Exhibit 10.1
 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of November
21, 2011, between NXT Nutritionals Holdings, Inc., a Delaware corporation (the
“Company”), and NXT Investment Partners, LLC, a Delaware limited liability
company (“Purchaser”).
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to Purchaser, Purchaser desires to purchase from the Company,
securities of the Company as more fully described in this Agreement.
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
 
 ARTICLE I.
DEFINITIONS
 
1.1    Definitions.  In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Note (as defined herein); and (b) the
following terms have the meanings set forth in this Section 1.1:
 
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.
 
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.

“Annual Dividend” shall have the meaning ascribed to such term in Section
2.5(d).
 
“Board of Directors” means the board of directors of the Company.

“BP” means Becker & Poliakoff, LLP with offices located at 45 Broadway, 8th
Floor, New York, New York 10006-3007.
 
“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
 
“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1; provided that if the Closing is conducted in one or more
closings, the first closing shall be referred to as the “Initial Closing,” each
additional closing shall be referred to as an “Additional Closing,” and the
final closing shall be referred to as the “Final Closing.”
 
“Closing Date” means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all
conditions precedent to: (i) the Purchaser’s obligations to pay the Subscription
Amount; and (ii) the Company’s obligations to deliver the Securities, in each
case, have been satisfied
or waived, but in no event later than the third Trading Day following the date
hereof; provided that if the Closing is scheduled in one or more closings, each
shall be a Closing Date.
 
 “Closing Price” means on any particular date: (a) the last reported closing bid
price per share of Common Stock on such date on the Trading Market (as reported
by Bloomberg L.P. at 4:15 p.m. (New York City time)); (b) if there is no such
price on such date, then the closing bid price on the Trading Market on the date
nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New
York City time)); (c)  if the Common Stock is not then listed or quoted on a
Trading Market and if prices for the Common Stock are then reported in the “pink
sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (d) if the shares of Common Stock are
not then publicly traded the fair market value as of such date of a share of
Common Stock as determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company.
 
 
 

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 “Commission” means the United States Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.
 
“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
 
“Company Counsel” means Blank Rome, LLP, with offices located at 405 Lexington
Avenue, New York, New York 10174.
 
“Conversion Price” shall have the meaning ascribed to such term in the Series A
Preferred Stock.
 
“Disclosure Schedules” shall have the meaning ascribed to such term in Section
3.1.
 
“Effective Date” means the earlier of the date that: (a) all of the Registrable
Securities (as defined in the Registration Rights Agreement) have been
registered for resale by the holders thereof pursuant to a registration
statement(s) declared effective by the Commission; and (b) all of the
Registrable Securities have been sold pursuant to Rule 144 or may be sold
pursuant to Rule 144 without the requirement for the Company to be in compliance
with the current public information required under Rule 144 and without volume
or manner-of-sale restrictions.
  
“Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Exempt Issuance” means the issuance of: (a) shares of Common Stock or options
to consultants, employees, officers or directors of the Company pursuant to any
stock or option plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the members of a
committee of non-employee directors established for such purpose; (b) securities
upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities or to decrease the
exercise price, exchange price or conversion price of such securities other than
with respect to the First Modification and Amendment Agreement and the Fourth
Modification and Amendment Agreement; (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equity holders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities; and (d) the issuance of Series C Warrants to investors
in the Company’s prior offering closed on August 27, 2009 to purchase up to
300,000 shares of Common Stock at an exercise price of $2.00 per share in
connection with the extinguishment of potential liquidated damages related
thereto.
 
 
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“First Modification and Amendment Agreement” shall have the meaning ascribed to
such term in Section 4.12(a).

“Fourth Modification and Amendment Agreement” shall have the meaning ascribed to
such term in Section 4.12(b).

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

 “Indebtedness” shall have the meaning ascribed to such term in Section 3.1(aa).
 
“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).
 
“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).
 
“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
 
 “Lock-Up Agreement” means the Lock-Up Agreements dated the date hererof, among
the Purchaser, the Company and each director and executive officer of the
Company.
 
“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).
 
“Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).

“Maturity Date” means the fourth (4th) anniversary of the Closing Date.
 
“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.
 
“Note” means the 13% Senior Secured Note issued by the Company to Purchaser
hereunder and due, subject to the terms therein, on the Maturity Date in the
form of Exhibit A attached hereto.
 
 “Person” means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
“Principal Amount” shall have the meaning ascribed to such term in the Note.
 
 “Proceeding” means an action, claim, suit, investigation or proceeding, whether
commenced or threatened.
 
“Public Information Failure” shall have the meaning ascribed to such term in
Section 4.3(b). 
  
“Public Information Failure Payments” shall have the meaning ascribed to such
term in Section 4.3(b).
 
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.
 
“Registration Rights Agreement” means the Registration Rights Agreement, dated
the date hereof, between the Company and Purchaser, in the form of Exhibit C
attached hereto.
 
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by Purchaser as provided for in the Registration Rights
Agreement.
 
“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).

 
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“Required Minimum” means, as of the first date of conversion, the number of
shares of Common Stock equal to twenty percent (20%) of the total number of
shares of Common Stock issued and outstanding on a fully diluted basis
(including the shares of Common Stock issuable upon conversion of the Series A
Preferred Stock).
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
 
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
 
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
 
“Securities” means the Notes, the Series A Preferred Stock and the Underlying
Shares.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
“Security Agreement” means the Security Agreement, dated the date hereof,
between the Company and Purchaser, in the form of Exhibit F attached hereto.

“Security Documents” shall mean the Security Agreement, the Subsidiary Guarantee
and certain other documents and filing required thereunder in order to grant
Purchaser a first priority security interest in the assets of the Company and
the Subsidiaries as provided in the Security Agreement, including all UCC-1
filing receipts.

