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Exhibit 10.3
 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of May 5,
2014, between World Surveillance Group Inc., a Delaware corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and permitted assigns, a “Purchaser” and collectively,
the “Purchasers”).

PREAMBLE
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement (the “Offering”).
 
WHEREAS, the Purchaser acknowledges that the Company is simultaneously with the
Offering selling all of its capital stock in its subsidiary Lighter Than Air
Systems Corp. (the “LTAS Sale”).

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 Purchaser agree
as follows:
 
ARTICLE I.
DEFINITIONS
 
1.1          Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
 
 
“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 405 under the
Securities Act.

 “Board of Directors” means the board of directors of the Company.
 
“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 “Closing” means the Closing of the purchase and sale of the Securities pursuant
to Section 2.1.

“Closing Date” means the Closing Date and is the Trading Day on which all of the
Transaction Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay
the Subscription Amount at such Closing  and (ii) the Company’s obligations to
deliver the Securities to be issued and sold at such Closing, in each case, have
been satisfied or waived, but in no event later than the third Trading Day
following the date hereof in the case of the Closing.

“Commission” means the United States Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, $0.00001 par value, and
any other class of securities into which such securities may hereafter be
reclassified or changed.
 
 
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“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
  
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Exempt Issuance” means the issuance of (a) shares of Common Stock and options
to officers, employees, directors, consultants or partners of the Company that
have been approved by a majority of the independent members of the board of
directors of the Company, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder (subject to adjustment for forward
and reverse stock splits and the like that occur after the date hereof) and/or
other securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement, provided that
such securities and any term thereof have not been amended since the date of
this Agreement to increase the number of such securities or to decrease the
issue price, exercise price, exchange price or conversion price of such
securities and which securities and the principal terms thereof are described in
the SEC Reports, (c) securities in full or partial consideration in connection
with a strategic merger, acquisition, consolidation or purchase of substantially
all of the securities or assets of a corporation or other entity but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is
investing in securities, (d) securities in connection with strategic license
agreements and other partnering arrangements so long as such issuances are not
primarily for the purpose of raising capital, (e) securities issued in
settlement of Company matters, (f) securities issued as commissions pursuant to
distributor, finder, independent contractor or similar contracts, (g) securities
issued in other “non-capital raising transactions of the Company, and (h)
securities issued or issuable pursuant to this Agreement or upon exercise of
conversion of any such securities.
 
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 “G&M” means Grushko & Mittman, P.C., with offices located at 515 Rockaway
Avenue, Valley Stream, New York 11581, Fax: (212) 697-3575.
  
“Liens” means a lien, charge pledge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.

 “Permitted Indebtedness” means capital lease obligations and purchase money
indebtedness of up to $100,000, in the aggregate, incurred in connection with
the acquisition of capital assets and lease obligations with respect to newly
acquired or leased assets.

“Permitted Lien” means the individual and collective reference to the following:
(a) Liens for taxes, assessments and other governmental charges or levies not
yet due or Liens for taxes, assessments and other governmental charges or levies
being contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Company) have been
established in accordance with GAAP, (b) Liens imposed by law which were
incurred in the ordinary course of the business of the Company or any of its
Subsidiaries, such as suppliers’, vendors’, carriers’, warehousemen’s and
mechanics’ Liens, statutory workmen’s, repairmen’s and landlords’ Liens, and
other similar Liens arising in the ordinary course of the business of the
Company or any of its Subsidiaries, and which (x) do not individually or in the
aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business of the
Company and its consolidated Subsidiaries or (y) are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the property or
asset subject to such Lien, (c) Liens incurred prior to the Closing Date in
connection with Permitted Indebtedness, provided that such Liens are not secured
by assets of the Company or its Subsidiaries other than the assets so acquired
or leased, (e) non-exclusive licenses granted by the Company in respect of its
intellectual property, and (f) Liens disclosed on the Company Disclosure
Schedule or in the SEC Reports.

 
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“Purchase Price” equals $0.007 per share, subject to appropriate adjustment for
reverse and forward stock splits, stock dividends, stock combinations and other
similar transactions of the Common Stock that occur after the date of this
Agreement.
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.

 “Removal Date” means the date that all of the issued Shares have been sold
pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement
for the Company to be in compliance with the current public information
requirements under Rule 144 and without volume or manner-of-sale restrictions.
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
 
“SEC Reports” shall mean all reports, schedules, forms, statements and other
documents filed by the Company under the Securities Act and the Exchange Act
from time to time, including pursuant to Section 13(a) or 15(d) thereof,
including the exhibits thereto and documents incorporated by reference therein.

“Securities” means the Shares.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

“Securities Laws” means the securities laws of the United States or any state
thereof and the rules and regulations promulgated thereunder.
 
 “Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement, provided that any such share of Common Stock shall
not constitute a Share after such share has been irrevocably sold pursuant to an
effective registration statement under the Securities Act or pursuant to Rule
144 without further restrictions or conditions to transfer pursuant to Rule 144,
and provided further that Additional Shares shall constitute Shares only as
provided in Section 4.14.
 
 
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“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act. 

“Stock Option Plan” means the Stock Option Plan of the Company in effect as the
date of this Agreement, the principal terms of which have been disclosed in the
SEC Reports.
 
“Subscription Amount” means, as to each Purchaser at the Closing, the aggregate
amount to be paid for Shares purchased hereunder at the Closing as specified
below such Purchaser’s name on the signature page of this Agreement and next to
the heading “Subscription Amount,” in United States dollars and in immediately
available funds.
 
“Subsidiary” means any subsidiary of the Company as set forth in the SEC Reports
and shall, where applicable and with regard to future events, also include any
direct or indirect subsidiary of the Company formed or acquired after the date
hereof.

“Trading Day” means a day on which the principal Trading Market is open for
trading; provided, that in the event that the Common Stock is not listed or
quoted for trading on a Trading Market on the date in question, then Trading Day
shall mean a Business Day.
 
“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange, the OTC Bulletin Board or the OTC
Pink Marketplace (or any successors to any of the foregoing).
 
“Transaction Documents” means this Agreement and all exhibits and schedules
thereto and hereto and any other documents or agreements executed in connection
with the transactions contemplated hereunder.
 
“Transfer Agent” means American Stock Transfer and Trust, and any successor
transfer agent of the Company. 

 
ARTICLE II.
PURCHASE AND SALE
 
2.1           Closing.  On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and each of the Purchasers, severally and not jointly, agrees to purchase Shares
at the Purchase Price for an aggregate purchase price of $150,000 (such purchase
and sale being the “Closing”). Each Purchaser shall deliver to the the Company
such Purchaser’s Closing Subscription Amount as set forth on the signature page
hereto executed by such Purchaser by a wire transfer of immediately available
funds, and the Company shall, on the Closing Date, deliver to each Purchaser a
certificate or DRS Statement representing the number of Shares purchased by such
Purchaser at the Closing as determined pursuant to Section 2.2(a). The Company
and each Purchaser shall also deliver the other items set forth in Section 2.2
deliverable at the Closing. Upon satisfaction of the covenants and conditions
set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of G&M
or such other location as the parties shall mutually agree.  Notwithstanding
anything herein to the contrary, the Closing Date shall occur on or before May
16, 2014 (such outside date, “Termination Date”).

 
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2.2          Deliveries.
 
(a)           On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to the Purchaser the following:
 
(i)           (x) this Agreement duly executed by the Company; and
  
(ii)         a certificate or DRS Statement evidencing a number of Shares of
Common Stock equal to such Purchaser’s Closing Subscription Amount divided by
the Purchase Price registered in the name of such Purchaser.
 
