Exhibit 10.1

EXECUTION COPY

SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of July 25, 2006, by
and among Apollo Resources International, Inc., a Utah corporation, with its
corporate headquarters located at 3001 Knox Street, Suite 403, Dallas, Texas
75205 (the ”Company”), and the investors listed on the Schedule of Buyers
attached hereto (individually, a “Buyer” and collectively, the “Buyers”).

WHEREAS:

A.            The Company and each Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and
Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act.

B.            The Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) that aggregate number of
shares (the “Common Shares”) of the Common Stock, par value $0.001 per share, of
the Company (the “Common Stock”), set forth opposite such Buyer’s name in column
(3) on the Schedule of Buyers attached hereto (which aggregate amount for all
Buyers shall be 13,157,895 and (ii) warrants, in substantially the form attached
hereto as Exhibit A (the “Warrants”), to acquire up to that number of additional
shares of Common Stock set forth opposite such Buyer’s name in column (4) of the
Schedule of Buyers (as exercised, collectively, the “Warrant Shares”).

C.            Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit B (the
“Registration Rights Agreement”), pursuant to which the Company will agree to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Registration Rights Agreement) under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.

D.            The Common Shares, the Warrants and the Warrant Shares
collectively are referred to herein as the “Securities”.

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

1.             PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.

(A)           PURCHASE OF COMMON SHARES AND WARRANTS.

(I)            COMMON SHARES AND WARRANTS.  SUBJECT TO THE SATISFACTION (OR
WAIVER) OF THE CONDITIONS SET FORTH IN SECTIONS 6 AND 7 BELOW, ON THE CLOSING
DATE (AS DEFINED BELOW), THE COMPANY SHALL ISSUE AND SELL TO EACH BUYER, AND
EACH BUYER SEVERALLY, BUT NOT JOINTLY, SHALL PURCHASE FROM THE COMPANY THE
NUMBER OF COMMON SHARES AS IS SET FORTH OPPOSITE SUCH BUYER’S NAME IN COLUMN (3)
ON THE SCHEDULE OF BUYERS ALONG WITH  WARRANTS TO

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ACQUIRE UP TO THAT NUMBER OF WARRANT SHARES AS IS SET FORTH OPPOSITE SUCH
BUYER’S NAME IN COLUMN (4) ON THE SCHEDULE OF BUYERS (THE “CLOSING”).

(II)           CLOSING.  THE DATE AND TIME OF THE CLOSING (THE “CLOSING DATE”)
SHALL BE 10:00 A.M., NEW YORK CITY TIME, ON JULY 26, 2006 (OR SUCH OTHER DATE AS
IS MUTUALLY AGREED TO BY THE COMPANY AND EACH BUYER) AFTER NOTIFICATION OF
SATISFACTION (OR WAIVER) OF THE CONDITIONS TO THE CLOSING SET FORTH IN SECTIONS
6 AND 7 BELOW AT THE OFFICES OF SCHULTE ROTH & ZABEL LLP, 919 THIRD AVENUE, NEW
YORK, NEW YORK 10022.

(III)          PURCHASE PRICE.  THE AGGREGATE PURCHASE PRICE FOR THE COMMON
SHARES AND THE WARRANTS TO BE PURCHASED BY EACH SUCH BUYER AT THE CLOSING (THE
“PURCHASE PRICE”) SHALL BE THE AMOUNT SET FORTH OPPOSITE EACH BUYER’S NAME IN
COLUMN (5) OF THE SCHEDULE OF BUYERS.

(B)           FORM OF PAYMENT.  ON THE CLOSING DATE, (I) EACH BUYER SHALL PAY
ITS PURCHASE PRICE TO THE COMPANY FOR THE COMMON SHARES AND THE WARRANTS TO BE
ISSUED AND SOLD TO SUCH BUYER AT THE CLOSING (LESS, (X) IN THE CASE OF
CASTLERIGG, THE AMOUNTS WITHHELD PURSUANT TO SECTION 4(G)), BY WIRE TRANSFER OF
IMMEDIATELY AVAILABLE FUNDS IN ACCORDANCE WITH THE COMPANY’S WRITTEN WIRE
INSTRUCTIONS AND (II) THE COMPANY SHALL DELIVER TO EACH BUYER ONE OR MORE STOCK
CERTIFICATES, FREE AND CLEAR OF ALL RESTRICTIVE AND OTHER LEGENDS (EXCEPT AS
EXPRESSLY PROVIDED IN SECTION 2(G) HEREOF), EVIDENCING THE NUMBER OF COMMON
SHARES SUCH BUYER IS PURCHASING AS IS SET FORTH OPPOSITE SUCH BUYER’S NAME IN
COLUMN (3) ON THE SCHEDULE OF BUYERS ALONG WITH THE WARRANTS (ALLOCATED IN THE
AMOUNTS AS SUCH BUYER SHALL REQUEST) TO ACQUIRE UP TO AN AGGREGATE NUMBER OF
WARRANT SHARES AS IS SET FORTH OPPOSITE SUCH BUYER’S NAME IN COLUMN (4) ON THE
SCHEDULE OF BUYERS, IN EACH CASE DULY EXECUTED ON BEHALF OF THE COMPANY AND
REGISTERED IN THE NAME OF SUCH BUYER.

2.             BUYER’S REPRESENTATIONS AND WARRANTIES.

Each Buyer represents and warrants to the Company with respect to only itself
that:

(A)           NO PUBLIC SALE OR DISTRIBUTION.  SUCH BUYER IS (I) ACQUIRING THE
COMMON SHARES AND THE WARRANTS AND (II) UPON EXERCISE OF THE WARRANTS WILL
ACQUIRE THE WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS, FOR
INVESTMENT PURPOSES, AS PRINCIPAL FOR ITS OWN ACCOUNT AND NOT WITH A VIEW
TOWARDS, OR FOR RESALE IN CONNECTION WITH, THE PUBLIC SALE OR DISTRIBUTION
THEREOF, EXCEPT PURSUANT TO SALES REGISTERED OR EXEMPTED UNDER THE 1933 ACT;
PROVIDED, HOWEVER, THAT BY MAKING THE REPRESENTATIONS HEREIN, SUCH BUYER DOES
NOT AGREE TO HOLD ANY OF THE SECURITIES FOR ANY MINIMUM OR OTHER SPECIFIC TERM
AND RESERVES THE RIGHT TO DISPOSE OF THE SECURITIES AT ANY TIME IN ACCORDANCE
WITH OR PURSUANT TO A REGISTRATION STATEMENT OR AN EXEMPTION UNDER THE 1933
ACT.  SUCH BUYER IS ACQUIRING THE SECURITIES HEREUNDER IN THE ORDINARY COURSE OF
ITS BUSINESS.  SUCH BUYER DOES NOT PRESENTLY HAVE ANY AGREEMENT OR
UNDERSTANDING, DIRECTLY OR INDIRECTLY, WITH ANY PERSON TO DISTRIBUTE ANY OF THE
SECURITIES.

(B)           ACCREDITED INVESTOR STATUS.  AT THE TIME SUCH BUYER WAS OFFERED
THE SECURITIES, IT WAS, AND AT THE DATE HEREOF IT IS, AND ON EACH DATE ON WHICH
IT EXERCISES WARRANTS IT

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WILL BE, AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE 1933 ACT. 
SUCH BUYER IS NOT A REGISTERED BROKER-DEALER UNDER SECTION 15 OF THE 1934 ACT.

(C)           RELIANCE ON EXEMPTIONS.  SUCH BUYER UNDERSTANDS THAT THE
SECURITIES ARE BEING OFFERED AND SOLD TO IT IN RELIANCE ON SPECIFIC EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF UNITED STATES FEDERAL AND STATE SECURITIES
LAWS AND THAT THE COMPANY IS RELYING IN PART UPON THE TRUTH AND ACCURACY OF, AND
SUCH BUYER’S COMPLIANCE WITH, THE REPRESENTATIONS, WARRANTIES, AGREEMENTS,
ACKNOWLEDGMENTS AND UNDERSTANDINGS OF SUCH BUYER SET FORTH HEREIN IN ORDER TO
DETERMINE THE AVAILABILITY OF SUCH EXEMPTIONS AND THE ELIGIBILITY OF SUCH BUYER
TO ACQUIRE THE SECURITIES.

(D)           INFORMATION.  SUCH BUYER AND ITS ADVISORS, IF ANY, HAVE BEEN
FURNISHED WITH ALL MATERIALS RELATING TO THE BUSINESS, FINANCES AND OPERATIONS
OF THE COMPANY AND MATERIALS RELATING TO THE OFFER AND SALE OF THE SECURITIES
WHICH HAVE BEEN REQUESTED BY SUCH BUYER.  SUCH BUYER AND ITS ADVISORS, IF ANY,
HAVE BEEN AFFORDED THE OPPORTUNITY TO ASK QUESTIONS OF THE COMPANY.  NEITHER
SUCH INQUIRIES NOR ANY OTHER DUE DILIGENCE INVESTIGATIONS CONDUCTED BY SUCH
BUYER OR ITS ADVISORS, IF ANY, OR ITS REPRESENTATIVES SHALL MODIFY, AMEND OR
AFFECT SUCH BUYER’S RIGHT TO RELY ON THE COMPANY’S REPRESENTATIONS AND
WARRANTIES CONTAINED HEREIN.  SUCH BUYER UNDERSTANDS THAT ITS INVESTMENT IN THE
SECURITIES INVOLVES A HIGH DEGREE OF RISK.  SUCH BUYER HAS SOUGHT SUCH
ACCOUNTING, LEGAL AND TAX ADVICE AS IT HAS CONSIDERED NECESSARY TO MAKE AN
INFORMED INVESTMENT DECISION WITH RESPECT TO ITS ACQUISITION OF THE SECURITIES.

(E)           NO GOVERNMENTAL REVIEW.  SUCH BUYER UNDERSTANDS THAT NO UNITED
STATES FEDERAL OR STATE AGENCY OR ANY OTHER GOVERNMENT OR GOVERNMENTAL AGENCY
HAS PASSED ON OR MADE ANY RECOMMENDATION OR ENDORSEMENT OF THE SECURITIES OR THE
FAIRNESS OR SUITABILITY OF THE INVESTMENT IN THE SECURITIES NOR HAVE SUCH
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF THE
SECURITIES.

(F)            TRANSFER OR RESALE.  SUCH BUYER UNDERSTANDS THAT EXCEPT AS
PROVIDED IN THE REGISTRATION RIGHTS AGREEMENT: (I) THE SECURITIES HAVE NOT BEEN
AND ARE NOT BEING REGISTERED UNDER THE 1933 ACT OR ANY STATE SECURITIES LAWS,
AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED UNLESS (A)
SUBSEQUENTLY REGISTERED THEREUNDER, (B) SUCH BUYER SHALL HAVE DELIVERED TO THE
COMPANY AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
TO THE EFFECT THAT SUCH SECURITIES TO BE SOLD, ASSIGNED OR TRANSFERRED MAY BE
SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION,
OR (C) SUCH BUYER PROVIDES THE COMPANY WITH REASONABLE ASSURANCE THAT SUCH
SECURITIES CAN BE SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO RULE 144 OR RULE
144A PROMULGATED UNDER THE 1933 ACT, AS AMENDED, (OR A SUCCESSOR RULE THERETO)
(COLLECTIVELY, “RULE 144”); (II) ANY SALE OF THE SECURITIES MADE IN RELIANCE ON
RULE 144 MAY BE MADE ONLY IN ACCORDANCE WITH THE TERMS OF RULE 144 AND FURTHER,
IF RULE 144 IS NOT APPLICABLE, ANY RESALE OF THE SECURITIES UNDER CIRCUMSTANCES
IN WHICH THE SELLER (OR THE PERSON (AS DEFINED IN SECTION 3(S)) THROUGH WHOM THE
SALE IS MADE) MAY BE DEEMED TO BE AN UNDERWRITER (AS THAT TERM IS DEFINED IN THE
1933 ACT) MAY REQUIRE COMPLIANCE WITH SOME OTHER EXEMPTION UNDER THE 1933 ACT OR
THE RULES AND REGULATIONS OF THE SEC THEREUNDER; AND (III) NEITHER THE COMPANY
NOR ANY OTHER PERSON IS UNDER ANY OBLIGATION TO REGISTER THE SECURITIES UNDER
THE 1933 ACT OR ANY STATE SECURITIES LAWS OR TO COMPLY WITH THE TERMS AND
CONDITIONS OF ANY EXEMPTION THEREUNDER.  THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES AND SUCH PLEDGE OF SECURITIES SHALL NOT BE

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DEEMED TO BE A TRANSFER, SALE OR ASSIGNMENT OF THE SECURITIES HEREUNDER, AND NO
BUYER EFFECTING A PLEDGE OF SECURITIES SHALL BE REQUIRED TO PROVIDE THE COMPANY
WITH ANY NOTICE THEREOF OR OTHERWISE MAKE ANY DELIVERY TO THE COMPANY PURSUANT
TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT (AS DEFINED IN SECTION
3(B)), INCLUDING, WITHOUT LIMITATION, THIS SECTION 2(F).

(G)           LEGENDS.  SUCH BUYER UNDERSTANDS THAT THE CERTIFICATES OR OTHER
INSTRUMENTS REPRESENTING THE COMMON SHARES AND THE WARRANTS AND, UNTIL SUCH TIME
AS THE RESALE OF THE COMMON SHARES AND THE WARRANT SHARES HAVE BEEN REGISTERED
UNDER THE 1933 ACT AS CONTEMPLATED BY THE REGISTRATION RIGHTS AGREEMENT, THE
STOCK CERTIFICATES REPRESENTING THE COMMON SHARES AND THE WARRANT SHARES, EXCEPT
AS SET FORTH BELOW, SHALL BEAR ANY LEGEND AS REQUIRED BY THE “BLUE SKY” LAWS OF
ANY STATE AND A RESTRICTIVE LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM (AND A
STOP-TRANSFER ORDER MAY BE PLACED AGAINST TRANSFER OF SUCH STOCK CERTIFICATES):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. 
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act (a “Registration
Event”), or (ii) in connection with a sale, assignment or other transfer, such
holder provides the Company with an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such sale or transfer of the
Securities may be made without registration under the applicable requirements of
the 1933 Act, or (iii) following a sale of transfer of such Securities pursuant
to Rule 144 (assuming the transferor is not an affiliate of the Company), or
(iv) while such Securities are eligible for sale under Rule 144(k).  If the
Company shall fail for any reason or for no reason to issue to the holder of the
Securities within three (3) Trading Days after the occurrence of any of (i)
through (iii) above, a certificate without such legend to the holder or to issue
such Securities to such holder by electronic delivery at the applicable balance
account at DTC, and if on or after such Trading Day the holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a

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sale by the holder of such Securities that the holder anticipated receiving
without legend from the Company (a “Buy-In”), then the Company shall, within
three (3) Business Days after the holder’s request and in the holder’s
discretion, either (i) pay cash to the holder in an amount equal to the holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such unlegended Securities shall terminate, or (ii)
promptly honor its obligation to deliver to the holder such unlegended
Securities as provided above and pay cash to the holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the date of exercise.

(H)           VALIDITY; ENFORCEMENT.  THIS AGREEMENT AND THE REGISTRATION RIGHTS
AGREEMENT TO WHICH SUCH BUYER IS A PARTY HAVE BEEN DULY AND VALIDLY AUTHORIZED,
EXECUTED AND DELIVERED BY SUCH BUYER AND CONSTITUTE THE LEGAL, VALID AND BINDING
OBLIGATIONS OF SUCH BUYER ENFORCEABLE AGAINST SUCH BUYER IN ACCORDANCE WITH
THEIR RESPECTIVE TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY GENERAL
PRINCIPLES OF EQUITY OR TO APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION,
MORATORIUM, LIQUIDATION AND OTHER SIMILAR LAWS RELATING TO, OR AFFECTING
GENERALLY, THE ENFORCEMENT OF APPLICABLE CREDITORS’ RIGHTS AND REMEDIES.

(I)            NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH
BUYER OF THIS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT TO WHICH SUCH
BUYER IS A PARTY AND THE CONSUMMATION BY SUCH BUYER OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY WILL NOT (I) RESULT IN A VIOLATION OF THE
ORGANIZATIONAL DOCUMENTS OF SUCH BUYER 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 TO WHICH
SUCH BUYER IS A PARTY, OR (III) RESULT IN A VIOLATION OF ANY LAW, RULE,
REGULATION, ORDER, JUDGMENT  OR DECREE (INCLUDING FEDERAL AND STATE SECURITIES
LAWS) APPLICABLE TO SUCH BUYER, EXCEPT IN THE CASE OF CLAUSES (II) AND (III)
ABOVE, FOR SUCH CONFLICTS, DEFAULTS, RIGHTS OR VIOLATIONS WHICH WOULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT ON THE ABILITY OF SUCH BUYER TO PERFORM ITS OBLIGATIONS
HEREUNDER.

(J)            RESIDENCY.  SUCH BUYER IS A RESIDENT OF THAT JURISDICTION
SPECIFIED BELOW ITS ADDRESS ON THE SCHEDULE OF BUYERS.

(K)           INDEPENDENT INVESTMENT DECISION.  SUCH BUYER HAS INDEPENDENTLY
EVALUATED THE MERITS OF ITS DECISION TO PURCHASE SECURITIES PURSUANT TO THE
TRANSACTION DOCUMENTS, AND SUCH BUYER CONFIRMS THAT IT HAS NOT RELIED ON THE
ADVICE OF THE COMPANY NOR ANY OTHER BUYER’S BUSINESS AND/OR LEGAL COUNSEL IN
MAKING SUCH DECISION.

(L)            CERTAIN TRADING ACTIVITIES.  SUCH BUYER HAS NOT DIRECTLY OR
INDIRECTLY, NOR HAS ANY PERSON ACTING ON BEHALF OF OR PURSUANT TO ANY
UNDERSTANDING WITH SUCH BUYER, ENGAGED IN ANY TRANSACTIONS IN THE SECURITIES OF
THE COMPANY (INCLUDING, WITHOUT LIMITATIONS, ANY SHORT SALES INVOLVING THE
COMPANY’S SECURITIES) SINCE THE EARLIER OF (I) THE TIME THAT SUCH BUYER WAS
FIRST CONTACTED BY THE COMPANY REGARDING THE TRANSACTIONS CONTEMPLATED HEREBY
AND (II) TWENTY (20) CALENDAR DAYS PRIOR TO THE DATE HEREOF.  SUCH BUYER
COVENANTS THAT NEITHER IT NOR ANY PERSON ACTING ON ITS BEHALF OR PURSUANT TO ANY
UNDERSTANDING WITH IT WILL ENGAGE IN ANY TRANSACTIONS IN THE SECURITIES OF THE
COMPANY (INCLUDING SHORT SALES) PRIOR TO THE TIME THAT THE TRANSACTIONS

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CONTEMPLATED BY THIS AGREEMENT ARE PUBLICLY DISCLOSED.  FOR THE PURPOSE OF THIS
AGREEMENT, “SHORT SALES” INCLUDE, WITHOUT LIMITATION, ALL “SHORT SALES” AS
DEFINED IN RULE 200 PROMULGATED UNDER REGULATION SHO UNDER THE 1934 ACT AND ALL
TYPES OF DIRECT AND INDIRECT STOCK PLEDGES, FORWARD SALE CONTRACTS, OPTIONS,
PUTS, CALLS, SWAPS AND SIMILAR ARRANGEMENTS (INCLUDING ON A TOTAL RETURN BASIS),
AND SALES AND OTHER TRANSACTIONS THROUGH NON-US BROKER DEALERS OR FOREIGN
REGULATED BROKERS.

(M)          GENERAL SOLICITATION.  SUCH BUYER 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.

