SECURITIES PURCHASE AGREEMENT
 
SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of November 1, 2007,
by and among Akeena Solar, Inc., a Delaware corporation with headquarters
located at 16005 Los Gatos Boulevard, Los Gatos, California 94032 (the
“Company”), and the investors listed on the Schedule of Investors attached
hereto as Exhibit A (individually, an “Investor” and collectively, the
“Investors”).
 
BACKGROUND

A. The Company and each Investor are executing and delivering this Agreement in
reliance upon the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of
Regulation D (“Regulation D”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act.
 
B. Each Investor, severally and not jointly, wishes to purchase, and the Company
wishes to sell, upon the terms and conditions stated in this Agreement, (i) that
aggregate number of shares of the common stock, par value $0.001 per share, of
the Company (the “Common Stock”), set forth opposite such Investor’s name in
column two (2) on the Schedule of Investors in Exhibit A (which aggregate amount
for all Investors together shall be 3,728,572 shares of Common Stock and shall
collectively be referred to herein as the “Common Shares”) and (ii) warrants, in
substantially the form attached hereto as Exhibit F (the “Warrants”) to acquire
up to that number of additional shares of Common Stock set forth opposite such
Investor’s name in column three (3) on the Schedule of Investors (the shares of
Common Stock issuable upon exercise of or otherwise pursuant to the Warrants,
collectively, the “Warrant Shares”).
 
C. The Common Shares, the Warrants and the Warrant Shares issued pursuant to
this Agreement are collectively referred to herein as the “Securities.”
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
 
ARTICLE I
DEFINITIONS
 
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms have the meanings indicated:
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act.
 
“Agent” has the meaning set forth in Section 3.1(l).
 

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“Agreement” has the meaning set forth in the Preamble.
 
“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.
 
“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.
 
“Closing Date” means the date and time of the Closing and shall be on such date
and time as is mutually agreed to by the Company and each Investor.
 
“Company” has the meaning set forth in the Preamble.
 
“Company Counsel” means DLA Piper US LLP, counsel to the Company.
 
“Common Shares” has the meaning set forth in the Preamble.
 
“Common Stock” has the meaning set forth in the Preamble.
 
“Contingent Obligation” has the meaning set forth in Section 3.1(bb).
 
“Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.
 
“Disclosure Materials” has the meaning set forth in Section 3.1(g).
 
“Effective Date” means the date that the Registration Statement is first
declared effective by the SEC.
 
“Effectiveness Period” has the meaning set forth in Section 6.1(b).
 
“8-K Filing” has the meaning set forth in Section 4.5. 
 
“Eligible Market” means any of the New York Stock Exchange, the American Stock
Exchange, The Nasdaq Global Select Market, The Nasdaq Global Market or The
Nasdaq Capital Market.
 
“Environmental Laws” has the meaning set forth in Section 3.1(ee).
 
“Event” has the meaning set forth in Section 6.1(d).
 
“Event Payments” has the meaning set forth in Section 6.1(d).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Excluded Events” has the meaning set forth in Section 6.1(d)(ii).
 
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“Excluded Investors” means Cowen and Company, LLC and its Affiliates.
 
“Existing Holders” are existing holders of the Company’s Common Stock that
purchased such Common Stock pursuant to the provisions of the Company’s
Securities Purchase Agreements.
 
“Filing Date” means 30 days after the Closing Date.
 
“GAAP” has the meaning set forth in Section 3.1(g).
 
“Hazardous Materials” has the meaning set forth in Section 3.1(ee).
 
“Indebtedness” has the meaning set forth in Section 3.1(bb).
 
“Indemnified Party” has the meaning set forth in Section 6.4(c).
 
“Indemnifying Party” has the meaning set forth in Section 6.4(c).
 
“Insolvent” has the meaning set forth in Section 3.1(h).
 
“Intellectual Property Rights” has the meaning set forth in Section 3.1(u).
 
“Investor” has the meaning set forth in the Preamble.
 
“Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.
 
“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, reasonable attorneys’ fees.
 
“Material Adverse Effect” means (i) a material adverse effect on the results of
operations, assets, business or financial condition of the Company and the
Subsidiaries, taken as a whole on a consolidated basis, or (ii) materially and
adversely impair the Company's ability to perform its obligations under any of
the Transaction Documents, provided, that none of the following alone shall be
deemed, in and of itself, to constitute a Material Adverse Effect: (i) a change
in the market price or trading volume of the Common Stock or (ii) changes in
general economic conditions or changes affecting the industry in which the
Company operates generally (as opposed to Company-specific changes) so long as
such changes do not have a disproportionate effect on the Company and its
Subsidiaries taken as a whole.
 
“Material Permits” has the meaning set forth in Section 3.1(v).
 
“Options” means any outstanding rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
 
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“Person” means any individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, or
joint stock company.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, a partial proceeding, such as a deposition),
whether commenced or threatened in writing.
 
“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A, 430B or Rule 430C promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
 
“Registrable Securities” means the Common Shares and the Warrant Shares issued
or issuable pursuant to the Transaction Documents, together with any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.
 
“Registration Statement” means each registration statement required to be filed
under Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
 
“Regulation D” has the meaning set forth in the Preamble.
 
“Required Effectiveness Date” means the date which is the earliest of (i) if the
Registration Statement does not become subject to review by the SEC, (a) ninety
(90) days after the Closing Date or (b) five (5) Trading Days after the Company
receives notification from the SEC that the Registration Statement will not
become subject to review and the Company fails to request to accelerate the
effectiveness of the Registration Statement, or (ii) if the Registration
Statement becomes subject to review by the SEC, one hundred thirty five (135)
days after the Closing Date.
 
“Rule 144,” “Rule 415,” “Rule 424,” “Rule 430A,” “Rule 430B,” and “Rule 430C”
means Rule 144, Rule 415, Rule 424, Rule 430A, Rule 430B, and Rule 430C
respectively, promulgated by the SEC pursuant to the Securities Act, as such
Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.
 
“SEC” has the meaning set forth in the Preamble.
 
“SEC Reports” has the meaning set forth in Section 3.1(g).
 
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“Securities” has the meaning set forth in the Preamble.
 
“Securities Act” has the meaning set forth in the Preamble.
 
“Securities Purchase Agreements” has the meaning set forth in Section 3.1(d).
 
“Shares” means shares of Common Stock.
 
“Short Sales” has the meaning set forth in Section 3.2(h).
 
“Subsidiary” means any direct or indirect subsidiary of the Company.
 
“Trading Day” means (a) any day on which the Common Stock is listed or quoted or
traded on its primary Trading Market, (b) if the Common Stock is not then listed
or quoted or traded on its primary Trading Market, the any date on which the
common Stock is listed or quoted or traded on any other Eligible Market (or any
respective successor thereto), or (c) if trading ceases to occur on any Eligible
Market (or any respective successor thereto), any Business Day.
 
“Trading Market” means The Nasdaq Capital Market or any other Eligible Market or
any national securities exchange, market or trading or quotation facility on
which the Common Stock is then listed or quoted.
 
“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Warrants and the Transfer Agent Instructions.
 
“Transfer Agent” means Empire Stock Transfer, Inc. or any successor transfer
agent for the Company.
 
“Transfer Agent Instructions” means, with respect to the Company, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit E, executed by
the Company and delivered to and acknowledged in writing by the Transfer Agent.
 
“Warrants” has the meaning set forth in the Preamble.
 
“Warrant Shares” has the meaning set forth in the Preamble.
 
ARTICLE II
PURCHASE AND SALE
 
2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at
the Closing the Company shall issue and sell to each Investor, and each Investor
shall, severally and not jointly, purchase from the Company, such number of
Common Shares and Warrants for the price set forth opposite such Investor's name
on Exhibit A hereto under the headings “Common Shares” and “Warrants”. The date
and time of the Closing and shall be 11:00 a.m., New York City Time, on the
Closing Date. The Closing shall take place at the offices of the Company’s
Counsel.
 
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2.2 Closing Deliveries.
 
(a) At the Closing, the Company shall deliver or cause to be delivered to each
Investor the following:
 
(i) one or more stock certificates (or copies thereof provided by the Transfer
Agent), containing the restrictive and other legends provided in Section 4.1(b)
hereof, evidencing such number of Common Shares set forth opposite such
Investor’s name on Exhibit A hereto under the heading “Common Shares,”
registered in the name of such Investor;
 
(ii) a Warrant, issued in the name of such Investor, pursuant to which such
Investor shall have the right to acquire such number of Warrant Shares set forth
opposite such Investor’s name on Exhibit A hereto under the heading “Warrant
Shares”; and
 
(iii) a legal opinion of Company Counsel, in the form of Exhibit C, executed by
such counsel and delivered to the Investors.
 
(b) At the Closing, each Investor shall deliver or cause to be delivered to the
Company the purchase price set forth opposite such Investor’s name on Exhibit A
hereto under the heading “Purchase Price” in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing to such Investor by the Company for such purpose.
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES
 
3.1 Representations and Warranties of the Company. Except as disclosed in the
corresponding section of the Schedules, which Schedules shall be deemed a part
hereof, the Company hereby represents and warrants to the Investors and the
Agent as follows:
 
(a) Subsidiaries. The Company has no Subsidiaries other than those listed in
Schedule 3.1(a) hereto. Except as disclosed in Schedule 3.1(a) hereto, the
Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any Lien and all the
issued and outstanding shares of capital stock or comparable equity interest of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.
 
(b) Organization and Qualification. Each of the Company and the Subsidiaries is
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as applicable), with
the requisite corporate authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified to
do business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not, individually or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
 
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(c) Authorization; Enforcement. The Company has the requisite corporate
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents to which it is a party and otherwise to carry out
its obligations hereunder and thereunder. The execution and delivery of each of
the Transaction Documents to which it is a party by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of the Company and
no further consent or action is required by the Company, its Board of Directors
or its stockholders. Each of the Transaction Documents to which it is a party
has been (or upon delivery will be) duly executed by the Company and is, or when
delivered in accordance with the terms hereof, will constitute, the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors rights generally, and (ii) the effect of
rules of law governing the availability of specific performance and other
equitable remedies.
 