“Series A Preferred Stock” means the Series A Preferred Stock of the Company,
par value $0.001 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed, delivered by the Company to
Purchaser at the Closing in accordance with Section 2.2(a)(iv) hereof, which
Series A Preferred Stock shall have the terms and conditions set forth in the
Certificate of Designation in the form of Exhibit B attached hereto.

“Series C Warrants” means collectively, the Series C Common Stock purchase
warrants issued by the Company, together with the 2010 Notes to certain
purchasers in a private offering which closed on February 26, 2010.
 
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock). 
 
“Subscription Amount” means, as to Purchaser, the amount to be paid for the Note
and Series A Preferred Stock purchased hereunder as specified below Purchaser’s
name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds which shall be an amount delivered to the Company not less than $1,000,000
nor more than $1,500,000.
 
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a)
and shall, where applicable, mean any corporation, limited or general
partnership, limited liability company, trust, estate, association, joint
venture or other business entity formed or acquired after the date hereof.
 
“Subsidiary Guarantee” means the Subsidiary Guarantee, dated the date hereof, by
each Subsidiary in favor of Purchaser, in the form of Exhibit E attached hereto.

 “Trading Day” means a day on which the principal Trading Market is open for
trading.
 
“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any
successors to any of the foregoing).
 
 
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“Transaction Documents” means this Agreement, the Note, the Series A Preferred
Stock, the Registration Rights Agreement, the Security Agreement, the Subsidiary
Guarantee, all exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.
 
 “Transfer Agent” means Corporate Stock Transfer, the current transfer agent of
the Company, with a mailing address of 3200 Cherry Creek South Drive, Suite 430,
Denver, CO 80209 and a facsimile number of (303) 282-5800, and any successor
transfer agent of the Company. 

 “2009 Debentures” means the three-year 10% convertible debentures issued by the
Company, as amended, together with Series A Warrants and Series B Warrants, in a
private offering for an aggregate subscription amount of $3,173,000 completed on
August 27, 2009 to certain accredited investors.

“2010 Notes” means the 0% Original Issue Discount Senior Secured Convertible
Notes, as amended, issued by the Company, together with Series C Warrants, in a
private offering for an aggregate subscription amount of $5,667,743 completed on
February 26, 2010 to certain accredited investors.
 
“Underlying Shares” means the shares of Common Stock issued and issuable upon
conversion of the Series A Preferred Stock.
 
“Variable Rate Transaction” shall have the meaning ascribed to such term in
Section 4.13(b).
 
“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)); (b)  if the OTC Bulletin Board is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
listed or quoted for trading on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the “Pink Sheets” published by Pink OTC
Markets, Inc. (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good faith by the
Purchasers of a majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company.
 
 
ARTICLE II.
PURCHASE AND SALE
 
2.1    Closing.  On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and the Purchaser agrees to purchase the Note and Series A Preferred Stock in
exchange for the Subscription Amount, in the amount as set forth on the
Signature Page attached hereto.  The parties agree that the Subscription Amount
shall be attributed 20% for the purchase of the Note and 80% for the purchase of
the Series A Preferred Stock in the respective dollar amount indicated on the
Purchaser Signature Page.  Purchaser shall deliver to the Company via wire
transfer or a certified check of immediately available funds equal to such
Purchaser’s Subscription Amount as set forth on the signature page hereto
executed by Purchaser, and the Company shall deliver to Purchaser the Note and a
certificate representing 13,075,468 shares of Series A Preferred Stock, and the
Company and Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing.  Upon satisfaction of the covenants and conditions
set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of BP
or such other location as the parties shall mutually agree.
          
 
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2.2    Deliveries.
 
 (a)          On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:

(i)            this Agreement duly executed by the Company;

(ii)           a legal opinion of Company Counsel, substantially in the form of
Exhibit D attached hereto;
 
(iii)          a Note with a principal amount equal to Purchaser’s  Principal
Amount, registered in the name of such Purchaser;

(iv)          a certificate representing the shares of Series A Preferred Stock
registered in the name of Purchaser equal to 13,075,468 shares of Series A
Preferred Stock;

(v)           the Security Agreement, duly executed by the Company and each
Subsidiary, along with all of the Security Documents, including the Subsidiary
Guarantee, duly executed by the parties thereto;

(vi)          the Registration Rights Agreement duly executed by the Company;

(vii)         the First Modification and Amendment Agreement executed by holders
of the 2009 Debentures in the form of Exhibit G attached hereto;

(viii)        the Fourth Modification and Amendment Agreement executed by
holders of the 2010 Notes in the form of Exhibit H attached hereto; and

(ix)           the Lock-Up  Agreement executed by each director and executive
officer of the Company in the form of Exhibit I attached hereto, unless
otherwise waived by the Purchaser.
 
 (b)         On or prior to the Closing Date, Purchaser shall deliver or cause
to be delivered to the Company the following:
 
(i)             this Agreement duly executed by such Purchaser;
 
(ii)            Purchaser’s Subscription Amount by wire transfer to the account
as specified in writing by the Company;
 
(iii)           the Security Agreement duly executed by Purchaser; and
 
(iv)           the Registration Rights Agreement duly executed by Purchaser.
 
2.3    Closing Conditions.
 
 (a)          The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:

(i)             the accuracy in all material respects on the Closing Date of the
representations and warranties of Purchaser contained herein (unless as of a
specific date therein);

(ii)            all obligations, covenants and agreements of Purchaser required
to be performed at or prior to the Closing Date shall have been performed;

(iii)           the Subscription Amount shall be equal to at least $1,000,000;
and

(iv)           the delivery by Purchaser of the items set forth in Section
2.2(b) of this Agreement.
 