(N)           ORGANIZATION.  SUCH BUYER IS AN ENTITY DULY ORGANIZED, VALIDLY
EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS
ORGANIZATION WITH THE REQUISITE CORPORATE OR PARTNERSHIP POWER AND AUTHORITY TO
ENTER INTO AND TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE APPLICABLE
TRANSACTION DOCUMENTS (AS DEFINED BELOW) AND OTHERWISE TO CARRY OUT ITS
OBLIGATIONS THEREUNDER.

3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Buyers that:

(A)           ORGANIZATION AND QUALIFICATION.  THE COMPANY AND ITS
“SUBSIDIARIES” (WHICH FOR PURPOSES OF THIS AGREEMENT MEANS ANY JOINT VENTURE OR
ANY ENTITY (I) IN WHICH THE COMPANY, DIRECTLY OR INDIRECTLY, OWNS 50% OR MORE OF
THE OUTSTANDING CAPITAL STOCK OR HOLDS AN EQUITY OR SIMILAR INTEREST
REPRESENTING 50% OR MORE OF THE OUTSTANDING EQUITY OR SIMILAR INTEREST OF SUCH
ENTITY, (II) THAT IS A SIGNIFICANT SUBSIDIARY OF THE COMPANY AS DEFINED UNDER
REGULATION S-X OF THE 1934 ACT OR (III) IN WHICH THE COMPANY CONTROLS OR
OPERATES ALL OR PART OF THE BUSINESS, OPERATIONS OR ADMINISTRATION OF SUCH
ENTITY) ARE ENTITIES DULY ORGANIZED AND VALIDLY EXISTING IN GOOD STANDING UNDER
THE LAWS OF THE JURISDICTION IN WHICH THEY ARE FORMED, AND HAVE THE REQUISITE
POWER AND AUTHORIZATION TO OWN THEIR PROPERTIES AND TO CARRY ON THEIR BUSINESS
AS NOW BEING CONDUCTED.   EACH OF THE COMPANY AND ITS SUBSIDIARIES IS DULY
QUALIFIED AS A FOREIGN ENTITY TO DO BUSINESS AND IS IN GOOD STANDING IN EVERY
JURISDICTION IN WHICH ITS OWNERSHIP OF PROPERTY OR THE NATURE OF THE BUSINESS
CONDUCTED BY IT MAKES SUCH QUALIFICATION NECESSARY, EXCEPT TO THE EXTENT THAT
THE FAILURE TO BE SO QUALIFIED OR BE IN GOOD STANDING WOULD NOT REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.  AS USED IN THIS AGREEMENT,
“MATERIAL ADVERSE EFFECT” MEANS ANY MATERIAL ADVERSE EFFECT ON THE BUSINESS,
PROPERTIES, ASSETS, OPERATIONS, RESULTS OF OPERATIONS, CONDITION (FINANCIAL OR
OTHERWISE) OR PROSPECTS OF THE COMPANY AND ITS SUBSIDIARIES, TAKEN AS A WHOLE,
OR ON THE TRANSACTIONS CONTEMPLATED HEREBY AND THE OTHER TRANSACTION DOCUMENTS
OR BY THE AGREEMENTS AND INSTRUMENTS TO BE ENTERED INTO IN CONNECTION HEREWITH
OR THEREWITH, OR ON THE AUTHORITY OR ABILITY OF THE COMPANY TO PERFORM ITS
OBLIGATIONS UNDER THE TRANSACTION DOCUMENTS (AS DEFINED BELOW).  THE COMPANY HAS
NO SUBSIDIARIES EXCEPT AS SET FORTH ON SCHEDULE 3(A).

(B)           AUTHORIZATION; ENFORCEMENT; VALIDITY.  THE COMPANY HAS THE
REQUISITE POWER AND AUTHORITY TO ENTER INTO AND PERFORM ITS OBLIGATIONS UNDER
THIS AGREEMENT, THE COMMON SHARES, THE REGISTRATION RIGHTS AGREEMENT, THE
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS (AS DEFINED IN SECTION 5(B)), THE
WARRANTS AND EACH OF THE OTHER AGREEMENTS ENTERED INTO BY

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THE PARTIES HERETO IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT (COLLECTIVELY, THE “TRANSACTION DOCUMENTS”) AND TO ISSUE THE
SECURITIES IN ACCORDANCE WITH THE TERMS HEREOF AND THEREOF.  THE EXECUTION AND
DELIVERY OF THE TRANSACTION DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY THE
COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, INCLUDING, WITHOUT
LIMITATION, THE ISSUANCE OF THE COMMON SHARES AND THE WARRANTS, THE RESERVATION
FOR ISSUANCE AND ISSUANCE OF WARRANT SHARES ISSUABLE UPON EXERCISE OF THE
WARRANTS HAVE BEEN DULY AUTHORIZED BY THE COMPANY’S BOARD OF DIRECTORS AND OTHER
THAN (I) THE FILING OF A FORM D UNDER REGULATION D OF THE 1933 ACT, (II) THE
FILING WITH THE SEC OF ONE OR MORE REGISTRATION STATEMENTS IN ACCORDANCE WITH
THE REQUIREMENTS OF THE REGISTRATION RIGHTS AGREEMENT, (III) SUCH FILINGS AS ARE
REQUIRED BY THE PRINCIPAL MARKET (AS DEFINED BELOW) AND (IV) SUCH FILINGS
REQUIRED UNDER APPLICABLE SECURITIES OR “BLUE SKY” LAWS OF THE STATES OF THE
UNITED STATES, NO FURTHER FILING, CONSENT, OR AUTHORIZATION IS REQUIRED BY THE
COMPANY, ITS BOARD OF DIRECTORS OR ITS STOCKHOLDERS.  THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS OF EVEN DATE HEREWITH HAVE BEEN DULY EXECUTED AND
WHEN DELIVERED BY THE COMPANY WILL CONSTITUTE THE LEGAL, VALID AND BINDING
OBLIGATIONS OF THE COMPANY, ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH
THEIR RESPECTIVE TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY GENERAL
PRINCIPLES OF EQUITY OR APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION,
MORATORIUM, LIQUIDATION OR SIMILAR LAWS RELATING TO, OR AFFECTING GENERALLY, THE
ENFORCEMENT OF APPLICABLE CREDITORS’ RIGHTS AND REMEDIES.

(C)           ISSUANCE OF SECURITIES.  THE ISSUANCE OF THE COMMON SHARES AND THE
WARRANTS ARE DULY AUTHORIZED AND ARE FREE FROM ALL TAXES, LIENS AND CHARGES WITH
RESPECT TO THE ISSUE THEREOF.  AS OF THE CLOSING, A NUMBER OF SHARES OF COMMON
STOCK SHALL HAVE BEEN DULY AUTHORIZED AND RESERVED FOR ISSUANCE WHICH EQUALS
130% OF THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THE WARRANTS (ASSUMING SUCH EXERCISE OCCURRED AT CLOSING).  THE COMMON SHARES
AND, UPON EXERCISE IN ACCORDANCE WITH THE WARRANTS, THE WARRANT SHARES,
RESPECTIVELY, WHEN ISSUED, WILL BE VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE
AND FREE FROM ALL PREEMPTIVE OR SIMILAR RIGHTS, TAXES, LIENS AND CHARGES WITH
RESPECT TO THE ISSUE THEREOF, WITH THE HOLDERS BEING ENTITLED TO ALL RIGHTS
ACCORDED TO A HOLDER OF COMMON STOCK.  BASED IN PART UPON THE ACCURACY OF THE
REPRESENTATIONS AND WARRANTIES OF THE BUYERS’ SET FORTH IN ARTICLE 2, ISSUANCE
BY THE COMPANY OF THE SECURITIES IS, OR WILL BE UPON ISSUANCE, EXEMPT FROM
REGISTRATION UNDER THE 1933 ACT.

(D)           NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE OF THE
TRANSACTION DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY THE COMPANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY (INCLUDING, WITHOUT LIMITATION, THE
ISSUANCE OF THE COMMON SHARES AND THE WARRANTS, AND RESERVATION FOR ISSUANCE AND
ISSUANCE OF THE WARRANT SHARES) WILL NOT (I) RESULT IN A VIOLATION OF ANY
CERTIFICATE OF INCORPORATION, CERTIFICATE OF FORMATION, ANY CERTIFICATE OF
DESIGNATIONS OR OTHER CONSTITUENT DOCUMENTS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, ANY CAPITAL STOCK OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR
BYLAWS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR (II) CONFLICT WITH, OR
CONSTITUTE A DEFAULT (OR AN EVENT WHICH WITH NOTICE OR LAPSE OF TIME OR BOTH
WOULD BECOME A DEFAULT) IN ANY RESPECT UNDER, OR GIVE TO OTHERS ANY RIGHTS OF
TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION OF, ANY AGREEMENT,
INDENTURE OR INSTRUMENT TO WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS A
PARTY, OR (III) RESULT IN A VIOLATION OF ANY LAW, RULE, REGULATION, ORDER,
JUDGMENT OR DECREE (INCLUDING FOREIGN, FEDERAL AND STATE SECURITIES LAWS AND
REGULATIONS AND THE RULES AND REGULATIONS OF THE OTC BULLETIN BOARD AS REPORTED
ON BLOOMBERG FINANCIAL MARKETS LP (THE “PRINCIPAL MARKET”)) APPLICABLE TO THE
COMPANY OR ANY OF

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ITS SUBSIDIARIES OR BY WHICH ANY PROPERTY OR ASSET OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS BOUND OR AFFECTED; EXCEPT IN THE CASE OF EACH OF CLAUSES (II)
AND (III), SUCH AS COULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE OR
REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

(E)           CONSENTS.  OTHER THAN AS CONTEMPLATED IN SECTION 3(B), AND
OTHERWISE AS SET FORTH ON SCHEDULE 3(E), THE COMPANY IS NOT REQUIRED TO OBTAIN
ANY CONSENT, AUTHORIZATION OR ORDER OF, OR MAKE ANY FILING OR REGISTRATION WITH,
ANY COURT, GOVERNMENTAL AGENCY OR ANY REGULATORY OR SELF-REGULATORY AGENCY OR
ANY OTHER PERSON IN ORDER FOR IT TO EXECUTE, DELIVER OR PERFORM ANY OF ITS
OBLIGATIONS UNDER OR CONTEMPLATED BY THE TRANSACTION DOCUMENTS, IN EACH CASE IN
ACCORDANCE WITH THE TERMS HEREOF OR THEREOF.  ALL CONSENTS, AUTHORIZATIONS,
ORDERS, FILINGS AND REGISTRATIONS WHICH THE COMPANY IS REQUIRED TO OBTAIN
PURSUANT TO THE PRECEDING SENTENCE HAVE BEEN OBTAINED OR EFFECTED ON OR PRIOR TO
THE CLOSING DATE (OTHER THAN THOSE WHICH THE COMPANY IS NOT REQUIRED TO OBTAIN
IN ACCORDANCE WITH THE TRANSACTION DOCUMENTS UNTIL AFTER THE CLOSING DATE) AND
THE COMPANY AND ITS SUBSIDIARIES ARE UNAWARE OF ANY FACTS OR CIRCUMSTANCES WHICH
MIGHT PREVENT THE COMPANY FROM OBTAINING OR EFFECTING ANY OF THE REGISTRATION,
APPLICATION OR FILINGS PURSUANT TO THE PRECEDING SENTENCE.  THE COMPANY IS NOT
IN VIOLATION OF THE LISTING REQUIREMENTS OF THE PRINCIPAL MARKET AND HAS NO
KNOWLEDGE OF ANY FACTS WHICH WOULD REASONABLY LEAD TO DELISTING OR SUSPENSION OF
THE COMMON STOCK IN THE FORESEEABLE FUTURE.

(F)            ACKNOWLEDGMENT REGARDING BUYER’S PURCHASE OF SECURITIES.  THE
COMPANY ACKNOWLEDGES AND AGREES THAT EACH BUYER IS ACTING SOLELY IN THE CAPACITY
OF AN ARM’S LENGTH PURCHASER WITH RESPECT TO THE TRANSACTION DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND THAT NO BUYER IS (I) AN OFFICER
OR DIRECTOR OF THE COMPANY, (II) TO THE COMPANY’S KNOWLEDGE, AN “AFFILIATE” OF
THE COMPANY (AS DEFINED IN RULE 144 OF THE 1933 ACT) OR (III) TO THE KNOWLEDGE
OF THE COMPANY, A “BENEFICIAL OWNER” OF MORE THAN 10% OF THE SHARES OF COMMON
STOCK (AS DEFINED FOR PURPOSES OF RULE 13D-3 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED (THE “1934 ACT”)).  THE COMPANY FURTHER ACKNOWLEDGES THAT NO
BUYER IS ACTING AS A FINANCIAL ADVISOR OR FIDUCIARY OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES (OR IN ANY SIMILAR CAPACITY) WITH RESPECT TO THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND ANY ADVICE
GIVEN BY A BUYER OR ANY OF ITS REPRESENTATIVES OR AGENTS IN CONNECTION WITH THE
TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY IS
MERELY INCIDENTAL TO SUCH BUYER’S PURCHASE OF THE SECURITIES.  THE COMPANY
FURTHER REPRESENTS TO EACH BUYER THAT THE COMPANY’S DECISION TO ENTER INTO THE
TRANSACTION DOCUMENTS HAS BEEN BASED SOLELY ON THE INDEPENDENT EVALUATION BY THE
COMPANY AND ITS REPRESENTATIVES.

(G)           NO GENERAL SOLICITATION; PLACEMENT AGENT’S FEES.  NEITHER THE
COMPANY, NOR ANY OF ITS AFFILIATES, NOR ANY PERSON ACTING ON ITS OR THEIR
BEHALF, HAS ENGAGED IN ANY FORM OF GENERAL SOLICITATION OR GENERAL ADVERTISING
(WITHIN THE MEANING OF REGULATION D) IN CONNECTION WITH THE OFFER OR SALE OF THE
SECURITIES.  THE COMPANY SHALL BE RESPONSIBLE FOR THE PAYMENT OF ANY PLACEMENT
AGENT’S FEES, FINANCIAL ADVISORY FEES, OR BROKERS’ COMMISSIONS (OTHER THAN FOR
PERSONS ENGAGED BY ANY BUYER OR ITS INVESTMENT ADVISOR) RELATING TO OR ARISING
OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY.  THE COMPANY SHALL PAY, AND HOLD
EACH BUYER HARMLESS AGAINST, ANY LIABILITY, LOSS OR EXPENSE (INCLUDING, WITHOUT
LIMITATION, ATTORNEY’S FEES AND OUT-OF-POCKET EXPENSES) ARISING IN CONNECTION
WITH ANY SUCH CLAIM.  THE COMPANY HAS NOT ENGAGED ANY PLACEMENT AGENT OR OTHER
AGENT IN CONNECTION WITH THE SALE OF THE SECURITIES.

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(H)           NO INTEGRATED OFFERING.  NONE OF THE COMPANY, ITS SUBSIDIARIES,
ANY OF THEIR AFFILIATES, AND ANY PERSON ACTING ON THEIR BEHALF HAS, DIRECTLY OR
INDIRECTLY, MADE ANY OFFERS OR SALES OF ANY SECURITY OR SOLICITED ANY OFFERS TO
BUY ANY SECURITY, UNDER CIRCUMSTANCES THAT WOULD REQUIRE REGISTRATION OF ANY OF
THE SECURITIES UNDER THE 1933 ACT OR CAUSE THIS OFFERING OF THE SECURITIES TO BE
INTEGRATED WITH PRIOR OFFERINGS BY THE COMPANY FOR PURPOSES OF THE 1933 ACT OR
ANY APPLICABLE STOCKHOLDER APPROVAL PROVISIONS, INCLUDING, WITHOUT LIMITATION,
UNDER THE RULES AND REGULATIONS OF ANY EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON
WHICH ANY OF THE SECURITIES OF THE COMPANY ARE LISTED OR DESIGNATED.  NONE OF
THE COMPANY, ITS SUBSIDIARIES, THEIR AFFILIATES AND ANY PERSON ACTING ON THEIR
BEHALF WILL TAKE ANY ACTION OR STEPS REFERRED TO IN THE PRECEDING SENTENCE THAT
WOULD REQUIRE REGISTRATION OF ANY OF THE SECURITIES UNDER THE 1933 ACT OR CAUSE
THE OFFERING OF THE SECURITIES TO BE INTEGRATED WITH OTHER OFFERINGS.

(I)            DILUTIVE EFFECT.  THE COMPANY UNDERSTANDS AND ACKNOWLEDGES THAT
THE NUMBER OF WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS WILL
INCREASE IN CERTAIN CIRCUMSTANCES.  THE COMPANY FURTHER ACKNOWLEDGES THAT ITS
OBLIGATION TO ISSUE THE WARRANT SHARES UPON EXERCISE OF THE WARRANTS IN
ACCORDANCE WITH THIS AGREEMENT AND THE WARRANTS, IN EACH CASE, IS ABSOLUTE AND
UNCONDITIONAL REGARDLESS OF THE DILUTIVE EFFECT THAT SUCH ISSUANCE MAY HAVE ON
THE OWNERSHIP INTERESTS OF OTHER STOCKHOLDERS OF THE COMPANY.

(J)            APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT.  THE
COMPANY AND ITS 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 ARTICLES OF INCORPORATION OR
THE LAWS OF THE JURISDICTION OF ITS FORMATION WHICH IS OR COULD BECOME
APPLICABLE TO ANY BUYER AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE COMPANY’S ISSUANCE OF THE
SECURITIES AND ANY BUYER’S OWNERSHIP OF THE SECURITIES.  THE COMPANY HAS NOT
ADOPTED A STOCKHOLDER RIGHTS PLAN OR SIMILAR ARRANGEMENT RELATING TO
ACCUMULATIONS OF BENEFICIAL OWNERSHIP OF COMMON STOCK OR A CHANGE IN CONTROL OF
THE COMPANY.

