EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT
 
THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), is dated as of October 19,
2007, by and among Intelligentias, Inc., a Nevada corporation (the “Company”)
and the investors listed on Exhibit A hereto (each an “Investor” and
collectively, the “Investors”).
 
BACKGROUND
 
A. The Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of
Regulation D (“Regulation D”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act.

B. The Investors wish, severally, and not jointly, to purchase, and the Company
wishes to sell and issue to the Investors, upon the terms and subject to the
conditions stated in this Agreement, (i) an aggregate of up to 12,500,000 shares
of the Company’s Series A Preferred Stock, par value $0.0001 per share
(“Preferred Stock”), which will be convertible into shares (“Conversion Shares”)
of the Company’s Common Stock (as hereinafter defined) at the Rate of Conversion
(as hereinafter defined), and which will have the rights, preferences and
privileges set forth in the form of Certificate of Designation attached hereto
as Exhibit B (the “Certificate of Designation”); (ii) warrants to purchase an
aggregate of up to 6,250,000 shares of Common Stock at a price per share of
$1.25 (the “Market Warrants”) in the form attached hereto as Exhibit C; and
(iii) warrants to purchase an aggregate of up to 5,000,000 shares of Common
Stock at a price per share of $1.80 (the “Premium Warrants”) in the form
attached hereto as Exhibit D.
 
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
 
ARTICLE I
DEFINITIONS
 
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms have the meanings indicated:
 
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act.
 
“Agreement” has the meaning set forth in the Preamble.

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“Best Efforts” means the efforts that a prudent person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as practical.
 
“Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.
 
“Certificate of Designation” has the meaning set forth in the Background.

“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.
 
“Closing Date” means the date and time of the Closing and shall be on such date
and time as is mutually agreed to by the Company and each Investor.
 
“Company” has the meaning set forth in the Preamble.
 
“Company Counsel” means Greenberg Traurig, LLP, counsel to the Company.
 
“Common Stock” means the common stock of the Company, par value $0.0001 per
share.
 
“Conversion Price” means, initially, $0.80 per share, subject to the
anti-dilution adjustment set forth in Section 6.4 of the Certificate of
Designation.
 
“Conversion Shares” has the meaning set forth in the Background.

“Covering Shares” has the meaning set forth in Section 4.1(b).

“Disclosure Materials” has the meaning set forth in Section 3.1(g).
 
“Effective Date” means the date that the Registration Statement is first
declared effective by the SEC.
 
“Effectiveness Period” has the meaning set forth in Section 6.1(b).
 
“Environmental Laws” has the meaning set forth in Section 3.1(r).
 
“Equity Securities” has the meaning set forth in Section 7.1.

“Event” has the meaning set forth in Section 6.1(d).
 
“Event Payments” has the meaning set forth in Section 6.1(d).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
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“Excluded Securities” has the meaning set forth in Section 7.5.
 
“Filing Date” means thirty (30) days after the Closing Date.

“GAAP” has the meaning set forth in Section 3.1(g).
 
“Hazardous Materials” has the meaning set forth in Section 3.1(r).
 
“Indemnified Party” has the meaning set forth in Section 6.4(c).
 
“Indemnifying Party” has the meaning set forth in Section 6.4(c).
 
“Insolvent” has the meaning set forth in Section 3.1(h).

“Intellectual Property” means any and all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems,
or procedures) and other similar rights and proprietary knowledge.
 
“Investor” has the meaning set forth in the Preamble. 

“Investors” has the meaning set forth in the Preamble.
 
“Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.
 
“Lock-Up Agreements” has the meaning set forth in Section 5.1(c).
 
“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, reasonable attorneys’ fees.

“Market Warrants” has the meaning set forth in the Background.
 
“Material Adverse Effect” means (i) a material adverse effect on the results of
operations, prospects, assets, business or financial condition of the Company
and the Subsidiaries, taken as a whole on a consolidated basis, or
(ii) materially and adversely impair the Company’s ability to perform its
obligations under any of the Transaction Documents.
 
“Material Permits” has the meaning set forth in Section 3.1(q).

“Person” means any individual, corporation, limited liability company,
partnership, joint venture, trust, incorporated or unincorporated association,
joint stock company, unincorporated organization, or a government or any
department or agency thereof.
 
“Plan of Distribution” has the meaning set forth in Section 6.1(a).
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“Preferred Stock” has the meaning set forth in the Background.

“Premium Warrants” has the meaning set forth in the Background.

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, or a partial proceeding, such as a deposition),
whether commenced or threatened in writing.
 
“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A 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.
 
“Purchase Price” has the meaning set forth in Section 2.1.

“Purchase Rights” has the meaning set forth in Section 7.1.

“Purchasing Investors” has the meaning set forth in Section 7.2(b).

“Rate of Conversion” means the number of shares of Common Stock into which each
share of Preferred Stock may be converted, as determined by dividing (i) the
original purchase price of $0.80 per share by (ii) the Conversion Price.

“Registrable Securities” means the Conversion Shares and the Warrant Shares
issued or issuable pursuant to the Transaction Documents, together with any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing.
 
“Registration Statement” means each registration statement required to be filed
under Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
 
“Regulation D” has the meaning set forth in the Background.
 
“Required Effectiveness Date” means the date which is one hundred and eighty
(180) days after the Closing Date.
 
“Resale Registration Statement” has the meaning set forth in Section 6.1(e).
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“Rule 144,” “Rule 144(k),” “Rule 415,” and “Rule 424” means Rule 144, Rule
144(k), Rule 415 and Rule 424, respectively, promulgated by the SEC pursuant to
the Securities Act, as such Rules may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially the
same effect as such Rule.
 
“SEC” has the meaning set forth in the Background.

“SEC Reports” has the meaning set forth in Section 3.1(g).
 
“Securities” means, collectively, the Preferred Stock, the Conversion Shares,
the Warrants and the Warrant Shares.
 
“Securities Act” has the meaning set forth in the Background.
 
“Staff” has the meaning set forth in Section 6.1(e).

“Subsidiary” means any direct or indirect subsidiary of the Company.
 
“Trading Day” means (a) any day on which the Securities are listed or quoted and
traded on their primary Trading Market, or (b) if trading ceases to occur on any
Trading Market, any Business Day.
 
“Trading Market” means the over-the-counter market or any national securities
exchange, market or trading or quotation facility on which the Common Stock or
Preferred Stock is then listed or quoted.
 
“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Warrants, the Certificate of Designation, and the Transfer
Agent Instructions.
 
“Transfer Agent” means Holladay Stock Transfer, Inc. or any successor transfer
agent for the Company.
 
“Transfer Agent Instructions” means, with respect to the Company, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit F, executed by
the Company and delivered to and acknowledged in writing by the Transfer Agent.
 
“Warrants” means, collectively, the Market Warrants and the Premium Warrants.

“Warrant Shares” means the issuance of Common Stock to be issued upon exercise
of the Warrants.
 
