ex_10-1.htm


    
      

      

    

    Exhibit
      10.1

     

    
       

      SECURITIES
        PURCHASE AGREEMENT

       

      LV
        ADMINISTRATIVE SERVICES, INC.,

      as
        Administrative and Collateral Agent

       

      THE
        PURCHASERS

      From
        Time to Time Party Hereto

       

      and

       

      GENERAL
        ENVIRONMENTAL MANAGEMENT, INC.

       

      Dated:
        October 31, 2007

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      TABLE
        OF CONTENTS

       

    

    
      
        	 	 	 	
                Page

              
	 	 	 	 
	1.	
                Agreement
                  to Sell and Purchase

              	
                1

              
	 	 	 
	
                2.

              	
                
                  Fees
                    and Warrant

                

              	
                2

              
	 	 	 
	3.	
                
                  Closing,
                    Delivery and Payment.

                

              	
                2

              
	 	
                3.1

              	
                Closing

              	
                2

              
	 	
                3.2

              	
                Delivery

              	
                2

              
	 	 	 	
                 

              
	
                4.

              	
                
                  Representations
                    and Warranties of the Company

                

              	
                3

              
	 	
                4.1

              	
                Organization,
                  Good Standing and Qualification

              	
                3

              
	 	
                4.2

              	
                Subsidiaries

              	
                4

              
	 	
                4.3

              	
                Capitalization;
                  Voting Rights.

              	
                4

              
	 	
                4.4

              	
                Authorization;
                  Binding Obligations

              	
                5

              
	 	
                4.5

              	
                Liabilities;
                  Solvency

              	
                5

              
	 	
                4.6

              	
                Agreements;
                  Action

              	
                6

              
	 	
                4.7

              	
                Obligations
                  to Related Parties

              	
                7

              
	 	
                4.8

              	
                Changes

              	
                8

              
	 	
                4.9

              	
                Title
                  to Properties and Assets; Liens, Etc

              	
                9

              
	 	
                4.10

              	
                Intellectual
                  Property.

              	
                10

              
	 	
                4.11

              	
                Compliance
                  with Other Instruments

              	
                11

              
	 	
                4.12

              	
                Litigation

              	
                11

              
	 	
                4.13

              	
                Tax
                  Returns and Payments

              	
                11

              
	 	
                4.14

              	
                Employees

              	
                12

              
	 	
                4.15

              	
                Registration
                  Rights and Voting Rights

              	
                12

              
	 	
                4.16

              	
                Compliance
                  with Laws; Permits

              	
                13

              
	 	
                4.17

              	
                Environmental
                  and Safety Laws

              	
                13

              
	 	
                4.18

              	
                Valid
                  Offering

              	
                13

              
	 	
                4.19

              	
                Full
                  Disclosure

              	
                14

              
	 	
                4.20

              	
                Insurance

              	
                14

              
	 	
                4.21

              	
                SEC
                  Reports

              	
                14

              
	 	
                4.22

              	
                Listing

              	
                14

              
	 	
                4.23

              	
                No
                  Integrated Offering

              	
                15

              
	 	
                4.24

              	
                Stop
                  Transfer

              	
                15

              
	 	
                4.25

              	
                Dilution

              	
                15

              
	 	
                4.26

              	
                Patriot
                  Act

              	
                15

              
	 	
                4.27

              	
                ERISA

              	
                16

              
	 	 	 	
                 

              
	
                5.

              	
                
                  Representations
                    and Warranties of each Purchaser

                

              	
                16

              
	 	
                5.1

              	
                No
                  Shorting

              	
                16

              
	 	
                5.2

              	
                Requisite
                  Power and Authority

              	
                16

              
	 	
                5.3

              	
                Investment
                  Representations

              	
                16

              
	 	
                5.4

              	
                The
                  Purchaser Bears Economic Risk

              	
                17

              
	 	
                5.5

              	
                Acquisition
                  for Own Account

              	
                17

              
	 	
                5.6

              	
                The
                  Purchaser Can Protect Its Interest

              	
                17

              
	 	
                5.7

              	
                Accredited
                  Investor

              	
                17

              
	 	
                5.8

              	
                Legends

              	
                17

              


      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      TABLE
        OF CONTENTS

       

      
        	 	 	 	
                Page

              
	 	 	 	
                 

              
	
                6.

              	
                
                  Covenants
                    of the Company

                

              	
                18

              
	 	
                6.1

              	
                Stop-Orders

              	
                18

              
	 	
                6.2

              	
                Listing

              	
                18

              
	 	
                6.3

              	
                Market
                  Regulations

              	
                19

              
	 	
                6.4
                  

              	Reporting
                Requirements	
                19

              
	 	
                6.5
                  

              	Use
                of Funds	
                20

              
	 	
                6.6
                  

              	Access
                to Facilities	
                21

              
	 	
                6.7

              	
                Taxes.

              	
                21

              
	 	
                6.8

              	
                Insurance

              	
                23

              
	 	
                6.9

              	
                Intellectual
                  Property

              	
                24

              
	 	
                6.10

              	
                Properties

              	
                24

              
	 	
                6.11

              	
                Confidentiality

              	
                24

              
	 	
                6.12

              	
                Required
                  Approvals

              	
                25

              
	 	
                6.13

              	
                Reissuance
                  of Securities

              	
                26

              
	 	
                6.14

              	
                Opinion

              	
                27

              
	 	
                6.15

              	
                Margin
                  Stock

              	
                27

              
	 	
                6.16

              	
                FIRPTA

              	
                27

              
	 	
                6.17

              	
                Financing
                  Right of First Refusal.

              	
                27

              
	 	
                6.18

              	
                Authorization
                  and Reservation of Shares

              	
                28

              
	 	
                6.19

              	
                Maximum
                  Consolidated Leverage Ratio

              	
                28

              
	 	 	 	
                 

              
	
                7.

              	
                
                  Covenants
                    of the Purchasers

                

              	
                31

              
	 	
                7.1

              	
                Confidentiality

              	
                31

              
	 	
                7.2

              	
                Non-Public
                  Information

              	
                32

              
	 	
                7.3

              	
                Limitation
                  on Acquisition of Common Stock of the Company

              	
                32

              
	 	 	 	
              
	
                8.

              	
                
                  Covenants
                    of the Company and the Purchasers Regarding
                    Indemnification.

                

              	
                32

              
	 	
                8.1

              	
                Company
                  Indemnification

              	
                32

              
	 	
                8.2

              	
                Purchaser
                  Indemnification

              	
                32

              
	 	 	 	 
	
                9.

              	
                
                  Conversion
                    of Convertible Note.

                

              	
                33

              
	 	
                9.1

              	
                Mechanics
                  of Conversion

              	
                33

              
	 	 	 	
                 

              
	
                10.

              	
                
                  Registration
                    Rights.

                

              	
                34

              
	 	
                10.1

              	
                Registration
                  Rights Granted

              	
                34

              
	 	
                10.2

              	
                Offering
                  Restrictions

              	
                34

              
	 	 	 	
                 

              
	
                11.

              	
                
                  Miscellaneous.

                

              	
                34

              
	 	
                11.1

              	
                Governing
                  Law, Jurisdiction and Waiver of Jury Trial.

              	
                34

              
	 	
                11.2

              	
                Severability

              	
                35

              
	 	
                11.3

              	
                Survival

              	
                36

              
	 	
                11.4

              	
                Successors.

              	
                36

              
	 	
                11.5

              	
                Entire
                  Agreement; Maximum Interest

              	
                37

              
	 	
                11.6

              	
                Amendment
                  and Waiver.

              	
                37

              


      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

      
         

        TABLE
          OF CONTENTS

         

      

      
        	 	 	 	
                Page

              
	 	 	 	 
	 	
                11.7

              	
                Delays
                  or Omissions

              	
                37

              
	 	
                11.8

              	
                Notices

              	
                38

              
	 	
                11.9

              	
                Attorneys’
                  Fees

              	
                39

              
	 	
                11.10

              	
                Titles
                  and Subtitles

              	
                39

              
	 	
                11.11

              	
                Facsimile
                  Signatures; Counterparts

              	
                39

              
	 	
                11.12

              	
                Broker’s
                  Fees

              	
                39

              
	 	
                11.13

              	
                Construction

              	
                39

              
	 	
                11.14

              	
                Agency

              	
                39

              


      

    

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    
       

      LIST
        OF EXHIBITS

       

      
        
          	
                  Form
                    of Convertible Term Note

                	
                  Exhibit
                    A

                
	
                  Form
                    of Warrant

                	
                  Exhibit
                    B

                
	
                  Form
                    of Opinion

                	
                  Exhibit
                    C

                
	
                  Form
                    of Escrow Agreement

                	
                  Exhibit
                    D

                
	
                  Form
                    of Compliance Certificate

                	
                  Exhibit
                    E

                


        

      

       

      LIST
        OF SCHEDULES

       

      
        	
                Schedule
                  1

              	
                Purchaser
                  Commitments

              
	
                Schedule
                  2

              	
                Warrant
                  Holders and Warrant Shares

              
	
                Schedule
                  4.2

              	
                Subsidiaries

              
	
                Schedule
                  4.3

              	
                Capitalization

              
	
                Schedule
                  4.6

              	
                Extraordinary
                  Agreements

              
	
                Schedule
                  4.7

              	
                Obligations
                  to Related Parties

              
	
                Schedule
                  4.9

              	
                Title
                  to Properties; Liens

              
	
                Schedule
                  4.10

              	
                IP
                  Registration

              
	
                Schedule
                  4.12

              	
                Litigation

              
	
                Schedule
                  4.13

              	
                Taxes

              
	
                Schedule
                  4.14

              	
                Employees

              
	
                Schedule
                  4.15

              	
                Registration
                  and Voting Rights

              
	
                Schedule
                  4.17

              	
                Environmental

              
	
                Schedule
                  4.21

              	
                SEC
                  Reports

              
	
                Schedule
                  6.12(e)

              	
                Indebtedness

              
	
                Schedule
                  11.12

              	
                Brokers

              


      

       

       

       

       

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

    

     

    
      SECURITIES
        PURCHASE AGREEMENT

       

      THIS
        SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into
        as of October 31, 2007, among GENERAL ENVIRONMENTAL MANAGEMENT, INC., a Nevada
        corporation (the “Company”), the purchasers from time to time a party
        hereto (each a “Purchaser” and collectively, the “Purchasers”), LV
        Administrative Services, Inc., a Delaware corporation, as administrative
        and
        collateral agent for each Purchaser, (the “Agent” and together with the
        Purchasers, the “Creditor Parties”).

       

      RECITALS

       

      WHEREAS,
        the Company has authorized the sale to each Purchaser of a Secured Convertible
        Term Note in the form of Exhibit A hereto in the principal amount set
        forth opposite such Purchaser’s name on Schedule 1 hereto (each as
        amended, restated, modified and/or supplemented from time to time, a
“Note” and, collectively, the “Notes”), which Note is convertible
        into shares of the Company’s common stock, $0.001 par value per share (the
“Common Stock”) at an initial fixed conversion price of $2.78 per share
        of Common Stock (“Fixed Conversion Price”);

       

      WHEREAS,
        the Company wishes to issue to each Purchaser a warrant in the form of
Exhibit B hereto (each as amended, restated, modified and/or supplemented
        from time to time, a “Warrant” and, collectively the “Warrants”)
        to purchase up to the number of shares of the Common Stock set forth opposite
        such Purchaser’s name on Schedule 2 (subject to adjustment as set forth
        therein) in connection with such Purchaser’s purchase of the applicable
        Note;

       

      WHEREAS,
        each Purchaser desires to purchase the applicable Note and Warrant on the
        terms
        and conditions set forth herein; and

       

      WHEREAS,
        the Company desires to issue and sell the applicable Note and Warrant to
        each
        Purchaser on the terms and conditions set forth herein.

       

      AGREEMENT

       

      NOW,
        THEREFORE, in consideration of the foregoing recitals and the mutual promises,
        representations, warranties and covenants hereinafter set forth and for other
        good and valuable consideration, the receipt and sufficiency of which are
        hereby
        acknowledged, the parties hereto agree as follows:

       

      1.           Agreement
        to Sell and Purchase.  Pursuant to the terms and conditions set
        forth in this Agreement, on the Closing Date (as defined in Section 3), the
        Company shall sell to each Purchaser, and each Purchaser shall purchase from
        the
        Company, the applicable Note.  The sale of the Notes on the Closing
        Date shall be known as the “Offering.”  The Notes will mature
        on the Maturity Date (as defined in the Note).  Collectively, the
        Notes and Warrants and Common Stock issuable upon conversion of the Notes
        and
        upon exercise of the Warrants are referred to as the
“Securities.”

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      2.           Fees
        and Warrant.  On the Closing Date:

       

      (a)           The
        Company will issue and deliver to each Purchaser a Warrant to purchase up
        to the
        number of shares of Common Stock set forth opposite its name on Schedule
        2 (subject to adjustment as set forth therein) in connection with the
        Offering pursuant to Section 1 hereof.  All the representations,
        covenants, warranties, undertakings, and indemnification, and other rights
        made
        or granted to or for the benefit of each Creditor Party by the Company are
        hereby also made and granted for the benefit of the holder of the related
        Warrant and shares of the Common Stock issuable upon exercise of such Warrant
        (the “Warrant Shares”).

       

      (b)           Subject
        to the terms of Section 2(c) below, the Company shall pay (i) to Valens Capital
        Management, LLC, the investment manager of the Purchasers (“VCM”), a
        non-refundable payment in an amount equal to $5,000; (ii) a non-refundable
        payment in an amount equal to (A) $10,400 to Valens U.S. SPV I, LLC (“Valens
        U.S.”), and (B) $9,600 to Valens Offshore SPV II, Corp. (“Valens
        Offshore”) and (iii) an advance prepayment discount deposit equal to (A)
        $10,400 to Valens U.S. and (B) $9,600 to Valens Offshore.  Each of the
        foregoing payments in clauses (i) and (ii) shall be deemed fully earned on
        the
        Closing Date and shall not be subject to rebate or proration for any reason,
        except to the extent a Purchaser fails to deliver, or cause to be delivered,
        the
        funds required of such Purchaser at the Closing notwithstanding the Company’s
        and its Subsidiaries’ full compliance with all conditions to funding set forth
        in this Agreement or in any of the Related Agreements, including, without
        limitation, satisfaction (or waiver by the Agent in its sole discretion)
        of the
        items and matters set forth in the transaction checklist provided by the
        Agent
        to the Company on or prior to the Closing Date.

       

      (c)           The
        payments referred to in the preceding clause (b) shall be paid at closing
        out of
        funds held pursuant to the Escrow Agreement (as defined below) and a
        disbursement letter (the “Disbursement Letter”) and shall be in addition
        to all deposits previously paid by the Company which the Company hereby
        acknowledges have been fully earned by the recipient(s) thereof and are
        non-refundable.

       

      3.           Closing,
        Delivery and Payment.

       

      3.1           Closing.  Subject
        to the terms and conditions herein, the closing of the transactions contemplated
        hereby (the “Closing”), shall take place on the date hereof, at such time
        or place as the Company and the Agent may mutually agree (such date is
        hereinafter referred to as the “Closing Date”).