(K)           SEC DOCUMENTS; FINANCIAL STATEMENTS.  EXCEPT AS DISCLOSED IN
SCHEDULE 3(K), SINCE OCTOBER 7, 2005, THE COMPANY HAS FILED ALL REPORTS,
SCHEDULES, FORMS, STATEMENTS AND OTHER DOCUMENTS REQUIRED TO BE FILED BY IT WITH
THE SEC PURSUANT TO THE REPORTING REQUIREMENTS OF THE 1934 ACT (ALL OF THE
FOREGOING FILED PRIOR TO THE DATE HEREOF AND ALL EXHIBITS INCLUDED THEREIN AND
FINANCIAL STATEMENTS, NOTES AND SCHEDULES THERETO AND DOCUMENTS INCORPORATED BY
REFERENCE THEREIN BEING HEREINAFTER REFERRED TO AS THE “SEC DOCUMENTS”).  THE
COMPANY HAS DELIVERED TO THE BUYERS OR THEIR RESPECTIVE REPRESENTATIVES TRUE,
CORRECT AND COMPLETE COPIES OF THE SEC DOCUMENTS NOT AVAILABLE ON THE EDGAR
SYSTEM.  AS OF THEIR RESPECTIVE DATES, THE SEC DOCUMENTS COMPLIED IN ALL
MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE 1934 ACT AND THE RULES AND
REGULATIONS OF THE SEC PROMULGATED THEREUNDER APPLICABLE TO THE SEC DOCUMENTS,
AND NONE OF THE SEC DOCUMENTS, AT THE TIME THEY WERE FILED WITH THE SEC,
CONTAINED ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITTED TO STATE A MATERIAL
FACT REQUIRED TO BE STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS
THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING.  AS OF THEIR RESPECTIVE DATES, THE FINANCIAL STATEMENTS OF THE
COMPANY INCLUDED IN THE SEC DOCUMENTS COMPLIED AS TO FORM IN ALL MATERIAL
RESPECTS WITH APPLICABLE ACCOUNTING REQUIREMENTS AND THE PUBLISHED RULES AND
REGULATIONS OF THE SEC WITH RESPECT THERETO.  SUCH FINANCIAL STATEMENTS HAVE
BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
CONSISTENTLY APPLIED, DURING THE PERIODS INVOLVED (EXCEPT (I) AS MAY BE
OTHERWISE

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INDICATED IN SUCH FINANCIAL STATEMENTS OR THE NOTES THERETO, OR (II) IN THE CASE
OF UNAUDITED INTERIM STATEMENTS, TO THE EXTENT THEY MAY EXCLUDE FOOTNOTES OR MAY
BE CONDENSED OR SUMMARY STATEMENTS) AND FAIRLY PRESENT IN ALL MATERIAL RESPECTS
THE FINANCIAL POSITION OF THE COMPANY AS OF THE DATES THEREOF AND THE RESULTS OF
ITS OPERATIONS AND CASH FLOWS FOR THE PERIODS THEN ENDED (SUBJECT, IN THE CASE
OF UNAUDITED STATEMENTS, TO NORMAL YEAR-END AUDIT ADJUSTMENTS).  NO OTHER
INFORMATION PROVIDED BY OR ON BEHALF OF THE COMPANY TO THE BUYERS WHICH IS NOT
INCLUDED IN THE SEC DOCUMENTS, INCLUDING, WITHOUT LIMITATION, INFORMATION
REFERRED TO IN SECTION 2(D) OF THIS AGREEMENT, CONTAINS ANY UNTRUE STATEMENT OF
A MATERIAL FACT OR OMITS TO STATE ANY MATERIAL FACT NECESSARY IN ORDER TO MAKE
THE STATEMENTS THEREIN, IN THE LIGHT OF THE CIRCUMSTANCE UNDER WHICH THEY ARE OR
WERE MADE AND NOT MISLEADING.

(L)            ABSENCE OF CERTAIN CHANGES.  EXCEPT AS DISCLOSED IN SCHEDULE
3(L), SINCE DECEMBER 31, 2005, THERE HAS BEEN NO MATERIAL ADVERSE CHANGE AND NO
MATERIAL ADVERSE DEVELOPMENT IN THE BUSINESS, PROPERTIES, OPERATIONS, CONDITION
(FINANCIAL OR OTHERWISE), RESULTS OF OPERATIONS OR PROSPECTS OF THE COMPANY OR
ITS SUBSIDIARIES.  EXCEPT AS DISCLOSED IN SCHEDULE 3(1), SINCE OCTOBER 7, 2005,
THE COMPANY HAS NOT (I) DECLARED OR PAID ANY DIVIDENDS, (II) SOLD ANY ASSETS,
INDIVIDUALLY OR IN THE AGGREGATE, IN EXCESS OF $100,000 OUTSIDE OF THE ORDINARY
COURSE OF BUSINESS OR (III) HAD CAPITAL EXPENDITURES, INDIVIDUALLY OR IN THE
AGGREGATE, IN EXCESS OF $100,000.  THE COMPANY HAS NOT TAKEN ANY STEPS TO SEEK
PROTECTION PURSUANT TO ANY BANKRUPTCY LAW NOR DOES THE COMPANY HAVE ANY
KNOWLEDGE OR REASON TO BELIEVE THAT ITS CREDITORS INTEND TO INITIATE INVOLUNTARY
BANKRUPTCY PROCEEDINGS OR ANY ACTUAL KNOWLEDGE OF ANY FACT WHICH WOULD
REASONABLY LEAD A CREDITOR TO DO SO.  THE COMPANY AND ITS SUBSIDIARIES,
INDIVIDUALLY AND ON A CONSOLIDATED BASIS, WILL NOT, AFTER GIVING EFFECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY TO OCCUR AT THE CLOSING, BE INSOLVENT (AS
DEFINED BELOW).  FOR PURPOSES OF THIS SECTION 3(L), “INSOLVENT” MEANS, WITH
RESPECT TO ANY PERSON (AS DEFINED IN SECTION 3(S)), (I) THE PRESENT FAIR
SALEABLE VALUE OF SUCH PERSON’S ASSETS IS LESS THAN THE AMOUNT REQUIRED TO PAY
SUCH PERSON’S TOTAL INDEBTEDNESS (AS DEFINED IN SECTION 3(S)), (II) SUCH PERSON
IS UNABLE TO PAY ITS DEBTS AND LIABILITIES, SUBORDINATED, CONTINGENT OR
OTHERWISE, AS SUCH DEBTS AND LIABILITIES BECOME ABSOLUTE AND MATURED, (III) SUCH
PERSON INTENDS TO INCUR OR BELIEVES THAT IT WILL INCUR DEBTS THAT WOULD BE
BEYOND ITS ABILITY TO PAY AS SUCH DEBTS MATURE OR (IV) SUCH PERSON HAS
UNREASONABLY SMALL CAPITAL WITH WHICH TO CONDUCT THE BUSINESS IN WHICH IT IS
ENGAGED AS SUCH BUSINESS IS NOW CONDUCTED AND IS PROPOSED TO BE CONDUCTED.

(M)          NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. 
NO EVENT, LIABILITY, DEVELOPMENT OR CIRCUMSTANCE HAS OCCURRED OR EXISTS, OR IS
CONTEMPLATED TO OCCUR WITH RESPECT TO THE COMPANY, ITS SUBSIDIARIES OR THEIR
RESPECTIVE BUSINESS, PROPERTIES, PROSPECTS, OPERATIONS OR FINANCIAL CONDITION,
THAT WOULD BE REQUIRED TO BE DISCLOSED BY THE COMPANY UNDER APPLICABLE
SECURITIES LAWS ON A REGISTRATION STATEMENT ON FORM S-1 FILED WITH THE SEC
RELATING TO AN ISSUANCE AND SALE BY THE COMPANY OF ITS COMMON STOCK AND WHICH
HAS NOT BEEN PUBLICLY ANNOUNCED.

(N)           CONDUCT OF BUSINESS; REGULATORY PERMITS.  NEITHER THE COMPANY NOR
ITS SUBSIDIARIES IS IN VIOLATION OF ANY TERM OF OR IN DEFAULT UNDER ITS ARTICLES
OF INCORPORATION, ANY CERTIFICATE OF DESIGNATIONS OF ANY OUTSTANDING SERIES OF
PREFERRED STOCK OF THE COMPANY OR BYLAWS OR THEIR ORGANIZATIONAL CHARTER OR
BYLAWS, RESPECTIVELY.  NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS IN
VIOLATION OF ANY JUDGMENT, DECREE OR ORDER OR ANY STATUTE, ORDINANCE, RULE OR
REGULATION APPLICABLE TO THE COMPANY OR ITS SUBSIDIARIES, AND NEITHER THE
COMPANY NOR ANY OF ITS

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SUBSIDIARIES WILL CONDUCT ITS BUSINESS IN VIOLATION OF ANY OF THE FOREGOING,
EXCEPT FOR POSSIBLE VIOLATIONS WHICH COULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THE COMPANY IS NOT IN VIOLATION OF ANY
OF THE RULES, REGULATIONS OR REQUIREMENTS OF THE PRINCIPAL MARKET AND HAS NO
KNOWLEDGE OF ANY FACTS OR CIRCUMSTANCES THAT WOULD REASONABLY LEAD TO DELISTING
OR SUSPENSION OF THE COMMON STOCK BY THE PRINCIPAL MARKET IN THE FORESEEABLE
FUTURE.  SINCE OCTOBER 7, 2005, THE COMMON STOCK HAS BEEN DESIGNATED FOR
QUOTATION ON THE PRINCIPAL MARKET.  SINCE DECEMBER 31, 2005, (I) TRADING IN THE
COMMON STOCK HAS NOT BEEN SUSPENDED BY THE SEC OR THE PRINCIPAL MARKET AND (II)
THE COMPANY HAS RECEIVED NO COMMUNICATION, WRITTEN OR ORAL, FROM THE SEC OR THE
PRINCIPAL MARKET REGARDING THE SUSPENSION OR DELISTING OF THE COMMON STOCK FROM
THE PRINCIPAL MARKET.  THE COMPANY AND ITS SUBSIDIARIES POSSESS ALL
CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY THE APPROPRIATE REGULATORY
AUTHORITIES NECESSARY TO CONDUCT THEIR RESPECTIVE BUSINESSES, EXCEPT WHERE THE
FAILURE TO POSSESS SUCH CERTIFICATES, AUTHORIZATIONS OR PERMITS WOULD NOT HAVE,
INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT, AND NEITHER THE
COMPANY NOR ANY SUCH SUBSIDIARY HAS RECEIVED ANY NOTICE OF PROCEEDINGS RELATING
TO THE REVOCATION OR MODIFICATION OF ANY SUCH CERTIFICATE, AUTHORIZATION OR
PERMIT.

(O)           FOREIGN CORRUPT PRACTICES.  NEITHER THE COMPANY, NOR ANY OF ITS
SUBSIDIARIES, NOR ANY DIRECTOR, OFFICER, AGENT, EMPLOYEE OR OTHER PERSON ACTING
ON BEHALF OF THE COMPANY OR ANY OF ITS SUBSIDIARIES HAS, IN THE COURSE OF ITS
ACTIONS FOR, OR ON BEHALF OF, THE COMPANY OR ANY OF ITS SUBSIDIARIES (I) USED
ANY CORPORATE FUNDS FOR ANY UNLAWFUL CONTRIBUTION, GIFT, ENTERTAINMENT OR OTHER
UNLAWFUL EXPENSES RELATING TO POLITICAL ACTIVITY; (II) MADE ANY DIRECT OR
INDIRECT UNLAWFUL PAYMENT TO ANY FOREIGN OR DOMESTIC GOVERNMENT OFFICIAL OR
EMPLOYEE FROM CORPORATE FUNDS; (III) VIOLATED OR IS IN VIOLATION OF ANY
PROVISION OF THE U.S. FOREIGN CORRUPT PRACTICES ACT OF 1977, AS AMENDED; OR (IV)
MADE ANY UNLAWFUL BRIBE, REBATE, PAYOFF, INFLUENCE PAYMENT, KICKBACK OR OTHER
UNLAWFUL PAYMENT TO ANY FOREIGN OR DOMESTIC GOVERNMENT OFFICIAL OR EMPLOYEE.

(P)           SARBANES-OXLEY ACT.  THE COMPANY IS IN COMPLIANCE WITH ANY AND ALL
APPLICABLE REQUIREMENTS OF THE SARBANES-OXLEY ACT OF 2002 THAT ARE EFFECTIVE AS
OF THE DATE HEREOF, AND ANY AND ALL APPLICABLE RULES AND REGULATIONS PROMULGATED
BY THE SEC THEREUNDER THAT ARE EFFECTIVE AS OF THE DATE HEREOF.

(Q)           TRANSACTIONS WITH AFFILIATES.  EXCEPT AS SET FORTH IN THE SEC
DOCUMENTS FILED AT LEAST TEN (10) DAYS PRIOR TO THE DATE HEREOF AND OTHER THAN
THE GRANT OF STOCK OPTIONS DISCLOSED ON SCHEDULE 3(Q), NONE OF THE OFFICERS,
DIRECTORS OR EMPLOYEES OF THE COMPANY OR ANY OF ITS SUBSIDIARIES IS PRESENTLY A
PARTY TO ANY TRANSACTION WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES (OTHER THAN
FOR ORDINARY COURSE SERVICES AS EMPLOYEES, OFFICERS OR DIRECTORS), INCLUDING ANY
CONTRACT, AGREEMENT OR OTHER ARRANGEMENT PROVIDING FOR THE FURNISHING OF
SERVICES TO OR BY, PROVIDING FOR RENTAL OF REAL OR PERSONAL PROPERTY TO OR FROM,
OR OTHERWISE REQUIRING PAYMENTS TO OR FROM ANY SUCH OFFICER, DIRECTOR OR
EMPLOYEE OR, TO THE KNOWLEDGE OF THE COMPANY, ANY CORPORATION, PARTNERSHIP,
TRUST OR OTHER ENTITY IN WHICH ANY SUCH OFFICER, DIRECTOR, OR EMPLOYEE HAS A
SUBSTANTIAL INTEREST OR IS AN OFFICER, DIRECTOR, TRUSTEE OR PARTNER.

(R)            EQUITY CAPITALIZATION.  THE COMPANY’S CAPITALIZATION IS SET FORTH
ON SCHEDULE 3(R).  ALL OF SUCH OUTSTANDING SHARES HAVE BEEN, OR UPON ISSUANCE
WILL BE, VALIDLY ISSUED AND ARE FULLY PAID AND NONASSESSABLE.  EXCEPT AS
DISCLOSED IN SCHEDULE 3(R): (I) NONE OF THE

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COMPANY’S CAPITAL STOCK IS SUBJECT TO PREEMPTIVE RIGHTS OR ANY OTHER SIMILAR
RIGHTS OR ANY LIENS OR ENCUMBRANCES SUFFERED OR PERMITTED BY THE COMPANY; (II)
THERE ARE NO OUTSTANDING OPTIONS, WARRANTS, SCRIP, RIGHTS TO SUBSCRIBE TO, CALLS
OR COMMITMENTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR SECURITIES OR RIGHTS
CONVERTIBLE INTO, OR EXERCISABLE OR EXCHANGEABLE FOR, ANY CAPITAL STOCK OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES, OR CONTRACTS, COMMITMENTS, UNDERSTANDINGS OR
ARRANGEMENTS BY WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OR MAY BECOME
BOUND TO ISSUE ADDITIONAL CAPITAL STOCK OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR OPTIONS, WARRANTS, SCRIP, RIGHTS TO SUBSCRIBE TO, CALLS OR
COMMITMENTS OF ANY CHARACTER WHATSOEVER RELATING TO, OR SECURITIES OR RIGHTS
CONVERTIBLE INTO, OR EXERCISABLE OR EXCHANGEABLE FOR, ANY CAPITAL STOCK OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES; (III) THERE ARE NO OUTSTANDING DEBT
SECURITIES, NOTES, CREDIT AGREEMENTS, CREDIT FACILITIES OR OTHER AGREEMENTS,
DOCUMENTS OR INSTRUMENTS EVIDENCING INDEBTEDNESS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR BY WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OR MAY BECOME
BOUND; (IV) THERE ARE NO FINANCING STATEMENTS SECURING OBLIGATIONS IN ANY
MATERIAL AMOUNTS, EITHER SINGLY OR IN THE AGGREGATE, FILED IN CONNECTION WITH
THE COMPANY OR ANY OF ITS SUBSIDIARIES; (V) THERE ARE NO AGREEMENTS OR
ARRANGEMENTS UNDER WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OBLIGATED TO
REGISTER THE SALE OF ANY OF THEIR SECURITIES UNDER THE 1933 ACT (EXCEPT PURSUANT
TO THE REGISTRATION RIGHTS AGREEMENT); (VI) THERE ARE NO OUTSTANDING SECURITIES
OR INSTRUMENTS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES WHICH CONTAIN ANY
REDEMPTION OR SIMILAR PROVISIONS, AND THERE ARE NO CONTRACTS, COMMITMENTS,
UNDERSTANDINGS OR ARRANGEMENTS BY WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES
IS OR MAY BECOME BOUND TO REDEEM A SECURITY OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES; (VII) THERE ARE NO SECURITIES OR INSTRUMENTS CONTAINING
ANTI-DILUTION OR SIMILAR PROVISIONS THAT WILL BE TRIGGERED BY THE ISSUANCE OF
THE SECURITIES; (VIII) THE COMPANY DOES NOT HAVE ANY STOCK APPRECIATION RIGHTS
OR “PHANTOM STOCK” PLANS OR AGREEMENTS OR ANY SIMILAR PLAN OR AGREEMENT; AND
(IX) THE COMPANY AND ITS SUBSIDIARIES HAVE NO LIABILITIES OR OBLIGATIONS
REQUIRED TO BE DISCLOSED IN THE SEC DOCUMENTS BUT NOT SO DISCLOSED IN THE SEC
DOCUMENTS, OTHER THAN THOSE INCURRED IN THE ORDINARY COURSE OF THE COMPANY’S OR
ITS SUBSIDIARIES’ RESPECTIVE BUSINESSES AND WHICH, INDIVIDUALLY OR IN THE
AGGREGATE, DO NOT OR WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.  THE COMPANY HAS
FURNISHED TO THE BUYERS TRUE, CORRECT AND COMPLETE COPIES OF THE COMPANY’S
ARTICLES OF INCORPORATION, AS AMENDED AND AS IN EFFECT ON THE DATE HEREOF (THE
“ARTICLES OF INCORPORATION”), AND THE COMPANY’S BYLAWS, AS AMENDED AND AS IN
EFFECT ON THE DATE HEREOF (THE “BYLAWS”), AND THE TERMS OF ALL SECURITIES
CONVERTIBLE INTO, OR EXERCISABLE OR EXCHANGEABLE FOR, SHARES OF COMMON STOCK AND
THE MATERIAL RIGHTS OF THE HOLDERS THEREOF IN RESPECT THERETO.  SCHEDULE 3(R)
SETS FORTH THE SHARES OF COMMON STOCK OWNED BENEFICIALLY OR OF RECORD AND COMMON
STOCK EQUIVALENTS (AS DEFINED BELOW) HELD BY EACH DIRECTOR AND EXECUTIVE
OFFICER.