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents to which it is a party by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not, and will
not, (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise), including, without limitation, under those certain
Securities Purchase Agreements, dated March 8, 2007 and May 25, 2007,
respectively, between the Company and the investors named therein (the
“Securities Purchase Agreements”) or other understanding to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound, or affected, except to the extent that such conflict,
default or rights would not reasonably be expected to have a Material Adverse
Effect, or (iii) to the Company’s knowledge, result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including, assuming the accuracy of the representations and warranties
of the Investors set forth in Section 3.2 hereof, federal and state securities
laws and regulations and the rules and regulations of any self-regulatory
organization to which the Company or its securities are subject, including all
applicable Trading Markets), or by which any property or asset of the Company or
a Subsidiary is bound or affected, except to the extent that such violation
would not reasonably be expected to have a Material Adverse Effect.
 
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(e) The Securities. The Securities (including the Warrant Shares) are duly
authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens and will not be subject to preemptive or similar rights
(“Preemptive Rights”) of stockholders (other than those imposed by (i) the
Investors or (ii) any Preemptive Rights set forth in the Securities Purchase
Agreements for which proper notice was delivered to such Existing Holders by the
Company with respect to their rights to participate in this offering of
Securities and for which such Preemptive Rights have been either exercised or
lapsed with respect to such Existing Holders after proper notice under the
Securities Purchase Agreements). The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
upon exercise of the Warrants. The offer, issuance and sale of the Shares, the
Warrants and the Warrant Shares to the Investors pursuant to this Agreement, and
in the case of the Warrant Shares, pursuant to the Warrants as of the date
hereof, are exempt from the registration requirements of the Securities Act.
 
(f) Capitalization. The aggregate number of shares and type of all authorized,
issued and outstanding classes of capital stock, options and other securities of
the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f) hereto. All outstanding shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable and have been issued in
compliance in all material respects with all applicable securities laws. Except
as disclosed in the Securities Purchase Agreements and in Schedule 3.1(f)
hereto, the Company did not have outstanding as of the date hereof any other
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or entered into any
agreement giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. Except as set forth on Schedule 3.1(f) hereto, and except for
customary adjustments as a result of stock dividends, stock splits, combinations
of shares, reorganizations, recapitalizations, reclassifications or other
similar events, there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) and the issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Investors) and will not result in a right of any holder
of securities to adjust the exercise, conversion, exchange or reset price under
such securities. To the knowledge of the Company, except as disclosed in the SEC
Reports and any Schedules filed with the SEC pursuant to Rule 13d-1 of the
Exchange Act by reporting persons or in Schedule 3.1(f) hereto, no Person or
group of related Persons beneficially owns (as determined pursuant to Rule 13d-3
under the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Stock.
 
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(g) SEC Reports; Financial Statements. Since February 3, 2006, the Company has
filed all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof. Such reports required to be filed by
the Company under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, together with any materials filed or furnished by the Company under the
Exchange Act, whether or not any such reports were required being collectively
referred to herein as the “SEC Reports” and, together with this Agreement and
the Schedules to this Agreement, the “Disclosure Materials”. As of their
respective dates, the SEC Reports filed by the Company complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the SEC promulgated thereunder, and none of the SEC
Reports, when filed by the Company, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the SEC with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements, the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP or may be condensed or
summary statements, and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments. All material agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject are included as part of or identified in the SEC Reports,
to the extent such agreements are required to be included or identified pursuant
to the rules and regulations of the SEC.
 
(h) Since the date of the latest audited financial statements included within
the SEC Reports, except as disclosed in Schedule 3.1(h) hereto, (i) there has
been no event, occurrence or development that, individually or in the aggregate,
has had or that would result in a Material Adverse Effect, (ii) the Company has
not incurred any material liabilities other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the SEC, (iii) the Company has not altered its method of accounting or
changed its auditors, except as disclosed in Schedule 3.1(h) hereto, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders, in their capacities as such, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock (except for repurchases by the Company of shares of capital stock held by
employees, officers, directors, or consultants pursuant to an option to
repurchase such shares upon the termination of employment or services), and
(v) the Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to current or previously existing Company stock-based
plans. 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 is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the applicable Closing, will not be
Insolvent (as defined below). For purposes of this Section 3.1(h), “Insolvent”
means (i)  the present fair saleable value of the Company's assets is less than
the amount required to pay the Company's total Indebtedness (as defined in
Section 3.1(bb)), (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature or
(iv) the Company has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted.
 
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(i) Absence of Litigation. Except as disclosed in Schedule 3(i), there is no
action, suit, claim, or Proceeding, or, to the Company’s knowledge, inquiry or
investigation, before or by any court, public board, government agency, or
self-regulatory organization pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries that
could, individually or in the aggregate, have a Material Adverse Effect.
 
(j) Compliance. Except as described in Schedule 3.1(j), neither the Company nor
any Subsidiary, except in each case as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect, (i) is in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received written notice of a claim that it is in default under
or that it is in violation of, any material indenture, loan or credit agreement
or any other material agreement or instrument to which it is a party or by which
it or any of its properties is bound (whether or not such default or violation
has been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any material statute,
rule or regulation of any governmental authority.  
 
(k) Title to Assets. The Company and the Subsidiaries have good and marketable
title to all real property owned by them that is material to the business of the
Company and the Subsidiaries have good and marketable title in all personal
property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens that do
not, individually or in the aggregate, have or result in a Material Adverse
Effect. To the Company’s knowledge, any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid and
subsisting leases of which the Company and the Subsidiaries are in material
compliance.
 
(l) 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’ commission (other than for persons engaged
by any Investor or its investment advisor) relating to or arising out of the
issuance of the Securities pursuant to this Agreement. The Company acknowledges
that it has engaged Cowen and Company, LLC as its exclusive placement agent (the
“Agent”) in connection with the sale of the Securities. Other than the Agent,
the Company has not engaged any placement agent or other agent in connection
with the sale of the Securities.
 
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(m) No Integration. Neither the Company nor any of its Affiliates nor, any
Person acting on the Company’s behalf has, directly or indirectly, at any time
within the past six months, made any offer or sale of any security or
solicitation of any offer to buy any security under circumstances that would
(i) eliminate the availability of the exemption from registration under
Regulation D under the Securities Act in connection with the offer and sale by
the Company of the Securities as contemplated hereby or (ii) cause the offering
of the Securities pursuant to the Transaction Documents to be integrated with
prior offerings by the Company for purposes of any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of any Trading Market. The Company is not required to be registered
as, and is not an Affiliate of, an “investment company” within the meaning of
the Investment Company Act of 1940, as amended. The Company is not required to
be registered as, a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.
 
(n) Private Placement. Assuming the accuracy of the representations and
warranties of the Investors contained in Section 3.2 of this Agreement and the
compliance by the Investors with the provisions set forth herein, it is not
necessary, in connection with the issuance and sale of any Securities, in the
manner contemplated by the Transaction Documents, to register any Securities
under the Securities Act.
 
(o) Eligibility for Registration. The Company is eligible to register the Common
Shares and the Warrant Shares for resale by the Investors using Form S-3 or Form
SB-2 promulgated under the Securities Act.
 
(p) Listing and Maintenance Requirements. The Company has not, in the twelve
months preceding the date hereof, received written notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is in compliance, in all
material respects, with all such listing and maintenance requirements.
 
(q) Registration Rights. Except as described in Schedule 3.1(q), the Company has
not granted or agreed to grant to any Person any rights (including “piggy-back”
registration rights) to have any securities of the Company registered with the
SEC or any other governmental authority that have not been satisfied or waived.
 
(r) Application of Takeover Protections. Except as described in Schedule 3.1(r),
there is no control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s charter documents or the laws of its
state of incorporation that is or could become applicable to any of the
Investors as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including, without limitation, as a result of the Company’s issuance of the
Securities and the Investors’ ownership of the Securities.
 
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(s) Disclosure. The Company confirms that neither it nor any officers, directors
or Affiliates, has provided any of the Investors (other than Excluded Investors)
or their agents or counsel with any information that constitutes or might
constitute material, nonpublic information (other than the existence and terms
of the issuance of Securities, as contemplated by this Agreement). The Company
understands and confirms that each of the Investors will rely on the foregoing
representations in effecting transactions in securities of the Company (other
than Excluded Investors). All disclosure provided by the Company to the
Investors regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on the behalf
of the Company are true and correct in all material respects and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Investor (other than Excluded Investors) makes
or has made any representations or warranties with respect to the transactions
contemplated hereby other than those set forth in the Transaction Documents.
 
(t) Acknowledgment Regarding Investors' Purchase of Securities. Based upon the
assumption that the transactions contemplated by this Agreement are consummated
in all material respects in conformity with the Transaction Documents, the
Company acknowledges and agrees that each of the Investors (other than Excluded
Investors) 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. The Company further acknowledges that no Investor (other than
Excluded Investors) is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Investor (other than Excluded
Investors) or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to the Investors’ purchase of the Securities. The
Company further represents to each Investor that the Company’s decision to enter
into this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
 
(u) Patents and Trademarks. To the Company’s knowledge, the Company and its
Subsidiaries own, or possess adequate rights or licenses to use, all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent applications, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights (“Intellectual Property Rights”) necessary to conduct their respective
businesses as now conducted. Except as set forth in Schedule 3.1(u), none of the
Company's Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement. The Company does not have any knowledge of any infringement by the
Company or its Subsidiaries of Intellectual Property Rights of others. Except as
disclosed in Schedule 3(u), there is no claim, action or proceeding being made
or brought, or to the knowledge of the Company, being threatened, against the
Company or its Subsidiaries regarding its Intellectual Property Rights.
 
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(v) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses and location in which the
Company and the Subsidiaries are engaged.
 
(w) Regulatory Permits. To the Company’s knowledge, the Company and the
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports (“Material
Permits”), except where the failure to possess such permits does not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, and neither the Company nor any Subsidiary has received
any written notice of proceedings relating to the revocation or modification of
any Material Permit.
 
(x) Transactions With Affiliates. Except as set forth or incorporated by
reference in the Company’s SEC Reports, none of the officers or directors of the
Company is presently a party to any transaction that would be required to be
disclosed pursuant to Item 404 of Regulation S-B with the Company or any of its
Subsidiaries (other than for ordinary course services as 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
or director or, to the Company's knowledge, any corporation, partnership, trust
or other entity in which any such officer or director has a substantial interest
or is an officer, director, trustee or partner.
 
