Exhibit 10.1
 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement is entered into and dated as of June 23, 2006
(this “Agreement”), by and among IPIX Corporation, a Delaware corporation (the
“Company”), and each of the purchasers identified on the signature pages hereto
(each, a “Purchaser” and collectively, the “Purchasers”).
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933 (the “Securities Act”),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly, desires to
purchase from the Company, certain securities of the Company pursuant to the
terms set forth herein.
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser,
severally and not jointly, agree as follows:
 
ARTICLE I.  
 
DEFINITIONS
 
1.1  Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms shall have the meanings set forth in this Section 1.1:
 
“Additional Warrants” means, collectively, the Common Stock warrants issued upon
exercise of the Warrant B, in the form of Exhibit B-3.
 
“AdMission Transaction” means the transaction or series transaction(s) more
specifically described on Schedule 1.1 hereto, pursuant to which the Company
will sell all of its equity ownership in AdMission Corporation.
 
“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. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.
 
“Bankruptcy Event” means any of the following events: (a) the Company or any
Subsidiary commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Subsidiary thereof; (b) there is commenced against the Company or
any Subsidiary any such case or proceeding that is not dismissed within 60 days
after commencement; (c) the Company or any Subsidiary is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Subsidiary suffers any appointment
of any custodian or the like for it or any substantial part of its property that
is not discharged or stayed within 60 days; (e) the Company or any Subsidiary
makes a general assignment for the benefit of creditors; (f) the Company or any
Subsidiary fails to pay, or states that it is unable to pay or is unable to pay,
its debts generally as they become due; (g) the Company or any Subsidiary calls
a meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Company or any Subsidiary, by any act or
failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.
 

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“Business Day” means any day except Saturday, Sunday and any day which shall be
a federal legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other governmental action to
close.
 
“Change of Control” means the occurrence of any of the following in one or a
series of related transactions: (i) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1) under
the Exchange Act) of more than one-third of the voting rights or equity
interests in the Company; (ii) a replacement of more than one-half of the
members of the Company’s board of directors that is not approved by a majority
of those individuals who remain members of the board of directors; (iii) a
merger or consolidation of the Company or any Subsidiary or a sale of more than
one-third of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company’s securities prior to the first such transaction continue
to hold at least two-thirds of the voting rights and equity interests in of the
surviving entity or acquirer of such assets; (iv) a recapitalization,
reorganization or other transaction involving the Company or any Subsidiary that
constitutes or results in a transfer of more than one-half of the voting rights
or equity interests in the Company; (v) consummation of a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Exchange Act with respect to the
Company, or (vi) the execution by the Company or its controlling shareholders of
an agreement providing for or reasonably likely to result in any of the
foregoing events.
 
“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
 
“Closing Date” means the date of the Closing.
 
“Closing Price” means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on an Eligible Market or any other national securities exchange, the closing bid
price per share of the Common Stock for such date (or the nearest preceding
date) on the primary Eligible Market or exchange on which the Common Stock is
then listed or quoted; (b) if prices for the Common Stock are then quoted on the
OTC Bulletin Board, the closing bid price per share of the Common Stock for such
date (or the nearest preceding date) so quoted; (c) if prices for the Common
Stock are then reported in the “Pink Sheets” published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent closing bid price per share of
the Common Stock so reported; or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in
good faith by a majority in interest of the Purchasers.
 

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“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any securities into which such common stock may hereafter be
reclassified.
 
“Common Stock Equivalents” means, collectively, Options and Convertible
Securities.
 
“Company Counsel” means Winston & Strawn LLP, counsel to the Company.
 
“Conversion Price” has the meaning set forth in the Note.
 
“Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.
 
“Effective Date” means the date that the Registration Statement is first
declared effective by the Commission.
 
“Eligible Market” means any of the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Excluded Stock” means the issuance of Common Stock (A) upon exercise or
conversion of any options or other securities described in Schedule 3.1(g)
(provided that such exercise or conversion occurs in accordance with the terms
thereof, without amendment or modification, and that the applicable exercise or
conversion price or ratio is described in such schedule); (B) in connection with
any issuance of shares or grant of options to employees, officers, directors or
consultants of the Company pursuant to any stock option plan or employee benefit
plan described in Schedule 3.1(g) or hereafter adopted by the Company and
approved by its shareholders or in respect of the issuance of Common Stock upon
exercise of any such options; (C) pursuant to a bona fide firm commitment
underwritten public offering with a nationally recognized underwriter (excluding
any equity lines) in an aggregate offering amount greater than $15,000,000, or
(D) in connection with a bona fide joint venture, strategic partnership, or
strategic alliance the primary purpose of which is not to raise cash.
 
“Filing Date” means the 30th day following the Closing Date with respect to the
initial Registration Statement required to be filed hereunder, and, with respect
to any additional Registration Statements that may be required pursuant to
Section 6.1(g), the 15th day following the date on which the Company first
knows, or reasonably should have known, that such additional Registration
Statement is required under such Section.
 
“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including without limitation costs of preparation of legal
action and reasonable attorneys’ fees.
 

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“Notes” means the Senior Secured Convertible Notes due June 26, 2011 with an
aggregate principal face amount of $5,000,000 issued by the Company to the
Purchasers hereunder in the form of Exhibit A hereto.
 
“Options” means any rights, warrants or options to subscribe, directly or
indirectly for or purchase Common Stock or Convertible Securities (including all
Additional Warrants that can be issued under the Transaction Documents).
 
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“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 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.
 
“Purchaser Counsel” means Malhotra & Associates LLP, counsel to Iroquois Master
Fund, Ltd.
 
“Registrable Securities” means any Common Stock (including Underlying 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 the initial registration statement required to be
filed under Article VI and any additional registration statements contemplated
by Section 6.1(f), 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.
 
“Required Effectiveness Date” means (i) with respect to the initial Registration
Statement required to be filed hereunder, the 90th day following the Closing
Date, and (ii) with respect to any additional Registration Statements that may
be required pursuant to Section 6.1(f), the 60th day following the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement is required under such Section.
 

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“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the Commission 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 Commission having substantially the same effect as such
Rule.
 
“Securities” means the Notes, the Warrant A, the Warrant B, the Additional
Warrant and the Underlying Shares issued or issuable (as applicable) to the
applicable Purchaser pursuant to the Transaction Documents.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Security Agreement” means the Security Agreement dated as of the Closing Date,
among the Company, Iroquois Master Fund, Ltd., as agent, and the Purchasers
substantially in the form of Exhibit E.
 
“Subsidiary” means any subsidiary of the Company that is required to be listed
on Schedule 3.1(a). For the avoidance of doubt, AdMission Corporation shall not
be considered a “Subsidiary” of the Company hereunder.
 
“Trading Day” means (a) any day on which the Common Stock is listed or quoted
and traded on its primary Trading Market, or (b) if the Common Stock is not then
listed or quoted and traded on any Trading Market, then any Business Day.
 
“Trading Market” means Nasdaq SmallCap 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 Notes, the Warrant A, the
Warrant B, the Additional Warrant, the Transfer Agent Instructions and any other
documents or agreements executed or delivered in connection with the
transactions contemplated hereby.
 
