SECURITIES PURCHASE AGREEMENT (this "AGREEMENT," “PURCHASE AGREEMENT,” or
“SECURITIES PURCHASE AGREEMENT”), dated as of May___, 2008, by and among
UNIVERSAL ENERGY CORP., a Delaware corporation, ("COMPANY"), and each buyer
listed on the Schedule of Buyers attached hereto (each, including its successors
and assigns, a “BUYER” and collectively the “BUYERS”).

WHEREAS:

      A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT" or the “Securities Act”);

     B. Buyers desire to purchase and the Company desires to issue and sell in a
private offering, upon the terms and conditions set forth in this Agreement, (i)
convertible debentures (the “Debentures”) of the Company and (ii) Warrants (as
defined in Section 1(b)(iv) in the form described in this Agreement, to purchase
shares of common stock, par value $.0001 per share, of the Company (“Common
Stock”). The maximum aggregate Subscription Amount of this offering of the
Debentures all of the Buyers shall be Two Million U.S. Dollars (U.S.
$2,000,000)(the “Maximum Amount”)(collectively, the “Offering”);

     C. The terms of the Debentures, including the terms on which the Debentures
may be converted into Common Stock, are set forth in Debenture, in the form
attached hereto as

Exhibit A;

      D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit B (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.

     NOW THEREFORE, the Company and each Buyer, severally and not jointly,
hereby agree as follows:

1.      PURCHASE AND SALE OF DEBENTURES AND WARRANTS.     (a) Certain
Definitions. This Securities Purchase Agreement, the Debenture, the  

Registration Rights Agreement, the Warrants, and any other agreements delivered
together with this Agreement or in connection herewith shall be referred to
herein as the “Transaction Documents.” The Company and the each Buyer (severally
and not jointly) mutually agree to the terms of each of the Transaction
Documents. For purposes hereof:

“1934 Act” shall mean the Securities Exchange Act of 1934.

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     "Approved Stock Plan" means any employee benefit plan which has been duly
adopted by a majority of members of the Board of Directors of the Company or a
majority of the members of a committee of directors established for such
purpose, pursuant to which the Company's securities may be issued to any
employee, consultant, officer or director for services provided to the Company.

“Closing Legal Opinion” shall have the meaning set forth in Section 1(b)(v)(C)
below.

“Common Stock Equivalents” means any securities of the Company or the

Subsidiaries which would entitle the holder thereof to acquire, directly or
indirectly, at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.

“Conversion Shares” shall have the meaning set forth in Section 2(a) below.
“Convertible Securities” shall have the meaning ascribed to it in the Debenture.
“Designated Insiders” shall have the meaning set forth in Section 4(r) below.

     “Effective Date” shall mean the date that the initial Registration
Statement required to be filed pursuant to the Registration Rights Agreement is
declared effective by the SEC.

     "Eligible Market" means the over the counter Bulletin Board (“OTC-BB”), the
New York Stock Exchange, Inc., the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market or the American Stock Exchange.

  “Exempt Issuance” means the issuance of:

      (a) any Common Stock issued or issuable in connection with any Approved
Stock Plan of the outstanding Common Stock, in the aggregate (provided that no
such options shall be issued to consultants or advisors unless such options are
not registered, either at the time of issuance or at any time thereafter, and
are subject to volume limitations under Rule 144;

      (b) securities issuable upon (i) conversion of the debentures or exercise
of the warrants (the “September 2007 Securities”) issued pursuant to the
September 2007 Financing (ii) conversion of the debentures or exercise of the
warrants (the “November 2007 Securities”) issued pursuant to the November 2007
Financing and (iii) conversion of the Debentures or exercise of the Warrants
issued pursuant to this Agreement; other than the issuance of the September 2007
Securities, the November 2007 Securities and the Securities, no issuance of
Variable Equity Securities shall be an Exempt Issuance.

     (c) securities upon the exercise, exchange of, conversion or redemption of,
or payment of interest or liquidated or similar damages on, any Securities
issued hereunder;

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      (d) other securities exercisable, exchangeable for, convertible into, or
redeemable for shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to directly or indirectly effectively increase the number of such
securities or to decrease the exercise, exchange or conversion price of such
securities (and including any issuances of securities pursuant to the
anti-dilution provisions of any such securities);

      (e) any Common Stock issued or issuable in connection with a fixed price
offering provided that the price at which such Common Stock is issued is greater
than the then applicable Fixed Conversion Price (as defined in the Debentures)
as the same may be adjusted in accordance with the terms of the Debentures;

(f)      any issuance of securities to which the Buyers have consented to in
writing; and   (g)      any Common Stock issued or issuable in connection with
any acquisition by the  

Company, whether through an acquisition of stock or a merger of any business,
assets or technologies the primary purpose of which is not to raise equity
capital.

“Indebtedness” shall have the meaning set forth in Section 3(mm) below.

“Initial Warrant Exercise Price” shall have the meaning set forth in Section
1(b)(iv)

below.

“Intellectual Property” shall have the meaning set forth in Section 3(j) below.

“Intellectual Property Rights” shall have the meaning set forth in Section 3(j)
below.

“Key Person Life Insurance Policy” shall have the meaning set forth in Section
3(u)

below.

“Legend Removal Date” shall have the meaning set forth in Section 6(a).

“Lien” shall have the meaning set forth in Section 5 below.

“Limited Standstill Agreements” shall have the meaning set forth in Section 4(r)

below.

     "Market Price," for any security as of any date, shall have the meaning
ascribed to it in the applicable security.

“Material Adverse Effect” shall have the meaning set forth in Section 3(a)
below.

     “November 2007 Financing” means the offer and sale of an aggregate of
$1,742,647 principal amount of the Company’s amortizing 8% convertible
debentures and associated warrants, pursuant to the terms and conditions of a
Securities Purchase Agreement dated as of

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November 26, 2007, between the Company and the purchasers of the debentures and
warrants who are signatories thereto, consummated on or about November 26, 2007.

“Officer’s Certificate” shall have the meaning set forth in Section 8(c) below.

     “Ongoing Share Reservation Requirement” shall have the meaning set forth in
Section 4(h)(i) below.

“Options” shall have the meaning ascribed to it in the Debenture.

“Patents” shall have the meaning set forth in Section 3(j) below.

     “Payment Shares” shall mean (i) Default Shares (as defined in the
Debenture), (ii) Interest Payment Shares (as defined in the Debenture) and (iii)
shares issuable upon conversion of Required Cash Payments (as each is defined in
the Debenture) into Common Stock of the Company. The Payment Shares shall be
treated as Common Stock issuable upon conversion of the Debentures for all
purposes hereof and thereof and shall be subject to all of the limitations and
afforded all of the rights of the other shares of Common Stock issuable
hereunder or thereunder, including without limitation, the right to be included
in the Registration Statement (as defined in the Registration Rights Agreement)
filed pursuant to the Registration Rights Agreement.

     “Permitted Liens” shall mean: (i) Liens on equipment purchased in the
ordinary course of business, (ii) Liens subordinate to the liens, if any created
by this Agreement as long as the lienholder enters into a subordination
agreement acceptable to the Buyers in their reasonable discretion, (iii)
landlords', carriers', warehousemen's, mechanics' and other similar Liens
arising by operation of law in the ordinary course of the Company's business;
provided, however, that all such Liens shall be discharged or bonded off within
sixty (60) days from the filing thereof; (iv) Liens arising out of pledge or
deposits under worker's compensation, unemployment insurance, old age pension,
social security, retirement benefits or other similar legislation; (v) Liens for
taxes (excluding any Lien imposed pursuant to any provision of ERISA) not yet
due or which are being contested in good faith by appropriate proceedings and
the Company maintains appropriate reserves in respect thereto provided that in
Buyer's judgment such Lien does not adversely affect Buyer's rights or the
priority of Buyer's Lien in the Collateral; (vi) Liens created by or pursuant to
the September 2007 Financing and (vii) easements, rights of way, restrictions
and other similar charges or Liens relating to real property and not interfering
in a material way with the ordinary conduct of the Company's business.

     “Person” shall mean an individual, a limited liability company, a
partnership, a joint venture, an exempted company, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

“Principal Market” shall have the meaning set forth in Section 4(j) below.

“Purchase Price” shall have the meaning set forth in Section 1(b)(ii) below.

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“Registration Rights Agreement” shall have the meaning set forth in Recital “D”

above.

“Required Holders” shall have the meaning ascribed to it in the Debenture.
“Security Agreement” shall have the meaning ascribed to it in Recital “E” above.
“SEC Documents” shall have the meaning set forth in Section 3(g) below.
“Securities” shall have the meaning set forth in Section 2(a) below.

     “September 2007 Financing” means the offer and sale of an aggregate of
$5,110,294 principal amount of the Company’s amortizing senior 8% secured
convertible debentures and associated warrants, pursuant to the terms and
conditions of a Securities Purchase Agreement dated as of September 10, 2007,
between the Company and the purchasers of the debentures and warrants who are
signatories thereto, consummated on or about September 14, 2007.

“Subscription Amount” shall have the meaning set forth in Section 10 below.

“Subsidiaries” shall have the meaning set forth in Section 3(a) below.

     “Trading Market” means the Eligible Market on which the Common Stock is
listed or quoted for trading on the date in question.

     “Underlying Shares” means the shares of Common Stock issued and issuable
upon conversion or redemption of the Debentures or as Payment Shares, issued and
issuable upon exercise of the Warrants and issued and issuable in lieu of the
cash payment of interest on the Debentures in accordance with their terms.

“Variable Equity Securities” shall have the meaning set forth in Section 4(e)
below.