(y) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
 
(z) Sarbanes-Oxley Act. The Company is in compliance in all respects with
applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules
and regulations promulgated by the SEC thereunder, except where such
noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.
 
(aa) Foreign Corrupt Practices. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, 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 (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, except where such actions would not have, individually or in the
aggregate, a Material Adverse Effect.
 
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(bb) Indebtedness. Except as disclosed in Schedule 3.1(bb), neither the Company
nor any of its Subsidiaries (i) has any outstanding Indebtedness (as defined
below) or (ii) 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. For purposes of
this Agreement: (x) “Indebtedness” of any Person means, without duplication
(A) all indebtedness for borrowed money, (B) all obligations issued, undertaken
or assumed as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business), (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) “Contingent Obligation” means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; and
(z) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
 
(cc) Employee Relations. Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or, to the Company’s knowledge,
employs any member of a union. The Company believes that its relations with its
employees are as disclosed in the SEC Reports. Except as disclosed in Schedule
3(cc), since January 1, 2007 no executive officer of the Company or any of its
Subsidiaries (as defined in Rule 501(f) of the Securities Act) has notified in
writing 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. To the knowledge of the
Company or any such Subsidiary, no executive officer of the Company or any of
its Subsidiaries is 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 such Subsidiary to any liability with respect to any
of the foregoing matters.
 
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(dd) Labor Matters. The Company and its Subsidiaries are in compliance in all
material respects 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.
 
(ee) Environmental Laws. To the Company’s knowledge, the Company and its
Subsidiaries (i) are in compliance in all material respects 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 in all
material respects with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply would be reasonably expected to have, individually or in
the aggregate, a 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.
 
(ff) Subsidiary Rights. Except as set forth in Schedule 3.1(ff), the Company or
its Subsidiaries have 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.
 
(gg) Tax Status. The Company and each of its Subsidiaries (i) has made or filed
all foreign, federal and state income and all other material 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.
 
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(hh) Regulation M Compliance. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Agent in connection with the placement of the
Securities.
 
(ii) Disclosure Controls and Procedures. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 of the General
Rules and Regulations under the Exchange Act) that comply with the requirements
of the Exchange Act; such disclosure controls and procedures have been designed
to ensure that information required to be disclosed by the Company and its
Subsidiaries is accumulated and communicated to the Company’s management,
including the Company’s principal executive officer and principal financial
officer by others within those entities, such disclosure controls and procedures
are effective.
 
3.2 Representations, Warranties and Covenants of the Investors. Each Investor
hereby, as to itself only and for no other Investor, represents, warrants and
covenants to the Company and the Agent as follows:
 
(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate, partnership or other power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The purchase by such Investor of the Securities hereunder has been
duly authorized by all necessary corporate, partnership or other action on the
part of such Investor. This Agreement has been duly executed and delivered by
such Investor and constitutes the valid and binding obligation of such Investor,
enforceable against it in accordance with its terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors rights
generally, and (ii) the effect of rules of law governing the availability of
specific performance and other equitable remedies.
 
(b) No Public Sale or Distribution. Such Investor is (i) acquiring the Common
Shares and the Warrants and (ii) upon exercise of the Warrants will acquire the
Warrant Shares issuable upon exercise thereof, in the ordinary course of
business 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 under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws, and such Investor does not have a present arrangement to effect any
distribution of the Securities to or through any person or entity; provided,
however, that by making the representations herein, such Investor 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 Securities
Act.
 
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(c) Investor Status. At the time such Investor was offered the Securities, it
was, and at the date hereof it is, either (A) a “qualified institutional buyer”
as defined in Rule 144A(a) under the Securities Act or (B) an “accredited
investor” as defined in Rule 501(a)(1), (2) or (3) under the Securities Act. At
the date hereof, such Investor has that dollar amount of securities invested in
its portfolio or under management (including investments held by its wholly
owned subsidiaries) as set forth on the Investor Signature Page. Such Investor
is not a registered broker dealer registered under Section 15(a) of the Exchange
Act, or a member of the NASD, Inc. or an entity engaged in the business of being
a broker dealer. Except as otherwise disclosed in writing to the Company on
Exhibit B-2 (attached hereto) on or prior to the date of this Agreement, such
Investor is not affiliated with any broker dealer registered under Section 15(a)
of the Exchange Act, or a member of the NASD, Inc. or an entity engaged in the
business of being a broker dealer.
 
(d) Experience of Such Investor. Such Investor, either alone or together with
its representatives has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Investor understands that it must bear
the economic risk of this investment in the Securities indefinitely, and is able
to bear such risk and is able to afford a complete loss of such investment.
 
(e) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information (other than material non-public
information) about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such Investor
or its representatives or counsel shall modify, amend or affect such Investor’s
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company’s representations and warranties contained in the
Transaction Documents. Such Investor acknowledges receipt of copies of the SEC
Reports.
 
(f) No Governmental Review. Such Investor 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.
 
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(g) No Conflicts. The execution, delivery and performance by such Investor of
this Agreement and the consummation by such Investor of the transactions
contemplated hereby will not (i) result in a violation of the organizational
documents of such Investor 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 Investor
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 Investor, except in the case of clauses (ii) and (iii) above, for such that
are not material and do not otherwise affect the ability of such Investor to
consummate the transactions contemplated hereby.
 
(h) Prohibited Transactions. No Investor, directly or indirectly, and no Person
acting on behalf of or pursuant to any understanding with any Investor, has
engaged in any purchases or sales of any securities, including any derivatives,
of the Company (including, without limitation, any Short Sales involving any of
the Company’s securities) (a “Transaction”) since the time that such Investor
was first contacted by the Company, the Agent or any other Person regarding the
investment in the Company contemplated hereby. Such Investor covenants that
neither it nor any Person acting on its behalf or pursuant to any understanding
with such Investor will engage, directly or indirectly, in any Transactions
prior to the time the transactions contemplated by this Agreement are publicly
disclosed. “Short Sales” include, without limitation, all “short sales” as
defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and
all types of direct and indirect stock pledges, forward sale contracts, options,
puts, calls, short sales, swaps, derivatives and similar arrangements (including
on a total return basis), and sales and other transactions through non-U.S.
broker-dealers or foreign regulated brokers.
 
(i) Restricted Securities. The Investors understand that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.
 
(j) Legends. It is understood that, except as provided in Section 4.1(b) of this
Agreement, certificates evidencing such Securities may bear the legend set forth
in Section 4.1(b)
 
(k) No Legal, Tax or Investment Advice. Such Investor understands that nothing
in this Agreement or any other materials presented by or on behalf of the
Company to the Investor in connection with the purchase of the Securities
constitutes legal, tax or investment advice. Such Investor has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in con-nection with its purchase of the Securities.
Such Investor understands that the Agent has acted solely as the agent of the
Company in this placement of the Securities, and that the Agent makes no
representation or warranty with regard to the merits of this transaction or as
to the accuracy of any information such Investor may have received in connection
therewith. Such Investor acknowledges that he has not relied on any information
or advice furnished by or on behalf of the Agent.
 
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(l) Brokers or Finders. Such Investor has not engaged any brokers, finders or
agents, and neither the Company nor any Investor has, nor will, incur, directly
or indirectly, as a result of any action taken by each Investor, any liability
for brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with the Transaction Documents.
 
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
 
4.1 Transfer Restrictions.
 
(a) The Investors covenant that the Securities will only be disposed of pursuant
to an effective registration statement under, and in compliance with the
requirements of, the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company, or
pursuant to Rule 144(k), the Company may require the transferor to provide to
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its Transfer Agent, without any
such legal opinion, except to the extent that the Transfer Agent requests such
legal opinion, any transfer of Securities by an Investor to an Affiliate of such
Investor, provided that the transferee certifies to the Company that it is an
“accredited investor” as defined in Rule 501(a) under the Securities Act and
provided that such Affiliate does not request any removal of any existing
legends on any certificate evidencing the Securities.
 
(b) The Investors agree to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on any certificate evidencing any of the
Securities:
 
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
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.
 
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Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) following the Effective Date upon written request of an
Investor which request confirms in writing that such Investor will comply with
the provisions of Section 4.1(a); (ii) following any sale of such Securities
pursuant to an effective registration statement (including the Registration
Statement) covering the resale of the Securities, (iii) following any sale of
such Securities pursuant to Rule 144 if the holder provides the Company with a
legal opinion (and the documents upon which the legal opinion is based)
reasonable acceptance to the Company to the effect that the Securities can be
sold under Rule 144, (iv) if the holder provides the Company with a legal
opinion (and the documents upon which the legal opinion is based) reasonably
acceptable to the Company to the effect that the Securities are eligible for
sale under Rule 144(k), or (v) if the holder provides the Company with a legal
opinion (and the documents upon which the legal opinion is based) reasonably
acceptable to the Company to the effect that the legend is not required under
applicable requirements of the Securities Act (including controlling judicial
interpretations and pronouncements issued by the Staff of the SEC). The Company
shall cause its counsel to issue the notice included in the Transfer Agent
Instructions to the Transfer Agent on the Effective Date. Following the
Effective Date or at such earlier time as a legend is no longer required for
certain Securities, the Company will no later than three Trading Days following
the delivery by an Investor to the Company or the Transfer Agent of (i) a
legended certificate representing such Securities, and (ii) an opinion of
counsel to the extent required by Section 4.1(a), deliver or cause to be
delivered to such Investor a certificate representing such Securities that is
free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge
the restrictions on transfer set forth in this Section.

If within three Trading Days after the Company’s receipt of a legended
certificate and the other documents as specified in Clauses (i) and (ii) of the
paragraph immediately above, the Company shall fail to issue and deliver to such
Investor a certificate representing such Securities that is free from all
restrictive and other legends, and if on or after such Trading Day the Investor
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Investor of shares of Common Stock that
the Investor anticipated receiving from the Company without any restrictive
legend (the “Covering Shares”), then the Company shall, within three Trading
Days after the Investor’s request, pay cash to the Investor in an amount equal
to the excess (if any) of the Investor’s total purchase price (including
brokerage commissions, if any) for the Covering Shares, over the product of
(A) the number of Covering Shares, times (B) the closing bid price on the date
of delivery of such certificate and the other documents as specified in
Clauses (i) and (ii) of the paragraph immediately above.
 
