Document:

Exhibit 10.17

 

PROMISSORY NOTE

 

	
   

  	
  Account No                                  

  
	
   

  	
  Officer                                          

  

 

Borrower LANCER PARTNERSHIP,
LTD., a Texas limited partnership

	
  Amount$15,000,000.00

  	
  Date: DECEMBER

  	
  ,2004

  

 

For value received, the
receipt and sufficiency of which is hereby acknowledged, the undersigned,
jointly and severally, (hereinafter, “Borrower”, whether one or more) promise
to pay to the order of International Bank of
Commerce (hereinafter, “Lender”), at 130 E. Travis, San Antonio, Bexar County,
Texas the sum of FIFTEEN MILLION AND NO / 100 DOLLARS Dollars ($ 15. 000. 000.
00),* in legal and lawful money of the United States of America, with interest
as it accrues on the outstanding principal balance from date of advance of such
principal until paid.

 

* or so much thereof as may
be advanced from time to time,

* * SEE ADDENDUM TO
PROMISSORY NOTE ATTACHED HERETO AND INCORPORATED HEREIN.

 

To secure payment of this
Note, and, to the extent allowed by law, all other
indebtedness which may at any time be owing by the Borrower, or any of them,
Borrower hereby grants to Lender a
security interest and lien on the following

collateral

 

SEE EXHIBIT “A” ATTACHED
HERETO AND INCORPORATE HEREIN.

 

Borrower agrees to take adequate care of the collateral and to insure the
collateral with a company satisfactory to Lender, for such hazards, and in such
amounts as Lender directs. If Borrower fails to furnish Lender with proof of
required insurance coverage, Lender shall have the authority to purchase
insurance (including single interest insurance, which may provide protection
only for Lender) and add the premium for such insurance; with interest at the
loan pre-maturity contract rate, to the balance
of this Note.

 

The interest is calculated
on a 360-day factor applied on a 365-day year, or a 366-day year, in the event
that the year is a leap year, on the unpaid principal to the date of each
installment paid. Provided, however, that in the event the interest rate
reaches the maximum rate allowed by applicable law, said maximum legal rate
shall be computed on a full calendar year 365/365 days basis or on a 366/366
days basis, in the event that the year is a leap year. The interest charged and
herein contracted for will riot exceed the maximum allowed by law.

 

To the extent allowed by
law, matured unpaid amounts will bear interest computed on a full calendar year
365/365 days basis or on a 366/366 days basis, in the event that the year is a
leap year, at the highest legal rate of interest allowed by Texas Law, unless
Federal Law allows a higher interest rate, in which case, Borrower agrees to
pay the rate’ allowed by Federal Law. If applicable law does not set a maximum
rate of interest for matured unpaid amounts, then Borrower agrees that the
maximum rate for such amounts shall be eighteen percent (18%) per annum.

 

To the extent allowed by
law, as the late payment charge under this Note, lender may in its sole
discretion (i) increase the interest on the principal portion of any payment
amount that is not received by the payment due date to the maximum rate allowed
by law, computed on a full calendar year basis from the payment due date until
paid, or (ij), should any payment not be made within ten (10) days from the due
date, require Borrower to pay a one time “late charge” per late payment equal
to five percent (5%) of the amount of the past due principal and interest of
such payment, with a minimum of $10.00 and a maximum of $1,500.00 per late
payment. The “Iate charge” may be assessed without notice, and shall be
immediately due and payable.

 

1

 

The outstanding and unpaid
principal of this Note and all accrued and unpaid interest are payable as
follows:

 

	
  Number of

  Payments

  	
   

  	
  Frequency

  	
   

  	
  Amount of Payments

  	
   

  	
  When Payments are Due

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

SEE ADDENDUM TO PROMISSORY NOTE
ATTACHED HERETO AND INCORPORATED HEREIN.

 

	
  Final
  Maturity Date:

  	
  DECEMBER 30,
  2007

  

 

All outstanding unpaid
principal, all accrued and unpaid interest; and all fees, late charges, and/or
other charges incurred in this transaction by, or for the benefit of, Borrower
which remain due and owing on the Final Maturity Date are due and payable on
such date.

 

THIS OBLIGATION HAS A BALLOON
PAYMENT PROVISION:

 

THIS LOAN IS PAYABLE IN FULL ON
THE FINAL MATURITY DATE SET FORTH HEREIN IF NO PRIOR DEMAND HAS BEEN MADE. ON
THE FINAL MATURITY DATE YOU MUST REPAY THE ENTIRE OUTSTANDING UNPAID PRINCIPAL
BALANCE, ALL ACCRUED AND UNPAID INTEREST, AND ALL FEES, LATE CHARGES, AND/OR
OTHER CHARGES INCURRED IN THIS TRANSACTION BY, OR ON BEHALF OF, BORROWER, WHICH
REMAIN UNPAID. LENDER IS UNDER NO OBLIGATION TO REFINANCE THE LOAN, OR ANY
PORTION THEREOF, AT THAT TIME. YOU WILL THEREFORE BE REQUIRED TO MAKE PAYMENT
OUT OF OTHER ASSETS YOU MAY OWN, OR YOU WILL HAVE TO FIND A LENDER, WHICH MAY
BE THIS LENDER, WHICH AGREES TO LEND YOU THE MONEY TO REFINANCE. IF YOU
REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE CLOSING
COSTS NORMALLY ASSOCIATED WITH A NEW LOAN, EVEN IF YOU OBTAIN REFINANCING FROM
THIS LENDER.

 

The failure of Borrower to pay
any of the payment(s) of principal or any interest thereon, fees and/or late
charges when the same is due and payable, shall permit Lender, at its option,
to accelerate the maturity, of all, or any portion, of the remaining unpaid
principal balance outstanding, all accrued and unpaid interest and all accrued
and unpaid late charges of this Note, whereupon the same shall be due and
payable immediately.

 

Borrower
and Lender intend that the loan evidenced by this Note (the “Loan”) shall be in
strict compliance with applicable usury laws. If at any time any interest
contracted for, charged, or received under this Note or otherwise in connection
with. the Loan would be usurious under applicable law, then regardless of the
provisions, of this Note or the documents and instruments evidencing, securing
or otherwise executed in connection with ti1e,Loan or any action. or event
(including, without limitation, prepayment of principal hereunder or
acceleration of maturity by the Lender) which may occur with respect to this
Note or the Loan, it is agreed that all sums determined to be usurious shall be
immediately credited by the Lender as a payment of principal hereunder, or If
this Note has already been paid, immediately refunded to the Borrower. All
compensation which constitutes interest under applicable law in connection with
the Loan shall be amortized, prorated, allocated and spread over the full
period of time any indebtedness is owing by Borrower to the greatest extent
permissible without exceeding the applicable maximum rate allowed by applicable
law in effect from time to time during such period.

 

In no event shall the
provisions of Chapter 346, of the Texas Finance Code (which regulates certain
revolving loan accounts and revolving triparty accounts) apply to the loan.

 

IN THE EVENT ANY ITEM, ITEMS,
TERMS OR PROVISIONS CONTAINED IN THIS INSTRUMENT ARE IN CONFLICT WITH THE LAWS
OF THE STATE OF TEXAS, OR FEDERAL LAW, THIS INSTRUMENT. SHALL BE AFFECTED ONLY
AS TO ITS APPLICATION TO SUCH ITEM, ITEMS, TERMS’ ‘OR PROVISIONS, AND SHALL IN
ALL OTHER RESPECTS REMAIN IN FULL FORCE AND EFFECT. IT IS UNDERSTOOD AND AGREED
THAT IN NO EVENT AND UPON NO CONTINGENCY SHALL THE BORROWER OR ANY PARTY LIABLE
THEREON, OR THEREFORE, BE REQUIRED TO PAY INTEREST IN EXCESS OF THE RATE
ALLOWED BY THE LAWS OF THE: STATE OF TEXAS OR FEDERAL LAW, IF SUCH LAW PERMITS
A GREATER RATE OF INTEREST. THE INTENTION OF THE PARTIES BEING TO CONFORM
STRICTLY TO THE USURY LAWS AS NOW OR HEREINAFTER CONSTRUED BY THE COURTS HAVING
JURISDICTION.

 

***THE BORROWER, ENDORSERS;
SURETIES, GUARANTORS AND ALL PERSONS TO BECOME LIABLE ON THIS NOTE (THE “OBLIGORS”)
HEREBY, JOINTLY AND SEVERALLY, WAIVE EXPRESSLY ALL NOTICES OF OVERDUE
INSTALLMENT PAYMENTS, AND DEMANDS FOR PAYMENT THEREOF, NOTICES OF INTENTION TO
ACCELERATE MATURITY, NOTICES OF ACTUAL ACCELERATION OF MATURITY, PRESENTMENT,
DEMAND FOR PAYMENT, NOTICES OF

***Except as provided in
Section 1.14.1 and 1.14.2 of the Loan Agreement of even date herewith between
Borrower and Lender (“Loan Agreement”)

 

2

 

DISHONOR, DISHONOR, PROTEST,
NOTICES OF PROTEST, AND DILIGENCE IN COLLECTION HEREOF. EACH OBLIGOR CONSENTS
THAT THE LENDER OR OTHER HOLDER OF THIS NOTE MAY AT ANY TIME, ANDFROM TIME TO
TIME UPON REQUEST OF OR BY AGREEMENT WITH ANY OF THEM, RENEW THIS NOTE AND/OR
EXTEND THE DATE OF ATURITY HEREOF OR CHANGE THE TIME OR METHOD OF PAYMENTS
WITHOUT NOTICE TO ANY OF THE OTHER OBLIGORS, MAKERS, SURETIES OR ENDORSERS WHO
SHALL REMAIN BOUND FOR THE PAYMENT HEREOF. BUGORS WAIVE EXPRESSLY THE LATE
FILING OF’ANY SUIT OR CAUSE OF’ACTION HEREON, OR ANY DELAY IN THE HANDLING
OFANY COLLATERAL. OBLIGORS AGREE THAT HOLDER’S ACCEPTANCE OF PARTIAL OR
DELINQUENT PAYMENTS OR FAILURE OF HOLDER TO EXERCISE ANY RIGHT OR REMEDY
CONTAINED HEREIN OR IN ANY INSTRUMENT GIVEN AS SECURITY FOR THE PAYMENTOF THIS
NOTE SHALL NOT BE A WAIVER OF ANY OBLIGATION OF THE OBLIGORS OR
CONSTITUTE.WAIVER OF ANY PRIOR OR SUBSEQUENT DEFAULT. THE HOLDER MAY REMEDY ANY
DEFAUL T WITHOVT WAIVING THE DEFAULT REMEDIED AND MAY WAIVE ANY DEFAULT WITHOUT
WAIVING ANY OTHER PRIOR OR SUBSEQUENT DEFAULT.

 

To the extent allowed by
law, as security for this Note, and all other indebtedness which may at any
time be owing by Borrower (and any endorsers and/or guarantors hereof) to
Lender or other holder hereof, the Borrower (and any endorsers and/or
guarantors hereof) gives to Lender or other holder hereof, a security interest,
a lien and contractual right of set-off in and to all of the Borrower’s (and
any endorsers and/or guarantors hereof) money, credits, accounts and/or other
property now in, or at any time here after coming within the custody or control
of Lender or other holder hereof, or any member of Bank or branch Bank of
International Bancshares Corporation, whether held in a general or special
account or depositor for safekeeping or otherwise.  Every such security interest and right of
set-off may be exercised without demand or notice to Borrower (and any
endorsers and/or guarantors hereof.)  No
security interest or right of set-off to enforce such security shall be deemed
to have been waived by any act or conduct on the part of Lender, or by any
failure to exercise such right of set-off or to enforce such security interest,
or by any delay in so doing.  Every right
of set-off and security interest shall continue in full force and effect until
such right of set-off or security interest is specifically waived or released
by an instrument in writing executed by Lender. 
The foregoing is in addition to and not in lieu of any rights of set-off
allowed by law.

 

In connection with any
transaction between Borrower and Lender at any time in the past, present or
future, in the event Borrower, individually or jointly with others, has granted
or grants Lender a lien on any real and/or personal property, Borrower agrees
that the lien on such real and/or personal property shall also secure the
indebtedness of Borrower to Lender evidenced by this Note and all renewals,
extensions and modifications hereof.