“Transfer Agent Instructions” means the Company’s transfer agent instructions in
the form of Exhibit C.
 
“Underlying Shares” means the shares of Common Stock issuable (i) upon
conversion of the Notes, (ii) upon exercise of the Warrants, (iii) upon exercise
of the Additional Warrants issued upon exercise of the Warrant B, and (v) in
satisfaction of any other obligation of the Company to issue shares of Common
Stock pursuant to the Transaction Documents, and in each case, any securities
issued or issuable in exchange for or in respect of such securities.
 
“VWAP” means on any particular Trading Day or for any particular period the
volume weighted average trading price per share of Common Stock on such date or
for such period on an Eligible Market as reported by Bloomberg L.P., or any
successor performing similar functions; provided, however, that during any
period the VWAP is being determined, the VWAP shall be subject to adjustment
from time to time for stock splits, stock dividends, combinations and similar
events as applicable.
 

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“Warrant A” means, collectively, the Common Stock warrants issued and sold under
this Agreement, in the form of Exhibit B-1.
 
“Warrant B” means, collectively, the Common Stock warrants issued and sold under
this Agreement, in the form of Exhibit B-2.
 
“Warrants” means, collectively, each of the Warrant A and Warrant B issued and
sold under this Agreement
 
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 Purchaser, and each
Purchaser shall, severally and not jointly, purchase from the Company, the
Notes, the Warrant A and the Warrant B for the purchase price set forth on
Schedule A hereto under the heading “Purchase Price”. The Closing shall take
place at the offices of Purchaser Counsel or at such other location or time as
the parties may agree.
 
2.2  Closing Deliveries.
 
(a)   At the Closing, the Company shall deliver or cause to be delivered to each
Purchaser the following:
 
(i)  a Note, registered in the name of such Purchaser, in the principal amount
indicated on Schedule A hereto under the heading “Note Principal Amount”;
 
(ii)  a Warrant A, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire such number of Underlying Shares
indicated on Schedule A hereto under the heading “Warrant Shares”.
 
(iii)  a Warrant B, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire (i) such number of Underlying
Shares indicated on Schedule A hereto under the heading “Warrant B Shares”, and
(ii) an Additional Warrant, pursuant to which such Purchaser shall have the
right to acquire such number of Underlying Shares indicated on Schedule A hereto
under the heading “Additional Warrant Shares”, each on the terms set forth
therein;
 
(iv)  the legal opinion of Company Counsel, in the form of Exhibit D, executed
by such counsel and delivered to the Purchasers;
 
(v)  the Security Agreement executed by the parties thereto;
 
(vi)  duly executed Transfer Agent Instructions acknowledged by the Company’s
transfer agent; and
 
(vii)  any other document reasonably requested by the Purchasers or Purchaser
Counsel.
 

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(b)   At the Closing, each Purchaser shall deliver or cause to be delivered to
the Company the purchase price indicated below such Purchaser’s name on the
signature page of this Agreement under the heading “Purchase Price”, in United
States dollars and in immediately available funds, by wire transfer to an
account designated in writing by the Company for such purpose.
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES
 
3.1  Representations and Warranties of the Company. The Company hereby makes the
following representations and warranties to the Purchasers:
 
(a)   Subsidiaries. The Company does not directly or indirectly control or own
more than a five percent (5%) interest in any other corporation, partnership,
joint venture or other business association or entity (a “Subsidiary”), other
than those listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a),
the Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any lien, charge, claim,
security interest, encumbrance, right of first refusal or other restriction
(collectively, “Liens”), and all the issued and outstanding shares of capital
stock or comparable equity interests 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 incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (i) adversely
affect the legality, validity or enforceability of any Transaction Document,
(ii) have or result in a material adverse effect on the results of operations,
assets, prospects, business or condition (financial or otherwise) of the Company
and the Subsidiaries, taken as a whole, or (iii) adversely impair the Company’s
ability to perform fully on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).
 
(c)   Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereunder and thereunder have been duly authorized by all necessary
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 Transaction
Document has been (or upon delivery will be) duly executed by the Company 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. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its certificate or articles of
incorporation, by laws or other organizational or charter documents.
 

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(d)   No Conflicts. Except as disclosed on Schedule 3.1(d), the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
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, or (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) or other understanding to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations and the
rules and regulations of any self-regulatory organization to which the Company
or its securities are subject), or by which any property or asset of the Company
or a Subsidiary is bound or affected; except in each case as, individually or in
the aggregate, do not have or are not reasonably expected to result in a
Material Adverse Effect.
 
(e)   Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filing with the Commission of a Form 8-K Current Report, (ii) the filing
with the Commission of the Registration Statement(s), (iii) the application(s)
to each Trading Market for the listing of the Underlying Shares for trading
thereon, (iv) the notification to the Trading Market of the change in the number
of shares outstanding and (v) applicable Blue Sky filings (collectively, the
“Required Approvals”).
 
(f)   Issuance of the Securities. The Securities 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
(other than restrictions under applicable securities laws), and shall not be
subject to preemptive rights or similar rights of shareholders. The Securities
are issued in compliance with applicable securities laws, rules and regulations.
The Company has reserved from its duly authorized capital stock the maximum
number of shares of Common Stock issuable under the Transaction Documents
(without giving effect to any anti-dilution provisions contained therein).
 
(g)   Capitalization. The number of shares and type of all authorized, issued
and outstanding 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(g). All
outstanding shares of capital stock are duly authorized, validly issued, fully
paid and nonassessable and have been issued in compliance with all applicable
securities laws. No securities of the Company are entitled to preemptive or
similar rights, and no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except as disclosed in Schedule 3.1(g), there are
no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Except as disclosed on Schedule 3.1(g), the issue 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 Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. To the knowledge of the Company,
except as specifically disclosed in Schedule 3.1(g), 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, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at any single time. 
 

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(h)   SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the “SEC Reports” and, together with the Schedules to this
Agreement, the “Disclosure Materials”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the Purchasers a
copy of all SEC Reports filed within the 10 days preceding the date hereof. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
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 specifically identified in the SEC Reports.
 
 
 
 
 
 
 

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(i)   Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or in Schedule 3.1(i), (i) there has been no event, occurrence
or development that, individually or in the aggregate, has had or that could
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.
 
(j)   Absence of Litigation. Other than as described in the SEC Reports, there
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any formal investigation by
the Commission involving the Company or any current or former director or
officer of the Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
 
(k)   Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company.
 
(l)   Compliance. Except as disclosed in the SEC Reports or on Schedule 3.1(l),
neither the Company nor any Subsidiary (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is or has been in violation of
any statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case (a) as,
individually or in the aggregate, do not have or are not reasonably expected to
result in a Material Adverse Effect, or (b) for which appropriate accruals have
been made in the Company’s financial statements in the SEC Reports.
 

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(m)   Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect (“Material Permits”), and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.
 
(n)   Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and marketable title in
all personal property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all Liens, except
for Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance in all material respects.
 
