Document:

ex1035.htm

Exhibit 10.35

 

	
  
	
SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of September 11, 2009, between NewCardio, Inc., a Delaware corporation (the “Company”), and each purchaser identified
on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires
to purchase from the Company, 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 each Purchaser agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

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

 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

“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 405 under the Securities Act.

 

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

 

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

 

“Buy-In” shall have the meaning ascribed to such term in Section 4.10(c).

 

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

“Closing Date” means September 15, 2009 (with respect to each Purchaser who shall have executed this Agreement before September 15, 2009) or such other date as the Company, Vision Opportunity Master Fund Ltd. (“Vision”) and the Placement Agent shall
agree to in writing, but in no event later than September 18, 2009 (or four business days after the Closing, whichever is earlier).

 

 

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“Closing Escrow Agreement” means that certain Closing Escrow Agreement dated as of the date hereof, by and among the Company, the Placement Agent, Vision and Company Counsel, as escrow agent.

 

 “Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

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

 

“Company Counsel” means Sichenzia Ross Friedman Ference LLP, with offices located at 61 Broadway, 32nd Floor, New York, NY 10006.

 

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.

 

 “Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“FDA” shall have the meaning ascribed to such term in Section 3.1(gg).

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(z).

 

“Intellectual Property” shall have the meaning ascribed to such term in Section 3.1(o).

 

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Market Price” shall mean the VWAP for the Company’s Common Stock for the five (5) Trading Days immediately preceding the date as of which Market Price is to be determined, where “VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a
Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or
(d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

 

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“Material Adverse Effect” shall have the meaning ascribed to such term in Section 3.1(b).

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).

 

“Medical Device” shall mean any instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related
article, including a component part, or accessory which is: recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or intended to affect the structure or any function of the body of man or other animals, and which does not achieve any of its primary intended purposes through chemical action within or on
the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes or other non-drug based medical related technology or product developed, manufactured, marketed or distributed by the Company as of the date hereof.

 

“Per Share Purchase Price” equals $1,000, for each share of Series C Preferred Stock; provided, however, that for purposes of the Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of the Series C Preferred Stock, it shall
mean $1.00 per share of the Company’s common stock as of the date hereof, and otherwise refers to the price per share of the Company’s common stock, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

“Permit” shall have the meaning ascribed to such term in Section 3.1(gg).

 

“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.

 

 “Placement Agent” means The Benchmark Company, LLC.

 

“Preferred Stock Holder” means each of Vision (and affiliates) and Platinum – Montaur Life Science, LLC.

 

“Preferred Stock Purchase Agreement” means that certain Securities Purchase Agreement, dated as of December 27, 2007, between the Company and the Preferred Stock Holders.

 

 

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“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Purchaser” and “Purchasers” shall have the meanings ascribed to such terms, respectively, in the preamble to this Agreement.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.7.

 

“Registrable Securities” shall mean the Shares and the Warrant Shares.

 

 “Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Resolutions” shall have the meaning ascribed to such term in Section 2.2(a)(vii).

 

“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” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the Shares, the Warrants and the Warrant Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Shares” means the shares of Series C Preferred Stock issued or issuable to each Purchaser pursuant to this Agreement.

 

“Share Delivery Date” shall have the meaning ascribed to such term in Section 4.10(c).

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act, including the location and/or reservation of borrowable shares of Common Stock or creation of any net short position with respect to the Securities. 

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares and Warrants purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a), and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after
the date hereof.

 

 

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“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange, or the Over the Counter Bulletin Board (or any successors to any of the foregoing).

 

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

 

“Transfer Agent” means Action Stock Transfer Corp., the current transfer agent of the Company, with a mailing address of 7069 S. Highland Dr., Suite 300

 

Salt Lake City, UT 84121, and any successor transfer agent of the Company.

 

“Warrants” means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a), which Warrants shall be exercisable not earlier than 180 days after the Closing Date and have a term of exercise equal
to five (5) years, in the form of Exhibit B attached hereto.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.

ARTICLE II.

 

PURCHASE AND SALE

 

2.1 Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, agrees to purchase, up to an aggregate of $5,400,000 of Shares (and Warrants to be issued in connection therewith).  Each Purchaser shall, pursuant to the Closing Escrow Agreement, deliver to Company Counsel prior to the Closing Date, via wire transfer, immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page
hereto executed by such Purchaser and the Company shall deliver to each Purchaser on the Closing Date, its respective Shares and a Warrant in the amounts set forth on the signature page hereto executed by such Purchaser and the Company, and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Company Counsel or such
other location as the parties shall mutually agree.

 

 

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2.2 Deliveries.

 

(a) On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i) this Agreement duly executed by the Company;

 

(ii) a legal opinion of Company Counsel, substantially in the form of Exhibit A attached hereto;

 

(iii) a certificate duly issued by the Company representing the Shares purchased by the Purchaser;

 

(iv) a Warrant, duly executed by the Company, in the form of Exhibit B attached hereto, registered in the name of such Purchaser to purchase up to a number of shares of
Common Stock equal to 100% of the number of shares Common Stock issuable upon conversion of the Shares purchased by such Purchaser, with an exercise price equal to 120% of the Per Share Purchase Price, subject to adjustment therein;

 

(v) duly adopted resolutions of the Board of Directors of the Company consistent with Section 3.1(c) herein and in a form reasonably acceptable to such Purchaser (the “Resolutions”);

 

(vi) a secretary’s certificate, dated as of the Closing Date, certifying as to (A) the Resolutions, (B) the Certificate of Incorporation of the Company, certified as of a date within ten (10) days of the Closing Date, by the Secretary
of State of the State of Delaware, and (C) the Bylaws of the Company, each as in effect at the Closing; and

 

(vii) an officer’s certificate in form and substance reasonably satisfactory to the Purchaser, dated as of the Closing Date, certifying that the representations and warranties of the Company contained herein are true and correct
as of the Closing Date.

 

(b) On the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i) this Agreement duly executed by such Purchaser; and

 

(ii) such Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by the Company pursuant to the Closing Escrow Agreement.

 

2.3 Closing Conditions.

 

(a)           The obligations of the Company hereunder in connection with the Closing  are subject to the satisfaction or waiver (by the Company in its sole discretion) of the following conditions:

 

 

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(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained in Section 3.2 (unless as of a specific date therein in which case such representations and warranties shall
be true as of such specific date);

 

(ii) all obligations, covenants and agreements of each Purchaser required to be performed pursuant to the Transaction Documents at or prior to the Closing Date shall have been performed; and

 

(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b) The respective obligations of each Purchaser hereunder in connection with the Closing are subject to the satisfaction or waiver (by such Purchaser in its sole discretion) of the following conditions:

 

(i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case such representations and warranties
shall be true as of such specific date);

 

(ii) all obligations, covenants and agreements of the Company required to be performed pursuant to the Transaction Documents at or prior to the Closing Date shall have been performed;

 

(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

 

(v) trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of each Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

 

 

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ARTICLE III.

 

REPRESENTATIONS AND WARRANTIES

 

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

 

(a) Subsidiaries.  All of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of 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 to subscribe for or purchase securities.

 

(b) Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization, 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 nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business
and is 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 have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects
or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”), and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power
and authority or qualification.

 

(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 hereunder and thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection therewith.  Each Transaction Document
to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

 

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(d) No Conflicts.  The execution, delivery and performance by the Company of the Transaction Documents, the issuance and sale of the Securities and the consummation
by it of the transactions contemplated hereby and thereby to which it is a party 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, result in the creation of any Lien upon any of the properties or assets of the Company or any
Subsidiary, 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 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) subject to the Required Approvals, conflict with or 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 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 filings required pursuant to Section 4.3 of this Agreement, (ii) the filing with the Commission of a Form D, (iii) application(s) to each applicable Trading Market for the listing of the Securities for trading thereon in the time and manner required thereby and (iv) such filings
as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f) Issuance of the Securities.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will
be duly and validly issued, fully paid and non-assessable, free and clear of all Liens.  The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens.  The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants.

 

 

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(g) Capitalization.  The capitalization of the Company is as set forth on Schedule 3.1(g).  Except
in connection with the sale of the 12% Secured Revolving Debentures on July 30, 2009 (the “Debentures”), the Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the contractual obligations referenced in Schedule 3.1(g), pursuant to the exercise of employee stock options under the Company’s stock option plans in the SEC Reports, the issuance of shares of Common Stock and/or restricted stock units (that may be settled
with Common Stock upon vesting) to employees pursuant to written employment agreements or pursuant to the Company’s employee stock purchase plans (as described in the SEC Reports) and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act or registration statement on Form S-8/A.  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 a result of the purchase and sale of the Securities and as disclosed above and on Schedule 3.1(g), as at the date hereof, 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 exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares
of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.  The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under
any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and non-assessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  There
are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h) SEC Reports; Financial Statements.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company
under the Securities Act and the Exchange Act, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received 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, as applicable, 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 the light of the circumstances under which they were made, not
misleading. Since the filing of the SEC Reports, no event has occurred that would require an amendment to any of the SEC Reports.  The Company has never been an issuer subject to Rule 144(i) under the Securities Act.  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 United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, 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.

 

 

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(i) Material Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (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 and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (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 to any officer, director or Affiliate, except pursuant to existing Company stock option plans.  The
Company does not have pending before the Commission any request for confidential treatment of information.  Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective business, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the
Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.

 

(j) Litigation.  Except as disclosed in the Company’s SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or officer thereof, 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.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the Company.  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.

