PREFERRED STOCK PURCHASE AGREEMENT
 
This Preferred Stock Purchase Agreement (“Agreement”) is entered into and
effective as of April 13, 2010 (“Effective Date”), by and among Urban Barns
Foods Inc., a Nevada corporation (“Company”), and Socius Capital Group, LLC, a
Delaware limited liability company, dba Socius Special Situations Capital Group,
LLC (including its designees, successors and assigns, “Investor”).
 
RECITALS
 
A. The parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue to Investor, and Investor shall
purchase from the Company, from time to time as provided herein, up to
$5,000,000.00 of shares of Series A Preferred Stock and Warrant Shares in
connection therewith; and
 
B. The offer and sale of the Securities provided for herein are being made
without registration under the Act, in reliance upon the provisions of Section
4(2) of the Act, Regulation D promulgated under the Act, and such other
exemptions from the registration requirements of the Act as may be available
with respect to any or all of the purchases of Securities to be made hereunder.
 
AGREEMENT
 
In consideration of the premises, the mutual provisions of this Agreement, and
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, Company and Investor agree as follows:
 
ARTICLE 1
 
DEFINITIONS
 
In addition to the terms defined elsewhere in this Agreement:  (a) capitalized
terms that are not otherwise defined herein have the meanings given to such
terms in the Certificate of Designations, and (b) the following terms have the
meanings indicated in this ARTICLE 1:
 
“Act” means the Securities Act of 1933, as amended.
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Act.  With respect to Investor, without limitation, any Person owning, owned by,
or under common ownership with Investor, and any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as Investor will  be deemed to be an Affiliate.
 
“Agreement” means this Preferred Stock Purchase Agreement including the exhibits
and schedules hereto.
 
“Bloomberg” means Bloomberg Financial Markets.
 
“Certificate of Designations” means the certificate to be filed with the
Secretary of State of the State of Nevada, in the form attached hereto as
Exhibit B.
 
“Change in Control” has the meaning set forth within the definition of
Fundamental Transaction, below.
 
“Closing” means any one of (i) the Commitment Closing and (ii) each Tranche
Closing.
 
 
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“Closing Bid Price” means, for any security as of any date, the last closing bid
price for such security on the Trading Market, as reported by Bloomberg, or, if
the Trading Market begins to operate on an extended hours basis and does not
designate the closing bid price, then the last bid price of such security prior
to 4:00 p.m., Eastern time, as reported by Bloomberg, or, if the Trading Market
is not the principal securities exchange or trading market for such security,
the last closing bid price of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price is reported
for such security by Bloomberg, the average of the bid prices of any market
makers for such security as reported in the “pink sheets” by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.).  If the Closing Bid Price cannot
be calculated for a security on a particular date on any of the foregoing bases,
the Closing Bid Price of such security on such date shall be the fair market
value as mutually determined by the Company and Investor.  If the Company and
Investor are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 6.7.  All such determinations
to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation
period.
 
“Commitment Closing” has the meaning set forth in Section 2.2(a).
 
“Commitment Fee” means a non-refundable fee of $250,000.00 (5.0% of the Maximum
Placement), payable by the Company to Investor in consideration of Investor’s
commitment to fund the investment contemplated by this Agreement.  The
Commitment Fee is earned in full on the Effective Date, and payable as
follows:  On the Effective Date, the Company will issue in the name of Investor
or its designee, and deliver to the Company’s legal counsel to hold in trust, a
restricted stock certificate evidencing shares of Common Stock equal in value to
$250,000.00, with such valuation based upon 82% of the VWAP of the Common Stock
for the five Trading Days preceding the Effective Date.  The Commitment Fee
shall be payable in full on the earliest of: (i) the first Tranche Closing Date,
in cash by offset from the proceeds of the first Tranche, or (ii) the six-month
anniversary of the Effective Date, at the Company’s option either in cash or in
shares of Common Stock valued at the Commitment Share VWAP Price, or (iii) the
date that the Registration Statement is declared effective by the SEC, at the
Company’s option either in cash or in shares of Common Stock valued at the
Commitment Share VWAP Price.  The certificate for the Commitment Fee Shares
shall be delivered to Investor pursuant to Section 2.2(b) hereof.
 
“Commitment Fee Shares” means any shares of Common Stock issued to Investor in
payment of the Commitment Fee.  The Company shall take all steps necessary to
have all restrictive legends removed from the stock certificate evidencing
Commitment Fee Shares prior to delivery to Investor or its designee, including
without limitation causing the Company’s counsel to issue any necessary opinions
to the Transfer Agent.
 
“Commitment Share VWAP Price” means the lower of (1) 82% of the VWAP of the
Common Stock for the five Trading Days immediately preceding the Effective Date,
or (2) 82% of the VWAP of the Common Stock for the five Trading Days immediately
preceding the date that the Commitment Fee is paid to Investor.
 
“Common Shares” includes the Warrant Shares and any Commitment Fee Shares.
 
“Common Stock” means the common stock, par value $0.001 per share, of the
Company, and any replacement or substitute thereof, or any share capital into
which such Common Stock shall have been changed or any share capital resulting
from a reclassification of such Common Stock.
 
“Company Termination” has the meaning set forth in Section 3.2.
 
“Delisting Event” means any time during the term of this Agreement, that the
Common Stock is not listed for and actively and/or regularly trading on a
Trading Market, or is suspended or delisted with respect to the trading of the
shares of Common Stock on a Trading Market.
 
“Disclosure Schedules” means the disclosure schedules of the Company delivered
concurrently herewith, attached hereto, and incorporated herein by
reference.  The Disclosure Schedules shall contain no material non-public
information.
 
“DTC” means The Depository Trust Company, or any successor performing
substantially the same function for Company.
 
“DWAC Shares” means, except as expressly stated otherwise herein, all Common
Shares or other shares of Common Stock issued or issuable to Investor or any
Affiliate, successor or assign of Investor pursuant to any of the Transaction
Documents, including without limitation any Warrant Shares, all of which shall
be (a) issued in electronic form, (b) freely tradable and without restriction on
resale, and (c) timely credited by Company to the specified Deposit/Withdrawal
at Custodian (DWAC) account with DTC under its Fast Automated Securities
Transfer (FAST) Program or any similar program hereafter adopted by DTC
performing substantially the same function, in accordance with irrevocable
instructions issued to and countersigned by the Transfer Agent, in the form
attached hereto as Exhibit C or in such other form agreed upon by the parties.
 
 
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“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Fundamental Transaction” means and shall be deemed to have occurred at such
time upon any of the following events:
 
(i) a consolidation, merger or other business combination or event or
transaction, following which the holders of Common Stock immediately preceding
such consolidation, merger, combination or event either (a) no longer hold a
majority of the shares of Common Stock or (b) no longer have the ability to
elect a majority of the board of directors of the Company (a “Change in
Control”);
 
(ii) the sale or transfer of all or substantially all of the Company’s assets,
other than in the ordinary course of business; or
 
(iii) a purchase, tender or exchange offer made to the holders of the
outstanding shares of Common Stock.
 
“GAAP” means United States generally accepted accounting principles applied on a
consistent basis during the periods involved.
 
“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in
excess of $250,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent
obligations in respect of Indebtedness of others, whether or not the same are or
should be reflected in the Company’s balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and (c)
the present value of any lease payments in excess of $250,000 due under leases
required to be capitalized in accordance with GAAP.
 
“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
 
“Lock-Up Agreements” means an agreement in the form attached as Exhibit D,
executed by each of the Company’s officers, directors and beneficial owners of
10% or more of the Common Stock, precluding each such Person from participating
in any sale of the Common Stock from the Tranche Notice Date through the Tranche
Closing Date.
 
“Material Adverse Effect” means any material adverse effect on (i) the legality,
validity or enforceability of any Transaction Document, (ii) the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a the Company’s ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document.
 
“Material Agreement” means any material loan agreement, financing agreement,
equity investment agreement or securities instrument to which Company is a
party, any agreement or instrument to which Company and Investor or any
Affiliate of Investor is a party, and any other material agreement listed, or
required to be listed, on any of Company’s reports filed or required to be filed
with the SEC, including without limitation Forms 10-K, 10-Q or 8-K.
 
“Maximum Placement” means $5,000,000.00.
 
“Maximum Tranche Amount” means, subject to any other applicable limitations set
forth in this Agreement, the Maximum Placement less the amount of any previously
noticed and funded Tranches.
 
 “Officer’s Closing Certificate” means a certificate in customary form
reasonably acceptable to Investor, executed by an authorized officer of the
Company.
 
“Opinion” means an opinion from Company’s independent legal counsel, in the form
attached as Exhibit E or in such other form agreed upon by the parties, to be
delivered in connection with the Commitment Closing and any Tranche Closing.
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
 
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“Preferred Shares” means shares of Series A Preferred Stock of the Company
provided for in the Certificate of Designations, to be issued to Investor
pursuant to this Agreement.
 
“Prospectus” includes each prospectus and prospectus supplement (within the
meaning of the Act) related to the sale or offering of any Common Shares,
including without limitation any prospectus or prospectus supplement contained
within the Registration Statement.
 
“Registration Statement” means a valid, current and effective registration
statement registering for resale the shares of Common Stock to be issued as
Warrant Shares and Commitment Fee Shares hereunder, and if applicable the
Borrowed Shares issued in connection herewith, and except where the context
otherwise requires, means such registration statement, as amended, including (i)
all documents filed as a part thereof or incorporated by reference therein, and
(ii) any information contained or incorporated by reference in a prospectus
filed with the SEC in connection with such registration statement, to the extent
such information is deemed under the Act to be part of such registration
statement.
 
“Regulation D” means Regulation D promulgated under the Act.
 
“Required Approval” means any approval of the Trading Market or the Company’s
stockholders required to be obtained by Company prior to issuing the Securities
pursuant to any applicable rules of the Trading Market.
 
“Required Tranche Documents” has the meaning set forth in Section 2.3(e).
 
“Rule 144” means Rule 144 promulgated by the SEC pursuant to the Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect.
 
“Rule 144 Eligible” means eligible for immediate resale under Rule 144 without
limitation on the amount of securities sold under Rule 144(e) and
without  requiring discharge by payment in full of any promissory notes given to
the Company prior to the sale of the securities under Rule 144(d)(2)(iii).
 
“SEC” means the United States Securities and Exchange Commission.
 
“SEC Reports” includes all reports required to be filed by the Company under the
Act and/or the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the Effective Date (or such shorter period
as the Company was required by law to file such material) and for the period in
which this Agreement is in effect.
 
“Securities” includes the Warrant, the Common Shares and the Preferred Shares
issuable pursuant to this Agreement.
 
“Subsidiary” means any Person the Company owns or controls, or in which the
Company, directly or indirectly, owns a majority of the capital stock or similar
interest that would be disclosable pursuant to Regulation S-K, Item 601(b)(21).
 
“Termination” has the meaning set forth in Section 3.1.
 
“Termination Date” means the earlier of (i) the date that is the two-year
anniversary of the Effective Date, or (ii) the Tranche Closing Date on which the
sum of the aggregate Tranche Purchase Price for all Tranche Shares equals the
Maximum Placement.
 
“Termination Notice” has the meaning as set forth in Section 3.2.
 
 
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“Trading Day” means any day on which the Common Stock is traded on the Trading
Market; provided that it shall not include any day on which the Common Stock is
(a) scheduled to trade for less than 5 hours, or (b) suspended from trading.
 
“Trading Market” means the OTC Bulletin Board, the NASDAQ Capital Market, the
NASDAQ Global Market, the NASDAQ Global Select Market, the NYSE Amex, or the New
York Stock Exchange, whichever is at the time the principal trading system,
exchange or market for the Common Stock, but does not include the Pink Sheets
inter-dealer electronic quotation and trading system.
 
“Tranche” has the meaning set forth in Section 2.3(a).
 
“Tranche Amount” means the amount of any individual purchase of Preferred Shares
under this Agreement, as specified by the Company, and shall not exceed the
Maximum Tranche Amount.
 
“Tranche Closing” has the meaning set forth in Section 2.3(f)(iv).
 
“Tranche Closing Date” has the meaning set forth in Section 2.3(f)(i).
 
“Tranche Notice” has the meaning set forth in Section 2.3(b).
 
“Tranche Notice Date” has the meaning set forth in Section 2.3(b).
 
“Tranche Purchase Price” has the meaning set forth in Section 2.3(b), and shall
be specified in writing by the Company.
 
“Tranche Share Price” means $10,000.00 per Preferred Share.  The Company may not
issue fractional Preferred Shares.
 
“Tranche Shares” means the Preferred Shares that are purchased by Investor
pursuant to a Tranche.  For the Maximum Placement, the Company shall issue 500
Preferred Shares to Investor.
 
“Transaction Documents” means this Agreement, the other agreements and documents
referenced herein, and the exhibits and schedules hereto and thereto.
 
“Transfer Agent” means Holladay Stock Transfer or any successor transfer agent
for the Common Stock.
 
“Use of Proceeds Certificate” means a certificate, in substantially the form
attached as Exhibit F, signed by an officer of the Company, setting forth how
the Tranche Purchase Price will be applied by the Company.
 
“VWAP” means, for any date, the volume-weighted average price, calculated by
dividing the aggregate value of Common Stock traded on the Trading Market (price
multiplied by number of shares traded) by the total volume (number of shares) of
Common Stock traded on the Trading Market for such date, or the nearest
preceding Trading Day.
 
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrant.
 
“Warrant” means the warrant issuable under this Agreement, in the form attached
hereto as Exhibit A, to purchase shares of Common Stock with an aggregate
exercise price equal to 135.0% of the Maximum Placement (subject to adjustment
as set forth therein).
 
 
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ARTICLE 2
 
PURCHASE AND SALE
 
2.1 Agreement to Purchase
 
Subject to the terms and conditions herein and the satisfaction of the
conditions to closing set forth in this ARTICLE 2:
 
(a) Investor hereby agrees to purchase such amounts of Preferred Shares as the
Company may, in its sole and absolute discretion, from time to time elect to
issue and sell to Investor according to one or more Tranches pursuant to Section
2.3 below; and
 
(b) The Company agrees to pay the Commitment Fee and to issue the Preferred
Shares, the Common Shares, the Commitment Fee Shares, and the Warrant to
Investor as provided herein.
 
2.2 Investment Commitment
 
(a) Investment Commitment. The closing of this Agreement (the “Commitment
Closing”) shall be deemed to occur when this Agreement has been duly executed by
both Investor and the Company, and the other Conditions to the Commitment
Closing set forth in Section 2.2(b)(i) and Section 2.2(c) have been met.
 
(b) Commitment Fee Shares.
 
(i) As a condition to the Commitment Closing, on or prior to the Effective Date
the Company shall issue to Investor or its designee, as an estimate of the
maximum number of Commitment Fee Shares to which Investor may be or become
entitled under this Agreement, 1,470,588 Commitment Fee Shares.  The Commitment
Fee Shares shall be evidenced by a stock certificate titled in the name of
Investor or its designee and delivered to the Company’s legal counsel to hold in
trust for Investor.  The stock certificate shall bear a legend substantially in
the form set forth in Section 5.1(b) hereof and, at the Company’s option, an
additional legend indicating that such shares are subject to the contractual
restrictions set forth in this Agreement.
 
(ii) If the Commitment Fee is paid in cash when due, the certificate for the
Commitment Fee Shares issued pursuant to Section 2.2(b)(i) shall be returned to
the Company by its legal counsel and cancelled.
 
(iii) If for any reason whatsoever the Commitment Fee has not been paid, as set
forth in the definition of “Commitment Fee” in ARTICLE 1 hereof, by the earliest
of (A) the first Tranche Closing Date, (B) the six-month anniversary of the
Effective Date, or (C) the date that the Registration Statement is declared
effective by the SEC, then the Commitment Fee Shares issued to Investor or its
designee in payment of the Commitment Fee pursuant to Section 2.2(b)(i) will be
delivered to Investor as full or partial payment of the Commitment Fee.  If
necessary to make the aggregate number of shares delivered to Investor equal to
the total Commitment Fee divided by the then-applicable Commitment Share VWAP
Price, on the date the Commitment Fee is first payable the Company shall deliver
to Investor either (X) if more shares are required, a second legend-free
certificate for the balance of the required shares, or (Y) if less shares are
required, a legend-free replacement certificate for the total required number of
shares and, in such case, the original certificate shall be returned to the
Company for cancellation.
 
(iv) Unless the Company has a valid and effective Registration  Statement
permitting the lawful resale of all previously issued and issuable Commitment
Fee Shares and the Commitment Fee Shares have been previously delivered to
Investor pursuant to clause (iii) above, then on the date that any of the
Commitment Fee Shares first become Rule 144 Eligible, the Company shall take all
steps necessary to have the legends removed from the stock certificate(s)
evidencing such Commitment Fee Shares, including without limitation causing the
Company’s legal counsel to issue any necessary opinions to the Transfer Agent,
and unless the Commitment Fee is paid in cash, such Commitment Fee Shares shall
be delivered to Investor or its designee on the date that the Commitment  Fee is
payable pursuant to clause (iii) above as follows: (A) as DWAC shares, if the
Company is then DWAC eligible, or (B) if the Company is not then DWAC eligible,
then in original certificated form bearing no restrictive legend.
 
(v) A total of 1,470,588 shares of Common Stock shall be included in the
Registration Statement for potential use by the Company in satisfaction of the
Commitment Fee.  Prior to the date that Investor is entitled to receive the
Commitment Fee Shares, neither Investor nor the Company shall be entitled to
sell, pledge, assign or otherwise transfer any of the Commitment Fee Shares
represented by the certificate provided for in Section 2.2(b)(i), nor shall
Investor be entitled to vote such shares.
 