       

      3.2           Delivery.  Pursuant
        to the Escrow Agreement, at the Closing on the Closing Date, the Company
        will
        deliver to each Purchaser, among other things, the applicable Note and Warrant
        and such Purchaser will deliver to the Company, among other things, the amounts
        set forth opposite its name in the Disbursement Letter by certified funds
        or
        wire transfer. The Company hereby acknowledges and agrees that each Purchaser’s
        obligation to purchase the applicable Note from the Company on the Closing
        Date
        shall be contingent upon the satisfaction (or waiver by the Agent in its
        sole
        discretion) of the items and matters set forth in the closing checklist provided
        by the Agent to the Company on or prior to the Closing Date.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      4.           Representations
        and Warranties of the Company.  The Company hereby represents and
        warrants to each Creditor Party as follows:

       

      4.1           Organization,
        Good Standing and Qualification.  The Company and each of its
        Subsidiaries is a corporation, partnership or limited liability company,
        as the
        case may be, duly organized, validly existing and in good standing under
        the
        laws of its jurisdiction of organization.  The Company and each of its
        Subsidiaries has the corporate, limited liability company or partnership,
        as the
        case may be, power and authority to own and operate its properties and assets
        and, insofar as it is or shall be a party thereto, to (1) execute and deliver
        (i) this Agreement, (ii) the Notes and the Warrants to be issued in
        connection with this Agreement, (iii) the Master Security Agreement dated
        as of the date hereof among the Company, certain Subsidiaries of the Company
        and
        the Agent (as amended, restated, modified and/or supplemented from time to
        time,
        the “Master Security Agreement”), (iv) the Registration Rights
        Agreements relating to the Securities dated as of the date hereof (as amended,
        restated, modified and/or supplemented from time to time, the “Registration
        Rights Agreements”), (v) the Subsidiary Guaranty dated as of the date
        hereof made by certain Subsidiaries of the Company (as amended, restated,
        modified and/or supplemented from time to time, the “Subsidiary
        Guaranty”), (vi) the Equity Interest Agreement dated as of the date
        hereof among the Company, certain Subsidiaries of the Company and the Agent
        (as
        amended, restated, modified and/or or supplemented from time to time, the
        “Stock Pledge Agreement”), (vii) the Funds Escrow Agreement dated as
        of the date hereof among the Company, the Purchasers and the escrow agent
        referred to therein, substantially in the form of Exhibit D hereto (as
        amended, restated, modified and/or supplemented from time to time, the
“Escrow Agreement”), (viii) the Intellectual Property Security
        Agreement dated as of the date hereof among the Company and/or certain
        Subsidiaries of the Company and the Agent (as amended, restated, modified
        and/or
        supplemented from time to time, the “Intellectual Property Security
        Agreement”), (ix) the Deed of Trust, Security Agreement, Assignment Of
        Rents, And Fixture Filing dated as of the date hereof from General Environmental
        Management of Rancho Cordoba, LLC in favor of the Trustee thereunder for
        the
        benefit of the Agent (as amended, restated, modified and/or supplemented
        from
        time to time, the “Deed of Trust”), and (x) all other documents,
        instruments and agreements entered into in connection with the transactions
        contemplated hereby and thereby (the preceding clauses (ii) through (x),
        collectively, the “Related Agreements”); (2) issue and sell the
        Notes and the shares of Common Stock issuable upon conversion of the Note
        (the
“Note Shares”); (3) issue and sell the Warrants and the Warrant
        Shares; and (4) carry out the provisions of this Agreement and the Related
        Agreements and to carry on its business as presently conducted.  Each
        of the Company and each of its Subsidiaries is duly qualified and is authorized
        to do business and is in good standing as a foreign corporation, partnership
        or
        limited liability company, as the case may be, in all jurisdictions in which
        the
        nature or location of its activities and of its properties (both owned and
        leased) makes such qualification necessary, except for those jurisdictions
        in
        which failure to do so has not, or could not reasonably be expected to have,
        individually or in the aggregate, a material adverse effect on the business,
        assets, liabilities, condition (financial or otherwise), properties, operations
        or prospects of the Company and its Subsidiaries, taken individually and
        as a
        whole (a “Material Adverse Effect”).

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        4.2           Subsidiaries.  Each
          direct and indirect Subsidiary of the Company, the direct owner of such
          Subsidiary and its percentage ownership thereof, is set forth on Schedule
          4.2.  For the purpose of this Agreement, a “Subsidiary” of
          any Person means (i) a corporation or other entity or Person whose shares
          of
          stock or other ownership interests having ordinary voting power (other
          than
          stock or other ownership interests having such power only by reason of
          the
          happening of a contingency) to elect a majority of the directors of such
          corporation or other entity or Person, or other Persons or entities performing
          similar functions for such corporation or other entity or Person, are owned,
          directly or indirectly, by such Person or (ii) a corporation or other entity
          or
          Person in which such Person owns, directly or indirectly, more than 50%
          of the
          equity interests at such time.  For the purpose of this Agreement, a
“Person” means any individual, sole proprietorship, partnership, limited
          liability partnership, joint venture, trust, unincorporated organization,
          association, corporation, limited liability company, institution, public
          benefit
          corporation, entity or government (whether federal, state, county, city,
          municipal or otherwise, including any instrumentality, division, agency,
          body or
          department thereof), and shall include such Person’s successors and
          assigns.

         

        4.3           Capitalization;
          Voting Rights.

         

        (a)           The
          authorized capital stock of the Company, as of the date hereof consists
          of
          1,100,000,000 shares, of which 1,000,000,000 are shares of Common Stock,
          par
          value $0.001 per share, 12,403,082 shares of which are issued and outstanding,
          and 100,000,000 are shares of preferred stock, par value $0.001 per share,
          none
          of which are issued and outstanding.  The authorized, issued and
          outstanding capital stock of each Subsidiary of the Company is set forth
          on
Schedule 4.3.

         

        (b)           Except
          as disclosed on Schedule 4.3, other than:  (i) the shares
          reserved for issuance under the Company’s stock option plans; and (ii) shares
          which may be granted pursuant to this Agreement and the Related Agreements,
          there are no outstanding options, warrants, rights (including conversion
          or
          preemptive rights and rights of first refusal), proxy or stockholder agreements,
          or arrangements or agreements of any kind for the purchase or acquisition
          from
          the Company of any of its securities.  Except as disclosed on
Schedule 4.3, neither the offer, issuance or sale of any of the Notes or
          the Warrants, or the issuance of any of the Note Shares or Warrant Shares,
          nor
          the consummation of any transaction contemplated hereby will result in
          a change
          in the price or number of any securities of the Company outstanding, under
          anti-dilution or other similar provisions contained in or affecting any
          such
          securities.

         

        (c)           All
          issued and outstanding shares of the Company’s Common Stock:  (i) have
          been duly authorized and validly issued and are fully paid and non-assessable;
          and (ii) were issued in compliance with all applicable state and federal
          laws
          concerning the issuance of securities.

         

        (d)           The
          rights, preferences, privileges and restrictions of the shares of the Common
          Stock are as stated in the Company’s Certificate or Articles of
          Incorporation.  The Note Shares and Warrant Shares have been duly and
          validly reserved for issuance.  When issued in compliance with the
          provisions of this Agreement and the Company’s Certificate or Articles of
          Incorporation, the Securities will be validly issued, fully paid and
          non-assessable, and will be free of any liens or encumbrances; provided,
          however, that the Securities may be subject to restrictions on transfer
          under
          state and/or federal securities laws as set forth herein or as otherwise
          required by such laws at the time a transfer is proposed.

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        4.4           Authorization;
          Binding Obligations.  All corporate, partnership or limited
          liability company, as the case may be, action on the part of the Company
          and
          each of its Subsidiaries (including their respective officers and directors)
          necessary for the authorization of this Agreement and the Related Agreements,
          the performance of all obligations of the Company and its Subsidiaries
          hereunder
          and under the other Related Agreements at the Closing and, the authorization,
          sale, issuance and delivery of the Notes and Warrants has been taken or
          will be
          taken prior to the Closing.  This Agreement and the Related
          Agreements, when executed and delivered and to the extent it is a party
          thereto,
          will be valid and binding obligations of the Company and each of its
          Subsidiaries, enforceable against each such person or entity in accordance
          with
          their terms, except:

         

        (a)           as
          limited by applicable bankruptcy, insolvency, reorganization, moratorium
          or
          other laws of general application affecting enforcement of creditors’ rights;
          and

         

        (b)           general
          principles of equity that restrict the availability of equitable or legal
          remedies.

         

        The
          sale
          of the Notes and the subsequent conversion of the Notes into Note Shares
          are not
          and will not be subject to any preemptive rights or rights of first refusal
          that
          have not been properly waived or complied with.  The issuance of the
          Warrants and the subsequent exercise of the Warrants for Warrant Shares
          are not
          and will not be subject to any preemptive rights or rights of first refusal
          that
          have not been properly waived or complied with.

         

        4.5           Liabilities;
          Solvency.

         

        (a)           Neither
          the Company nor any of its Subsidiaries has any liabilities, except current
          liabilities incurred in the ordinary course of business and liabilities
          disclosed in any of the Company’s filings under the Securities Exchange Act of
          1934 (“Exchange Act”) made prior to the date of this Agreement
          (collectively, the “Exchange Act Filings”), copies of which have been
          provided to the Agent.

         

        (b)           Both
          before and after giving effect to (a) the transactions contemplated hereby
          that
          are to be consummated on the Closing Date, (b) the disbursement of the
          proceeds
          of, or the assumption of the liability in respect of, the Notes pursuant
          to the
          instructions or agreement of the Company and (c) the payment and accrual
          of all
          transaction costs in connection with the foregoing, the Company and each
          Subsidiary of the Company, is and will be, Solvent.  For purposes of
          this Section 4.5(b), “Solvent” means, with respect to any Person (as hereinafter
          defined) on a particular date, that on such date (a) the fair value of
          the
          property of such Person is greater than the total amount of liabilities,
          including contingent liabilities, of such Person; (b) the present fair
          salable
          value of the assets of such Person is not less than the amount that will
          be
          required to pay the probable liability of such Person on its debts as they
          become absolute and matured; (c) such Person does not intend to, and does
          not
          believe that it will, incur debts or liabilities beyond such Person’s ability to
          pay as such debts and liabilities mature; and (d) such Person is not engaged
          in
          a business or transaction, and is not about to engage in a business or
          transaction, for which such Person’s property would constitute and unreasonably
          small capital.  The amount of contingent liabilities (such as
          litigation, guaranties and pension plan liabilities) at any time shall
          be
          computed as the amount that, in light of all the facts and circumstances
          existing at the time, represents the amount that can reasonably be expected
          to
          become an actual or matured liability.

         

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

         

        4.6           Agreements;
          Action.  Except as set forth on Schedule 4.6 or as
          disclosed in any Exchange Act Filings:

         

        (a)           there
          are no agreements, understandings, instruments, contracts, proposed
          transactions, judgments, orders, writs or decrees to which the Company
          or any of
          its Subsidiaries is a party or by which it is bound which may involve:
          (i)
          obligations (contingent or otherwise) of, or payments to, the Company or
          any of
          its Subsidiaries in excess of $75,000 (other than obligations of, or payments
          to, the Company or any of its Subsidiaries arising from purchase or sale
          agreements entered into in the ordinary course of business); or (ii) the
          transfer or license of any patent, copyright, trade secret or other proprietary
          right to or from the Company or any of its Subsidiaries (other than licenses
          arising from the purchase of “off the shelf” or other standard products); or
          (iii) provisions restricting the development, manufacture or distribution
          of the
          Company’s or any of its Subsidiaries products or services; or (iv)
          indemnification by the Company or any of its Subsidiaries with respect
          to
          infringements of proprietary rights.

         

        (b)           Since
          June 30, 2007 (the “Balance Sheet Date”), neither the Company nor any of
          its Subsidiaries has:  (i) declared or paid any dividends, or
          authorized or made any distribution upon or with respect to any class or
          series
          of its capital stock; (ii) incurred any indebtedness for money borrowed
          or any
          other liabilities (other than ordinary course obligations) individually
          in
          excess of $50,000 or, in the case of indebtedness and/or liabilities
          individually less than $50,000, in excess of $100,000 in the aggregate;
          (iii)
          made any loans or advances to any person or entity not in excess, individually
          or in the aggregate, of $100,000, other than ordinary course advances for
          travel
          expenses; or (iv) sold, exchanged or otherwise disposed of any of its assets
          or
          rights, other than the sale of its inventory in the ordinary course of
          business.

         

        (c)           For
          the purposes of subsections (a) and (b) above, all indebtedness, liabilities,
          agreements, understandings, instruments, contracts and proposed transactions
          involving the same person or entity (including persons or entities the
          Company
          or any Subsidiary of the Company has reason to believe are affiliated therewith)
          shall be aggregated for the purpose of meeting the individual minimum dollar
          amounts of such subsections.

         

        (d)           The
          Company maintains disclosure controls and procedures (“Disclosure
          Controls”) designed to ensure that information required to be disclosed by
          the Company in the reports that it files or submits under the Exchange
          Act is
          recorded, processed, summarized, and reported, within the time periods
          specified
          in the rules and forms of the Securities and Exchange Commission
          (“SEC”).

         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

         

        (e)           The
          Company makes and keep books, records, and accounts, that, in reasonable
          detail,
          accurately and fairly reflect the transactions and dispositions of the
          Company’s
          assets.  The Company maintains internal control over financial
          reporting (“Financial Reporting Controls”) designed by, or under the
          supervision of, the Company’s principal executive and principal financial
          officers, and effected by the Company’s board of directors, management, and
          other personnel, to provide reasonable assurance regarding the reliability
          of
          financial reporting and the preparation of financial statements for external
          purposes in accordance with generally accepted accounting principles
          (“GAAP”), including that:

         

        (i)           transactions
          are executed in accordance with management’s general or specific
          authorization;

         

        (ii)           unauthorized
          acquisition, use, or disposition of the Company’s assets that could have a
          material effect on the financial statements are prevented or timely
          detected;

         

        (iii)           transactions
          are recorded as necessary to permit preparation of financial statements
          in
          accordance with GAAP, and that the Company’s receipts and expenditures are being
          made only in accordance with authorizations of the Company’s management and
          board of directors;

         

        (iv)           transactions
          are recorded as necessary to maintain accountability for assets;
          and

         

        (v)           the
          recorded accountability for assets is compared with the existing assets
          at
          reasonable intervals, and appropriate action is taken with respect to any
          differences.

         

        (f)           There
          is no weakness in any of the Company’s Disclosure Controls or Financial
          Reporting Controls that is required to be disclosed in any of the Exchange
          Act
          Filings, except as so disclosed.

         

        4.7           Obligations
          to Related Parties.  Except as set forth on Schedule 4.7,
          there are no obligations of the Company or any of its Subsidiaries to officers,
          directors, stockholders or employees of the Company or any of its Subsidiaries
          other than:

         

        (a)           for
          payment of salary for services rendered and for bonus payments;

         

        (b)           reimbursement
          for reasonable expenses incurred on behalf of the Company and its
          Subsidiaries;

         

        (c)           for
          other standard employee benefits made generally available to all employees
          (including stock option agreements outstanding under any stock option plan
          approved by the Board of Directors of the Company and each Subsidiary of
          the
          Company, as applicable); and

         

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        

         

        (d)           obligations
          listed in the Company’s and each of its Subsidiary’s financial statements or
          disclosed in any of the Company’s Exchange Act Filings.

         

        Except
          as
          described above or set forth on Schedule 4.7, none of the officers,
          directors or, to the best of the Company’s knowledge, key employees or
          stockholders of the Company or any of its Subsidiaries or any members of
          their
          immediate families, are indebted to the Company or any of its Subsidiaries,
          individually or in the aggregate, in excess of $50,000 or have any direct
          or
          indirect ownership interest in any firm or corporation with which the Company
          or
          any of its Subsidiaries is affiliated or with which the Company or any
          of its
          Subsidiaries has a business relationship, or any firm or corporation which
          competes with the Company or any of its Subsidiaries, other than passive
          investments in publicly traded companies (representing less than one percent
          (1%) of such company) which may compete with the Company or any of its
          Subsidiaries.  Except as described above, no officer, director or
          stockholder of the Company or any of its Subsidiaries, or any member of
          their
          immediate families, is, directly or indirectly, interested in any material
          contract with the Company or any of its Subsidiaries and no agreements,
          understandings or proposed transactions are contemplated between the Company
          or
          any of its Subsidiaries and any such person.  Except as set forth on
Schedule 4.7, neither the Company nor any of its Subsidiaries is a
          guarantor or indemnitor of any indebtedness of any other person or
          entity.

