Document:

exv10w26

 

Exhibit 10.26

FOURTH AMENDMENT TO LEASE AGREEMENT

     THIS FOURTH AMENDMENT TO LEASE AGREEMENT (this “Amendment”) is entered on and to be effective as of
August 25, 2006, by and between ACQUIPORT DFWIP, INC., a Delaware corporation, as lessor
(“Lessor”), and SPORT SUPPLY GROUP, INC., a Delaware corporation, as lessee (“Lessee”).

R E C I T A L S

     WHEREAS, Merit Investment Partners, L.P. (“Original Lessor”), predecessor in interest to Lessor,
and Lessee entered into that certain Lease Agreement dated July 28, 1989, as amended by (i) that
certain First Amendment to Lease dated as of July 13, 1998, by and between Lessor and Lessee; (ii)
that certain Second Amendment to Lease Agreement dated as of July 31, 2000, by and between Lessor
and Lessee; and (iii) that certain Third Amendment to Lease Agreement dated as of April 15, 2004
(the “Third Amendment”), by and between Lessor and Lessee (as amended, the “Lease”), pursuant to
which Lessee leases from Lessor certain industrial space known as 1901 Diplomat, Farmers Branch,
Texas (the “Premises”); and

     WHEREAS, Lessee has requested to extend the term of the Lease, and Lessor and Lessee desire to set
forth the terms and conditions upon which the Lease will be extended.

     NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lessor and Lessee hereby agree that the Lease should be, and hereby is, amended as
follows:

     1. Term of Lease. The term of the Lease shall be extended to December 31, 2010
(unless terminated sooner pursuant to the Lease). As used herein, the term “Extended Term” shall
mean the period from January 1, 2008 through December 31, 2010.

     2. Minimum Fixed Rent. The minimum fixed rent, as such term is used in the Lease,
shall continue to mean, for each month during the Extended Term, $37,286.00 per month.
Notwithstanding the foregoing, Lessor agrees to abate Lessee’s minimum fixed rent for the 90-day
period from October 1, 2006 through December 31, 2006; however, Lessee shall continue to pay all
other charges under the Lease, including, without limitation, taxes, utility charges, and insurance
costs during such 90-day period.

     3. Improvements to Premises. Lessor shall deliver the Premises to Lessee in its
as-is condition. Lessor has agreed to Lessee’s completion in the Premises of those leasehold
improvements described in Exhibit A hereto (the “Improvements”). All work with respect to the
Improvements shall (a) be performed substantially as described in Exhibit A; (b) be performed in
such a manner as to maintain harmonious labor relations and not to interfere with or delay any
other work and activities being carried on by Lessor, any of Lessor’s contractors, and other
tenants; (c) be designed, performed, and completed in strict compliance with the Lease and with all
building standards and regulations established by Lessor; (d) be completed by contractors and
subcontractors approved by Lessor; (e) be coordinated by all contractors and subcontractors engaged
by Lessee so as to insure timely completion thereof; (f) be coordinated with Lessor with respect to
the movement of equipment and materials; (g) not adversely affect the structure or safety of the
Building; (h) comply with all building, safety, fire, plumbing, electrical, and other codes and
governmental and insurance requirements; (i) not result in any usage in excess of services provided
by Lessor under the Lease for the Premises, including water, electricity, gas, heating,
ventilating, and air conditioning (either during or after such work), unless prior written
arrangements satisfactory to Lessor are made with respect thereto; and (j) be completed promptly
and in a good and workmanlike manner.

     So long as no Event of Default (or event which with notice and/or lapse of time could become an
Event of Default) under the Lease has occurred, Lessee shall be entitled to a cash allowance in the
amount of Seventy Thousand and No/100 Dollars ($70,000,00) (the “Improvement Allowance”) toward the
construction of the Improvements in the Premises, which shall be payable to Lessee within thirty
(30) days after receipt by Lessor of (a) original invoices of the general

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contractor aggregating at least the amount requested, and (b) original final lien
waivers and/or original releases of liens from the general contractor and all subcontractors
associated with the Improvements who perform work, the cost of which exceeds $2,500.00
(collectively, the “Construction Documentation”), Lessee acknowledges and agrees that Lessor has
conditioned its agreement to fund the Improvement Allowance on the payment thereof on or before
December 31, 2006. Therefore, all Construction Documentation must be delivered to Lessor on or
before November 30, 2006, and any portion of the Improvement Allowance remaining after payment of
the amount supported by such Construction Documentation will be deemed forfeited by Lessee.

     4. Surrender of Premises. The following is hereby added to Section 4.07 of the
Lease:

“Lessee must, at Lessee’s sole cost, remove upon termination of this Lease, any and all of Lessee’s
furniture, furnishings, equipment, movable partitions of less than full height from floor to
ceiling and other trade fixtures and personal property (collectively, ‘Personalty’). Personalty not
so removed shall be deemed abandoned by the Lessee and title to the same shall thereupon pass to
Lessor under this Lease as by a bill of sale, but Lessee shall remain responsible for the cost of
removal and disposal of such Personalty, as well as any damage caused by such removal.”

