Document:

Exhibit 10.1

 

ADDENDUM #7 TO LEASE
AGREEMENT

 

THIS ADDENDUM #7 TO LEASE AGREEMENT, dated as of February 3,
2006, is entered into by and between CIRCLE CAPITAL LONGMONT LLC, a Delaware
limited liability company (“Landlord”) and ARRAY BIOPHARMA, INC., a Delaware
corporation (“Tenant”).

 

Recitals:

 

A.                                   Landlord’s predecessor in interest and Tenant
entered into a written lease agreement, dated February 28, 2000, as
amended by Addendum to Lease Agreement #1 dated May 24, 2001, Addendum to
Lease Agreement #2, dated February 11, 2002, Addendum to Lease Agreement
dated November 30, 2004, Addendum #4 to Lease Agreement dated August 1,
2005 (“Addendum #4), Addendum #5 to Lease Agreement dated November 30,
2005 (“Addendum #5) and Addendum #6 to Lease Agreement dated December 22,
2005 (“Addendum #6) (collectively, the “Lease”), pertaining to Suites A &
B of the Building located at 2620 Trade Centre Avenue which Premises consist of
approximately 43,200 rentable square feet of space (the “Premises”). (Initially
capitalized terms not otherwise defined herein have the same meaning as in the
Lease.)

 

B.                                     Under Addendum #4 to Lease Agreement, Tenant
was granted an option, under certain terms, to lease additional space (as
defined in Addendum #4, the “Expansion Option”) in the buildings located at
2500, 2420 and/or 2410 Trade Centre Avenue. 
To exercise the Expansion Option, Tenant was required to give written
notice to Landlord of its election to exercise the Expansion Option on or
before the 120th day after mutual execution of Addendum #4.

 

C.                                     Under Addendum #5 to Lease Agreement, Tenant
exercised the Expansion Option with respect to 2500 and 2420 Trade Centre
Avenue and Tenant and Landlord amended the terms of the Expansion Option with
respect to 2410 Trade Centre Avenue. 
Under Addendum #6 to Lease Agreement, Tenant and Landlord further
amended the terms of the Expansion Option with respect to 2410 Trade Centre
Avenue.

 

D.                                    Tenant and Landlord wish to further amend the
terms of the Expansion Option with respect to 2410 Trade Centre Avenue.

 

E.                                      Landlord and Tenant desire to amend the Lease
in the manner and form hereinafter set forth.

 

NOW, THEREFORE, for good and valuable consideration,
Landlord and Tenant hereby agree as follows:

 

1.                                       Modification of Section 3.  The
date, February 6, 2006 in Section 3 of Addendum # 5 (as amended from December 31,
2005 by Amendment # 6) shall be amended to March 6, 2006.

 

2.                                       Modification of Section 5.  The
date, February 6, 2006 in Section 5 of Addendum # 5 (as amended from December 31,
2005 by Amendment # 6) shall be amended to March 6, 2006.

 

3.                                       Conflicts. If there is any conflict between the terms of
this Addendum and the terms of the Lease, the terms of this Addendum shall
govern.  The Lease as hereby amended is
in full force and effect, is hereby ratified and affirmed by the parties, and
is binding upon the parties in accordance with its terms.

 

4.                                       Time of Essence.  Time is of the essence herein.

 

1

 

IN WITNESS WHEREOF, the parties have executed this
Addendum as of the day and year first above written and is effective upon
delivery of a fully executed copy to Tenant; the last date signed is the date
of mutual execution as referred to above.

 

	
  LANDLORD:

  	
  CIRCLE CAPITAL LONGMONT LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Circle Capital Property Management LLC, Authorized Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By

  	
   

  	
   

  
	
  Date Signed

  	
   

  	
   

  	
  Terry Fitzpatrick, Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TENANT:

  	
  ARRAY BIOPHARMA, INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By

  	
   

  	
   

  
	
  Date Signed

  	
   

  	
   

  	
  John R. Moore, General
  Counsel

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

2

 

ADDENDUM #8 TO LEASE
AGREEMENT

 

THIS ADDENDUM #8 TO LEASE AGREEMENT, dated as of March 1,
2006, is entered into by and between CIRCLE CAPITAL LONGMONT LLC, a Delaware
limited liability company (“Landlord”) and ARRAY BIOPHARMA, INC., a Delaware
corporation (“Tenant”).