 

 

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(k) 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, which
could reasonably be expected to result in a Material Adverse Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  No executive officer, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries are
in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l) 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 judgment, decree or order of any court, arbitrator
or governmental body or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(m) 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 reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

 

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(n) Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable
title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, 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 and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property
and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(o) Intellectual Property Rights.  The Company owns or possesses adequate rights or licenses to use all trademarks, trademark applications and registrations,
trade names, service marks, service mark registrations, service names, patents, patent rights, patent applications, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (collectively, “Intellectual Property”) necessary to conduct their respective businesses as now conducted.  Schedule 3.1(o) contains
a complete and accurate list of all patented and registered Intellectual Property owned by the Company and all pending patent applications and applications for the registration of other Intellectual Property owned or filed by the Company.  Schedule 3.1(o) also contains a complete and accurate list of all licenses and other rights granted by the Company to any third party with respect to Intellectual Property and licenses and other rights with respect to Intellectual Property granted by any third party
to the Company.  None of the rights of the Company in its Intellectual Property have expired or terminated, or are expected to expire or terminate within five years from the date of this Agreement.  To the knowledge of the Company, except as described in Schedule 3.1(o), there are no third parties who have rights to any of the Intellectual Property owned or licensed by the Company, except for the rights retained by the owners of the Intellectual Property that is licensed to the Company.  The
Company has no knowledge of any infringement by the Company or any of the Company’s licensors or licensees of any Intellectual Property rights of others.  The Company has no knowledge of any infringement by any third parties of any Intellectual Property owned or licensed by the Company, or of any development of similar or identical trade secrets or technical information by others.  There is no claim, action or proceeding being made or brought against, or to the Company’s knowledge,
being threatened against, the Company or any of the Company’s licensors regarding its Intellectual Property or infringement of other Intellectual Property rights.  The Company does not have any knowledge of any facts or circumstances that could reasonably be expected to give rise to any of the foregoing.  To the Company’s knowledge, there is no patent or patent application which contains claims that interfere with the issued or pending claims of any of the Intellectual Property
owned or licensed by the Company.  The Company, the inventors of the Intellectual Property owned or licensed by the Company, and, to the Company’s knowledge, the Company’s licensors, have complied with the duty of candor and disclosure set forth in 37 C.F.R. § 1.56 with respect to each of the patents and patent applications comprising the Intellectual Property owned or licensed by the Company.  None of the technology employed by the Company has been obtained or is being used
by the Company in violation of any contractual obligation binding on the Company or, to the Company’s knowledge, any of its officers, directors or employees in violation of the rights of any persons.  The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its Intellectual Property.

 

 

13

 

 

(p) 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, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount.  Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant
increase in cost.

 

(q) Transactions With Affiliates and Employees.  Except as disclosed in the Company’s 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, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

 

(r) Sarbanes-Oxley; Internal Accounting Controls.  The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable
to it as of the Closing Date.  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 information required to be disclosed by the Company in the reports it files or submits under the Exchange Act
is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).  The
Company presented in its most recently filed periodic report under the Exchange Act 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 changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

 

 

14

 

(s) Certain Fees.  The Purchasers shall have no obligation with respect to any brokerage for finder’s fees or commissions or with respect to any claims
made by or on behalf of other Persons for any such fees or commissions that may be due and payable by the Company in connection with the transactions contemplated by the Transaction Documents.

 

(t) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

(u) Registration Rights. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company to the Purchasers under the Transaction Documents.  The Company is eligible to register its Common Stock and the Warrant Shares for resale by the Purchasers under Form S-1 promulgated under the Securities Act.  Except as specified in Schedule 3.1(u), neither the Company nor any of its subsidiaries has 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.

 

(v) Listing and Maintenance Requirements.  The Common Stock is registered pursuant to the Exchange Act, and the Company has taken no action designed to, or which
to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.  Except as disclosed in the Company’s SEC Reports, the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Trading Market. Except as disclosed in the Company’s SEC Reports, the Company is, immediately after the consummation of the transactions contemplated by the Transaction Documents will be, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 

 

15

 

 

(w) Application of Takeover Protections.  The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the 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 Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of
the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

(x) Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information.  The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business
and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not 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.  The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2.

 

(y) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(z) Solvency.  After giving effect to the transactions contemplated by this Agreement and the Transaction Documents, including, without limitation, the expenses
to be incurred by the Company and its Subsidiaries in connection herewith and therewith, neither the Company nor any of its Subsidiaries intends to: (i) be insolvent; (ii) be left with unreasonably small capital with which to engage in its business; or (iii) incur debts beyond its ability to pay such debts as they mature.  The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws
of any jurisdiction within one year from the Closing Date.  Schedule 3.1(z) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or
amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease
payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is in material default with respect to any Indebtedness.

 

 

16

 

 

(aa) Tax Status.  Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect,
the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

 

(bb) Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(cc) Accountants.  The Company’s accounting firm is RBSM, LLP.  To the knowledge and belief of the Company, such accounting firm (i) is a registered
public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the year ending December 31, 2009.

 

(dd) Acknowledgment Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby.  The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities.  The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

 

17

 

 

(ee) RESERVED

 

(ff) Regulation M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement agent in connection
with the placement of the Securities.

 

(gg) FDA.  The Company possesses all certificates, authorizations, approvals, licenses and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business as presently conducted (“Permits”), including all Permits required by the United States Food and Drug Administration (the “FDA”) or any other federal, state or foreign agencies or bodies engaged in the regulation of Medical Devices, and the Company has not received any notice of proceedings relating to the revocation
or modification of any such Permit.  There is no pending, completed or, to the Company's knowledge, threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge, complaint, or investigation) against the Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries has received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) contests the premarket clearance, licensure,
registration, or approval of, the uses of, the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the labeling and promotion of any Medical Device, (ii) withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any Medical Device, (iii) imposes a clinical hold on any clinical investigation by the Company or any of its Subsidiaries, (iv) enjoins production at any facility
of the Company or any of its Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with the Company or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws, rules or regulations by the Company or any of its Subsidiaries, and which, either individually or in the aggregate, would have a Material Adverse Effect.  The Company has not been informed by the FDA that the FDA will prohibit the marketing, sale, license or use in the United States of
any product proposed to be developed, produced or marketed by the Company nor has the FDA expressed to the Company any concern as to approving or clearing for marketing any product being developed or proposed to be developed by the Company.

 

3.2 Representations and Warranties of the Purchasers.  Each Purchaser, severally and not jointly, hereby represents and warrants as of the date hereof and as of
the Closing Date to the Company as follows (unless as of a specific date therein):

 

 

18

 

 

(a) Organization; Authority.  Such Purchaser is either an individual or an entity duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of
such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b) Own Account.  Such Purchaser is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s
right to sell the Securities in compliance with applicable federal and state securities laws).  Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c) Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises
any Warrants, it will be, either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

 

(d) Experience of Such Purchaser.  Such Purchaser, either alone or together with its representatives, 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, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e) Certain Transactions and Confidentiality.  Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting
on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) as of the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing,
in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement.  Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow
in order to effect Short Sales or similar transactions in the future.

 

 

19

 

 

(f) Reliance on Exemptions.  Such Purchaser understands that the Securities  have not been registered under the Securities Act or applicable state securities
laws, and that the Securities may not be offered for sale, sold, transferred or assigned (i) in the absence of (A) an effective registration statement therefor under the Securities Act or applicable state securities laws or (B) an opinion of counsel, in a generally acceptable form, that registration is not required under the Securities Act or applicable state securities laws or (ii) unless sold pursuant to Rule 144.  Such Purchaser understands that the Company is relying in part upon the truth and accuracy
of, and such Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of such Purchaser to acquire the Securities.

 

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

 

(h) Legends.  Such Purchaser understands that the certificates or other instruments representing the Shares and the Warrants and, until such time as the sale
of the Shares and the Warrant Shares have been registered under the Securities Act, the stock certificates representing the Shares and the Warrant Shares, except as set forth below, shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

 

 

20

 

 

THIS CERTIFICATE AND THE SECURITIES REPRE­SENTED BY THIS CERTIFICATE AND ALL RIGHTS THEREIN ARE SUBJECT TO, AND RESTRICTED AS TO TRANSFER BY THE PROVISIONS OF A CERTAIN SECURITIES PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 11, 2009, BETWEEN NEWCARDIO, INC., A DELAWARE CORPORATION AND THE CERTIFICATE HOLDER.  A COPY OF
SUCH AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, IS ON FILE AND AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Securities upon which it is stamped, if (i) such Securities are registered for resale under the Securities Act, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the Securities Act, (iii) such holder provides the Company with reasonable assurances that the Securities can be sold pursuant to Rule 144(b)(i) promulgated under the Securities Act (or a successor rule thereto), or (iv) such holder provides the Company reasonable assurance that the Securities have been or are being sold pursuant to Rule 144.

 

The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other
document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

 

(i) Each Purchaser agrees that sales and other transfers or dispositions of the Securities are restricted entirely for six (6) months after the Closing Date, and thereafter shall be limited through the date that is the last day of the
12th month following the Closing Date, as follows:

 

 

21

 

 

Based 30 day VWAP, Purchasers can sell (transfer or dispose of shares) during months 6-12 after the Closing Date, according to the following schedule:

	  30-day Avg Trading Volume	 
	
Low (000’s)
	
High (000’s)
	
Volume of investors stock they are able to sell / day (1)

	
0
	
50
	
2.5%

	
50
	
100
	
5%

	
100
	
150
	
7.5%

	
150
	
250
	
10%

	
250
	
500
	
25%

	
500
	
And up
	
No limit

 (1) For months 6-12, volumes above are permissible if the stock is trading at or over $1.25 per share. If the stock is trading below $1.25 per share (based on 5 day VWAP), sales, transfers and other dispositions are not permitted.  After month 12 there is no price restriction or volume limitations for sales, transfers and other
dispositions.

 

 

ARTICLE IV.

 

OTHER AGREEMENTS OF THE PARTIES

 

4.1 SEC Reports.  The Company covenants to timely file (or obtain extensions pursuant to Rule 12b-25 promulgated under the Exchange Act in respect thereof and
file within the applicable grace period) all SEC Reports required to be filed by the Company after the date hereof pursuant to the Exchange Act through and including the date that the Securities may be freely resold without restriction pursuant to Rule 144. As long as any Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required
for the Purchasers to sell the Securities, including without limitation, under Rule 144.

 

4.2 Integration.  The Company shall not 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 Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

 

22

 

 

4.3 Securities Laws Disclosure; Publicity.  The Company shall, within four (4) business days after  the Closing Date, issue a press release and file
a Current Report on Form 8-K with the Commission, disclosing the material terms of the transactions contemplated hereby, and including the Transaction Documents as exhibits thereto.  From and after the issuance of such press release, the Company shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents.  The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent
shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a)
as required by federal securities law in connection with the filing of final Transaction Documents (including signature pages thereto) with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such required disclosure under this clause (b).

