Document:

exv10w1

 

Exhibit 10.1

Restricted Equity Purchase Agreement

THIS Restricted Equity Purchase Agreement (this “Agreement”) is made and entered into
as of April 2, 2007, between Innuity, Inc., a corporation organized and existing under the laws of
Utah, having an address of 8644 154th NE, Redmond, WA 98053 (the “Company”), and
Mercatus & Partners, Limited (the “Purchaser”).

     WHEREAS, PURCHASER desires to purchase Shares of the Company; and

     WHEREAS, Company desires for Purchaser to purchase Shares of the Company.

     NOW, THEREFORE, subject to the terms and conditions set forth in this Agreement, for good,
valuable and binding consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound hereby, now agree as follows:

ARTICLE I

INTRODUCTION AND DEFINITIONS

     This Agreement is entered into by the parties for purchase of equity shares of the Company by
the Purchaser. This is a delayed purchase transaction not an immediate funding. The
Company recognizes and agrees that the Purchaser shall have up to thirty (30) days, as set forth in
this Agreement to tender the Purchase Price to the Company through the intermediary Custodian and
Purchaser, once the valuation and purchase of the shares is made in accordance with the terms of
this Agreement. The Company shall have the right to contact the Custodian administrator for
Purchaser account verification and for confirmation of the share status, location and control.
Purchaser shall have up to thirty (30) days from the date of delivery of the Shares in the name of
the Purchaser to the Custodian to pay the Purchase Price.

     Certain Definitions. As used in this Agreement, and unless the context requires a
different meaning, the following terms have the meanings indicated:

     “Affiliate” means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such Person. For the
purposes of this definition, “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”) shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or by contract or
otherwise.

     “Agreement” shall have the meaning set forth in the introductory paragraph of this
Agreement.

     “Attorney-in-fact” means the agent of the Purchaser or Designee, R. Matthew Tullis.
The attorney-in-fact, R. Matthew Tullis, has limited oversight authority of the Purchaser and the
Custodian to submit terms sheets, execute the Agreement as well as oversight authority, verify
share deposit, valuation process and share transaction status.

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     “Business Day” means any day except Saturday, Sunday, any day which shall be a legal
holiday or a day on which banking institutions in the State of New York are authorized or required
by law or other government actions to close.

     “Change of Control” means the acquisition, directly or indirectly, by any Person of
ownership of, or the power to direct the exercise of voting power with respect to, a majority of
the issued and outstanding voting shares of the Company.

     “Closing” or “Closing Date” shall be the date of the payment by the Purchaser
of the Purchase Price.

     “Company” shall mean (Company) as set forth in the introductory paragraph.

     “Control Person” shall have the meaning set forth in Section 4.9(a)(i).

     “Custodian” means a financial institution that has the legal responsibility for a
customer’s securities. This implies management as well as safekeeping. The Custodian for this
Agreement is named in Schedule 1.

     “Default” means any event or condition which constitutes an Event of Default or which
with the giving of notice or lapse of time or both would, unless cured or waived, become an Event
of Default.

     “Depository” means a company which holds securities deposited by others, and where
exchanges of these securities takes place.

     “Disclosure Documents” means the Company’s reports filed under the Exchange Act with
the SEC.

     “Event of Default” shall have the meaning set forth in Section 3.1(o).

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

     “Execution Date” means the date of this Agreement first written above.

     “Final Market Price” means the average of the last sale price for the Common Stock of
the Company as reported on the OTCBB Over-The-Counter (OTC) listing service, for the ten (10)
Business days immediately preceding the Closing. Final Market Price shall be agreed to by the
parties as evidenced by the execution by both Company and Purchaser of the Funding Addendum
Schedule 2, which is made a part of this Agreement.

     “Final Purchase Price’” means the Final Market Price multiplied by the Purchase Price
Percentage.

     “Funding Addendum” Schedule 2 shall mean the instructions provided to Purchaser by
Company setting out the Final Market Price and directing how the Purchase Price is to be remitted.

     “Indemnified Party” shall have the meaning set forth in Section 4.9(b).

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     “Indemnifying Party” shall have the meaning set forth in Section 4.9(b).

     “Losses” shall have the meaning set forth in Section 4.9(a)(i).

 

     “Material Adverse Effect” shall have the meaning set forth in Section 3.1(a).

     “NASD” means the National Association of Securities Dealers, Inc.

     “NASDAQ” shall mean the Nasdaq Stock Market, Inc.®

     “Number of Shares” means the number of shares to be received by the
Custodian which is seven million four hundred thousand (7,400,000) shares.

     “OTCBB” shall mean the NASD over-the counter Bulletin Board.®

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

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

     “Purchase Price” shall have the meaning set forth in Article II.

     “Purchase Price Percentage” means forty five percent (45%).

     “Purchaser” shall have the meaning set forth in the introductory paragraph.

     “Reporting Issuer” means a company that is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act.

     “Required Approvals” shall have the meaning set forth in Section 3.1(g).

     “Securities” means the Common Stock and stock of any other class into which such
shares may hereafter have been reclassified or changed.

     “SEC” means the Securities and Exchange Commission.

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

     “Shares” shall have the meaning set forth in Article II.

     “Subsidiaries” shall have the meaning set forth in Section 3.1(a).

     “Trading Day” means (a) a day on which the Common Stock is quoted on NASDAQ, the OTCBB
or the principal stock exchange on which the Common Stock has been listed, or (b) if the Common
Stock is not quoted on NASDAQ, the OTCBB or any stock exchange.

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     “Transaction Documents” means this Agreement and all exhibits and schedules hereto,
and all other documents, instruments and writings required pursuant to this Agreement.

     “U.S.” means the United States of America.

