f8k021710ex10i_nxt.htm


    Exhibit
10.1

     

    
      


      SECURITIES
PURCHASE AGREEMENT

       

      This
Securities Purchase Agreement (this “Agreement”) is dated
as of February 17, 2010, between NXT Nutritionals Holdings, Inc., a Delaware
corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).

       

      WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.

       

      NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as
follows:

       

       

      ARTICLE
I.

      DEFINITIONS

       

      1.1    Definitions.  In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Notes (as defined herein), and (b) the following terms have the meanings set
forth in this Section 1.1:

       

      “Acquiring Person”
shall have the meaning ascribed to such term in Section 4.7.

       

      “Action” shall have
the meaning ascribed to such term in Section 3.1(j).

       

      “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 405 under the Securities Act.

       

      “Board of Directors”
means the board of directors of the Company.

       

      “Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.

       

      “Closing” means the
closing of the purchase and sale of the Securities pursuant to Section
2.1.

       

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

       

      “Closing Date” means
the Trading Day on which all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been
satisfied or waived, but in no event later than the third Trading Day following
the date hereof.

       

       “Closing Price” means
on any particular date (a) the last reported closing bid price per share of
Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
at 4:15 p.m. (New York City time)), (b) if there is no such price on such date,
then the closing bid price on the Trading Market on the date nearest preceding
such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)),
(c)  if the Common Stock is not then listed or quoted on a Trading Market
and if prices for the Common Stock are then reported in the “pink sheets”
published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) if the shares of Common Stock
are not then publicly traded the fair market value as of such date of a share of
Common Stock as determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding and
reasonably acceptable to the Company, the fees and expenses of which shall be
paid by the Company.

       

       “Commission” means the
United States Securities and Exchange Commission.

       

      “Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed.

       

      “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

       

      “Company Counsel”
means Anslow & Jaclin, LLP, with offices located at 195 Route 9 South,
Manalapan, New Jersey 07726.

       

      “Conversion Price”
shall have the meaning ascribed to such term in the Notes.

       

      “Disclosure Schedules”
shall have the meaning ascribed to such term in Section 3.1.

       

       “Effective Date” means
the earlier of the date that (a) all of the Registrable Securities (as defined
in the Registration Rights Agreement) have been registered for resale by the
holders thereof pursuant to a registration statement(s) declared effective by
the Commission and (b) all of the Registrable Securities have been sold pursuant
to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the
Company to be in compliance with the current public information required under
Rule 144 and without volume or manner-of-sale restrictions.

       

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      “Escrow Agent” means
Signature Bank, a New York State chartered bank and having an office at 261
Madison Avenue, New York, New York 10016.

       

      “Escrow Agreement”
means the escrow agreement entered into prior to the date hereof, by and among
the Company and the Escrow Agent pursuant to which the Purchasers, shall deposit
Subscription Amounts with the Escrow Agent to be applied to the transactions
contemplated hereunder.

       

      “Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).

       

      “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

      


      “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board
of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price
or conversion price of such securities, (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities, (d) with the prior written consent of Garden State, up
to a Subscription Amount of Notes and Series C Warrants equal to the difference
between $6,000,000 and the aggregate Subscription Amounts hereunder, on the same
terms and conditions and prices as hereunder, with investors executing
definitive agreements for the purchase of such securities and such transactions
having closed on or before ___, and (e) the issuance of Series C Warrants to
investors in the Company’s prior offering closed on August 27, 2009 to purchase
up to 300,000 shares of Common Stock at an exercise price of $2.00 per share in
connection with the extinguishment of potential liquidated damages related
thereto.

       

      “GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

       

      “Garden State” means
Garden State Securities, Inc.

       

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      “Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(aa).

       

      “Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).

       

      “Legend Removal Date”
shall have the meaning ascribed to such term in Section 4.1(c).

       

      “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

       

      “Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).

       

      “Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).

       

      “Maximum Rate” shall
have the meaning ascribed to such term in Section 5.17.

       

      “Notes” means the
Original Issue Discount Senior Secured Convertible Notes due, subject to the
terms therein, 15 months from their date of issuance, issued by the Company to
the Purchasers hereunder, in the form of Exhibit A attached
hereto.

       

      “Participation
Maximum” shall have the meaning ascribed to such term in Section
4.12(a).

       

      “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

       

      “Pre-Notice” shall
have the meaning ascribed to such term in Section 4.12(b).

       

      “Principal Amount”
means, as to each Purchaser, the amounts set forth below such Purchaser’s
signature block on the signature pages hereto next to the heading “Principal
Amount,” in United States Dollars, which shall equal such Purchaser’s
Subscription Amount multiplied by 1.15.

       

      “Pro Rata Portion”
shall have the meaning ascribed to such term in Section 4.12(e).

       

      “Proceeding” means an
action, claim, suit, investigation or proceeding, whether commenced or
threatened.

       

      “Public Information
Failure” shall have the meaning ascribed to such term in Section
4.3(b).

       

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      “Public Information Failure
Payments” shall have the meaning ascribed to such term in Section
4.3(b).

       

      “Purchaser Party”
shall have the meaning ascribed to such term in Section 4.10.

       

      “Registration Rights
Agreement” means the Registration Rights Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of Exhibit B attached
hereto.

