EXECUTION COPY
 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of March 9,
2007 among Lighting Science Group Corporation, a Delaware corporation (the
“Company”), and the purchasers identified on the signature pages hereto (each, a
“Purchaser” and collectively, the “Purchasers”).
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), the Company desires to issue and sell to each Purchaser, and
each Purchaser, severally and not jointly, desires to purchase from the Company,
certain securities of the Company as more fully described in this Agreement.
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each of the
Purchasers, severally and not jointly, agree as follows:
 
ARTICLE I  
DEFINITIONS
 
1.1   Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms have the meanings indicated:
 
“Additional Warrants” means, collectively, the Common Stock warrants issued upon
exercise of the Warrant B, in the form of Exhibit A-3.
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
 
“Business Day” means any day other than Saturday, Sunday or other day on which
the Federal Reserve Bank of New York is closed.
 
“Change of Control” means the occurrence of any of the following in one or a
series of related transactions: (i) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1) under
the Exchange Act) of more than one-third of the voting rights or equity
interests in the Company; (ii) a replacement of more than one-third of the
members of the Company's board of directors that is not approved by those
individuals who are members of the board of directors on the date hereof (or
other directors previously approved by such individuals); (iii) a merger or
consolidation of the Company or any significant Subsidiary or a sale of more
than one-third of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company's securities prior to the first such transaction continue
to hold at least two-thirds of the voting rights and equity interests in the
surviving entity or acquirer of such assets; (iv) a recapitalization,
reorganization or other transaction involving the Company or any significant
Subsidiary that constitutes or results in a transfer of more than one-half of
the voting rights or equity interests in the Company; (v) consummation of a
“Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act with
respect to the Company, or (vi) the execution by the Company or its controlling
stockholders of an agreement providing for or reasonably likely to result in any
of the foregoing events.
 
“Closing” means the closing of the purchase and sale of the Shares and Warrants
pursuant to Section 2.1.
 
“Closing Date” means the date of the Closing.
 
“Closing Price” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on an Eligible Market or any other national securities exchange, the closing
price per share of the Common Stock for such date (or the nearest preceding
date) on the primary Eligible Market or exchange on which the Common Stock is
then listed or quoted; (b) if prices for the Common Stock are then quoted on the
OTC Bulletin Board, the closing bid price per share of the Common Stock for such
date (or the nearest preceding date) so quoted; (c) if prices for the Common
Stock are then reported in the “Pink Sheets” published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent closing bid price per share of
the Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in
good faith by Purchasers holding a majority of the Securities.
 
“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, par value $0.001 per
share.
 
"Common Stock Equivalents" means, collectively, Options and Convertible
Securities. 
 
“Company Counsel” means Haynes and Boone, LLP, counsel to the Company.
 
"Convertible Securities" means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock. 
 
“Effective Date” means the date that the Registration Statement is first
declared effective by the Commission.
 
“Eligible Market” means any of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Select Market, NASDAQ Global Market, the NASDAQ
Capital Market or the OTC Bulletin Board.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Excluded Stock” means any of the following:
 
(i) shares of capital stock of the Company issued or issuable upon conversion or
exercise of any currently outstanding securities set forth in Schedule 3.1(f)
(provided that such exercise of conversion occurs in accordance with the terms
thereof, without amendment or modification, and that the applicable exercise or
conversion price or ratio is described in such schedule) or any Excluded Stock
issued in accordance with this Agreement;
 
(ii) shares or options or warrants for Common Stock granted to officers,
directors and employees of, and consultants to, the Company pursuant to stock
option or purchase plans or other compensatory agreements approved by the Board
of Directors;
 
(iii) shares of Common Stock or Preferred Stock issued in connection with any
pro rata stock split, stock dividend (including PIK Dividend Shares) or
recapitalization by the Company;
 
(iv) shares of capital stock, or options or warrants to purchase capital stock,
issued in connection with a strategic commercial agreement or commercial
relationship as determined by the Company, the primary purpose of which is not
to raise capital;
 
(v) shares of capital stock, or options or warrants to purchase capital stock,
issued in accordance with the letter dated March 7, 2007, provided by the
Company to Iroquois Master Fund, Ltd; provided, that such financing is completed
within 30 days following the date hereof;
 
(vi) shares of capital stock, or options or warrants to purchase capital stock,
issued pursuant to the acquisition of another corporation or entity by the
Company by consolidation, merger, purchase of all or substantially all of the
assets, or other reorganization in which the Company acquires, in a single
transaction or series of related transactions, all or substantially all of the
assets of such other corporation or entity or fifty percent (50%) or more of the
voting power of such other corporation or entity or fifty percent (50%) or more
of the equity ownership of such other corporation or entity, in each case the
primary purpose of which is not to raise capital; and
 
(vii) shares of capital stock issued in a bona-fide underwritten public
securities offering with a nationally recognized underwriter with net proceeds
of at least $20 Million;
 
(viii) securities issuable upon conversion or exercise of the securities set
forth in paragraphs (i) - (vii) above.
 
“Filing Date” means the 45th day following the Closing Date with respect to the
initial Registration Statement required to be filed hereunder, and, with respect
to any additional Registration Statements that may be required pursuant to
Section 6.1(f), the 10th day following the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required under such Section.
 
“Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.
 
“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, costs of preparation and
reasonable attorneys’ fees.
 
“Options” means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities (including all Warrants and Additional
Warrants that can be issued under the Transaction Documents).
 
“Person” means any 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 any court or
other federal, state, local or other governmental authority or other entity of
any kind.
 
“Per Unit Purchase Price” means $0.30.
 
“PIK Dividend Shares” means the shares of Common Stock issued and issuable in
payment of dividends on the Preferred Stock, and upon any stock split, stock
dividend, recapitalization or similar event with respect to such shares of
Common Stock and any other securities issued in exchange of or replacement of
such shares of Common Stock;
 
“Post-Effective Amendment” means a post-effective amendment to the Registration
Statement.
 
“Post-Effective Amendment Filing Deadline” means the 10th Trading Day after the
Registration Statement ceases to be effective pursuant to applicable securities
laws due to the passage of time or the occurrence of an event requiring the
Company to file a Post-Effective Amendment.
 
“Preferred Stock” means the 6% convertible preferred stock of the Company, par
value $0.001 per share.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus including post effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
 
“Purchaser Counsel” has the meaning set forth in Section 6.2(a).
 