ARTICLE II

     The Purchaser hereby agrees to purchase 7,400,000 shares of the Common Stock of the Company
(the “Shares”). The Purchase Price to be paid by the Purchaser shall be determined at Closing. The
Purchase Price shall be the Final Purchase Price as defined herein multiplied by the Number of
Shares deposited with the Custodian.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     3.1 Representations, Warranties and Agreements of the Company. The Company hereby
makes the following representations and warranties to the Purchaser, all of which shall survive the
Closing:

      (a) Organization and Qualification. The Company is a publicly traded
corporation, duly incorporated, validly existing and in good standing under the laws of the
State of Utah, with the requisite corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. The Company has no
subsidiaries other than as set forth on Schedule 3.1(a) attached hereto (collectively,
the “Subsidiaries”). Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its incorporation,
with the full corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation 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, would not, individually or in the aggregate, have a material adverse effect
on the results of operations, assets, prospects, or financial condition of the Company and the
Subsidiaries, taken as a whole (a “Material Adverse Effect”).

      (b) Authorization, Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated hereby and by each
other Transaction Document and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and each of the other Transaction
Documents by the Company and the consummation by it of the transactions contemplated hereby
and thereby has been duly authorized by all necessary action on the part of the Company. This
Agreement and each of the other Transaction Documents has been or will be duly executed by the
Company

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and when delivered in accordance with the terms hereof or thereafter will constitute
the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies or by other equitable principles
of general application.

      (c) Capitalization. The authorized, issued and outstanding capital stock of the
Company is set forth on Schedule 3.1(c). No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or
similar rights arising out of any agreement or understanding with the Company by virtue of
this Agreement. Except as disclosed in Schedule 3.1(c), there are no outstanding
options, warrants, scripts, rights to subscribe to, registration rights, calls or commitments
of any character whatsoever relating to securities, rights or obligations convertible into 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
securities or rights convertible or exchangeable into shares of Common Stock. Neither the
Company nor any Subsidiary is in violation of any of the provisions of its Certificate of
Incorporation, bylaws or other charter documents.

      (d) Issuance of Securities. The Shares have been duly and validly authorized for
issuance, offer and sale pursuant to this Agreement and, when issued and delivered as provided
hereunder against payment in accordance with the terms hereof, shall be valid and binding
obligations of the Company enforceable in accordance with their respective terms.

      (e) Use of Proceeds. The proceeds from the sale of shares shall be used by the
Company for payment of obligations and general working capital needs consistent with financial
budgets and approved from time to time by the Board of Directors.

      (f) No Conflicts. The execution, delivery and performance of this Agreement and
the other Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of its Certificate of Incorporation or bylaws (each as amended through the date
hereof) or (ii) be subject to obtaining any consents except those referred to in Section
3.1(f), conflict with, or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the
Company is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental authority to
which the Company or its Subsidiaries is subject (including, but not limited to, those of
other countries and the federal and state securities laws and regulations), or by which any
property or asset of the Company or its Subsidiaries is bound or affected, except in the case
of clause (ii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a

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Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted in
violation of any law, ordinance or regulation of any governmental authority.

      (g) Consents and Approvals. Except as specifically set forth in Schedule
3.1(g), neither the Company nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, 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 this Agreement and each of the other
Transaction Documents (together with the consents, waivers, authorizations, orders, notices
and filings referred to herein or in Schedule 3.1(g), the “Required
Approvals”).

      (h) Litigation; Proceedings. Except as specifically disclosed in Schedule
3.1(h), there is no action, suit, notice of violation, proceeding or investigation pending
or, to the best knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries or any of their respective properties before or by any court, governmental
or administrative agency or regulatory authority (federal, state, county, local or foreign)
which (i) relates to or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Shares, (ii) could, individually or in the aggregate, have a
Material Adverse Effect or (iii) could, individually or in the aggregate, materially impair
the ability of the Company to perform fully on a timely basis its obligations under the
Transaction Documents.

      (i) No Default or Violation. Except as set forth in Schedule 3.1(i)
hereto, neither the Company nor any Subsidiary (i) is in default under or 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, except such conflicts or defaults as
do not have a Material Adverse Effect, (ii) is in violation of any order of any court,
arbitrator or governmental body, except for such violations as do not have a Material Adverse
Effect, or (iii) is in violation of any statute, rule or regulation of any governmental
authority which could (individually or in the aggregate) adversely affect the legality,
validity or enforceability of this Agreement, have a Material Adverse Effect or adversely
impair the Company’s ability or obligation to perform fully on a timely basis its obligations
under this Agreement.

      (j) Disclosure Documents. The Disclosure Documents are accurate in all material
respects and do not contain any untrue statement of 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. Violation of this
clause is and will be considered grounds for default and could result in the termination
of this Agreement.

      (k) Non-Registered Offering Neither the Company nor any Person acting on its
behalf has taken or will take any action (including, without limitation, any offering of any
securities of the Company under circumstances which would require the integration of such
offering with the offering of the Shares under the Securities Act) which might subject the
offering, issuance or sale of the Shares to the registration requirements of Section 5 of the
Securities Act.

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      (l) Registration Rights. The Company agrees: (1) to instruct and require its
transfer agent to remove the restrictive legend upon the request of Purchaser if the Shares
are eligible for resale under Rule 144(k) promulgated under the Securities Act or if the
resale of the Shares has been registered under the Securities Act; (2) there will be no
trading by affiliates of the Company (as defined in the Securities Act) within thirty (30)
days of the Closing; or (3) there will be no selling by affiliates of the Company during the
fifteen (15) months subsequent to the date of Closing or three (3) months following the
registration of Purchaser shares, whichever is sooner. The Company covenants and agrees that,
in the event the Purchaser is deemed to be an “affiliate” of the Company pursuant to the
Securities Act, as of or at any time subsequent to the second anniversary of the Closing Date,
the Company will, within 120 days of the Company’s receipt of the Purchaser’s request, file a
registration statement with the SEC to register for immediate resale pursuant to the
Securities Act all Shares then held by the Purchaser (including any shares of common stock
issuable upon conversion of the Shares then held by the Purchaser) (the “Registrable
Securities”). The Company shall use its best efforts to cause such registration statement to
be declared effective under the Securities Act as promptly as possible after the filing
thereof. The Company shall use its reasonable commercial efforts to keep such registration
statement continuously effective under the Securities Act until the date which is the earlier
date of when (i) all Registrable Securities have been sold, or (ii) all Registrable Securities
covered by such registration statement may be sold immediately without registration under the
Securities Act and without volume restrictions pursuant to Rule 144(k). The Company shall pay
all expenses of such registration, including registration and filing fees, “blue sky” fees and
expenses and fees and expenses of counsel to the Company and one counsel to the Purchaser.
All selling commissions applicable to the sale of Registrable Securities, including any fees
and disbursements of any special counsel to the Purchaser beyond those included above, shall
not be the responsibility of the Company. The Company and the Purchaser agree that the
determination of the Purchaser’s status as an “affiliate” will be made by counsel to the
Purchaser in good faith after consultation with counsel to the Company.

