NOTE PURCHASE AGREEMENT

 

                     NOTE PURCHASE AGREEMENT

 

          THIS NOTE PURCHASE AGREEMENT, dated as of October 26, 2005 (this

"Agreement"), by and between OMNI MEDICAL HOLDINGS, INC., a Utah limited

liability company (the "Company"), with headquarters located at 1257 Lake

Plaza Drive, Suite 219, Colorado Springs, Colorado 80906, and SIGMA

OPPORTUNITY FUND, LLC, a Delaware limited liability company (the "Buyer").

 

                      W I T N E S S E T H:

                               

          WHEREAS, the Buyer wishes to purchase from the Company and the

Company wishes to sell to the Buyer, upon the terms and subject to the

conditions of this Agreement, a promissory note of the Company having the

aggregate principal amount set forth on the signature page of this Agreement

and in connection with which the Company shall issue to the Buyer warrants to

purchase shares of Common Stock (such capitalized term and all other

capitalized terms used in this Agreement having the meanings provided in

Section 1);

 

           NOW THEREFORE, in consideration of the premises and the mutual

covenants contained herein and other good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, the parties agree as

follows:

 

          1.    DEFINITIONS

 

          (a)   All the agreements or instruments herein defined shall mean

such agreements or instruments as the same may from time to time be

supplemented or amended or the terms thereof waived or modified to the extent

permitted by, and in accordance with, the terms thereof and of this Agreement.

 

          (b)   The following terms shall have the following meanings (such

meanings to be equally applicable to both the singular and plural forms of the

terms defined):

 

          "Blackout Period" means the period of up to 20 Trading Days

(whether or not consecutive) during any period of 365 consecutive days after

the date the Company notifies the Investors that they are required, pursuant

to Section 8(c)(4), to suspend offers and sales of Registrable Securities as a

result of an event or circumstance described in Section 8(b)(5)(A), during

which period, by reason of Section 8(b)(5)(B), the Company is not required to

amend the Registration Statement or supplement the related Prospectus.

 

          "Business Day" means any day other than a Saturday, Sunday or a

day on which commercial banks in The City of New York are authorized or

required by law or executive order to remain closed.

 

          "Claims" means any losses, claims, damages, liabilities or

expenses, including, without limitation, reasonable fees and expenses of legal

counsel (joint or several), incurred by a Person.

 

          "Closing Date" means 10:00 a.m., New York City time, on October

26, 2005 or such other mutually agreed to time.

 

          "Common Stock" means the Common Stock, par value $.001 per share,

of the Company.

 

          "Common Stock Equivalent" means any warrant, option, subscription

or purchase right with respect to shares of Common Stock, any security

convertible into, exchangeable for, or otherwise entitling the holder thereof

to acquire, shares of Common Stock or any warrant, option, subscription or

purchase right with respect to any such convertible, exchangeable or other

security.

 

          "Indemnified Party" means the Company, each of its directors, each

of its officers who signs the Registration Statement, each Person, if any, who

controls the Company within the meaning of the 1933 Act or the 1934 Act, any

underwriter and any other stockholder selling securities pursuant to the

Registration Statement or any of its directors or officers or any Person who

controls such stockholder or underwriter within the meaning of the 1933 Act or

the 1934 Act.

 

          "Indemnified Person" means the Buyer and each other Investor who

beneficially owns or holds Registrable Securities and each other Investor who

sells such Registrable Securities in the manner permitted under this

Agreement, the directors, if any, of such Investor, the officers or persons

performing similar functions, if any, of the Buyer and any such Investor, each

Person, if any, who controls the Buyer or any such Investor within the meaning

of the 1933 Act or the 1934 Act, any underwriter (as defined in the 1933 Act)

acting on behalf of an Investor who participates in the offering of

Registrable Securities of such Investor in accordance with the plan of

distribution contained in the Prospectus, the directors, if any, of such

underwriter and the officers, if any, of such underwriter, and each Person, if

any, who controls any such underwriter within the meaning of the 1933 Act or

the 1934 Act.

 

          "Inspector" means any attorney, accountant or other agent retained

by an Investor for the purposes provided in Section 8(b)(9).