ARTICLE II
PURCHASE AND SALE

2.1 Purchase and Sale of the Preferred Stock and Warrants. Subject to the terms
and conditions of this Agreement, each of the Investors hereby severally, and
not jointly, agrees to purchase, and the Company hereby agrees to sell and issue
to each of the Investors, the number of shares of Preferred Stock and Warrants
set forth opposite such Investor’s name on Exhibit A for the aggregate purchase
price (the “Purchase Price”) set forth opposite such Investor’s name on Exhibit
A.

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2.2 Closing. At Closing, the Company shall deliver to the Investors (a) the
Preferred Stock and Warrants, registered in the names of the Investors as
indicated on Exhibit A; (b) evidence of filing of the Certificate of
Designation, in the form provided on Exhibit B, with the State of Nevada; (c)
executed Transfer Agent Instructions in the form provided on Exhibit F; (d) a
legal opinion from Company Counsel in the form set forth on Exhibit G; (e)
evidence of notification of filing with each applicable Trading Market of an
additional shares listing application covering all of the Registrable
Securities; (f) Lock-up Agreements in the form set forth on Exhibit H with all
executives and directors of the Company; and (g) a certificate, in the form set
forth on Exhibit I, executed by the secretary of the Company and dated as of the
Closing Date, as to the Articles of Incorporation, by-laws, foreign
qualification, and good standing of the Company and the resolutions adopted by
the Company’s Board of Directors authorizing the transactions contemplated by
the Transaction Documents. The Investors shall deliver the Purchase Price to the
Company by wire transfer of immediately available funds to the account specified
by the Company in writing, subject to the execution and delivery of such other
documents contemplated hereby on or prior to the Closing.
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES
 
3.1 Representations and Warranties of the Company. The Company hereby represents
and warrants to the Investors on and as of the date hereof as follows (which
representations and warranties shall be deemed to apply, where appropriate, to
each Subsidiary of the Company):
 
(a) Subsidiaries. The Company has no Subsidiaries other than those listed in
Schedule 3.1(a) hereto. Except as disclosed in Schedule 3.1(a) hereto, the
Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any Lien and all the
issued and outstanding shares of capital stock or comparable equity interest of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.
 
(b) Organization and Qualification. Each of the Company and, except as would not
have a Material Adverse Effect, its Subsidiaries is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite legal
authority to own or lease and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
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(c) Authorization; Enforcement. The Company has the requisite corporate
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents to which it is a party and otherwise to carry out
its obligations hereunder and thereunder. The execution and delivery of each of
the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company and no further consent or
action is required by the Company, its officers, its Board of Directors or its
stockholders. Each of the Transaction Documents to which it is a party has been
(or upon delivery will be) duly executed by the Company and is, or when
delivered in accordance with the terms hereof, will constitute, the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors rights generally; and (ii) the effect of
rules of law governing the availability of specific performance and other
equitable remedies.

(d) No Conflicts. The execution, delivery and performance by the Company of the
Transaction Documents to which it is a party and the consummation by the Company
of the transactions contemplated hereby and thereby do not, and will not,
(i) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents; (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
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,
including all applicable Trading Markets), or by which any property or asset of
the Company or a Subsidiary is bound or affected, except, in the case of clause
(ii) or (iii), to the extent that such conflict or violation would not
reasonably be expected to have a Material Adverse Effect.
 
(e) 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 and will not
be subject to preemptive rights, rights of first refusal, or similar rights of
stockholders (other than those imposed by the Investors). The Company has
reserved from its duly authorized capital stock the maximum number of shares of
Common Stock issuable upon exercise of the Warrants and conversion of the
Preferred Stock. The offer, issuance and sale of the Securities to the Investors
pursuant to the Agreement, in the case of the Conversion Shares, pursuant to the
Certificate of Designation, and in the case of the Warrant Shares, pursuant to
the Warrants, are exempt from the registration requirements of the Securities
Act.
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(f) Capitalization. Just prior to Closing, the aggregate number of shares and
type of all authorized, issued and outstanding classes of capital stock, options
and other securities of the Company (whether or not presently convertible into
or exercisable or exchangeable for shares of capital stock of the Company)
consists of (i) 300,000,000 authorized shares of Common Stock, par value $0.0001
per share, with 114,555,468 shares of Common Stock outstanding; (ii) 200,000,000
shares of blank check preferred stock, with no shares outstanding; (iii)
12,781,250 shares of Common Stock, on a diluted basis, reserved for issuance
upon the exercise of outstanding warrants; and (iv) 2,000,000 shares of Common
Stock, on a diluted basis, reserved for issuance upon the exercise of
outstanding employee stock options. 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 and regulations. Except
as disclosed in this Section 3.1(f), the Company does not have outstanding any
other options, warrants, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or entered into any
agreement giving any Person any right to subscribe for or acquire, any shares of
Preferred Stock or Common Stock, or securities or rights convertible or
exchangeable into shares of Preferred Stock or Common Stock. Except as set forth
on Schedule 3.1(f) hereto or in the SEC Reports, there are no anti-dilution or
price adjustment provisions contained in any security issued by the Company (or
in any agreement providing rights to security holders) and the issuance and sale
of the Securities will not obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Investors) and will not result
in a right of any holder of securities to adjust the exercise, conversion,
exchange or reset price under such securities. To the knowledge of the Company,
except as disclosed in Schedule 3.1(f) hereto, no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 under the
Exchange Act) or has the right to acquire, by agreement with or by obligation
binding upon the Company, beneficial ownership of in excess of five percent (5%)
of the outstanding Common Stock.
 
(g) SEC Reports; Financial Statements. Except as set forth on Schedule 3.1(g),
the Company has filed all reports required to be filed by it under Exchange Act
Sections 13(a) or 15(d), 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. Such reports required to be filed by the Company under the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, together with any
materials filed or furnished by the Company under the Exchange Act, whether or
not any such reports were required being collectively referred to herein as the
“SEC Reports” and, together with this Agreement and the Schedules to this
Agreement, the “Disclosure Materials”. Except as otherwise disclosed in later
dated SEC Reports, as of their respective dates, or to the extent corrected by a
subsequent restatement filed with the SEC, the SEC Reports filed by the Company
complied as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder,
and none of the SEC Reports, when filed by the Company, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Except as
otherwise disclosed in later dated SEC Reports, the financial statements of the
Company included in the SEC Reports comply as to form in all material respects
with applicable accounting requirements and the rules and regulations of the SEC
with respect thereto as in effect at the time of filing. Except as otherwise
disclosed in later dated SEC Reports, such financial statements have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements, the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP or may be condensed or summary statements, and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries taken as a whole as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, year-end audit
adjustments. All material agreements to which the Company or any Subsidiary is a
party or to which the property or assets of the Company or any Subsidiary are
subject are included as part of or identified in the SEC Reports, to the extent
such agreements are required to be included or identified pursuant to the rules
and regulations of the SEC.
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(h) No Change. Since the date of the latest unaudited financial statements
included within the SEC Reports, except as disclosed in Schedule 3.1(h) hereto,
(i) there has been no event, occurrence or development that, individually or in
the aggregate, has had or that would reasonably be expected to result in a
Material Adverse Effect; (ii) the Company has not incurred any liabilities other
than (A) trade payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice, (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or required to be disclosed in filings made with the SEC, and (C) other
liabilities that would not, individually or in the aggregate, have a Material
Adverse Effect; (iii) the Company has not altered its method of accounting or
the changed its auditors, except as disclosed in its SEC Reports; (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders, in their capacities as such, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock (except for repurchases by the Company of shares of capital stock held by
employees, officers, directors, or consultants pursuant to an option of the
Company to repurchase such shares upon the termination of employment or
services); and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock-based
plans. The Company has not taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company believe that its creditors intend to
initiate involuntary bankruptcy Proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so. The Company is not Insolvent
(as hereinafter defined) as of the date hereof, and will not be Insolvent after
giving effect to the transactions contemplated hereby to occur at the applicable
Closing. For purposes of this Section 3.1(h), “Insolvent” means (i) the present
fair saleable value of the Company’s assets is less than the amount required to
pay the Company’s total indebtedness, (ii) the Company is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (iii) the Company has unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted.