      (m) Regulation S. Neither the Company nor any affiliate or any person
acting on the Company’s behalf, has made or is aware of any “directed selling efforts” in the
United States, which is defined in Regulation S to be any activity undertaken for the purpose
of, or that could reasonably be expected to have the effect of, conditioning the market in the
United States for any of the Shares being purchased hereby.

      (n) Due Diligence. The Company agrees to cooperate with the Purchaser and
provide access to the Company’s books and records so that the Purchase is able to conduct a
due diligence review of the Company and its business. The Purchaser shall have up to thirty
(30) days following execution of this Agreement to conduct such due diligence review.

      (o) Material Misrepresentations. The Company agrees that all materials and
information it discloses or otherwise provides to the Purchaser relating to this Agreement and
the transactions contemplated pursuant to this Agreement are

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accurate in all material respects
and do not contain any untrue statement of material fact or omit to state any material face
necessary in order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. Violation of this clause is and will be considered an
event of default permitting the Purchaser to terminate the Agreement immediately.

      (p) Company Funding Agent. In the event the Company has any agreement for
compensation with any party to raise the funds on behalf of the Company (“Company Funding
Agent Agreement”), the Company will disclose the terms of that Company Funding Agent Agreement
to Purchaser prior to the execution of this Agreement. Following the execution of this
Agreement, the Attorney-in-Fact shall be the Company contact for all information relating to
the status of funding, location of Shares, settlement of the payment of the Purchase Price and
any other information requests of the Company. Notwithstanding the above, in the event the
Purchase Price is not paid as required herein, the Company may directly contact the
Attorney-in-Fact to provide the Company notice of demand for the return of the Shares.

The Purchaser acknowledges and agrees that the Company makes no representation or warranty with
respect to the transactions contemplated hereby other than those specifically set forth in this
Section 3.1.

     3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents
and warrants to the Company as follows:

      (a) Organization; Authority. The Purchaser is a corporation, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its formation with
the requisite power and authority to enter into and to consummate the transactions
contemplated hereby and by the other Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The acquisition of the Shares to be purchased by the
Purchaser hereunder has been duly authorized by all necessary action on the part of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser and
constitutes the valid and legally binding obligation of the Purchaser, enforceable against it
in accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to, or affecting
generally the enforcement of, creditors rights and remedies or by other general principles of
equity.

      (b) Investment Intent. The Purchaser is acquiring the Shares to be purchased by
it hereunder, for its own account for investment purposes only and not
with a view to or for distributing or reselling such Shares, or any part thereof or
interest therein. Purchaser’s right, subject to the provisions of this Agreement, to sell or
otherwise dispose of all or any part of such Shares shall be in compliance with applicable
federal and state securities laws.

      (c) Experience of Purchaser. The 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

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an investment in the Shares
to be acquired by it hereunder, and has so evaluated the merits and risks of such investment.

      (d) Ability of Purchaser to Bear Risk of Investment. The Purchaser is able to
bear the economic risk of an investment in the Shares to be acquired by it hereunder and, at
the present time, is able to afford a complete loss of such investment.

      (e) Reliance. The Purchaser understands and acknowledges that (i) the Shares
being offered and sold to it hereunder are being offered and sold without registration under
the Securities Act in a private placement that is exempt from the registration provisions of
the Securities Act under Section 4(2) of the Securities Act and (ii) the availability of such
exemption depends in part on, and that the Company will rely upon the accuracy and
truthfulness of, the foregoing representations and such Purchaser hereby consents to such
reliance.

      (f) Regulation S. Purchaser understands and acknowledges that (A) the Shares
have not been registered under the Securities Act, are being sold in reliance upon an
exemption from registration afforded by Regulation S; and that such Shares have not been
registered with any state securities commission or authority; (B) pursuant to the requirements
of Regulation S, the Shares may not be transferred, sold or otherwise exchanged unless in
compliance with the provisions of Regulation S and/or pursuant to registration under the
Securities Act, or pursuant to an available exemption hereunder; and (C) Purchaser is under no
obligation to register the Shares under the Securities Act or any state securities law, or to
take any action to make any exemption from any such registration provisions available except
as agreed in Section 3.1 (c) above.

     Purchaser is not a U.S. person and is not acquiring the Shares for the account of any U.S.
person; (B) no director or executive officer of Purchaser is a national or citizen of the United
States; and (C) it is not otherwise deemed to be a “U.S. Person” within the meaning of Regulation
S.

     Purchaser was not formed specifically for the purpose of acquiring the Shares purchased
pursuant to this Agreement.

     Purchaser is purchasing the Shares for its own account and risk and not for the account or
benefit of a U.S. Person as defined in Regulation S and no other person has any interest in or
participation in the Shares or any right, option, security interest, pledge or other interest in or
to the Shares. Purchaser understands, acknowledges and agrees that it must bear the economic risk
of its investment in the Shares for an indefinite period of time and that prior to any such offer
or sale, the Company may require, as a condition to effecting a transfer of the
Shares, an opinion of counsel, acceptable to the Company, as to the registration or exemption
therefrom under the Securities Act and any state securities acts, if applicable.