     “VWAP” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time); (b) if the Common Stock is not then listed or quoted for trading on a
Trading Market and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Buyers of a majority in interest of the
Securities then outstanding and reasonably acceptable to the Company.

“Warrants” shall mean the “I Warrants,” as defined in Section 1(b) below.

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“Warrant Amount” shall mean the “I Warrant Amount,” as defined in Section 1(b)

below.

“Warrant Shares” shall have the meaning set forth in Section 2(a) below.

     (b) Closing of Purchase of Debentures and Warrants. Subject to the
satisfaction or waiver of the terms and conditions of this Agreement, on the
Closing Date (as defined below), the Company shall issue and sell to each Buyer
and each Buyer, severally and not jointly, agrees to purchase from the Company
the Debenture in a principal amount equal to the Subscription Amount (as defined
in Section 10) and an accompanying number of Warrants (as described below) to
purchase a number of shares equal to the Warrant Amount (as defined below).

    (i) Form of Debenture.    The Debenture shall be in the form annexed hereto 
as Exhibit A.                (ii) Form Of Payment.    The aggregate purchase
price for the Debenture 

and the Warrants to be purchased by each Buyer at the Closing (the "Purchase
Price") shall be the amount set forth opposite such Buyer's name in column (5)
of the Schedule of Buyers annexed hereto. Each Buyer shall pay $0.80 for each
$1.00 of principal amount of Debentures and related Warrants to be purchased by
such Buyer at the Closing, representing a twenty percent (20%) original issue
discount (the “Original Issue Discount”). On or before the Closing Date (as
defined below), (i) each Buyer shall pay the Purchase Price for the Debentures
and the Warrants to be issued and sold to it at the Closing (as defined below)
by wire transfer of immediately available funds to the Company, in accordance
with the Company's written wiring instructions, against delivery of duly a
executed Debenture having an aggregate initial principal amount (the “Original
Principal Amount”) equal to the Purchase Price and the number of Warrants equal
to the Warrant Amount, and (ii) the Company shall deliver such Debentures and
Warrants duly executed on behalf of the Company, to such Buyer, against delivery
of such Purchase Price.

     (iii) Closing Date. Subject to the satisfaction or waiver of the terms and
conditions of this Agreement, the "Closing" with respect to a Buyer shall occur
when subscriber funds representing the aggregate Original Principal Amount of
the Debenture being purchased by such Buyer are transmitted by wire transfer of
immediately available funds by each Buyer to the Company, assuming that the
Transaction Documents are signed by both parties prior to or within three (3)
business days following such transmission. The date of the Closing shall be
referred to herein as the “Closing Date.” Unless otherwise mutually agreed by
the parties, the last Closing of the transactions contemplated hereunder shall
occur not later than June 16, 2008. The Closing contemplated by this Agreement
shall occur on the applicable Closing Date at the offices of the Company, or at
such other location as may be agreed to by the parties.

     (iv) Warrants. Each Buyer’s Debenture shall be accompanied by a number of
warrants (the “I Warrants”) to purchase a number of shares of Common Stock equal
to 100% of the Original Principal Amount of the Debentures being purchased by
such Buyer,

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divided by the Initial Conversion Price (as defined in the Debenture) (the “I
Warrant Amount”). The I Warrants shall be in the form of the Warrant annexed
hereto as Exhibit E, except that the “Initial Exercise Price,” as defined
therein, shall equal $0.25 (the “Initial I Warrant Exercise Price”), subject to
adjustment therein. The I Warrants shall contain Exercise Price adjustment
provisions that are consistent with the adjustment provisions afforded to the
Conversion Price of the Debenture in the Debenture and shall have a five (5)
year term.

     (v) Closing Deliveries. On the Closing Date, the Company will deliver or
cause to be delivered to each Buyer (the “Company Documents”):

     (A) the items required to be delivered to Buyer pursuant to Section 8, duly
executed by the Company where so required,

(B)      omitted,   (C)      a legal opinion of the Company's counsel, dated as
of the  

Closing Date, in form, scope and substance reasonably satisfactory to the Buyer
and in substantially the same form as Exhibit F attached hereto in relation to
the Company, the applicable Debenture, the applicable Warrant and the
Transaction Documents ("Closing Legal Opinion"),

     (D) a duly executed Debenture with a principal amount equal to such Buyer’s
Subscription Amount, divided by 0.8 to account for the Original Issue Discount,
registered in the name of such Buyer,

     (E) a duly executed I Warrant registered in the name of such Buyer to
purchase up to a number of shares of Common Stock equal to the I Warrant Amount
(as defined in Section 1(b)(iv)) with an exercise price equal to the Initial I
Warrant Exercise Price (as defined in Section 1(b)(iv)) subject to adjustment
therein,

     (F) Limited Standstill Agreements, duly executed by each of the Designated
Insiders (as defined in Section 4(m));

     (G) The Company shall have delivered to such Buyer a true copy of
certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity's jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction, as of a date
within 10 days of the Closing Date.

     (H) The Company shall have delivered to such Buyer a true copy of
certificate evidencing the Company's qualification as a foreign corporation and
good standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company conducts business, as of a date within five
(5) days of the Closing Date.

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     (I) The Company shall have delivered to such Buyer a certified copy of the
Certificate of Incorporation as certified by the Secretary of the State of
Delaware as of a date that is five (5) days prior to the Closing Date.

     On the Closing Date, each Buyer shall deliver or cause to be delivered to
the Company the following (the “Buyer Documents”):

     (A) this Securities Purchase Agreement and the Registration Rights
Agreement duly executed by such Buyer; and

     (B) such Buyer’s Subscription Amount by wire transfer to the account as
specified in writing by the Company (subject to offsets for any expenses to
which such Buyer is entitled hereunder).

     2. BUYER’S REPRESENTATIONS AND WARRANTIES. Each Buyer represents and
warrants to the Company solely as to such Buyer that:

     (a) Investment Purpose. As of the date hereof, the Buyer is purchasing the
Debenture and the shares of Common Stock issuable upon conversion of the
Debenture or otherwise pursuant to the Debenture and the other Transaction
Documents (including, without limitation, the Payment Shares) (such shares of
Common Stock being collectively referred to herein as the “Conversion Shares")
and the Warrants and the shares of Common Stock issuable upon exercise thereof
(the "Warrant Shares" and, collectively with the Debenture, Warrants and
Conversion Shares, the "Securities") for its own account and not with a present
view towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act; PROVIDED, HOWEVER,
that by making the representations herein, the Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act and applicable state
securities laws.

     (b) Accredited Investor Status. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D (an "Accredited Investor").

     (c) Reliance On Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.

     (d) Information. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by the Buyer or its advisors. The Buyer and its advisors, if
any, have been afforded the opportunity to ask questions of the

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Company. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its investment in the
Securities involves a significant degree of risk.

     (e) Transfer Or Re-Sale. The Buyer understands that (i) except as provided
in the Registration Rights Agreement, the sale or re-sale of the Securities has
not been and is not being registered under the 1933 Act or any applicable state
securities laws, and the Securities may not be transferred or resold unless (a)
the Securities are sold pursuant to an effective registration statement under
the 1933 Act, (b) the Buyer shall have delivered to the Company an opinion of
counsel (which opinion shall be in form, substance and scope reasonably
satisfactory to counsel to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration, (c) the Securities are sold or transferred to an "affiliate"
(as defined in Rule 144 promulgated under the 1933 Act (or a successor rule)
("Rule 144") of the Buyer who agrees to sell or otherwise transfer the
Securities only in accordance with this Section 2(e) and who is an Accredited
Investor, or (d) the Securities are sold pursuant to Rule 144; and (ii) any sale
of such Securities made in reliance on Rule 144 may be made only in accordance
with the terms of said Rule. Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.

     (f) Organization; Authorization; Enforcement. Buyer is a duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized. Buyer has all requisite power and authority to enter into
and perform this Agreement and the other Transaction Documents to which Buyer is
a signatory and to consummate the transactions contemplated hereby and thereby
in accordance with the terms hereof and thereof. The execution and delivery of
this Agreement and the other Transaction Documents to which Buyer is a signatory
have been duly and validly authorized and no further consent or authorization of
Buyer, its manager or members is required. This Agreement has been duly executed
and delivered on behalf of the Buyer, and this Agreement constitutes, and upon
execution and delivery by the Buyer of the other Transaction Documents to which
Buyer is a signatory, such agreements will constitute, legal, valid and binding
agreements of the Buyer enforceable in accordance with their 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.

(g)      Residency. The Buyer’s residency is as indicated on its signature page
hereto.   (h)      Knowledge And Experience. Buyer has such knowledge and
experience in  

financial and business matters that it is capable of evaluating the merits and
risks of the investment in the Securities.

     (i) Short Sales Prior To The Date Hereof. Buyer and its Affiliates have not
from the time that such Buyer first received a term sheet (written or oral) from
the Company or

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any other person setting forth the material terms of the transactions
contemplated hereunder until the date hereof entered into or effected, or
attempted to induce any third party to enter into or effect, any short sales of
the Common Stock, or any hedging transaction which establishes a net short
position with respect to the Common Stock.

     (j) Independent Investment Decision. Such Buyer has independently evaluated
the merits of its decision to purchase the Securities pursuant to the
Transaction Documents, and such Buyer confirms that it has not relied on the
advice of any other Buyer's business and/or legal counsel in making such
decision.