 
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(c) Conditions to Investment Commitment. As a condition precedent to the
Commitment Closing, all of the following (the “Conditions to Commitment
Closing”) shall have been satisfied prior to or concurrently with the Company’s
execution and delivery of this Agreement:
 
(i) the following documents shall have been delivered to Investor:  (A) this
Agreement (including the Disclosure Schedules), executed by the Company; (B) a
Secretary’s Certificate as to (x) the resolutions of the Company’s board of
directors authorizing this Agreement and the Transaction Documents, and the
transactions contemplated hereby and thereby, and (y) a copy of the Company’s
current Articles of Incorporation, Bylaws, and other governing documents; (C)
the Certificate of Designations executed by the Company and filed with the
Nevada Secretary of State; (D) the Opinion; and (E) a copy of (1) the Company’s
press release (if any) announcing the transactions contemplated by this
Agreement; and (F) a copy of the Company’s Current Report on Form 8-K, as filed
with the SEC, describing the transaction contemplated by, and attaching a
complete copy of, the Transaction Documents;
 
(ii) other than for losses incurred in the ordinary course of business, there
has not been any Material Adverse Effect on the Company since the date of the
last SEC Report filed by the Company, including but not limited to incurring
material liabilities;
 
(iii) the representations and warranties of the Company in this Agreement shall
be true and correct in all material respects and the Company shall have
delivered an Officer’s Closing Certificate to such effect to Investor, signed by
an officer of the Company;
 
(iv) the Warrant to purchase shares of Common Stock with an aggregate exercise
price equal to 135.0% of the Maximum Placement (subject to adjustment as set
forth therein) shall have been delivered to Investor;
 
(v) the Company shall have issued, and delivered to its legal counsel to be held
in trust, the stock certificate for the Commitment Fee Shares as described in
the definition of “Commitment Fee Shares” in ARTICLE 1 hereof; and
 
(vi) any Required Approval has been obtained.
 
(d) Investor’s Obligation to Purchase. Subject to the prior satisfaction of all
conditions set forth in this Agreement, following Investor’s receipt of a
validly delivered Tranche Notice, Investor shall be required to purchase from
the Company a number of Tranche Shares equal to the permitted Tranche Share
Amount, in the manner described below.
 
2.3 Tranches to Investor
 
(a) Procedure to Elect a Tranche. Subject to the Maximum Tranche Amount, the
Maximum Placement and the other conditions and limitations set forth in this
Agreement, at any time beginning on the effective date of the Registration
Statement, the Company may, in its sole and absolute discretion, elect to
exercise one or more individual purchases of Preferred Shares under this
Agreement (each a “Tranche”) according to the following procedure.
 
(b) Delivery of Tranche Notice.  The Company shall deliver an irrevocable
written notice (the “Tranche Notice”), in the form attached hereto as Exhibit G,
to Investor stating that the Company shall exercise a Tranche and stating the
number of Preferred Shares which the Company will sell to Investor at the
Tranche Share Price, and the aggregate purchase price for such Tranche (the
“Tranche Purchase Price”).  A Tranche Notice delivered by the Company to
Investor by 4:30 p.m. Eastern time on any Trading Day shall be deemed delivered
on the same day.  A Tranche Notice delivered by the Company to Investor after
4:30 p.m. Eastern time on any Trading Day, or at any time on a non-Trading Day,
shall be deemed delivered on the next Trading Day.  The date that the Tranche
Notice is deemed delivered is the “Tranche Notice Date”.  Each Tranche Notice
shall be delivered via facsimile or electronic mail, with confirming copy by
overnight carrier, in each case to the address set forth in Section 6.2.  Except
for the first Tranche Closing, the Company may not give a Tranche Notice unless
the Tranche Closing for the prior Tranche has occurred or has been cancelled by
the Company pursuant to Section 2.3(g).
 
(c) Warrant.  On each Tranche Notice Date, that portion of the Warrant equal to
135% of the Tranche Amount shall vest and become exercisable, and such vested
portion may be exercised at any time on or after such Tranche Notice Date.  Any
portion of the Warrant that becomes exercisable in connection with the delivery
of the Tranche Notice and is exercised by Investor in accordance with Section
1.1 of the Warrant shall be deemed exercised (i) on the applicable Tranche
Notice Date, if the Company receives the Exercise Delivery Documents from
Investor by 6:30 p.m. Eastern time on the Tranche Notice Date, or (ii) on the
next Trading Day, if the Company receives the Exercise Delivery Documents from
Investor after 6:30 p.m. Eastern Time on the applicable Tranche Notice Date or
on any subsequent date.
 
 
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(d) Conditions Precedent to Right to Deliver a Tranche Notice.  The right of the
Company to deliver a Tranche Notice is subject to the satisfaction (or written
waiver by Investor in its sole discretion), on the date of delivery of such
Tranche Notice, of each of the following conditions:
 
(i) the Common Stock (including without limitation any shares of Common Stock
that may be issued to Investor in payment of the Commitment Fee) shall be listed
for and currently trading on the Trading Market, and to the Company’s knowledge
there is no notice of any suspension or delisting with respect the trading of
the shares of Common Stock on such Trading Market;
 
(ii) the representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects as if made on such
date (except for any representations and warranties that are expressly made as
of a particular date, in which case such representations and warranties shall be
true and correct as of such particular date), and no default shall have occurred
under this Agreement, or any other agreement with Investor or any Affiliate of
Investor, or any other Material Agreement, and the Company shall deliver an
Officer’s Closing Certificate to such effect to Investor, signed by an officer
of the Company;
 
(iii) other than losses incurred in the ordinary course of business, there has
been no Material Adverse Effect on the Company since the Commitment Closing;
 
(iv) the Company is not, and will not be as a result of the applicable Tranche,
in default of this Agreement, any other agreement with Investor or any Affiliate
of Investor, or any other Material Agreement;
 
(v) there is not then in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated in this Agreement or any other
Transaction Document, or requiring any consent or approval which shall not have
been obtained, nor is there any pending or threatened proceeding or
investigation which may have the effect of prohibiting or adversely affecting
any of the transactions contemplated by this Agreement; no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or adopted by any court or governmental authority
of competent jurisdiction that prohibits the transactions contemplated by this
Agreement, and no actions, suits or proceedings shall be in progress, pending
or, to the Company’s knowledge threatened, by any person (other than Investor or
any Affiliate of Investor), that seek to enjoin or prohibit the transactions
contemplated by this Agreement;
 
(vi) all Common Shares shall have been timely delivered at the times provided
for in this Agreement, including all Warrant Shares issuable pursuant to any
Exercise Notice delivered to Company prior to the Tranche Notice Date;
 
(vii) all previously-issued and issuable Warrant Shares and all previously
issued and issuable Commitment Fee Shares (A) are DWAC Shares, are DTC eligible,
and can be immediately converted into electronic form without restriction on
resale, or (B) if the Company is not DWAC eligible, have been issued to Investor
in original certificated form bearing no restrictive legend and have been
previously converted into electronic form without restriction on resale;
 
(viii) Company is in compliance with all requirements to maintain its
then-current listing on the Trading Market;
 
(ix) Company has a current, valid and effective Registration Statement
permitting the lawful resale of all previously-issued and issuable Common Shares
(including without limitation all Warrant Shares issuable upon exercise of the
Warrant delivered in connection with such Tranche and any Commitment Fee
Shares);
 
(x) Company has a sufficient number of duly authorized shares of Common Stock
reserved for issuance in such amount as may be required to fulfill its
obligations pursuant to the Transaction Documents and any outstanding agreements
with Investor and any Affiliate of Investor, including without limitation all
Warrant Shares issuable upon exercise of the Warrant issued in connection with
such Tranche;
 
(xi) Company has provided notice of its delivery of the Tranche Notice to all
signatories of a Lock-Up Agreement as required under the Lock-Up Agreement;
 
(xii) the aggregate number of Warrant Shares issuable upon exercise of the
Warrant on the Tranche Notice Date, when aggregated with all other shares of
Common Stock deemed beneficially owned by Investor and its Affiliates (whether
acquired in connection with the transactions contemplated by the Transaction
Documents or otherwise), would not result in Investor owning more than 9.99% of
all Common Stock outstanding on the Tranche Notice Date, as determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder; and
 
(xiii) for any Tranche Notice delivered after the earliest of (A) the first
Tranche Closing, (B) the six-month anniversary of the Effective Date, or (C) the
date the Registration Statement is declared effective by the SEC, Investor shall
have previously received the Commitment Fee.
 
 
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(e) Documents to be Delivered at Tranche Closing. The Closing of any Tranche and
Investor’s obligations hereunder shall additionally be conditioned upon the
delivery to Investor of each of the following (the “Required Tranche Documents”)
on or before the applicable Tranche Closing Date:
 
(i) a number of Preferred Shares equal to the Tranche Purchase Price divided by
the Tranche Share Price shall have been delivered to Investor or an account
specified by Investor for the Tranche Shares;
 
(ii) the following executed documents:  Opinion, Officer’s Certificate and
Lock-Up Agreements;
 
(iii) a Use of Proceeds Certificate, signed by an officer of the Company, and
setting forth how the Tranche Purchase Price will be applied by the Company;
 
(iv) all Warrant Shares shall have been timely delivered in accordance with any
Exercise Notice delivered to Company prior to the Tranche Closing Date;
 
(v) all documents, instruments and other writings required to be delivered by
the Company to Investor on or before the Tranche Closing Date pursuant to any
provision of this Agreement or in order to implement and effect the transactions
contemplated herein; and
 
(vi) payment of a $5,000.00 non-refundable administrative fee to Investor’s
counsel, by offset against the Tranche Amount, or by wire transfer of
immediately available funds.
 
(f) Mechanics of Tranche Closing.
 
(i) Each of the Company and Investor shall deliver all documents, instruments
and writings required to be delivered by either of them pursuant to Section
2.3(e) of this Agreement at or prior to each Tranche Closing. Subject to such
delivery and the satisfaction of the conditions set forth in Section 2.3(d) as
of the Tranche Closing Date, the closing of the purchase by Investor of
Preferred Shares shall occur by 5:00 p.m. Eastern time, on the date which is ten
(10) Trading Days following (and not counting) the Tranche Notice Date (each a
“Tranche Closing Date”) at the offices of Investor.
 
(ii) If any portion of the Warrant is exercised by Investor on or after the
Tranche Notice Date and prior to or on the Tranche Closing Date (which exercise
shall be effected by Investor sending the Exercise Delivery Documents to the
Company in accordance with Section 1.1 of the Warrant), the Company shall send
Investor an electronic copy of its share issuance instructions to the Transfer
Agent and shall cause the requisite number of Warrant Shares to be credited to
Investor’s account with DTC as DWAC Shares (or, if the Company is not then DWAC
eligible, delivered to Investor in original certificated form bearing no
restrictive legend) by 12:00 p.m. Eastern time on the Trading Day after the date
the Company receives the Exercise Delivery Documents from Investor.  If DWAC
shares are not timely credited pursuant to this Section 2.3(f)(ii), then the
Tranche Closing Date shall be extended by one Trading Day for each Trading Day
that such timely credit of DWAC Shares is not made; provided, that if timely
credit was not made because the Company is not DWAC eligible and has delivered
certificated shares instead of DWAC Shares, then the Tranche Closing Date shall
be extended by one Trading Day for each Trading Day required for Investor to
receive the certificated shares and convert such certificated shares into
electronic form.
 
(iii) On or before each Tranche Closing Date, Investor shall deliver to the
Company, in cash or immediately available funds, the Tranche Purchase Price to
be paid for such Tranche Shares.
 
(iv) The closing (each a “Tranche Closing”) for each Tranche shall occur on the
date that both (i) the Company has delivered to Investor all Required Tranche
Documents, and (ii) Investor has delivered to the Company the Tranche Purchase
Price.
 
(g) Limitation on Investor’s Obligation to Purchase and Company’s Obligation to
Sell.  Notwithstanding anything herein to the contrary, in the event the Closing
Bid Price of the Common Stock during any one or more of the 9 Trading Days
following the Tranche Notice Date is below 75.0%: Investor may, at its option,
and without penalty, decline to purchase the applicable Tranche Shares on the
Tranche Closing Date.  In the event that Investor declines to proceed with the
Tranche, within 10 business days Investor shall return for cancellation, with
all documentation required to effect such cancellation, to the Company (A) all
unexercised Warrants issued in connection with the Tranche Notice, and (B) any
shares of Common Stock then held by Investor as a result of an exercise of the
Warrant issued in connection with the Tranche Notice.
 
 
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2.4 Share Sufficiency
 
On or before the date on which any portion of the Warrant become exercisable,
the Company shall have a sufficient number of duly authorized shares of Common
Stock for issuance in such amount as may be required to fulfill its obligations
pursuant to the Transaction Documents and any outstanding agreements with
Investor and any Affiliate of Investor.
 
2.5 Maximum Placement
 
Investor shall not be obligated to purchase any additional Tranche Shares once
the aggregate Tranche Purchase Price paid by Investor equals the Maximum
Placement.
 
ARTICLE 3
 
TERMINATION
 
3.1 Termination
 
 The Investor may elect to terminate this Agreement and the Company’s right to
initiate subsequent Tranches to Investor under this Agreement (each, a
“Termination”) upon the occurrence of any of the following:
 
(a) if, at any time, either the Company or any director or executive officer of
the Company has engaged in a transaction or conduct related to the Company that
has resulted in (i) a SEC enforcement action, including without limitation such
director or executive officer being sanctioned by the SEC, or (ii) a civil
judgment or criminal conviction for fraud or misrepresentation, or for any other
offense that, if prosecuted criminally, would constitute a felony under
applicable law;
 
(b) on any date after a Delisting Event that lasts for an aggregate of 20
Trading Days during any calendar year;
 
(c) if at any time the Company has filed for and/or is subject to any
bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of
debtors instituted by or against the Company or any Subsidiary of the Company;
 
(d) the Company is in breach or default of any Material Agreement, which breach
or default could have a Material Adverse Effect;
 
(e) the Company is in breach or default of this Agreement, any Transaction
Document, or any agreement with Investor or any Affiliate of Investor;
 
(f) upon the occurrence of a Fundamental Transaction;
 
(g) so long as any Preferred Shares are outstanding, the Company effects or
publicly announces its intention to create a security senior to the Series A
Preferred Stock, or substantially altering the capital structure of the Company
in a manner that materially adversely affects the rights or preferences of the
Series A Preferred Stock; and
 
(h) on the Termination Date.
 
 
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3.2 Company Termination
 
The Company may at any time in its sole discretion terminate (a “Company
Termination”) this Agreement and its right to initiate future Tranches by
providing thirty (30) days advance written notice (“Termination Notice”) to
Investor.
 
3.3 Effect of Termination
 
Except as otherwise provided herein, the termination of this Agreement will have
no effect on any Common Shares, Preferred Shares, Commitment Fee Shares,
Warrant, Warrant Shares, or DWAC Shares previously issued, delivered or
credited, or on any then-existing rights of any holder thereof.  Notwithstanding
any other provision of this Agreement and regardless of whether the first
Tranche has closed, the Commitment Fee is payable despite any termination of
this Agreement and all fees paid to Investor or its counsel are non-refundable.
 
ARTICLE 4
 
REPRESENTATIONS AND WARRANTIES
 
4.1 Representations and Warranties of the Company
 
Except as set forth under the corresponding section of the Disclosure Schedules,
which shall be deemed a part hereof and which shall not contain any material
non-public information, the Company hereby represents and warrants to, and as
applicable covenants with, Investor as of each Closing:
 
(a) Subsidiaries.  All of the direct and indirect subsidiaries of the Company
are set forth on Section 4.1(a) to the Disclosure Schedule.  The Company owns,
directly or indirectly, all of the capital stock or other equity interests of
each Subsidiary, and all of such directly or indirectly owned capital stock or
other equity interests are owned free and clear of any Liens.  All the issued
and outstanding shares of capital stock of each Subsidiary are duly authorized,
validly issued, fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.
 
(b) Organization and Qualification.  Each of the Company and each Subsidiary is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, as applicable, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation or default of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.  Each of the
Company and each Subsidiary is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in a Material Adverse Effect and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
 
(c) Authorization; Enforcement.  The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder or thereunder.  The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby or thereby have been duly authorized by all necessary action
on the part of the Company and no further consent or action is required by the
Company other than the filing of the Certificate of Designations.  Each of the
Transaction Documents has been, or upon delivery will be, duly executed by the
Company and, when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.  Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, by-laws
or other organizational or charter documents.
 
 
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(d) No Conflicts.  The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Securities and the
consummation by the Company of the other transactions contemplated thereby do
not and will not
 
 (i) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, articles of association, bylaws, or
other organizational or charter documents, or
 
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) conflict with or result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected,
or (iv) conflict with or violate the terms of any agreement by which the Company
or any Subsidiary is bound or to which any property or asset of the Company or
any Subsidiary is bound or affected; except in the case of each of clauses (ii)
and (iii), such as could not have or reasonably be expected to result in a
Material Adverse Effect.
 
(e) Filings, Consents and Approvals.  Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than the filing of the Certificate of Designations and required
federal and state securities filings and such filings and approvals as are
required to be made or obtained under the applicable Trading Market rules in
connection with the transactions contemplated hereby, each of which has been, or
(if not yet required to be filed) shall be, timely filed.
 