     Purchaser will, after the expiration of the Restricted Period, as set forth under Regulation S
Rule 903(b) (3) (iii) (A), offer, sell, pledge or otherwise transfer the Shares only in accordance
with Regulation S, or pursuant to an available exemption under the Securities Act and, in any case,
in accordance with applicable state securities laws or following the effective date of a
Registration of the Shares by the Company. The transactions contemplated

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by this Agreement have neither been pre-arranged with a purchaser who is in the U.S. or who is a U.S. Person, nor are they
part of a plan or scheme to evade the registration provisions of the United States federal
securities laws.

     The offer leading to the sale evidenced hereby was made in an “offshore transaction.” For
purposes of Regulation S, Purchaser understands that an “offshore transaction” as defined under
Regulation S is any offer or sale not made to a person in the United States and either (A) at the
time the buy order is originated, the purchaser is outside the United States, or the seller or any
person acting on his behalf reasonably believes that the purchaser is outside the United States; or
(B) for purposes of (1) Rule 903 of Regulation S, the transaction is executed in, or on or through
a physical trading floor of an established foreign exchange that is located outside the United
States or (2) Rule 904 of Regulation S, the transaction is executed in, on or through the
facilities of a designated offshore securities market, and neither the seller nor any person acting
on its behalf knows that the transaction has been prearranged with a buyer in the U.S.

     Neither the Purchaser nor any affiliate or any person acting on the Purchaser’s behalf, has
made or is aware of any “directed selling efforts” in the United States, which is defined in
Regulation S to be any activity undertaken for the purpose of, or that could reasonably be expected
to have the effect of, conditioning the market in the United States for any of the Shares being
purchased hereby.

     Purchaser understands that the Company is the seller of the Shares which are the subject of
this Agreement, and that, for purpose of Regulation S, a “distributor” is any underwriter, dealer
or other person who participates, pursuant to a contractual arrangement, in the distribution of
securities offered or sold in reliance on Regulation S and that an “affiliate” is any partner,
officer, director or any person directly or indirectly controlling, controlled by or under common
control with any person in question. Purchaser agrees that Purchaser will not, during the
Restricted Period set forth under Rule 903(b)(iii)(A), act as a distributor, either directly or
through any affiliate, nor shall it sell, transfer, hypothecate or otherwise convey the Shares
other than to a non-U.S. Person.

     Purchaser acknowledges that the Shares will bear a legend in the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED AND SOLD IN AN “OFFSHORE
TRANSACTION” IN RELIANCE UPON REGULATION S AS PROMULGATED BY THE SECURITIES AND EXCHANGE
COMMISSION. ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND MAY NOT BE TRANSFERRED OTHER THAN IN
ACCORDANCE WITH REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY.

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

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ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

     4.1 Manner of Sale. The Shares are being issued pursuant to Section 4(2) of the
Securities Act, and Rule 506 of Regulation D and Regulation S thereunder.

     4.2 Non-Shorting. Purchaser agrees to not engage in short sales of the Shares nor has
it engaged in short sales of the Shares.

     4.3 Notice of Certain Events. For so long as the Purchaser shall own any Shares, the
Company shall, on a continuing basis, (i) advise the Purchaser promptly after obtaining knowledge
of, and, if requested by the Purchaser, confirm such advice in writing, of the issuance by any
state securities commission of any stop order suspending the qualification or exemption from
qualification of the Shares, for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any state securities commission or other regulatory authority, (ii)
use its best efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption from qualification of the Shares under any state securities or Blue Sky
laws, and (iii) if at any time any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from qualification of the Shares under any
such laws, use its best efforts to obtain the withdrawal or lifting of such order at the earliest
possible time. For so long as the Purchaser shall own any Shares and during any period in which
the Company has not filed all forms, reports and documents required to be filed by it with the SEC,
the Company shall advise the Purchaser promptly after obtain knowledge of any event that makes any
statement of a material fact made by the Company in Section 3.1 or in the Disclosure
Documents untrue or that requires the making of any additions to or changes in Section 3.1
or in the Disclosure Documents in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading.

     4.4 Blue Sky Laws. The Company shall cooperate with the Purchaser in connection with
the exemption from registration of the Shares under the securities or Blue Sky laws of such
jurisdictions as the Purchaser may request; provided, however, that neither the
Company nor its Subsidiaries shall be required in connection therewith to qualify as a foreign
corporation where they are not now so qualified. The Company agrees that it will execute all
necessary documents and pay all necessary state filing or notice fees to enable the Company to sell
the Shares to the Purchaser.

     4.5 Integration. The Company shall ensure that no Affiliate shall sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares in
a manner that would require the registration under the Securities Act of the sale of the
Shares to the Purchaser.

     4.6 Furnishing of Rule 144 Materials. The Company shall, for so long as any of the
Shares remain outstanding and during any period in which the Company is not subject to Section 13
or 15(d) of the Exchange Act, make available to any registered holder of the Shares (“Holder” or
“Holders”) in connection with any sale thereof and any prospective purchaser of such Shares from
such Person, such information in accordance with Rule 144 or

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Regulation S as promulgated under the
Securities Act as is required to sell the Shares under Rule 144 promulgated under the Securities
Act.

     4.7 Solicitation Materials. The Company shall not (i) distribute any offering
materials in connection with the offering and sale of the Shares other than the Disclosure
Documents and any amendments and supplements thereto prepared in compliance herewith or (ii)
solicit any offer to buy or sell the Shares or, if applicable, by means of any form of general
solicitation or advertising.

     4.8 Listing of Common Stock. If the Common Stock is or shall become listed on the
OTCBB or on another exchange, the Company shall (a) use its best efforts to maintain the listing of
its Common Stock on the OTCBB or such other exchange on which the Common Stock is then listed until
two (2) years from the date hereof, and (b) shall provide to the Purchaser evidence of such
listing.