     5. Waiver of Subrogation. The second paragraph of Section 5.03 of the Lease is
hereby deleted in its entirety, and the following is hereby substituted therefor:

     “So long as their respective insurers so permit, Lessee and Lessor hereby mutually waive their
respective rights of recovery against each other (and their respective agents and employees) for
any loss insured by fire, extended coverage, All Risks or other property insurance now or hereafter
existing for the benefit of the respective party but only to the extent of the net insurance
proceeds payable under such policies. SUCH WAIVER AND RELEASE SHALL APPLY EVEN IF THE LOSS OR
DAMAGE SHALL HAVE BEEN CAUSED BY THE FAULT OR NEGLIGENCE OF EITHER PARTY OR ITS AGENTS OR
EMPLOYEES; provided, however, that such waiver and release shall not apply if the loss or damage
was caused by the intentionally wrongful acts or omissions of either party or its agents or
employees. Each party shall obtain any special endorsements required by their insurer to evidence
compliance with the aforementioned waiver.”

     6. Insurance.

     (a) The following is hereby added to the first paragraph of Section 5.04 of the
Lease:

“Notwithstanding the foregoing, Lessor agrees that Lessee may opt out of the workers’ compensation
program so long as Lessee has taken all action necessary under the Workers’ Compensation Act to opt
out of providing such coverage, and so long as Lessee either maintains reserves in an amount
satisfactory to Lessor to satisfy any potential claims or maintains a primary employer’s indemnity
policy in the amount of $1,000,000.00 per occurrence to satisfy any potential claims.”

     (b) The second paragraph of Section 5.04 of the Lease is hereby deleted in its entirety, and
the following is hereby substituted therefor:

     “The aforesaid policies shall (a) be provided at Lessee’s expense; (b) name the Lessor Entities as
additional insureds (General Liability) and loss payee (Property—Special Form); (c) be issued by an
insurance company with a minimum Best’s rating of ‘A-:VII’ during the term of this Lease; and (d)
provide that said insurance shall not be canceled unless thirty (30) days prior written notice (ten
days for non-payment of premium) shall have been given to Lessor; a certificate of Liability
insurance on ACORD Form 25 and a certificate of Property insurance on ACORD Form 28 shall be
delivered to Lessor by Lessee upon the commencement date and at least five (5) days prior to each
renewal of said insurance.”

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     7. Renewal Option. Lessor hereby acknowledges that the Renewal Option (as
defined in Paragraph 7 of the Third Amendment) shall continue to be made available to Lessee upon
the terms and conditions set forth in the Third Amendment; provided, however, that the term
“Extended Term”, as used in such Paragraph 7 shall hereafter be deemed to refer to the Extended
Term (as defined in this Amendment).

     8. Termination Option. The termination option set forth in Paragraph 8 of the Third
Amendment is hereby deleted in its entirety.

     9. Financial Statements and Credit Reports. At Lessor’s request, Lessee shall
deliver to Lessor a copy, certified by an officer of Lessee as being a true and correct copy, of
Lessee’s most recent audited financial statement, or, if unaudited, certified by Lessee’s chief
financial officer as being true, complete and correct in all material respects. So long as (a) no
Event of Default (or event which with notice and/or lapse of time could become an Event of Default)
has occurred under the Lease, and (b) Lessee has not become insolvent and has not admitted in
writing its inability to pay its debts generally as they become due, Lessee shall not be required
to provide such financial statements more often than once in any twelve-month period; provided,
however, that Lessor shall be entitled to request additional financial statements if (i) such
financial statements are required by Lessor’s lender or a potential purchaser of the Building, or
(ii) Lessor reasonably believes that Lessee’s Financials have changed since the date of a prior
statement or report. Lessee hereby authorizes Lessor to obtain one or more credit reports on
Lessee at any time, and shall execute such further authorizations as Lessor may reasonably require
in order to obtain a credit report.

     10. Lessee’s Authority. If Lessee signs as a corporation, partnership, trust or other
legal entity, each of the persons executing this Amendment on behalf of Lessee represents and
warrants that Lessee has been and is qualified to do business in the state in which the Premises
are located, that the entity has full right and authority to enter into this Amendment, and that
all persons signing on behalf of the entity were authorized to do so by appropriate actions.

Lessee hereby represents and warrants that neither Lessee, nor any persons or entities holding any
legal or beneficial interest whatsoever in Lessee, are (i) the target of any sanctions program that
is established by Executive Order of the President or published by the Office of Foreign Assets
Control, U.S. Department of the Treasury (“OFAC”); (ii) designated by the President or OFAC
pursuant to the Trading with the Enemy Act, 50 U.S.C. App, §5, the International Emergency Economic
Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224
(September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or
(iii) named on the following list that is published by OFAC: “List of Specially Designated
Nationals and Blocked Persons.” If the foregoing representation is untrue at any time during the
term, an Event of Default will be deemed to have occurred, without the necessity of notice to
Lessee.

