Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT, dated as of February 29, 2008 (this
“Agreement”), is entered into by and between OMNICOMM SYSTEMS, INC., a Delaware
corporation with headquarters located at 2101 W. Commercial Blvd., Suite 4000,
Ft. Lauderdale, FL 33309 (the “Company”), and each individual or entity named on
an executed counterpart of the signature page hereto (each such signatory is
referred to as a “Buyer”) (each agreement with a Buyer being deemed a separate
and independent agreement between the Company and such Buyer, except that each
Buyer acknowledges and consents to the rights granted to each other Buyer [each,
an “Other Buyer”] under such agreement and the Transaction Agreements, as
defined below, referred to therein).

W I T N E S S E T H:

WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration for offers and sales
to accredited investors afforded, inter alia, by Rule 506 under Regulation D
(“Regulation D”) as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”), and/or Section 4(2) of the 1933 Act; and

WHEREAS, the Buyer wishes to lend to the Company, subject to and upon the terms
and conditions of this Agreement and acceptance of this Agreement by the
Company, the Purchase Price (as defined below), the repayment of which will be
represented by 10% Secured Convertible Debentures Series 08 of the Company (the
“Convertible Debentures”), which Convertible Debentures will be convertible into
shares of Common Stock, $0.001 par value per share, of the Company (the “Common
Stock”), upon the terms and subject to the conditions of such Convertible
Debentures, together with the Warrants (as defined below) exercisable for the
purchase of shares of Common Stock;

NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1. AGREEMENT TO PURCHASE; PURCHASE PRICE.

(i) Subject to the terms and conditions of this Agreement and the other
Transaction Agreements, the undersigned Buyer hereby agrees to loan to the
Company the principal amount set forth on the Buyer’s signature page of this
Agreement (the “Purchase Price”), out of the aggregate amount being loaned by
all Buyers of $2,325,000 (the “Aggregate Purchase Price”).

(ii) The obligation to repay the loan from the Buyer shall be evidenced by the
Company’s issuance of one or more Convertible Debentures to the Buyer in the
aggregate principal amount equal to the Purchase Price (the Convertible
Debentures issued to the Buyer, the “Debentures”). Each Debenture (a) shall
provide for a Conversion Price (as defined below), which price may be adjusted
from time to as provided in the Debenture, and (b) shall have the terms and
conditions of, and be substantially in the form attached hereto as, Annex I and
(c) shall be secured pursuant to the terms of the Security Interest Agreement
substantially in the form annexed hereto as Annex VII (the “Security Interest
Agreement”).

(iii) On the Closing Date (as defined below), the Purchase Price shall be paid
by the Buyer and the Company will deliver the Certificates (as defined below) to
the Escrow Agent, as provided in Section 1(c) hereof.

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(iv) The loan to be made by the Buyer and the issuance of the Debentures and the
Warrants (collectively, the “Purchased Securities”) to the Buyer are sometimes
referred to herein and in the other Transaction Agreements as the purchase and
sale of the Debentures and the Warrants

b. Certain Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:

“Affiliate” means, with respect to a specific Person referred to in the relevant
provision, another Person who or which controls or is controlled by or is under
common control with such specified Person.

“Agreement Amount” means the amount, if any (other than interest and principal
due under the Debentures), due to the Buyer or the Holder, as the case may be,
pursuant to any provision of the Transaction Agreements.

“Agreement Payment Date” means the date the Buyer or the Holder, as the case may
be, demands payment of an Agreement Amount.

“Agreement Shares” means the shares of Common Stock issuable in payment of
Agreement Amounts , if such Agreement Amounts may be paid in such shares;
provided, however, that any demand for Agreement Shares shall be subject to the
provisions of Section 4(C) of the Debenture, as if such demand were a conversion
of the Debenture and as if such provision were set forth herein in full.

“Buyer Control Person” means the Buyer and each such other Persons as may be
deemed in control of the Buyer pursuant to Rule 405 under the 1933 Act or
Section 20 of the 1934 Act (as defined below).

“By-laws” means the by-laws of the Company (howsoever denominated), as amended
to date.

“Certificate of Incorporation” means the certificate of incorporation, articles
of incorporation or other charter document (howsoever denominated) of the
Company, as amended to date.

“Certificates” means the (x) the original manually-signed Debentures and (y) the
original manually-signed Warrants, each duly executed by the Company and issued
in the name of the Buyer on the Closing Date.

“Closing Date” means the date of the closing of the purchase and sale of the
Purchased Securities.

“Closing Price” means the 4:00 P.M. closing bid price of the Common Stock on the
Principal Trading Market on the relevant Trading Day(s), as reported by the
Reporting Service for the relevant date.

“Company Control Person” means each director, executive officer, promoter, and
such other Persons as may be deemed in control of the Company pursuant to Rule
405 under the 1933 Act or Section 20 of the 1934 Act.

“Company Counsel” means Schneider Weinberger & Beilly, LLP.

“Company’s SEC Documents” means the Company’s filings on the SEC’s EDGAR system
which are listed on Annex VI annexed hereto, to the extent available on EDGAR or
otherwise provided to the Buyer as indicated on said Annex VI.

“Conversion Certificates” means certificates representing any one or more of the
following, if any: (i) Conversion Shares, or (ii) Warrant Shares.

“Conversion Date” means the date a Holder submits a Notice of Conversion, as
provided in the Debentures or makes a demand for an Agreement Amount which is to
be paid in Agreement Shares.

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“Conversion Price” means the Fixed Conversion Price or the Interest Conversion
Price, as the context may require.

“Conversion Shares” means (i) the shares of Common Stock issued or issuable upon
conversion of the Debentures, (ii) the shares of Common Stock issued or issuable
in payment of accrued interest thereon, as contemplated in the Debentures,
(iii) the shares of Common Stock issued or issuable in payment of an Agreement
Amount which is being paid in Agreement Shares, or (iv) any or all of them, as
the context may require.

“Converting Holder” means the Holder of Debentures or Warrants, as the case may
be, who or which has submitted a Notice of Conversion (as contemplated by the
Debentures) or a Notice of Exercise (as contemplated by the Warrants) or a
demand for Agreement Shares.

“Current Information Reports” means all reports and material required to be
filed by the Company so that the conditions, if applicable, of Rule 144 that
there is adequate current information with respect to the Company will be
satisfied.

“Delivery Date” means, as the case may be, (x) the meaning ascribed to it, as
may be relevant, in the Debentures, the Warrants or other relevant Transaction
Agreement, as the case may be, or (y) the third Trading Day after the Buyer or
the Holder, as the case may be, makes a demand for an Agreement Amount which is
being paid in Agreement Shares.

“Disclosure Annex” means Annex IV to this Agreement; provided, however, that the
Disclosure Annex shall be arranged in sections corresponding to the identified
Sections of this Agreement, but the disclosure in any such section of the
Disclosure Annex shall qualify other provisions in this Agreement to the extent
that it would be readily apparent to an informed reader from a reading of such
section of the Disclosure Annex that it is also relevant to other provisions of
this Agreement.

“Effective Date” means the date, if any, on which the Registration Statement is
declared effective by the SEC.

“Effective” or “Effectiveness” means, as of any relevant date, the continuing
effectiveness of the Registration Statement.

“Escrow Agent” means Krieger & Prager LLP, the escrow agent identified in the
Joint Escrow Instructions attached hereto as Annex II (the “Joint Escrow
Instructions”).

“Escrow Funds” means the Purchase Price delivered to the Escrow Agent as
contemplated by Sections 1(c) and (d) hereof.

“Escrow Property” means the Escrow Funds and the Certificates delivered to the
Escrow Agent, as contemplated by Section 1(c) hereof.

“Exercise Price” means the per share exercise price of the Warrant.

“Fixed Conversion Price” means the VWAP for the ten (10) Regular Trading Days
ending on the Trading Day immediately before the Closing Date.

“Holder” means the Person holding the relevant Securities at the relevant time.

“Interest Conversion Price” has the meaning ascribed to in the Debenture.

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“Issue Date” means, with respect each Debenture and each Warrant, the Closing
Date on which such instrument was initially issued to the Buyer.

“Issue Date Conversion Shares” means, with respect to the Closing Date, the
number of shares of Common Stock equal to (x) the Purchase Price paid by the
Buyer on the Closing Date, divided by (y) the Fixed Conversion Price (without
regard to whether or not the Debentures were convertible on such date in
accordance with their terms).

“Last Audited Date” means December 31, 2006.

“Majority in Interest of the Holders” means one or more Holders whose respective
outstanding principal amounts of the Debentures held by each of them, as of the
relevant date, aggregate at least fifty and 01/100 percent (50.01%) of the
aggregate outstanding principal amounts of the outstanding Debentures held by
the Holder and all other Holders on that date.

“Material Adverse Effect” means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (x) adversely
affect the legality, validity or enforceability of the Purchased Securities or
any of the Transaction Agreements, (y) have or result in a material adverse
effect on the results of operations, assets, or financial condition of the
Company and its subsidiaries, taken as a whole, or (z) adversely impair the
Company’s ability to perform fully on a timely basis its material obligations
under any of the Transaction Agreements or the transactions contemplated
thereby.

“Maturity Date” has the meaning ascribed to it in the Debentures.

“New Common Stock” means shares of Common Stock and/or securities convertible
into, and/or other rights exercisable for, Common Stock, which are offered or
sold in a New Transaction.

“New Investor” means the third party investor, purchaser or lender (howsoever
denominated) or, where relevant, an Existing Securityholder (as defined below)
in a New Transaction.