     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Buyer that, except as set forth on the Company’s disclosure
schedules referred to herein and attached hereto or any update thereto prior to
the Closing Date (so long as such schedules do not contain any material adverse
change)(collectively, the “Disclosure Schedules”). If an exception is adequately
disclosed in any one section of the Disclosure Schedule it shall be deemed
disclosed for purposes of each other applicable section of the Disclosure
Schedule.

     (a) Organization And Qualification. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. Schedule 3(a) sets forth
a list of all of the Subsidiaries of the Company and the jurisdiction in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on (i) the
Securities, (ii) the business, operations, assets, financial condition or
prospects of the Company and its Subsidiaries, if any, taken as a whole, (iii)
on the transactions contemplated hereby or by the agreements or instruments to
be entered into in connection herewith or (iv) the authority or the ability of
the Company to perform its obligations under this Agreement, the Registration
Rights Agreement, the Debenture or the Warrants. "Subsidiaries" means any
corporation or other organization, whether incorporated or unincorporated, in
which the Company owns, directly or indirectly, any equity or other ownership
interest.

     (b) Authorization; Enforcement. (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, the Registration
Rights Agreement, the Debenture and the Warrants and to consummate the
transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) except as otherwise set forth
in Schedule 3(b), the execution and delivery of this Agreement, the Registration
Rights Agreement, the Debenture and the Warrants by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Debenture and the Warrants
and the issuance and reservation for issuance of the Conversion Shares issuable
upon conversion of or otherwise pursuant to the

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Debenture and the Warrant Shares issuable upon exercise of or otherwise pursuant
to the Warrants) have been duly authorized by the Company's Board of Directors
and no further consent or authorization of the Company, its Board of Directors,
or its stockholders is required, (iii) this Agreement has been duly executed and
delivered by the Company, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Registration Rights Agreement, the
Debenture and the Warrants, each of such agreements and instruments will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

     (c) Capitalization. As of the date hereof, the authorized capital stock of
the Company is as set forth on Schedule 3(c-1). The authorized capital stock of
the Company consists of 250,000,000 shares of Common Stock, par value $0.0001
per share, of which approximately 29,897,233 shares are outstanding as of the
date hereof. There are no outstanding securities which are convertible into
shares of Common Stock, whether such conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the
future, except as disclosed on Schedule (c-1). If any such securities are listed
on the Schedule (c-1), the number or amount of each such outstanding convertible
security and the conversion terms are set forth in said Schedule (c-1). All of
such outstanding shares of capital stock set forth in Schedule 3(c-1) are, or
upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable.

     No shares of capital stock of the Company are subject to preemptive rights
or any other similar rights of the stockholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company.
Except as disclosed in Schedule 3(c-2), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement) and
(iii) there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Debenture, the Warrants,
the Conversion Shares, the Payment Shares, or the Warrant Shares. The Company
has furnished to each Buyer true and correct copies of the Company's Articles of
Incorporation as in effect on the date hereof ("Articles Of Incorporation"), the
Company's By-laws, as in effect on the date hereof (the "By-Laws"), and the
terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect thereto. In
the event that the date of execution of this Agreement is not the Closing Date,
the Company shall provide each Buyer with a written update of this
representation signed by the Company's President and Chief

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Executive or Chief Financial Officer on behalf of the Company as of the Closing
Date (“Closing Bring-Down Certificate”). No further approval or authorization of
any stockholder, the Board of Directors of the Company or others is required for
the issuance and sale of the Securities. There are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.

     (d) Issuance of Shares. Upon issuance upon conversion of the Debenture and
upon exercise of the Warrants in accordance with their respective terms, and
receipt of the exercise price therefor, the Conversion Shares and Warrant
Shares, along with any Payment Shares or any other shares issued pursuant to the
terms of the Transaction Documents, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances and
shall not be subject to preemptive rights or other similar rights of
stockholders of the Company and will not impose personal liability upon the
holder thereof.

     (e) Acknowledgment Of Dilution. The Company understands and acknowledges
the potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares upon conversion of or otherwise pursuant to the Debentures or
upon issuance of the Warrant Shares upon exercise of or otherwise pursuant to
the Warrants. The Company's directors and executive officers have studied and
fully understand the nature of the Securities being sold hereunder. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of or otherwise pursuant to the Debentures, to issue Warrant Shares
upon exercise of or otherwise pursuant to the Warrants in accordance with this
Agreement, and to otherwise issue Payment Shares or other shares of Common Stock
to the Buyer is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company. Taking the foregoing into account, the Company's Board of Directors
has determined, in its good faith business judgment, that the issuance of the
Securities hereunder and under the Debentures and the Warrants and the
consummation of the transactions contemplated hereby and thereby are in the best
interest of the Company and its stockholders.

     (f) No Conflicts. Except as otherwise set forth in Schedule 3(f), the
execution, delivery and performance of each of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Certificate of
Incorporation or By-laws, (ii) trigger any resets of conversion or exercise
prices in other outstanding convertible securities, warrants or options of the
Company, (iii) trigger the issuance of securities by the Company to any third
party, (iv) violate or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which the Company or any of its Subsidiaries is
a party, or (v) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any

12

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property or asset of the Company or any of its Subsidiaries is bound or affected
(except, in the case of clauses (i), (iv) and (v) above, for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect).
Neither the Company nor any of its Subsidiaries is in violation of its
Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event has
occurred which with notice or lapse of time or both could put the Company or any
of its Subsidiaries in default) under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party or by which any property or assets of the Company or any
of its Subsidiaries is bound or affected, except for possible defaults as would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its Subsidiaries, if any, are not being conducted,
and shall not be conducted so long as a Buyer owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity the
violation of which would have a Material Adverse Effect. Except as disclosed in
Schedule 3(f) or as specifically contemplated by this Agreement or as required
under the 1933 Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement, the Debentures or the Warrants in accordance with
the terms hereof or thereof or to issue and sell the Debentures and Warrants in
accordance with the terms hereof and to issue the Conversion Shares upon
conversion of or otherwise pursuant to the Debentures and the Warrant Shares
upon exercise of or otherwise pursuant to the Warrants. Except as disclosed in
Schedule 3(f), all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof. The Company is not in
violation of the listing or trading requirements of the Principal Market (as
defined herein) and does not reasonably anticipate that the Common Stock will
cease to be listed or traded on the Principal Market in the foreseeable future.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.

     (g) SEC Documents; Financial Statements. Since at least the beginning of
the most recent fiscal quarter that began more than two (2) years prior to the
Closing Date, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing filed prior
to the date hereof and since at least the beginning of the most recent fiscal
quarter that began more than two (2) years prior to the Closing Date, and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the "SEC Documents"). For
purposes of this Agreement, “Timely Filed” shall mean that the applicable
document was filed (i) by its original due date under the 1934 Act, or, if a
request for an extension was timely filed, (ii) by such extended due date. True
and complete copies of the SEC Documents are available on the SEC’s internet
website (www.sec.gov), except for such exhibits and incorporated documents. Upon
the request of a Buyer, the Company will promptly provide

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copies of the SEC Documents to such Buyer. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings prior to
the date hereof). As of their respective dates, the financial statements of the
Company (and the Buyers thereto) included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to the date of the Company’s most recent
10-QSB or 10-KSB and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.

     (h) Absence Of Certain Changes. Except for losses incurred in the ordinary
course of business that have been publicly disclosed at least five (5) days
prior to the date hereof or as set forth on Schedule 3(h) hereof, since the date
of the Company’s most recent 10-Q or 10-K, there has been no material adverse
change and no material adverse development in the assets, liabilities, business,
properties, operations, financial condition, results of operations or prospects
of the Company or any of its Subsidiaries. For purposes of this Section 3(h),
the terms

"Material Adverse Change" and "Material Adverse Development" shall exclude
continuing losses that are consistent with the Company's historical losses.
Except as disclosed in Schedule 3(h), since the date of the Company’s most
recent audited financial statements contained in a Form 10-K, neither the
Company nor any of its Subsidiaries has

(i)      declared or paid any dividends on its Common Stock;   (ii)      sold
any assets, individually or in the aggregate, in excess of $100,000 outside  

of the ordinary course of business;

     (iii) except as set forth in Schedule 3(h), had capital expenditures,
individually or in the aggregate, in excess of $100,000;

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     (iv) issued any stock, bonds or other corporate securities or any rights,
options or warrants with respect thereto;

     (v) borrowed any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the ordinary
course of business which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business during the comparable
portion of its prior fiscal year, as adjusted to reflect the current nature and
volume of the Company's or such subsidiary's business;

     (vi) discharged or satisfied any lien or encumbrance or paid any obligation
or liability (absolute or contingent), other than current liabilities paid in
the ordinary course of business;

     (vii) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;

     (viii) sold, assigned or transferred any other tangible assets, or canceled
any debts or claims, except in the ordinary course of business;

     (ix) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or intellectual
property rights, or disclosed any proprietary confidential information to any
person except to customers in the ordinary course of business or to the Buyers
or their representatives;

     (x) suffered any material losses or waived any rights of material value,
whether or not in the ordinary course of business, or suffered the loss of any
material amount of prospective business;

     (xi) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;

    (xii) made capital expenditures or commitments therefor that aggregate in
excess  of $50,000;                (xiii) entered into    any other transaction
other than in the ordinary course of 

business, or entered into any other material transaction, whether or not in the
ordinary course of business;

(xiv)      made charitable contributions or pledges in excess of $10,000;  
(xv)      suffered any material damage, destruction or casualty loss, whether or
not  

covered by insurance;

     (xvi) experienced any material problems with labor or management in
connection with the terms and conditions of their employment;

15

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     (xvii) effected any two or more events of the foregoing kind which in the
aggregate would be material to the Company or its subsidiaries; or

     (xviii) entered into an agreement, written or otherwise, to take any of the
foregoing actions.