(o)   Patents and Trademarks. Other than as described in the SEC Reports, the
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or material for
use in connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material Adverse Effect
(collectively, the “Intellectual Property Rights”). Other than as described in
the SEC Reports, neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. Other than as
described in the SEC Reports, to the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
 
(p)   Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
 
(q)   Transactions With Affiliates and Employees. Except as set forth in SEC
Reports, none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
 

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(r)   Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP and
includes those policies and procedures that (i) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and
directors of the Company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Company’s assets that could have a material effect on the financial
statements.
 
(s)   Solvency. Based on the financial condition of the Company as of the
Closing Date and subject to the Company meeting its projected revenue targets
for the third and fourth quarters of the current fiscal year: (i) the Company’s
fair saleable value of its assets exceeds the amount that will be required to be
paid on or in respect of the Company’s existing debts and other liabilities
(including known contingent liabilities) as they mature during the current
fiscal year; (ii) the Company’s assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
assuming (A) the liquidation of assets includes receipts of material payment for
intellectual property which is not currently reflected on the Company’s balance
sheet and (B) that forced liquidation of inventory assets would not adversely
affect the realizable value of that inventory when compared to its carrying
value and the sale of inventory in the normal course of business, the current
cash flow of the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. While the Company
does not intend to incur debts beyond its ability to pay such debts as they
mature taking into account the timing and amounts of cash to be paid on or in
respect of its debt, the Company does believe that an additional working capital
financing will be required in the next fiscal year.
 
(t)   Certain Fees. Except as described in Schedule 3.1(t), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Purchasers shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchasers, their employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney’s fees) and
expenses suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
 

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(u)   Private Placement. Neither the Company nor any Person acting on the
Company’s behalf has sold or offered to sell or solicited any offer to buy the
Securities by means of any form of general solicitation or advertising. 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 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
stockholder approval provisions under the rules and regulations of any Trading
Market. Assuming the accuracy of the Purchasers representations and warranties
set forth in Section 3.2, no registration under the Securities Act is required
for the offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market and no shareholder
approval is required for the Company to fulfill its obligations under the
Transaction Documents. The Company is not a United States real property holding
corporation within the meaning of the Foreign Investment in Real Property Tax
Act of 1980.
 
(v)   Form S-3 Eligibility. The Company is eligible to register the resale of
its Common Stock for resale by the Purchasers under Form S-3 promulgated under
the Securities Act.
 
(w)   Listing and Maintenance Requirements. Other than as disclosed in the SEC
Reports, the Company has not, in the two years preceding the date hereof,
received notice (written or oral) from any Eligible 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 Eligible Market.
The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.
 
(x)   Registration Rights. Except as described in Schedule 3.1(x), 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 Commission or any other governmental authority that have not been satisfied.
 
(y)   Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar anti
takeover provision under the Company’s Certificate of Incorporation (or similar
charter documents) or the laws of its state of incorporation that is or could
become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.
 

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(z)   Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Purchasers or their agents or
counsel with any information that constitutes or might constitute material,
non-public information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct 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 light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed. The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2.
 
(aa)   No Violation. The issuance and sale of the Securities contemplated hereby
does not conflict with or violate any rules or regulations of the Trading
Market.
 
(bb)   Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company or any
other Purchaser (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any Purchaser or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Purchaser’s purchase of the Securities. The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives. The Company further acknowledges that no Purchaser has made any
promises or commitments other than as set forth in this Agreement, including any
promises or commitments for any additional investment by any such Purchaser in
the Company.
 
(cc)   Investment Company. The Company is not, and is not an Affiliate of, an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
 
(dd)   Ranking. Except as set forth on Schedule 3.1(dd), as of the date of this
Agreement, no indebtedness of the Company is senior to, or pari passu with, the
Notes in right of payment, whether with respect to interest or upon liquidation
or dissolution, or otherwise.
 
(ee)   Indebtedness. Except as set forth on Schedule 3.1(ee) and trade payables
arising in the ordinary course of business not more than sixty (60) days past
due, the Company does not have any indebtedness.
 
(ff)   Sarbanes-Oxley Act. The Company is in compliance with applicable
requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in effect as of the date of
this Agreement, except where such noncompliance could not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect.
 

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3.2  Representations and Warranties of the Purchasers. Each Purchaser hereby, as
to itself only and for no other Purchaser, represents and warrants to the
Company as follows:
 
(a)   Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate, limited liability company or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution, delivery and performance by
such Purchaser of this Agreement have been duly authorized by all necessary
corporate or limited liability company action on the part of such Purchaser.
This Agreement has been duly executed by such Purchaser and, when delivered by
such Purchaser in accordance with terms hereof, will constitutes the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms.
 
(b)   Investment Intent.Such Purchaser is acquiring the Securities for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to such
Purchaser’s right, subject to the provisions of this Agreement, at all times to
sell or otherwise dispose of all or any part of such Securities pursuant to an
effective registration statement under the Securities Act or under an exemption
from such registration and in compliance with applicable federal and state
securities laws. Nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold Securities for any period of time. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business
 
(c)   Purchaser Status. At the time such Purchaser was offered the Securities,
it was, and at the date hereof it is, an “accredited investor” as defined in
Rule 501(a) under the Securities Act. Such Purchaser is not a registered
broker-dealer under Section 15 of the Exchange Act.
 
(d)   Group Status.Such Purchaser is not acting with any other Purchaser as a
"group" as that term is used in Section 13(d) of the Exchange Act.
 
(e)   Experience of such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
 
(f)   General Solicitation. Such Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
 

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(g)   Access to Information. Such Purchaser has had the opportunity to ask
questions or, and receive answers from, representatives of the Company
concerning the Company and the terms and conditions of this transaction, as well
as obtain any information requested by such Purchaser. Such Purchaser’s decision
to enter into the transactions contemplated hereby is based on such Purchaser’s
own evaluation of the risks and merits of the Company.
 
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
 
4.1  Transfer Restrictions.
 
(a)   The Securities may only be disposed of pursuant to an effective
registration statement under 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), except as otherwise set
forth herein, 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, any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser, provided that the transferee certifies to the Company that it is
an “accredited investor” as defined in Rule 501(a) under the Securities Act.
 
(b)   The Purchasers agree to the imprinting, except as otherwise permitted by
Section 4.1(c), the following legend on any certificate evidencing Securities:
 
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[EXERCISABLE] [CONVERTIBLE]] 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”), 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, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON [EXERCISE]
[CONVERSION] OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.
 

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(c)   Certificates evidencing Securities shall not be required to contain the
legend set forth in Section 4.1(b) or any other legend (i) while a Registration
Statement covering the resale of such Securities is effective under the
Securities Act, or (ii) following any sale of such Securities pursuant to Rule
144, or (iii) if such Securities are eligible for sale under Rule 144(k), or
(iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). The Company shall cause its counsel to issue the
legal opinion included in the Transfer Agent Instructions to the Company’s
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 a
Purchaser to the Company or the Company’s transfer agent of a legended
certificate representing such Securities, deliver or cause to be delivered to
such Purchaser 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 any transfer agent of the Company that enlarge
the restrictions on transfer set forth in Section 4.1(b). For so long as any
Purchaser owns Securities, the Company will not effect or publicly announce its
intention to effect any exchange, recapitalization or other transaction that
effectively requires or rewards physical delivery of certificates evidencing the
Common Stock.
 