 

If this Note, or any part
hereof, is not paid according to its terms, is placed in the hands of an
attorney for collection, or is collected through Probate, Bankruptcy or other
judicial or non-judicial proceedings, whether matured by expiration of time or
by the exercise of the option given to the Lender to mature it, the Borrower
and all parties now or hereafter personally liable hereon hereby now agree to
and shall pay an additional amount equal to a reasonable and necessary attorney’s
fees and associated costs for collection. 
Said attorney’s fees and costs if collection, once liquidated and paid
by Lender or otherwise allowed by law, will bear interest at the rate of
interest applied to the matured and past-due principal balance of this Note as
such rate may change from time to time from date due until repaid.

 

In the event any legal action or proceeding, by
arbitration or otherwise, is commenced with the enforcement of, or any
declaration of rights under this Note and/or any instrument or written
agreement required or delivered under or pursuant to the terms of this Note,
and/or any controversy or claim, whether sounding in contract, tort or statute,
legal or equitable, involving in any way the financing or the transaction(s),
the subject of this Note or any other proposed or actual loan or extension of
credit, the prevailing party shall be entitled to recover reasonable and
necessary attorney’s fees, paralegal costs (including allocated costs for
in-house legal services), costs, expenses, expert witness fees and costs, and
other necessary disbursements made in connection with any such action or
proceeding.

 

Lender, in its sole
discretion and without obligation on Lender to do so, any advance and pay sums
on behalf and for the benefit of Borrower for costs necessary for the
protection and preservation of the collateral securing this Note and other
costs that me be appropriate, in Lender’s sole discretion, including but not
limited to insurance premiums, ad valorem taxes, and attorney’s fees.  Any sums which may be so paid out by Lender
and all sums paid for insurance premiums, as aforesaid, including the costs,
expenses and attorney’s fees paid in any suit affecting said property shall
bear interest from the dates of such payments at the prematurity contract rate
applied to the principal balance of this Note and shall be paid by Borrower to
Lender upon demand, at the same place at which this Note is payable, and shall
be deemed a part of the debt and recoverable as such in all aspects.

 

Borrower reserves the right
to prepay, prior to maturity, all or any part of the principal of this Note
without penalty, and interest shall immediately cease on any amount so
prepaid.  All prepayments shall be
applied to the last maturing installments of principal, without interrupting
the regular installment payments.

 

Any assumption, if permitted
by Lender, by ant other person or persons, partnership, corporation,
organization or any other entity without the express written consent of Lender,
shall not release the liability of Borrower for the payment of this Note.

 

In the event that the
hereinafter described collateral, if any, is sold, conveyed, or otherwise
disposed of without the prior written consent of the Lender other than in the
ordinary course of business, the maturity of this Note may, at the option of
the Lender, be accelerated and Lender may immediately demand payment of the
then outstanding principal sum together with all accrued and unpaid interest
due thereon.

 

Borrower and Lender hereby
expressly acknowledge and agree that in the event of a default under this Note
or under any document executed by Borrower in connection with, or to secure the
payment of, this Note (I) Lender shall not be required to comply with
Subsection 3.05 (d) of the Texas Revised Partnership Act and (2) Lender shall
not be required to proceed against or exhaust the assets of Borrower before
pursuing any remedy against one or more of the partners of Borrower of the
property of such partners.

 

ARBITRATION.

LENDER AND BORROWER FURTHER AGREE
AS FOLLOWS:

 

I.              PROVISIONS APPLICABLE TO
CONSUMER.RELATED CLAIMS OF $75,000.00 OR LESS IN ACTUAL DAMAGES:

 

(a)           WITH REGARD TO ALL CONSUMER
RELATED CLAIMS OF $75,000.00 OR LESS IN ACTUAL DAMAGES, ANY AND ALL
CONTROVERSIES OR CLAIMS ARISING OUT OF THIS CONTRACT, ITS NEGOTIATION AND/OR
THE BREACH THEREOF, SHALL BE SETT.LED BY ARBITRATION ADMINISTERED BY THE
AMERICAN ARBITRATION ASSOCIATION UNDER ITS SUPPLEMENTAL PROCEDURES FOR
RESOLUTION OF CONSUMER.RELATED DISPUTES AND CONSUMER DUE PROCESS PROTOCOL
(WHICH ARE INCORPORATED HEREIN FOR ALL PURPOSES), AND JUDGMENT ON THE AWARD
RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING JURISDICTION
THEREOF. IT IS INTENDED BY ALL PARTIES THAT THIS ARBITRATION CLAUSE MEET AND
INCLUDE ALL FAIRNESS STANDARDS AND PRINCIPLES OF THE AMERICAN ARBITRATION
ASSOCIATION’S CONSUMER DUE PROCESS PROTOCOL AND DUE PROCESS IN PREDISPUTE
ARBITRATION.

 

3

 

(b)           INSTEAD OF PROCEEDING IN
ARBITRATION, ANY PARTY HERETO MAY PURSUEITS CLAIMIN THE CONSUMER’S LACAL SMALL
CLAIMS COURT, IF THE CONSUMER-RELATED CLAIM IS WITHIN THE SMALL CLAIMS COURT
JURISDICTION LIMITS. IF THE SMALL CLAIMS COURT OPTION IS CHOSEN THE PARTY MUST
CONTACT THE SMALL CLAIMS COURT DIRECTLY.

 

(c)           THE PARTIES FURTHER AGREE THAT
(i) NO ARBITRATION PROCEEDING HEREUNDER SHALL BE CERTIFIED AS A CLASS ACTION OR
PROCEED AS A CLASS ACTION; OR ON A BASIS INVOLVING CLAIMS BROUGHT IN A
PURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF THE GENERAL PUBLIC, OTHER
CUSTOMERS OR POTENTIAL CUSTOMERS OR PERSONS SIMILARLY SITUATED AND (II) NO
ARBITRATION PROCEEDING HEREUNDER SHALL BE CONSOLIDATED WITH, OR JOINED IN ANY
WAY WITH, ANY OTHER ARBITRATION PROCEEDING.

 

(d)           THIS ARBITRATION PROVISION SHALL
SURVIVE ANY TERMINATION, AMENDMENT, OR EXPIRATION OF THE AGREEMENT IN WHICH
THIS PROVISION IS CONTAINED, UNLESS ALL OF THE PARTIES OTHERWISE EXPRESSLY
AGREE IN WRITING.

 

(e)           THE PARTIES ACKNOWLEDGE THAT THIS
AGREEMENT EVIDENCES A TRANSACTION INVOLVING INTERSTATE COMMERCE. THE FEDERAL ARBITRATION
ACT SHALL GOVERN THE INTERPRETATION, ENFORCEMENT, AND PROCEEDINGS PURSUANT TO
THE ARBITRATION CLAUSE OF THIS AGREEMENT.

 

II.            ADDITIONAL PROVISIONS FOR
CONSUMER-RELATED CLAIMS ABOVE $75,000.00 IN ACTUAL DAMAGES AND/OR ALL
COMMERCIAL CLAIMS:

 

(a)           ANY ARBITRATION INVOLVING
CONSUMER-RELATED CLAIMS ABOVE $75,000.00 IN ACTUAL DAMAGES AND/OR COMMERCIAL
CLAIMS HEREUNDER SHALL BE BEFORE AT LEAST THREE NEUTRAL ARBITRATORS ASSOCIATED
WITH THE AMERICAN ARBITRATION ASSOCIATION AND SELECTED IN ACCORDANCE WITH THE
COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. FAILURE
OF ANY ARBITRATOR TO DISCLOSE ALL FACTS WHICH MIGHT TO AN OBJECTIVE OBSERVER
CREATE A REASONABLE IMPRESSION OF THE ARBITRATORIS PARTIALITY, AND/OR MATERIAL
ERRORS OF LAW SHALL BE GROUNDS [IN ADDITION TO ALL OTHERS] FOR VACATUR OF AN
AWARD RENDERED PURSUANT TO THIS AGREEMENT.

 

(b)           THE PARTIES FURTHER AGREE THAT
(i) NO ARBITRATION PROCEEDING HEREUNDER SHALL BE CERTIFIED AS A CLASS ACTION OR
PROCEED AS A CLASS ACTION, OR ON A BASIS INVOLVING CLAIMS BROUGHT IN A
PURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF THE GENERAL PUBLIC, OTHER
CUSTOMERS OR POTENTIAL CUSTOMERS OR PERSONS SIMILARLY SITUATED AND (ii) NO
ARBITRATION PROCEEDING HEREUNDER SHALL BE CONSOLIDATED WITH, OR JOINED IN ANY
WAY WITH, ANY OTHER ARBITRATION PROCEEDING.

 

(c)           THIS ARBITRATION PROVISION SHALL
SURVIVE ANY TERMINATION, AMENDMENT, OR EXPIRATION OF THE AGREEMENT IN WHICH
THIS PROVISION IS CONTAINED, UNLESS ALL OF THE PARTIES OTHERWISE EXPRESSLY
AGREE IN WRITING.

 

(d)           THE PARTIES ACKNOWLEDGE THAT THIS
AGREEMENT EVIDENCES A TRANSACTION INVOLVING INTERSTATE COMMERCE. THE FEDERAL
ARBITRATION ACT SHALL GOVERN THE INTERPRETATION, ENFORCEMENT, AND PROCEEDINGS
PURSUANT TO THE ARBITRATION CLAUSE OF THIS AGREEMENT.

 

III.           ADDITIONAL PROVISIONS FOR ALL
COMMERCIAL CLAIMS:

 

(a)           ANY AND ALL COMMERCIAL
CONTROVERSIES BETWEEN THE PARTIES, SHALL BE RESOLVED BY ARBITRATION IN
ACCORDANCE, WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION IN EFFECT AT THE TIME OF FILING, UNLESS THE COMMERCIAL ARBITRATION
RULES CONFLICT WITH THIS PROVISION, AND IN SUCH EVENT THE TERMS OF THIS
PROVISION SHALL CONTROL TO THE EXTENT OF THE CONFLICT.

 

(b)           THE AWARD OF THE ARBITRATORS, OR
A MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY BE
ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION. THE ARBITRATION
AWARD SHALL BE IN WRITING AND SPECIFY THE FACTUAL AND LEGAL BASIS FOR THE
AWARD. UPON THE REQUEST OF ANY PARTY, THE AWARD SHALL INCLUDE FINDINGS OF FACT
AND CONCLUSION OF LAW.

 

(c)           ARBITRABLE DISPUTES INCLUDE ANY
AND ALL CONTROVERSIES OR CLAIMS BETWEEN THE PARTIES OF WHATEVER TYPE OR MANNER,
INCLUDING WITHOUT LIMITATION, ANY CLAIM ARISING OUT OF OR RELATING TO THIS
SECURITY INSTRUMENT, ALL PAST, PRESENT AND/OR FUTURE CREDIT FACILITIES AND/OR
AGREEMENTS INVOLVING THE PARTIES, ANY TRANSACTIONS BETWEEN OR, INVOLVING THE
PARTIES, AND/OR ANY ASPECT OF ANY PAST OR PRESENT RELATIONSHIP OF THE PARTIES,
WHETHER BANKING OR OTHERWISE, SPECIFICALLY INCLUDING ANY ALLEGED TORT COMMITTED
BY ANY PARTY.

 

(d)           THE PARTIES SHALL ALLOW AND
PARTICIPATE IN DISCOVERY IN ACCORDANCE WITH THE FEDERAL RULES OF CIVIL
PROCEDURE FOR A PERIOD OF ONE HUNDRED TWENTY (120) DAYS AFTER THE FILING OF THE
ORIGINAL RESPONSIVE PLEADING. DISCOVERY MAY CONTINUE THEREAFTER AS AGREED BY
THE PARTIES OR AS ALLOWED BY THE ARBITRATORS. UNRESOLVED DISCOVERY DISPUTES
SHALL BE BROUGHT TO THE ATTENTION OF THE ARBITRATORS BY WRITTEN MOTION FOR
PROPER DISPOSITION, INCLUDING RULING ON ANY ASSERTED OBJECTIONS, PRIVILEGES,
AND PROTECTIVE ORDER REQUESTS AND AWARDING REASONABLE ATTORNEY’S FEES TO THE
PREVAILING PARTY.