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(i) Obligations to Related Parties. Except as set forth in Schedule 3.1(i),
there are no arrangements which would be required to be disclosed by Item 404 of
Regulation S-B under the Securities Act except as disclosed in the SEC Reports.

(j)  Title to Properties and Assets. Each of the Company and its Subsidiaries
has good and valid title to all of the properties and assets reflected as owned
in the Company’s financial statements, free and clear of all Liens, mortgages
(statutory or otherwise), security interests, pledges, claims or encumbrances
except those, if any, disclosed in the Company’s financial statements and except
as would not have a Material Adverse Effect. Each of the Company and its
Subsidiaries holds its leased properties under valid and binding leases, with
such exceptions as are not materially significant in relation to the business of
the Company or the Subsidiary. Each of the Company and its Subsidiaries owns or
leases all of the properties which, to its knowledge, are necessary to its
operations as now conducted.

(k)  Intellectual Property. Except as set forth in Schedule 3.1(k), each of the
Company and its Subsidiaries owns or possesses adequate and enforceable rights
to use all Intellectual Property used or necessary for the conduct of its
business as now being conducted, proposed to be conducted, and as described in
the Company’s SEC Reports. To the Company’s knowledge, neither the Company nor
any Subsidiary of the Company infringes on or is in conflict with any right of
any other person with respect to any Intellectual Property nor is there any
claim of infringement made by a third party against or involving the Company or
any of its Subsidiaries, which infringement, conflict or claim, individually or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect. None of the Intellectual Property used in
the Company’s business is expected to expire or terminate within two (2) years
from the date of this Agreement, except where such expiration or termination
would not result, either individually or in the aggregate, in a Material Adverse
Effect. The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their Intellectual
Property. The Company has never agreed to indemnify any person for or against
any interference. infringement, misappropriation or other conflict with respect
to any Intellectual Property, except as would not have a Material Adverse
Effect. To the Company’s knowledge, none of the key employees of the Company are
obligated under any contract (including, without limitation, licenses,
covenants, or commitments of any, nature) or other agreement, or subject to any
judgment, decree, or order of any court or administrative agency, that would
interfere with the use of his or her reasonable diligence to promote the
interests of the Company or that would conflict with the Company’s business as
presently conducted, except as would not have a Material Adverse Effect.

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(l) Compliance with Other Instruments. Except as would not have a Material
Adverse Effect, the Company is not in violation or default of any provision of
any mortgage, indenture, contract, agreement, instrument or contract to which it
is party or by which it is bound or of any judgment, decree, order or writ. None
of the Company’s Subsidiaries is in violation or default of any provision of any
material mortgage, indenture, contract, agreement, instrument or contract to
which it is party or by which it is bound or of any judgment, decree, order or
writ.

(m)  Litigation. Except as disclosed in Schedule 3.1(m), there is no Proceeding
pending or, to the Company’s knowledge, currently threatened against the Company
or any Subsidiary that questions the validity of this Agreement, or the
Transaction Documents, or the right of the Company to enter into any of such
agreements or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company or
any Subsidiary, financially or otherwise, or any change in the current equity
ownership of the Company or any Subsidiary, nor is the Company aware that there
is any basis for any of the foregoing. The foregoing includes, without
limitation, actions pending or, to the Company’s knowledge, threatened involving
the prior employment of any of the employees of the Company or any Subsidiary,
their use in connection with the business of the Company or any Subsidiary of
any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
Except as disclosed in Schedule 3.1(m), neither the Company nor any Subsidiary
is a party or subject to the provisions of any material order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. There
is no material Proceeding by the Company or any Subsidiary currently pending or
which the Company or any Subsidiary intends to initiate.

(n) Labor Matters. The Company and its Subsidiaries are in compliance in all
respects with all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits, terms and
conditions of employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.

(o) Key Employees. Neither the Company nor any of its Subsidiaries has
collective bargaining agreements with any of its employees. There is no labor
union organizing activity pending or, to the Company’s knowledge, threatened
with respect to the Company or any Subsidiary. Except as disclosed on Schedule
3.1(o), neither the Company nor any of its Subsidiaries is a party to or bound
by any currently effective employment contract, consulting agreement, deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement.

(p) Registration Rights and Voting Rights. Except as required pursuant Article
VI of this Agreement and as disclosed in Schedule 3.1(p), the Company is
presently not under any obligation, and has not granted any rights, to register
any of the Company’s presently outstanding securities or any of its securities
that may hereafter be issued. To the Company’s knowledge, except as disclosed in
Schedule 3.1(p), no stockholder of the Company has entered into any agreement
with respect to the voting of equity securities of the Company.

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(q) Compliance with Laws; Permits. Neither the Company nor any of its
Subsidiaries is in violation of any applicable statute, rule, regulation, order
or restriction of any domestic or foreign government or any instrumentality or
agency thereof, in respect of the conduct of its business or the ownership of
its properties which violation would have a Material Adverse Effect. Except as
disclosed in Schedule 3.1(q), no governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the issuance of the Securities, the issuance of
the Conversion Shares pursuant to the Certificate of Designation, or issuance of
the Warrant Shares upon exercise of the Warrants, except such as has been duly
and validly obtained or filed, or with respect to any filings that must be made
after the Closing, as will be filed in a timely manner. Except as disclosed in
Schedule 3.1(q), each of the Company and is Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports (“Material Permits”),
except where the failure to possess such permits is not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any written notice of
Proceedings relating to the revocation or modification of any Material Permit.

(r) Environmental and Safety Laws. The Company and its Subsidiaries (i) are in
compliance in all respects with any and all Environmental Laws (as hereinafter
defined); (ii) have received all permits, licenses or other approvals required
of them under applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance in all respects with all terms and
conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term “Environmental Laws” means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

(s) Offering Valid. Assuming the accuracy of the representations and warranties
of the Investors contained in Section 3.2 hereof, the offer, sale and issuance
of the Preferred Stock, the Warrants, and the Warrant Shares will be exempt from
the registration requirements of the Securities Act, and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws. Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Securities to any person or persons so as
to bring the sale of such Securities by the Company within the registration
provisions of the Securities Act or any state securities laws.