“New Transaction” means, unless consented to by a Majority in Interest of the
Holders (which consent is in the sole discretion of the Holders and may be
withheld for any reason or for no reason whatsoever),

(i) the sale of New Common Stock by or on behalf of the Company to a New
Investor in connection with a transaction which will provide funds to the
Company (including, but not necessarily limited to, any such transaction which
is an equity, debt, credit line or equity line transaction), and/or

(ii) the grant of a security interest in, or the pledge of, shares of the
Company’s Common Stock or securities convertible into or exercisable for the
Company’s Common Stock to any other party, or the pledge of such shares or
securities to any other party, whether such grant or pledge is made by the
Company or any other holder thereof, in connection with a transaction in which
the Company borrows or is otherwise obligated to pay funds to a third party,
and/or

(iii) in exchange for the forbearance, modification or relinquishment of any
rights an existing holder of any of the Company’s securities (each, an “Existing
Securityholder”), (x) the sale or issuance to such Existing Securityholder of
additional New Common Stock and/or (y) the effectuation by the Company of, or
the other agreement of the Company to provide, more beneficial terms with
respect to any existing securities of the Company held by an Existing
Securityholder, and/or,

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(iv) the effectuation by the Company of, or the other agreement of the Company
to provide, the reduction of the conversion price of any security convertible
into Common Stock and/or the reduction of the exercise price of any right
exercisable for Common Stock held by an Existing Securityholder

in a transaction consummated after the date hereof; provided, however, that it
is specifically understood that the term “New Transaction” (1) unless consented
to otherwise by a Majority in Interest of the Holders (which consent is in the
sole discretion of the Holders and may be withheld for any reason or for no
reason whatsoever), includes, but is not limited to, a sale of Common Stock or
of a security convertible into Common Stock or an equity or credit line
transaction, but (2) does not include (a) the issuance of Common Stock upon the
exercise or conversion of options, warrants or convertible securities
outstanding on the date hereof, or in respect of any other financing agreements
as in effect on the date hereof and identified in the Disclosure Annex (provided
the same is not amended after the date hereof to a per share price below the
Conversion Price or the Exercise Price, as the case may be) or in the Company’s
SEC Documents (provided the same is not amended after the date hereof to a per
share price below the Conversion Price or the Exercise Price, as the case may
be), (b) the issuance of an Employee Stock Option Plan (an “ESOP”) of the
Company, such ESOP having been properly approved by the shareholders of the
Company, (c) the issuance of a non-employee director stock option plan of the
Company, or (d) the issuance of Common Stock upon the exercise of any options or
warrants referred to in the preceding clauses of this paragraph (provided the
same is not amended after the date hereof).

“New Transaction Closing Date” means the date a New Transaction is consummated.

“Person” means any living person or any entity, such as, but not necessarily
limited to, a corporation, partnership or trust.

“Placement Agent” means Emerging Growth Equities, Ltd.

“Principal Trading Market” means the Over the Counter Bulletin Board or such
other market on which the Common Stock is principally traded at the relevant
time, but shall not include the “pink sheets.”

“Qualification State” means a state, other than the State of Incorporation, in
which the Company is qualified.

“Registrable Securities” means (i) shares of Common Stock previously issued to
the Holder under the terms of the Transaction Agreements and (ii) shares of
Common Stock issuable to the Holder (x) on conversion of the Debentures (whether
for principal or interest or both), (y) on exercise of the Warrants or
(z) pursuant to any other provision of the Transaction Agreements as of the date
of the filing of the Registration Statement or any amendment thereof.

“Registration Statement” means a registration statement covering the resale by
the Holder of Registrable Securities.

“Regular Trading Day” means the regular trading hours of a Trading Day on the
Principal Trading Market shall be open for business (as of the date of this
Agreement, such hours are, for most Trading Days, approximately 9:00 or 9:30AM
to approximately 4PM Eastern Time; provided, however, that certain Trading Days
may have shorter regular trading hours; and provided, further, that the regular
trading hours may be subsequently changed for the Principal Trading Market).

“Reporting Service” means Bloomberg LP or if that service is not then reporting
the relevant information regarding the Common Stock, a comparable reporting
service of national reputation selected by a Majority in Interest of the Holders
and reasonably acceptable to the Company.

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“Rule 144” means, as may be in effect from time to time, (i) Rule 144
promulgated under the 1933 Act or (ii) any other similar rule or regulation of
the SEC that may at any time permit Holder to sell securities of the Company to
the public without registration under the 1933 Act.

“Securities” means the Purchased Securities and the Shares.

“Shares” means the shares of Common Stock representing any or all of the
Conversion Shares and the Warrant Shares.

“State of Incorporation” means Delaware.

“Subsidiary” means, as of the relevant date, any subsidiary of the Company
(whether or not included in the Company’s SEC Documents) whether now existing or
hereafter acquired or created.

“Trading Day” means any day during which the Principal Trading Market shall be
open for business.

“Transaction Agreements” means this Agreement, each issued Debenture, the Joint
Escrow Instructions, each issued Warrant, the Security Interest Agreement, and
the Disclosure Annex and includes all ancillary documents referred to in those
agreements.

“Transaction End Date” means the date which is the later of (x) the date on
which all of the Debentures have been converted or have been paid in full or
(y) the date on which all of the Warrants have been fully exercised or have
expired.

“Transfer Agent” means, at any time, the transfer agent for the Company’s Common
Stock.

“VWAP” means the volume weighted average price of the Common Stock on the
Principal Trading Market for the relevant Regular Trading Day(s), as reported by
the Reporting Service.

“Warrant Shares” means shares of Common Stock issued or issuable upon exercise
of the Warrants.

“Wire Instructions” means the Purchase Price Wire Instructions as provided in
Annex VIII annexed hereto.

c. Form of Payment; Delivery of Certificates.

(i) The Buyer shall pay the Purchase Price by delivering immediately available
good funds in United States Dollars to the Escrow Agent no later than the date
prior to the Closing Date.

(ii) Within three (3) Trading Days after the Company is notified that the Escrow
Agent has on deposit cleared funds from or on behalf of one or more Buyers an
aggregate amount equal to the Aggregate Purchase Price and the Company shall
have accepted the Buyer’s subscription hereunder, but in no event later than the
Closing Date, the Company will deliver the Certificates to the Escrow Agent.
Such Certificates shall be held in escrow by the Escrow Agent until released as
provided in the Joint Escrow Instructions.

(iii) By signing this Agreement, each of the Buyer and the Company, subject to
acceptance by the Escrow Agent, agrees to all of the terms and conditions of,
and becomes a party to, the Joint Escrow Instructions, all of the provisions of
which are incorporated herein by this reference as if set forth in full.

d. Method of Payment. Payment into escrow of the Purchase Price shall be made to
the Escrow Agent as provided in the Wire Instructions.

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2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.

The Buyer represents and warrants to, and covenants and agrees with, the
Company, as of the date hereof and, except as otherwise noted, as of each
Closing Date, as follows:

a. Without limiting Buyer’s right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the 1933 Act,
the Buyer is purchasing the Securities for the Buyer’s own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof.

b. The Buyer is (i) an “accredited investor” as that term is defined in Rule 501
of the General Rules and Regulations under the 1933 Act, (ii) experienced in
making investments of the kind described in this Agreement and the other
Transaction Agreements, (iii) able, by reason of the business and financial
experience of the Buyer and the Buyer’s professional advisors (who are not
affiliated with or compensated in any way by the Company or any of its
Affiliates or selling agents), to protect the Buyer’s own interests in
connection with the transactions described in this Agreement and the other
Transaction Agreements, and to evaluate the merits and risks of an investment in
the Securities, and (iv) able to afford the entire loss of its investment in the
Securities.

c. All subsequent offers and sales of the Securities by the Buyer shall be made
pursuant to registration of the relevant Securities under the 1933 Act or
pursuant to an exemption from such registration.

d. The Buyer understands and agrees that the Securities have not been registered
under the 1933 Act or any applicable state securities laws, by reason of their
issuance in a transaction that does not require registration under the 1933 Act
(based in part on the accuracy of the representations and warranties of the
Buyer contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any
applicable state securities laws or is exempt from such registration. The Buyer
understands that the Securities are being offered and sold to the Buyer in
reliance on specific exemptions from the registration requirements of the 1933
Act and state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.

e. The Buyer and the Buyer’s advisors, if any, have been furnished with or have
been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Purchased Securities which have been requested by the Buyer, including those set
forth in any annex attached hereto. The Buyer and the Buyer’s advisors, if any,
have been afforded the opportunity to ask questions of the Company and its
management and have received complete and satisfactory answers to any such
inquiries. Without limiting the generality of the foregoing, the Buyer has also
had the opportunity to obtain and to review the Company’s SEC Documents.

f. The Buyer understands that its investment in the Securities involves a high
degree of risk.

g. The Buyer hereby represents that, in connection with the Buyer’s investment
or the Buyer’s decision to purchase the Securities, the Buyer has not relied on
any statement or representation of any Person, including any such statement or
representation by the Company or any of their respective controlling Persons,
officers, directors, partners, agents and employees or any of their respective
attorneys, except as specifically set forth herein.

h. The Buyer understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Securities or the suitability of the investment in the
Securities nor have any such authorities passed upon or endorsed the merits of
the offering of the Securities.