       

      “Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Purchaser as provided for in the Registration Rights
Agreement.

       

      “Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).

       

      “Required Minimum”
means, as of any date, the maximum aggregate number of shares of Common Stock
then issued or potentially issuable in the future pursuant to the Transaction
Documents, including any Underlying Shares issuable upon exercise in full of all
Series C Warrants or conversion in full of all Notes, ignoring any conversion or
exercise limits set forth therein, and assuming that the Conversion Price is at
all times on and after the date of determination 75% of the then Conversion
Price on the Trading Day immediately prior to the date of
determination.

       

      “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

       

      “Rule 424” means Rule
424 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

       

      “SEC Reports” shall
have the meaning ascribed to such term in Section 3.1(h).

       

      “Securities” means the
Notes, the Series C Warrants, the Warrant Shares and the Underlying
Shares.

       

      “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

       

      “Security Agreement”
means the Security Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit E attached
hereto.

      


      “Security Documents”
shall mean the Security Agreement, the Subsidiary Guarantees and any other
documents and filing required thereunder in order to grant the Purchasers a
first priority security interest in the assets of the Company and the
Subsidiaries as provided in the Security Agreement, including all UCC-1 filing
receipts.

       

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      “Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock). 

       

       “Subscription Amount”
means, as to each Purchaser, the aggregate amount to be paid for Notes and
Series C Warrants purchased hereunder as specified below such Purchaser’s name
on the signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available
funds.

       

      “Subsequent Financing”
shall have the meaning ascribed to such term in Section 4.12(a).

       

      “Subsequent Financing
Notice” shall have the meaning ascribed to such term in Section
4.12(b).

       

      “Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) and
shall, where applicable, mean any corporation, limited or general partnership,
limited liability company, trust, estate, association, joint venture or other
business entity formed or acquired after the date hereof.

       

      “Subsidiary Guarantee”
means the Subsidiary Guarantee, dated the date hereof, by each Subsidiary in
favor of the Purchasers, in the form of Exhibit F attached
hereto.

       

      “Trading Day” means a
day on which the principal Trading Market is open for trading.

       

      “Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange or the OTC Bulletin Board (or any successors to any of the
foregoing).

       

       “Transaction
Documents” means this Agreement, the Notes, the Series C Warrants, the
Registration Rights Agreement, the Security Agreement, the Subsidiary Guarantee,
the Escrow Agreement, all exhibits and schedules thereto and hereto and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.

       

      “Transfer Agent” means
Corporate Stock Transfer, the current transfer agent of the Company, with a
mailing address of 3200 Cherry Creek South Drive, Suite 430, Denver, CO 80209
and a facsimile number of (303) 282-5800, and any successor transfer agent of
the Company.

       

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      “Underlying Shares”
means the shares of Common Stock issued and issuable upon conversion or
redemption of the Notes and upon exercise of the Series C Warrants.

       

      “Variable Rate
Transaction” shall have the meaning ascribed to such term in Section
4.13(b).

       

      “VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed
or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC
Bulletin Board is not a Trading Market, the volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board, (c) if the Common Stock is not then listed or quoted for trading on the
OTC Bulletin Board and if prices for the Common Stock are then reported in the
“Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported, or (d) in all other cases,
the fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers of a majority in interest of
the Securities then outstanding and reasonably acceptable to the Company, the
fees and expenses of which shall be paid by the Company.

       

      “Warrants” or “Series C Warrants”
means, collectively, the Series C Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Series C Warrants shall be exercisable immediately, have a term of exercise
equal to five years and exercise price equal to $1.25 per share, subject to
adjustment therein in the form of Exhibit C
attached hereto.

       

      “Warrant Shares” means
the shares of Common Stock issuable upon exercise of the Series C
Warrants.

       

      “WS” means Weinstein
Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New York,
New York 10170-0002.

       

      ARTICLE
II.

      PURCHASE
AND SALE

       

      2.1    Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly, agree to purchase, up to an aggregate of $6,000,000 in
Subscription Amount of the Notes.  Each Purchaser shall deliver to the
Company via wire transfer or a certified check of immediately available funds
equal to such Purchaser’s Subscription Amount as set forth on the signature page
hereto executed by such Purchaser, and the Company shall deliver to each
Purchaser its respective Note and a Series C Warrant, as determined pursuant to
Section 2.2(a), and the Company and each Purchaser shall deliver the other items
set forth in Section 2.2 deliverable at the Closing.  Upon
satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3,
the Closing shall occur at the offices of WS or such other location as the
parties shall mutually agree.

       

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      2.2    Deliveries.

       

            
(a)    On or
prior to the Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:

       

      (i) 
this
Agreement duly executed by the Company;

       

      (ii) a legal
opinion of Company Counsel, substantially in the form of Exhibit D attached
hereto;

       

      (iii) a Note
with a principal amount equal to such Purchaser’s  Principal Amount,
registered in the name of such Purchaser;

       

      (iv) a Series
C Warrant registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 100% of such Purchaser’s Principal Amount
divided by the Conversion Price;

       

      (v) the
Security Agreement, duly executed by the Company and each Subsidiary, along with
all of the Security Documents, including the Subsidiary Guarantee, duly executed
by the parties thereto; and

       

      (vi) the
Registration Rights Agreement duly executed by the Company.