(d)   The Company acknowledges and agrees that a Purchaser may from time to time
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, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser’s expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including 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.
 
4.2  Acknowledgment of Dilution. The Company acknowledges that the issuance of
the Securities (including the Underlying Shares) will result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including without limitation its obligation to
issue the Securities (including the Underlying Shares) pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of the effect of
any such dilution or any claim that the Company may have against any Purchaser.
 
4.3  Furnishing of Information. As long as any Purchaser owns Securities, the
Company covenants 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. Upon the request of
any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers to
sell the Securities under Rule 144. The Company further covenants that it will
take such further action as any holder of Securities may reasonably request to
satisfy the provisions of Rule 144 applicable to the issuer of securities
relating to transactions for the sale of securities pursuant to Rule 144.
 

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4.4  Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company 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 Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
 
4.5  Reservation and Listing of Securities.
 
(a)   The Company shall maintain a reserve from its duly authorized shares of
Common Stock for issuance pursuant to the Transaction Documents in such amount
as may be required to fulfill its obligations in full under the Transaction
Documents.
 
(b)   The Company shall (i) promptly prepare and file with such Trading Market
an additional shares listing application covering all of the shares of Common
Stock issued or issuable under the Transaction Documents, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing on
each Trading Market as soon as possible thereafter, (iii) provide to the
Purchasers evidence of such listing, and (iv) maintain the listing of such
Common Stock on each such Trading Market or another Eligible Market.
 
(c)   In the case of a breach by the Company of Section 4.5(a), in addition to
the other remedies available to the Purchasers, the Purchasers shall have the
right to require the Company to either: (i) use its best efforts to obtain the
required shareholder approval necessary to permit the issuance of such shares of
Common Stock as soon as is possible, but in any event not later than the 60th
day after such notice, or (ii) within five Trading Days after delivery of a
written notice, pay cash to such Purchaser, as liquidated damages and not as a
penalty, in an amount equal to the number of shares of Common Stock not issuable
by the Company times 115% of the arithmetic average of the VWAP for the five
Trading Days immediately prior to the date of such notice or, if greater, the
five Trading Days immediately prior to the date of payment (the “Cash Amount”).
If the exercising or converting Purchaser elects the first option under the
preceding sentence and the Company fails to obtain the required shareholder
approval on or prior to the 60th day after such notice, then within three
Trading Days after such 60th day, the Company shall pay the Cash Amount to such
Purchaser, as liquidated damages and not as penalty.
 

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4.6  Subsequent Placements.
 
(a)   From the date hereof until the Effective Date, the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition of) any of its or the Subsidiaries’ equity or equity
equivalent securities, including without limitation any debt, preferred stock or
other instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for Common Stock
or Common Stock Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a “Subsequent Placement”).
 
(b)   From the Effective Date and for so long as the Notes are outstanding, the
Company will not, directly or indirectly, effect any Subsequent Placement unless
the Company shall have first complied with this Section 4.6(b).
 
(i)  The Company shall deliver to each Purchaser a written notice (the “Offer”)
of any proposed or intended issuance or sale or exchange of the securities being
offered (the “Offered Securities”) in a Subsequent Placement, which Offer shall
(w) identify and describe the Offered Securities, (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number
or amount of the Offered Securities to be issued, sold or exchanged, (y)
identify the Persons or entities to which or with which the Offered Securities
are to be offered, issued, sold or exchanged and (z) offer to issue and sell to
or exchange with each Purchaser (A) a pro rata portion of 66% of the Offered
Securities based on such Purchaser’s pro rata portion of the aggregate principal
amount of the Notes purchased hereunder (the “Basic Amount”), and (B) with
respect to each Purchaser that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Purchasers as such Purchaser shall indicate it will purchase or acquire
should the other Purchasers subscribe for less than their Basic Amounts (the
“Undersubscription Amount”).
 
(ii)  To accept an Offer, in whole or in part, a Purchaser must deliver a
written notice to the Company prior to the end of the five (5) Trading Day
period of the Offer, setting forth the portion of the Purchaser’s Basic Amount
that such Purchaser elects to purchase and, if such Purchaser shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that
such Purchaser elects to purchase (in either case, the “Notice of Acceptance”).
If the Basic Amounts subscribed for by all Purchasers are less than the total of
all of the Basic Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, that if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the “Available Undersubscription
Amount”), each Purchaser who has subscribed for any Undersubscription Amount
shall be entitled to purchase on that portion of the Available Undersubscription
Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of
all Purchasers that have subscribed for Undersubscription Amounts, subject to
rounding by the Board of Directors to the extent its deems reasonably necessary.
 

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(iii)  The Company shall have three (3) Trading Days from the expiration of the
period set forth in Section 4.6(b)(ii) above to issue, sell or exchange all or
any part of such Offered Securities as to which a Notice of Acceptance has not
been given by the Purchasers (the “Refused Securities”), but only to the
offerees described in the Offer and only upon terms and conditions (including,
without limitation, unit prices and interest rates) that are not more favorable
to the acquiring Person or Persons or less favorable to the Company than those
set forth in the Offer.
 
(iv)  In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4.6(b)(iii) above), then each Purchaser may, at its sole option and in
its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that the Purchaser elected to
purchase pursuant to Section 4.6(b)(ii) above multiplied by a fraction, (i) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Purchasers pursuant to Section 4.6(c)(ii)
above prior to such reduction) and (ii) the denominator of which shall be the
original amount of the Offered Securities. In the event that any Purchaser so
elects to reduce the number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in accordance with Section
4.6(b)(i) above.
 
(v)  Upon the closing of the issuance, sale or exchange of all or less than all
of the Refused Securities, the Purchasers shall acquire from the Company, and
the Company shall issue to the Purchasers, the number or amount of Offered
Securities specified in the Notices of Acceptance, as reduced pursuant to
Section 4.6(b)(iv) above if the Purchasers have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Purchasers of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Purchasers of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Purchasers and
their respective counsel.
 
(vi)  Any Offered Securities not acquired by the Purchasers or other Persons in
accordance with Section 4.6(b)(iii) above may not be issued, sold or exchanged
until they are again offered to the Purchasers under the procedures specified in
this Agreement.
 
(c)   The restrictions contained in paragraphs (b) of this Section 4.6 shall not
apply to Excluded Stock.
 
4.7  Conversion and Exercise Procedures. The form of Exercise Notice included in
the Warrants and Additional Warrants and the form of Holder Conversion Notice
included in the Notes set forth the totality of the procedures required by the
Purchasers in order to exercise the Warrants or Additional Warrants or convert
the Notes. No additional legal opinion or other information or instructions
shall be necessary to enable the Purchasers to exercise their Warrants or
convert their Notes. The Company shall honor exercises of the Warrants and
Additional Warrants and conversions of the Notes and shall deliver Underlying
Shares in accordance with the terms, conditions and time periods set forth in
the Transaction Documents.
 