     11. Brokerage Commissions. Each of the parties hereto represents and warrants to the
other that it has not dealt with any broker or finder in connection with this Amendment, except
Cushman & Wakefield of Texas, Inc. and RREEF Management Company (collectively, “the Brokers”),
which Brokers are being paid by Lessor pursuant to a separate agreement. Lessor and Lessee agree to
indemnify and defend (with counsel reasonably acceptable to the other) the other party and to hold
the other party harmless from and against any liability for claims for commissions or fees by any
other broker or finder based on the acts of the indemnifying party.

     12. Effectiveness. Except as modified herein, all other terms and conditions of the
Lease shall remain unchanged and shall continue in full force and effect.

     13. Time and Governing Law. Time is of the essence of this Amendment and all of its
provisions. The laws of the State of Texas and of the United States of America shall govern the
rights, remedies, and duties of the parties hereto and the validity, construction, enforcement, and
interpretation hereof.

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     14. Successors and Assigns. This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.

     15. Illegality. If any provision of this Amendment is held to be illegal, invalid,
or unenforceable under present or future laws, such provision shall be fully severable; this
Amendment shall be construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof; and the remaining provisions hereof shall remain in full force
and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its
severance herefrom.

     16. Limited Liability. Redress for any claim against Lessor under this Amendment or
the Lease shall be limited to and enforceable only against and to the extent of Lessor’s interest
in the Premises. The obligations of Lessor under this Amendment and the Lease are not intended to
be and shall not be personally binding on, nor shall any resort be had to the private properties
of, any of its or its investment manager’s trustees, directors, officers, partners, beneficiaries,
members, stockholders, employees, or agents, and in no case shall Lessor be liable to Lessee
hereunder for any lost profits, damage to business, or any form of special, indirect or
consequential damages.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first
above written.

	 	 	 	 	 
	 	LESSOR:

ACQUIPORT DFWIP, INC., a Delaware
corporation

 	 
	 	By:  	/s/ Bryan B. Marsh
 	 
	 	Name: Bryan B. Marsh III 	 
	 	Title:   Vice President 	 
	 

	 	 	 	 	 
	 	LESSEE:

SPORT SUPPLY GROUP, INC., a Delaware

corporation

 	 
	 	By:  	/s/ T. M. Babilla
 	 
	 	Name:        Terrence M. Babilla 	 
	 	Title:      President 	 

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EXHIBIT A

Parking Lot Lighting; replace existing bulbs on 6 pole lights; add fifteen (15) additional
canopy lights, five (5) ground flood lights and one (1) additional wall pack.

Security System; install a new security system to handle fire and burglar alarms as well as
maintain current security card access system.

Install two (2) Big Ass fans in warehouse.

Perform overhead door maintenance, including repair of bottom sections of six (6) doors and
performing door and dock leveler maintenance on nineteen (19) dock doors, one (1) horizontal slide
door and one (1) mechanical dock leveler.

Fill cracks in warehouse floor.exv4w1

 

Exhibit 4.1

SERIES 5-A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

     THIS SERIES 5-A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the “Agreement”) is
dated as of September 18, 2006, by and among Tri-Isthmus Group, Inc. (f/k/a Vsource, Inc.), a
Delaware corporation (the “Company”), and the investors listed on Exhibit A
attached to this Agreement (each a “Purchaser” and together the “Purchasers”).

     The parties hereby agree as follows:

1. Authorization and Sale of Shares and Warrants.

     1.1 Authorization. The Company has duly authorized the sale and issuance, pursuant to
the terms of this Agreement, of up to 2,274 shares (the “Shares”) of its Series 5-A
Convertible Preferred Stock, par value $0.01 per share (the “Series 5-A Preferred”), and
warrants to purchase up to 1,364,400 shares of the Company’s common stock, par value $0.01 per
share (the “Common Stock”), at an exercise price of $0.50 per share substantially in the
form attached hereto as Exhibit B (the “Warrants”). For purposes of this
Agreement, a “Unit” shall consist of one share of Series 5-A Preferred and one Warrant to
purchase 600 shares of Common Stock.

     1.2 Purchase and Sale. Upon the terms and subject to the conditions herein, and in
reliance on the representations, warranties and covenants set forth herein, at the Closing each
Purchaser named on Exhibit A hereto shall, individually and not jointly, purchase from the
Company, and the Company shall issue and sell to each such Purchaser, the number of Units set forth
opposite the name of such Purchaser on Exhibit A hereto, for a purchase price of $1,000.00
per Unit (the “Purchase Price”).

     1.3 Defined Terms Used in this Agreement. The following terms used in this Agreement
shall be construed to have the meanings set forth below.

          “Affiliate” means with respect to any person or entity (a “Person”), any
Person which, directly or indirectly, controls, is controlled by, or is under common control with
such Person, including, without limitation, any partner, officer, director, or member of such
Person.

          “Balance Sheet” means the Company’s balance sheet as of January 31, 2006 included in
the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006.

          “Code” means the Internal Revenue Code of 1986, as amended.

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

          “Material Adverse Effect” means a material adverse effect on the assets or liabilities
of the Company.