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(t) Private Placement. Neither the Company, nor any of its Affiliates, nor any
Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities. 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 in connection with the offer and sale by the
Company of the Securities as contemplated hereby or (ii) cause the offering of
the Securities pursuant to the Transaction Documents to be integrated with prior
offerings by the Company for purposes of any applicable law, regulation or
stockholder approval provisions, including, without limitation, under the rules
and regulations of any Trading Market in a manner which would require any
stockholder or other approval.

(u) Insurance. The Company maintains insurance of the types and in the amounts
it deems adequate for its business covering all risks customarily insured
against, provided that the Company has a general directors and officers
liability insurance policy with coverage customary for companies similarly
situated to the Company.

(v)  Illegal Payments. The Company and its Subsidiaries have not, and to the
best knowledge of the Company, no director, officer, agent or employee of the
Company or any of its Subsidiaries has paid, caused to be paid, or agreed to
pay, directly or indirectly, in connection with the business of the Company (i)
to any government or agency thereof, any agent or any supplier or customer, any
bribe, kickback or other similar payment; (ii) any contribution to any political
party or candidate (other than from personal funds of directors. officers or
employees not reimbursed by their respective employers or as otherwise permitted
by applicable law; or (iii) intentionally established or maintained any
unrecorded fund or asset or made any false entries on any books or records for
any purpose.

(w)  Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income taxes) required to be paid in connection with the sale and
transfer of the Shares to be sold to the Purchasers hereunder will be, or will
have been, fully paid or provided for by the Company, and all laws imposing such
taxes will be or will have been complied with fully.

(x) Placement Agent’s Fees. The Company is not, directly or indirectly,
obligated to pay any placement agent’s fees, financial advisory fees, or
brokers’ commission (other than for persons engaged by any Investor or its
investment advisor) relating to or arising out of the execution, delivery or
performance of the Transaction Documents or issuance of the Securities. The
Company shall pay, and hold each Investor harmless against, any liability, loss
or expense (including, without limitation, reasonable attorney’s fees and
out-of-pocket expenses) arising in connection with any such claim for fees
arising out of the issuance of the Securities pursuant to this Agreement.
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(y) Application of Takeover Protections. Except as described in Schedule 3.1(y),
there is no control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s charter documents or the laws of its
state of incorporation or otherwise, that is or could become applicable to any
of the Investors as a result of the Investors and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including, without limitation, as a result of the Company’s issuance of the
Securities and the Investors’ ownership of the Securities.
 
(z) Disclosure. All disclosure provided by the Company to the Investors
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on the behalf of the
Company are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. To the Company’s knowledge, except
for the transactions contemplated by this Agreement, 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, operations or financial
condition, which, under applicable law, rule or regulation, required public
disclosure or announcement by the Company prior to the date hereof but which has
not been so publicly announced or disclosed. The Company acknowledges and agrees
that no Investor makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those set forth in
the Transaction Documents.
 
(aa) Acknowledgment Regarding Investors’ Purchase of Securities. Based upon the
assumption that the transactions contemplated by this Agreement are consummated
in all material respects in conformity with the Transaction Documents, the
Company acknowledges and agrees it has been advised that each of the Investors
is acting solely in the capacity of an arm’s length purchaser with respect to
the Transaction Documents and the transactions contemplated hereby and thereby.
The Company further acknowledges that no Investor is acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereby and any advice given by
any Investor or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to the Investors’ purchase of the Securities. The
Company further represents to each Investor that the Company’s decision to enter
into this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives. 
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(bb) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

(cc) Sarbanes-Oxley Act. Except as disclosed in SEC Reports, the Company is in
compliance in all material respects with applicable requirements of the
Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by
the SEC thereunder, except where such noncompliance would not have, individually
or in the aggregate, a Material Adverse Effect.
 
(dd)  Tax Status. Except as disclosed in Schedule 3.1(dd), the Company and each
of its Subsidiaries (i) has made or filed all foreign, federal, state and local
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, to the extent the final deadlines for which
were on or before the date hereof; (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith; and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply.

(ee) Investment Company. The Company is not now, and after the sale of the
Securities under the Transaction Documents and the application of net proceeds
from the sale of the Securities described in Section 4.6 herein will not be, an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.

3.2 Representations, Warranties and Covenants of the Investors. Each Investor
hereby, as to itself only and for no other Investor, represents, warrants and
covenants to the Company as follows:
 
(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate, partnership or other power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The purchase by such Investor of the Securities hereunder has been
duly authorized by all necessary corporate, partnership or other action on the
part of such Investor. This Agreement has been duly executed and delivered by
such Investor and constitutes the valid and binding obligation of such Investor,
enforceable against it in accordance with its terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors rights
generally, and (ii) the effect of rules of law governing the availability of
specific performance and other equitable remedies.
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(b) No Public Sale or Distribution. Such Investor is (i) acquiring the Preferred
Stock and the Warrants and (ii) upon exercise of the Warrants will acquire the
Warrant Shares issuable upon exercise thereof, not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered under the Securities Act or under an exemption from
such registration and in compliance with applicable federal and state securities
laws, and such Investor does not have a present arrangement to effect any
distribution of the Securities to or through any person or entity; provided,
however, that by making the representations herein, such Investor does not agree
to hold any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act.
 
(c) Investor Status. At the time such Investor 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 or a “qualified institutional buyer” as defined
in Rule 144A(a) under the Securities Act.
 
(d) Experience of Such Investor. Such Investor, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. Such Investor understands that it must bear
the economic risk of this investment in the Securities indefinitely, and is able
to bear such risk and is able to afford a complete loss of such investment.
 
(e) Access to Information. Such Investor acknowledges that it has had access to
the Disclosure Materials and information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment. No information, inquiry, or investigation conducted by or on behalf
of such Investor or its representatives or counsel shall modify, amend or affect
such Investor’s right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company’s representations and warranties contained
in the Transaction Documents.

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

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(g) Short Sales. No Investor, directly or indirectly, and no Person acting on
behalf of any Investor, has engaged in any purchases or sales of any securities,
including any derivatives, of the Company (including, without limitation, any
Short Sales involving any of the Company’s securities) since the time that such
Investor was first contacted by the Company regarding the sale of Securities as
contemplated under the Transaction Documents. “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps,
derivatives and similar arrangements (including on a total return basis), and
sales and other transactions through non-U.S. broker-dealers or foreign
regulated brokers.

(h) Legends. It is understood that, except as provided in Section 4.1(b) of this
Agreement, certificates evidencing such Securities may bear the legend set forth
in Section 4.1(b).
 
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
 
4.1 Transfer Restrictions.

(a) The Investors covenant that the Securities will only be disposed of pursuant
to an effective registration statement under, and in compliance with the
requirements of, the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company, or
pursuant to Rule 144(k), the Company may require the transferor to provide to
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its Transfer Agent, without any
such legal opinion, except to the extent that the Transfer Agent requests such
legal opinion, any transfer of Securities by an Investor to an Affiliate of such
Investor, provided that the transferee certifies to the Company that it is an
“accredited investor,” as defined in Rule 501(a) under the Securities Act, and
provided that such Affiliate does not request any removal of any existing
legends on any certificate evidencing the Securities.
 