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(c) The Company will not object to and shall permit (except as prohibited by
law) an Investor to pledge or grant a security interest in some or all of the
Securities in connection with a bona fide margin agreement or other loan or
financing arrangement secured by the Securities, and if required under the terms
of such agreement, loan or arrangement, the Company will not object to and shall
permit (except as prohibited by law) such Investor to transfer pledged or
secured Securities to the pledgees or secured parties. Except as required by
law, such a pledge or transfer would not be subject to approval of the Company,
no legal opinion of the pledgee, secured party or pledgor shall be required in
connection therewith, and no notice shall be required of such pledge. Each
Investor acknowledges that the Company shall not be responsible for any pledges
relating to, or the grant of any security interest in, any of the Securities or
for any agreement, understanding or arrangement between any Investor and its
pledgee or secured party. At the appropriate Investor's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
Selling Stockholders thereunder. Provided that the Company is in compliance with
the terms of this Section 4.1(c), the Company’s indemnification obligations
pursuant to Section 6.4 shall not extend to any Proceeding or Losses arising out
of or related to this Section 4.1(c).
 
4.2 Furnishing of Information. Until the date that all Investors owning Shares
or Warrant Shares may sell all of them under Rule 144(k) of the Securities Act
(or any successor provision), the Company covenants to use its reasonable best
efforts to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to the Exchange Act. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request to satisfy the provisions of this Section 4.2.
 
4.3 Integration. The Company shall not, and shall use its reasonable best
efforts to ensure that no Affiliate thereof shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Investors or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.
 
4.4 Reservation of Securities. The Company shall maintain a reserve from its
duly authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may be required to fulfill its obligations to issue
such Shares under the Transaction Documents. In the event that at any time the
then authorized shares of Common Stock are insufficient for the Company to
satisfy its obligations to issue such Shares under the Transaction Documents,
the Company shall use reasonable best efforts to take such actions as may be
required to increase the number of authorized shares.
 
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4.5 Securities Laws Disclosure; Publicity. The Company shall, on or before 8:30
a.m., New York time, on the first Trading Day following execution of this
Agreement, issue a press release reasonably acceptable to the Investors
disclosing all material terms of the transactions contemplated hereby. On the
Closing Date, the Company shall file a Current Report on Form 8-K with the SEC
(the “8-K Filing”) describing the terms of the transactions contemplated by the
Transaction Documents and including as exhibits to 8-K Filing the Transaction
Documents (including the schedules and the names, and addresses of the Investors
and the amount(s) of Securities respectively purchased) and the form of
Warrants, in the form required by the Exchange Act. Thereafter, the Company
shall timely file any filings and notices required by the SEC or applicable law
with respect to the transactions contemplated hereby and provide copies thereof
to the Investors promptly after filing. Except as herein provided, the Company
shall not publicly disclose the name of any Investor, or include the name of any
Investor in any press release without the prior written consent of such
Investor, unless otherwise required by law. 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 Investor with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the issuance of the above referenced press release without the express
written consent of such Investor.
 
4.6 Use of Proceeds. The Company intends to use the net proceeds from the sale
of the Securities for working capital and general corporate purposes. The
Company also may use a portion of the net proceeds, currently intended for
general corporate purposes, to acquire or invest in technologies, products or
services that complement its business, although the Company has no present plans
or commitments and is not currently engaged in any material negotiations with
respect to these types of transactions. Pending these uses, the Company intends
to invest the net proceeds from this offering in short-term, interest-bearing,
investment-grade securities, or as otherwise pursuant to the Company's customary
investment policies.
 
4.7 Listing of Common Stock. The Company hereby agrees to use reasonable best
efforts to maintain the listing of the Common Stock on the Nasdaq Capital Market
or another Eligible Market.
 
4.8 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Investor. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Investors at the
Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Investor.
 
4.9 Covenant Regarding No Offerings. For a period of thirty (30) days from the
effective date of the Registration Statement, the Company shall refrain from
selling, contracting to sell or otherwise disposing of or issuing any securities
of the Company, except (i) pursuant any agreements or outstanding securities
providing for anti-dilution or other share issuance rights in existence on the
date hereof, (ii) in connection with the Company’s 2006 Stock Incentive Plan or
2001 Stock Option Plan; (iii) upon exercise of the Warrants; (iv) in connection
with any acquisition by the Company, whether through an acquisition of stock or
a merger of any business, assets or technologies the primary purpose of which is
not to raise equity capital; (v) in connection with any other strategic
transaction or alliance the primary purpose of which is not to raise equity
capital; and (vi) upon conversion or exercise of any Options or Convertible
Securities which are outstanding on the date hereof.
 
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ARTICLE V
CONDITIONS
 
5.1 Conditions Precedent to the Obligations of the Investors. The obligation of
each Investor to acquire Securities at the Closing is subject to the
satisfaction or waiver by such Investor, at or before the Closing, of each of
the following conditions:
 
(a) Representations and Warranties. The representations and warranties of the
Company contained herein 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 as though made on and
as of such date;
 
(b) Compliance with Provisions of Securities Purchase Agreements. The Company
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required to be performed by it under the
Securities Purchase Agreements with respect to the issuance of the Securities
under the Transaction Documents, or shall have received waivers of such
covenants, agreements or conditions, prior to the Closing;
 
(c) Closing Deliveries. The Company shall have delivered or caused to be
delivered to the Investors the Closing Deliveries specified in Section 2.2(a);
 
(d) Performance. The Company and each other Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing; and
 
(e) Common Stock. The Common Stock shall be authorized for quotation or trading
on the Trading Market, trading in the Common Stock shall not have been suspended
for any reason, and all the Common Shares and Warrant Shares shall be approved
for listing or trading on the Trading Market.
 
5.2 Conditions Precedent to the Obligations of the Company. The obligation of
the Company to sell the Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:
 
(a) Representations and Warranties. The representations and warranties of the
Investors contained herein 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 on
and as of such date;

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(b) Purchases by Existing Investors. Purchases of Securities pursuant to this
Agreement by Existing Holders shall be for their own account or for an account
the name of a designee which they have designated to the Company in writing
prior to the Closing (“Designee”) in accordance with the provisions of the
Securities Purchase Agreements and such Existing Holder or Designee shall not
have any present arrangement to effect any transfer, directly or indirectly, of
the Securities to or through any person or entity through syndication of such
Securities to any such other person or entity or otherwise;
 
(c) Closing Deliveries. Each Investor shall have delivered or caused to be
delivered to the Company the Closing Deliveries specified in Section 2.2(b); and
 
(d) Performance. The Investors shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Investors at or prior to the Closing.
 
ARTICLE VI
REGISTRATION RIGHTS
 
6.1 Registration Statement.
 
(a) As promptly as possible, and in any event on or prior to the Filing Date,
the Company shall prepare and file with the SEC a Registration Statement
covering the resale of all Registrable Securities for an offering to be made on
a continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance with the Securities Act and the Exchange
Act) and shall contain (except if otherwise directed by the Investors or
requested by the SEC) the Plan of Distribution in substantially the form
attached hereto as Exhibit D.
 
(b) The Company shall use its reasonable best efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as possible after the
filing thereof, but in any event prior to the Required Effectiveness Date, and
shall use its reasonable best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier of the date
that all Common Shares and Warrant Shares covered by such Registration Statement
have been sold or can be sold publicly under Rule 144(k) (the “Effectiveness
Period”); provided that, upon notification by the SEC that a Registration
Statement will not be reviewed or is no longer subject to further review and
comments, the Company shall request acceleration of such Registration Statement
within five (5) Trading Days after receipt of such notice and request that it
becomes effective on 4:00 p.m. New York City time on the Effective Dave and file
a prospectus supplement for any Registration Statement, whether or not required
under Rule 424 (or otherwise), by 9:00 a.m. New York City time the day after the
Effective Date. Notwithstanding the foregoing, if the SEC, by written or oral
comment or otherwise, limits the Company’s ability to request effectiveness, or
prohibits the effectiveness of, a Registration Statement with respect to any or
all the Registrable Securities pursuant to Rule 415, it shall not be a breach or
default by the Company under this Agreement and shall not be deemed a failure by
the Company to use reasonable best efforts. Any limitations on the number of
Registrable Securities pursuant to Rule 415 will be made pro rata to each
Investor.

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(c) The Company shall notify the Investors in writing promptly (and in any event
within two Trading Days) after receiving notification from the SEC that the
Registration Statement has been declared effective.
 
(d) Should an Event (as defined below) occur, then upon the occurrence of such
Event, and on every monthly anniversary thereof until the applicable Event is
cured, the Company shall pay to each Investor an amount in cash, as liquidated
damages and not as a penalty, equal to one percent (1.0%) of (i) the number of
Common Shares held by such Investor as of the date of such Event, multiplied by
(ii) the purchase price paid by such Investor for such Common Shares then held;
provided, however, that the total amount of payments pursuant to this
Section 6.1(d) shall not exceed, when aggregated with all such payments paid to
all Investors, ten percent (10%) of the aggregate purchase price. The payments
to which an Investor shall be entitled pursuant to this Section 6.1(d) are
referred to herein as “Event Payments.” Any Event Payments payable pursuant to
the terms hereof shall apply on a pro rated basis for any portion of a month
prior to the cure of an Event. In the event the Company fails to make Event
Payments in a timely manner, such Event Payments shall bear interest at the rate
of one percent (1.0%) per month (prorated for partial months) until paid in
full. All pro rated calculations made pursuant to this paragraph shall be based
upon the actual number of days in such pro rated month.
 