(f) Issuance of the Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens.  The Company has reserved from its duly authorized capital stock a
number of shares of Common Stock and Preferred Stock for issuance of the
Securities at least equal to the number of Securities which could be issued
pursuant to the terms of the Transaction Documents, based on the
then-anticipated exercise prices of the Warrant.
 
(g) Capitalization.  Other than as set forth in Section 4.1(g) to the Disclosure
Schedule, the capitalization of the Company is as described in the Company’s
most recently filed periodic SEC Report.  No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction
Documents.  Except as a result of the purchase and sale of the Securities or as
set forth in the SEC Reports or on Section 4.1(g) to the Disclosure Schedule,
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or
securities convertible into or exercisable for shares of Common Stock.  The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than Investor)
and will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange, or reset price under such securities. All of the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance and
sale of the Securities.  There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any
of the Company’s stockholders.
 
(h) SEC Reports; Financial Statements.  The Company has filed all required SEC
Reports for the two years preceding the Effective Date (or such shorter period
as the Company was required by law to file such SEC Reports) on a timely
basis.  As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Act and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder, as applicable, and none of the
SEC Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.  The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing.  Such financial statements have been
prepared in accordance with GAAP, except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.
 
 
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(i) Material Changes.  Since the date of the latest audited financial statements
included within the SEC Reports, except as set forth on Section 4(i) to the
Disclosure Schedule, (i) there has been no event, occurrence or development that
has had, or that could reasonably be expected to result in, a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice, and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the SEC, (iii) the Company
has not altered its method of accounting, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company equity
incentive plans as disclosed in the SEC Reports.  The Company does not have
pending before the SEC any request for confidential treatment of information.
 
(j) Litigation.  There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”), which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities, or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect.  Neither the
Company nor any Subsidiary, nor to the knowledge of the Company any director or
officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty.  There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the SEC
involving the Company or any current or former director or officer of the
Company.  The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Act.
 
(k) Labor Relations.  No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company,
which could reasonably be expected to result in a Material Adverse Effect.
 
(l) Compliance.  Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other similar agreement or instrument
to which it is a party or by which it or any of its properties is bound (whether
or not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business, except in each case under clauses (i)-(iii) above as
could not have a Material Adverse Effect.
 
(m) Regulatory Permits.  The Company and each Subsidiary possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
 
(n) Title to Assets.  The Company and each Subsidiary have good and marketable
title in fee simple to all real property owned by them that is material to the
business of the Company and each Subsidiary and good and marketable title in all
personal property owned by them that is material to the business of the Company
and each Subsidiary, in each case free and clear of all Liens, except for Liens
that do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and each Subsidiary and Liens for the payment of federal, state or other
taxes, the payment of which is neither delinquent nor subject to penalties.  Any
real property and facilities held under lease by the Company and each Subsidiary
are held by them under valid, subsisting and enforceable leases of which the
Company and each Subsidiary are in compliance.
 
(o) Patents and Trademarks.  The Company and each Subsidiary have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”).  Neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights of the Company or each Subsidiary.
 
 
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(p) Insurance.  The Company and each Subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
each Subsidiary are engaged, including but not limited to directors and officers
insurance coverage at least equal to the Maximum Placement.  To the best of
Company’s knowledge, such insurance contracts and policies are accurate and
complete.  Neither the Company nor any Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.
 
(q) Transactions With Affiliates and Employees.  Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than 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 knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than (i) for payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) for other employee benefits, including stock option
agreements under any equity incentive plan of the Company.
 
(r) Sarbanes-Oxley; Internal Accounting Controls.  The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002, which are
applicable to it as of the date of the Commitment Closing.  The Company and each
Subsidiary 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 Exchange 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 its 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
periodic report under the Exchange Act, as the case may be, is being
prepared.  The Company’s certifying officers have evaluated the effectiveness of
the Company’s disclosure controls and procedures as of the date prior to the
filing date of the most recently filed periodic report under the Exchange Act
(such date, the “Evaluation Date”).  The Company presented in its most recently
filed periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the Company’s 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 accounting controls or its disclosure controls and procedures or, to
the Company’s knowledge, in other factors that could materially affect the
Company’s internal accounting controls or its disclosure controls and
procedures.
 
(s) Certain Fees.  Except for the payment of the Commitment Fee, no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement.  Investor shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section 4.1(s) that may be due in connection with the
transactions contemplated by this Agreement or the other Transaction Documents.
 
(t) Private Placement. Assuming the accuracy of Investor representations and
warranties set forth in Section 4.2, no registration under the Act is required
for the offer and sale of the Securities by the Company to Investor as
contemplated hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of any Trading Market.
 
(u) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
 
(v) Registration Rights.  No Person (other than Investor pursuant to the
Transaction Documents) has any right to cause the Company to effect the
registration under the Act of any securities of the Company.
 
 
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(w) Listing and Maintenance Requirements.  The Common Stock is registered
pursuant to Section 12 of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the SEC is contemplating terminating
such registration.  Except for the late filing of its Quarterly Report on Form
10-Q for the period ended January 31, 2010, the Company has not, in the 12
months preceding the Effective Date, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
 
(x) Application of Takeover Protections.  The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti takeover provision
under the Company’s Articles of Incorporation (or similar charter documents) or
the laws of its state of incorporation that is or could become applicable to
Investor as a result of Investor and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Securities and Investor’s ownership of
the Securities.
 
(y) Disclosure; Non-Public Information.  Except with respect to the information
that will be, and to the extent that it actually is timely publicly disclosed by
the Company pursuant to Section 2.2(c)(i), and notwithstanding any other
provision in this Agreement or the other Transaction Documents, neither the
Company nor any other Person acting on its behalf has provided Investor or its
agents or counsel with any information that constitutes or might constitute
material, non-public information, including without limitation this Agreement
and the Exhibits, Appendices and Schedules hereto, unless prior thereto Investor
shall have executed a written agreement regarding the confidentiality and use of
such information.  The Company understands and confirms that neither Investor
nor any Affiliate of Investor shall have any duty of trust or confidence that is
owed directly, indirectly, or derivatively to the Company or the shareholders of
the Company or to any other Person who is the source of material non-public
information regarding the Company.  No information contained in the Disclosure
Schedules constitutes material non-public information.  There is no adverse
material information regarding the Company that has not been publicly disclosed
prior to the Effective Date.  The Company understands and confirms that Investor
will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company.  All disclosure provided to Investor
regarding the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, furnished by or on behalf
of the Company with respect to the representations and warranties made herein
are true and correct in all material respects and do 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 light of the circumstances under
which they were made, not misleading.
 
(z) 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 security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the Act or which
could violate any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Trading Market.
 
(aa) Financial Condition.  Based on the financial condition of the Company as of
the date of the Commitment Closing: (i) the fair saleable market value of the
Company’s assets exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities (including known
contingent liabilities) as they mature; (ii) the Company’s assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements, capital
availability thereof and the capital available pursuant to this Agreement; and
(iii) the current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all amounts
on or in respect of its debt when such amounts are required to be paid.  The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt). The Company has no knowledge of any facts or
circumstances, which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the date of the Commitment Closing.  The SEC Reports set
forth as of the dates thereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  Neither the Company nor any Subsidiary is in default with respect
to any Indebtedness.
 
 
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(bb) Tax Status.  The Company and each of its Subsidiaries has made or filed all
federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply.  There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.  The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, statue or local tax.  None of the Company’s
tax returns is presently being audited by any taxing authority.
 
(cc) No General Solicitation or Advertising.  Neither the Company nor, to the
knowledge of the Company, any of its directors or officers (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Securities,
or (ii) made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Securities under the Act or made any “directed selling efforts” as defined in
Rule 902 of Regulation S.
 
(dd) Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
 
(ee) Acknowledgment Regarding Investor’s Purchase of Securities.  The Company
acknowledges and agrees that Investor is acting solely in the capacity of arm’s
length purchaser with respect to this Agreement and the transactions
contemplated hereby.  The Company further acknowledges that Investor is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by Investor or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation and is merely incidental to Investor’s
purchase of the Securities.  The Company further represents to Investor that the
Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.
 
(ff) Accountants.  The Company’s accountants are set forth in the SEC Reports
and such accountants are an independent registered public accounting firm as
required by the Act.
 
(gg) No Disagreements with Accountants and Lawyers.  There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the accountants and lawyers formerly or presently employed by the
Company, and the Company is current with respect to any fees owed to its
accountants and lawyers, except for any past-due amounts that may be owed in the
ordinary course of business.
 
(hh) Registration Statements and Prospectuses.
 
(i) The offer and sale of the Common Shares as contemplated hereby complies with
the requirements of Rule 415 under the Act.
 
(ii) The Company has not, directly or indirectly, used or referred to any “free
writing prospectus” (as defined in Rule 405 under the Act) except in compliance
with Rules 164 and 433 under the Act.
 
(iii) The Company is an “ineligible issuer” (as defined in Rule 405 under the
Act) as of the eligibility determination date for purposes of Rules 164 and 433
under the Act with respect to the offering of the Common Shares contemplated by
any Registration Statement filed or to be filed.
 
(ii) Section 5 Compliance. No representation or warranty or other statement made
by Company in the Transaction Documents contains any untrue statement or omits
to state a material fact necessary to make any of them, in light of the
circumstances in which it was made, not misleading. The Company is not aware of
any facts or circumstances that would cause the transactions contemplated by the
Transaction Documents, when consummated, to violate Section 5 of the Act or
other federal or state securities laws or regulations.
 
 
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4.2 Representations and Warranties of Investor.
 
 Investor hereby represents and warrants as of the Effective Date as follows:
 
(a) Organization; Authority.  Investor is an entity duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, company power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations thereunder.  The execution, delivery and
performance by Investor of the transactions contemplated by this Agreement have
been duly authorized by all necessary company or similar action on the part of
Investor.  Each Transaction Document to which it is a party has been (or will
be) duly executed by Investor, and when delivered by Investor in accordance with
the terms hereof, will constitute the valid and legally binding obligation of
Investor, enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
 
(b) Investor Status.  At the time Investor was offered the Securities, it was,
and at the Effective Date it is an “accredited investor” as defined in Rule
501(a) under the Act.
 
(c) Experience of Investor.  Investor, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.  Investor is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
 
(d) General Solicitation.  Investor is not purchasing the Securities as a result
of any advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.
 
The Company acknowledges and agrees that Investor does not make or has not made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 4.2.
 
ARTICLE 5
 
OTHER AGREEMENTS OF THE PARTIES
 
5.1 Transfer Restrictions
 
(a) The Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other than (i)
pursuant to an effective Registration Statement or Rule 144, (ii) to the
Company, (iii) to an Affiliate of Investor, or (iv) in connection with a pledge
as contemplated in Section 5.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of Luce Forward Hamilton & Scripps
LLP (“Luce Forward”), or other counsel selected by the transferor and reasonably
acceptable to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Act.
 
(b) Except with respect to Securities that are required, pursuant to this
Agreement or the other Transaction Documents, to be issued free of restrictive
legends, Investor agrees to the imprinting, so long as is required by this
Section 5.1 and of the following legend, or substantially similar legend, on any
certificate evidencing Securities other than DWAC Shares:
 
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
 
 
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The Company agrees to cause such legend to be removed immediately upon
effectiveness of a Registration Statement, or when any Common Shares are
eligible for sale under Rule 144 and, if requested by Investor or the transfer
agent, to promptly provide at the Company’s expense a legal opinion of counsel
to the Company confirming that such legend may be removed.  Company further
acknowledges and agrees that Investor may from time to time pledge pursuant to a
bona fide margin agreement with a registered broker-dealer or grant a security
interest in some or all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under the Act and who agrees to
be bound by the provisions of this Agreement and, if required under the terms of
such arrangement, Investor may transfer pledged or secured Securities to the
pledgees or secured parties.  Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith.  Further, no
notice shall be required of such pledge.  At Investor’s reasonable expense, the
Company will execute and deliver such documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities.
 
5.2 Furnishing of Information
 
As long as Investor owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the Effective Date
pursuant to the Exchange Act.  Upon the request of Investor, the Company shall
deliver to Investor a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as Investor owns
Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to Investor and make publicly available in
accordance with Rule 144(c) such information as is required for Investor to sell
the Securities under Rule 144.  The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, all to
the extent required from time to time to enable such Person to sell such
Securities without registration under the Act within the limitation of the
exemptions provided by Rule 144.
 
5.3 Integration
 
The Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Act of the sale of the Securities to
Investor or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market such that it
would require stockholder approval prior to the closing of such other
transaction unless stockholder approval is obtained before the closing of such
subsequent transaction.
 
5.4 Securities Laws Disclosure; Publicity
 
The Company shall timely file a Current Report on Form 8-K as required by this
Agreement, and in the Company’s discretion shall file a press release, in each
case reasonably acceptable to Investor, disclosing the material terms of the
transactions contemplated hereby.  The Company and Investor shall consult with
each other in issuing any press releases with respect to the transactions
contemplated hereby, and neither the Company nor Investor shall issue any such
press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any such press release of Investor, or
without the prior consent of Investor, with respect to any such press release of
the Company, which consent shall not unreasonably be withheld or delayed, except
if such disclosure is required by law or Trading Market regulations, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of Investor, or
include the name of Investor in any filing with the SEC or any regulatory agency
or Trading Market, without the prior written consent of Investor, except (i) as
contained in the Current Report on Form 8-K and press release described above,
(ii) as required by federal securities law in connection with any registration
statement under which the Common Shares are registered, (iii) to the extent such
disclosure is required by law or Trading Market regulations, in which case the
Company shall provide Investor with prior notice of such disclosure, or (iv) to
the extent such disclosure is required in any SEC Report filed by the Company.
 
5.5 Shareholders Rights Plan
 
 No claim will be made or enforced by the Company or, to the knowledge of the
Company, any other Person that Investor is an “Acquiring Person” under any
shareholders rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that Investor could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company
and Investor. The Company shall conduct its business in a manner so that it will
not become subject to the Investment Company Act of 1940, as amended.
 
 
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5.6 Non-Public Information
 
The Company covenants and agrees that neither it nor any other Person acting on
its behalf will provide Investor or its agents or counsel with any information
that the Company believes or reasonably should believe constitutes material
non-public information, unless prior thereto Investor shall have executed a
written agreement regarding the confidentiality and use of such information.  On
and after the Effective Date, neither Investor nor any Affiliate Investor shall
have any duty of trust or confidence that is owed directly, indirectly, or
derivatively, to the Company or the shareholders of the Company, or to any other
Person who is the source of material non-public information regarding the
Company.  The Company understands and confirms that Investor shall be relying on
the foregoing in effecting transactions in securities of the Company.
 
5.7 Reimbursement
 
 If Investor becomes involved in any capacity in any proceeding by or against
any Person who is a stockholder of the Company (except as a result of sales,
pledges, margin sales and similar transactions by Investor to or with any
current stockholder), solely as a result of Investor’s acquisition of the
Securities under this Agreement, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred, or will assume the defense of Investor
in such matter.  The reimbursement obligations of the Company under this Section
5.7 shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of Investor
who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of Investor and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, Investor and any such Affiliate and any such
Person.  The Company also agrees that neither Investor nor any such Affiliates,
partners, directors, agents, employees or controlling persons shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company solely as a result of acquiring the Securities under this
Agreement.
 
5.8 Indemnification of Investor
 
(a) Company Indemnification Obligation.  Subject to the provisions of this
Section 5.8, the Company will indemnify and hold Investor and any Warrant
holder, their Affiliates and attorneys, and each of their directors, officers,
shareholders, partners, employees, agents, and any person who controls Investor
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
(collectively, the “Investor Parties” and each an “Investor Party”), harmless
from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of
investigation (collectively, “Losses”) that any Investor Party may suffer or
incur as a result of or relating to (i) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents, (ii) any action instituted
against any Investor Party, or any of them or their respective Affiliates, by
any stockholder of the Company who is not an Affiliate of an Investor Party,
with respect to any of the transactions contemplated by the Transaction
Documents (unless such action is based upon a breach of Investor’s
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings Investor may have with any such stockholder or any
violations by Investor of state or federal securities laws or any conduct by
Investor which constitutes fraud, gross negligence, willful misconduct or
malfeasance), (iii) any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement (or in a Registration
Statement as amended by any post-effective amendment thereof by the Company) or
arising out of or based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and/or (iv) any untrue statement or alleged untrue
statement of a material fact included in any Prospectus (or any amendments or
supplements to any Prospectus), in any free writing prospectus, in any “issuer
information” (as defined in Rule 433 under the Act) of the Company, or in any
Prospectus together with any combination of one or more of the free writing
prospectuses, if any, or arising out of or based upon any omission or alleged
omission to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
 
(b) Indemnification Procedures.  If any action shall be brought against an
Investor Party in respect of which indemnity may be sought pursuant to this
Agreement, such Investor Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof with counsel of
its own choosing.  The Investor Parties shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the Investor Parties
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel, a
material conflict with respect to the dispute in question on any material issue
between the position of the Company and the position of the Investor Parties
such that it would be inappropriate for one counsel to represent the Company and
the Investor Parties.  The Company will not be liable to the Investor Parties
under this Agreement (i) for any settlement by an Investor Party effected
without the Company’s prior written consent, which shall not be unreasonably
withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
claim, damage or liability is either attributable to Investor’s breach of any of
the representations, warranties, covenants or agreements made by Investor in
this Agreement or in the other Transaction Documents.
 
