Exhibit 10.1

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 19th day of July, 2007
by and among Terabeam, Inc., a Delaware corporation (the “Company”), and the
Investors set forth on the signature pages affixed hereto (each an “Investor”
and collectively the “Investors”).

Recitals

A.           The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended; and

B.           The Investors wish to purchase from the Company, and the Company
wishes to sell and issue to the Investors, upon the terms and conditions stated
in this Agreement, (i) an aggregate of 4,300,000 shares of the Company’s Common
Stock, par value $0.01 per share (together with any securities into which such
shares may be reclassified the “Common Stock”), at purchase price of $1.75 per
share, and (ii) warrants to purchase an aggregate of 2,150,000 shares of Common
Stock (subject to adjustment) at an exercise price of $2.45 per share (subject
to adjustment) in the form attached hereto as Exhibit A (the “Warrants”); and

C.           Contemporaneous with the sale of the Common Stock and Warrants, the
parties hereto will execute and deliver a Registration Rights Agreement, in the
form attached hereto as Exhibit B (the “Registration Rights Agreement”),
pursuant to which the Company will agree to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws.

In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1.            Definitions.  In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth below:

“Affiliate” means, with respect to any Person, any other Person which directly
or indirectly through one or more intermediaries Controls, is controlled by, or
is under common control with, such Person.

“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

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“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

“Company’s Knowledge” means the actual knowledge of the executive officers (as
defined in Rule 405 under the 1933 Act) of the Company, after due
inquiry.  Notwithstanding the foregoing, each of the Investors acknowledges and
agrees that the Company has conducted no freedom to operate searches or similar
inquiries as to the existence of any patents that would be infringed by the
operation of the Company's and each of its Subsidiaries respective businesses,
as currently conducted or currently proposed to be conducted, and that no
knowledge of any matters that would be revealed by any such searches or
inquiries will be imputed to Company under this Agreement.

“Confidential Information” means trade secrets, confidential information and
know-how (including but not limited to ideas, formulae, compositions, processes,
procedures and techniques, research and development information, product price
and cost information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).

“Control” (including the terms “controlling”, “controlled by” or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

“Intellectual Property” means all of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).

“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the ability of the Company to perform its obligations under the Transaction
Documents; provided that in determining whether there has been or would be a
Material Adverse Effect circumstances attributable to general industry,
economic, national or international conditions shall not be taken into account
unless they have a disproportionate impact on the Company and its Subsidiaries.

“Nasdaq” means The Nasdaq Stock Market, Inc.

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship,

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unincorporated organization, governmental authority or any other form of entity
not specifically listed herein.

“Purchase Price” means Seven Million Five Hundred Twenty-Five Thousand Dollars
($7,525,000).

“Registration Statement” has the meaning set forth in the Registration Rights
Agreement.

“SEC Filings” has the meaning set forth in Section 4.6.

“Securities” means the Shares, the Warrants and the Warrant Shares.

“Shares” means the shares of Common Stock being purchased by the Investors
hereunder.

“Subsidiary” of any Person means another Person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first Person.

“Transaction Documents” means this Agreement, the Warrants and the Registration
Rights Agreement.

“Warrant Shares” means the shares of Common Stock issuable upon the exercise of
the Warrants.

“1933 Act” means the Securities Act of 1933, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.

“1934 Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.

2.           Purchase and Sale of the Shares and Warrants.  Subject to the terms
and conditions of this Agreement, on the Closing Date, each of the Investors
shall severally, and not jointly, purchase, and the Company shall sell and issue
to the Investors, the Shares and Warrants in the respective amounts set forth
opposite the Investors’ names on the signature pages attached hereto in exchange
for the Purchase Price as specified in Section 3 below.

3.           Closing.  Upon confirmation that the other conditions to closing
specified herein have been satisfied or duly waived by the Investors, the
Company shall deliver to Lowenstein Sandler PC, in trust, a certificate or
certificates, registered in such name or names as the Investors may designate,
representing the Shares and Warrants, with instructions that such certificates
are to be held for release to the Investors only upon payment in full of the
Purchase Price to the Company by all the Investors.  Upon such receipt by
Lowenstein Sandler PC of the

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certificates, each Investor shall promptly, but no more than one Business Day
thereafter, cause a wire transfer in same day funds to be sent to the account of
the Company as instructed in writing by the Company, in an amount representing
such Investor’s pro rata portion of the Purchase Price as set forth on the
signature pages to this Agreement.  On the date (the “Closing Date”) the Company
receives the Purchase Price, the certificates evidencing the Shares and Warrants
shall be released to the Investors (the “Closing”).  The Closing of the purchase
and sale of the Shares and Warrants shall take place at the offices of
Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th Floor, New York, New
York 10020, or at such other location and on such other date as the Company and
the Investors shall mutually agree.

4.           Representations and Warranties of the Company.  The Company hereby
represents and warrants to the Investors that, except as set forth in the
disclosure letter delivered contemporaneous herewith (the “Disclosure Letter”)
(with references to Schedules below referring to portions of the Disclosure
Letter):

4. 1           Organization, Good Standing and Qualification.  Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to carry on its business as now
conducted and to own its properties.  Each of the Company and its Subsidiaries
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property makes such qualification or leasing necessary
unless the failure to so qualify has not had and could not reasonably be
expected to have a Material Adverse Effect.  The Company’s Subsidiaries are
listed on Schedule 4.1 hereto.

4.2           Authorization.  The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Transaction Documents, (ii) the authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Securities.  The
Transaction Documents constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors’
rights generally.

4.3           Capitalization.  Schedule 4.3 sets forth (a) the authorized
capital stock of the Company on the date hereof; (b) the number of shares of
capital stock issued and outstanding; (c) the number of shares of capital stock
issuable pursuant to the Company’s stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities (other
than the Shares and the Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company.  All of the issued
and outstanding shares of the Company’s capital stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of pre-emptive
rights and were issued in full compliance with applicable state and federal
securities law and any rights of third parties.  Except as described on Schedule
4.3, all of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive

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rights, were issued in full compliance with applicable state and federal
securities law and any rights of third parties and are owned by the Company,
beneficially and of record, subject to no lien, encumbrance or other adverse
claim.  Except as described on Schedule 4.3, no Person is entitled to
pre-emptive or similar statutory or contractual rights with respect to any
securities of the Company.  Except as described on Schedule 4.3, there are no
outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind and except as contemplated by this Agreement, neither the Company nor any
of its Subsidiaries is currently in negotiations for the issuance of any equity
securities of any kind.  Except as described on Schedule 4.3 and except for the
Registration Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them.  Except as described on
Schedule 4.3 and except as provided in the Registration Rights Agreement, no
Person has the right to require the Company to register any securities of the
Company under the 1933 Act, whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the account
of any other Person.