“Registrable Securities” means any Common Stock (including Underlying Shares)
issued or issuable pursuant to the Transaction Documents, together with any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing.
 
“Registration Statement” means each registration statement required to be filed
under Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
 
“Required Effectiveness Date” means (i) with respect to the initial Registration
Statement required to be filed hereunder, the 120th day following the Closing
Date and (ii) with respect to any additional Registration Statements that may be
required pursuant to Section 6.1(f), the 30th day following the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement is required under such Section.
 
“Restricted Person” means, as of Closing, each of the executive officers of the
Company and each of the members of the Company’s board of directors.
 
“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the Commission pursuant to the Securities Act, as
such Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such
Rule.
 
“Securities” means the Shares, the Warrant A, the Warrant B, the Additional
Warrant and the Underlying Shares.
 
“Shares” means the shares of Common Stock, which are being issued and sold to
the Purchasers at the Closing.
 
“Subsidiary” means any Person in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest.
 
“Trading Day” means (a) any day on which the Common Stock is listed or quoted
and traded on its primary Trading Market, or (b) if the Common Stock is not then
listed or quoted and traded on its primary Trading Market, then a day on which
trading occurs on an Eligible Market (or any successor thereto), or (c) if
trading ceases to occur on an Eligible Market (or any successor thereto), any
Business Day.
 
“Trading Market” means the OTC Bulletin Board or any other Eligible Market, or
any national securities exchange, market or trading or quotation facility on
which the Common Stock is then listed or quoted.
 
“Transaction Documents” means this Agreement, the Warrant A, the Warrant B, the
Additional Warrant, the Lock-Up Letters, the Transfer Agent Instructions and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
 
"Transfer Agent Instructions" means the Irrevocable Transfer Agent Instructions,
in the form of Exhibit D, executed by the Company and delivered to and
acknowledged in writing by the Company's transfer agent.
 
“Underlying Shares” means the shares of Common Stock issuable (i) upon exercise
of the Warrants and (ii) upon exercise of the Additional Warrants issued upon
exercise of the Warrant B.
 
“Unit” means (i) one Share, (ii) a Warrant A to acquire 0.75 shares of Common
Stock, (ii) a Warrant B to acquire one share of Common Stock, and (iii) an
Additional Warrant to acquire 0.75 shares of Common Stock upon the exercise of a
Warrant B.
 
“Warrant A” means each Common Stock purchase warrant in the form of Exhibit A-1.
 
“Warrant B” means each Common Stock purchase warrant in the form of Exhibit A-2.
 
“Warrants” means, collectively, each of the Warrant A and Warrant B.
 

 
ARTICLE II  
PURCHASE AND SALE
 
2.1   Subject to the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to each Purchaser, and each Purchaser
shall, severally and not jointly, purchase from the Company, the Shares, the
Warrant A and the Warrant B for the purchase price set forth on Schedule A
hereto under the heading “Purchase Price”. The Closing shall take place at the
offices of Malhotra & Associates LLP immediately following the execution hereof,
or at such other location or time as the parties may agree.
 
2.2   Closing Deliveries.
 
(a)   At the Closing, the Company shall deliver or cause to be delivered to each
Purchaser the following:
 
(i)   one or more stock certificates, free and clear of all restrictive and
other legends (except as expressly provided in Section 4.1(b) hereof),
evidencing such number of Shares equal to the number of Units indicated on
Schedule A hereto under the heading “Units”, registered in the name of such
Purchaser;
 
(ii)   a Warrant A, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire such number of Underlying Shares
indicated on Schedule A hereto under the heading “Warrant Shares”.
 
(iii)   a Warrant B, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire (i) such number of Underlying
Shares indicated on Schedule A hereto under the heading “Warrant B Shares”, and
(ii) an Additional Warrant, pursuant to which such Purchaser shall have the
right to acquire such number of Underlying Shares indicated on Schedule A hereto
under the heading “Additional Warrant Shares”, each on the terms set forth
therein;
 
(iv)   a lock up letter executed by each Restricted Person in the form of
Exhibit E (the “Lock-Up Letter”);
 
(v)   a legal opinion of Company Counsel, in the form of Exhibit B, executed by
such counsel and delivered to the Purchasers;
 
(vi)   duly executed Transfer Agent Instructions; and
 
(vii)   a certificate from a duly authorized officer certifying on behalf of the
Company that each of the conditions set forth in Section 5.1 has been satisfied;
 
(b)   At the Closing, each Purchaser shall deliver or cause to be delivered an
amount equal to the Per Unit Purchase Price multiplied by the number of Units
purchased, in United States dollars and in immediately available funds, by wire
transfer to the Company’s account at:
 
Bank of Texas
4217 Swiss Avenue
Dallas, Texas 75204
Routing #: 111014325
A/C #: 8091185481

 
The total purchase price payable by each Purchaser shall be set forth on
Schedule A hereto under the heading “Purchase Price.”
 

ARTICLE III  
REPRESENTATIONS AND WARRANTIES
 
3.1   Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
 
(a)   Subsidiaries. The Company has no direct or indirect Subsidiaries other
than those listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a),
the Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any Lien and all the
issued and outstanding shares of capital stock or comparable equity interest of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.
 
(b)   Organization and Qualification. Each of the Company and the Subsidiaries
is an entity duly 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 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 the Subsidiaries 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,
individually or in the aggregate, (i) adversely affect the legality, validity or
enforceability of any Transaction Document, (ii) have or result in a material
adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole on a consolidated basis, or (iii) adversely impair the Company's ability
to perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”).
 
(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 and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and 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, its Board of Directors or its stockholders. Each of the
Transaction Documents has been (or upon delivery will be) duly executed by the
Company and, assuming the due authorization, execution and delivery by the other
parties thereto, is, or 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. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its certificate or articles of
incorporation, bylaws or other organizational or charter documents.
 
(d)   No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and 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, bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, 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) 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 and the rules and regulations of any
self-regulatory organization to which the Company or its securities are
subject), or by which any property or asset of the Company or a Subsidiary is
bound or affected.
 
(e)   Issuance of the Securities. The Securities (including the Underlying
Shares) are duly authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens and shall not be subject to
preemptive rights or similar rights of stockholders. The Company has reserved
from its duly authorized capital stock the maximum number of shares of Common
Stock currently issuable upon exercise of the Warrants.
 