 
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 (b)  The obligations of Purchaser hereunder in connection with the Closing are
subject to the following conditions being met:

(i)             the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein);

(ii)            all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have been
performed;

(iii)           the delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;
 
(iv)           the Subscription Amount shall be equal to at least $1,000,000;
 
(v)           there shall have been no Material Adverse Effect with respect to
the Company since the date hereof; and
 
(vi)           from the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission  or the Company’s
principal Trading Market (except for any suspension of trading of limited
duration agreed to by the Company, which suspension shall be terminated prior to
the Closing), and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg L.P. shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the Closing.

2.4     Note.  At the Closing and pursuant to the terms and conditions of the
Note, as set forth in Exhibit A hereto, Purchaser shall loan the Company the
Principal Amount, and the Company shall deliver to the Purchaser the four-year
Note, which shall bear interest at a rate of thirteen percent (13%) per annum.
 
 (a)          Use of Proceeds. Except as set forth in Section 4.9, the
Subscription Amount shall be used to pay closing costs, existing trade debt and
usual and customary operating expenses.
 
 (b)          Security. So long as the Principal Amount of the Note is
outstanding, Purchaser will maintain an exclusive first lien and first priority
secured position in all of the assets of the Company and each of the
Subsidiaries (both existing and future subsidiaries) of the Company; provided
that Purchaser will subordinate the Note to the security interest to be granted
by the Company to unaffiliated third parties with respect to inventory, raw
materials, and accounts receivable, provided that in each such case prior
written notice is delivered to Purchaser.
 
2.5     Series A Preferred Stock. At the Closing, the Company shall issue to
Purchaser a stock certificate representing 13,075,468 shares of Series A
Preferred Stock. The rights and preferences of the Series A Preferred Stock are
set forth in the Series A Preferred Stock Certificate of Designation (the
“Certificate of Designation”) attached hereto as ExhibitB.
 
 ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.1     Representations and Warranties of the Company.  Except as set forth in
the Disclosure Schedules (each sectional Disclosure Schedule referred to as a
“Schedule”), which Disclosure Schedules shall be deemed a part hereof and shall
qualify any representation or otherwise made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure Schedules,
the Company hereby makes the following representations and warranties to
Purchaser:
 
 
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 (a)    Subsidiaries.   All of the Subsidiaries of the Company are set forth on
Schedule 3.1(a).  The Company owns, directly or indirectly, all of the capital
stock or other equity interests of each Subsidiary free and clear of any Liens,
and all of the issued and outstanding shares of capital stock of each Subsidiary
are validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.  If the Company has no
subsidiaries, all other references to the Subsidiaries or any of them in the
Transaction Documents shall be disregarded.
 
(b)    Organization and Qualification.  The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation nor default
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.  Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in: (i) a material adverse effect on the legality, validity or enforceability of
any Transaction Document; (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
 
(c)    Authorization; Enforcement.  The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals.  
   
Each Transaction Document to which it is a party has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof and thereof, will constitute the valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally; (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies; and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
 
(d)    No Conflicts.  Except as set forth in the Schedule 3.1(d), the execution,
delivery and performance by the Company of the Transaction Documents, the
issuance and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby to which it is a party do not and
will not: (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents; (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or assets
of the Company or any Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not have or reasonably
be expected to result in a Material Adverse Effect.
 
 
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(e)    Filings, Consents and Approvals.  The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.6 of this Agreement; (ii)
the filing with the Commission pursuant to the Registration Rights Agreement;
(iii) the notice and/or application(s) to each applicable Trading Market for the
issuance and sale of the Securities and the listing of the Underlying Shares for
trading thereon in the time and manner required thereby; (iv) the filing of Form
D with the Commission and such filings as are required to be made under
applicable state securities laws; (v) the consent of the 2010 Note holders, all
of which are attached in Schedule 3.1(e); and (vi) the consent of the 2009
Debenture holders, all of which are attached in Schedule 3.1(e) (collectively,
the “Required Approvals”). 
 
(f)    Issuance of the Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The Underlying Shares, when issued in
accordance with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by the Company
other than restrictions on transfer provided for in the Transaction
Documents.  The Company has reserved from its duly authorized capital stock a
number of shares of Common Stock equal to the Underlying Shares.
 
(g)    Capitalization.  The capitalization of the Company is as set forth on
Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares
of Common Stock owned beneficially, and of record, by Affiliates of the Company
as of the date hereof. Except as set forth in Schedule 3.1(g), the Company has
not issued any capital stock since its most recently filed periodic report under
the Exchange Act, other than pursuant to the exercise of employee stock options
under the Company’s stock option plans, the issuance of shares of Common Stock
to employees pursuant to the Company’s employee stock purchase plans and
pursuant to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic report under the
Exchange Act.  Except as set forth on Schedule 3.1(g), no Person has any right
of first refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by the Transaction
Documents.  Except as set forth on Schedule 3.1(g) or as a result of the
purchase and sale of the Securities, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire any shares of Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. Except as
set forth on Schedule 3.1(g), the issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than Purchaser) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. All of the outstanding shares of capital stock of
the Company are validly issued, fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities.  No further approval or
authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities.  There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company’s stockholders.
 
 
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(h)    SEC Reports; Financial Statements.  Except as set forth on Schedule
3.1(h), the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by the Company under the Securities Act and
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company was
required by law or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the “SEC Reports”) on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension.  As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing.  Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”), except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may not contain
all footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
 
(i)    Material Changes; Undisclosed Events, Liabilities or Developments.  Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC Report filed prior
to the date hereof: (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material Adverse
Effect; (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than: (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice; and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the Commission; (iii) the Company has not
altered its method of accounting; (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.  Except for the issuance of
the Securities contemplated by this Agreement or as set forth on Schedule
3.1(i), no event, liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with respect to
the Company or its Subsidiaries or their respective business, properties,
operations, assets or financial condition, that would be required to be
disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least one (1) Trading Day prior to the date that this representation is made.
 