         

        4.8           Changes.  Since
          the Balance Sheet Date, except as disclosed in any Exchange Act Filing
          or in any
          Schedule to this Agreement or to any of the Related Agreements, there has
          not
          been:

         

        (a)           any
          change in the business, assets, liabilities, condition (financial or otherwise),
          properties, operations or prospects of the Company or any of its Subsidiaries,
          which individually or in the aggregate has had, or could reasonably be
          expected
          to have, individually or in the aggregate, a Material Adverse
          Effect;

         

        (b)           any
          resignation or termination of any officer, key employee or group of employees
          of
          the Company or any of its Subsidiaries;

         

        (c)           any
          material change, except in the ordinary course of business, in the contingent
          obligations of the Company or any of its Subsidiaries by way of guaranty,
          endorsement, indemnity, warranty or otherwise;

         

        (d)           any
          damage, destruction or loss, whether or not covered by insurance, which
          has had,
          or could reasonably be expected to have, individually or in the aggregate,
          a
          Material Adverse Effect;

         

        (e)           any
          waiver by the Company or any of its Subsidiaries of a valuable right or
          of a
          material debt owed to it;

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

         

        (f)           any
          direct or indirect loans made by the Company or any of its Subsidiaries
          to any
          stockholder, employee, officer or director of the Company or any of its
          Subsidiaries, other than advances made in the ordinary course of
          business;

         

        (g)           any
          material change in any compensation arrangement or agreement with any employee,
          officer, director or stockholder of the Company or any of its
          Subsidiaries;

         

        (h)           any
          declaration or payment of any dividend or other distribution of the assets
          of
          the Company or any of its Subsidiaries;

         

        (i)           any
          labor organization activity related to the Company or any of its
          Subsidiaries;

         

        (j)           any
          debt, obligation or liability incurred, assumed or guaranteed by the Company
          or
          any of its Subsidiaries, except those for immaterial amounts and for current
          liabilities incurred in the ordinary course of business;

         

        (k)           any
          sale, assignment, transfer, abandonment or other disposition of any patents,
          trademarks, copyrights, trade secrets or other intangible assets owned
          by the
          Company or any of its Subsidiaries;

         

        (l)           any
          change in any material agreement to which the Company or any of its Subsidiaries
          is a party or by which either the Company or any of its Subsidiaries is
          bound
          which either individually or in the aggregate has had, or could reasonably
          be
          expected to have, individually or in the aggregate, a Material Adverse
          Effect;

         

        (m)           any
          other event or condition of any character that, either individually or
          in the
          aggregate, has had, or could reasonably be expected to have, individually
          or in
          the aggregate, a Material Adverse Effect; or

         

        (n)           any
          arrangement or commitment by the Company or any of its Subsidiaries to
          do any of
          the acts described in subsection (a) through (m) above.

         

        4.9           Title
          to Properties and Assets; Liens, Etc.  The Company and each of its
          Subsidiaries has good and marketable title to its properties and assets,
          and
          good title to its leasehold interests, in each case subject to no mortgage,
          pledge, lien, lease, encumbrance or charge (each for the foregoing, a
“Lien”), other than the following (each a “Permitted
          Encumbrance”):

         

        (a)           those
          in favor of the Agent, for the ratable benefit of the Creditor
          Parties;

         

        (b)           those
          in favor of Laurus Master Fund, Ltd. (“Laurus”);

         

        (c)           those
          resulting from taxes which have not yet become delinquent;

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

         

        (d)           minor
          Liens which do not materially detract from the value of the property subject
          thereto or materially impair the operations of the Company or any of its
          Subsidiaries, so long as in each such case, such Liens have no effect on
          the
          Lien priority of the Agent, for the ratable benefit of the Creditor Parties,
          in
          such property;

         

        (e)           those
          that have otherwise arisen in the ordinary course of business, so long
          as they
          have no effect on the Lien priority of the Purchaser therein;

         

        (f)           Purchase
          Money Liens (as defined in Section 6.12) securing Purchase Money
          Indebtedness (as defined in Section 6.12) to the extent permitted in this
          Agreement; and

         

        (g)           Liens
          specified on Schedule 4.9.

         

        All
          facilities, machinery, equipment, fixtures, vehicles and other properties
          owned,
          leased or used by the Company and its Subsidiaries are in good operating
          condition and repair and are reasonably fit and usable for the purposes
          for
          which they are being used.  Except as set forth on Schedule
          4.9, the Company and its Subsidiaries are in compliance with all material
          terms of each lease to which it is a party or is otherwise bound.

         

        4.10           Intellectual
          Property.

         

        (a)           The
          Company and each of its Subsidiaries owns or possesses sufficient legal
          rights
          to use all patents, trademarks, service marks, trade names, copyrights,
          trade
          secrets, licenses, information and other proprietary rights and processes
          necessary for its business as now conducted and, to the Company’s knowledge, as
          presently proposed to be conducted (the “Intellectual
          Property”).  There are no settlements or consents, covenants not
          to sue, non-assertion assurances, or releases to which the Company or any
          of its
          Subsidiaries is bound which adversely affects its rights to own or use
          any
          Intellectual Property.

         

        (b)           To
          the Company’s knowledge, the conduct of the Company’s and each of its
          Subsidiaries’ business as now conducted, and as presently proposed to be
          conducted, does not (and will not) result in any infringement or other
          violation
          of the rights of others.

         

        (c)           Schedule
          4.10 (as such schedule may be amended or supplemented from time to time)
          sets forth a true and complete list of (i) all registrations and applications
          for Intellectual Property owned by the Company and each of its Subsidiaries
          filed or issued by any Intellectual Property registry and (ii) all Intellectual
          Property licenses which are either material to the business of the Company
          or
          relate to any material portion of the Company’s or any of its Subsidiaries’
inventory, including licenses for standard software having a replacement
          value
          of more than $30,000.  None of such Intellectual Property licenses are
          reasonably likely to be construed as an assignment of the licensed Intellectual
          Property to the Company or any of its Subsidiaries.

         

        (d)           There
          are no claims pending or, to the best of the Company’s knowledge, threatened and
          neither the Company nor any of its Subsidiaries has received any other
          communications, alleging that, the Company or any of its Subsidiaries has
          infringed, diluted, misappropriated, or otherwise violated any Intellectual
          Property of any other person or entity, nor is the Company or any of its
          Subsidiaries aware of any basis therefore.

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

         

        (e)           The
          Company is not aware of any infringement diluted, misappropriated, or other
          violation of its Intellectual Property by any other person or
          entity.

         

        (f)           Neither
          the Company nor any of its Subsidiaries utilizes any inventions, trade
          secrets
          or other Intellectual Property of any of its employees, officers, or
          contractors) except for inventions, trade secrets or other Intellectual
          Property
          that is owned by the Company or any Subsidiary as a matter of law or have
          been
          rightfully assigned to the Company or any of its Subsidiaries.

         

        4.11           Compliance
          with Other Instruments.  Neither the Company nor any of its
          Subsidiaries is in violation or default of (x) any term of its articles
          or
          certificate of incorporation, certificate of formation, operating agreement
          or
          bylaws, as applicable, or (y) any provision of any indebtedness, mortgage,
          indenture, contract, agreement or instrument to which it is party or by
          which it
          is bound or of any judgment, decree, order or writ, which violation or
          default,
          in the case of this clause (y), has had, or could reasonably be expected
          to
          have, either individually or in the aggregate, a Material Adverse
          Effect.  The execution, delivery and performance of and compliance
          with this Agreement and the Related Agreements to which it is a party,
          and the
          issuance and sale of the Notes by the Company and the other Securities
          by the
          Company each pursuant hereto and thereto, will not, with or without the
          passage
          of time or giving of notice, result in any such material violation, or
          be in
          conflict with or constitute a default under any such term or provision,
          or
          result in the creation of any Lien upon any of the properties or assets
          of the
          Company or any of its Subsidiaries or the suspension, revocation, impairment,
          forfeiture or non-renewal of any permit, license, authorization or approval
          applicable to the Company, its business or operations or any of its assets
          or
          properties.

         

        4.12           Litigation.  Except
          as set forth on Schedule 4.12 hereto, there is no action, suit,
          proceeding or investigation pending or, to the Company’s knowledge, currently
          threatened against the Company or any of its Subsidiaries that prevents
          the
          Company or any of its Subsidiaries from entering into this Agreement or
          the
          other Related Agreements, or from consummating the transactions contemplated
          hereby or thereby, or which has had, or could reasonably be expected to
          have,
          either individually or in the aggregate, a Material Adverse Effect or any
          change
          in the current equity ownership of the Company or any of its Subsidiaries,
          nor
          is the Company aware that there is any basis to assert any of the
          foregoing.  Neither the Company nor any of its Subsidiaries is a party
          to or subject to the provisions of any order, writ, injunction, judgment
          or
          decree of any court or government agency or instrumentality.  There is
          no action, suit, proceeding or investigation by the Company or any of its
          Subsidiaries currently pending or which the Company or any of its Subsidiaries
          intends to initiate.

         

        4.13           Tax
          Returns and Payments.  The Company and each of its Subsidiaries
          has timely filed all tax returns (federal, state and local) required to
          be filed
          by it.  All taxes shown to be due and payable on such returns, any
          assessments imposed, and all other taxes due and payable by the Company
          or any
          of its Subsidiaries on or before the Closing, have been paid or will be
          paid
          prior to the time they become delinquent.  Except as set forth on
Schedule 4.13, neither the Company nor any of its Subsidiaries has been
          advised:

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

         

        (a)           that
          any of its returns, federal, state or other, have been or are being audited
          as
          of the date hereof; or

         

        (b)           of
          any adjustment, deficiency, assessment or court decision in respect of
          its
          federal, state or other taxes.

         

        The
          Company has no knowledge of any liability for any tax to be imposed upon
          its
          properties or assets as of the date of this Agreement that is not adequately
          provided for.

         

        4.14           Employees.  Except
          as set forth on Schedule 4.14, neither the Company nor any of its
          Subsidiaries has any collective bargaining agreements with any of its
          employees.  There is no labor union organizing activity pending or, to
          the Company’s knowledge, threatened with respect to the Company or any of its
          Subsidiaries.  Except as disclosed in the Exchange Act Filings or on
Schedule 4.14, neither the Company nor any of its Subsidiaries is a party
          to or bound by any currently effective employment contract, deferred
          compensation arrangement, bonus plan, incentive plan, profit sharing plan,
          retirement agreement or other employee compensation plan or
          agreement.  To the Company’s knowledge, no employee of the Company or
          any of its Subsidiaries, nor any consultant with whom the Company or any
          of its
          Subsidiaries has contracted, is in violation of any term of any employment
          contract, proprietary information agreement or any other agreement relating
          to
          the right of any such individual to be employed by, or to contract with,
          the
          Company or any of its Subsidiaries because of the nature of the business
          to be
          conducted by the Company or any of its Subsidiaries; and to the Company’s
          knowledge the continued employment by the Company and its Subsidiaries
          of their
          present employees, and the performance of the Company’s and its Subsidiaries’
contracts with its independent contractors, will not result in any such
          violation.  Neither the Company nor any of its Subsidiaries is aware
          that any of its employees is obligated under any contract (including licenses,
          covenants or commitments of any nature) or other agreement, or subject
          to any
          judgment, decree or order of any court or administrative agency that would
          interfere with their duties to the Company or any of its
          Subsidiaries.  Neither the Company nor any of its Subsidiaries has
          received any notice alleging that any such violation has
          occurred.  Except for employees who have a current effective
          employment agreement with the Company or any of its Subsidiaries, no employee
          of
          the Company or any of its Subsidiaries has been granted the right to continued
          employment by the Company or any of its Subsidiaries or to any material
          compensation following termination of employment with the Company or any
          of its
          Subsidiaries.  Except as set forth on Schedule 4.14, the
          Company is not aware that any officer, key employee or group of employees
          intends to terminate his, her or their employment with the Company or any
          of its
          Subsidiaries, nor does the Company or any of its Subsidiaries have a present
          intention to terminate the employment of any officer, key employee or group
          of
          employees.

         

        4.15           Registration
          Rights and Voting Rights.  Except as set forth on Schedule
          4.15 and except as disclosed in Exchange Act Filings, neither the Company
          nor any of its Subsidiaries is presently under any obligation, and neither
          the
          Company nor any of its Subsidiaries has granted any rights, to register
          any of
          the Company’s or its Subsidiaries’ presently outstanding securities or any of
          its securities that may hereafter be issued.  Except as set forth on
Schedule 4.15 and except as disclosed in Exchange Act Filings, to the
          Company’s knowledge, no stockholder of the Company or any of its Subsidiaries
          has entered into any agreement with respect to the voting of equity securities
          of the Company or any of its Subsidiaries.

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

         

        4.16           Compliance
          with Laws; Permits.  Neither the Company nor any of its
          Subsidiaries is in violation of any provision of the Sarbanes-Oxley Act
          of 2002
          or any SEC related regulation or rule or any rule of the Principal Market
          (as
          hereafter defined) promulgated thereunder or any other applicable statute,
          rule,
          regulation, order or restriction of any domestic or foreign government
          or any
          instrumentality or agency thereof in respect of the conduct of its business
          or
          the ownership of its properties which has had, or could reasonably be expected
          to have, either individually or in the aggregate, a Material Adverse
          Effect.  No governmental orders, permissions, consents, approvals or
          authorizations are required to be obtained and no registrations or declarations
          are required to be filed in connection with the execution and delivery
          of this
          Agreement or any other Related Agreement and the issuance of any of the
          Securities, except such as have been duly and validly obtained or filed,
          or with
          respect to any filings that must be made after the Closing, as will be
          filed in
          a timely manner.  The Company and its Subsidiaries has all material
          franchises, permits, licenses and any similar authority necessary for the
          conduct of its business as now being conducted by it, the lack of which
          could,
          either individually or in the aggregate, reasonably be expected to have
          a
          Material Adverse Effect.

         

        4.17           Environmental
          and Safety Laws.  Neither the Company nor any of its Subsidiaries
          is in violation of any applicable statute, law or regulation relating to
          the
          environment or occupational health and safety, and to its knowledge, no
          material
          expenditures are or will be required in order to comply with any such existing
          statute, law or regulation.  Except as set forth on Schedule
          4.17, no Hazardous Materials (as defined below) are used or have been used,
          stored, or disposed of by the Company or any of its Subsidiaries or, to
          its
          knowledge, by any other Person on any property owned, leased or used by
          the
          Company or any of its Subsidiaries other than in full compliance with all
          applicable statute, law and regulation. For the purposes of the preceding
          sentence, “Hazardous Materials” shall mean:

         

        (a)         materials
          which are listed or otherwise defined as “hazardous” or “toxic” under any
          applicable local, state, federal and/or foreign laws and regulations that
          govern
          the existence and/or remedy of contamination on property, the protection
          of the
          environment from contamination, the control of hazardous wastes, or other
          activities involving hazardous substances, including building materials;
          and

         

        (b)         any
          petroleum products or nuclear materials.

         

        4.18           Valid
          Offering.  Assuming the accuracy of the representations and
          warranties of the Purchasers contained in this Agreement, the offer, sale
          and
          issuance of the Securities will be exempt from the registration requirements
          of
          the Securities Act of 1933, as amended (the “Securities Act”), and will
          have been registered or qualified (or are exempt from registration and
          qualification) under the registration, permit or qualification requirements
          of
          all applicable state securities laws.

         

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

         

        4.19           Full
          Disclosure.  The Company and each of its Subsidiaries has provided
          the Purchasers with all information requested by the Purchasers in connection
          with the Purchasers’ decision to purchase the Notes and Warrants, including all
          information the Company and its Subsidiaries believe is reasonably necessary
          to
          make such investment decision.  Neither this Agreement, the Related
          Agreements, the exhibits and schedules hereto and thereto nor any other
          document
          including, without limitation, the responses contained in any questionnaire
          provided to the Company by the Agent, delivered by the Company or any of
          its
          Subsidiaries to Purchasers or their attorneys or agents in connection herewith
          or therewith or with the transactions contemplated hereby or thereby, contain
          any untrue statement of a material fact nor omit to state a material fact
          necessary in order to make the statements contained herein or therein,
          in light
          of the circumstances in which they are made, not misleading.  Any
          financial projections and other estimates provided to the Purchasers by
          the
          Company or any of its Subsidiaries were based on the Company’s and its
          Subsidiaries’ experience in the industry and on assumptions of fact and opinion
          as to future events which the Company or any of its Subsidiaries, at the
          date of
          the issuance of such projections or estimates, believed to be
          reasonable.

         

        4.20           Insurance.  The
          Company and each of its Subsidiaries has general commercial, product liability,
          fire and casualty insurance policies with coverages which the Company and
          each
          of its Subsidiaries believe are customary for companies similarly situated
          to
          the Company and its Subsidiaries in the same or similar business.

         

        4.21           SEC
          Reports.  Except as set forth on Schedule 4.21, the Company
          has filed all proxy statements, reports and other documents required to
          be filed
          by it under the Exchange Act.  The Company has furnished the Agent
          copies of:  (i) its Annual Reports on Form 10-KSB for its fiscal years
          ended December 31, 2004, December 31, 2005 and December 31, 2006; and (ii) its
          Quarterly Reports on Form 10-QSB for its fiscal quarter ended March 31,
          2007 and
          June 30, 2007, and the Form 8-K filings which it has made during the fiscal
          year
          December 31, 2007 to date (collectively, the “SEC
          Reports”).  Except as set forth on Schedule 4.21, each SEC
          Report was, at the time of its filing, in substantial compliance with the
          requirements of its respective form and none of the SEC Reports, nor the
          financial statements (and the notes thereto) included in the SEC Reports,
          as of
          their respective filing dates, contained any untrue statement of a material
          fact
          or omitted to state a material fact required to be stated therein or necessary
          to make the statements therein, in light of the circumstances under which
          they
          were made, not misleading.