 

(e)           IN THE EVENT THE AGGREGATE OF ALL
AFFIRMATIVE CLAIMS ASSERTED EXCEED $500,000.00, EXCLUSIVE OF INTEREST AND
ATTORNEY’S FEES, OR UPON THE WRITTEN REQUEST OF ANY PARTY, (1) PRIOR TO THE
DISSEMINATION OF A LIST OF POTENTIAL ARBITRATORS. THE AMERICAN ARBITRATION
ASSOCIATION SHALL CONDUCT AN IN PERSON ADMINISTRATIVE CONFERENCE WITH THE
PARTIES AND THEIR

 

4

 

ATTORNEYS FOR THE FOLLOWING
PURPOSES AND FOR SUCH ADDITIONAL PURPOSES AS THE PARTIES OR THE AMERICAN
ARBITRATION ASSOCIATION MAY DEEM APPROPRIATE, (A) TO OBTAIN ADDITIONAL
INFORMATION ABOUT THE NATURE AND MAGNITUDE OF THE DISPUTE AND THE ANTICIPATED LENGTH
OF HEARINGS AND SCHEDULING; (B) TO DISCUSS THE VIEW OF THE PARTIES ABOUT ANY
TECHNICAL AND/OR OTHER SPECIAL QUALIFICATIONS OF THE ARBITRATORS; AND (C) TO
CONSIDER, WHETHER MEDIATION OR OTHER METHODS OF DISPUTE RESOLUTION MIGHT BE
APPROPRIATE, AND (2) AS PROMPTLY AS PRACTICABLE AFTER THE SELECTION OF THE
ARBITRATORS, A PRELIMINARY HEARING SHALL BE HELD AMONG THE PARTIES, THEIR
ATTORNEYS AND THE ARBITRATORS WITH THE AGREEMENT OF THE ARBITRATORS AND THE
PARTIES, THE PRELIMINARY HEARING MAY BE CONDUCTED BY TELEPHONE CONFERENCE CALL
RATHER THAN IN PERSON. AT THE PRELIMINARY HEARING THE MATTERS THAT MAY BE
CONSIDERED SHALL INCLUDE, WITHOUT LIMITATION, A PREHEARING SCHEDULING ORDER
ADDRESSING (A) EACH PARTY’S DUTY TO SUBMIT A DETAILED STATEMENT OF CLAIMS, DAMAGES
AND/OR DEFENSES, A STATEMENT OF THE ISSUES ASSERTED BY EACH PARTY AND ANY LEGAL
AUTHORITIES THE PARTIES MAY WISH TO BRING TO THE ATTENTION OF THE ARBITRATORS;
(B) RESPONSES AND/OR REPLIES TO THE PLEADINGS FILED IN COMPLIANCE WITH SUBPART
2(A): (C) STIPULATIONS REGARDING ANY UNCONTESTED FACTS; (D) EXCHANGE AND
PREMARKING OF ALL DOCUMENTS WHICH EACH PARTY BELIEVES MAY BE OFFERED AT THE
FINAL ARBITRATION HEARING; (E) THE IDENTIFICATION AND AVAILABILITY OF
WITNESSES, INCLUDING EXPERTS, AND SUCH ADDITIONAL MATTERS REGARDING WITNESSES
INCLUDING THEIR BIOGRAPHIES AND A SHORT SUMMARY OF THEIR EXPECTED TESTIMONY,
(F) WHETHER A STENOGRAPHIC OR OTHER OFFICIAL RECORD OF THE PROCEEDINGS SHALL BE
MAINTAINED; AND (G) THE POSSIBILITY OF UTILIZING MEDIATION OR OTHER ALTERNATIVE
METHODS OF DISPUTE RESOLUTION.

 

(f)            FOR PURPOSES OF THIS PROVISION, “THE
PARTIES” MEAN BORROWER AND LENDER, AND EACH AND ALL PERSONS AND ENTITIES
SIGNING THIS AGREEMENT OR ANY OTHER AGREEMENTS BETWEEN OR AMONG ANY OF THE
PARTIES AS PART OF THIS TRANSACTION. “THE PARTIES” SHALL ALSO INCLUDE
INDIVIDUAL PARTNERS, AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND/OR
REPRESENTATIVES OF ANY PARTY TO SUCH DOCUMENTS, AND SHALL INCLUDE ANY OTHER
OWNER AND HOLDER OF THIS AGREEMENT.

 

(g)           THE PARTIES SHALL HAVE THE RIGHT
TO INVOKE SELF-HELP REMEDIES (SUCH AS SET-OFF, NOTIFICATION OF ACCOUNT DEBTORS,
SEIZURE AND/OR FORECLOSURE OF COLLATERAL, AND NON- JUDICIAL SALE OF PERSONAL
PROPERTY AND REAL PROPERTY COLLATERAL) BEFORE, DURING OR AFTER ANY ARBITRATION AND/OR
REQUEST ANCILLARY OR PROVISIONAL JUDICIAL REMEDIES (SUCH AS GARNISHMENT,
ATTACHMENT, SPECIFIC PERFORMANCE, RECEIVER, INJUNCTION OR RESTRAINING ORDER,
AND SEQUESTRATION) BEFORE OR AFTER ANY ARBITRATION. THE PARTIES NEED NOT AWAIT
THE OUTCOME OF THE ARBITRATION BEFORE USING SELF-HELP REMEDIES. USE OF
SELF-HELP OR ANCILLARY AND/OR PROVISIONAL JUDICIAL REMEDIES SHALL NOT OPERATE
AS A WAIVER OF EITHER PARTY’S RIGHT TO COMPEL ARBITRATION. ANY ANCILLARY OR
PROVISIONAL REMEDY WHICH WOULD BE AVAILABLE FROM A COURT AT LAW SHALL BE
AVAILABLE FROM THE ARBITRATORS, INCLUDING INJUNCTION AND RESTRAINING ORDERS.

 

(h)           THE
PARTIES AGREE THAT ANY ACTION REGARDING ANY CONTROVERSY BETWEEN THE PARTIES
SHALL EITHER BE BROUGHT BY ARBITRATION, AS DESCRIBED HEREIN, OR BY JUDICIAL
PROCEEDINGS, BUT SHALL NOT BE PURSUED SIMULTANEOUSLY IN DIFFERENT OR
ALTERNATIVE FORMS. A TIMELY WRITTEN NOTICE OF INTENT TO ARBITRATE PURSUANT TO
THIS AGREEMENT STAYS AND/OR ABATES ANY AND ALL ACTION IN A TRIAL COURT, SAVE
AND EXCEPT A HEARING ON A MOTION TO COMPEL ARBITRATION AND/OR THE ENTRY OF AN
ORDER COMPELLING ARBITRATION AND STAYING AND/OR ABATING THE LITIGATION PENDING
THE FILING OF THE FINAL AWARD OF THE ARBITRATORS. ALL REASONABLE AND NECESSARY
ATTORNEY’S FEES AND ALL TRAVEL COSTS SHALL BE AWARDED TO THE PREVAILING PARTY
ON ANY MOTION TO COMPEL ARBITRATION AND MUST BE PAID TO SUCH PARTY WITHIN TEN
(10) DAYS OF THE SIGNING OF THE ORDER COMPELLING ARBITRATION.

 

(i)            ANY PARTY SEEKING TO ARBITRATE
SHALL SERVE A WRITTEN NOTICE OF INTENT TO ARBITRATE TO ANY AND ALL OPPOSING
PARTIES WITHIN 360 DAYS AFTER DISPUTE HAS ARISEN. A DISPUTE IS DEFINED TO HAVE
ARISEN ONLY UPON RECEIPT OF SERVICE OF JUDICIAL PROCESS, INCLUDING SERVICE OF A
COUNTERCLAIM, FAILURE TO SERVE A WRITTEN NOTICE OF INTENT TO ARBITRATE WITHIN
THE TIME SPECIFIED ABOVE SHALL BE DEEMED A WAIVER OF THE AGGRIEVED PARTY’S
RIGHT TO COMPEL ARBITRATION OF SUCH CLAIM. THE ISSUE OF WAIVER PURSUANT TO THIS
AGREEMENT IS AN ARBITRABLE DISPUTE.

 

(j)            ACTIVE PARTICIPATION IN PENDING
LITIGATION DURING THE 360 DAY NOTICE PERIOD, WHETHER AS PLAINTIFF OR DEFENDANT,
IS NOT A WAIVER OF THE RIGHT TO COMPEL ARBITRATION. ALL DISCOVERY OBTAINED IN
THE PENDING LITIGATION MAY BE USED IN ANY SUBSEQUENT ARBITRATION PROCEEDING.

 

(k)           THE PARTIES FURTHER AGREE THAT
(i) NO ARBITRATION PROCEEDING HEREUNDER SHALL BE CERTIFIED AS A CLASS ACTION OR
PROCEED AS A CLASS ACTION, OR ON A BASIS INVOLVING CLAIMS BROUGHT IN A
PURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF THE GENERAL PUBLIC, OTHER
CUSTOMERS OR POTENTIAL CUSTOMERS OR PERSONS SIMILARLY SITUATED AND (ii) NO
ARBITRATION PROCEEDING HEREUNDER SHALL BE CONSOLIDATED WITH, OR JOINED IN ANY
WAY WITH, ANY OTHER ARBITRATION PROCEEDING.

 

(l)            ANY ARBITRATOR SELECTED SHALL BE
KNOWLEDGEABLE IN THE SUBJECT MATTER OF THE DISPUTE. EACH OF THE PARTIES SHALL
PAY AN EQUAL SHARE OF THE ARBITRATION COSTS, FEES, EXPENSES, AND OF THE
ARBITRATORS’ FEES, COSTS AND EXPENSES.

 

(m)          ALL STATUTES OF LIMITATIONS WHICH
WOULD OTHERWISE BE APPLICABLE SHALL APPLY TO ANY AND ALL CLAIMS ASSERTED IN ANY
ARBITRATION PROCEEDING HEREUNDER AND THE COMMENCEMENT OF ANY ARBITRATION
PROCEEDING TOLLS SUCH STATUTES OF LIMITATIONS.

 

5

 

(n)           IN ANY ARBITRATION PROCEEDING
SUBJECT TO THIS PROVISION, THE ARBITRATORS, OR MAJORITY OF THEM, ARE
SPECIFICALLY EMPOWERED TO DECIDE (BY DOCUMENT ONLY, OR WITH A HEARING, AT THE
ARBITRATORS’ SOLE DISCRETION) PRE-HEARING MOTIONS WHICH ARE SUBSTANTIALLY
SIMILAR TO PRE HEARING MOTIONS TO DISMISS AND MOTIONS FOR SUMMARY ADJUDICATION.

 

(o)           THIS ARBITRATION PROVISION SHALL
SURVIVE ANY TERMINATION, AMENDMENT, OR EXPIRATION OF THE AGREEMENT IN WHICH
THIS PROVISION IS CONTAINED, UNLESS ALL OF THE PARTIES OTHERWISE EXPRESSLY
AGREE IN WRITING.

 

(p)           THE PARTIES ACKNOWLEDGE THAT THIS
AGREEMENT EVIDENCES A TRANSACTION INVOLVING INTERSTATE COMMERCE. THE FEDERAL
ARBITRATION ACT SHALL GOVERN THE INTERPRETATION ENFORCEMENT, AND PROCEEDINGS
PURSUANT TO THE ARBITRATION CLAUSE OF THIS AGREEMENT.

 

(q)           THE ARBITRATORS, OR A MAJORITY OF
THEM, SHALL AWARD ATTORNEY’S FEES AND COSTS TO THE PREVAILING PARTY PURSUANT TO
THE TERMS OF THIS AGREEMENT.

 

(r)           NEITHER THE PARTIES NOR THE
ARBITRATORS MAY DISCLOSE THE EXISTENCE, CONTENT, OR RESULTS OF ANY ARBITRATION
HEREUNDER WITHOUT PRIOR WRITTEN CONSENT OF ALL PARTIES AND/OR COURT ORDER.

 

(s)           VENUE OF ANY ARBITRATION
PROCEEDING HEREUNDER SHALL BE IN BEXAR COUNTY, TEXAS.