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4.8  Securities Laws Disclosure; Publicity. On or before 8:30 a.m., New York
time, on June 26, 2006, the Company shall issue a press release acceptable to
the Purchasers disclosing all material terms of the transactions contemplated
hereby. Within two Trading Days of the date of this Agreement, the Company shall
file a Current Report on Form 8-K with the Commission (the “8-K Filing”)
describing the terms of the transactions contemplated by the Transaction
Documents and including as exhibits to such Current Report on Form 8-K this
Agreement and the form of Notes and Warrants, in the form required by the
Exchange Act. Thereafter, the Company shall timely file any filings and notices
required by the Commission or applicable law with respect to the transactions
contemplated hereby and provide copies thereof to the Purchasers promptly after
filing. Except with respect to the 8-K Filing and the press release referenced
above (a copy of which will be provided to Purchaser Counsel for its review as
early as practicable prior to its filing), the Company shall, at least two
Trading Days prior to the filing or dissemination of any disclosure required by
this paragraph, provide a copy thereof to the Purchasers for their review. The
Company and the Purchasers shall consult with each other in issuing any press
releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement, filing
or other communication without the prior consent of the other, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing or
other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure. 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
Purchaser with any material nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing without the
express written consent of such Purchaser. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Purchaser shall
have the right to require the Company to make a public disclosure, in the form
of a press release, public advertisement or otherwise, of such material
nonpublic information. No Purchaser shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the foregoing,
neither the Company nor any Purchaser shall issue any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Purchaser, to make any press release or other public disclosure
with respect to such transactions (i) in substantial conformity with the 8-K
Filing and contemporaneously therewith and (ii) as is required by applicable law
and regulations (provided that in the case of clause (i) Purchaser Counsel shall
be consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Each press release disseminated during
the 12 months prior to the Closing Date did not at the time of release contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
 

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4.9  Use of Proceeds. The Company shall use the net proceeds from the sale of
the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company’s debt (other than payment of trade
payables and accrued expenses in the ordinary course of the Company’s business
and prior practices), to redeem any Company equity or equity-equivalent
securities or to settle any outstanding litigation.
 
4.10  Indebtedness.
 
(a)   At any time after the date of this Agreement, neither the Company nor any
Subsidiary of the Company shall incur any indebtedness, liability or obligation
that is senior to, or pari passu with, the Notes in right of payment, whether
with respect to interest or upon liquidation or dissolution, or otherwise;
provided, however, that notwithstanding the foregoing, the Company may, in the
ordinary course of business, incur indebtedness secured by purchase money
security interests (which will be senior only as to the underlying assets
covered thereby) and indebtedness under capital lease obligations (which will be
senior only as to the underlying assets covered thereby).
 
(b)   The provisions of this Section 4.10 shall terminate and be of no further
force or effect upon the conversion or indefeasible repayment in full of the
Notes and all accrued interest thereon and any and all expenses or liabilities
relating thereto.
 
4.11  Repayment of Notes. Each of the parties hereto agrees that all repayments
of the Notes (including any accrued interest thereon) by the Company (other than
by conversion of the Notes) will be paid pro rata to the holders thereof based
upon the principal amount then outstanding to each of such holders.
 
4.12  No Impairment. At all times after the date hereof, the Company will not
take or permit any action, or cause or permit any subsidiary to take or permit
any action that impairs or adversely affects the rights of the Purchasers under
the Agreement or the Notes.
 
4.13  Fundamental Changes.
 
(a)   In addition to any other rights provided by law or set forth herein, from
and after the date of this Agreement and for so long as any Notes remain
outstanding, the Company shall not without first obtaining the approval (by vote
or written consent, as provided by law) of the holders of a majority of the
outstanding principal face amount of the Notes:
 
(i)purchase, redeem (other than pursuant to equity incentive agreements with
non-officer employees giving the Company the right to repurchase shares upon the
termination of services) or set aside any sums for the purchase or redemption
of, or declare or pay any dividend (including a dividend payable in stock of the
Company) or make any other distribution with respect to, any shares of capital
stock or any other securities that are convertible into or exercisable for such
stock;
 

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(ii)change the nature of the Company’s business to any business which is
fundamentally distinct and separate from the business currently conducted by the
Company; or
 
(iii)cause or permit any subsidiary of the Company directly or indirectly to
take any actions described in clauses (a) through (b) above, other than issuing
securities to the Company.
 
(b)   From the date of this Agreement until the Effective Date, except in
connection with the AdMission Transaction, the Company shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of a majority of the outstanding principal face amount of the Notes,
which approval shall not be unreasonably withheld or delayed:
 
(i)  acquire or merge with any other business entity;
 
(ii)  sell a substantial portion of assets not in the ordinary course of
business;
 
(iii)  enter into a transaction that results in or cause a Change of Control;
 
(iv)  amend the company’s charter or by-laws (other than to make changes that
are not material);
 
(v)  increase the number of shares issuable pursuant to any stock option or
other equity incentive plan;
 
(vi)  change the nature of the Company’s business to any business which is
fundamentally distinct and separate from the business currently conducted by the
Company;
 
(vii)  create, incur, assume or suffer to exist indebtedness (other than trade
payables incurred in the ordinary course of business) greater than $200,000 in
aggregate;
 
(viii)  create or suffer to exist any Lien (other than Liens arising by
operation of law) or transfer upon or against any of its property or assets now
owned or hereafter acquired, except for indebtedness less than $200,000 in
aggregate; or
 
(ix)  cause or permit any Subsidiary of the Company directly or indirectly to
take any actions described in clauses (a) through (j) above, other than issuing
securities to the Company.
 

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4.14  Reimbursement. If any Purchaser or any of its Affiliates or any officer,
director, partner, controlling person, employee or agent of a Purchaser or any
of its Affiliates (a “Related Person”) becomes involved in any capacity in any
Proceeding brought by or against any Person in connection with or as a result of
the transactions contemplated by the Transaction Documents, the Company will
indemnify and hold harmless such Purchaser or Related Person for its reasonable
legal and other expenses (including the costs of any investigation, preparation
and travel) and for any Losses incurred in connection therewith, as such
expenses or Losses are incurred, excluding only Losses that result directly from
such Purchaser’s or Related Person’s gross negligence or willful misconduct. In
addition, the Company shall indemnify and hold harmless each Purchaser and
Related Person from and against any and all Losses, as incurred, arising out of
or relating to any breach by the Company of any of the representations,
warranties or covenants made by the Company in this Agreement or any other
Transaction Document, or any allegation by a third party that, if true, would
constitute such a breach (unless such allegation is based upon a breach of such
Purchaser’s representation, warranties or covenants under the Transaction
Documents or any agreements or understandings that such Purchaser may have with
any other Person or any violations by the Purchaser or any Related Person of
state or federal securities laws or any conduct by such Purchaser or Related
Person which constitutes gross negligence or willful misconduct). The conduct of
any Proceedings for which indemnification is available under this paragraph
shall be governed by Section 6.4(c) below. The indemnification obligations of
the Company under this paragraph shall be in addition to any liability that the
Company may otherwise have and shall be binding upon and inure to the benefit of
any successors, assigns, heirs and personal representatives of the Purchasers
and any such Related Persons. If the Company breaches its obligations under any
Transaction Document, then, in addition to any other liabilities the Company may
have under any Transaction Document or applicable law, the Company shall pay or
reimburse the Purchasers on demand for all costs of collection and enforcement
(including reasonable attorneys’ fees and expenses). Without limiting the
generality of the foregoing, the Company specifically agrees to reimburse the
Purchasers on demand for all costs of enforcing the indemnification obligations
in this paragraph.
 