(j)    Litigation.  Except as set forth on Schedule 3.1(j), there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to
the knowledge of the Company, threatened in writing against the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which:
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities; or (ii) could, if there were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty.  There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company.  The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.
 
(k)   Labor Relations.  No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company,
which could reasonably be expected to result in a Material Adverse Effect.  None
of the Company’s or its Subsidiaries’ employees is a member of a union that
relates to such employee’s relationship with the Company or such Subsidiary, and
neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good.  No executive officer, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant in favor of any third party,
and the continued employment of each such executive officer does not subject the
Company or any of its Subsidiaries to any liability with respect to any of the
foregoing matters.  The Company and its Subsidiaries are in compliance with all
U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
 
 
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(l)    Compliance.  Neither the Company nor any Subsidiary: (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived); (ii) is in violation of any
judgment, decree or order of any court, arbitrator or governmental body; or
(iii) is or has been in violation of any statute, rule, ordinance or regulation
of any governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental protection,
occupational health and safety, product quality and safety and employment and
labor matters, except in each case as could not have or reasonably be expected
to result in a Material Adverse Effect.
 
(m)    Regulatory Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.
 
(n)    Title to Assets.  Except as set forth in the Schedule 3.1(n), the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do
not materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties.  Any real
property and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance.
 
(o)    Patents and Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or material for use in connection with their
respective businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property Rights”).  Schedule
3.1(o) sets forth a list of the Company’s patents, patents applications pending,
trademarks and trademark applications pending. None of, and neither the Company
nor any Subsidiary has received a notice (written or otherwise) that any of, the
Intellectual Property Rights has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned, within two (2) years from the
date of this Agreement.  Except as set forth on Schedule 3.1(o), neither the
Company nor any Subsidiary has received, since the date of the latest audited
financial statements included within the SEC Reports, a written notice of a
claim or otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any Person, except as would not have a
Material Adverse Effect.  To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
 
 
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(p)    Insurance.  The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged, including, but not limited to, directors and
officers insurance coverage at least equal to the aggregate Subscription
Amount.  Neither the Company nor any Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.
 
(q)    Transactions With Affiliates and Employees.  Except as set forth in the
SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $120,000 other than for:
(i) payment of salary or consulting fees for services rendered; (ii)
reimbursement for expenses incurred on behalf of the Company; and (iii) other
employee benefits, including stock option agreements under any stock option plan
of the Company.
 
(r)    Sarbanes-Oxley; Internal Accounting Controls.  The Company is in
compliance with any requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof for which compliance by the Company as a small
business issuer is required as of the date hereof, and any and all applicable
rules and regulations promulgated by the Commission thereunder that are
effective as of the date hereof and as of the Closing Date.  Except as set forth
in Schedule 3.1(r), 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
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms.  The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls
and procedures as of the end of the period covered by the Company’s most
recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”).  The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date, there have
been no changes in the Company’s internal control over financial reporting (as
such term is defined in the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
 
(s)    Certain Fees.  Except as set forth on Schedule 3.1(s), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents.   Purchaser shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in connection with
the transactions contemplated by the Transaction Documents.
 
(t)    Private Placement.  Assuming the accuracy of Purchaser’s representations
and warranties set forth in Section 3.2, no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchaser as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market.
 
(u)    Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The Company shall conduct its business in a
manner so that it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as amended.
 
 
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(v)    Registration Rights.  Except as set forth on Schedule 3.1(v), no Person,
other than  Purchaser has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
 
(w)    Listing and Maintenance Requirements.  The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration.  The Company has not, in the 12
months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements. 
  
(x)    Application of Takeover Protections.  The Company and the Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to Purchaser as a result of Purchaser 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 Purchaser’s ownership of the Securities.
 
(y)    Disclosure.   All of the disclosure furnished by or on behalf of the
Company to Purchaser regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, is
true and correct and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.  The Company acknowledges and agrees that Purchaser is not making or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2
hereof.

 (z)    No Integrated Offering. Assuming the accuracy of Purchaser’s
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor, to the knowledge of the Company, any Person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated
with prior offerings by the Company for purposes of (i) the Securities Act which
would require the registration of any such securities under the Securities Act,
or (ii) any applicable stockholder approval provisions of any Trading Market on
which any of the securities of the Company are listed or designated.
 
(aa)    Indebtedness.  Except as set forth on Schedule 3.1(aa), the Company has
no knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date.  Schedule
3.1(aa) sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments.  For the purposes of this Agreement, “Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in excess of
$50,000 (other than trade accounts payable incurred in the ordinary course of
business), (y) all guaranties, endorsements and other contingent obligations in
respect of indebtedness of others, whether or not the same are or should be
reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (z) the present
value of any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is
in default with respect to any Indebtedness as of the date hereof. 
 
 
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(bb)    Tax Status. Except as set forth on Schedule 3.1(bb) and except for
matters that would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect, the Company and each Subsidiary
(i) has made or filed all United States federal and state income and all foreign
income and franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations and (iii) has set
aside on its books provision reasonably adequate for the payment of all material
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply.  There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company or of any Subsidiary know of no basis for any such claim.
 
(cc)    No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. 
 
(dd)    Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds; (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
 
(ee)    Accountants.  The Company’s accounting firm is set forth on Schedule
3.1(ee) of the Disclosure Schedules.  To the knowledge and belief of the
Company, such accounting firm: (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion with respect to
the financial statements to be included in the Company’s Annual Report for the
year ending December 31, 2010.
 
(ff)    Seniority.  As of the Closing Date, pursuant to the terms of a
subordination agreement between the Purchaser and 2010 Note holders effective as
of November 7, 2011, no Indebtedness or other claim against the Company is
senior to the Note in right of payment, whether upon liquidation or dissolution,
or otherwise, other than indebtedness secured by purchase money security
interests (which is senior only as to underlying assets covered thereby) and
capital lease obligations (which is senior only as to the property covered
thereby).
 