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k. This Agreement and each of the other Transaction Agreements to which the
Buyer is a party, and the transactions contemplated hereby and thereby, have
been duly and validly authorized by the Buyer. This Agreement has been executed
and delivered by the Buyer, and this Agreement is, and each of the other
Transaction Agreements to which the Buyer is a party, when executed and
delivered by the Buyer (if necessary), will be valid and binding obligations of
the Buyer enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors’ rights
generally.

l. The offer to sell the Securities was directly communicated to the Buyer by
the Company. At no time was the Buyer presented with or solicited by any
leaflet, newspaper or magazine article, radio or television advertisement, or
any other form of general advertising or solicited or invited to attend a
promotional meeting otherwise than in connection and concurrently with such
communicated offer.

m. The execution, delivery and performance of this Agreement and the
consummation by the Buyer of the transactions contemplated hereby or relating
hereto do not and will not conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
the Buyer is a party or by which its properties or assets are bound, or result
in a violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to such Buyer or its properties
(except for such conflicts, defaults and violations as would not, individually
or in the aggregate, have a material adverse effect on the Buyer’s ability to
fulfill its obligations under this Agreement or the other Transaction
Agreements). The Buyer is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or to purchase the Securities in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
the Buyer is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.

3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to the
Buyer as of the date hereof and as of each Closing Date that, except as
otherwise provided in the Disclosure Annex or in the Company’s SEC Documents:

a. Rights of Others Affecting the Transactions. There are no preemptive rights
of any stockholder of the Company to acquire the Securities. No other party has
a currently exercisable right of first refusal which would be applicable to any
or all of the transactions contemplated by the Transaction Agreements. Except as
set forth in the Disclosure Annex, no Person has, and as of the Closing Date, no
Person shall have, any demand, “piggy-back” or other rights to cause the Company
to file any registration statement under the 1933 Act relating to any of its
securities or to participate in any such registration statement.

b. Status. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Incorporation and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those jurisdictions in which the failure to so qualify would not have or result
in a Material Adverse Effect. The Company has registered its stock and is
obligated to file reports pursuant to Section 12 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the “1934 Act”). The Common Stock
is quoted on the Principal Trading Market. The Company has received no notice,
either oral or written, with respect to the continued eligibility of the Common
Stock for quotation on the Principal Trading Market, and the Company has
maintained all requirements on its part for the continuation of such quotation.

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c. Authorized Shares.

(i) The capitalization of the Company (including the number of shares of each
class of stock which is authorized and the number of such shares which are
outstanding) is as indicated in the consolidated balance sheet of the Company as
included in the most recently filed quarterly or annual report included in the
Company’s SEC Documents and there has been no material change to such
capitalization since the filing of that report.

(ii) There are no outstanding securities which are exercisable for, exchangeable
for or convertible into shares of Common Stock or exercisable for, exchangeable
for or convertible into instruments which are convertible into shares of Common
Stock, whether such exercise, exchange or conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the
future. If any such securities are listed on the Disclosure Annex, the number or
amount of each such outstanding convertible security and the conversion terms
are set forth in said Disclosure Annex.

(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
has sufficient authorized and unissued shares of Common Stock as may be
necessary to effect the issuance of the Shares on the Closing Date, were the
Debentures fully converted and were the Warrant fully exercised on that date.

(iv) The Shares have been duly authorized by all necessary corporate action on
the part of the Company, and, when issued on conversion of, or in payment of
interest on, the Debentures or upon exercise of the Warrants, in each case in
accordance with their respective terms, will have been duly and validly issued,
fully paid and non-assessable and will not subject the Holder thereof to
personal liability by reason of being such Holder.

d. Transaction Agreements and Stock. This Agreement and each of the other
Transaction Agreements, and the transactions contemplated hereby and thereby,
have been duly and validly authorized by the Company. This Agreement has been
duly executed and delivered by the Company and this Agreement is, and each of
the Debentures, the Warrants and each of the other Transaction Agreements, when
executed and delivered by the Company (if necessary), will be, valid and binding
obligations of the Company enforceable in accordance with their respective
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors’ rights generally.

e. Non-contravention. The execution and delivery of this Agreement and each of
the other Transaction Agreements by the Company, the issuance of the Securities
in accordance with the terms hereof, and the consummation by the Company of the
other transactions contemplated by this Agreement, the Debentures, the Warrants
and the other Transaction Agreements do not and will not conflict with or result
in a breach by the Company of any of the terms or provisions of, or constitute a
default under (i) the Certificate of Incorporation or By-laws, each as currently
in effect, (ii) any indenture, mortgage, deed of trust, or other material
agreement or instrument to which the Company is a party or by which it or any of
its properties or assets are bound, including any listing agreement for the
Common Stock except as herein set forth, or (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, except such conflict, breach or default which would
not have or result in a Material Adverse Effect. The timely payment of interest
on the Debentures is not prohibited by the Certificate of Incorporation or
By-Laws, or any agreement, contract, document or other undertaking to which the
Company is a party.

f. Securities Law Matters; Approvals.

(i) No authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization, or stock exchange or market or
the stockholders of the Company is required to be obtained by the Company for
the issuance and sale of the Securities to the Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained.

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(ii) Assuming the accuracy of the representations and warranties of the Buyer
set forth in Section 2, the offer and sale by the Company of the Purchased
Securities is exempt from (A) the registration and prospectus delivery
requirements of the 1933 Act and the rules and regulations of the SEC thereunder
and (B) the registration and/or qualification provisions of all applicable state
and provincial securities and “blue sky” laws.

g. Filings. None of the Company’s SEC Documents contained, at the time they were
filed, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Since February 1, 2007, the Company has filed all annual and
quarterly reports and all proxy statements required to be filed by the Company
with the SEC under Section 13(a) or 15(d) of the 1934 Act. The financial
statements of the Company included in the Company’s SEC Documents, as of the
dates of such documents, were true and complete in all material respects and
complied with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, were prepared in accordance
with generally accepted accounting principles in the United States (“GAAP”)
(except in the case of unaudited statements permitted by Form 10-QSB under the
1934 Act) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presented the consolidated
financial position of the Company and its Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments that in the aggregate are not material and to any other
adjustment described therein).

h. Absence of Certain Changes. Since the Last Audited Date, there has been no
Material Adverse Effect, except as disclosed in the Company’s SEC Documents.
Since the Last Audited Date, except as provided in the Company’s SEC Documents,
the Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other material tangible assets, or canceled any material debts
owed to the Company by any third party or material claims of the Company against
any third party, except in the ordinary course of business consistent with past
practices; (v) waived any rights of material value, whether or not in the
ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any increases in employee compensation, except in
the ordinary course of business consistent with past practices; or
(vii) experienced any material problems with labor or management in connection
with the terms and conditions of their employment.

i. Full Disclosure. There is no fact known to the Company (other than conditions
known to the public generally or as disclosed in the Company’s SEC Documents)
that has not been disclosed in writing to the Buyer that would reasonably be
expected to have or result in a Material Adverse Effect.

j. Absence of Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company before or
by any governmental authority or non-governmental department, commission, board,
bureau, agency or instrumentality or any other person, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements. The Company is not aware of any valid basis for any such claim that
(either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.

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k. Absence of Events of Default. Except as set forth in Section 3(e) hereof, no
Event of Default (or its equivalent term), as defined in the respective
agreement to which the Company or its Subsidiary is a party, and no event which,
with the giving of notice or the passage of time or both, would become an Event
of Default (or its equivalent term) (as so defined in such agreement), has
occurred and is continuing, which would have a Material Adverse Effect.

l. Absence of Certain Company Control Person Actions or Events. To the Company’s
knowledge, none of the following has occurred during the past five (5) years
with respect to a Company Control Person:

(1) A petition under the federal bankruptcy laws or any state insolvency law was
filed by or against, or a receiver, fiscal agent or similar officer was
appointed by a court for the business or property of such Company Control
Person, or any partnership in which he was a general partner at or within two
years before the time of such filing, or any corporation or business association
of which he was an executive officer at or within two years before the time of
such filing;

(2) Such Company Control Person was convicted in a criminal proceeding or is a
named subject of a pending criminal proceeding (excluding traffic violations and
other minor offenses);

(3) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:

(i) acting, as an investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, as a futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, any other Person regulated by the Commodity Futures
Trading Commission (“CFTC”) or engaging in or continuing any conduct or practice
in connection with such activity;

(ii) engaging in any type of business practice; or

(iii) engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of federal or state
securities laws or federal commodities laws;

(4) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than 60 days the
right of such Company Control Person to engage in any activity described in
paragraph (3) of this item, or to be associated with Persons engaged in any such
activity; or

(5) Such Company Control Person was found by a court of competent jurisdiction
in a civil action or by the CFTC or SEC to have violated any federal or state
securities law, and the judgment in such civil action or finding by the CFTC or
SEC has not been subsequently reversed, suspended, or vacated.

m. No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the Transaction Agreements or the
Company’s SEC Documents or those incurred in the ordinary course of the
Company’s business since the Last Audited Date, or which individually or in the
aggregate, do not or would not have a Material Adverse Effect. No event or
circumstance has occurred or exists with respect to the Company or its
properties, business, operations, condition (financial or otherwise), or results
of operations, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed. There are no proposals currently
under

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consideration or currently anticipated to be under consideration by the Board of
Directors or the executive officers of the Company which proposal would
(x) change the Certificate of Incorporation or the By-laws, each as currently in
effect, with or without stockholder approval, which change would reduce or
otherwise adversely affect the rights and powers of the stockholders of the
Common Stock or (y) materially or substantially change the business, assets or
capital of the Company, including its interests in subsidiaries.

n. No Integrated Offering. Neither the Company nor any of its Affiliates nor any
Person acting on its or their behalf has, directly or indirectly, at any time
since August 1, 2007, made any offer or sales of any security or solicited any
offers to buy any security under circumstances that would eliminate the
availability of the exemption from registration under Regulation D in connection
with the offer and sale of the Securities as contemplated hereby.