(b)          On or prior to the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company the following:
 
(i)          this Agreement duly executed by such Purchaser; and
 
(ii)         such Purchaser’s Closing Subscription Amount by wire transfer to
the account of the Company set forth herein on Exhibit D.
  
2.3           Closing Conditions.
 
(a)           The obligations of the Company hereunder in connection with the
Closing, unless waived by the Company,  are subject to the following conditions
being met:
 
(i)          the accuracy in all material respects (determined without regard to
any materiality, Material Adverse Effect or other similar materiality qualifiers
therein) on the Closing Date of the representations and warranties of the
Purchasers contained herein (unless as of a specific date therein in which case
they shall be accurate as of such date);
 
(ii)         all obligations, covenants and agreements of each Purchaser under
this Agreement required to be performed at or prior to the Closing Date shall
have been performed in all material respects;
 
(iii)      the delivery by each Purchaser of the items set forth in Section
2.2(b) of this Agreement;

(iv)           the delivery by each Purchaser of executed signature pages to
this Agreement showing an agreement to purchase Shares hereunder with an
aggregate purchase price of $150,000 and the delivery to the Company of an
aggregate of $150,000 in corresponding Subscription Amounts from such Purchasers
in cash.
 
(b)             The respective obligations of a Purchaser hereunder in
connection with the Closing, unless waived by the Purchaser, are subject to the
following conditions being met:
 
(i)           the accuracy in all material respects (determined without regard
to any materiality, Material Adverse Effect or other similar materiality
qualifiers therein) on the Closing Date of the representations and warranties of
the Company contained herein (unless as of a specific date therein in which case
they shall be accurate as of such date);
 
 
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(ii)          all obligations, covenants and agreements of the Company under
this Agreement required to be performed at or prior to the Closing Date shall
have been performed in all material respects;
 
(iii)         the delivery by the Company of the items set forth in Section
2.2(a) of this Agreement; 

 (iv) the delivery by the Company of executed signature pages to this Agreement
showing an agreement to sell Shares hereunder with an aggregate purchase price
of $150,000 and the delivery to the Purchasers of certificates or DRS statements
evidencing a number of Shares of Common Stock equal to an aggregate of $150,000
in corresponding Subscription Amounts from the Purchasers.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.1          Representations and Warranties of the Company. Except as set forth
in the Disclosure Schedules and SEC Reports and except for the LTAS Sale, which
shall each qualify any representation or warranty made herein, the Company
hereby makes the following representations and warranties to each Purchaser as
of the Closing Date (unless as of a specific date therein):
 
(a) Organization, Standing and Power.  The Company is duly incorporated or
organized and validly existing under the laws of its state of incorporation and
has the corporate power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it to own,
lease or otherwise hold its properties and assets and to conduct its businesses
as presently conducted, other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, has not had and would not reasonably be expected to have a material
adverse effect on the Company, a material adverse effect on the ability of the
Company to perform its obligations under this Agreement or on the ability of the
Company to consummate the Transactions (a “Company Material Adverse
Effect”).  The Company is duly qualified to do business in each jurisdiction
where the nature of its business or its ownership or leasing of its properties
make such qualification necessary, except where the failure to so qualify would
not reasonably be expected to have a Company Material Adverse Effect.  The
Company certificate of incorporation and bylaws of the Company, each as amended
to the date of this Agreement are as set forth in the SEC Reports in the SEC
Reports and otherwise than stated therein, does not own, directly or indirectly,
any capital stock, membership interest, partnership interest, joint venture
interest or other equity interest in any person.
 
(b) Capital Structure.  The authorized capital structure of the Company is as
set forth in the SEC Reports.  All outstanding capital of the Company is duly
authorized, validly issued, fully paid and non assessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the applicable corporate laws of its state of incorporation, the Company Charter
Documents or any Contract (as defined in Section 3.1(d) to which the Company is
a party or otherwise bound.  No other capital stock of the Company is issued,
reserved for issuance or outstanding. There are no bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which holders of the Company’s capital stock may vote (“Voting Company
Debt”).  Except as otherwise set forth herein or in the SEC Reports, as of the
date of this Agreement, there are no options, warrants, rights, convertible or
exchangeable securities, “phantom” stock rights, stock appreciation rights,
stock-based performance units, commitments, Contracts, arrangements or
undertakings of any kind to which the Company is a party or by which the Company
is bound (i) obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock or other equity interest in, the Company or any Voting
Company Debt, (ii) obligating the Company to issue, grant, extend or enter into
any such option, warrant, call, right, security, commitment, Contract,
arrangement or undertaking or (iii) that give any person the right to receive
any economic benefit or right similar to or derived from the economic benefits
and rights occurring to holders of the Company Shares of the Company.
 
 
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(c) Authority; Execution and Delivery; Enforceability.  The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the Transactions.  The execution and delivery by the Company
of this Agreement and the consummation by the Company of the Transactions have
been duly authorized and approved by the Board of Directors of the Company and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Transactions.  When executed and delivered,
this Agreement will be enforceable against the Company in accordance with its
terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
 
(d) No Conflicts; Consents.
 
(1) The execution and delivery by the Company of this Agreement does not, and
the consummation of the Transactions and compliance with the terms hereof and
thereof will not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to loss
of a material benefit under, or result in the creation of any Lien upon any of
the properties or assets of the Company under any provision of (i) the Company
Charter Documents, (ii) any material contract, lease, license, indenture, note,
bond, agreement, permit, concession, franchise or other instrument (a
“Contract”) to which the Company is a party or by which any of its respective
properties or assets is bound or (iii) subject to the filings and other matters
referred to in Section 3.1(d)(2), any material judgment, order or decree
(“Judgment”) or material Law applicable to the Company or its properties or
assets, other than, in the case of clauses (ii) and (iii) above, any such items
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
 
(2) No material consent, approval, license, permit, order or authorization
(“Consent”) of, or registration, declaration or filing with, or permit from, any
Governmental Entity is required to be obtained or made by or with respect to the
Company in connection with the execution, delivery and performance of this
Agreement or the consummation of the Transactions, other than filings by Company
of requisite forms with the Securities and Exchange Commission.
 
 
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(e) Taxes.
 
(1) The Company has timely filed, or has caused to be timely filed on its
behalf, all Tax Returns required to be filed by it, except as set forth on the
Company Disclosure Schedule, and all such Tax Returns are true, complete and
accurate, except to the extent any failure to file or any inaccuracies in any
filed Tax Returns, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect or as set forth
in the SEC Reports.  All Taxes shown to be due on such Tax Returns, or otherwise
owed, have been timely paid, except to the extent that any failure to pay,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect or as set forth in the SEC
Reports.  To the Company’s knowledge, there are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and to the
Company’s knowledge, there is no basis for any such claim, except as set forth
in the SEC Reports.
 
(2) If applicable, the Company has established an adequate reserve reflected on
its financial statements for all Taxes payable by the Company (in addition to
any reserve for deferred Taxes to reflect timing differences between book and
Tax items) for all Taxable periods and portions thereof through the date of such
financial statements.  No deficiency with respect to any Taxes has been
proposed, asserted or assessed against the Company, and no requests for waivers
of the time to assess any such Taxes are pending, except to the extent any such
deficiency or request for waiver, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material Adverse Effect
or as set forth in the SEC Reports.
 
(3) For purposes of this Agreement:
 
“Taxes” includes all forms of taxation, whenever created or imposed, and whether
of the United States or elsewhere, and whether imposed by a local, municipal,
governmental, state, foreign, federal or other Governmental Entity, or in
connection with any agreement with respect to Taxes, including all interest,
penalties and additions imposed with respect to such amounts.
“Tax Return” means all federal, state, local, provincial and foreign Tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes.