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

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

2. Closing; Deliveries.

     2.1 Closing. In accordance with the terms and conditions of that certain escrow
agreement, dated as of September 18, 2006 (the “Escrow Agreement”), by and among the
Company, the Purchasers and Hughes & Luce LLP, as escrow agent (the “Escrow Agent”), the
purchase and sale of the Units shall take place as of the date hereof at the offices of the Escrow
Agent (which time and place is designated as the “Closing”).

     2.2 Deliveries; Certificate of Designation.

          (a) Shares and Warrants; Purchase Price. At the Closing and in accordance with the
Escrow Agreement, the Company shall deliver to each Purchaser certificates representing the Shares
and the Warrants being purchased by such Purchaser against payment of the Purchase Price to the
Company.

          (b) Certificate of Designation. The Company has previously filed the Certificate of
Designation of the Company, in the form attached hereto as Exhibit C (the “Certificate
of Designation”), which establishes the rights and preferences of the Series 5-A Preferred.

3. Representations and Warranties of the Company. The Company hereby represents and
warrants to each Purchaser that the following representations are true and correct as of the date
hereof. For purposes of these representations and warranties, the phrase “to the Company’s
knowledge” shall mean the actual knowledge of David Hirschhorn, Todd Parker or Dennis Smith.

     3.1 Organization, Good Standing, Corporate Power and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its business as presently
conducted and as proposed to be conducted. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure to so qualify would have a Material
Adverse Effect.

     3.2 Capitalization. The authorized capital stock of the Company consists of (i)
100,000,000 shares of Common Stock, 3,673,967 shares of which are issued and outstanding, and (ii)
5,000,000 shares of preferred stock, of which (a) 67,600 shares of Series 1-A Preferred Stock, par
value $0.01 per share, (b) 3,900 shares of Series 2-A Preferred Stock, par value $0.01 per share,
and (c) 1,478 shares of Series 5-A Preferred Stock, par value $0.01 per share, are issued and
outstanding. Except as disclosed on Schedule 3.2 and as contemplated hereby, there are no
outstanding subscriptions, options, warrants, commitments, agreements or arrangements for or
relating to the issuance, or sale of, or outstanding securities convertible into or exchangeable
for, any shares of capital stock of any class or other equity interests of the Company. As of the
Closing, and after giving effect to the transactions contemplated hereby, all of the outstanding
shares of capital stock of the Company will have been duly and validly authorized and issued and
will be fully paid and non-assessable and will have been offered, issued, sold and delivered in
compliance with applicable federal and state securities laws and not

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subject to any preemptive rights. When issued in accordance with the terms of the Series 5-A
Preferred and the Warrants, the shares of Common Stock issuable upon exercise of Series 5-A
Preferred and the Warrants will be validly issued, fully paid and non-assessable. The terms
relating to the Warrants are as set forth in Exhibit B attached hereto. The relative
rights, preferences and other terms relating to the Series 5-A Preferred are as set forth in
Exhibit C attached hereto. There are no preemptive rights, rights of first refusal, put or
call rights or obligations or any other purchase or redemption obligations or anti-dilution rights
with respect to the Company’s capital stock or any interests therein, other than as disclosed on
Schedule 3.2 or rights set forth herein or in the Company’s Certificate of Incorporation or
the Certificates of Designation establishing such capital stock. Other than as set forth herein,
there are no rights to have the Company’s capital stock registered for sale to the public in
connection with the laws of any jurisdiction, and there are no agreements relating to the voting of
the Company’s voting securities or restrictions on the transfer of the Company’s capital stock.

     3.3 Authorization; No Conflict. The execution, delivery and performance by the
Company of this Agreement, and the consummation by the Company of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding obligation of the
Company enforceable in accordance with its terms. The execution of and performance of the
transactions contemplated by this Agreement and the compliance with its provisions by the Company
will not (a) conflict with or violate any provision of the Certificate of Incorporation or Bylaws
of the Company, (b) conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under,
any material contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security Interest (as defined
below) or other arrangement to which the Company is a party or by which the Company is bound or to
which its assets are subject, (c) result in the imposition of any Security Interest upon any assets
of the Company or (d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its properties or assets. For purposes of this Agreement,
“Security Interest” means any mortgage, pledge, security interest, encumbrance, charge, or
other lien (whether arising by contract or by operation of law).

     3.4 Valid Issuance of Shares. The Shares, when issued, sold and delivered in
accordance with the terms and for the consideration set forth in this Agreement, will be validly
issued, fully paid and non-assessable and free of restrictions on transfer other than restrictions
on transfer under applicable state and federal securities laws and liens or encumbrances created by
or imposed by a Purchaser. Assuming the accuracy of the representations of the Purchasers in
Section 4 of this Agreement and subject to the filings described in Section 3.5
below, the Shares will be issued in compliance with all applicable federal and state securities
laws. The Common Stock issuable upon conversion of the Shares and exercise of the Warrants has
been duly reserved for issuance, and upon issuance, will be validly issued, fully paid and
non-assessable and free of restrictions on transfer other than restrictions on transfer under
applicable federal and state securities laws and liens or encumbrances created by or imposed by a
Purchaser. Based in part upon the representations of the Purchasers in Section 4 of this
Agreement, and subject to Section 3.5 below, the Common Stock issuable upon conversion of
the Shares and exercise of the Warrants will be issued in compliance with all applicable federal
and state securities laws.