Except as described on Schedule 4.3, the issuance and sale of the Securities
hereunder will not obligate the Company to issue shares of Common Stock or other
securities to any other Person (other than the Investors) and will not result in
the adjustment of the exercise, conversion, exchange or reset price of any
outstanding security.

Except as described on Schedule 4.3, the Company does not have outstanding
stockholder purchase rights or “poison pill” or any similar arrangement in
effect giving any Person the right to purchase any equity interest in the
Company upon the occurrence of certain events.

4.4           Valid Issuance.  The Shares have been duly and validly authorized
and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws.  The Warrants have been duly and validly
authorized.  Upon the due exercise of the Warrants, the Warrant Shares will be
validly issued, fully paid and non-assessable free and clear of all encumbrances
and restrictions, except for restrictions on transfer set forth in the
Transaction Documents or imposed by applicable securities laws and except for
those created by the Investors.  The Company has reserved a sufficient number of
shares of Common Stock for issuance upon the exercise of the Warrants, free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws
and except for those created by the Investors.

4.5           Consents.  The execution, delivery and performance by the Company
of the Transaction Documents and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and post-sale

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filings pursuant to applicable state and federal securities laws which the
Company undertakes to file within the applicable time periods.  Subject to the
accuracy of the representations and warranties of each Investor set forth in
Section 5 hereof, the Company has taken all action necessary to exempt (i) the
issuance and sale of the Securities, (ii) the issuance of the Warrant Shares
upon due exercise of the Warrants, and (iii) the other transactions contemplated
by the Transaction Documents from the provisions of any stockholder rights plan
or other “poison pill” arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject and any provision of the
Company’s Certificate of Incorporation or Bylaws that is or could reasonably be
expected to become applicable to the Investors as a result of the transactions
contemplated hereby, including without limitation, the issuance of the
Securities and the ownership, disposition or voting of the Securities by the
Investors or the exercise of any right granted to the Investors pursuant to this
Agreement or the other Transaction Documents.

4.6           Delivery of SEC Filings; Business.  The Company has made available
to the Investors through the EDGAR system, true and complete copies of the
Company’s most recent Annual Report on Form 10-K for the fiscal year ended
December 31, 2006 (the “10-K”), and all other reports filed by the Company
pursuant to the 1934 Act since the filing of the 10-K and prior to the date
hereof (collectively, the “SEC Filings”).  The SEC Filings are the only filings
required of the Company pursuant to the 1934 Act for such period.  The Company
and its Subsidiaries are engaged in all material respects only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole.

4.7           Use of Proceeds.  The net proceeds of the sale of the Shares and
the Warrants hereunder shall be used by the Company for working capital and
general corporate purposes.

4.8           No Material Adverse Change.  Since December 31, 2006, except as
identified and described in the SEC Filings or as described on Schedule 4.8,
there has not been:

(i)           any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the Company’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2007, except for changes in the ordinary course of
business which have not had and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;

(ii)           any declaration or payment of any dividend, or any authorization
or payment of any distribution, on any of the capital stock of the Company, or
any redemption or repurchase of any securities of the Company;

(iii)           any material damage, destruction or loss, whether or not covered
by insurance to any assets or properties of the Company or its Subsidiaries;

(iv)           any waiver, not in the ordinary course of business, by the
Company or any Subsidiary of a material right or of a material debt owed to it;

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(v)           any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company or a Subsidiary, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company and its
Subsidiaries taken as a whole (as such business is presently conducted and as it
is proposed to be conducted);

(vi)           any change or amendment to the Company's Certificate of
Incorporation or Bylaws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;

(vii)          any material labor difficulties or labor union organizing
activities with respect to employees of the Company or any Subsidiary;

(viii)         any material transaction entered into by the Company or a
Subsidiary other than in the ordinary course of business;

(ix)            the loss of the services of any key employee, or material change
in the composition or duties of the senior management of the Company or any
Subsidiary;

(x)            the loss or threatened loss of any customer which has had or
could reasonably be expected to have a Material Adverse Effect; or

(xi)           any other event or condition of any character that has had or
could reasonably be expected to have a Material Adverse Effect.

4.9           SEC Filings; S-3 Eligibility.

(a)           At the time of filing thereof, the SEC Filings complied as to form
in all material respects with the requirements of the 1934 Act and did 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.

(b)           Each registration statement and any amendment thereto filed by the
Company since January 1, 2004 pursuant to the 1933 Act and the rules and
regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the 1933 Act and
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein not misleading; and each prospectus filed by the Company
since January 1, 2004 pursuant to Rule 424(b) under the 1933 Act, as of its
issue date and as of the closing of any sale of securities pursuant thereto did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.

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(c)           The Company is eligible to use Form S-3 to register the
Registrable Securities (as such term is defined in the Registration Rights
Agreement) for sale by the Investors as contemplated by the Registration Rights
Agreement.

4.10           No Conflict, Breach, Violation or Default.  The execution,
delivery and performance of the Transaction Documents by the Company and the
issuance and sale of the Securities will not conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a default
under (i) the Company’s Certificate of Incorporation or the Company’s Bylaws,
both as in effect on the date hereof (true and complete copies of which have
been made available to the Investors through the EDGAR system), or (ii)(a) any
statute, rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company, any Subsidiary
or any of their respective assets or properties, or (b) any agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or a Subsidiary is bound or to which any of their respective assets or
properties is subject.

4.11           Tax Matters.  The Company and each Subsidiary has timely prepared
and filed all tax returns required to have been filed by the Company or such
Subsidiary with all appropriate governmental agencies and timely paid all taxes
shown thereon or otherwise owed by it, except for such instances of
noncompliance as have not had and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate.  The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company or any Subsidiary nor, to the Company’s
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company and its
Subsidiaries, taken as a whole.  All taxes and other assessments and levies that
the Company or any Subsidiary is required to withhold or to collect for payment
have been duly withheld and collected and paid to the proper governmental entity
or third party when due.  There are no tax liens or claims pending or, to the
Company’s Knowledge, threatened against the Company or any Subsidiary or any of
their respective assets or property.  Except as described on Schedule 4.11,
there are no outstanding tax sharing agreements or other such arrangements
between the Company and any Subsidiary or other corporation or entity.