(f)   Capitalization. The number of shares and type of all authorized, issued
and outstanding capital stock, options and other securities of the Company
(whether or not presently convertible into or exercisable or exchangeable for
shares of capital stock of the Company), as of February 28, 2007, is set forth
in Schedule 3.1(f). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws. No securities of the Company are entitled
to preemptive or similar rights, and 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 disclosed
in Schedule 3.1(f), 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 exercisable 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 or rights convertible or
exchangeable into shares of Common Stock. Except as disclosed in Schedule
3.1(f), there are no anti-dilution or price adjustment provisions contained in
any security issued by the Company (or in any agreement providing rights to
security holders). The issue and sale of the Securities (including the
Underlying Shares) will not obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Purchasers) 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. To the knowledge of
the Company, except as specifically disclosed in Schedule 3.1(f), no Person or
group of related Persons beneficially owns (as determined pursuant to Rule 13d-3
under the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Stock, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at any single time.
 
(g)   SEC Reports; Financial Statements; Press Releases. The Company has filed
all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law to file such
material) (the foregoing materials (together with any materials filed by the
Company under the Exchange Act, whether or not required) being collectively
referred to herein as the “SEC Reports” and, together with this Agreement and
the Schedules to this Agreement, the “Disclosure Materials”) on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Reports prior to the expiration of any such extension. The Company has
delivered to each Purchaser true, correct and complete SEC Reports filed by the
Company within the 10 days preceding the date hereof. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, 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 the 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 Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto, 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. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports. Each press release
disseminated during the 12 months preceding the date of this Agreement did not
at the time of release contain any untrue statement of a material fact or omit
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 are
made, not misleading..
 
(h)   Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that is reasonably likely 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
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, except as disclosed in its SEC Reports, (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 stock-based plans.
 
(i)   Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
that is reasonably likely to, individually or in the aggregate, have a Material
Adverse Effect. Schedule 3.1(i) contains a complete list and summary description
of any pending or, to the knowledge of the Company, threatened proceeding
against or affecting the Company or any of its Subsidiaries, without regard to
whether it could, individually or in the aggregate, have a Material Adverse
Effect.
 
(j)   Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and, to the knowledge of the Company, 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 written 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 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 relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or
in the aggregate, have or result in a Material Adverse Effect.
 
(k)   Title to Assets. The Company and the Subsidiaries 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 the Subsidiaries and good and marketable title in
all personal property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all Liens, except
for Liens as 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 the Subsidiaries. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance.
 
(l)   Certain Fees. Except for the fees described in Schedule 3.1(l), all of
which are payable to registered broker-dealers, 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, and the
Company has not taken any action that would cause any Purchaser to be liable for
any such fees or commissions.
 
(m)   Private Placement. Neither the Company nor any Person acting on the
Company’s behalf has sold or offered to sell or solicited any offer to buy the
Securities by means of any form of general solicitation or advertising. Neither
the Company nor any of its Affiliates nor any Person acting on the Company's
behalf has, directly or indirectly, at any time within the past six months, made
any offer or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability of the
exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Securities as contemplated hereby or
(ii) cause the offering of the Securities pursuant to the Transaction Documents
to be integrated with prior offerings by the Company for purposes of any
applicable law, regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of any Trading Market.
Assuming the accuracy of the Purchasers representations and warranties set forth
in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The Company is not, and is not an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended. The Company is not a United States real property holding corporation
within the meaning of the Foreign Investment in Real Property Tax Act of 1980.
 
(n)   Listing and Maintenance Requirements. The Company has not, in the two
years preceding the date hereof, received notice (written or oral) 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.
 
(o)   Registration Rights. Except as described in Schedule 3.1(o), the Company
has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
 
(p)   Application of Takeover Protections. There is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
charter documents or the laws of its state of incorporation that is or could
become applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
 
(q)   Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Purchasers or their agents or
counsel with any information that constitutes or might constitute material,
nonpublic information (other than the existence of the transactions contemplated
by this Agreement, which shall be disclosed in the press release issued pursuant
to Section 4.6). The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. To our knowledge, all disclosure materials
provided to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company are true and correct 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 the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed. The Company acknowledges and
agrees that (i) no Purchaser makes or has made any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 or (ii) any statement, commitment or
promise to the Company or, to its knowledge, any of its representatives which is
or was an inducement to the Company to enter into this Agreement or otherwise.
 
(r)   Acknowledgment Regarding Purchasers' Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is 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 advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
 
(s)   Patents and Trademarks. The Company and the Subsidiaries 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.
 
(t)   Insurance. The Company and the Subsidiaries 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
the Subsidiaries are engaged. 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.
 
(u)   Regulatory Permits. The Company and the Subsidiaries 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
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.
 
(v)   Transactions With Affiliates and Employees. Except as set forth in SEC
Reports filed at least ten days prior to the date hereof, 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.
 
(w)   Form SB-2 Eligibility. The Company is eligible to register the resale of
its Common Stock for resale by the Purchasers under Form SB-2 promulgated under
the Securities Act.
 
(x)   Solvency. Based on the financial condition of the Company as of the
Closing Date, (i) the Company’s fair saleable value of its 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 and capital availability thereof; 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).
 
(y)   Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles 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.
 
(z)   Sarbanes-Oxley Act. The Company is in compliance with applicable
requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in effect as of the date of
this Agreement, except where such noncompliance could not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect.
 

3.2   Representations and Warranties of the Purchasers. Each Purchaser hereby,
as to itself only and for no other Purchaser, represents and warrants to the
Company as follows:
 
(a)   Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The purchase by such Purchaser of the Shares and the Warrants hereunder has been
duly authorized by all necessary action on the part of such Purchaser. This
Agreement has been duly executed and delivered by such Purchaser and constitutes
the valid and binding obligation of such Purchaser, enforceable against it in
accordance with its terms.
 
(b)   No Conflicts. The execution and delivery of the Transaction Documents by
the Purchaser and the consummation by such Purchaser of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of such Purchaser’s certificate or articles of incorporation,
bylaws or other organizational or charter documents; (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, 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 or other
understanding to which such Purchaser is a party or by which any property or
asset of such Purchaser is bound or affected, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which such Purchaser is
subject.
 
(c)   Purchaser Status. At the time such Purchaser was offered the Shares and
the Warrants, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the Securities Act.
 
(d)   Experience of such Purchaser. Such Purchaser, 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. Such Purchaser 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.
 
3.3   Schedules. For purposes of the Transaction Documents, disclosure of
information in the Schedules, regardless of section references or headings,
shall automatically constitute disclosure where such disclosure is applicable or
may be necessary.
 