 

4.4 Shareholder Rights Plan.  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser could
be deemed to trigger the provisions of any control share agreement, business combination agreement poison pill or other such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

4.5 Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement with the Company regarding the confidentiality and use of such information.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.

 

4.6 Use of Proceeds.  The Company shall use the net proceeds from the sale of the Securities hereunder for repayment of indebtedness and/or working capital purposes,
and shall not use such proceeds for (a) the redemption of any Common Stock or Common Stock Equivalents or (b) the settlement of any outstanding litigation.

 

 

23

 

 

4.7 Indemnification of Purchasers.   Subject to the provisions of this Section 4.7, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a)
any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser’s representations, warranties
or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such stockholder or any violations by such Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has
failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement
by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

 

4.8 Listing of Common Stock. The Company hereby agrees to use best efforts to maintain the listing or quotation
of the Common Stock on the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote all of the Shares on such Trading Market and promptly secure the listing of all of the Shares and Warrant Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as
is necessary to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible.  The Company will then take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market.

 

4.9 Short Sales.  The Purchasers warrant that, prior to the date hereof, neither they nor any Affiliates have executed, and Purchasers covenant
that, for a period of one (1) year after the Closing Date neither they nor any Affiliates shall execute, any Short Sales in the securities of the Company.

 

4.10 Transferability; Certificate.

 

 

24

 

 

(a) The sale, transfer and other disposition is limited to the extent provided in Section 3.2(i) above.  In any event, the Securities may only be disposed of in compliance with state and federal securities laws.  In
connection with any transfer of the Securities other than pursuant to an effective registration statement, to the Company, to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.10(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 Securities will contain the following legend, until such time as they are not required under Section 4.10(c):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.

 

THIS CERTIFICATE AND THE SECURITIES REPRE­SENTED BY THIS CERTIFICATE AND ALL RIGHTS THEREIN ARE SUBJECT TO, AND RESTRICTED AS TO TRANSFER BY THE PROVISIONS OF A CERTAIN SECURITIES PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 11, 2009, BETWEEN NEWCARDIO, INC., A DELAWARE CORPORATION AND THE CERTIFICATE HOLDER.  A COPY OF
SUCH AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, IS ON FILE AND AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

 

25

 

 

The Company acknowledges and agrees that a Purchaser may from time to time pledge, and/or grant a security interest in some or all of the Securities 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 Purchaser may transfer pledged or
secured Securities 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 Purchaser transferee of the pledge.  No notice shall be required of such pledge.  At the appropriate Purchaser’s
expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer thereof 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.  Except as otherwise provided in Section 4.10(c), any Securities subject to
a pledge or security interest as contemplated by this Section 4.10(b) shall continue to bear the legend set forth in this Section 4.10(b) and be subject to the restrictions on transfer set forth in Section 4.10(a).

 

(c) Certificates evidencing Securities due to be delivered pursuant to the Transaction Documents, shall not contain any legend (including the legend set forth in Section 4.10(b)): (i) while a registration statement covering such Securities
is then effective, or (ii) following a sale or transfer of such Securities pursuant to Rule 144 (assuming the transferee is not an Affiliate of the Company), or (iii) while such Securities are eligible for sale by the selling Investor without volume restrictions under Rule 144.  The Company agrees that following the Effective Date or such other time as legends are no longer required to be set forth on certificates representing Securities under this Section 4.10(c), it will, no longer than three (3)
Trading Days following the delivery by an Investor to the Company or the Transfer Agent of a certificate representing such Securities containing a restrictive legend, deliver or instruct the Transfer Agent to deliver to such Investor, Securities which are free of all restrictive and other legends.  If the Company is then eligible, certificates for Securities subject to legend removal hereunder shall be transmitted by the Transfer Agent to an Investor by crediting the prime brokerage account of such
Investor with the Depository Trust Company System as directed by such Investor.  If an Investor shall make a sale or transfer of Securities either (x) pursuant to Rule 144 or (y) pursuant to a registration statement and in each case shall have delivered to the Company or the Company’s transfer agent the certificate representing the applicable Securities containing a restrictive legend which are the subject of such sale or transfer and a representation letter in customary form (the date of such
sale or transfer and Securities delivery being the “Share Delivery Date”) and (1) the Company shall fail to deliver or cause to be delivered to such Investor a certificate representing such Securities that is free from all restrictive or other legends by the third Trading Day following the Share Delivery Date and (2) following such third Trading Day after the Share Delivery Date and prior to the time such Securities are received free
from restrictive legends, 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 Securities (a “Buy-In”), then, in addition to any other rights available to the Investor under the Transaction Documents and applicable law, 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 4.10.

 

 

26

 

 

4.11 Warrant Shares.  If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance or resale
of the Warrant Shares or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant to any such exercise shall be issued free of all legends.  Upon a cashless exercise of a Warrant, the holding period for purposes of Rule 144 shall tack back to the original date of issuance of such Warrant.

 

4.12 Equal Treatment of Purchasers.  No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend
or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents.  For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group
with respect to the purchase, disposition or voting of Securities or otherwise.

 

4.13 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on
its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.3.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.3, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules.  Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary other than the provisions of Section 4.9, the Company expressly acknowledges and agrees that (i) no Purchaser makes
any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.3, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated
by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.3 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the issuance of the initial press release as described in Section 4.3.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers
have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.

 

 

27

 

4.14           Approval Rights – New Capital Raise or Investment.  For one year after the Closing Date, Vision Opportunity Master Fund Ltd. (“Vision”)
shall have the right to approve (which approval shall not be unreasonably withheld, delayed or conditioned) any new capital raise or investment (1) by a strategic or financial investor in the Company if, in either case, the price per share for such investment is lower than the lower of (x) 15% below the market price for the Corporation’s common shares (using 5-day VWAP), or (y) the price per share for the PIPE transaction, or (2) Vision also shall have the right to approve (which approval shall not be unreasonably
withheld, delayed or conditioned) any new  investor in an equity, equity linked or debt offering by the Company that is not a strategic investor, provided that, in the case of such other investor the determination is limited to whether the investor is of a class/type that reasonably would be viewed as consistent with the other investors holding PIPE securities of the Company, and, to facilitate the foregoing, the Company will submit, reasonably in advance of committing to any future investment with
a potential investor, the name of the investor to Vision, for prior written approval and further provided that Vision shall act reasonably and promptly in its review of such submission and the designation of such investor as an eligible investor.

 

 

ARTICLE V.

 

MISCELLANEOUS

 

5.1 Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the
obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before September15, 2009 (with respect to each Purchaser who shall have executed this Agreement on or before September 15, 2009), unless extended by written approval of the Placement Agent, Vision and the Company, but in no event later than September 18, 2009); provided, however,
that no such termination will affect the right of any party to sue for any breach by the other party (or parties).

 

5.2 Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, 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 this Agreement.  The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

 

28

 

 

5.3 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 and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4 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 at the facsimile number set forth on the signature pages attached hereto prior to 5:30 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 set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York
City time) on any Trading Day, (c) the second (2nd) 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 set forth on the signature pages attached hereto.

 

5.5 Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of
an amendment, by the Company, Vision and the Purchasers holding at least 51% in interest of the Shares then outstanding (which may include the Shares hold by Vision if Vision has approved the amendment or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  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 or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.6 Headings.  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.

 

5.7 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 each Purchaser (other than by merger).  Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers at least 25% of the Securities originally purchased by such purchaser, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents
that apply to the Purchasers.

 

5.8 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 or Section 5.22.

 

 

29

 

 

5.9 Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents 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 legal proceedings 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, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof 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 other manner permitted by law.  If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.7, the prevailing party in such action or proceeding 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 or proceeding.

 

5.10 Survival.  The representations and warranties contained herein shall survive the Closing and the delivery of the Shares.

 

5.11 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 or by e-mail delivery of a “.pdf” format data file, 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 or “.pdf”
signature page were an original thereof.

 

5.12 Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void
or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

 

30

 

 

5.13 Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other
Transaction Documents, whenever any Purchaser 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 Purchaser 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; provided, however,
that in the case of a rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).

 

5.14 Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), 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.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.15 Remedies.  In addition to being entitled to exercise all rights or remedies provided herein or granted by law, including recovery of damages, each of the
Purchasers 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 contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16 Payment Set Aside.  To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser 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.

 

5.17 Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser 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 Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by
its own separate legal counsel in their review and negotiation of the Transaction Documents.  The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.

 

 

31

 

 

5.18 Liquidated Damages.  The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing
obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.19 Saturdays, Sundays, Holidays, etc.                                                                If
the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.20 Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore,
the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.21 WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING
IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

5.22 The Company acknowledges that it has engaged The Benchmark Company, LLC (“the Placement Agent”) as placement agent in connection with the sale of the Securities
and that the Company shall be responsible for the Placement Agent’s fees hereunder. The Placement Agent shall be entitled to rely on the representations and warranties of the Company hereunder as a third party beneficiary hereto.

 

(Signature Pages Follow)

 

  

32

  

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.

 

	
NEWCARDIO, INC.

 

 
	
Address for Notice:

2350 Mission College Blvd.

Suite 1175

Santa Clara, CA 95054

 

	
By: /s/ Richard D. Brounstein

Name: Richard D. Brounstein

Title: CFO

 

 

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

Andrew Smith

Sichenzia Ross Friedman Ference LLP

61 Broadway

32nd Floor

New York, NY 10006

Direct: 646-810-2180

Phone: 212-930-9700

Fax:     212-930-9725

Email:  asmith@srff.com

 

 

 

 
	  

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

  

33

  

[PURCHASER SIGNATURE PAGES TO NWCI SECURITIES PURCHASE AGREEMENT]

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

 

Name of Purchaser: ________________________________________________________

Signature of Authorized Signatory of Purchaser: _________________________________

Name of Authorized Signatory: _______________________________________________

Title of Authorized Signatory: ________________________________________________

Email Address of Authorized Signatory:_________________________________________

Facsimile Number of Authorized Signatory: ______________________________________

Address for Notice of Purchaser:______________________________________________

Address for Delivery of Securities for Purchaser (if not same as address for notice):

Subscription Amount: $_________________

Shares: _________________

Warrant Shares: _______________

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]

  

34

  

Exhibit A

 

 

September 15, 2009

 

To the Purchasers Signatory to the

  Securities Purchase Agreement (hereinafter defined) (the “Purchasers”)

 

	
  
	
Re:
	
NewCardio, Inc.