4.15  Shareholders Rights Plan. No claim will be made or enforced by the Company
or any other Person that any Purchaser is an “Acquiring Person” under any
shareholders rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Underlying
Shares under the Transaction Documents or under any other agreement between the
Company and the Purchasers.
 
4.16  Seniority. For so long as the Notes are outstanding, (i)  no indebtedness
of the Company is or will be senior to, or pari passu with, this Note in right
of payment, whether with respect of interest, damages or upon liquidation or
dissolution or otherwise and (ii) the Company will not, and will not permit any
Subsidiary to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness for borrowed money of any kind, on or with
respect to any of its property or assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom, that is senior or pari
passu in any respect to the Company’s obligations under the Notes, whether with
respect to interest or upon liquidation or dissolution, or otherwise; provided,
however, that the Company may incur any such indebtedness if the proceeds
received in respect thereof are used for repayment of the Notes in full.
 

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4.17  Delivery of Certificates. In addition to any other rights available to a
Purchaser, if the Company fails to deliver to such Purchaser a certificate
representing Common Stock on the date on which delivery of such certificate is
required by any Transaction Document, and if after such date such Purchaser
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Purchaser of the shares that the
Purchaser anticipated receiving from the Company (a “Buy-In”), then the Company
shall, within three Trading Days after such Purchaser’s request and in such
Purchaser’s discretion, either (i) pay cash to such Purchaser in an amount equal
to such Purchaser’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate (and to issue such
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to such Purchaser a certificate or certificates representing such Common Stock
and pay cash to such Purchaser in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the VWAP on the date of the event giving rise to the Company’s
obligation to deliver such certificate.
 
ARTICLE V
CONDITIONS
 
5.1  Conditions Precedent to the Obligations of the Purchasers. The obligation
of each Purchaser to acquire Securities at the Closing is subject to the
satisfaction or waiver by such Purchaser, 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 as
of the date when made and as of the Closing as though made on and as of such
date;
 
(b)   Performance. The Company and each other Purchaser 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;
 
(c)   No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents;
 
(d)   Adverse Changes. Since the date of execution of this Agreement, no event
or series of events shall have occurred that reasonably would be expected to
have or result in a Material Adverse Effect; and
 
(e)   No Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day solely
to permit dissemination of material information regarding the Company) at any
time since the date of execution of this Agreement, and the Common Stock shall
have been at all times since such date listed for trading on an Eligible Market.
 

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5.2  Conditions Precedent to the Obligations of the Company. The obligation of
the Company to sell 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
Purchasers contained herein shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made on and as of
such date;
 
(b)   Performance. The Purchasers 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
Purchasers at or prior to the Closing; and
 
(c)   No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction that prohibits
the consummation of any of the transactions contemplated by the Transaction
Documents.
 
ARTICLE VI
REGISTRATION RIGHTS
 
6.1  Shelf Registration.
 
(a)   As promptly as possible, and in any event on or prior to the Filing Date,
the Company shall prepare and file with the Commission a “shelf” Registration
Statement covering the resale of all Registrable Securities for an offering to
be made on a continuous basis pursuant to Rule 415. If for any reason the
Commission does not permit all of the Registrable Securities to be included in
such Registration Statement, then the Company shall prepare and file with the
Commission a separate Registration Statement with respect to any such
Registrable Securities not included with the initial Registration Statements, as
expeditiously as possible, but in no event later than the date which is 30 days
after the date on which the Commission shall indicate as being the first date
such filing may be made. The Registration Statement shall be on Form S-3 and
shall contain (except if otherwise directed by the Purchasers) the “Plan of
Distribution”, substantially as attached hereto as Exhibit G. In the event the
Form S-3 is not available for the registration of the resale of Registrable
Securities hereunder, the Company shall (i) register the resale of the
Registrable Securities on another appropriate form in accordance herewith as the
Purchasers may consent and (ii) attempt to register the Registrable Securities
on Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statements then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the Commission.
 
(b)   The Company shall use its best efforts to cause the Registration Statement
to be declared effective by the Commission as promptly as possible after the
filing thereof, but in any event prior to the Required Effectiveness Date, and
shall use its best efforts to keep the Registration Statement continuously
effective under the Securities Act until the earlier of (i) the fifth
anniversary of the Effective Date, (ii) the date when all Registrable Securities
covered by such Registration Statement have been sold publicly, or (iii) the
date on which the Registrable Securities are eligible for sale without
registration pursuant to subparagraph (k) of Rule 144 (the “Effectiveness
Period”).
 

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(c)   The Company shall notify each Purchaser in writing promptly (and in any
event within one business day) after receiving notification from the Commission
that the Registration Statement has been declared effective.
 
(d)   If: (i) any Registration Statement is not filed on or prior to the Filing
Date (if the Company files such Registration Statement without affording the
Purchasers the opportunity to review and comment on the same as required by
Section 6.2(a) hereof, the Company shall not be deemed to have satisfied this
clause (i)), or (ii) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days after the date that the Company is notified (orally or
in writing, whichever is earlier) by the Commission that a Registration
Statement will not be “reviewed,” or will not be subject to further review, or
(iii) the Company fails to respond to any comments made by the Commission within
10 Trading Days after the receipt of such comments, or (iv) a Registration
Statement filed hereunder is not declared effective by the Commission by the
Required Effectiveness Date, or (v) except as provided in Section 6.1(f) hereof,
after a Registration Statement is filed with and declared effective by the
Commission, such Registration Statement ceases to be effective as to all
Registrable Securities to which it is required to relate at any time prior to
the expiration of the Effectiveness Period without being succeeded within 10
Trading Days by an amendment to such Registration Statement or by a subsequent
Registration Statement filed with and declared effective by the Commission, or
(vi) an amendment to a Registration Statement is not filed by the Company with
the Commission within ten Trading Days after the Commission’s having notified
the Company that such amendment is required in order for such Registration
Statement to be declared effective, or (vii) the Common Stock is not listed or
quoted, or is suspended from trading on the Nasdaq National Market for a period
of three Trading Days (which need not be consecutive Trading Days), or (viii)
the exercise rights of the Purchasers pursuant to the Warrants are suspended for
any reason (any such failure or breach being referred to as an “Event,” and for
purposes of clause (i), (iv) or (viii) the date on which such Event occurs, or
for purposes of clause (ii) the date on which such five Trading Day period is
exceeded, or for purposes of clauses (iii), (v) or (vi) the date which such ten
Trading Day-period is exceeded, or for purposes of clause (vii) the date on
which such three Trading Day period is exceeded, being referred to as “Event
Date”), then: (x) on each such Event Date the Company shall pay to each
Purchaser an amount in cash, as partial liquidated damages and not as a penalty,
equal to 2% of the aggregate purchase price paid by such Purchaser pursuant to
this Agreement; and (y) on each monthly anniversary of each such Event Date
thereof (if the applicable Event shall not have been cured by such date) until
the applicable Event is cured, the Company shall pay to each Purchaser an amount
in cash, as partial liquidated damages and not as a penalty, equal to 2% of the
aggregate purchase price paid by such Purchaser pursuant to the Purchase
Agreement. Such payments shall be in partial compensation to the Purchasers and
shall not constitute the Purchaser’s exclusive remedy for such events. If the
Company fails to pay any liquidated damages pursuant to this Section in full
within seven days after the date payable, the Company will pay interest thereon
at a rate of 18% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the Purchaser, accruing daily from the date such
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full.
 