       

                     
(b)    On or
prior to the Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company the following:

       

      (i) 
this
Agreement duly executed by such Purchaser;

       

      (ii) such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company;

       

      (iii) the
Security Agreement duly executed by such Purchaser; and

       

      (iv) the
Registration Rights Agreement duly executed by such Purchaser.

       

      2.3    Closing
Conditions.

       

                    
(a)    The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

       

      (i) the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a specific date
therein);

       

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

       

      (ii) all
obligations, covenants and agreements of each Purchaser required to be performed
at or prior to the Closing Date shall have been performed;

       

      (iii) the
aggregate Subscription Amounts shall be equal to at least $2,000,000;
and

       

      (iv) the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this
Agreement.

       

                     
(b)    The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:

       

      (i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless as of a
specific date therein);

       

      (ii) all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;

       

      (iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;

       

      (iv) the
aggregate Subscription Amounts shall be equal to at least
$2,000,000;

       

      (v) there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof; and

       

      (vi) from the
date hereof to the Closing Date, trading in the Common Stock shall not have been
suspended by the Commission  or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the Closing.

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      ARTICLE
III.

      REPRESENTATIONS
AND WARRANTIES

       

      3.1    Representations and
Warranties of the Company.  Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation or otherwise made herein to the extent of
the disclosure contained in the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations and warranties
to each Purchaser:

       

      (a)    Subsidiaries.  All
of the Subsidiaries of the Company are set forth on Schedule
3.1(a).  The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be
disregarded.

       

      (b)    Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation nor
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

       

      (c)    Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required by
the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required
Approvals.  

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

         

        Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

      

       

      (d)    No
Conflicts.  The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it of the transactions contemplated hereby and thereby
to which it is a party do not and will not: (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

       

      (e)    Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.6 of this Agreement, (ii)
the filing with the Commission pursuant to the Registration Rights Agreement,
(iii) the notice and/or application(s) to each applicable Trading Market for the
issuance and sale of the Securities and the listing of the Underlying Shares for
trading thereon in the time and manner required thereby and (iv) the filing of
Form D with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the “Required
Approvals”).

       

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      (f)    Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The Underlying Shares, when issued
in accordance with the terms of the Transaction Documents, will be validly
issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction
Documents.  The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Underlying Shares
at least equal to the Required Minimum on the date hereof.

       

      (g)    Capitalization.  The
capitalization of the Company is as set forth on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the date hereof.
Except as set forth in Schedule 3.1(g), the
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than pursuant to the exercise of employee
stock options under the Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee stock purchase
plans and pursuant to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic report under the
Exchange Act.  No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents.  Except as set
forth on Schedule
3.1(g) or as a result of the purchase and sale of the Securities, there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities.  No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities.  There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.

       

      (h)    SEC Reports; Financial
Statements.  Except as set forth on Schedule 3.1(h), the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law or regulation to file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to 

       

       

      
        
           

        

        
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        herein as
the “SEC
Reports”) on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any
such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  Except as set forth on Schedule 3.1(h), the
Company has never been an issuer subject to Rule 144(i) under the Securities
Act. The financial statements of the Company included in the SEC Reports comply
in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time
of filing.  Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.

      

       

      (i)    Material Changes;
Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date hereof: (i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.  Except for the
issuance of the Securities contemplated by this Agreement or as set forth on
Schedule
3.1(i), no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its Subsidiaries or their respective business,
properties, operations, assets or financial condition, that would be required to
be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is
made.

       

       

      
        
           

        

        
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      (j)    Litigation.  Except
as set forth on Schedule 3.1(j),
there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect.  Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty.  There has not
been, and to the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company or any current or
former director or officer of the Company.  The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

       

      (k)        
Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company
or such Subsidiary, and neither the Company nor any of its Subsidiaries is a
party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good.  No
executive officer, to the knowledge of the Company, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.  The Company
and its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

       

      (l)    Compliance.  Neither
the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or governmental body or (iii) is or has been in
violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor matters, except in
each case as could not have or reasonably be expected to result in a Material
Adverse Effect.

       

       

      
        
           

        

        
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      (m)    Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

       

      (n)    Title to
Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.

       

      (o)    Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights as described
in the SEC Reports as necessary or material for use in connection with their
respective businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”).  None of, and neither the Company nor any Subsidiary
has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to
expire or terminate or be abandoned, within two (2) years from the date of this
Agreement.  Neither the Company nor any Subsidiary has received, since
the date of the latest audited financial statements included within the SEC
Reports, a written notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of any Person,
except as would not have a Material Adverse Effect.  To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.  The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do so could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

       

       

      
        
           

        

        
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      (p)    Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount.  Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

       

      (q)    Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner, in
each case in excess of $120,000 other than for: (i) payment of salary or
consulting fees for services rendered, (ii) reimbursement for expenses incurred
on behalf of the Company and (iii) other employee benefits, including stock
option agreements under any stock option plan of the Company.

       

      (r)    Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in compliance with any
requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof for which compliance by the Company as a small business issuer is
required as of the date hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of the date
hereof and as of the Closing Date.  Except as set forth in Schedule 3.1(r), the
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms.  The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the period covered by the Company’s most recently filed periodic report under
the Exchange Act (such date, the “Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

       

       

      
        
           

        

        
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      (s)    Certain
Fees.  Except as set forth on Schedule 3.1(s), no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents.  The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents.