o. Dilution. Each of the Company and its executive officers and directors is
aware that the number of shares issuable on conversion of the Debentures, upon
exercise of the Warrants or pursuant to the other terms of the Transaction
Agreements may have a dilutive effect on the ownership interests of the other
stockholders (and Persons having the right to become stockholders) of the
Company. The Company specifically acknowledges that its obligation to issue the
Conversion Shares upon conversion of the Debentures and the Warrant Shares upon
exercise of the Warrants or any shares pursuant to any other terms of any of the
Transaction Agreements is binding upon the Company and enforceable regardless of
the dilution such issuance may have on the ownership interests of other
stockholders of the Company, and the Company will honor such obligations,
including, but not necessarily limited to, honoring every Notice of Conversion
(as contemplated by the Debentures) and every Notice of Exercise (as
contemplated by the Warrants), unless the Company is subject to an injunction
(which injunction was not sought by the Company) prohibiting the Company from
doing so.

p. Fees to Brokers, Finders and Others. Except for the placement agent agreement
with the Placement Agent, the Company has taken no action which would give rise
to any claim by any Person for brokerage commission, placement agent or finder’s
fees or similar payments by Buyer relating to this Agreement or the transactions
contemplated hereby. Except for such fees arising as a result of any agreement
or arrangement entered into by the Buyer without the knowledge of the Company (a
“Buyer’s Fee”), Buyer shall have no obligation with respect to such fees or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this paragraph that may be due in connection with the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Buyer, its employees, officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney’s fees) and expenses suffered
in respect of any such claimed or existing fees (other than a Buyer’s Fee).

q. Tax Returns. The Company and each of its Subsidiaries has made and filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company and each of its Subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) 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 has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.

r. Disclosure. All information relating to or concerning the Company set forth
in the Transaction Agreements or in the Company’s public filings with the SEC is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or its business,
properties, prospects, operations or financial conditions, which under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company. In furtherance of the foregoing, and not in limitation thereof,
the Company confirms that, any other representation or provision of this
Agreement or any of the other Transaction Agreements to the contrary
notwithstanding, the Company is in

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compliance with Regulation FD promulgated by the SEC or any similar rule or
regulation regarding the dissemination of information regarding the Company and
the Company has not provided, and will not provide, the Buyer with any
non-public material information regarding the Company prior to the consummation
of the transactions consummated hereunder on the Closing Date.

s. Confirmation. The Company agrees that, if, to the knowledge of the Company,
any events occur or circumstances exist prior to the release of the Escrow Funds
to the Company which would make any of the Company’s representations or
warranties set forth herein materially untrue or materially inaccurate as of
such date, the Company shall immediately notify the Buyer and the Escrow Agent
in writing prior to such date of such fact, specifying which representation,
warranty or covenant is affected and the reasons therefor.

4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

a. Transfer Restrictions. The Buyer acknowledges that (1) the Securities have
not been and are not being registered under the provisions of the 1933 Act and
the Shares have not been and are not being registered under the 1933 Act, and
may not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such Securities under
circumstances in which the seller, or the Person through whom the sale is made,
may be deemed to be an underwriter, as that term is used in the 1933 Act, may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (3) neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.

b. Restrictive Legend. The Buyer acknowledges and agrees that, until such time
as the relevant Shares have been registered under the 1933 Act and may be sold
in accordance with an effective registration statement, or until such Shares can
otherwise be sold without restriction, whichever is earlier, the certificates
and other instruments representing any of the Securities shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

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

c. Filings. The Company undertakes and agrees to make all filings required to be
made by it in connection with the sale of the Securities to the Buyer under the
1933 Act, the 1934 Act or any United States state securities laws and
regulations thereof applicable to the Company or by the rules and regulations of
the Principal Trading Market, and, unless such filing is publicly available on
the SEC’s EDGAR system (via the SEC’s web site at no additional charge), to
provide a copy thereof to the Buyer promptly after such filing. Reference is
made to the Section titled “Publicity, Filings, Releases, Etc.” below.

d. Reporting Status; Disclosure of Information.

(i) During the period from the Closing Date to and including the Transaction End
Date, the Company shall

(A) timely file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act,

(B) take all reasonable action under its control to ensure that adequate current
public information with respect to the Company, as required in accordance with
Rule 144 of the 1933 Act, is publicly available,

(C) not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination, and

(D) comply with Regulation FD promulgated by the SEC or any similar rule or
regulation regarding the dissemination of information regarding the Company, and
in furtherance of the foregoing, and not in limitation thereof, and
notwithstanding anything to the contrary in this Agreement or in any of the
other Transaction Agreements, without the prior written consent of the Holder in
each instance, not disclose to the Holder any non-public material information
regarding the Company.

(ii) The Company will take all reasonable action under its control to maintain
the continued listing and quotation and trading of its Common Stock (including,
without limitation, all Shares) on the Principal Trading Market or a listing on
the NASDAQ Capital, Global or Global Select Markets or AMEX and, to the extent
applicable to it, will comply in all material respects with the Company’s
reporting, filing and other obligations under the by-laws or rules of the
Principal Trading Market and/or the National Association of Securities Dealers,
Inc., as the case may be, applicable to it at least through the date which is
the Trading Day after the Transaction End Date.

e. Use of Proceeds. The Company will use the net proceeds received hereunder
(excluding amounts paid as contemplated by the Joint Escrow Instructions) for
general corporate purposes, including growth and capital initiatives and
research and development.

f. Warrants.

(i) The Company agrees to issue to the Buyer, and the Buyer agrees to purchase
from the Company, on the Closing Date a transferable warrant (each, a “Warrant”
and, collectively, the “Warrants”) for the purchase of the number of shares
equal to seventy-five percent (75%) of the Issue Date Conversion Shares.

(ii) Each Warrant shall have an exercise price (each, an “Exercise Price”) equal
to $0.75 per share (subject to adjustment as provided in the Warrant and
herein).

(iii) Each Warrant shall be exercisable commencing on the Issue Date and shall
expire at the close of business on the last day of the calendar month in which
the fourth annual anniversary of the Issue Date of such Warrant occurs.

(iv) Each Warrant shall have cashless exercise rights and automatic exercise
provisions, each as provided in the Warrant. Except as specified above, each
Warrant shall generally be in the form annexed hereto as Annex V.

g. Certain Agreements.

(i) For purposes of this Agreement, the following terms shall have meanings
indicated:

(A) “New Transaction Period” means the period commencing on the Closing Date and
continuing through and including the Transaction End Date.

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(B) “New Transaction Price” means the Basic New Transaction Price, except that
if the Basic New Transaction Exercise Price is lower than the Basic New
Transaction Price, it means the Basic New Transaction Exercise Price.

(C) “Basic New Transaction Price” means the lower of (i) if the purchase price,
conversion price or put or call price per share for any shares of New Common
Stock contemplated in the New Transaction is a fixed price, the lowest such
fixed price or (ii) if the purchase price, conversion price or put or call price
per share for any shares of New Common Stock contemplated in the New Transaction
is a variable price, the price determined by the application of such formula on
the date the Holder gives a Notice of Conversion under the Debenture; and
provided, further, that, if the securities issued in the New Transaction are
issued at a Face Value Discount (as defined below), the Basic New Transaction
Price shall be adjusted to reflect such discount.1

(D) “Basic New Transaction Exercise Price” means the lower of (i) if the
exercise price per share applicable to the warrants, option or similar
instrument (howsoever denominated; collectively, “New Transaction Warrants”)
included in such New Transaction is a fixed price, the lowest such fixed price,
or (ii) if the exercise price per share applicable to the New Transaction
Warrants is a formula, the price determined by application of such formula on
the date the Holder gives a Notice of Exercise under the Warrant.

(E) “New Transaction Exercise Price” means the lower of (i) the Basic New
Transaction Exercise Price, or (ii) the Basic New Transaction Price multiplied
by the Original Warrant Exercise Price Ratio.

(F) “Original Warrant Exercise Price Ratio” means the fraction which is the
lower of (i) the fraction, of which the numerator is the Exercise Price on the
Closing Date and the denominator is the Fixed Conversion Price on the Closing
Date, or (ii) the fraction, of which the numerator is the Exercise Price in
effect immediately before the consummation of the New Transaction and the
denominator is the Fixed Conversion Price in effect immediately before the
consummation of the New Transaction.

(G) “Face Value Discount” means consideration less than, as the case may be,
(x) the number of shares being issued multiplied by the stated purchase price,
(y) the stated principal amount of a debenture, note or similar instrument or
(z) the stated value of the shares of convertible stock.

(ii) The Company covenants and agrees that, if, during the New Transaction
Period, without the prior written consent of a Majority in Interest of the
Holders in each instance (which consent is in the sole discretion of the Holders
and may be withheld for any reason or for no reason whatsoever), the Company
enters into a New Transaction, then

(A) the Fixed Conversion Price applicable to any conversion of the Debenture
effected thereafter by the Holder shall be the lower of (i) the Fixed Conversion
Price in effect as of the Trading Day immediately before the consummation of the
New Transaction (adjusted for any subsequent capital transactions as provided in
the Debenture) or (ii) the lowest New Transaction Price from this or any other
New Transaction effected during the New Transaction Period (in each case,
adjusted for any subsequent capital transactions as provided in the Debenture);
and

(B) the Exercise Price applicable to any exercise of the Warrant effected
thereafter by the Holder shall be the lower of (i) the Exercise Price in effect
as of the Trading Day immediately before the consummation of the New Transaction
(adjusted for

 

1

By way of illustration, if convertible preferred shares having a stated value of
$1 million and a fixed conversion price of $0.05 were sold for a purchase price
of $800,000, the effective Basic New Transaction Price would be $0.04.