 
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5.9 Reservation of Securities
 
The Company shall maintain a reserve from its duly authorized shares of Common
Stock for issuance pursuant to the Transaction Documents in such amount as may
be required to fulfill its obligations in full under the Transaction Documents.
 
5.10 Limited Standstill
 
The Company will deliver to Investor on or before each Tranche Closing Date, and
will honor and enforce, and will take reasonable actions to assist Investor in
enforcing, the provisions of, the Lock-Up Agreements with the Company’s
officers, directors and beneficial owners of 10% or more of the Common Stock.
 
5.11 Prospectus Availability and Changes
 
The Company will make available to Investor upon request, and thereafter from
time to time will furnish Investor, as many copies of any Prospectus (or of the
Prospectus as amended or supplemented if the Company shall have made any
amendments or supplements thereto after the effective date of the applicable
Registration Statement) as Investor may request for the purposes contemplated by
the Act; and in case Investor is required to deliver  a prospectus after the
nine-month period referred to in Section 10(a)(3) of the Act in connection with
the sale of the Common Shares, or after the time a post-effective amendment to
the applicable Registration Statement is required pursuant to Item 512(a) of
Regulation S-K under the Act, the Company will prepare, at its expense, promptly
upon request such amendment or amendments to the Registration Statement and the
Prospectus as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act or Item 512(a) of Regulation S-K under the Act, as
the case may be.  The Company will advise Investor promptly of the happening of
any event within the time during which a Prospectus is required to be delivered
under the Act which could require the making of any change in the Prospectus
then being used so that the Prospectus would not include an untrue statement of
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, and to advise Investor promptly if, during such period, it shall
become necessary to amend or supplement any Prospectus to cause such Prospectus
to comply with the requirements of the Act, and in each case, during such time,
to prepare and furnish, at the Company’s expense, to Investor promptly such
amendments or supplements to such Prospectus as may be necessary to reflect any
such change or to effect such compliance.  The Company shall have no obligation
to separately advise Investor of, or deliver copies to Investor of, the SEC
Reports, all of which Investor shall be deemed to have notice of.
 
5.12 Required Approval.  
 
No transactions contemplated under this Agreement or the Transaction Documents
shall be consummated for an amount that would require approval by any Trading
Market or Company stockholders under any approval provisions, rules or
regulations of any Trading Market applicable to the Company, unless and until
such approval is obtained.  Company shall use best efforts to obtain any
required approval as soon as possible.
 
5.13 Activity Restrictions. 
 
 For so long as Investor or any of its Affiliates holds any Preferred Shares,
Commitment Fee Shares, Warrant, Warrant Shares, or DWAC Shares, neither Investor
nor any Affiliate will: (i) vote any shares of Common Stock owned or controlled
by it, solicit any proxies, or seek to advise or influence any Person with
respect to any voting securities of the Company; (ii) engage or participate in
any actions, plans or proposals which relate to or would result in (a) acquiring
additional securities of the Company, alone or together with any other Person,
which would result in beneficially owning or controlling more than 9.99% of the
total outstanding Common Stock or other voting securities of the Company, (b) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving Company or any of its subsidiaries, (c) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries, (d) any change in the present board of directors or management of
the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board, (e) any material
change in the present capitalization or dividend policy of the Company, (f) any
other material change in the Company’s business or corporate structure,
including but not limited to, if the Company is a registered closed-end
investment company, any plans or proposals to make any changes in its investment
policy for which a vote is required by Section 13 of the Investment Company Act
of 1940, (g) changes in the Company’s charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any Person, (h) causing a class of securities of the
Company to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association, (i) a class of equity securities of the Company
becoming eligible for termination of registration pursuant  to Section 12(g)(4)
of the Act, or (j) any action, intention, plan or arrangement similar to any of
those enumerated above; or (iii) request the Company or its directors, officers,
employees, agents or representatives to amend or waive any provision of this
Section 5.13.
 
 
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5.14 Registration Statements and Prospectuses.
 
(a) The Company will use its best efforts to file within 30 (thirty) calendar
days after the Effective Date (or as soon as possible thereafter), to cause to
become effective as soon as possible thereafter, and to remain effective until
all Common Shares have been sold or are Rule 144 Eligible, a Registration
Statement for the resale of all Common Shares issued or  issuable hereunder
(including without limitation all Warrant Shares underlying the Warrant and any
Common Shares that may be issued to Investor in payment of the Commitment
Fee).  Each Registration Statement shall comply when it becomes effective, and,
as amended or supplemented, at the time of any Tranche Notice Date, Tranche
Closing Date, or issuance of any Common Shares, and at all times during which a
prospectus is required by the Act to be delivered in connection with any sale of
Common Shares, will comply, in all material respects, with the requirements of
the Act.
 
(b) Each Registration Statement, as of its respective effective time, will not,
as applicable, contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading.
 
(c) Each Prospectus will comply, as of its date and the date it  will be filed
with the SEC,  and, at the time of any Tranche Notice Date, Tranche Closing
Date, or issuance of any Common Shares, and at all times during which a
prospectus is required by the Act to be delivered in connection with any sale of
Common Shares, will comply, in all material respects, with the requirements of
the Act.
 
(d) At no time during the period that begins on the date a Prospectus is filed
with the SEC and ends at the time a Prospectus is no longer required by the Act
to be delivered in connection with any sale of Common Shares will any such
Prospectus, as then amended or supplemented, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
 
(e) Each Registration Statement will meet, and the offering and sale of the
Common Shares as contemplated hereby will comply with, the requirements of Rule
415 under the Act.
 
(f) The Company will not, directly or indirectly, use or refer to any “free
writing prospectus” (as defined in Rule 405 under the Act) except in compliance
with Rules 164 and 433 under the Act.
 
(g) The Company will be an “ineligible issuer” (as defined in Rule 405 under the
Act) as of the eligibility determination date for purposes of Rules 164 and 433
under the Act with respect to the offering of the Common Shares contemplated by
any Registration Statement that is filed.
 
5.15 Investor Due Diligence. 
 
 Investor shall have the right and opportunity to conduct due diligence, at its
own expense, with respect to any Registration Statement or Prospectus in which
the name of Investor or any Affiliate of Investor appears.
 
5.16 Registration. 
 
 In the event that all Common Shares that Company is required to make available
to Investor, including as Warrant Shares upon the exercise of Warrants, are not,
by the one year anniversary of the Effective Date, made available to Investor as
DWAC Shares without restriction on resale pursuant to (i) an effective
Registration Statement, or (ii) Rule 144 without requiring discharge by payment
in full of any notes given in exchange for any Warrant Shares prior to the sale
thereof or limiting the amount of securities that may be sold, Company shall, at
Investor’s election in Investor’s sole discretion, exercise the Company’s
Redemption Option provided for in Section 6 of the Certificate of Designations
to effectuate the repurchase of any outstanding Preferred Shares.
 
 
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ARTICLE 6
 
MISCELLANEOUS
 
6.1 Fees and Expenses
 
 Except for the $20,000.00 non-refundable document preparation fee previously
paid by the Company to counsel for Investor (which shall cover only the initial
draft of the Transaction Documents and one week of legal fees), the receipt of
which is hereby acknowledged, and the $5,000.00 non-refundable administrative
fee payable to counsel for Investor at each Tranche Closing, or as may be
otherwise provided in this Agreement, each party shall pay the fees and expenses
of its own advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of the Transaction Documents.  The Company
acknowledges and agrees that Luce Forward solely represents Investor, and does
not represent the Company or its interests in connection with the Transaction
Documents or the transactions contemplated thereby.  The Company shall pay all
stamp and other taxes and duties levied in connection with the sale of the
Securities, if any.
 
6.2 Notices
 
Unless a different time of day or method of delivery is set forth in the
Transaction Documents, any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of:  (a) the date of transmission, if
such notice or communication is delivered via facsimile or electronic mail prior
to 5:30 p.m. Eastern time on a Trading Day and an electronic confirmation of
delivery is received by the sender, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered later than 5:30 p.m.
Eastern time or on a day that is not a Trading Day, (c) three Trading Days
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given.  The addresses for such notices and communications are
those set forth following the signature page hereof, or such other address as
may be designated in writing hereafter, in the same manner, by such Person.
 
6.3 Amendments; Waivers
 
No provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and Investor or,
in the case of a waiver, by the party against whom enforcement of any such
waiver is sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right.
 
6.4 Headings
 
The headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof
 
6.5 Successors and Assigns
 
This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.  The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of Investor, which consent shall not be unreasonably withheld or
delayed.  Investor may assign any or all of its rights under this Agreement (a)
to any Affiliate, or (b) to any Person to whom Investor assigns or transfers any
Securities.
 
 
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6.6 No Third-Party Beneficiaries
 
 This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 5.8.
 
6.7 Governing Law; Dispute Resolution
 
All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
regard to the principles of conflicts of law that would require or permit the
application of the laws of any other jurisdiction.  Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.  The parties hereby waive all rights to a trial by jury.  If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses reasonably incurred in connection with the
investigation, preparation and prosecution of such action or proceeding.
 
6.8 Survival
 
The representations and warranties contained herein shall survive the Closing
and the delivery and exercise of the Securities.
 
6.9 Execution
 
This Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by facsimile
transmission or in a PDF by e-mail transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.
 
6.10 Severability
 
If any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
 
6.11 Replacement of Securities
 
 If any certificate or instrument evidencing any Securities is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested.  The
applicants for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the issuance of such
replacement Securities.
 
6.12 Remedies
 
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of Investor and the Company will be
entitled to specific performance under the Transaction Documents.  The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be
adequate.   Neither the Company nor Investor shall be liable for special,
indirect, consequential or punitive damages suffered or alleged to be suffered
by the other party or any third party, whether arising from or related to the
Transaction Documents or otherwise.
 
 
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6.13 Payment Set Aside
 
To the extent that the Company makes a payment or payments to Investor pursuant
to any Transaction Document or Investor enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
 
6.14 Liquidated Damages
 
The Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due and
payable shall have been cancelled.
 
6.15 Time of the Essence
 
 Time is of the essence with respect to all provisions of this Agreement that
specify a time for performance.
 
6.16 Construction
 
.  The parties agree that each of them and/or their respective counsel has
reviewed and had an opportunity to revise the Transaction Documents and,
therefore, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of the Transaction Documents or any amendments hereto. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party.
 
6.17 Entire Agreement
 
.  This Agreement, together with the Exhibits, Appendices and Schedules hereto,
contains the entire agreement and understanding of the parties, and supersedes
all prior and contemporaneous agreements, term sheets, letters, discussions,
communications and understandings, both oral and written, which the parties
acknowledge have been merged into this Agreement.  No party, representative,
attorney or agent has relied upon any collateral contract, agreement, assurance,
promise, understanding or representation not expressly set forth
hereinabove.  The parties hereby expressly waive all rights and remedies, at law
and in equity, directly or indirectly arising out of or relating to, or which
may arise as a result of, any Person’s reliance on any such assurance.
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
 

URBAN BARNS FOODS INC.
 
By: /s/ Daniel Meikleham
Name: Daniel Meikleham
Title:   Chief Financial Officer

SOCIUS SPECIAL SITUATIONS CAPITAL GROUP, LLC
 
By: /s/ Terren Peizer
Name: Terren Peizer
Title:   Managing Director

 
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Addresses for Notice
 

To Company:

Urban Barns Foods Inc.
7170 Glover Road
Milner, British Columbia
V0X 1T0 Canada
Attention: Daniel Meikleham, CFO
Fax No.:  604.888.8048
Email:  daniel_dubai@hotmail.com

with a copy (which shall not constitute notice) to:

Macdonald Tuskey, Corporate and Securities Lawyers
W.L. Macdonald Law Corporation
1210-777 Hornby Street
Vancouver, British Columbia
V6Z 1S4 Canada
Attention: Konrad Malik
Fax No.: (604) 681-4760
Email:  kmalik@wlmlaw.ca
 
 

To Investor:
 
Socius Special Situations Capital Group, LLC
11150 Santa Monica Boulevard, Suite 1500
Los Angeles, California 90025
Fax No.:  (310) 444-5300
Email: info@sociuscg.com
 
with a copy (which shall not constitute notice) to:
 
Luce Forward Hamilton & Scripps LLP
601 South Figueroa Street, Suite 3900
Los Angeles, California 90017
Attention:  John C. Kirkland, Esq.
Fax No.:  (213) 452-8035
Email:  jkirkland@luce.com
 
 
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Exhibit A
 
Form of Warrant
 
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
 
Urban Barns Foods Inc.
 
Warrant To Purchase Common Stock
Warrant No.:
2010-1                                                                                                                                                                                                                                        
                                                                                                      Issuance
Date:   April 13, 2010

Number of Warrant Shares:  27,000,000

Initial Exercise Price:  $0.25 per share

Urban Barns Foods Inc., a Nevada corporation (“Company”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged,
 
Socius CG II, Ltd., a Bermuda exempted company, the holder hereof or its
designees or assigns (“Holder”), is entitled, subject to the terms set forth
herein, to purchase from the Company, at the Exercise Price then in effect, upon
exercise of this Warrant to Purchase Common Stock (including any warrant issued
in exchange, transfer or replacement hereof, the “Warrant”), at any time or
times after issuance of the Warrant and until 11:59 p.m. Eastern time on the
fifth anniversary of the Issuance Date, subject to acceleration pursuant to
Section 3.3 hereof, that number of duly authorized, validly issued, fully paid
and non-assessable shares of Common Stock set forth above and as adjusted herein
(the “Warrant Shares”); provided, however, that this Warrant may only be
exercised, from time to time, for that number of shares of Common Stock with an
Aggregate Exercise Price equal to up to 135% of the cumulative amount of Tranche
Purchase Prices under Tranche Notices delivered prior to or on the date of
exercise.
 
This Warrant is issued pursuant to the Preferred Stock Purchase Agreement dated
 
April 13, 2010, by and among the Company and the investor referred to therein
(the “Purchase Agreement”).  Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in ARTICLE 13 hereof.
 
This Warrant shall consist of and be exercisable in tranches (each, a “Warrant
Tranche”), with a separate tranche being created upon each delivery of a Tranche
Notice under the Purchase Agreement.  Each Warrant Tranche will grant to the
Holder the right, for a five-year period commencing on the applicable Tranche
Notice Date, to exercise the Warrant and purchase up to a number of shares of
Common Stock with an Aggregate Exercise Price equal to 135% of the Tranche
Purchase Price for the applicable Tranche Notice.  Attached to this Warrant is a
schedule (the “Warrant Tranche Schedule”) that sets forth the issuance date, the
number of Warrant Shares, and the Exercise Price for each Warrant Tranche.  The
Warrant Tranche Schedule shall be updated by the Company, with an updated copy
provided to the Holder, promptly following each exercise of this Warrant.  No
portion of this Warrant shall vest or be exercisable except under the Warrant
Tranches.
 
 
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ARTICLE 1
 
EXERCISE OF WARRANT
 
1.1 Mechanics of Exercise.
 
1.1.1 Subject to the terms and conditions hereof, this Warrant may be exercised
by the Holder on any day on or after the Issuance Date, in whole or in part, by
(i) delivery of a written notice to the Company, in the form attached hereto as
Appendix 1 (the “Exercise Notice”), of the Holder’s election to exercise this
Warrant, and (ii) payment to the Company of an amount equal to the applicable
Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the “Aggregate Exercise Price”), with such payment
made, at Investor’s option, (x) in cash or by wire transfer of immediately
available funds, (y) by the issuance and delivery of a recourse promissory note
substantially in the form attached hereto as Appendix 2 (each, a “Recourse
Note”), or (z) if applicable, by cashless exercise pursuant to Section 1.3.
 
1.1.2 The Holder shall not be required to deliver the original Warrant in order
to effect an exercise hereunder.  Execution and delivery of the Exercise Notice
with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares.
 
1.1.3 On the Trading Day on which the Company has received each of the Exercise
Notice and the Aggregate Exercise Price (the “Exercise Delivery Documents”) from
the Holder by 6:30 p.m. Eastern time, or on the next Trading Day if the Exercise
Delivery Documents are received after 6:30 p.m. Eastern time or on a non-Trading
Day (in each case, the “Exercise Delivery Date”), the Company shall transmit (i)
a facsimile acknowledgment of confirmation of receipt of the Exercise Delivery
Documents to the Holder, and (ii) an electronic copy of its share issuance
instructions to the Holder and to the Company’s transfer agent (the “Transfer
Agent”), with such transmissions to comply with the notice provisions contained
in Section 6.2 of the Purchase Agreement, and shall instruct and authorize the
Transfer Agent to credit such aggregate number of freely-tradable Warrant Shares
to which the Holder is entitled to receive upon such exercise to the Holder’s or
its designee’s balance account with The Depository Trust Company (DTC) through
the Fast Automated Securities Transfer (FAST) Program through its Deposit
Withdrawal Agent Commission (DWAC) system, with such credit to occur no later
than 12:00 p.m. Eastern Time on the Trading Day following the Exercise Delivery
Date, time being of the essence; provided, however, that if the Warrant Shares
are not credited as DWAC Shares by 12:00 p.m. Eastern Time on the Trading Day
following the Exercise Delivery Date, then the Tranche Closing Date applicable
to the Exercise Notice shall be extended by one Trading Day for each Trading Day
that timely credit of DWAC Shares is not made.  Notwithstanding the foregoing,
if the Company is not DWAC eligible on the Exercise Delivery Date, then the
Warrant Shares shall be issued in certificated form, free of restrictive legend,
and delivered to Investor or its designee no later than 12:00 p.m. Eastern Time
on the Trading Day following the Exercise Delivery Date, time being of the
essence, and the Tranche Closing Date shall be extended by one Trading Day for
each Trading Day required for Investor to receive the certificated shares and
convert such certificated shares into electronic form.
 