       

      (t)    Private
Placement.  Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.

       

      (u)    Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.  The Company shall conduct its business in a manner so that
it will not become an “investment company” subject to registration under the
Investment Company Act of 1940, as amended.

       

      (v)    Registration
Rights.  Except as set forth on Schedule 3.1(v), no
Person, other than each of the Purchasers, has any right to cause the Company to
effect the registration under the Securities Act of any securities of the
Company.

       

      (w)    Listing and Maintenance
Requirements.  The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration.  The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

       

      
        
           

        

        
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      (x)    Application of Takeover
Protections.  The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

       

      (y)    Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor, to the knowledge of the Company, any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information
that it believes constitutes or might constitute material, non-public
information.  The Company understands and confirms that the Purchasers
will rely on the foregoing representation in effecting transactions in
securities of the Company.  All of the disclosure furnished by or on
behalf of the Company to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.  The Company acknowledges and agrees that no
Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

       

      (z)    No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor, to the knowledge of the Company, 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 this offering of the Securities to be integrated with prior
offerings by the Company for purposes of (i) the Securities Act which would
require the registration of any such securities under the Securities Act, or
(ii) any applicable shareholder approval provisions of any Trading Market on
which any of the securities of the Company are listed or
designated.

       

      (aa)    Solvency.  Based
on the consolidated financial condition of the Company as of the Closing Date,
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder: the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature.  The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its
debt).  Except as set forth on Schedule 3.1(aa), the
Company has no knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing
Date.  Schedule 3.1(aa) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $50,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

       

       

      
        
           

        

        
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      (bb)    Tax
Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary (i) has made or filed all United States
federal and state income and all foreign income and franchise tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision reasonably adequate
for the payment of all material taxes for periods subsequent to the periods to
which such returns, reports or declarations apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company or of any Subsidiary know of
no basis for any such claim.

       

      (cc)    No General
Solicitation. Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the Securities by any form of general
solicitation or general advertising.  The Company has offered the
Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

       

      (dd)    Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.

       

      (ee)    Accountants.  The
Company’s accounting firm is set forth on Schedule 3.1(ee) of
the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as required by
the Exchange Act and (ii) shall express its opinion with respect to the
financial statements to be included in the Company’s Annual Report for the year
ending December 31, 2009.

       

       

      
        
           

        

        
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      (ff)    Seniority.  As
of the Closing Date, no Indebtedness or other claim against the Company is
senior to the Notes in right of payment, whether upon liquidation or
dissolution, or otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets covered
thereby) and capital lease obligations (which is senior only as to the property
covered thereby).

       

      (gg)    No Disagreements with
Accountants and Lawyers.  Except as set forth on Schedule 3.1(gg),
there are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants and
lawyers formerly or presently employed by the Company and the Company is current
with respect to any fees owed to its accountants and lawyers which could affect
the Company’s ability to perform any of its obligations under any of the
Transaction Documents.

       

      (hh)    Acknowledgment Regarding
Purchasers’ Purchase of Securities.  The Company acknowledges
and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby.  The Company further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities.  The Company further
represents to each Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.

       

      (ii)     Acknowledgment
Regarding Purchaser’s Trading Activity.  Anything in this Agreement or elsewhere
herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.16
hereof), it is understood and acknowledged by the Company that: (i) none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term, (ii) past or future
open market or other transactions by any Purchaser, specifically including,
without limitation, Short Sales or “derivative” transactions, before or after
the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities, (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock and (iv) each Purchaser shall not be deemed to have
any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The
Company further understands and acknowledges that (y) one or more Purchasers may
engage in hedging activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods
that the value of the Underlying Shares deliverable with respect to Securities
are being determined, and (z) such hedging activities (if any) could reduce the
value of the existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted.  The Company
acknowledges that such aforementioned hedging activities do not constitute a
breach of any of the Transaction Documents.

       

       

      
        
           

        

        
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      (jj)    Regulation M
Compliance.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.

       

      (kk)    Office of Foreign Assets
Control.  Neither the Company nor, to the Company's knowledge,
any director, officer, agent, employee or affiliate of the Company is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”).

       

      (ll)    U.S. Real Property Holding
Corporation.  The Company is not and has never been a U.S. real
property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company shall so certify upon
Purchaser’s request.

       

      (mm)    Bank Holding Company
Act.  Neither the Company nor any of its Subsidiaries or
Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to
regulation by the Board of Governors of the Federal Reserve System (the “Federal
Reserve”).  Neither the Company nor any of its Subsidiaries or
Affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent or more of the total equity of a bank or any entity that is subject to
the BHCA and to regulation by the Federal Reserve.  Neither the
Company nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

       

      (nn)    Money
Laundering.  The operations of the Company are and have been
conducted at all times in compliance with applicable financial record-keeping
and reporting requirements of the Currency and Foreign Transactions Reporting
Act of 1970, as amended, applicable money laundering statutes and applicable
rules and regulations thereunder (collectively, the “Money Laundering
Laws”), and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
with respect to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.