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

any subsequent capital transactions as provided in the Warrant) or (ii) the
lowest New Transaction Exercise Price from this or any other New Transaction
effected during the New Transaction Period (adjusted for any subsequent capital
transactions as provided in the Warrant); and

(C) if the Exercise Price is reduced pursuant to the provisions of the
immediately preceding clause (B), the number of shares issuable on exercise of
the Warrants shall be increased to a number of shares (the “Adjusted Warrant
Shares Number”) such that the aggregate Exercise Price (after taking into
account such reduction) for the Adjusted Warrant Shares Number shall be equal to
the aggregate Exercise Price (immediately before such reduction) for the Warrant
Shares issuable on exercise of the Warrants prior to the adjustment contemplated
by this clause (C) (for purposes of all such calculations, all Warrants shall be
assumed to be fully exercisable without regard to any limitations, restrictions
or conditions that may be provided in any provision of any of the Transaction
Agreements); and

(D) if the provisions applicable to subsequent adjustments to any one or more or
all of the purchase price, conversion price or warrant exercise price of the
securities issued in the New Transaction are more beneficial to the Holder than
the terms, if any, provided in the Transaction Agreements, the Holder may apply
the provisions of the New Transaction to the Transaction Agreements.

(iii) In addition to, and not in lieu of, the other provisions of this
Section 4(g), if, during the New Transaction Period, the Company anticipates
entering into a New Transaction in which the Company will receive, in addition
to all other New Transactions previously entered into during such period , gross
proceeds (before deductions for fees, commissions or other expenses of any kind)
of at least $3,000,000 (such New Transaction, a “Threshold New Transaction”),
the Company shall give written notice to the Holder at least five (5) Trading
Days before the consummation of the Threshold New Transaction, including the
terms of the Threshold New Transaction and the terms of each other New
Transaction, if any, previously entered into during the New Transaction Period.
The Holder may, by written notice to the Company given within four (4) Trading
Days after the Holder’s receipt of such notice, elect to exchange all or any
part of an outstanding Debenture (and accrued interest thereon; collectively,
with such principal, the “Exchanged Securities”) for the securities which are
being offered in such Threshold New Transaction or, if there has been one or
more previous New Transactions, any such previous New Transaction (the specific
New Transaction selected by the Holder, the “Selected New Transaction”) on the
following terms: (w) no other consideration shall be provided by the Holder in
connection with such exchange and no commission or equivalent compensation will
be paid by the Holder or the Company to any party in connection with such
exchange (provided, however, that nothing herein shall limit the Holder’s right
to participate in any New Transaction in addition to and separate from the
exchange, if any, contemplated by this provision); (x) such exchange shall be
effected under Section 3(a)(9) of the 1933 Act; (y) for purposes of determining
the interests to be issued to the Holder pursuant to such exchange, the
Exchanged Securities shall be deemed to have a value equal to the principal and
accrued interest of the Exchanged Securities divided by ninety percent (90%);
and (z) except as provided in the preceding clauses, such exchange shall be made
on terms substantially equivalent to those provided to the New Investors in the
Selected New Transaction.

(iv) If during the New Transaction Period, the Company enters into a New
Transaction and subsequently files a registration statement naming the New
Investors of that New Transaction as selling stockholders (a “New Transaction
Registration Statement”), the Holder shall have piggy-back registration rights
with respect to the all or any of the Conversion Shares or Warrant Shares then
held by the Holder or then subject to issuance upon conversion of the
outstanding Debenture, exercise of the outstanding Warrant or otherwise issuable
as Agreement Shares (collectively, the “Remaining Shares”), subject to the
conditions set forth below. Prior to the filing of the New Transaction
Registration Statement, the Company shall give written notice of such
anticipated filing to the Holder and the Holder shall have the right,
exercisable within ten (10) Trading Days after receipt of such notice, to demand
inclusion of all or a portion of the Holder’s Remaining Shares in the New
Transaction Registration Statement. If the Holder exercises such election, the
Remaining Shares so designated shall be included in the New Transaction
Registration Statement at no cost or expense to the Holder (other than any costs
or commissions which would be borne by the Holder were the Holder a New
Investor). If the Holder elects to include any such shares, the Holder shall
have, with respect to such shares, all of the rights and benefits provided to a
New Investor

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under the terms of the agreements reflecting the New Transaction with respect to
the filing, effectiveness and maintenance of effectiveness of such registration
statement (including, but not necessarily limited to, provisions, if any, for
liquidated damages payable by the Company under certain events) as if the Holder
had been a New Investor in the New Transaction.

(v) Nothing in the foregoing provisions reflects either an obligation on the
part of any Buyer to participate in any New Transaction or a limitation on any
Buyer from participating in any New Transaction.

(vi) Any of the foregoing provisions of this Section 4(g) or any other provision
of this Agreement or any of the other Transaction Agreements to the contrary
notwithstanding, the Company shall not engage in any offers, sales or other
transactions of its securities which would adversely affect the exemption from
registration available for the transactions contemplated by the Transaction
Agreements.

h. Available Shares.

(i) The Company shall have at all times authorized and reserved for issuance,
free from preemptive rights, a number of shares (the “Reserved Amount”) at least
equal to the sum of (x) one hundred fifty percent (150%) of the number of shares
of Common Stock issuable as may be required, at any time, to satisfy the
conversion rights of the Holders of principal on all outstanding Debentures plus
interest thereon through the Maturity Date (assuming for such purposes that
interest is paid in shares at the Interest Conversion Price in effect on the
Reserved Share Determination Date, as defined below), plus (y) one hundred
percent (100%) of the number of shares issuable upon exercise of all outstanding
Warrants held by the Holders (in each case, whether any of such outstanding
Convertible Debentures or Warrants were originally issued to the Holder, the
Buyer or to any other party and without regard to any restrictions which might
limit any Holder’s right to convert any of the Debentures or to exercise any of
the Warrants held by such Holder).

(ii) The Reserved Amount shall be determined on the Closing Date and after each
New Transaction Closing Date, and thereafter on the first Trading Day after the
end of each subsequent calendar quarter (each such determination date, a
“Reserved Share Determination Date”), and the number of shares to be reserved
shall be based on (q) all outstanding Debentures and the Conversion Price which
would have been applicable as of such Reserved Share Determination Date and
(r) all unexercised Warrants as of such date. The Reserved Amount determined on
such date shall remain the Reserved Amount until the next New Transaction
Closing Date or the next quarterly determination, as the case may be. The
Company shall give written instructions to the Transfer Agent to reserve for
issuance to the Buyer the number of shares equal to the Reserved Amount. The
Company will, at the request of the Buyer, provide written confirmation,
certified by an executive officer of the Company, of the number of shares then
reserved for the Buyer and that the instructions referred to in the preceding
sentence have been given to the Transfer Agent.

i. Reports under 1933 Act and 1934 Act. With a view to making available to
Investor the benefits of Rule 144, the Company agrees, subject to the provisions
of Section 4(d) hereof, to (all at the Company’s expense) that the Company
shall:

(i) make and keep public information available, as those terms are understood
and defined in Rule 144;

(ii) file all Current Information Reports with the SEC in a timely manner; and

(iii) furnish to the Holder at any time prior to the Transaction End Date,
promptly upon reasonable request, (a) a written statement by the Company that it
has complied with the reporting requirements of Rule 144, the 1933 Act and the
1934 Act, and (b) such other information as may be reasonably requested to
permit the Holder to sell such securities pursuant to Rule 144 without
limitation; and

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(iv) at the request of the Holder, give the Transfer Agent instructions
(supported by an opinion of Company Counsel or other counsel to the Company, if
required or requested by the Transfer Agent) to the effect that, upon the
Transfer Agent’s receipt from the Buyer of

(A) a certificate (a “Rule 144 Certificate”) certifying that the Holder’s
holding period (as determined in accordance with the provisions of Rule 144) for
the Shares which the Holder proposes to sell (the “Securities Being Sold”) is
not less than six (6) months; and

(B) an opinion of counsel acceptable to the Company (for which purposes it is
agreed that Krieger & Prager, LLP shall be deemed acceptable)2 if not given by
Company Counsel) that, based on the Rule 144 Certificate, Securities Being Sold
may be sold pursuant to the provisions of Rule 144, even in the absence of an
effective registration statement,

the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent’s books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.

j. Publicity, Filings, Releases, Etc. Each of the parties agrees that it will
not disseminate any information relating to the Transaction Agreements or the
transactions contemplated thereby, including issuing any press releases, holding
any press conferences or other forums, or filing any reports (collectively,
“Publicity”), without giving the other party reasonable advance notice and an
opportunity to comment on the contents thereof. Neither party will include in
any such Publicity any statement or statements or other material to which the
other party reasonably objects, unless in the reasonable opinion of counsel to
the party proposing such statement, such statement is legally required to be
included. In furtherance of the foregoing, the Company will provide to the
counsel designated by the Buyer (“Investor’s Counsel”) drafts of the applicable
text the first filing of a Current Report on Form 8-K or a Quarterly or Annual
Report on Form 10-Q or 10-K (or equivalent SB forms), as the case may be,
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least two
(2) Trading Days before such filing will be made) and will not include in such
filing (or any other filing filed before then) any statement or statements or
other material to which the other party reasonably objects, unless in the
reasonable opinion of counsel to the party proposing such statement, such
statement is legally required to be included. Notwithstanding the foregoing,
each of the parties hereby consents to the inclusion of the text of the
Transaction Agreements in filings made with the SEC (but any descriptive text
accompanying or part of such filing shall be subject to the other provisions of
this paragraph). Notwithstanding, but subject to, the foregoing provisions of
this Section 4(j), the Company will, after the Closing Date, promptly (but in
any event withing four (4) Trading Days after the Closing Date) issue a press
release and file a Current Report on Form 8-K or, if appropriate, a quarterly or
annual report on the appropriate form, referring to the transactions
contemplated by the Transaction Agreements (excepts that drafts thereof shall
have provided to the Holder at least two Trading Days before the Closing Date).

k. Independent Nature of Buyers’ Obligations and Rights. The obligations of each
Buyer under the Transaction Agreements are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any Other Buyer under any one or more of
the Transaction Agreements. The decision of each Buyer or Other Buyer to
purchase Purchased Securities pursuant to the Transaction Agreements has been
made by such Buyer independently of any Other Buyer and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its subsidiaries, if

 

2 The Company will be responsible for paying the fees of such counsel or
reimbursing the Holder for any such fees paid or payable by the Holder.