         

        4.22           Listing.  The
          Common Stock is listed or quoted, as applicable, on a Principal Market
          (as
          hereafter defined) and satisfies and at all times hereafter will satisfy,
          all
          requirements for the continuation of such listing or quotation, as
          applicable.  The Company has not received any notice that its Common
          Stock will be delisted from, or no longer quoted on, as applicable, the
          Principal Market or that its Common Stock does not meet all requirements
          for
          such listing or quotation, as applicable.  For purposes hereof, the
          term “Principal Market” means the NASD Over The Counter Bulletin Board,
          NASDAQ Capital Market, NASDAQ National Markets System, American Stock Exchange
          or New York Stock Exchange (whichever of the foregoing is at the time the
          principal trading exchange or market for the Common Stock).

         

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

         

        4.23           No
          Integrated Offering.  Neither the Company, nor any of its
          Subsidiaries or affiliates, nor any person acting on its or their behalf,
          has
          directly or indirectly made any offers or sales of any security or solicited
          any
          offers to buy any security under circumstances that would cause the offering
          of
          the Securities pursuant to this Agreement or any of the Related Agreements
          to be
          integrated with prior offerings by the Company for purposes of the Securities
          Act which would prevent the Company from selling the Securities pursuant
          to Rule
          506 under the Securities Act, or any applicable exchange-related stockholder
          approval provisions, nor will the Company or any of its affiliates or
          Subsidiaries take any action or steps that would cause the offering of
          the
          Securities to be integrated with other offerings.

         

        4.24           Stop
          Transfer.  The Securities are restricted securities as of the date
          of this Agreement.  Neither the Company nor any of its Subsidiaries
          will issue any stop transfer order or other order impeding the sale and
          delivery
          of any of the Securities at such time as the Securities are registered
          for
          public sale or an exemption from registration is available, except as required
          by state and federal securities laws.

         

        4.25           Dilution.  The
          Company specifically acknowledges that its obligation to issue the shares
          of
          Common Stock upon conversion of the Notes and exercise of the Warrants
          is
          binding upon the Company and enforceable regardless of the dilution such
          issuance may have on the ownership interests of other shareholders of the
          Company.

         

        4.26           Patriot
          Act.  The Company certifies that, to the best of Company’s
          knowledge, neither the Company nor any of its Subsidiaries has been designated,
          nor is or shall be owned or controlled, by a “suspected terrorist” as defined in
          Executive Order 13224.  The Company hereby acknowledges that each of
          the Creditor Parties seeks to comply with all applicable laws concerning
          money
          laundering and related activities.  In furtherance of those efforts,
          the Company hereby represents, warrants and covenants that:  (i) none
          of the cash or property that the Company or any of its Subsidiaries will
          pay or
          will contribute to any Creditor Party has been or shall be derived from,
          or
          related to, any activity that is deemed criminal under United States law;
          and
          (ii) no contribution or payment by the Company or any of its Subsidiaries
          to any
          Creditor Party, to the extent that they are within the Company’s and/or its
          Subsidiaries’ control shall cause any Creditor Party to be in violation of the
          United States Bank Secrecy Act, the United States International Money Laundering
          Control Act of 1986 or the United States International Money Laundering
          Abatement and Anti-Terrorist Financing Act of 2001.  The Company shall
          promptly notify the Agent if any of these representations, warranties or
          covenants ceases to be true and accurate regarding the Company or any of
          its
          Subsidiaries.  The Company shall provide any Creditor Party all
          additional information regarding the Company or any of its Subsidiaries
          that
          such Creditor Party deems necessary or convenient to ensure compliance
          with all
          applicable laws concerning money laundering and similar
          activities.  The Company understands and agrees that if at any time it
          is discovered that any of the foregoing representations, warranties or
          covenants
          are incorrect, or if otherwise required by applicable law or regulation
          related
          to money laundering or similar activities, the Creditor Parties may undertake
          appropriate actions to ensure compliance with applicable law or regulation,
          including but not limited to segregation and/or redemption of any Purchaser’s
          investment in the Company.  The Company further understands that the
          Creditor Parties may release confidential information about the Company
          and its
          Subsidiaries and, if applicable, any underlying beneficial owners, to proper
          authorities if such Creditor Party, in its sole discretion, determines
          that it
          is in the best interests of such Creditor Party in light of relevant rules
          and
          regulations under the laws set forth in subsection (ii) above.

         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

         

        4.27           ERISA.  Based
          upon the Employee Retirement Income Security Act of 1974 (“ERISA”), and the
          regulations and published interpretations thereunder:  (i) neither the
          Company nor any of its Subsidiaries has engaged in any Prohibited Transactions
          (as defined in Section 406 of ERISA and Section 4975 of the Internal Revenue
          Code of 1986, as amended (the “Code”)); (ii) each of the Company and each of its
          Subsidiaries has met all applicable minimum funding requirements under
          Section
          302 of ERISA in respect of its plans; (iii) neither the Company nor any
          of its
          Subsidiaries has any knowledge of any event or occurrence which would cause
          the
          Pension Benefit Guaranty Corporation to institute proceedings under Title
          IV of
          ERISA to terminate any employee benefit plan(s); (iv) neither the Company
          nor
          any of its Subsidiaries has any fiduciary responsibility for investments
          with
          respect to any plan existing for the benefit of persons other than the
          Company’s
          or such Subsidiary’s employees; and (v) neither the Company nor any of its
          Subsidiaries has withdrawn, completely or partially, from any multi-employer
          pension plan so as to incur liability under the Multiemployer Pension Plan
          Amendments Act of 1980.

         

        5.           Representations
          and Warranties of each Purchaser.  Each Purchaser hereby
          represents and warrants, severally and not jointly, to the Company as follows
          (such representations and warranties do not lessen or obviate the
          representations and warranties of the Company set forth in this
          Agreement):

         

        5.1           No
          Shorting.  Neither such Purchaser nor any of its affiliates and
          investment partners has, nor will cause any person or entity, to directly
          engage
          in “short sales” of the Common Stock as long as any Note shall be
          outstanding.

         

        5.2           Requisite
          Power and Authority.  Such Purchaser has all necessary power and
          authority under all applicable provisions of law to execute and deliver
          this
          Agreement and the Related Agreements and to carry out their
          provisions.  All corporate action on such Purchaser’s part required
          for the lawful execution and delivery of this Agreement and the Related
          Agreements have been or will be effectively taken prior to the
          Closing.  Upon their execution and delivery, this Agreement and the
          Related Agreements will be valid and binding obligations of such Purchaser,
          enforceable in accordance with their terms, except:

         

        (a)           as
          limited by applicable bankruptcy, insolvency, reorganization, moratorium
          or
          other laws of general application affecting enforcement of creditors’ rights;
          and

         

        (b)           as
          limited by general principles of equity that restrict the availability
          of
          equitable and legal remedies.

         

        5.3           Investment
          Representations.  Such Purchaser understands that the Securities
          are being offered and sold pursuant to an exemption from registration contained
          in the Securities Act based in part upon such Purchaser’s representations
          contained in this Agreement, including, without limitation, that such Purchaser
          is an “accredited investor” within the meaning of Regulation D under the
          Securities Act.  Such Purchaser confirms that it has received or has
          had full access to all the information it considers necessary or appropriate
          to
          make an informed investment decision with respect to the applicable Note
          and
          Warrant to be purchased by it under this Agreement and the Note Shares
          and the
          Warrant Shares acquired by it upon the conversion of such Note and the
          exercise
          of such Warrant, respectively.  Such Purchaser further confirms that
          it has had an opportunity to ask questions and receive answers from the
          Company
          regarding the Company’s and its Subsidiaries’ business, management and financial
          affairs and the terms and conditions of the Offering, the Notes, the Warrants
          and the Securities and to obtain additional information (to the extent
          the
          Company possessed such information or could acquire it without unreasonable
          effort or expense) necessary to verify any information furnished to such
          Purchaser or to which such Purchaser had access.

         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

         

        5.4           The
          Purchaser Bears Economic Risk.  Such Purchaser has substantial
          experience in evaluating and investing in private placement transactions
          of
          securities in companies similar to the Company so that it is capable of
          evaluating the merits and risks of its investment in the Company and has
          the
          capacity to protect its own interests.  Such Purchaser must bear the
          economic risk of this investment until the Securities are sold pursuant
          to: (i)
          an effective registration statement under the Securities Act; or (ii) an
          exemption from registration is available with respect to such sale.

         

        5.5           Acquisition
          for Own Account.  Such Purchaser is acquiring the applicable Note
          and Warrant and the Note Shares and the Warrant Shares for such Purchaser’s own
          account for investment only, and not as a nominee or agent and not with
          a view
          towards or for resale in connection with their distribution.

         

        5.6           The
          Purchaser Can Protect Its Interest.  Such Purchaser represents
          that by reason of its, or of its management’s, business and financial
          experience, such Purchaser has the capacity to evaluate the merits and
          risks of
          its investment in the applicable Note, the Warrant and the Securities and
          to
          protect its own interests in connection with the transactions contemplated
          in
          this Agreement and the Related Agreements.  Further, such Purchaser is
          aware of no publication of any advertisement in connection with the transactions
          contemplated in the Agreement or the Related Agreements.

         

        5.7           Accredited
          Investor.  Such Purchaser represents that it is an accredited
          investor within the meaning of Regulation D under the Securities
          Act.

         

        5.8           Legends.

         

        (a)           The
          applicable Note shall bear substantially the following legend:

         

        “THIS
          NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
          BEEN
          REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
          STATE
          SECURITIES LAWS.  THIS NOTE AND THE COMMON STOCK ISSUABLE UPON
          CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
          HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
          AS TO
          THIS NOTE OR SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES
          LAWS OR
          (B) AN EXEMPTION FROM SUCH REGISTRATION.”

         

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

         

        (b)           The
          applicable Note Shares and Warrant Shares, if not issued by DWAC system
          (as
          hereinafter defined), shall bear a legend which shall be in substantially
          the
          following form until such shares are covered by an effective registration
          statement filed with the SEC:

         

        “THE
          SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
          SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
          LAWS.  THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
          HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
          UNDER
          SUCH SECURITIES ACT AND APPLICABLE STATE LAWS OR (B) AN EXEMPTION FROM
          SUCH
          REGISTRATION.”

         

        (c)           The
          applicable Warrant shall bear substantially the following legend:

         

        “THIS
          WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
          NOT
          BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
          STATE SECURITIES LAWS.  THIS WARRANT AND THE COMMON SHARES ISSUABLE
          UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
          OR
          HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
          AS TO
          THIS WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND
          APPLICABLE STATE SECURITIES LAWS OR (B) AN EXEMPTION FROM SUCH
          REGISTRATION.”

         

        6.           Covenants
          of the Company.  The Company covenants and agrees with each
          Creditor Party as follows:

         

        6.1           Stop-Orders.  The
          Company will, by written notice, advise the Agent, promptly after it receives
          notice of issuance by the SEC, any state securities commission or any other
          regulatory authority of any stop order or of any order preventing or suspending
          any offering of any securities of the Company, or of the suspension of
          the
          qualification of the Common Stock of the Company for offering or sale in
          any
          jurisdiction, or the initiation of any proceeding for any such
          purpose.

         

        6.2           Listing.  The
          Company shall promptly secure the listing or quotation, as applicable,
          of the
          shares of Common Stock issuable upon conversion of the Notes and upon the
          exercise of the Warrants on the Principal Market upon which shares of Common
          Stock are listed or quoted for trading, as applicable (subject to official
          notice of issuance) and shall maintain such listing or quotation, as applicable,
          so long as any other shares of Common Stock shall be so listed or quoted,
          as
          applicable.  The Company will maintain the listing or quotation, as
          applicable, of its Common Stock on the Principal Market, and will comply
          in all
          material respects with the Company’s reporting, filing and other obligations
          under the bylaws or rules of the National Association of Securities Dealers
          (“NASD”) and such exchanges, as applicable.

         

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

        

         

        6.3           Market
          Regulations.  The Company shall notify the SEC, NASD and
          applicable state authorities, in accordance with their requirements, of
          the
          transactions contemplated by this Agreement, and shall take all other necessary
          action and proceedings as may be required and permitted by applicable law,
          rule
          and regulation, for the legal and valid issuance of the applicable Securities
          to
          each Purchaser and promptly provide copies thereof to such
          Purchaser.

         

        6.4           Reporting
          Requirements.  The Company will deliver, or cause to be delivered,
          to the Agent each of the following, which shall be in form and detail acceptable
          to the Agent:

         

        (a)           As
          soon as available, and in any event within ninety (90) days after the end
          of
          each fiscal year of the Company, the Company’s and each of its Subsidiaries’
audited financial statements with a report of independent certified public
          accountants of recognized standing selected by the Company and acceptable
          to the
          Agent (the “Accountants”), which annual financial statements shall be
          without qualification and shall include the Company’s and each of its
          Subsidiaries’ balance sheet as at the end of such fiscal year and the related
          statements of the Company’s and each of its Subsidiaries’ income, retained
          earnings and cash flows for the fiscal year then ended, prepared, if the
          Agent
          so requests, on a consolidating and consolidated basis to include the Company,
          each Subsidiary of the Company and each of their respective affiliates,
          all in
          reasonable detail and prepared in accordance with GAAP, together with (i)
          if and
          when available, copies of any management letters prepared by the Accountants;
          and (ii) a certificate of the Company’s President, Chief Executive Officer or
          Chief Financial Officer stating that such financial statements have been
          prepared in accordance with GAAP and whether or not such officer has knowledge
          of the occurrence of any Event of Default  (as defined in each Note)
          and, if so, stating in reasonable detail the facts with respect
          thereto;

         

        (b)           As
          soon as available and in any event within forty five (45) days after the
          end of
          each fiscal quarter of the Company, an unaudited/internal balance sheet
          and
          statements of income, retained earnings and cash flows of the Company and
          each
          of its Subsidiaries as at the end of and for such quarter and for the year
          to
          date period then ended, prepared, if the Agent so requests, on a consolidating
          and consolidated basis to include all the Company, each Subsidiary of the
          Company and each of their respective affiliates, in reasonable detail and
          stating in comparative form the figures for the corresponding date and
          periods
          in the previous year, all prepared in accordance with GAAP, subject to
          year-end
          adjustments and accompanied by a certificate of the Company’s President, Chief
          Executive Officer or Chief Financial Officer, stating (i) that such financial
          statements have been prepared in accordance with GAAP, subject to year-end
          audit
          adjustments, and (ii) whether or not such officer has knowledge of the
          occurrence of any Event of Default (as defined in each Note) not theretofore
          reported and remedied and, if so, stating in reasonable detail the facts
          with
          respect thereto;

         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

         

        (c)           As
          soon as available and in any event within twenty (20) days after the end
          of each
          calendar month, an unaudited/internal balance sheet and statements of income,
          retained earnings and cash flows of the Company and its Subsidiaries as
          at the
          end of and for such month and for the year to date period then ended, prepared,
          on a consolidating and consolidated basis to include the Company, each
          Subsidiary of the Company and each of their respective affiliates, in reasonable
          detail and stating in comparative form the figures for the corresponding
          date
          and periods in the previous year, all prepared in accordance with GAAP,
          subject
          to year-end adjustments and accompanied by a certificate of the Company’s
          President, Chief Executive Officer or Chief Financial Officer, stating
          (i) that
          such financial statements have been prepared in accordance with GAAP, subject
          to
          year-end audit adjustments, and (ii) whether or not such officer has knowledge
          of the occurrence of any Event of Default (as defined in each Note) not
          theretofore reported and remedied and, if so, stating in reasonable detail
          the
          facts with respect thereto;

         

        (d)           The
          Company shall timely file with the SEC all reports required to be filed
          pursuant
          to the Exchange Act and refrain from terminating its status as an issuer
          required by the Exchange Act to file reports thereunder even if the Exchange
          Act
          or the rules or regulations thereunder would permit such
          termination.  Promptly after (i) the filing thereof, copies of the
          Company’s most recent registration statements and annual, quarterly, monthly or
          other regular reports which the Company files with the SEC, and (ii) the
          issuance thereof, copies of such financial statements, reports and proxy
          statements as the Company shall send to its stockholders;

         

        (e)           Together
          with each delivery of any financial statement pursuant to Section 6.4(a),
          6.4(b)
          or 6.4(c), a Compliance Certificate, substantially in the form of Exhibit
          E hereto, duly executed by the President, Chief Executive Officer or
          Chief
          Financial Officer of the Company that, among other things, (i) states that
          such
          financial statements have been prepared in accordance with GAAP, subject
          to
          year-end audit adjustments, (ii) shows in reasonable detail the calculations
          used in determining each financial covenant contained in Section 6.19 and
          (iii)
          states that no Event of Default (as defined in each Note) is continuing
          as of
          the date of delivery of such Compliance Certificate or, if an Event of
          Default
          is continuing, states the nature thereof and the action that the Company
          proposes to take with respect thereto; and

         

        (f)           The
          Company shall deliver, or cause the applicable Subsidiary of the Company
          to
          deliver, such other information as any Creditor Party shall reasonably
          request.