ARTICLE IV  
OTHER AGREEMENTS OF THE PARTIES
 
4.1   Transfer Restrictions.
 
(a)   Securities may only be disposed of pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company or
pursuant to Rule 144, except as otherwise set forth herein, the Company may
require the transferor to provide to the Company an opinion of counsel selected
by the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, any transfer of
Securities by a Purchaser to an Affiliate of such Purchaser, provided that the
transferee certifies to the Company that it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act.
 
(b)   The Purchasers agree to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on any certificate evidencing
Securities:
 
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE] HAVE [NOT] 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 COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE
FOREGOING, 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 OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
 
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, (ii) following any sale
of such Securities pursuant to Rule 144, (iii) if such Securities are eligible
for sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue the letter included in the Transfer
Agent Instructions to the Company's transfer agent on the Effective Date.
Following the Effective Date or at such earlier time as a legend is no longer
required for certain Securities, the Company will cause its transfer agent, no
later than three Trading Days following the delivery by a Purchaser to the
Company or the Company’s transfer agent of a legended certificate representing
such Securities, to deliver or cause to be delivered to such Purchaser a
certificate representing such Securities that is free from all restrictive and
other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
 
(c)   The Company acknowledges and agrees that a Purchaser may from time to time
pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties that are accredited investors.
Such a pledge or transfer would not be subject to approval of the Company and no
legal opinion of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such pledge. At
the appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.
 
4.2   Furnishing of Information. As long as any Purchaser 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 date hereof pursuant to the Exchange Act. Upon the request of
any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers 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 to
satisfy the provisions of Rule 144 applicable to the issuer of securities
relating to transactions for the sale of securities pursuant to Rule 144.
 
4.3   Integration. The Company shall not, and shall use its commercially
reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
to the Purchasers or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market.
 
4.4   Reservation and Listing of Securities.
 
(a)   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. In the event that at any time the then authorized shares of Common
Stock are insufficient for the Company to satisfy its obligations in full under
the Transaction Documents, the Company shall promptly take such actions as may
be required to increase the number of authorized shares. The Company shall in
the time and manner required by its Trading Market take any steps necessary to
cause such shares of Common Stock to be approved for listing on its Trading
Market as soon as possible.
 
(b)   In the case of a breach by the Company of Section 4.4(a), in addition to
the other remedies available to the Purchasers, the Purchasers shall have the
right to require the Company to either: (i) use its commercially reasonable
efforts to obtain the required stockholder approval necessary to permit the
issuance of such shares of Common Stock as soon as is possible, but in any event
not later than the 60th day after such notice, or (ii) within five Trading Days
after delivery of a written notice, pay cash to such Purchaser, as liquidated
damages and not as a penalty, in an amount equal to the number of shares of
Common Stock not issuable by the Company times 115% of the average Closing Price
over the five Trading Days immediately prior to the date of such notice or, if
greater, the five Trading Days immediately prior to the date of payment (the
“Cash Amount”). If the exercising or Purchaser elects the first option under the
preceding sentence and the Company fails to obtain the required stockholder
approval on or prior to the 60th day after such notice, then within three
Trading Days after such 60th day, the Company shall pay the Cash Amount to such
Purchaser, as liquidated damages and not as penalty.
 
4.5   Subsequent Placements.
 
(a)   From the date hereof until the Effective Date, the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition of) any of its or the Subsidiaries’ equity or equity
equivalent securities, including without limitation any debt, preferred stock or
other instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for Common Stock
or Common Stock Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a “Subsequent Placement”).
 
(b)   From the Effective Date until 30 Trading Days after the Effective Date
(the “Blockout Period”), the Company will not, directly or indirectly, effect
any Subsequent Placement except as set forth in Section 4.5(e).
 
(c)    The Blockout Period set forth in Section 4.5(b) above shall be extended
for the number of Trading Days during such period in which (i) trading in the
Common Stock is suspended by any Trading Market, (ii) the Registration Statement
is not effective, or (iii) the prospectus included in the Registration Statement
may not be used by the Purchasers for the resale of Registrable Securities
thereunder.
 
(d)   From the end of the Blockout Period until the one year anniversary
thereof, the Company will not, directly or indirectly, effect any Subsequent
Placement unless the Company shall have first complied with this Section 4.5(d).
 
(i)   The Company shall deliver to each Purchaser a written notice (the "Offer")
of any proposed or intended issuance or sale or exchange of the securities being
offered (the “Offered Securities”) in a Subsequent Placement, which Offer shall
(w) identify and describe the Offered Securities, (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number
or amount of the Offered Securities to be issued, sold or exchanged, (y)
identify the Persons or entities to which or with which the Offered Securities
are to be offered, issued, sold or exchanged and (z) offer to issue and sell to
or exchange with each Purchaser (A) a pro rata portion of the Offered Securities
based on such Purchaser’s pro rata portion of the aggregate purchase price paid
by the Purchasers for all of the Shares purchased hereunder (the "Basic
Amount"), and (B) with respect to each Purchaser that elects to purchase its
Basic Amount, any additional portion of the Offered Securities attributable to
the Basic Amounts of other Purchasers as such Purchaser shall indicate it will
purchase or acquire should the other Purchasers subscribe for less than their
Basic Amounts (the “Undersubscription Amount”).
 
(ii)   To accept an Offer, in whole or in part, a Purchaser must deliver a
written notice to the Company prior to the end of the ten (10) Trading Day
period of the Offer, setting forth the portion of the Purchaser's Basic Amount
that such Purchaser elects to purchase and, if such Purchaser shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that
such Purchaser elects to purchase (in either case, the "Notice of Acceptance").
If the Basic Amounts subscribed for by all Purchasers are less than the total of
all of the Basic Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, that if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), each Purchaser who has subscribed for any Undersubscription Amount
shall be entitled to purchase on that portion of the Available Undersubscription
Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of
all Purchasers that have subscribed for Undersubscription Amounts, subject to
rounding by the Board of Directors to the extent its deems reasonably necessary.
 
(iii)   The Company shall have five (5) Trading Days from the expiration of the
period set forth in Section 4.5(d)(ii) above to issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has not
been given by the Purchasers (the "Refused Securities"), but only to the
offerees described in the Offer and only upon terms and conditions (including,
without limitation, unit prices and interest rates) that are not more favorable
to the acquiring Person or Persons or less favorable to the Company than those
set forth in the Offer.
 