 

Ladies and Gentlemen: 

 

We have acted as counsel to NewCardio, Inc., a Delaware corporation, (the “Company”), in connection with the Securities Purchase Agreement, dated as of September 11, 2009, between you and the Company (the “Agreement”)
and the transactions contemplated therein.  Capitalized terms used herein and not otherwise defined herein shall have the same meanings ascribed to such terms in the Agreement.  The Agreement and the Warrants are hereinafter referred to collectively as the “Transaction Documents.”

 

In so acting, we have examined (i) the Transaction Documents, (ii) the Company’s Articles of Incorporation, as amended and in effect on the date hereof (the “Articles of Incorporation”), and (iii) the Company’s Bylaws, as in effect on the date hereof (the “Bylaws”),
and we have examined and considered such corporate records, certificates and matters of law as we have deemed appropriate as a basis for our opinions set forth below.

 

In rendering the opinions set forth in this opinion letter, we assume the following:

	
  
	
a.
	
the legal capacity of each natural person and the legal existence of all parties other than the Company to the transactions referred to in the Transaction Documents;

	
  
	
b.
	
the power and authority of each person other than the Company or person(s) acting on behalf of the Company to execute, deliver and perform each document executed and delivered and to do each other act done or to be done by such person;

	
  
	
c.
	
the legality, validity, binding effect and enforceability as to each person other than the Company or person(s) acting on behalf of the Company of each document executed and delivered or to be executed or delivered and of each other act done or to be done by such person;

 

61 Broadway    New York, New York  10006  212-930-9700  212-930-9725 Fax

www.srff.com

 

 

A-1

 

 

	
  
	
d.
	
the transactions referred to in the Transaction Documents have been consummated;

	
  
	
e.
	
the genuineness of all signatures and the completeness of each document submitted to us;

	
  
	
f.
	
that the addressees have acted in good faith, without notice of adverse claims, and have complied with all laws applicable to them that affect the transactions referred to in the Transaction Documents;

	
  
	
g.
	
that no action, discretionary or otherwise, will be taken by or on behalf of the Company in the future that might result in a violation of law; and

 

	 	

h.  

	
that with respect to the Transaction Documents and to the transactions referred to therein, there has been no mutual mistake of fact and there exists no fraud or duress.

 

As to certain questions of fact material to this opinion, we have relied upon statements or certificates of public officials and officers of the Company. We provide no opinion with respect to usury laws.

Based upon the foregoing and subject to the assumptions, limitations, qualifications and exceptions stated herein, we are of the opinion that as of the date hereof:

 

1. The Company has all requisite power and authority (i) to execute, deliver and perform the Transaction Documents, (ii) to issue, sell and deliver the Shares, the Warrants and the Warrant Shares pursuant to the Transaction Documents
and (iii) to carry out and perform its obligations under, and to consummate the transactions contemplated by, the Transaction Documents.

2. All action on the part of the Company, its directors and its stockholders necessary for the authorization, execution and delivery by the Company of the Transaction Documents, the authorization, issuance, sale and delivery of the Shares
and the Warrants pursuant to the Agreement, the issuance and delivery of the Warrant Shares and the consummation by the Company of the transactions contemplated by the Transaction Documents has been duly taken.  The Transaction Documents have been duly and validly executed and delivered by the Company and constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms, except that (a) such enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors’ rights in general and (b) the remedies of specific performance and injunctive and other forms of injunctive relief may be subject to equitable defenses.

 

61 Broadway    New York, New York  10006  212-930-9700  212-930-9725 Fax

www.srff.com

 

 

A-2

 

 

3. After giving effect to the transactions contemplated by the Agreement, and immediately after the Closing, the authorized capital stock of the Company will consist of: 99,000,000 shares of Common Stock, of which based solely upon information
provided by the Company, 23,900,000 shares of Common Stock will be issued and outstanding and 35,080,909 shares1 will be reserved for issuance upon conversion of issued and outstanding options, warrants and other derivative securities, 6,451,230 shares will be reserved for issuance to employees, officers and directors under the Company’s 2004 Equity Compensation Plan and 2009 Equity Compensation Plan.

4. The Shares and Warrants which are being issued on the date hereof pursuant to the Agreement have been duly authorized and validly issued and are fully paid and nonassessable and to our knowledge free of preemptive or similar rights,
and have been issued in compliance with applicable securities laws, rules and regulations.  The Warrant Shares have been duly and validly authorized and reserved for issuance, and when issued upon the exercise of the Warrants in accordance with the terms therein, will be validly issued, fully paid and nonassessable, and to our knowledge free of any preemptive or similar rights.  To our knowledge, except for rights described in Schedule 3.1(g) of the Agreement, there are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase or otherwise acquire from the Company any capital stock or other securities of the Company, or any other agreements to issue any such securities or rights.  The rights, privileges and preferences of the Common Stock are as stated in the Company’s Certificate of Incorporation and with regard to the Preferred Stock are set forth in the Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of
the Series C Preferred Stock.

5. Based in part upon the representations of the Purchasers contained in the Agreement, the Shares, the Warrants and the Warrant Shares may be issued to the Purchasers without registration under the Securities Act of 1933, as amended.

6. The execution, delivery and performance by the Company of, and the compliance by the Company with the terms of, the Transaction Documents and the issuance, sale and delivery of the Shares, the Warrants and the Warrant Shares pursuant
to the Agreement do not (a) conflict with or result in a violation of any provision of law, rule or regulation applicable to the Company or its Subsidiaries or of the certificate of incorporation or by-laws or other similar organizational documents of the Company or its Subsidiaries, (b) conflict with, result in a breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or result in or permit the termination or modification of, any agreement, instrument,
order, writ, judgment or decree known to us to which the Company of its Subsidiaries is a party or is subject and of which we have knowledge or (c) result in the creation or imposition of any lien, claim or encumbrance on any of the assets or properties of the Company or its Subsidiaries.

 

______________________

1 Plus shares underlying the Series C Convertible Preferred stock and warrants issuable under the Securities Purchase Agreement dated as of September 11, 2009.

 

61 Broadway    New York, New York  10006  212-930-9700  212-930-9725 Fax

www.srff.com

 

 

A-3

 

 

7. To our knowledge, except as set forth in the Agreement, there is no claim, action, suit, proceeding, arbitration, investigation or inquiry, pending or threatened, before any court or governmental or administrative body or agency, or
any private arbitration tribunal, against the Company or its Subsidiaries, or any of the officers, directors or employees (in connection with the discharge of their duties as officers, directors and employees) of the Company or its Subsidiaries, or affecting any of its properties or assets.

8. In connection with the valid execution, delivery and performance by the Company of the Transaction Documents, or the offer, sale, issuance or delivery of the Shares, the Warrants and the Warrant Shares or the consummation of the transactions
contemplated thereby, no consent, license, permit, waiver, approval or authorization of, or designation, declaration, registration or filing with, any court, governmental or regulatory authority, or self-regulatory organization, is required, other than customary Blue Sky filings and the filing with the Securities and Exchange Commission (on Edgar) of a Form D notice of an exempt offering of securities.

9. The Company, after the consummation of the transactions contemplated by the Transaction Documents shall not be, an Investment Company within the meaning of the Investment Company Act of 1940, as amended.

These opinions are limited to the matters expressly stated herein and are rendered solely for your benefit and may not be quoted or relied upon for any other purpose or by another person.

 

The opinions expressed herein are subject to the following assumptions, limitations, qualifications and exceptions:

 

A.           We have assumed the genuineness of all signatures, the authenticity of all Transaction Documents submitted to us as originals, the conformity with originals of all Transaction Documents submitted to us as copies, the authenticity of certificates of public officials and the
due authorization, execution and delivery of all Transaction Documents (except the due authorization, execution and delivery by the Company of the Transaction Documents).

 

61 Broadway    New York, New York  10006  212-930-9700  212-930-9725 Fax

www.srff.com

 

 

A-4

 

 

 

B.           We have assumed that each of the parties to the Transaction Documents other than the Company (the “Other Parties”) has the legal right, capacity and power to enter into, enforce and perform all of its obligations under the Transaction Documents.  Furthermore,
we have assumed the due authorization by each of the Other Parties of all requisite action and the due execution and delivery of the Transaction Documents by each of the Other Parties, and that the Transaction Documents are valid and binding upon each of the Other Parties and are enforceable against each Other Party in accordance with their terms.

 

C.           Whenever a statement herein is qualified by "to our knowledge" or similar phrase, it means that, during the course of our representation of the Company for the purposes of this opinion letter, (1) no information that would give those lawyers who participated in the preparation
of the letter (collectively, the "Opinion Letter Participants") current actual knowledge of the inaccuracy of such statement has come to their attention; (2) we have not undertaken any independent investigation or inquiry to determine the accuracy of such statement; (3) any limited investigation or inquiry otherwise undertaken by the Opinion Letter Participants during the preparation of this opinion letter should not be regarded as such an investigation
or inquiry; and (4) no inference as to our knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of our representation of the Company.

We are counsel admitted to practice in the State of New York and we do not express any opinion with respect to the effect or applicability of the laws of any jurisdiction, other than the laws of the State of New York and the federal laws of the United States of America.

 

This opinion is given as of the date hereof and we assume no obligation, to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention or any changes in laws which may hereafter occur.

 

Sincerely, 

 

Sichenzia Ross Friedman Ference LLP

 

. 

 

 

 

 

61 Broadway    New York, New York  10006  212-930-9700  212-930-9725 Fax

www.srff.com
 

  

A-5

  

Exhibit B

Form of Warrant

[See Exhibit 4.12 of this Form 8-K]

 

 

 

 

  

B-1

  

Schedules

3.1(a)

3.1(g)

3.1(o)

3.1(z)<PAGE>

Exhibit 10.1

                            STOCK PURCHASE AGREEMENT

                                      AMONG

                                 NUMOBILE, INC.,

                       ENHANCE NETWORK COMMUNICATION, INC.