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     3.5 Governmental Consents and Filings. Assuming the accuracy of the representations
made by the Purchasers in Section 4 of this Agreement, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority is required on the part of the Company in connection
with the consummation of the transactions contemplated by this Agreement, except such filings as
shall have been made prior to and shall be effective on and as of the Closing and such filings
required to be made after the Closing under applicable federal and state securities laws.

     3.6 Subsidiaries. The Company’s subsidiaries are as set forth in the Company’s Annual
Report on Form 10-K for the fiscal year ended January 31, 2006.

     3.7 Compliance with Laws. The Company has complied in all material respects with all
laws, regulations and orders applicable to its present and currently proposed business and has all
material permits and licenses required thereby, except where the failure to have such permits or
licenses would not have a Material Adverse Effect.

     3.8 Absence of Litigation. There is no action, suit or proceeding pending or, to the
Company’s knowledge, threatened, against the Company which questions the validity of this Agreement
or the right of the Company to enter into it, or which might result, either individually or in the
aggregate, in a Material Adverse Effect.

     3.9 Absence of Liabilities. The Company does not have any material liabilities or
obligations, whether accrued, absolute, contingent or otherwise, of the type required to be
disclosed on a balance sheet other than (i) such matters as are specifically and expressly set
forth on the Balance Sheet or (ii) those which have been incurred by the Company in the ordinary
course of business during the period from the date of the Balance Sheet to the date hereof.

     3.10 Material Contracts and Obligations. Except as disclosed on Schedule
3.10, the Company is not a party to, nor is it bound by any of the following types of
agreements: (a) any agreement which requires future expenditures by the Company in excess of
$25,000 or which might result in payments to the Company in excess of $25,000, (b) any agreement
with any current officer or director of the Company, or any “affiliate” or “associate” of such
persons (as such terms are defined in the rules and regulations promulgated under the Securities
Act), including without limitation any agreement or other arrangement providing for the furnishing
of services by, rental of real or personal property from, or otherwise requiring payments to, any
such Person, (c) any agreement under which the Company is restricted from carrying on any business
or other services anywhere in the world, (d) any agreement for the disposition of a material
portion of the Company’s assets or (e) any agreement for the acquisition of the business or shares
of another party.

     3.11 Changes. Except as disclosed in the Company’s Annual Report on Form 10-K for the
fiscal year ended January 31, 2006, and in Schedule 3.11, since January 31, 2006, there has
not been:

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          (a) any material change in the assets or liabilities of the Company from that reflected on the
Balance Sheet, except changes in the ordinary course of business that have not caused, in the
aggregate, a Material Adverse Effect;

          (b) any damage, destruction or loss, whether or not covered by insurance, that would have a
Material Adverse Effect;

          (c) any waiver or compromise by the Company of a valuable right or of a material debt owed to
it;

          (d) any satisfaction or discharge of any lien, claim, or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business and the satisfaction or
discharge of which would not have a Material Adverse Effect;

          (e) any material change to a material contract or agreement by which the Company or any of its
assets is bound or subject;

          (f) any material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder;

          (g) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company,
with respect to any of its material properties or assets, except liens for taxes not yet due or
payable and liens that arise in the ordinary course of business and do not materially impair the
Company’s ownership or use of such property or assets;

          (h) any loans or guarantees made by the Company to or for the benefit of its employees,
officers or directors, or any members of their immediate families, other than travel advances and
other advances made in the ordinary course of its business;

          (i) any declaration, setting aside or payment or other distribution in respect of any of the
Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of
any of such stock by the Company;

          (j) to the Company’s knowledge, any other event or condition of any character, other than
events affecting the economy or the Company’s industry generally, that could reasonably be expected
to result in a Material Adverse Effect; or

          (k) any agreement or commitment by the Company to do any of the foregoing.

     3.12 Employees. The Company’s only employees are David Hirschhorn and Todd Parker.

     3.13 Tax Returns and Payments. There are no federal, state, county, local or foreign
taxes due and payable by the Company which have not been timely paid. There are no accrued and
unpaid federal, state, country, local or foreign taxes of the Company which are due, whether or not
assessed or disputed. There have been no examinations or audits of any tax returns or reports by
any applicable federal, state, local or foreign governmental agency. The Company has

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duly and timely filed all federal, state, county, local and foreign tax returns required to
have been filed by it and there are in effect no waivers of applicable statutes of limitations with
respect to taxes for any year.

     3.14 No Stop Order. No stop order suspending or prohibiting the transactions
contemplated by this Agreement has been issued by the SEC or the regulatory authorities of any
state and, to the Company’s knowledge, no proceeding for that purpose has been initiated or is
threatened or contemplated by the SEC or the regulatory authorities of any state.