(S)           INDEBTEDNESS AND OTHER CONTRACTS.  EXCEPT AS DISCLOSED IN SCHEDULE
3(S), NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES (I) HAS ANY OUTSTANDING
INDEBTEDNESS (AS DEFINED BELOW), (II) IS A PARTY TO ANY CONTRACT, AGREEMENT OR
INSTRUMENT, THE VIOLATION OF WHICH, OR DEFAULT UNDER WHICH, BY THE OTHER
PARTY(IES) TO SUCH CONTRACT, AGREEMENT OR INSTRUMENT COULD REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT, (III) IS IN VIOLATION OF ANY
TERM OF OR IN DEFAULT UNDER ANY CONTRACT, AGREEMENT OR INSTRUMENT RELATING TO
ANY INDEBTEDNESS, EXCEPT WHERE SUCH VIOLATIONS AND DEFAULTS WOULD NOT RESULT,
INDIVIDUALLY OR IN THE AGGREGATE, IN A MATERIAL ADVERSE EFFECT, OR (IV) IS A
PARTY TO ANY CONTRACT, AGREEMENT OR INSTRUMENT RELATING TO ANY INDEBTEDNESS, THE
PERFORMANCE OF WHICH, IN THE JUDGMENT OF THE COMPANY’S OFFICERS, HAS OR IS
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.  SCHEDULE 3(S) PROVIDES A DETAILED
DESCRIPTION OF THE MATERIAL TERMS OF ANY SUCH OUTSTANDING INDEBTEDNESS.  FOR
PURPOSES OF THIS AGREEMENT:  (X) “INDEBTEDNESS” OF ANY

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PERSON MEANS, WITHOUT DUPLICATION (A) ALL INDEBTEDNESS FOR BORROWED MONEY, (B)
ALL OBLIGATIONS ISSUED, UNDERTAKEN OR ASSUMED AS THE DEFERRED PURCHASE PRICE OF
PROPERTY OR SERVICES, INCLUDING (WITHOUT LIMITATION) “CAPITAL LEASES” IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (OTHER THAN TRADE
PAYABLES ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS), (C) ALL REIMBURSEMENT
OR PAYMENT OBLIGATIONS WITH RESPECT TO LETTERS OF CREDIT, SURETY BONDS AND OTHER
SIMILAR INSTRUMENTS, (D) ALL OBLIGATIONS EVIDENCED BY NOTES, BONDS, DEBENTURES
OR SIMILAR INSTRUMENTS, INCLUDING OBLIGATIONS SO EVIDENCED INCURRED IN
CONNECTION WITH THE ACQUISITION OF PROPERTY, ASSETS OR BUSINESSES, (E) ALL
INDEBTEDNESS CREATED OR ARISING UNDER ANY CONDITIONAL SALE OR OTHER TITLE
RETENTION AGREEMENT, OR INCURRED AS FINANCING, IN EITHER CASE WITH RESPECT TO
ANY PROPERTY OR ASSETS ACQUIRED WITH THE PROCEEDS OF SUCH INDEBTEDNESS (EVEN
THOUGH THE RIGHTS AND REMEDIES OF THE SELLER OR BANK UNDER SUCH AGREEMENT IN THE
EVENT OF DEFAULT ARE LIMITED TO REPOSSESSION OR SALE OF SUCH PROPERTY), (F) ALL
MONETARY OBLIGATIONS UNDER ANY LEASING OR SIMILAR ARRANGEMENT WHICH, IN
CONNECTION WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED
FOR THE PERIODS COVERED THEREBY, IS CLASSIFIED AS A CAPITAL LEASE, (G) ALL
INDEBTEDNESS REFERRED TO IN CLAUSES (A) THROUGH (F) ABOVE SECURED BY (OR FOR
WHICH THE HOLDER OF SUCH INDEBTEDNESS HAS AN EXISTING RIGHT, CONTINGENT OR
OTHERWISE, TO BE SECURED BY) ANY MORTGAGE, LIEN, PLEDGE, CHARGE, SECURITY
INTEREST OR OTHER ENCUMBRANCE UPON OR IN ANY PROPERTY OR ASSETS (INCLUDING
ACCOUNTS AND CONTRACT RIGHTS) OWNED BY ANY PERSON, EVEN THOUGH THE PERSON WHICH
OWNS SUCH ASSETS OR PROPERTY HAS NOT ASSUMED OR BECOME LIABLE FOR THE PAYMENT OF
SUCH INDEBTEDNESS, AND (H) ALL CONTINGENT OBLIGATIONS IN RESPECT OF INDEBTEDNESS
OR OBLIGATIONS OF OTHERS OF THE KINDS REFERRED TO IN CLAUSES (A) THROUGH (G)
ABOVE; (Y) “CONTINGENT OBLIGATION” MEANS, AS TO ANY PERSON, ANY DIRECT OR
INDIRECT LIABILITY, CONTINGENT OR OTHERWISE, OF THAT PERSON WITH RESPECT TO ANY
INDEBTEDNESS, LEASE, DIVIDEND OR OTHER OBLIGATION OF ANOTHER PERSON IF THE
PRIMARY PURPOSE OR INTENT OF THE PERSON INCURRING SUCH LIABILITY, OR THE PRIMARY
EFFECT THEREOF, IS TO PROVIDE ASSURANCE TO THE OBLIGEE OF SUCH LIABILITY THAT
SUCH LIABILITY WILL BE PAID OR DISCHARGED, OR THAT ANY AGREEMENTS RELATING
THERETO WILL BE COMPLIED WITH, OR THAT THE HOLDERS OF SUCH LIABILITY WILL BE
PROTECTED (IN WHOLE OR IN PART) AGAINST LOSS WITH RESPECT THERETO; AND (Z)
“PERSON” MEANS AN INDIVIDUAL, A LIMITED LIABILITY COMPANY, A PARTNERSHIP, A
JOINT VENTURE, A CORPORATION, A TRUST, AN UNINCORPORATED ORGANIZATION AND A
GOVERNMENT OR ANY DEPARTMENT OR AGENCY THEREOF.

(T)            ABSENCE OF LITIGATION.  EXCEPT AS SET FORTH ON SCHEDULE 3(S),
THERE IS NO ACTION, SUIT, PROCEEDING OR INVESTIGATION BEFORE OR BY THE PRINCIPAL
MARKET, ANY COURT, PUBLIC BOARD, GOVERNMENT AGENCY, SELF-REGULATORY ORGANIZATION
OR BODY PENDING OR, TO THE KNOWLEDGE OF THE COMPANY, THREATENED AGAINST OR
AFFECTING THE COMPANY OR ANY OF ITS SUBSIDIARIES, THE COMMON STOCK OR ANY OF THE
COMPANY’S SUBSIDIARIES OR ANY OF THE COMPANY’S OR ITS SUBSIDIARIES’ OFFICERS OR
DIRECTORS, WHETHER OF A CIVIL OR CRIMINAL NATURE OR OTHERWISE.

(U)           INSURANCE.  THE COMPANY AND EACH OF ITS SUBSIDIARIES ARE INSURED
BY INSURERS OF RECOGNIZED FINANCIAL RESPONSIBILITY AGAINST SUCH LOSSES AND RISKS
AND IN SUCH AMOUNTS AS MANAGEMENT OF THE COMPANY BELIEVES TO BE PRUDENT AND
CUSTOMARY IN THE BUSINESSES IN WHICH THE COMPANY AND ITS SUBSIDIARIES ARE
ENGAGED.  NEITHER THE COMPANY NOR ANY SUCH SUBSIDIARY HAS BEEN REFUSED ANY
INSURANCE COVERAGE SOUGHT OR APPLIED FOR AND NEITHER THE COMPANY NOR ANY SUCH
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 AT A COST THAT WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.

 

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(V)           EMPLOYEE RELATIONS.  (I)  NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES IS A PARTY TO ANY COLLECTIVE BARGAINING AGREEMENT OR EMPLOYS ANY
MEMBER OF A UNION.  THE COMPANY AND ITS SUBSIDIARIES BELIEVE THAT THEIR
RELATIONS WITH THEIR EMPLOYEES ARE GOOD.  NO EXECUTIVE OFFICER OF THE COMPANY OR
ANY OF ITS SUBSIDIARIES (AS DEFINED IN RULE 501(F) OF THE 1933 ACT) HAS NOTIFIED
THE COMPANY OR ANY SUCH SUBSIDIARY THAT SUCH OFFICER INTENDS TO LEAVE THE
COMPANY OR ANY SUCH SUBSIDIARY OR OTHERWISE TERMINATE SUCH OFFICER’S EMPLOYMENT
WITH THE COMPANY OR ANY SUCH SUBSIDIARY.  NO EXECUTIVE OFFICER OF THE COMPANY OR
ANY OF ITS SUBSIDIARIES IS, OR IS NOW EXPECTED TO BE, IN VIOLATION OF ANY
MATERIAL TERM OF ANY EMPLOYMENT CONTRACT, CONFIDENTIALITY, DISCLOSURE OR
PROPRIETARY INFORMATION AGREEMENT, NON-COMPETITION AGREEMENT, OR ANY OTHER
CONTRACT OR AGREEMENT OR ANY RESTRICTIVE COVENANT, 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.

(II)           THE COMPANY AND ITS SUBSIDIARIES ARE IN COMPLIANCE WITH ALL
FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND REGULATIONS RESPECTING LABOR,
EMPLOYMENT AND EMPLOYMENT PRACTICES AND BENEFITS, TERMS AND CONDITIONS OF
EMPLOYMENT AND WAGES AND HOURS, EXCEPT WHERE FAILURE TO BE IN COMPLIANCE WOULD
NOT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO RESULT
IN A MATERIAL ADVERSE EFFECT.

(W)          TITLE.  THE COMPANY AND ITS SUBSIDIARIES HAVE GOOD AND MARKETABLE
TITLE IN FEE SIMPLE TO ALL REAL PROPERTY AND GOOD AND MARKETABLE TITLE TO ALL
PERSONAL PROPERTY OWNED BY THEM WHICH IS MATERIAL TO THE BUSINESS OF THE COMPANY
AND ITS SUBSIDIARIES, IN EACH CASE FREE AND CLEAR OF ALL LIENS, ENCUMBRANCES AND
DEFECTS EXCEPT SUCH AS DO NOT MATERIALLY AFFECT THE VALUE OF SUCH PROPERTY AND
DO NOT INTERFERE WITH THE USE MADE AND PROPOSED TO BE MADE OF SUCH PROPERTY BY
THE COMPANY AND ANY OF ITS SUBSIDIARIES.   ANY REAL PROPERTY AND FACILITIES HELD
UNDER LEASE BY THE COMPANY AND ANY OF ITS SUBSIDIARIES ARE HELD BY THEM UNDER
VALID, SUBSISTING AND ENFORCEABLE LEASES WITH SUCH EXCEPTIONS AS ARE NOT
MATERIAL AND DO NOT INTERFERE WITH THE USE MADE AND PROPOSED TO BE MADE OF SUCH
PROPERTY AND BUILDINGS BY THE COMPANY AND ITS SUBSIDIARIES.

(X)            INTELLECTUAL PROPERTY RIGHTS. THE COMPANY AND ITS SUBSIDIARIES
OWN OR POSSESS ADEQUATE RIGHTS OR LICENSES TO USE ALL TRADEMARKS, SERVICE MARKS
AND ALL APPLICATIONS AND REGISTRATIONS THEREFOR, TRADE NAMES, PATENTS, PATENT
RIGHTS, COPYRIGHTS, ORIGINAL WORKS OF AUTHORSHIP, INVENTIONS, LICENSES,
APPROVALS, GOVERNMENTAL AUTHORIZATIONS, TRADE SECRETS AND OTHER INTELLECTUAL
PROPERTY RIGHTS (“INTELLECTUAL PROPERTY RIGHTS”) NECESSARY TO CONDUCT THEIR
RESPECTIVE BUSINESSES AS NOW CONDUCTED.  NONE OF THE COMPANY’S REGISTERED, OR
APPLIED FOR, INTELLECTUAL PROPERTY RIGHTS HAVE EXPIRED OR TERMINATED OR HAVE
BEEN ABANDONED, OR ARE EXPECTED TO EXPIRE OR TERMINATE OR EXPECTED TO BE
ABANDONED, WITHIN THREE YEARS FROM THE DATE OF THIS AGREEMENT.  THE COMPANY DOES
NOT HAVE ANY KNOWLEDGE OF ANY INFRINGEMENT BY THE COMPANY OR ITS SUBSIDIARIES OF
INTELLECTUAL PROPERTY RIGHTS OF OTHERS.  THERE IS NO CLAIM, ACTION OR PROCEEDING
BEING MADE OR BROUGHT, OR TO THE KNOWLEDGE OF THE COMPANY, BEING THREATENED,
AGAINST THE COMPANY OR ANY OF ITS SUBSIDIARIES REGARDING ITS INTELLECTUAL
PROPERTY RIGHTS.  THE COMPANY IS UNAWARE OF ANY FACTS OR CIRCUMSTANCES WHICH
MIGHT GIVE RISE TO ANY OF THE FOREGOING INFRINGEMENTS OR CLAIMS, ACTIONS OR
PROCEEDINGS.  THE COMPANY AND ITS SUBSIDIARIES HAVE TAKEN REASONABLE SECURITY
MEASURES TO PROTECT THE SECRECY, CONFIDENTIALITY AND VALUE OF ALL OF THEIR
INTELLECTUAL PROPERTY RIGHTS.

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(Y)           ENVIRONMENTAL LAWS.  THE COMPANY AND ITS SUBSIDIARIES (I) ARE IN
COMPLIANCE WITH ANY AND ALL ENVIRONMENTAL LAWS (AS HEREINAFTER DEFINED), (II)
HAVE RECEIVED ALL PERMITS, LICENSES OR OTHER APPROVALS REQUIRED OF THEM UNDER
APPLICABLE ENVIRONMENTAL LAWS TO CONDUCT THEIR RESPECTIVE BUSINESSES AND (III)
ARE IN COMPLIANCE WITH ALL TERMS AND CONDITIONS OF ANY SUCH PERMIT, LICENSE OR
APPROVAL WHERE, IN EACH OF THE FOREGOING CLAUSES (I), (II) AND (III), THE
FAILURE TO SO COMPLY COULD BE REASONABLY EXPECTED TO HAVE, INDIVIDUALLY OR IN
THE AGGREGATE, A MATERIAL ADVERSE EFFECT.  THE TERM “ENVIRONMENTAL LAWS” MEANS
ALL FEDERAL, STATE, LOCAL OR FOREIGN LAWS RELATING TO POLLUTION OR PROTECTION OF
HUMAN HEALTH OR THE ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, AMBIENT AIR,
SURFACE WATER, GROUNDWATER, LAND SURFACE OR SUBSURFACE STRATA), INCLUDING,
WITHOUT LIMITATION, LAWS RELATING TO EMISSIONS, DISCHARGES, RELEASES OR
THREATENED RELEASES OF CHEMICALS, POLLUTANTS, CONTAMINANTS, OR TOXIC OR
HAZARDOUS SUBSTANCES OR WASTES (COLLECTIVELY, “HAZARDOUS MATERIALS”) INTO THE
ENVIRONMENT, OR OTHERWISE RELATING TO THE MANUFACTURE, PROCESSING, DISTRIBUTION,
USE, TREATMENT, STORAGE, DISPOSAL, TRANSPORT OR HANDLING OF HAZARDOUS MATERIALS,
AS WELL AS ALL AUTHORIZATIONS, CODES, DECREES, DEMANDS OR DEMAND LETTERS,
INJUNCTIONS, JUDGMENTS, LICENSES, NOTICES OR NOTICE LETTERS, ORDERS, PERMITS,
PLANS OR REGULATIONS ISSUED, ENTERED, PROMULGATED OR APPROVED THEREUNDER.

(Z)            SUBSIDIARY RIGHTS.  THE COMPANY OR ONE OF ITS SUBSIDIARIES HAS
THE UNRESTRICTED RIGHT TO VOTE, AND (SUBJECT TO LIMITATIONS IMPOSED BY
APPLICABLE LAW) TO RECEIVE DIVIDENDS AND DISTRIBUTIONS ON, ALL CAPITAL
SECURITIES OF ITS SUBSIDIARIES AS OWNED BY THE COMPANY OR SUCH SUBSIDIARY.

(AA)         INVESTMENT COMPANY.  THE COMPANY IS NOT, AND UPON CONSUMMATION OF
THE SALE OF THE SECURITIES WILL NOT BE, AN “INVESTMENT COMPANY,” A COMPANY
CONTROLLED BY AN “INVESTMENT COMPANY” OR AN “AFFILIATED PERSON” OF, OR
“PROMOTER” OR “PRINCIPAL UNDERWRITER” FOR, AN “INVESTMENT COMPANY” AS SUCH TERMS
ARE DEFINED IN THE INVESTMENT COMPANY ACT OF  1940, AS AMENDED.

(BB)         TAX STATUS.  THE COMPANY AND EACH OF ITS SUBSIDIARIES (I) HAS MADE
OR FILED ALL FOREIGN, FEDERAL AND STATE INCOME AND ALL OTHER 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, EXCEPT THOSE BEING CONTESTED IN GOOD FAITH AND (III) HAS SET ASIDE
ON ITS BOOKS PROVISION REASONABLY ADEQUATE FOR THE PAYMENT OF ALL TAXES FOR
PERIODS SUBSEQUENT TO THE PERIODS TO WHICH SUCH RETURNS, REPORTS OR DECLARATIONS
APPLY.  THERE ARE NO UNPAID TAXES IN ANY MATERIAL AMOUNT CLAIMED TO BE DUE BY
THE TAXING AUTHORITY OF ANY JURISDICTION, AND THE OFFICERS OF THE COMPANY KNOW
OF NO BASIS FOR ANY SUCH CLAIM.

(CC)         INTERNAL ACCOUNTING AND DISCLOSURE CONTROLS.  THE COMPANY AND EACH
OF ITS SUBSIDIARIES MAINTAIN A SYSTEM OF INTERNAL ACCOUNTING CONTROLS SUFFICIENT
TO PROVIDE REASONABLE ASSURANCE THAT (I) TRANSACTIONS ARE EXECUTED IN ACCORDANCE
WITH MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATIONS, (II) TRANSACTIONS ARE
RECORDED AS NECESSARY TO PERMIT PREPARATION OF FINANCIAL STATEMENTS IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND TO MAINTAIN ASSET
AND LIABILITY ACCOUNTABILITY, (III) ACCESS TO ASSETS OR INCURRENCE OF
LIABILITIES IS PERMITTED ONLY IN ACCORDANCE WITH MANAGEMENT’S GENERAL OR
SPECIFIC AUTHORIZATION AND (IV) THE RECORDED ACCOUNTABILITY FOR ASSETS AND
LIABILITIES IS COMPARED WITH THE EXISTING ASSETS AND LIABILITIES AT REASONABLE
INTERVALS AND APPROPRIATE ACTION IS TAKEN WITH RESPECT TO ANY DIFFERENCE. THE

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COMPANY MAINTAINS DISCLOSURE CONTROLS AND PROCEDURES (AS SUCH TERM IS DEFINED IN
RULE 13A-14 UNDER THE 1934 ACT) THAT ARE EFFECTIVE IN ENSURING THAT INFORMATION
REQUIRED TO BE DISCLOSED BY THE COMPANY IN THE REPORTS THAT IT FILES OR SUBMITS
UNDER THE 1934 ACT IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED, WITHIN THE
TIME PERIODS SPECIFIED IN THE RULES AND FORMS OF THE SEC, INCLUDING, WITHOUT
LIMITATION, CONTROLS AND PROCEDURES DESIGNED IN TO ENSURE THAT INFORMATION
REQUIRED TO BE DISCLOSED BY THE COMPANY IN THE REPORTS THAT IT FILES OR SUBMITS
UNDER THE 1934 ACT IS ACCUMULATED AND COMMUNICATED TO THE COMPANY’S MANAGEMENT,
INCLUDING ITS PRINCIPAL EXECUTIVE OFFICER OR OFFICERS AND ITS PRINCIPAL
FINANCIAL OFFICER OR OFFICERS, AS APPROPRIATE, TO ALLOW TIMELY DECISIONS
REGARDING REQUIRED DISCLOSURE.  SINCE OCTOBER 7, 2005, NEITHER THE COMPANY NOR
ANY OF ITS SUBSIDIARIES HAVE RECEIVED ANY NOTICE OR CORRESPONDENCE FROM ANY
ACCOUNTANT IDENTIFYING A MATERIAL WEAKNESS IN ANY PART OF THE SYSTEM OF INTERNAL
ACCOUNTING CONTROLS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES WHICH IS NOT
SPECIFIED IN THE COMPANY’S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2005.

(DD)         OFF BALANCE SHEET ARRANGEMENTS.  THERE IS NO TRANSACTION,
ARRANGEMENT, OR OTHER RELATIONSHIP BETWEEN THE COMPANY AND AN UNCONSOLIDATED OR
OTHER OFF BALANCE SHEET ENTITY THAT IS REQUIRED TO BE DISCLOSED BY THE COMPANY
IN ITS EXCHANGE ACT FILINGS AND IS NOT SO DISCLOSED OR THAT OTHERWISE WOULD BE
REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT.

(EE)         FORM SB-2 ELIGIBILITY.  THE COMPANY IS ELIGIBLE TO REGISTER THE
WARRANT SHARES FOR RESALE BY THE BUYERS USING FORM SB-2 PROMULGATED UNDER THE
1933 ACT.

(FF)           TRANSFER TAXES.  ON THE CLOSING DATE, ALL STOCK TRANSFER OR OTHER
TAXES (OTHER THAN INCOME OR SIMILAR TAXES) WHICH ARE REQUIRED TO BE PAID IN
CONNECTION WITH THE SALE AND TRANSFER OF THE SECURITIES TO BE SOLD TO EACH BUYER
HEREUNDER WILL BE, OR WILL HAVE BEEN, FULLY PAID OR PROVIDED FOR BY THE COMPANY,
AND ALL LAWS IMPOSING SUCH TAXES WILL BE OR WILL HAVE BEEN COMPLIED WITH.