                                       AND

             THE SHAREHOLDERS OF ENHANCE NETWORK COMMUNICATION, INC.

                             DATED SEPTEMBER 9, 2009

<PAGE>

                            STOCK PURCHASE AGREEMENT

         THIS STOCK PURCHASE AGREEMENT is made as of September 17th, 2009 (the
"AGREEMENT"), among NuMobile, Inc., a corporation existing under the laws of
Nevada (the "PURCHASER"), Enhance Network Communication, Inc., a corporation
existing under the laws of California ("ENHANCE"), and the shareholders of
Enhance listed on SCHEDULE 1 hereof (collectively the "SELLERS").

                              W I T N E S S E T H:

         WHEREAS, the Sellers own an aggregate of 1,500 shares of common stock,
$0.001 par value per share (the "Common Stock"), the "SHARES"), which constitute
100% of the issued and outstanding shares of capital stock of Enhance; and

         WHEREAS, the Sellers desire to sell to Purchaser, and the Purchaser
desires to purchase from the Sellers, the Shares upon the terms and conditions
hereinafter set forth;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereby agree as
follows:

                      ARTICLE I SALE AND PURCHASE OF SHARES

1.1      SALE AND PURCHASE OF SHARES.

         Upon the terms and subject to the conditions contained herein, on the
Closing Date each Seller shall sell, assign, transfer, convey and deliver to the
Purchaser, and the Purchaser shall purchase from each Seller, all Shares of
Enhance owned by such Seller set forth opposite such Seller's name on SCHEDULE 1
attached hereto. The sale and purchase are intended to be a tax-free
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code.

                      ARTICLE II PURCHASE PRICE AND PAYMENT

2.1      AMOUNT AND PAYMENT OF PURCHASE PRICE.

         On the Closing Date, the Purchaser shall issue an aggregate principal
amount of $5,000,000 notes with $1,000,000 due September 9th, 2010 and subject
to performance as set forth in Section 2.2 of this Agreement, $4,000,000 due
September 9th, 2014 in the form attached hereto as Exhibit 1 (the "Notes") to
the Sellers based on the percentages set forth on Schedule 1.

2.2      TERMS AND CONDITIONS OF PAYMENT.

         The $4,000,000 payment due September 9th, 2014 is subject to specific
performance as set forth in this Section 2.2. Enhance anticipates entering into
a contract for its proprietary technology prior to April 1, 2011. That contract
is expected to contemplate the generation of in excess of $20,000,000 in revenue
and $8,000,000 in gross margin. If Enhance does not enter into a contract that
contemplates the generation of at least $20,000,000 in revenue and $8,000,000 in
gross margin (the "Performance Contract") prior to April 1, 2011, then the

                                       1
<PAGE>

$4,000,000 note will be canceled and the $1,000,000 note due September 9th, 2010
will be considered payment in full for the 1,500 shares of common stock which
constitute 100% of the issued and outstanding shares of capital stock of
Enhance. If Enhance is successful in entering into the Performance Contract,
then $4,000,000 of the Notes will be due September 9th, 2014 (unless such Notes
shall have been cancelled in accordance with this Section 2.2), and the Sellers
will have an option to buy back 1,500 shares of common stock which constitute
100% of the issued and outstanding shares of capital stock of Enhance in
exchange for $5,000,000 in cash, and the cancelation of any outstanding notes
due the Sellers, if the cash payment is delivered prior to September 9, 2012.

                       ARTICLE III CLOSING AND TERMINATION

3.1      CLOSING DATE.

         Subject to the satisfaction of the conditions set forth in Sections 7.1
and 7.2 hereof (or the waiver thereof by the party entitled to waive that
condition), the closing of the sale and purchase of the Notes provided for in
Section 2 hereof (the "CLOSING") shall take place at the offices of Sichenzia
Ross Friedman Ference LLP, 61 Broadway, New York, NY 10006 (or at such other
place as the parties may designate in writing) on such date as the Sellers and
the Purchaser may designate. The Closing may also take place through the
delivery of documents in electronic or telefaxed format or through courier
delivery of actual signatures to counsel for the parties.

3.2      TERMINATION OF AGREEMENT.

         This Agreement may be terminated prior to the Closing by either (a)
mutual written consent of the Sellers and the Purchaser or (b) the failure to
complete the Closing by September 30, 2009. In the event that this Agreement is
validly terminated as provided herein, then each of the parties shall be
relieved of their duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without liability to the
Purchaser, Enhance or any Seller; PROVIDED, HOWEVER, that nothing in this
Section 3.2 shall relieve the Purchaser or any Seller of any liability for a
breach of this Agreement.

            ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS

         Each of the Sellers represents and warrants to the Purchaser that as of
the Closing Date:

4.1      ORGANIZATION AND GOOD STANDING OF ENHANCE.

         Enhance is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation as set forth
above.

4.2      AUTHORITY.
         ---------

         (a)      Enhance has full power and authority (corporate and otherwise)
                  to carry on its business and has all permits and licenses that
                  are necessary to the conduct of its business or to the
                  ownership, lease or operation of its properties and assets,
                  except where the failure to have such permits and licenses
                  would not have a material adverse effect on the Company's

                                       2
<PAGE>

                  business or operations taken as a whole ("MATERIAL ADVERSE
                  EFFECT").

         (b)      The execution of this Agreement and the delivery hereof to the
                  Purchaser and the sale contemplated herein have been, or will
                  be prior to Closing, duly authorized by Enhance's Board of
                  Directors and, if necessary, by Enhance's stockholders having
                  full power and authority to authorize such actions.

         (c)      Neither the execution and delivery of this Agreement, the
                  consummation of the transactions herein contemplated, nor
                  compliance with the terms of this Agreement will violate,
                  conflict with, result in a breach of, or constitute a default
                  under any statute, regulation or other agreement to which
                  Enhance or any Seller is a party or by which it or any of them
                  is bound, any charter, regulation, or bylaw provision of
                  Enhance, or any decree, order, or rule of any court or
                  governmental authority or arbitrator that is binding on
                  Enhance or any Seller in any way, except where such would not
                  have a Material Adverse Effect.

4.3      SHARES.
         ------

         (a)      Enhance's authorized capital stock consists of 1,500,000
                  shares of Common Stock of which 1,500 shares are issued and
                  outstanding. All of the Shares are duly authorized, validly
                  issued, fully paid and non-assessable.

         (b)      There are no authorized or outstanding subscriptions, options,
                  warrants, calls, contracts, demands, commitments, convertible
                  securities or other agreements or arrangements of any
                  character or nature whatever under which or Enhance is or may
                  become obligated to issue, assign or transfer any shares of
                  capital stock of Enhance. Based upon the representations and
                  warranties of the Sellers in this Agreement, upon the delivery
                  to Purchaser on the Closing Date of the certificate(s)
                  representing the Shares, Purchaser will have good, legal,
                  valid, marketable and indefeasible title to 100% of the then
                  issued and outstanding shares of capital stock of Enhance,
                  free and clear of any liens, pledges, encumbrances, charges,
                  agreements, options, claims or other arrangements or
                  restrictions of any kind, other than those imposed by
                  applicable securities laws.

4.4      BASIC CORPORATE RECORDS.

         The copies of the Certificate of Incorporation of Enhance (certified by
the Secretary of State or other authorized official of the jurisdiction of
incorporation), and the Bylaws of Enhance, all of which have been delivered to
the Purchaser, are true, correct and complete as of the date of this Agreement.

         The minute books of Enhance, which shall be exhibited to the Purchaser
between the date hereof and the Closing Date, each contain true, correct and
materially complete minutes and records of all meetings, proceedings and other
actions of the shareholders and Board of Directors of Enhance, except where such
would not have a Material Adverse Effect and, on the Closing Date, will, contain
true, correct and materially complete minutes and records of any meetings,
proceedings and other actions of the shareholders and the Board of Directors of
Enhance.

                                       3
<PAGE>

4.5      SUBSIDIARIES AND AFFILIATES.

         Any and all businesses, entities, enterprises and organizations in
which Enhance has any ownership, voting or profit and loss sharing percentage
interest (the "SUBSIDIARIES") are identified in Schedule 4.5 hereto, together
with Enhance's interest therein.

4.6      CONSENTS.

         No consents or approvals of any public body or authority and no
consents or waivers from other parties to leases, licenses, franchises, permits,
indentures, agreements or other instruments are (i) required for the lawful
consummation of the transactions contemplated hereby, or (ii) necessary in order
that the business currently conducted by Enhance can be conducted by the
Purchaser in the same manner after the Closing as heretofore conducted by
Enhance, nor will the consummation of the transactions contemplated hereby
result in creating, accelerating or increasing any liability of Enhance, except
where the failure of any of the foregoing would not have a Material Adverse
Effect.

4.7      FINANCIAL STATEMENTS.

         The Sellers have delivered, or will deliver prior to Closing, to the
Purchaser copies of the financial statements dated 06/30/2009 and the period
then ended, all of which are true, complete and correct, have been prepared from
the books and records of Enhance. The records and books of Enhance reflect all
material assets and liabilities.

         There are no liabilities or obligations of Enhance of any kind
whatsoever exceeding $10,000, individually or in the aggregate, whether accrued,
fixed, absolute, contingent, determined or determinable, except as identified in
Schedule 4.14.

4.8      TAXES.

         For purposes of this Agreement, "TAX" or "TAXES" refers to any and all
federal taxes, assessments and other governmental charges, duties, impositions
and liabilities relating to taxes, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes and escheatment payments, together with all interest,
penalties and additions imposed with respect to such amounts and any obligations
under any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.

         Enhance has timely filed all federal returns, estimates, information
statements and reports ("TAX Returns") relating to Taxes required to be filed by
Enhance with any Tax authority effective through the Closing Date. All such Tax
Returns are true, correct and complete in all respects, except for immaterial
amounts where such would not have a Material Adverse Effect.

         Enhance has not been delinquent in the payment of any Tax nor is there
any Tax deficiency outstanding or assessed against Enhance. Enhance has not
executed any unexpired waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax.

                                       4
<PAGE>

4.9      REAL PROPERTY MATTERS.

         Enhance does not own any real property as of the date hereof and has
not owned any real property during the three years preceding the date hereof.