4.12           Title to Properties.  Except as disclosed in the SEC Filings, the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.

4.13           Certificates, Authorities and Permits.  The Company and each
Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies

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or bodies necessary to conduct the business now operated by it, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company or such Subsidiary, could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.

                      4.14           Labor Matters.

                      (a)           Except as set forth on Schedule 4.14, the
Company is not a party to or bound by any collective bargaining agreements or
other agreements with labor organizations.  The Company has not violated in any
material respect any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, labor organizations or any laws,
regulations or orders affecting employment discrimination, equal opportunity
employment, or employees’ health, safety, welfare, wages and hours.

                      (b)           (i) There are no labor disputes existing, or
to the Company's Knowledge, threatened, involving strikes, slow-downs, work
stoppages, job actions, disputes, lockouts or any other disruptions of or by the
Company's employees, (ii) there are no unfair labor practices or petitions for
election pending or, to the Company's Knowledge, threatened before the National
Labor Relations Board or any other federal, state or local labor commission
relating to the Company's employees, (iii) no demand for recognition or
certification heretofore made by any labor organization or group of employees is
pending with respect to the Company and (iv) to the Company's Knowledge, the
Company enjoys good labor and employee relations with its employees and labor
organizations.

                      (c)           The Company is, and at all times has been,
in compliance in all material respects with all applicable laws respecting
employment (including laws relating to classification of employees and
independent contractors) and employment practices, terms and conditions of
employment, wages and hours, and immigration and naturalization.  There are no
claims pending against the Company before the Equal Employment Opportunity
Commission or any other administrative body or in any court asserting any
violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination
Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other federal, state or local Law,
statute or ordinance barring discrimination in employment.

                      (d)           Except as disclosed in the SEC Filings or as
described on Schedule 4.14, the Company is not a party to, or bound by, any
employment or other contract or agreement that contains any severance,
termination pay or change of control liability or obligation, including, without
limitation, any “excess parachute payment,” as defined in Section 280G(b) of the
Internal Revenue Code.

                      (e)           Except as specified in Schedule 4.14, each
of the Company's employees is a Person who is either a United States citizen or
a permanent resident entitled to work in the United States.  To the Company's
Knowledge, the Company has no liability for the improper classification by the
Company of such employees as independent contractors or leased employees prior
to the Closing.

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4.15           Intellectual Property.

(a)           All Intellectual Property of the Company and its Subsidiaries is
currently in compliance with all legal requirements (including timely filings,
proofs and payments of fees) and, to the Company’s Knowledge, is valid and
enforceable.  No Intellectual Property of the Company or its Subsidiaries which
is necessary for the conduct of Company’s and each of its Subsidiaries’
respective businesses as currently conducted or as currently proposed to be
conducted has been or is now involved in any cancellation, dispute or
litigation, and, to the Company’s Knowledge, no such action is threatened.  No
patent of the Company or its Subsidiaries has been or is now involved in any
interference, reissue, re-examination or opposition proceeding.

(b)           All of the licenses and sublicenses and consent, royalty or other
agreements concerning Intellectual Property which are necessary for the conduct
of the Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted to which the
Company or any Subsidiary is a party or by which any of their assets are bound
(other than  generally commercially available, non-custom, off-the-shelf
software application programs having a retail acquisition price of less than
$10,000 per license) (collectively, “License Agreements”) are valid and binding
obligations of the Company or its Subsidiaries that are parties thereto and, to
the Company’s Knowledge, the other parties thereto, enforceable in accordance
with their terms, except to the extent that enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally,
and, to the Company’s Knowledge, there exists no event or condition which will
result in a material violation or breach of or constitute (with or without due
notice or lapse of time or both) a default by the Company or any of its
Subsidiaries under any such License Agreement.

(c)           The Company and its Subsidiaries own or have the valid right to
use all of the Intellectual Property that is necessary for the conduct of the
Company’s and each of its Subsidiaries’ respective businesses as currently
conducted and for the ownership, maintenance and operation of the Company’s and
its Subsidiaries’ properties and assets, free and clear of all liens,
encumbrances, adverse claims or obligations to license all such owned
Intellectual Property and Confidential Information, other than licenses entered
into in the ordinary course of the Company’s and its Subsidiaries’
businesses.  The Company and its Subsidiaries have a valid and enforceable right
to use all third party Intellectual Property and Confidential Information used
or held for use in the respective businesses of the Company and its
Subsidiaries.

(d)           To the Company’s Knowledge, the conduct of the Company’s and its
Subsidiaries’ businesses as currently conducted does not infringe or otherwise
impair or conflict with (collectively, “Infringe”) any Intellectual Property
rights of any third party or any confidentiality obligation owed to a third
party, and, to the Company’s Knowledge, the Intellectual Property and
Confidential Information of the Company and its Subsidiaries which are necessary
for the conduct of Company’s and each of its Subsidiaries’ respective businesses
as currently conducted or as currently proposed to be conducted are not being
Infringed by any third party.  There is no litigation or order pending or
outstanding or, to the Company’s

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Knowledge, threatened or imminent, that seeks to limit or challenge or that
concerns the ownership, use, validity or enforceability of any Intellectual
Property or Confidential Information of the Company and its Subsidiaries and the
Company’s and its Subsidiaries’ use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company’s Knowledge, there is no
valid basis for the same.

(e)           The consummation of the transactions contemplated hereby and by
the other Transaction Documents will not result in the alteration, loss,
impairment of or restriction on the Company’s or any of its Subsidiaries’
ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted.

(f)           The Company and its Subsidiaries have taken reasonable steps to
protect the Company’s and its Subsidiaries’ rights in their Intellectual
Property and Confidential Information.  Each employee, consultant and contractor
who has had access to Confidential Information which is necessary for the
conduct of Company’s and each of its Subsidiaries’ respective businesses as
currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential Information and
has executed appropriate agreements that are substantially consistent with the
Company’s standard forms thereof.  Except under confidentiality obligations or
otherwise in accordance with applicable laws, to the Company’s Knowledge there
has been no material disclosure of any of the Company’s or its Subsidiaries’
Confidential Information to any third party.

4.16           Environmental Matters.  Neither the Company nor any Subsidiary is
in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company’s Knowledge, threatened
investigation that might lead to such a claim.