(b) The Investors agree to the imprinting, so long as is required by this
Section 4.1(b), of the following legend on any certificate evidencing any of the
Securities:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
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Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a registration statement (including the
Registration Statement) covering the resale of the Securities is effective under
the Securities Act; (ii) following any sale of such Securities pursuant to Rule
144 if the holder provides the Company with a legal opinion reasonably
acceptable to the Company to the effect that the Securities can be sold under
Rule 144; (iii) if the Securities are eligible for sale under Rule 144(k); or
(iv) if the holder provides the Company with a legal opinion reasonably
acceptable to the Company to the effect that the legend is not required under
applicable requirements of the Securities Act (including controlling judicial
interpretations and pronouncements issued by the staff of the SEC). Subject to
receipt of the undertaking referred to above, the Company shall use its Best
Efforts to cause its counsel to issue the legal opinion included in the Transfer
Agent Instructions to the Transfer Agent on the Effective Date. Following the
Effective Date or at such earlier time as a legend is no longer required for
certain Securities, the Company will no later than three (3) Trading Days
following the delivery by an Investor to the Company or the Transfer Agent of
(i) a legended certificate representing such Securities, and (ii) an opinion of
counsel to the extent required by Section 4.1(a), deliver or cause to be
delivered to such Investor a certificate representing such Securities that is
free from the legend referred to above. The Company may not make any notation on
its records or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section.
 
If within three (3) Trading Days after the Company’s receipt of a legended
certificate and the other documents as specified in clauses (i) and (ii) of the
paragraph immediately above, the Company shall fail to issue and deliver to such
Investor a certificate representing such Securities that is free from the legend
referred to above, and if on or after such third Trading Day the Investor
purchases (in an open market transaction) shares of Common Stock to deliver in
satisfaction of a sale by the Investor of shares of Common Stock that the
Investor anticipated receiving from the Company without any restrictive legend
(the “Covering Shares”), then the Company shall, within three (3) Trading Days
after the Investor’s request, pay cash to the Investor in an amount equal to the
excess (if any) of the Investor’s total purchase price (including reasonable
brokerage commissions, if any) for the Covering Shares, over the product of (A)
the number of Covering Shares, times (B) the closing sale price on the date of
delivery of such certificate.

(c) The Company will not object to and shall permit (except as prohibited by
law) an Investor to pledge or grant a security interest in some or all of the
Securities in connection with a bona fide margin agreement or other loan or
financing arrangement secured by the Securities, and if required under the terms
of such agreement, loan or arrangement, the Company will not object to and shall
permit (except as prohibited by law) such Investor to transfer pledged or
secured Securities to the pledges or secured parties. Except as required by law,
such a pledge or transfer would not be subject to approval of the Company, no
legal opinion of the pledgee, secured party or pledgor shall be required in
connection therewith, and no notice shall be required of such pledge. Each
Investor acknowledges that the Company shall not be responsible for any pledges
relating to, or the grant of any security interest in, any of the Securities or
for any agreement, understanding or arrangement between any Investor and its
pledgee or secured party. At the appropriate Investor’s expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder. Provided that the Company is in compliance with
the terms of this Section 4.1(c), the Company’s indemnification obligations
pursuant to Section 6.4 shall not extend to any Proceeding or Losses arising out
of or related to this Section 4.1(c).
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4.2 Furnishing of Information. During the time the Registration Statement is
required to be effective, 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.
 
4.3 Integration. The Company shall not, and shall use its commercially
reasonably efforts to ensure that no Affiliate thereof shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Investors or that would be integrated with the offer or sale of the Securities
for purposes of the rules and regulations of any Trading Market.
 
4.4 Reservation of Securities. The Company shall maintain a reserve from its
duly authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may be required to fulfill its obligations to issue
Conversion Shares and Warrant Shares under the Transaction Documents. In the
event that at any time the then authorized shares of Common Stock are
insufficient for the Company to satisfy its obligations to issue such Conversion
Shares and Warrant Shares under the Transaction Documents, the Company shall
promptly take such actions as may be required to increase the number of
authorized shares.
 
4.5 Use of Proceeds. The Company intends to use the net proceeds from the sale
of the Securities for working capital and general corporate purposes.
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ARTICLE V
CONDITIONS AND COVENANTS
 
5.1 Conditions Precedent to the Obligations of the Investors. The obligation of
each Investor to acquire Securities at the Closing is subject to the
satisfaction or waiver by such Investor, at or before the Closing, of each of
the following conditions:
 
(a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects
(other than those representations and warranties that are qualified by
materiality or Material Adverse Effect qualifiers, which shall be true and
correct in all respects) as of the date when made and as of the Closing as
though made on and as of such date;
 
(b) Performance. The Company and each other Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing; and

(c) Lock-Up Agreements. Lock-up agreements, in the form attached as Exhibit H
shall have been put in place covering all shares of Common Stock held by Company
executive officers and directors (the “Lock-Up Agreements”). The lock-up
restrictions in such Lock-Up Agreements will be released only after one hundred
eighty (180) days following the Effective Date of the Registration Statement
referred to in Section 6.1(b) below.

(d) Payment of Expenses. The Company shall pay, in accordance with Section 8.2,
the reasonable fees, expenses and disbursements of Ropes & Gray LLP, as counsel
to the Investors.
 
5.2 Conditions Precedent to the Obligations of the Company. The obligation of
the Company to sell the Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:

(a) Representations and Warranties. The representations and warranties of the
Investors contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made on and as of
such date; and
 
(b) Performance. The Investors shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Investors at or prior to the Closing.

5.3 Covenants of the Company. The Company hereby covenants as follows:

(a) Observation Rights. So long as Investors own a majority of the shares of
Preferred Stock acquired hereunder, at any time that the Investors do not choose
to designate a director to serve on the Board of Directors of the Company
pursuant to Section 2 of the Certificate of Designation, Investors will be
entitled to designate one individual as an observer to attend all meetings of
the Board of Directors and to receive all information provided to the directors.
The Company will reimburse all costs associated with the attendance of the
meetings of the Board of Directors, or any committees thereof, by any director
or observer designated by the Investors.

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(b) NASDAQ Listing. If requested by the Investors, the Company will use its Best
Efforts to list its shares for trading on the NASDAQ Global Market, NASDAQ
Global Select Market, or NASDAQ Capital Market (or any other exchange specified
by the Investors) as promptly as practicable, including using its Best Efforts
to take all action necessary to meet, and maintain compliance, with all
qualifications for such listing.
 
ARTICLE VI
REGISTRATION RIGHTS
 
6.1 Registration Statement.
 
(a) As soon as practicable but in no event later than the Filing Date, the
Company shall prepare and file with the SEC a Registration Statement covering
the resale of all Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance with the Securities Act and the Exchange
Act) and shall contain (except if otherwise directed by the Investors or
requested by the SEC) the “Plan of Distribution” in substantially the form
attached hereto as Exhibit E.
 