         

          "Investor" means the Buyer and any transferee or assignee who

agrees to become bound by the provisions of Sections 5(a), 5(b), 8, 9, and 10

of this Agreement.

 

          "Margin Stock" shall have the meaning provided in Regulation U of

the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221).

 

          "Nasdaq" means the Nasdaq National Market.

 

          "Nasdaq SmallCap" means the Nasdaq SmallCap Market.

 

          "NASD" means the National Association of Securities Dealers, Inc.

 

          "1934 Act" means the Securities Exchange Act of 1934, as amended.

 

          "1933 Act" means the Securities Act of 1933, as amended.

 

          "Note" means the 5% Senior Note due 2006 of the Company in the

form attached as Annex I.

 

          "Person" means any natural person, corporation, partnership,

limited liability company, trust, incorporated organization, unincorporated

association or similar entity or any government, governmental agency or

political subdivision.

 

          "Prospectus" means the prospectus forming part of the Registration

Statement at the time the Registration Statement is declared effective and any

amendment or supplement thereto (including any information or documents

incorporated therein by reference).

 

          "Purchase Price" means the purchase price for the Note set forth

on the signature page of this Agreement.

 

          "Record" means all pertinent financial and other records,

pertinent corporate documents and properties of the Company subject to

inspection for the purposes provided in Section 8(b)(9).

 

          "register," "registered," and "registration" refer to a

registration effected by preparing and filing a Registration Statement or

Statements in compliance with the 1933 Act and pursuant to Rule 415, and the

declaration or ordering of effectiveness of such Registration Statement by the

SEC.

 

          "Registrable Securities" means (1) the Warrant Shares, (2) if the

Common Stock is changed, converted or exchanged by the Company or its

successor, as the case may be, into any other stock or other securities on or

after the date hereof, such other stock or other securities which are issued

or issuable in respect of or in lieu of the Warrant Shares and (3) if any

other securities are issued to holders of the Common Stock (or such other

shares or other securities into which or for which the Common Stock is so

changed, converted or exchanged as described in the immediately preceding

clause (2)) upon any reclassification, share combination, share subdivision,

share dividend, merger, consolidation or similar transaction or event, such

other securities which are issued or issuable in respect of or in lieu of the

Common Stock.

 

          "Registration Default Period" means the period during which any

Registration Event occurs and is continuing.

 

           "Registration Event" means the occurrence of any of the following

events:

 

          (i)   the Company fails to file with the SEC the Registration

     Statement on or before the date by which the Company is required to file

     the Registration Statement pursuant to Section 8(a)(1),

    

          (ii) the Registration Statement covering Registrable Securities

     is not declared effective by the SEC within 90 days following the filing

     thereof,

    

          (iii) after the SEC Effective Date, sales cannot be made pursuant

     to the Registration Statement for any reason (including without

     limitation by reason of a stop order of any untrue statement of a

     material fact or omission of a material fact in the Registration

     Statement, or the Company's failure to update the Registration

     Statement) but except as excused pursuant to Section 8(b)(5),

    

          (iv) after the date on which securities of the Company are listed

     or included for quotation on a Trading Market, the Common Stock

     generally or the Registrable Securities specifically are not listed or

     included for quotation on a Trading Market, or trading of the Common

     Stock is suspended or halted for a period exceeding 5 days on the

     Trading Market which at the time constitutes the principal market for

     the Common Stock, or

    

          (v)   the Company fails, refuses or is otherwise unable timely to

     issue Warrant Shares upon exercise of the Warrant in accordance with the

     terms of the Warrant, or certificates therefor as required under the

     Transaction Documents or the Company fails, refuses or is otherwise

     unable timely to transfer any Warrant Shares as and when required by the

     Transaction Documents.

 

          "Registration Period" means the period from the SEC Effective Date

to the earlier of (A) the date which is three years after the Closing Date (or

if the Note shall no longer remain outstanding, such date after which each

Investor may sell all of its Registrable Securities without registration under

the 1933 Act pursuant to Rule 144, free of any limitation on the volume of

such securities which may be sold in any period) and (B) the date on which the

Investors no longer own any Registrable Securities.