(GG)         MANIPULATION OF PRICE.  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.

(HH)         ACKNOWLEDGEMENT REGARDING BUYERS’ TRADING ACTIVITY.  IT IS
UNDERSTOOD AND ACKNOWLEDGED BY THE COMPANY (I) THAT FOLLOWING THE PUBLIC
DISCLOSURE OF THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS IN
ACCORDANCE WITH THE TERMS HEREOF, NONE OF THE BUYERS HAVE BEEN ASKED TO AGREE,
NOR HAS ANY BUYER AGREED, TO DESIST FROM PURCHASING OR SELLING, LONG AND/OR
SHORT, SECURITIES OF THE COMPANY, OR “DERIVATIVE” SECURITIES BASED ON SECURITIES
ISSUED BY THE COMPANY OR TO HOLD THE SECURITIES FOR ANY SPECIFIED TERM (II) THAT
ANY BUYER, AND COUNTER PARTIES IN “DERIVATIVE” TRANSACTIONS TO WHICH ANY SUCH
BUYER IS A PARTY, DIRECTLY OR INDIRECTLY, WHICH WERE ESTABLISHED PRIOR TO THEIR
LEARNING OF THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS,
PRESENTLY MAY HAVE A “SHORT” POSITION IN THE COMMON STOCK, AND (III) THAT EACH
BUYER SHALL NOT BE DEEMED TO HAVE ANY AFFILIATION WITH OR CONTROL OVER ANY ARM’S
LENGTH COUNTER-PARTY IN ANY “DERIVATIVE” TRANSACTION.  THE COMPANY FURTHER
UNDERSTANDS AND ACKNOWLEDGES THAT, FOLLOWING THE PUBLIC DISCLOSURE OF THE
TRANSACTIONS CONTEMPLATED BY THE

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TRANSACTION DOCUMENTS IN ACCORDANCE WITH THE TERMS HEREOF, (A) ONE OR MORE
BUYERS MAY ENGAGE IN HEDGING AND/OR TRADING ACTIVITIES AT VARIOUS TIMES DURING
THE PERIOD THAT THE SECURITIES ARE OUTSTANDING, INCLUDING, WITHOUT LIMITATION,
DURING THE PERIODS THAT THE VALUE OF THE WARRANT SHARES DELIVERABLE WITH RESPECT
TO SECURITIES ARE BEING DETERMINED AND (B) SUCH HEDGING AND/OR TRADING
ACTIVITIES, IF ANY, CAN REDUCE THE VALUE OF THE EXISTING STOCKHOLDERS’ EQUITY
INTEREST IN THE COMPANY BOTH AT AND AFTER THE TIME THE HEDGING AND/OR TRADING
ACTIVITIES ARE BEING CONDUCTED.  THE COMPANY ACKNOWLEDGES THAT SUCH
AFOREMENTIONED HEDGING AND/OR TRADING ACTIVITIES DO NOT CONSTITUTE A BREACH OF
THIS AGREEMENT, THE WARRANTS OR ANY OF THE DOCUMENTS EXECUTED IN CONNECTION
HEREWITH.

(II)           U.S. REAL PROPERTY HOLDING CORPORATION.  THE COMPANY IS NOT, NOR
HAS EVER 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 BUYER’S REQUEST.

(JJ)           DISCLOSURE.  THE COMPANY CONFIRMS THAT NEITHER IT NOR ANY OTHER
PERSON ACTING ON ITS BEHALF HAS PROVIDED ANY OF THE BUYERS OR THEIR AGENTS OR
COUNSEL WITH ANY INFORMATION THAT CONSTITUTES MATERIAL, NONPUBLIC INFORMATION
CONCERNING THE COMPANY OR ITS SUBSIDIARIES OTHER THAN THE EXISTENCE OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS. 
THE COMPANY UNDERSTANDS AND CONFIRMS THAT EACH OF THE BUYERS WILL RELY ON THE
FOREGOING REPRESENTATIONS IN EFFECTING TRANSACTIONS IN SECURITIES OF THE
COMPANY.  ALL DISCLOSURE PROVIDED TO THE BUYERS REGARDING THE COMPANY, ITS
BUSINESS AND THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE SCHEDULES TO
THIS AGREEMENT, FURNISHED BY OR ON BEHALF OF THE COMPANY IS TRUE AND CORRECT AND
DOES NOT CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY
MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS MADE THEREIN, IN THE
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.  EACH
PRESS RELEASE ISSUED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES DURING THE TWELVE
(12) MONTHS PRECEDING THE DATE OF THIS AGREEMENT DID NOT AT THE TIME OF RELEASE
CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT
REQUIRED TO BE STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS
THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING.  NO EVENT OR CIRCUMSTANCE HAS OCCURRED OR INFORMATION EXISTS WITH
RESPECT TO THE COMPANY OR ANY OF ITS SUBSIDIARIES OR ITS OR THEIR BUSINESS,
PROPERTIES, PROSPECTS, OPERATIONS OR FINANCIAL CONDITIONS, WHICH, UNDER
APPLICABLE LAW, RULE OR REGULATION, REQUIRES PUBLIC DISCLOSURE OR ANNOUNCEMENT
BY THE COMPANY BUT WHICH HAS NOT BEEN SO PUBLICLY ANNOUNCED OR DISCLOSED.

4.             COVENANTS.

(A)           BEST EFFORTS.  EACH PARTY SHALL USE ITS BEST EFFORTS TIMELY TO
SATISFY EACH OF THE CONDITIONS TO BE SATISFIED BY IT AS PROVIDED IN SECTIONS 6
AND 7 OF THIS AGREEMENT.

(B)           FORM D AND BLUE SKY.  THE COMPANY AGREES TO FILE A FORM D WITH
RESPECT TO THE SECURITIES AS REQUIRED UNDER REGULATION D AND TO PROVIDE A COPY
THEREOF TO EACH BUYER PROMPTLY AFTER SUCH FILING.  THE COMPANY SHALL, ON OR
BEFORE THE CLOSING DATE, TAKE SUCH ACTION AS THE COMPANY SHALL REASONABLY
DETERMINE IS NECESSARY IN ORDER TO OBTAIN AN EXEMPTION FOR OR TO QUALIFY THE
SECURITIES FOR SALE TO THE BUYERS AT THE CLOSING PURSUANT TO THIS AGREEMENT
UNDER APPLICABLE SECURITIES OR “BLUE SKY” LAWS OF THE STATES OF THE UNITED
STATES (OR TO OBTAIN AN EXEMPTION FROM SUCH QUALIFICATION), AND SHALL PROVIDE
EVIDENCE OF ANY SUCH ACTION SO TAKEN TO THE

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BUYERS ON OR PRIOR TO THE CLOSING DATE.  THE COMPANY SHALL MAKE ALL FILINGS AND
REPORTS RELATING TO THE OFFER AND SALE OF THE SECURITIES REQUIRED UNDER
APPLICABLE SECURITIES OR “BLUE SKY” LAWS OF THE STATES OF THE UNITED STATES
FOLLOWING THE CLOSING DATE.

(C)           REPORTING STATUS.  UNTIL THE DATE ON WHICH THE INVESTORS (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) SHALL HAVE SOLD ALL THE COMMON
SHARES AND WARRANT SHARES AND NONE OF THE WARRANTS ARE OUTSTANDING (THE
“REPORTING PERIOD”), THE COMPANY SHALL FILE ALL REPORTS REQUIRED TO BE FILED
WITH THE SEC PURSUANT TO THE 1934 ACT, AND THE COMPANY SHALL NOT TERMINATE ITS
STATUS AS AN ISSUER REQUIRED TO FILE REPORTS UNDER THE 1934 ACT EVEN IF THE 1934
ACT OR THE RULES AND REGULATIONS THEREUNDER WOULD OTHERWISE PERMIT SUCH
TERMINATION.

(D)           USE OF PROCEEDS.  THE COMPANY WILL USE THE PROCEEDS FROM THE SALE
OF THE SECURITIES FOR GENERAL CORPORATE AND FOR WORKING CAPITAL PURPOSES,
PROVIDED, HOWEVER, THAT THE COMPANY MAY NOT USE THE PROCEEDS FROM THE SALE OF
THE SECURITIES FOR (I) THE REPAYMENT OF ANY OTHER OUTSTANDING INDEBTEDNESS OF
THE COMPANY OR ANY OF ITS SUBSIDIARIES OR (II) THE REDEMPTION OR REPURCHASE OF
ANY OF ITS OR ITS SUBSIDIARIES’ EQUITY SECURITIES.

(E)           FINANCIAL INFORMATION.  THE COMPANY AGREES TO SEND THE FOLLOWING
TO EACH INVESTOR (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) DURING THE
REPORTING PERIOD (I) UNLESS THE FOLLOWING ARE FILED WITH THE SEC THROUGH EDGAR
AND ARE AVAILABLE TO THE PUBLIC THROUGH THE EDGAR SYSTEM, WITHIN ONE (1)
BUSINESS DAY AFTER THE FILING THEREOF WITH THE SEC, A COPY OF ITS ANNUAL REPORTS
ON FORM 10-K OR 10-KSB, ANY INTERIM REPORTS OR ANY CONSOLIDATED BALANCE SHEETS,
INCOME STATEMENTS, STOCKHOLDERS’ EQUITY STATEMENTS AND/OR CASH FLOW STATEMENTS
FOR ANY PERIOD OTHER THAN ANNUAL, ANY CURRENT REPORTS ON FORM 8-K AND ANY
REGISTRATION STATEMENTS (OTHER THAN ON FORM S-8) OR AMENDMENTS FILED PURSUANT TO
THE 1933 ACT, (II) ON THE SAME DAY AS THE RELEASE THEREOF, IF NOT PUBLICLY
FILED, FACSIMILE OR E-MAILED COPIES OF ALL PRESS RELEASES ISSUED BY THE COMPANY
OR ANY OF ITS SUBSIDIARIES, AND (III) COPIES OF ANY NOTICES AND OTHER
INFORMATION MADE AVAILABLE OR GIVEN TO THE STOCKHOLDERS OF THE COMPANY
GENERALLY, CONTEMPORANEOUSLY WITH THE MAKING AVAILABLE OR GIVING THEREOF TO THE
STOCKHOLDERS.  AS USED HEREIN, “BUSINESS DAY” MEANS ANY DAY OTHER THAN SATURDAY,
SUNDAY OR OTHER DAY ON WHICH COMMERCIAL BANKS IN THE CITY OF NEW YORK ARE
AUTHORIZED OR REQUIRED BY LAW TO REMAIN CLOSED.

(F)            LISTING.  THE COMPANY SHALL PROMPTLY SECURE THE LISTING OF ALL OF
THE REGISTRABLE SECURITIES (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT)
UPON EACH NATIONAL SECURITIES EXCHANGE AND AUTOMATED QUOTATION SYSTEM, IF ANY,
UPON WHICH THE COMMON STOCK IS THEN LISTED (SUBJECT TO OFFICIAL NOTICE OF
ISSUANCE) AND SHALL MAINTAIN SUCH LISTING OF ALL REGISTRABLE SECURITIES FROM
TIME TO TIME ISSUABLE UNDER THE TERMS OF THE TRANSACTION DOCUMENTS.  THE COMPANY
SHALL MAINTAIN THE COMMON STOCKS’ AUTHORIZATION FOR QUOTATION ON THE PRINCIPAL
MARKET.  NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES SHALL TAKE ANY ACTION
WHICH WOULD BE REASONABLY EXPECTED TO RESULT IN THE DELISTING OR SUSPENSION OF
THE COMMON STOCK ON THE PRINCIPAL MARKET.  THE COMPANY SHALL PAY ALL FEES AND
EXPENSES IN CONNECTION WITH SATISFYING ITS OBLIGATIONS UNDER THIS SECTION 4(F).

(G)           FEES.  THE COMPANY SHALL REIMBURSE CASTLERIGG MASTER INVESTMENTS
LTD. (A BUYER) (“CASTLERIGG”) OR ITS DESIGNEE(S) (IN ADDITION TO ANY OTHER
EXPENSE AMOUNTS PAID TO ANY BUYER PRIOR TO THE DATE OF THIS AGREEMENT) FOR ALL
REASONABLE DOCUMENTATION COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS

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(INCLUDING ALL REASONABLE LEGAL FEES AND DISBURSEMENTS IN CONNECTION THEREWITH,
DOCUMENTATION AND IMPLEMENTATION OF THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENTS AND DUE DILIGENCE IN CONNECTION THEREWITH), WHICH AMOUNT
SHALL BE WITHHELD BY SUCH BUYER FROM ITS PURCHASE PRICE AT THE CLOSING.  THE
COMPANY SHALL BE RESPONSIBLE FOR THE PAYMENT OF ANY PLACEMENT AGENT’S FEES,
FINANCIAL ADVISORY FEES, OR BROKER’S COMMISSIONS (OTHER THAN FOR PERSONS ENGAGED
BY ANY BUYER) RELATING TO OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED
HEREBY.  THE COMPANY SHALL PAY, AND HOLD EACH BUYER HARMLESS AGAINST, ANY
LIABILITY, LOSS OR EXPENSE (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEY’S
FEES AND OUT-OF-POCKET EXPENSES) ARISING IN CONNECTION WITH ANY CLAIM AGAINST A
BUYER RELATING TO ANY SUCH PAYMENT.  EXCEPT AS OTHERWISE SET FORTH IN THE
TRANSACTION DOCUMENTS, EACH PARTY TO THIS AGREEMENT SHALL BEAR ITS OWN EXPENSES
IN CONNECTION WITH THE SALE OF THE SECURITIES TO THE BUYERS.

(H)           PLEDGE OF SECURITIES.  THE COMPANY ACKNOWLEDGES AND AGREES THAT
THE SECURITIES MAY BE PLEDGED BY AN INVESTOR (AS DEFINED IN THE REGISTRATION
RIGHTS AGREEMENT) IN CONNECTION WITH A BONA FIDE MARGIN AGREEMENT OR OTHER LOAN
OR FINANCING ARRANGEMENT THAT IS SECURED BY THE SECURITIES.  THE PLEDGE OF
SECURITIES SHALL NOT BE DEEMED TO BE A TRANSFER, SALE OR ASSIGNMENT OF THE
SECURITIES HEREUNDER, AND NO INVESTOR EFFECTING A PLEDGE OF SECURITIES SHALL BE
REQUIRED TO PROVIDE THE COMPANY WITH ANY NOTICE THEREOF OR OTHERWISE MAKE ANY
DELIVERY TO THE COMPANY PURSUANT TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, INCLUDING, WITHOUT LIMITATION, SECTION 2(F) HEREOF; PROVIDED THAT AN
INVESTOR AND ITS PLEDGEE SHALL BE REQUIRED TO COMPLY WITH THE PROVISIONS OF
SECTION 2(F) HEREOF IN ORDER TO EFFECT A SALE, TRANSFER OR ASSIGNMENT OF
SECURITIES TO SUCH PLEDGEE.  THE COMPANY HEREBY AGREES TO EXECUTE AND DELIVER
SUCH DOCUMENTATION AS A PLEDGEE OF THE SECURITIES MAY REASONABLY REQUEST IN
CONNECTION WITH A PLEDGE OF THE SECURITIES TO SUCH PLEDGEE BY AN INVESTOR.

(I)            DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION.  ON OR
BEFORE 8:30 A.M., NEW YORK CITY TIME, ON THE FIRST BUSINESS DAY FOLLOWING THE
DATE OF THIS AGREEMENT, THE COMPANY SHALL ISSUE A PRESS RELEASE AND FILE A
CURRENT REPORT ON FORM 8-K DESCRIBING THE TERMS OF THE TRANSACTIONS CONTEMPLATED
BY THE TRANSACTION DOCUMENTS IN THE FORM REQUIRED BY THE 1934 ACT AND ATTACHING
THE MATERIAL TRANSACTION DOCUMENTS (INCLUDING, WITHOUT LIMITATION, THIS
AGREEMENT (AND ALL SCHEDULES TO THIS AGREEMENT), THE FORM OF THE WARRANT AND THE
FORM OF THE REGISTRATION RIGHTS AGREEMENT) AS EXHIBITS TO SUCH FILING (INCLUDING
ALL ATTACHMENTS, THE “8-K FILING”).  FROM AND AFTER THE FILING OF THE 8-K FILING
WITH THE SEC, NO BUYER SHALL BE IN POSSESSION OF ANY MATERIAL, NONPUBLIC
INFORMATION RECEIVED FROM THE COMPANY, ANY OF ITS SUBSIDIARIES OR ANY OF ITS
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS, THAT IS NOT DISCLOSED IN
THE 8-K FILING.  THE COMPANY SHALL NOT, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES
AND ITS AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS,
NOT TO, PROVIDE ANY BUYER WITH ANY MATERIAL, NONPUBLIC INFORMATION REGARDING THE
COMPANY OR ANY OF ITS SUBSIDIARIES FROM AND AFTER THE FILING OF THE 8-K FILING
WITH THE SEC WITHOUT THE EXPRESS WRITTEN CONSENT OF SUCH BUYER OR AS MAY BE
REQUIRED UNDER THE TERMS OF THE TRANSACTION DOCUMENTS.  IF A BUYER HAS, OR
BELIEVES IT HAS, RECEIVED ANY SUCH MATERIAL, NONPUBLIC INFORMATION REGARDING THE
COMPANY OR ANY OF ITS SUBSIDIARIES, IT SHALL PROVIDE THE COMPANY WITH WRITTEN
NOTICE THEREOF.  THE COMPANY SHALL, WITHIN FIVE (5) TRADING DAYS (AS DEFINED IN
THE WARRANT) OF RECEIPT OF SUCH NOTICE, MAKE PUBLIC DISCLOSURE OF SUCH MATERIAL,
NONPUBLIC INFORMATION.  IN THE EVENT OF A BREACH OF THE FOREGOING COVENANT BY
THE COMPANY, ANY OF ITS SUBSIDIARIES, OR ANY OF ITS OR THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, IN ADDITION TO ANY OTHER REMEDY
PROVIDED HEREIN OR IN THE TRANSACTION DOCUMENTS, A BUYER SHALL HAVE THE RIGHT TO
MAKE A PUBLIC DISCLOSURE, IN THE FORM OF A

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PRESS RELEASE, PUBLIC ADVERTISEMENT OR OTHERWISE, OF SUCH MATERIAL, NONPUBLIC
INFORMATION WITHOUT THE PRIOR APPROVAL BY THE COMPANY, ITS SUBSIDIARIES, OR ANY
OF ITS OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS.  NO BUYER
SHALL HAVE ANY LIABILITY TO THE COMPANY, ITS SUBSIDIARIES, OR ANY OF ITS OR
THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS OR AGENTS FOR ANY
SUCH DISCLOSURE.  SUBJECT TO THE FOREGOING, NEITHER THE COMPANY, ITS
SUBSIDIARIES NOR ANY BUYER SHALL ISSUE ANY PRESS RELEASES OR ANY OTHER PUBLIC
STATEMENTS WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY; PROVIDED,
HOWEVER, THAT THE COMPANY SHALL BE ENTITLED, WITHOUT THE PRIOR APPROVAL OF ANY
BUYER, TO MAKE ANY PRESS RELEASE OR OTHER PUBLIC DISCLOSURE WITH RESPECT TO SUCH
TRANSACTIONS (I) IN SUBSTANTIAL CONFORMITY WITH THE 8-K FILING AND
CONTEMPORANEOUSLY THEREWITH AND (II) AS IS REQUIRED BY APPLICABLE LAW AND
REGULATIONS (PROVIDED THAT IN THE CASE OF CLAUSE (I) EACH BUYER SHALL BE
CONSULTED BY THE COMPANY IN CONNECTION WITH ANY SUCH PRESS RELEASE OR OTHER
PUBLIC DISCLOSURE PRIOR TO ITS RELEASE).  WITHOUT THE PRIOR WRITTEN CONSENT OF
ANY APPLICABLE BUYER, NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES OR
AFFILIATES SHALL DISCLOSE THE NAME OF SUCH BUYER IN ANY FILING, ANNOUNCEMENT,
RELEASE OR OTHERWISE, UNLESS SUCH DISCLOSURE IS REQUIRED BY LAW, REGULATION OR
THE PRINCIPAL MARKET.