         

        6.5           Use
          of Funds.  The Company shall use the proceeds of the sale of the
          Notes and the Warrants to pay off in full certain indebtedness owing from
          the
          Company to Firestone Associates, Inc. and Firestone Environmental Services,
          Inc.
          (in an aggregate amount not to exceed $130,000) and for general working
          capital
          purposes only.

         

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

         

        6.6           Access
          to Facilities.  The Company and each of its Subsidiaries will
          permit any representatives designated by the Agent (or any successor of
          the
          Agent), upon reasonable notice and during normal business hours, at the
          Company’s expense and accompanied by a representative of the Company or any
          Subsidiary (provided that no such prior notice shall be required to be
          given and
          no such representative of the Company or any Subsidiary shall be required
          to
          accompany the Agent in the event the Agent believes such access is necessary
          to
          preserve or protect the Collateral (as defined in the Master Security Agreement)
          or following the occurrence and during the continuance of an Event of Default
          (as defined in each Note)), to:

         

        (a)           visit
          and inspect any of the properties of the Company or any of its
          Subsidiaries;

         

        (b)           examine
          the corporate and financial records of the Company or any of its Subsidiaries
          (unless such examination is not permitted by federal, state or local law
          or by
          contract) and make copies thereof or extracts therefrom; and

         

        (c)           discuss
          the affairs, finances and accounts of the Company or any of its Subsidiaries
          with the directors, officers and independent accountants of the Company
          or any
          of its Subsidiaries.

         

        Notwithstanding
          the foregoing no Creditor Party shall have the right to review any of the
          Company’s (or its Subsidiaries’) material, non-public information, unless such
          Creditor Party signs a confidentiality agreement and otherwise complies
          with
          Regulation FD, under the federal securities laws.

         

        6.7           Taxes.

         

        (a)           The
          Company and each of its Subsidiaries will promptly pay and discharge, or
          cause
          to be paid and discharged, when due and payable, all taxes, assessments
          and
          governmental charges or levies imposed upon the income, profits, property
          or
          business of the Company and its Subsidiaries; provided, however, that any
          such
          tax, assessment, charge or levy need not be paid currently if (i) the validity
          thereof shall currently and diligently be contested in good faith by appropriate
          proceedings, (ii) such tax, assessment, charge or levy shall have no effect
          on
          the lien priority of the Agent in any property of the Company or any of
          its
          Subsidiaries and (iii) if the Company and/or such Subsidiary shall have
          set
          aside on its books adequate reserves with respect thereto in accordance
          with
          GAAP; and provided, further, that the Company and its Subsidiaries will
          pay all
          such taxes, assessments, charges or levies forthwith upon the commencement
          of
          proceedings to foreclose any lien which may have attached as security
          therefor.

         

        (b)           All
          payments made by the Company under this Agreement or any Note shall be
          made free
          and clear of, and without deduction or withholding for or on account of,
          any
          present or future Taxes (as defined below) now or hereafter imposed, levied,
          collected, withheld or assessed by any Governmental Authority, other than
          Excluded Taxes (as defined below).  “Governmental Authority”
means any nation or government, any state or other political subdivision
          thereof, and any agency, department or other entity exercising executive,
          legislative, judicial, regulatory or administrative functions of or pertaining
          to government.

         

        
          
            
            

          

          
            21

            
              

            

          

          
            
            

          

        

         

        (c)           In
          addition, the Company shall pay any Other Taxes to the relevant Governmental
          Authority in accordance with applicable law.

         

        (d)           Whenever
          any Non-Excluded Taxes or Other Taxes are payable by the Company, as promptly
          as
          possible thereafter the Company shall send to the Agent for its own account
          or
          for the account of the relevant Lender, as the case may be, a certified
          copy of
          an original official receipt received by the Company showing payment thereof
          (or
          such other evidence reasonably satisfactory to the Agent).  If the
          Company fails to pay any Non-Excluded Taxes or Other Taxes when due to
          the
          appropriate taxing authority or fails to remit to the Agent the required
          receipts or other required documentary evidence, the Company shall indemnify
          the
          Creditor Parties for any incremental taxes, interest or penalties that
          may
          become payable by any Creditor Party as a result of any such
          failure.

         

        (e)           Each
          Purchaser (or its assignee) that is not a “United States Person” as defined in
          Section 7701(a)(30) of the Code (a “Non-U.S. Purchaser”) shall deliver to
          the Company and the Agent two completed originals of an appropriate U.S.
          Internal Revenue Service Form W-8, as applicable, or any subsequent versions
          thereof or successors thereto, properly completed and duly executed by
          such
          Non-U.S. Purchaser.  Such forms shall be delivered by each Non-U.S.
          Purchaser on or before the date it becomes a party to this
          Agreement.  In addition, each Non-U.S. Purchaser shall deliver such
          forms promptly upon the obsolescence or invalidity of any form previously
          delivered by such Non-U.S. Purchaser.  Each Non-U.S. Purchaser shall
          promptly notify the Company at any time it determines that it is no longer
          in a
          position to provide any previously delivered certificate to the Company
          (or any
          other form of certification adopted by the U.S. taxing authorities for
          such
          purpose).  Notwithstanding any other provision of this paragraph (e),
          a Non-U.S. Purchaser shall not be required to deliver any form pursuant
          to this
          paragraph that such Non-U.S. Purchaser is not legally able to
          deliver.

         

        (f)           The
          agreements in the preceding paragraphs (b), (c), (d), (e) and this paragraph
          (f)
          shall survive the termination of this Agreement and the payment of the
          Notes and
          all other amounts payable hereunder or thereunder or under any other Related
          Agreement.

         

        As
          used
          in this Section 6.7, the following terms shall have the following meanings
          (such
          meanings to be equally applicable to both the singular and plural forms
          of the
          terms defined):

         

        “Excluded
          Taxes” means, with respect to any Creditor Party: (a) taxes imposed on or
          measured by its overall net income and franchise taxes imposed on it in
          lieu of
          net income taxes, by the jurisdiction (or any political subdivision thereof)
          under the laws of which such Creditor Party is incorporated or organized
          or by
          the jurisdiction (or any political subdivision thereof) in which the principal
          place of management or applicable lending office of such Creditor Party
          is
          located; (b) taxes imposed on or measured by its properties; (c) payroll
          tax or
          other similar taxes imposed on or measured by the wages, compensation and
          fees
          paid by it to officers, directors, employees, agents and contractors; (d)
          taxes
          imposed on or measured by purchases made by it, such as sales and use tax;
          and
          (e) any other tax that is directly related to the Creditor Party’s business
          operations and unrelated to the transactions contemplated by this Agreement
          or
          is incurred because any assignee or holder of any of the Obligations (as
          defined
          in the Master Security Agreement) at any time is not a “United States Person” as
          defined in Section 7701(a)(30) of the Code.

         

        
          
            
            

          

          
            22

            
              

            

          

          
            
            

          

        

         

        “Non-Excluded
          Taxes” means all Taxes other than (i) Excluded Taxes and (ii) Other
          Taxes.

         

        “Other
          Taxes” means any and all present or future stamp or documentary taxes or any
          other excise or property taxes, charges or similar levies arising from
          any
          payment made hereunder or from the execution, delivery or enforcement of,
          or
          otherwise with respect to, this Agreement or any other Related
          Agreement.

         

        “Taxes”
          means any and all present or future taxes, duties, levies, imposts, deductions,
          assessments, fees, withholdings or similar charges, and all liabilities
          with
          respect thereto.

         

        6.8           Insurance.  (i)  The
          Company shall
          bear the full risk of loss from any loss of any nature whatsoever with
          respect
          to the Collateral (as defined in each of the Master Security Agreement,
          the
          Stock Pledge Agreement and each other security agreement entered into by
          the
          Company and/or any of its Subsidiaries for the benefit of the Creditor
          Parties)
          and the Company and each of its Subsidiaries will, jointly and severally,
          bear
          the full risk of loss from any loss of any nature whatsoever with respect
          to the
          assets pledged to the Agent, for the ratable benefit of the Creditor Parties,
          as
          security for the Obligations (as defined in the Master Security
          Agreement).  Furthermore, the Company will insure or cause the
          Collateral to be insured in the Agent’s name as an additional insured and lender
          loss payee, with an appropriate loss payable endorsement in form and substance
          satisfactory to the Agent, against loss or damage by fire, flood, sprinkler
          leakage, theft, burglary, pilferage, loss in transit and other risks customarily
          insured against by companies in similar business similarly situated as
          the
          Company and its Subsidiaries including but not limited to workers compensation,
          public and product liability and business interruption, and such other
          hazards
          as the Agent shall specify in amounts and under insurance policies and
          bonds by
          insurers acceptable to the Agent and all premiums thereon shall be paid
          by the
          Company and the policies delivered to the Agent.  If the Company or
          any of its Subsidiaries fails to obtain the insurance and in such amounts
          of
          coverage as otherwise required pursuant to this Section 6.8, the Agent
          may
          procure such insurance and the cost thereof shall be promptly reimbursed
          by the
          Company and shall constitute Obligations.

         

        (ii)           The
          Company’s insurance coverage shall not be impaired or invalidated by any act or
          neglect of the Company or any of its Subsidiaries and the insurer will
          provide
          the Agent with no less than thirty (30) days notice prior of
          cancellation;

         

        (iii)           The
          Agent, in connection with its status as a lender loss payee, will be assigned
          at
          all times to a first lien position until such time as all the Obligations
          have
          been indefeasibly satisfied in full.

         

        
          
            
            

          

          
            23

            
              

            

          

          
            
            

          

        

         

        6.9           Intellectual
          Property.

         

        (a)           The
          Company and each of its Subsidiaries shall maintain in full force and effect
          its
          existence, rights and franchises and all licenses and other rights to own
          or use
          Intellectual Property including registrations and applications therefore,
          that
          are necessary to the conduct of its business, as now conducted or as presently
          proposed to be conducted, and shall not do any act or omit to do any act
          whereby
          any of such Intellectual Property may lapse, or become abandoned, dedicated
          to
          the public, or unenforceable, or the Lien therein in favor of the Agent,
          for the
          ratable benefit of the Creditor Parties, would be adversely
          affected,

         

        (b)           The
          Company shall report to the Agent (i) the filing by the Company or any
          of its
          Subsidiaries of any application to register a Copyright no later than ten
          (10)
          days after such filing occurs (ii) the filing of any application to register
          any
          other Intellectual Property with any other Intellectual Property registry,
          and
          the issuance thereof, no later than thirty (30) days after such filing
          or
          issuance occurs and, in each case, shall, simultaneously with such report,
          deliver to the Agent fully-executed documents required to acknowledge,
          confirm,
          register, record or perfect the Lien in such Intellectual
          Property.  In addition, the Company and its Subsidiaries hereby
          authorize the Agent to modify this Agreement by amending Schedule 4.10 to
          include any registrations or applications for Intellectual Property
          inadvertently omitted from such Schedule or filed, registered, acquired
          by the
          Company or any of its Subsidiaries after the date hereof and agree to cooperate
          with the Agent in effecting any such amendment to include any new item
          of
          Intellectual Property included in the Collateral.

         

        (c)           The
          Company shall, and shall cause each of its Subsidiaries to, promptly upon
          the
          reasonable request of the Agent, execute and deliver to the Agent any document
          or instrument required to acknowledge, confirm, register, record, or perfect
          the
          Lien of the Agent in any part of the Intellectual Property owned by the
          Company
          and its Subsidiaries.

         

        (d)           The
          Company shall, and shall cause of each of its Subsidiaries to, not sell,
          assign,
          transfer, license, grant any option, or create or suffer to exist any Lien
          upon
          or with respect to Intellectual Property, except for the Permitted
          Encumbrances.

         

        6.10           Properties.  The
          Company and each of its Subsidiaries will keep its properties in good repair,
          working order and condition, reasonable wear and tear excepted, and from
          time to
          time make all needful and proper repairs, renewals, replacements, additions
          and
          improvements thereto; and each of the Company and each of its Subsidiaries
          will
          at all times comply with each provision of all leases to which it is a
          party or
          under which it occupies property if the breach of such provision could,
          either
          individually or in the aggregate, reasonably be expected to have a Material
          Adverse Effect.

         

        6.11           Confidentiality.  The
          Company will not, and will not permit any of its Subsidiaries to, disclose,
          and
          will not include in any public announcement, the name of any Creditor Party,
          unless expressly agreed to by such Creditor Party or unless and until such
          disclosure is required by law or applicable regulation, and then only to
          the
          extent of such requirement.  Notwithstanding the foregoing, (i) the
          Company may disclose any Creditor Party’s identity and the terms of this
          Agreement and the Related Agreements to its current and prospective debt
          and
          equity financing sources, and (ii) the Company (and each employee,
          representative, or other agent of the Company) may disclose to any and
          all
          Persons, without limitation of any kind, the tax treatment and any facts
          that
          may be relevant to the tax structure of the transactions contemplated by
          this
          Agreement and the Related Agreements and the agreements referred to therein;
          provided, however, that the Company (and no employee, representative or
          other
          agent of the Company) disclose pursuant to this clause (ii) any other
          information that is not relevant to understanding the tax treatment or
          tax
          structure of such transactions (including the identity of any party or
          any
          information that could lead another to determine the identity of any party);
          and, provided, further, that the Company will not, and will not permit
          any of
          its Subsidiaries to, disclose any information to the extent that such disclosure
          could reasonably be expected to result in a violation of any U.S. federal
          or
          state securities law or similar law of another jurisdiction.  Each
          Creditor Party shall be permitted to discuss, distribute or otherwise transfer
          any non-public information of the Company and its Subsidiaries in such
          Creditor
          Party’s possession now or in the future to potential or actual (i) direct or
          indirect investors in such Creditor Party and (ii) third party assignees
          or
          transferees of all or a portion of the obligations of the Company and/or
          any of
          its Subsidiaries hereunder and under the Related Agreements.