 

          "Registration Statement" means a registration statement on Form S-

1, Form SB-2, Form S-3 or such other form as may be available to the Company

to be filed with the SEC under the 1933 Act relating to the Registrable

Securities and which names the Investors as selling stockholders.

 

          "Regulation D" means Regulation D under the 1933 Act.

 

          "Required Information" means, with respect to each Investor, all

information regarding such Investor, the Registrable Securities held by such

Investor or which such Investor has the right to acquire and the intended

method of disposition of the Registrable Securities held by such Investor or

which such Investor has the right to acquire as shall be required by the 1933

Act to effect the registration of the resale by such Investor of such

Registrable Securities.

 

          "Rule 144" means Rule 144 promulgated under the 1933 Act or any

other similar rule or regulation of the SEC that may at any time provide a

"safe harbor" exemption from registration under the 1933 Act so as to permit a

holder to sell securities of the Company to the public without registration

under the 1933 Act.

 

          "Rule 144A" means Rule 144A under the 1933 Act or any successor

rule thereto.

 

          "SEC" means the Securities and Exchange Commission.

 

          "SEC Effective Date" means the date the Registration Statement is

declared effective by the SEC.

 

          "SEC Filing Date" means the date the Registration Statement is

first filed with the SEC pursuant to Section 8.

 

           "SEC Reports" means the Company's (1) Annual Report on Form 10-KSB

for the fiscal year ended March 31, 2005, (2) Quarterly Report on Form 10-QSB

for the quarter ended June 30, 2005,   and (3) all other periodic and other

reports filed by the Company with the SEC pursuant to the 1934 Act subsequent

to June 30, 2005, and prior to the date hereof, in each case as filed with the

SEC and including the information and documents (other than exhibits)

incorporated therein by reference.

 

          "Securities" means, collectively, the Note, the Warrants and the

Warrant Shares.

 

          "Subsidiary" means any corporation or other entity of which a

majority of the capital stock or other ownership interests having ordinary

voting power to elect a majority of the board of directors or other persons

performing similar functions are at the time directly or indirectly owned by

the Company.

 

          "Trading Day" means at any time a day on which any of a national

securities exchange, Nasdaq, Nasdaq SmallCap or such other securities market

as at such time constitutes the principal securities market for the Common

Stock is open for general trading of securities.

 

          "Trading Market" means the Over-The-Counter Bulletin Board, the

American Stock Exchange, Inc., the Nasdaq, the Nasdaq SmallCap or the New York

Stock Exchange, Inc.

 

          "Transaction Documents" means, collectively, this Agreement, the

Securities and the other agreements, instruments and documents contemplated

hereby and thereby.

 

          "Transfer Agent" means Interwest Transfer Co., as transfer agent

and registrar for the Common Stock, or its successor.

 

          "Violation" means

 

          (i)   any untrue statement or alleged untrue statement of a

material fact contained in the Registration Statement or any post-effective

amendment thereof or the omission or alleged omission to state therein a

material fact required to be stated therein or necessary to make the

statements therein not misleading,

 

          (ii) any untrue statement or alleged untrue statement of a

material fact contained in any Prospectus (as amended or supplemented, if the

Company files any amendment thereof or supplement thereto with the SEC) or the

omission or alleged omission to state therein any material fact necessary to

make the statements made therein, in light of the circumstances under which

the statements therein were made, not misleading,

 

          (iii)      any violation or alleged violation by the Company of the

1933 Act, the 1934 Act, any state securities law or any rule or regulation

under the 1933 Act, the 1934 Act or any state securities law, or

 

          (iv) any breach or alleged breach by any Person other than the

Buyer of any representation, warranty, covenant, agreement or other term of

any of the Transaction Documents.

 

          "Warrants" means the Common Stock Purchase Warrants in the form

attached hereto as Annex II.

 

          "Warrant Shares" means the shares of Common Stock issuable upon

exercise of the Warrants.