4.17           Litigation.  Except as described on Schedule 4.17, there are no
pending actions, suits or proceedings against or affecting the Company, its
Subsidiaries or any of its or their properties; and to the Company’s Knowledge,
no such actions, suits or proceedings are threatened or contemplated.  Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or since
January 1, 2002 has been the subject of any action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty.  There has not been, and to the Company’s Knowledge,
there is not pending or contemplated, any investigation by the SEC involving the
Company or any current or former director or officer of the Company.  The SEC
has not issued any stop order or other order

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suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the 1933 Act or the 1934 Act.

4.18           Financial Statements.  The financial statements included in each
SEC Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis (“GAAP”) (except as may be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-Q under the 1934 Act).  Except as
set forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof or as described on Schedule 4.18, neither the
Company nor any of its Subsidiaries has incurred any liabilities, contingent or
otherwise, except those incurred in the ordinary course of business, consistent
(as to amount and nature) with past practices since the date of such financial
statements, none of which, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect.

4.19           Insurance Coverage.  The Company and each Subsidiary maintains in
full force and effect insurance coverage that is customary for comparably
situated companies for the business being conducted and properties owned or
leased by the Company and each Subsidiary, and the Company reasonably believes
such insurance coverage to be adequate against all liabilities, claims and risks
against which it is customary for comparably situated companies to insure.

4.20           Compliance with Nasdaq Continued Listing Requirements.  The
Company is in compliance with applicable Nasdaq continued listing
requirements.  There are no proceedings pending or, to the Company’s Knowledge,
threatened against the Company relating to the continued listing of the Common
Stock on Nasdaq and the Company has not received any notice of, nor to the
Company’s Knowledge is there any basis for, the delisting of the Common Stock
from Nasdaq.

4.21           Brokers and Finders.  No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company, other than as
described in Schedule 4.21.

4.22           No Directed Selling Efforts or General Solicitation.  Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.

4.23           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 Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for

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the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.

4.24           Private Placement.  The offer and sale of the Securities to the
Investors as contemplated hereby is exempt from the registration requirements of
the 1933 Act.

4.25           Questionable Payments.  Neither the Company nor any of its
Subsidiaries nor, to the Company’s Knowledge, any of their respective current or
former stockholders, directors, officers, employees, agents or other Persons
acting on behalf of the Company or any Subsidiary, has on behalf of the Company
or any Subsidiary or in connection with their respective businesses: (a) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment of
any nature.

4.26           Transactions with Affiliates.  Except as disclosed in the SEC
Filings or as disclosed on Schedule 4.26, none of the officers or directors of
the Company and, to the Company’s Knowledge, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Company’s Knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.

4.27           Internal Controls.  The Company is in material compliance with
the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the
Company.  The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in 1934
Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including the Subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which the
Company’s most recently filed periodic report under the 1934 Act, as the case
may be, is being prepared.  The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the end of the
period covered by the most recently filed periodic report under the 1934 Act
(such date, the "Evaluation Date").

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The Company presented in its most recently filed periodic report under the 1934
Act the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date.  Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in Item 308
of Regulation S-K) or, to the Company's Knowledge, in other factors that could
significantly affect the Company's internal controls.  The Company maintains and
will continue to maintain a standard system of accounting established and
administered in accordance with GAAP and the applicable requirements of the 1934
Act.

4.28           Application of Takeover Protections.  There is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
or any Subsidiary's charter documents or the laws of its state of incorporation
that is or could become applicable to any of the Investors as a result of the
Investors and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including, without limitation, as a
result of the Company’s issuance of the Securities and the Investors’ ownership
of the Securities.

Section 4.29    Disclosures.  Neither the Company nor any Person acting on its
behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information, other than the terms of the transactions contemplated hereby.  The
written materials delivered to the Investors in connection with the transactions
contemplated by the Transaction Documents do not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.

5.           Representations and Warranties of the Investors.  Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:

5.1           Organization and Existence.  Such Investor, if applicable, is a
validly existing corporation, limited partnership or limited liability company
and has all requisite corporate, partnership or limited liability company power
and authority to invest in the Securities pursuant to this Agreement.

5.2           Authorization.  The execution, delivery and performance by such
Investor of the Transaction Documents to which such Investor is a party have
been duly authorized and each constitute the valid and legally binding
obligation of such Investor, enforceable against such Investor in accordance
with their respective terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors’ rights generally.

5.3           Purchase Entirely for Own Account.  The Securities to be received
by such Investor hereunder will be acquired for such Investor’s own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof in violation of the 1933 Act or any applicable state securities
laws, and such Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same in violation of the 1933
Act or any applicable state securities laws without prejudice, however, to such
Investor’s right at all

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times to sell or otherwise dispose of all or any part of such Securities in
compliance with applicable federal and state securities laws.  Nothing contained
herein shall be deemed a representation or warranty by such Investor to hold the
Securities for any period of time.  Such Investor is not a broker-dealer
registered with the SEC under the 1934 Act or an entity engaged in a business
that would require it to be so registered.

5.4           Investment Experience.  Such Investor acknowledges that it can
bear the economic risk and complete loss of its investment in the Securities and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment contemplated
hereby.

5.5           Disclosure of Information.  Such Investor has had an opportunity
to receive all information related to the Company requested by it and to ask
questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities.  Such
Investor acknowledges receipt of copies of the SEC Filings.  Neither such
inquiries nor any other due diligence investigation conducted by such Investor
shall modify, limit or otherwise affect such Investor’s right to rely on the
Company’s representations and warranties contained in this Agreement.

5.6           Restricted Securities.  Such Investor understands that the
Securities are characterized as “restricted securities” under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.

5.7           Legends.  It is understood that, except as provided below,
certificates evidencing the Securities may bear the following or any similar
legend:

(a)           “The securities represented hereby may not be transferred unless
(i) such securities have been registered for sale pursuant to the Securities Act
of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144(k),
or (iii) the Company has received an opinion of counsel reasonably satisfactory
to it that such transfer may lawfully be made without registration under the
Securities Act of 1933 or qualification under applicable state securities laws.”

(b)           If required by the authorities of any state in connection with the
issuance of sale of the Securities, the legend required by such state authority.

5.8           Accredited Investor.  Such Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

5.9           No General Solicitation.  Such Investor did not learn of the
investment in the Securities as a result of any general solicitation or general
advertising.

5.10           Brokers and Finders.  No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon

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the Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor.