For such purposes, each of the following shall constitute an “Event”:

(i) the Registration Statement is not filed on or prior to the Filing Date or is
not declared effective on or prior to the Required Effectiveness Date; provided
that if the SEC, by written or oral comment or otherwise, limits the Company’s
ability to request effectiveness, or prohibits the effectiveness of, a
Registration Statement with respect to any or all the Registrable Securities
pursuant to Rule 415, it shall not be a breach or default by the Company under
this Agreement and shall not be deemed a failure by the Company to use
reasonable best efforts;
 
(ii) except as provided for in Section 6.1(e) (the “Excluded Events”), after the
Effective Date, an Investor is not permitted to sell Registrable Securities
under the Registration Statement (or a subsequent Registration Statement filed
in replacement thereof) for any reason (other than the fault of such Investor)
for five or more Trading Days (whether or not consecutive);

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(iii) the Common Stock is not listed or quoted, or is suspended from trading, on
an Eligible Market for a period of three Trading Days (which need not be
consecutive Trading Days) during the Effectiveness Period;
 
(iv) with respect to an Investor, the Company fails for any reason to deliver a
certificate evidencing any Securities to such Investor within five Trading Days
after delivery of such certificate is required pursuant to any Transaction
Document or the exercise rights of the Investors pursuant to the Warrants are
otherwise suspended for any reason; or

(v) during the Effectiveness Period, except as a result of the Excluded Events,
the Company fails to have any Shares listed on an Eligible Market.
 
(e) Notwithstanding anything in this Agreement to the contrary, after 60
consecutive Trading Days of continuous effectiveness of the initial Registration
Statement filed and declared effective pursuant to this Agreement, the Company
may, by written notice to the Investors, suspend sales under a Registration
Statement after the Effective Date thereof and/or require that the Investors
immediately cease the sale of shares of Common Stock pursuant thereto and/or
defer the filing of any subsequent Registration Statement if the Company is
engaged in a material merger, acquisition or sale and the Board of Directors
determines in good faith, by appropriate resolutions, that, as a result of such
activity, (A) it would be materially detrimental to the Company (other than as
relating solely to the price of the Common Stock) to maintain a Registration
Statement at such time or (B) it is in the best interests of the Company to
suspend sales under such registration at such time. Upon receipt of such notice,
each Investor shall immediately discontinue any sales of Registrable Securities
pursuant to such registration until such Investor is advised in writing by the
Company that the current Prospectus or amended Prospectus, as applicable, may be
used. In no event, however, shall this right be exercised to suspend sales
beyond the period during which (in the good faith determination of the Company’s
Board of Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company’s rights under this Section 6.1(e) may
be exercised for a period of no more than 20 Trading Days at a time and not more
than three times in any twelve-month period, without such suspension being
considered as part of an Event Payment determination. Immediately after the end
of any suspension period under this Section 6.1(e), the Company shall take all
necessary actions (including filing any required supplemental prospectus) to
restore the effectiveness of the applicable Registration Statement and the
ability of the Investors to publicly resell their Registrable Securities
pursuant to such effective Registration Statement.
 
(f) The Company shall not, from the date hereof until the Effective Date of the
Registration Statement, prepare and file with the SEC a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than any registration
statement or post-effective amendment to a registration statement (or supplement
thereto) relating to the Company’s employee benefit plans registered on
Form S-8.
 
6.2 Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:

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(a) Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto,
furnish via email to those Investors who have supplied the Company with email
addresses copies of all such documents proposed to be filed, which documents
(other than any document that is incorporated or deemed to be incorporated by
reference therein) will be subject to the review of such Investors. The Company
shall reflect in each such document when so filed with the SEC such comments
regarding the Investors and the Plan of Distribution as the Investors may
reasonably and promptly propose no later than two Trading Days after the
Investors have been so furnished with copies of such documents as aforesaid.
 
(b) (i) Subject to Section 6.1(e), prepare and file with the SEC such
amendments, including post-effective amendments, to each Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective, as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the SEC such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible, and in any event within 15
Trading Days (except to the extent that the Company reasonably requires
additional time to respond to accounting or Rule 415 comments), to any comments
received from the SEC with respect to the Registration Statement or any
amendment thereto; and (iv) comply in all material respects with the provisions
of the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Investors thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.
 
(c) Notify the Investors as promptly as reasonably possible and as
simultaneously as reasonably possible, and (if requested by the Investors
confirm such notice in writing no later than three Trading Days thereafter, of
any of the following events: (i) the SEC notifies the Company whether there will
be a “review” of any Registration Statement; (ii) the SEC comments in writing on
any Registration Statement; (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the SEC or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the SEC issues any stop order suspending the effectiveness
of any Registration Statement or initiates any Proceedings for that purpose;
(vi) the Company receives notice of any suspension of the qualification or
exemption from qualification of any Registrable Securities for sale in any
jurisdiction, or the initiation or threat of any Proceeding for such purpose; or
(vii) the financial statements included in any Registration Statement become
ineligible for inclusion therein or any Registration Statement or Prospectus or
other document contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

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(d) Use its reasonable best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
 
(e) If requested by an Investor, provide such Investor and any counsel selected
by a majority of holders of the Securities (“Investor Counsel”), without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, and all exhibits to the
extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
SEC.
 
(f) Promptly deliver to each Investor, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Investors in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto to the extent permitted by federal and state
securities laws and regulations.
 
(g) (i) In the time and manner required by each Trading Market, prepare and file
with such Trading Market an additional shares listing application covering all
of the Registrable Securities; (ii) take all steps necessary to cause such
Common Shares to be approved for listing on each Trading Market as soon as
possible thereafter; (iii) provide to Investor Counsel evidence of such listing;
and (iv) during the Effectiveness Period, maintain the listing of such Common
Shares on each such Trading Market or another Eligible Market.
 
(h) Prior to any public offering of Registrable Securities, use reasonable best
efforts to register or qualify or cooperate with the selling Investors in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Investor requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective for so long as required, but
not to exceed the duration of the Effectiveness Period, and to do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
 
(i) Cooperate with the Investors to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement and under law, of all
restrictive legends.

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(j) Upon the occurrence of any event described in Section 6.2(c)(vii), as
promptly reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
 
(k) Cooperate with any reasonable due diligence investigation undertaken by the
Investors in connection with the sale of Registrable Securities, including,
without limitation, by making available documents and information; provided that
the Company will not deliver or make available to any Investor material,
nonpublic information unless such Investor requests in advance in writing to
receive material, nonpublic information and agrees to keep such information
confidential.
 
(l) Comply in all material respects with all rules and regulations of the SEC
applicable to the registration of the Securities.
 
(m) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of any particular Investor or to make any Event Payments
set forth in Section 6.1(c) to such Investor that such Investor furnish to the
Company the information specified in Exhibits B-1, B-2 and B-3 hereto and such
other information regarding itself, the Registrable Securities and other shares
of Common Stock held by it and the intended method of disposition of the
Registrable Securities held by it (if different from the Plan of Distribution
set forth on Exhibit D hereto) as shall be reasonably required to effect the
registration of such Registrable Securities and shall complete and execute such
documents in connection with such registration as the Company may reasonably
request.
 
(n) The Company shall comply with all applicable rules and regulations of the
SEC under the Securities Act and the Exchange Act, including, without
limitation, Rule 172 under the Securities Act, file any final Prospectus,
including any supplement or amendment thereof, with the SEC pursuant to Rule 424
under the Securities Act, promptly inform the Holders in writing if, at any time
during the Effectiveness Period, the Company does not satisfy the conditions
specified in Rule 172 and, as a result thereof, the Holders are required to make
available a Prospectus in connection with any disposition of Registrable
Securities and take such other actions as may be reasonably necessary to
facilitate the registration of the Registrable Securities hereunder.
 
6.3 Registration Expenses. The Company shall pay all fees and expenses incident
to the performance of or compliance with Article VI of this Agreement by the
Company, including without limitation (a) all registration and filing fees and
expenses, including without limitation those related to filings with the SEC,
any Trading Market, any required filing with the Financial Industry Regulatory
Authority by the Agent, and in connection with applicable state securities or
Blue Sky laws, (b) printing expenses (including without limitation expenses of
printing certificates for Registrable Securities), (c) messenger, telephone and
delivery expenses, (d) fees and disbursements of counsel for the Company,
(e) fees and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this Agreement, and
(f) all listing fees to be paid by the Company to the Trading Market.

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6.4 Indemnification
 
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the
officers, directors, partners, members, agents and employees of each of them,
each Person who controls any such Investor (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all Losses, as incurred, arising out of or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, (ii) any breach of any covenant, agreement
or obligation of the Company contained in the Transaction Documents, (iii) any
cause of action, suit or claim brought or made against such Indemnified Party
(as defined in Section 6.4(c) below) by a third party (including for these
purposes a derivative action brought on behalf of the Company), arising out of
or resulting from (x) execution, delivery, performance or enforcement of the
Transaction Documents or (y) the status of Indemnified Party as holder of the
Securities or (iv) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of Company
prospectus or in any amendment or supplement thereto or in any Company
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that
(A) such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Investor furnished in
writing to the Company by such Investor for use therein, or to the extent that
such information relates to such Investor or such Investor's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
by such Investor expressly for use in the Registration Statement, or (B) with
respect to any prospectus, if the untrue statement or omission of material fact
contained in such prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented, if such corrected prospectus was timely made
available by the Company to the Holder, and the Holder seeking indemnity
hereunder was advised in writing not to use the incorrect prospectus prior to
the use giving rise to Losses.  
 
(b) Indemnification by Investors. Each Investor shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses arising
solely out of any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising out of or relating to any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, but only to the extent that such untrue statement or
omission is contained in any information so furnished by such Investor in
writing to the Company specifically for inclusion in such Registration Statement
or such Prospectus or to the extent that (i) such untrue statements or omissions
are based solely upon information regarding such Investor furnished to the
Company by such Investor in writing expressly for use therein, or to the extent
that such information relates to such Investor or such Investor’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved by such Investor expressly for use in the Registration Statement (it
being understood that the information provided by the Investor to the Company in
Exhibits B-1, B-2 and B-3 and the Plan of Distribution set forth on Exhibit D,
as the same may be modified by such Investor, constitutes information reviewed
and expressly approved by such Investor in writing expressly for use in the
Registration Statement), such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. In no event shall the liability of any selling
Investor hereunder be greater in amount than the dollar amount of the net
proceeds (after discounts and commissions but before expenses) received by such
Investor upon the sale of the Registrable Securities giving rise to such
indemnification obligation.

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(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
 
An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees and
expenses; or (ii) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (iii) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in
which case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of separate counsel shall be at the
expense of the Indemnifying Party). It being understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding
(including separate Proceedings that have been or will be consolidated before a
single judge) be liable for the fees and expenses of more than one separate firm
of attorneys at any time for all Indemnified Parties, which firm shall be
appointed by a majority of the Indemnified Parties. The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.