(J)            ADDITIONAL WARRANTS; VARIABLE SECURITIES; DILUTIVE ISSUANCES.  SO
LONG AS ANY WARRANTS REMAIN OUTSTANDING, THE COMPANY WILL NOT ISSUE ANY WARRANTS
OTHER THAN TO THE BUYERS AS CONTEMPLATED HEREBY AND THE COMPANY SHALL NOT ISSUE
ANY OTHER SECURITIES THAT WOULD CAUSE A BREACH OR DEFAULT UNDER THE WARRANTS. 
FOR SO LONG AS ANY WARRANTS REMAIN OUTSTANDING, THE COMPANY SHALL NOT, IN ANY
MANNER, ISSUE OR SELL ANY RIGHTS, WARRANTS OR OPTIONS TO SUBSCRIBE FOR OR
PURCHASE COMMON STOCK OR DIRECTLY OR INDIRECTLY EXCHANGEABLE OR EXERCISABLE FOR
COMMON STOCK AT A PRICE WHICH VARIES OR MAY VARY WITH THE MARKET PRICE OF THE
COMMON STOCK, INCLUDING BY WAY OF ONE OR MORE RESET(S) TO ANY FIXED PRICE (OTHER
THAN PURSUANT TO ANTIDILUTION PROVISIONS) UNLESS THE EXCHANGE OR EXERCISE PRICE
OF ANY SUCH SECURITY CANNOT BE LESS THAN THE THEN APPLICABLE EXERCISE PRICE (AS
DEFINED IN THE WARRANTS) WITH RESPECT TO THE COMMON STOCK INTO WHICH ANY WARRANT
IS EXERCISABLE.  FOR LONG AS ANY WARRANTS REMAIN OUTSTANDING, THE COMPANY SHALL
NOT, IN ANY MANNER, ENTER INTO OR AFFECT ANY DILUTIVE ISSUANCE (AS DEFINED IN
THE WARRANTS) IF THE EFFECT OF SUCH DILUTIVE ISSUANCE IS TO CAUSE THE COMPANY TO
BE REQUIRED TO ISSUE UPON EXERCISE OF ANY WARRANT ANY SHARES OF COMMON STOCK IN
EXCESS OF THAT NUMBER OF SHARES OF COMMON STOCK WHICH THE COMPANY MAY ISSUE UPON
EXERCISE OF THE WARRANTS WITHOUT BREACHING THE COMPANY’S OBLIGATIONS UNDER THE
RULES OR REGULATIONS OF THE ELIGIBLE MARKET (AS DEFINED IN THE REGISTRATION
RIGHTS AGREEMENT).

(K)           RESERVATION OF SHARES.  SO LONG AS ANY BUYER OWNS ANY WARRANT, THE
COMPANY SHALL TAKE ALL ACTION NECESSARY TO AT ALL TIMES HAVE AUTHORIZED, AND
RESERVED FOR THE PURPOSE OF ISSUANCE, NO LESS THAN 130% OF THE NUMBER OF SHARES
OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS THEN OUTSTANDING (WITHOUT
TAKING INTO ACCOUNT ANY LIMITATIONS ON THE EXERCISE OF THE WARRANTS SET FORTH IN
WARRANTS).

(L)            CONDUCT OF BUSINESS.  THE BUSINESS OF THE COMPANY AND ITS
SUBSIDIARIES SHALL NOT BE CONDUCTED IN VIOLATION OF ANY LAW, ORDINANCE OR
REGULATION OF ANY GOVERNMENTAL ENTITY, EXCEPT WHERE SUCH VIOLATIONS WOULD NOT
RESULT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, IN A MATERIAL ADVERSE EFFECT.

(M)          CORPORATE EXISTENCE.  SO LONG AS ANY WARRANTS REMAIN OUTSTANDING,
THE COMPANY SHALL NOT BE PARTY TO ANY FUNDAMENTAL TRANSACTION (AS DEFINED IN THE
WARRANTS) UNLESS

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THE COMPANY IS IN COMPLIANCE WITH THE APPLICABLE PROVISIONS GOVERNING
FUNDAMENTAL TRANSACTIONS SET FORTH IN THE WARRANTS.

(N)           ADDITIONAL ISSUANCES OF SECURITIES.

(I)            FOR PURPOSES OF THIS SECTION 4(N), THE FOLLOWING DEFINITIONS
SHALL APPLY.

(1)           “CONVERTIBLE SECURITIES” MEANS ANY STOCK OR SECURITIES (OTHER THAN
OPTIONS) CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE FOR SHARES OF COMMON
STOCK.

(2)           “OPTIONS” MEANS ANY RIGHTS, WARRANTS OR OPTIONS TO SUBSCRIBE FOR
OR PURCHASE SHARES OF COMMON STOCK OR CONVERTIBLE SECURITIES.

(3)           “COMMON STOCK EQUIVALENTS” MEANS, COLLECTIVELY, OPTIONS AND
CONVERTIBLE SECURITIES.

(II)           FROM THE DATE HEREOF UNTIL THE DATE THAT IS THIRTY (30) CALENDAR
DAYS FOLLOWING THE EFFECTIVE DATE (AS DEFINED IN THE REGISTRATION RIGHTS
AGREEMENT) (THE “TRIGGER DATE”), THE COMPANY WILL NOT, DIRECTLY OR INDIRECTLY,
OFFER, SELL, GRANT ANY OPTION TO PURCHASE, OR OTHERWISE DISPOSE OF (OR ANNOUNCE
ANY OFFER, SALE, GRANT OR ANY OPTION TO PURCHASE OR OTHER DISPOSITION OF) ANY OF
ITS OR ITS SUBSIDIARIES’ EQUITY OR EQUITY EQUIVALENT SECURITIES, INCLUDING
WITHOUT LIMITATION ANY DEBT, PREFERRED STOCK OR OTHER INSTRUMENT OR SECURITY
THAT IS, AT ANY TIME DURING ITS LIFE AND UNDER ANY CIRCUMSTANCES, CONVERTIBLE
INTO OR EXCHANGEABLE OR EXERCISABLE FOR SHARES OF COMMON STOCK OR COMMON STOCK
EQUIVALENTS (ANY SUCH OFFER, SALE, GRANT, DISPOSITION OR ANNOUNCEMENT BEING
REFERRED TO AS A “SUBSEQUENT PLACEMENT”).

(III)          FOR A PERIOD OF 24 MONTHS FOLLOWING THE EFFECTIVE DATE (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT), THE COMPANY WILL NOT, DIRECTLY OR
INDIRECTLY, EFFECT ANY SUBSEQUENT PLACEMENT UNLESS THE COMPANY SHALL HAVE FIRST
COMPLIED WITH THIS SECTION 4(O)(III).

(1)           THE COMPANY SHALL DELIVER TO EACH BUYER (EACH AN “ELIGIBLE BUYER”)
A WRITTEN NOTICE (THE ”OFFER NOTICE”) OF ANY PROPOSED OR INTENDED ISSUANCE OR
SALE OR EXCHANGE (THE ”OFFER”) OF THE SECURITIES BEING OFFERED (THE “OFFERED
SECURITIES”) IN A SUBSEQUENT PLACEMENT, WHICH OFFER NOTICE SHALL (W) IDENTIFY
AND DESCRIBE THE OFFERED SECURITIES, (X) DESCRIBE THE PRICE AND OTHER TERMS UPON
WHICH THEY ARE TO BE ISSUED, SOLD OR EXCHANGED, AND THE NUMBER OR AMOUNT OF THE
OFFERED SECURITIES TO BE ISSUED, SOLD OR EXCHANGED, (Y) IDENTIFY THE PERSONS OR
ENTITIES (IF KNOWN) TO WHICH OR WITH WHICH THE OFFERED SECURITIES ARE TO BE
OFFERED, ISSUED, SOLD OR EXCHANGED AND (Z) OFFER TO ISSUE AND SELL TO OR
EXCHANGE WITH SUCH ELIGIBLE BUYERS AT LEAST 50% OF THE OFFERED SECURITIES,
ALLOCATED AMONG SUCH ELIGIBLE BUYERS (A) BASED ON SUCH ELIGIBLE BUYER’S PRO RATA
PORTION OF THE COMMON SHARES PURCHASED HEREUNDER BY ELIGIBLE BUYERS (THE “BASIC
AMOUNT”), AND (B) WITH RESPECT TO EACH ELIGIBLE BUYER THAT ELECTS TO PURCHASE
ITS BASIC AMOUNT, ANY ADDITIONAL PORTION OF THE OFFERED SECURITIES ATTRIBUTABLE
TO THE BASIC AMOUNTS OF OTHER ELIGIBLE BUYERS AS SUCH ELIGIBLE BUYER SHALL
INDICATE IT WILL PURCHASE OR ACQUIRE SHOULD THE OTHER ELIGIBLE BUYERS SUBSCRIBE
FOR LESS THAN THEIR BASIC

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AMOUNTS (THE “UNDERSUBSCRIPTION AMOUNT”), WHICH PROCESS SHALL BE REPEATED UNTIL
THE BUYERS SHALL HAVE AN OPPORTUNITY TO SUBSCRIBE FOR ANY REMAINING
UNDERSUBSCRIPTION AMOUNT.

(2)           TO ACCEPT AN OFFER, IN WHOLE OR IN PART, SUCH ELIGIBLE BUYER MUST
DELIVER A WRITTEN NOTICE TO THE COMPANY PRIOR TO THE END OF THE SEVENTH (7TH)
BUSINESS DAY AFTER SUCH ELIGIBLE BUYER’S RECEIPT OF THE OFFER NOTICE (THE “OFFER
PERIOD”), SETTING FORTH THE PORTION OF SUCH ELIGIBLE BUYER’S BASIC AMOUNT THAT
SUCH ELIGIBLE BUYER ELECTS TO PURCHASE AND, IF SUCH ELIGIBLE BUYER SHALL ELECT
TO PURCHASE ALL OF ITS BASIC AMOUNT, THE UNDERSUBSCRIPTION AMOUNT, IF ANY, THAT
SUCH ELIGIBLE BUYER ELECTS TO PURCHASE (IN EITHER CASE, THE “NOTICE OF
ACCEPTANCE”).  IF THE BASIC AMOUNTS SUBSCRIBED FOR BY ALL ELIGIBLE BUYERS ARE
LESS THAN THE TOTAL OF ALL OF THE BASIC AMOUNTS, THEN EACH ELIGIBLE BUYER WHO
HAS SET FORTH AN UNDERSUBSCRIPTION AMOUNT IN ITS NOTICE OF ACCEPTANCE SHALL BE
ENTITLED TO PURCHASE, IN ADDITION TO THE BASIC AMOUNTS SUBSCRIBED FOR, THE
UNDERSUBSCRIPTION AMOUNT IT HAS SUBSCRIBED FOR; PROVIDED, HOWEVER, THAT IF THE
UNDERSUBSCRIPTION AMOUNTS SUBSCRIBED FOR EXCEED THE DIFFERENCE BETWEEN THE TOTAL
OF ALL THE BASIC AMOUNTS AND THE BASIC AMOUNTS SUBSCRIBED FOR (THE “AVAILABLE
UNDERSUBSCRIPTION AMOUNT”), EACH ELIGIBLE BUYER WHO HAS SUBSCRIBED FOR ANY
UNDERSUBSCRIPTION AMOUNT SHALL BE ENTITLED TO PURCHASE ONLY THAT PORTION OF THE
AVAILABLE UNDERSUBSCRIPTION AMOUNT AS THE BASIC AMOUNT OF SUCH ELIGIBLE BUYER
BEARS TO THE TOTAL BASIC AMOUNTS OF ALL ELIGIBLE BUYERS THAT HAVE SUBSCRIBED FOR
UNDERSUBSCRIPTION AMOUNTS, SUBJECT TO ROUNDING BY THE COMPANY TO THE EXTENT ITS
DEEMS REASONABLY NECESSARY.

(3)           THE COMPANY SHALL HAVE TEN (10) BUSINESS DAYS FROM THE EXPIRATION
OF THE OFFER PERIOD ABOVE TO (I) OFFER, ISSUE, SELL OR EXCHANGE ALL OR ANY PART
OF SUCH OFFERED SECURITIES AS TO WHICH A NOTICE OF ACCEPTANCE HAS NOT BEEN GIVEN
BY THE ELIGIBLE BUYERS (THE “REFUSED SECURITIES”), BUT ONLY TO THE OFFEREES
DESCRIBED IN THE OFFER NOTICE (IF SO DESCRIBED THEREIN) AND ONLY UPON TERMS AND
CONDITIONS (INCLUDING, WITHOUT LIMITATION, UNIT PRICES AND INTEREST RATES) THAT
ARE NOT MORE FAVORABLE TO THE ACQUIRING PERSON OR PERSONS OR LESS FAVORABLE TO
THE COMPANY THAN THOSE SET FORTH IN THE OFFER NOTICE AND (II) TO PUBLICLY
ANNOUNCE (A) THE EXECUTION OF SUCH SUBSEQUENT PLACEMENT AGREEMENT (AS DEFINED
BELOW), AND (B) EITHER (X) THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY
SUCH SUBSEQUENT PLACEMENT AGREEMENT OR (Y) THE TERMINATION OF SUCH SUBSEQUENT
PLACEMENT AGREEMENT, WHICH SHALL BE FILED WITH THE SEC ON A CURRENT REPORT ON
FORM 8-K WITH SUCH SUBSEQUENT PLACEMENT AGREEMENT AND ANY DOCUMENTS CONTEMPLATED
THEREIN FILED AS EXHIBITS THERETO (THE “OFFER 8-K”).  IN THE EVENT OF A BREACH
OF THE FOREGOING COVENANT BY THE COMPANY, ANY OF ITS SUBSIDIARIES, OR ANY OF ITS
OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, IN ADDITION TO
ANY OTHER REMEDY PROVIDED HEREIN OR IN THE TRANSACTION DOCUMENTS, A BUYER SHALL
HAVE THE RIGHT TO MAKE A PUBLIC DISCLOSURE, IN THE FORM OF A PRESS RELEASE,
PUBLIC ADVERTISEMENT OR OTHERWISE, OF SUCH MATERIAL, NONPUBLIC INFORMATION
WITHOUT THE PRIOR APPROVAL BY THE COMPANY, ITS SUBSIDIARIES, OR ANY OF ITS OR
THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS.  NO BUYER SHALL HAVE
ANY LIABILITY TO THE COMPANY, ITS SUBSIDIARIES, OR ANY OF ITS OR THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS OR AGENTS FOR ANY SUCH
DISCLOSURE.

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(4)           IN THE EVENT THE COMPANY SHALL PROPOSE TO SELL LESS THAN ALL THE
REFUSED SECURITIES (ANY SUCH SALE TO BE IN THE MANNER AND ON THE TERMS SPECIFIED
IN SECTION 4(O)(III)(3) ABOVE), THEN EACH ELIGIBLE BUYER MAY, AT ITS SOLE OPTION
AND IN ITS SOLE DISCRETION, REDUCE THE NUMBER OR AMOUNT OF THE OFFERED
SECURITIES SPECIFIED IN ITS NOTICE OF ACCEPTANCE TO AN AMOUNT THAT SHALL BE NOT
LESS THAN THE NUMBER OR AMOUNT OF THE OFFERED SECURITIES THAT SUCH ELIGIBLE
BUYER ELECTED TO PURCHASE PURSUANT TO SECTION 4(O)(III)(2) ABOVE MULTIPLIED BY A
FRACTION, (I) THE NUMERATOR OF WHICH SHALL BE THE NUMBER OR AMOUNT OF OFFERED
SECURITIES THE COMPANY ACTUALLY PROPOSES TO ISSUE, SELL OR EXCHANGE (INCLUDING
OFFERED SECURITIES TO BE ISSUED OR SOLD TO ELIGIBLE BUYERS PURSUANT TO SECTION
4(O)(III)(3) ABOVE PRIOR TO SUCH REDUCTION) AND (II) THE DENOMINATOR OF WHICH
SHALL BE THE ORIGINAL AMOUNT OF THE OFFERED SECURITIES.  IN THE EVENT THAT ANY
ELIGIBLE BUYER SO ELECTS TO REDUCE THE NUMBER OR AMOUNT OF OFFERED SECURITIES
SPECIFIED IN ITS NOTICE OF ACCEPTANCE, THE COMPANY MAY NOT ISSUE, SELL OR
EXCHANGE MORE THAN THE REDUCED NUMBER OR AMOUNT OF THE OFFERED SECURITIES UNLESS
AND UNTIL SUCH SECURITIES HAVE AGAIN BEEN OFFERED TO THE ELIGIBLE BUYERS IN
ACCORDANCE WITH SECTION 4(O)(III)(1) ABOVE.

(5)           UPON THE CLOSING OF THE ISSUANCE, SALE OR EXCHANGE OF ALL OR LESS
THAN ALL OF THE REFUSED SECURITIES, THE ELIGIBLE BUYERS SHALL ACQUIRE FROM THE
COMPANY, AND THE COMPANY SHALL ISSUE TO THE ELIGIBLE BUYERS, THE NUMBER OR
AMOUNT OF OFFERED SECURITIES SPECIFIED IN THE NOTICES OF ACCEPTANCE, AS REDUCED
PURSUANT TO SECTION 4(O)(III)(3) ABOVE IF THE ELIGIBLE BUYERS HAVE SO ELECTED,
UPON THE TERMS AND CONDITIONS SPECIFIED IN THE OFFER.  THE PURCHASE BY THE
ELIGIBLE BUYERS OF ANY OFFERED SECURITIES IS SUBJECT IN ALL CASES TO THE
PREPARATION, EXECUTION AND DELIVERY BY THE COMPANY AND THE ELIGIBLE BUYERS OF A
PURCHASE AGREEMENT RELATING TO SUCH OFFERED SECURITIES REASONABLY SATISFACTORY
IN FORM AND SUBSTANCE TO THE ELIGIBLE BUYERS AND THEIR RESPECTIVE COUNSEL.

(6)           ANY OFFERED SECURITIES NOT ACQUIRED BY THE ELIGIBLE BUYERS OR
OTHER PERSONS IN ACCORDANCE WITH SECTION 4(O)(III)(3) ABOVE MAY NOT BE ISSUED,
SOLD OR EXCHANGED UNTIL THEY ARE AGAIN OFFERED TO THE ELIGIBLE BUYERS UNDER THE
PROCEDURES SPECIFIED IN THIS AGREEMENT.

(IV)          THE RESTRICTIONS CONTAINED IN SUBSECTIONS (II) AND (III) OF THIS
SECTION 4(O) SHALL NOT APPLY IN CONNECTION WITH THE ISSUANCE OF ANY EXCLUDED
SECURITIES (AS DEFINED IN THE WARRANT).