(gg)    No Disagreements with Accountants and Lawyers.  Except as set forth on
Schedule 3.1(gg), there are no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the Company and the
Company is current with respect to any fees owed to its accountants and lawyers
which could affect the Company’s ability to perform any of its obligations under
any of the Transaction Documents.
 
(hh)    Acknowledgment Regarding Purchaser’s Purchase of Securities.  The
Company acknowledges and agrees that Purchaser is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby.  The Company further acknowledges that
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by Purchaser or any of
its respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to
Purchaser’s purchase of the Securities.  The Company further represents to
Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
 
 (ii)    Reserved

(jj)    Regulation M Compliance.  The Company has not, and to its knowledge no
one acting on its behalf has: (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities; (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities; or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.
 
 
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(kk)    Office of Foreign Assets Control.  Neither the Company nor, to the
Company's knowledge, any director, officer, agent, employee or affiliate of the
Company is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
 
(ll)    U.S. Real Property Holding Corporation.  The Company is not and has
never been a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon Purchaser’s request.
 
(mm)    Bank Holding Company Act.  Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956,
as amended (the “BHCA”) and to regulation by the Board of Governors of the
Federal Reserve System (the “Federal Reserve”).  Neither the Company nor any of
its Subsidiaries or Affiliates owns or controls, directly or indirectly, five
percent (5%) or more of the outstanding shares of any class of voting securities
or twenty-five percent or more of the total equity of a bank or any entity that
is subject to the BHCA and to regulation by the Federal Reserve.  Neither the
Company nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.
 
(nn)    Money Laundering.  The operations of the Company are and have been
conducted at all times in compliance with applicable financial record-keeping
and reporting requirements of the Currency and Foreign Transactions Reporting
Act of 1970, as amended, applicable money laundering statutes and applicable
rules and regulations thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company with respect to the
Money Laundering Laws is pending or, to the knowledge of the Company,
threatened.
 
3.2    Representations and Warranties of the Purchaser.    Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows (unless as of a specific date therein): 
 
(a)    Organization; Authority.   Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate, partnership, limited liability
company or similar action, as applicable, on the part of Purchaser.  Each
Transaction Document to which it is a party has been duly executed by Purchaser,
and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of Purchaser, enforceable
against it in accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally; (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies; and (iii) insofar as indemnification and contribution provisions may
be limited by applicable law.

(b)   No Conflicts. The execution, delivery and performance of this Agreement
and each of the other Transaction Documents to which Purchaser is a party and
the consummation by Purchaser of the transactions contemplated hereby and
thereby or relating hereto do not and will not (i) result in a violation of
Purchaser’s charter documents, bylaws, operating agreement, partnership
agreement or other organizational documents or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument or
obligation to which Purchaser is a party or by which its properties or assets
are bound, or result in a violation of any law, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable to
Purchaser or its properties (except for such conflicts, defaults and violations
as would not, individually or in the aggregate, have a material adverse effect
on Purchaser). Purchaser is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or any other Transaction Document to which Purchaser is a
party or to purchase the Note or Series A Preferred Stock in accordance with the
terms hereof.
 
 
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(c)    Own Account.   Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for
its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
in violation of the Securities Act or any applicable state securities law (this
representation and warranty not limiting Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws).   Purchaser is acquiring the
Securities hereunder in the ordinary course of its business.

(d)    Opportunities for Additional Information. Purchaser acknowledges that
Purchaser has had the opportunity to ask questions of and receive answers from,
or obtain additional information from, the executive officers of the Company
concerning the financial and other affairs of the Company.
 
(e)    Purchaser Status.  At the time Purchaser was offered the Securities, it
was, and as of the date hereof it is, and on each date on which it converts any
Series A Preferred Stock it will be either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act; or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act.  Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
 
(f)    Experience of Purchaser.   Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.   Purchaser is able to bear the economic risk of
an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment. 
  
(g)    General Solicitation.   Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

(h)          Rule 144. Purchaser understands that the Series A Preferred Stock
and Underlying Shares must be held indefinitely unless such Securities are
registered under the Securities Act or an exemption from registration is
available. Purchaser acknowledges that Purchaser is familiar with Rule 144 of
the rules and regulations of the Commission, as amended, promulgated pursuant to
the Securities Act (“Rule 144”), and that Purchaser has been advised that Rule
144 permits resales only under certain circumstances. Purchaser understands that
to the extent that Rule 144 is not available, Purchaser will be unable to sell
any Securities without either registration under the Securities Act or the
existence of another exemption from such registration requirement.
 
(i)    Certain Transactions and Confidentiality.  Other than consummating the
transactions contemplated hereunder, Purchaser has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
Purchaser, executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that
Purchaser first received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof.  Notwithstanding the foregoing, in the case of a Purchaser
that is a multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of Purchaser’s assets and the portfolio managers have
no direct knowledge of the investment decisions made by the portfolio managers
managing other portions of Purchaser’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement.  Other than to other Persons party to this Agreement,
Purchaser has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction).
 
 
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(j)    Brokers’ Fees.  Except as set forth in Schedule 3.2(j), Purchaser has no
knowledge of any brokerage or finder’s fees or commissions that are or will be
payable by a placement agent, the Company or any Subsidiary to any broker,
financial advisor, Purchaser, consultant, finder, placement agent, investment
banker, bank or other person or entity with respect to the transactions
contemplated by this Agreement.
 
The Company acknowledges and agrees that the representations contained in
Section 3.2 shall not modify, amend or affect Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby.

 ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 
4.1     Transfer Restrictions.
 
(a)    The Securities may only be disposed of in compliance with state and
federal securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in writing to
be bound by the terms of this Agreement and the Registration Rights Agreement
and shall have the rights and obligations of Purchaser under this Agreement and
the Registration Rights Agreement.
 