     Except as set forth in Schedule 3(h), neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so. The
Company and its Subsidiaries, individually and on a consolidated basis, are not
as of the date hereof, and after giving effect to the transactions contemplated
hereby to occur at the Closing, will not be Insolvent (as defined below). For
purposes of this Section 3(h), “Insolvent” means, without giving effect to this
transactions contemplated hereby, (i) the present fair saleable value of the
Company’s assets is less than the amount required to pay the Company’s total
Indebtedness, (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature or
(iv) the Company has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted.

     (i) Absence Of Litigation. Except as disclosed in Schedule 3(i-1), to the
knowledge of the Company or any of its subsidiaries, there is no action, suit,
claim, proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such. Schedule 3(i-2) contains a complete list and summary
description of any known pending or threatened proceeding against or affecting
the Company or any of its Subsidiaries, without regard to whether it, if
adversely decided, would have a Material Adverse Effect. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.

     (j) Patents, Copyrights, Etc. All of the Company’s material patents, patent
applications, Patents (as defined below), patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks, service names,
trade names and copyrights ("Intellectual Property") are set forth in Schedule
3(j-1) hereof. The Company and its Subsidiaries own or possess adequate rights
or licenses to use all of the Intellectual property and the rights to receive
proceeds from patent licensing agreements, patent infringement litigation or
other litigation related to such intellectual property (collectively, the
“Intellectual Property Rights”). Any Liens, encumbrances or licenses that have
been granted against the Intellectual Property are listed in Schedule 3(j-2).
Except as set forth in Schedule 3(j-2), none of the Company's Intellectual
Property Rights have expired or terminated, or are expected to expire or
terminate, within three years from the date of this Agreement. Except as
otherwise set forth on Schedule 3(j-2), the Company owns all right and title to
the Intellectual Property free and clear

16

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of any Liens or encumbrances and has not granted any licenses or rights to use
any of the Patents to any third party. The Company and each of its Subsidiaries
owns or possesses the requisite licenses or rights to use all Intellectual
Property necessary to enable it to conduct its business as now operated,
including but not limited to the intellectual property set forth in Schedule
3(j-1) hereof (and, except as otherwise set forth in Schedule 3(j-2) hereof, to
the best of the Company's knowledge, as presently contemplated to be operated in
the future), except for such licenses or rights the failure of which to own or
possess would not, individually or in the aggregate, have a Material Adverse
Effect; there is no claim or action by any person pertaining to, or proceeding
pending, or to the Company's knowledge threatened, which challenges the right of
the Company or of a Subsidiary with respect to any Intellectual Property
necessary to enable it to conduct its business as now operated (and, except as
otherwise set forth in Schedule 3(j-2) hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future), except for
actions or claims which, if adversely decided, would not have a Material Adverse
Effect; to the best of the Company's knowledge, the Company's or its
Subsidiaries' current and intended products, services and processes do not
infringe on any Intellectual Property Rights or other rights held by any person,
and the Company is unaware of any facts or circumstances which might give rise
to any of the foregoing. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property.

     For purposes hereof, "Patents" means all domestic and foreign letters
patent, design patents, utility patents, industrial designs, inventions, trade
secrets, ideas, concepts, methods, techniques, processes, proprietary
information, technology, know-how, formulae, rights of publicity and other
general intangibles of like nature, now existing or hereafter acquired
(including, without limitation, all domestic and foreign letters patent, design
patents, utility patents, industrial designs, inventions, trade secrets, ideas,
concepts, methods, techniques, processes, proprietary information, technology,
know-how and formulae described in Schedule 3(j-1) hereof), all applications,
registrations and recordings thereof (including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office, or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof, in each case owned by the Company or an of its Subsidiaries. The
Company does not own or have any rights in and to any Patents.

     (k) No Materially Adverse Contracts, Etc. Except as set forth on Schedule 3
(k), neither the Company nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or is reasonably
likely in the future to have a Material Adverse Effect. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement, or has
knowledge of a breach of any contract or agreement to which the Company or any
of its Subsidiaries is a party, either of which in the judgment of the Company's
officers has or is reasonably likely to have a Material Adverse Effect.

     (l) Tax Status. Except as set forth on Schedule 3(l), the Company and each
of its Subsidiaries has made or filed all federal, state and foreign income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the

17

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extent that the Company and each of its Subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. Except as set forth on
Schedule 3(l), none of the Company's tax returns is presently being audited by
any taxing authority.

     (m) Transactions With And Obligations To Affiliates. Other than the grant
of stock options disclosed on Schedule 3(m), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than customary employment contracts
for ordinary course 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 corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner. Schedule
3(m) sets forth any loans, payables, payments, transactions, debt or equity
securities, or similar agreements or obligations between the Company and any
officers, directors, management or affiliates of the Company.

     (n) Acknowledgment Regarding Buyer’s Purchase Of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of
arm's length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that each Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and that any statement made by each Buyer or any of its respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyer’s purchase of the Securities and has not been relied upon by the
Company, its officers or directors in any way. The Company further represents to
each Buyer that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.

     (o) No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has directly or indirectly made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would require registration under the 1933 Act of the
issuance of the Securities to any Buyer. The issuance of the Securities to each
Buyer will not be integrated with any other issuance of the Company's securities
(past, current or future) for purposes of any stockholder approval provisions
applicable to the Company or its securities.

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     (p) No Brokers. The identity of any brokers or placement agents (each, a
“Placement Agent”) that are receiving compensation in respect to this Offering,
along with the amount of cash, warrants or other consideration that compose any
compensation to each such broker or placement agent, are disclosed in Schedule
3(p) hereto. Other than as set forth on Schedule 3(p), the Company has taken no
action which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments relating to this Agreement or the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Buyer, its employees, officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees.

     (q) Conduct of Business; Regulatory Permits; Compliance. The Company and
each of its Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the "Company Permits"), except where the failure to so possess
any such Company Permits would not have a Material Adverse Effect, and there is
no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. Neither the Company
nor any of its Subsidiaries is in conflict with, or in default or violation of,
any of the Company Permits, except for any such conflicts, defaults or
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under its respective
Certificates or Articles of Incorporation or its Bylaws or their organizational
charter or bylaws, respectively. Since the beginning of the most recent fiscal
quarter that began more than two (2) years prior to the Closing Date, neither
the Company nor any of its Subsidiaries has received any notification with
respect to possible conflicts, defaults or violations of applicable laws, except
for notices relating to possible conflicts, defaults or violations, which
conflicts, defaults or violations would not have a Material Adverse Effect.
Neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit. To the best of the Company’s knowledge, neither the
Company nor any of its Subsidiaries is in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the Company or
its Subsidiaries, and neither the Company nor any of its Subsidiaries will
conduct its business in violation of any of the foregoing, except for possible
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Without limiting the generality of
the foregoing, the Company is not in violation of any of the rules, regulations
or requirements of the Principal Market and has no knowledge of any facts or
circumstances that would reasonably lead to delisting or suspension of the
Common Stock by its Principal Market in the foreseeable future. Since at least
September 2, 2004, (i) the Common Stock has been designated for quotation on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the
SEC or the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market.

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     (r) Title To Property. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all Liens,
encumbrances and defects except such as are described in Schedule 3(r) or such
as would not have a Material Adverse Effect. Any real property and facilities
held under lease by the Company and its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as would not have
a Material Adverse Effect.

     (s) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.

     (t) Solvency. The Company (both before and after giving effect to the
transactions contemplated by this Agreement) is solvent (i.e., its assets have a
fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. Except as disclosed
in Schedule 3(t), the Company did not receive a qualified opinion from its
auditors with respect to its most recent fiscal year end and does not anticipate
or know of any basis upon which its auditors might issue a qualified opinion in
respect of its current fiscal year.

     (u) No Investment Company. The Company is not, and upon the issuance and
sale of the Securities as contemplated by this Agreement will not be, an
"investment company" required to be registered under the Investment Company Act
of 1940 (an "Investment Company"). The Company is not controlled by an
Investment Company.

     (v) No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, other than
those incurred in the ordinary course of the Company's businesses which have
been disclosed in the Company’s public filings and which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect other
than as set forth in Schedule 3(v).

     (w) No Disagreements With Accountants And Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the

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Company, including but not limited to disputes or conflicts over payment owed to
such accountants and lawyers.

     (x) Company Acknowledgment. The Company hereby acknowledges that each Buyer
may elect to hold its Debenture and the Warrants for various periods of time, as
permitted by the terms of the Transaction Documents and the Company further
acknowledges that Buyer has made no representations or warranties, either
written or oral, as to how long the Securities will be held by such Buyer or
regarding Buyer’s trading history or investment strategies.

     (y) Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Buyers or their agents or counsel
with any information that constitutes material, nonpublic information concerning
the Company or its Subsidiaries other than the existence of the transactions
contemplated by this Agreement or the other Transaction Documents. The Company
understands and confirms that each of the Buyers will rely on the foregoing
representations in effecting transactions in securities of the Company. All
disclosure provided to the Buyers regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each press release
issued by the Company or any of its Subsidiaries during the twelve (12) months
preceding the date of this Agreement did not at the time of release contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. No event
or circumstance has occurred or information exists with respect to the Company
or any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed.