31

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(d) Contribution. If a claim for indemnification under Section 6.4(a) or  (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 6.4(c), any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
 
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6.4(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Investor from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
 
The indemnity and contribution agreements contained in this Section 6.4(d) are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
 
6.5 Dispositions. Each Investor agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement and
shall sell its Registrable Securities in accordance with the Plan of
Distribution set forth in the Prospectus. Each Investor further agrees that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Sections 6.2(c)(v), (vi) or (vii), such Investor will
discontinue disposition of such Registrable Securities under the Registration
Statement until such Investor is advised in writing by the Company that the use
of the Prospectus, or amended Prospectus, as applicable, may be used. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.

32

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6.6 No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Investors in such capacity pursuant hereto, the Agent
for any placement agent warrants issued as compensation for this offering and
any other placement agent receiving warrants issued as compensation for this
offering) may include securities of the Company in the Registration Statement
other than the Registrable Securities.
 
6.7 Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each Investor not then eligible to sell
all of their Registrable Securities under Rule 144 in a three-month period,
written notice of such determination and if, within ten days after receipt of
such notice, any such Investor shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable
Securities such Investor requests to be registered. Notwithstanding the
foregoing, in the event that, in connection with any underwritten public
offering, the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit;
provided, however, that (i) the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities, the
holders of which are not contractually entitled to inclusion of such securities
in such Registration Statement or are not contractually entitled to pro rata
inclusion with the Registrable Securities and (ii) after giving effect to the
immediately preceding proviso, any such exclusion of Registrable Securities
shall be made pro rata among the Investors seeking to include Registrable
Securities and the holders of other securities having the contractual right to
inclusion of their securities in such Registration Statement by reason of demand
registration rights, in proportion to the number of Registrable Securities or
other securities, as applicable, sought to be included by each such Investor or
other holder. If an offering in connection with which an Investor is entitled to
registration under this Section 6.7 is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering and shall enter into an underwriting agreement in a form and substance
reasonably satisfactory to the Company and the underwriter or underwriters. Upon
the effectiveness the registration statement for which piggy-back registration
has been provided in this Section 6.7, any Event Payments payable to an Investor
whose Securities are included in such registration statement shall terminate.

33

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ARTICLE VII
MISCELLANEOUS
 
7.1 Termination. This Agreement may be terminated by the Company or any
Investor, by written notice to the other parties, if the Closing has not been
consummated by the third Business Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).
 
7.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all Transfer
Agent fees, stamp taxes and other taxes and duties levied in connection with the
sale and issuance of their applicable Securities.
 
7.3 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Investors such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
 
7.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile or email at the facsimile
number or email address specified in this Section  prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or
email at the facsimile number or email address specified in this Section on a
day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (c) the Trading Day following the date of deposit with a
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The addresses, facsimile
numbers and email addresses for such notices and communications are those set
forth on the signature pages hereof, or such other address or facsimile number
as may be designated in writing hereafter, in the same manner, by any such
Person.

34

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7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and each of the Investors or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Investors under Article VI may
be given by Investors holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
 
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.
 
7.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign its
rights under this Agreement to any Person to whom such Investor assigns or
transfers any Securities, provided (i) such transferor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company after such assignment, (ii) the Company is furnished
with written notice of (x) the name and address of such transferee or assignee
and (y) the Registrable Securities with respect to which such registration
rights are being transferred or assigned, (iii)  such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the “Investors” and (iv) such transfer shall
have been made in accordance with the applicable requirements of this Agreement
and with all laws applicable thereto.
 
7.8 Persons Entitled to Benefit of Agreement. This Agreement shall inure to the
benefit of and be binding upon the Company and each Investor and their
respective successors and permitted assigns. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, other than
those persons mentioned in the preceding sentence or otherwise explicitly
mentioned in this Agreement, any legal or equitable right, remedy or claim under
or in respect of this Agreement, or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person; except that each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Section directly against the parties with obligations thereunder.

35

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7.9 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE
OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE
COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY
AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN
FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR ANY INVESTOR
HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN
ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY OR ANY INVESTOR, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT
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 VIA REGISTERED OR
CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY
AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY AND INVESTORS
HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
 
7.10 Survival. The representations and warranties contained herein shall survive
the Closing for two years. The agreements and covenants contained herein shall
survive the Closing.
 
7.11 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or email attachment, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or
email-attached signature page were an original thereof.
 
7.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

36

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7.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Investor exercises a right, election, demand or option
owed to such Investor by the Company under a Transaction Document and the
Company does not timely perform its related obligations within the periods
therein provided, then, prior to the performance by the Company of the Company's
related obligation, such Investor 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.
 
7.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement
to indemnify and hold harmless the Company for any losses in connection
therewith. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities.
 
7.15 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Investors
and the Company will be entitled to seek specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation (other than in
connection with any action for temporary restraining order) the defense that a
remedy at law would be adequate.
 
7.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor hereunder or any Investor enforces or exercises its
rights hereunder or thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company
by a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
 
7.17 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof and prior to
the Closing, each reference in any Transaction Document to a number of shares or
a price per share shall be amended to appropriately account for such event.

37

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

 
7.18 Independent Nature of Investors' Obligations and Rights. The obligations of
each Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Document. The decision of each Investor to purchase Securities
pursuant to this Agreement has been made by such Investor independently of any
other Investor and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other Investor
or by any agent or employee of any other Investor, and no Investor or any of its
agents or employees shall have any liability to any other Investor (or any other
person) relating to or arising from any such information, materials, statements
or opinions. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Document. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with making
its investment hereunder and that no other Investor will be acting as agent of
such Investor in connection with monitoring its investment hereunder. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.
 
[SIGNATURE PAGES TO FOLLOW]

38

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
AKEENA SOLAR, INC.
   
By:
/s/ Gary Effren
Name: Garry Effren
Title: Chief Financial Officer
Address for Notice: 16005 Los Gatos Boulevard
Los Gatos, CA 95032

Facsimile No.:
408-402-9492
Telephone No.:
408-402-9404
Attn: Gary Effren
With a copy to: Angela Lipanovich
Facsimile:
408-395-7979
Telephone:
408-402-9404
Attn:
Anglea Lipanovich

COMPANY SIGNATURE PAGE
 

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

 
Investor Signature Page

By its execution and delivery of this signature page, the undersigned Investor
hereby joins in and agrees to be bound by the terms and conditions of the
Securities Purchase Agreement dated as of November 1, 2007 (the “Purchase
Agreement”) by and among Akeena Solar, Inc. and the Investors (as defined
therein), as to the number of shares of Common Stock and Warrants set forth
below, and authorizes this signature page to be attached to the Purchase
Agreement or counterparts thereof.
 
Name of Investor:
 ___________________________    
By:
 ________________________  
Name:
 
Title:

Address:  ____________________________________
 ________________________________  ________________________________
Telephone No.: _________________________________
Facsimile No.: __________________________________
Email Address: __________________________________
Number of Shares: _______________________________
Number of Warrants: ______________________________
Aggregate Purchase Price: $_________________________

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

Exhibits:

A
Schedule of Investors

B
Instruction Sheet for Investors

C
Opinion of Company Corporate Counsel

D
Plan of Distribution

E
Company Transfer Agent Instructions

F.
Form of Warrant

 

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

 
Exhibit A
 
Schedule of Investors

Investor
 
Common Shares
 
Warrants
 
Warrant Shares
 
Purchase Price
                     
Ardsley Partners Renewable Energy Fund L.P.
   
187,500
   
1
   
37,500
 
$
1,312,500
 
Ardsley Renewable Energy Offshore Fund, Ltd.
   
253,500
   
1
   
50,700
 
$
1,774,500
 
HFR HE Ardsley Master Trust
   
59,000
   
1
   
11,800
 
$
413,000
 
Bristol Investment Fund, Ltd.
   
214,286
   
1
   
42,857
 
$
1,500,002
 
Chestnut Ridge Partners, LP
   
25,000
   
1
   
5,000
 
$
175,000
 
Cranshire Capital, LP
   
285,714
   
1
   
57,143
 
$
1,999,998
 
Enable Growth Partners LP
   
242,857
   
1
   
48,572
 
$
1,699,998
 
Enable Opportunity Partners LP
   
28,571
   
1
   
5,714
 
$
200,000
 
Pierce Diversified Strategy Master Fund LLC, Ena
   
14,286
   
1
   
2,857
 
$
100,000
 
Excalibur Small Cap Opportunities LP
   
57,143
   
1
   
11,429
 
$
400,001
 
GLG North American Opportunity Fund
   
745,714
   
1
   
149,143
 
$
5,219,998
 
GLG Technology Fund
   
186,429
   
1
   
37,286
 
$
1,305,003
 
Highbridge International LLC
   
71,429
   
1
   
14,286
 
$
500,003
 
Hudson Bay Fund, LP
   
245,714
   
1
   
49,143
 
$
1,719,998
 
Hudson Bay Overseas Fund, Ltd.
   
325,715
   
1
   
65,143
 
$
2,280,005
 
Iroquois Master Fund Ltd.
   
71,429
   
1
   
14,286
 
$
500,003
 
UBS O’Connor LLC F/B/O: O’Connor Pipes Corporate Strategies Master Limited
   
142,857
   
1
   
28,571
 
$
999,999
 
UBS O’Connor LLC F/B/O: O’Connor Global Convertible Arbitrage Master Limited
   
131,428
   
1
   
26,286
 
$
919,996
 
UBS O’Connor LLC F/B/O: O’Connor Global Convertible Arbitrage II Master Limited
   
11,429
   
1
   
2,286
 
$
80,003
 
Winslow Management Company, LLC FBO Winslow Hedge Fund
   
57,140
   
1
   
11,428
 
$
399,980
 
Winslow Management Company, LLC FBO Scenic Hudson
   
21,431
   
1
   
4,286
 
$
150,017
 

 

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

Investor
 
Common Shares
 
Warrants
 
Warrant Shares
 
Purchase Price
                     
Winslow Management Company, LLC FBO Great Lakes Protection Fund
   
14,290
   
1
   
2,858
 
$
100,030
 
Winslow Management Company, LLC FBO Jessie Smith Nates Foundation
   
14,290
   
1
   
2,858
 
$
100,030
 
Winslow Management Company, LLC FBO Farrell Distributing Corporation Pension
Plan
   
35,710
   
1
   
7,142
 
$
249,970
 
Winslow Management Company, LLC FBO Winslow Green Growth Fund
   
285,710
   
1
   
57,142
 
$
1,999,970
                             
TOTAL
   
3,728,572
   
25
   
745,716
 
$
26,100,004
 

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

 
Exhibit B
 
INSTRUCTION SHEET FOR INVESTOR
 
(to be read in conjunction with the entire Securities Purchase Agreement)
 
A.
Complete the following items in the Securities Purchase Agreement:

 

 
1.
Complete and execute the Investor Signature Page. The Agreement must be executed
by an individual authorized to bind the Investor.