4.10     PATENTS, SOFTWARE, TRADEMARKS, ETC.

         Enhance owns, or possesses adequate licenses or other rights to use,
all patents, software, trademarks, service marks, trade names and copyrights and
trade secrets, if any, necessary to conduct its Business as now operated by it.
The patents, software, trademarks, service marks, copyrights, trade names and
trade secrets, if any, registered in the name of or owned or used by or licensed
to Enhance and applications for any thereof, other than commercial,
off-the-shelf products, (hereinafter the "INTANGIBLES") are described or
referenced in SCHEDULE 4.10. Sellers hereby specifically acknowledge that all
right, title and interest in and to all patents and software listed on SCHEDULE
4.10 as patents owned by Enhance are owned by Enhance or Enhance has a right to
use same and that the ownership of such patents and software will be transferred
as part of Enhance to Purchaser as part of the transaction contemplated hereby,
subject to any filings required by the USPTO. No officer, director, shareholder
or employee of Enhance or any relative or spouse of any such person owns any
patents or patent applications or any inventions, software, secret formulae or
processes, trade secrets or other similar rights, nor is any of them a party to
any license agreement, used by or useful to Enhance or related to its business
except as listed in SCHEDULE 4.10.

         All of said Intangibles are enforceable and are free and clear of all
liens, security interests, charges, restrictions and encumbrances of any kind
whatsoever, and have not been licensed to any third party except as described in
SCHEDULE 4.10. Enhance has not been charged with, nor has it infringed or is it
threatened to be charged with infringement of, any patent, proprietary rights or
trade secrets of others in the conduct of its business, and, to the date hereof,
neither the Sellers nor Enhance has received any notice of conflict with or
violation of the asserted rights in intangibles or trade secrets of others.
Enhance is not now manufacturing any goods under a present permit, franchise or
license. The consummation of the transactions contemplated hereby will not alter
or impair any rights of Enhance in any such Intangibles or in any such permit,
franchise or license, except as described in SCHEDULE 4.10. The Intangibles are
in such form and of such quality and will be maintained in such a manner that
Enhance can, following the Closing, design, produce, manufacture, assemble and
sell the products and provide the services heretofore provided by it so that
such products and services meet applicable specifications and conform with the
standards of quality and cost of production standards heretofore met by it.
Enhance has the sole and exclusive right to use its corporate and trade names in
the jurisdictions where it transacts business.

4.11     MACHINERY AND EQUIPMENT.

         Except for items disposed of in the ordinary course of business, all
machinery, tools, furniture, fixtures, equipment, vehicles, leasehold
improvements and all other tangible personal property (hereinafter "FIXED
ASSETS") of the Company currently being used in the conduct of its business (the
"BUSINESS"), together with any machinery or equipment that is leased or operated
by the Company, are in fully serviceable working condition and repair. Schedule
4.11 describes all Fixed Assets owned by Enhance. All Fixed Assets owned, used

                                       5
<PAGE>

or held by the Company are situated at its business premises and are currently
used in its Business.

4.12     LISTS OF CONTRACTS, ETC.

         There is included in SCHEDULE 4.12 a list of the following items
(whether written or oral) relating to Enhance, which list identifies and fairly
summarizes each item (collectively, "CONTRACTS"):

         (a)      All joint venture contracts of Enhance or affiliates relating
                  to the Business;

         (b)      All contracts of Enhance relating to (a) obligations for
                  borrowed money and (b) obligations under capital leases, (e)
                  debt of others secured by a lien on any asset of Enhance, and
                  (f) debts of others guaranteed by Enhance;

         (c)      All agreements of Enhance relating to the supply of raw
                  materials for and the distribution of the products of its
                  business, including without limitation all sales agreements,
                  manufacturer's representative agreements and distribution
                  agreements of whatever magnitude and nature, and any
                  commitments therefor;

         (d)      All contracts that individually provide for aggregate future
                  payments to or from Enhance of $25,000 or more, to the extent
                  not included in (a) through (c) above;

         (e)      All contracts of Enhance that have a term exceeding one year
                  and that may not be cancelled without any liability, penalty
                  or premium, to the extent not included in (a) through (d)
                  above;

         (f)      All contracts, agreements and commitments of Enhance set forth
                  in SCHEDULE 4.12 are valid, binding and in full force and
                  effect, and (ii) neither Enhance nor, any other party to any
                  such contract, agreement, or commitment has materially
                  breached any provision thereof or is in default thereunder.
                  Immediately after the Closing, each such contract, agreement
                  or commitment will continue in full force and effect without
                  the imposition or acceleration of any burdensome condition or
                  other obligation on Enhance resulting from the sale of the
                  Shares by the Sellers.

4.13     COMPLIANCE WITH THE LAW.

         Enhance is not in violation of any applicable federal, state, local or
foreign law, regulation or order or any other, decree or requirement of any
governmental, regulatory or administrative agency or authority or court or other
tribunal (including, but not limited to, any law, regulation order or
requirement relating to securities, properties, business, products,
manufacturing processes, advertising, sales or employment practices, terms and
conditions of employment, occupational safety, health and welfare, conditions of
occupied premises, product safety and liability, civil rights, or environmental
protection, including, but not limited to, those related to waste management,
air pollution control, waste water treatment or noise abatement), except where
such would not have a Material Adverse Effect. Enhance has not been and is not
now charged with, or to Enhance's knowledge under investigation with respect to,
any violation of any applicable law, regulation, order or requirement relating
to any of the foregoing, nor, to Enhance's knowledge after due inquiry, are

                                       6
<PAGE>

there any circumstances that would or might give rise to any such violation.
Enhance has filed all reports required to be filed with any governmental,
regulatory or administrative agency or authority, except where the failure to
file such would not have a Material Adverse Effect.

4.14     LITIGATION.

         Except as specifically identified on the Balance Sheet or footnotes
thereto or set forth in SCHEDULE 4.14:

         (a)      There are no legal, administrative, arbitration or other
                  proceedings or governmental investigations pending or, to
                  Enhance's knowledge, threatened, against the Sellers or
                  Enhance, relating to its Business or Enhance or its properties
                  (including leased property), or the transactions contemplated
                  by this Agreement, nor is there any basis known to Enhance for
                  any such action.

         (b)      There are no judgments, decrees or orders of any court, or any
                  governmental department, commission, board, agency or
                  instrumentality binding Enhance relating to its Business or
                  Enhance the effect of which is to prohibit any business
                  practice or the acquisition of any property or the conduct of
                  any business by Enhance or which limit or control or otherwise
                  would have a Material Adverse Affect on its method or manner
                  of doing business.

4.15     ABSENCE OF CERTAIN CHANGES OR EVENTS.

         Enhance has not, since December 31, 2008:

         (a)      Incurred any material obligation or liability (absolute,
                  accrued, contingent or otherwise), except in the ordinary
                  course of its business consistent with past practice or in
                  connection with the performance of this Agreement;

         (b)      Disposed of or permitted to lapse any patents or trademarks or
                  any patent or trademark applications material to the operation
                  of its Business; or

         (c)      Issued any stocks, bonds, or other corporate securities, or
                  made any declaration or payment of any dividend or any
                  distribution in respect of its capital stock.

4.16     ABSENCE OF CERTAIN COMMERCIAL PRACTICES.

         Enhance has not made any payment (directly or by secret commissions,
discounts, compensation or other payments) or given any gifts to another
business concern, to an agent or employee of another business concern or of any
governmental entity (domestic or foreign) or to a political party or candidate
for political office (domestic or foreign), to obtain or retain business for
Enhance or to receive favorable or preferential treatment, except for gifts and
entertainment given to representatives of customers or potential customers of
sufficiently limited value and in a form (other than cash) that would not be
construed as a bribe or payoff.

                                       7
<PAGE>

4.17     ENVIRONMENTAL MATTERS.

         The operations of Enhance are in compliance with all applicable laws
promulgated by any governmental entity which prohibit, regulate or control any
hazardous material or any hazardous material activity ("ENVIRONMENTAL LAWS") and
all permits issued pursuant to Environmental Laws or otherwise except for where
noncompliance or the absence of such permits would not, individually or in the
aggregate, have a Material Adverse Effect;

         Enhance has obtained all permits required under all applicable
Environmental Laws necessary to operate its business, except for any failures of
such which would not have a Material Adverse Effect;

         Enhance is not the subject of any outstanding written order or Contract
with any governmental authority or person respecting Environmental Laws or any
violation or potential violations thereof; and

         Enhance has not received any written communication alleging either or
both that Enhance may be in violation of any Environmental Law, or any permit
issued pursuant to Environmental Law, or may have any liability under any
Environmental Law.

         Each Seller, individually and not jointly, represents and warrants to
the Purchaser as of the Closing Date that:

4.18     INVESTMENT INTENT.

         The Notes are being acquired hereunder by the Seller for investment
purposes only, for Seller's own account, not as a nominee or agent and not with
a view to the distribution thereof. The Seller has no present intention to sell
or otherwise dispose of the Notes and will not do so except in compliance with
the provisions of the Securities Act of 1933, as amended, and applicable law.
The Seller understands that the Notes which may be acquired hereunder must be
held by Seller indefinitely unless a subsequent disposition or transfer of any
of said Notes is registered under the Securities Act of 1933, as amended, or is
exempt from registration therefrom. The Seller further understands that the
exemption from registration afforded by Rule 144 (the provisions of which are
known to such Seller) promulgated under the Securities Act of 1933, as amended,
depends on the satisfaction of various conditions, and that, if and when
applicable, Rule 144 may afford the basis for sales only in limited amounts.

4.19     INVESTMENT EXPERIENCE; SUITABILITY.

         The Seller is a sophisticated investor familiar with the type of risks
inherent in the acquisition of securities such as the Notes and the Seller's
financial position is such that the Seller can afford to retain the Notes for an
indefinite period of time without realizing any direct or indirect cash return
on Seller's investment.

4.20     OWNERSHIP

         With respect to Seller's Shares, Seller is the lawful record and
beneficial owner of all the Seller's Shares, free and clear of any liens,
pledges, encumbrances, charges, claims or restrictions of any kind and has, or

                                       8
<PAGE>

will have on the Closing Date, the absolute, unilateral right, power, authority
and capacity to enter into and perform this Agreement without any other or
further authorization, action or proceeding, except as specified herein.