1.1.4 Upon delivery of the Exercise Delivery Documents, the Holder shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date such Warrant Shares are credited to the Holder’s DTC
account.  Any Warrant delivered in connection with a Tranche Notice and
exercised by Holder shall be deemed exercised (i) on the Tranche Notice Date, if
exercised by 6:30 p.m. Eastern time on the Tranche Notice Date, or (ii) on the
next Trading Day, if exercised by Investor after 6:30 p.m. Eastern Time on the
Tranche Notice Date or on any other date, in each case with Holder deemed to be
a holder of record as of such date.
 
1.1.5 If this Warrant is exercised and the number of Warrant Shares represented
by this Warrant is greater than the number of Warrant Shares being acquired upon
such exercise, then the Company shall, as soon as practicable and in no event
later than one Trading Day after such exercise, update the Tranche Exercise
Schedule to reflect the revised number of Warrant Shares for which this Warrant
is then exercisable and deliver a copy of the updated Tranche Exercise Schedule
to the Holder.  No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole number.  The Company shall pay
any and all taxes which may be payable with respect to the issuance and delivery
of Warrant Shares upon exercise of this Warrant.
 
 
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1.2 Adjustments to Exercise Price and Number of Shares.  In addition to other
adjustments specified herein, the Exercise Price of this Warrant and the number
of shares of Common Stock issuable upon exercise shall be adjusted as follows:
 
1.2.1 Exercise Price.  The “Exercise Price” per share of Common Stock underlying
this Warrant, subject to further adjustment as provided herein, shall be as
follows:
 
(i) with respect to the portion of this Warrant issued on the Effective Date and
until the first Tranche Notice Date, the amount per Warrant Share set forth on
the face of this Warrant, which is equal to Closing Bid Price for the Common
Stock on the Trading Day prior to the Effective Date, and (ii) with respect to
the portion of this Warrant that becomes exercisable on any Tranche Notice Date
(including the first Tranche Notice Date), an amount per Warrant Share equal to
the Closing Bid Price of a share of Common Stock on such Tranche Notice Date.
 
1.2.2 Number of Shares.  The number of Warrant Shares underlying this Warrant
and each Warrant Tranche, subject to further adjustment as provided herein,
shall be as follows: (i) with respect to the portion of this Warrant issued on
the Effective Date and until the first Tranche Notice Date, the number of shares
set forth on the face of this Warrant, which is a number of shares of Common
Stock equal to the Maximum Placement multiplied by 135%, with the resulting sum
divided by the Closing Bid Price of a share of Common Stock on the Trading Day
prior to the Effective Date, and (ii) with respect to the portion of this
Warrant issued on any Tranche Notice Date including the first Tranche Notice
Date, a number of shares equal to the Tranche Purchase Price set forth in the
applicable Tranche Notice multiplied by 135%, with the resulting sum divided by
the Closing Bid Price of a share of Common Stock on the Tranche Notice
Date.  For example, if the Tranche Purchase Price is $1,000,000 and the Closing
Bid Price is $0.50, then the number of Warrant Shares underlying that Warrant
Tranche shall be $1,000,000 x 135% = $1,350,000 divided by $0.50 = 2,700,000
shares of Common Stock.  On each Tranche Notice Date, the number of Warrant
Shares underlying the related Warrant Tranche shall vest and become exercisable,
and the aggregate number of Warrant Shares underlying this Warrant that are
currently exercisable shall automatically adjust up or down to account for the
change in the number of Warrant Shares covered by the new Warrant Tranche and
for any Warrant Shares issued upon any prior or simultaneous exercise of this
Warrant.  If at any time the Holder reasonably believes that the number of
Warrant Shares included in the Registration Statement is not sufficient to cover
all exercises under this Warrant, then the Company shall amend such Registration
Statement to include the additional number of Warrant Shares that may be
required to provide such coverage.
 
1.3 Cashless Exercise.  Notwithstanding anything contained herein to the
contrary, if at any time there is not a current, valid and effective
registration statement covering the Warrant Shares that are the subject of the
Exercise Notice (the “Unavailable Warrant Shares”), the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (a “Cashless Exercise”):
 
Net Number = (B-C) x A
                           B
 
For purposes of the foregoing formula:

A = the total number of shares with respect to which this Warrant is then being
exercised.

B = the average of the Closing Bid Prices of the shares of Common Stock (as
reported by Bloomberg) for the five (5) consecutive Trading Days ending on the
date immediately preceding the date of the Exercise Notice.

C = the Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.

 
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1.4 Company’s Failure to Timely Deliver Securities.  If the Company shall fail
for any reason or for no reason to credit to the Holder’s balance account with
DTC, by 12:00 p.m. Eastern time on the Trading Day following the Exercise
Delivery Date, the number of shares of Common Stock to which the Holder is
entitled upon the Holder’s exercise of this Warrant, then, in addition to all
other remedies available to the Holder, the Company shall pay in cash to the
Holder on each day after such Trading Day that the issuance of such shares of
Common Stock is not timely effected an amount equal to 1.5% of the product of
(A) the sum of the number of shares of Common Stock not issued to the Holder on
a timely basis and to which the Holder is entitled and (B) the Closing Bid Price
of the shares of Common Stock on the Trading Day immediately preceding the last
possible date which the Company could have issued such shares of Common Stock to
the Holder without violating Section 1.1.  In addition to the foregoing, if
after the Company’s receipt of an Exercise Notice the Company shall fail to
timely (pursuant to Section 1.1.3 hereof) credit the Holder’s balance account
with DTC for the number of shares of Common Stock to which the Holder is
entitled upon the Holder’s exercise hereunder, and the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of shares of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company, then the
Company shall, within one Trading Day after the Holder’s request and in the
Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to credit such Holder’s balance account with DTC for the
number of Warrant Shares to which the Holder is entitled upon the Holder’s
exercise hereunder and to issue such Warrant Shares shall terminate, or (ii)
promptly honor its obligation to credit such Holder’s balance account with DTC
for the number of Warrant Shares to which the Holder is entitled upon the
Holder’s exercise hereunder and pay cash to the Holder in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock sold by Holder in satisfaction of its obligations, times
(B) the Closing Bid Price on the date of exercise.
 
1.5 Exercise Limitation.  Notwithstanding any other provision, at no time may
the Holder (a) exercise this Warrant such that the number of Warrant Shares to
be received pursuant to such exercise exceeds 135.0% of the aggregate of all
Tranche Purchase Prices under and in connection with all Tranche Notices
delivered pursuant to the Purchase Agreement prior to the date of exercise; or
(b) exercise this Warrant such that the number of Warrant Shares to be received
pursuant to such exercise, aggregated with all other shares of Common Stock then
owned, or deemed beneficially owned, by the Holder and its affiliates, would
result in the Holder and its affiliates owning more than 9.99% of all of such
Common Stock as would be outstanding on the date of exercise, as determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder.  In addition, as of any date, the aggregate number of
shares of Common Stock into which this Warrant is exercisable within 61 days,
together with all other shares of Common Stock then beneficially owned (as such
term is defined in Rule 13(d) under the Exchange Act) by Holder and its
affiliates, shall not exceed 9.99% of the total outstanding shares of Common
Stock as of such date.
 
1.6 Activity Restrictions.  For so long as Holder or any of its affiliates holds
this Warrant or any Warrant Shares, neither Holder nor any affiliate will:  (i)
vote any shares of Common Stock owned or controlled by it, solicit any proxies,
or seek to advise or influence any Person with respect to any voting securities
of the Company; (ii) engage or participate in any actions, plans or proposals
which relate to or would result in (a) acquiring additional securities of the
Company, alone or together with any other Person, which would result in
beneficially owning or controlling more than 9.99% of the total outstanding
Common Stock or other voting securities of the Company, (b) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving Company or any of its subsidiaries, (c) a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries, (d) any
change in the present board of directors or management of the Company, including
any plans or proposals to change the number or term of directors or to fill any
existing vacancies on the board, (e) any material change in the present
capitalization or dividend policy of the Company, (f) any other material change
in the Company’s business or corporate structure, including but not limited to,
if the Company is a registered closed-end investment company, any plans or
proposals to make any changes in its investment policy for which a vote is
required by Section 13 of the Investment Company Act of 1940, (g) changes in the
Company’s charter, bylaws or instruments corresponding thereto or other actions
which may impede the acquisition of control of the Company by any Person, (h)
causing a class of securities of the Company to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association, (i) a class of
equity securities of the Company becoming eligible for termination of
registration pursuant  to Section 12(g)(4) of the Act, or (j) any action,
intention, plan or arrangement similar to any of those enumerated above; or
(iii) request the Company or its directors, officers, employees, agents or
representatives to amend or waive any provision of this Section 1.6.
 
1.7 Disputes.  In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are not disputed
and resolve such dispute in accordance with Section 12.
 
1.8 Insufficient Authorized Shares.  If at any time while any portion of this
Warrant remains outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of this Warrant at least a number of shares
of Common Stock equal to 110% of the number of shares of Common Stock as shall
from time to time be necessary to effect the exercise of the portion of the
Warrant then outstanding (the “Required Reserve Amount”) (an “Authorized Share
Failure”), then the Company shall immediately take all action necessary to
increase the Company’s authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for the portion of
the Warrant then outstanding.  Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than 90 days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of authorized
shares of Common Stock.  In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its best efforts
to solicit its stockholders’ approval of such increase in authorized shares of
Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.
 
 
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ARTICLE 2
 
ADJUSTMENT UPON SUBDIVISION OR COMBINATION OF COMMON STOCK
 
If the Company at any time on or after the Issuance Date subdivides (by any
stock split, stock dividend, recapitalization or otherwise) one or more classes
of its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced and the number of Warrant Shares will be proportionately
increased.  If the Company at any time on or after the Issuance Date combines
(by combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately
decreased.  Any adjustment under this ARTICLE 2 shall become effective at the
close of business on the date the subdivision or combination becomes effective.
 
ARTICLE 3
 
PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS
 
3.1 Purchase Rights.  In addition to any adjustments pursuant to ARTICLE 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) immediately before
the date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
 
3.2 Subsequent Equity Sales. In addition to any adjustments made pursuant to
ARTICLE 2 above, if the Company or any Subsidiary thereof, as applicable, at any
time while this Warrant is outstanding, shall sell or grant any option to
purchase, or sell or grant any right to reprice, or otherwise dispose of or
issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than the
then Exercise Price (such lower price, the “Base Share Price” and such
issuances, collectively, a “Dilutive Issuance”), then the Exercise Price shall
be reduced and only reduced to equal the Base Share Price and the number of
Warrant Shares issuable hereunder shall be increased such that the aggregate
Exercise Price payable hereunder, after taking into account the decrease in the
Exercise Price, shall be equal to the aggregate Exercise Price prior to such
adjustment.  Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued.  If the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which are issued
in connection with such issuance, be entitled to receive shares of Common Stock
at an effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price on
such date of the Dilutive Issuance.  Notwithstanding the foregoing, no
adjustments shall be made, paid or issued under this Section 3.2 in respect of
an Exempt Issuance, subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of the Purchase Agreement. The Company shall
notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalents subject to this Section
3.2, indicating therein the applicable issuance price, or applicable reset
price, exchange price, conversion price and other pricing terms (such notice the
“Dilutive Issuance Notice”).  For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3.2, upon
the occurrence of any Dilutive Issuance, after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder accurately refers to the
Base Share Price in the Notice of Exercise.
 
 
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3.3 Fundamental Transactions.  The Company shall not enter into or be party to a
Fundamental Transaction unless the Successor Entity assumes in writing all of
the obligations of the Company under this Warrant in accordance with the
provisions of this Section 3.3 pursuant to written agreements in form and
substance satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each Holder of this Warrant in exchange for such Warrant a security of the
Successor Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant, including, without limitation, an adjusted
exercise price equal to the value for the shares of Common Stock reflected by
the terms of such Fundamental Transaction, and exercisable for a corresponding
number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and satisfactory to the Required Holders.  Upon the occurrence of
any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein.  Upon consummation of the Fundamental Transaction, the Successor
Entity shall deliver to the Holder confirmation that there shall be issued upon
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property) purchasable upon the exercise of this Warrant
prior to such Fundamental Transaction, such shares of stock, securities, cash,
assets or any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had this Warrant been converted
immediately prior to such Fundamental Transaction, as adjusted in accordance
with the provisions of this Warrant.  In addition to and not in substitution for
any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon an
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities,
cash, assets or other property) purchasable upon the exercise of this Warrant
prior to such Fundamental Transaction, such shares of stock, securities, cash,
assets or any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had this Warrant been exercised
immediately prior to such Fundamental Transaction; provided, however, that in
the event the Fundamental Transaction involves the issuance of cash or freely
tradable securities by an issuer listed on the New York Stock Exchange or the
Nasdaq Stock Market, then the ability to exercise this Warrant shall expire on
the consummation of that Fundamental Transaction.  Provision made pursuant to
the preceding sentence shall be in a form and substance reasonably satisfactory
to the Required Holders.  The provisions of this Section 3.3  shall apply
similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise of
this Warrant.
 
3.4 Purchase of Warrant.  Notwithstanding the foregoing Section 3.3, in the
event of a Fundamental Transaction other than one in which the Successor Entity
is a Public Successor Entity that assumes this Warrant such that this Warrant
shall be exercisable for the publicly traded common stock of such Public
Successor Entity, at the request of the Holder delivered before the 90th day
after the effective date of such Fundamental Transaction, the Company (or the
Successor Entity) shall purchase this Warrant from the Holder by paying to the
Holder, within five (5) Trading Days after such request (or, if later, on the
effective date of the Fundamental Transaction), cash in an amount equal to the
value of the remaining unexercised portion of this Warrant on the date of such
consummation, which value shall be determined by use of the Black Scholes Option
Pricing Model using a volatility equal to the 100 day average historical price
volatility prior to the date of the public announcement of such Fundamental
Transaction.
 
ARTICLE 4
 
NONCIRCUMVENTION
 
The Company hereby covenants and agrees that the Company will not, by amendment
of its certificate or articles of incorporation, articles of association,
bylaws, or any other organization documents, or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, and
will at all times in good faith carry out all the provisions of this Warrant and
take all action as may be required to protect the rights of the Holder.  Without
limiting the generality of the foregoing, the Company (i) shall not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, (ii) shall take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, and (iii) shall, so long as any portion of this
Warrant remains outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued shares of Common Stock, solely for
the purpose of effecting the exercise of this Warrant, 110% of the number of
shares of Common Stock as shall from time to time be necessary to effect the
exercise of this Warrant then outstanding (without regard to any limitations on
exercise).
 
 
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ARTICLE 5
 
WARRANT HOLDER NOT DEEMED A STOCKHOLDER
 
Except as otherwise specifically provided herein, the Holder, solely in such
Person’s capacity as a holder of this Warrant, shall not be entitled to vote or
receive dividends or be deemed the holder of share capital of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder, solely in such Person’s capacity as the Holder of this Warrant,
any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
which such Person is then entitled to receive upon the due exercise of this
Warrant.  In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the
Company.  Notwithstanding this ARTICLE 5, the Company shall provide the Holder
with copies of the same notices and other information given to the stockholders
of the Company generally, contemporaneously with the giving thereof to the
stockholders.
 
ARTICLE 6
 
REISSUANCE OF WARRANTS
 
6.1 Transfer of Warrant.  If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith
issue and deliver upon the order of the Holder a new Warrant (in accordance with
Section 6.4), registered as the Holder may request, representing the right to
purchase the number of Warrant Shares being transferred by the Holder and, if
less then the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 6.4) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.
 
6.2 Lost, Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this Warrant,
the Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 6.4) representing the right to purchase the Warrant Shares then
underlying this Warrant.
 
6.3 Exchangeable for Multiple Warrant.  This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Warrant or Warrants (in accordance with Section 6.4) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrant for fractional shares of
Common Stock shall be given.
 
6.4 Issuance of New Warrant.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 6.1 or
Section 6.3, the Warrant Shares designated by the Holder which, when added to
the number of shares of Common Stock underlying the other new Warrant issued in
connection with such issuance, does not exceed the number of Warrant Shares then
underlying this Warrant), (iii) shall have an issuance date, as indicated on the
face of such new Warrant which is the same as the Issuance Date, and (iv) shall
have the same rights and conditions as this Warrant.
 
ARTICLE 7
 
NOTICES
 
Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with Section 6.2 of
the Purchase Agreement.  The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Warrant, including in
reasonable detail a description of such action and the reason
therefore.  Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least fifteen days prior to the date
on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the shares of Common Stock, (B) with respect to
any grants, issuances or sales of any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property to holders of shares
of Common Stock as such or (C) for determining rights to vote with respect to
any Fundamental Transaction, dissolution or liquidation, provided in each case
that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.
 
 
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ARTICLE 8
 
AMENDMENT AND WAIVER
 
Except as otherwise provided herein, the provisions of this Warrant may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Required Holders; provided that except as
set forth in this Warrant no such action may increase the exercise price of any
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any Warrant without the written consent of the Holder.  No such
amendment shall be effective to the extent that it applies to less than all of
the holders of this Warrant.
 
ARTICLE 9
 
GOVERNING LAW
 
This Warrant shall be governed by and construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws of the State
of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.
 