     (z) Absence Of Certain Company Control Person Actions Or Events. To the
Company’s knowledge, during the past five (5) years:

     (i) No petition under the federal bankruptcy laws or any state insolvency
law was filed by or against, and no receiver, fiscal agent or similar officer
was appointed by a court for the business or property of such Company Control
Person, or any partnership in which he was a general partner at or within two
years before the time of such filing, or any corporation or business association
of which he was an executive officer at or within two years before the time of
such filing;

     (ii) No Company Control Person was convicted in a criminal proceeding or is
a named subject of a pending criminal proceeding (excluding traffic violations
and other minor offenses);

     (iii) No Company Control Person has been the subject of any order, judgment
or decree, that was not subsequently reversed, suspended or vacated, of any
court of competent

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jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, the following activities:

(A) acting, as an investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, as a futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, any other Person regulated by the Commodity Futures
Trading Commission (“CFTC”) or engaging in or continuing any conduct or practice
in connection with such activity;

(B)      engaging in any type of business practice; or   (C)      engaging in
any activity in connection with the purchase or  

sale of any security or commodity or in connection with any violation of federal
or state securities laws or federal commodities laws;

     (iv) No Company Control Person has been the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any federal or
state authority barring, suspending or otherwise limiting for more than 60 days
the right of such Company Control Person to engage in any activity described in
paragraph (3) of this item, or to be associated with Persons engaged in any such
activity; or

     (v) No Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the CFTC or SEC has not been subsequently reversed, suspended, or
vacated.

     For purposes hereof, “Company Control Person” means each director,
executive officer, promoter, and such other Persons as may be deemed in control
of the Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934
Act.

     (aa) DTC Status. The Company's transfer agent is a participant in and the
Common Stock is eligible for transfer pursuant to the Depository Trust Company
Automated Securities Transfer Program. The name, address, telephone number, fax
number, contact person and email address of the Company transfer agent is set
forth on Schedule 3(aa) hereto.

     (bb) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are applicable to it as of the Closing Date.

     (cc) Seniority. The Debentures are junior and subordinate to the Company's
senior 8% secured convertible debentures issued in conjunction with the
September 2007

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Financing and the 8% unsecured convertible debentures issued in conjunction with
the November 2007 Financing. Except as set forth in the immediately preceding
sentence, and except as set forth on Schedule 3 (cc), as of the Closing Date, no
indebtedness or other equity of the Company is senior to or pari passu with the
Debentures in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise.

     (dd) Registration Rights. Except for the registration rights granted in
connection with the September 2007 Financing, the November 2007 Financing and as
otherwise set forth on Schedule 3(dd) hereto, other than each of the Buyers, no
Person has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.

     (ee) Off Balance Sheet Arrangements. There is no transaction, arrangement,
or other relationship between the Company and an unconsolidated or other off
balance sheet entity that is required to be disclosed by the Company in its 1934
Act filings and is not so disclosed or that otherwise would be reasonably likely
to have a Material Adverse Effect.

     (ff) Indebtedness And Other Contracts. Except as disclosed in Schedule
3(ff), neither the Company nor any of its Subsidiaries (i) has any outstanding
indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any indebtedness, or (iv) is 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 Material Adverse Effect. Schedule 3(ff) provides a detailed
description of the material terms of any such outstanding Indebtedness.

     (gg) Conduct Of Business. Neither the Company nor its Subsidiaries is in
violation of any term of or in default under its Certificate of Incorporation,
Bylaws or their organizational charter or bylaws, respectively. Except as
disclosed in Schedule 3(gg), neither the Company nor any of its Subsidiaries is
in violation of any judgment, decree or order or any statute, ordinance, rule or
regulation applicable to the Company or its Subsidiaries, and neither the
Company nor any of its Subsidiaries will conduct its business in violation of
any of the foregoing, except for possible violations which would not,
individually or in the aggregate, have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company is not in violation of any
of the rules, regulations or requirements of the Principal Market other than
violations which could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect and has no knowledge of any facts
or circumstances which would reasonably lead to delisting or suspension of the
Common Stock by the Principal Market in the foreseeable future. Except as
disclosed on Schedule 3(gg) since September 2, 2004, (i) the Common Stock has
been designated for quotation on the Principal Market, (ii) trading in the
Common Stock has not been suspended by the SEC or the Principal Market and (iii)
the Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market, and the Company has not received any letters of inquiry
from the SEC Division of Enforcement or state securities regulators in the past
24 months related to any potential or alleged violation of state or

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federal securities laws. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

(hh) No Undisclosed Events, Liabilities, Developments Or

Circumstances. Except as disclosed in the Disclosure Schedules, no event,
liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form SB-2 or any other
appropriate form filed with the SEC relating to an issuance and sale by the
Company of its Common Stock and which has not been publicly announced.

      (ii) Obligations To Issue Additional Securities. Schedule 3(ii) lists all
outstanding debt or equity securities, warrants or options, or Common Stock
Equivalents, and all contractual agreements of the Company, in each case, that
contain any provisions (“Triggering Provisions”) that could require the
adjustment to conversion or exercise prices of existing securities, or the
issuance of additional securities triggered as a result of the issuance of
securities by the Company or by the passage of time on or after the date of this
Securities Purchase Agreement.

     (jj) Regulation M Compliance. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the securities of the Company or (iii) paid or
agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company, other than, in the case of clauses (ii) and
(iii), compensation paid to the Company’s placement agent in connection with the
placement of the Securities.

     4. COVENANTS. Unless otherwise specified below, with respect to the
covenants in Sections 4 and 5 applicable to the Company: the Company’s
obligations to follow such covenants shall continue until such time as less than
20% of the principal amount of Debenture issued in the Offering remain
outstanding; and, any or all of such covenants may be waived by the written
consent of the Required Holders (as defined in the Debenture).

     (a) Form D; Blue Sky Laws. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof
to each Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for sale to the Buyer at the Closing
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to each Buyer on or prior
to the Closing Date.

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     (b) Reporting Status. The Company's Common Stock is registered under 12(b)
or 12(g) of the 1934 Act. So long as any Buyer beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act (“1934 Act Filings”), and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.

     (c) Use Of Proceeds. The Company shall use the proceeds from the sale of
the Debentures and the Warrants in the manner set forth in Schedule 4(c)
attached hereto and made a part hereof and, except as otherwise expressly
specified in Schedule 4(c), the Company shall not use any of such proceeds (i)
to repay any of its corporate debt or other Indebtedness, (ii) to redeem any
Common Stock or Common Stock Equivalents, (iii) to settle any outstanding
litigation, or (iv) to repay any debt or obligation to any officer, director or
manager of the Company, including but not limited to the Company’s president,
chief executive officer, chief financial officer and chief operations officer,
and any of their affiliates or family members (collectively, “Insiders”).

     (d) Securities Issuance Restrictions; Capital Raising Limitations; Right Of
Participation.

     (i) Lock-Up of Issuance of Securities. Except for Exempt Issuances, the
transactions or other issuances of securities by the Company to the Buyers as
contemplated by the Transaction Documents, during the period from the date
hereof until the earlier of (i) the date that is 90 days following the Effective
Date or (ii) twelve (12) months from the Closing Date (the “Limitation Period”),
neither the Company nor any Subsidiary shall issue shares of Common Stock or
Common Stock Equivalents (the “Equity Issuance Lock-Up”), provided, however, the
90 day period set forth in this Section 4(d)(i) shall be extended for the number
of Trading Days during such period in which (i) trading in the Common Stock is
suspended by any Trading Market, or (ii) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Buyers for the resale of the
Underlying Shares The Equity Issuance Lock-Up shall not apply in respect of an
Exempt Issuance.

     (ii) Capital Raising Limitations. During the period that any Debentures
remain outstanding, notwithstanding whether or not an issuance of securities is
an Exempt Issuance, the Company shall not issue or sell, or agree to issue or
sell Variable Equity Securities (as defined below)(the “Variable Equity
Securities Lock-Up”), without obtaining the prior written approval of each of
the Buyers, with the exception of any such agreements or transactions that (x)
exist as of the date hereof and (y) are not amended or modified after the date
hereof. For purposes hereof, the following shall be collectively referred to
herein as, the “Variable Equity Securities”: (A) any debt or equity securities
which are convertible into, exercisable or exchangeable for, or carry the right
to receive additional shares of Common Stock either (1) at any conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for Common Stock at any time after the
initial issuance of such debt or equity security, or (2) with a fixed
conversion, exercise or exchange

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price that is subject to being reset at some future date at any time after the
initial issuance of such debt or equity security due to a change in the market
price of the Company’s Common Stock since date of initial issuance, or (B) any
amortizing convertible security which amortizes prior to its maturity date,
where the Company is required to or has the option to (or the investor in such
transaction has the option to require the Company to) make such amortization
payments in shares of Common Stock (whether or not such payments in stock are
subject to certain equity conditions), or (C) any transaction involving a
written agreement between the Company and an investor or underwriter whereby the
Company has the right to “put” its securities to the investor or underwriter
over an agreed period of time and at an agreed price or price formula (each, an
“Equity Line” transaction). For purposes of the above, the “Market Price” at
time of closing shall mean the Market Price, as defined in the Debentures.

     It is expressly agreed and understood that the Variable Equity Securities
Lock-Up shall apply in respect of an Exempt Issuance and that no issuance of
Variable Equity Securities shall be an Exempt Issuance.

  (iii) Omitted.

(iv) Buyer’s Right of Participation in Future Financings.

     (A) From the date hereof and during the period that any portion of the
Debenture is outstanding, upon any financing by the Company or any of its
subsidiaries (each, a “Subsequent Financing”) of Common Stock or Common Stock
Equivalents (as defined in Section 1(a)), excluding any securities issued
pursuant to the Offering described in this Agreement, each Buyer shall have the
right to participate (the “Buyer’s Right Of Participation”) in up to the Buyer’s
Participation Maximum (as defined below) of the Subsequent Financing, provided
that any securities issued to the Buyer hereunder, and any securities issuable
pursuant to the conversion or exercise of such securities, shall be subject to
the Beneficial Ownership Limitation.