     4.9 Indemnification.

      (a) Indemnification

         (i) The Company shall, notwithstanding termination of this Agreement and without
limitation as to time, indemnify and hold harmless the Purchaser and its officers,
directors, agents, employees and affiliates, each Person who controls or the Purchaser
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
(each such Person, a “Control Person”) and the officers, directors, agents,
employees and affiliates of each such Control Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and attorneys’ fees) and expenses
(collectively, “Losses”), as incurred, arising out of, or relating to, a breach or
breaches of any representation, warranty, covenant or agreement by the Company under this
Agreement or any other Transaction Document.

         (ii) The Purchaser shall, notwithstanding termination of this Agreement and without
limitation as to time, indemnify and hold harmless the Company, its officers, directors,
agents and employees, each Control Person and the officers, directors, agents and employees
of each Control Person, to the fullest extent permitted by application law, from and against
any and all Losses, as incurred, arising out of, or relating to, a breach or breaches of any
representation, warranty, covenant or agreement by the Purchaser under this Agreement or any
other Transaction Document.

      (b) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
“Indemnified Party”), such Indemnified Party promptly
shall notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to
the extent that it shall be finally

12

 

determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced
the Indemnifying Party.

     An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to
pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party
in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right
to assume the defense of the claim against the Indemnified Party but will retain the right to
control the overall Proceedings out of which the claim arose and such counsel employed by the
Indemnified Party shall be at the expense of the Indemnifying Party). The Indemnifying Party shall
not be liable for any settlement of any such Proceeding affected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

     All fees and expenses of the Indemnified Party to which the Indemnified Party is entitled
hereunder (including reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of
written notice thereof to the Indemnifying Party.

     No right of indemnification under this Section shall be available as to a particular
Indemnified Party if there is a non-appealable final judicial determination that such Losses arise
solely out of the negligence or bad faith of such Indemnified Party in performing the obligations
of such Indemnified Party under this Agreement or a breach by such Indemnified Party of its
obligations under this Agreement.

      (c) Contribution. If a claim for indemnification under this Section
is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this
Section would apply by its terms (other than by reason of exceptions provided
in this Section), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other and the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions or omissions that resulted in such

13

 

Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether there was a judicial determination that such Losses arise in
part out of the negligence or bad faith of the Indemnified Party in performing
the obligations of such Indemnified Party under this Agreement or the
Indemnified Party’s breach of its obligations under this Agreement. The
amount paid or payable by a party as a result of any Losses shall be deemed to
include any attorneys’ or other fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party.

      (d) Non-Exclusivity. The indemnity and contribution agreements
contained in this Section are in addition to any obligation or liability that
the Indemnifying Parties may have to the Indemnified Parties.

ARTICLE V

MISCELLANEOUS

     5.1 Fees and Expenses. Except as set forth in this Agreement, each party shall pay
the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation, preparation, execution, delivery
and performance of this Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of the Shares (and, upon conversion or exercise thereof, the
Shares) pursuant hereto. The Purchaser shall be responsible for any taxes payable by the Purchaser
that may arise as a result of the investment hereunder or the transactions contemplated by this
Agreement or any other Transaction Document. The Company shall pay all costs, expenses, fees and
all taxes incident to and in connection with: (A) the issuance and delivery of the Shares, (B) the
exemption from registration of the Shares for offer and sale to the Purchaser under the securities
or Blue Sky laws of the applicable jurisdictions, (C) the preparation of certificates for the
Shares (including, without limitation, printing and engraving thereof), and (D) all fees and
expenses of counsel and accountants of the Company. The Company shall pay to Purchaser the fees
which are defined in the Schedule 1(a) executed by the Company and Purchaser, said payments to be
remitted upon the execution of this Agreement or paid from the gross proceeds due the Company at
time of payment of the Purchase Price to the Company.

     5.2 Entire Agreement. This Agreement, together with all of the Exhibits and Schedules
annexed hereto, and any other Transaction Document contains 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. This Agreement shall be deemed to have been drafted
and negotiated by both parties hereto and no presumptions as to interpretation, construction or
enforceability shall be made by or against either party in such regard.

14

 

     5.3 Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered to
the address designated below by hand or by nationally recognized overnight courier services (costs
prepaid); or (b) upon facsimile transmission (with written transmission confirmation report) at
the number designated below (if delivered on a Business Day during normal business hours where
such notice is to be received), or the first Business Day following such delivery (if delivered
other than on a Business Day during normal business hours where such notice is to be received)
whichever shall first occur. The addresses for such communications shall be:

	 	 	 
	If to the Company:

	 	Innuity, Inc.
	 

	 	8644 154th Avenue NE
	 

	 	Redmond, WA 98052
	 

	 	Attn: President
	 

	 	Fax: (425) 497-9909
	 
	 	 
	With copies to:

	 	DLA Piper US LLP
	 

	 	701 Fifth Avenue, Suite 7000
	 

	 	Seattle, WA 98104
	 

	 	Attn: Michael Hutchings
	 

	 	Fax: (206) 839-4801
	 
	 	 
	If to the Purchaser:

	 	Mercatus & Partners, Limited
	 

	 	c/o R. Matthew Tullis
	 

	 	115 Mauldin Dr
	 

	 	Alpharetta, GA 30004
	 

	 	Fax: (678) 240-9069
	 
	 	 
	With copies to:

	 	Mercatus & Partners, Limited
	 

	 	c/o Cary Masi
	 

	 	115 Mauldin Dr.
	 

	 	Alpharetta, GA 30004
	 

	 	Fax: (678) 240-9069
	 
	 	 
	 

	 	Parscale & Associates
	 

	 	c/o Dwight Parscale
	 

	 	25920 Stone Canyon
	 

	 	San Antonio, TX 78260
	 

	 	Fax: (830)-438-7938
	 
	 	 
	 

	 	Waterford Law Group
	 

	 	c/o Kurt V. Beasley
	 

	 	112 Westwood Place
	 

	 	Suite 200
	 

	 	Brentwood, TN 37027

     5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by both

15

 

the Company and the
Purchaser, or, in the case of a waiver, by the party against whom enforcement of any such waiver 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 other
provision, condition or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such right accruing to it
thereafter.