(f) Benefit Plans.  The Company does not have or maintain any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, share ownership, share purchase, share
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company (collectively, “Company Benefit
Plans”), except as set forth in the Company Disclosure Schedule or the SEC
Reports.  As of the date of this Agreement, there are no employment, consulting,
indemnification, severance or termination agreements or arrangements between the
Company and any current or former employee, officer or director of the Company,
nor does the Company have any general severance plan or policy, except as set
forth in the Company Disclosure Schedule or the SEC Reports.
 
 
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(g) Litigation.  There is no action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
or any of its properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility (“Action”), except as
set forth on the Company Disclosure Schedule or in the SEC Reports.  Neither the
Company nor any director or officer thereof (in his or her capacity as such), is
or has been the subject of any Action involving a claim or violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty that has not been disclosed in its SEC Reports.
 
(h) Compliance with Applicable Laws.  To the Company’s knowledge, the Company is
in material compliance with all applicable Laws, including those relating to
occupational health and safety and the environment, except for instances of
noncompliance that, individually and in the aggregate, have not had and would
not reasonably be expected to have a Company Material Adverse Effect.  This
Section 3.1(h) does not relate to matters with respect to Taxes, which are the
subject of Section 3.1(e).
 
(i)           Brokers; Schedule of Fees and Expenses.  No broker, investment
banker, financial advisor or other person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company.
 
(i) Contracts.  The SEC Reports set forth all Contracts that are material to the
business, properties, assets, condition (financial or otherwise), or results of
operations of the Company.  The Company is not in violation of or in default
under (nor does there exist any condition which upon the passage of time or the
giving of notice would cause such a violation of or default under) any Contract
to which it is a party or by which it or any of its properties or assets is
bound, except for violations or defaults that would not, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse Effect
or as set forth in the SEC Reports.  The Company’s execution of this Agreement
and the consummation of the Transactions contemplated herein would not violate
any Contract to which the Company is a party nor will the execution of this
Agreement or the consummation of the Transactions consummated hereby violate or
trigger any “change in control” provision or covenant in any Contract to which
the Company is a party.
 
(j) Title to Properties.  The Company does not own any real property.  The
Company has sufficient title to, or valid leasehold interests in, all of its
properties and assets used in the conduct of its businesses.  All such assets
and properties, other than assets and properties in which the Company has
leasehold interests, are free and clear of all Liens other than those Liens
that, in the aggregate, do not and will not materially interfere with the
ability of the Company to conduct business as currently conducted.
 
 
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(k) Intellectual Property.  The Company owns, or is validly licensed or
otherwise has the right to use, all Intellectual Property (the “Intellectual
Property Rights”) which are material to the conduct of the business of the
Company taken as a whole, except as set forth in the Company Disclosure Schedule
or the SEC Reports.  The SEC Reports sets forth a description of all
Intellectual Property Rights that are material to the conduct of the business of
the Company taken as a whole.  No claims are pending or, to the knowledge of the
Company, threatened that the Company is infringing or otherwise adversely
affecting the rights of any person with regard to any Intellectual Property
Right.  To the knowledge of the Company, no person is infringing the rights of
the Company with respect to any Intellectual Property Right other than as to
which the Company has the full right and power to bring action and to enforce
such Intellectual Property Right, and receive the entirety of the proceeds
thereof, by way of judgment settlement or otherwise, and no third-party has any
such claims or rights.
 
(l) Insurance.  The Company has provided to Parent all insurance policies held
by the Company.
 
(m)           Transactions With Affiliates and Employees.  Except as set forth
in the Company Disclosure Schedule or the SEC Reports, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company (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.
 
(n) Application of Takeover Protections.  The Company has taken all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company Charter
Documents or the laws of its state of incorporation that is or could become
applicable to the Company as a result of the Company fulfilling its obligations
or exercising their rights under this Agreement.
 
(o) Labor Matters.  There are no collective bargaining or other labor union
agreements to which the Company is a party or by which it is bound.  No material
labor dispute exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company.
 
(p) ERISA Compliance; Excess Parachute Payments. Except as set forth in the
Company Disclosure Schedule or the SEC Reports, the Company does not, and since
its inception never has, maintained, or contributed to any “employee pension
benefit plans” (as defined in Section 3(2) of ERISA), “employee welfare benefit
plans” (as defined in Section 3(1) of ERISA) or any other Company Benefit Plan
for the benefit of any current or former employees, consultants, officers or
directors of Company.
 
 
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(q) Investment Company.  The Company is not, and is not an affiliate of, and
immediately following the Closing will not have become, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.
 
(r) Disclosure.  All disclosure provided to the Purchaser regarding the Company,
its business and the Transactions, furnished by or on behalf of the Company
(including the Company’s representations and warranties set forth in this
Agreement) are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
 
(s) Absence of Certain Changes or Events.  Except in connection with the
Transactions or as will be set forth in the Company’s Quarterly Report on 10Q
for the quarter ended March 31, 2014, since December 31, 2013, the Company has
conducted its business only in the ordinary course, and during such period there
has not been:
 
(1) any change in the assets, liabilities, financial condition or operating
results of the Company, except changes in the ordinary course of business, or
that have not caused, in the aggregate, a Company Material Adverse Effect;
 
(2) any damage, destruction or loss, whether or not covered by insurance, that
would have a Company Material Adverse Effect;
 
(3) any waiver or compromise by the Company of a valuable right or of a material
debt owed to it;
 
(4) any satisfaction or discharge of any lien, claim, or encumbrance or payment
of any obligation by the Company, except in the ordinary course of business and
the satisfaction or discharge of which would not have a Company Material Adverse
Effect;
 
(5) any material change to a material Contract by which the Company or any of
its assets is bound or subject;
 
(6) any mortgage, pledge, transfer of a security interest in, or lien, created
by the Company, with respect to any of its material properties or assets, except
liens for taxes not yet due or payable and liens that arise in the ordinary
course of business and does not materially impair the Company’s ownership or use
of such property or assets;
 
(7) any loans or guarantees made by the Company to or for the benefit of its
employees, officers or directors, or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of its
business;
 
(8) any alteration of the Company’s method of accounting or the identity of its
auditors;
 
 
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(9) any declaration or payment of dividend or distribution of cash or other
property to the Company or any purchase, redemption or agreements to purchase or
redeem any capital stock;
 
(10) any issuance of equity securities to any officer, director or affiliate; or
 
(11) any arrangement or commitment by the Company to do any of the things
described in this Section.
 
(t) Foreign Corrupt Practices.  Neither the Company, nor, to the Company’s
knowledge, any director, officer, agent, employee or other person acting on
behalf of the Company has, in the course of its actions for, or on behalf of,
the Company (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; (ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
 
(u)           Licenses and Permits.  The Company has obtained and maintains all
federal, state, local and foreign licenses, permits, consents, approvals,
registrations, memberships, authorizations and qualifications required to be
maintained in connection with the operations of the Company as presently
conducted, where the failure to so obtain would be reasonably expected to have a
Company Material Adverse Effect.  The Company is not in default under any of
such licenses, permits, consents, approvals, registrations, memberships,
authorizations and qualifications, where the default would be reasonably
expected to have a Company Material Adverse Effect.