(b) The Company shall use its reasonable Best Efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as practical after the
filing thereof, but in any event prior to the Required Effectiveness Date, and
shall use its reasonable Best Efforts to keep the Registration Statement
continuously effective under the Securities Act for all Registrable Securities
until the date that all Conversion Shares and Warrant Shares covered by such
Registration Statement have been sold or can be sold publicly under Rule 144 on
a single day (the “Effectiveness Period”).

(c) The Company shall notify the Investors in writing promptly (and in any event
within two (2) Trading Days) after receiving notification from the SEC that the
Registration Statement has been declared effective.
 
(d) Should an Event (as defined below) occur, then upon the occurrence of such
Event, and on every monthly anniversary thereof for fifteen (15) months or until
the applicable Event is cured, whichever is longer, as relief for the damages
suffered therefrom by the Investors (the parties hereto agreeing that the
liquidated damages provided for in this Section 6.1(d) constitute a reasonable
estimate of the damages that may be incurred by the Investors by reason of the
Event and that such liquidated damages represent the exclusive monetary remedy
for the Investors for damages suffered due to an Event), the Company shall pay
to each Investor an amount in cash, as liquidated damages and not as a penalty,
equal to one and a half percent (1.5%) of the aggregate Purchase Price paid by
such Investor hereunder, subject to a cap of twenty-two and a half percent
(22.5%) (provided that, to the extent an Event occurs with respect to only a
portion of the Registrable Securities, the Event Payments with respect to such
Event shall be reduced proportionately to the portion of Registrable Securities
with regard to which no Event has occurred). The payments to which an Investor
shall be entitled pursuant to this Section 6.1(d) are referred to herein as
“Event Payments.” Any Event Payments payable pursuant to the terms hereof shall
apply on a pro rated basis for any portion of a month prior to the cure of an
Event. In the event the Company fails to make Event Payments in a timely manner,
such Event Payments shall bear interest at the rate of one percent (1.0%) per
month (prorated for partial months) until paid in full. All pro rated
calculations made pursuant to this Section 6.1 shall be based upon the actual
number of days in such pro rated month.
 
For such purposes, each of the following shall constitute an “Event”:
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(i) the Registration Statement is not filed on or prior to the Filing Date or is
not declared effective on or prior to the Required Effectiveness Date;
 
(ii) the Registration Statement is not kept continuously effective under the
Securities Act during the Effectiveness Period;
 
(iii) the exercise rights of the Investors pursuant to the Warrants are
suspended.
 
(e) Notwithstanding anything to the contrary contained in this Agreement, if the
staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering
pursuant to a Registration Statement filed pursuant to this Agreement as
constituting a primary offering of securities by or on behalf of the Company, or
in any other manner, such that the Staff or the SEC does not permit such
Registration Statement to become effective and used for resales in a continuous
at the market offering pursuant to Rule 415 under the Securities Act by the
Investors (or as otherwise may be acceptable to each Investor) without being
named therein as “underwriters” (a “Resale Registration Statement”), and the
Company has used its Best Efforts to contest such determination, and as a result
the Company is not able to register all of the Registrable Securities, but is
able to register at least eighty percent (80%) of the Registrable Securities,
then no Event shall be deemed to have accrued as a result of such failure. If
any reduction in the number of Registrable Securities included in a Registration
Statement is made pursuant to this Section 6.1(e), then an affected Investor
shall have the right, upon delivery of a written request to the Company signed
by the Investor, to require the Company to file a Resale Registration Statement
under Rule 415 within ninety (90) days after its receipt of such request
(subject to any restrictions imposed by Rule 415 or required by the Staff or the
SEC) for resale by such Investor in a manner reasonably acceptable to such
Investor, and the Company shall, following such request, use its Best Efforts to
cause such registration statement to be declared and kept effective in the same
manner as otherwise contemplated in this Agreement for registration statements
hereunder, in each case for a period equal to that specified in Section 6.1(b)
herein (it being understood that the special demand right under this sentence
may be exercised by a Investor multiple times and with respect to limited
amounts of Registrable Securities to the extent limitations are required in
order to permit the resale thereof by such Investor pursuant to a Resale
Registration Statement as contemplated above); and the Company shall otherwise
use its Best Efforts to satisfy the registration rights set forth in Sections
6.1 through 6.8 herein as promptly as practicable.

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(f) The Company shall not, from the date hereof until the Effective Date of the
Registration Statement, prepare and file with the SEC a registration statement
relating to an offering for cash for its own account, or for the account of any
other person, under the Securities Act of any of its equity securities, other
than any registration statement or post-effective amendment to a registration
statement (or supplement thereto) relating to the Company’s employee benefit
plans registered on Form S-8.

(g) The Company may require each Investor to provide such information regarding
such Investor as may be required under the Securities Act to effect the
registration contemplated hereunder.
 
6.2 Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:
 
(a) (i) Prepare and file with the SEC such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective, as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the SEC such additional Registration Statements
in order to register for resale under the Securities Act all of the Registrable
Securities during the Effectiveness Period; (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 practical, and in any event within ten (10) Trading Days
(except to the extent that the Company reasonably requires additional time to
respond to accounting comments), to any comments received from the SEC with
respect to the Registration Statement or any amendment thereto; and (iv) comply
in all material respects with the provisions of the Securities Act and the
Exchange Act applicable to the Company with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Investors thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented.
 
(b) Notify the Investors as promptly as reasonably practical, and confirm such
notice in writing no later than two (2) Trading Days thereafter, of any of the
following events: (i) any Registration Statement or any post-effective amendment
is declared effective; (ii) the SEC issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (iii) 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 (iv) the financial statements included in any Registration Statement
become ineligible for inclusion therein or any Registration Statement or
Prospectus or other document contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
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(c) Use its reasonable Best Efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
 
(d) If requested by an Investor, promptly provide such Investor, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, and all exhibits to the
extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
SEC.

(e) Promptly deliver to each Investor, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Investors in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto to the extent permitted by federal and state
securities laws and regulations.
 
(f) Prior to any public offering of Registrable Securities, use its reasonable
Best Efforts to register or qualify or cooperate with the selling Investors in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as any Investor requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective for so long as required, but
not to exceed the duration of the Effectiveness Period, and to do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
 
(g) Cooperate with the Investors to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement and under law, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Investors may reasonably
request.
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(h) Promptly upon the occurrence of any event described in Section 6.1(d),
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.
 
(i) Comply with all rules and regulations of the SEC applicable to the Company
in connection with the registration of the Securities.

(j) The Company shall comply with all applicable rules and regulations of the
SEC under the Securities Act and the Exchange Act, including, without
limitation, Rule 172 under the Securities Act, file any final Prospectus,
including any supplement or amendment thereof, with the SEC pursuant to Rule 424
under the Securities Act, promptly inform the Holders in writing if, at any time
during the Effectiveness Period, the Company does not satisfy the conditions
specified in Rule 172 and, as a result thereof, the Holders are required to make
available a Prospectus in connection with any disposition of Registrable
Securities and take such other actions as may be reasonably necessary to
facilitate the registration of the Registrable Securities hereunder.
 