     5.5 Headings. The headings herein are for convenience only, do not constitute part of
this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

     5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns. The assignment by a
party of this Agreement or any rights hereunder shall not affect the obligations of such party
under this Agreement.

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

     5.8 Governing Law; Venue; Service of Process. The parties hereto acknowledge that the
transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to
the State of New York. The parties hereto agree that the internal laws of the State of New York
shall govern this Agreement and the exhibits hereto, including, but not limited to, all issues
related to usury. Any action to enforce the terms of this Agreement or any of its exhibits, or any
other Transaction Document shall be brought exclusively in the state and/or federal courts situate
in the County and State of New York. Service of process in any action by the Purchaser to enforce
the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition
to any other relevant documents, by commercial overnight courier to the Company at its principal
address set forth in this Agreement.

     5.9 Survival. The representations and warranties of the Company and the Purchaser
contained in this agreement shall survive the Closing. The provisions contained in Sections 4.9
(Indemnification), 5.1 (Fees and Expenses), 5.11 (Publicity), 5.13 (Limitation of Remedies), and
5.15 (Delivery of Purchase Price and Recall of Shares) shall survive termination of this Agreement.

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

     5.11 Publicity. The Company and the Purchaser shall consult with each other in
issuing any press releases or otherwise making public statements with respect to the transactions
contemplated hereby and neither party shall issue any such press release or otherwise make any such
public statement without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed; unless counsel for the

16

 

disclosing party deems such public
statement to be required by applicable federal and/or state securities laws. The Company shall
provide the Purchaser with a copy of its intended communication or filing prior to making it public
and giving Purchaser sufficient time to discuss it with the Company. Except as otherwise required
by applicable law or regulation, the Company will not disclose to any third party (excluding its
legal counsel, accountants and representatives) the names of the Purchaser.

     5.12 Severability. In case any one or more of the provisions of this Agreement shall
be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms
and provisions of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable
substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this
Agreement.

     5.13 Limitation of Remedies. With respect to claims by the Company or any person
acting by or through the Company, or by the Purchaser or any person acting through the Purchaser,
for remedies at law or at equity relating to or arising out of a breach of this Agreement,
liability, if any, shall, in no event, include loss of profits or incidental, indirect, exemplary,
punitive, special or consequential damages of any kind. The sole remedy for both parties under this
Agreement shall be the return of the Shares in accordance with Section 5.15. Request by Company for
return of Shares subsequent to the timeline set forth in 5.15 must be requested in writing pursuant
to 5.3.

     5.14 Delivery of Securities. The Company shall deliver the Shares directly to the
Custodian, in Purchaser’s name, within five days of the execution of this Agreement in accordance
with the directions provided in Schedule 1.

     5.15 Delivery of Purchase Price and Recall of Shares. The Purchaser shall, within
thirty (30) days following the delivery of the Shares to the Custodian, subject to the execution of
Schedule 2 by both Company and Purchaser, pay the Purchase Price to the Company via wire transfer
to the directed wire transfer bank and account as specified in the Funding Addendum Schedule 2
which is attached hereto.

If the Purchase Price is not received by the Company within thirty (30) days of the delivery of the
Shares to the Custodian in the name of the Purchaser, the Company may, at its discretion, demand
recall of the Shares, issue or cause to be issued a stop transfer order or other order impeding the
sale and delivery of any of the Shares, and terminate this Agreement. The Company may recall the
Shares by providing notice to the Purchaser pursuant to Section 5.3. If the Company recalls the
Shares, the Purchaser will use its best efforts, and will use its best
efforts to cause the Custodian to, transmit and deliver the Shares to the Company within 20 days
following the deliver of the recall notice pursuant to Section 5.3.

     5.16. Delivery of Opinion of Counsel. The Company hereby agrees that it hereby binds
itself, if requested in writing to the aforementioned address of the Company, by the Purchaser or
their designate or assignee, that it shall deliver, within five (5) days of such demand, an opinion
of counsel regarding the transferability or status of the Shares; provided, however, that if the
Company’s counsel requires additional information or representations from or with respect to the
Purchaser and/or its designate or assignee, then such opinion shall

17

 

not be required until five (5) days following the delivery of such additional information or representations.

     5.17. Duty for Due Diligence. The Company hereby agrees that it, and on behalf, its transfer
agent, and any accessed management of the Company by the Purchaser or designee banks or purchasers
shall cooperate in the verification of the originating nature of the Shares, the restriction period
of the Shares, and the transferability of the Shares during the due diligence period of the Shares
involved in this transaction. Such failure of information to said parties is acknowledged as
grounds for rejections by the Purchaser or their designees or assignees as described above.

18

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the date first indicated above.