4.21     OPTIONS AND RIGHTS

         There are no authorized or outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments, convertible securities or
other agreements or arrangements of any character or nature whatever under which
Seller is or may become obligated to assign or transfer any shares of capital
stock of Enhance. Upon the delivery to Purchaser on the Closing Date of the
certificate(s) representing the Shares, Purchaser will have good, legal, valid,
marketable and indefeasible title to all the Seller's Shares, free and clear of
any liens, pledges, encumbrances, charges, agreements, options, claims or other
arrangements or restrictions of any kind, other than those imposed by applicable
securities laws.

4.22     ABSENCE OF CERTAIN COMMERCIAL PRACTICES.

         Seller has not made any payment (directly or by secret commissions,
discounts, compensation or other payments) or given any gifts to another
business concern, to an agent or employee of another business concern or of any
governmental entity (domestic or foreign) or to a political party or candidate
for political office (domestic or foreign), to obtain or retain business for
Enhance or to receive favorable or preferential treatment, except for gifts and
entertainment given to representatives of customers or potential customers of
sufficiently limited value and in a form (other than cash) that would not be
construed as a bribe or payoff.

              ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER

         The Purchaser represents and warrants to each Seller and to Enhance, as
of the Closing Date, that:

5.1      ORGANIZATION AND GOOD STANDING OF THE PURCHASER.

         The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada. Purchaser has, as of
September 3rd, 2009, 5,000,000,000 shares of common stock, $0.001 par value,
authorized, of which 28,901,534 shares are issued and outstanding, 5,000 shares
of Series A Preferred Stock, $0.001 par value, of which 2,656 are issued and
outstanding, 100,000 shares of Series B Preferred Stock, $0.001 par value, of
which 0 are issued and outstanding, 12,000,000 shares of Series C Preferred
Stock, $0.001 par value, of which 5,000 are issued and outstanding, 25,000
shares of Series D Preferred Stock, $0.001 par value, of which 11,575 are issued
and outstanding and 25,000 shares of Series E Preferred Stock, $0.001 par value,
of which 5,708 are issued and outstanding.

                                       9
<PAGE>

5.2      AUTHORITY.

         (a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated herein have been, or will prior to Closing be,
duly and validly approved and acknowledged by all necessary corporate action on
the part of the Purchaser and the Agreement is enforceable in accordance with
its terms.

         (b) The execution of this Agreement and the delivery hereof to the
Sellers and the purchase contemplated herein have been, or will be prior to
Closing, duly authorized by the Purchaser's Board of Directors having full power
and authority to authorize such actions.

5.3      CONSENTS.

         (a)      The execution and delivery of this Agreement, the acquisition
                  of the Shares by Purchaser and the consummation of the
                  transactions herein contemplated, and the compliance with the
                  provisions and terms of this Agreement, are not prohibited by
                  the Articles of Incorporation or Bylaws of the Purchaser and
                  will not violate, conflict with or result in a breach of any
                  of the terms or provisions of, or constitute a default under,
                  any court order, indenture, mortgage, loan agreement, or other
                  agreement or instrument to which the Purchaser is a party or
                  by which it is bound.

         (b)      No consent, waiver, approval, order, permit or authorization
                  of, or declaration or filing with, or notification to, any
                  person or governmental body is required on the part of the
                  Purchaser in connection with the execution and delivery of
                  this Agreement or any other agreement referenced herein or the
                  compliance by Purchaser with any of the provisions hereof or
                  thereof.

5.4      LITIGATION.

         There are no legal proceedings pending or, to the best knowledge of the
Purchaser, threatened that are reasonably likely to prohibit or restrain the
ability of the Purchaser to enter into this Agreement or consummate the
transactions contemplated hereby.

5.5      INVESTMENT INTENT AND QUALIFICATION.

         The Purchaser is acquiring the Shares for its own account, for
investment purposes only and not with a view to the distribution (as such term
is used in Section 2(11) of the Securities Act of 1933, as amended (the
"SECURITIES ACT")) thereof. Purchaser understands that the Shares have not been
registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser has, or as of the Closing Date will have had, access to all
information Purchaser has requested and has, or will have, received satisfactory
answers to all questions Purchaser has regarding Enhance and the Shares.
Purchaser understands that the Shares which may be acquired hereunder must be
held by it indefinitely unless a subsequent disposition or transfer of any of
those Shares is registered under the Securities Act of 1933, as amended, or is
exempt from registration therefrom. Purchaser is a sophisticated investor
familiar with the type of risks inherent in the acquisition of securities such

                                       10
<PAGE>

as the Shares and Purchaser can bear the full risk, including the entire loss,
of the investment.

5.6      DUE AUTHORIZATION OF NOTES.

         The Notes, when delivered to the Sellers, shall be validly issued and
outstanding as fully paid and non-assessable, free and clear of any liens,
pledges, encumbrances, charges, agreements, options, claims or other
arrangements or restrictions of any kind.

5.7      ACCURACY OF INFORMATION.

         Purchaser's filings with the Securities and Exchange Commission (i) are
true, complete, and accurate as of their dates and none contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements made in it, in light of the circumstances under
which they were made, not misleading, and (ii) comply with the applicable
requirements, and since the date of the most recently filed Form 10-Q, there
have been no material changes in the business or financial condition other than
changes that would not have a Material Adverse Effect. When Purchaser has filed
necessary periodic reports, including, without limitation, the Form 10-K for its
most recently completed fiscal year and any subsequent quarterly reports, those
reports will be true, complete, and accurate as of their dates and none will
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made in it, in light of the
circumstances under which they were made, not misleading.

                              ARTICLE VI COVENANTS

6.1      ACCESS TO INFORMATION.

         Enhance agrees that, prior to the Closing Date, the Purchaser shall be
entitled, through its officers, employees and representatives (including,
without limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of Enhance and such
examination of the books, records and financial condition of Enhance and its
Subsidiaries as it reasonably requests and to make extracts and copies of such
books and records.

         Purchaser agrees that, prior to the Closing Date, Enhance shall be
entitled, through its officers, employees and representatives (including,
without limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of the Purchaser and
such examination of the books, records and financial condition of the Purchaser
as it reasonably requests and to make extracts and copies of such books and
records.

         No investigation prior to or after the date of this Agreement shall
diminish or obviate any of the representations, warranties, covenants or
agreements contained in this Agreement or any other agreement referenced herein.

                                       11
<PAGE>

6.2      CONDUCT OF THE BUSINESS PENDING THE CLOSING.

         (a)      Except as otherwise expressly contemplated by this Agreement
                  or with the prior written consent of the Purchaser, prior to
                  the Closing the Sellers shall, and shall cause Enhance to:

                  (i)      Conduct the business of Enhance only in the ordinary
                           course consistent with past practice;

                  (ii)     Use its best efforts to (A) preserve its present
                           business operations, organization (including, without
                           limitation, management and the sales force) and
                           goodwill of Enhance and (B) preserve its present
                           relationship with parties having business dealings
                           with Enhance; and

                  (iii)    Comply in all material respects with applicable laws.

         (b)      Except as otherwise expressly contemplated by this Agreement
                  or with the prior written consent of the Purchaser, prior to
                  the Closing the Sellers shall not, and shall cause Enhance not
                  to:

                  (i)      Transfer, issue, sell or dispose of any shares of
                           capital stock or other securities of Enhance or grant
                           options, warrants, calls or other rights to purchase
                           or otherwise acquire shares of the capital stock or
                           other securities of Enhance;

                  (ii)     Amend the Certificate of Incorporation or Bylaws of
                           Enhance;

                  (iii)    Subject to any lien (except for leases that do not
                           materially impair the use of the property subject
                           thereto in their respective businesses as presently
                           conducted), any of the properties or assets (whether
                           tangible or intangible) of Enhance;

                  (iv)     Acquire any material properties or assets or sell,
                           assign, transfer, convey, lease or otherwise dispose
                           of any of the material properties or assets (except
                           for fair consideration in the ordinary course of
                           business consistent with past practice) of Enhance;

                  (v)      Enter into any commitment for capital expenditures
                           out of the ordinary course;

                  (vi)     Permit Enhance to enter into any transaction or to
                           make or enter into any Contract which by reason of
                           its size or otherwise is not in the ordinary course
                           of business consistent with past practice;

                  (vii)    Permit Enhance to enter into or agree to enter into
                           any merger or consolidation with any corporation or
                           other entity, and not engage in any new business or
                           invest in, make a loan, advance or capital
                           contribution to or otherwise acquire the securities
                           of any other party;

                                       12
<PAGE>

                  (viii)   Agree to do anything prohibited by this Section 6.2
                           or anything which would make any of the
                           representations and warranties of the Sellers in this
                           Agreement or any other agreement referenced herein
                           untrue or incorrect in any material respect as of any
                           time through and including the Closing.

6.3      OTHER ACTIONS.

         Each of the Sellers and the Purchaser shall use its best efforts to (i)
take all actions necessary or appropriate to consummate the transactions
contemplated by this Agreement, and (ii) cause the fulfillment at the earliest
practicable date of all of the conditions to their respective obligations to
consummate the transactions contemplated by this Agreement.

6.4      USE OF NAME.

         The Sellers hereby agree that upon the consummation of the transactions
contemplated hereby, the Purchaser and Enhance shall have the sole right to the
use of the name "Enhance, Inc." and the Sellers shall not, and shall not cause
or permit any affiliate to, use such name or any variation or simulation
thereof.

6.5      TAX MATTERS.

         (a) Tax Periods Ending on or Before the Closing Date.

         The Sellers shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns for Enhance for all periods ending on or prior to the
Closing Date which are filed after the Closing Date as soon as practicable and
prior to the date due (including any proper extensions thereof).

         (b) Tax Periods Beginning Before and Ending After the Closing Date.

         Enhance or the Purchaser shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns of Enhance for Tax periods that begin
before the Closing Date and end after the Closing Date.

6.6      SECURITIES LAW FILINGS

         Purchaser shall make, in a timely manner, all filings under applicable
federal and state securities laws necessary in order to assure that exemptions
from registration are available for the transactions hereunder.