(b)    The Purchaser agrees to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following form:
 
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE
CONVERSION OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
 
 
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The Company acknowledges and agrees that Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties.  Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith.  Further, no
notice shall be required of such pledge.  At Purchaser’s expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are subject to
registration pursuant to the Registration Rights Agreement, the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders (as defined in the
Registration Rights Agreement) thereunder. 
  
(c)   The Company shall cause its counsel to issue a legal opinion to the
Transfer Agent, if so required by the Transfer Agent to effect the removal of
the legend hereunder, promptly after the Effective Date upon receipt of a
written notice from Purchaser and its broker that a sale of the Underlying
Shares under the Registration Statement has been made and that the sale was made
in compliance with the Plan of Distribution set forth in the Registration
Statement and that the broker complied with the prospectus delivery
requirements.  If all or any portion of Series A Preferred Stock is converted at
a time when there is an effective registration statement to cover the resale of
the Underlying Shares, or if such Underlying Shares have been sold under Rule
144 and the Company is then in compliance with the current public information
required under Rule 144, or if such Underlying Shares may be sold under Rule 144
without the requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Underlying Shares and
without volume or manner-of-sale restrictions or if such legend is not otherwise
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission), at
such time as such legend is no longer required under this Section 4.1(c), it
will, no later than five (5) Trading Days following the delivery by Purchaser to
the Company or the Transfer Agent of (i) a certificate representing Underlying
Shares, as applicable, issued with a restrictive legend and (ii) such
documentation from the Purchaser as required by Company’s counsel (such fifth
Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to
Purchaser a certificate representing such shares that is free from all
restrictive and other legends.  The Company may not make any notation on its
records or give instructions to the Transfer Agent that enlarge the restrictions
on transfer set forth in this Section 4.  Certificates for Underlying Shares
subject to legend removal hereunder shall be transmitted by the Transfer Agent
to Purchaser by crediting the account of Purchaser’s prime broker with the
Depository Trust Company System as directed by Purchaser.

(d)   If the Company fails to cause the Transfer Agent to transmit to the
Purchaser a certificate or certificates representing the Underlying Shares
without a restrictive legend within five (5) Trading Days following the delivery
by Purchaser to the Company or the Transfer Agent of a certificate representing
the Underlying Shares and such other documentation as required in Section
4.1(c), and if after such five (5) Trading Days the Purchaser is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Purchaser of the Underlying
Shares (a “Buy-In”), then the Company shall pay in cash to the Purchaser the
amount by which (x) the Purchaser’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Underlying Shares that the
Company was required to deliver to the Purchaser times (B) the price at which
the sell order giving rise to such purchase obligation was executed.  For
example, if the Purchaser purchases Common Stock (in an open market transaction
or otherwise) having a total purchase price of $11,000 to cover a Buy-In with
respect to the sale of Underlying Shares with an aggregate sale price giving
rise to such purchase obligation of $10,000, under the immediately preceding
sentence the Company shall be required to pay the Purchaser $1,000. The
Purchaser shall provide the Company written notice indicating the amounts
payable to the Purchaser in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company.

(e)   Purchaser agrees with the Company that Purchaser will sell any Securities
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set forth therein,
and acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.
 
 
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4.2    Acknowledgment of Dilution.  The Company acknowledges that the issuance
of the Securities may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions.  The
Company further acknowledges that its obligations under the Transaction
Documents, including, without limitation, its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against Purchaser and regardless of the dilutive effect that such issuance may
have on the ownership of the other stockholders of the Company.
 
4.3    Furnishing of Information; Public Information.  If the Common Stock is
not registered under Section 12(b) or 12(g) of the Exchange Act on the date
hereof, the Company agrees to cause the Common Stock to be registered under
Section 12(g) of the Exchange Act on or before the 60th calendar day following
the date hereof. Until such time as the Underlying Shares are eligible to be
sold under Rule 144, the Company covenants to maintain the registration of the
Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file
(or obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act even if the Company is not then subject to the
reporting requirements of the Exchange Act.    As long as Purchaser owns
Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will use its best efforts to prepare and furnish to Purchaser
and make publicly available in accordance with Rule 144(c) such information as
is required for Purchaser to sell the Securities, including without limitation,
under Rule 144.  The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act, including without limitation, within the
requirements of the exemption provided by Rule 144.
 
4.4    Integration.  The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities or that would be integrated with
the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before
the closing of such subsequent transaction.
 
4.5    Conversion Procedures.  The form of Notice of Conversion included in the
Series A Preferred Stock set forth the totality of the procedures required of
Purchaser in order to convert the Series A Preferred Stock.  No additional legal
opinion, other information or instructions shall be required of Purchaser to
convert its Series A Preferred Stock.  The Company shall honor conversion of the
Series A Preferred Stock and shall deliver Underlying Shares in accordance with
the terms, conditions and time periods set forth in the Transaction Documents.
 
 4.6    Securities Laws Disclosure; Publicity.  The Company shall by: (a) within
two (2) Trading Days following the Closing Date, issue a press release,
disclosing the material terms of the transactions contemplated hereby; and (b)
5:00 p.m. (New York City time) on the fourth Trading Day immediately following
the Closing Date, file a Current Report on Form 8-K, disclosing the material
terms of the transactions contemplated hereby and including the Transaction
Documents as exhibits thereto.  From and after the issuance of such press
release, the Company shall have publicly disclosed all material, non-public
information delivered to Purchaser by the Company or any of its subsidiaries, or
any of their respective officers, directors, employees or agents in connection
with the transactions contemplated by the Transaction Documents. The Company and
Purchaser shall consult with each other in issuing any other press releases with
respect to the transactions contemplated hereby, and neither the Company nor
Purchaser shall issue any such press release nor otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of Purchaser, or without the prior consent of Purchaser, with respect to
any press release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Notwithstanding the foregoing, the
Company shall not publicly disclose the name of  Purchaser, or include the name
of Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of Purchaser, except: (a) as
required by federal securities law in connection with: (i) any registration
statement contemplated by the Registration Rights Agreement; and (ii) the filing
of final Transaction Documents (including signature pages thereto) with the
Commission; and (b) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide Purchaser with prior
notice of such disclosure permitted under this clause (b).
 