5.11           Prohibited Transactions.  During the last thirty (30) days prior
to the date hereof, neither such Investor nor any Affiliate of such Investor
which (x) had knowledge of the transactions contemplated hereby, (y) has or
shares discretion relating to such Investor’s investments or trading or
information concerning such Investor’s investments, including in respect of the
Securities, or (z) is subject to such Investor’s review or input concerning such
Affiliate’s investments or trading (collectively, “Trading Affiliates”) has,
directly or indirectly, effected or agreed to effect any short sale, whether or
not against the box, established any “put equivalent position” (as defined in
Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Securities (each, a “Prohibited
Transaction”).  Until the end of the Effectiveness Period (as defined in the
Registration Rights Agreement), so long as any Investor continues to hold any
Securities, such Investor shall not, and shall cause its Trading Affiliates not
to, engage, directly or indirectly, in a Prohibited Transaction; provided,
however, that the provisions of this sentence shall not apply during any period
when either (i) the bid price per share of the Common Stock is more than $3.00
per share (appropriately adjusted for any stock split, reverse stock split,
stock dividend or other reclassification or combination of the Common Stock
occurring after the date hereof) or (ii) a Registration Statement covering the
Registrable Securities (as defined in the Registration Rights Agreement) is
required to be effective under the terms of the Registration Rights Agreement
but is not effective and available for resales of the Registrable Securities
(other than as a result of an Allowed Delay).  Such Investor acknowledges that
the representations, warranties and covenants contained in this Section 5.11 are
being made for the benefit of the Investors as well as the Company and that each
of the other Investors shall have an independent right to assert any claims
against such Investor arising out of any breach or violation of the provisions
of this Section 5.11.

6.  Conditions to Closing.

6.1           Conditions to the Investors’ Obligations. The obligation of each
Investor to purchase the Shares and the Warrants at the Closing is subject to
the fulfillment to such Investor’s satisfaction, on or prior to the Closing
Date, of the following conditions, any of which may be waived by such Investor
(as to itself only):

(a)           The representations and warranties made by the Company in Section
4 hereof qualified as to materiality shall be true and correct at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct as of such earlier date,
and, the representations and warranties made by the Company in Section 4 hereof
not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly

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speaks as of an earlier date, in which case such representation or warranty
shall be true and correct in all material respects as of such earlier date.  The
Company shall have performed in all material respects all obligations and
covenants herein required to be performed by it on or prior to the Closing Date.

(b)           The Company shall have obtained any and all consents, permits,
approvals, registrations and waivers necessary or appropriate for consummation
of the purchase and sale of the Securities and the consummation of the other
transactions contemplated by the Transaction Documents, all of which shall be in
full force and effect.

(c)           The Company shall have executed and delivered the Registration
Rights Agreement.

(d)           The Company shall have filed with Nasdaq a Notification Form for
the inclusion of the Shares and the Warrant Shares in the Nasdaq Capital Market.

(e)           No judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, including any bankruptcy court or judge,
or any order of or by any governmental authority, shall have been issued, and no
action or proceeding shall have been instituted by any governmental authority,
enjoining or preventing the consummation of the transactions contemplated hereby
or in the other Transaction Documents.

(f)           The Company shall have delivered a Certificate, executed on behalf
of the Company by its Chief Executive Officer or its Chief Financial Officer,
dated as of the Closing Date, certifying to the fulfillment of the conditions
specified in subsections (a), (b), (d), (e) and (i) of this Section 6.1.

(g)           The Company shall have delivered a Certificate, executed on behalf
of the Company by its Secretary, dated as of the Closing Date, certifying the
resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Securities, certifying the current versions of the
Certificate of Incorporation and Bylaws of the Company and certifying as to the
signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company.

(h)           The Investors shall have received an opinion from Foley Hoag LLP,
the Company's counsel, dated as of the Closing Date, in form and substance
reasonably acceptable to the Investors and addressing such legal matters as the
Investors may reasonably request.

(i)           No stop order or suspension of trading shall have been imposed by
Nasdaq, the SEC or any other governmental or regulatory body with respect to
public trading in the Common Stock.

6.2           Conditions to Obligations of the Company. The Company's obligation
to sell and issue the Shares and the Warrants at the Closing is subject to the
fulfillment to the

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satisfaction of the Company on or prior to the Closing Date of the following
conditions, any of which may be waived by the Company:

(a)           The representations and warranties made by the Investors in
Section 5 hereof, other than the representations and warranties contained in
Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the “Investment
Representations”), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date.  The
Investment Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on the Closing Date with the same
force and effect as if they had been made on and as of said date.  The Investors
shall have performed in all material respects all obligations and covenants
herein required to be performed by them on or prior to the Closing Date.

(b)           The Investors shall have executed and delivered the Registration
Rights Agreement.

(c)           The Investors shall have delivered the Purchase Price to the
Company.

6.3           Termination of Obligations to Effect Closing; Effects.

(a)           The obligations of the Company, on the one hand, and the
Investors, on the other hand, to effect the Closing shall terminate as follows:

(i)           Upon the mutual written consent of the Company and the Investors;

(ii)           By the Company if any of the conditions set forth in Section 6.2
shall have become incapable of fulfillment, and shall not have been waived by
the Company;

(iii)           By an Investor (with respect to itself only) if any of the
conditions set forth in Section 6.1 shall have become incapable of fulfillment,
and shall not have been waived by the Investor; or

(iv)           By either the Company or any Investor (with respect to itself
only) if the Closing has not occurred on or prior to July 31, 2007;

provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party’s seeking to
terminate its obligation to effect the Closing.

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(b)           In the event of termination by any Investor of its obligations to
effect the Closing pursuant to this Section 6.3 (such Investor, a “Terminating
Investor”), written notice thereof shall forthwith be given by the Company to
the other Investors, and each other Investor shall have the right (but not the
obligation) to purchase at a price per Share equal to the Per Share Purchase
Price a pro rata portion of the Terminating Investor’s allocated portion of the
total number of Shares to be acquired by all Investors under this Agreement (or
such greater portion of the Terminated Investor’s allocated portion of the
Shares as otherwise agreed to among each of the other Investors electing to
purchase a portion of the Terminated Investor’s allocated portion of the
Shares).  Nothing in this Section 6.3 shall be deemed to release any party from
any liability for any breach by such party of the terms and provisions of this
Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.]

7.           Covenants and Agreements of the Company.

7.1           Reservation of Common Stock.  The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of providing for the exercise of the Warrants,
such number of shares of Common Stock as shall from time to time equal the
number of shares sufficient to permit the exercise of the Warrants issued
pursuant to this Agreement in accordance with their respective terms.