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(e)   The Company shall not, prior to the Effective Date of the Registration
Statement, prepare and file with the Commission 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.
 
(f)   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 Purchasers, suspend sales under a Registration
Statement after the Effective Date thereof and/or require that the Purchasers
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 file a Registration
Statement at such time and (B) it is in the best interests of the Company to
defer proceeding with such registration at such time. Upon receipt of such
notice, each Purchaser shall immediately discontinue any sales of Registrable
Securities pursuant to such registration until such Purchaser has received
copies of a supplemented or amended Prospectus or until such Purchaser is
advised in writing by the Company that the then-current Prospectus may be used
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus. 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(f) may be
exercised for a period of no more than 15 Trading Days in any twelve-month
period, of which no more than 5 Trading Days may be consecutive. Immediately
after the end of any suspension period under this Section 6(f), 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 Purchasers to publicly resell their Registrable
Securities pursuant to such effective Registration Statement.
 
(g)   If the Company issues to the Purchasers any Common Stock pursuant to the
Transaction Documents that is not included in the initial Registration
Statement, then the Company shall file an additional Registration Statement
covering such number of shares of Common Stock on or prior to the Filing Date
and shall use it best efforts, but in no event later than the Required Filing
Date, to cause such additional Registration Statement to become effective by the
Commission.
 
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
(including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to the Purchasers and
Purchaser Counsel copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Purchasers and Purchaser
Counsel (it being understood that such review must be completed within three
Trading Days of receipt of the applicable documents), and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file a Registration Statement or any
such Prospectus or any amendments or supplements thereto to which Purchasers
holding a majority of the Registrable Securities shall reasonably object.
 
(b)   (i) Prepare and file with the Commission 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 Commission 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 ten days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Purchasers true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement; 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 Purchasers thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented
 
(c)   Notify the Purchasers of Registrable Securities to be sold and Purchaser
Counsel as promptly as reasonably possible, and (if requested by any such
Person) confirm such notice in writing no later than one Trading Day thereafter,
of any of the following events: (i) the Commission notifies the Company whether
there will be a “review” of any Registration Statement; (ii) the Commission
comments in writing on any Registration Statement (in which case the Company
shall deliver to each Purchaser a copy of such comments and of all written
responses thereto); (iii) any Registration Statement or any post-effective
amendment is declared effective; (iv) the Commission 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 Commission 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 or incorporated by reference in any
Registration Statement become ineligible for inclusion or incorporation therein
or any statement made in any Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference is
untrue in any material respect or any revision to a Registration Statement,
Prospectus or other document is required so that it will not contain any untrue
statement of a material fact or omit 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)   Except as provided in Section 6.1(f), use its 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)   Furnish to each Purchaser and Purchaser Counsel, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, 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 Commission.
 
(f)   Promptly deliver to each Purchaser and Purchaser Counsel, 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 Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
 
(g)   (i) Promptly prepare and file with each Trading Market an additional
shares listing application covering all of the Registrable Securities; (ii) take
all steps necessary to cause such Registrable Securities to be approved for
listing on each Trading Market as soon as possible thereafter; (iii) provide to
the Purchasers evidence of such listing; and (iv) maintain the listing of such
Registrable Securities on each such Trading Market or another Eligible Market
(it being understood that the Company will seek a waiver of NASDAQ Marketplace
Rule 4310(c)(17)(D)).
 
(h)   Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Purchasers and
Purchaser Counsel 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 Purchaser requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement.
 
(i)   Cooperate with the Purchasers 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, of all restrictive legends, and
to enable such Registrable Securities to be in such denominations and registered
in such names as any such Purchasers may request.
 

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(j)   Upon the occurrence of any event described in Section 6.2(c)(vii), as
promptly as 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 due diligence investigation undertaken by the
Purchasers in connection with the sale of Registrable Securities, including,
without limitation, by making available any documents and information; provided
that the Company will not deliver or make available to any Purchaser material,
nonpublic information unless such Purchaser specifically requests in advance to
receive material, nonpublic information in writing.
 
(l)   Comply with all applicable rules and regulations of the Commission.
 
In connection with the registration of the Registrable Securities, 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 a particular Purchaser (or to make any payments or other damages
to such Purchaser pursuant to Section 6.1) that such Purchaser shall furnish to
the Company the Selling Stockholder Questionnaire set forth on Exhibit G hereto
within ten Trading Days of the Company’s written request.

6.3  Registration Expenses. The Company shall pay (or reimburse the Purchasers
for) all fees and expenses incident to the performance of or compliance with
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 Commission, any Trading Market and in connection with
applicable state securities or Blue Sky laws, (b) printing expenses (including
without limitation expenses of printing certificates for Registrable Securities
and of printing prospectuses requested by the Purchasers), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel for the
Company and up to $5,000 for the Purchaser Counsel, (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 Purchaser, the
officers, directors, partners, members, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Purchaser
(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 any untrue or alleged 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 in any 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 (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount by which the net proceeds received by such
Purchaser upon the sale of the Registrable Securities giving rise to such
indemnification obligation exceeds the amount paid, directly or indirectly, by
such Purchaser for such Registrable Securities.
 
(b)   Indemnification by Purchasers. Each Purchaser 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 (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) 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 solely out of
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 to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser 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 Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
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 such counsel shall be at the expense of the Indemnifying Party). 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.
 
All fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section) shall be
paid to the Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
 

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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 Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser 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 are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
 
6.5  Dispositions. Each Purchaser 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.
Each Purchaser 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 Purchaser will discontinue disposition of such Registrable
Securities under the Registration Statement until such Purchaser’s receipt of
the copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 6.2(j), or until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
 

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6.6  No Piggyback on Registrations. Except as set forth on Schedule 3.1(x)
neither the Company nor any of its security holders (other than the Purchasers
in such capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right to any of its security holders.
 
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
Commission 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 Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
 
ARTICLE VII
MISCELLANEOUS
 
7.1  Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading 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. At the Closing, the Company shall pay to Iroquois Master
Fund, Ltd. an aggregate of $30,000 for their legal fees and expenses incurred in
connection with the preparation and negotiation of this Agreement, of which
amount $20,000 has been previously paid by the Company. In lieu of the foregoing
remaining payment, Iroquois Master Fund, Ltd. may retain such amount at the
Closing. 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 issuance of
any Securities.
 