(iv)   In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4.5(d)(iii) above), then each Purchaser may, at its sole option and in
its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that the Purchaser elected to
purchase pursuant to Section 4.5(d)(ii) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Purchasers pursuant to Section 4.5(c)(ii)
above prior to such reduction) and (ii) the denominator of which shall be the
original amount of the Offered Securities. In the event that any Purchaser so
elects to reduce the number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in accordance with Section
4.5(d)(i) above.
 
(v)   Upon the closing of the issuance, sale or exchange of all or less than all
of the Refused Securities, the Purchasers shall acquire from the Company, and
the Company shall issue to the Purchasers, the number or amount of Offered
Securities specified in the Notices of Acceptance, as reduced pursuant to
Section 4.5(d)(iv) above if the Purchasers have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Purchasers of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Purchasers of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Purchasers and
their respective counsel. Notwithstanding anything to the contrary contained in
this Agreement, if the Company does not consummate the closing of the issuance,
sale or exchange of all or less than all of the Refused Securities within seven
(7) Trading Days of the expiration of the period set forth in Section
4.5(d)(ii), the Company shall issue to the Purchasers the number or amount of
Offered Securities specified in the Notices of Acceptance, as reduced pursuant
to Section 4.5(d)(iv) above if the Purchasers have so elected, upon the terms
and conditions specified in the Offer.
 
(vi)   Any Offered Securities not acquired by the Purchasers or other persons in
accordance with Section 4.5(d)(iii) above may not be issued, sold or exchanged
until they are again offered to the Purchasers under the procedures specified in
this Agreement.
 
(vii)   Notwithstanding anything to the contrary in this Section 4.5 and unless
otherwise agreed to by the Purchasers, the Company shall either confirm in
writing to the Purchasers that the transaction with respect to the Subsequent
Placement has been abandoned or shall publicly disclose its intention to issue
the Offered Securities, in either case in such a manner such that the Purchasers
will not be in possession of material non-public information, by the 10th
Trading Day following delivery of the Offer notice. If by the 10th Trading Day
following the Offer notice no public disclosure regarding a transaction with
respect to the Offered Securities has been made, and no notice regarding the
abandonment of such transaction has been received by the Purchasers, such
transaction shall be deemed to have been abandoned and the Purchasers shall not
be deemed to be in possession of any material non-public information with
respect to the Company. Should the Company decide to pursue such transaction
with respect to the Offered Securities, the Company shall provide each Purchaser
with another Offer notice and each Purchaser will again have the right of
participation set forth in this Section 4.5. The Company shall not be permitted
to deliver more than four such Offer notices to the Purchasers in any 12 month
period.
 
(e)   The restrictions contained in paragraphs (a), (b) and (d) of this Section
4.5 shall not apply to Excluded Stock.
 
4.6   Securities Laws Disclosure; Publicity. The Company shall, on or before
8:30 a.m., New York City time on March 12, 2007, issue a press release
acceptable to the Purchasers disclosing all material terms of the transactions
contemplated hereby. Prior to the second Business Day after the Closing Date,
the Company shall file a Current Report on Form 8-K with the Commission (the
“8-K Filing”) describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to such Current Report on Form
8-K this Agreement and the form of Warrant, in the form required by the Exchange
Act. Thereafter, the Company shall timely file any filings and notices required
by the Commission or applicable law with respect to the transactions
contemplated hereby and provide copies thereof to the Purchasers promptly after
filing. Except with respect to the 8-K Filing and the press release referenced
above (a copy of which will be provided to the Purchasers for their review as
early as practicable prior to its filing), the Company shall, at least two
Trading Days prior to the filing or dissemination of any disclosure required by
this paragraph that does not contain any material non-public information,
provide a copy thereof to the Purchasers for their review. The Company and the
Purchasers shall consult with each other in issuing any press releases or
otherwise making public statements or filings and other communications with the
Commission or any regulatory agency or Trading Market with respect to the
transactions contemplated hereby, and neither party shall issue any such press
release or otherwise make any such public statement, filing or other
communication without the prior consent of the other, except if such disclosure
is required by law, in which case the disclosing party shall promptly provide
the other party with prior notice of such public statement, filing or other
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by law or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents not to, provide any
Purchaser with any material nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing without the
express written consent of such Purchaser. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Purchaser shall
have the right to make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material nonpublic information
without the prior approval by the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees or agents. No Purchaser shall
have any liability to the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents for any such
disclosure. Subject to the foregoing, neither the Company nor any Purchaser
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of any Purchaser, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations (provided that in the case
of clause (i) each Purchaser shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
 
4.7   Use of Proceeds. Except as set forth on Schedule 4.7, the Company shall
use the net proceeds from the sale of the Securities hereunder for working
capital purposes and other general corporate purposes, but not (i) for the
satisfaction of any portion of the Company’s debt (other than payment of trade
payables and accrued expenses in the ordinary course of the Company’s business
and consistent with past practice), (ii) to redeem any Company equity or
equity-equivalent securities, or (iii) to settle any outstanding litigation.
 
4.8   Reimbursement. If any Purchaser or any of its Affiliates or any officer,
director, partner, controlling Person, employee or agent of a Purchaser or any
of its Affiliates (a “Related Person”) becomes involved in any capacity in any
Proceeding brought by or against any Person in connection with or as a result of
the transactions contemplated by the Transaction Documents, the Company will
indemnify and hold harmless such Purchaser or Related Person for its reasonable
legal and other expenses (including the costs of any investigation, preparation
and travel) and for any Losses incurred in connection therewith, as such
expenses or Losses are incurred, excluding only Losses that result directly from
such Purchaser’s or Related Person’s gross negligence or willful misconduct. In
addition, the Company shall indemnify and hold harmless each Purchaser and
Related Person from and against any and all Losses, as incurred, arising out of
or relating to any breach by the Company of any of the representations,
warranties or covenants made by the Company in this Agreement or any other
Transaction Document, or any allegation by a third party that, if true, would
constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. If the Company breaches its obligations under any Transaction
Document, then, in addition to any other liabilities the Company may have under
any Transaction Document or applicable law, the Company shall pay or reimburse
the Purchasers on demand for all costs of collection and enforcement (including
reasonable attorneys fees and expenses). Without limiting the generality of the
foregoing, the Company specifically agrees to reimburse the Purchasers on demand
for all costs of enforcing the indemnification obligations in this paragraph. To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 4.8
shall be the same as those set forth in Section 6.4(c) below.
 