 

          2.    PURCHASE AND SALE; PURCHASE PRICE.

 

          (a)   Purchase.   Upon the terms and subject to the conditions of

this Agreement, the Buyer hereby agrees to purchase from the Company, and the

Company hereby agrees to sell to the Buyer, on the Closing Date, the Note in

the principal amount set forth on the signature page of this Agreement and

having the terms and conditions as set forth in the form of the Note attached

hereto as Annex I for the Purchase Price.   In connection with the purchase of

the Note by the Buyer, the Company shall issue to the Buyer at the closing on

the Closing Date Warrants initially entitling the holder to purchase 15,000

shares of Common Stock for each $1,000 principal amount of the Note.

 

          (b)   Form of Payment.   Payment by the Buyer of the Purchase Price

to the Company on the Closing Date shall be made by wire transfer of

immediately available funds to:

 

          Wells Fargo Bank

          90 South Cascade Ave.

          Colorado Springs, CO 80903

          ABA No.: 102000076

         

           For credit to account No. 2323174348

          For credit to the account of Omni Medical Holdings, Inc.

 

          (c)   Closing.   The issuance and sale of the Note and the issuance

of the Warrants shall occur on the Closing Date.   At the closing, upon the

terms and subject to the conditions of this Agreement, (1) the Company shall

issue and deliver to the Buyer the Note and the Warrants against payment by

the Buyer to the Company of an amount equal to the Purchase Price, and (2) the

Buyer shall pay to the Company an amount equal to the Purchase Price against

delivery by the Company to the Buyer of the Note and the Warrants.

 

          3.    REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE BUYER.

 

          The Buyer represents and warrants to, and covenants and agrees

with, the Company as follows:

 

          (a)   Purchase for Investment.   The Buyer is purchasing the Note

and acquiring the Warrants for its own account for investment and not with a

view towards the public sale or distribution thereof within the meaning of the

1933 Act; and the Buyer will acquire any Shares issued to the Buyer prior to

the SEC Effective Date of a Registration Statement covering the resale of such

Shares by the Buyer for its own account for investment and not with a view

towards the public sale or distribution thereof within the meaning of the 1933

Act prior to the SEC Effective Date; and the Buyer has no intention of making

any distribution, within the meaning of the 1933 Act, of the Shares except in

compliance with the registration requirements of the 1933 Act or pursuant to

an exemption therefrom;

 

          (b)   Accredited Investor.   The Buyer is an "accredited investor"

as that term is defined in Rule 501 of Regulation D under the 1933 Act by

reason of Rule 501(a)(3) thereof;

 

          (c)   Reoffers and Resales.   The Buyer will not, directly or

indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit

any offers to buy, purchase or otherwise acquire or take a pledge of) any of

the Securities unless registered under the 1933 Act, pursuant to an exemption

from registration under the 1933 Act or in a transaction not requiring

registration under the 1933 Act;

 

          (d)   Information Provided.   The Buyer and its advisors, if any,

have requested, received and considered all information relating to the

business, properties, operations, condition (financial or other), results of

operations or prospects of the Company and information relating to the offer

and sale of the Note and the offer of the Warrant Shares deemed relevant by

them (assuming the accuracy and completeness of the SEC Reports and of the

Company's responses to the Buyer's requests); the Buyer and its advisors, if

any, have been afforded the opportunity to ask questions of the Company

concerning the terms of the offering of the Securities and the business,

properties, operations, condition (financial or other), results of operations

and prospects of the Company and its Subsidiaries and have received

satisfactory answers to any such inquiries; and

 

          (e)   Note Purchase Agreement.   The Buyer has all requisite power

and authority, corporate or otherwise, to execute, deliver and perform its

obligations under this Agreement and the other agreements executed by the

Buyer in connection herewith and to consummate the transactions contemplated

hereby and thereby; and this Agreement has been duly and validly authorized,

duly executed and delivered by the Buyer and, assuming due execution and

delivery by the Company, is a valid and binding agreement of the Buyer

enforceable in accordance with its terms, except as the enforceability hereof

may be limited by bankruptcy, insolvency, reorganization, moratorium,

fraudulent conveyance or other similar laws now or hereafter in effect

relating to or affecting creditors' rights generally and general principles of

equity, regardless of whether enforcement is considered in a proceeding in

equity or at law.