     3.15 Quotation of Common Stock. The Company’s Common Stock continues to be quoted on
the OTC Bulletin Board.

     3.16 Directors and Officer’s Liability Insurance. The Company has made all payments
under its existing policy of directors and officers’ liability insurance on a timely basis.

4. Representations and Warranties of the Purchasers. Each Purchaser hereby represents and
warrants to the Company, severally and not jointly, that:

     4.1 Authorization. The Purchaser has full power and authority to enter into this
Agreement. This Agreement, when executed and delivered by the Purchaser, will constitute the valid
and legally binding obligation of the Purchaser, enforceable in accordance with its terms.

     4.2 Purchase for Own Account; Accredited Investor. This Agreement is made with the
Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s
execution of this Agreement, the Purchaser hereby confirms, that the Shares to be acquired by the
Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof, and that the
Purchaser has no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser further represents that the
Purchaser does not presently have any contract, undertaking, agreement or arrangement with any
Person to sell, transfer or grant participations to such Person or to any third Person, with
respect to any of the Shares. The Purchaser has not been formed for the specific purpose of
acquiring the Shares. The Purchaser is an “accredited investor” as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act.

     4.3 Experience. The Purchaser has carefully reviewed the representations concerning
the Company contained in this Agreement and has made detailed inquiry concerning the Company, its
business and its personnel. The officers of the Company have made available to the Purchaser any
and all information which the Purchaser has requested and have answered to the Purchaser’s
satisfaction all inquiries made by the Purchaser; and the Purchaser has sufficient knowledge and
experience in finance and business that it is capable of evaluating the risks and merits of its
investment in the Company and the Purchaser is able financially to bear the risks thereof.

     4.4 Restricted Securities. The Purchaser understands that the issuance of the Shares
and the Warrants and the Common Stock issuable upon conversion of the Shares and exercise of the
Warrants have not been registered under the Securities Act, by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among other things,

6

 

the bona fide nature of the investment intent and the accuracy of the Purchaser’s
representations as expressed herein. The Purchaser understands that the Shares, the Warrants and
the Common Stock issuable upon conversion of the Shares and exercise of the Warrants are
“restricted securities” under applicable U.S. federal and state securities laws and that, pursuant
to these laws, the Purchaser must hold the Shares, the Warrants and such Common Stock indefinitely
unless the resales of same are registered with the SEC and qualified by state authorities, or an
exemption from such registration and qualification requirements is available. The Purchaser
acknowledges that, except as otherwise provided herein, the Company has no obligation to register
or qualify the resale of the Shares, the Warrants or the Common Stock issuable upon conversion of
the Shares or exercise of the Warrants for resale. The Purchaser further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale, the holding period for the
Shares, the Warrants and the Common Stock issuable upon conversion of the Shares and exercise of
the Warrants, and on requirements relating to the Company which are outside of the Purchaser’s
control, and which the Company is under no obligation and may not be able to satisfy.

     4.5 Legends. The Purchaser understands that the Shares, the Warrants and any
securities issued in respect of or exchange for the Shares or exercise of the Warrants, may bear
one or all of the following legends:

          (a) “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

          (b) Any legend required by the securities laws of any state to the extent such laws are
applicable to the Shares and the Warrants represented by the certificate so legended.

5. Registration Rights.

     5.1 Registration Obligations. Upon demand by Purchasers owning at least Fifty Percent
(50%) of the outstanding Shares, the Company shall include the shares of Common Stock issuable upon
conversion of the Series 5-A Preferred and exercise of the Warrants (the “Registrable
Securities”) in a registration statement prepared by the Company and filed with the SEC within
thirty (30) days of such demand (the “Registration Statement”); provided, that no
demand shall be made sooner than the six month anniversary of the Closing and the Purchasers shall
be entitled to only one demand to register the resale of the Registrable Securities pursuant to
this Section 6.1. The Registration Statement will be on Form SB-2 or other appropriate
form (as the Company shall determine in its sole discretion) and will permit the Registrable
Securities to be offered on a continuous basis. The Company shall use its commercially reasonable
efforts to cause the Registration Statement to be declared effective under the Securities Act by
the SEC as promptly as possible after the filing thereof. The

7

 

Company shall use its commercially reasonable efforts to keep the Registration Statement
continuously effective under the Securities Act until the date which is the earliest of (a) the
date on which all Registrable Securities have been sold, (b) the date on which all Registrable
Securities may be sold immediately without registration under the Securities Act and without volume
restrictions pursuant to Rule 144(k) of the Securities Act or (c) two years from the date the
Registration Statement is declared effective by the SEC.

     5.2 Suspension of Registration Obligations. The Company’s obligations under this
Section 8 shall be suspended if (a) the fulfillment of such obligations would require the
Company to make a disclosure that would be detrimental to the Company and the Company’s Board of
Directors determines that it is in the best interests of the Company to defer such obligations or
(b) the fulfillment of such obligations would require the Company to prepare financial statements
not required to be prepared by the Company to comply with its obligations under the Exchange Act at
the time the Registration Statement is proposed to be filed (the period during which either of the
preceding conditions is in effect is referred to as a “Permitted Black-Out Period”). A
Permitted Black-Out Period will end, as applicable, upon the making of the relevant disclosure by
the Company (or, if earlier, when such disclosure would no longer be necessary or detrimental) or
as soon as it would no longer be necessary to prepare such financial statements to comply with the
Securities Act.