         

        
          
            
            

          

          
            24

            
              

            

          

          
            
            

          

        

         

        6.12           Required
          Approvals.  (I) The Company, without the prior written
          consent of the Agent, shall not, and shall not permit any of its Subsidiaries
          to:

         

        (a)           (i)
          directly or indirectly declare, pay or make any dividends, other than dividends
          paid to the Company or any of its wholly-owned Subsidiaries, (ii) issue
          any
          preferred stock or (iii) redeem any of its preferred stock or other equity
          interests;

         

        (b)           liquidate,
          dissolve or effect a material reorganization (it being understood that
          in no
          event shall the Company or any of its Subsidiaries dissolve, liquidate
          or merge
          with any other person or entity (unless, in the case of such a merger,
          the
          Company or, in the case of merger not involving the Company, such Subsidiary,
          as
          applicable, is the surviving entity);

         

        (c)           become
          subject to (including, without limitation, by way of amendment to or
          modification of) any agreement or instrument which by its terms would (under
          any
          circumstances) restrict the Company’s or any of its Subsidiaries, right to
          perform the provisions of this Agreement, any Related Agreement or any
          of the
          agreements contemplated hereby or thereby;

         

        (d)           materially
          alter or change the scope of the business of the Company and its Subsidiaries
          taken as a whole; or

         

        (e)           (i)
          create, incur, assume or suffer to exist any indebtedness (exclusive of
          trade
          debt) whether secured or unsecured other than (x) the Company’s obligations owed
          to each Purchaser or Laurus, (y) indebtedness set forth on Schedule
          6.12(e) attached hereto and made a part hereof and any refinancings or
          replacements thereof on terms no less favorable to the Purchasers than
          the
          indebtedness being refinanced or replaced, and (z) any indebtedness
          (“Purchase Money Indebtedness”) incurred in connection with the purchase
          of equipment in the ordinary course of business, or any refinancings or
          replacements thereof on terms no less favorable to the Purchasers than
          the
          indebtedness being refinanced or replaced, so long as any lien (“Purchase
          Money Lien”) relating thereto shall only encumber the fixed assets so
          purchased and no other assets of the Company or any of its Subsidiaries;
          (ii)
          cancel any indebtedness owing to it in excess of $50,000 in the aggregate
          during
          any twelve (12) month period; (iii) assume, guarantee, endorse or otherwise
          become directly or contingently liable in connection with any obligations
          of any
          other person or entity, except the endorsement of negotiable instruments
          by the
          Company or any Subsidiary thereof for deposit or collection or similar
          transactions in the ordinary course of business or guarantees of indebtedness
          otherwise permitted to be outstanding pursuant to this clause (e); (iv)
          make any
          payment or distribution in respect of any subordinated indebtedness of
          the
          Company or its Subsidiaries in violation of any subordination or other
          agreement
          made in favor of any Creditor Party; (v) make any optional payment or prepayment
          on or redemption (including, without limitation, by making payments to
          a sinking
          fund or analogous fund) or repurchase of any indebtedness for borrowed
          money
          other than indebtedness pursuant to this Agreement; and (vi) purchase or
          hold beneficially any stock or other securities or evidences of indebtedness
          of,
          make or permit to exist any loans or advances to, or make any investment
          or
          acquire any interest whatsoever in, any other Person, including any partnership
          or joint venture, except (x) travel advances, (y) loans to its and its
          Subsidiaries’ officers and employees not exceeding at any one time an aggregate
          of $10,000, and (z) loans to its existing Subsidiaries so long as such
          Subsidiaries are designated as either a co-borrower hereunder or has entered
          into such guaranty and security documentation required by the Agent, including,
          without limitation, to grant to the Agent a first priority perfected security
          interest in substantially all of such Subsidiary’s assets to secure the
          Obligations (as defined in the Master Security Agreement); and

         

        
          
            
            

          

          
            25

            
              

            

          

          
            
            

          

        

         

        (II)
          The
          Company, without the prior written consent of the Agent, shall not, and
          shall
          not permit any of its Subsidiaries to, create or acquire any Subsidiary
          after
          the date hereof unless (i) such Subsidiary is a wholly-owned Subsidiary
          of the
          Company and (ii) such Subsidiary becomes a party to (A) the Master Security
          Agreement, the Stock Pledge Agreement and the Intellectual Property Security
          Agreement (either by executing a counterpart thereof or an assumption or
          joinder
          agreement in respect thereof); (B) a Subsidiary Guaranty in favor of the
          Purchasers in form and substance satisfactory to the Agent and (c) to the
          extent
          required by the Agent, satisfies each condition of this Agreement and the
          Related Agreements as if such Subsidiary were a Subsidiary on the Closing
          Date.

         

        6.13           Reissuance
          of Securities.  The Company agrees to reissue certificates
          representing the Securities without the legends set forth in Section 5.8
          above
          at such time as:

         

        (a)           the
          holder thereof is permitted to dispose of such Securities pursuant to Rule
          144(k) under the Securities Act; or

         

        (b)           upon
          resale subject to an effective registration statement after such Securities
          are
          registered under the Securities Act.

         

        The
          Company agrees to cooperate with the Purchasers in connection with all
          resales
          pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary
          to
          allow such resales provided the Company and its counsel receive reasonably
          requested representations from the applicable Purchasers and broker, if
          any.

         

        
          
            
            

          

          
            26

            
              

            

          

          
            
            

          

        

         

        6.14           Opinion.  On
          the Closing Date, the Company will deliver to the Creditor Parties substantially
          in the form of Exhibit C hereto an opinion acceptable to the Agent from
          the Company’s external legal counsel.  The Company will provide, at
          the Company’s expense, such other legal opinions in the future as are deemed
          reasonably necessary by the Agent (and acceptable to the Agent) in connection
          with the conversion of any Note and exercise of the any Warrant.

         

        6.15           Margin
          Stock.  The Company will not permit any of the proceeds of the
          Notes or the Warrants to be used directly or indirectly to “purchase” or “carry”
“margin stock” or to repay indebtedness incurred to “purchase” or “carry”
“margin stock” within the respective meanings of each of the quoted terms under
          Regulation U of the Board of Governors of the Federal Reserve System as
          now and
          from time to time hereafter in effect.

         

        6.16           FIRPTA.  Neither
          the Company, nor any of its Subsidiaries, is a “United States real property
          holding corporation” as such term is defined in Section 897(c)(2) of the Code
          and Treasury Regulation Section 1.897-2 promulgated thereunder and neither
          the
          Company nor any of its Subsidiaries shall at any time take any action or
          otherwise acquire any interest in any asset or property to the extent the
          effect
          of which shall cause the Company and/or such Subsidiary, as the case may
          be, to
          be a “United States real property holding corporation” as such term is defined
          in Section 897(c)(2) of the Code and Treasury Regulation Section 1.897-2
          promulgated thereunder.

         

        6.17           Financing
          Right of First Refusal.

         

        (a)           The
          Company hereby grants to the Purchasers a right of first refusal to provide
          any
          Additional Financing (as defined below) to be issued by the Company and/or
          any
          of its Subsidiaries, subject to the following terms and
          conditions.  From and after the date hereof, prior to the incurrence
          of any additional indebtedness and/or the sale or issuance of any equity
          interests of the Company or any of its Subsidiaries (an “Additional
          Financing”), the Company and/or any Subsidiary of the Company, as the case
          may be, shall notify the Agent of its intention to enter into such Additional
          Financing.  For purposes of the foregoing, “Additional Financing”
excludes: (a) the sale or issuance of equity interests of the Company to
          officers, directors, employees and consultants pursuant to the Company’s stock
          option plans now in effect or adopted in the future; and (b) the receipt
          of
          proceeds from the exercise of options and warrants outstanding as of the
          date
          hereof (or to be issued, as permitted by the terms hereof and disclosed
          to
          Agent).  In connection therewith, the Company and/or the applicable
          Subsidiary thereof shall submit a fully executed term sheet (a “Proposed Term
          Sheet”) to the Agent setting forth the terms, conditions and pricing of any
          such Additional Financing (such financing to be negotiated on “arm’s length”
terms and the terms thereof to be negotiated in good faith) proposed to
          be
          entered into by the Company and/or such Subsidiary.  The Agent shall
          have the right, but not the obligation, to deliver its own proposed term
          sheet
          (the “Purchaser Term Sheet”) setting forth the terms and conditions upon
          which the Purchasers would be willing to provide such Additional Financing
          to
          the Company and/or such Subsidiary.  The Purchaser Term Sheet shall
          contain terms no less favorable to the Company and/or such Subsidiary than
          those
          outlined in Proposed Term Sheet.  The Agent shall deliver such
          Purchaser Term Sheet within ten (10) business days of receipt of each such
          Proposed Term Sheet.  If the provisions of the Purchaser Term Sheet
          are at least as favorable to the Company and/or such Subsidiary, as the
          case may
          be, as the provisions of the Proposed Term Sheet, the Company and/or such
          Subsidiary shall enter into and consummate the Additional Financing transaction
          outlined in the Purchaser Term Sheet.

         

        
          
            
            

          

          
            27

            
              

            

          

          
            
            

          

        

         

        (b)           The
          Company will not, and will not permit its Subsidiaries to, agree, directly
          or
          indirectly, to any restriction with any person or entity which limits the
          ability of the Purchasers to consummate an Additional Financing with the
          Company
          or any of its Subsidiaries.

         

        6.18           Authorization
          and Reservation of Shares.  The Company shall at all times have
          authorized and reserved a sufficient number of shares of Common Stock to
          provide
          for the conversion of the Notes and exercise of the Warrants.

         

        6.19           Maximum
          Consolidated Leverage Ratio.  Commencing with the month ending May
          31, 2009, the Company and its Subsidiaries on a Consolidated basis shall
          not
          have, on the last day of each month thereafter, a Consolidated Leverage
          Ratio
          greater than 3.50 to 1.0 (measured on a trailing twelve month
          basis).

         

        As
          used
          in this Section 6.19, the following terms shall have the following meanings
          (such meanings to be equally applicable to both the singular and plural
          forms of
          the terms defined):

         

        “Capital
          Lease” means, with respect to any Person, any lease of, or other arrangement
          conveying the right to use, any property (whether real, personal or mixed)
          by
          such Person as lessee that has been or should be accounted for as a capital
          lease on a balance sheet of such Person prepared in accordance with
          GAAP.

         

        “Capitalized
          Lease Obligations” means, at any time, with respect to any Capital Lease,
          any lease entered into as part of any sale/leaseback transaction of any
          Person
          or any synthetic lease, the amount of all obligations of such Person that
          is (or
          that would be, if such synthetic lease or other lease were accounted for
          as a
          Capital Lease) capitalized on a balance sheet of such Person prepared in
          accordance with GAAP.

         

        “Consolidated”
          means, with respect to any Person, the accounts of such Person and its
          Subsidiaries consolidated in accordance with GAAP.

         

        “Consolidated
          EBITDA” means, with respect to any Person for any period, (a) the
          Consolidated Net Income of such Person for such period plus (b) the sum
          of, in
          each case to the extent included in the calculation of such Consolidated
          Net
          Income but without duplication, (i) any provision for United States federal
          income taxes or other taxes measured by net income, (ii) Consolidated Interest
          Expense, amortization of debt discount and commissions and other fees and
          charges associated with Indebtedness (except amortization and expenses
          related
          to the consummation of the initial Loans on the Closing Date and the payment
          of
          all fees, costs and expenses associated with the foregoing), (iii) any
          loss from
          extraordinary items, (iv) any depreciation, depletion and amortization
          expense,
          (v) any aggregate net loss on the sale of property (other than Accounts
          and
          Inventory (as defined under the applicable UCC) outside the ordinary course
          of
          business and (vi) any other non-cash expenditure, charge or loss for such
          period (other than any non-cash expenditure, charge or loss relating to
          write-offs, write-downs or reserves with respect to accounts and inventory),
          including the amount of any compensation deduction as the result of any
          grant of
          Equity Interests to employees, officers, directors or consultants and minus
          (c)
          the sum of, in each case to the extent included in the calculation of such
          Consolidated Net Income and without duplication, (i) any credit for United
          States federal income taxes or other taxes measured by net income, (ii)
          any
          interest income, (iii) any gain from extraordinary items and any other
          non-recurring gain, (iv) any aggregate net gain from the sale of property
          (other
          than Accounts and Inventory (as defined in the applicable UCC) out of the
          ordinary course of business by such Person, (v) any other non-cash gain,
          including any reversal of a charge referred to in clause (b)(vi) above
          by reason
          of a decrease in the value of any Equity Interests, and (vi) any other
          cash
          payment in respect of expenditures, charges and losses that have been added
          to
          Consolidated EBITDA of such Person pursuant to clause (b)(vi) above in
          any prior
          period.

         

        
          
            
            

          

          
            28

            
              

            

          

          
            
            

          

        

         

        “Consolidated
          Interest Expense” means, for any Person for any period, (a) Consolidated
          total interest expense of such Person and its Subsidiaries for such period
          and
          including, in any event, (i) interest capitalized during such period and
          net
          costs under Interest Rate Contracts for such period and (ii) all fees,
          charges,
          commissions, discounts and other similar obligations (other than reimbursement
          obligations) with respect to letters of credit, bank guarantees, banker’s
          acceptances, surety bonds and performance bonds (whether or not matured)
          payable
          by such Person and its Subsidiaries during such period minus (b) the sum
          of (i)
          Consolidated net gains of such Person and its Subsidiaries under Interest
          Rate
          Contracts for such period and (ii) Consolidated interest income of such
          Person and its Subsidiaries for such period.

         

        “Consolidated
          Leverage Ratio” means, with respect to any Person as of any date, the ratio
          of (a) Consolidated Total Debt of such Person outstanding as of such date
          to (b)
          Consolidated EBITDA for such Person for the last period of four consecutive
          fiscal quarters ending on or before such date.

         

        “Consolidated
          Net Income” means, with respect to any Person, for any period, the
          Consolidated net income (or loss) of such Person and its Subsidiaries for
          such
          period; provided, however, that the following shall be excluded:  (a)
          the net income of any other Person in which such Person or one of its
          Subsidiaries has a joint interest with a third-party (which interest does
          not
          cause the net income of such other Person to be Consolidated into the net
          income
          of such Person), except to the extent of the amount of dividends or
          distributions paid to such Person or Subsidiary, (b) the net income of
          any
          Subsidiary of such Person that is, on the last day of such period, subject
          to
          any restriction or limitation on the payment of dividends or the making
          of other
          distributions, to the extent of such restriction or limitation and (c)
          the net
          income of any other Person arising prior to such other Person becoming
          a
          Subsidiary of such Person or merging or consolidating into such Person
          or its
          Subsidiaries.

         

        
          
            
            

          

          
            29

            
              

            

          

          
            
            

          

        

         

        “Consolidated
          Total Debt” of any Person means all Indebtedness of a type described in
          clause (a), (b), (c)(i), (d), (f), (g) or (i) of the definition thereof,
          in each
          case of such Person and its Subsidiaries on a Consolidated basis.

         

        “Contractual
          Obligation” means, with respect to any Person, any provision of any
          indenture, mortgage, deed of trust, contract, undertaking, agreement or
          other
          instrument to which such Person is a party or by which it or any of its
          property
          is bound or to which any of its property is subject.

         

        “Equity
          Interests” shall mean, with respect to any Person, any and all shares,
          rights to purchase, options, warrants, general, limited or limited liability
          partnership interests, member interests, units, participations or other
          equivalents of or interest in (regardless of how designated) equity of
          such
          Person, whether voting or nonvoting, including common stock, preferred
          stock,
          convertible securities or any other “equity security” (as such term is defined
          in Rule 3a11-1 of the General Rules and Regulations promulgated by the
          SEC (or
          any successor thereto) under the Exchange Act).

         

        “Guaranty
          Obligation” means, as applied to any Person, any direct or indirect
          liability, contingent or otherwise, of such Person for any Indebtedness,
          lease,
          dividend or other obligation (the “primary obligation”) of another Person (the
“primary obligor”), if the purpose or intent of such Person in incurring such
          liability, or the economic effect thereof, is to guarantee such primary
          obligation or provide support, assurance or comfort to the holder of such
          primary obligation or to protect or indemnify such holder against loss
          with
          respect to such primary obligation, including (a) the direct or indirect
          guaranty, endorsement (other than for collection or deposit in the ordinary
          course of business), co-making, discounting with recourse or sale with
          recourse
          by such Person of any primary obligation, (b) the incurrence of reimbursement
          obligations with respect to any letter of credit or bank guarantee in support
          of
          any primary obligation, (c) the existence of any Lien, or any right, contingent
          or otherwise, to receive a Lien, on the property of such Person securing
          any
          part of any primary obligation and (d) any liability of such Person for
          a
          primary obligation through any Contractual Obligation (contingent or otherwise)
          or other arrangement (i) to purchase, repurchase or otherwise acquire such
          primary obligation or any security therefor or to provide funds for the
          payment
          or discharge of such primary obligation (whether in the form of a loan,
          advance,
          stock purchase, capital contribution or otherwise), (ii) to maintain the
          solvency, working capital, equity capital or any balance sheet item, level
          of
          income or cash flow, liquidity or financial condition of any primary obligor,
          (iii) to make take-or-pay or similar payments, if required, regardless
          of
          non-performance by any other party to any Contractual Obligation, (iv)
          to
          purchase, sell or lease (as lessor or lessee) any property, or to purchase
          or
          sell services, primarily for the purpose of enabling the primary obligor
          to
          satisfy such primary obligation or to protect the holder of such primary
          obligation against loss or (v) to supply funds to or in any other manner
          invest
          in, such primary obligor (including to pay for property or services irrespective
          of whether such property is received or such services are rendered); provided,
          however, that “Guaranty Obligations” shall not include (x) endorsements for
          collection or deposit in the ordinary course of business and (y) product
          warranties given in the ordinary course of business.  The outstanding
          amount of any Guaranty Obligation shall equal the outstanding amount of
          the
          primary obligation so guaranteed or otherwise supported or, if lower, the
          stated
          maximum amount for which such Person may be liable under such Guaranty
          Obligation.

         

        
          
            
            

          

          
            30

            
              

            

          

          
            
            

          

        

         

        “Hedging
          Agreement” means any Interest Rate Contract, foreign exchange, swap, option
          or forward contract, spot, cap, floor or collar transaction, any other
          derivative instrument and any other similar speculative transaction and
          any
          other similar agreement or arrangement designed to alter the risks of any
          Person
          arising from fluctuations in any underlying variable.