       

      3.2    Representations and
Warranties of the Purchasers.    Each Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows (unless as of a
specific date therein):

       

       

      
        
           

        

        
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      (a)    Organization;
Authority.  Such Purchaser is either an individual or an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the
Transaction Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as applicable, on the
part of such Purchaser.  Each Transaction Document to which it is a
party has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.

       

      (b)    Own
Account.  Such Purchaser understands that the Securities are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
in violation of the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws).  Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its
business.

       

      (c)    Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises
any Series C Warrants or converts any Notes it will be either: (i) an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act.  Such Purchaser is
not required to be registered as a broker-dealer under Section 15 of the
Exchange Act.

       

      (d)    Experience of Such Purchaser.  Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such
investment.  Such Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

       

       

      
        
           

        

        
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      (e)    General
Solicitation.  Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

       

      (f)    Certain Transactions and
Confidentiality.  Other than consummating the transactions
contemplated hereunder, such Purchaser has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such
Purchaser, executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that such
Purchaser first received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material terms of the
transactions contemplated hereunder and ending immediately prior to the
execution hereof.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar transactions in the
future.

       

      (g)    Brokers’
Fees.  Other than Garden State and except as set forth on Schedule 3.1(s), each
Purchaser has no knowledge of any brokerage or finder’s fees or commissions that
are or will be payable by the Placement Agent, the Company or any Subsidiary to
any broker, financial advisor, Purchaser, consultant, finder, placement agent,
investment banker, bank or other person or entity with respect to the
transactions contemplated by this Agreement.

       

      The
Company acknowledges and agrees that the representations contained in Section
3.2 shall not modify, amend or affect such Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated
hereby.

      


       

      ARTICLE
IV.

      OTHER
AGREEMENTS OF THE PARTIES

       

      4.1 Transfer
Restrictions.

       

       

      
        
           

        

        
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      (a)    The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and the Registration Rights
Agreement and shall have the rights and obligations of a Purchaser under this
Agreement and the Registration Rights Agreement.

       

      (b)    The
Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:

       

      [NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE
UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

       

      The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be required of such
pledge.  At the appropriate Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities, including, if the Securities are subject to registration
pursuant to the Registration Rights Agreement, the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders (as defined in the Registration Rights Agreement)
thereunder.

       

       

      
        
           

        

        
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      (c)    Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement
(including the Registration Statement) covering the resale of such security is
effective under the Securities Act, (ii) following any sale of such Underlying
Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for
sale under Rule 144, without the requirement for the Company to be in compliance
with the current public information required under Rule 144 as to such
Underlying Shares and without volume or manner-of-sale restrictions or (iv) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Company shall cause its counsel to issue a legal opinion to
the Transfer Agent promptly after the Effective Date if required by the Transfer
Agent to effect the removal of the legend hereunder.  If all or any
portion of a Note is converted or Series C Warrant is exercised at a time when
there is an effective registration statement to cover the resale of the
Underlying Shares, or if such Underlying Shares may be sold under Rule 144 and
the Company is then in compliance with the current public information required
under Rule 144, or if such Underlying Shares may be sold under Rule 144 without
the requirement for the Company to be in compliance with the current public
information required under Rule 144 as to such Underlying Shares and without
volume or manner-of-sale restrictions or if such legend is not otherwise
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Underlying Shares shall be issued free of all legends.  The
Company agrees that following the Effective Date or at such time as such legend
is no longer required under this Section 4.1(c), it will, no later than three
Trading Days following the delivery by a Purchaser to the Company or the
Transfer Agent of a certificate representing Underlying Shares, as applicable,
issued with a restrictive legend (such third Trading Day, the “Legend Removal
Date”), deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4.  Certificates for Underlying Shares subject
to legend removal hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System as directed by such Purchaser.

      


      (d)    In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the
date such Securities are submitted to the Transfer Agent) delivered for removal
of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day
(increasing to $15 per 

       

       

      
        
           

        

        
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        Trading
Day five (5) Trading Days after such damages have begun to accrue) for each
Trading Day after the fourth (4th)
Trading Day after such Legend Removal Date until such certificate is delivered
without a legend.  Nothing herein shall limit such Purchaser’s right
to pursue actual damages for the Company’s failure to deliver certificates
representing any Securities as required by the Transaction Documents, and such
Purchaser shall have the right to pursue all remedies available to it at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief.

      

       

      (e)    Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the
Company that such Purchaser will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, and that if
Securities are sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein, and acknowledges
that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance upon this understanding.

       

      4.2    Acknowledgment of
Dilution.  The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market
conditions.  The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its obligation
to issue the Underlying Shares pursuant to the Transaction Documents, are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.

       

      4.3    Furnishing of Information;
Public Information.

       

      (a)    If the
Common Stock is not registered under Section 12(b) or 12(g) of the Exchange Act
on the date hereof, the Company agrees to cause the Common Stock to be
registered under Section 12(g) of the Exchange Act on or before the 60th
calendar day following the date hereof. Until such time that no Purchaser owns
Securities, the Company covenants to maintain the registration of the Common
Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act even if the Company is not then subject to the
reporting requirements of the Exchange Act.    As long as
any Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will use its best efforts to prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the
Securities, including without limitation, under Rule 144.  The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to
enable such Person to sell such Securities without registration under the
Securities Act, including without limitation, within the requirements of the
exemption provided by Rule 144.