 

          4.    REPRESENTATIONS, WARRANTIES, COVENANTS, ETC. OF THE COMPANY.

 

          The Company represents and warrants to, and covenants and agrees

with, the Buyer as follows:

 

          (a)   Organization and Authority.   The Company and each of the

Subsidiaries is a corporation duly organized, validly existing and in good

standing under the laws of the jurisdiction of its incorporation, and (i) each

of the Company and the Subsidiaries has all requisite corporate power and

authority to own, lease and operate its properties and to carry on its

business as described in the SEC Reports and as currently conducted, and (ii)

the Company has all requisite corporate power and authority to execute,

deliver and perform its obligations under this Agreement and the other

Transaction Documents to be executed and delivered by the Company in

connection herewith, and to consummate the transactions contemplated hereby

and thereby; and the Company does not have any equity investment in any other

Person other than the Subsidiaries listed in Schedule 4(a) hereto.

 

          (b)   Qualifications.   The Company and each of the Subsidiaries

are duly qualified to do business as foreign corporations and are in good

standing in all jurisdictions where such qualification is necessary and where

failure so to qualify could have a material adverse effect on the business,

properties, operations, condition (financial or other), results of operations

or prospects of the Company and the Subsidiaries, taken as a whole.

 

          (c)   Capitalization.   (1) The authorized and outstanding capital

stock of the Company and each of the Subsidiaries is as set forth on Schedule

4(c).   Except as set forth on Schedule 4(c), there are no outstanding options

or warrants for the purchase of, or rights to purchase or subscribe for, or

securities convertible into, exchangeable for, or otherwise entitling the

holder to acquire, Common Stock or other capital stock of the Company or any

Subsidiary or any contracts or commitments to issue or sell Common Stock or

other capital stock of the Company or any Subsidiary or any such options,

warrants, rights or other securities. Schedule 4 (c) sets forth the number of

shares held by the Company in each Subsidiary.

 

     (2)    The outstanding shares of Common Stock of the Company and each

Subsidiary have been duly and validly authorized and issued.   None of the

outstanding shares of Common Stock or capital stock of any Subsidiary has been

issued in violation of the preemptive rights of any securityholder of the

Company or any Subsidiary.   The offers and sales of the outstanding shares of

Common Stock of the Company or capital stock of any Subsidiary were at all

relevant times either registered under the 1933 Act and applicable state

securities laws or exempt from such requirements.   Except as set forth on

Schedule 4(c), no holder of any of the Company's or any Subsidiary's

securities has any rights, "demand," "piggy-back" or otherwise, to have such

securities registered by reason of the intention to file, filing or

effectiveness of the Registration Statement or otherwise.

 

          (d)   Concerning the Warrant Shares.   The Warrant Shares have been

duly authorized and, when issued upon exercise of the Warrants, will be duly

and validly issued, fully paid and non-assessable and will not subject the

holder thereof to personal liability by reason of being such holder.   There

are no preemptive or similar rights of any stockholder of the Company or any

other Person to acquire any of the Warrants or Warrant Shares.   The Company

has duly reserved 6,000,000 shares of Common Stock for issuance upon exercise

of the Warrants, and such shares shall remain so reserved, and the Company

shall from time to time reserve such additional shares of Common Stock as

shall be required to be reserved pursuant to the Warrants, so long as the

Warrants are outstanding.   The Common Stock is traded on the Over-The-Counter

Bulletin Board.   The Company knows of no reason that the Warrant Shares will

be ineligible for quotation on the Over-The-Counter Bulletin Board.

 

          (e)   Corporate Authorization.   This Agreement and the other

Transaction Documents to which the Company is a party have been duly and

validly authorized by the Company; this Agreement has been duly executed and

delivered by the Company and, assuming due execution and delivery by the

Buyer, this Agreement, the Note and the Warrants are the valid and binding

obligations of the Company enforceable in accordance with their respective

terms, except as the enforceability hereof or thereof may be limited by

bankruptcy, insolvency, reorganization, moratorium or other similar laws now

or hereafter in effect relating to or affecting creditors' rights generally

and general principles of equity, regardless of whether enforcement is

considered in a proceeding in equity or at law.