 

 
2.
Exhibit B-1 - Stock Certificate Questionnaire:

Provide the information requested by the Stock Certificate Questionnaire;
 

 
3.
Exhibit B-2 - Registration Statement Questionnaire:

Provide the information requested by the Registration Statement Questionnaire.
 

 
4.
Exhibit B-3 /B-4 - Investor Certificate:

Provide the information requested by the Certificate for Individual Investors
(B-3) or the Certificate for Corporate, Partnership, Trust, Foundation and Joint
Investors (B-4), as applicable.
 

 
5.
Return, via facsimile, the signed Securities Purchase Agreement including the
properly completed Exhibits B-1 through B-4, to:

 
Facsimile:
Telephone:
Attn:
 

 
6.
After completing instruction number five (5) above, deliver the original signed
Securities Purchase Agreement including the properly completed Exhibits  B-1
through B-4 to:

 
Facsimile:
Telephone:
Attn:
 
B.
Instructions regarding the wire transfer of funds for the purchase of the Shares
will be telecopied to the Investor by the Company at a later date.

 
C.
Upon the resale of any Shares by the Investor after the Registration Statement
covering any Shares is effective, as described in the Securities Purchase
Agreement, the Investor must send a letter in the form of Exhibit D to the
Company and the Company’s transfer agent so that the Shares may be properly
transferred.

 

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

 
Exhibit B-1
 
AKEENA SOLAR, INC.
 
STOCK CERTIFICATE QUESTIONNAIRE

 
 
Please provide us with the following information:
 
 
1.
 
The exact name that the Securities are to be registered in (this is the name
that will appear on the stock certificate(s)). You may use a nominee name if
appropriate:
 
 
2.
 
The relationship between the Investor of the Securities and the Registered
Holder listed in response to item 1 above:
 
 
3.
 
The mailing address, telephone and telecopy number and email address of the
Registered Holder listed in response to item 1 above:
 
 
4.
 
The Tax Identification Number of the Registered Holder listed in response to
item 1 above:
 

 

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Exhibit B-2
 
AKEENA SOLAR, INC.
 
REGISTRATION STATEMENT QUESTIONNAIRE
 
In connection with the Registration Statement, please provide us with the
following information regarding the Investor.
 
1. Please state your organization’s name exactly as it should appear in the
Registration Statement:
______________________________________________________________________
 
Except as set forth below, your organization does not hold any equity securities
of the  Company on behalf of another person or entity.
 
State any exceptions here:
 
______________________________________________________________________
 
2. Address of your organization:
 
______________________________________________________
 
______________________________________________________
 
Telephone: __________________________
 
Fax: ________________________________
 
Contact Person: _______________________
 
3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?
(Include any relationships involving you or your affiliates, officers,
directors, or principal equity holders (5% or more) that has held any position
or office or has had any other material relationship with the Company (or its
predecessors or affiliates) during the past three years.)
 
o  Yes   o No
If yes, please indicate the nature of any such relationship below:
 
4. Are you the beneficial owner of any other securities of the Company? (Include
any equity securities that you beneficially own or have a right to acquire
within 60 days after the date hereof, and as to which you have sole voting
power, shared voting power, sole investment power or shared investment power.)
 
o Yes   o No

If yes, please describe the nature and amount of such ownership as of a recent
date.

 
5. Except as set forth below, you wish that all the shares of the Company’s
common stock beneficially owned by you or that you have the right to acquire
from the Company be offered for your account in the Registration Statement.
 
State any exceptions here:
 
6. Have you made or are you aware of any arrangements relating to the
distribution of the shares of the Company pursuant to the Registration
Statement?
o Yes   o No

If yes, please describe the nature and amount of such arrangements.
 
7. FINRA Matters
 
(a) State below whether (i) you or any associate or affiliate of yours are a
member of FINRA, a controlling shareholder of a FINRA member, a person
associated with a member, a direct or indirect affiliate of a member, or an
underwriter or related person with respect to the proposed offering; (ii) you or
any associate or affiliate of yours owns any stock or other securities of any
FINRA member not purchased in the open market; or (iii) you or any associate or
affiliate of yours has made any outstanding subordinated loans to any FINRA
member. If you are a general or limited partnership, a no answer asserts that no
such relationship exists for you as well as for each of your general or limited
partners.
 
Yes: o  No: o
 

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If “yes,” please identify the FINRA member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner:
 
If you answer “no” to Question 7(a), you need not respond to Question 7(b).
 
State below whether you or any associate or affiliate of yours has been an
underwriter, or a controlling person or member of any investment banking or
brokerage firm which has been or might be an underwriter for securities of the
Corporation or any affiliate thereof including, but not limited to, the common
stock now being registered. 
Yes: o  No: o
 
If “yes,” please identify the FINRA member and describe your relationship,
including, in the case of a general or limited partner, the name of the partner.
 
ACKNOWLEDGEMENT
 
The undersigned hereby agrees to notify the Company promptly of any changes in
the foregoing information which should be made as a result of any developments,
including the passage of time. The undersigned also agrees to provide the
Company and the Company’s counsel any and all such further information regarding
the undersigned promptly upon request in connection with the preparation,
filing, amending, and supplementing of the Registration Statement (or any
prospectus contained therein). The undersigned hereby consents to the use of all
such information in the Registration Statement.
 

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The undersigned understands and acknowledges that the Company will rely on the
information set forth herein for purposes of the preparation and filing of the
Registration Statement.
 
The undersigned understands that the undersigned may be subject to serious civil
and criminal liabilities if the Registration Statement, when it becomes
effective, either contains an untrue statement of a material fact or omits to
state a material fact required to be stated in the Registration Statement or
necessary to make the statements in the Registration Statement not misleading.
The undersigned represents and warrants that all information it provides to the
Company and its counsel is currently accurate and complete and will be accurate
and complete at the time the Registration Statement becomes effective and at all
times subsequent thereto, and agrees during the Effectiveness Period and any
additional period in which the undersigned is making sales of Shares under and
pursuant to the Registration Statement, and agrees during such periods to notify
the Company immediately of any misstatement of a material fact in the
Registration Statement, and of the omission of any material fact necessary to
make the statements contained therein not misleading.
 
Dated: __________

 
Name
 
Signature
 
Name and Title of Signatory

 

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Exhibit B-3
 
AKEENA SOLAR, INC.
 
CERTIFICATE FOR CORPORATE, PARTNERSHIP, LIMITED LIABILITY COMPANY,
TRUST, FOUNDATION AND JOINT INVESTORS
 
If the investor is a corporation, partnership, limited liability company, trust,
pension plan, foundation, joint Investor (other than a married couple) or other
entity, an authorized officer, partner, or trustee must complete, date and sign
this Certificate.
 
CERTIFICATE

The undersigned certifies that the representations and responses below are true
and accurate:
 
(a) The investor has been duly formed and is validly existing and has full power
and authority to invest in the Company. The person signing on behalf of the
undersigned has the authority to execute and deliver the Securities Purchase
Agreement on behalf of the Investor and to take other actions with respect
thereto.

(b) Indicate the form of entity of the undersigned:
 
____ Limited Partnership
____ General Partnership
____ Limited Liability Company
____ Corporation
____ Revocable Trust (identify each grantor and indicate under what
circumstances the trust is revocable by the grantor):____________
__________________________________________________________________________________________________
(Continue on a separate piece of paper, if necessary.)
____ Other type of Trust (indicate type of trust and, for trusts other than
pension trusts, name the grantors and
beneficiaries):______________________________
__________________________________________________________________________________________________
(Continue on a separate piece of paper, if necessary.)
____ Other form of organization (indicate form of organization
(____________________).
(c) Indicate the approximate date the undersigned entity was formed: ___.
 

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(d) In order for the Company to offer and sell the Securities in conformance
with state and federal securities laws, the following information must be
obtained regarding your investor status. Please initial each category applicable
to you as an investor in the Company.
 
___ 1. A bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity;
 
___ 2. A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934;
 
___ 3. An insurance company as defined in Section 2(13) of the Securities Act;
 
___ 4. An investment company registered under the Investment Company Act of 1940
or a business development company as defined in Section  2(a)(48) of that Act;
 
___ 5. A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958;
 
___ 6. A plan established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political subdivisions, for
the benefit of its employees, if such plan has total assets in excess of
$5,000,000;
 
___ 7. An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors;
 
___ 8. A private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940;
 
___ 9. Any partnership or corporation or any organization described in
Section 501(c)(3) of the Internal Revenue Code or similar business trust, not
formed for the specific purpose of acquiring the Shares, with total assets in
excess of $5,000,000;
 
___ 10. A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares, whose purchase is directed by a
sophisticated person as described in Rule  506(b)(2)(ii) of the Exchange Act;
 
___ 11. An entity in which all of the equity owners qualify under any of the
above subparagraphs. If the undersigned belongs to this investor category only,
list the equity owners of the undersigned, and the investor category which each
such equity owner satisfies:_         
____________________________________________________________________________________
(Continue on a separate piece of paper, if necessary.)
 

 
(e)
As of the date hereof, please set forth below the dollar amount of securities in
the aggregate in your portfolio or under management, including investments held
by wholly owned subsidiaries.

 

 
(f)
Please set forth in the space provided below the (i) states, if any, in the U.S.
in which you maintained your principal office during the past two years and the
dates during which you maintained your office in each state, (ii) state(s), if
any, in which you are incorporated or otherwise organized and (iii) state(s), if
any, in which you pay income taxes.