 

Recitals:

 

A.                                   Landlord’s predecessor in interest and Tenant
entered into a written lease agreement, dated February 28, 2000, as
amended by Addendum to Lease Agreement #1 dated May 24, 2001, Addendum to
Lease Agreement #2, dated February 11, 2002, Addendum to Lease Agreement
dated November 30, 2004, Addendum #4 to Lease Agreement dated August 1,
2005 (“Addendum #4), Addendum #5 to Lease Agreement dated November 30,
2005 (“Addendum #5), Addendum #6 to Lease Agreement dated December 22,
2005 (“Addendum #6) and Addendum #7 To Lease Agreement dated February 28,
2006, (collectively, the “Lease”), pertaining to Suites A & B of the
Building located at 2620 Trade Centre Avenue which Premises consist of
approximately 43,200 rentable square feet of space (the “Premises”). (Initially
capitalized terms not otherwise defined herein have the same meaning as in the
Lease.)

 

B.                                     Under Addendum #4 to Lease Agreement, Tenant
was granted an option, under certain terms, to lease additional space (as
defined in Addendum #4, the “Expansion Option”) in the buildings located at
2500, 2420 and/or 2410 Trade Centre Avenue. 
To exercise the Expansion Option, Tenant was required to give written
notice to Landlord of its election to exercise the Expansion Option on or
before the 120th day after mutual execution of Addendum #4.

 

C.                                     Under Addendum #5 to Lease Agreement, Tenant
exercised the Expansion Option with respect to 2500 and 2420 Trade Centre
Avenue and Tenant and Landlord amended the terms of the Expansion Option with
respect to 2410 Trade Centre Avenue. 
Under Addenda #6 and #7 to Lease Agreement, Tenant and Landlord further
amended the terms of the Expansion Option with respect to 2410 Trade Centre
Avenue.

 

D.                                    Tenant and Landlord wish to further amend the
terms of the Expansion Option and to amend the terms of the Option to Purchase.

 

E.                                      Landlord and Tenant desire to amend the Lease
in the manner and form hereinafter set forth.

 

NOW, THEREFORE, for good and valuable consideration,
Landlord and Tenant hereby agree as follows:

 

1.                                       Option Space.  The
building located at 2400 Trade Centre Avenue shall be deemed part of the Option
Space and shall be included within, inter alia, the
Expansion Option described in Section 10 of Addendum #4 and the option to
purchase described in Section 12 of Addendum #4.

 

2.                                       Expansion Notice.  Upon
execution by both Landlord and Tenant, this Addendum shall be deemed Tenant’s
Expansion Notice with respect to the buildings located at 2410 and 2400 Trade
Centre Avenue.

 

3.                                       Notice of Expansion Premises.  On
or before March 31, 2006, Landlord shall notify Tenant in writing as to
which of the buildings included within Tenant’s Expansion Notice (i.e., the
buildings located at 2500, 2420, 2410 and 2400 Trade Centre Avenue) are included
within the Expansion Premises. 
Thereafter, the remaining procedures provided in Sections 10.B through
10.F of Addendum #4 shall govern the leasing of such space.

 

4.                                       Item deleted

 

3

 

5.                                       Conflicts. If there is any conflict between the terms of
this Addendum and the terms of the Lease, the terms of this Addendum shall
govern.  The Lease as hereby amended is
in full force and effect, is hereby ratified and affirmed by the parties, and
is binding upon the parties in accordance with its terms.

 

6.                                       Time of Essence.  Time is of the essence herein.

 

IN WITNESS WHEREOF, the parties have executed this
Addendum as of the day and year first above written and is effective upon
delivery of a fully executed copy to Tenant; the last date signed is the date
of mutual execution as referred to above.

 

	
  LANDLORD:

  	
  CIRCLE CAPITAL LONGMONT LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Circle Capital Property Management LLC, Authorized Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By

  	
   

  	
   

  
	
  Date Signed

  	
   

  	
   

  	
  Terry Fitzpatrick, Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TENANT:

  	
  ARRAY BIOPHARMA, INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By

  	
   

  	
   

  
	
  Date Signed

  	
   

  	
   

  	
   

  	
   

  

 

4Exhibit 10.53

 

PURCHASE AGREEMENT

 

THIS
PURCHASE AGREEMENT (“Agreement”) is made as of the 27th day of
April, 2006 by and among Primal Solutions, Inc., 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 1,750,000 shares
of the Company’s Common Stock, par value $0.01 per share (together with any
securities into which such shares may be reclassified the “Common Stock”), and
(ii) warrants to purchase an aggregate of 875,000 shares of Common Stock
(subject to adjustment as provided therein) at an exercise price of $0.15 per
share (subject to adjustment as provided therein) in the form attached hereto
as Exhibit A (the “Warrants”); and

 

C.            Contemporaneous with the sale of the Common
Stock and the Warrants, the Company and the Investors will execute and deliver
a Registration Rights Agreement, in the form attached hereto as Exhibit B
(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.

 

 

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

 

“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.

 

“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, 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 One Hundred Seventy Five Thousand Dollars ($175,000).