	 	 	 	 	 
	 	Company

 	 
	 	By:  	/s/ 
John R. Wall
 	 
	 	 	Name: 	John R. Wall 	 
	 	 	Title: 	CEO 	 
	 
	 	Purchaser:

Mercatus & Partners, Limited

 	 
	 	By:  	/s/ Matthew
Tullis
 	 
	 	 	R. Matthew Tullis  POA on behalf of 	 
	 	 	Mercatus & Partners, Limited 	 
	 

19

 

SCHEDULE 1

	 	 	 
	 
	 	 
	Purchaser information:
	 	Mercatus & Partners Limited
	 
	 	Attention: Dr. Stefano Cevolo
	 
	 	Via S. Roberto Bellarmino #4
	 
	 	00142 Roma, Italy
	 
	 	 
	Corporate information:
	 	 
	 
	 	 
	Company Number:
	 	04500047
	Incorporated on:
	 	31/07/2002
	Company Name:
	 	Mercatus & Partners Limited
	Registered Office:
	 	54 Dukes Wood Drive
	 
	 	Gerrards Cross
	 
	 	Buckinghamshire SL9 7LR
	Company Type:
	 	Private Limited Company
	Country of Origin:
	 	United Kingdom
	 
	 	 
	Issue certificate in:
	 	Antares Trading Fund Mercatech SP
	 
	 	 
	 
	 	 
	Custodian:
	 	Maximum Financial Investment Group
	 
	 	Attention: Gregory Barton
	 
	 	50 Broad Street
	 
	 	Suite 1402
	 
	 	New York, NY 10004
	 
	 	Phone: 646-292-2928
	 
	 	 
	Depository:
	 	Penson Financial Services, Inc.
	 
	 	1700 Pacific Avenue
	 
	 	Suite 1400
	 
	 	Dallas, Texas 75201

THE SECURITIES REPRESENTED IN THIS AGREEMENT ARE OFFERED AND SOLD IN AN “OFFSHORE TRANSACTION”
IN RELIANCE UPON REGULATION S AS PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION.
ACCORDINGLY, THE SECURITIES REPRESENTED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE “SECURITIES ACT”) AND MAY NOT BE TRANSFERRED OTHER THAN IN ACCORDANCE WITH REGULATION S,
PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY.

 

Schedule 1(a)

	 	 	 
	 
	 	 
	Structuring Fee:

	 	The Company will pay to the Investor or its assigns
Structuring Fee of Twenty-Five Thousand Dollars
($25,000). The fee shall be payable on the Closing
Date.
	 
	 	 
	Due Diligence Fee:

	 	The Company will pay to the Investor or its assigns Due
Diligence Fee of Twenty Thousand Dollars ($20,000). The
fee shall be payable on the Closing Date.
	 
	 	 
	Administration Fee:

	 	The Company will pay to the Investor or its assigns a
Administration Fee of Fifteen Thousand Dollars
($15,000). The fee shall be payable on the Closing
Date.
	 
	 	 
	Good Faith Deposit:

	 	A good faith non-refundable deposit of Fifteen Thousand
Dollars ($15,000) is payable to the Investor or its
assigns upon acceptance of this Term Sheet. The
deposit will be credited against Transaction Fees at Closing.

 

Schedule 2

This Funding Schedule (hereinafter “Schedule 2”) is entered into on                                                             , 2007
between Mercatus & Partners LTD (“Purchaser”), and                                                                                 (“Company”). This
Addendum is attached to and made a part of the Restricted Equity Purchase Agreement (“Agreement”),
dated                                         2007 and is incorporated therein by reference. Unless otherwise defined herein,
all capitalized terms shall have the meanings given them in the Agreement.

Stock purchase description and values as of the date of Funding:

	 	 	 	 	 
	1.

	 	Final Market Price:
	 	The average of the last sale price
for the Common Shares of the
Company as reported on the OTCBB
Over-The-Counter (OTC) listing
service, for the ten (10) Business
days immediately preceding this
Closing is $                     per share.
	 
	 	 	 	 
	2.

	 	Total share value
	 	$                                        
	 
	 	 	 	 
	3.

	 	Discount:
	 	                                        .0%
	 
	 	 	 	 
	4.

	 	Gross Purchase price:
	 	$                                        
	 
	 	 	 	 
	5.

	 	Less Fees:
	 	$                                        
	 
	 	 	 	 
	6.

	 	Net Purchase Price:
	 	$                                        

7. Representations and Warranties. Company hereby represents and warrants that all of the
representations and warranties made by Company in the Restricted Equity Purchase Agreement are true
and accurate as if made as of the date hereof.

1

 

8. Wiring Instructions

	 	 	 	 	 	 
	 	Company Name:

	 	 	 
	 
	 	Funding Date:
	 	 	 	 
	 	Stock Symbol:
	 	 	 	 
	 	Net Purchase Price:
	 	 	 	 
	 	Name on Account:
	 	 	 	 
	 	Name of Bank:
	 	 	 	 
	 	Company Account Number:
	 	 	 	 
	 	ABA Routing Number:
	 	 	 	 
	 	International Swift Code:
	 	 	 	 
	 	Bank Contact Name:
	 	 	 	 
	 	Bank Address:
	 	 	 	 
	 	Bank Telephone Number:
	 	 	 	 
	 

Additional Notes: In this space, please add any notes, clarifications, or other information of
which Company feels Mercatus should be aware. Attach a separate sheet if necessary.

	 	 	 	 
	 
	 	 
	 
	 	 
	Mercatus & Partners Limited

	 	Company Name
	 
	 	 	 
	 
	 	 	 
	 

	 	 
	R. Mathew Tullis
	 	 	 
	 

	 	[Name]:
	 

	 	 	 
	As Power Of Attorney
	 	 	 
	 

	 	[Title]:
	 

	 	 	 

2exv10w6w1

 

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Exhibit 10.6.1

FIRST AMENDMENT TO DISTRIBUTION AGREEMENT

This FIRST AMENDMENT TO DISTRIBUTION AGREEMENT (this “Amendment”) is made and entered into as of
March 30, 2007 (the “Effective Amendment Date”) by and between Century Medical, Inc., a Japanese
corporation with its principal place of business located at 1-6-4 Ohsaki, Shinagawa-Ku, Tokyo,
141-8588, Japan (“DISTRIBUTOR”), and Cardica, Inc., a Delaware corporation with its principal place
of business located at 900 Saginaw Drive, Redwood City, California 94063 USA (“COMPANY”).