ARTICLE 10
 
CONSTRUCTION; HEADINGS
 
This Warrant shall be deemed to be jointly drafted by the Company and the Holder
and shall not be construed against any person as the drafter hereof.  The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.
 
ARTICLE 11
 
DISPUTE RESOLUTION
 
In the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within 2
Trading Days of receipt of the Exercise Notice giving rise to such dispute, as
the case may be, to the Holder.  If the Holder and the Company are unable to
agree upon such determination or calculation of the Exercise Price or the
Warrant Shares within three Trading Days of such disputed determination or
arithmetic calculation being submitted to the Holder, then the Company shall,
within 2 Trading Days submit via facsimile (a) the disputed determination of the
Exercise Price or arithmetic calculation to an independent, reputable investment
bank or independent registered public accounting firm selected by Holder subject
to Company’s approval, which may not be unreasonably withheld or delayed, or (b)
the disputed arithmetic calculation of the Warrant Shares to the Company’s
independent registered public accounting firm.  The Company shall cause at its
expense the investment bank or the accountant, as the case may be, to perform
the determinations or calculations and notify the Company and the Holder of the
results no later than 3 Trading Days from the time it receives the disputed
determinations or calculations.  Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.
 
 
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ARTICLE 12
 
REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF
 
The remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder right to pursue actual damages for
any failure by the Company to comply with the terms of this Warrant.  The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate.  The Company therefore agrees that, in the event of any such
breach or threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.
 
ARTICLE 13
 
DEFINITIONS
 
For purposes of this Warrant, in addition to the terms defined elsewhere herein,
the following terms shall have the following meanings:
 
13.1 “Bloomberg” means Bloomberg Financial Markets.
 
13.2 “Closing Bid Price” means, for any security as of any date, the last
closing bid price for such security on the Trading Market, as reported by
Bloomberg, or, if the Trading Market begins to operate on an extended hours
basis and does not designate the closing bid price, then the last bid price of
such security prior to 4:00 p.m., Eastern time, as reported by Bloomberg, or, if
the Trading Market is not the principal securities exchange or trading market
for such security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the “pink sheets” by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.).  If the Closing Bid Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Bid Price of such security on such date shall be the fair
market value as mutually determined by the Company and Holder.  If the Company
and Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to ARTICLE 11.  All such determinations
to be appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable calculation
period.
 
13.3 “Common Stock” means (i) the Company’s shares of Common Stock, par value
$0.001 per share, and (ii) any share capital into which such Common Stock shall
have been changed or any share capital resulting from a reclassification of such
Common Stock.
 
13.4 “Common Stock Deemed Outstanding” means, at any given time, the number of
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Section 3.1 hereof
regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock owned or held
by or for the account of the Company or issuable upon exercise of this Warrant.
 
13.5 “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
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
 
 
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13.6 “Convertible Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
shares of Common Stock.
 
13.7 “DWAC Shares” means, except as expressly stated otherwise herein, all
Warrant Shares issued or issuable to Holder or any Affiliate, successor or
assign of Holder pursuant to this Warrant, all of which shall be (a) issued in
electronic form, (b) freely tradable and without restriction on resale, and (c)
timely credited by Company to the specified Deposit/Withdrawal at Custodian
(DWAC) account with DTC under its Fast Automated Securities Transfer (FAST)
Program or any similar program hereafter adopted by DTC performing substantially
the same function, in accordance with instructions issued to and countersigned
by the Transfer Agent of the Company.
 
13.8 “Eligible Market” means the Trading Market, The New York Stock Exchange,
Inc., The NASDAQ Global Select Market, The NASDAQ Global Market, The NASDAQ
Capital Market, the NYSE Amex or the OTC Bulletin Board, but does not include
the Pink Sheets.
 
13.9 “Exempt Issuance” means the issuance of (a) shares of Common Stock or
options to employees, officers, or directors of the Company pursuant to any
stock or option plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the members of a
committee of non-employee directors established for such purpose, (b) securities
upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities or to decrease the
exercise price, exchange price or conversion price of such securities (except as
a result of anti-dilution provisions therein), and (c) securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equity holders of a Person) which is, itself or
through its subsidiaries, an operating company or an asset in a business
synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is
investing in securities.
 
13.10 “Fundamental Transaction” has the meaning set forth in the Purchase
Agreement.
 
13.11 “Maximum Placement” has the meaning set forth in the Purchase Agreement.
 
13.12 “Options” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.
 
13.13 “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person and whose common stock or equivalent equity
security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest
public market capitalization as of the date of consummation of the Fundamental
Transaction.
 
13.14 “Person” means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization, any
other entity and a government or any department or agency thereof.
 
13.15 “Public Successor Entity” means a Successor Entity that is a publicly
traded corporation whose stock is quoted or listed for trading on an Eligible
Market.
 
13.16 “Required Holders” means the Holders of this Warrant representing at least
a majority of shares of Common Stock underlying this Warrant as then
outstanding.
 
 
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13.17 “Successor Entity” means the Person (or, if so elected by the Required
Holders, the Parent Entity) formed by, resulting from or surviving any
Fundamental Transaction or the Person (or, if so elected by the Required
Holders, the Parent Entity) with which such Fundamental Transaction shall have
been entered into.
 
13.18 “Trading Day” means any day on which the Common Stock is traded on an
Eligible Market; provided that it shall not include any day on which the Common
Stock (a) is suspended from trading, or (b) is scheduled to trade on such
exchange or market for less than 5 hours.
 
13.19 “Trading Market” means the OTC Bulletin Board, the NASDAQ Capital Market,
the NASDAQ Global Market, the NASDAQ Global Select Market, the NYSE Amex, or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock, but does not include the Pink Sheets
inter-dealer electronic quotation and trading system.
 
13.20 “Tranche Closing Date” has the meaning set forth in the Purchase
Agreement.
 
13.21 “Tranche Notice” has the meaning set forth in the Purchase Agreement.
 
13.22 “Tranche Notice Date” has the meaning set forth in the Purchase Agreement.
 
13.23 “Tranche Purchase Price” has the meaning set forth in the Purchase
Agreement.
 
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set out above.
 
  URBAN BARNS FOODS INC.

  By: /s/ Daniel Meikleham
  Name: Daniel Meikleham
  Title:   Chief Financial Officer

 
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Warrant Exercise Schedule
 
Exercise Date
Number of Warrant Shares
Exercise Price Per Share
Aggregate Exercise Price
Dollar Amount Remaining
         

 
 
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APPENDIX 1
 
EXERCISE NOTICE
 
URBAN BARNS FOODS INC.
 
The undersigned hereby exercises the right to purchase ________________ shares
of Common Stock (“Warrant Shares”) of Urban Barns Foods Inc., a Nevada
corporation (“Company”), evidenced by the attached Warrant to Purchase Common
Stock (“Warrant”).  Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Warrant.  The Holder intends
that payment of the Exercise Price shall be made as:
 
___ Cash Exercise with respect to ____________ Warrant Shares

___ Cashless Exercise with respect to ____________ Warrant Shares

___ Recourse Note Exercise with respect to ____________ Warrant Shares

           Please issue

___ A certificate or certificates representing said shares of Common Stock in
the namespecified below

            ___Said shares in electronic form to the Deposit/Withdrawal at
Custodian (DWAC) account with Depository Trust Company (DTC) specified below.
 
 
____________________                                                     
Holder Name

By: __________________________                                                     
Name: _______________________                                                     
Title: _________________________                                                    

 
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ACKNOWLEDGMENT
 
The Company hereby acknowledges the foregoing Exercise Notice and hereby directs
[_________] to issue the above indicated number of shares of Common Stock as
specified above, in accordance with the Transfer Agent Instructions dated
[_________] from the Company, and acknowledged and agreed to by the transfer
agent.
 
URBAN BARNS FOODS INC.
 
By:_______________________
Name: ____________________
Title:______________________
 
 
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APPENDIX 2
 
FORM OF NOTE
 
SECURED PROMISSORY NOTE

$[_____________]                                                                                                                                                                                                                                                                                                                                                Date:           [________],
20[__]
 
FOR VALUE RECEIVED, [_____________] (“Borrower”) promises to pay to the order of
Urban Barns Foods Inc. (“Lender”), at [________], or at such other place as
Lender may from time to time designate in writing, the principal sum of
$[________], with interest, as follows:

1. Interest.  The principal balance outstanding from time to time under this
Secured Promissory Note (this “Note”), shall bear interest from and after the
date hereof at the rate of 2.0% per year.  Interest shall be calculated on a
simple interest basis and the number of days elapsed during the period for which
interest is being calculated.  Payments of interest will be due on each annual
anniversary of the date of this Note; provided that Borrower will not be in
default hereunder for failure to make any annual interest payment when due
(other than on the Maturity Date) and the amount of interest not paid when due
shall be added to the principal balance of this Note and such amount will
thereafter accrue interest at the rate set forth above.
 
2. Payments.  If not sooner paid, the entire unpaid principal balance, interest
thereon and any other charges due and payable under this Note shall be due and
payable on the fourth anniversary of the date of this Note (“Maturity
Date”); provided, however, that no payments on this Note will be due or payable
so long as either (a) Lender is in default under any preferred stock purchase
agreement for Series A Preferred Stock with Borrower or any Warrant issued
pursuant thereto, any loan agreement or other material agreement entered into
with Borrower, or (b) there are any shares of Series A Preferred Stock of Lender
issued or outstanding (each, a “Non-Payment Event”).  Upon the termination or
cure of any Non-Payment Event, Borrower’s obligation to pay amounts outstanding
on this Note will immediately be reinstated.  Borrower shall have the right to
prepay all or any part of the principal balance of this Note at any time without
penalty or premium.  In the event that Lender redeems all or a portion of any
shares of Series A Preferred Stock then held by Borrower, the proceeds of any
such redemption will be applied by Borrower to pay down the accrued interest and
outstanding principal of this Note and Lender will be permitted to offset the
full amount of such proceeds against amounts outstanding under this Note.  All
payments on this Note shall be first applied to interest, then to reduce the
outstanding principal balance hereof.
 
3. Full Recourse Note.  THIS IS A FULL RECOURSE PROMISSORY NOTE.  Accordingly,
notwithstanding that Borrower’s obligations under this Note are secured by the
Collateral, in the event of a material default hereunder, Lender shall have full
recourse to all the other assets of Borrower.  Moreover, Lender shall not be
required to proceed against or exhaust any Collateral, or to pursue any
Collateral in any particular order, before Lender pursues any other remedies
against Borrower or against any of Borrower’s assets.
 
4. Security
 
a. Pledge.  As security for the due and prompt payment and performance of all
payment obligations under this Note and any modifications, replacements and
extensions hereof (collectively, “Secured Obligations”), Borrower hereby pledges
and grants a security interest to Lender in all of Borrower’s right, title, and
interest in and to all of the following, now owned or hereafter acquired or
arising (together the “Collateral”):
 
i. Freely tradable shares of common stock, preferred stock, bonds, notes and/or
debentures (collectively, “Pledged Securities”) with a fair market value on the
date hereof at least equal to the principal amount of this Note, based upon the
trading price of such securities on the OTC Bulletin Board, NASDAQ Capital
Market, NASDAQ Global Market, NASDAQ Global Select Market, NYSE Amex, or New
York Stock Exchange;
 
ii. all rights of Borrower with respect to or arising out of the Pledged
Securities, including voting rights, and all equity and debt securities and
other property distributed or distributable with respect thereto as a result of
merger, consolidation, dissolution, reorganization, recapitalization, stock
split, stock dividend, reclassification, exchange, redemption, or other change
in capital structure; and
 
iii. all proceeds, replacements, substitutions, accessions and increases in any
of the Collateral.
 
 
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b. Replacement Securities.  So long as any Secured Obligations remain
outstanding, in the event that Borrower sells or disposes of any Pledged
Securities, Borrower shall promptly provide replacement securities of equal or
greater value than such Pledged Securities.
 
c. Rights With Respect to Distributions.  So long as no default shall have
occurred and be continuing under this Note, Borrower shall be entitled to
receive any and all dividends and distributions made with respect to the Pledged
Securities and any other Collateral.  However, upon the occurrence and during
the continuance of any default, Lender shall have the sole right (unless
otherwise agreed by Lender) to receive and retain dividends and distributions
and apply them to the outstanding balance of this Note or hold them as
Collateral, at Lender’s election.
 
d. Voting Rights.  So long as no default shall have occurred and be continuing
under this Note, Borrower shall be entitled to exercise all voting rights
pertaining to the Pledged Securities and any other Collateral.  However, upon
the occurrence and during the continuance of any default, all rights of Borrower
to exercise the voting rights that Borrower would otherwise be entitled to
exercise with respect to the Collateral shall cease and (unless otherwise agreed
by Lender) all such rights shall thereupon become vested in Lender, which shall
thereupon have the sole right to exercise such rights.
 
e. Financing Statement; Further Assurances.  Borrower agrees, concurrently with
executing this Note, that Lender may file a UCC-1 financing statement relating
to the Collateral in favor of Lender, and any similar financing statements in
any jurisdiction in which Lender reasonably determines such filing to be
necessary.  Borrower further agrees that at any time and from time to time
Borrower shall promptly execute and deliver all further instruments and
documents that Lender may request in order to perfect and protect the security
interest granted hereby, or to enable Lender to exercise and enforce its rights
and remedies with respect to any Collateral following an event of default.  In
addition, following an event of default, Borrower shall deliver the Collateral,
including original certificates or other instruments representing the Pledged
Securities, to Lender to hold as secured party, and Borrower shall, if requested
by Lender, execute a securities account control agreement.
 
f. Powers of Lender.  Borrower hereby appoints Lender as Borrower’s true and
lawful attorney-in-fact to perform any and all of the following acts, which
power is coupled with an interest, is irrevocable until the Secured Obligations
are paid and performed in full, and may be exercised from time to time by Lender
in its discretion:  To take any action and to execute any instrument which
Lender may deem reasonably necessary or desirable to accomplish the purposes of
this Section 4(f) and, more broadly, this Note including, without
limitation:  (i) to exercise voting and consent rights with respect to
Collateral in accordance with this Note, (ii) during the continuance of any
default hereunder, to receive, endorse and collect all instruments or other
forms of payment made payable to Borrower representing any dividend, interest
payment or other distribution in respect of the Collateral or any part thereof
and to give full discharge for the same, when and to the extent permitted by
this Note, (iii) to perform or cause the performance of any obligation of
Borrower hereunder in Borrower’s name or otherwise, (iv) during the continuance
of any default hereunder, to liquidate any Collateral pledged to Lender
hereunder and to apply proceeds thereof to the payment of the Secured
Obligations or to place such proceeds into a cash collateral account or to
transfer the Collateral into the name of Lender, all at Lender’s sole
discretion, (v)  to enter into any extension, reorganization or other agreement
relating to or affecting the Collateral, and, in connection therewith, to
deposit or surrender control of the Collateral, (vi) to accept other property in
exchange for the Collateral, (vii) to make any compromise or settlement Lender
deems desirable or proper, and (viii) to execute on Borrower’s behalf and in
Borrower’s name any documents required in order to give Lender a continuing
first lien upon the Collateral or any part thereof.
 
5. Additional Terms
 
a. No Waiver.  The acceptance by Lender of payment of a portion of any
installment when due or an entire installment but after it is due shall neither
cure nor excuse the default caused by the failure of Borrower timely to pay the
whole of such installment and shall not constitute a waiver of Lender’s right to
require full payment when due of any future or succeeding installments.
 
b. Default.  Any one or more of the following shall constitute a “default” under
this Note:  (i) a default in the payment when due of any amount hereunder, (ii)
Borrower’s refusal to perform any material term, provision or covenant under
this Note, (iii) the commencement of any liquidation, receivership, bankruptcy,
assignment for the benefit of creditors or other debtor-relief proceeding by or
against Borrower, (iv) the transfer by Borrower of any Pledged Securities
without being replaced by Pledged Securities in accordance with Section 4(b),
and (iv) the levying of any attachment, execution or other process against
Borrower, the Collateral or any material portion thereof.
 
c. Default Rights
 
i. Upon the occurrence of any payment default Lender may, at its election,
declare the entire balance of principal and interest under this Note immediately
due and payable.  A delay by Lender in exercising any right of acceleration
after a default shall not constitute a waiver of the default or the right of
acceleration or any other right or remedy for such default.  The failure by
Lender to exercise any right of acceleration as a result of a default shall not
constitute a waiver of the right of acceleration or any other right or remedy
with respect to any other default, whenever occurring.  
 
ii. Further, upon the occurrence of any material non-monetary default, following
30 days notice from Lender to Borrower specifying the default and demanded
manner of cure for any non-monetary default, Lender shall thereupon and
thereafter have any and all of the rights and remedies to which a secured party
is entitled after a default under the applicable Uniform Commercial Code, as
then in effect.  In addition to Lender’s other rights and remedies, Borrower
agrees that, upon the occurrence of default, Lender may in its sole discretion
do or cause to be done any one or more of the following:
 
 
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(a) Proceed to realize upon the Collateral or any portion thereof as provided by
law, and without liability for any diminution in price which may have occurred,
sell the Collateral or any part thereof, in such manner, whether at any public
or private sale, and whether in one lot as an entirety, or in separate portions,
and for such price and other terms and conditions as is commercially reasonable
given the nature of the Collateral.
 
(b) If notice to Borrower is required, give written notice to Borrower at least
ten days before the date of sale of the Collateral or any portion thereof.
 