 

          (f)   Non-contravention.   The execution and delivery of the

Transaction Documents by the Company and the consummation by the Company of

the issuance of the Securities as contemplated by this Agreement and

consummation by the Company of the other transactions contemplated by the

Transaction Documents do not and will not, with or without the giving of

notice or the lapse of time, or both, (i) result in any violation of any term

or provision of the certificate of incorporation or bylaws of the Company or

any Subsidiary, (ii) conflict with or result in a breach by the Company or any

Subsidiary of any of the terms or provisions of, or constitute a default

under, or result in the modification of, or result in the creation or

imposition of any lien, security interest, charge or encumbrance upon any of

the properties or assets of the Company or any Subsidiary pursuant to, any

indenture, mortgage, deed of trust or other agreement or instrument to which

the Company or any Subsidiary is a party or by which the Company or any

Subsidiary or any of their respective properties or assets are bound or

affected, in any such case which would be reasonably likely to have a material

adverse effect on the business, properties, operations, condition (financial

or other), results of operations or prospects of the Company and the

Subsidiaries, taken as a whole, or the validity or enforceability of, or the

ability of the Company to perform its obligations under, the Transaction

Documents, (iii) violate or contravene any applicable law, rule or regulation

or any applicable decree, judgment or order of any court, United States

federal or state regulatory body, administrative agency or other governmental

body having jurisdiction over the Company or any Subsidiary or any of their

respective properties or assets, in any such case which would be reasonably

likely to have a material adverse effect on the business, properties,

operations, condition (financial or other), results of operations or prospects

of the Company and the Subsidiaries, taken as a whole, or the validity or

enforceability of, or the ability of the Company to perform its obligations

under, the Transaction Documents, or (iv) have any material adverse effect on

any permit, certification, registration, approval, consent, license or

franchise necessary for the Company or any Subsidiary to own or lease and

operate any of its properties and to conduct any of its business or the

ability of the Company or any Subsidiary to make use thereof.

 

          (g)   Approvals, Filings, Etc.   No authorization, approval or

consent of, or filing with, any United States or foreign court, governmental

body, regulatory agency, self-regulatory organization, or stock exchange or

market or the stockholders of the Company is required to be obtained or made

by the Company or any Subsidiary for (x) the execution, delivery and

performance by the Company of the Transaction Documents, (y) the issuance and

sale of the Securities as contemplated by this Agreement and the terms of the

Note and the Warrants and (z) the performance by the Company of its

obligations under the Transaction Documents, other than (1) registration of

the resale of the Shares under the 1933 Act as contemplated by Section 8, (2)

as may be required under applicable state securities or "blue sky" laws, and

(3) filing of one or more Forms D with respect to the Securities as required

under Regulation D.

 

          (h)   Information Provided.   The SEC Reports, the Transaction

Documents and the instruments delivered by the Company to the Buyer in

connection with the closing on the Closing Date do not contain any untrue

statement of a material fact or omit to state any material fact necessary in

order to make the statements therein, in the light of the circumstances under

which they are made, not misleading, it being understood that for purposes of

this Section 4(h), any statement contained in such information shall be deemed

to be modified or superseded for purposes of this Section 4(h) to the extent

that a statement in any document included in such information which was

prepared and furnished to the Buyer on a later date or filed with the SEC on a

later date modifies or replaces such statement, whether or not such later

prepared or filed statement so states.

 

          (i)   Absence of Brokers, Finders, Etc.   No broker, finder or

similar Person is entitled to any commission, fee or other compensation by

reason of action taken by or on behalf of the Company in connection with the

transactions contemplated by this Agreement, and the Company shall pay, and

indemnify and hold harmless the Buyer from, any claim made against the Buyer

by any Person for any such commission, fee or other compensation.