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

any, which may been made or given by any Other Buyer or any of their respective
officers, directors, principals, employees, agents, counsel or representatives
(collectively, including the Buyer, the “Buyer Representatives”). No Buyer
Representative shall have any liability to any Other Buyer or the Company
relating to or arising from any such information, materials, statements or
opinions, if any. Each Buyer acknowledges that no Other Buyer has acted as agent
for such Buyer in connection with making its investment hereunder and that no
Buyer will be acting as agent of such Other Buyer in connection with monitoring
its investment in the Purchased Securities or enforcing its rights under the
Transaction Agreements. Each Buyer shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Agreements, and it shall not be
necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that, for reasons of
administrative convenience, (x) the Transaction Agreements have been prepared by
counsel for one of the Buyers and such counsel does not represent all of the
Buyers with respect to the transactions contemplated hereby, and each other
Buyer has retained its own counsel (or had the opportunity to do so) with
respect to such transactions, and (y) the Company has elected to provide each of
the Buyers with the same Transaction Agreements for the purpose of closing a
transaction with multiple Buyers and not because it was required or requested to
do so by any Buyer. In furtherance of the foregoing, and not in limitation
thereof, the Company acknowledges that nothing contained in this Agreement or in
any Transaction Agreement, and no action taken by any Buyer pursuant thereto,
shall be deemed to constitute any two or more Buyers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Agreements.

l. Equal Treatment of Buyers. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of any
of the Transaction Agreements unless the same consideration is also offered to
all of the parties to the Transaction Agreements.

m. Independent Investment Decision. No Buyer has agreed to act with any Other
Buyer for the purpose of acquiring, holding, voting or disposing of the
Securities purchased hereunder for purposes of Section 13(d) under the Exchange
Act, and each Buyer is acting independently with respect to its investment in
the Securities. The decision of each Buyer to purchase Purchased Securities
pursuant to this Agreement has been made by such Buyer independently of any
other purchase and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or its subsidiaries which may have made or given by any
Other Buyer or by any agent or employee of any Other Buyer, and no Buyer or any
of its agents or employees shall have any liability to any Other Buyer (or any
other person) relating to or arising from any such information, materials,
statements or opinions.

n. NASD Rule 2710. The Company is aware that the Corporate Financing Rule 2710
(“NASD Rule 2710”) of the National Association of Securities Dealers (“NASD”) is
or may become applicable to the transactions contemplated by the Transaction
Agreements or to the sale by a Holder of any of the Securities. If NASD Rule
2710 is so applicable, the Company shall, to the extent required by such rule,
timely make any filings and cooperate with any broker or selling stockholder in
respect of any consents, authorizations or approvals that may be necessary for
the NASD to timely and expeditiously permit the stockholder to sell the
securities.

o. Keeping of Records and Books of Account. The Company shall keep and cause
each Subsidiary, if any, to maintain a standard and uniform system of accounting
and to keep adequate records and books of account, in which complete entries
will be made in accordance with GAAP consistently applied, reflecting all
financial transactions of the Company and such subsidiaries, and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.

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p. Transactions with Affiliates. Until the Transaction End Date, neither the
Company nor any of its Subsidiaries shall, directly or indirectly, enter into
any material transaction or agreement with any stockholder, officer, director or
Affiliate of the Company or family member of any officer, director or Affiliate
of the Company, unless the transaction or agreement is (i) reviewed and approved
by a majority of Disinterested Directors (as such term is hereinafter defined)
and (ii) on terms no less favorable to the Company or the applicable Subsidiary
than those obtainable from a non-affiliated person. The term “Disinterested
Director” means a director of the Company who is not and has not been an officer
or employee of the Company and who is not a member of the family of, controlled
by or under common control with, any such officer or employee.

q. Certain Restrictions. Until the Transaction End Date, no dividends shall be
declared or paid or set apart for payment nor shall any other distribution be
declared or made upon any capital stock of the Company, nor shall any capital
stock of the Company be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan (including a stock option
plan) of the Company or pursuant to the security agreements, if any, listed on
the Disclosure Annex) for any consideration by the Company, directly or
indirectly, nor shall any moneys be paid to or made available for a sinking fund
for the redemption of any Common Stock.

r. Failure to Make Timely Filings. The Company agrees that, if, after the
application of any extensions available to the Company (provided the application
for any such extension was timely filed by the Company in the relevant
instance), the Company fails to timely file on the SEC’s EDGAR system any one or
more Current Information Reports, the Company shall be liable to pay to the
Holder an amount based on the following schedule (where “No. Trading Days Late”
refers to each Trading Day after the latest due date for the relevant filing):

 

No. Trading Days Late

  

Late Filing Payment For Each $10,000 of Principal of Outstanding
Debentures

1

   $    100

2

   $    200

3

   $    300

4

   $    400

5

   $    500

6

   $    600

7

   $    700

8

   $    800

9

   $    900

10

   $    1,000

>10

   $    1,000 + $200 for each Trading Day Late beyond 10 days

The Company shall pay any payments incurred under this Section in immediately
available funds upon demand by the Holder; provided, however, that the Holder
making the demand may specify that the payment shall be made in shares of Common
Stock at the Fixed Conversion Price applicable to the date of such demand. If
the payment is to be made in shares of Common Stock, such shares shall be
considered Conversion Shares under the Debentures, with the “Delivery Date” for
such shares shall determined from the date of such demand,, the certificates to
be delivered shall be considered Conversion Certificates, the demand for payment
of such amount in shares shall be considered a Notice of Conversion (but the
delivery of such shares shall be in payment of the amount contemplated by this
paragraph and not in payment of any principal or interest on any Debenture).

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5. TRANSFER AGENT INSTRUCTIONS.

a. The Company warrants that, with respect to the Securities, other than the
stop transfer instructions to give effect to Section 4(a) hereof, it will give
the Transfer Agent no instructions inconsistent with instructions to issue
Common Stock from time to time upon conversion of the Debentures, the exercise
of the Warrants, or the issuance of Agreement Shares, if any, as may be
applicable from time to time, in such amounts as specified from time to time by
the Company to the Transfer Agent, bearing the restrictive legend specified in
Section 4(b) of this Agreement prior to registration of the Shares under the
1933 Act, registered in the name of the Buyer or its nominee and in such
denominations to be specified by the Holder in connection therewith. Except as
so provided, the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Agreements. Nothing in this Section shall affect in any way
the Buyer’s obligations and agreement to comply with all applicable securities
laws upon resale of the Securities. If the Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Buyer of any of the Securities in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the 1933 Act or upon
request from a Holder while there is an effective registration statement
covering the sale of the relevant Shares, the Company shall (except as provided
in clause (2) of Section 4(a) of this Agreement) permit the transfer of the
Securities, as may be applicable, promptly instruct the Transfer Agent to issue
one or more certificates for Common Stock without legend in such name and in
such denominations as specified by the Buyer.

b. (i) The Company understands that a delay in the delivery of Conversion
Certificates, whether on conversion of a Debenture and/or in payment of accrued
interest thereon or on exercise of the Warrants, beyond the relevant Delivery
Date (as defined in the Debenture or Warrant or in Section 4(g) hereof, as the
case may be), could result in economic loss to the Holder. As compensation to
the Holder for such loss, in addition to any other available remedies at law,
the Company agrees to pay late payments to the Holder for late issuance of the
Conversion Certificates in accordance with the following schedule (where “No.
Trading Days Late” is defined as the number of Trading Days beyond two
(2) Trading Days after the Delivery Date):

 

No. Trading Days Late

  

Late Payment For Each $10,000 of Principal or Interest Being Converted,
of Late Fees3, or of Exercise Price of Warrant Being Exercised

1

   $    100

2

   $    200

3

   $    300

4

   $    400

5

   $    500

6

   $    600

7

   $    700

8

   $    800

9

   $    900

10

   $    1,000

>10

   $    1,000 + $200 for each Trading Day Late beyond 10 days

The Company shall pay any payments incurred under this Section in immediately
available funds upon demand; provided, however, that the Holder making the
demand may specify that the payment shall be made in shares of Common Stock at
the Fixed Conversion Price applicable to the date of such demand. If the payment
is to be made in shares of Common Stock, such shares shall be considered
Conversion Shares under the Debentures, with the “Delivery Date” for such shares
shall determined from the date of such demand,, the certificates to be delivered
shall be considered Conversion Certificates, the demand for payment of such
amount in shares shall be considered a Notice of Conversion (but the delivery of
such shares shall be in payment of the amount contemplated by this paragraph

 

 

3

“Late Fess” are amounts payable under the provisions of Section 4(o) or this
Section 5(b) which the Holder has designated to be paid in shares of Common
Stock.