(c) Transfer all or any part of the Collateral into Lender’s name or in the name
of its nominee or nominees.
 
(d) Vote all or any part of the Collateral (whether or not transferred into the
name of Lender ) and give all consents, waivers and ratifications in respect of
the Collateral and otherwise act with respect thereto, as though Lender were the
outright owner thereof.
 
iii. Borrower acknowledges that all or part of foreclosure of the Collateral may
be restricted by state or federal securities laws, Lender may be unable to
effect a public sale of all or part of the Collateral, that a public sale is or
may be impractical and inappropriate and that, in the event of such
restrictions, Lender thus may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire the Collateral for their own account, for investment
and not with a view to its distribution or resale.  Borrower agrees that if
reasonably necessary Lender may resort to one or more sales to a single
purchaser or a restricted or limited group of purchasers.  Lender shall not be
obligated to make any sale or other disposition, unless the terms thereof shall
be satisfactory to it.
 
iv. If, in the opinion of Lender based upon written advice of counsel, any
consent, approval or authorization of any federal, state or other governmental
agency or authority should be necessary to effectuate any sale or other
disposition of any Collateral, Borrower shall execute all such applications and
other instruments as may reasonably be required in connection with securing any
such consent, approval or authorization, and will otherwise use its commercially
reasonable best efforts to secure the same.
 
v. The rights, privileges, powers and remedies of Lender shall be cumulative,
and no single or partial exercise of any of them shall preclude the further or
other exercise of any of them.  Any waiver, permit, consent or approval of any
kind by Lender of any default hereunder, or any such waiver of any provisions or
conditions hereof, must be in writing and shall be effective only to the extent
set forth in writing.  Any proceeds of any disposition of the Collateral, or any
part thereof, may be applied by Lender to the payment of expenses incurred by
Lender in connection with the foregoing, and the balance of such proceeds shall
be applied by Lender toward the payment of the Secured Obligations.
 
d. No Oral Waivers or Modifications.  No provision of this Note may be waived or
modified orally, but only in a writing signed by Lender and Borrower.
 
e. Attorney Fees. The prevailing party in any action by Lender to collect any
amounts due under this Note shall be entitled to recover its reasonable
attorneys fees and costs.
 
f. Governing Law.  This Note has been executed and delivered in, and is to be
construed, enforced, and governed according to the internal laws of, the State
of New York without regard to its principles of conflict of laws that would
require or permit the application of the laws of any other jurisdiction.
 
g. Severability.  Whenever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable
law.  However, if any provision of this Note shall be held to be prohibited by
or invalid under applicable law, it shall be ineffective only to the extent of
such prohibition or invalidity without invalidating the remainder of that
provision or the other provisions of this Note.
 
h. Entire Agreement.  This Note contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, with respect to such matters.

                                             
By: _______________________                                                     
Name: ____________________                                                     
Title: ______________________   
                                                  
 
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Exhibit B
 
Certificate of Designations
 
URBAN BARNS FOODS INC.
 
CERTIFICATE OF DESIGNATIONS
OF PREFERENCES, RIGHTS AND LIMITATIONS
OF
SERIES A PREFERRED STOCK
 
The undersigned, Daniel Meikleham and Jacob Benne, hereby certify that:
 
1. They are the Chief Financial Officer and Chief Executive Officer,
respectively, of Urban Barns Foods Inc., a Nevada corporation (the
“Corporation”).
 
2. The Corporation is authorized to issue no shares of preferred stock.
 
3. The following resolutions were duly adopted by the Board of Directors:
 
WHEREAS, the Certificate of Incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, comprised of 100,000,000
shares, $0.01 par value per share (the Preferred Stock”), issuable from time to
time in one or more series;
 
WHEREAS, the Board of Directors of the Corporation is authorized to fix the
dividend rights, dividend rate, voting rights, conversion rights, rights and
terms of redemption and liquidation preferences of any wholly unissued series of
Preferred Stock and the number of shares constituting any series and the
designation thereof, of any of them; and
 
WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant
to its authority as aforesaid, to fix the rights, preferences, restrictions and
other matters relating to a series of Preferred Stock, which shall consist of up
to 1,000 shares of the Preferred Stock which the Corporation has the authority
to issue, with face value of $10,000.00 per share, as follows:
 
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide
for the issuance of a series of Preferred Stock for cash or exchange of other
securities, rights or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series of Preferred
Stock as follows:
 
 
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TERMS OF PREFERRED STOCK
 
1. Designation, Amount and Par Value.  The series of Preferred Stock shall be
designated as the Corporation’s Series A Preferred Stock (the “Series A
Preferred Stock”) and the number of shares so designated shall be 1,000 (which
shall not be subject to increase without any consent of the holders of the
Series A  Preferred Stock (each a “Holder” and collectively, the “Holders”) that
may be required by applicable law.  Each share of Series A Preferred Stock shall
have a par value of $0.01 per share.
 
2. Ranking and Voting.
 
a. Ranking.  The Series A Preferred Stock shall, with respect to dividend rights
and rights upon liquidation, winding-up or dissolution, rank: (i) senior to the
Corporation’s common stock, par value $0.001 per share (“Common Stock”), and any
other class or series of preferred stock of the Corporation (collectively,
together with any warrants, rights, calls or options exercisable for or
convertible into such Preferred Stock, the “Junior Securities”); and (ii) junior
to all existing and future indebtedness of the Corporation.
 
b. Voting.  Except as required by applicable law or as set forth herein, the
holders of shares of Series A Preferred Stock will have no right to vote on any
matters, questions or proceedings of this Corporation including, without
limitation, the election of directors.
 
3. Dividends and Other Distributions.  Commencing on the date of the issuance of
any such shares of Series A Preferred Stock (each respectively an “Issuance
Date”), Holders of Series A Preferred Stock shall be entitled to receive annual
dividends on each outstanding share of Series A Preferred Stock (“Dividends”),
which shall accrue in shares of Series A Preferred Stock at a rate equal to
10.0% per annum from the Issuance Date.  Accrued Dividends shall be payable upon
redemption of the Series A Preferred Stock in accordance with Section 6.
 
a. Any calculation of the amount of such Dividends payable pursuant to the
provisions of this Section 3 shall be made based on a 365-day year and on the
number of days actually elapsed during the applicable period, compounded
annually.
 
b. So long as any shares of Series A Preferred Stock are outstanding, no
dividends or other distributions will be paid, declared or set apart with
respect to any Junior Securities.  The Common Stock shall not be redeemed while
the Series A Preferred Stock is outstanding.
 
4. Protective Provision.  So long as any shares of Series A Preferred Stock are
outstanding, the Corporation shall not, without the affirmative approval of the
Holders of a majority of the shares of the Series A Preferred Stock then
outstanding (voting as a class), (a) alter or change adversely the powers,
preferences or rights given to the Series A Preferred Stock or alter or amend
this Certificate of Designations, (b) authorize or create any class of stock
ranking as to distribution of assets upon a liquidation senior to or otherwise
pari passu with the Series A Preferred Stock, (c) amend its certificate or
articles of incorporation, articles of association, or other charter documents
in breach of any of the provisions hereof, (d) increase the authorized number of
shares of Series A Preferred Stock, (e) liquidate, dissolve or wind-up the
business and affairs of the Corporation, or effect any Deemed Liquidation Event
(as defined below), or (f) enter into any agreement with respect to the
foregoing.
 
a. A “Deemed Liquidation Event” shall mean:  (i) a merger or consolidation in
which the Corporation is a constituent party or a subsidiary of the Corporation
is a constituent party and the Corporation issues shares of its capital stock
pursuant to such merger or consolidation, except any such merger or
consolidation involving the Corporation or a subsidiary in which the shares of
capital stock of the Corporation outstanding immediately prior to such merger or
consolidation continue to represent, or are converted into or exchanged for
shares of capital stock that represent, immediately following such merger or
consolidation, at least a majority, by voting power, of the capital stock of the
surviving or resulting corporation or if the surviving or resulting corporation
is a wholly owned subsidiary of another corporation immediately following such
merger or consolidation, the parent corporation of such surviving or resulting
corporation; or (ii) the sale, lease, transfer, exclusive license or other
disposition, in a single transaction or series of related transactions, by the
Corporation or any subsidiary of the Corporation of all or substantially all the
assets of the Corporation and its subsidiaries taken as a whole,  or the sale or
disposition (whether by merger or otherwise) of one or more subsidiaries of the
Corporation if substantially all of the assets of the Corporation and its
subsidiaries taken as a whole are held by such subsidiary or subsidiaries,
except where such sale, lease, transfer, exclusive license or other disposition
is to a wholly owned subsidiary of the Corporation.
 
b. The Corporation shall not have the power to effect a Deemed Liquidation Event
referred to in Section 4(a) unless the agreement or plan of merger or
consolidation for such transaction provides that the consideration payable to
the stockholders of the Corporation shall be allocated among the holders of
capital stock of the Corporation in accordance with Section 5.
 
 
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5. Liquidation.
 
a. Upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, after payment or provision for payment of debts and
other liabilities of the Corporation, before any distribution or payment shall
be made to the holders of any Junior Securities by reason of their ownership
thereof, the Holders of Series A Preferred Stock shall first be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders an amount with respect to each outstanding share of Series A
Preferred Stock equal to $10,000.00 (the “Original Series A Issue Price”), plus
any accrued but unpaid Dividends thereon (collectively, the “Series A
Liquidation Value”).  If, upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the amounts payable with respect
to the shares of Series A Preferred Stock are not paid in full, the holders of
shares of Series A Preferred Stock shall share equally and ratably in any
distribution of assets of the Corporation in proportion to the liquidation
preference and an amount equal to all accumulated and unpaid Dividends, if any,
to which each such holder is entitled.
 
b. After payment has been made to the Holders of the Series A Preferred Stock of
the full amount of the Series A Liquidation Value, any remaining assets of the
Corporation shall be distributed among the holders of the Corporation’s Junior
Securities in accordance with the Corporation’s Certificates of Designation and
Articles of Incorporation.
 
c. If, upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation shall be insufficient to make payment in full to all
Holders, then such assets shall be distributed among the Holders at the time
outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
 
6. Redemption.
 
a. Corporation’s Redemption Option.  Upon or after the fourth anniversary of the
initial Issuance Date, the Corporation shall have the right, at the
Corporation’s option, to redeem all or a portion of the shares of Series A
Preferred Stock, at a price per share (the “Corporation Redemption Price”) equal
to 100% of the Series A Liquidation Value.
 
b. Early Redemption.  Prior to redemption pursuant to Section 6(a) hereof, the
Corporation shall have the right, at the Corporation’s option, to redeem all or
a portion of the shares of Series A Preferred Stock, at a price per share equal
to: (i) 127% of the Series A Liquidation Value if redeemed on or after the first
anniversary but prior to the second anniversary of the initial Issuance Date,
(ii) 118% of the Series A Liquidation Value if redeemed on or after the second
anniversary but prior to the third anniversary of the initial Issuance Date, and
(iii) 109% of the Series A Liquidation Value if redeemed on or after the third
anniversary but prior to the fourth anniversary of the initial Issuance Date.
 
c. Mandatory Redemption.  If the Corporation determines to liquidate, dissolve
or wind-up its business and affairs, or effect any Deemed Liquidation Event, the
Corporation shall redeem the Series A Preferred Stock at the prices set forth in
Section 6(b) including the premium for early redemption set forth therein.
 
d. Mechanics of Redemption.  If the Corporation elects to redeem any of the
Holders’ Series A Preferred Stock then outstanding, it shall do so by delivering
written notice thereof via facsimile and overnight courier (“Notice of
Redemption at Option of Corporation”) to each Holder, which Notice of Redemption
at Option of Corporation shall indicate (A) the number of shares of Series A
Preferred Stock that the Corporation is electing to redeem and (B) the
Corporation Redemption Price (plus the premium for early redemption pursuant to
Section 6(b) if applicable).
 
e. Payment of Redemption Price.  Upon receipt by any Holder of a Notice of
Redemption at Option of Corporation, such Holder shall promptly submit to the
Corporation such Holder’s Series A Preferred Stock certificates.  Upon receipt
of such Holder’s Series A Preferred Stock certificates, the Corporation shall
pay the Corporation Redemption Price (plus the premium for early redemption
pursuant to Section 6(b) if applicable), to such Holder, at the Corporation’s
option either (i) in cash, or (ii) by offset against any outstanding note
payable from Holder to the Corporation that was issued by Holder in connection
with the exercise of warrants by such Holder.
 
7. Transferability. The Series A Preferred Stock may only be sold, transferred,
assigned, pledged or otherwise disposed of (“Transfer”) in accordance with state
and federal securities laws.  The Corporation shall keep at its principal
office, or at the offices of the transfer agent, a register of the Series A
Preferred Stock.  Upon the surrender of any certificate representing Series A
Preferred Stock at such place, the Corporation, at the request of the record
Holder of such certificate, shall execute and deliver (at the Corporation’s
expense) a new certificate or certificates in exchange therefor representing in
the aggregate the number of shares represented by the surrendered
certificate.  Each such new certificate shall be registered in such name and
shall represent such number of shares as is requested by the Holder of the
surrendered certificate and shall be substantially identical in form to the
surrendered certificate.
 
 
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8. Miscellaneous.
 
a. Notices.  Any and all notices to the Corporation shall be addressed to the
Corporation’s President or Chief Executive Officer at the Corporation’s
principal place of business on file with the Secretary of State of the State of
Nevada.  Any and all notices or other communications or deliveries to be
provided by the Corporation to any Holder hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile telephone number or
address of such Holder appearing on the books of the Corporation, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section 8 prior to 5:30 p.m.
Eastern time, (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this section later than 5:30 p.m. but prior to 11:59 p.m. Eastern
time on such date, (iii) the second business day following the date of mailing,
if sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
 
b. Lost or Mutilated Preferred Stock Certificate.  Upon receipt of evidence
reasonably satisfactory to the Corporation (an affidavit of the registered
Holder shall be satisfactory) of the ownership and the loss, theft, destruction
or mutilation of any certificate evidencing shares of Series A Preferred Stock,
and in the case of any such loss, theft or destruction upon receipt of indemnity
reasonably satisfactory to the Corporation (provided that if the Holder is a
financial institution or other institutional investor its own agreement shall be
satisfactory) or in the case of any such mutilation upon surrender of such
certificate, the Corporation shall, at its expense, execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
 
c. Headings.  The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designations and shall not be deemed to
limit or affect any of the provisions hereof.
 
RESOLVED, FURTHER, that the chairman, chief executive officer, president or any
vice-president, and the secretary or any assistant secretary, of the Corporation
be and they hereby are authorized and directed to prepare and file a Designation
of Preferences, Rights and Limitations of Series A Preferred Stock in accordance
with the foregoing resolution and the provisions of Nevada law.
 
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Designations this ___ day of April, 2010.

By: ____________________
Name: __________________
Title: ____________________

 

By: _____________________
Name: ___________________
Title: ____________________

 
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Exhibit C
 
Transfer Agent Instructions
 
[Date]
 
Holladay Stock Transfer

Re:  Urban Barns Foods Inc.
 
Ladies and Gentlemen:
 
In accordance with the Preferred Stock Purchase Agreement (“Purchase
Agreement”), dated April 13, 2010, by and between Urban Barns Foods Inc., a
Nevada corporation (“Company”), and Socius Capital Group, LLC, a Delaware
limited liability company, dba Socius Special Situations Capital Group, LLC
(“Buyer”), pursuant to which Company may issue and deliver shares of common
stock of the Company, par value $0.001 per share (“Common Stock”), in payment of
the Commitment Fee payable thereunder (the “Commitment Fee Shares”), and a
warrant (the “Warrant”) to purchase additional shares of Common Stock (the
“Warrant Shares”) (the Commitment Fee Shares and Warrant Shares, collectively,
the “Common Shares”), this shall serve as our irrevocable authorization and
direction to you (provided that you are the transfer agent of the Company at
such time) to issue the Fee Shares and, in the event the holder of the Warrant
elects or has elected to exercise all or any portion of the Warrant, from time
to time, upon surrender to you of a notice of exercise of the Warrant, the
Warrant Shares. Capitalized terms used herein without definition shall have the
respective meanings ascribed to them in the Purchase Agreement.
 
Specifically, this shall constitute an irrevocable instruction to you to process
any notice of exercise of the Warrant in accordance with the terms of these
instructions as soon as practicable. Upon your receipt of a copy of the executed
notice of exercise of the Warrant, you shall use your best efforts to, within
one (1) Trading Day following the date of receipt of the notice of exercise, (A)
issue and surrender to a common carrier for overnight delivery to the address as
specified in the notice of exercise a certificate, registered in the name of the
Buyer or its designee, for the number of shares of Common Stock to which the
Buyer is entitled upon exercise of the Warrant as set forth in the notice of
exercise, or (B) provided you are participating in The Depository Trust Company
(DTC) Fast Automated Securities Transfer (FAST) Program, upon the request of the
Buyer, credit such aggregate number of shares of Common Stock to which the Buyer
is entitled to the Buyer’s or its designee’s balance account with DTC through
its Deposit Withdrawal At Custodian (DWAC) system provided the Buyer causes its
bank or broker to initiate the DWAC transaction.
 
The Company hereby confirms that the Common Shares should not be subject to any
stop-transfer restrictions and shall otherwise be freely transferable on the
books and records of the Company.  If the Common Shares are certificated, the
certificates shall not bear any legend restricting transfer of the shares
represented thereby.
 