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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 Purchasers 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 (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (ii) the Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Agreement later than 6:30 p.m. (New York City time) on any date and earlier
than 11:59 p.m. (New York City time) on such date, (iii) the Trading Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
 
If to the Company:
 
IPIX Corporation
Reston Executive Center
12120 Sunset Hills Road
Suite 410
Reston, VA 20190
Phone: (703) 674-4100
Fax: (703) 674-4101
Attn: Chief Executive Officer
 
With a copy to:                Winston & Strawn LLP
1700 K Street, N.W.
Washington, D.C. 20006
Phone: (202) 282-5000
Fax: (202) 282-5100
Attn: Gerald P. Farano

and

Baker, Donelson, Bearman, Caldwell
& Berkowitz, P.C.
165 Madison Avenue, Suite 2000
Memphis, Tennessee 38103
Phone: (901) 577.8117
Fax: (901) 577-0737
Attn: Matthew S. Heiter, Esq.

        If to the Purchasers:                    To the address set forth under
such Purchaser's name on the signature pages attached hereto.      
 
 
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
 

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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 holders collectively holding 51% of the aggregate amount
outstanding under the Notes 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 Purchasers under Article VI and
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers 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 Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Purchasers.” Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.
 
7.8  No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except that each Related Person is an intended third party beneficiary
of Section 4.14 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
 
7.9  Governing Law; Venue; Waiver of Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, including Sections 5-1401 and 5-1402 of the New York
General Obligations Law. Each party agrees that all legal proceedings concerning
the interpretations, enforcement and defense of the transactions contemplated by
any of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York, Borough of Manhattan. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of this
Agreement), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto 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. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or any
of the Transaction Documents or the transactions contemplated hereby or thereby.
If either party shall commence an action or proceeding to enforce any provisions
of this Agreement or any Transaction Document, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other reasonable costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
 

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7.10  Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and/or
conversion of the Securities, as applicable.
 
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, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile 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.
 
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 Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
 
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 customary and reasonable
indemnity, if requested. 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.
 

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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 Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation 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 Purchaser hereunder or pursuant to the Notes or Warrants or any
Purchaser 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  Usury. To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will resist any
and all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser’s election.
 

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7.18  Independent Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. The decision of each Purchaser to purchase Notes pursuant
to this Agreement has been made by such Purchaser independently of any other
Purchaser 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 or of the Subsidiary which may have been made or given
by any other Purchaser or by any agent or employee of any other Purchaser, and
no Purchaser or any of its agents or employees shall have any liability to any
other Purchaser (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 Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. The
Company hereby confirms that it understands and agrees that the Purchasers are
not acting as a “group” as that term is used in Section 13(d) of the Exchange
Act. Each Purchaser acknowledges that no other Purchaser has acted as agent for
such Purchaser in connection with making its investment hereunder and that no
other Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment hereunder. Each Purchaser 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 Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser represents
that it has been represented by its own separate legal counsel in its review and
negotiations of this Agreement and the Transaction Documents and each party
represents and confirms that Malhotra & Associates LLP represents only Iroquois
Master Fund, Ltd. in connection with this Agreement and the other Transaction
Documents.
 
7.19  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, each
reference in this Agreement to a number of shares or a price per share shall be
amended to appropriately account for such event.
 
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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.
 

 
IPIX CORPORATION
         
By: __________________________________
 
Name:
 
Title:
           

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS FOLLOW.]
 

 

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Iroquois Master Fund, Ltd.
 
 
By: _________________________
Name: _________________________
Title: _________________________
 
 
Note Principal Amount: $__________
 
 
Address for Notice:
 
Iroquois Master Fund Ltd.
641 Lexington Avenue, 28th Floor
New York, NY 10022
Facsimile No.:212-207-3452
Telephone No.:212-974-3070
Attn: Joshua Silverman
 
 
With a copy to:
 
Malhotra & Associates LLP
11 Penn Plaza, 5th Floor
New York, New York 10001
Facsimile No.: (212) 504-0863
Telephone No.: (212) 593-2284
Attn: Gary Malhotra, Esq.

 [Signature Page to Securities Purchase Agreement]
 

 

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[Purchaser]
 
By: _________________________
Name: _________________________
Title: _________________________
 
 
Note Principal Amount: $__________
 
 
Address for Notice:
 
________________________
________________________
________________________
Facsimile No.:
Telephone No.:
Attn:
 
   

 
 
 
[Signature Page to Securities Purchase Agreement]
 

 

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Exhibits:
 
A.          Form of Note
 
B-1.       Form of Warrant A
 
B-2.       Form of Warrant B
 
B-3        Form of Additional Warrant
 
C.          Transfer Agent Instructions
 
D.          Form of Opinion of Company Counsel
 
E.          Form of Security Agreement
 
F.          Plan of Distribution
 
G.         Selling Stockholder Questionnaire
 

 

 
Schedules:
 
3.1(a)      Subsidiaries
 
3.1(d)     No Conflicts
 
3.1(g)     Capitalization
 
3.1(i)      Material Changes
 
3.1(l)      Compliance
 
3.1(t)      Certain Fees
 
3.1(x)      Registration Rights
 
3.1(dd)   Ranking
 
3.1(ee)    Indebtedness
 

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Schedule A
 
 
 
 
 
Purchasers
 
Note Principal Amount
 
 
Warrant A Shares
 
 
Warrant B Shares
 
Additional Warrant Shares
 
 
 
Purchase Price
Iroquois Master Fund, Ltd.
$1,150,000.00
419,271
598,959
209,636
$1,150,000.00
Rockmore Investment Master Fund Ltd
$650,000.00
236,980
338,542
118,490
   $650,000.00
Bonanza Master Fund Ltd.
$500,000.00
182,292
260,417
91,146
$500,000.00
Crescent International Ltd.
$300,000.00
109,375
156,250
54,688
$300,000.00
Hudson Bay Fund LP
$120,000.00
43,750
62,500
21,875
$120,000.00
Hudson Bay Overseas Fund LTD
$30,000.00
10,938
15,625
5,469
        $30,000.00
Knott Partners, L.P
$241,000.00
87,865
125,521
43,933
       $241,000.00
Matterhorn Offshore Fund, Ltd.
$358,000.00
130,521
186,459
65,261
       $358,000.00
Common Fund Hedged Equity Co.
$29,000.00
10,574
15,105
5,287
         $29,000.00
Shoshone Partners, L.P.
$153,000.00
55,782
79,688
27,891
        $153,000.00
Good Steward Trading Co. SPC
$9,000.00
3,282
4,688
1,641
           $9,000.00
Finderne LLC
$10,000.00
3,646
5,209
1,824
        $10,000.00
Nite Capital LP
$600,000.00
218,750
312,500
109,375
         $600,000.00
C.E. Unterberg, Towbin Capital Partners I, L.P.
$650,000.00
236,980
338,542
118,490
     $650,000.00
Bristol Capital Advisors, LLC
$200,000.00
72,917
104,167
36,459
     $200,000.00