(v)           Environmental Laws.  The Company (i) is in compliance in all
material respects with any and all Environmental Laws (as hereinafter defined),
(ii) has received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct its businesses and (iii) is in
compliance in all material respects with all terms and conditions of any such
permit, license or approval where, in each of the foregoing clauses (i), (ii)
and (iii), the failure to so comply would be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect.  The term
“Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

(w)           Indebtedness. The Indebtedness of the Company is as set forth in
the SEC Reports.  Except as set forth in the SEC Reports, the Company (i) is not
in violation of any term of or is in default under any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Company
Material Adverse Effect, and (ii) is not a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the
judgment of the Company's officers, has or is expected to have a Company
Material Adverse Effect.    For purposes of this Agreement:  (x) “Indebtedness”
of any Person means, without duplication (A) all indebtedness for borrowed
money, (B) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (other than trade payables entered into
in the ordinary course of business), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (E) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the
rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (F) all monetary
obligations under any leasing or similar arrangement which, in connection with
generally accepted accounting principles, consistently applied for the periods
covered thereby, is classified as a capital lease, (G) all indebtedness referred
to in clauses (A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, charge, security interest or other encumbrance upon
or in any property or assets (including accounts and contract rights) owned by
any Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; (y) “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto; and (z) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, a government or any department or agency
thereof and any other legal entity.

 
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The Purchasers acknowledge and agree that the representations contained in
Section 3.1 shall not modify, amend or affect the Company’s right to rely on the
Purchaser representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby.

3.2          Representations and Warranties of the Purchasers.  Each Purchaser,
for itself and for no other Purchaser, hereby represents and warrants as of the
Closing Date to the Company as follows (unless as of a specific date therein):
 
(a)           Organization; Authority.  Such Purchaser is either an individual
or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full
right, corporate, partnership, limited liability company or similar 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 execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as applicable, on the
part of such Purchaser.  Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
 
(b)           Understandings or Arrangements.  Such Purchaser understands that
the Securities are “restricted securities” and have not been registered under
the Securities Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to or for
distributing or reselling such Securities or any part thereof in violation of
the Securities Act or any applicable state securities law, has no present
intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding
the distribution of such Securities in violation of the Securities Act or any
applicable state securities law (this representation and warranty not limiting
such Purchaser’s right to sell the Securities pursuant to a registration
statement or otherwise in compliance with applicable federal and state
securities laws).  Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.
 
(c)           Purchaser Status.  At the time such Purchaser was offered the
Shares, it was, and as of the date hereof it will be either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.  Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act. Such
Purchaser has the authority and is duly and legally qualified to purchase and
own the Securities. Such Purchaser is able to bear the risk of such investment
for an indefinite period and to afford a complete loss thereof. Such Purchaser
has provided the information in the Accredited Investor Questionnaire attached
hereto as Exhibit C (the “Investor Questionnaire”). The information set forth on
the signature pages hereto and the Investor Questionnaire regarding such
Purchaser is true and complete in all respects. Except as disclosed in the
Investor Questionnaire, such Purchaser has had no position, office or other
material relationship within the past three years with the Company or Persons
(as defined below) known to such Purchaser to be affiliates of the Company, and
is not a member of the Financial Industry Regulator-y Authority or an
“associated person” (as such term is defined under the FINRA Membership and
Registration Rules Section 1011).
 
(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.
 
 
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(e)           Information on Company. Such Purchaser has been furnished with or
has had access to the EDGAR Website of the Commission to the Company’s filings
made with the Commission, including but not limited to the Risk Factor section
of the Company’s Annual Report on Form 10-K filed with the Commission for the
fiscal year ended December 31, 2013.  Purchasers are not deemed to have any
knowledge of any information not included in the SEC Reports unless such
information is delivered in the manner described in the next sentence.  In
addition, such Purchaser may have received in writing from the Company such
other information concerning its operations, financial condition and other
matters as such Purchaser has requested (such other information is collectively,
the “Other Written Information”), and considered all factors such Purchaser
deems material in deciding on the advisability of investing in the
Securities.  Such Purchaser was afforded (i) the opportunity to ask such
questions as such Purchaser deemed necessary of, and to receive answers from,
representatives of the Company concerning the merits and risks of acquiring the
Securities; (ii) the right of access to information about the Company and its
financial condition, results of operations, business, properties, management and
prospects sufficient to enable such Purchaser to evaluate the Securities; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to acquiring the
Securities. Such Purchaser has sought such accounting, legal and tax advice as
it has considered necessary to make to make an informed investment decision with
respect to the acquisition of the securities.
 
(f)           Certain Transactions and Confidentiality.  Such Purchaser
understands and agrees that the Securities have not been registered under the
Securities Act or any applicable state securities laws, by reason of their
issuance in a transaction that does not require registration under the
Securities Act, and that such Securities must be held indefinitely unless a
subsequent disposition is registered under the Securities Act or any applicable
state securities laws or is exempt from such registration. Such Purchaser
understands and agrees that the Securities are being offered and sold to such
Purchaser in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws and regulations and that the
Company is relying upon the truth and accuracy of, and such Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire
the Securities.
 
(g)           Communication of Offer. Such Purchaser is not purchasing the
Securities as a result of any “general solicitation” or “general advertising,”
as such terms are defined in Regulation D, which includes, but is not limited
to, any advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or on the
internet or broadcast over television, radio or the internet or presented at any
seminar or any other general solicitation or general advertisement.

(h)
No Governmental Review. Such Purchaser understands that no United States federal
or state agency or any other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.

(i)
No Conflicts. The execution, delivery and performance of this Agreement and
performance under the other Transaction Documents and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or relating hereto
or thereto do not and will not (i) result in a violation of such Purchaser’s
charter documents, bylaws or other organizational documents, if applicable, (ii)
conflict with nor constitute a default (or an event which with notice or lapse
of time or both would become a default) under any agreement to which such
Purchaser is a party, nor (iii) result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on (i) such Purchaser, (ii) the legality, validity or
enforceability of any Transaction Document, or (iii) on Purchasers ability to
perform on a timely basis its obligations under any Transaction Document). Such
Purchaser is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement or perform under the other Transaction Documents nor to purchase the
Securities in accordance with the terms hereof, provided that for purposes of
the representation made in this sentence, such Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.

(j)
Certain Transactions and Confidentiality.  Other than consummating the
transactions contemplated hereunder, such Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, executed any purchases or sales, including
Short Sales, of the securities of the Company during the period commencing as of
the time that such Purchaser first received a term sheet (written or oral) from
the Company or any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and ending immediately
prior to the execution hereof.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to other Persons
party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).  The Purchaser will not engage in any
Short Sales relating to the securities of the Company.

 
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(k)
Survival. The foregoing representations and warranties shall survive the Closing
Date.

 
 

The Company acknowledges and agrees that the representations contained in
Section 3.2 shall not modify, amend or affect such Purchasers’ right to rely on
the Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby.

 
ARTICLE IV.

 
OTHER AGREEMENTS OF THE PARTIES

 
4.1          Transfer Restrictions.
 
(a)           The Securities may only be disposed of in compliance with state
and federal securities laws.  In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act.  As a condition of such transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and the other
applicable Transaction Documents and shall have the rights and obligations of a
Purchaser under this Agreement.
 