R E C I T A L S

          WHEREAS, DISTRIBUTOR and COMPANY have entered into that certain Distribution Agreement
effective as of June 16, 2003 (the “Distribution Agreement”), in which COMPANY appointed
DISTRIBUTOR as its exclusive distributor of the Products within the Territory;

          WHEREAS, concurrent with the execution of this Amendment, DISTRIBUTOR and COMPANY are entering
into that certain Amendment No. 2 to Convertible Subordinated Note Agreement, pursuant to which,
among other things, the Maturity Date of the Note (as such terms are defined therein) is being
extended; and

          WHEREAS, in connection therewith, DISTRIBUTOR and COMPANY have agreed to amend certain
provisions contained in the Distribution Agreement;

          NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein,
and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to and on the terms and conditions herein set forth, the parties hereto
agree as follows:

	A.	 	Definitions. Unless otherwise defined herein, all capitalized terms in this Amendment shall
have the respective meanings ascribed to them in the Distribution Agreement.
	 
	B.	 	Amendment to Section 1.3. Section 1.3 of the Distribution Agreement is hereby deleted in its
entirety and replaced with the following provision:

““First Commercial Sale” shall mean the first sale of the C-Port xA, Distal
Device with the intended maximum shelf life of twelve (12) months or more by
DISTRIBUTOR to a third party in the Territory with all medical device
approvals required to market and sell such Product (“Shonin”) and all
facility accreditation approvals from the Japanese Ministry of Health,
Labour and Welfare (“MHLW”).”

	C.	 	Amendment to Section 1.6. Section 1.6 of the Distribution Agreement is hereby amended by
deleting the phrase “of all Products” from the end of the sentence.

 

 

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

	D.	 	Amendment to Section 3. Section 3 of the Distribution Agreement is hereby deleted in its
entirety and replaced with the following provision:

““This Agreement and rights conferred on DISTRIBUTOR hereunder shall come
into effect on the Effective Date. The term of this Agreement for the
Pas-Port, Proximal Device, shall expire on July 31, 2014, and the term
of this Agreement for the C-Port xA, Distal Device, shall remain in
effect until the expiration of the Initial Term. At the end of the
Initial Term, this Agreement shall automatically renew, only with
respect to the C-Port xA, Distal Device, for an additional five (5)
years (the “Renewal Period”) subject to DISTRIBUTOR having met the MPL
for the Distal Device for each Contract Year during the Initial Term as
required under Section 8.6 below.”

	E.	 	Amendment to Section 8.1. Section 8.1 of the Distribution Agreement is hereby deleted in its
entirety and replaced with the following provision:

““COMPANY shall sell the Products to DISTRIBUTOR at the prices set
forth in Schedule 1. Payments on purchase orders shall be due at
the end of the month immediately following the month of shipment of the
Products to DISTRIBUTOR. Payment shall be made by wire transfer in U.S.
funds to an account designated in writing by COMPANY. All shipments of
Products shall be billed to DISTRIBUTOR at the price in effect for each
Product in accordance with this Section 8.1 and Schedule 1, on the
date of DISTRIBUTOR’s purchase order for such Products. COMPANY shall have
the right to change the prices of the Products no more than [*] each
Contract Year consistent with prices charged to third-party international
distributors of the Products, taking into consideration such factors as
exchange rates, device-specific reimbursement rates for the Products in the
Territory, if any, competition, and the like, by notifying DISTRIBUTOR in
writing of any such change at least ninety (90) days prior to the effective
date of any such change. Notwithstanding the foregoing, (i) in no event
shall any price increase exceed [*]% of the then current price for such
Product, and (ii) COMPANY shall maintain the price of the Pas-Port, Proximal
Device, at $[*] until June 17, 2010. Further, DISTRIBUTOR shall have the
right to request a change in price, taking into consideration such factors
as exchange rates, device-specific reimbursement rates for the Products in
the Territory, if any, competition, and the like, by notifying COMPANY in
writing of any such request and the reason for such request which request
COMPANY shall consider in good faith.”

2

 

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

	F.	 	Schedule 1, Products and Prices. Schedule 1 of the Distribution Agreement, Products and
Prices, is hereby deleted and replaced with a new Schedule 1, attached hereto.
	 
	G.	 	Entire Agreement. Except as specifically modified or amended hereby, the Distribution
Agreement shall remain in full force and effect and, as modified or amended, is hereby
ratified, confirmed and approved. This Amendment and the Distribution Agreement constitute
the entire and final agreement between the Parties on the subject matter hereof and supersede
any and all prior oral or written agreements or discussions on the subject matter hereof.
This Amendment and the Distribution Agreement may not be modified in any respect except in a
writing which states the modification and is signed by both Parties hereto.
	 
	H.	 	Conflicts. This Amendment shall be governed by all the terms and conditions of the
Distribution Agreement. In the event of any conflict between the terms of the Distribution
Agreement and the terms of this Amendment, the terms of this Amendment shall control.

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3

 

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of the Effective
Amendment Date.

COMPANY:

CARDICA, INC.

	 	 	 	 	 
	/s/ Bernard Hausen	 	 
	  	 	 
	Name:

	 	Bernard Hausen	 	 
	Title:

	 	President and CEO	 	 
	 
	 	 	 	 
	DISTRIBUTOR:	 	 
	 
	 	 	 	 
	CENTURY MEDICAL, INC.	 	 
	 
	 	 	 	 
	/s/ Toshio Konishi	 	 
	  	 	 
	Name:

	 	Toshio Konishi	 	 
	Title:

	 	President & CEO	 	 

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[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

Schedule 1. Products and Prices

u       $[*] FCA per Pas-Port, Proximal Device.

           In accordance with Section 8.1 of the Distribution Agreement, as amended, this price shall be
valid until June 17, 2010.

u       $[*] FCA per C-Port xA, Distal Device.

If the selling price to DISTRIBUTOR exceeds 80% of COMPANY’s average U.S. selling price, then
DISTRIBUTOR shall have the right to discuss pricing matters with COMPANY. COMPANY shall reasonably
disclose its average U.S. selling price to DISTRIBUTOR upon written request by DISTRIBUTOR.

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