(V)           IN EXCHANGE FOR THE COMPANY’S WILLINGNESS TO AGREE TO THESE
PROCEDURES, EACH ELIGIBLE BUYER HEREBY IRREVOCABLY AGREES THAT IT WILL HOLD IN
STRICT CONFIDENCE ANY AND ALL OFFER NOTICES, THE INFORMATION CONTAINED THEREIN,
AND THE FACT THAT THE COMPANY IS CONTEMPLATING A SUBSEQUENT PLACEMENT, FROM THE
DATE SUCH ELIGIBLE BUYER RECEIVES SUCH OFFER NOTICE UNTIL THE EARLIER TO OCCUR
OF (1) THE DATE THE OFFER 8-K IS FILED WITH THE SEC AND (2) THE DATE SUCH
INFORMATION IS DISCLOSED TO THE PUBLIC BY ANY ELIGIBLE BUYER IN ACCORDANCE WITH
SECTION 4(O)(III)(3) ABOVE.  NOTWITHSTANDING ANYTHING IN THIS SECTION 4(O) TO
THE CONTRARY, AT ANY TIME ANY ELIGIBLE BUYER MAY ELECT, BY DELIVERING WRITTEN
NOTICE TO THE COMPANY, NOT TO RECEIVE ANY OFFER NOTICES HEREUNDER AND, UNTIL
SUCH TIME AS SUCH ELIGIBLE BUYER OR ITS SUCCESSOR ELECTS, BY DELIVERING WRITTEN
NOTICE TO THE COMPANY, TO RECEIVE OFFER NOTICES HEREUNDER, THE COMPANY SHALL NOT
BE OBLIGATED TO DELIVER ANY OFFER NOTICES TO SUCH ELIGIBLE BUYER.

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(O)           ADDITIONAL REGISTRATION STATEMENTS.  UNTIL THE EFFECTIVE DATE (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT), THE COMPANY WILL NOT FILE A
REGISTRATION STATEMENT UNDER THE 1933 ACT RELATING TO SECURITIES THAT ARE NOT
THE SECURITIES.

(P)           STOCKHOLDER APPROVAL.  IF AT ANY TIME THE EXCHANGE CAP (AS DEFINED
IN THE WARRANTS) WOULD LIMIT THE AGGREGATE NUMBER OF SHARES OF COMMON STOCK
WHICH THE COMPANY MAY ISSUE UPON EXERCISE OF THE WARRANTS, AT THE WRITTEN
REQUEST OF HOLDERS OF A MAJORITY OF THE WARRANT SHARES OUTSTANDING AT SUCH TIME
(AS DETERMINED ASSUMING FULL EXERCISE OF THE WARRANTS PRIOR TO SUCH DATE WITHOUT
TAKING INTO ACCOUNT ANY LIMITATIONS ON THE EXERCISE OF THE WARRANTS SET FORTH IN
THE WARRANTS) (THE DATE OF SUCH REQUEST, THE “STOCKHOLDER MEETING REQUEST
DATE”), THE COMPANY SHALL PROVIDE EACH STOCKHOLDER ENTITLED TO VOTE AT A SPECIAL
OR ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY (THE “STOCKHOLDER MEETING”),
WHICH SHALL BE PROMPTLY CALLED AND HELD NOT LATER THAN NINETY (90) CALENDAR DAYS
AFTER THE STOCKHOLDER MEETING REQUEST DATE (THE “STOCKHOLDER MEETING DEADLINE”),
A PROXY STATEMENT, SUBSTANTIALLY IN THE FORM WHICH HAS BEEN PREVIOUSLY REVIEWED
BY THE BUYERS AND SCHULTE ROTH & ZABEL LLP, SOLICITING EACH SUCH STOCKHOLDER’S
AFFIRMATIVE VOTE AT THE STOCKHOLDER MEETING FOR APPROVAL OF RESOLUTIONS
PROVIDING FOR THE COMPANY’S ISSUANCE OF ALL OF THE SECURITIES AS DESCRIBED IN
THE TRANSACTION DOCUMENTS IN ACCORDANCE WITH APPLICABLE LAW AND THE RULES AND
REGULATIONS OF THE PRINCIPAL MARKET AND SUCH AFFIRMATIVE APPROVAL BEING REFERRED
TO HEREIN AS THE “STOCKHOLDER APPROVAL”), AND THE COMPANY SHALL USE ITS
REASONABLE BEST EFFORTS TO SOLICIT ITS STOCKHOLDERS’ APPROVAL OF SUCH
RESOLUTIONS  AND TO CAUSE THE BOARD OF DIRECTORS OF THE COMPANY TO RECOMMEND TO
THE STOCKHOLDERS THAT THEY APPROVE SUCH RESOLUTIONS.  THE COMPANY SHALL BE
OBLIGATED TO USE ITS REASONABLE BEST EFFORTS TO OBTAIN THE STOCKHOLDER APPROVAL
BY THE STOCKHOLDER MEETING DEADLINE.  IF, DESPITE THE COMPANY’S REASONABLE BEST
EFFORTS THE STOCKHOLDER APPROVAL IS NOT OBTAINED ON OR PRIOR TO THE STOCKHOLDER
MEETING DEADLINE, THE COMPANY SHALL CAUSE AN ADDITIONAL STOCKHOLDER MEETING TO
BE HELD EVERY SIX (6) MONTHS THEREAFTER UNTIL SUCH STOCKHOLDER APPROVAL IS
OBTAINED OR THE WARRANTS ARE NO LONGER OUTSTANDING.

5.             REGISTER; TRANSFER AGENT INSTRUCTIONS.

(A)           REGISTER.  THE COMPANY SHALL MAINTAIN AT ITS PRINCIPAL EXECUTIVE
OFFICES (OR SUCH OTHER OFFICE OR AGENCY OF THE COMPANY AS IT MAY DESIGNATE BY
NOTICE TO EACH HOLDER OF SECURITIES), A REGISTER FOR THE COMMON SHARES AND THE
WARRANTS IN WHICH THE COMPANY SHALL RECORD THE NAME AND ADDRESS OF THE PERSON IN
WHOSE NAME THE COMMON SHARES AND THE WARRANTS HAVE BEEN ISSUED (INCLUDING THE
NAME AND ADDRESS OF EACH TRANSFEREE), THE FACE AMOUNT OF COMMON SHARES HELD BY
SUCH PERSON, THE NUMBER OF WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS
HELD BY SUCH PERSON AND THE NUMBER OF COMMON SHARES HELD BY SUCH PERSON.  THE
COMPANY SHALL KEEP THE REGISTER OPEN AND AVAILABLE AT ALL TIMES DURING BUSINESS
HOURS FOR INSPECTION OF ANY BUYER OR ITS LEGAL REPRESENTATIVES UPON REASONABLE
NOTICE.

(B)           TRANSFER AGENT INSTRUCTIONS.  THE COMPANY SHALL ISSUE IRREVOCABLE
INSTRUCTIONS TO ITS TRANSFER AGENT, AND ANY SUBSEQUENT TRANSFER AGENT, TO ISSUE
CERTIFICATES OR CREDIT SHARES TO THE APPLICABLE BALANCE ACCOUNTS AT THE
DEPOSITORY TRUST COMPANY (“DTC”), REGISTERED IN THE NAME OF EACH BUYER OR ITS
RESPECTIVE NOMINEE(S), FOR THE COMMON SHARES AND THE WARRANT SHARES ISSUED AT
THE CLOSING OR UPON EXERCISE OF THE WARRANTS IN SUCH AMOUNTS AS SPECIFIED FROM
TIME TO TIME BY EACH BUYER TO THE COMPANY UPON EXERCISE OF THE WARRANTS IN THE
FORM OF EXHIBIT C ATTACHED HERETO (THE “IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS”).  THE COMPANY WARRANTS

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THAT NO INSTRUCTION OTHER THAN THE IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
REFERRED TO IN THIS SECTION 5(B), AND STOP TRANSFER INSTRUCTIONS TO GIVE EFFECT
TO SECTION 2(G) HEREOF, WILL BE GIVEN BY THE COMPANY TO ITS TRANSFER AGENT, AND
THAT THE SECURITIES SHALL OTHERWISE BE FREELY TRANSFERABLE ON THE BOOKS AND
RECORDS OF THE COMPANY AS AND TO THE EXTENT PROVIDED IN THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS.  UPON A REGISTRATION EVENT OR IF A BUYER EFFECTS A
SALE, ASSIGNMENT OR TRANSFER OF THE SECURITIES IN ACCORDANCE WITH SECTION 2(F),
THE COMPANY SHALL PROMPTLY INSTRUCT ITS TRANSFER AGENT TO ISSUE ONE OR MORE
CERTIFICATES OR CREDIT SHARES TO THE APPLICABLE BALANCE ACCOUNTS AT DTC IN SUCH
NAME AND IN SUCH DENOMINATIONS AS SPECIFIED BY SUCH BUYER TO EFFECT SUCH SALE,
TRANSFER OR ASSIGNMENT AND, WITH RESPECT TO ANY TRANSFER, SHALL PERMIT THE
TRANSFER.  IN THE EVENT THAT A REGISTRATION EVENT HAS OCCURRED OR SUCH SALE,
ASSIGNMENT OR TRANSFER INVOLVES COMMON SHARES OR WARRANT SHARES SOLD, ASSIGNED
OR TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO
RULE 144, THE TRANSFER AGENT SHALL ISSUE SUCH SECURITIES TO THE BUYER, ASSIGNEE
OR TRANSFEREE, AS THE CASE MAY BE, WITHOUT ANY RESTRICTIVE LEGEND.  THE COMPANY
ACKNOWLEDGES THAT A BREACH BY IT OF ITS OBLIGATIONS HEREUNDER WILL CAUSE
IRREPARABLE HARM TO A BUYER.  ACCORDINGLY, THE COMPANY ACKNOWLEDGES THAT THE
REMEDY AT LAW FOR A BREACH OF ITS OBLIGATIONS UNDER THIS SECTION 5(B) WILL BE
INADEQUATE AND AGREES, IN THE EVENT OF A BREACH OR THREATENED BREACH BY THE
COMPANY OF THE PROVISIONS OF THIS SECTION 5(B), THAT A BUYER SHALL BE ENTITLED,
IN ADDITION TO ALL OTHER AVAILABLE REMEDIES, TO AN ORDER AND/OR INJUNCTION
RESTRAINING ANY BREACH AND REQUIRING IMMEDIATE ISSUANCE AND TRANSFER, WITHOUT
THE NECESSITY OF SHOWING ECONOMIC LOSS AND WITHOUT ANY BOND OR OTHER SECURITY
BEING REQUIRED.

6.             CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

Closing Date.  The obligation of the Company hereunder to issue and sell the
Common Shares and the related Warrants to each Buyer at the Closing is subject
to the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:

(A)           SUCH BUYER SHALL HAVE EXECUTED EACH OF THE TRANSACTION DOCUMENTS
TO WHICH IT IS A PARTY AND DELIVERED THE SAME TO THE COMPANY.

(B)           SUCH BUYER AND EACH OTHER BUYER SHALL HAVE DELIVERED TO THE
COMPANY THE PURCHASE PRICE (LESS IN THE CASE OF CASTLERIGG, THE AMOUNTS WITHHELD
PURSUANT TO SECTION 4(G)) FOR THE COMMON SHARES AND THE RELATED WARRANTS BEING
PURCHASED BY SUCH BUYER AT THE CLOSING BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE
FUNDS PURSUANT TO THE WIRE INSTRUCTIONS PROVIDED BY THE COMPANY.

(C)           THE REPRESENTATIONS AND WARRANTIES OF SUCH BUYER SHALL BE TRUE AND
CORRECT IN ALL MATERIAL RESPECTS (EXCEPT FOR THOSE REPRESENTATIONS AND
WARRANTIES THAT ARE QUALIFIED BY MATERIALITY OR MATERIAL ADVERSE EFFECT, WHICH
SHALL BE TRUE AND CORRECT IN ALL RESPECTS) AS OF THE DATE WHEN MADE AND AS OF
THE CLOSING DATE AS THOUGH MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND
WARRANTIES THAT SPEAK AS OF A SPECIFIC DATE, WHICH SHALL BE TRUE AND CORRECT AS
OF SUCH SPECIFIC DATE), AND SUCH BUYER SHALL HAVE PERFORMED, SATISFIED AND
COMPLIED IN ALL MATERIAL RESPECTS WITH THE COVENANTS, AGREEMENTS AND CONDITIONS
REQUIRED BY THIS AGREEMENT TO BE PERFORMED, SATISFIED OR COMPLIED WITH BY SUCH
BUYER AT OR PRIOR TO THE CLOSING DATE.

 

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7.             CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

Closing Date.  The obligation of each Buyer hereunder to purchase the Common
Shares and the related Warrants at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for each Buyer’s sole benefit and may be waived by
such Buyer at any time in its sole discretion by providing the Company with
prior written notice thereof:

(A)           THE COMPANY SHALL HAVE DULY EXECUTED AND DELIVERED TO SUCH BUYER
(I) EACH OF THE TRANSACTION DOCUMENTS AND (II) THE COMMON SHARES (ALLOCATED IN
SUCH AMOUNTS AS SUCH BUYER SHALL REQUEST), BEING PURCHASED BY SUCH BUYER AT THE
CLOSING PURSUANT TO THIS AGREEMENT, (III) THE RELATED WARRANTS (ALLOCATED IN
SUCH AMOUNTS AS SUCH BUYER SHALL REQUEST) BEING PURCHASED BY SUCH BUYER AT THE
CLOSING PURSUANT TO THIS AGREEMENT.

(B)           SUCH BUYER SHALL HAVE RECEIVED THE OPINION OF SCHEEF & STONE, LLP,
THE COMPANY’S OUTSIDE COUNSEL, DATED AS OF THE CLOSING DATE, IN SUBSTANTIALLY
THE FORM OF EXHIBIT D ATTACHED HERETO.

(C)           THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A COPY OF THE
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS, IN THE FORM OF EXHIBIT C ATTACHED
HERETO, WHICH INSTRUCTIONS SHALL HAVE BEEN DELIVERED TO AND ACKNOWLEDGED IN
WRITING BY THE COMPANY’S TRANSFER AGENT.

(D)           THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A TRUE COPY OF
CERTIFICATE EVIDENCING THE FORMATION AND GOOD STANDING OF THE COMPANY AND EACH
OF ITS SUBSIDIARIES IN SUCH ENTITY’S JURISDICTION OF FORMATION ISSUED BY THE
SECRETARY OF STATE (OR COMPARABLE OFFICE) OF SUCH JURISDICTION, AS OF A DATE
WITHIN 10 DAYS OF THE CLOSING DATE.

(E)           THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A TRUE COPY OF
CERTIFICATE EVIDENCING THE COMPANY’S QUALIFICATION AS A FOREIGN CORPORATION AND
GOOD STANDING ISSUED BY THE SECRETARY OF STATE (OR COMPARABLE OFFICE) OF EACH
JURISDICTION IN WHICH THE COMPANY CONDUCTS BUSINESS, AS OF A DATE WITHIN 10 DAYS
OF THE CLOSING DATE.

(F)            THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A CERTIFIED COPY
OF THE ARTICLES OF INCORPORATION AS CERTIFIED BY THE SECRETARY OF STATE OF THE
STATE OF DELAWARE WITHIN TEN (10) DAYS OF THE CLOSING DATE.

(G)           THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A CERTIFICATE,
EXECUTED BY THE SECRETARY OF THE COMPANY AND DATED AS OF THE CLOSING DATE, AS TO
(I) THE RESOLUTIONS CONSISTENT WITH SECTION 3(B) AS ADOPTED BY THE COMPANY’S
BOARD OF DIRECTORS IN A FORM REASONABLY ACCEPTABLE TO SUCH BUYER, (II) THE
ARTICLES OF INCORPORATION AND (III) THE BYLAWS, EACH AS IN EFFECT AT THE
CLOSING, IN THE FORM ATTACHED HERETO AS EXHIBIT E.

(H)           THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHALL BE TRUE
AND CORRECT IN ALL MATERIAL RESPECTS (EXCEPT FOR THOSE REPRESENTATIONS AND
WARRANTIES THAT ARE QUALIFIED BY MATERIALITY OR MATERIAL ADVERSE EFFECT, WHICH
SHALL BE TRUE AND CORRECT IN ALL RESPECTS) AS OF THE DATE WHEN MADE AND AS OF
THE CLOSING DATE AS THOUGH MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND
WARRANTIES THAT SPEAK AS OF A SPECIFIC DATE, WHICH SHALL BE TRUE AND CORRECT AS
OF SUCH SPECIFIC DATE) AND THE COMPANY SHALL HAVE PERFORMED, SATISFIED AND
COMPLIED IN ALL

26

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

MATERIAL RESPECTS WITH THE COVENANTS, AGREEMENTS AND CONDITIONS REQUIRED BY THE
TRANSACTION DOCUMENTS TO BE PERFORMED, SATISFIED OR COMPLIED WITH BY THE COMPANY
AT OR PRIOR TO THE CLOSING DATE.  SUCH BUYER SHALL HAVE RECEIVED A CERTIFICATE,
EXECUTED BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY, DATED AS OF THE CLOSING
DATE, TO THE FOREGOING EFFECT AND AS TO SUCH OTHER MATTERS AS MAY BE REASONABLY
REQUESTED BY SUCH BUYER IN THE FORM ATTACHED HERETO AS EXHIBIT F.

(I)            THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A LETTER FROM THE
COMPANY’S TRANSFER AGENT CERTIFYING THE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING AS OF A DATE WITHIN FIVE DAYS OF THE CLOSING DATE.

(J)            THE COMMON STOCK (I) SHALL BE DESIGNATED FOR QUOTATION OR LISTED
ON THE PRINCIPAL MARKET AND (II) SHALL NOT HAVE BEEN SUSPENDED, AS OF THE
CLOSING DATE, BY THE SEC OR THE PRINCIPAL MARKET FROM TRADING ON THE PRINCIPAL
MARKET NOR SHALL SUSPENSION BY THE SEC OR THE PRINCIPAL MARKET HAVE BEEN
THREATENED, AS OF THE CLOSING DATE, EITHER (A) IN WRITING BY THE SEC OR THE
PRINCIPAL MARKET OR (B) BY FALLING BELOW THE MINIMUM LISTING MAINTENANCE
REQUIREMENTS OF THE PRINCIPAL MARKET.

(K)           THE COMPANY SHALL HAVE OBTAINED ALL GOVERNMENTAL, REGULATORY OR
THIRD PARTY CONSENTS AND APPROVALS, IF ANY, NECESSARY FOR THE SALE OF THE
SECURITIES.

(L)            THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER SUCH OTHER
DOCUMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AS SUCH
BUYER OR ITS COUNSEL MAY REASONABLY REQUEST.

8.             TERMINATION. IN THE EVENT THAT THE CLOSING SHALL NOT HAVE
OCCURRED WITH RESPECT TO A BUYER ON OR BEFORE FIVE (5) BUSINESS DAYS FROM THE
DATE HEREOF DUE TO THE COMPANY’S OR SUCH BUYER’S FAILURE TO SATISFY THE
CONDITIONS SET FORTH IN SECTIONS 6 AND 7 ABOVE (AND THE NONBREACHING PARTY’S
FAILURE TO WAIVE SUCH UNSATISFIED CONDITION(S)), THE NONBREACHING PARTY SHALL
HAVE THE OPTION TO TERMINATE THIS AGREEMENT WITH RESPECT TO SUCH BREACHING PARTY
AT THE CLOSE OF BUSINESS ON SUCH DATE WITHOUT LIABILITY OF ANY PARTY TO ANY
OTHER PARTY; PROVIDED, HOWEVER, THAT IF THIS AGREEMENT IS TERMINATED PURSUANT TO
THIS SECTION 8, DUE TO THE FAILURE OF THE COMPANY TO SATISFY THE CONDITIONS TO
CLOSING SET FORTH IN SECTION 7, THE COMPANY SHALL REMAIN OBLIGATED TO REIMBURSE
THE NON-BREACHING BUYERS FOR THEIR EXPENSES DESCRIBED IN SECTION 4(G) ABOVE.