                        ARTICLE VII CONDITIONS TO CLOSING

7.1      CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.

         The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject to the fulfillment, on or prior to the
Closing Date, of each of the following conditions (any or all of which may be

                                       13
<PAGE>

waived by the Purchaser in whole or in part to the extent permitted by
applicable law):

         (a)      all representations and warranties of the Sellers contained
                  herein shall be true and correct as of the date hereof;

         (b)      the Sellers shall have performed and complied in all material
                  respects with all obligations and covenants required by this
                  Agreement to be performed or complied with by them on or prior
                  to the Closing Date;

         (c)      the Sellers shall have obtained all consents and waivers with
                  respect to the transactions contemplated by this Agreement;

         (d)      no legal proceedings shall have been instituted or threatened
                  or claim or demand made against the Sellers, Enhance, or the
                  Purchaser seeking to restrain or prohibit or to obtain
                  substantial damages with respect to the consummation of the
                  transactions contemplated hereby, and there shall not be in
                  effect any order by a governmental body of competent
                  jurisdiction restraining, enjoining or otherwise prohibiting
                  the consummation of the transactions contemplated hereby;

         (e)      the Purchaser shall have received the written resignations of
                  each director of Enhance.

Enhance may provide the Purchaser with information required by Article IV of
this Agreement within thirty days after the Closing Date. The Purchaser shall
consummate the transaction on the Closing Date without receiving that
information.

7.2      CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS.

         The obligations of the Sellers to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or on
the Closing Date, of each of the following conditions (any or all of which may
be waived by the Sellers in whole or in part to the extent permitted by
applicable law):

         (a)      all representations and warranties of the Purchaser contained
                  herein shall be true and correct as of the date hereof;

         (b)      the Purchaser shall have performed and complied in all
                  material respects with all obligations and covenants required
                  by this Agreement to be performed or complied with by
                  Purchaser on or prior to the Closing Date; and

         (c)      no legal proceedings shall have been instituted or threatened
                  or claim or demand made against the Sellers, Enhance, or the
                  Purchaser seeking to restrain or prohibit or to obtain
                  substantial damages with respect to the consummation of the
                  transactions contemplated hereby, and there shall not be in
                  effect any order by a governmental body of competent
                  jurisdiction restraining, enjoining or otherwise prohibiting
                  the consummation of the transactions contemplated hereby.

                                       14
<PAGE>

                     ARTICLE VIII DOCUMENTS TO BE DELIVERED

8.1      DOCUMENTS TO BE DELIVERED BY THE SELLERS.

         At or prior to the Closing, the Sellers shall deliver, or cause to be
delivered, to the Purchaser the following:

         (a)      stock certificates representing the Shares referred to in
                  Section 7.1(c) hereof, duly endorsed in blank or accompanied
                  by stock transfer powers and with all requisite stock transfer
                  tax stamps attached;

         (b)      certificate of good standing with respect to Enhance issued by
                  the Secretary of State of the State of incorporation, and for
                  each state, if any, in which Enhance is qualified to do
                  business as a foreign corporation, or other evidence of good
                  standing reasonably acceptable to the Purchaser; and

         (c)      such other documents as the Purchaser shall reasonably
                  request.

8.2      DOCUMENTS TO BE DELIVERED BY THE PURCHASER.

         At or prior to the Closing, the Purchaser shall deliver to the Sellers
the following:

         (a) The Notes to be delivered pursuant to 2.1(a) are delivered to the
Sellers; and

         (b) such other documents as the Sellers shall reasonably request.

                           ARTICLE IX INDEMNIFICATION

9.1      INDEMNIFICATION. Each individual Seller hereby agrees to indemnify and
         hold the Purchaser harmless from and against any losses, liabilities,
         obligations, damages, costs and expenses based upon, attributable to or
         resulting from the failure of any representation or warranty of that
         individual Seller set forth in Section 4 hereof to be true and correct
         in all respects as of the date made.

                             ARTICLE X MISCELLANEOUS

10.1     SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

         The parties hereto hereby agree that the representations and warranties
contained in this Agreement or in any certificate, document or instrument
delivered in connection herewith, shall survive the execution and delivery of
this Agreement, and the Closing hereunder, regardless of any investigation made
by the parties hereto, and continue in full force and effect for a period of one
year.

10.2     EXPENSES.

         Except as otherwise provided in this Agreement, the Sellers and the
Purchaser shall each bear its own expenses incurred in connection with the
negotiation and execution of this Agreement and each other agreement, document

                                       15
<PAGE>

and instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby.

         All sales, use, transfer, intangible, recordation, documentary stamp or
similar Taxes or charges, of any nature whatsoever, applicable to, or resulting
from, the transactions contemplated by this Agreement shall be borne by the
Sellers.

10.3     FURTHER ASSURANCES.

         The Sellers and the Purchaser each agrees to execute and deliver such
other documents or agreements and to take such other action as may be reasonably
necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.

10.4     GOVERNING LAW; SUBMISSION TO JURISDICTION.

         This Agreement shall be governed by and construed in accordance with
the laws of the United States of America and the State of New York, both
substantive and remedial, without regard to New York conflicts of law
principles. Any judicial proceeding brought against either of the parties to
this Agreement or any dispute arising out of this Agreement or any matter
related hereto shall be brought in the courts of the State of New York, New York
County, or in the United States District Court for the Southern District of New
York and, by its execution and delivery of this Agreement, each party to this
Agreement accepts the jurisdiction of such courts. The foregoing consent to
jurisdiction shall not be deemed to confer rights on any person other than the
parties to this Agreement

10.5     ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS.

         This Agreement represents the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof and can be
amended, supplemented or changed, and any provision hereof can be waived, only
by written instrument making specific reference to this Agreement signed by the
party against whom enforcement of any such amendment, supplement, modification
or waiver is sought. No action taken pursuant to this Agreement, including
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representation, warranty, covenant or agreement contained herein. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.

10.6     COUNTERPARTS.

         This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument. In the

                                       16
<PAGE>

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.

10.7     NOTICES.

         All notices and other communications under this Agreement shall be in
writing and shall be deemed given when delivered personally, mailed by certified
mail, return receipt requested, or via recognized overnight courier service with
all charges prepaid or billed to the account of the sender to the parties (and
shall also be transmitted by facsimile to the parties receiving copies thereof)
at the following addresses (or to such other address as a party may have
specified by notice given to the other party pursuant to this provision):

         (a) Purchaser:

                    NuMobile, Inc.
                    2520 South Third Street #206
                    Louisville, KY 40208
                    Phone: 502-636-2807
                    Facsimile: 502-636-2806

                    Copy to:

                    Andrea Cataneo, Esq.
                    Sichenzia Ross Friedman Ference LLP
                    61 Broadway
                    New York, New York 10006
                    Phone:  (212) 930-9700
                    Facsimile: (212) 930-9725

         (b) Sellers:

                    Enhance Networks, Inc.
                    19925 Stevens Creek Blvd, Suite 100
                    Cupertino CA  95014
                    Phone:  408-244-8500
                    Facsimile:  1 800 290 7064

10.8     BINDING EFFECT; ASSIGNMENT; SEVERABILITY

         This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns. Nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights
in any person or entity not a party to this Agreement except as provided below.
No assignment of this Agreement or of any rights or obligations hereunder may be
made by either the Sellers or the Purchaser (by operation of law or otherwise)

                                       17
<PAGE>

without the prior written consent of the other parties hereto and any attempted
assignment without the required consents shall be void.

         If any provision of this Agreement is invalid or unenforceable, the
balance of this Agreement shall remain in effect.

                              [INTENTIONALLY BLANK]

                                       18
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed or caused to be
duly executed this Stock Purchase Agreement as of the date first set forth
above.

                                             NUMOBILE, INC.

                                             By: /s/ James Tilton
                                                 ------------------------------
                                                 Name: James Tilton
                                                 Title: Chief Executive Officer

                                             ENHANCE NETWORK COMMUNICATION, INC.

                                             By: /s/ Paykar Chamani
                                                 ------------------------------
                                                 Name: Paykar Chamani
                                                 Title: Director

                                             SELLERS:

                                             /s/ Aubrey C. Brown
                                             ----------------------------------
                                             Aubrey C. Brown

                                             ----------------------------------

                                             ----------------------------------

                                             ----------------------------------

                                             ----------------------------------

                                             ----------------------------------

                                       19
<PAGE>

                                   SCHEDULE 1

---------------------------- --------------------------- -------------------
SELLER                             SHARES                   PERCENTAGE
---------------------------- --------------------------- -------------------
Aubrey C. Brown                            1,500                  100%
---------------------------- --------------------------- -------------------
            TOTALS                         1,500                  100.00%
---------------------------- --------------------------- -------------------

<PAGE>

                                  SCHEDULE 4.5

                SCHEDULE 4.5 LIST OF SUBSIDIARIES AND AFFILIATES

None

<PAGE>

                                  SCHEDULE 4.10

                      SCHEDULE 4.10: INTELLECTUAL PROPERTY

IP: software product

Description:
Enhance Network Communication, Inc. has under development a proprietary Internet
Access Provisioning And Denial technology that greatly strengthens the ability
to insure access to the Internet is granted to only those persons or entities
entitled to such access.

<PAGE>

                                  SCHEDULE 4.11

                       ENHANCE NETWORK COMMUNICATION, INC.
                          PROPERTY AND EQUIPMENT DETAIL

THE TOTAL ASSETS OF ENHANCE ARE IN EXCESS OF $450,000.00 BUT HAVE NOT BEEN
DETAILED IN THIS SCHEDULE AT THE INSISTENCE OF OUR CUSTOMERS AND IN AGREEMENT
WITH THE PURCHASER.

<PAGE>

                                  SCHEDULE 4.12

                       ARTICLE XI SCHEDULE 4.12: CONTRACTS

Reseller:          See Document - 3Com Corporation

<PAGE>

                                  SCHEDULE 4.14

                           ACCRUED LIABILITIES LEDGER

This accrued liability ledger documents Enhance Network Communication, Inc.
liabilities in excess of $10,000:

     1. Resource Operations of NG - $825K

There is no current litigation involving Enhance Networks, Inc.

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