 
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4.7    Shareholder Rights Plan.  No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that Purchaser is
an “Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and Purchaser.

4.8     Non-Public Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf, will provide Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto Purchaser shall have executed a written agreement with the Company
regarding the confidentiality and use of such information.  The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company. 

4.9    Use of Proceeds.  Except as set forth in Section 2.4(e) and on Schedule
4.9 attached hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use such
proceeds for: (a) the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the Company’s business
and the specific Company debt set forth on Schedule 4.9); (b) the settlement of
any outstanding litigation; or (c) in violation of the FCPA or OFAC regulations.

4.10   Indemnification of Purchasers.   Subject to the provisions of this
Section 4.10, the Company will indemnify and hold Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls Purchaser (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating solely to: (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents; or (b) any action instituted against Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of Purchaser, with respect to
any of the transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of Purchaser’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
Purchaser may have with any such stockholder or any violations by  Purchaser of
state or federal securities laws or any conduct by Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance).  If any action
shall be brought against any Purchaser Party in respect of which indemnity may
be sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party.  Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Purchaser Party
except to the extent that: (i) the employment thereof has been specifically
authorized by the Company in writing; (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate
counsel.  The Company will not be liable to any Purchaser Party under this
Agreement, will not have to admit wrongdoing, agree to any injunctive action or
other penalties or make any payments (y) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (z) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by such Purchaser Party in this Agreement or in the other Transaction
Documents.  The indemnification required by this Section 4.10 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or are incurred.  The indemnity
agreements contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others, and (y) any
liabilities the Company may be subject to pursuant to law.

 
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4.11    Reservation and Listing of Securities.

(a)    The Company shall maintain a reserve from its duly authorized shares of
Common Stock for issuance pursuant to the Transaction Documents in such amount
as may then be required to fulfill its obligations in full under the Transaction
Documents.  Until the Maturity Date or the date that all shares of Series A
Preferred Stock are converted into shares of Common Stock, the Company will not
enter into any transaction providing for the issuance of shares of Common Stock
(or securities convertible into shares of Common Stock) whatsoever if the effect
of such transaction could result in the Company having less than the Required
Minimum.
 
(b)    The Company shall hold a meeting of all stockholders of the Company not
later than November 1, 2012, whether an annual or special meeting, to submit for
the requisite approval of stockholders an amendment to the Company’s certificate
or articles incorporation to increase the number of authorized but unissued
shares of Common Stock from 200,000,000 to at least 300,000,000 shares.  All
officers and directors of the Company shall recommend to the Company’s
stockholders to approve such amendment and agree to vote their respective shares
of Common Stock in favor of such proposal to increase the authorized number of
shares of Common Stock which shall be disclosed to stockholders in the proxy
materials to be delivered to stockholders in connection with such
meeting.   Purchaser covenants and agrees to vote in favor of such proposal.

(c)    The Company shall, if applicable: (i) in the time and manner required by
the principal Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application;
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing or quotation on such Trading Market as soon as possible
thereafter; (iii) provide to the Purchasers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common Stock on any
date at least equal to the Required Minimum on such date on such Trading Market
or another Trading Market.
 
4.12    Modification and Amendment Agreements.

 (a)  2009 Debentures. The holders of at least 65% of the outstanding principal
amount of the 2009 Debentures shall have: (a) (i) consented to the transactions
contemplated by this Agreement; or (ii) agreed to convert such 2009 Debentures
into Common Stock; and (b) executed the First Modification and Amendment in the
form of Exhibit G attached hereto.
 
(b)   2010 Notes. The holders of the 2010 Notes, as previously modified and
amended on September 1, 2010, December 6, 2010 and September 6, 2011,
representing at least 67% of the outstanding principal amount of 2010 Notes (or
such combination of Notes, Series C Warrants, and warrant shares as is required)
shall have executed the Fourth Modification and Amendment Agreement in the form
of Exhibit H attached hereto, which shall be binding on all holders of 2010
Notes.
 
4.13     Reserved.
 
4.14     Certain Transactions and Confidentiality.  Purchaser covenants that
neither it, nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales, including Short
Sales, of any of the Company’s securities during the period commencing with the
execution of this Agreement and ending at such time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.6.  Purchaser covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to the initial press release as described in
Section 4.6, such Purchaser will maintain the confidentiality of the existence
and terms of this transaction and the information included in the Transaction
Documents and the Disclosure Schedules.  
 
 
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4.15   Form D; Blue Sky Filings.  The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to Purchaser at the
Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of Purchaser.
 
4.16   Capital Changes.  Until the six month anniversary of the Effective Date,
the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of
Purchaser.

4.17   Company Board of Directors. Upon the Closing Date, the Board of Directors
shall take such necessary action to increase the number of directors on the
Board of Directors by one to eight (8) directors.  Subject to the terms of the
Certificate of Designation, the Series A Preferred stockholders shall have the
right to designate and elect one (1) director to the Board in a separate class
vote who shall be elected and join the Board effective on the Closing
Date.  Purchaser will cooperate to provide all required information to enable
the Company to make appropriate filings with the Commission in connection with
election of additional director to the Board of Directors.
 
ARTICLE V.
MISCELLANEOUS
  
5.1     Reserved.
 
5.2     Fees and Expenses.  Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement; provided that at the Closing the
Company shall pay out of the Subscription Amount up to $20,000 of Purchaser’s
fees and expenses, including Purchaser’s attorney’s fees, accounting fees and
out-of-pocket expenses.  The Company shall pay all Transfer Agent fees, stamp
taxes and other taxes and duties levied in connection with the delivery of any
Securities to Purchaser.
 