 

THE TERM LENDER INCLUDES ANY
OTHER OWNER AND HOLDER OF THIS NOTE AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS. THIS NOTE IS GOVERNED BY APPLICABLE TEXAS LAW, EXCEPT TO THE EXTENT
THE USURY LAWS OF TEXAS ARE PRE-EMPTED BY FEDERAL LAW, IN WHICH CASE, SUCH
FEDERAL LAW SHALL APPLY VENUE OF ALL ACTIONS ON THIS NOTE, SHALL LIE IN BEXAR
COUNTY, TEXAS, AND ALL OBLIGATIONS REQUIRED HEREIN ARE PERFORMABLE IN BEXAR
COUNTY, TEXAS.

 

This Note will be governed
by, construed and enforced in accordance with federal law and the laws of the
State of Texas. This Note has been accepted by Lender in the State of Texas.

 

If the loan proceeds are to
be used primarily for personal, family or household use, the following notice
shall apply:

 

NOTICE TO CONSUMERS: UNDER
TEXAS LAW IF YOU CONSENT TO THIS AGREEMENT YOU MAY BE SUBJECT TO A FUTURE
RATING AS HIGH AS 24% ANNUAL PERCENTAGE RATE, OR THE STATE USURY CEILING,
WHICHEVER IS LESS.

 

NO ORAL
AGREEMENTS.

 

THIS WRITTEN AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

 

	
  LANCER PARTNERSHIP, LTD.,
  a Texas limited partnership

  	
   

  	
   

  
	
  By:
  Lancer Capital Corporation,

  	
   

  	
   

  
	
  a
  Delaware corporation, General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Scott Adams

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Scott Adams

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Secretary

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  6655 LANCER BLVD.

  	
   

  	
   

  	
  City/State:

  	
  SAN ANTONIO, TEXAS 78219

  
								

 

6

 

**ADDENDUM TO PROMISSORY NOTE

 

This Addendum to Promissory
Note (“Addendum”) is executed by the undersigned and made a part of that
certain Promissory Note (“Note”) dated December          ,
2004, executed by Lancer Partnership, Ltd., a Texas limited
partnership (the “Borrower”) and payable to the order of International Bank of
Commerce (the “Lender”) in the original principal sum of Fifteen Million and
No/100 Dollars ($15,000,000.00).

 

The interest rate on this
Note shall be either (A) or (B) below, as determined in accordance with
Borrower’s election:

 

A.            The interest rate shall be floating at 0.50
percent per annum below the New York Prime Rate (“Prime Rate”) (described below)
as it fluctuates from time to time.  The
starting interest rate on this Note shall be 4.75% percent per annum.  The rate of interest due hereunder shall be
recomputed as of the date of any change in the Prime Rate.

 

The New York Prime Rate
shall mean the annual lending rate of interest announced from time to time by
JP Morgan Chase & Co., New York, New York, as its prime rate.  If the New York Prime Rate has been selected
as the Prime Rate and if, thereafter, a prime rate is not announced by JP
Morgan Chase & Co., New York, New York, then the Wall Street Journal Prime
Rate (as defined herein) shall be the Prime Rate.  The Wall Street Journal Prime Rate shall mean
the variable rate of interest established and quoted from time-to-time in the “Money
Rates” column in the “Money & Investing” Section of The Wall Street
Journal (Southwest Edition) as its Prime Rate.

 

B.            The interest rate on this Note shall be equal
to the Index Rate (as defined herein) plus the Applicable Margin (as defined in
the Loan Agreement) per annum.  The term “Index
Rate” as used herein shall mean the thirty (30), sixty (60) or ninety (90) day
(as elected by Borrower) LIBOR Rate (as defined herein) on a 360-day year basis
determined as hereinafter provided. “LIBOR Rate” means the interest per annum
as determined by Lender at which United States dollar deposits are offered by
banks in the London Interbank market two (2) business days prior to the
commencement of such interest period. 
Borrower acknowledges that many of Lender’s commercial or other loans
may be priced in relation to the LIBOR Rate, that it is not necessarily the
lowest or best rate of interest actually charged on any loan, and that Lender
may make various commercial or other loans at rates of interest having no
relationship to the LIBOR Rate.

 

C.            This Note is made pursuant to and is governed
in all respects by the Loan Agreement. 
In the case of any conflict between the terms and provisions of this
Note and those of the Loan Agreement, the terms and provisions of the Loan Agreement
shall control.

 

D.

 

	
  Number
  of

  Payments

  	
   

  	
  Frequency

  	
   

  	
  Amount of

  Payments

  	
   

  	
  When Payments

  are Due

  
	
  (a)
  Thirty-five (35)

  	
   

  	
  Monthly

  	
   

  	
  Interest
  only on the outstanding principal balance.

  	
   

  	
  Commencing
  January 30, 2005 and continuing on the last day of each successive calendar
  month until and including November 30, 2007.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)
  One (1)

  	
   

  	
   

  	
   

  	
  All
  outstanding principal and all accrued, unpaid interest thereon shall be due
  and payable.

  	
   

  	
  On
  Final Maturity Date.

  

 

Final
Maturity Date: DECEMBER 30, 2007.

 

 

THIS
LOAN IS PAYABLE IN FULL ON DECEMBER 30, 2007.  YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OF
THE LOAN AND UNPAID INTEREST THEN DUE. 
THE BANK IS UNDER NO OBLIGATION TO REFINANCE THE LOAN.  YOU WOULD, THEREFORE, BE REQUIRED TO MAKE
PAYMENT OUT OF OTHER ASSETS YOU MAY OWN, OR YOU WOULD HAVE TO FIND A LENDER,
WHICH MAY BE THE BANK YOU HAVE THIS LOAN WITH AT MATURITY.  YOU MAY HAVE TO PAY SOME OR ALL THE CLOSING
COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING FROM
THE SAME BANK.

 

This
Note is a revolving note evidencing a line of credit loan from Lender to
Borrower.  During the term of this Note,
Borrower may borrow, repay and reborrow hereunder at any time under this Note
provided, however, that the principal balance outstanding under this Note at
any time shall not exceed Fifteen Million and No/100 Dollars ($15,000,000.00).  The
unpaid balance of this Note shall increase and decrease with each new advance
or payment hereunder, as the case may be, and although the entire principal
balance of this Note may be paid in full from time to time, this Note shall not
be deemed terminated or canceled as a result thereof.

 

Executed this          
day of December, 2004.

 

 

BORROWER:

 

Lancer
Partnership, Ltd., a Texas limited partnership

 

	
  By:  Lancer Capital Corporation,

  
	
  a Delaware corporation, General
  Partner

  
	
   

  
	
   

  	
  By:

  	
  /s/
  Scott Adams

  	
   

  
	
   

  	
  Name:

  	
  Scott
  Adams

  	
   

  
	
   

  	
  Title:

  	
   
  Secretary

  	
   

  
						

 

 

EXHIBIT “A”

 

A.            Equipment. All equipment of Debtor now or hereafter
acquired by Debtor, including without limitation, including without limitation,
furniture, machinery, vehicles and trade fixtures, together with any and all
accessions, attachments and other additions to, substitutes and replacements
for and improvements of the equipment, whether now owned or at any time hereafter
acquired or made, together with all tools, parts and appurtenances now or at
any timer hereafter used in and together with all proceeds of the equipment
described or referred to above, including insurance payable by reason of loss
or damage thereto, and all proceeds of any policy of insurance required on the
Collateral by Secured Party, including any refunds or unearned premiums in
connection with any cancellation, adjustment or termination of any such policy
of insurance.

 

B.            Inventory. All inventory of Debtor, whenever
acquired and whether now or hereafter existing, including but not limited to
all goods, wares and merchandise intended for sale or lease by Debtor or to be
furnished by Debtor, under contracts of service and all raw materials, goods in
process, finished goods and supplies of every nature used or usable in
connection with the manufacturing, processing, packing, shipping, advertising,
selling, leasing or furnishing of such services, goods, wares and merchandise;
all certificates of title, manufacture’s statements of origin and other
documents arising from or related to such inventory; and all accessions,
attachments and other additions to, substitutes for, replacements for,
improvements to and returns of such inventory; and all proceeds of such
inventory.

 

C.            Fixtures.

 

(1)           All of the property, personal or
otherwise, whether now existing or hereafter arising, existing or created, now
or hereafter attached to or incorporated into or used in or about the Debtor’s
premises, including all furniture, appliances, furnishings, goods, equipment,
and machinery owned by Debtor and other tangible personal property now or
hereafter affixed, attached or related to such property or now or hereafter
affixed, attached or related to such property or used in connection therewith,
and all replacements, substitutions and additions for or to any of the
foregoing;

 

(2)           All accessories, attachments and other
additions to, substitutes and replacements for, and improvements of, the
property described in (a) above, whether now owned or at any time hereafter
acquired or made, together with all tools, parts and appurtenances now or at
any time used in connection therewith;

 

(3)           All products and proceeds, including,
without limitation, insurance proceed of, and additions, improvements and
accessions to, all and any of the property described above, excluding proceeds
used to replace worn-out or obsolete equipment or other property.

 

D.            Accounts Receivable. All accounts and chattel paper of Debtor,
whenever acquired and whether now or hereafter existing, including, but not
limited to, accounts and chattel paper which arise out of: (i) the sale or
other disposition of goods; (ii) the furnishing of services; (iii) the
furnishing of, the use of, or the lease of any of the Collateral, and (iv) the
agreement to provide any of the above; and all proceeds relating to, resulting
from or arising in connection with any such accounts and/or chattel paper.

 

This
Security Agreement is being executed pursuant to the terms and provisions of that
certain Loan Agreement of even date herewith between Debtor and Secured Party
and which Loan Agreement will govern in case of conflict with this Agreement.

 

Together
with all books, records, files, computer software, documents and other
information pertaining to, and all containers and packages for, the property
described or referred to in subsections A through D above, and the proceeds of
all of the foregoing.Exhibit 10.1

 

PURCHASE
AGREEMENT

 

THIS PURCHASE
AGREEMENT (“Agreement”) is made as of the 15 day of March, 2005 by and among
VantageMed Corporation, a Delaware corporation (the “Company”), and the
Investors set forth on the signature pages affixed hereto (each an “Investor”
and collectively the “Investors”).

 

Recitals

 

A.            The Company and the Investors are
executing and delivering this Agreement in reliance upon the exemption from
securities registration afforded by the provisions of Regulation D (“Regulation
D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended; and

 

B.            The Investors wish to purchase from
the Company, and the Company wishes to sell and issue to the Investors, upon
the terms and conditions stated in this Agreement, (i) an aggregate of
5,376,344 shares of the Company’s Common Stock, par value $0.001 per share
(together with any securities into which such shares may be reclassified the “Common
Stock”), at purchase price of $0.93 per share, (ii) Series A warrants to
purchase an aggregate of 1,075,268 shares of Common Stock (subject to
adjustment) at an exercise price of $1.30 per share (subject to adjustment) in
the form attached hereto as Exhibit A (the “Series A Warrants”), and
(iii) Series B warrants to purchase an aggregate of 1,075,268 shares of Common
Stock (subject to adjustment) at an exercise price of $1.55 per share (subject
to adjustment) in the form attached hereto as Exhibit B (together with
the Series A Warrants, the “Warrants”); and

 

C.            Contemporaneous with the sale of the
Common Stock and Warrants, the parties hereto will execute and deliver a
Registration Rights Agreement, in the form attached hereto as Exhibit C
(the “Registration Rights Agreement”), pursuant to which the Company will agree
to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, and applicable
state securities laws.

 

In
consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.             Definitions.  In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth below:

 

“Affiliate”
means, with respect to any Person, any other Person which directly or
indirectly through one or more intermediaries Controls, is controlled by, or is
under common control with, such Person.

 

 

“Business
Day” means a day, other than a Saturday or Sunday, on which banks in New
York City are open for the general transaction of business.

 

“Company’s
Knowledge” means the actual knowledge of the executive officers (as defined
in Rule 405 under the 1933 Act) of the Company, after due inquiry.

 

“Confidential
Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes,
procedures and techniques, research and development information, computer
program code, performance specifications, support documentation, drawings,
specifications, designs, business and marketing plans, and customer and
supplier lists and related information).

 

“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.

 

“Effective
Date” means the date on which the initial Registration Statement is
declared effective by the SEC.