(b)          The Purchasers agree to the imprinting, so long as is required by
this Section 4.1, of a legend on the Shares in the following form:
 
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THIS SECURITY HAS 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 APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 

(c)           Certificates or DRS Statements evidencing the Shares shall not
contain any legend (including the legend set forth in Section 4.1(b) hereof),
(i) following any sale of such Shares pursuant to Rule 144, or (ii) if such
Shares are eligible for sale under Rule 144, without the requirement for the
Company to be in compliance with the current public information required under
Rule 144 as to such Shares and without volume or manner-of-sale restrictions, or
(iii) 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 a
legal opinion to the Transfer Agent promptly for any Security after the Removal
Date if required by the Transfer Agent to effect the removal of the legend
hereunder, provided that the holder of such Securities has provided such
documentation as may be reasonably requested by counsel for the purposes of said
opinion.  If all or any portion of the Shares are included in an effective
registration statement to cover the resale of such Shares (and the Purchaser
provides the Company or the Company’s counsel with any reasonable certifications
requested by the Company with respect to future sales of such Shares) or the
Shares may be sold under Rule 144 without the requirement for the Company to be
in compliance with the current public information and any other limitations or
requirements set forth in Rule 144, including, without limitation, volume or
manner-of-sale restrictions, or if a legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Shares will be reissued without the legend shall be issued free of all
legends. The Company agrees that following the Removal Date or at such time as
such legend is no longer required under this Section 4.1(c), it will, no later
than seven Trading Days following the delivery by a Purchaser to the Company or
the Transfer Agent of a certificate representing Shares issued with a
restrictive legend, together with any reasonable certifications requested by the
Company, the Company’s counsel or the Transfer Agent (such seventh Trading Day,
the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a
certificate or DRS Statement representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to the Transfer Agent that enlarge the restrictions
on transfer set forth in this Section 4. Certificates for Securities subject to
legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System through its Deposit or Withdrawal at Custodian
system (“DWAC”) as directed by such Purchaser if the Transfer Agent is then a
participant in such system and either (i) there is an effective registration
statement permitting the resale of such Securities by the Purchaser (and the
Purchaser provides the Company or the Company’s counsel with any requested
certifications with respect to future sales of such Securities) or (ii) the
shares are eligible for resale by the Purchaser without further volume
limitations or manner-of-sale restrictions and may be sold without the
requirement for the Company to be in compliance with Rule 144(c)(1) of the
Securities Act.

 
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(d)         DWAC. In lieu of delivering physical certificates representing the
unlegended shares, upon request of a Purchaser, so long as the certificates
therefor do not bear a legend and the Purchaser is not obligated to return such
certificate for the placement of a legend thereon, the Company shall cause its
transfer agent to electronically transmit the unlegended shares by crediting the
account of Purchaser’s prime broker with the Depository Trust Company through
its Deposit Withdrawal At Custodian system, provided that the Company’s Common
Stock is DTC eligible and the Company’s transfer agent participates in the
Deposit Withdrawal at Custodian system. Such delivery must be made on or before
the Legend Removal Date.

(e)              Injunction. In the event a Purchaser shall request delivery of
Shares as described in this Section 4.1 and the Company is required to deliver
such Shares, the Company may not refuse to deliver Shares based on any claim
that such Purchaser or anyone associated or affiliated with such Purchaser has
not complied with Purchaser’s obligations under the Transaction Documents, or
for any other reason, unless, (i) Purchaser has not provided any requested
certifications, paperwork or information requested by the Company or (ii) an
injunction or temporary restraining order from a court, on notice, restraining
and or enjoining delivery of such unlegended shares shall have been sought and
obtained by the Company.
 
4.2           Furnishing of Information; Public Information.  Until the earliest
of the time that (i) no Purchaser owns any outstanding Securities, or (ii) two
(2) years after the Closing Date, 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 even if the Company is not then subject to the
reporting requirements of the Exchange Act.
 
4.3          Integration.  The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities by the Company in a manner that would require the registration
under the Securities Act of the sale of the Securities or that would be
integrated with the offer or sale of the Shares for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
 
 
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4.4           Securities Laws Disclosure; Publicity.  The Company shall file a
Current Report on Form 8-K including the Transaction Documents as exhibits
thereto within the time period proscribed by the Exchange Act.  From and after
the issuance of such Form 8-K, the Company represents to the Purchasers that it
shall have publicly disclosed all material, non-public information delivered to
any of the Purchasers by the Company or any of its Subsidiaries, or any of their
respective officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents. The Company and each
Purchaser shall consult with each other in issuing any other press releases with
respect to the transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release nor otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, 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 or 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 unless the name of such
Purchaser is already included in the body of the Transaction Documents, without
the prior written consent of such Purchaser, except: (a) as required by federal
securities law in connection with the filing of final Transaction Documents with
the Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under this clause (b).

4.5           Non-Public Information.  Except with respect to the material terms
and conditions of the transactions contemplated by the Transaction Documents and
the LTAS Sale, the Company covenants and agrees that neither it, nor any other
Person acting on its behalf, will provide any Purchaser or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have entered into a
written agreement with the Company regarding the confidentiality and use of such
information; provided, however, the Company may provide Purchaser or its related
parties such information as is appropriate or required pursuant to other
agreements between such parties.  The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.
 
4.6           Use of Proceeds.  The Company will use the net proceeds to the
Company from the sale of the Shares for working capital purposes.  The Company
shall not use such proceeds: (a) for the redemption of any Common Stock or
Common Stock Equivalents, or (b) in violation of the law, including FCPA or
OFAC.
 
4.7           Indemnification.   (a) Subject to the provisions of this Section
4.7, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such
Purchaser Party, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such
Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with
any such stockholder or any violations by such Purchaser Party of Securities
Laws or any conduct by such Purchaser Party which constitutes fraud, gross
negligence, willful misconduct or malfeasance).  If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with
counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of such Purchaser Party’s counsel, a material conflict on
any material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate counsel for all
Purchaser Parties.  The Company will not be liable to any Purchaser Party under
this Agreement (iv) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, or (v) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by such Purchaser Party in this Agreement or in the other Transaction Documents
or any agreements or any violations by such Purchaser Party of Securities Laws
or any conduct by such Purchaser Party which constitutes fraud, gross
negligence, willful misconduct or malfeasance.  The indemnification required by
this Section 4.7 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
are incurred.  The indemnity agreements contained herein shall be in addition to
any cause of action or similar right of any Purchaser Party against the Company
or others and any liabilities the Company may be subject to pursuant to law.

 
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   (b) Subject to the provisions of this Section 4.7, the Purchaser will
indemnify and hold the Company and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), 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, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any
other title) of such controlling persons (each, a “Company Party”) harmless from
any and all losses, liabilities, obligations, claims, contingencies, damages,
costs and expenses, including all judgments, amounts paid in settlements, court
costs and reasonable attorneys’ fees and costs of investigation that any such
Company Party may suffer or incur as a result of or relating to any breach of
any of the representations, warranties, covenants or agreements made by the
Purchasers in this Agreement or in the other Transaction Documents.  If any
action shall be brought against any Company Party in respect of which indemnity
may be sought pursuant to this Agreement, such Company Party shall promptly
notify the Purchasers in writing, and the Purchasers shall have the right to
assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Company Party.  Any Company Party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Company Party except to the extent that (i) the employment thereof has been
specifically authorized by the Purchasers in writing, (ii) the Purchasers have
failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of such
Company Party’s counsel, a material conflict on any material issue between the
position of the Purchaser and the position of such Company Party, in which case
the Purchasers shall be responsible for the reasonable fees and expenses of no
more than one such separate counsel for all Company Parties.  The Purchasers
will not be liable to any Company Party under this Agreement (iv) for any
settlement by a Company Party effected without the Purchasers’ prior written
consent; or (v) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Company Party’s breach of any of the
representations, warranties, covenants or agreements made by such Company Party
in this Agreement or in the other Transaction Documents or any agreements or any
violations by such Company Party of Securities Laws or any conduct by such
Company Party which constitutes fraud, gross negligence, willful misconduct or
malfeasance).   The indemnification required by this Section 4.7 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or are incurred.  The
indemnity agreements contained herein shall be in addition to any cause of
action or similar right of any Company Party against the Purchasers or others
and any liabilities the Purchasers may be subject to pursuant to law.