 
Dated:__________________________, 2007
  ___________________________________ 
Print Name of Investor
___________________________________ 
Name:
Title:
(Signature and title of authorized officer, partner or trustee)

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SECURITIES DELIVERY INSTRUCTIONS
 
Please instruct us as to where you would like the Securities delivered to at
Closing:

Name: __________________________________________________________________
 
Company: _______________________________________________________________
 
Address: ________________________________________________________________
 
____________________________________________________________
 
Telephone: ______________________________________________________________
 
Other Special Instructions: __________________________________________________
 
            _________________________________________________________________________________
 
 

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Exhibit C
 
OPINION OF COMPANY CORPORATE COUNSEL
 

 
1.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with corporate power and
authority to own, lease and operate its properties and to conduct its business.

 

 
2.
The Company has all necessary corporate power and authority to execute and
deliver the Transaction Documents, to perform its obligations thereunder, to
issue the Securities and to consummate the other transactions contemplated
thereby.

 

 
3.
Each of the Transaction Documents (other than the Warrants) has been duly
authorized, executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by all parties thereto other than
the Company, constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and other similar laws affecting the rights of
creditors generally and subject to general principles of equity, regardless of
whether such enforcement is considered in a proceeding at law or in equity and
(ii) any rights to indemnity and contribution thereunder limited by federal and
state securities laws and public policy considerations.

 

 
4.
The Company has all necessary corporate power and authority to execute, issue
and deliver the Warrants. The Warrants have been duly authorized for issuance
and sale by the Company and, when fully executed and issued in accordance with
the terms of the Purchase Agreement and delivered to and paid for by the
Investors pursuant to the Purchase Agreement, will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms subject to (i) applicable bankruptcy, insolvency, fraudulent
conveyance or transfer, reorganization, moratorium and other similar laws
affecting the rights of creditors generally and subject to general principles of
equity, regardless of whether such enforcement is considered in a proceeding at
law or in equity and (ii) any rights to indemnity and contribution thereunder as
may be limited by federal and state securities laws and public policy
considerations.

 
 

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5.
The Company has all necessary corporate power and authority to issue and deliver
the Warrant Shares. The Warrant Shares have been duly reserved for issuance by
the Company. The Warrant Shares, when issued in accordance with the Warrant,
will be validly issued, fully paid and nonassessable. Assuming the Warrant
Shares were issued as of the date hereof, (i) except as set forth in Schedule
3.1(d) to the Schedule of Exceptions of the Purchase Agreement, the issuance of
the Warrant Shares would not violate any statutory or, to our knowledge,
contractual preemptive or other similar rights to subscribe for or purchase
securities of the Company upon the issuance or sale thereof; and (ii) such
Warrant Shares may be issued to the Investors without registration under the
Securities Act.

 

 
6.
The Company has all necessary corporate power and authority to issue and deliver
the Shares. The Shares have been duly authorized, and, when issued and delivered
to the Investors and paid for by the Investors in accordance with the terms of
the Purchase Agreement, the Shares will be duly and validly issued, fully paid
and nonassessable and may be issued to the Investors without registration under
the Securities Act. Except as set forth in Schedule 3.1(d) to the Schedule of
Exceptions of the Purchase Agreement, none of the Shares will be issued in
violation of any statutory or, to our knowledge, contractual preemptive or other
similar rights to subscribe for or purchase securities of the Company upon the
issuance and sale thereof.

 

 
7.
The execution and delivery of the Transaction Documents by the Company, the
performance by the Company of its obligations thereunder, the issuance and sale
of the Shares, the issuance and sale of the Warrants and the issuance of the
Warrant Shares upon exercise of the Warrants in accordance with the provisions
of the Warrants (assuming the Warrant Shares were issued as of the date hereof)
(i) will not result in any violation of the provisions of the Charter or By-laws
of the Company; (ii) will not constitute a breach of, or default under, or
result in the creation or imposition of any security interest, mortgage, pledge,
lien, charge, encumbrance or adverse claim upon any property or assets of the
Company, pursuant to any material agreement filed as an exhibit to the SEC
Documents, including, without limitation, under the Purchase Agreement; (iii)
will not result in any violation of any federal or New York law or the General
Corporation Law of the State of Delaware or, to our knowledge, any
administrative or court decree, applicable to the Company; or (iv) to our
knowledge, will not require any consent, approval, authorization or other order
of, or registration or filing with, any federal or New York court or other
governmental or regulatory authority or agency, except (i) with respect to the
transactions contemplated by Section 6 of the Purchase Agreement as may be
required under the Securities Act and the Exchange Act, (ii) the filing of Form
D with the Commission; (iii) as required by the state securities or “blue sky”
laws as to which we express no opinion and (iv) for those which will be obtained
prior to closing or for which, to our knowledge, the failure to obtain could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 
 

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

 
8.
Assuming the accuracy of the representations and warranties of the Company and
the Investors contained in the Purchase Agreement and the compliance of such
parties with the agreements set forth therein (other than Section 3.1(n)) of the
Purchase Agreement), it is not necessary, in connection with the issuance and
sale of any of the Securities, in the manner contemplated by Transaction
Documents, to register any of the Securities under the Securities Act.

 

 
9.
Based on the Company’s certifications as to the use of proceeds from the sale of
the Securities, the Company is not, and after receipt of payment for the
Securities will not be, an “investment company” within the meaning of the
Investment Company Act.

 

 
10.
The Company has an authorized capitalization as set forth in the Purchase
Agreement.

 
 

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Exhibit D
 
PLAN OF DISTRIBUTION
 
The selling stockholders may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed
prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or negotiated prices. The selling stockholders
may use any one or more of the following methods when selling shares:
 
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
 
block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction;
 
purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
 
an exchange distribution in accordance with the rules of the applicable
exchange;
 
privately negotiated transactions;
 
short sales;
 
broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
 
a combination of any such methods of sale; and
 
any other method permitted pursuant to applicable law.
 
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
 
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. Any
profits on the resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or commissions under the
Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares
if liabilities are imposed on that person under the Securities Act. In
connection with sales of the shares of common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers, which may
in turn engage in short sales of the shares of common stock in the course of
hedging in positions they assume. The selling stockholders may also sell shares
of common stock short and deliver shares of common stock covered by this
prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The selling stockholders may also loan or
pledge shares of common stock to broker-dealers that in turn may sell such
shares.
 
 

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The selling stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed a supplement to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
supplementing or amending the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.
 
The selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed a supplement to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 supplementing or
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.
 
The selling stockholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
 
Under the securities laws of some states, the shares of common stock may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
 
There can be no assurance that any selling stockholder will sell any or all of
the shares of common stock registered pursuant to the shelf registration
statement, of which this prospectus forms a part.
 
We are required to pay all fees and expenses incident to the registration of the
shares of common stock. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
 
 

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The selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling stockholder. If we are notified by any
selling stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file
a supplement to this prospectus. If the selling stockholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
 
The selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common
stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
 
Once sold under the shelf registration statement, of which this prospectus forms
a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.
 
 

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Exhibit E
 
COMPANY TRANSFER AGENT INSTRUCTIONS
 
EMPIRE STOCK TRANSFER INC.
2470 Saint Rose Pkwy, Suite 304
Henderson, NV 89074

Attention: Patrick Mokros
 
Ladies and Gentlemen:
 
Reference is made to that certain Securities Purchase Agreement, dated as of
November 1, 2007 (the “Agreement”), by and among Akeena Solar, Inc., a Delaware
corporation (the “Company”), and the investors named on the Schedule of
Investors attached thereto (collectively, the “Holders”), pursuant to which the
Company is issuing to the Holders shares (the “Common Shares”) of Common Stock
of the Company, par value $0.001 per share (the “Common Stock”), and Warrants
(the “Warrants”), which are exercisable into shares of Common Stock.
 
This letter shall serve as our irrevocable authorization and direction to you
(provided that you are the transfer agent of the Company at such time):
 
(i)  to issue shares of Common Stock upon transfer or resale of the Common
Shares; and
 
(ii)  to issue shares of Common Stock upon the exercise of the Warrants (the
“Warrant Shares”) to or upon the order of a Holder from time to time upon
delivery to you of a properly completed and duly executed Exercise Notice, in
the form attached hereto as Exhibit I, which has been acknowledged by the
Company as indicated by the signature of a duly authorized officer of the
Company thereon.
 
You acknowledge and agree that so long as you have previously received
(a) written confirmation from the Company’s legal counsel that either (i) a
registration statement covering resales of the Common Shares and the Warrant
Shares has been declared effective by the Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”)
and that resales of the Common Shares and the Warrant Shares may be made
thereunder, or (ii) sales of the Common Shares and the Warrant Shares may be
made in conformity with Rule 144 under the Securities Act (“Rule 144”), (b) if
applicable, a copy of such registration statement, and (c) notice from legal
counsel to the Company or any Holder that a transfer of Common Shares and/or
Warrant Shares has been effected either pursuant to the registration statement
(and a prospectus delivered to the transferee) or pursuant to Rule 144, then,
unless otherwise required by law, within three (3) business days of your receipt
of the notice referred to in (c), you shall issue the certificates representing
the Common Shares and the Warrant Shares so sold to the transferees registered
in the names of such transferees, and such certificates shall not bear any
legend restricting transfer of the Common Shares and the Warrant Shares thereby
and should not be subject to any stop-transfer restriction.
 
 

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A form of written confirmation (to be used in connection with any sale) from the
Company’s outside legal counsel that a registration statement covering resales
of the Common Shares and the Warrant Shares has been declared effective by the
SEC under the Securities Act is attached hereto as Exhibit II.
 
Please be advised that the Holders are relying upon this letter as an inducement
to enter into the Agreement and, accordingly, each Holder is a third party
beneficiary to these instructions.
 
Please execute this letter in the space indicated to acknowledge your agreement
to act in accordance with these instructions. Should you have any questions
concerning this matter, please contact me at (408) 402-9404..

 
Very truly yours,
     
AKEENA SOLAR, INC.
     
By:
     
Name:
   
Title:

 
THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this day of November 1, 2007

EMPIRE STOCK TRANSFER INC.

By:
     
Name:
     
Title:
   

 
Enclosures

 

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Exhibit F
 
FORM OF WARRANT

 

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