 

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

 

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

 

2

 

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

 

“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 the
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 the 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 Bryan Cave LLP, in trust, a certificate or certificates, registered
in the name of each Investor (or such Investor’s nominee) representing the
Shares and the 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 Bryan Cave LLP
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 shall be
released to the Investors (the “Closing”). The Closing of the purchase and sale
of the Shares and the Warrants shall take place at the offices of Bryan Cave
LLP, 2020 Main Street, Suite 600, Irvine, CA 92614, 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”):

 

3

 

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 had 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 its part, 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. When delivered in accordance with the terms hereof, the Transaction
Documents will 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 Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company. Except as
described in Schedule 4.3, 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 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

 

4

 

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.

 

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 consents which have been
obtained and which are in full force and effect and filings that have been made
or will be made within applicable time periods 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 provision of the Company’s Certificate of Incorporation or
Bylaws 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

 

5

 

recent Annual Report on Form 10-KSB for the fiscal year ended December
31, 2005 (the “10-K”), and all other reports filed by the Company pursuant to
the 1934 Act since the filing of the 10-K 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, other than
filings required by Form 8-K which the failure of the Company to file does not
make the Company untimely in its filings under the 1934 Act. Except as
described on Schedule 4.6, 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,
debt service, advisory fees and general corporate purposes.

 

4.8           No Material Adverse Change. Since December 31, 2005, 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 Form 10-K, 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);

 

(vi)          any change or amendment to the Company’s
Certificate of Incorporation or Bylaws, 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;

 

6

 

(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, 2003 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 (except for information provided by any selling
securityholders as to which this representation does not apply) 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 (except for information provided by any selling
securityholders as to which this representation does not apply) 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 Bylaws, both as in effect on the date hereof,
or (ii)(a) any statute, rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over the Company,
any Subsidiary or any of their respective assets or properties, except for such
breaches, violations or defaults as have not had and could not reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate,
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.

 

7

 

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 or
as described in Schedule 4.12, 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, except where the failure to possess such certificates, authorities or
permits has not and could not reasonably be expected to have a Material Adverse
Effect, individually or in the aggregate, 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 is not in violation
in any material respect of 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)           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. There are no claims 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 disclosed in the SEC Filings or as
described on Schedule 4.14, the Company is not a party to, or bound by,
any employment or other contract or agreement that contains any severance,
termination pay or change of control liability or obligation, including,
without limitation, any “excess parachute payment,” as defined in Section 2806(b)
of the Internal Revenue Code.

 

(e)           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 or alien authorized 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)           To the Company’s Knowledge, all Intellectual
Property of the Company and its Subsidiaries is currently in compliance in all
material respects with all legal requirements, if any, applicable thereto
(including timely filings, proofs and payments of fees) and 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
to which the Company is a party, 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

 

9

 

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, off-the-shelf software application programs)
(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 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 to the Company’s Knowledge, 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)           Except as described in Schedule 4.15,
the Company and its Subsidiaries own or 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 material third party
Intellectual Property and Confidential Information used or held for use in the
respective businesses of the Company and its Subsidiaries as currently
conducted or as currently proposed to be conducted.

 

(d)           The conduct of the Company’s and its
Subsidiaries’ businesses as currently conducted does not infringe or
misappropriate or conflict with (collectively, “Infringe”) any Intellectual
Property rights of any third party or conflict with 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 to the which the Company or any
Subsidiary is a party 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.

 

10

 

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

 

(g)           The Investors acknowledge that the Company is
using and will continue to use certain “open source” or “free” software
products (collectively, “OS Products”) in its products. The Company makes no
representations with respect to the OS Products or their use.

 

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, or 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 by any governmental agency or body that might lead to
such a claim.

 

4.17         Litigation. Except as described 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.

 

11

 

4.19         Insurance Coverage. The Company and each Subsidiary maintains
in full force and effect insurance coverage that is 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 material 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 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 each Investor set forth herein, 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

 

12

 

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 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-15(e) and 15d-15(e)) 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 308 of Regulation S-B) 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. Except as described in Schedule 4.27, 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. If the Investor is an entity, such Investor
is an entity duly organized, validly existing and in good standing (to the
extent relevant) under the

 

13

 

laws of its jurisdiction of organization with the requisite corporate, partnership
or limited liability company power and authority to enter into and to
consummate the transactions contemplated by the applicable Transaction
Documents and otherwise to carry out its obligations thereunder. Such Investor
has provided the Company with its jurisdiction of organization and the location
of its principal place of business. If the Investor is an individual, such
individual is of an age twenty-one (21) years or older and has the full
capacity, power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The address of the Investor set forth on the
signature page hereof is the principal residence of the Investor.

 

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.

 

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, such Investor does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities 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. Such Investor has
independently evaluated the merits of an investment in the Securities, such
Investor has independently made its decision to invest in the Securities and
such Investor confirms that it has not relied on the advice of any other Person
in connection therewith. 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.

 

14

 

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.