6.3 Registration Expenses. The Company shall pay all fees and expenses incident
to the performance of or compliance with Article VI of this Agreement, but
excluding underwriting discounts and commissions of the Investors, including
without limitation (a) all registration and filing fees and expenses, including
without limitation those related to filings with the SEC, 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), (c) messenger, telephone and delivery expenses incurred
by the Company, (d) fees and disbursements of counsel for the Company, (e) fees
and expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, (f) reasonable
fees and expenses of one special counsel for the Investors; and (g) all listing
fees to be paid by the Company to the Trading Market.
 
6.4 Indemnification
 
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Investor, the
officers, directors, partners, members, agents and employees of each of them,
each Person who controls or is alleged to control any such Investor (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, partners, members, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law, from
and against any and all Losses, as incurred, arising out of or relating to any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of Company prospectus or in
any amendment or supplement thereto or in any Company preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
the light of the circumstances under which they were made) not misleading,
provided, however, that the Company shall not be liable in any such case to the
extent that such Loss arises out of, or is based upon, an untrue statement or
omission or alleged untrue statement or omission made in such Registration
Statement in reliance upon and in conformity with information that relates to
such Investor or such Investor’s proposed method of distribution of Registrable
Securities and was provided by such Investor in writing for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto.

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(b) Indemnification by Investors. Each Investor shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising out of any untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising out of or
relating to any omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, in each case, on the effective date
thereof, but only to the extent that such untrue statement or omission is based
solely upon information regarding such Investor furnished to the Company by such
Investor in writing expressly for use therein, or to the extent that such
information relates to such Investor or such Investor’s proposed method of
distribution of Registrable Securities and was provided by such Investor for use
in the Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto. In no event shall the liability of any
selling Investor under this Section 6 be greater in amount than the excess of
the dollar amount of the net proceeds received by such Investor upon the sale of
the Registrable Securities giving rise to such indemnification obligation over
the dollar amount of an other damages incurred by Investor in connection with
such registration.
 
(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
reasonable 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 such failure shall have
materially and 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; (ii) the
Indemnifying Party shall have failed promptly to assume the defense of 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 or that additional or
different defenses may be available to the Indemnified Party (in which case, if
such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
the reasonable fees and expenses of separate counsel shall be at the expense of
the Indemnifying Party). It being understood, however, that the Indemnifying
Party shall not, in connection with any one such Proceeding (including separate
Proceedings that have been or will be consolidated before a single judge) be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for all Indemnified Parties, which firm shall be appointed by a
majority of the Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
unless such consent is unreasonably withheld or delayed. 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 reasonable 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 twenty (20) 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 shall 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.

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The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6.4(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Investor shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Investor from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
 
6.5 Dispositions. Each Investor agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement and
shall sell its Registrable Securities in accordance with the Plan of
Distribution set forth in the Prospectus. Each Investor further agrees that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Sections 6.2(b)(ii), (iii) or (iv), such Investor will use
commercially reasonable efforts to discontinue disposition of such Registrable
Securities under the Registration Statement until such Investor is advised in
writing by the Company that the use of the Prospectus, or amended Prospectus, as
applicable, may be used. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
 
6.6 Assignment of Registration Rights. The registration rights under Article VI
of this Agreement shall be automatically assignable by the Investors to any
transferee of all or any potion of such Investor’s Registrable Securities if (i)
the Investor agrees in writing with the transferee or assignee to assign such
rights and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws; (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this sentence the transferee or assignee agrees in writing to be
bound by all of the provisions contained herein; and (v) such transfer shall
have been made in accordance with the applicable requirements of this Agreement.

6.7 No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Investors in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities. The Company will not file a registration statement
relating to the resale of Company securities for the account of any other holder
of Company securities prior to the Effective Date.
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6.8 Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each Investor not then eligible to sell
all of its Registrable Securities under Rule 144(k), written notice of such
determination and if, within ten (10) days after receipt of such notice, any
such Investor shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Investor requests to be registered. Notwithstanding the foregoing, in the event
that, in connection with any underwritten public offering, the managing
underwriter(s) thereof shall impose a limitation on the number of shares which
may be included in the Registration Statement because, in such underwriter(s)’
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
as the underwriter shall permit. If an offering in connection with which an
Investor is entitled to registration under this Section 6.8 is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Preferred Stock and Common
Stock included in such underwritten offering and shall enter into an
underwriting agreement in a form and substance reasonably satisfactory to the
Company and the underwriter or underwriters.

ARTICLE VII
PURCHASE RIGHTS

7.1 Subsequent Offerings. So long as a majority of the shares of Preferred Stock
remain outstanding, the Investors will have the right of first refusal (the
“Purchase Rights”) to purchase, on the same terms as other investors, up to
twenty-five percent (25%) of any equity securities, securities convertible into
equity securities, or options or warrants therefor (“Equity Securities”) that
the Company proposes to offer, other than the securities excluded by Section 7.5
hereof.

7.2  Exercise of Rights.

(a) If the Company proposes to issue any Equity Securities, it shall give each
Investor written notice of its intention, describing the Equity Securities, the
price and the terms and conditions upon which the Company proposes to issue the
same. Each Investor shall have fifteen (15) days from the giving of such notice
to elect to purchase its pro rata share (based on the number of shares of
Preferred Stock owned by it in relation to the number of shares of Preferred
Stock owned by all Investors) of Equity Securities for the price and upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of such Equity Securities to be
purchased.

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(b) If not all of the Investors elect to purchase their share of the Equity
Securities, then the Company shall promptly notify in writing the Investors who
have elected to purchase their full share of such Equity Securities and shall
offer such Investors (the “Purchasing Investors”) the right to acquire such
unsubscribed shares. The Purchasing Investors shall have ten (10) days after
receipt of such notice to notify the Company of their election to purchase all
or a portion thereof of the unsubscribed shares. If the Purchasing Investors
have, in the aggregate, elected to purchase more than the number of unsubscribed
shares being offered in such notice, then the unsubscribed shares shall be
allocated according to each Purchasing Investor’s share up to the number of
unsubscribed shares set forth in the notice to the Purchasing Investors. The
Purchasing Investors shall then effect the purchase of the Equity Securities at
the closing of the issuance of Equity Securities described in the notice
delivered by the Company pursuant to Section 7.2(a). On the date of such
closing, the Company shall deliver to the Investors the certificates
representing the Equity Securities to be purchased by the Purchasing Investors,
each certificate to be properly endorsed for transfer, and at such time, the
Purchasing Investors shall pay the purchase price for the Equity Securities.

7.3 Issuance of Equity Securities to Other Persons. If the Investors fail to
exercise in full their Purchase Rights, the Company shall have forty-five (45)
days thereafter to sell the Equity Securities in respect of which the Investor’s
rights were not exercised, at a price and upon general terms and conditions no
more favorable to the purchasers thereof than specified in the Company’s notice
to the Investors pursuant to Section 7.2(a) hereof. If the Company has not sold
such Equity Securities within such forty-five (45) days, the Company shall not
thereafter issue or sell any Equity Securities, without first again complying
with this Article VII.