4.8           Listing of Common Stock. The Company hereby agrees to maintain the
listing or quotation of the Common Stock on the Trading Market on which it is
currently listed. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will then include in such
application all of the Shares, and will take such other action as is necessary
to cause all of the Shares to be listed or quoted on such other Trading Market
as promptly as possible.  The Company will then take all action necessary to
continue the listing or quotation and trading of the Common Stock on a Trading
Market until at least two years after the Closing Date, and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Trading Market at least until two years after the Closing
Date.
 
 
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4.9        Reimbursement.  If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder, or as a result of Purchasers’
breach of any of the representations, warranties, covenants or agreements made
by such Purchasers in this Agreement or in the other Transaction Documents or
any agreements, or any violations by such Purchasers of Securities Laws, or any
conduct by such Purchasers which constitutes fraud, gross negligence, willful
misconduct or malfeasance), solely as a result of such Purchaser’s acquisition
of the Securities under this Agreement, the Company will reimburse such
Purchaser for its reasonable legal and other expenses (including the cost of any
investigation preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.  The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers and any such Affiliate and any such Person.  The Company
also agrees that neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any liability to
the Company or any Person asserting claims on behalf of or in right of the
Company solely as a result of acquiring the Securities under this Agreement.

            4.10         Equal Treatment of Purchasers.  No consideration
(including any modification of any Transaction Document) shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the Purchasers that are parties to such Transaction
Document. For clarification purposes, this provision constitutes a separate
right granted to each Purchaser by the Company and negotiated separately by each
Purchaser, and is intended for the Company to treat the Purchasers as a class
and shall not in any way be construed as the Purchasers acting in concert or as
a group with respect to the purchase, disposition or voting of Securities or
otherwise.
 
            4.11         Participation in Future Financing.

(a)           From the date hereof through the 12 month anniversary of the
Closing Date, upon any proposed issuance by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration,
Indebtedness or a combination of cash consideration and Indebtedness, other than
(i) a rights offering to all holders of Common Stock, (ii) an underwritten
public offering of Common Stock or Common Stock Equivalents, or (iii) an Exempt
Issuance, (a “Subsequent Financing”), the Purchasers that still own outstanding
Securities shall have the right to participate in up to an amount of the
Subsequent Financing equal to 100% of the Subsequent Financing (the
“Participation Maximum”) on the same terms, conditions and price provided for in
the Subsequent Financing.

 
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(b)           At least five (5) Trading Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing Notice”).  Upon the
request of a Purchaser, and only upon a request by such Purchaser, for a
Subsequent Financing Notice, the Company shall promptly, but no later than one
(1) Trading Day after such request, deliver a Subsequent Financing Notice to
such Purchaser.  The requesting Purchaser shall be deemed to have acknowledged
that the Subsequent Financing Notice may contain material non-public
information.  The Subsequent Financing Notice shall describe in reasonable
detail the proposed terms of such Subsequent Financing, the amount of proceeds
intended to be raised thereunder and the Person or Persons through or with whom
such Subsequent Financing is proposed to be effected and shall include a term
sheet or similar document relating thereto as an attachment.
 
 
(c)           Any Purchaser desiring to participate in such Subsequent Financing
must provide written notice to the Company by not later than 5:30 p.m. (New York
City time) on the fifth (5th) Trading Day after all of the Purchasers have
received the Pre-Notice that such Purchaser is willing to participate in the
Subsequent Financing, the amount of such Purchaser’s participation, and
representing and warranting that such Purchaser has such funds ready, willing,
and available for investment on the terms set forth in the Subsequent Financing
Notice.  If the Company receives no such notice from a Purchaser as of such
fifth (5th) Trading Day, such Purchaser shall be deemed to have notified the
Company that it does not elect to participate.

(d)           If by 5:30 p.m. (New York City time) on the fifth (5th) Trading
Day after all of the Purchasers have received the Pre-Notice, notifications by
the Purchasers of their willingness to participate in the Subsequent Financing
(or to cause their designees who at the time are Accredited Investors to
participate) is, in the aggregate, equal to or less than the aggregate amount of
the Participation Maximum, then the Company may effect the remaining portion of
such Subsequent Financing on the terms and with the Persons set forth in the
Subsequent Financing Notice.

(e)           If by 5:30 p.m. (New York City time) on the fifth (5th) Trading
Day after all of the Purchasers have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Purchasers seeking to
purchase more than the aggregate amount of the Participation Maximum, each such
Purchaser shall have the right to purchase its Pro Rata Portion (as defined
below) of the Participation Maximum.  “Pro Rata Portion” means the ratio of (x)
the Subscription Amount of Shares purchased hereunder by a Purchaser
participating under this Section 4.11 and (y) the sum of the aggregate
Subscription Amounts of Securities purchased hereunder by all Purchasers
participating under this Section 4.11.

(f)           The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of participation
set forth above in this Section 4.11, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason on the
terms set forth in such Subsequent Financing Notice within forty-five (45)
Trading Days after the date of the initial Subsequent Financing Notice.

 
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(g)           The Company and each Purchaser agree that if any Purchaser elects
to participate in the Subsequent Financing, the transaction documents related to
the Subsequent Financing shall not include any term or provision whereby such
Purchaser shall be required to agree to any restrictions on trading as to any of
the Securities purchased hereunder (for avoidance of doubt, the securities
purchased in the Subsequent  Financing shall not be considered securities
purchased hereunder) or be required to consent to any amendment to or
termination of, or grant any waiver, release or the like under or in connection
with, this Agreement, without the prior written consent of such Purchaser.

(h)           Notwithstanding anything to the contrary in this Section 4.11 and
unless otherwise agreed to by such Purchaser, the Company shall either confirm
in writing to such Purchaser that the transaction with respect to the Subsequent
Financing has been abandoned or shall publicly disclose  the closing of the
Subsequent Financing, in either case in such a manner such that such Purchaser
will not be in possession of any material, non-public information, by the fourth
(4th) Business Day following the closing of the Subsequent Financing.

4.12        Acknowledgment of Dilution.  The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock.  The Company further acknowledges that its obligations under the
Transaction Documents, including, without limitation, its obligation to issue
the Shares pursuant to the Transaction Documents, are unconditional and
absolute, but subject to the terms and conditions of the Transaction Documents,
and not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.

4.13           (a)           Purchase Price Reset. From the date of this
Agreement until the earlier of (i) such time as no Purchaser and his permitted
assigns holds any Shares and (ii) one year from the Closing Date (the
“Protection Period”), in the event that the Company issues or sells any shares
of Common Stock or any Common Stock Equivalent (calculated on an as converted,
as exercised basis) pursuant to which shares of Common Stock may be acquired at
a price less than the Purchase Price of the Common Stock (a “Share Dilutive
Issuance”) (adjusted as described in Section 5.23), then the Company shall
promptly issue additional shares of Common Stock to the Purchasers who held
outstanding Shares on the date of such Share Dilutive Issuance, for no
additional consideration, in an amount sufficient to take into consideration a
weighted average anti-dilution formula (each such adjustment, a “Share Dilution
Adjustment”, and such shares, the “Additional Shares”).   The Additional Shares
to be issued in a Share Dilution Adjustment shall be issued by the Company to
the Purchasers who held outstanding Shares on the date of the applicable Share
Dilutive Issuance (in proportion to the number of such Shares held by such
Purchasers on the date of such Share Dilutive Issuance).  Such Share Dilution
Adjustment shall be made successively whenever such an issuance is made. Such
Additional Shares must be delivered to the applicable Purchasers not later than
the date that is 15 days from the date the Share Dilutive Issuance occurs.  Not
later than fifteen (15) days after each Share Dilutive Issuance (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the
Holder a certificate or certificates or DRS Statements representing the number
of Additional Shares issuable upon a Share Dilution Adjustment.
 