     (B) At least ten (10) days prior to the closing of the Subsequent
Financing, the Company shall deliver to each Buyer a written notice of its
intention to effect a Subsequent Financing (an “Advance Notice Of Financing”),
which Advance Notice of Financing shall ask such Buyer if it wants to review the
details of such financing (such additional notice, a “Subsequent Financing
Notice”). Upon the request of a Buyer, and only upon a request by such Buyer,
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 Buyer. 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, the Person with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto and complete, definitive legal documentation (“Legal
Documents”) for the transaction.

     (C) Any Buyer desiring to participate in such Subsequent Financing must
provide written notice (“Participation Notice”) to the Company by not later than
5:30 p.m. (New York City time) on the tenth (10th) Trading Day after such Buyer
has

26

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received the Advance Notice of Financing that the Buyer is willing to
participate in the Subsequent Financing, the amount of the Buyer’s
participation, and that the Buyer has such funds ready, willing, and available
for investment on the terms set forth in the Subsequent Financing Notice. If the
Company receives no notice from a Buyer as of such tenth (10th) Trading Day,
such Buyer shall be deemed to have notified the Company that it does not elect
to participate. Buyer shall not be obligated to participate in a Subsequent
Offering after delivering a Participation Notice to the Company until after the
Buyer has reviewed and agreed to the final Legal Documents for such offering.

     (D) If by 5:30 p.m. (New York City time) on the tenth (10th) Trading Day
after all of the requesting Buyers have received the Advance Notice of
Financing, notifications by the Buyers of their willingness to participate in
the Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice.

     (E) If by 5:30 p.m. (New York City time) on the tenth (10th) Trading Day
after all of the Buyers have received the Advance Notice of Financing, the
Company receives responses to a Subsequent Financing Notice from Buyers seeking
to purchase more than the aggregate amount of the Subsequent Financing, each
such Buyer shall have the right to purchase up to (the “Buyer’s Participation
Maximum”) (a) their Pro Rata Portion (as defined below) of the Subsequent
Financing, plus (b) a pro rata amount (based upon the relative amount of the
participating Buyers’ respective Pro Rata Portions) of the aggregate of the
unused Pro Rata Portions of the other Buyers. For purposes hereof, “Pro Rata
Portion” shall mean the ratio of (x) the aggregate Purchase Price of Securities
purchased on the Closing Date by a Buyer participating under this Section
4(e)(iv) and (y) the sum of the aggregate Purchase Price of Securities purchased
on the Closing Date by all Buyers participating under this Section 4(d)(iv).

     (F) For purposes of clarity, in the event that there is any amount of a
Subsequent Financing that is not requested to be purchased by a Buyer, then any
other Buyer shall have the right to purchase such remaining amount of the
Subsequent Financing.

     (G) The Company must provide the Buyers with a second Subsequent Financing
Notice, and the Buyers will again have the right of participation set forth
above in this Section 4(d)(iv), 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 thirty (30) Trading
Days after the date of the initial Subsequent Financing Notice.

     (H) The Company and the Buyers agree that if any Buyer elects to
participate in the Subsequent Financing, (x) neither the agreement regarding the
Subsequent Placement (the "Subsequent Placement Agreement") with respect to such
Subsequent Financing nor any other transaction documents related thereto
(collectively, the "Subsequent Placement Documents") shall include any term or
provisions whereby any Buyer shall be required to agree to any restrictions in
trading as to any securities of the Company owned by

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such Buyer prior to such Subsequent Placement, and (y) the Buyers shall be
entitled to the same registration rights provided to other investors in the
Subsequent Placement.

(v) Most Favored Nation (MFN) Securities Exchange Provision.

From the date hereof until the date when such Buyer holds less than 20% in
principal amount of Debentures originally purchased by such Buyer hereunder, if
the Company effects a Subsequent Financing, each Buyer may elect, in its sole
discretion, to exchange (an “MFN Exchange”) all or some of the Debentures then
held by such Buyer for any securities or units issued in a Subsequent Financing
on a $1.00 for $1.00 basis based on the outstanding principal amount of such
Debentures, along with any accrued but unpaid interest, liquidated damages and
other amounts owing thereon, and the effective price at which such securities
were sold in such Subsequent Financing; PROVIDED, HOWEVER, that this Section
4(d)(v) shall not apply with respect to (a) an Exempt Issuance or (b) a firm
commitment underwritten public offering of Common Stock with a reputable
national underwriter. The Company shall provide each Buyer with notice of any
such Subsequent Financing in the manner set forth in Section 4(d)(iv). Following
such an exchange, the Holder shall retain all of its unconverted Warrants and
shall receive any warrants, options or other ancillary securities that normally
accompany the securities being purchased and sold in the Subsequent Financing.

     (vi) Injunctive Relief. The remedies provided in this Agreement shall be
cumulative and in addition to all other remedies available under this Agreement
and any of the other Transaction Documents at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the Holder's right to pursue actual and consequential damages
for any failure by the Company to comply with the terms of this Agreement or any
of the Transaction Documents. The Company acknowledges that a breach by it of
its obligations under this Agreement or the other Transaction Documents,
including but not limited to a breach of its obligations under this subsection
4(d) or its obligations under Section 4(t) hereof, will cause irreparable harm
to Buyer, by vitiating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement or the other Transaction
Documents, including but not limited to a breach of its obligations under this
subsection 4(d) or a breach of its obligations under subsection 4(t) hereof,
will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Agreement or the other Transaction
Documents, that Buyer shall be entitled, in addition to all other available
remedies in law or in equity, to an injunction or injunctions to prevent or cure
any breaches of the provisions of this Agreement or the other Transaction
Documents, including but not limited to a breach of its obligations under this
subsection 4(d) or of subsection 4(m) hereof, and to enforce specifically the
terms and provisions of this Agreement and the other Transaction Documents,
including but not limited to its obligations under this subsection 4(d) or of
subsection 4(m) hereof, without the necessity of showing economic loss and
without any bond or other security being required. Specifically, the Buyer shall
be entitled to injunctive relief to cause the court to rescind any financing or
financings or other transactions between the Company and a third party that are
in violation of subsection 4(d) or subsection 4(t).

     (vii) Stockholder Approval. If at any time the number of shares of Common
Stock authorized and reserved for issuance is below 100% of the number of

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Conversion Shares issued and issuable upon conversion of or otherwise pursuant
to the Debentures (based on the Conversion Price (as defined in the Debentures)
in effect from time to time) and Warrant Shares issued or issuable upon exercise
of or otherwise pursuant to the Warrants (based on the Exercise Price of the
Warrants in effect from time to time), together with the Payment Shares and any
other shares of Common Stock issued or issuable pursuant to the terms of the
Transaction Documents, the Company will promptly take all corporate action
necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of stockholders to authorize
additional shares to meet the Company's obligations under this Section 4(h), in
the case of an insufficient number of authorized shares, and using its best
efforts to obtain stockholder approval of an increase in such authorized number
of shares.

     (e) Certain Trading Activities. For so long as such Buyer owns any
Debentures, such Buyer shall not maintain a Net Short Position. For purposes
hereof, a "Net Short Position" by a person means a position whereby such person
has executed one or more sales of Common Stock that is marked as a short sale
and that is executed at a time when such Buyer has no equivalent offsetting long
position in the Common Stock or contract for the foregoing. For purposes of
determining whether a Buyer has an equivalent offsetting long position in the
Common Stock, all Common Stock (i) that is owned by such Buyer, (ii) that may be
issued as Interest Shares pursuant to the terms of the Debentures to the Buyer,
(iii) that would be issuable upon conversion or exercise in full of all
Securities then held by such Buyer (assuming that such Securities were then
fully convertible or exercisable, notwithstanding any provisions to the
contrary, and giving effect to any conversion or exercise price adjustments that
would take effect given only the passage of time), or (iv) that would otherwise
be issuable to the Buyer as Payment Shares, shall be deemed to be held long by
such Buyer. Without limiting the foregoing, the Buyers may engage in hedging
activities at various times during the period following the Initial Effective
Date.

     (f) Listing. The Company shall use its best efforts to promptly secure the
listing of the Conversion Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and, so
long as any Buyer owns any of the Securities, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares from time to time issuable upon conversion of or otherwise pursuant to
the Debentures and all Warrant Shares from time to time issuable upon exercise
of or otherwise pursuant to the Warrants. The Company will use its best efforts
to obtain and, so long as any Buyer owns any of the Securities, maintain the
listing and trading of its Common Stock on an Eligible Market (whichever
Eligible Market is at the time the principal trading exchange or market for the
Common Stock is referred to herein as the "Principal Market"), and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the National Association of Securities Dealers, or any
successor entity ("NASD") and such exchanges, as applicable. The Company shall
promptly provide to Buyer copies of any notices it receives from the Principal
Market and any other exchanges or quotation systems on which the Common Stock is
then listed regarding the continued eligibility of the Common Stock for listing
on such exchanges and quotation systems.

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     (g) Corporate Existence. So long as a Buyer beneficially owns any portion
of the Debentures or Warrants, the Company shall maintain its corporate
existence in good standing and remain a “Reporting Issuer” (defined as a Company
which files periodic reports under the 1934 Act).

     (h) No 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 to the Buyers in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Buyers or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.