       

       

      
        
           

        

        
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             (b)           At
any time during the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may be sold
without the requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule 144, if the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) (a “Public Information
Failure”) then, in addition to such Purchaser’s other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated damages and
not as a penalty, by reason of any such delay in or reduction of its ability to
sell the Securities, an amount in cash equal to one percent (1.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities on the day of a
Public Information Failure and on every thirtieth (30th) day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured and (b) such
time that such public information is no longer required  for the Purchasers
to transfer the Underlying Shares pursuant to Rule 144.  The payments to
which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred
to herein as “Public
Information Failure Payments.”  Public Information Failure Payments shall be paid
on the earlier of (i) the last day of the calendar month during which such
Public Information Failure Payments are incurred
and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is
cured.  In the event the Company fails to make Public Information
Failure Payments in
a timely manner, such Public Information Failure Payments shall bear
interest at the rate of 1.0% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to pursue actual
damages for the Public Information Failure, and such Purchaser shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.

       

      4.4    Integration.  The Company shall not
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the Securities for
purposes of the rules and regulations of any Trading Market such that it would
require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent
transaction.

       

      4.5    Conversion and Exercise
Procedures.  Each of the form of Notice of Exercise included in
the Series C Warrants and the form of Notice of Conversion included in the
Notes set forth the
totality of the procedures required of the Purchasers in order to exercise the
Series C Warrants or convert the Notes.  No additional legal opinion,
other information or instructions shall be required of the Purchasers to
exercise their Series C Warrants or convert their Notes.  The Company
shall honor exercises of the Series C Warrants and conversions of the Notes and
shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.

       

       

      
        
           

        

        
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      4.6    Securities Laws Disclosure;
Publicity.  The Company shall by (a) 8:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof, issue a press
release, disclosing the material terms of the transactions contemplated hereby,
and (b) 5:00 p.m. (New York City time) on the fourth Trading Day immediately
following the date hereof, file a Current Report on Form 8-K, disclosing the
material terms of the transactions contemplated hereby and including the
Transaction Documents as exhibits thereto.  From and after the
issuance of such press release, the Company shall have publicly disclosed all
material, non-public information delivered to any of the Purchasers by the
Company or any of its subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release nor otherwise make any such public statement without the
prior consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each Purchaser, with respect to any
press release of the Company, which consent shall not unreasonably be withheld
or delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.  Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except: (a) as required by federal securities law in connection with
(i) any registration statement contemplated by the Registration Rights Agreement
and (ii) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under this clause
(b).

       

      4.7    Shareholder Rights
Plan.  No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction
Documents or under any other agreement between the Company and the
Purchasers.

       

      4.8    Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on its
behalf, will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement with the
Company regarding the confidentiality and use of such
information.  The Company understands and confirms that each Purchaser
shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.

       

       

      
        
           

        

        
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      4.9    Use of
Proceeds.  Except as set forth on Schedule 4.9 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds for: (a)
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables in the ordinary course of the Company’s business and prior
practices and the Company debt set forth on Schedule 4.9), (b)
the redemption of any Common Stock or Common Stock Equivalents, (c) the
settlement of any outstanding litigation or (d) in violation of the FCPA or OFAC
regulations.

       

      4.10    Indemnification of
Purchasers.   Subject to the provisions of this Section
4.10, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by such  Purchaser of state or federal securities laws or
any conduct by such Purchaser which constitutes fraud, gross negligence, willful
misconduct or malfeasance).  If any action shall be brought against
any Purchaser Party in respect of which indemnity may be sought pursuant to this
Agreement, such Purchaser Party shall promptly notify the Company in writing,
and the Company shall have the right to assume the defense thereof with counsel
of its own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party, in
which case the Company shall be responsible for the reasonable fees and expenses
of no more than one such separate counsel.  The Company will not be
liable to any Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only to
the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents.  The indemnification required by this Section
4.10 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or are
incurred.  The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser Party against
the Company or others, and (y) any liabilities the Company may be subject to
pursuant to law.

       

       

      
        
           

        

        
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      4.11    Reservation and Listing of
Securities.

       

      (a)    The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may then be
required to fulfill its obligations in full under the Transaction
Documents.

       

      (b)    If, on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then the
Board of Directors shall use commercially reasonable efforts to amend the
Company’s certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the Required Minimum
at such time, as soon as possible and in any event not later than the 75th day
after such date.

       

      (c)    The
Company shall, if applicable: (i) in the time and manner required by the
principal Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares of Common
Stock at least equal to the Required Minimum on the date of such application,
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing or quotation on such Trading Market as soon as possible
thereafter, (iii) provide to the Purchasers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common Stock on any
date at least equal to the Required Minimum on such date on such Trading Market
or another Trading Market.

       

      4.12    Participation in Future
Financing.

       

      (a)    From the
date hereof until such time as the Notes are no longer outstanding, upon any
issuance by the Company or any of its Subsidiaries of Common Stock, Common Stock
Equivalents for cash consideration, Indebtedness (or a combination of units
hereof) (a “Subsequent
Financing”), each Purchaser shall have the right to participate in up to
an amount of the Subsequent Financing equal to 100% of the Subsequent Financing
(the “Participation
Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing.