(b)           Certificate as to Adjustments.  In each case of any adjustment or
readjustment in the Purchase Price of the Common Stock pursuant to this Section
4.13, the Company at its expense will promptly cause its Chief Financial Officer
or other appropriate designee to compute such adjustment or readjustment and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock or Common Stock Equivalent
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock outstanding or deemed to be outstanding, and (c) the Purchase
Price of the Common Stock and the number of shares of Common Stock to be
received upon a Share Dilutive Issuance, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Section 4.13.  The Company will forthwith mail a copy of each such certificate
to the Purchaser. Purchaser will be entitled to the benefit of the adjustment
regardless of the giving of such notice. The Company shall promptly, but not
later than the fifteenth (15th) day after the effectiveness of the adjustment,
provide notice to the Purchaser setting forth the Additional Shares issuable
after a Share Dilutive Issuance and setting forth a statement of the facts
requiring such adjustment.
 
 
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(c)           Obligation Absolute; Partial Liquidated Damages.  The Company’s
obligations to issue and deliver Additional Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by
the Purchaser to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Purchaser or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Purchaser or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Purchaser in connection with the issuance of such Additional Shares; provided,
however, that such delivery shall not operate as a waiver by the Company of any
such action the Company may have against the Purchaser.    Nothing herein shall
limit a Purchaser’s right to pursue actual damages pursuant to Section 4.13
hereof for the Company’s failure to deliver shares within the period specified
herein and the Purchaser shall have the right to pursue all remedies available
to it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief for any breaches of this Section
4.13.  The exercise of any such rights shall not prohibit the Purchaser from
seeking to enforce damages pursuant to any other Section hereof or under
applicable law.
 
Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of
an Exempt Issuance.  No adjustment shall be made hereunder which would require
the Purchaser to surrender any shares to the Company.  The holder of outstanding
Additional Shares is granted the same rights and benefits as a holder of
outstanding Shares pursuant to the Transaction Documents, except the rights and
benefits of this Section 4.13 and except that such rights and benefits shall not
apply to a holder of outstanding Additional Shares after such outstanding
Additional Share has been irrevocably sold pursuant to an effective registration
statement under the Securities Act or pursuant to Rule 144 without further
restrictions or conditions to transfer pursuant to Rule 144.

4.14           DTC Program.  From the date hereof until the end of the
Protective Period, the Company will employ as the transfer agent for the Common
Stock a participant in the Depository Trust Company Automated Securities
Transfer Program and cause the Common Stock to be transferable pursuant to such
program.

4.15           Form D; Blue Sky Filings.  The Company agrees to timely file a
Form D with respect to the sale of the Securities by the Company under this
Agreement as required under Regulation D. The Company shall take such action as
the Company shall reasonably determine is necessary in order to obtain an
exemption for, or to qualify the Securities for, sale to the Purchasers at the
Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.

4.16           Shareholder Rights Plan.  No claim will be made or enforced by
the Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.

 
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4.17           Preservation of Corporate Existence.  The Company shall preserve
and maintain its corporate existence, rights, privileges and franchises in the
jurisdiction of its incorporation, and qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
necessary in view of its business or operations and where the failure to qualify
or remain qualified might reasonably have a Material Adverse Effect.

4.18   Certain Transactions and Confidentiality. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that neither it, nor any
Affiliate acting on its behalf or pursuant to any understanding with it will
execute any purchases or sales, including Short Sales, of any of the Company’s
securities during the period commencing with the execution of this Agreement and
ending at such time that the transactions contemplated by this Agreement are
first publicly disclosed or required to be disclosed, whichever occurs first, in
the Form 8-K described in Section 4.4.  Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed or required
to be publicly disclosed, whichever occurs first, by the Company in such Form
8-K, such Purchaser will maintain the confidentiality of the existence and terms
of this transaction and the information included in the Transaction Documents
and the Disclosure Schedules.  Notwithstanding the foregoing, and
notwithstanding anything contained in this Agreement to the contrary, the
Company expressly acknowledges and agrees that (i) no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in effecting
transactions in any securities of the Company after the time that the
transactions contemplated by this Agreement are required to be disclosed in the
Form 8-K described in Section 4.4, other than as set forth in Section 3.2(j),
(ii) no Purchaser shall be restricted or prohibited from effecting any
transactions in any securities of the Company in accordance with applicable
Securities Laws from and after the time that the transactions contemplated by
this Agreement are first disclosed or required to be disclosed, whichever occurs
first, in the Form 8-K described in Section 4.4, other than as set forth in
Section 3.2(j), and (iii) no Purchaser shall have any duty of confidentiality to
the Company or its Subsidiaries after the filing of such Form 8-K or after the
date such Form 8-K is required to have been filed, whichever occurs first, other
than any obligation such Purchaser may have with the Company through agreements
other than the Transaction Documents.  Notwithstanding the foregoing, in the
case of a Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.

4.19           Maintenance of Property.  The Company shall keep all of its
property, which is necessary to the conduct of its business, in good working
order and condition, ordinary wear and tear excepted. 

4.20           Piggy-Back Registrations. If at any time after the Closing Date,
for a period of one (1) year after the Closing Date, there is not an effective
registration statement covering all of the Shares and the Company determines 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, but excluding (i) the registration contemplated
by the Company in connection with a simultaneous term sheet dated the date
hereof and (ii) Forms S-4 or S-8 and similar forms which do not permit such
registration, then the Company shall send to each holder of any of the issued
Shares written notice of such determination and, if within fifteen calendar days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of the
Shares, such holder requests to be registered and which inclusion of such Shares
will be subject to customary underwriter cutbacks applicable to all holders of
registration rights and minimum cutbacks in accordance with guidance provided by
the Securities and Exchange Commission (including, but not limited to, Rule
415). The obligations of the Company under this Section may be waived by any
holder of any of the Shares entitled to registration rights under this Section
4.20.  The holders whose Shares are included or required to be included in such
registration statement are granted the same rights, benefits, liquidated or
other damages and indemnification granted to other holders of securities
included in such registration statement. In no event shall the liability of any
holder of Shares or permitted successor in connection with any Shares included
in any such registration statement be greater in amount than the dollar amount
of the net proceeds actually received by such Purchaser upon the sale of the
Shares sold pursuant to such registration or such lesser amount in proportion to
all other holders of Shares included in such registration statement. All
expenses incurred by the Company in complying with Section 4.20, including,
without limitation, all registration and filing fees, printing expenses (if
required), fees and disbursements of counsel and independent public accountants
for the Company, fees and expenses (including reasonable counsel fees) incurred
in connection with complying with state securities or “blue sky” laws, fees of
the FINRA, transfer taxes, and fees of transfer agents and registrars, are
called “Registration Expenses.” All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are called "Selling
Expenses." The Company will pay all Registration Expenses in connection with the
registration statement under Section 4.20. Selling Expenses in connection with
each registration statement under Section 4.20 shall be borne by the holder and
will be apportioned among such holders in proportion to the number of Shares
included therein for a holder relative to all the securities included therein
for all selling holders, or as all holders may agree. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Shares of a particular Purchaser
that such Purchaser shall furnish to the Company in writing such information and
representation letters, including a completed form of a securityholder
questionnaire, with respect to itself and the proposed distribution by it as the
Company may reasonably request to assure compliance with federal and applicable
state securities laws.