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

and not in payment of any principal or interest on any Debenture). Nothing
herein shall limit the Holder’s right to pursue actual damages for the Company’s
failure to issue and deliver the Conversion Certificates to the Holder within a
reasonable time. Furthermore, in addition to any other remedies which may be
available to a Holder, in the event that the Company fails for any reason to
effect delivery of such Conversion Certificates within two (2) Trading Days
after the Delivery Date, the Converting Holder will be entitled to revoke the
relevant Notice of Conversion or Notice of Exercise by delivering a notice to
such effect to the Company prior to the Converting Holder’s receipt of the
relevant Conversion Certificates, whereupon the Company and the Converting
Holder shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion or Notice of Exercise, as the case may be;
provided, however, that any payments contemplated by this Section 5(b) of this
Agreement which have accrued through the date of such revocation notice shall
remain due and owing to the Converting Holder notwithstanding such revocation.

(ii) If, by the tenth Trading Day after the relevant Delivery Date, the Company
fails for any reason to deliver the Conversion Certificates, but at any time
after the Delivery Date, the Converting Holder purchases, in an arm’s-length
open market transaction or otherwise, shares of Common Stock (the “Covering
Shares”) in order to make delivery in satisfaction of a sale of Common Stock by
the Converting Holder (the “Sold Shares”), which delivery such Converting Holder
anticipated to make using the shares to be issued upon such conversion (a
“Buy-In”), the Converting Holder shall have the right to require the Company to
pay to the Converting Holder, in addition to and not in lieu of the amounts
contemplated in other provisions of the Transaction Agreements, including, but
not limited to, the provisions of the immediately preceding Section 5(b)(i)),
the Buy-In Adjustment Amount (as defined below). The “Buy-In Adjustment Amount”
is the amount equal to the number of Sold Shares multiplied by the excess, if
any, of (x) the Holder’s total purchase price per share (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds per share
(after brokerage commissions, if any) received by the Holder from the sale of
the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to the
Holder in immediately available funds immediately upon demand by the Converting
Holder. By way of illustration and not in limitation of the foregoing, if the
Holder purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which Company will be required to pay to the Holder will be $1,000.

c. The provisions of this paragraph apply if the provisions of Rule 144 would
then be applicable to the sale of the relevant Shares by the Holder without
restriction or other limitation or while there is an effective Registration
Statement covering the Registrable Shares (any such period, the “Effective
Period”). During the Effective Period, the Company will issue Shares without
legend and without transfer restrictions on the books of the Transfer Agent,
and, at the request of the Holder, will use it best efforts to have previously
issued certificates representing the Shares re-issued without legend and without
transfer restrictions on the books of the Transfer Agent. In lieu of delivering
physical certificates representing the Common Stock issuable upon conversion of
the Debenture or exercise of a Warrant or at the request of the Holder with
respect to any Shares previously issued, provided the Transfer Agent is
participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer program, upon request of the Holder and the Holder’s compliance with
the provisions contained in this paragraph, so long as the certificates therefor
do not bear a legend and the Holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause the Transfer Agent to electronically transmit to the
Holder the Common Stock issuable upon conversion of the Debenture or exercise of
the Warrant or in replacement of any Shares previously issued by crediting the
account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent
Commission system. The Company specifically acknowledges that, as of the date
hereof and as of the Closing Date, the Transfer Agent is participating in the
DTC program and the Company is not aware of any plans of the Transfer Agent to
terminate such participation. While any Holder holds Securities, the Company
will not appoint any transfer agent which does not participate in the DTC
program.

d. The Company shall assume any fees or charges of the Transfer Agent or Company
counsel regarding (i) the removal of a legend or stop transfer instructions with
respect to Shares, and (ii) the issuance of certificates or DTC registration to
or in the name of the Holder or the Holder’s designee or to a transferee.
Notwithstanding the foregoing, it shall be the Holder’s responsibility to obtain
all needed formal requirements (specifically: medallion guarantee) in connection
with any electronic issuance of shares of Common Stock.

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

e. The Holder of a Debenture or a Warrant shall be entitled to exercise its
conversion or exercise privilege with respect to the Debenture or the Warrant,
as the case may be, notwithstanding the commencement of any case under 11 U.S.C.
§101 et seq. (the “Bankruptcy Code”). In the event the Company is a debtor under
the Bankruptcy Code, the Company hereby waives, to the fullest extent permitted,
any rights to relief it may have under 11 U.S.C. §362 in respect of such
holder’s exercise privilege. The Company hereby waives, to the fullest extent
permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of
the conversion of the Debenture or the exercise of the Warrant. The Company
agrees, without cost or expense to such Holder, to take or to consent to any and
all action necessary to effectuate relief under 11 U.S.C. §362.

f. The Company will authorize the Transfer Agent to give information relating to
the Company directly to the Holder or the Holder’s representatives upon the
request of the Buyer or any such representative, to the extent such information
relates to (i) the status of shares of Common Stock issued or claimed to be
issued to the Holder in connection with a Notice of Conversion or a Notice of
Exercise, or (ii) the aggregate number of outstanding shares of Common Stock of
all stockholders (as a group and not individually) as of a current or other
specified date. At the request of the Holder, the Company will provide the
Holder with a copy of the authorization so given to the Transfer Agent.

6. CLOSING DATE.

a. The Closing Date shall occur on the date which is the first Trading Day after
each of the conditions contemplated by Sections 7 and 8 hereof shall have either
been satisfied or been waived by the party in whose favor such conditions run.
Notwithstanding the foregoing, the Closing Date shall occur after the Buyer
completes, to the Buyer’s own satisfaction, its own due diligence review of the
Company and the Buyer’s execution and delivery of this Agreement shall have been
approved by the Buyer’s investment committee, if any. If the Closing Date does
not occur within thirty (30) days from the date of this Agreement, the Company
may, by written notice to the Buyer, terminate this Agreement, in which event
neither party shall have any obligations to the other hereunder.

b. The closing of the purchase and issuance of Debentures and Warrants shall
occur on the Closing Date at the offices of the Escrow Agent and shall take
place no later than 3:00 P.M., Eastern Time, on the day specified above (or if
such day is not a Trading Day, the next Trading Day) or such other time as is
mutually agreed upon by the Company and the Buyer.

c. Notwithstanding anything to the contrary contained herein, the Escrow Agent
will be authorized to release the Escrow Funds to the Company and to others and
to release the other Escrow Property on the Closing Date upon satisfaction of
the conditions set forth in Sections 7 and 8 hereof and as provided in the Joint
Escrow Instructions.

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

The Buyer understands that the Company’s obligation to sell the Purchased
Securities to the Buyer pursuant to this Agreement on the Closing Date is
conditioned upon:

a. The execution and delivery of this Agreement and, where indicated, the other
Transaction Agreements by the Buyer on or before such Closing Date;

b. The execution and delivery by the Buyer to the Escrow Agent by such Closing
Date of good funds as payment in full of an amount equal to the Purchase Price
in accordance with this Agreement;

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

c. The accuracy on such Closing Date of the representations and warranties of
the Buyer contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date; and

d. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.

8. CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.

The Company understands that the Buyer’s obligation to purchase the Purchased
Securities on the Closing Date is conditioned upon:

a. The execution and delivery of this Agreement and the other Transaction
Agreements by the Company on or before such Closing Date;

b. The delivery by the Company to the Escrow Agent of the Certificates in
accordance with this Agreement;

c. On such Closing Date, each of the Transaction Agreements executed by the
Company on or before such date shall be in full force and effect and the Company
shall not be in default thereunder;

d. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;

e. The delivery to the Escrow Agent of an opinion of counsel for the Company,
dated such Closing Date, addressed to the Buyer, in form, scope and substance
reasonably satisfactory to the Buyer, substantially to the effect set forth in
Annex III attached hereto; and

f. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.

9. INDEMNIFICATION AND REIMBURSEMENT.

a. (i) The Company agrees to indemnify and hold harmless the Buyer and its
officers, directors, employees, and agents, and each Buyer Control Person from
and against any losses, claims, damages, liabilities or expenses incurred
(collectively, “Damages”), joint or several, and any action in respect thereof
to which the Buyer, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Buyer Control Person becomes subject
to, resulting from, arising out of or relating to any misrepresentation, breach
of warranty or nonfulfillment of or failure to perform any covenant or agreement
on the part of Company contained in this Agreement, as such Damages are
incurred, except to the extent such Damages result primarily from Buyer’s
failure to perform any covenant or agreement contained in this Agreement or the
Buyer’s or its officer’s, director’s, employee’s, agent’s or Buyer Control
Person’s illegal or willful misconduct, gross negligence, recklessness or bad
faith (in each case, as determined by a non-appealable judgment to such effect)
in performing its obligations under this Agreement.

(ii) The Company hereby agrees that, if the Buyer, other than by reason of its
gross negligence or willful misconduct (in each case, as determined by a
non-appealable judgment to such effect), (x) becomes involved in any capacity in
any action, proceeding or investigation brought by any stockholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by this Agreement or the other Transaction Agreements,
or if the Buyer is impleaded in any such action, proceeding or investigation by
any Person, or (y) becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC, any self-regulatory organization or other body
having jurisdiction, against or involving the Company or in connection

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

with or as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements, or (z) is impleaded in any such
action, proceeding or investigation by any Person, then in any such case, the
Company shall indemnify, defend and hold harmless the Buyer from and against and
in respect of all losses, claims, liabilities, damages or expenses resulting
from, imposed upon or incurred by the Buyer, directly or indirectly, and
reimburse such Buyer for its reasonable legal and other expenses (including the
cost of any investigation and preparation) incurred in connection therewith, as
such expenses are incurred. The indemnification and reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Buyer who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and Buyer Control
Persons (if any), as the case may be, of the Buyer and any such Affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, the Buyer, any such Affiliate and
any such Person. The Company also agrees that neither the Buyer nor any such
Affiliate, partner, director, agent, employee or Buyer Control Person shall have
any liability to the Company or any Person asserting claims on behalf of or in
right of the Company in connection with or as a result of the consummation of
this Agreement or the other Transaction Agreements, except as may be expressly
and specifically provided in or contemplated by this Agreement.

b. All claims for indemnification by any Indemnified Party (as defined below)
under this Section shall be asserted and resolved as follows:

(i) In the event any claim or demand in respect of which any Person claiming
indemnification under any provision of this Section (an “Indemnified Party”)
might seek indemnity under paragraph (a) of this Section is asserted against or
sought to be collected from such Indemnified Party by a Person other than a
party hereto or an Affiliate thereof (a “Third Party Claim”), the Indemnified
Party shall deliver a written notification, enclosing a copy of all papers
served, if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party’s claim for indemnification that is being
asserted under any provision of this Section against any Person (the
“Indemnifying Party”), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a “Claim Notice”) with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party’s ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the “Dispute Period”) whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.