4.9   Acknowledgment of Dilution. The Company acknowledges that the issuance of
the Securities (including the Underlying Shares) will result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including without limitation its obligation to
issue the Securities (including the Underlying Shares) pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of the effect of
any such dilution or any claim that the Company may have against any Purchaser.
Anything in this Agreement or elsewhere herein to the contrary notwithstanding,
it is understood and agreed by the Company (i) that none of the Purchasers have
been asked to agree, nor has any Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term; (ii) that future open market or other transactions by
any Purchaser, including short sales, and specifically including, without
limitation, short sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly traded securities; (iii) that any
Purchaser, and counter parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock; and (iv) that each Purchaser shall not be deemed
to have any affiliation with or control over any arm’s length counter party in
any “derivative” transaction.
 

ARTICLE V  
CONDITIONS

5.1   Conditions Precedent to the Obligations of the Purchasers. The obligation
of each Purchaser to acquire Securities at the Closing is subject to the
satisfaction or waiver by such Purchaser, at or before the Closing, of each of
the following conditions:
 
(a)   Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing as though made on and as of such
date;
 
(b)   Performance. The Company and each other Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing;
 
(c)   No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents;
 
(d)   Adverse Changes. Since the date of execution of this Agreement, no event
or series of events shall have occurred that reasonably would be expected to
have or result in a Material Adverse Effect; and
 
(e)   No Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day solely
to permit dissemination of material information regarding the Company) at any
time since the date of execution of this Agreement, and the Common Stock shall
have been at all times since such date listed for trading on an Eligible Market;
 

5.2   Conditions Precedent to the Obligations of the Company. The obligation of
the Company to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company, at or before the Closing, of each of the following
conditions:
 
(a)   Representations and Warranties. The representations and warranties of the
Purchasers contained herein shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made on and as of
such date;
 
(b)   Performance. The Purchasers shall have performed, satisfied and complied
in all material respects with all covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Purchasers at or prior to the Closing; and
 
(c)   No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents.
 
ARTICLE VI  
REGISTRATION RIGHTS
 
6.1   Shelf Registration
 
(a)   As promptly as possible, and in any event on or prior to the Filing Date,
the Company shall prepare and file with the Commission a “Shelf” Registration
Statement covering the resale of all Registrable Securities for an offering to
be made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on Form SB-2) and shall contain (except if otherwise directed by the
Purchasers) the “Plan of Distribution” attached hereto as Exhibit C.
 
(b)   The Company shall use its commercially reasonable efforts to cause the
Registration Statement to be declared effective by the Commission as promptly as
possible after the filing thereof, but in any event prior to the Required
Effectiveness Date, and shall use its commercially reasonable efforts to keep
the Registration Statement continuously effective under the Securities Act until
the earlier of (i) the second anniversary of the Effective Date, (ii) the date
when all Registrable Securities covered by such Registration Statement have been
sold publicly, or (iii) the date on which the Registrable Securities are
eligible for sale without registration pursuant to subparagraph (k) of Rule 144
(the “Effectiveness Period”). The Company shall notify each Purchaser in writing
promptly (and in any event within one Business Day) after receiving notification
from the Commission that the Registration Statement has been declared effective.
 
(c)   As promptly as possible, and in any event no later than the Post-Effective
Amendment Filing Deadline, the Company shall prepare and file with the
Commission a Post-Effective Amendment. The Company shall use its commercially
reasonable efforts to cause the Post-Effective Amendment to be declared
effective by the Commission as promptly as possible after the filing thereof,
but in any event prior to the 15th Trading Day following the Post-Effective
Amendment Filing Deadline. The Company shall notify each Purchaser in writing
promptly (and in any event within one Business Day) after receiving notification
from the Commission that the Post-Effective Amendment has been declared
effective.
 
(d)   If: (i) any Registration Statement is not filed on or prior to the Filing
Date or a Post-Effective Amendment is not filed on or prior to the
Post-Effective Amendment Filing Deadline (if the Company files such Registration
Statement or amendment without affording the Purchasers the opportunity to
review and comment on the same as required by Section 6.2(a) hereof, the Company
shall not be deemed to have satisfied this clause (i)), or (ii) the Company
fails to file with the Commission a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five Trading Days after
the date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that a Registration Statement will not be “reviewed,”
or will not be subject to further review, or (iii) the Company fails to respond
to any comments made by the Commission within 10 Trading Days after the receipt
of such comments, or (iv) a Registration Statement filed hereunder is not
declared effective by the Commission by the Required Effectiveness Date or a
Post-Effective Amendment is not declared effective on or prior to the 15th
Trading Day following the Post-Effective Amendment Filing Deadline, or (v)
except as provided in Section 6.1(g), after a Registration Statement is filed
with and declared effective by the Commission, such Registration Statement
ceases to be effective as to all Registrable Securities to which it is required
to relate at any time prior to the expiration of the Effectiveness Period
without being succeeded within 10 Trading Days by an amendment to such
Registration Statement or by a subsequent Registration Statement filed with and
declared effective by the Commission, or (vi) except as provided in Section
6.1(g), an amendment to a Registration Statement is not filed by the Company
with the Commission within ten Trading Days after the Commission’s having
notified the Company that such amendment is required in order for such
Registration Statement to be declared effective, or (vii) the Common Stock is
not listed or quoted, or is suspended from trading on its Trading Market for a
period of three Trading Days (which need not be consecutive Trading Days), or
(viii) the exercise rights of the Purchasers pursuant to the Warrants are
suspended for any reason (any such failure or breach being referred to as an
“Event,” and for purposes of clause (i), (iv) or (viii) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five Trading
Day period is exceeded, or for purposes of clauses (iii), (v) or (vi) the date
which such ten Trading Day-period is exceeded, or for purposes of clause (vii)
the date on which such three Trading Day period is exceeded, being referred to
as “Event Date”), then: (x) on each such Event Date the Company shall pay to
each Purchaser an amount in cash, as partial liquidated damages and not as a
penalty, equal to 1% of the aggregate purchase price paid by such Purchaser
pursuant to this Agreement; and (y) on each monthly anniversary of each such
Event Date thereof (if the applicable Event shall not have been cured by such
date) until the applicable Event is cured, the Company shall pay to each
Purchaser an amount in cash, as partial liquidated damages and not as a penalty,
equal to 1% of the aggregate purchase price paid by such Purchaser pursuant to
the Purchase Agreement; provided, however the maximum aggregate amount that may
be assessed under this Section 6.1(d) for all Events shall not exceed 10% of the
aggregate purchase price paid by such Purchaser pursuant to this Agreement. Such
payments shall be in partial compensation to the Purchasers and shall not
constitute the Purchaser’s exclusive remedy for such events. If the Company
fails to pay any liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest thereon at a
rate of 18% per annum (or such lesser maximum amount that is permitted to be
paid by applicable law) to the Purchaser, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. Notwithstanding anything herein to the contrary, to the extent
that the registration of any or all of the Registrable Securities by the Company
on a registration statement is prohibited (the “Non-Registered Shares”) as a
result of rules, regulations, positions or releases issued or actions taken by
the Commission pursuant to its authority with respect to Rule 415 and the
Company has registered at such time the maximum number of Registrable Securities
permissible upon consultation with the Commission, then the liquidated damages
described in this Section 6.1(d) shall not be applicable to such Non-Registered
Shares.
 