7.2           Reports.  The Company will furnish to the Investors and/or their
assignees such information relating to the Company and its Subsidiaries as from
time to time may reasonably be requested by the Investors and/or their
assignees; provided, however, that the Company shall not disclose material
nonpublic information to the Investors, or to advisors to or representatives of
the Investors, unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information and provides
the Investors, such advisors and representatives with the opportunity to accept
or refuse to accept such material nonpublic information for review and any
Investor wishing to obtain such information enters into an appropriate
confidentiality agreement with the Company with respect thereto.

7.3           No Conflicting Agreements.  The Company will not take any action,
enter into any agreement or make any commitment that would conflict or interfere
in any material respect with the Company’s obligations to the Investors under
the Transaction Documents.

7.4           Compliance with Laws.  The Company will comply in all material
respects with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities.

7.5           Listing of Underlying Shares and Related Matters.  Promptly
following the date hereof, the Company shall take all necessary action to cause
the Shares and the Warrant Shares to be listed on the Nasdaq Capital Market no
later than the Closing Date.  Further, if the Company applies to have its Common
Stock or other securities traded on any other principal stock exchange or
market, it shall include in such application the Shares and the Warrant Shares
and will take such other action as is necessary to cause such Common Stock to be
so listed.  The Company will use commercially reasonable efforts to continue the
listing and trading of its

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Common Stock on the Nasdaq Capital Market and, in accordance, therewith, will
use commercially reasonable efforts to comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of such market
or exchange, as applicable.

7.6           Termination of Covenants.  The provisions of Sections 7.2 through
7.4 shall terminate and be of no further force and effect on the date on which
the Company’s obligations under the Registration Rights Agreement to register or
maintain the effectiveness of any registration covering the Registrable
Securities (as such term is defined in the Registration Rights Agreement) shall
terminate.

7.7           Removal of Legends.  Upon the earlier of (i) registration for
resale pursuant to the Registration Rights Agreement or (ii) Rule 144(k)
becoming available the Company shall (A) deliver to the transfer agent for the
Common Stock (the “Transfer Agent”) irrevocable instructions that the Transfer
Agent shall reissue a certificate representing shares of Common Stock (or make
available such shares in electronic format via DWAC) without legends upon
receipt by such Transfer Agent of the legended certificates for such shares,
together with either (1) a customary representation by the Investor that Rule
144(k) applies to the shares of Common Stock represented thereby or (2) a
statement by the Investor that such Investor has sold the shares of Common Stock
represented thereby in accordance with the Plan of Distribution contained in the
Registration Statement, and (B) cause its counsel to deliver to the Transfer
Agent one or more blanket opinions to the effect that the removal of such
legends in such circumstances may be effected under the 1933 Act.  From and
after the earlier of such dates, upon an Investor’s written request, the Company
shall promptly cause certificates evidencing the Investor’s Securities to be
replaced with certificates which do not bear such restrictive legends or to be
replaced with unlegended shares made available electronically via DWAC, and
Warrant Shares subsequently issued upon due exercise of the Warrants shall not
bear such restrictive legends provided the provisions of either clause (i) or
clause (ii) above, as applicable, are satisfied with respect to such Warrant
Shares.  When the Company is required to cause an unlegended certificate (or
electronic unlegended shares) to replace a previously issued legended
certificate, if: (1) the unlegended certificate is not delivered (or unlegended
electronic shares are not made available) to an Investor within three (3)
Business Days of submission by that Investor of a legended certificate and
supporting documentation to the Transfer Agent as provided above (a copy of
which shall be given to the Company) and (2) prior to the time such unlegended
certificate is received by the Investor (or unlegended electronic shares are
made available to the Investor via DWAC), the Investor, or any third party on
behalf of such Investor or for the Investor’s account, purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Investor of shares represented by such certificate
(a “Buy-In”), then the Company shall pay in cash to the Investor (for costs
incurred either directly by such Purchaser or on behalf of a third party) the
amount by which the total purchase price paid for Common Stock as a result of
the Buy-In (including brokerage commissions, if any) exceeds the proceeds
received by such Investor as a result of the sale to which such Buy-In
relates.  The Investor shall provide the Company written notice indicating the
amounts payable to the Investor in respect of the Buy-In.

7.8           Subsequent Equity Sales.  From the date hereof until such time as
no Investor holds any of the Securities (but in no event beyond July 1, 2009),
the Company shall be

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prohibited from effecting or entering into an agreement to effect any Subsequent
Financing involving a “Variable Rate Transaction”.  The term “Variable Rate
Transaction” shall mean a transaction in which the Company issues or sells (i)
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may sell securities at a
future determined price.

7.9           Equal Treatment of Investors.  No consideration shall be offered
or paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents.  For
clarification purposes, this provision constitutes a separate right granted to
each Investor by the Company and negotiated separately by each Investor, and is
intended for the Company to treat the Investors as a class and shall not in any
way be construed as the Investors acting in concert or as a group with respect
to the purchase, disposition or voting of Securities or otherwise.

7.10          Right of First Refusal on Future Financings. From the date hereof
until the first anniversary of the Closing Date, upon any financing by the
Company of its Common Stock or Common Stock Equivalents at an effective price
per share of $2.70 or less (appropriately adjusted for any stock split, reverse
stock split, stock dividend or other reclassification or combination of the
Common Stock occurring after the date hereof), the primary purpose of which is
the raising of capital (a “Subsequent Financing”), each Investor shall have the
right to participate in such Subsequent Financing as provided herein.  At least
five (5) Business Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Investor a written notice of its intention to
effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such
Investor if it wants to review the details of such financing (such additional
notice, a “Subsequent Financing Notice”).  Upon the request of an Investor, and
only upon a request by such Investor, for a Subsequent Financing Notice, the
Company shall promptly, but no later than one Business Day after such request,
deliver a Subsequent Financing Notice to such Investor.  Any Investor who elects
to receive a Subsequent Financing Notice shall keep the contents thereof
confidential until the consummation or the abandonment of the Subsequent
Financing.  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.  Each Investor shall notify the Company by 6:30 p.m.
(New York City time) on the fifth (5th) Business Day after their receipt of the
Subsequent Financing Notice of its willingness to provide the Subsequent
Financing on the terms described in the Subsequent Financing Notice, subject to
completion of mutually acceptable documentation.  If one or more Investors shall
fail to so notify the Company of their willingness to participate in the
Subsequent Financing, the Investors agreeing to participate in the