 

          (j)   No Solicitation.   No form of general solicitation or general

advertising was used by the Company or, to the best of its knowledge, any

other Person acting on behalf of the Company, in respect of the Securities or

in connection with the offer and sale of the Securities.   Neither the Company

nor, to its knowledge, any Person acting on behalf of the Company has, either

directly or indirectly, sold or offered for sale to any Person any of the

Securities or, within the six months prior to the date hereof, any other

similar security of the Company except as contemplated by this Agreement and

neither the Company nor any Person authorized to act on its behalf will sell

or offer for sale any promissory notes, warrants, shares of Common Stock or

other securities to, or solicit any offers to buy any such security from, any

Person so as thereby to cause the issuance or sale of any of the Securities to

be in violation of any of the provisions of Section 5 of the 1933 Act.

 

          5.    CERTAIN COVENANTS.

 

          (a) Restrictive Legends.   Once the Registration Statement required

to be filed by the Company pursuant to Section 8 has been declared effective

or particular Warrant Shares are eligible for resale pursuant to Rule 144(k)

under the 1933 Act, thereafter (1) upon request of the Buyer the Company will

substitute certificates without restrictive legend for certificates for any

such Warrant Shares issued prior to the SEC Effective Date or prior to the

time of such eligibility, as the case may be, which bear such restrictive

legend and remove any stop-transfer restriction relating thereto promptly, but

in no event later than three days after surrender of such certificates by the

Buyer and (2) the Company shall not place any restrictive legend on

certificates issued upon exercise of the Warrants or impose any stop-transfer

restriction thereon.

 

          (b)   Reporting Status.   During the Registration Period, the

Company shall timely file all reports required to be filed with the SEC

pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not

terminate its status as an issuer required to file reports under the 1934 Act

even if the 1934 Act or the rules and regulations thereunder would permit such

termination.

 

          (c)   Form D.   The Company agrees to file one or more Forms D with

respect to the Securities as required under Regulation D to claim the

exemption provided by Rule 506 of Regulation D and to provide a copy thereof

to the Buyer promptly after such filing.

 

          (d)   State Securities Laws.   On or before the Closing Date, the

Company shall take such action as shall be necessary to qualify, or to obtain

an exemption for, the offer and sale of the Securities to the Buyer as

contemplated by the Transaction Documents under such of the securities laws of

jurisdictions in the United States as shall be applicable thereto.

Notwithstanding the foregoing obligations of the Company in this Section 5(e),

the Company shall not be required (1) to qualify to do business in any

jurisdiction where it would not otherwise be required to qualify but for this

Section 5(e), (2) to subject itself to general taxation in any such

jurisdiction, (3) to file a general consent to service of process in any such

jurisdiction, (4) to provide any undertakings that cause more than nominal

expense or burden to the Company or (5) to make any change in its charter or

by-laws which the Company determines to be contrary to the best interests of

the Company and its stockholders.   The Company shall furnish the Buyer with

copies of all filings, applications, orders and grants or confirmations of

exemptions relating to such securities laws on or before the Closing Date.

 

           (e) Use of Proceeds.   The Company represents and agrees that:

(1) it does not own or have any present intention of acquiring any Margin

Stock; (2) the proceeds of sale of the Note and the Warrant Shares will be

used for general working capital purposes and in the operation of the

Company's business; (3) none of such proceeds will be used, directly or

indirectly (A) except as disclosed on Schedule 5(e), to pay any existing debt

obligations (B) to make any loan to or investment in any other Person or (C)

for the purpose, whether immediate, incidental or ultimate, of purchasing or

carrying any margin stock or for the purpose of maintaining, reducing or

retiring any indebtedness which was originally incurred to purchase or carry

any stock that is currently a Margin Stock or for any other purpose which

might constitute the transactions contemplated by this Agreement a "purpose

credit" within the meaning of such Regulation U of the Board of Governors of

the Federal Reserve System; and (4) neither the Company nor any agent acting

on its behalf has taken or will take any action which might cause this

Agreement or the transactions contemplated hereby to violate Regulation T,

Regulation U or any other regulation of the Board of Governors of the Federal

Reserve System or to violate the 1934 Act, in each case as in effect now or as

the same may hereafter be in effect.

 

          (f)   Right of First Refusal.   If the Company shall make an

offering per