 

“Effectiveness
Deadline” means the date on which the initial Registration Statement is
required to be declared effective by the SEC under the terms of the
Registration Rights Agreement.

 

“Intellectual
Property” means all of the following: (i) patents, patent applications,
patent disclosures and inventions (whether or not patentable and whether or not
reduced to practice); (ii) trademarks, service marks, trade dress, trade names,
corporate names, logos, slogans and Internet domain names, together with all
goodwill associated with each of the foregoing; (iii) copyrights and
copyrightable works; (iv) registrations, applications and renewals for any of
the foregoing; and (v) proprietary computer software (including but not limited
to data, data bases and documentation).

 

“Material
Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the ability of the Company to perform its obligations under the
Transaction Documents.

 

“Person”
means an individual, corporation, partnership, limited liability company,
trust, business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

 

“Purchase
Price” means Five Million Dollars ($5,000,000).

 

“SEC
Filings” has the meaning set forth in Section 4.6.

 

2

 

“Registration
Statement” has the meaning set forth in the Registration Rights Agreement.

 

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

 

“Shares”
means the shares of Common Stock being purchased by the Investors hereunder.

 

“Subsidiary”
of any Person means another Person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient to
elect at least a majority of its Board of Directors or other governing body
(or, if there are no such voting interests, 50% or more of the equity interests
of which) is owned directly or indirectly by such first Person.

 

“Transaction
Documents” means this Agreement, the Warrants and the Registration Rights
Agreement.

 

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

 

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

 

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

 

2.             Purchase and Sale of the Shares
and Warrants.  Subject to the terms
and conditions of this Agreement, on the Closing Date, each of the Investors
shall severally, and not jointly, purchase, and the Company shall sell and
issue to the Investors, the Shares and Warrants in the respective amounts set
forth opposite the Investors’ names on the signature pages attached hereto in
exchange for the Purchase Price as specified in Section 3 below.

 

3.             Closing.  Upon confirmation that the other conditions
to closing specified herein have been satisfied or duly waived by the
Investors, the Company shall deliver to Lowenstein Sandler PC, in trust, a
certificate or certificates, registered in such name or names as the Investors
may designate, representing the Shares and Warrants, with instructions that
such certificates are to be held for release to the Investors only upon payment
in full of the Purchase Price to the Company by all the Investors.  Upon such receipt by Lowenstein Sandler PC of
the certificates, each Investor shall promptly, but no more than one Business
Day thereafter, cause a wire transfer in same day funds to be sent to the
account of the Company as instructed in writing by the Company, in an amount
representing such Investor’s pro rata portion of the Purchase Price as set
forth on the signature pages to this Agreement. 
On the date (the “Closing Date”) the Company receives the Purchase
Price, the certificates evidencing the Shares and Warrants shall be released to
the Investors (the “Closing”).  The Closing
of the purchase and sale of the Shares and Warrants shall take place at the
offices of Lowenstein Sandler PC, 1251 Avenue of the

 

3

 

Americas, 18th Floor, New York, New York 10020, or at such other location
and on such other date as the Company and the Investors shall mutually agree.

 

4.             Representations and Warranties
of the Company.  The Company hereby
represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the “Disclosure Schedules”):

 

4. 1          Organization,
Good Standing and Qualification. 
Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted and to own its
properties.  Each of the Company and its
Subsidiaries is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not and could not reasonably be
expected to have a Material Adverse Effect. 
The Company’s Subsidiaries are listed on Schedule 4.1 hereto.

 

4.2           Authorization.  The Company has full power and authority and
has taken all requisite action on the part of the Company, its officers,
directors and stockholders necessary for (i) the authorization, execution and
delivery of the Transaction Documents, (ii) the authorization of the
performance of all obligations of the Company hereunder or thereunder, and
(iii) the authorization, issuance (or reservation for issuance) and delivery of
the Securities.  The Transaction Documents constitute the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.

 

4.3           Capitalization.  Schedule 4.3 sets forth (a) the
authorized capital stock of the Company on the date hereof; (b) the number of
shares of capital stock issued and outstanding; (c) the number of shares of
capital stock issuable pursuant to the Company’s stock plans; and (d) the
number of shares of capital stock issuable and reserved for issuance pursuant
to securities (other than the Shares and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock of the
Company.  All of the issued and
outstanding shares of the Company’s capital stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of pre-emptive rights
and were issued in full compliance with applicable state and federal securities
law and any rights of third parties. 
Except as described on Schedule 4.3, all of the issued and
outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued and are fully paid, nonassessable and free of
pre-emptive rights, were issued in full compliance with applicable state and
federal securities law and any rights of third parties and are owned by the
Company, beneficially and of record, subject to no lien, encumbrance or other
adverse claim.  Except as described on Schedule
4.3, no Person is entitled to pre-emptive or similar statutory or
contractual rights with respect to any securities of the Company.  Except as described on Schedule 4.3,
there are no outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under which the Company or
any of its Subsidiaries is or may be obligated to issue any equity securities
of any kind and except as contemplated by this Agreement, neither the Company
nor any of its

 

4

 

Subsidiaries is currently in negotiations for the issuance of any
equity securities of any kind.  Except as
described on Schedule 4.3 and except for the Registration Rights
Agreement, there are no voting agreements, buy-sell agreements, option or right
of first purchase agreements or other agreements of any kind among the Company
and any of the securityholders of the Company relating to the securities of the
Company held by them.  Except as
described on Schedule 4.3 and except as provided in the Registration
Rights Agreement, no Person has the right to require the Company to register
any securities of the Company under the 1933 Act, whether on a demand basis or
in connection with the registration of securities of the Company for its own
account or for the account of any other Person.

 

Except as
described on Schedule 4.3, the issuance and sale of the Securities hereunder
will not obligate the Company to issue shares of Common Stock or other
securities to any other Person (other than the Investors) and will not result
in the adjustment of the exercise, conversion, exchange or reset price of any
outstanding security.

 

Except as
described on Schedule 4.3, the Company does not have outstanding
stockholder purchase rights or “poison pill” or any similar arrangement in
effect giving any Person the right to purchase any equity interest in the
Company upon the occurrence of certain events.

 

4.4           Valid Issuance.  The Shares have been duly and validly
authorized and, when issued and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable, and shall be free and clear of
all encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. 
The Warrants have been duly and validly authorized.  Upon the due exercise of the Warrants, the
Warrant Shares will be validly issued, fully paid and non-assessable free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws
and except for those created by the Investors. 
The Company has reserved a sufficient number of shares of Common Stock
for issuance upon the exercise of the Warrants, free and clear of all
encumbrances and restrictions, except for restrictions on transfer set forth in
the Transaction Documents or imposed by applicable securities laws and except
for those created by the Investors.

 

4.5           Consents.  The execution, delivery and performance by the
Company of the Transaction Documents and the offer, issuance and sale of the
Securities require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official other than filings that have
been made pursuant to applicable state securities laws and post-sale filings
pursuant to applicable state and federal securities laws which the Company
undertakes to file within the applicable time periods.  Subject to the accuracy of the
representations and warranties of each Investor set forth in Section 5 hereof,
the Company has taken all action necessary to exempt (i) the issuance and sale
of the Securities, (ii) the issuance of the Warrant Shares upon due exercise of
the Warrants, and (iii) the other transactions contemplated by the Transaction
Documents from the provisions of any stockholder rights plan or other “poison
pill” arrangement, any anti-takeover, business combination or control share law
or statute binding on the Company or to which the Company or any of its assets
and properties may be subject and any

 

5

 

provision of the Company’s Certificate of Incorporation or By-laws that
is or could reasonably be expected to become applicable to the Investors as a
result of the transactions contemplated hereby, including without limitation,
the issuance of the Securities and the ownership, disposition or voting of the
Securities by the Investors or the exercise of any right granted to the
Investors pursuant to this Agreement or the other Transaction Documents.

 

4.6           Delivery of SEC Filings; Business.
 The Company has made available to the
Investors through the EDGAR system, true and complete copies of the Company’s
most recent Annual Report on Form 10-KSB for the fiscal year ended December 31,
2003, as amended prior to the date hereof (the “10-KSB”), and all other reports
filed by the Company pursuant to the 1934 Act since the filing of the 10-KSB
and prior to the date hereof (collectively, the “SEC Filings”).  The SEC Filings are the only filings required
of the Company pursuant to the 1934 Act for such period.  The Company and its Subsidiaries are engaged
in all material respects only in the business described in the SEC Filings and
the SEC Filings contain a complete and accurate description in all material
respects of the business of the Company and its Subsidiaries, taken as a whole.

 

4.7           Use of Proceeds.  The net proceeds of the sale of the Shares
and the Warrants hereunder shall be used by the Company for working capital and
general corporate purposes.

 

4.8           No Material Adverse Change.  Since September 30, 2004, except as
identified and described in the SEC Filings or as described on Schedule 4.8,
there has not been:

 

(i)            any change in the consolidated
assets, liabilities, financial condition or operating results of the Company
from that reflected in the financial statements included in the Company’s
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004,
except for changes in the ordinary course of business which have not had and
could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;

 

(ii)           any declaration or payment of any
dividend, or any authorization or payment of any distribution, on any of the
capital stock of the Company, or any redemption or repurchase of any securities
of the Company;

 

(iii)          any material damage, destruction or
loss, whether or not covered by insurance to any assets or properties of the
Company or its Subsidiaries;

 

(iv)          any waiver, not in the ordinary course
of business, by the Company or any Subsidiary of a material right or of a
material debt owed to it;

 

(v)           any satisfaction or discharge of any
lien, claim or encumbrance or payment of any obligation by the Company or a
Subsidiary, except in the ordinary course of business and which is not material
to the assets, properties, financial condition, operating results or business
of the Company and its Subsidiaries taken as a whole (as such business is
presently conducted and as it is proposed to be conducted);

 

6

 

(vi)          any change or amendment to the Company’s
Certificate of Incorporation or by-laws, or material change to any material
contract or arrangement by which the Company or any Subsidiary is bound or to
which any of their respective assets or properties is subject;

 

(vii)         any material labor difficulties or
labor union organizing activities with respect to employees of the Company or
any Subsidiary;

 

(viii)        any material transaction entered into by
the Company or a Subsidiary other than in the ordinary course of business;

 

(ix)           the loss of the services of any key
employee, or material change in the composition or duties of the senior
management of the Company or any Subsidiary;

 

(x)            the loss or threatened loss of any
customer which has had or could reasonably be expected to have a Material
Adverse Effect; or

 

(xi)           any other event or condition of any
character that has had or could reasonably be expected to have a Material
Adverse Effect.

 

4.9           SEC Filings.

 

(a)           At the time of filing thereof, the
SEC Filings complied as to form in all material respects with the requirements
of the 1934 Act and did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.

 

(b)           Each registration statement and any
amendment thereto filed by the Company since January 1, 2001 pursuant to the
1933 Act and the rules and regulations thereunder, as of the date such
statement or amendment became effective, complied as to form in all material
respects with the 1933 Act and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein not misleading; and
each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its
issue date and as of the closing of any sale of securities pursuant thereto did
not contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.

 

4.10         No Conflict, Breach, Violation or
Default.  The execution, delivery and
performance of the Transaction Documents by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under
(i) the Company’s Certificate of Incorporation or the Company’s Bylaws, both as
in effect on the date hereof (true and complete copies of which have been made
available to the Investors through the EDGAR system), or (ii)(a) any statute,
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign,

 

7

 

having jurisdiction over the Company, any Subsidiary or any of their
respective assets or properties, or (b) any agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or a
Subsidiary is bound or to which any of their respective assets or properties is
subject.

 

4.11         Tax Matters.  The Company and each Subsidiary has timely
prepared and filed all tax returns required to have been filed by the Company
or such Subsidiary with all appropriate governmental agencies and timely paid
all taxes shown thereon or otherwise owed by it.  The charges, accruals and reserves on the
books of the Company in respect of taxes for all fiscal periods are adequate in
all material respects, and there are no material unpaid assessments against the
Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period
or audits by any federal, state or local taxing authority except for any
assessment which is not material to the Company and its Subsidiaries, taken as
a whole.  All taxes and other assessments
and levies that the Company or any Subsidiary is required to withhold or to
collect for payment have been duly withheld and collected and paid to the
proper governmental entity or third party when due.  There are no tax liens or claims pending or,
to the Company’s Knowledge, threatened against the Company or any Subsidiary or
any of their respective assets or property. 
Except as described on Schedule 4.11, there are no outstanding
tax sharing agreements or other such arrangements between the Company and any
Subsidiary or other corporation or entity.