     5.3 Expenses; Indemnification. The Company shall pay all costs and expenses incurred
by the Company in connection with the preparation and filing of the Registration Statement, other
than selling commissions and fees which shall be the sole responsibility of the Purchasers. The
Company and the Purchasers shall provide each other with customary indemnification rights in
connection with the Registration Statement prepared and filed with the SEC pursuant to this
Section 6.

6. Indemnification.

     6.1 Indemnification by the Company. The Company shall indemnify and hold harmless
each Purchaser and its officers, directors, agents, Affiliates, principal shareholders, successors
and assigns from and against any and all claims, demands, liabilities, obligations, damages, costs,
and expenses (including reasonable attorneys’ fees) (collectively, “Losses”) arising out of
any breach of the Company’s representations, warranties, covenants or agreements set forth herein;
provided, however, that (a) the Company shall not indemnify any Purchaser for any
Losses resulting from such Purchaser’s negligence or intentional misconduct or any breach of such
Purchaser’s representations, warranties, covenants or agreements hereunder; and (b) the Company’s
total liability under this Section 7.1 shall not exceed the aggregate consideration paid to
the Company by the Purchasers for the Units issued and sold pursuant to this Agreement.

     6.2 Indemnification by the Purchasers. Hope & Abel Investments, LLC will indemnify
and hold harmless the Company and its officers, directors, agents, Affiliates, principal
shareholders, successors and assigns from and against any and all Losses arising out of any breach
of any of the Purchasers’ representations, warranties, covenants or agreements set forth herein;
provided, however, that Hope & Abel Investments, LLC shall not indemnify the
Company for any Losses resulting from the Company’s negligence or intentional misconduct or any
breach of the Company’s representations, warranties, covenants or agreements hereunder.

8

 

7. Miscellaneous.

     7.1 Survival of Representations and Warranties. The representations and warranties of
the Company and the Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing for a period of one year following the
Closing.

     7.2 Successors and Assigns; No Third Party Beneficiaries. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.

     7.3 Governing Law. This Agreement shall be governed by and construed in accordance
with the internal substantive laws of the State of Delaware, without regard to its principles of
conflicts of laws.

     7.4 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may also be executed and delivered by facsimile signature and in two or
more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

     7.5 Notices. All notices and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during
normal business hours of the recipient, and if not so confirmed, then on the next business day, (c)
five (5) days after having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All communications shall be
sent to the respective parties at their address as set forth on the signature page or Exhibit
A, or to such e-mail address, facsimile number or address as subsequently modified by written
notice given in accordance with this Section 7.5. If notice is given to the Company, a
copy shall also be sent to Hughes & Luce LLP, 1717 Main Street, Suite 2800, Dallas, Texas 75201,
Attention: I. Bobby Majumder, and if notice is given to the Purchasers, a copy shall also be given
to Hope & Abel Investments, LLC, 149 South Barrington Ave., #808, Los Angeles, California 90049,
Attention: David Hirschhorn.

     7.6 No Finder’s Fees. Each party represents that it neither is nor will be obligated
for any finder’s fee or commission in connection with the transactions contemplated by this
Agreement. Each Purchaser agrees to indemnify and to hold harmless the Company from any liability
for any commission or compensation in the nature of a finder’s fee arising out of the transactions
contemplated hereby (and the costs and expenses of defending against such liability or asserted
liability) for which each Purchaser or any of its officers, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless each Purchaser from any liability
for any commission or compensation in the nature of a finder’s or

9

 

broker’s fee arising out of the transactions contemplated hereby (and the costs and expenses
of defending against such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.

     7.7 Fees and Expenses. All fees and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring such fees or
expenses.

     7.8 Amendments and Waivers. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended, terminated or waived only with the written
consent of the Company and the holders of at least a majority of the then-outstanding Shares. Any
amendment or waiver effected in accordance with this Section 8.8 shall be binding upon the
Purchasers and each transferee of the Shares (or the Common Stock issuable upon conversion
thereof), each future holder of all such securities, and the Company.

     7.9 Severability. The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any other provision.

     7.10 Delays or Omissions. No delay or omission to exercise any right, power or remedy
accruing to any party under this Agreement, upon any breach or default of any other party under
this Agreement, shall impair any such right, power or remedy of such non-breaching or
non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any
waiver of any single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this Agreement, or any waiver on
the part of any party of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not
alternative.

     7.11 Acknowledgement. Each party hereto acknowledges that: (a) it has read this
Agreement; (b) it has been represented in the preparation, negotiation and execution of this
Agreement by legal counsel of its own choice or has voluntarily declined to seek such counsel; and
(c) it understands the terms and consequences of this Agreement and is fully aware of the legal and
binding effect of this Agreement.