(e)   The Company shall not, prior to the Effective Date of the Registration
Statement, prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others (other than
as contemplated in the Transaction Documents) under the Securities Act of any of
its equity securities.
 
(f)   If the Company issues to the Purchasers any Common Stock pursuant to the
Transaction Documents that is not included in the initial Registration
Statement, then the Company shall file an additional Registration Statement
covering such number of shares of Common Stock on or prior to the Filing Date
and shall use its commercially reasonable efforts to cause such additional
Registration Statement to become effective by the Commission.
 
(g)   Suspension Period. Notwithstanding anything in this Agreement to the
contrary, after 60 consecutive Trading Days of continuous effectiveness of the
initial Registration Statement filed and declared effective pursuant to this
Agreement, the Company may, by written notice to the Purchasers, suspend sales
under a Registration Statement after the Effective Date thereof and/or require
that the Purchasers immediately cease the sale of shares of Common Stock
pursuant thereto and/or defer the filing of any subsequent Registration
Statement if the Company is engaged in a material merger, acquisition or sale
and the Board of Directors determines in good faith, by appropriate resolutions,
that, as a result of such activity, (A) it would be materially detrimental to
the Company (other than as relating solely to the price of the Common Stock) to
file a Registration Statement at such time and (B) it is in the best interests
of the Company to defer proceeding with such registration at such time. Upon
receipt of such notice, each Purchaser shall immediately discontinue any sales
of Registrable Securities pursuant to such registration until such Purchaser has
received copies of a supplemented or amended Prospectus or until such Purchaser
is advised in writing by the Company that the then-current Prospectus may be
used and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus. In no
event, however, shall this right be exercised to suspend sales beyond the period
during which (in the good faith determination of the Company’s Board of
Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company’s rights under this Section 6.1(g) may
not be exercised more than (2) times or 30 days in the aggregate in any twelve
month period; provided, further, that no such suspension shall be permitted for
more than twenty (20) consecutive days, arising out of the same set of facts,
circumstances or transactions. Immediately after the end of any suspension
period under this Section 6.1(g), the Company shall take all necessary actions
(including filing any required supplemental prospectus) to restore the
effectiveness of the applicable Registration Statement and the ability of the
Purchasers to publicly resell their Registrable Securities pursuant to such
effective Registration Statement.
 
6.2   Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
 
(a)   Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to each Purchaser and any
counsel designated by any Purchaser (each, a “Purchaser Counsel”, and Iroquois
Master Fund Ltd. has initially designated Malhotra & Associates LLP “LP
Counsel”) copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of each Purchaser and Purchaser Counsel upon their
request and on a confidential basis strictly in accordance with Regulation FD
promulgated pursuant to the Exchange Act, and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file a Registration Statement or any such
Prospectus or any amendments or supplements thereto to which Purchasers holding
a majority of the Registrable Securities shall reasonably object.
 
(b)   (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as to the applicable Registrable Securities for
the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Purchasers true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Purchasers thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented
 
(c)   Notify the Purchasers of Registrable Securities to be sold and Purchaser
Counsel as promptly as reasonably possible, and (if requested by any such
Person) confirm such notice in writing no later than one Trading Day thereafter,
of any of the following events: (i) the Commission notifies the Company whether
there will be a “review” of any Registration Statement; (ii) the Commission
comments in writing on any Registration Statement (in which case the Company
shall deliver to each Purchaser a copy of such comments and of all written
responses thereto); (iii) any Registration Statement or any post-effective
amendment is declared effective; (iv) the Commission or any other Federal or
state governmental authority requests any amendment or supplement to any
Registration Statement or Prospectus or requests additional information related
thereto; (v) the Commission issues any stop order suspending the effectiveness
of any Registration Statement or initiates any Proceedings for that purpose;
(vi) the Company receives notice of any suspension of the qualification or
exemption from qualification of any Registrable Securities for sale in any
jurisdiction, or the initiation or threat of any Proceeding for such purpose; or
(vii) the financial statements included in any Registration Statement become
ineligible for inclusion therein or any statement made in any Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
 
(d)   Use its commercially reasonable efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
any Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
 
(e)   Furnish to each Purchaser and Purchaser Counsel, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
 
(f)   Promptly deliver to each Purchaser and Purchaser Counsel, without charge,
as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
 
(g)    (i) In the time and manner required by each Trading Market, prepare and
file with such Trading Market an additional shares listing application covering
all of the Registrable Securities; (ii) take all steps necessary to cause such
Registrable Securities to be approved for listing on each Trading Market as soon
as possible thereafter; (iii) provide to the Purchasers evidence of such
listing; and (iv) maintain the listing of such Registrable Securities on each
such Trading Market or another Eligible Market.
 
(h)   Prior to any public offering of Registrable Securities, use its reasonable
commercially reasonable efforts to register or qualify or cooperate with the
selling Purchasers and each applicable Purchaser Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Purchaser requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement.
 
(i)   Cooperate with the Purchasers to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement, of all restrictive legends, and
to enable such Registrable Securities to be in such denominations and registered
in such names as any such Purchasers may request.
 
(j)   Upon the occurrence of any event described in Section 6.2(c)(vii), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an 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,
in the light of the circumstances under which they were made, not misleading.
 
(k)   Cooperate with any due diligence investigation undertaken by the
Purchasers in connection with the sale of Registrable Securities, including,
without limitation, by making available any documents and information; provided
that the Company will not deliver or make available to any Purchaser material,
nonpublic information unless such Purchaser specifically requests in advance to
receive material, nonpublic information in writing.
 