 

4.12         Title to Properties.  Except as disclosed in the SEC Filings, the
Company and each Subsidiary has good and marketable title to all real
properties and all other properties and assets owned by it, in each case free
from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and each Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.

 

4.13         Certificates, Authorities and
Permits.  The Company and each
Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company
or such Subsidiary, could reasonably be expected to have a Material Adverse
Effect, individually or in the aggregate.

 

4.14         Labor
Matters.

 

(a)           Except
as set forth on Schedule 4.14, the Company is not a party to or bound by any
collective bargaining agreements or other agreements with labor
organizations.  The Company has not
violated in any material respect any laws, regulations, orders or contract
terms, affecting the collective bargaining rights of employees, labor
organizations or any laws, regulations or orders affecting employment
discrimination, equal opportunity employment, or employees’ health, safety,
welfare, wages and hours.

 

8

 

(b)           (i)
There are no labor disputes existing, or to the Company’s Knowledge,
threatened, involving strikes, slow-downs, work stoppages, job actions,
disputes, lockouts or any other disruptions of or by the Company’s employees,
(ii) there are no unfair labor practices or petitions for election pending or,
to the Company’s Knowledge, threatened before the National Labor Relations
Board or any other federal, state or local labor commission relating to the
Company’s employees, (iii) no demand for recognition or certification
heretofore made by any labor organization or group of employees is pending with
respect to the Company and (iv) to the Company’s Knowledge, the Company enjoys
good labor and employee relations with its employees and labor organizations.

 

(c)           To
the Company’s Knowledge, the Company is in compliance in all material respects
with all applicable laws respecting employment (including laws relating to
classification of employees and independent contractors) and employment practices,
terms and conditions of employment, wages and hours, and immigration and
naturalization.  No claims are pending
against the Company before the Equal Employment Opportunity Commission or any
other administrative body or in any court asserting any violation of Title VII
of the Civil Rights Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C.
§§ 1981 or 1983 or any other federal, state or local Law, statute or ordinance
barring discrimination in employment.

 

(d)           Except
as specified in Schedule 4.14, each of the Company’s employees is a
Person who is either a United States citizen or a permanent resident entitled
to work in the United States.  To the
Company’s Knowledge, the Company has no liability for the improper
classification by the Company of such employees as independent contractors or
leased employees prior to the Closing.

 

4.15         Intellectual Property.

 

(a)           All Intellectual Property of the
Company and its Subsidiaries is currently in compliance with all legal
requirements (including timely filings, proofs and payments of fees) and to the
Company’s Knowledge is valid and enforceable. 
No Intellectual Property of the Company or its Subsidiaries which is
necessary for the conduct of Company’s and each of its Subsidiaries’ respective
businesses as currently conducted or as currently proposed to be conducted has
been or is now involved in any cancellation, dispute or litigation, and, to the
Company’s Knowledge, no such action is threatened.  No patent of the Company or its Subsidiaries
has been or is now involved in any interference, reissue, re-examination or
opposition proceeding.

 

(b)           All of the licenses and sublicenses
and consent, royalty or other agreements concerning Intellectual Property which
are necessary for the conduct of the Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be
conducted to which the Company or any Subsidiary is a party or by which any of
their assets are bound (other than  generally commercially available, non-custom,
off-the-shelf software application programs having a retail acquisition price
of less than $10,000 per license) (collectively, “License Agreements”) are
valid and binding obligations of the Company or its Subsidiaries that are
parties thereto and, to the Company’s Knowledge, the other

 

9

 

parties thereto, enforceable in accordance with their terms, except to
the extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors’ rights generally, and there exists no
event or condition which will result in a material violation or breach of or
constitute (with or without due notice or lapse of time or both) a default by
the Company or any of its Subsidiaries under any such License Agreement.

 

(c)           The Company and its Subsidiaries own
or to the Company’s Knowledge have the valid right to use all of the
Intellectual Property that is necessary for the conduct of the Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted and for the ownership, maintenance and
operation of the Company’s and its Subsidiaries’ properties and assets, free
and clear of all liens, encumbrances, adverse claims or obligations to license
all such owned Intellectual Property and Confidential Information, other than
licenses entered into in the ordinary course of the Company’s and its
Subsidiaries’ businesses.  To the Company’s
Knowledge, the Company and its Subsidiaries have a valid and enforceable right
to use all third party Intellectual Property and Confidential Information used
or held for use in the respective businesses of the Company and its Subsidiaries.

 

(d)           To the Company’s Knowledge, the
conduct of the Company’s and its Subsidiaries’ businesses as currently
conducted does not infringe or otherwise impair or conflict with (collectively,
“Infringe”) any Intellectual Property rights of any third party or any
confidentiality obligation owed to a third party, and, to the Company’s
Knowledge, the Intellectual Property and Confidential Information of the
Company and its Subsidiaries which are necessary for the conduct of Company’s
and each of its Subsidiaries’ respective businesses as currently conducted or
as currently proposed to be conducted are not being Infringed by any third
party.  There is no litigation or order
pending or outstanding or, to the Company’s Knowledge, threatened or imminent,
that seeks to limit or challenge or that concerns the ownership, use, validity
or enforceability of any Intellectual Property or Confidential Information of
the Company and its Subsidiaries and the Company’s and its Subsidiaries’ use of
any Intellectual Property or Confidential Information owned by a third party,
and, to the Company’s Knowledge, there is no valid basis for the same.

 

(e)           The consummation of the transactions
contemplated hereby and by the other Transaction Documents will not result in
the alteration, loss, impairment of or restriction on the Company’s or any of
its Subsidiaries’ ownership or right to use any of the Intellectual Property or
Confidential Information which is necessary for the conduct of Company’s and
each of its Subsidiaries’ respective businesses as currently conducted or as
currently proposed to be conducted.

 

(f)            The Company and its Subsidiaries
have taken reasonable steps to protect the Company’s and its Subsidiaries’
rights in their Intellectual Property and Confidential Information.  Each employee, consultant and contractor who
has had access to Confidential Information which is necessary for the conduct
of Company’s and each of its Subsidiaries’ respective businesses as currently
conducted or as currently proposed to be conducted has executed an agreement to
maintain the confidentiality of such Confidential Information and has

 

10

 

executed appropriate agreements that are substantially consistent with
the Company’s standard forms thereof. 
Except under confidentiality obligations, there has been no material
disclosure of any of the Company’s or its Subsidiaries’ Confidential
Information to any third party.

 

4.16         Environmental Matters.  Neither the Company nor any Subsidiary is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, and is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s Knowledge,
threatened investigation that might lead to such a claim.

 

4.17         Litigation.  Except as described in the SEC filings or on Schedule
4.17, there are no pending actions, suits or proceedings against or
affecting the Company, its Subsidiaries or any of its or their properties; and
to the Company’s Knowledge, no such actions, suits or proceedings are
threatened or contemplated.

 

4.18         Financial Statements.  The financial statements included in each SEC
Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis (“GAAP”) (except as may be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-QSB under the 1934 Act).  Except as set forth in the financial
statements of the Company included in the SEC Filings filed prior to the date
hereof or as described on Schedule 4.18, neither the Company nor any of
its Subsidiaries has incurred any liabilities, contingent or otherwise, except
those incurred in the ordinary course of business, consistent (as to amount and
nature) with past practices since the date of such financial statements, none
of which, individually or in the aggregate, have had or could reasonably be
expected to have a Material Adverse Effect.

 

4.19         Insurance Coverage.  The Company and each Subsidiary maintains in
full force and effect insurance coverage that is, to the Company’s Knowledge,
customary for comparably situated companies for the business being conducted
and properties owned or leased by the Company and each Subsidiary, and the
Company reasonably believes such insurance coverage to be adequate against all
liabilities, claims and risks against which it is customary for comparably situated
companies to insure.

 

4.20         Brokers and Finders.  No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor
for any commission, fee or other compensation

 

11

 

pursuant to any agreement, arrangement or understanding entered into by
or on behalf of the Company, other than as described in Schedule 4.20.

 

4.21         No Directed Selling Efforts or
General Solicitation.  Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D)
in connection with the offer or sale of any of the Securities.

 

4.22         No Integrated Offering.  Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.

 

4.23         Private Placement.  Assuming the accuracy of the representations
and warranties of the Investors in Section 5 of this Agreement, the offer and
sale of the Securities to the Investors as contemplated hereby is exempt from
the registration requirements of the 1933 Act.

 

4.24         Questionable Payments.  Neither
the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of
their respective current or former stockholders, directors, officers,
employees, agents or other Persons acting on behalf of the Company or any
Subsidiary, has on behalf of the Company or any Subsidiary or in connection
with their respective businesses: (a) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to any
governmental officials or employees from corporate funds; (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets;
(d) made any false or fictitious entries on the books and records of the
Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment of any nature.

 

4.25         Transactions with Affiliates.  Except as disclosed in the SEC Filings or as
disclosed on Schedule 4.25, none of the officers or directors of the
Company and, to the Company’s Knowledge, none of the employees of the Company
is presently a party to any transaction with the Company or any Subsidiary
(other than as holders of stock options and/or warrants, and for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the Company’s
Knowledge, any entity in which any officer, director, or any such employee has
a substantial interest or is an officer, director, trustee or partner.

 

4.26         Internal Controls.  The Company is in material compliance with
the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the
Company.  The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to

 

12

 

provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences. The Company has established
disclosure controls and procedures (as defined in 1934 Act Rules 13a-14 and
15d-14) for the Company and designed such disclosure controls and procedures to
ensure that material information relating to the Company, including the
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s most recently
filed period report under the 1934 Act, as the case may be, is being
prepared.  The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and
procedures as of the end of the period covered by the most recently filed
periodic report under the 1934 Act (such date, the “Evaluation Date”).  The Company presented in its most recently
filed periodic report under the 1934 Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no
significant changes in the Company’s internal controls (as such term is defined
in Item 307(b) of Regulation S-K) or, to the Company’s Knowledge, in other
factors that could significantly affect the Company’s internal controls.  The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with GAAP and the applicable requirements of the 1934 Act.

 

4.27         Disclosures.  Neither the Company nor any Person acting on
its behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information.  The written materials
delivered to the Investors in connection with the transactions contemplated by
the Transaction Documents do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made,
not misleading.

 

5.             Representations and Warranties
of the Investors.  Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:

 

5.1           Organization
and Existence.  Such Investor is an individual
or a validly existing corporation, limited partnership or limited liability
company and has all requisite corporate, partnership or limited liability
company power and authority to invest in the Securities pursuant to this
Agreement.

 

5.2           Authorization.  The execution, delivery and performance by
such Investor of the Transaction Documents to which such Investor is a party
have been duly authorized and will each constitute the valid and legally
binding obligation of such Investor, enforceable against such Investor in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.

 

13

 

5.3           Purchase Entirely for Own Account.  The Securities to be received by such
Investor hereunder will be acquired for such Investor’s own account, not as
nominee or agent, and not with a view to the resale or distribution of any part
thereof in violation of the 1933 Act, and such Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act without prejudice, however, to such
Investor’s right at all times to sell or otherwise dispose of all or any part
of such Securities in compliance with applicable federal and state securities
laws.  Nothing contained herein shall be
deemed a representation or warranty by such Investor to hold the Securities for
any period of time.  Such Investor is not
a broker-dealer registered with the SEC under the 1934 Act or an entity engaged
in a business that would require it to be so registered.

 

5.4           Investment
Experience.  Such Investor
acknowledges that it can bear the economic risk and complete loss of its
investment in the Securities and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks of
the investment contemplated hereby.

 

5.5           Disclosure
of Information.  Such Investor has
had an opportunity to receive all information related to the Company requested
by it and to ask questions of and receive answers from the Company regarding
the Company, its business and the terms and conditions of the offering of the
Securities.  Such Investor acknowledges
receipt of copies of the SEC Filings. 
Neither such inquiries nor any other due diligence investigation
conducted by such Investor shall modify, amend or affect such Investor’s right
to rely on the Company’s representations and warranties contained in this
Agreement.

