by Company upon execution of the Term Sheet will be credited against this amount. 
  
 13. Legal Fees. If any action at law or in equity is necessary to enforce or interpret the terms of the Transaction
Documents, the prevailing party or parties shall be entitled to receive from the other party or parties reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which the prevailing party or parties may
be entitled. 
  
 14. 8-K Filing and Press Releases. The
Company shall file a Form 8-K with the SEC within 5 trading days after the Closing Date setting forth the general terms of the transaction. Neither party shall issue any press release relating to this transaction without the prior written consent of
the other party, which consent shall not be unreasonably withheld or delayed. 
  
 15. Successors. This Agreement shall inure to the benefit of and be binding upon Purchasers, MAG and the Company and their respective successors and legal representatives, and nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained; this Agreement and all conditions 

 
and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person. Neither the
Company nor any Purchaser may assign this Agreement or any rights or obligation hereunder without the prior written consent of the other party. 
  
 16. No Waiver; Modifications in Writing. No failure or delay on the part of the Company, MAG or any Purchaser in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided
for herein are cumulative and are not exclusive of any remedies that may be available to the Company, MAG or any Purchaser at law or in equity or otherwise. No waiver of or consent to any departure by the Company, MAG or any Purchaser from any
provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof, provided that notice of any such waiver shall be given to each party hereto as set forth below. Except as otherwise provided
herein, no amendment, modification or termination of any provision of this Agreement shall be effective unless signed in writing by or on behalf of each of the Company, MAG and the Purchasers. Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Company, MAG or any Purchaser from the terms of any provision of this Agreement shall be effective only in the specific instance and
for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or
other circumstances. 
  
 17. Entire Agreement. This
Agreement, together with Transaction Documents, constitutes the entire agreement among the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, among the parties hereto with respect to the subject
matter hereof and thereof. 
  
 18. 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. 
  
 19. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT,
AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR FEDERAL COURTS LOCATED IN THE
CITY OF LOS ANGELES, CALIFORNIA AND HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE. 

 20. Counterparts. This Agreement may be executed in two or more counterparts and may be delivered
by facsimile transmission, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 
  
 21. Mandatory Conversion. The Series B Stock shall be subject to mandatory conversion on the terms and conditions set forth in the Certificate of
Designation.  
  
 If the foregoing correctly sets forth our
understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this Agreement shall constitute a binding agreement among the Company, the Purchaser and MAG. 
  

			
	 Very truly yours,

	
	 Global ePoint, Inc.

		
	 By:
	 	 /s/ Toresa Lou

	 Name:
	 	 Toresa Lou

	 Title:
	 	 Chief Executive Officer

 ACCEPTED AND AGREED: 
  

					
	M.A.G. CAPITAL, LLC
		
	 By:
	 	 /s/ David Firestone

	 	 	 Name:
	 	 David Firestone

	 	 	 Title:
	 	 Managing Member

  

									
	 	 	 	 	 Purchase Price
	 	$-0-
				
	 	 	 	 	 Number of Shares of Series B Stock:
	 	-0-
				
	 	 	 	 	 Number of Warrants:
	 	53,571
				
	 	 	 	 	 Address for Notice:
	 	 
			
	 	 	 	 	 M.A.G. Capital, LLC
 555 South Flower Street,
Suite 4200
 Los Angeles, California 90071
 Facsimile No.: (213)
533-8285
 Attn: David Firestone

			
	 	 	With a copy to:	 	 Sheppard, Mullin, Richter & Hampton LLP
 333 South Hope Street, 48th Floor
 Los Angeles, California 90071
 Facsimile: (213) 620-1398
 David C. Ulich, Esq.

 ACCEPTED AND AGREED: 
  

					
	MERCATOR MOMENTUM FUND, LP
		
	 By:
	 	 /s/ David Firestone

	 	 	 Name:
	 	 David Firestone

	 	 	 Title:
	 	 Managing Member

  

									
	 	 	 	 	 Purchase Price
	 	$380,000
				
	 	 	 	 	 Number of Shares of Series B Stock:
	 	3,800
				
	 	 	 	 	 Number of Warrants:
	 	54,286
				
	 	 	 	 	 Address for Notice:
	 	 
			
	 	 	 	 	 M.A.G. Capital, LLC
 555 South Flower Street,
Suite 4200
 Los Angeles, California 90071
 Facsimile No.: (213)
533-8285
 Attn: David Firestone

			
	 	 	With a copy to:	 	 Sheppard, Mullin, Richter & Hampton LLP
 333 South Hope Street, 48th Floor
 Los Angeles, California 90071
 Facsimile: (213) 620-1398
 David C. Ulich, Esq.

 ACCEPTED AND AGREED: 
  

					
	MERCATOR MOMENTUM FUND III, LP
		
	 By:
	 	 /s/ David Firestone

	 	 	 Name:
	 	 David Firestone

	 	 	 Title:
	 	 Managing Member

  

									
	 	 	 	 	 Purchase Price
	 	$240,000
				
	 	 	 	 	 Number of Shares of Series B Stock:
	 	2,400
				
	 	 	 	 	 Number of Warrants:
	 	34,286
				
	 	 	 	 	 Address for Notice:
	 	 
			
	 	 	 	 	 M.A.G. Capital, LLC
 555 South Flower Street,
Suite 4200
 Los Angeles, California 90071
 Facsimile No.: (213)
533-8285
 Attn: David Firestone

			
	 	 	With a copy to:	 	 Sheppard, Mullin, Richter & Hampton LLP
 333 South Hope Street, 48th Floor
 Los Angeles, California 90071
 Facsimile: (213) 620-1398
 David C. Ulich, Esq.

 ACCEPTED AND AGREED: 
  

					
	MONARCH POINTE FUND, LTD.
		
	 By:
	 	 /s/ David Firestone

	 	 	 Name:
	 	 David Firestone

	 	 	 Title:
	 	 Managing Member

  

									
	 	 	 	 	 Purchase Price
	 	$880,000
				
	 	 	 	 	 Number of Shares of Series B Stock:
	 	8,800
				
	 	 	 	 	 Number of Warrants:
	 	125,714
				
	 	 	 	 	 Address for Notice:
	 	 
			
	 	 	 	 	 M.A.G. Capital, LLC
 555 South Flower Street,
Suite 4200
 Los Angeles, California 90071
 Facsimile No.: (213)
533-8285
 Attn: David Firestone

			
	 	 	With a copy to:	 	 Sheppard, Mullin, Richter & Hampton LLP
 333 South Hope Street, 48th Floor
 Los Angeles, California 90071
 Facsimile: (213) 620-1398
 David C. Ulich, Esq.

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