       

      (b)    At least
five (5) Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its intention to
effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing
Notice”).  Upon the request of a Purchaser, and only upon a
request by such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than one (1) Trading Day after such request, deliver a
Subsequent Financing Notice to such Purchaser.  The Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised thereunder
and the Person or Persons through or with whom such Subsequent Financing is
proposed to be effected and shall include a term sheet or similar document
relating thereto as an attachment.

       

       

      
        
           

        

        
          30

          
            

          

        

        
           

        

      

       

      (c)    Any
Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the fifth (5th)
Trading Day after all of the Purchasers have received the Pre-Notice that the
Purchaser is willing to participate in the Subsequent Financing, the amount of
the Purchaser’s participation, and representing and warranting that the
Purchaser has such funds ready, willing, and available for investment on the
terms set forth in the Subsequent Financing Notice.  If the Company
receives no such notice from a Purchaser as of such fifth (5th)
Trading Day, such Purchaser shall be deemed to have notified the Company that it
does not elect to participate.

       

      (d)    If by
5:30 p.m. (New York City time) on the fifth (5th )
Trading Day after all of the Purchasers have received the Pre-Notice,
notifications by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate) is, in the
aggregate, less than the total amount of the Subsequent Financing, then the
Company may effect the remaining portion of such Subsequent Financing on the
terms and with the Persons set forth in the Subsequent Financing
Notice.

       

      (e)    If by
5:30 p.m. (New York City time) on the fifth (5th)
Trading Day after all of the Purchasers have received the Pre-Notice, the
Company receives responses to a Subsequent Financing Notice from Purchasers
seeking to purchase more than the aggregate amount of the Participation Maximum,
each such Purchaser shall have the right to purchase its Pro Rata Portion (as
defined below) of the Participation Maximum.  “Pro Rata Portion”
means the ratio of (x) the Subscription Amount of Securities purchased on the
Closing Date by a Purchaser participating under this Section 4.12 and (y) the
sum of the aggregate Subscription Amounts of Securities purchased on the Closing
Date by all Purchasers participating under this Section 4.12 plus the aggregate
subscription amounts of investors party to securities purchase agreement(s)
contemplated by clause (d) in the definition of Exempt Issuance that are
participating in such Subsequent Financing pursuant to participation rights
granted to such investors under such agreements that are substantially similar
to this Section 4.12.

       

      (f)     The Company
must provide the Purchasers with a second Subsequent Financing Notice, and the
Purchasers will again have the right of participation set forth above in this
Section 4.12, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within thirty (30) Trading Days after the date
of the initial Subsequent Financing Notice.

       

      (g)    Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of (i) an Exempt
Issuance, or (ii) an underwritten public offering of Common Stock.

       

      4.13    Subsequent Equity
Sales.

       

       

      
        
           

        

        
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      (a)    From the
date hereof until sixty (60) days after the Effective Date, neither the Company
nor any Subsidiary shall issue, enter into any agreement to issue or announce
the issuance or proposed issuance of any shares of Common Stock or Common Stock
Equivalents; provided, however, that the
sixty (60) day period set forth in this Section 4.13 shall be extended for the
number of Trading Days during such period in which (i) trading in the Common
Stock is suspended by any Trading Market, or (ii) following the Effective Date,
the Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Underlying Shares.

       

      (b)    From the
date hereof until such time as no Purchaser holds any of the Securities, the
Company shall be prohibited from effecting or entering into an agreement to
effect any issuance by the Company or any of its Subsidiaries of Common Stock or
Common Stock Equivalents for cash consideration (or a combination of units
thereof) involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company (i) issues or sells
any debt or equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive, additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock or (ii) enters into any agreement, including,
but not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price.   Any Purchaser shall be
entitled to obtain injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.

       

      (c)    Notwithstanding
the foregoing, this (i) Section 4.13 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance
and (ii) Section 4.13(a) shall not apply in respect of up to 2,000,000 shares of
Common Stock (subject to forward and reverse stock splits, stock dividends and
the like that occur after the date hereof) issuable to consultants in any 12
month period.

       

      4.14    Equal Treatment of
Purchasers.  No consideration (including any modification of
any Transaction Document) shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents. Further, the Company shall not make any payment of
principal on the Notes in amounts which are disproportionate to the respective
Principal Amounts outstanding on the Notes at any applicable
time.  For clarification purposes, this provision constitutes a
separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended for the Company to treat the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.

       

       

      
        
           

        

        
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      4.15    Certain Transactions and
Confidentiality. Each Purchaser, severally and not jointly with the other
Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or
pursuant to any understanding with it will execute any purchases or sales,
including Short Sales, of any of the Company’s securities during the period
commencing with the execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.6.  Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to the initial press release as described in
Section 4.6, such Purchaser will maintain the confidentiality of the existence
and terms of this transaction and the information included in the Transaction
Documents and the Disclosure Schedules.  Notwithstanding the
foregoing, and notwithstanding anything contained in this Agreement to the
contrary, the Company expressly acknowledges and agrees that (i) no Purchaser
makes any representation, warranty or covenant hereby that it will not engage in
effecting transactions in any securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.6, (ii) no
Purchaser shall be restricted or prohibited from effecting any transactions in
any securities of the Company in accordance with applicable securities laws from
and after the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as described in
Section 4.6 and (iii) no Purchaser shall have any duty of confidentiality to the
Company or its Subsidiaries after the issuance of the initial press release as
described in Section 4.6.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.