 

5.6           Restricted
Securities.  Such Investor
understands that the Securities are characterized as “restricted securities”
under the U.S. federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the 1933 Act only in certain limited circumstances.

 

5.7           Legends.  It is understood that, except as provided
below, certificates evidencing the Securities may bear the following or any
similar legend:

 

(a)           “The
securities represented hereby may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii) the
Company has received an opinion of counsel reasonably satisfactory to it that
such transfer may lawfully be made without registration under the Securities
Act of 1933 or qualification under applicable state securities laws.”

 

(b)           If
required by the authorities of any state in connection with the issuance of
sale of the Securities, the legend required by such state authority.

 

5.8           Accredited Investor.  Such Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

 

14

 

5.9           No General Solicitation.  Such Investor did not learn of the investment
in the Securities as a result of any public advertising or general
solicitation.

 

5.10         Brokers and Finders.  No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor
for any commission, fee or other compensation pursuant to any agreement,
arrangement or understanding entered into by or on behalf of such Investor.

 

5.11         Prohibited Transactions.  During the last thirty (30) days prior to the
date hereof, neither such Investor nor any Affiliate of such Investor which (x)
had knowledge of the transactions contemplated hereby, (y) has or shares
discretion relating to such Investor’s investments or trading or information
concerning such Investor’s investments, including in respect of the Securities,
or (z) is subject to such Investor’s review or input concerning such Affiliate’s
investments or trading (collectively, “Trading Affiliates”) has, directly or
indirectly, effected or agreed to effect any short sale, whether or not against
the box, established any “put equivalent position” (as defined in Rule 16a-1(h)
under the 1934 Act) with respect to the Common Stock, granted any other right
(including, without limitation, any put or call option) with respect to the
Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a “Prohibited Transaction”).  Prior to the earliest to occur of (i) the
termination of this Agreement, (ii) the Effective Date or (iii) the
Effectiveness Deadline, such Investor shall not, and shall cause its Trading
Affiliates not to, engage, directly or indirectly, in a Prohibited Transaction.  Such Investor acknowledges that the
representations, warranties and covenants contained in this Section 5.11 are
being made for the benefit of the Investors as well as the Company and that
each of the other Investors shall have an independent right to assert any
claims against such Investor arising out of any breach or violation of the
provisions of this Section 5.11.

 

6.  Conditions to Closing.

 

6.1           Conditions to the Investors’
Obligations. The obligation of each Investor to purchase the Shares and the
Warrants at the Closing is subject to the fulfillment to such Investor’s
satisfaction, on or prior to the Closing Date, of the following conditions, any
of which may be waived by such Investor (as to itself only):

 

(a)           The representations and warranties
made by the Company in Section 4 hereof qualified as to materiality shall be
true and correct at all times prior to and on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct
as of such earlier date, and, the representations and warranties made by the
Company in Section 4 hereof not qualified as to materiality shall be true and
correct in all material respects at all times prior to and on the Closing Date,
except to the extent any such representation or warranty expressly speaks as of
an earlier date, in which case such representation or warranty shall be true
and correct in all material respects as of such earlier date.  The Company shall have performed in all

 

15

 

material respects all obligations and conditions herein required to be
performed or observed by it on or prior to the Closing Date.

 

(b)           The Company shall have obtained any
and all consents, permits, approvals, registrations and waivers necessary or
appropriate for consummation of the purchase and sale of the Securities and the
consummation of the other transactions contemplated by the Transaction
Documents, all of which shall be in full force and effect.

 

(c)           The Company shall have executed and
delivered the Registration Rights Agreement.

 

(d)           No judgment, writ, order, injunction,
award or decree of or by any court, or judge, justice or magistrate, including
any bankruptcy court or judge, or any order of or by any governmental
authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the
consummation of the transactions contemplated hereby or in the other
Transaction Documents.

 

(e)           The Company shall have delivered a
Certificate, executed on behalf of the Company by its Chief Executive Officer
or its Chief Financial Officer, dated as of the Closing Date, certifying to the
fulfillment of the conditions specified in subsections (a), (b), (d) and (h) of
this Section 6.1.

 

(f)            The Company shall have delivered a
Certificate, executed on behalf of the Company by its Secretary, dated as of
the Closing Date, certifying the resolutions adopted by the Board of Directors
of the Company approving the transactions contemplated by this Agreement and
the other Transaction Documents and the issuance of the Securities, certifying
the current versions of the Certificate of Incorporation and Bylaws of the
Company and certifying as to the signatures and authority of persons signing
the Transaction Documents and related documents on behalf of the Company.

 

(g)           The Investors shall have received an
opinion from DLA Piper Rudnick Gray Cary US LLP, the Company’s
counsel, dated as of the Closing Date, in form and substance reasonably
acceptable to the Investors and addressing such legal matters as the Investors
may reasonably request.

 

(h)           No stop order or suspension of
trading shall have been imposed by the SEC or any other governmental or
regulatory body with respect to public trading in the Common Stock.

 

6.2           Conditions to Obligations of the
Company. The Company’s obligation to sell and issue the Shares and the
Warrants at the Closing is subject to the fulfillment to the satisfaction of
the Company on or prior to the Closing Date of the following conditions, any of
which may be waived by the Company:

 

(a)           The representations and warranties
made by the Investors in Section 5 hereof, other than the representations and
warranties contained in Sections 5.3, 5.4,

 

16

 

5.5, 5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shall be
true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date.  The Investment Representations shall be true
and correct in all respects when made, and shall be true and correct in all
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.  The
Investors shall have performed in all material respects all obligations and
conditions herein required to be performed or observed by them on or prior to
the Closing Date.

 

(b)           The Investors shall have executed and
delivered the Registration Rights Agreement.

 

(c)           The Investors shall have delivered
the Purchase Price to the Company.

 

6.3           Termination of Obligations to
Effect Closing; Effects.

 

(a)           The obligations of the Company, on
the one hand, and the Investors, on the other hand, to effect the Closing shall
terminate as follows:

 

(i)            Upon the mutual written consent of
the Company and the Investors;

 

(ii)           By the Company if any of the
conditions set forth in Section 6.2 shall have become incapable of fulfillment,
and shall not have been waived by the Company;

 

(iii)          By an Investor (with respect to itself
only) if any of the conditions set forth in Section 6.1 shall have become
incapable of fulfillment, and shall not have been waived by the Investor; or

 

(iv)          By either the Company or any Investor
(with respect to itself only) if the Closing has not occurred on or prior to
March 31, 2005;

 

provided, however, that, except in the case
of clause (i) above, the party seeking to terminate its obligation to effect
the Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the other
Transaction Documents if such breach has resulted in the circumstances giving
rise to such party’s seeking to terminate its obligation to effect the Closing.

 

(b)           In the event of termination by the
Company or any Investor of its obligations to effect the Closing pursuant to
this Section 6.3, written notice thereof shall forthwith be given to the other
Investors and the other Investors shall have the right to terminate their
obligations to effect the Closing upon written notice to the Company and the
other Investors.  Nothing in this Section
6.3 shall be deemed to release any party from any liability for any breach by
such party of the terms and provisions of this Agreement or the other
Transaction

 

17

 

Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or the
other Transaction Documents.

 

7.             Covenants and Agreements of the
Company.

 

7.1           Reservation of Common Stock.  The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of providing for the exercise of the Warrants, such
number of shares of Common Stock as shall from time to time equal the number of
shares sufficient to permit the exercise of the Warrants issued pursuant to
this Agreement in accordance with their respective terms.

 

7.2           Reports.  The Company will furnish to the Investors
and/or their assignees such information relating to the Company and its
Subsidiaries as from time to time may reasonably be requested by the Investors
and/or their assignees; provided, however, that the Company shall not disclose
material nonpublic information to the Investors, or to advisors to or
representatives of the Investors, unless prior to disclosure of such information
the Company identifies such information as being material nonpublic information
and provides the Investors, such advisors and representatives with the
opportunity to accept or refuse to accept such material nonpublic information
for review and any Investor wishing to obtain such information enters into an
appropriate confidentiality agreement with the Company with respect thereto.

 

7.3           No Conflicting Agreements.  The Company will not take any action, enter
into any agreement or make any commitment that would conflict or interfere in
any material respect with the Company’s obligations to the Investors under the
Transaction Documents.

 

7.4           Insurance.  The Company shall not materially reduce the
insurance coverages described in Section 4.19.

 

7.5           Compliance with Laws.  The Company will comply in all material
respects with all applicable laws, rules, regulations, orders and decrees of
all governmental authorities.

 

7.6           Listing of Underlying Shares and
Related Matters.  If the Company
applies to have its Common Stock or other securities traded on any principal
stock exchange or market, it shall include in such application the Shares and
the Warrant Shares and will take such other action as is necessary to cause
such Common Stock to be so listed.

 

7.7           Termination of Covenants.  The provisions of Sections 7.2 through 7.5
shall terminate and be of no further force and effect on the date on which the
Company’s obligations under the Registration Rights Agreement to register or
maintain the effectiveness of any registration covering the Registrable
Securities (as such term is defined in the Registration Rights Agreement) shall
terminate.

 

7.8           Removal of Legends.  Upon the earlier of (i) registration for
resale pursuant to the Registration Rights Agreement and receipt by the Company
of the Investor’s written confirmation that such Securities will not be
disposed of except in compliance with the

 

18

 

prospectus delivery requirements of the 1933 Act or (ii) Rule 144(k) becoming
available the Company shall, upon an Investor’s written request, promptly cause
certificates evidencing the Investor’s Securities to be replaced with
certificates which do not bear such restrictive legends, and Warrant Shares
subsequently issued upon due exercise of the Warrants shall not bear such
restrictive legends provided the provisions of either clause (i) or clause (ii)
above, as applicable, are satisfied with respect to such Warrant Shares.  When the Company is required to cause
unlegended certificates to replace previously issued legended certificates, if
unlegended certificates are not delivered to an Investor within three (3)
Business Days of submission by that Investor of legended certificate(s) to the
Company’s transfer agent together with a representation letter in customary
form, the Company shall be liable to the Investor for liquidated damages in an
amount equal to 1.5% of the aggregate purchase price of the Securities
evidenced by such certificate(s) for each thirty (30) day period (or portion
thereof) beyond such three (3) Business Day that the unlegended certificates
have not been so delivered.

 

8.             Survival and Indemnification.

 

8.1  Survival.  The representations, warranties, covenants
and agreements contained in this Agreement shall survive the Closing of the
transactions contemplated by this Agreement.

 

8.2  Indemnification.  The Company agrees to indemnify and hold
harmless each Investor and its Affiliates and their respective directors,
officers, employees and agents from and against any and all losses, claims,
damages, liabilities and expenses (including without limitation reasonable
attorney fees and disbursements and other expenses incurred in connection with
investigating, preparing or defending any action, claim or proceeding, pending
or threatened and the costs of enforcement thereof) (collectively, “Losses”) to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed on
the part of the Company under the Transaction Documents, and will reimburse any
such Person for all such amounts as they are incurred by such Person.

 

8.3  Conduct
of Indemnification Proceedings.  Promptly after receipt by any
Person (the “Indemnified Person”) of notice of
any demand, claim or circumstances which would or might give rise to a claim or
the commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall
promptly notify the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified
Person so to notify the Company shall not relieve the Company of its
obligations hereunder except to the extent that the Company is materially
prejudiced by such failure to notify.  In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless: (i) the Company and the Indemnified Person
shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them.  The Company
shall not be liable for any settlement of any proceeding effected without its
written consent, which consent

 

19

 

shall not be unreasonably withheld, but if settled with such consent,
or if there be a final judgment for the plaintiff, the Company shall indemnify and
hold harmless such Indemnified Person from and against any loss or liability
(to the extent stated above) by reason of such settlement or judgment.  Without the prior written consent of the
Indemnified Person, which consent shall not be unreasonably withheld, the
Company shall not effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.