      (i) Limitation On Sale Or Disposition Of Intellectual Property. So long as
any portion of the Debentures remain outstanding, so long as the Company shall
have any obligation under the Debentures or so long as any of the Warrants
remain outstanding, the Corporation shall not sell, convey, dispose of, spin off
or assign any or all of its Intellectual Property (including but not limited to
the Intellectual Property set forth in Schedules 3(j)(1) and (2) hereof), or any
of the Intellectual Property Rights, in each case without Buyer’s written
consent, provided that the Company may, without the Buyer’s written consent,
enter into one or more licensing agreements with respect to its Intellectual
Property so long as such licensing agreements exceed $5 million per calendar
year and so long as such agreements are not with any affiliate (as such term is
defined in Rule 501(b) of Regulation D) of the Company or with any relative of,
or entity controlled by, or any entity 10% or more of which is owned by, any
officer, director, employee or former employee of the Company, provided,
further, that the Company shall not be subject to the restrictions of this
Section 4(i) if the cash consideration received by the Company in exchange for
such Intellectual Property Rights exceeds $50 million.

     (j) Limitation On Rate Of Issuance Of Shares. The parties agree that, if by
virtue of this AGREEMENT, or by virtue of any other agreement between the
parties, Holder becomes entitled to receive from the Company a number of shares
of Common Stock of the Company (collectively, “Issuable Securities”), such that
the sum of (1) the number of shares of Common Stock of the Company beneficially
owned by HOLDER and any applicable affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the unconverted
portion of the Debenture, the unexercised Warrants or the unexercised or
unconverted portion of any other security of HOLDER subject to a limitation on
conversion or exercise analogous to the limitations contained
herein)(collectively, the “Beneficially Owned Shares”) and (2) the number
Issuable Securities described above, with respect to which the determination of
this proviso is being made, would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock
(the “Beneficial Ownership Limitation”), then the Company shall immediately
deliver to Holder the number of shares of Common Stock of the Company, that can
be issued without exceeding the Beneficial Ownership Limitation, and the Company
shall not issue shares of Common Stock to the Buyer in excess of the Beneficial
Ownership Limitation.

     For purposes of the proviso to the immediately preceding sentence, (i)
beneficial ownership shall be determined by the Holder in accordance with
Section 13(d) of the 1934 Act

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and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of
such proviso to the immediately preceding sentence, and PROVIDED THAT the
Beneficial Ownership Limitation shall be conclusively satisfied if the
applicable notice from Holder includes a signed representation by the Holder
that the issuance of the shares in such notice will not violate the Beneficial
Ownership Limitation, and the Company shall not be entitled to require
additional documentation of such satisfaction.

     The parties agree that, in the event that the Company receives any tender
offer or any offer to enter into a merger with another entity whereby the
Company shall not be the surviving entity (an “Offer”), or in the event the
Company is issuing Default Shares (as defined in the Debenture) to the Buyer,
then “4.99%” shall be automatically revised immediately after such offer to read
“9.99%” each place it occurs in the first two paragraphs of this Section 4(j)
above. Notwithstanding the above, Holder shall retain the option to either
exercise or not exercise its option(s) to acquire Common Stock pursuant to the
terms hereof after an Offer. In addition, the Beneficial Ownership Limitation
provisions of this Section 4(j) may be waived by such Holder, at the election of
such Holder, upon not less than 61 days’ prior notice to the Company, to change
the Beneficial Ownership Limitation to any other percentage not less than 4.99%
and not in excess of 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 conversion of the Debenture held by the Holder or upon exercise of a
Warrant held by the Holder, as applicable, and the provisions of this Section
4(j) shall continue to apply. The limitations on conversion set forth in this
subsection are referred to as the “Beneficial Ownership Limitation.” Upon such a
change by a Holder of the Beneficial Ownership Limitation from such 4.99%
Beneficial Ownership Limitation to such 9.99% limitation, the Beneficial
Ownership Limitation may not be further waived by such Holder.

     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(j)
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.

     In the event the Buyer notifies the Company that the exercise of the rights
described herein or in the Warrants, or the issuance of Payment Shares or other
shares of Common Stock issuable to the Holder under the terms of the Transaction
Documents (collectively, “Issuable Shares”) would result in the issuance of an
amount of Common Stock of the Company that would exceed the maximum amount that
may be issued to a Buyer calculated in the manner described in this Section 4(j)
of this Agreement, then the issuance of such additional shares of Common Stock
of the Company to such Buyer will be deferred in whole or in part until such
time as such Buyer is able to beneficially own such Common Stock without
exceeding the maximum amount set forth calculated in the manner described in
herein. The determination of when such Common Stock may be issued shall be made
by each Buyer as to only such Buyer.

     (k) Equal Treatment Of Buyers. The terms of Securities issued to Buyers per
the terms of this Agreement and the Transaction Documents shall be identical in
all material

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respects. In addition, neither the Company nor any of its affiliates shall,
directly or indirectly, pay or cause to be paid any consideration (immediate or
contingent), whether by way of interest, fee, payment for the redemption,
conversion of the Debentures or exercise of the Warrants, or otherwise, to any
Buyer or holder of Securities, for or as an inducement to, or in connection with
the solicitation of, any consent, waiver or amendment. of any terms or
provisions of the Transaction Documents, unless such consideration is required
to be paid to all Buyers or holders of Securities bound by such consent, waiver
or amendment. The Company shall not, directly or indirectly, redeem any
Securities unless such offer of redemption is made pro rata to all Buyers or
holders of Securities, as the case may be, on identical terms. For clarification
purposes, this provision constitutes a separate right granted by the Company to
each Buyer of Securities and negotiated separately by each Buyer, is intended
for the Company to treat the Buyers as a class, and shall not in any way be
construed as the Buyers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

(l)      Omitted.   (m)      Limited Standstill. The Company will deliver to the
Buyers on or before the  

Closing Date and enforce the provisions of irrevocable standstill agreements
("Limited Standstill Agreements") in the form annexed hereto as Exhibit G with
the Insiders and other shareholders that are identified on Schedule 4(m) hereto
(collectively, the “Designated Insiders”).

     (n) Non-Public Information. The Company covenants and agrees that from and
after the date hereof, neither it nor any other Person acting on its behalf will
provide any Buyer or its agents or counsel with any information that constitutes
material non-public information, unless prior thereto such Buyer shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Buyer shall be
relying on the foregoing representations in effecting transactions in securities
of the Company. In the event of a breach of the foregoing covenant by the
Company, or any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided herein
or in the Transaction Documents, the Company shall publicly disclose any
material, non-public information in a Form 8-K within five (5) Business Days of
the date that it discloses such information to the Buyer. In the event that the
Company discloses any material, non-public information to the Buyer and fails to
publicly file a Form 8-K in accordance with the above, a Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any
liability to the Company, its Subsidiaries, or any of its or their respective
officers, directors, employees, stockholders or agents, for any such disclosure.
The Company understands and confirms that each Buyer shall be relying on the
foregoing representations in effecting transactions in securities of the
Company.

  (o) Omitted.

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     (p) Transactions With Affiliates. So long as any Debenture or Warrant is
outstanding, the Company shall not, and shall cause each of its Subsidiaries not
to, enter into, amend, modify or supplement, or permit any Subsidiary to enter
into, amend, modify or supplement any agreement, transaction, commitment, or
arrangement with any of its or any Subsidiary’s officers, directors, employees,
persons who were officers or directors at any time during the previous two (2)
years, stockholders who beneficially own five percent (5%) or more of the Common
Stock, or Affiliates (as defined below) of any thereof, or with any individual
related by blood, marriage, or adoption to any such individual or with any
entity in which any such entity or individual owns a five percent (5%) or more
beneficial interest (each a “Related Party”), except for customary employment
arrangements and benefit programs on reasonable terms. “Affiliate” for purposes
hereof means, with respect to any person or entity, another person or entity
that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. “Control” or “Controls”
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.

     (q) Pledge Of Securities. The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(e) hereof; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(e) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.

     (r) Additional Registration Statements. Except for the filing of a
registration statement on Form S-8 for Approved Stock Plans (as defined in the
Debentures) and as required in order to satisfy the Company’s obligations in
connection with the September 2007 Financing and November 2007 Financing, until
such time that all of the Conversion Shares and Warrant Shares can be sold under
a registration statement declared effective by the SEC, the Company will not
file a registration statement under the 1933 Act relating to securities that are
not the Securities without the prior written consent of the Buyers.

5.      Omitted.   6.      LEGENDS.     (a) The Conversion Shares and the
Warrant Shares, together with any other  

shares of Common Stock that are issued or issuable pursuant to the Transaction
Documents shall be referred to herein as the “Issued Common Shares.”
Certificates evidencing the Issued Common Shares shall not contain any legend
restricting the transfer thereof (including the legend set forth in Section 2(e)
of the Debentures): (i) while a registration statement (including

33

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the Registration Statement) covering the resale of such security is effective
under the Securities Act, or (ii) following any sale of such Issued Common
Shares pursuant to Rule 144, or (iii) if such Issued Common Shares are eligible
for sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission)(collectively, the “Unrestricted Conditions”). The Company shall
cause its counsel to issue a legal opinion to the Company’s transfer agent
promptly after the Effective Date if required by the Company’s transfer agent to
effect the issuance of Issued Common Shares without a restrictive legend or
removal of the legend hereunder. If the Unrestricted Conditions are met at the
time of issuance of Issued Common Shares, then such Issued Common Shares shall
be issued free of all legends. The Company agrees that following the Effective
Date or at such time as the Unrestricted Conditions are met or such legend is
otherwise no longer required under this Section 6(a), it will, no later than
three (3) Trading Days following the delivery by a Buyer to the Company or the
Company’s transfer agent of a certificate representing Issued Common Shares, as
applicable, issued with a restrictive legend (such third Trading Day, the
“Legend Removal Date”), deliver or cause to be delivered to such Buyer a
certificate representing such shares that is free from all restrictive and other
legends.