9.             MISCELLANEOUS.

(A)           GOVERNING LAW; JURISDICTION; JURY TRIAL.  ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF NEW YORK OR ANY OTHER JURISDICTIONS) THAT WOULD CAUSE THE APPLICATION
OF THE LAWS OF ANY JURISDICTIONS OTHER THAN THE STATE 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, AND HEREBY IRREVOCABLY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,

27

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

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 BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER.  EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER
THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF.  NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. 
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

(B)           COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
IDENTICAL COUNTERPARTS, ALL OF WHICH SHALL BE CONSIDERED ONE AND THE SAME
AGREEMENT AND SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY EACH
PARTY AND DELIVERED TO THE OTHER PARTY; PROVIDED THAT A FACSIMILE SIGNATURE
SHALL BE CONSIDERED DUE EXECUTION AND SHALL BE BINDING UPON THE SIGNATORY
THERETO WITH THE SAME FORCE AND EFFECT AS IF THE SIGNATURE WERE AN ORIGINAL, NOT
A FACSIMILE SIGNATURE.

(C)           HEADINGS.  THE HEADINGS OF THIS AGREEMENT ARE FOR CONVENIENCE OF
REFERENCE AND SHALL NOT FORM PART OF, OR AFFECT THE INTERPRETATION OF, THIS
AGREEMENT.

(D)           SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT SHALL BE INVALID
OR UNENFORCEABLE IN ANY JURISDICTION, SUCH INVALIDITY OR UNENFORCEABILITY SHALL
NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF THE REMAINDER OF THIS AGREEMENT IN
THAT JURISDICTION OR THE VALIDITY OR ENFORCEABILITY OF ANY PROVISION OF THIS
AGREEMENT IN ANY OTHER JURISDICTION.

(E)           ENTIRE AGREEMENT; AMENDMENTS.  THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS SUPERSEDE ALL OTHER PRIOR ORAL OR WRITTEN AGREEMENTS
BETWEEN THE BUYERS, THE COMPANY, THEIR AFFILIATES AND PERSONS ACTING ON THEIR
BEHALF WITH RESPECT TO THE MATTERS DISCUSSED HEREIN, AND THIS AGREEMENT, THE
OTHER TRANSACTION DOCUMENTS AND THE INSTRUMENTS REFERENCED HEREIN AND THEREIN
CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE MATTERS
COVERED HEREIN AND THEREIN AND, EXCEPT AS SPECIFICALLY SET FORTH HEREIN OR
THEREIN, NEITHER THE COMPANY NOR ANY BUYER MAKES ANY REPRESENTATION, WARRANTY,
COVENANT OR UNDERTAKING WITH RESPECT TO SUCH MATTERS.  NO PROVISION OF THIS
AGREEMENT MAY BE AMENDED OTHER THAN BY AN INSTRUMENT IN WRITING SIGNED BY THE
COMPANY AND THE REQUIRED HOLDERS, AND ANY AMENDMENT TO THIS AGREEMENT MADE IN
CONFORMITY WITH THE PROVISIONS OF THIS SECTION 9(E) SHALL BE BINDING ON ALL
BUYERS AND HOLDERS OF SECURITIES, AS APPLICABLE.  NO PROVISION HEREOF MAY BE
WAIVED OTHER THAN BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM
ENFORCEMENT IS SOUGHT.  NO SUCH AMENDMENT SHALL BE EFFECTIVE TO THE EXTENT THAT
IT APPLIES TO LESS THAN ALL OF THE HOLDERS OF THE APPLICABLE SECURITIES THEN
OUTSTANDING.  NO CONSIDERATION SHALL BE OFFERED OR PAID TO ANY PERSON TO AMEND
OR CONSENT TO A WAIVER OR MODIFICATION OF ANY PROVISION OF ANY OF THE
TRANSACTION DOCUMENTS UNLESS THE SAME CONSIDERATION ALSO IS OFFERED TO ALL OF
THE PARTIES TO THE TRANSACTION DOCUMENTS, HOLDERS OF COMMON SHARES OR HOLDERS OF
THE WARRANTS, AS THE CASE MAY BE.  THE COMPANY HAS NOT, DIRECTLY OR INDIRECTLY,
MADE ANY AGREEMENTS WITH ANY BUYERS RELATING TO THE TERMS OR CONDITIONS OF THE
TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS EXCEPT AS SET FORTH IN
THE TRANSACTION DOCUMENTS.  WITHOUT LIMITING THE FOREGOING, THE COMPANY CONFIRMS
THAT,

28

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

EXCEPT AS SET FORTH IN THIS AGREEMENT, NO BUYER HAS MADE ANY COMMITMENT OR
PROMISE OR HAS ANY OTHER OBLIGATION TO PROVIDE ANY FINANCING TO THE COMPANY OR
OTHERWISE.

(F)            NOTICES.  ANY NOTICES, CONSENTS, WAIVERS OR OTHER COMMUNICATIONS
REQUIRED OR PERMITTED TO BE GIVEN UNDER THE TERMS OF THIS AGREEMENT MUST BE IN
WRITING AND WILL BE DEEMED TO HAVE BEEN DELIVERED:  (I) UPON RECEIPT, WHEN
DELIVERED PERSONALLY; (II) UPON RECEIPT, WHEN SENT BY FACSIMILE (PROVIDED
CONFIRMATION OF TRANSMISSION IS MECHANICALLY OR ELECTRONICALLY GENERATED AND
KEPT ON FILE BY THE SENDING PARTY); OR (III) ONE BUSINESS DAY AFTER DEPOSIT WITH
AN OVERNIGHT COURIER SERVICE, IN EACH CASE PROPERLY ADDRESSED TO THE PARTY TO
RECEIVE THE SAME.  THE ADDRESSES AND FACSIMILE NUMBERS FOR SUCH COMMUNICATIONS
SHALL BE:

 

If to the Company:

 

 

 

Apollo Resources International, Inc.

 

3001 Knox Street, Suite 403,

 

Dallas, Texas 75205

 

Telephone:

 

(214) 389-9800

 

Facsimile:

 

(214) 389-9806

 

Attention:

 

Chief Executive Officer

 

 

 

 

 

Copy to (for informational purposes only):

 

 

 

 

 

Scheef & Stone, LLP

 

Telephone:

 

(214) 706-4200

 

Facsimile:

 

(214) 706-4242

 

Attention:

 

Roger A. Crabb, Esq.

 

 

 

 

 

If to the Transfer Agent:

 

 

 

 

 

Colonial Stock Transfer

 

66 Exchange Place

 

Salt Lake City, Utah 84111

 

Telephone:

 

(801) 355-5740

 

Facsimile:

 

(801) 355-6505

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the Schedule
of Buyers,

 

with a copy (for informational purposes only) to:

 

 

 

Schulte Roth & Zabel LLP

 

919 Third Avenue

 

New York, New York 10022

 

Telephone:

 

(212) 756-2000

 

Facsimile:

 

(212) 593-5955

 

Attention:

 

Eleazer N. Klein, Esq.

 

29

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

or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change. 
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

(G)           SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF THE PARTIES AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS,
INCLUDING ANY PURCHASERS OF THE COMMON SHARES OR THE WARRANTS.  THE COMPANY
SHALL NOT ASSIGN THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER WITHOUT
THE PRIOR WRITTEN CONSENT OF THE REQUIRED HOLDERS (UNLESS THE COMPANY IS IN
COMPLIANCE WITH THE APPLICABLE PROVISIONS GOVERNING FUNDAMENTAL TRANSACTIONS SET
FORTH IN THE COMMON SHARES AND THE WARRANTS).  A BUYER MAY ASSIGN SOME OR ALL OF
ITS RIGHTS HEREUNDER WITHOUT THE CONSENT OF THE COMPANY, IN WHICH EVENT SUCH
ASSIGNEE SHALL BE DEEMED TO BE A BUYER HEREUNDER WITH RESPECT TO SUCH ASSIGNED
RIGHTS.

(H)           NO THIRD PARTY BENEFICIARIES.  THIS AGREEMENT IS INTENDED FOR THE
BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE PERMITTED SUCCESSORS AND
ASSIGNS, AND IS NOT FOR THE BENEFIT OF, NOR MAY ANY PROVISION HEREOF BE ENFORCED
BY, ANY OTHER PERSON.

(I)            SURVIVAL.  UNLESS THIS AGREEMENT IS TERMINATED UNDER SECTION 8,
THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE BUYERS CONTAINED IN
SECTIONS 2 AND 3 AND THE AGREEMENTS AND COVENANTS SET FORTH IN SECTIONS 4, 5 AND
9 SHALL SURVIVE THE CLOSING AND THE DELIVERY AND EXERCISE OF SECURITIES, AS
APPLICABLE.  EACH BUYER SHALL BE RESPONSIBLE ONLY FOR ITS OWN REPRESENTATIONS,
WARRANTIES, AGREEMENTS AND COVENANTS HEREUNDER.

(J)            FURTHER ASSURANCES.  EACH PARTY SHALL DO AND PERFORM, OR CAUSE TO
BE DONE AND PERFORMED, ALL SUCH FURTHER ACTS AND THINGS, AND SHALL EXECUTE AND
DELIVER ALL SUCH OTHER AGREEMENTS, CERTIFICATES, INSTRUMENTS AND DOCUMENTS, AS
ANY OTHER PARTY MAY REASONABLY REQUEST IN ORDER TO CARRY OUT THE INTENT AND
ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY.

(K)           INDEMNIFICATION.  IN CONSIDERATION OF EACH BUYER’S EXECUTION AND
DELIVERY OF THE TRANSACTION DOCUMENTS AND ACQUIRING THE SECURITIES THEREUNDER
AND IN ADDITION TO ALL OF THE COMPANY’S OTHER OBLIGATIONS UNDER THE TRANSACTION
DOCUMENTS, THE COMPANY SHALL DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS EACH
BUYER AND EACH OTHER HOLDER OF THE SECURITIES AND ALL OF THEIR STOCKHOLDERS,
PARTNERS, MEMBERS, OFFICERS, DIRECTORS, EMPLOYEES AND DIRECT OR INDIRECT
INVESTORS AND ANY OF THE FOREGOING PERSONS’ AGENTS OR OTHER REPRESENTATIVES
(INCLUDING, WITHOUT LIMITATION, THOSE RETAINED IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT) (COLLECTIVELY, THE “INDEMNITEES”)
FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES,
COSTS, PENALTIES, FEES, LIABILITIES AND DAMAGES, AND EXPENSES IN CONNECTION
THEREWITH (IRRESPECTIVE OF WHETHER ANY SUCH INDEMNITEE IS A PARTY TO THE ACTION
FOR WHICH INDEMNIFICATION HEREUNDER IS SOUGHT), AND INCLUDING REASONABLE
ATTORNEYS’ FEES AND DISBURSEMENTS (THE “INDEMNIFIED LIABILITIES”), INCURRED BY
ANY INDEMNITEE AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO (A) ANY
MISREPRESENTATION OR BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY THE

30

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

COMPANY IN THE TRANSACTION DOCUMENTS OR ANY OTHER CERTIFICATE, INSTRUMENT OR
DOCUMENT CONTEMPLATED HEREBY OR THEREBY, (B) ANY BREACH OF ANY COVENANT,
AGREEMENT OR OBLIGATION OF THE COMPANY CONTAINED IN THE TRANSACTION DOCUMENTS OR
ANY OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY OR
(C) ANY CAUSE OF ACTION, SUIT OR CLAIM BROUGHT OR MADE AGAINST SUCH INDEMNITEE
BY A THIRD PARTY (INCLUDING FOR THESE PURPOSES A DERIVATIVE ACTION BROUGHT ON
BEHALF OF THE COMPANY) AND ARISING OUT OF OR RESULTING FROM (I) THE EXECUTION,
DELIVERY, PERFORMANCE OR ENFORCEMENT OF THE TRANSACTION DOCUMENTS OR ANY OTHER
CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY, (II) ANY
TRANSACTION FINANCED OR TO BE FINANCED IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, WITH THE PROCEEDS OF THE ISSUANCE OF THE SECURITIES, (III) ANY
DISCLOSURE MADE BY SUCH BUYER PURSUANT TO SECTION 4(I) OR (IV) THE STATUS OF
SUCH BUYER OR HOLDER OF THE SECURITIES AS AN INVESTOR IN THE COMPANY PURSUANT TO
THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS.  TO THE EXTENT THAT
THE FOREGOING UNDERTAKING BY THE COMPANY MAY BE UNENFORCEABLE FOR ANY REASON,
THE COMPANY SHALL MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION
OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE
LAW.  EXCEPT AS OTHERWISE SET FORTH HEREIN, THE MECHANICS AND PROCEDURES WITH
RESPECT TO THE RIGHTS AND OBLIGATIONS UNDER THIS SECTION 9(K) SHALL BE THE SAME
AS THOSE SET FORTH IN SECTION 6 OF THE REGISTRATION RIGHTS AGREEMENT.

(L)            NO STRICT CONSTRUCTION.  THE LANGUAGE USED IN THIS AGREEMENT WILL
BE DEEMED TO BE THE LANGUAGE CHOSEN BY THE PARTIES TO EXPRESS THEIR MUTUAL
INTENT, AND NO RULES OF STRICT CONSTRUCTION WILL BE APPLIED AGAINST ANY PARTY.

(M)          REMEDIES.  EACH BUYER AND EACH HOLDER OF THE SECURITIES SHALL HAVE
ALL RIGHTS AND REMEDIES SET FORTH IN THE TRANSACTION DOCUMENTS AND ALL RIGHTS
AND REMEDIES WHICH SUCH HOLDERS HAVE BEEN GRANTED AT ANY TIME UNDER ANY OTHER
AGREEMENT OR CONTRACT AND ALL OF THE RIGHTS WHICH SUCH HOLDERS HAVE UNDER ANY
LAW.  ANY PERSON HAVING ANY RIGHTS UNDER ANY PROVISION OF THIS AGREEMENT SHALL
BE ENTITLED TO ENFORCE SUCH RIGHTS SPECIFICALLY (WITHOUT POSTING A BOND OR OTHER
SECURITY), TO RECOVER DAMAGES BY REASON OF ANY BREACH OF ANY PROVISION OF THIS
AGREEMENT AND TO EXERCISE ALL OTHER RIGHTS GRANTED BY LAW.  FURTHERMORE, THE
COMPANY RECOGNIZES THAT IN THE EVENT THAT IT FAILS TO PERFORM, OBSERVE, OR
DISCHARGE ANY OR ALL OF ITS OBLIGATIONS UNDER THE TRANSACTION DOCUMENTS, ANY
REMEDY AT LAW MAY PROVE TO BE INADEQUATE RELIEF TO THE BUYERS.  THE COMPANY
THEREFORE AGREES THAT THE BUYERS SHALL BE ENTITLED TO SEEK TEMPORARY AND
PERMANENT INJUNCTIVE RELIEF IN ANY SUCH CASE WITHOUT THE NECESSITY OF PROVING
ACTUAL DAMAGES AND WITHOUT POSTING A BOND OR OTHER SECURITY.

(N)           RESCISSION AND WITHDRAWAL RIGHT.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN (AND WITHOUT LIMITING ANY SIMILAR PROVISIONS OF) THE
TRANSACTION DOCUMENTS, WHENEVER ANY BUYER EXERCISES A RIGHT, ELECTION, DEMAND OR
OPTION UNDER A TRANSACTION DOCUMENT AND THE COMPANY DOES NOT TIMELY PERFORM ITS
RELATED OBLIGATIONS WITHIN THE PERIODS THEREIN PROVIDED, THEN SUCH BUYER 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.

(O)           PAYMENT SET ASIDE.  TO THE EXTENT THAT THE COMPANY MAKES A PAYMENT
OR PAYMENTS TO THE BUYERS HEREUNDER OR PURSUANT TO ANY OF THE OTHER TRANSACTION
DOCUMENTS OR THE BUYERS ENFORCE OR EXERCISE THEIR RIGHTS HEREUNDER OR
THEREUNDER, AND SUCH PAYMENT OR PAYMENTS OR THE PROCEEDS OF SUCH ENFORCEMENT OR
EXERCISE OR ANY PART THEREOF ARE SUBSEQUENTLY INVALIDATED,

31

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

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, FOREIGN, 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.

(P)           INDEPENDENT NATURE OF BUYERS’ OBLIGATIONS AND RIGHTS.  THE
OBLIGATIONS OF EACH BUYER UNDER ANY TRANSACTION DOCUMENT ARE SEVERAL AND NOT
JOINT WITH THE OBLIGATIONS OF ANY OTHER BUYER, AND NO BUYER SHALL BE RESPONSIBLE
IN ANY WAY FOR THE PERFORMANCE OF THE OBLIGATIONS OF ANY OTHER BUYER UNDER ANY
TRANSACTION DOCUMENT.  NOTHING CONTAINED HEREIN OR IN ANY OTHER TRANSACTION
DOCUMENT, AND NO ACTION TAKEN BY ANY BUYER PURSUANT HERETO OR THERETO, SHALL BE
DEEMED TO CONSTITUTE THE BUYERS AS A PARTNERSHIP, AN ASSOCIATION, A JOINT
VENTURE OR ANY OTHER KIND OF ENTITY, OR CREATE A PRESUMPTION THAT THE BUYERS ARE
IN ANY WAY ACTING IN CONCERT OR AS A GROUP WITH RESPECT TO SUCH OBLIGATIONS OR
THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS AND THE COMPANY
ACKNOWLEDGES THAT THE BUYERS ARE NOT ACTING IN CONCERT OR AS A GROUP, AND THE
COMPANY WILL NOT ASSERT ANY SUCH CLAIM, WITH RESPECT TO SUCH OBLIGATIONS OR THE
TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS.  EACH BUYER CONFIRMS
THAT IT HAS INDEPENDENTLY PARTICIPATED IN THE NEGOTIATION OF THE TRANSACTION
CONTEMPLATED HEREBY WITH THE ADVICE OF ITS OWN COUNSEL AND ADVISORS.  EACH BUYER
SHALL BE ENTITLED TO INDEPENDENTLY PROTECT AND ENFORCE ITS RIGHTS, INCLUDING,
WITHOUT LIMITATION, THE RIGHTS ARISING OUT OF THIS AGREEMENT OR OUT OF ANY OTHER
TRANSACTION DOCUMENTS, AND IT SHALL NOT BE NECESSARY FOR ANY OTHER BUYER TO BE
JOINED AS AN ADDITIONAL PARTY IN ANY PROCEEDING FOR SUCH PURPOSE.

[Signature Page Follows]

 

32

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

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

COMPANY:

 

 

 

 

APOLLO RESOURCES INTERNATIONAL, INC.

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

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

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS:

 

 

 

 

CASTLERIGG MASTER INVESTMENTS LTD.

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

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

SCHEDULE OF BUYERS

 

(1)

 

(2)

 

(3)

 

(4)

 

(5)

 

(6)

Buyer

 

Address and
Facsimile
Number

 

Number of
Common
Shares

 

Number of 
Warrant
Shares

 

Purchase
Price

 

Legal Representative’s
Address and Facsimile
Number

Castlerigg Master
Investments Ltd.

 

c/o Sandell Asset
Management
40 West 57th St
26th Floor
New York, NY 10019
Attention: Cem Hacioglu
                 Matthew Pliskin
Fax: 212-603-5710
Telephone: 212-603-5700
Residence: British Virgin
Islands

 

13,157,895

 

16,447,369

 

$5,000,000

 

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Eleazer Klein, Esq.
Facsimile: (212) 593-5955
Telephone: (212) 756-2376

 

 

 

 

 

 

 

 

 

 

 

 

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

EXHIBITS

Exhibit A

 

Form of Warrants

Exhibit B

 

Registration Rights Agreement

Exhibit C

 

Irrevocable Transfer Agent Instructions

Exhibit D

 

Form of Outside Company Counsel Opinion

Exhibit E

 

Form of Secretary’s Certificate

Exhibit F

 

Form of Officer’s Certificate

 

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