       

      4.16    Form D; Blue Sky
Filings.  The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.

       

      4.17    Capital
Changes.  Until the six month anniversary of the Effective
Date, the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in Principal Amount outstanding of the
Notes.

       

      ARTICLE
V.

      MISCELLANEOUS

       

       

      
        
           

        

        
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      5.1    Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before March 2,
2010, unless such
date is extended upon written agreement by the Company and Garden State, for up
to an additional 60 days, in the aggregate, by which the Company and Garden
State may extend for two separate 30 day periods; provided, however, that such
termination will not affect the right of any party to sue for any breach by the
other party (or parties).

       

      5.2    Fees and
Expenses.  Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.  The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchasers.

       

      5.3    Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.

       

      5.4    Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd)
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

       

      5.5    Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers holding at least 67% in
interest of the Securities then outstanding or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is
sought.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.

       

      5.6    Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

       

       

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

       

      5.7    Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser (other
than by merger).  Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided that such transferee agrees in writing to be bound,
with respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchasers”; provided, however, the rights
under Section 4.12 of this Agreement shall be assignable solely upon transfer of
the rights under the Note.

       

      5.8    No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.10.

       

      5.9    Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.   If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then, in
addition to the obligations of the Company under Section 4.10, the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.

       

      5.10    Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities for the applicable statute of
limitations.

       

       

      
        
           

        

        
          35

          
            

          

        

        
           

        

      

       

      5.11    Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

       

      5.12    Severability. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

       

      5.13    Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, that in the
case of a rescission of a conversion of a Note or exercise of a Series C
Warrant, the applicable Purchaser shall be required to return any shares of
Common Stock subject to any such rescinded conversion or exercise notice
concurrently with the return to such Purchaser of the aggregate exercise price
paid to the Company for such shares and the restoration of such Purchaser’s
right to acquire such shares pursuant to such Purchaser’s Series C Warrant
(including, issuance of a replacement warrant certificate evidencing such
restored right).

       

      5.14    Replacement of Securities.  If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof (in the case of mutilation), or
in lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction.  The applicant for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance of such
replacement Securities.

       

      5.15    Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.

       

       

      
        
           

        

        
          36

          
            

          

        

        
           

        

      

       

      5.16    Payment Set Aside. To
the extent that the Company makes a payment or payments to any Purchaser
pursuant to any Transaction Document or a Purchaser enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

       

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

       

      5.18    Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of 

       

       

      
        
           

        

        
          37

          
            

          

        

        
           

        

         

        this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.  Each Purchaser has been represented by
its own separate legal counsel in their review and negotiation of the
Transaction Documents.  For reasons of administrative convenience
only, each Purchaser and its respective counsel have chosen to communicate with
the Company through WS.  WS does not represent any of the Purchasers
and only represents Garden State, as the placement agent for the
transaction.  The Company has elected to provide all Purchasers with
the same terms and Transaction Documents for the convenience of the Company and
not because it was required or requested to do so by any of the
Purchasers.

      

       

      5.19    Liquidated
Damages.  The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been
canceled.

       

      5.20    Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.

       

      5.21    Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction
Document shall be subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.

       

      5.22    WAIVER OF JURY
TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY
ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.

       

      


       

      (Signature
Pages Follow)

       

       

      
        
           

        

        
          38

          
            

          

        

        
           

        

      

       

       

      IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

       

      
        	
                NXT
      NUTRITIONALS HOLDINGS, INC.

                 

                 

              	
                Address for
      Notice:

              
	
                By:/s/ Francis
      McCarthy

                     Name:
      Francis McCarthy

                     Title:
      President and CEO

                 

                With
      a copy to (which shall not constitute notice):

              	
                Fax:

              
	
                 

                Anslow
      & Jaclin, LLP

                195
      Route 9 South, Suite 204

                Manalapan,
      NJ 07726

                Tel:
      (732) 409-1212

                Fax:
      (732) 577-1188

                 

              	 
      


      

      


      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

       

       

       

       

       

      
        
           

        

        
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      [PURCHASER
SIGNATURE PAGES TO NXTH SECURITIES PURCHASE AGREEMENT]

      


      IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.

       

      Name of
Purchaser:
_____________________________________________________________

       

      Signature of Authorized Signatory of
Purchaser: ______________________________________

       

      Name of
Authorized Signatory:
____________________________________________________

       

      Title of
Authorized Signatory:
_____________________________________________________

       

      Email
Address of Authorized Signatory:
_____________________________________________

       

      Facsimile
Number of Authorized Signatory:
___________________________________________

       

      Address
for Notice of Purchaser:

      


      
 

      Address
for Delivery of Securities for Purchaser (if not same as address for
notice):

      


      


      
 

      Subscription
Amount: _____________

      


      Principal
Amount (1.15 x Subscription
Amount): _____________

      


      Series C
Warrant Shares: _________________

      


      Name in
which Securities should be issued: ______________________

      


      


      EIN
Number:  ______________________

      


      [SIGNATURE
PAGES CONTINUE]

      
40