5.3     Entire Agreement.  The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
 
5.4     Notices.  Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day; (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day; (c) the second (2nd) Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service; or (d) upon actual receipt
by the party to whom such notice is required to be given.  The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
 
5.5     Amendments; Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and holders of at least 67% of the
Principal Amount of the Note outstanding at such time or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right. 
 
 
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5.6     Headings.  The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
 
  5.7   Successors and Assigns.  This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns.  The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of Purchaser (other than by merger).  
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to
“Purchaser”; provided, however, the rights under Section 4.12 of this Agreement
shall be assignable solely upon transfer of the rights under the Note.

 5.8    No Third-Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.10.

5.9     Governing Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof.  Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York.  Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient venue for such proceeding.  Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law.   If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then, in addition to the obligations of the Company under Section
4.10, the prevailing party in such action or proceeding shall be reimbursed by
the other party for its reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such action or
proceeding.
 
5.10   Survival.  The representations and warranties contained herein shall
survive the Closing and the delivery of the Securities for a period of one (1)
year.  Each covenant and agreement of any of the parties contained in this
Agreement, which by its terms is required to be performed after the Closing
Date, shall survive the Closing and remain in full force and effect until such
covenant or agreement is performed.
   
5.11   Execution.  This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.  In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.
 
5.12   Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
 
 
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5.13   Rescission and Withdrawal Right.  Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; provided,
however, that in the case of a rescission of a conversion of Series A Preferred
Stock, the Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded conversion concurrently with the restoration of
Purchaser’s right to acquire such shares pursuant to Purchaser’s Series A
Preferred Stock.
 
5.14   Replacement of Securities.  If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.
 
5.15   Remedies.  In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agree to waive and not to
assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
 
 5.16  Payment Set Aside. To the extent that the Company makes a payment or
payments to Purchaser pursuant to any Transaction Document or Purchaser enforces
or exercises its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
5.17   Usury.  To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document.  Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate.  It is agreed that if the
maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date thereof forward, unless such
application is precluded by applicable law.  If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by Purchaser to the unpaid principal balance of any
such indebtedness or be refunded to the Company, the manner of handling such
excess to be at Purchaser’s election.
 
 
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5.18    Liquidated Damages.  The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
 
5.19    Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.
 
5.20    Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto. In
addition, each and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse and forward
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.
 
5.21    WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.
  
(Signature Pages Follow)
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
NXT NUTRITIONALS HOLDINGS, INC.
 
 
Address for Notice:
 
933 E. Columbus Avenue
Springfield, MA 01105
Fax: (413) 747-9303
By:____________________________
      Name: Francis McCarthy
      Title: President and CEO
 
With a copy to (which shall not constitute notice):
 
Blank Rome, LLP
405 Lexington Avenue
New York, New York 10174
Attn:  Kristina L. Trauger, Esq.
Tel: (212) 885-5339
Fax: (917) 332-3840
 
 
NXT INVESTMENT PARTNERS, LLC
 
By: NIP-GGS MANAGEMENT, LLC
       Manager
 
 
By: ______________________________
 

       Richard J. Golden
       Manager

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

Becker & Poliakoff, LLP
45 Broadway, 8th Floor
New York, New York 10006
Attn: Steven L. Glauberman, Esq.
Tel: (212) 599-3322
Fax: (212) 557-0295
 
 
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[PURCHASER SIGNATURE PAGE TO NXT SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned has caused this Securities Purchase
Agreement to be duly executed by its authorized signatories as of the date first
indicated above.
 
Name of Purchaser:  NXT INVESTMENT PARTNERS, LLC 
 
Signature of Authorized Signatory of Purchaser:
_____________________________________
 
Name of Authorized Signatory: Richard J. Golden
 
Title of Authorized Signatory: Manager of NIP-GGS Management, LLC, Manager of
Purchaser,

Email Address of Authorized Signatory:
 
Facsimile Number of Authorized Signatory:
___________________________________________
 
Address for Notice of Purchaser:
 
 
Address for Delivery of Securities for Purchaser (if not same as address for
notice):

 
Subscription Amount: $1,000,000

Principal Amount of Note: $1,000,000

Series A Preferred Shares: 13,075,468

Name in which Securities should be issued: NXT Investment Partners, LLC
 
 
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EXHIBIT INDEX
 
A           -           Note
 
B           -           Certification of Designation relating to Series A
Convertible Preferred Stock
 
C           -           Registration Rights Agreement
 
D           -           Legal Opinions of Blank Rome LLP and Mark Giresi, Esq.
 
E           -           Subsidiary Guarantee
 
F           -           Security Agreement
 
G           -           First Modification and Amendment Agreement executed by
holders of 2009 Debentures
 
H           -           Fourth Modification and Amendment Agreement executed by
holders of 2010 Notes
 
I             -           Form of Lock-Up Agreements
 
 
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SCHEDULES
 
3.1(a)          Subsidiaries
 
3.1(d)          No Conflicts
 
3.1(e)          Filings, Consents and Approvals
 
3.1(g)          Capitalization
 
3.1(h)          SEC Reports; Financial Statements
 
3.1(i)           Material Changes; Undisclosed Events, Liabilities or
Developments
 
3.1(j)           Litigation
 
3.1(n)          Title to Assets
 
3.1(o)          Patents and Trademarks
 
3.1(r)          Sarbanes-Oxley; Internal Accounting Controls
 
3.1(s)          Certain Fees
 
3.1(v)          Registration Rights
 
3.1(aa)        Indebtedness
 
3.1(bb)       Tax Status
 
3.1(ee)       Accountants
 
3.1(gg)       No Disagreements with Accountants and Lawyers
 
3.2(j)           Brokers’ Fees
 
4.9              Use of Proceeds
 
 
 
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