(l)   If Holders of a majority of the Registrable Securities being offered
pursuant to a Registration Statement select underwriters for the offering, the
Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, by
providing customary legal opinions, comfort letters and indemnification and
contribution obligations.
 
(m)   Comply with all applicable rules and regulations of the Commission.
 

6.3   Registration Expenses. The Company shall pay (or reimburse the Purchasers
for) all fees and expenses incident to the performance of or compliance with
this Agreement by the Company, including without limitation (a) all registration
and filing fees and expenses, including without limitation those related to
filings with the Commission, any Trading Market and in connection with
applicable state securities or Blue Sky laws, (b) printing expenses (including
without limitation expenses of printing certificates for Registrable Securities
and of printing prospectuses requested by the Purchasers), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel for the
Company, (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the Trading
Market.
 
6.4   Indemnification
 
(a)   Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Purchaser, the
officers, directors, partners, members, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Purchaser
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, partners, members, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out of
or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. The
Company shall notify the Purchasers promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
 
(b)   Indemnification by Purchasers. Each Purchaser shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
 
(c)   Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
 
An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (iii) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
 
All fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section) shall be
paid to the Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
 
(d)   Contribution. If a claim for indemnification under Section 6.4(a) or (b)
is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
 
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6.4(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
 
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
 
6.5   Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
“Advice”) by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders and stop transfer instructions to enforce the provisions
of this paragraph.
 
6.6   No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Purchasers in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
 
6.7   Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
 
ARTICLE VII  
MISCELLANEOUS
 
7.1   Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).
 
7.2   Fees and Expenses. At the Closing, the Company shall pay to Iroquois
Master Fund Ltd. an aggregate of $30,000 for their legal fees and expenses
incurred in connection with the preparation and negotiation of this Agreement,
of which amount $20,000 has been previously paid by the Company. In lieu of the
foregoing remaining payment, Iroquois Master Fund Ltd. may retain such amount at
the Closing. Except as expressly set forth in the Transaction Documents to the
contrary, each party shall pay the fees and expenses of its 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 this Agreement. The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
the Securities.
 
7.3   Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
 
7.4   Notices. 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 at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The
addresses and facsimile numbers for such notices and communications are those
set forth on the signature pages hereof, or such other address or facsimile
number as may be designated in writing hereafter, in the same manner, by any
such Person.
 
7.5   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 Purchasers holding a majority of the Shares 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. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Purchasers under Article VI and that does not directly or indirectly
affect the rights of other Purchasers may be given by Purchasers holding at
least a majority of the Registrable Securities to which such waiver or consent
relates.
 
7.6   Construction. 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. 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.
 
7.7   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 the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Purchasers.” Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.
 
7.8   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 that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
 
7.9   Governing Law; Venue; Waiver Of Jury Trial. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY IRREVOCABLY SUBMIT 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 BROUGHT BY
THE COMPANY OR ANY PURCHASER HEREUNDER, 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
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. 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 COMPANY AND PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.
 
7.10   Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and/or exercise of
the Securities, as applicable.
 
7.11   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, 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.
 
7.12   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.
 
7.13   Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
 
7.14   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.
 
7.15   Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages each of the Purchasers
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.
 
7.16   Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Warrants or any Purchaser
enforces or exercises its rights hereunder or 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 by 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.
 
7.17   Usury. To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will resist any
and all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election.
 
7.18   Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
 
7.19   Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. The decision of each Purchaser to purchase Securities
pursuant to this Agreement has been made by such Purchaser independently of any
other Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or of the Subsidiary which may have been made or given
by any other Purchaser or by any agent or employee of any other Purchaser, and
no Purchaser or any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. The
Company hereby confirms that it understands that the Purchasers are not acting
as a “group” as that term is used in Section 13(d) of the Exchange Act. Each
Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no other
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser represents
that it has been represented by its own separate legal counsel in its review and
negotiations of this Agreement and the Transaction Documents and each party
represents and confirms that Malhotra & Associates LLP represents only Iroquois
Master Fund Ltd. in connection with this Agreement and the other Transaction
Documents.
 

[SIGNATURE PAGES TO FOLLOW]

 

securities purchase agreement.DOC
 
 

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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.
 
Lighting Science Group Corporation
 
By: __________________________
Name: 
Title: 
 
Address for Notice:
 
Lighting Science Group Corporation
 
2100 McKinney Avenue, Suite 1555
 
Dallas, Texas 75201
 
Facsimile No.: 214.382.3631
 
Telephone No.: 214.382.3630
 
Attn: Mr. Ron Lusk, Chairman & CEO
 

 
With a copy to: 
Haynes and Boone, LLP
901 Main Street
3100 Bank of America Plaza
Dallas, Texas 75202
Facsimile No.: 214.200.0577
Telephone No.: 214.651.6545
Attn: Greg. R. Samuel, Esq.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
 

 
 

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IROQUOIS MASTER FUND LTD.
 
By: __________________________
Name: 
Title:
 
Address for Notice:

Iroquois Master Fund Ltd.
641 Lexington Ave, 26th Floor
New York, NY 10022
Facsimile No.: (212) 207-3452
Telephone No.: (212) 974-3070
Attn: Joshua Silverman

With a copy to:
Malhotra & Associates LLP
11 Penn Plaza, 5th Floor
New York, New York 10001
Facsimile No.: (212) 504-0863
Telephone No.: (212) 593-2284
Attn: Gary Malhotra, Esq.

 
 
 

 
 

--------------------------------------------------------------------------------

 

_______________________________________
 
(Name of Purchaser)      
 
By: __________________________
Name: 
Title: 
 
Address for Notice:

___________________
___________________
___________________
Facsimile No.: ___________________
Telephone No.: ___________________
Attn: ___________________
 

 

 
 

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Exhibits:
 
A-1  Form of Warrant A
A-2 Form of Warrant B
A-3 Form of Additional Warrant
B  Form of Opinion of Company Counsel
C  Plan of Distribution
D  Form of Transfer Agent Instructions
E  Lock-Up Letter

 
 

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Schedule A
 
 
 
 
 
 
Purchasers
 
 
 
 
 
Units
 
 
 
 
 
Warrant A Shares
 
 
 
 
 
Warrant B Shares
 
 
 
 
Additional Warrant Shares
 
 
 
 
Purchase Price
 
Iroquois Master Fund, Ltd.