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Subsequent Financing (the “Participating Investors”) shall have the right to
provide all of the Subsequent Financing.  If one or more Investors fail to
notify the Company of their willingness to provide all of the Subsequent
Financing and the Participating Investors do not agree to provide all of the
Subsequent Financing, the Company may effect the remaining portion of such
Subsequent Financing on substantially the same terms and to the Persons set
forth in the Subsequent Financing Notice; provided that the Company must provide
the Investors with a second Subsequent Financing Notice, and the Investors will
again have the right of first refusal set forth above in this Section 7.10, 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 60 Business Days after the date of the initial
Subsequent Financing Notice with the Person identified in the Subsequent
Financing Notice.  In the event the Company receives responses to Subsequent
Financing Notices from Investors seeking to purchase more than the financing
sought by the Company in the Subsequent Financing such Investors shall have the
right to purchase their Pro Rata Portion (as defined below) of the Common Stock
or Common Stock Equivalents to be issued in such Subsequent Financing.  “Pro
Rata Portion” is the ratio of (x) the amount invested by such Investor pursuant
to this Agreement (the “Subscription Amount”) and (y) the aggregate sum of all
of the Subscription Amounts.  Notwithstanding the foregoing, this Section 7.10
shall not apply in respect of the issuance of (a) shares of Common Stock or
options to employees, consultants, officers or directors of the Company pursuant
to any stock or option plan duly adopted by the Board of Directors of the
Company or a majority of the members of a committee of non-employee directors
established for such purpose and (b) securities upon the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date of this Agreement, provided that such securities have
not been amended since the date of this Agreement to increase the number of
shares of Common Stock issuable thereunder or to lower the exercise or
conversion price thereof.

8.            Survival and Indemnification.

8.1  Survival.  The representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing of the transactions
contemplated by this Agreement.

8.2  Indemnification.  The Company agrees to indemnify and hold harmless each
Investor and its Affiliates and their respective directors, officers, employees
and agents from and against any and all losses, claims, damages, liabilities and
expenses (including without limitation reasonable attorney fees and
disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, “Losses”) to which such
Person may become subject as a result of any breach of representation, warranty,
covenant or agreement made by or to be performed on the part of the Company
under the Transaction Documents, and will reimburse any such Person for all such
amounts as they are incurred by such Person.

8.3  Conduct of Indemnification Proceedings.  Promptly after receipt by any
Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such

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Indemnified Person shall promptly notify the Company in writing and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person, and shall assume the payment of all
fees and expenses; provided, however, that the failure of any Indemnified Person
so to notify the Company shall not relieve the Company of its obligations
hereunder except to the extent that the Company is materially prejudiced by such
failure to notify.  In any such proceeding, any Indemnified Person shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person unless: (i) the Company and
the Indemnified Person shall have mutually agreed to the retention of such
counsel; or (ii) in the reasonable judgment of counsel to such Indemnified
Person representation of both parties by the same counsel would be inappropriate
due to actual or potential conflicts of interest between them.  The Company
shall not be liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Company shall indemnify and hold harmless such Indemnified Person from and
against any loss or liability (to the extent stated above) by reason of such
settlement or judgment.  Without the prior written consent of the Indemnified
Person, which consent shall not be unreasonably withheld, the Company shall not
effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
arising out of such proceeding.

9.           Miscellaneous.

9.1           Successors and Assigns.  This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Investors,
as applicable, provided, however, that (a) an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Securities in a transaction complying with
applicable securities laws without the prior written consent of the Company or
the other Investors and (b) the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with a
merger or consolidation of the Company with another corporation, or a sale,
transfer or other disposition of all or substantially all of the Company’s
assets to another corporation without the prior written consent of the
Investors, after notice duly given by the Company to each Investor.  The
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties.  Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

9.2           Counterparts; Faxes.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement may also
be executed via facsimile (including electronic transmission of scanned
documents), which shall be deemed an original.

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9.3           Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

9.4           Notices.  Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier.  All notices shall be addressed to the party to be
notified at the address as follows, or at such other address as such party may
designate by ten days’ advance written notice to the other party:

If to the Company:

Terabeam, Inc.
2115 O’Nel Drive
San Jose, California 95131
Attention:
Fax:

With a copy to:

Terabeam, Inc.
881 North King Street, Suite 100
Northampton, Massachusetts 01060
Attention:  David L. Renauld
Fax:  (413) 584-2685

If to the Investors:

to the addresses set forth on the signature pages hereto.

9.5           Expenses.  The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of Andrews Kurth LLP not to exceed $10,000 and of
Lowenstein Sandler PC not to exceed $35,000; it being understood that Lowenstein
Sandler PC has only rendered legal advice to funds affiliated with SRB Greenway
Capital participating in this transaction and not to the Company or any other
Investor in connection with the transactions contemplated hereby, and that each
of the Company and each Investor has relied for such matters on the advice of
its own respective counsel.  Such expenses shall be paid not later than the
Closing.  The Company shall reimburse the Investors upon demand for all
reasonable out-of-pocket expenses incurred by the Investors, including without
limitation reimbursement of attorneys’ fees and disbursements, in connection

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with any amendment, modification or waiver of this Agreement or the other
Transaction Documents.  In the event that legal proceedings are commenced by any
party to this Agreement against another party to this Agreement in connection
with this Agreement or the other Transaction Documents, the party or parties
which do not prevail in such proceedings shall severally, but not jointly, pay
their pro rata share of the reasonable attorneys’ fees and other reasonable
out-of-pocket costs and expenses incurred by the prevailing party in such
proceedings.

9.6           Amendments and Waivers.  Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investors.  Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Securities purchased under this Agreement at the time outstanding,
each future holder of all such Securities, and the Company.

9.7           Publicity.  Except as set forth below, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
the Company or the Investors without the prior consent of the Company (in the
case of a release or announcement by the Investors) or the Investors (in the
case of a release or announcement by the Company) (which consents shall not be
unreasonably withheld), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange or
securities market, in which case the Company or the Investors, as the case may
be, shall allow the Investors or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance.  By 8:30 a.m. (New York
City time) on the trading day immediately following the Closing Date, the
Company shall issue a press release disclosing the consummation of the
transactions contemplated by this Agreement.  No later than the fourth trading
day following the Closing Date, the Company will file a Current Report on Form
8-K attaching the press release described in the foregoing sentence as well as
copies of the Transaction Documents.  In addition, the Company will make such
other filings and notices in the manner and time required by the SEC or Nasdaq.

9.8           Severability.  Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.  To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.

9.9           Entire Agreement.  This Agreement, including the Exhibits and the
Disclosure Letter, and the other Transaction Documents constitute the entire
agreement among the parties hereof with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.