         

        “Indebtedness”
          of any Person means, without duplication, any of the following, whether
          or not
          matured:  (a) all indebtedness for borrowed money (including, without
          limitation, all principal, interest, fees and charges relating thereto),
          (b) all
          obligations evidenced by notes, bonds, debentures or similar instruments,
          (c)
          all reimbursement and all obligations with respect to (i) letters of credit,
          bank guarantees or bankers’ acceptances or (ii) surety, customs, reclamation or
          performance bonds (in each case not related to judgments or litigation)
          other
          than those entered into in the ordinary course of business, (d) all obligations
          to pay the deferred purchase price of property or services, other than
          trade
          payables incurred in the ordinary course of business, (e) all obligations
          created or arising under any conditional sale or other title retention
          agreement, regardless of whether the rights and remedies of the seller
          or lender
          under such agreement in the event of default are limited to repossession
          or sale
          of such property, (f) all Capitalized Lease Obligations, (g) all obligations,
          whether or not contingent, to purchase, redeem, retire, defease or otherwise
          acquire for value any of its own Equity Interests (or any Equity Interests
          of a
          direct or indirect parent entity thereof) prior to the date that is 180
          days
          after the maturity of the Notes, valued at, in the case of redeemable preferred
          Equity Interests, the greater of the voluntary liquidation preference and
          the
          involuntary liquidation preference of such Equity Interests plus accrued
          and
          unpaid dividends, (h) all payments that would be required to be made in
          respect
          of any Hedging Agreement in the event of a termination (including an early
          termination) on the date of determination and (i) all Guaranty Obligations
          for
          obligations of any other Person constituting Indebtedness of such other
          Person;
          provided, however, that the items in each of clauses (a) through (i) above
          shall
          constitute “Indebtedness” of such Person solely to the extent, directly or
          indirectly, (x) such Person is liable for any part of any such item, (y)
          any
          such item is secured by a Lien on such Person’s property or (z) any other Person
          has a right, contingent or otherwise, to cause such Person to become liable
          for
          any part of any such item or to grant such a Lien.

         

        “Interest
          Rate Contracts” means all interest rate swap agreements, interest rate cap
          agreements, interest rate collar agreements and interest rate
          insurance.

         

        “UCC”
          means the Uniform Commercial Code as from time to time in effect in the
          specified jurisdiction.

         

        7.           Covenants
          of the Purchasers.  Each Purchaser covenants and agrees with the
          Company as follows:

         

        7.1           Confidentiality.  No
          Purchaser will disclose, nor will it include in any public announcement,
          the
          name of the Company, unless expressly agreed to by the Company in writing
          or
          unless and until such disclosure is required by law or applicable regulation,
          and then only to the extent of such requirement.

         

        
          
            
            

          

          
            31

            
              

            

          

          
            
            

          

        

         

        7.2           Non-Public
          Information.  No Purchaser will effect any sales in the shares of
          the Common Stock while in possession of material, non-public information
          regarding the Company if such sales would violate applicable securities
          law.

         

        7.3           Limitation
          on Acquisition of Common Stock of the Company.  Notwithstanding
          anything to the contrary contained in this Agreement, any Related Agreement
          or
          any document, instrument or agreement entered into in connection with any
          other
          transactions entered into by a Purchaser and the Company (and/or Subsidiaries
          or
          Affiliates of the Company), such Purchaser (and/or Subsidiaries or Affiliates
          of
          such Purchaser) shall not acquire stock in the Company (including, without
          limitation, pursuant to a contract to purchase, by exercising an option
          or
          warrant, by converting any other security or instrument, by acquiring or
          exercising any other right to acquire, shares of stock or other security
          convertible into shares of stock in the Company, or otherwise, and such
          contracts, options, warrants, conversion or other rights shall not be
          enforceable or exercisable) to the extent such stock acquisition would
          cause any
          interest (including any original issue discount) payable by the Company
          to a
          Non-U.S. Purchaser not to qualify as “portfolio interest” within the meaning of
          Section 871(h)(2) or Section 881(c)(2) of the Code, by reason of Section
          871(h)(3) or Section 881(c)(3)(B) of the Code, as applicable, taking into
          account the constructive ownership rules under Section 871(h)(3)(C) of
          the Code
          (the “Stock Acquisition Limitation”).  The Stock Acquisition
          Limitation shall automatically become null and void without any notice
          to the
          Company upon the earlier to occur of either (a) the Company’s delivery to the
          Purchaser of a Notice of Redemption (as defined in the applicable Note)
          or (b)
          the existence of an Event of Default (as defined in the Note) at a time
          when the
          average closing price of the Company’s common stock as reported by Bloomberg,
          L.P. on the Principal Market for the immediately preceding five trading
          days is
          greater than or equal to 150% of the Fixed Conversion Price (as defined
          in the
          applicable Note).

         

        8.           Covenants
          of the Company and the Purchasers Regarding Indemnification.

         

        8.1           Company
          Indemnification.  The Company agrees to indemnify, hold harmless,
          reimburse and defend each Creditor Party, each of such Creditor Party’s
          officers, directors, agents, affiliates, control persons, and principal
          shareholders, against all claims, costs, expenses, liabilities, obligations,
          losses or damages (including reasonable legal fees) of any nature, incurred
          by
          or imposed upon such Creditor Party which result, arise out of or are based
          upon: (i) any misrepresentation by the Company or any of its Subsidiaries
          or
          breach of any warranty by the Company or any of its Subsidiaries in this
          Agreement, any other Related Agreement or in any exhibits or schedules
          attached
          hereto or thereto; or (ii) any breach or default in performance by Company
          or
          any of its Subsidiaries of any covenant or undertaking to be performed
          by
          Company or any of its Subsidiaries hereunder, under any other Related Agreement
          or any other agreement entered into by the Company and/or any of its
          Subsidiaries and such Creditor Party relating hereto or thereto.

         

        8.2           Purchaser
          Indemnification.  Each Purchaser Party agrees to indemnify, hold
          harmless, reimburse and defend the Company and each of the Company’s officers,
          directors, agents, affiliates, control persons and principal shareholders,
          at
          all times against any claims, costs, expenses, liabilities, obligations,
          losses
          or damages (including reasonable legal fees) of any nature, incurred by
          or
          imposed upon the Company which result, arise out of or are based
          upon:  (i) any misrepresentation by such Purchaser or breach of any
          warranty by such Purchaser in this Agreement or in any exhibits or schedules
          attached hereto or any Related Agreement; or (ii) any breach or default
          in
          performance by such Purchaser of any covenant or undertaking to be performed
          by
          such Purchaser hereunder, or any other agreement entered into by the Company
          and
          such Purchaser relating hereto.

         

        
          
            
            

          

          
            32

            
              

            

          

          
            
            

          

        

         

        9.           Conversion
          of Convertible Note.

         

        9.1           Mechanics
          of Conversion.  In the case of any Purchaser:

         

        (a)           Provided
          such Purchaser has notified the Company of such Purchaser’s intention to sell
          the Note Shares and the Note Shares are included in an effective registration
          statement or are otherwise exempt from registration when sold:  (i)
          upon the conversion of the applicable Note or part thereof, the Company
          shall,
          at its own cost and expense, take all necessary action (including the issuance
          of an opinion of counsel reasonably acceptable to such Purchaser following
          a
          request by such Purchaser) to assure that the Company’s transfer agent shall
          issue shares of the Common Stock in the name of such Purchaser (or its
          nominee)
          or such other Persons as designated by such Purchaser in accordance with
          Section
          9.1(b) hereof and in such denominations to be specified representing the
          number
          of Note Shares issuable upon such conversion; and (ii) the Company warrants
          that
          no instructions other than these instructions have been or will be given
          to the
          transfer agent of the Common Stock and that after the Effectiveness Date
          (as
          defined in the Registration Rights Agreements) the applicable Note Shares
          issued
          will be freely transferable subject to the prospectus delivery requirements
          of
          the Securities Act and the provisions of this Agreement, and will not contain
          a
          legend restricting the resale or transferability of the Note
          Shares.

         

        (b)           Such
          Purchaser will give notice of its decision to exercise its right to convert
          the
          applicable Note or part thereof by telecopying or otherwise delivering
          an
          executed and completed notice of the number of shares to be converted to
          the
          Company (the “Notice of Conversion”).  Such Purchaser will not be
          required to surrender the applicable Note until such Purchaser receives
          a credit
          to the account of such Purchaser’s prime broker through the DWAC system (as
          defined below), representing the Note Shares or until the applicable Note
          has
          been fully satisfied.  Each date on which a Notice of Conversion is
          telecopied or delivered to the Company in accordance with the provisions
          hereof
          shall be deemed a “Conversion Date.”  Pursuant to the terms of the
          Notice of Conversion, the Company will issue instructions to the transfer
          agent
          accompanied by an opinion of counsel within two (2) business day of the
          date of
          the delivery to the Company of the  Notice of Conversion and shall
          cause the transfer agent to transmit the certificates representing the
          Conversion Shares to the Holder by crediting the account of such Purchaser’s
          prime broker with the Depository Trust Company (“DTC”) through its Deposit
          Withdrawal Agent Commission (“DWAC”) system within four (4) business days after
          receipt by the Company of the Notice of Conversion (the “Delivery
          Date”).

         

        
          
            
            

          

          
            33

            
              

            

          

          
            
            

          

        

         

        (c)           The
          Company understands that a delay in the delivery of the Note Shares in
          the form
          required pursuant to Section 9 hereof beyond the Delivery Date could result
          in
          economic loss to such Purchaser.  In the event that the Company fails
          to direct its transfer agent to deliver the applicable Note Shares to such
          Purchaser via the DWAC system within the time frame set forth in Section
          9.1(b)
          above and the applicable Note Shares are not delivered to such Purchaser
          by the
          Delivery Date, as compensation to such Purchaser for such loss, the Company
          agrees to pay late payments to such Purchaser for late issuance of the
          applicable Note Shares in the form required pursuant to Section 9 hereof
          upon
          conversion of the applicable Note in the amount equal to the greater
          of:  (i) $250 per business day after the Delivery Date; or (ii) such
          Purchaser’s actual damages from such delayed delivery.  The Company
          shall pay any payments incurred under this Section in immediately available
          funds upon demand and, in the case of actual damages, accompanied by reasonable
          documentation of the amount of such damages.  Such documentation shall
          show the number of shares of Common Stock such Purchaser is forced to purchase
          (in an open market transaction) which such Purchaser anticipated receiving
          upon
          such conversion, and shall be calculated as the amount by which (A) such
          Purchaser’s total purchase price (including customary brokerage commissions, if
          any) for the shares of Common Stock so purchased exceeds (B) the aggregate
          principal and/or interest amount of the applicable Note, for which such
          Conversion Notice was not timely honored.

         

        10.           Registration
          Rights.

         

        10.1           Registration
          Rights Granted.  The Company hereby grants registration rights to
          each Purchaser pursuant to the Registration Rights Agreements.

         

        10.2           Offering
          Restrictions.  Except as previously disclosed in the SEC Reports
          or in the Exchange Act Filings, or stock or stock options granted to employees
          or directors of the Company (these exceptions hereinafter referred to as
          the
“Excepted Issuances”), neither the Company nor any of its Subsidiaries
          will, prior to the full exercise by the Purchasers of the Warrants, (x)
          enter
          into any equity line of credit agreement or similar agreement or (y) issue,
          or
          enter into any agreement to issue, any securities with a variable/floating
          conversion and/or pricing feature which are or could be (by conversion
          or
          registration) free-trading securities (i.e.  common stock subject to a
          registration statement).

         

        11.           Miscellaneous.

         

        11.1           Governing
          Law, Jurisdiction and Waiver of Jury Trial.

         

        (a)           THIS
          AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED
          AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
          TO
          CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES
          OF
          CONFLICTS OF LAWS.

         

        
          
            
            

          

          
            34

            
              

            

          

          
            
            

          

        

         

        (b)           THE
          COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
          IN
          THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
          TO
          HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE
          HAND,
          AND ANY CREDITOR PARTY, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT
          OR ANY
          OF THE RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO
          THIS
          AGREEMENT OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT EACH
          CREDITOR PARTY AND THE COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
          COURTS
          MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK,
          STATE
          OF NEW YORK; AND FURTHERPROVIDED, THAT, TO THE EXTENT NECESSARY TO
          EXERCISE ANY RIGHTS OR REMEDIES THAT ANY CREDITOR PARTY HAS WITH RESPECT
          TO
          COLLATERAL LOCATED IN ANOTHER JURISDICTION, THAT, NOTHING IN THIS AGREEMENT
          SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY CREDITOR PARTY FROM BRINGING
          SUIT OR
          TAKING OTHER LEGAL ACTION IN ANY SUCH OTHER JURISDICTION TO COLLECT THE
          OBLIGATIONS, TO REALIZE ON THE COLLATERAL (AS DEFINED IN THE MASTER SECURITY
          AGREEMENT) OR ANY OTHER SECURITY FOR THE OBLIGATIONS (AS DEFINED IN THE
          MASTER
          SECURITY AGREEMENT), OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
          OF
          ANY CREDITOR PARTY.  THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN
          ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
          COURT,
          AND THE COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON
          LACK OF
          PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
          CONVENIENS.  THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
          SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
          AND
          AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE
          MADE BY
          REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET
          FORTH
          IN SECTION 11.9 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
          THE
          EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT
          IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

         

        (c)           THE
          PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
          APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
          BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
          WAIVE ALL
          RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
          ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN ANY
          CREDITOR PARTY AND/OR THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED
          OR
          INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
          THIS
          AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO
          OR
          THERETO.

         

        11.2           Severability.  Wherever
          possible each provision of this Agreement and the Related Agreements shall
          be
          interpreted in such manner as to be effective and valid under applicable
          law,
          but if any provision of this Agreement or any Related Agreement shall be
          prohibited by or invalid or illegal under applicable law such provision
          shall be
          ineffective to the extent of such prohibition or invalidity or illegality,
          without invalidating the remainder of such provision or the remaining provisions
          thereof which shall not in any way be affected or impaired thereby.

         

        
          
            
            

          

          
            35

            
              

            

          

          
            
            

          

        

         

        11.3           Survival.  The
          representations, warranties, covenants and agreements made herein shall
          survive
          any investigation made by any Creditor Party and the closing of the transactions
          contemplated hereby to the extent provided therein.  All statements as
          to factual matters contained in any certificate or other instrument delivered
          by
          or on behalf of the Company pursuant hereto in connection with the transactions
          contemplated hereby shall be deemed to be representations and warranties
          by the
          Company hereunder solely as of the date of such certificate or
          instrument.  All indemnities set forth herein shall survive the
          execution, delivery and termination of this Agreement and the Notes and
          the
          making and repayment of the obligations arising hereunder, under the Notes
          and
          under the other Related Agreements.

         

        11.4           Successors.

         

        (a)           Except
          as otherwise expressly provided herein, the provisions hereof shall inure
          to the
          benefit of, and be binding upon, the successors, heirs, executors and
          administrators of the parties hereto and shall inure to the benefit of
          and be
          enforceable by each person or entity which shall be a holder of the Securities
          from time to time, other than the holders of Common Stock which has been
          sold by
          any Purchaser pursuant to Rule 144 or an effective registration
          statement.  Each Purchaser may assign any or all of the Obligations to
          any Person and, subject to acceptance and recordation thereof by the Agent
          pursuant to Section 11.4(b) and receipt by the Agent of a copy of the agreement
          or instrument pursuant to which such assignment is made (each such agreement
          or
          instrument, an “Assignment Agreement”), any such assignee shall succeed to all
          of such Purchaser’s rights with respect thereto; provided that no Purchaser
          shall be permitted to assign its rights hereunder or under any Related
          Agreement
          to a competitor of the Company unless an Event of Default (as defined in
          each
          Note) has occurred and is continuing.  Upon such assignment, such
          Purchaser shall be released from all responsibility for the Collateral
          (as
          defined in the Master Security Agreement, the Stock Pledge Agreement and
          each
          other security agreement, mortgage, cash collateral deposit letter, pledge
          and
          other agreements which are executed by the Company or any of its Subsidiaries
          in
          favor of any Creditor Party) to the extent same is assigned to any
          transferee.  Each Purchaser may from time to time sell or otherwise
          grant participations in any of the Obligations (as defined in the Master
          Security Agreement) and the holder of any such participation shall, subject
          to
          the terms of any agreement between such Purchaser and such holder, be entitled
          to the same benefits as such Purchaser with respect to any security for
          the
          Obligations (as defined in the Master Security Agreement) in which such
          holder
          is a participant.  The Company agrees that each such holder may
          exercise any and all rights of banker’s lien, set-off and counterclaim with
          respect to its participation in the Obligations (as defined in the Master
          Security Agreement) as fully as though the Company were directly indebted
          to
          such holder in the amount of such participation.  The Company may not
          assign any of its rights or obligations hereunder without the prior written
          consent of the Agent.  All of the terms, conditions, promises,
          covenants, provisions and warranties of this Agreement shall inure to the
          benefit of each of the undersigned, and shall bind the representatives,
          successors and permitted assigns of the Company.