 
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4.21           Purchaser’s Exercise Limitations.  The Company shall not effect
any exercise of the option granted to each Purchaser in Sections 4.11 of this
Agreement, and a Purchaser shall not have the right to exercise any portion of
such option, pursuant to Sections 4.11 or otherwise, to the extent that after
giving effect to such issuance after exercise as set forth on the applicable
exercise notice, the Purchaser (together with the Purchaser’s Affiliates, and
any other Persons acting as a group together with the Purchaser or any of the
Purchaser’s Affiliates), would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below).  For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the
Purchaser and its Affiliates shall include the number of shares of Common Stock
issuable upon exercise of the option with respect to which such determination is
being made, but shall exclude the number of shares of Common Stock which would
be issuable upon (i) exercise of the remaining, nonexercised portion of the
option beneficially owned by the Purchaser or any of its Affiliates and (ii)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other  Common
Stock Equivalents) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the Purchaser or any of
its Affiliates.  Except as set forth in the preceding sentence, for purposes of
this Section 4.24, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Purchaser that the Company is not
representing to the Purchaser that such calculation is in compliance with
Section 13(d) of the Exchange Act and the Purchaser is solely responsible for
any schedules required to be filed in accordance therewith.   To the extent that
the limitation contained in this Section 4.24 applies, the determination of
whether the option is exercisable (in relation to other securities owned by the
Purchaser together with any Affiliates) and of which portion of the option is
exercisable shall be in the sole discretion of the Purchaser, and the submission
of an Exercise Notice shall be deemed to be the Purchaser’s determination of
whether the option is exercisable (in relation to other securities owned by the
Purchaser together with any Affiliates) and of which portion of the option is
exercisable, in each case subject to the Beneficial Ownership Limitation.  To
ensure compliance with this restriction, a Purchaser will be deemed to represent
to the Company when it delivers an Exercise Notice that such Exercise Notice has
not violated the restrictions set forth in this paragraph, and the Company shall
have no obligation to verify or confirm the accuracy of such determination.   In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder.  For purposes of this Section 4.21, in
determining the number of outstanding shares of Common Stock, a Purchaser may
rely on the number of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with the Commission, as
the case may be, (B) a more recent public announcement by the Company or (C) a
more recent written notice by the Company or the Transfer Agent setting forth
the number of shares of Common Stock outstanding.  Upon the written or oral
request of a Purchaser, the Company shall within two Trading Days confirm orally
and in writing to the Purchaser the number of shares of Common Stock then
outstanding.  In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion of securities of the
Company by the Purchaser or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported.  The “Beneficial
Ownership Limitation” shall be 9.99%, unless a Purchaser elects on its signature
page hereto a different amount for its own Beneficial Ownership Limitation of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon exercise of the
option.  The Purchaser may decrease the Beneficial Ownership Limitation at any
time and the Purchaser, upon not less than 61 days’ prior notice to the Company,
may increase the Beneficial Ownership Limitation provisions of this Section
4.21, provided that the Beneficial Ownership Limitation in no event exceeds
9.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon exercise of the
option held by the Purchaser and the provisions of this Section 4.21 shall
continue to apply.  Any such increase will not be effective until the 61st day
after such notice is delivered to the Company.  The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 4.21 to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of
the option right.  In the event the limitations in this Section 4.21 would
prevent the exercise of a Purchaser’s rights under Sections 4.11, then such
Purchaser may exercise all such rights and comply with all obligations
applicable thereto except that the delivery of Common Stock will be deferred
until such time as such Purchaser provides notice to the Company that such
Purchaser may receive or beneficially own such Common Stock which exceeds the
Beneficial Ownership Limitation without exceeding the then applicable Beneficial
Ownership Limitation.
 

 
ARTICLE V.
MISCELLANEOUS
 
5.1         Intentionally Omitted. 
 
5.2         Fees and Expenses.  Except as expressly set forth below, 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
similar taxes and duties levied in connection with the delivery of any
Securities to the Purchasers. At the Closing the Company agrees to pay
reasonable legal fees of G&M in the amount of $10,000, counsel to some of the
Purchasers, incurred in connection with the negotiation, preparation, execution
and delivery of the Transaction Documents.
 
 
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5.3         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 thereof 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.

5.4         Notices.  All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be for personal or courier delivery: (i) if to the
Company, to: World Surveillance Group, Inc., State Road 405, Building M6-306A,
Room 1400, Kennedy Space Center, FL 32815, Attn: General Counsel, facsimile:
321-452-8965, and if by mail delivery, if to the Company, to: World Surveillance
Group, Inc., Mail Code: SWC, Kennedy Space Center, FL 32899, Attn: General
Counsel , and (ii) if to the Purchasers, to: the addresses and fax numbers
indicated on the signature pages hereto, with an additional copy by fax only to
(which shall not constitute notice): Grushko & Mittman, P.C., 515 Rockaway
Avenue, Valley Stream, New York 11581, facsimile: (212) 697-3575.

5.5           Amendments; Waivers.  No provision of this Agreement may be
waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding at least
a majority in interest of the component of the affected Securities then
outstanding or, in the case of a waiver, by the party against whom enforcement
of any such waived provision 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 any party to exercise any right hereunder in any manner
impair the exercise of any such right.
 
5.6           Headings.  The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
 
5.7           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 each Purchaser (other than to a successor
entity).  Any Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any Securities,
provided that such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchasers.” 
 
5.8           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 as otherwise set forth in Section 4.7.
 
 
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5.9           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law.  If either party shall commence an action or proceeding
to enforce any provisions of the Transaction Documents, then in addition to the
obligations of the Company under Section 4.7, the prevailing party in such
action, suit or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

5.10         Survival.  The representations and warranties contained herein
shall survive the Closing and the delivery of the Securities at the Closings for
the applicable statute of limitations.
 
5.11         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 each other party, it being understood that the
parties need not sign the same counterpart.  In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, 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 or “.pdf” signature page were an original
thereof.
 
5.12         Severability.  If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
 
5.13         Rescission and Withdrawal Right.  Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other 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.

 
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5.14         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
surrender and cancellation thereof (in the case of mutilation), 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,
destruction, or mutilation, and of the ownership of such Security.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity and
bonds) associated with the issuance of such replacement Securities.
 
5.15         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 contained in the Transaction Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
 
5.16         Payment Set Aside.  To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
5.17         Intentionally Omitted

    5.18         Intentionally Omitted

5.19         Saturdays, Sundays, Holidays, etc.     If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.
 
5.20         Construction. The parties agree that each of them and/or their
respective counsel have reviewed and had an opportunity to revise the
Transaction Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any
amendments thereto. In addition, each and every reference to share prices and
shares of Common Stock in any Transaction Document shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

5.21           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 applicable to
the Transaction Documents from the Closing Date thereof 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.
 
 
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5.22         WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.

5.23                            
Equitable Adjustment.  Trading volume amounts, price/volume amounts and similar
figures in the Transaction Documents shall be equitably adjusted (but without
duplication) to offset the effect of stock splits, similar events and as
otherwise described in this Agreement.

5.24              Consent.  As employed herein, “Consent” or consent shall mean
consent of the holders of the majority of the then outstanding Shares on the
date such consent is requested or required.
 

(Signature Pages Follow)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

WORLD SURVEILLANCE GROUP INC.
   
 
 
 
By: 
 
 
 
/s/ Glenn D. Estrella
   
Name:
Glenn D. Estrella
   
Title: 
President and CEO
         

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 
 
 
 
 
 
 
 
 
 
 

 
 
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[PURCHASER SIGNATURE PAGES TO WORLD SURVEILLANCE GROUP, INC.
SECURITIES PURCHASE AGREEMENT]
 
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Purchaser:
_______________________________________________________________   

Signature of Authorized Signatory of Purchaser:
__________________________________________

Name of Authorized Signatory:
_______________________________________________________

Title of Authorized Signatory:
________________________________________________________

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

Closing Subscription Amount: US$150,000

Shares: 21,428,571

EIN Number, if applicable, will be provided under separate cover:
________________________

Beneficial Ownership Limitation: _________%

 
 

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