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9.10            Further Assurances.  The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

9.11            Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial.  This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York without regard to the choice of law
principles thereof.  Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated
hereby.  Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement.  Each
of the parties hereto irrevocably consents to the jurisdiction of any such court
in any such suit, action or proceeding and to the laying of venue in such
court.  Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. EACH OF THE PARTIES
HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH
RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.

9.12           Independent Nature of Investors' Obligations and Rights.  The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document.  The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor.  Nothing contained herein or in
any Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors 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
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents.  Each Investor 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 Investor to be joined as an additional party in any
proceeding for such purpose.  The Company acknowledges that each of the
Investors has been provided with the same Transaction Documents for the purpose
of closing a transaction with multiple Investors and not because it was required
or requested to do so by any Investor.
[signature page follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their
duly authorized officers to execute this Agreement as of the date first above
written.

The Company:
TERABEAM, INC.
                   
By:
 /s/ Robert E. Fitzgerald
 
Name:
 Robert E. Fitzgerald
 
Title:
 Chief Executive Officer

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The Investors:
SRB GREENWAY CAPITAL, L.P.
     
By:  SRB Management, L.P., General Partner
     
By:  BC Advisors, L.L.C., General Partner
         
By: /s/ Steven R. Becker
 
Name:  Steven R. Becker
 
Title:  Member

Aggregate Purchase Price:
  $
322,875
 
Number of Shares:
   
184,500
 
Number of Warrants:
   
92,250
 

Address for Notice:
300 Crescent Court, Suite 1111
 
Dallas, Texas 75201
 
214-756-6040 (telephone)
 
214-756-6079 (fax)
 
Attn:  George Lee
     
with a copy to:
     
Lowenstein Sandler PC
 
65 Livingston Avenue
 
Roseland, NJ  07068
 
Attn:  John D. Hogoboom, Esq.
 
Telephone:   973.597.2500
 
Facsimile:      973.597.2400

 
SRB GREENWAY CAPITAL (Q.P.), L.P.
     
By:  SRB Management, L.P., General Partner
     
By:  BC Advisors, L.L.C., General Partner
         
By: /s/ Steven R. Becker
 
Name:  Steven R. Becker
 
Title:  Member

Aggregate Purchase Price:
  $
2,797,725
 
Number of Shares:
   
1,598,700
 
Number of Warrants:
   
799,350
 

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Address for Notice:
300 Crescent Court, Suite 1111
 
Dallas, Texas 75201
 
214-756-6040 (telephone)
 
214-756-6079 (fax)
 
Attn:  George Lee
     
with a copy to:
     
Lowenstein Sandler PC
 
65 Livingston Avenue
 
Roseland, NJ  07068
 
Attn:  John D. Hogoboom, Esq.
 
Telephone:  973.597.2500
 
Facsimile:     973.597.2400

 
SRB GREENWAY OFFSHORE
 
OPERATING FUND, L.P.
     
By:  SRB Management, L.P., General Partner
     
By:  BC Advisors, L.L.C., General Partner
         
By: /s/ Steven R. Becker
 
Name:  Steven R. Becker
 
Title:  Member

Aggregate Purchase Price:
  $
116,900
 
Number of Shares:
   
66,800
 
Number of Warrants:
   
33,400
 

Address for Notice:
300 Crescent Court, Suite 1111
 
Dallas, Texas 75201
 
214-756-6040 (telephone)
 
214-756-6079 (fax)
 
Attn:  George Lee
     
with a copy to:
     
Lowenstein Sandler PC
 
65 Livingston Avenue
 
Roseland, NJ  07068
 
Attn:  John D. Hogoboom, Esq.
 
Telephone:    973.597.2500
 
Facsimile:       973.597.2400

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Lloyd I. Miller, III
     
/s/ Lloyd I. Miller, III
 
Lloyd I. Miller, III

Aggregate Purchase Price:
  $
1,618,750
 
Number of Shares:
   
925,000
 
Number of Warrants:
   
462,500
 

Address for Notice:
4550 Gordon Drive
 
Naples, Florida 34102
 
Tel:  (239) 262-8577
 
Fax:  (239) 262-8025
     
with a copy to:
     
Robyn Tupper
 
4550 Gordon Drive
 
Naples, Florida 34102
 
Tel:  (239) 263-8860
 
Fax:  (239) 262-8025

 
MILFAM II, LP
     
By: Milfam LLC, its General Partner
     
By: /s/ Lloyd I. Miller, III
 
Name:  Lloyd I. Miller, III
 
Title:  Manager

Aggregate Purchase Price:
  $
1,618,750
 
Number of Shares:
   
925,000
 
Number of Warrants:
   
462,500
 

Address for Notice:
4550 Gordon Drive
 
Naples, Florida 34102
 
Tel:  (239) 262-8577
 
Fax:  (239) 262-8025
     
with a copy to:
     
Robyn Tupper
 
4550 Gordon Drive
 
Naples, Florida 34102
 
Tel:  (239) 263-8860
 
Fax:  (239) 262-8025

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CLARION CAPITAL CORP.
             
By: /s/ Morton A. Cohen
 
Name:  Morton A. Cohen
 
Title:  Chairman

Aggregate Purchase Price:  $525,000
Number of Shares:  300,000
Number of Warrants:  150,000

Address for Notice:
   
3690 Orange Place, Suite 400
 
Beachwood, Ohio 44122

 
CLARION WORLD OFFSHORE FUND, LTD.
             
By: /s/ Morton A. Cohen
 
Name:  Morton A. Cohen
 
Title:  Investment Manager

Aggregate Purchase Price:  $175,000
Number of Shares:  100,000
Number of Warrants:  50,000

Address for Notice:
   
3690 Orange Place, Suite 400
 
Beachwood, Ohio 44122

 
THE AMENDED & RESTATED DECLARATION OF
 
TRUST OF MORTON A. COHEN, DATED MAY 9, 2005
             
By: /s/ Morton A. Cohen
 
Name:  Morton A. Cohen
 
Title:  Trustee

Aggregate Purchase Price:  $175,000
Number of Shares:  100,000
Number of Warrants:  50,000

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Address for Notice:
   
3690 Orange Place, Suite 400
 
Beachwood, Ohio 44122

 
SHAKER INVESTMENTS TOWER, L.P.
             
By: /s/ Edward Hemmelgarn
 
Name:  Edward Hemmelgarn
 
Title:  Managing Member
   

Aggregate Purchase Price:  $175,000
Number of Shares:  100,000
Number of Warrants:  50,000

Address for Notice:
   
3690 Orange Place, Suite 400
 
Beachwood, Ohio 44122
   

 
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