(x) If the Indemnifying Party notifies the Indemnified Party within the Dispute
Period that the Indemnifying Party desires to defend the Indemnified Party with
respect to the Third Party Claim pursuant to this paragraph (b) of this Section,
then the Indemnifying Party shall have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
other than the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party shall not be indemnified in
full pursuant to paragraph (a) of this Section). The Indemnifying Party shall
have full control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at the
sole cost and expense of the Indemnified Party, at any time prior to the
Indemnifying Party’s delivery of the notice referred to in the first sentence of
this subparagraph (x), file any motion, answer or other pleadings or take any
other action that the Indemnified Party reasonably believes to be necessary or
appropriate protect its interests; and provided further, that if

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requested by the Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this subparagraph (x), and except as provided in
the preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the foregoing, the
Indemnified Party may take over the control of the defense or settlement of a
Third Party Claim at any time if it irrevocably waives its right to indemnity
under paragraph (a) of this Section with respect to such Third Party Claim.

(y) If the Indemnifying Party fails to notify the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the Third Party
Claim pursuant to paragraph (b) of this Section, or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, each in a reasonable manner, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period, then the
Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Party, the Third Party Claim by all appropriate proceedings,
which proceedings shall be prosecuted by the Indemnified Party in a reasonable
manner and in good faith or will be settled at the discretion of the Indemnified
Party (with the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is contesting. Notwithstanding
the foregoing provisions of this subparagraph (y), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner provided in
subparagraph(z) below, the Indemnifying Party will not be required to bear the
costs and expenses of the Indemnified Party’s defense pursuant to this
subparagraph (y) or of the Indemnifying Party’s participation therein at the
Indemnified Party’s request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses incurred by the
Indemnifying Party in connection with such litigation. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this subparagraph (y), and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation.

(z) If the Indemnifying Party notifies the Indemnified Party that it does not
dispute its liability or the amount of its liability to the Indemnified Party
with respect to the Third Party Claim under paragraph (a) of this Section or
fails to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party with respect to such Third Party Claim, the amount of Damages
specified in the Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under paragraph (a) of this Section and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified Party on demand.
If the Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.

(ii) In the event any Indemnified Party should have a claim under paragraph
(a) of this Section against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a
claim for indemnity

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under paragraph (a) of this Section specifying the nature of and basis for such
claim, together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such claim (an “Indemnity
Notice”) with reasonable promptness to the Indemnifying Party. The failure by
any Indemnified Party to give the Indemnity Notice shall not impair such party’s
rights hereunder except to the extent that the Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim or the amount
of the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim or the amount of the claim described in such Indemnity
Notice, the amount of Damages specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under paragraph (a) of
this Section and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute; provided, however, that if the dispute
is not resolved within thirty (30) days after the Claim Notice, the Indemnifying
Party shall be entitled to institute such legal action as it deems appropriate.

c. The indemnity agreements contained herein shall be in addition to (i) any
cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.

10. JURY TRIAL WAIVER. The Company and the Buyer hereby waive a trial by jury in
any action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out or in connection with the
Transaction Agreements.

11. SPECIFIC PERFORMANCE. The Company and the Buyer acknowledge and agree that
irreparable damage would occur in the event that any provision of this Agreement
or any of the other Transaction Agreements were not performed in accordance with
its specific terms or were otherwise breached. It is accordingly agreed that the
parties (including any Holder) shall be entitled to an injunction or
injunctions, without (except as specified below) the necessity to post a bond,
to prevent or cure breaches of the provisions of this Agreement or such other
Transaction Agreement and to enforce specifically the terms and provisions
hereof or thereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity; provided, however that the Company, upon
receipt of a Notice of Conversion or a Notice of Exercise, may not fail or
refuse to deliver the stock certificates and the related legal opinions, if any,
or if there is a claim for a breach by the Company of any other provision of
this Agreement or any of the other Transaction Agreements, the Company shall not
raise as a legal defense, based on any claim that the Holder or anyone
associated or affiliated with the Holder has violated any provision hereof or
any other Transaction Agreement, has engaged in any violation of law or for any
other reason, unless the Company has first posted a bond for one hundred fifty
percent (150%) of the principal amount and, if relevant, then obtained a court
order specifically directing it not to deliver said stock certificates to the
Holder. The proceeds of such bond shall be payable to the Holder to the extent
that the Holder obtains judgment or its defense is recognized. Such bond shall
remain in effect until the completion of the relevant proceeding and, if the
Holder appeals therefrom, until all such appeals are exhausted. This provision
is deemed incorporated by reference into each of the Transaction Agreements as
if set forth therein in full.

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12. GOVERNING LAW: MISCELLANEOUS.

a. This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York for contracts to be wholly performed in such state
and without giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the exclusive jurisdiction of the federal
courts whose districts encompass any part of the County of New York or the state
courts of the State of New York sitting in the County of New York in connection
with any dispute arising under this Agreement or any of the other Transaction
Agreements and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions or to any claim that such
venue of the suit, action or proceeding is improper. To the extent determined by
such court, the Company shall reimburse the Buyer for any reasonable legal fees
and disbursements incurred by the Buyer in enforcement of or protection of any
of its rights under any of the Transaction Agreements. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.

b. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

c. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.

d. All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.

e. This Agreement may be signed in one or more counterparts, each of which shall
be deemed an original.

f. A facsimile or other electronic transmission of this signed Agreement shall
be legal and binding on all parties hereto.

g. The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.

h. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

i. This Agreement may be amended only by an instrument in writing signed by the
party to be charged with enforcement thereof.

j. This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.

k. All dollar amounts referred to or contemplated by this Agreement or any other
Transaction Agreement shall be deemed to refer to US Dollars, unless otherwise
explicitly stated to the contrary.

13. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of

(a) the date delivered, if delivered by personal delivery as against written
receipt therefor or by confirmed facsimile transmission,

(b) the fifth Trading Day after deposit, postage prepaid, in the United States
Postal Service by registered or certified mail, or

(c) the third Trading Day after mailing by domestic or international express
courier, with delivery costs and fees prepaid,

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in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days’ advance written notice similarly given to each of the other
parties hereto):

 

COMPANY:   At the address set forth at the head of this Agreement.   Attn:
President   Telephone No.: (954) 473-1254   Telecopier No.: (954) 473-1256  
with a copy to:   Schneider Weinberger & Beilly LLP   2200 NW Corporate Blvd.,
Suite 210   Boca Raton, FL 33431   Attn: Roxanne K. Beilly, Esq.   Telephone
No.: (561) 362-9595   Telecopier No.: (561) 362-9612 BUYER:   At the address set
forth on the signature page of this Agreement.   with a copy to:   Krieger &
Prager LLP, Esqs.   39 Broadway   Suite 920   New York, NY 10006   Attn: Ronald
J. Nussbaum, Esq.   Telephone No.: (212) 363-2900   Telecopier No. (212)
363-2999   ESCROW AGENT:   Krieger & Prager LLP, Esqs.   39 Broadway   Suite 920
  New York, NY 10006   Attn: Samuel Krieger, Esq.   Telephone No.: (212)
363-2900   Telecopier No. (212) 363-2999

14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company’s and the Buyer’s
representations and warranties herein shall survive the execution and delivery
of this Agreement and the delivery of the Certificates and the payment of the
Purchase Price, for a period of three (3) years after the Closing Date hereunder
and shall inure to the benefit of the Buyer and the Company and their respective
successors and assigns.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]

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[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]

IN WITNESS WHEREOF, with respect to the Purchase Price specified below, each of
the undersigned represents that the foregoing statements made by it above are
true and correct and that it has caused this Agreement to be duly executed on
its behalf (if an entity, by one of its officers thereunto duly authorized) as
of the date first above written.

 

PURCHASE PRICE:      $                                                 

BUYER:

 

 

   

 

  Address     Printed Name of Buyer  

 

     

 

    By:  

 

  Telecopier No.                                      (Signature of Authorized
Person)

 

   

 

 

 

    Printed Name and Title  

Jurisdiction of Incorporation

or Organization

     

If the above Notice Address is not the Residence (for individual Buyer) or
Principal Place of Business (for Buyer which is not an individual), such
Residence or Principal Place of Business is:

 

 

     

 

     

 

     

COMPANY:

 

OMNICOMM SYSTEMS, INC. By:  

 

Title:  

 

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ANNEX I    FORM OF DEBENTURE ANNEX II    JOINT ESCROW INSTRUCTIONS ANNEX III   
OPINION OF COUNSEL ANNEX IV    COMPANY DISCLOSURE ANNEX V    FORM OF WARRANT
ANNEX VI    COMPANY’S SEC DOCUMENTS AVAILABLE ON EDGAR ANNEX VII    SECURITY
INTEREST AGREEMENT ANNEX VIII    PURCHASE PRICE WIRE INSTRUCTIONS