         

        
          
            
            

          

          
            36

            
              

            

          

          
            
            

          

        

         

        (b)           The
          Agent shall maintain, or cause to be maintained, for this purpose only
          as agent
          of the Company, (i) a copy of each Assignment Agreement delivered to it
          and (ii)
          a book entry system, within the meaning of U.S. Treasury Regulation Sections
          15f.103-1(c) and 1.871-14(c) (the “Register”), in which it will register
          the name and address of each Purchase and the name and address of each
          assignee
          of each Purchaser under this Agreement, and the principal amount of, and
          stated
          interest on, the Notes owing to each such Purchaser and assignee pursuant
          to the
          terms hereof and each Assignment Agreement.  The right, title and
          interest of the Purchasers and their assignees in and to such Notes shall
          be
          transferable only upon notation of such transfer in the Register, and no
          assignment thereof shall be effective until recorded therein.  The
          Company and each Creditor Party shall treat each Person whose name is recorded
          in the Register as a Purchaser pursuant to the terms hereof as a Purchaser
          and
          owner of an interest in the Obligations hereunder for all purposes of this
          Agreement, notwithstanding notice to the contrary or any notation of ownership
          or other writing or any Note.  The Register shall be available for
          inspection by the Company or any Purchaser, at any reasonable time and
          from time
          to time, upon reasonable prior notice.

         

        11.5           Entire
          Agreement; Maximum Interest.  This Agreement, the Related
          Agreements, the exhibits and schedules hereto and thereto and the other
          documents delivered pursuant hereto constitute the full and entire understanding
          and agreement between the parties with regard to the subjects hereof and
          no
          party shall be liable or bound to any other in any manner by any
          representations, warranties, covenants and agreements except as specifically
          set
          forth herein and therein.  Nothing contained in this Agreement, any
          Related Agreement or in any document referred to herein or delivered in
          connection herewith shall be deemed to establish or require the payment
          of a
          rate of interest or other charges in excess of the maximum rate permitted
          by
          applicable law.  In the event that the rate of interest or dividends
          required to be paid or other charges hereunder exceed the maximum rate
          permitted
          by such law, any payments in excess of such maximum shall be credited against
          amounts owed by the Company to the Purchasers and thus refunded to the
          Company.

         

        11.6           Amendment
          and Waiver.

         

        (a)           This
          Agreement may be amended or modified only upon the written consent of the
          Company and the Agent.

         

        (b)           The
          obligations of the Company and the rights of the Creditor Parties under
          this
          Agreement may be waived only with the written consent of the Agent.

         

        (c)           The
          obligations of the Creditor Parties and the rights of the Company under
          this
          Agreement may be waived only with the written consent of the
          Company.

         

        11.7           Delays
          or Omissions.  It is agreed that no delay or omission to exercise
          any right, power or remedy accruing to any party, upon any breach, default
          or
          noncompliance by another party under this Agreement or the Related Agreements,
          shall impair any such right, power or remedy, nor shall it be construed
          to be a
          waiver of any such breach, default or noncompliance, or any acquiescence
          therein, or of or in any similar breach, default or noncompliance thereafter
          occurring.  All remedies, either under this Agreement or the Related
          Agreements, by law or otherwise afforded to any party, shall be cumulative
          and
          not alternative.

         

        
          
            
            

          

          
            37

            
              

            

          

          
            
            

          

        

         

        11.8           Notices.  All
          notices required or permitted hereunder shall be in writing and shall be
          deemed
          effectively given:

         

        (a)           upon
          personal delivery to the party to be notified;

         

        (b)           when
          sent by confirmed facsimile if sent during normal business hours of the
          recipient, if not, then on the next business day;

         

        (c)           three
          (3) business days after having been sent by registered or certified mail,
          return
          receipt requested, postage prepaid; or

         

        (d)           one
          (1) day after deposit with a nationally recognized overnight courier, specifying
          next day delivery, with written verification of receipt.

         

        All
          communications shall be sent as follows:

         

        
          	
                  If
                    to the Company, to:

                	
                  General
                    Environmental Management, Inc.

                  3191
                    Temple Ave., Suite 250

                  Pomona,
                    CA 91768

                  Attention:  Chief
                    Financial Officer

                  Facsimile
                    No.:  909-444-9900

                
	 	 
	
                  with
                    a copy to:

                	
                  de
                    Castro, P.C.

                  309
                    Laurel Street

                  San
                    Diego, CA 92101

                  Attention:  Stanley
                    Moskowitz

                  Facsimile
                    No.:  619-702-9401

                
	 	 
	
                  If
                    to the Agent, to:

                	
                  LV
                    Administrative Services, Inc.

                  c/o
                    Laurus Capital Management, LLC

                  335
                    Madison Avenue, 10th Floor

                  New
                    York, NY 10017

                  Facsimile
                    No.:                                212-581-5037

                
	 	 
	
                  with
                    a copy to:

                	
                  Loeb
                    & Loeb, LLP

                  345
                    Park Avenue

                  New
                    York, NY 10154

                  Attention:                      Scott
                    J. Giordano, Esq.

                  Facsimile
                    No.:                                212-407-4990

                
	 	 
	
                  If
                    to a Purchaser:

                	
                  To
                    the address indicated under its signature on the signature pages
                    hereto

                


        

         

        or
          at
          such other address as the Company or the applicable Creditor Party may
          designate
          by written notice to the other parties hereto given in accordance
          herewith.

         

        
          
            
            

          

          
            38

            
              

            

          

          
            
            

          

        

         

        11.9           Attorneys’
          Fees.  In the event that any suit or action is instituted to
          enforce any provision in this Agreement or any Related Agreement, the prevailing
          party in such dispute shall be entitled to recover from the losing party
          all
          fees, costs and expenses of enforcing any right of such prevailing party
          under
          or with respect to this Agreement and/or such Related Agreement, including,
          without limitation, such reasonable fees and expenses of attorneys and
          accountants, which shall include, without limitation, all fees, costs and
          expenses of appeals.

         

        11.10          Titles
          and Subtitles.  The titles of the sections and subsections of this
          Agreement are for convenience of reference only and are not to be considered
          in
          construing this Agreement.

         

        11.11          Facsimile
          Signatures; Counterparts.  This Agreement may be executed by
          facsimile signatures and in any number of counterparts, each of which shall
          be
          an original, but all of which together shall constitute one
          agreement.

         

        11.12          Broker’s
          Fees.  Except as set forth on Schedule 11.12 hereof, each
          party hereto represents and warrants that no agent, broker, investment
          banker,
          person or firm acting on behalf of or under the authority of such party
          hereto
          is or will be entitled to any broker’s or finder’s fee or any other commission
          directly or indirectly in connection with the transactions contemplated
          herein.  Each party hereto further agrees to indemnify each other
          party for any claims, losses or expenses incurred by such other party as
          a
          result of the representation in this Section 11.12 being untrue.

         

        11.13          Construction.  Each
          party acknowledges that its legal counsel participated in the preparation
          of
          this Agreement and the Related Agreements and, therefore, stipulates that
          the
          rule of construction that ambiguities are to be resolved against the drafting
          party shall not be applied in the interpretation of this Agreement or any
          Related Agreement to favor any party against the other.

         

        11.14          Agency.  Each
          Purchaser has pursuant to an Administrative and Collateral Agency Agreement
          designated and appointed the Agent as the administrative and collateral
          agent of
          such Purchaser under this Agreement and the Related Agreements.

         

        [THE
          REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

         

         

        
          
            
            

          

          
            39

            
              

            

          

          
            
            

          

        

         

        IN
          WITNESS WHEREOF, the parties hereto have executed the SECURITIES PURCHASE
          AGREEMENT as of the date set forth in the first paragraph hereof.

         

        
          	
                  COMPANY:

                	 	
                  PURCHASERS:

                	 
	 	 	 	 	 
	
                  GENERAL
                    ENVIRONMENTAL MANAGEMENT, INC. 

                	 	
                  VALENS
                    U.S. SPV I, LLC 

                	 
	 	 	 	 	 	 
	 	 	 	By: 	
                  VALENS
                    CAPITAL MANAGEMENT, LLC, 

                  its
                    investment manager

                	 
	 	 	 	 	 	 
	By:
                  	
                   

                	 	By:	
                   

                	 
	 	
                  Name:
                    

                	 	 	
                  Name:
                    

                	 
	 	
                  Title:
                    

                	 	 	
                  Title:
                    Authorized Signatory

                	 


        

         

         

        
          
            	
                    
                      AGENT:

                    

                  	 	
                    
                      VALENS
                        OFFSHORE SPV II, CORP.

                    

                  	 
	 	 	 	 	 	 
	
                    LV
                      ADMINISTRATIVE SERVICES, INC.,

                    as
                      Agent 

                  	 	By: 
                     	
                    VALENS
                      CAPITAL MANAGEMENT, LLC, 

                    its
                      investment manager

                  	 
	 	 	 	 	 	 
	By:
                    	
                     

                  	 	By:	
                     

                  	 
	 	
                    Name:
                      

                  	 	 	
                    Name:
                      

                  	 
	 	
                    Title:
                      

                  	 	 	
                    Title:
                      Authorized Signatory

                  	 


          

        

         

         

        
          
            
            

          

          
            40

            
              

            

          

          
            
            

          

        

         

        EXHIBIT
          A

         

        FORM
          OF CONVERTIBLE TERM NOTE

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        
          
            
            

          

          
            41

            
              

            

          

          
            
            

          

        

         

        EXHIBIT
          B

         

        FORM
          OF WARRANT

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        
          
            
            

          

          
            42

            
              

            

          

          
            
            

          

        

         

        EXHIBIT
          C

         

        FORM
          OF OPINION

         

        1.           The
          Company and each of its Subsidiaries is a corporation duly incorporated,
          validly
          existing and in good standing under the laws of the jurisdiction of its
          formation and has all requisite corporate power and authority to own, operate
          and lease its properties and to carry on its business as it is now being
          conducted.

         

        2.           The
          Company and each of its Subsidiaries has the requisite corporate power
          and
          authority to execute, deliver and perform its obligations under the Agreement
          and the Related Agreements.  All corporate action on the part of the
          Company and each of its Subsidiaries and its officers, directors and
          stockholders necessary has been taken for:  (i) the authorization of
          the Agreement and the Related Agreements and the performance of all obligations
          of the Company and each of its Subsidiaries thereunder; and (ii) the
          authorization, sale, issuance and delivery of the Securities pursuant to
          the
          Agreement and the Related Agreements.  The Note Shares and the Warrant
          Shares, when issued pursuant to and in accordance with the terms of the
          Agreement and the Related Agreements and upon delivery shall be validly
          issued
          and outstanding, fully paid and non assessable.

         

        3.           The
          execution, delivery and performance by the Company and each of its Subsidiaries
          of the Agreement and the Related Agreements (to which it is a party) and
          the
          consummation of the transactions on its part contemplated by any thereof,
          will
          not, with or without the giving of notice or the passage of time or
          both:

         

        (a)           Violate
          the provisions of their respective Charter or bylaws; or

         

        (b)           Violate
          any judgment, decree, order or award of any court binding upon the Company
          or
          any of its Subsidiaries; or

         

        (c)           Violate
          any [insert jurisdictions in which counsel is qualified] or federal
          law

         

        4.           The
          Agreement and the Related Agreements will constitute, valid and legally
          binding
          obligations of the Company and each of its Subsidiaries (to the extent
          such
          entity is a party thereto), and are enforceable against the Company and
          each of
          its Subsidiaries party thereto in accordance with their respective terms,
          except:

         

        (a)           as
          limited by applicable bankruptcy, insolvency, reorganization, moratorium
          or
          other laws of general application affecting enforcement of creditors’ rights;
          and

         

        (b)           general
          principles of equity that restrict the availability of equitable or legal
          remedies.

         

        5.           To
          such counsel’s knowledge, the sale of each Note and the subsequent conversion of
          such Note into Note Shares are not subject to any preemptive rights or
          rights of
          first refusal that have not been properly waived or complied with.  To
          such counsel’s knowledge, the sale of the Warrants and the subsequent exercise
          of the Warrants for Warrant Shares are not subject to any preemptive rights
          or,
          to such counsel’s knowledge, rights of first refusal that have not been properly
          waived or complied with.

         

        
          
            
            

          

          
            43

            
              

            

          

          
            
            

          

        

         

        6.           Assuming
          the accuracy of the representations and warranties of each Purchaser contained
          in the Agreement, the offer, sale and issuance of the Securities on the
          Closing
          Date will be exempt from the registration requirements of the Securities
          Act.  To such counsel’s knowledge, neither the Company, nor any of its
          affiliates, nor any person acting on its or their behalf, has directly
          or
          indirectly made any offers or sales of any security or solicited any offers
          to
          buy and security under circumstances that would cause the offering of the
          Securities pursuant to the Agreement or any Related Agreement to be integrated
          with prior offerings by the Company for purposes of the Securities Act
          which
          would prevent the Company from selling the Securities pursuant to Rule
          506 under
          the Securities Act, or any applicable exchange-related stockholder approval
          provisions.

         

        7.           There
          is no action, suit, proceeding or investigation pending or, to such counsel’s
          knowledge, currently threatened against the Company or any of its Subsidiaries
          that prevents the right of the Company or any of its Subsidiaries to enter
          into
          this Agreement or any Related Agreement, or to consummate the transactions
          contemplated thereby.  To such counsel’s knowledge, the Company is not
          a party or subject to the provisions of any order, writ, injunction, judgment
          or
          decree of any court or government agency or instrumentality; nor is there
          any
          action, suit, proceeding or investigation by the Company currently pending
          or
          which the Company intends to initiate.

         

        8.           The
          terms and provisions of the Master Security Agreement and the Stock Pledge
          Agreement create a valid security interest in favor of the Agent, in the
          respective rights, title and interests  of the Company and its
          Subsidiaries in and to the Collateral (as defined in each of the Master
          Security
          Agreement and the Stock Pledge Agreement).  Each UCC-1 Financing
          Statement naming the Company or any Subsidiary thereof as debtor and the
          Agent
          as secured party are in proper form for filing and assuming that such UCC-1
          Financing Statements have been filed with the Secretary of State of
          [_____________], the security interest created under the Master Security
          Agreement will constitute a perfected security interest under the Uniform
          Commercial Code in favor of the Agent in respect of the Collateral that
          can be
          perfected by filing a financing statement.  After giving effect to the
          delivery to the Agent of the stock certificates representing the ownership
          interests of each Subsidiary of the Company (together with effective
          endorsements) and assuming the continued possession by the Agent of such
          stock
          certificates in the State of New York, the security interest created in
          favor of
          the Agent under the Stock Pledge Agreement constitutes a valid and enforceable
          first perfected security interest in such ownership interests (and the
          proceeds
          thereof) in favor of the Agent, subject to no other security
          interest.  No filings, registrations or recordings are required in
          order to perfect (or maintain the perfection or priority of) the security
          interest created under the Stock Pledge Agreement in respect of such ownership
          interests.

         

        9.           [Real
          property opinions will also be required]

         

        
          
            
            

          

          
            44

            
              

            

          

          
            
            

          

        

        


         

        EXHIBIT
          D

         

        FORM
          OF ESCROW AGREEMENT

        


         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        
          
            
            

          

          
            45

            
              

            

          

          
            
            

          

        

         

        EXHIBIT
          E

         

        FORM
          OF COMPLIANCE CERTIFICATE

         

        


         

        [See
          Attached]

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        
          
            
            

          

          
            46

            
              

            

          

          
            
            

          

        

         

        SCHEDULE
          1

         

        PURCHASER
          COMMITMENTS

         

        


         

        VALENS
          U.S. SPV I,
          LLC                                                                                     $647,508.90

         

        


         

        VALENS
          OFFSHORE SPV II,
          CORP                                                                   $597,700.52

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        
          
            
            

          

          
            47

            
              

            

          

          
            
            

          

        

         

        SCHEDULE
          2

         

        WARRANT
          HOLDERS AND WARRANT SHARES

         

        


         

        VALENS
          U.S. SPV I,
          LLC                                                                                     516,218

         

        


         

        VALENS
          OFFSHORE SPV II,
          CORP                                                                   476,509