7.4 Transfer of Purchase Rights. The Purchase Rights of each Investor under this
Article VII may be transferred to any Affiliate of such Investor.

7.5 Excluded Securities. The Purchase Rights established by this Article VII
shall have no application to any of the following issuances of Equity Securities
(collectively, the “Excluded Securities”):
 
(a) shares of Common Stock issued or issuable to employees, directors or
consultants pursuant to equity holder plans maintained by the Company and
registered with the SEC on Form S-8;

(b) shares of Common Stock issued or issuable upon the exercise or conversion of
currently outstanding options, warrants, or convertible securities;

(c) shares of Common Stock issued or issuable on the exercise of the Warrants or
conversion of the Preferred Stock;

(d) shares of Common Stock issued or issuable solely as consideration for bank
financings, equipment leases, investor relations/public relations services,
business acquisitions, mergers or strategic partnerships, and not for financing
purposes.

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ARTICLE VIII
MISCELLANEOUS
 
8.1 Termination. This Agreement may be terminated by the Company or any
Investor, by written notice to the other parties, if the Closing has not been
consummated by the third Business Day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).
 
8.2 Fees and Expenses. The Company shall pay, reimburse and hold the Investors
harmless from liability for the payment of all reasonable fees and expenses
incurred by them in connection with the preparation and negotiation of this
Agreement and the consummation of the transactions contemplated hereby. The fees
and expenses of the Investors may include, without limitation, the fees and
expenses of counsel (which shall not exceed, without the Company’s prior written
consent, the sum of $[ ]) and accountants and out of pocket expenses of the
Investors arising in connection with the preparation, negotiation and execution
of the Transaction Documents and the consummation of the transactions
contemplated thereby (an estimate of the fees and expenses of such counsel may
be paid by check delivered or wire transfer to such counsel at the Closing by
the Investors, the amount of such check or wire transfer being deducted from the
aggregate amount to be paid by the Investors at the Closing for the Preferred
Stock to be purchased by them under this Agreement). The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection
with the sale and issuance of the Securities.
 
8.3 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.
 
8.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile or email at the facsimile
number or email address specified in this Section  prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or
email at the facsimile number or email address specified in this Section on a
day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (c) the Trading Day following the date of deposit with a
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The addresses, facsimile
numbers and email addresses for such notices and communications are as follows:

Notices for the Company:

Intelligentias, Inc.  
303 Twin Dolphin Drive, 6th Floor
Redwood City, California 94101
Attention: Mr. Ian Rice, Chairman and CEO
Telephone No.: 650-632-4526
Facsimile No.: 650-357-6901
 
with a copy to:

Greenberg Traurig, LLP
MetLife Building
200 Park Avenue, 15th Floor
New York, New York 10166
Attention: Spencer G. Feldman, Esq.
Telephone No.: 212-801-9200
Facsimile No.: 212-801-6400
Email Address: feldmans@gtlaw.com

Notices for the Investors:

Kingdon Capital Management, LLC
152 West 57th Street, 50th Floor
New York, New York 10019
Attention: Alfred Barbagallo
Telephone No.: 212-333-0123
Email Address: alfred.barbagallo@kingdon.com

with a copy to:

Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Joel F. Freedman
Telephone No.: 617-951-7309
Facsimile No.: 617-951-7050
 
8.5 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 the holders of at least 80% of the Registrable Securities held on
the date of such amendment or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Investors under Article VI may
be given by Investors holding at least a majority of the Registrable Securities
to which such waiver or consent relates, and any such amendment shall be binding
upon the Company and all holders of Registrable Securities.
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8.6 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.
 
8.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign its
rights under this Agreement to any Person to whom such Investor assigns or
transfers any Securities, provided (i) the Investor agrees in writing with the
transferee or assignee to assign such rights and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the Registrable Securities with respect to which
such rights are being transferred or assigned; (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws; (iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this sentence the transferee or assignee agrees
in writing to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
this Agreement.

8.8 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 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.
 
8.9 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 IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. THE COMPANY AND INVESTORS HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY
OR ANY INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION
CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE
ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE,
AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY
OR ANY INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH
PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO
PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF
DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
THE COMPANY AND INVESTORS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
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8.10 Survival. The representations and warranties contained herein shall survive
the Closing.
 
8.11 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or email attachment, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or
email-attached signature page were an original thereof.
 
8.12 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.
 
8.13 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall promptly
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 at no cost to the Investor. The Company may require the execution
by the holder thereof of a customary lost certificate affidavit of that fact and
a customary agreement to indemnify and hold harmless the Company (and Transfer
Agent, if applicable) for any losses in connection therewith.

8.14 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Investors
and the Company will be entitled to seek specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation (other than in
connection with any action for temporary restraining order) the defense that a
remedy at law would be adequate.
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8.15 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof and prior to
the Closing, each reference in any Transaction Document to a number of shares or
a price per share shall be amended to appropriately account for such event.
 
8.16 Independent Nature of Investors’ Obligations and Rights. The obligations of
each Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Document. The decision of each Investor to purchase Securities
pursuant to this Agreement has been made by such Investor independently of any
other Investor and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other Investor
or by any agent or employee of any other Investor, and no Investor or any of its
agents or employees shall have any liability to any other Investor (or any other
person) relating to or arising from any such information, materials, statements
or opinions. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Document. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with making
its investment hereunder and that no other Investor will be acting as agent of
such Investor in connection with monitoring its investment hereunder. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any Proceeding for such purpose.
 
[SIGNATURE PAGES TO FOLLOW]
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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.

        INTELLIGENTIAS, INC.  
   
   
  By:   /s/ Luigi Caramico  

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Name:  Luigi Caramico   Title:    President

 
 
 
Securities Purchase Agreement

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        INVESTORS:       Kingdon Capital Management, LLC, the
Investment Manager to M. Kingdon Offshore Ltd.   
   
   
  By:   /s/ Alan P. Winters  

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Name:  Alan P. Winters   Title:  Chief Operating Officer

 

            By: Kingdon Capital Management, LLC, the
Investment Adviser to Kingdon Associates   
   
   
  By:   /s/ Alan P. Winters  

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Name:  Alan P. Winters   Title:  Chief Operating Officer

 

            By: Kingdon Capital Management, LLC, the
Investment Adviser to Kingdon Family Partnership, L.P.  
   
   
  By:   /s/ Alan P. Winters  

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Name:  Alan P. Winters   Title:  Chief Operating Officer

 
 

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Exhibit A
Schedule of Investors

Investor
 
Preferred Stock
 
Market Warrants
 
Premium Warrants
 
Purchase Price
                 
M. Kingdon Offshore Ltd.
 
8,875,000
 
4,437,500
 
3,550,000
 
7,100,000
                 
Kingdon Associates
 
3,143,750
 
1,571,875
 
1,257,500
 
2,515,000
                 
Kingdon Family Partnership, L.P.
 
481,250
 
240,625
 
192,500
 
385,000
                 
TOTAL
 
12,500,000
 
6,250,000
 
5,000,000
 
$10,000,000

 

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