 

9.             Miscellaneous.

 

9.1           Successors
and Assigns.  This Agreement may not
be assigned by a party hereto without the prior written consent of the Company
or the Investors, as applicable, provided, however, that an Investor may assign
its rights and delegate its duties hereunder in whole or in part to an
Affiliate or to a third party acquiring some or all of its Securities in a
private transaction without the prior written consent of the Company or the
other Investors, after notice duly given by such Investor to the Company
provided, that no such assignment or obligation shall affect the obligations of
such Investor hereunder.  The provisions
of this Agreement shall inure to the benefit of and be binding upon the
respective permitted 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.

 

9.2           Counterparts;
Faxes.  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 via facsimile, which shall be deemed an original.

 

9.3           Titles
and Subtitles.  The titles and
subtitles used in this Agreement are used for convenience only and are not to
be considered in construing or interpreting this Agreement.

 

9.4           Notices.  Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given as hereinafter described (i) if given by personal
delivery, then such notice shall be deemed given upon such delivery, (ii) if
given by telex or telecopier, then such notice shall be deemed given upon
receipt of confirmation of complete transmittal, (iii) if given by mail, then
such notice shall be deemed given upon the earlier of (A) receipt of such
notice by the recipient or (B) three days after such notice is deposited in
first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one
Business Day after delivery to such carrier. 
All notices shall be addressed to the party to be notified at the address
as follows, or at such other address as such party may designate by ten days’
advance written notice to the other party:

 

20

 

If to the
Company:

 

VantageMed
Corporation

3017 Kilgore
Road, Suite 180

Rancho
Cordova, California 95670

Attention:

Fax:

 

With a copy
to:

 

DLA Piper Rudnick Gray Cary
US LLP

400 Capitol
Mall, Suite 2400

Sacramento, CA
95814

Attention:   Kevin A. Coyle, Esq.

Fax:  916-930-3201

 

If to the
Investors:

 

to the addresses set forth on
the signature pages hereto.

 

9.5           Expenses.  The parties hereto shall pay their own costs
and expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of Lowenstein Sandler PC not to exceed
$35,000.  Such expenses shall be paid not
later than the Closing.  The Company
shall reimburse the Investors upon demand for all reasonable out-of-pocket
expenses incurred by the Investors, including without limitation reimbursement
of attorneys’ fees and disbursements, in connection with any amendment,
modification or waiver of this Agreement or the other Transaction
Documents.  In the event that legal
proceedings are commenced by any party to this Agreement against another party
to this Agreement in connection with this Agreement or the other Transaction
Documents, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable
attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred
by the prevailing party in such proceedings.

 

9.6           Amendments
and Waivers.  Any term of this
Agreement may be amended and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investors.  Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Securities purchased under this Agreement at the time
outstanding, each future holder of all such Securities, and the Company.

 

9.7           Publicity.  Except as set forth below, no public release
or announcement concerning the transactions contemplated hereby shall be issued
by the Company or the Investors without the prior consent of the Company (in
the case of a release or announcement by the Investors) or the Investors (in
the case of a release or announcement by the Company) (which consents shall not
be unreasonably withheld), except as such release or announcement may be
required by law or the applicable rules or regulations of any securities
exchange or securities

 

21

 

market, in which case the Company or the Investors, as the case may be,
shall allow the Investors or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance.  By 8:30 a.m. (New York City time) on the
trading day immediately following the Closing Date, the Company shall issue a
press release disclosing the consummation of the transactions contemplated by
this Agreement.  No later than the third
trading day following the Closing Date, the Company will file a Current Report
on Form 8-K attaching the press release described in the foregoing sentence as
well as copies of the Transaction Documents. 
In addition, the Company will make such other filings and notices in the
manner and time required by the SEC. 
Notwithstanding the foregoing, the Company shall not publicly disclose
the name of any Investor, or include the name of any Investor in any filing
with the SEC (other than the Registration Statement and any exhibits to filings
made in respect of this transaction in accordance with periodic filing
requirements under the 1934 Act) or any regulatory agency, without the prior
written consent of such Investor, except to the extent such disclosure is
required by law or trading market regulations, in which case the Company shall
provide the Investors with prior notice of such disclosure.

 

9.8           Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.  To the extent
permitted by applicable law, the parties hereby waive any provision of law
which renders any provision hereof prohibited or unenforceable in any respect.

 

9.9           Entire
Agreement.  This Agreement, including
the Exhibits and the Disclosure Schedules, and the other Transaction Documents
constitute the entire agreement among the parties hereof with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof and thereof.

 

9.10         Further
Assurances.  The parties shall
execute and deliver all such further instruments and documents and take all
such other actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained.

 

9.11         Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York County and the United States District Court for the
Southern District of New York for the purpose of any suit, action, proceeding
or judgment relating to or arising out of this Agreement and the transactions
contemplated hereby.  Service of process
in connection with any such suit, action or proceeding may be served on each
party hereto anywhere in the world by the same methods as are specified for the
giving of notices under this Agreement. 
Each of the

 

22

 

parties hereto irrevocably consents to the jurisdiction of any such
court in any such suit, action or proceeding and to the laying of venue in such
court.  Each party hereto irrevocably
waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
an inconvenient forum.  EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS
THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

9.12         Independent
Nature of Investors’ Obligations and Rights.  The obligations of each Investor under any
Transaction Document are several and not joint with the obligations of any other
Investor, and no Investor shall be responsible in any way for the performance
of the obligations of any other Investor under any Transaction Document.  The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor
independently of any other Investor. 
Nothing contained herein or in any Transaction Document, and no action
taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. 
Each Investor acknowledges that no other Investor has acted as agent for
such Investor in connection with making its investment hereunder and that no
Investor will be acting as agent of such Investor in connection with monitoring
its investment in the Securities or enforcing its rights under the Transaction
Documents.  Each Investor shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor to
be joined as an additional party in any proceeding for such purpose.  The Company acknowledges that each of the
Investors has been provided with the same Transaction Documents for the purpose
of closing a transaction with multiple Investors and not because it was
required or requested to do so by any Investor.

 

[signature page follows]

 

23

 

IN WITNESS
WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written.

 

	
  The Company:

  	
  VANTAGEMED
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steve
  Curd

  	
   

  
	
   

  	
  Name: Steve
  Curd

  
	
   

  	
  Title: CEO

  

 

24

 

	
  The
  Investors:

  	
  SPECIAL
  SITUATIONS PRIVATE EQUITY FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  	 

	
   

  	
  By: /S/
  AUSTIN W. MARXE

  	 

	
   

  	
  Name: Austin W. Marxe

  	 

	
   

  	
  Title: General Partner

  	 

 

Aggregate Purchase Price:  $3,000,000

Number of Shares:  3,225,806

Number of Series A Warrants:
645,161

Number of Series B Warrants:
645,161

 

Address for Notice:

	
   

  	
  153 E. 53rd
  Street

  
	
   

  	
  55th
  Floor

  
	
   

  	
  New York,
  NY  10022

  
	
   

  	
   

  
	
   

  	
  with a copy
  to:

  
	
   

  	
   

  
	
   

  	
  Lowenstein
  Sandler PC

  
	
   

  	
  65
  Livingston Avenue

  
	
   

  	
  Roseland,
  NJ  07068

  
	
   

  	
  Attn:  John D. Hogoboom, Esq.

  
	
   

  	
  Telephone:    973.597.2500

  
	
   

  	
  Facsimile:       973.597.2400

  

 

25

 

	
   

  	
  LEAF
  INVESTMENT PARTNERS, L.P.

  
	
   

  	
   

  
	
   

  	
   

  	 

	
   

  	
  By: /S/ KEN
  GOLDBLATT

  	 

	
   

  	
  Name: Ken Goldblatt

  	 

	
   

  	
  Title: Principal

  	 

 

Aggregate Purchase Price:  $1,170,000

Number of Shares:  1,258,064

Number of Series A Warrants:
251,612

Number of Series B Warrants:
251,612

 

Address for Notice:

	
   

  	
  c/o S Squared Technology, LLC

  
	
   

  	
  515 Madison Avenue

  
	
   

  	
  Suite 4200

  
	
   

  	
  New York, NY  10022

  
	
   

  	
  Attention:  Sheldon Rubin

  
	
   

  	
  212-421-2155 phone

  
	
   

  	
  212-838-3783
  fax

  

 

26

 

                                                                                

 

	
   

  	
  LEAF
  OFFSHORE INVESTMENT FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: /S/ KEN
  GOLDBLATT

  	 

	
   

  	
  Name: Ken Goldblatt

  	 

	
   

  	
  Title: Principal

  	 

 

Aggregate Purchase Price:  $330,000

Number of Shares:  354,838

Number of Series A Warrants:
70,967

Number of Series B Warrants:
70,967

 

Address for Notice:

	
   

  	
  c/o S Squared Technology, LLC

  
	
   

  	
  515 Madison Avenue

  
	
   

  	
  Suite 4200

  
	
   

  	
  New York, NY  10022

  
	
   

  	
  Attention:  Sheldon Rubin

  
	
   

  	
  212-421-2155 phone

  
	
   

  	
  212-838-3783 fax

  

 

27

 

	
   

  	
  STEVE CURD

   

  
	
   

  	
  /S/ STEVE CURD

  

 

Aggregate
Purchase Price:  $225,000

Number
of Shares:  241,935

Number
of Series A Warrants:  48,387

Number
of Series B Warrants:  48,387

 

 

	
  Address for Notice:

  	
  1245 Day Road

  
	
   

  	
  Gilroy, CA 95020

  
	
   

  	
  Telephone :  877.879.8633

  
	
   

  	
  Facsimile:  916.638.0504

  

 

28

 

	
   

  	
  RICHARD ALTINGER

   

  
	
   

  	
  /S/ RICHARD
  ALTINGER

  

 

Aggregate Purchase Price: 
$100,000

Number of Shares:  107,527

Number of Series A Warrants: 
21,505

Number of Series B Warrants: 
21,505

 

 

	
  Address for Notice:

  	
  608 Grialda
  Drive

  
	
   

  	
  Los Altos
  Cordova, CA 94024

  
	
   

  	
  Telephone
  :  877.879.8633

  
	
   

  	
  Facsimile:  916.638.0504

  

 

29

 

	
   

  	
  ROY ERNEST
  CHASTAIN

   

  
	
   

  	
  /S/ ROY
  ERNEST CHASTAIN

  

 

Aggregate Purchase Price:  $90,000

Number of Shares:  96,774

Number of Series A Warrants: 
19,355

Number of Series B Warrants: 
19,355

 

 

	
  Address for Notice:

  	
  874
  Lakeshore Drive

  
	
   

  	
  Berkeley
  Lake, GA 30096

  
	
   

  	
  Telephone
  :  877.879.8633

  
	
   

  	
  Facsimile:  916.638.0504

  

 

30

 

	
   

  	
  MARK CAMERON

   

  
	
   

  	
  /S/ MARK
  CAMERON

  

 

Aggregate Purchase Price: 
$25,000

Number of Shares:  26,882

Number of Series A Warrants: 
5,376

Number of Series B Warrants: 
5,376

 

 

	
  Address for Notice:

  	
  318 Lindo
  Avenue

  
	
   

  	
  Newport
  Beach, CA 92661

  
	
   

  	
  Telephone
  :  877.879.8633

  
	
   

  	
  Facsimile:  916.638.0504

  

 

31

 

	
   

  	
  PHILIP RANGER

   

  
	
   

  	
  /S/ PHILIP
  RANGER

  

 

Aggregate Purchase Price: 
$10,000

Number of Shares:  10,753

Number of Series A Warrants: 
2,151

Number of Series B Warrants: 
2,151

 

 

	
  Address for Notice:

  	
  8408 W
  Hidden Lakes Drive

  
	
   

  	
  Granite Bay,
  CA 95670

  
	
   

  	
  Telephone
  :  877.879.8633

  
	
   

  	
  Facsimile:  916.638.0504

  

 

32

 

	
   

  	
  DAVID PHILIPP

   

  
	
   

  	
  /S/ DAVID
  PHILIPP

  

 

Aggregate Purchase Price: 
$50,000

Number of Shares:  53,763

Number of Series A Warrants: 
10,753

Number of Series B Warrants: 
10,753

 

 

	
  Address for Notice:

  	
  3084
  Fairchild Drive

  
	
   

  	
  El Dorado
  Hills, CA 95762

  
	
   

  	
  Telephone
  :  877.879.8633

  
	
   

  	
  Facsimile:  916.638.0504

  

 

33

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