     (b) Each Buyer, severally and not jointly with the other Buyers, agrees
that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 6 is predicated upon the Company’s
reliance that each Buyer will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein.

     7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the
Company hereunder to issue and sell the Debentures and Warrants to a Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions thereto, provided that these conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion:

     (a) The Buyer shall have executed each of the Transaction Documents which
requires Buyer’s signature, and delivered the same to the Company.

     (b) The Buyer shall have delivered the applicable Purchase Price in
accordance with Section 1(b) above.

     (c) The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the
applicable Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Closing Date.

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     (d) No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

     8. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE. The obligation of each
Buyer hereunder to purchase the Debenture and Warrants at each Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for such Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:

     (a) The Company shall have executed this Agreement, and the Registration
Rights Agreement, and delivered the same to the Buyer.

     (b) The Company shall have delivered to such Buyer the duly executed
Debenture and Warrants in accordance with Section 1 above.

     (c) The representations and warranties of the Company contained in this
Agreement, as modified by the Exhibits and Schedules hereto, shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at such time (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true
and correct as of such date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer shall have received a
certificate or certificates (the “Officer’s Certificate”), executed by the
President and Chief Executive Officer of the Company, dated as of the applicable
Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer including, but not limited to certificates
with respect to the Company's Certificate of Incorporation, By-laws and Board of
Directors' resolutions relating to the transactions contemplated hereby.

     (d) No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by or in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

     (e) Trading in the Common Stock on the Principal Market shall not have been
suspended by the SEC or the Nasdaq and, within two (2) business days of the
Closing, the Company will make application to the Principal Market, if legally
required by Nasdaq, to have the Conversion Shares and the Warrant Shares
authorized for quotation.

(f) The Buyer shall have received a Closing Legal Opinion as further described
in

Section 1(b)(v)(C) hereof.

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     (g) The Buyer shall have received a Closing Certificate described in
Section 1(b)(v)(B) above, dated as of the Closing Date.

     (h) The Company shall have delivered to the Buyer executed Accountant and
Lawyer Letters, as described in Section 3(w) hereof.

     (i) The Company shall have received funds from Buyers representing their
respective Purchase Prices in an amount not exceeding the Maximum Amount, in the
aggregate.

     (j) No Material Adverse Changes have occurred since the date that the Buyer
executed this Agreement.

9.      GOVERNING LAW; MISCELLANEOUS.     (a) Governing Law. All questions
concerning the construction, validity,  

enforcement and interpretation of this Agreement and the other 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, 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. If either party shall commence an action or proceeding to enforce
any provisions of the Transaction Documents, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding. THE PARTIES HEREBY
WAIVE ALL RIGHTS TO, AND AGREES NOT TO REQUEST, A TRIAL BY JURY FOR ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY OR BY ANY OF THE TRANSACTION DOCUMENTS.

     (b) Counterparts; Signatures By Facsimile. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering this
Agreement.

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     (c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

     (d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

     (e) Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and supersede all previous
communication, representation, or Agreements whether oral or written, between
the parties with respect to the matters covered herein. Except as specifically
set forth herein or therein, neither the Company nor the Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters.
The Agreement may not be orally modified. Only a modification in writing, signed
authorized representatives of both parties will be enforceable. The parties
waive the right to rely on any oral representations made by the other party,
whether in the past or in the future, regarding the subject matter of the
Agreement, the instruments referenced herein or any other dealings between the
parties related to investments or potential investments into the Company or any
securities transactions or potential securities transactions with the Company.

     (f) Independent Nature Of Buyers’ Obligations And Rights. The obligations
of each Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any Transaction Document, and no action
taken by any Buyer pursuant thereto, shall be deemed to constitute the Buyers as
a partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Buyers are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Buyer shall be entitled to independently protect and
enforce its rights, including without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose. Each Buyer has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents.

     (g) Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:

  If to the Company, to:

Attn: Dyron M. Watford, CFO

37

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  Universal Energy Corp.
30 Skyline Drive
Lake Mary, FL 32746
Office: 800-975-2076
Local: 407-771-0312
Cell: 407-694-3714
Fax: 800-805-4561

  With copy to:

  Joseph Sierchio, Esq.
Sierchio Greco & Greco, LLP
110 East 59th Street, 29th Floor
New York, New York 10022
Tel. (212) 246-3030
Fax (212) 486-0208

If to a Buyer: To the address set forth immediately below such Buyer's name on
the signature pages hereto.

Each party shall provide notice to the other party of any change in address.

     (h) Successors And Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Neither the
Company nor any Buyer shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other. Notwithstanding the
foregoing, subject to Section 2(f), Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from a Buyer or to any
of its "Affiliates," as that term is defined under the 1934 Act, without the
consent of the Company.

     (i) Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

     (j) Survival. The representations and warranties of the parties hereto
contained in this Agreement shall survive the closing hereunder for the maximum
period permitted by applicable law notwithstanding any due diligence
investigation conducted by or on behalf of the Buyer.

     (k) Indemnification. The Company (the “Indemnifying Party”) agrees to
indemnify and hold harmless the Buyer and all its officers, directors,
employees, agents, members and managers (the “Indemnified Party”) for loss or
damage arising as a result of or related to any breach or alleged breach by the
Company of any of its representations, warranties and covenants set forth in
Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement or the Registration Rights Agreement, including advancement of
expenses as they are incurred with respect to claims by third parties.

38

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     Promptly after receipt of notice of the commencement of any action against
an Indemnified Party, such Indemnified Party shall notify the Indemnifying Party
in writing of the commencement thereof and the basis hereunder upon which a
claim for indemnification is asserted, but the failure to do so shall not
relieve the Indemnifying Party of its obligations hereunder except to the extent
the Indemnifying Party is materially prejudiced by such failure. In the event of
the commencement of any such action, the Indemnifying Party shall be entitled to
participate therein and to assume the defense thereof with counsel satisfactory
to the Indemnified Party, and, after notice from the Indemnifying Party to the
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party shall not be liable to the Indemnified Party hereunder for
any legal expenses (including attorneys' fees) subsequently incurred by such
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, PROVIDED,
HOWEVER, that, if the defendants in any such action include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the Indemnifying Party or if
the interests of the Indemnified Party reasonably may be deemed to conflict with
the interests of the Indemnifying Party, the Indemnified Party shall have the
right to select one separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the Indemnifying Party as incurred.

     As to cases in which the Indemnifying Party has assumed and is providing
the defense for the Indemnified Party, the control of such defense shall be
vested in the Indemnifying Party; provided that the consent of the Indemnified
Party shall be required prior to any settlement of such case or action, which
consent shall not be unreasonably withheld. As to any action, the party which is
controlling such action shall provide to the other party reasonable information
(including reasonable advance notice of all proceedings and depositions in
respect thereto) regarding the conduct of the action and the right to attend all
proceedings and depositions in respect thereto through its agents and attorneys,
and the right to discuss the action with counsel for the party controlling such
action.

     (l) Publicity. The Company and the Buyer shall have the right to review a
reasonable period of time before issuance of any press releases, filings with
the SEC, NASD or any stock exchange or interdealer quotation system, or any
other public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or public filings with respect
to such transactions as is required by applicable law and regulations (although
the Buyer shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon). The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Buyers without the consent of the Buyers unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.

     (m) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request

39

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in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.

     (n) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

     (p) Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to Buyer, by vitiating the
intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that Buyer
shall be entitled, in addition to all other available remedies in law or in
equity, to an injunction or injunctions to prevent or cure any breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required.

     10. NUMBER OF SHARES AND PURCHASE PRICE. Buyer subscribes for a Debenture
in the Original Principal Amount equal to the Original Principal Amount set
forth on the Schedule of Buyers against payment by wire transfer in the amount
of the Purchase Price (taking into account the Original Issue Discount) (the
“Subscription Amount”) set forth opposite such Buyer’s name on the Schedule of
Buyers (less any offset of expenses as permitted hereunder.

     The undersigned acknowledges that this Agreement and the subscription
represented hereby shall not be effective unless accepted by the Company as
indicated below.

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     IN WITNESS WHEREOF, the undersigned Buyer does represent and certify under
penalty of perjury that the foregoing statements are true and correct and that
Buyer by the following signature(s) executed this Agreement.

Dated this             day of
_____________
,    2008.                  Your Signature        PRINT EXACT NAME IN WHICH YOU
WANT              THE SECURITIES TO BE REGISTERED 

Buyer’s Subscription Amout: $
__________________
.

Buyer’s Entity Type and Residency:
______________________
.

____________________________________
Name: Please Print

DELIVERY INSTRUCTIONS:

Please type or print address where your security is to be delivered

____________________________________
Title/Representative Capacity (if applicable)

ATTN.:
___________________________________________

____________________________________
Name of Company You Represent (if applicable)

__________________________________________________
Street Address

____________________________________
Place of Execution of this Agreement

__________________________________________________
City, State or Province, Country, Offshore Postal Code

__________________________________________________
Phone Number (For Federal Express) and Fax Number (re: Notice)

THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF $
_________________
(“SUBSCRIPTION AMOUNT”) ON THE _____ DAY OF MAY, 2008.

UNIVERSAL ENERGY CORP.

By:
________________________________
Name: Dyron M. Watford
Title: Chief Financial Officer

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SCHEDULE OF BUYERS

42

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