The Company hereby confirms and you acknowledge that, in the event counsel to
the Company does not issue any opinion of counsel required to issue any Common
Shares free of legend, the Company authorizes you to accept an opinion of
counsel from Luce Forward Hamilton & Scripps LLP.
 
 
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The Company hereby confirms that no instructions other than as contemplated
herein will be given to you by the Company with respect to the Common Shares.
The Company hereby agrees that it shall not replace you as the Company’s
transfer agent, until such time as the Company provides written notice to you
and Buyer that a suitable replacement has agreed to serve as transfer agent and
to be bound by the terms and conditions of this letter agreement regarding
Irrevocable Transfer Agent Instructions (this “Agreement”).
 
The Company and you hereby acknowledge and confirm that complying with the terms
of this Agreement does not and shall not prohibit you from satisfying any and
all fiduciary responsibilities and duties you may owe to the Company.
 
The Company and you acknowledge that the Buyer is relying on the representations
and covenants made by the Company and you hereunder and that such
representations and covenants are a material inducement to the Buyer to enter
into the Purchase Agreement. The Company and you further acknowledge that
without such representations and covenants made hereunder, the Buyer would not
enter into the Purchase Agreement and purchase Securities pursuant thereto.
 
Each party hereto specifically acknowledges and agrees that a breach or
threatened breach of any provision hereof will cause irreparable damage and that
damages at law would be an inadequate remedy if this Agreement were not
specifically enforced.  Therefore, in the event of a breach or threatened breach
by a party hereto, including, without limitation, the attempted termination of
the agency relationship created by this instrument, in addition to all other
rights or remedies, an injunction restraining such breach and granting specific
performance of the provisions of this Agreement should issue without any
requirement to show any actual damage or to post any bond or other security.
 
You may at any time resign as transfer agent hereunder by giving fifteen (15)
days prior written notice of resignation to the Company and the Buyer. Prior to
the effective date of the resignation as specified in such notice, the Company
will issue to you instructions authorizing delivery of Common Shares to a
substitute transfer agent selected by, and in the sole discretion of, the
Company. If no successor transfer agent is named by the Company, you may apply
to a court of competent jurisdiction in the State of Nevada for appointment of a
successor transfer agent and for an order to deposit Common Shares with the
clerk of any such court.
 
The Company must keep its bill current with you – if the Company is not current
and is on suspension, the Buyer will have the right to pay the Company’s
outstanding bill, in order for you to act upon this Agreement. If the
outstanding bill is not paid by the Company or the Buyer, you have no further
obligation under this Agreement.
 
IN WITNESS WHEREOF, the parties have caused this letter agreement regarding
Irrevocable Transfer Agent Instructions to be duly executed and delivered as of
the date first written above.
 
URBAN BARNS FOODS INC.
 
By:_______________________
Name:_____________________
Title: ______________________

THE FOREGOING INSTRUCTIONS ARE ACKNOWLEDGED AND AGREED TO:
 
Holladay Stock Transfer
By: ______________________                                                     
Name: ___________________                                                     
Title: _____________________                                                     
 
 
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Exhibit D
 
Lock-Up Agree

 [Date]
 
Socius Special Situations Capital Group, LLC
11150 Santa Monica Boulevard, Suite 1500
Los Angeles, CA 90025
 
Ladies and Gentlemen:
 
This Lock-Up Agreement is being delivered to you in connection with the
Preferred Stock Purchase Agreement dated as of April 13, 2010 (“Purchase
Agreement”) and entered into by and among Urban Barns Foods Inc., a Nevada
corporation (“Company”) and Socius Capital Group, LLC, a Delaware limited
liability company, dba Socius Special Situations Capital Group, LLC
(“Investor”), with respect to the purchase without registration under the
Securities Act of 1933, as amended (the “Act”), in reliance on Section 4(2) of
the Act and Rule 506 of Regulation D promulgated thereunder, of shares of the
Company’s Series A Preferred Stock and related Securities.  Capitalized terms
used herein without definition shall have the respective meanings ascribed to
them in the Purchase Agreement.
 
In order to induce Investor to enter into the Purchase Agreement, the
undersigned agrees that, for a period of ten Trading Days beginning on each date
the Company delivers a Tranche Notice to Investor (the “Tranche Notice Date”)
and ending on the Tranche Closing Date pursuant to the terms of the Purchase
Agreement (the “Lock-up Period”), the undersigned will not, without the prior
written consent of Investor, (a) sell, offer to sell, contract or agree to sell,
hypothecate, pledge, grant any option to purchase or otherwise dispose of or
agree to dispose of, directly or indirectly, in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC promulgated
thereunder (the “Exchange Act”) with respect to, any Common Stock of the Company
or any securities convertible into or exercisable or exchangeable for Common
Stock, or warrants or other rights to purchase Common Stock or any such
securities, or any securities substantially similar to the Common Stock, (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
any such securities, or warrants or other rights to purchase Common Stock,
whether any such transaction is to be settled by delivery of Common Stock or
such other securities, in cash or otherwise, or
 
(c) publicly announce an intention to effect any transaction specified in clause
(a) or (b).
 
The foregoing sentence shall not apply to (a) bona fide gifts, provided the
recipient thereof agrees in writing to be bound by the terms of this Lock-Up
Agreement, (b) dispositions to any trust for the direct or indirect benefit of
the undersigned and/or the immediate family of the undersigned, provided that
such trust agrees in writing to be bound by the terms of this Lock-Up Agreement,
(c) sales made pursuant to any written sales plans established prior to the date
of this Lock-Up Agreement in conformity with the requirements of Rule 10b5-1(c)
promulgated under the Exchange Act or (d) exercise of options for Common Stock
and the disposition (whether by sale, gift or otherwise) of Common Stock
underlying such options.  Notwithstanding clause (a) above, the undersigned may
make a bona fide gift of up to 10,000 shares of Common Stock to a charity or
other non-profit entity and such charity or entity shall not be required to be
bound by the terms of this Lock-Up Agreement; provided, however, that in the
event the undersigned exercises options during the Lock-Up Period, the
undersigned may not, during the Lock-Up Period, dispose of the number of shares
of Common Stock underlying such exercised options equal to the number of shares
of Common Stock gifted by the undersigned pursuant to this sentence during the
Lock-Up Period.  For purposes of this paragraph, “immediate family” shall mean
the undersigned and the spouse, any lineal descendent, father, mother, brother
or sister of the undersigned.
 
The Company agrees to provide the undersigned with notice that the Company has
delivered a Tranche Notice to Investor prior to, or simultaneous with, its
delivery of the Tranche Notice to Investor.  Such notice shall provide the
undersigned with the Tranche Notice Date and clearly indicate the beginning of
the Lock-up Period.
 
Upon the termination of the Purchase Agreement, this Lock-Up Agreement shall be
terminated and the undersigned shall be released from its obligations hereunder.
 
Sincerely,
 
______________________________
Stockholder
Print Name: [                     ]

Acknowledged and Agreed:
 
Urban Barns Foods Inc.
 

 
By:                                                      
Name:
Title:

 
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Exhibit E
 
Opinion
 
 
 
Suite 1210 - 777 Hornby Street
Vancouver, BC
V6Z 1S4     CANADA
Telephone:  (604) 689-1022
Facsimile:  (604) 681-4760
 [urban-logo.jpg] 
CORPORATE AND SECURITIES LAWYERS

 
 April 13, 2010
 
Socius Special Situations Capital Group, LLC
11150 Santa Monica Boulevard, Suite 1500
Los Angeles, CA 90025
 
Re: Urban Barns Foods Inc.

Ladies and Gentlemen:
 
We are counsel to Urban Barns Foods Inc., a Nevada corporation (“Company”), in
connection with the sale and issuance of (a) up to 500 shares of its Series A
Preferred Stock, par value $0.01 per share (“Preferred Shares”), along with (b)
shares (“Commitment Fee Shares”) of the Company’s common stock, par value $0.001
per share (“Common Stock”), (c) warrants (the “Warrant”) to purchase shares of
Common Stock, and (d) shares of Common Stock issuable upon exercise of the
Warrant (the “Warrant Shares,” and together with the Preferred Shares and the
Warrant, the “Securities”), to Socius Capital Group, LLC, a Delaware limited
liability company, dba Socius Special Situations Capital Group, LLC
(“Investor”), pursuant to the terms of the Preferred Stock Purchase Agreement
dated as of April 13, 2010 (“Agreement”), by and between Company and
Investor.  Capitalized terms not otherwise defined herein have the meanings set
forth in the Agreement.
 
We have reviewed the following documents:
 
(a)  the Transaction Documents;
 
(b)  the Company’s Articles of Incorporation, as amended; and
 
(c)  the Company’s Bylaws.
 
 In connection with the opinions expressed herein, we have made such
examinations of law as we considered necessary or advisable for the purposes
hereof.  As to matters of fact material to the opinions expressed herein, we
have relied upon the representations and warranties as to factual matters
contained in and made by the Company and the Investor in the Transaction
Documents and upon certificates and statements of certain officers of the
Company as described below.  In addition, we have examined, among other things,
originals or copies of such corporate records of the Company and the Company’s
registrar and transfer agent, and such other documents and questions of law that
we consider necessary or advisable for the purpose of rendering this opinion.
 
We have assumed the genuineness and authenticity of all signatures on all
documents submitted or presented to us, the authenticity of all documents
submitted to us as originals and the conformity to authentic original documents
of documents submitted to us as certified, telecopied, conformed or photostatic
copies.
 
 
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We have also assumed, without verification: (i) that the Investor is an existing
body corporate, and has the power and authority to enter into and perform the
Transaction Documents to which the Investor is a party; (ii) the due
authorization, execution and delivery by the Investor of the Transaction
Documents; (iii) that each of the Transaction Documents, which are intended to
do so, constitutes legal, valid and binding obligations of the Investor,
enforceable in accordance with its respective terms; and (iv) that the
representations and warranties made by the Investor in the Transaction Documents
and pursuant thereto are true and correct.
 
This opinion is rendered only with regard to the matters set out in the numbered
paragraphs below.  No other opinions are intended nor should they be
inferred.  This opinion is based solely upon the laws of the Private
Corporations Code of the Nevada Revised Statutes, and does not include an
interpretation or statement concerning the laws of any other state or
jurisdiction.  Insofar as the Transaction Documents may be governed by the laws
of other states, we have assumed that such laws are identical in all respects to
the laws of the State of Nevada.
 
The opinions expressed herein are subject to the following qualifications:
 
a)  the validity, binding effect and enforceability of the Transaction Documents
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to creditors' rights generally;

b)  the enforceability of the Transaction Documents and the rights and remedies
set out therein may be limited by general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity) and no
opinion is given as to any specific remedy that may be granted, imposed or
rendered.  The limitation by general principles of equity include principles:

i.  governing the availability of specific performance, injunctive relief or
other equitable remedies;

ii.  affording equitable defences such as waiver, laches and estoppel against a
party seeking enforcement;

iii.  requiring good faith and fair dealing in the performance and enforcement
of a contract by the party seeking its enforcement;

iv.  requiring reasonableness in the performance and enforcement of an agreement
by the party seeking enforcement of the contract;

v.  requiring consideration of the materiality of a party's breach and the
consequences of the breach to the party seeking enforcement;

vi.  requiring consideration of the enforceability or impossibility of
performance at the time of attempted enforcement; and

vii.  affording defences based upon the unconscionability of the enforcing
party's conduct after the parties have entered into the contract;

c)  the ability to recover a claim for certain costs or expenses may be subject
to judicial discretion;
 
 
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d)  our opinions are subject to the effect of generally applicable rules of law
that:

i.  limit or affect the enforcement of provisions of a contract that purport to
require waiver of the obligations of good faith, fairness in dealing, diligence
and reasonableness;

ii.  limit the right of a creditor to use force or cause a breach of the peace
in enforcing rights, or limit the liability of a creditor for obligations
incurred or assumed by such creditor; and

iii.  may, where less than all of a contract may be unenforceable, limit the
enforceability of the balance of the contract to circumstances in which the
unenforceable portion is not an essential part of the agreed exchange;

e)  whenever our opinion herein with respect to the existence or absence of
facts or circumstances is qualified by the phrase “to our knowledge” or similar
language, it is intended to indicate that during the course of our
representation of the Company, no information has come to our attention which
would give us actual knowledge of the existence of such facts or
circumstances.  However, except to the extent expressly set forth herein, we
have not undertaken any special or independent investigation to determine the
existence or absence of such facts or circumstances, and no inference as to our
knowledge of the existence of such facts or circumstances should be drawn merely
from our representation of the Company; and

f)  this opinion is restricted to the matters expressly referred to herein and
no opinion is intended to be given or to be implied with respect to any other
matter.

Based on the foregoing and upon such investigation as we have deemed necessary,
we give you our opinion as follows:

1. Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada.

2. The Securities are duly authorized, the Preferred Shares, Commitment Fee
Shares and Warrant are, and when issued in accordance with the terms and
conditions of the Agreement the Warrant Shares will be, validly issued, fully
paid and non-assessable.  The issuance of the Securities will not be subject to
any statutory or contractual preemptive rights of any stockholder of the
Company.

3. Company has the corporate power and authority to (a) execute, deliver and
perform all of its obligations under the Agreement and the Transaction
Documents, and (b) issue, sell and deliver each of the Securities.

4. The execution, delivery and performance of the Agreement and the Transaction
Documents have been duly authorized by all necessary corporate action on the
part of Company, and have been duly executed and delivered by Company.

5. The execution and delivery of the Transaction Documents by Company does not,
and Company’s performance of its obligations thereunder will not (a) violate the
Articles of Incorporation, Bylaws, or other organizational or governing
documents of Company, as in effect on the date hereof, (b) violate in any
material respect any federal or state law, rule or regulation, or judgment,
order or decree of any state or federal court or governmental or administrative
authority, in each case that, to our knowledge, is applicable to Company or its
properties or assets and which could have a material adverse effect on Company’s
business, properties, assets, financial condition or results of operations or
prevent the performance by Company of any material obligation under the
Agreement, or (c) require the authorization, consent, approval of or other
action of, notice to or filing or qualification with, any state or federal
governmental authority, except as have been, or will be, made or obtained.

This opinion may not be relied upon by any person or entity other than the
addressees hereof, their successors and their assigns of whom we have notice at
the time of the assignment, and this opinion may not be circulated, quoted or
otherwise referred to for any purpose other than in connection with the
transactions contemplated by the Transaction Documents, in each case, without
our prior written consent.  We do not undertake to advise you or anyone else of
any changes in the opinions expressed herein resulting from changes in law,
changes in facts or any other matters that hereafter might occur that did not
exist on the date hereof.

Very truly yours,
 
W.L. MACDONALD LAW CORPORATION
 
 
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Exhibit F
 
Use of Proceeds Certificate
 
URBAN BARNS FOODS INC.
 
USE OF PROCEEDS CERTIFICATE
 
The undersigned, Daniel Meikleham and Jacob Benne, hereby certify that:
 
1. They are the Chief Financial Officer and Chief Executive Officer,
respectively, of Urban Barns Foods Inc., a Nevada corporation (the
“Corporation”).
 
2. This Use of Proceeds Certificate (this “Certificate”) is being delivered to
Socius Capital Group, LLC, a Delaware limited liability company, dba Socius
Special Situations Capital Group, LLC (“Investor”), by the Company, to fulfill
the requirement under Section 2.3(e)(iii) of the Preferred Stock Purchase
Agreement, dated as of April 13, 2010, between Investor and the Company (the
“Purchase Agreement”).  Terms used and not defined in this Certificate have the
meanings set forth in the Purchase Agreement.
 
3. On or prior to the date hereof, the Company has delivered to Investor a
Tranche Notice for the purchase by Investor of Tranche Shares upon payment by
the Company to Investor of the Tranche Purchase Price.
 
The undersigned do hereby certify that the Tranche Purchase Price will be used
for the following purpose or purposes:

[                      ].
 
IN WITNESS WHEREOF, the undersigned have executed this Certificate this[__] day
of _________, 2010.
 
By:__________________________
Name: _______________________
Title: ________________________
 
By: __________________________
Name: _______________________
Title: _________________________
 
 
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Exhibit G
 
Tranche Notice
 
Dated: [________], 20[__]
 
Socius Special Situations Capital Group, LLC
11150 Santa Monica Boulevard, Suite 1500
Los Angeles, CA 90025
 
Re: Tranche Notice
 
Ladies & Gentlemen:
 
Pursuant to the April 13, 2010 Preferred Stock Purchase Agreement (“Agreement”)
between Urban Barns Foods Inc., a Nevada corporation (“Company”), and Socius
Capital Group, LLC, a Delaware limited liability company, dba Socius Special
Situations Capital Group, LLC (“Investor”), Company hereby elects to exercise a
Tranche.  Capitalized terms not otherwise defined herein shall have the meanings
defined in the Agreement.
 
At the Tranche Closing, Company will sell to Investor [___________] Preferred
Shares at $10,000.00 per share for a Tranche Amount of $[___________].
 
On behalf of Company, the undersigned hereby certifies to Investor as follows:
 
1. The undersigned is a duly authorized officer of Company;
 
2. The above Tranche Amount does not exceed the Maximum Tranche Amount; and
 
3. All of the conditions precedent to the right of the Company to deliver a
Tranche Notice set forth in Section 2.3(d) of the Agreement have been satisfied.
 
IN WITNESS WHEREOF, the Company has executed and delivered this Tranche Notice
as of the date first written above.
 
URBAN BARNS FOODS INC.
 
By: _____________________
Name: __________________
Title: ____________________
 
54