     7.12 Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the
full and entire understanding and agreement among the parties with respect to the subject matter
hereof, and any other written or oral agreement relating to the subject matter hereof existing
among the parties is expressly canceled.

[SIGNATURE PAGE FOLLOWS]

10

 

     IN WITNESS WHEREOF, the parties have executed this Series 5-A Preferred Stock and Warrant
Purchase Agreement as of the date first written above.

	 	 	 	 	 
	 	COMPANY:

TRI-ISTHMUS GROUP, INC.

 	 
	 	By:  	/s/
David Hirschhorn	 
	 	 	DAVID HIRSCHHORN 	 
	 	 	Co-Chief Executive Officer 	 
	 

 

 

	 	 	 	 	 
	 	PURCHASERS: 

668411 BC LTD.

 	 
	 	/s/ Paul Mancuso
 	 
	 	Paul Mancuso, Authorized Representative
 	 
	 	Address:

668411 BC Ltd.
3562 King Edward Ave. W.
Vancouver, BC

V6S 1M6  Canada
 	 
	 
	 	DOERKEN 2003 CHARITABLE REMAINDER UNITRUST

 	 
	 	/s/ Peter W. Doerken
 	 
	 	Peter W. Doerken, Trustee
 	 
	 	Address:

Doerken 2003 Charitable Remainder Unitrust

1448 15th Street, Suite 100

Santa Monica, CA  90404

Attention:  Peter W. Doerken 	 
	 
	 	HOPE & ABEL INVESTMENTS, LLC

 	 
	 	/s/ David Hirschhorn
 	 
	 	David Hirschhorn, President
 	 
	 	Address:

149 South Barrington Ave. - #808

Los Angeles, CA  90049

Attention:  David Hirschhorn 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	THE LYNCH GROUP INC. DEFINED BENEFIT TRUST

 	 
	 	/s/ Allen J. Lynch
 	 
	 	Allen J. Lynch, Trustee
 	 
	 	Address:

The Lynch Group Inc. Defined Benefit Trust

2904 Poinsettia Ave.

Manhattan Beach, CA  90266

Attention:  Allen J. Lynch 	 
	 
	 	 	 
	 	                                              /s/ William J. McGrath /s/ Mary Ann McGrath
 	 
	 	WILLIAM J. MCGRATH AND MARY ANN MCGRATH
 	 
	 	Address:

William J. McGrath and Mary Ann McGrath

943 Edgemere Court

Evanston, IL  60202 	 
	 
	 	PAC TRADING CORPORATION

 	 
	 	/s/ Paul Rademaker
 	 
	 	Paul Rademaker, Sole Director and Officer
 	 
	 	Address:

PAC Trading Corporation

Plaza Colonial

Apartardo 201-1260

San Rafael De Escazu

San Jose, Costa Rica 	 
	 
	 	 	 
	 	                                              /s/ Todd Parker
 	 
	 	TODD PARKER
 	 
	 	Address:

Todd Parker

2464 Vallejo St., Apartment #2

San Francisco, CA  94123 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	 	 
	 	                                              /s/ Dennis M. Smith
 	 
	 	DENNIS M. SMITH
 	 
	 	Address:

Dennis Smith

33 Gull Point

Hilton Head Island, SC  29928 	 
	 
	 	 	 
	 	                                              /s/ Steven M. Spector
 	 
	 	STEVEN M. SPECTOR
 	 
	 	Address:

Steven M. Spector

17531 Weddington St.

Encino, CA  91316 	 

 

 

	 	 	 	 	 

EXHIBIT A

PURCHASERS

Series 5-A Preferred Stock and Warrants Purchase

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Purchaser	 	Purchase Price	 	 	Number of Shares	 	 	Number of Warrants	 
	668411 BC Ltd.
	 	$	20,000	 	 	 	20	 	 	 	20	 
	Doerken 2003 Charitable Remainder Unitrust
	 	$	100,000	 	 	 	100	 	 	 	100	 
	Hope & Abel Investments, LLC
	 	$	25,000	 	 	 	25	 	 	 	25	 
	The Lynch Group Inc. Defined Benefit Trust
	 	$	25,000	 	 	 	25	 	 	 	25	 
	William J. McGrath and Mary Ann McGrath
	 	$	30,000	 	 	 	30	 	 	 	30	 
	PAC Trading Corporation
	 	$	10,000	 	 	 	10	 	 	 	10	 
	Todd Parker
	 	$	35,000	 	 	 	35	 	 	 	35	 
	Dennis Smith
	 	$	25,000	 	 	 	25	 	 	 	25	 
	Steven M. Spector
	 	$	94,000	 	 	 	94	 	 	 	94	 
	 
	 	 	 	 	 	 	 	 	 
	TOTAL
	 	$	364,000	 	 	 	364	 	 	 	364	 
	 
	 	 	 	 	 	 	 	 	 

 

 

EXHIBIT B

Form of Warrant

 

 

EXHIBIT C

Form of Certificate of Designation

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