 

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

 

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

 

15

 

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
Shares and 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 material respects all obligations and covenants herein
required to be performed by them 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)           Reserved.

 

(e)           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.

 

(f)            Reserved.

 

(g)           Reserved.

 

(h)           Reserved.

 

16

 

(i)            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 obligation of the Company 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, 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 covenants herein required to be performed 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 applicable to such Investor
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 May 15,
2006;

 

17

 

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 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 Warrant
Shares issuable upon the due exercise of the Warrants in accordance with their
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 stock
exchange or market, it

 

18

 

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. Following any such listing, the Company will use commercially
reasonable efforts to continue the listing and trading of its Common Stock on
such stock exchange or market and, in accordance, therewith, will use
commercially reasonable efforts to comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of such stock
exchange or market, as applicable.

 

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 or (ii) Rule 144(k)
becoming available the Company shall (A) deliver to the transfer agent for the
Common Stock (the “Transfer Agent”) irrevocable instructions that the Transfer
Agent shall issue certificates representing the Shares and the Warrant Shares
without legends upon receipt by such Transfer Agent of the Shares and/or the
Warrants or any legended certificates previously issued for such shares,
together with either (1) a customary representation by the Investor that Rule
144(k) applies to the shares of Common Stock to be represented thereby or (2) a
statement by the Investor that such Investor has sold the shares of Common
Stock represented thereby in accordance with the Plan of Distribution contained
in the Registration Statement, and (B) cause its counsel to deliver to the
Transfer Agent one or more blanket opinions to the effect that the issuance of
such unlegended certificates in such circumstances may be effected under the
1933 Act. From and after the earlier of such dates, upon an Investor’s written
request, the Company shall promptly cause replacement Securities to be issued
without restrictive legends and/or legended certificates representing
previously issued Shares or Warrant Shares 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 Shares and/or Warrant Shares.
When the Company is required to cause unlegended Securities to replace
previously issued legended Securities, if unlegended Securities are not
delivered to an Investor within three (3) Business Days of submission by that
Investor of legended Securities to the Transfer Agent as provided above (or to
the Company, in the case of the Warrants), 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 thereby for each thirty (30) day
period (or portion thereof) beyond such three (3) Business Day that the
unlegended Securities have not been so delivered.

 

7.9           Reserved.

 

7.10         Restrictions on Issuance of Common Stock and
Equivalents. Prior to
September 30, 2006, (i) the Company shall not issue or agree to issue or become
obligated to issue any Common Stock at an effective per share price of less
than $0.15 per share (appropriately adjusted for any stock split, reverse stock
split, stock dividend or other reclassification or combination of the Common
Stock occurring after the date hereof) and (ii) the

 

19

 

Company shall not, and shall cause its Subsidiaries not to, issue or
agree to issue or become obligated to issue any Common Stock Equivalents at an
effective per share price of less than $0.15 per share (appropriately adjusted
for any stock split, reverse stock split, stock dividend or other
reclassification or combination of the Common Stock occurring after the date
hereof); provided, however that the provisions of this Section 7.10 shall not
apply to any “Excluded Issuance” (as such term is defined in the Warrants).

 

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 shall 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 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

 

20

 

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 and,
provided, further, that any such assignment shall comply with the requirements
of applicable securities laws. 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:

 

If
to the Company:

 

Primal Solutions, Inc.

18881 Von Karman Avenue,
Suite 500

Irvine, California 92612

Attention:  Joseph R. Simrell

Fax:  (949) 221-8594

 

21

 

With
a copy to:

(which
shall not constitute notice)

 

Bryan Cave LLP

2020 Main Street, Suite 600

Irving, California 92614

Attention:  Brett J. Souza, Esq.

Fax:  (949) 223-7100

 

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. 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           Reserved.

 

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.

 

22

 

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 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:

  	
  PRIMAL SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph R. Simrell

  	
   

  
	
   

  	
  Name:

  	
  Joseph R. Simrell

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
					

 

24

 

	
  The Investors:

  	
  /s/ David W. Mechler, Jr.

  	
   

  
	
   

  	
  Name: David W. Mechler,
  Jr.

  
	
   

  	
   

  
	
  Aggregate Purchase Price:
  $50,000

  	
   

  
	
  Number of Shares: 500,000

  	
   

  
	
  Number of Warrants:
  250,000

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address for Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Revocable Trust of May 16,
  1986,

  
	
   

  	
  as December 27, 1994

  
	
   

  	
   

  
	
   

  	
  /s/ John E. Refheld

  	
   

  
	
   

  	
  Name: John E. Rehfeld,
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
  Aggregate Purchase Price:
  $125,000

  	
   

  
	
  Number of Shares:
  1,250,000

  	
   

  
	
  Number of Warrants:
  625,000

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address for Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
				

 

25

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